Sri Subhash Bhararia, Visakhapatnam V. THE DCIT, CIRCLE - 3(1), Visakhapatnam

ITA 709/VIZ/2013

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8850 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 year(s) 7 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-07-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 11-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S R S NARAYAN
• Keywords: Business income
• Section: 143(3)

Judgement Text

ITA NO.709/VIZAG/2013 SRI SUBHASH BHARARIA, VSKP 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . . , BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER ./I.T.A.NO.709/VIZAG/2013 ( / ASSESSMENT YEAR: 2009-10) SRI SUBHASH BHARARIA, VISAKHAPATNAM DCIT, CIRCLE - 3(1), VISAKHAPATNAM [PAN NO. ABLPB6829Q ] ( / APPELLANT) ( / RESPONDENT) / APPELLANT BY : SHRI G.V.N. HARI, AR / RESPONDENT BY : SHRI S.R.S. NARAYAN, DR / DATE OF HEARING : 01.06.2017 / DATE OF PRONOUNCEMENT : 28.07.2017 / O R D E R PER D.S. SUNDER SINGH, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST ORDER OF THE COMMISSIONER OF INCOME TAX (APEALS) [CIT(A)], VISAK HAPATNAM IN ITA NO.336/11-12/JCIT(OSD),C-3(1)/VSP/2013-14 DATED 12. 9.2013 FOR THE A.Y. 2009-10. ITA NO.709/VIZAG/2013 SRI SUBHASH BHARARIA, VSKP 2 2. ALL THE GROUNDS OF THE APPEAL ARE RELATED TO THE ASSESSMENT OF BUSINESS LOSS IN SHARE TRADING AS CAPITAL GAINS AND NOT ALLOWING THE SET OFF OF BROUGHT FORWARD BUSINESS LOSSES. THE ASSESS EE IS ENGAGED IN THE BUSINESS OF TRANSPORT AND IN SHARE TRADING. FOR TH E ASSESSMENT YEAR 2009-10, THE ASSESSEE FILED RETURN OF INCOME ADMITT ING BUSINESS LOSS ON ACCOUNT OF TRADING IN SHARES AMOUNTING TO ` 37,87,504/- AND PROFIT FROM THE TRANSPORTATION BUSINESS OF ` 82,26,385/-. THE ASSESSEE CLAIMED THE SET OFF OF SHARE TRADING LOSS FROM THE BUSINESS PRO FIT OF THE TRANSPORT BUSINESS. THE ASSESSEE HAS INCURRED LOSS OF ` 36,58,780/- IN THE ASSESSMENT YEAR 2008-09, WHICH WAS AS SET OFF AGAINST THE CURR ENT YEARS BUSINESS INCOME AND FURNISHED RETURN OF INCOME ADMITTING T OTAL INCOME OF ` 24,54,170/-. THE CASE WAS SELECTED FOR SCRUTINY AN D THE ASSESSING OFFICER HELD THAT THE LOSS INCURRED ON ACCOUNT OF S ALE OF SHARES WAS CAPITAL GAINS SINCE THE ASSESSEE IS NOT A SHARE BRO KER AND THE SHARES WERE HELD FOR LONG PERIOD OF TIME AND THERE WERE NO DERIVATIVE TRANSACTIONS. IT WAS ALSO OBSERVED BY THE A.O. THA T THE ASSESSEE HAS USED HIS OWN SURPLUS FUNDS FOR INVESTING IN SHARES WITHOUT BORROWING ANY MONEY. ACCORDINGLY, THE ASSESSING OFFICER HELD THAT THE LOSS RESULTING ON PURCHASE AND SALE OF SHARES AS A CAPIT AL LOSS AND REJECTED THE ASSESSEES CLAIM FOR SET OFF OF BROUGHT FORWARD LOSSES AS WELL AS THE ITA NO.709/VIZAG/2013 SRI SUBHASH BHARARIA, VSKP 3 CURRENT YEARS LOSS HOLDING THE SAME WAS CAPITAL LO SS. AGGRIEVED BY THE ORDER OF THE A.O., THE ASSESSEE WENT ON APPEAL BEFO RE THE CIT(A). THE LD. CIT(A) DISMISSED THE ASSESSEES APPEAL AS UNDER : 5. THE AR FILED LETTER DTD.08.08.2013 IN WHICH THE SUBMISSION MADE TO THE AO VIDE LETTER DTD.30.11.2011 WAS ENCLOSED. THE AR ALSO RELIED ON THE RECENT CASE LAW IN CIT VS. GAUTAM G.CHADHA 2 011 (62 DTR DEL. 58). I HAVE CONSIDERED THE SUBMISSIONS MADE. THE DE TAILS OF PURCHASE AND SALE OF SHARES DURING THE YEAR WAS GIVEN AS FOL LOWS:- NAME OF SHARES P U R C H A S E D ET A I LS S A L E D E T A I L S LOSS DA TE CONT. NO.OF RATE VALUE DATE CONT. NO.OF RATE VALUE NO. SHARES NO. SHARE S 1 HIMACHALFU TOURISTIC COO MUNI- CATION LTD. HFCL 17.12.07 21951 10000 44.6 446000 4.11.08 50,304 6,000 7.08 425,000 18.12.07 64070 10000 39.25 392500 19.1 2.07 22527 10000 43.05 430500 2.1.08 68842 20000 51.00 1019930 10.1.08 71294 10000 60.94 609375 60000 2898305 6,000 - 2473305 2 OCLI LTD 27.12.07 66,470 1,000 321.57 1 321,574 4.11.08 50,304 1,000 1,000 50.7 1 50,700 -270874 3 STEEL EXCHANGE 25.1.08 28,171 2,000 120.9 241,800 4.11.08 1,414 2,000 17.63 35,250 -206550 EXCHANGE 4 UNIPLY INDUSTRIES 2.1.08 24,756 3,450 49.5 170,763 4.11.08 50,304 3,450 6.3 21,748 -149016 5 VARDHA ACRAE 11.2.08 13,744 8 109,929 4.11.08 50,304 13,744 3.24 44530 -65399 TOTAL LOSS 3165143 5.1 IT IS SEEN THAT THE AO HAS APPLIED THE CBDT CIR CULAR NO.4/2007 TO DETERMINE WHETHER THE TRANSACTION IS O NE OF THE CAPITAL GAINS OR BUSINESS INCOME. IT IS SEEN THAT THE ASSES SEE HAS NOT PURCHASED ANY NEW SHARES DURING THE YEAR AND THE CLAIM THAT I T WAS INVOLVED IN TRADING OF SHARES IS NOT SUSTAINABLE. I FIND THAT T HE AO HAS RIGHTLY CONCLUDED THAT THE TRANSACTION IS NOT BUSINESS IN N ATURE AND WOULD RESULT ONLY IN CAPITAL LOSS. ACCORDINGLY THE AO'S ACTION I N NOT ALLOWING THE LOSS RELATING TO A.Y.2008-09 AND THE CURRENT YEAR ON ACC OUNT OF PURCHASE AND SALE OF SHARES TO BE SET OFF AGAINST BUSINESS INCOM E IS JUSTIFIED. THE APPELLANT'S GROUND IS DISMISSED. ITA NO.709/VIZAG/2013 SRI SUBHASH BHARARIA, VSKP 4 3. AGGRIEVED BY THE ORDER OF THE LD. CIT(A) THE ASS ESSEE IS IN APPEAL BEFORE US. APPEARING FOR THE ASSESSEE, THE L D. A.R. ARGUED THAT DURING THE ASSESSMENT YEAR 2008-09, THE ASSESS EE HAS STARTED THE SHARE TRADING BUSINESS AND INCURRED LOSS OF ` 36,58,783/- AND FILED THE RETURN OF INCOME ON 30.9.2008 WHICH WAS A CCEPTED BY THE DEPARTMENT. THE BOOKS OF ACCOUNTS WERE DULY AUDITE D BY THE STATUTORY AUDITOR AND IN FORM 44AB, IT WAS CLEARLY MENTIONED THAT THE BUSINESS AS TRADING IN SHARES. THE ASSESSEE PURC HASED THE SHARES AND SOLD WITH CLEAR INTENTION TO DO THE BUSINESS. BY REFERRING PAGE NO.50 OF THE PAPER BOOK LD. A.R ARGUED THAT THE ASS ESSEE HAS DECLARED THE CLOSING STOCK OF SHARES IN THE BALANCE SHEET AND ACCOUNTED THE PURCHASES AND SALES OF SHARES IN PROF IT LOSS ACCOUNT. THE ASSESSEE HAS MADE FREQUENT PURCHASE AND SALE OF THE SHARES, WHICH IS EVIDENT FROM THE PAGE NO.56 & 57 OF THE PA PER BOOK, WHEREIN THE ASSESSEE HAS SUBMITTED THE DETAILS OF P URCHASES AND SALES FOR THE F.Y 2007-08. HE HAS ALSO TAKEN OUR A TTENTION TO THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2009-10 AN D STATED THAT THE CLOSING STOCK DECLARED IN THE IMMEDIATELY PRECE DING YEAR WAS SOLD IN THE YEAR UNDER CONSIDERATION AND THERE WERE NO FRESH PURCHASES MADE DURING THE YEAR AND ARGUED THAT THE LOSS RESULTED IN PURCHASE AND SALES OF SHARES SHOULD BE ASSESSED AS A BUSINESS ITA NO.709/VIZAG/2013 SRI SUBHASH BHARARIA, VSKP 5 INCOME AND BUSINESS LOSS. THE LD. A.R. FURTHER STA TED THAT IN THE BALANCE SHEET, THE ASSESSEE HAS DECLARED THE CLOSIN G STOCK AS A BUSINESS ASSET BUT NOT AS AN INVESTMENT. SINCE THE FINANCIAL STATEMENTS AND THE CONDUCT OF THE ASSESSEE CLEARLY SHOWS THAT THE ASSESSEE IS ACTIVELY INVOLVED IN THE PURCHASE AND S ALE OF SHARES WITH AN INTENTION TO DO THE BUSINESS, THE LD. A.R. ARGUE D THAT BOTH THE CIT(A) AND THE A.O. HAS MADE A BLATANT ERROR AND RE QUIRE INTERFERENCE FROM THIS TRIBUNAL. 4. ON THE OTHER HAND, THE LD. D.R. ARGUED THAT MERE LY BECAUSE OF THE RETURN OF INCOME IS ACCEPTED U/S 143(1), IT SHO ULD NOT BE TREATED AS AN ASSESSMENT FRAMED U/S 143(3) OF THE ACT. THE LD. A.O. HAS CONSIDERED ALL THE DETAILS AND INTENTION OF THE ASS ESSEE, SOURCES OF FUNDS FREQUENCY OF PURCHASE AND SALE OF SHARES AND HELD THAT THE LOSS WAS RESULTED ON ACCOUNT OF CAPITAL LOSS BUT NO T BUSINESS LOSS. ACCORDINGLY, THE LD. D.R. SUPPORTED THE ORDERS OF T HE LOWER AUTHORITIES. 5. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE ASSESSEE HAS FILED THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2008-09 AND 2009-10 BEFORE THE DUE DATE OF FILING THE RETURN OF INCOME, WHICH IS NOT DISPUTED. THE A SSESSEE HAS ITA NO.709/VIZAG/2013 SRI SUBHASH BHARARIA, VSKP 6 DECLARED THE BUSINESS RESULTS FOR THE ASSESSMENT YE AR 2008-09 AS BUSINESS LOSS AND FILED THE RETURN OF INCOME, WHICH WAS ACCEPTED BY THE DEPARTMENT U/S 143(1) OF THE ACT. THERE WAS NO DISPUTE THAT IN PROFIT & LOSS ACCOUNT AND IN THE BALANCE SHEET THE ASSESSEE HAS ADMITTED THE PURCHASE AND SALE OF SHARES AS BUSINES S TRANSACTIONS. IN THE BALANCE SHEET, THE ASSESSEE HAS DECLARED THE UNSOLD SHARES AS STOCK IN TRADE BUT NOT AS AN INVESTMENT. THE AUDIT REPORT U/S 44AB REPORT CLEARLY SHOWS THAT THE ASSESSEE IS ENGAGED I N THE BUSINESS OF TRADING IN SHARES. FOR THE ASSESSMENT YEAR 2009-10 , THE ASSESSEE HAS SOLD THE OPENING STOCK OF SHARES, WHICH WAS PUR CHASED IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. THE DETAILS OF PURCHASES AND SALES ARE FURNISHED IN THE PAPER BOOK. THERE W AS A CLEAR IDENTIFICATION OF SHARES HELD AS INVESTMENT AND SHA RES HELD AS STOCK IN TRADE. THIS FACT WAS NOT DISPUTED BY THE REVENU E. IT IS FOR THE ASSESSEE TO TREAT A PARTICULAR TRANSACTION AS INVES TMENT OR STOCK IN TRADE AND WHETHER THE INTENTION OF THE ASSESSEE WA S TO MAKE THE BUSINESS OR AS INVESTMENT SHOULD BE ESTABLISHED WIT H THE FINANCIAL STATEMENTS AND THE CONDUCT OF THE ASSESSEE. IN THE BALANCE SHEET BY DECLARING STOCK IN TRADE AND ACCOUNTING THE PURC HASES AND SALES IN P&L A/C THE ASSESSEE DECLARED THE INTENTION AS A BU SINESS TRANSACTION BUT NOT AS INVESTMENTS. THE ASSESSEE I S FREE TO MAKE ITA NO.709/VIZAG/2013 SRI SUBHASH BHARARIA, VSKP 7 CERTAIN ASSETS AS BUSINESS ASSETS AND CERTAIN ASSET S AS INVESTMENTS. THIS VIEW IS UPHELD BY THE HONBLE MADRAS HIGH COUR T DECISION IN THE CASE OF NSS INVESTMENTS VS. CIT. THEREFORE, WE HOL D THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF SHARE TRADIN G AND RESULTANT PROFIT OR LOSS REQUIRED TO BE ASSESSED AS A BUSINES S INCOME BUT NOT AS CAPITAL GAINS. ACCORDINGLY, WE SET ASIDE THE OR DER OF THE LOWER AUTHORITIES AND DELETE THE ADDITION MADE BY THE A.O . 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT O N 28 TH JUL17. SD/- SD/- ( . ) ( . . ) (V. DURGA RAO) (D.S. SUNDER SINGH) /JUDICIAL MEMBER /ACCOUNTANT MEMBER /VISAKHAPATNAM: /DATED : 28.07.2017 VG/SPS /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT SRI SUBHASH BHARARIA, B-101, VUD A APARTMENTS, MMTC COLONY, SEETHAMMADHARA, VISAKHAPATNAM 2. / THE RESPONDENT THE DCIT, CIRCLE-3(1), VISAKHAP ATNAM 3. / THE CIT, VISAKHAPATNAM 4. ( ) / THE CIT (A), VISAKHAPATNAM 5. , , / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // SR. PRIVATE SECRETARY ITAT, VISAKHAPATNAM