SHRIDHAR P IYER, MUMBAI V. ASST CIT 17(2), MUMBAI

ITA 724/MUM/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5692 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 5 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-07-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2010-2011
• Appeal Filed On: 02-02-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V JUSTIN
• Keywords: Business income; Rule of consistency
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR , ACCOUNTANT MEMBER ITA NO. 724/MUM./2015 ( ASSESSMENT YEAR : 20 1 0 11 ) SHRIDHAR P. IYER 14/2(22)(E), BHASKAR BHAVANI SIR BALCHANDRA ROAD, MATUNGA MUMBAI 400 019 PAN AADPI8931K . APPELLANT V/S ASSTT . COMMISSIONER OF INCOME TAX CIRCLE 1 7 ( 2 ), MUMBAI . RESPONDENT ASSESSEE BY : SHRI HARIDAS BHAT REVENUE BY : SHRI V. JUSTIN DATE OF HEARING 05 .0 7 .2018 DATE OF ORDER 11.07.2018 O R D E R PER SAKTIJIT DEY, J.M. AFORESAID APPEAL BY THE ASSESSEE IS AGAINST ORDER DATED 13 TH JANUARY 2015 , PASSED BY THE LEARNED COMMISSIONER (APPEALS) 32 , MUMBAI, FOR THE ASSESSMENT YEAR 201 0 11 . 2 . T HE ISSUE IN DISPUTE IN THE PRESENT APPEAL IS , WHETHER INCOME FROM SHARE TRANSACTION AMOUNTING TO ` 1,14,79,724 IS TO BE TREATED AS INCOME UNDER THE HEAD SHORT TERM CAPITAL GAIN OR INC OME FROM BUSINESS OR PROFESSION? 2 SHRIDHAR P. IYER 3 . BRIEF FACTS ARE, THE ASSESSEE , AN INDIVIDUAL , FILED HIS RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR ON 24 TH SEPTEMBER 2010 DECLARING INCOME OF ` 1,30,75,858. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER AFTER VERIFYING THE RETURN OF INCOME AND OTHER MATERIALS ON RECORD FOUND THAT IN COME OF ` 1,14,79,724 FROM SALE OF SHARES SHOWN AS SHORT TERM CAPITAL GAIN CONSTITUTES 86.8% OF THE TOTAL INCOME OFFERED BY THE ASSESSEE. THEREFORE, THE ASSESSING OFFICER WANTED TO VERIFY THE DETAILS OF SHARE TRANSACTION. AFTER VERIFYING THE DETAILS FURNIS HED BY THE ASSESSEE, THE ASSESSING OFFICER OBSERVED THAT OUT OF TOTAL 89 SCRIPS ASSESSEE HAS EARNED BOTH LONG TERM CAPITAL GAIN AND SHORT TERM CAPITAL GAIN IN NINE SCRIPS . W HEREAS , 62% OF THE GAIN ARE FROM SHARES TRADED ON SHORT TERM BASIS. THE ASSESSING O FFICER OBSERVED , SMALLNESS OF THE BUSINESS INCOME ALSO INDICATES THAT NO SUBSTANTIAL BUSINESS ACTIVITY WAS BEING CARRIED ON BY THE ASSESSEE OTHER THAN BUYING AND SELLING OF SHARES. THE ASSESSING OFFICER OBSERVED , IN THE PRECEDING ASSESSMENT YEARS ASSESSEE S INCOME CONSISTED MAINLY OF BUSINESS INCOME , WHEREAS , IN THE IMPUGNED ASSESSMENT YEAR MAJOR PART OF THE INCOME CONSISTED OF SHORT TERM CAPITAL GAIN. AFTER REFERRING TO A NUMBER OF JUDICIAL PRECEDENTS THE ASSESSING OFFICER ULTIMATELY HELD THAT THE ASSESSEE HAS CARRIED ON SHARE TRANSACTION AS ORGANIZED COMMERCIAL A CTIVITY, HENCE, INCOME DERIVED THEREFROM WILL COME UNDER THE HEAD BUSINESS AND PROFESSION. 3 SHRIDHAR P. IYER ACCORDINGLY, HE ASSESSED THE INCOME FROM SHARE TRA NSACTION AMOUNTING TO ` 1,14,79,724, AS BUSINESS INCOME. 4 . AGAINST THE AFORESAID DECISION OF THE ASSESSING OFFICER ASSESSEE PREFERRED APPEAL BEFORE THE LEARNED COMMISSIONER (APPEALS). HOWEVER, LEARNED COMMISSIONER (APPEALS) REJECTING THE SUBMISSIONS OF THE ASSESSEE UPHELD THE DECISION OF THE ASSESSING OFFICER. 5 . THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , THE ASSESSEE IS A SENIOR CITIZEN AND A REGULAR INVESTOR IN SHARES. HE SUBMITTED , FROM THE VERY INCEPTION THE ASSESSEE HAS MAINTAINED TWO SEPARATE PORTFOLIOS BY SEGREGATING THE BUSINESS ACTIVITY FROM INVESTI NG ACTIVITY. HE SUBMITTED , WHILE INCOME DERIVED FROM INTRA DAY TRANSACTION IN SHARES ARE TREATED AS BUSINESS INCOME , INCOME DERIVED FROM SHARES HELD FOR MORE THAN 30 DAYS ARE REGULARLY TREATED AS INVESTMENT AND INCOME DERIVED THEREFROM ARE OFFERE D AS CAPITAL GAIN. HE SUBMITTED , ASSESSEE WAS FOLLOWING THE AFORESAID METHOD CONSISTENTLY FROM THE VERY INCEPTION OF SHARE TRANSACTION ACTIVITY AND THERE IS NO CHANGE IN FACTS IN THE PRESENT ASSESSMENT YEAR. HE SUBMITTED , DURING THE YEAR, DUE TO VOLATILITY IN THE MARKET THE ASSESSEE HAS SOLD SOME OF THE INVESTMENT ON SHORT TERM BASIS. HOWEVER, MERE INCREASE IN NUMBER OF SCRIPS OR NUMBER OF TRANSACTIONS CANNOT BE THE SOLE CRITERIA FOR CONSIDERING THE CAPITAL GAIN AS BUSINESS INCOME. THE LEARNED AUTHORISED REP RESENTATIVE SUBMITTED , THE ASSESSEE HAS NOT UTILIZED ANY BORROWED 4 SHRIDHAR P. IYER FUNDS FOR INVESTMENT IN SHARE AND SUCH INVESTMENTS ARE OUT OF OWN FUND. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , EXCEPT THE IMPUGNED ASSESSMENT YEAR , IN NO OTHER ASSESSMENT YEAR THE ASSESSING OFFICER HAS TREATED THE INCOME FROM SHARE TRANSACTION AS BUSINESS INCOME. TO EMPHASIZE THE AFORESAID FACT, LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THE ORDER PASSED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2006 07, IN ITA NO. 2/MUM./2014, DATED 29 TH JUNE 2016, AND THE ASSESSMENT ORDER S PASSED UNDER SECTION 143(3) OF THE ACT FOR ASSESSMENT YEARS 2014 15 AND 2015 16. THE LEARNED AUTHORISED REPRESENTATIVE REFERRING TO A CHART CONTAINING THE DETAILS OF SHARE TRANSACTIONS SUBMITTED , IN MAJORITY OF THE CASE S THE SHARES WERE HELD FOR MORE THAN 30 DAYS. HE SUBMITTED , INCOME DERIVED FROM SALE OF SHARES HELD FOR LESS THAN 30 DAYS IS ONLY FOR ` 4,17,413. HE SUBMITTED , WHILE THE ASSESSEE HIMSELF HAS TREATED THE INCOME DERIVED FROM INTRA DAY TRANSACTION AS BUSINESS INCOME, HE IS FURTHER WILLING TO OFFER THE INCOME DERIVED FROM SALE OF SHARES HELD FOR LESS THAN 30 DAYS AS BUSINESS INCOME. THUS, HE SUBMITTED , THE AMOUNT OF ` 4,17,413 CAN BE TREATED AS BUSINESS INCOME. IN SUPPORT OF HIS CONTENTI ON, THE LEARNED AUTHORISED REPRESENTATIVE ALSO RELIED UPON THE DECISION OF THE TRIBUNAL, MUMBAI BENCH, IN CASE OF ACIT V/S JIGNESH MADHUKANT MEHTA, [2017] 165 ITD 646. 5 SHRIDHAR P. IYER 6 . THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE OBSERVATIONS OF THE ASSESSING OFFICER AND THE LEARNED COMMISSIONER (APPEALS). 7 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIALS ON RECORD. AS COULD BE SEEN FROM THE FACTS ON RECORD, THE ASSESSEE IS CARRYING ON THE ACTIVITY OF SHARE TRANSACTION SINCE PAST SO MANY YEARS. IT IS THE CONTENTION OF THE ASSESSEE THAT IT MAINTAINS TWO SEPARATE PORTFOLIOS FOR INVESTMENT ACTIVIT Y AS WELL AS BUSINESS ACTIVITY. FROM THE MATERIAL ON RECORD, IT IS EVIDENT , IN THE MAJORITY OF CASES THE ASSESSEE HELD THE SHARES FOR A SUBSTANTIALLY LONG PERIOD . AS STATED BEFORE US , THE INCOME DERIVED FROM INTRA DAY TRANSACTION HAS BEEN OFFERED AS BUSINESS INCOME BY THE ASSESSEE HIMSELF . FURTHER, AT THIS STAGE, THE ASSESSEE HAS ALSO AGREED TO OFFER THE INCOME DERIVED FROM SALE OF SHARES HELD FOR LESS THAN 30 DAY S AS BUSINESS INCOME. IT IS ALSO UN DISPUTED THAT EXCEPT THE IMPUGNED ASSESSMENT YEAR IN NO OTHER ASSESSMENT YEAR S, EITHER PAST OR FUTURE , THE ASSESSING OFFICER HAS TREATED THE INCOME FROM SALE OF SHARES SHOWN AS CAPITAL GAIN TO BE BUSINESS INCOME. ON A PER USAL OF THE ASSESSMENT ORDER S PASSED UNDER SECTION 143(3) OF THE ACT FOR ASSESSMENT YEARS 2014 15 AND 2015 16, IT IS EVIDENT , THOUGH , THE ASSESSEE OFFERED SUBSTANTIAL INCOME FROM SHARE TRANSACTION AS SHORT TERM CAPITAL GAIN COMPARED TO BUSINESS INCOME, THE ASSESSING OFFICER HAS ACCEPTED ASSESSEES CLAIM WITHOUT 6 SHRIDHAR P. IYER TREATING THE SHORT TERM CAPITAL GAIN AS BUSINESS INCOME. THEREFORE, MERELY BECAUSE THE BUSINESS INCOME IS SHOWN AT A LESSER FIGURE , THAT BY ITSELF CANNOT BE A REASON TO TREAT THE SHORT TERM CAPITAL G AIN DERIVED FROM SALE OF SHARE AS BUSINESS INCOME. MORE SO, WHEN THE ASSESSING OFFICER HAS NOT DISTURBED THE ASSESSEES CLAIM IN ANY OTHER ASSESSMENT YEAR. THEREFORE, APPLYIN G THE RULE OF CONSISTENCY ALSO ASSESSEES CLAIM OF SHORT TERM CAPITAL GAIN HAS TO BE ACCEPTED. HOWEVER, KEEPING IN VI E W THE SUBMISSIONS MADE BY THE LEARNED AUTHORISED REPRESENTATIVE , WE DIRECT THE ASSESSING OFFICER TO ASSESS THE AMOUNT OF ` 4,17,413, RECEIVED FROM SALE OF SHARES HELD FOR LESS THAN 30 DAYS AND SHOWN UNDER THE HEAD SHORT TERM CAPITAL GAIN AS BUSINESS INCOME. GROUNDS RAISED ARE PARTLY ALLOWED. 8 . IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 11.07.2018 SD/ - RAMIT KOCHAR ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 11.07.2018 COPY OF THE ORDER FORWARDED TO : TRUE COPY ( 1 ) THE ASSESSEE; (6) GUARD FILE BY ORDER ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, MUMBAI CITY CONCERNED; (SR. PRIVATE SECRETARY) ( 5 ) THE DR, ITAT, MUMBAI; ITAT, MUMBAI