The DCIT, Circle-9, Ahmedabad V. Smt. Dharmistha K.Nanavati, Ahmedabad

ITA 729/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89772 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 23-07-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 07-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DINESH SINGH
• Assessee Lawyers: S N DIVETIA
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH AHMEDABAD BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER. ITA NO. 729/AHD/2011 ASST. YEAR 2006-07 DY. C.I.T., CIRCLE-9, AHMEDABAD. APPELLANT VS. SMT. DHARMISTHA K. NANAVATI, KUNAL BH. VANDNA HIGH SCHOOL, NR. C. N. VIDYALAYA, PARK VIEW SOC., AMBAWADI, AHMEDABAD. RESPONDENT PAN : AATPN 6112F APPELLANT BY : SHRI DINESH SINGH, SR.DR RESPONDENT BY : SHRI S. N. DIVETIA, AR DATE OF HEARING : 23/7/2015 DATE OF PRONOUNCEMENT : 30/07/2015 O R D E R PER SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER. THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A) DATED 11 TH JANUARY, 2010 FOR AY 2006-07. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS IN THIS AP PEAL:- ITA NO._729/AHD/2011 ASST. YEAR 2006-07 2 1. THE LD. CIT(A)-XV, AHMEDABAD HAS ERRED IN LAW AND O N FACTS IN DIRECTING TO TREAT RS.20,65,334/- FROM SAL E OF SHARES AND MUTUAL FUNDS AS STCG AS DECLARED BY THE ASSESSE E. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE LD. CIT(A)-XV, AHMEDABAD OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 3. IT IS THEREFORE PRAYED THAT THE ORDER OF THE LD. CI T(A) XV, AHMEDABAD MAY BE SET ASIDE AND THAT OF THE ASSESSIN G OFFICER BE RESTORED. 2. THE FACTS OF THE CASE ARE THAT THE RETURN OF INC OME WAS FILED ON 30.12.2006 DECLARING INCOME OF RS.29,75,562/-. T HE RETURN WAS PROCESSED UNDER SECTION 143(1) OF INCOME-TAX ACT ON 10.7.2007, CONSEQUENT TO SCRUTINY NOTICE U/S 143(2)/142(1) WER E ISSUED. THE ASSESSEE IS A PARTNER IN FIRM ENGAGED IN LAW PRACTI CE/ADVOCATES. THE ASSESSING OFFICER ASSESSED THE INCOME AT RS.29, 69,960/-. DETAILED DISCUSSIONS HAVE BEEN MADE AT PARA 3.6 OF THE ASSESSMENT ORDER. COMPUTATION OF INCOME FILED WITH THE RETURN SHOWS FOLLOWING FIGURES : SALARY RECEIVED FROM M/S NANAVATI & ASSOCIATES RS.9,00,000 INCOME FROM CAPITAL GAINS. SHORT TERM CAPITAL GAIN ON SALE OF SHARES AS WORKING ATTACHED 12,62,857 SHORT TERM CAPITAL GAIN ON SALE OF UNITS OF MUTUAL FUNDS 4,84,227 SHORT TERM CAPITAL GAINS ON SALE OF SHARES (HDFC PMS) 3,18,250 RS.20,65,334 INCOME FROM OTHER SOURCES RS.1,10,228 ITA NO._729/AHD/2011 ASST. YEAR 2006-07 3 GROSS TOTAL INCOME RS.30,75,562 LESS :DEDUCTION UNDER CHAPTER VI-A RS.1,00,000 RS.29,75,560 THE ASSESSING OFFICER TREATED RS.20,65,334/- AS BUS INESS INCOME ON THE GROUND THAT THE ASSESSEE HAD SUBSTANTIAL INC OME FROM SALE OF SHARES AND SECURITIES THAT SHE HAD TRADED IN NUMBER OF COMPANIES AND THE NUMBER OF TRANSACTIONS ALSO SHOWED THAT THE INTENTION WAS TO BOOK PROFIT. THE ASSESSEE BEING AGGRIEVED CARRIE D THE MATTER IN APPEAL BEFORE THE CIT(A) WHEREIN VIDE DETAILED SUBM ISSIONS SHE STATED THAT THE ASSESSEE WAS AN INDIVIDUAL BEING PA RTNER IN THE FIRM OF M/S NANAVATI ASSOCIATES AND K. NANAVATI & GANDHI ASSOCIATES AND THAT SHE HAD FILED HER RETURN OF INCOME FOR AY 2006-07 ON 30.12.2006 DECLARING TOTAL INCOME OF RS.29,75,562/- WHICH INCLUDED INTER ALIA STCG AGGREGATING TO RS.20,65,33 4/- FROM SALE OF SHARES AND MUTUAL FUNDS AND THE BREAK UP WAS GIV EN AS UNDER :- STCG ON SALES OF RS.12,62,857/- STCG ON SALE OF MUTUAL FUNDS AT RS.4,84,227/- AND STCG ON SALE OF SHARES (HDFC PMS) OF RS.3,18,25 0/- THE CIT(A) AFTER CONSIDERING THE DETAILED SUBMISSIO NS ALLOWED THE CLAIM OF ASSESSEE. THE REVENUE IS AGGRIEVED AND IS IN APPEAL BEFORE US. ITA NO._729/AHD/2011 ASST. YEAR 2006-07 4 3. BEFORE US THE LD. DR SUPPORTED THE ORDER OF ASSE SSING OFFICER. ON THE OTHER HAND THE LD. AR RELIED ON THE ORDER OF CIT(A) AND SUBMITTED THAT THE ISSUE IS COVERED BY THE DECI SION OF THE TRIBUNAL IN THE CASE OF KUNAL K. NANAVATI VS. ACIT, CIRCLE-9, AHMEDABAD IN ITA NO.3264/AHD/2009 FOR AY 2006-07 VI DE ORDER DATED 05.08.2011. COPY OF THE TRIBUNALS ORDER IS P LACED ON RECORD. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CAR EFULLY GONE THROUGH THE MATERIAL ON RECORD. WE FIND THAT SIMILA R ISSUE CAME UP BEFORE THE TRIBUNAL IN THE CASE OF KUNAL K. NANAVAT I VS. ACIT (SUPRA) AND THE TRIBUNAL HAS DECIDED THE ISSUE BY O BSERVING AS UNDER :- 6. HAVING HEARD BOTH THE SIDES, WE HAVE CAREFULL Y GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT THE ASSESSEE IS AN ADVOCATE, MAINLY PRACTICING AT HIGH COURT OF GUJARAT. BEING AN ADVOC ATE, HE IS DEBARRED FROM ACCEPTING FULL OR PART TIME SERVICE OR EMPLOYMENT OR CANNOT E NGAGE HIMSELF IN A TRADE, BUSINESS OR PROFESSION EXEPT AS AN ARTICLE CLERK OF AN ATTORNEY , ASSISTANT TO ADVOCATE, PART TIME SERVICE AS A PROFESSOR/LECTURER OR TEACHER IN LAW, ETC. THIS ALONE INDICATES THAT THE ASSESSEE BEING AN ADVOCATE CANNOT ENGAGE HIMSELF IN TRADING OF SHARES. IN THE BOOKS OF ACCOUNTS, THE ASSESSEE HAS SHOWN THE PURCHASE OF SH ARES UNDER THE HEAD INVESTMENT AND NOT AS A STOCK IN TRADE. IN THE PREVIOUS TWO AS SESSMENT YEARS, INCOME DECLARED BY THE ASSESSEE UNDER THE HEAD SHORT TERM CAPITAL GAIN HAS BEEN DULY ACCEPTED. THE COUNSEL OF THE ASSESSEE ALSO POINTED OUT THAT IMMEDIATELY SUCC EEDING YEAR ALSO INCOME DECLARED FROM SALE OF SHARES HAS BEEN ACCEPTED UNDER THE HEAD S HORT TERM CAPITAL GAIN. THE ASSESSEE HAS MAINLY TAKEN LOAN FROM HIS FATHER SHRI KRUKANT NANAVATI. THERE IS NO BAR FOR TAKING LOAN FROM FAMILY MEMBERS FOR MAKING INVESTMENT IN S HARES. THE VOLUME AND FREQUENCY AND CONTINUITY AND REGULARITY AS ALLEGED BY THE AO, IN THE ASSESSMENT ORDER, IN OUR CONSIDERED OPINION, IS NOT ENOUGH TO ACCEPT THAT TH E ASSESSEE IS ENGAGED IN TRADING IN ITA NO._729/AHD/2011 ASST. YEAR 2006-07 5 SHARES BECAUSE THE ASSESSEE IS AN ADVOCATE AND HIS FULL TIME ACTIVITY IS LEGAL PROFESSION. AS A MATTER OF FACT, IF ONE APPLIES THE TEST LAID D OWN BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF REWASHANKER A. KOTHARI (SUPRA), IT SUPP ORTS THE CASE OF THE ASSESSEE THAT HE IS AN INVESTOR AND NOT A TRADER. IT IS ON DOUBTS AND S USPICION, BOTH THE DEPARTMENTAL AUTHORITIES BELOW TREATED THE ASSESSEE AS TRADER A ND TAXED THE PROFIT EARNED ON SALE OF SHARES AS BUSINESS INCOME AS AGAINST SHORT TERM CAP ITAL GAIN, DECLARED BY THE ASSESSEE. IN VIEW OF THE FOREGOING, WE DIRECT THE AO TO TAX THE INCOME DECLARED BY THE ASSESSEE UNDER THE HEAD SHORT TERM CAPITAL GAIN 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. 4.1 NOTHING CONTRARY WAS BROUGHT TO OUR KNOWLEDGE O N BEHALF OF THE REVENUE. IN VIEW OF ABOVE DISCUSSIONS, WE ARE O F THE CONSIDERED VIEW THAT THE CIT(A) HAS RIGHTLY DIRECTE D THE AO TO TREAT THE IMPUGNED INCOME AS SHORT TERM CAPITAL GA IN. THERE IS NO INFIRMITY IN THE ORDER OF CIT(A). WE UPHOLD THE SAM E. 5. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS THE 30 TH DAY OF JULY, 2015 SD/- SD/- (ANIL CHATURVEDI) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMB ER DATED : 30/7/2015 MAHATA/- ITA NO._729/AHD/2011 ASST. YEAR 2006-07 6 COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DY.REGISTRAR,ITAT, AHMEDABAD 1. DATE OF DICTATION: 28/7/2015 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 29/7/2015 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 30.7.2015 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: