NIMISH CHANDULAL SHAH, MUMBAI V. DCIT RG 2(1), MUMBAI

ITA 7318/MUM/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2610 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-07-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 15-04-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 12-12-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business income; Earning of tax free income
• Section: 142(1); 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUM BAI . . , , !' #$, % , & BEFORE SHRI R.C.SHARMA, AM AND SHRI AMARJIT SINGH, JM / I.T.A. NO.7318/MUM/2013 ( %' ( / ASSESSMENT YEAR: 2010-11) MR. NIMISH CHANDULAL SHAH 401- A, PLEASANT PAREK, 65, PEDDAR ROAD, MUMBAI - 400026 ' / VS. DEPUTY COMMISSIONER OF INCOME TAX RANGE 2(1) 5 TH FLOOR, AAYAKAR BHAVAN, MUMBAI ./ ./ PAN/GIR NO. : AAHPS6423N ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING: 22.04.2016 !' /DATE OF PRONOUNCEMENT: 13.07.2016 #$ / O R D E R PER AMARJIT SINGH, JM: THIS IS AN APPEAL AGAINST THE ORDER DATED 07.10.201 3 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) 4, MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO THE A.Y.20 10-11. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- ASSESSEE BY: SHRI CHETAN A. KARIA DEPARTMENT BY: SMT. POOJA SWAROOP ITA NO.7318/M/2013 A.Y. 2010-11 2 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) ERRED IN UPHOLDING THE ACTION OF THE LEARNED ASSESSING OF FICER IN TREATING CAPITAL GAIN ON TRANSACTIONS IN SHARES AMO UNTING TO RS,1,76,66,937/- AS BUSINESS INCOME. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO APPRECIATE THAT ON SAME FACTS IN THE EARLIER PRE VIOUS YEAR, THE TRANSACTION WERE TREATED AS INVESTMENT. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL) FAILED TO APPRECIATE THAT DISALLOWANCE U/S.14A WAS NOT CAL LED FOR IF THE HOLDING OF SHARES WAS HELD TO BE STOCK IN TR ADE. 4. THE APPELLANT PRAYS THAT: (I) IT MAY BE HELD THAT GAINS ON TRANSACTION IN SHA RES IS ASSESSABLE AS CAPITAL GAINS; (II) DISALLOWANCE U/S.14A MAY BE DELETED; (III) PERSONAL HEARING MAY BE GRANTED, (IV) ANY OTHER RELIEF YOUR HONOURS MAY DEEM FIT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FILED HIS RETURN OF INCOME ON 14.10.2010 DECLARING TOTAL INCOME TO T HE TUNE OF RS.1,22,44,600/-. THE RETURN WAS PROCESSED U/S.143 (1) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). THE CASE WAS S ELECTED FOR SCRUTINY, THEREFORE NOTICE U/S.143(2) OF THE ACT DA TED 02.09.2011 WAS ISSUED AND SERVED UPON THE ASSESSEE. NOTICES U/S.1 43(2) AND 142(1) OF THE ACT WERE ALSO ISSUED WHICH WERE SERVED UPON THE ASSESSEE. THE ASSESSEE HAS DISCLOSED THE SHORT TERM CAPITAL GAIN OF RS.1,76,66,937/- BUT THE ASSESSING OFFICER WAS OF T HE VIEW THAT THE ASSESSEE WAS DOING THE BUSINESS OF SHARE TRADING, T HEREFORE THE SAID INCOME WAS TREATED AS BUSINESS INCOME AND ACCORDING LY TAXED. ITA NO.7318/M/2013 A.Y. 2010-11 3 THEREAFTER, THE ASSESSING OFFICER ALSO APPLIED THE SECTION 14A R.W. RULE 8D OF THE ACT IN CONNECTION WITH THE EXPENDITU RE TO EARN THE EXEMPT INCOME TO THE TUNE OF RS.3,10,002/-. SINCE THE ASSESSEE WAS NOT SATISFIED, THEREFORE, FILED AN APPEAL BEFORE TH E CIT(A) WHO CONFIRMED THE ORDER OF THE ASSESSING OFFICER ON THE ABOVE SAID ISSUES, THEREFORE, THE ASSESSEE HAS FILED THE PRESENT APPEA L BEFORE US. ISSUE NO.1:- 4. THE ISSUE NO.1 IS NOT PRESSED BY THE ASSESSEE, T HEREFORE, THIS ISSUE IS DECIDED IN FAVOUR OF THE REVENUE AGAINST T HE ASSESSEE BEING NOT PRESSED. ISSUE NO.2 & 3:- 5. THE ISSUE NO.2 & 3 ARE INTERCONNECTED THEREFORE, THESE ISSUES ARE BEING TAKEN UP TOGETHER FOR ADJUDICATION. UNDER TH ESE ISSUES THE MAIN CONTENTION OF THE ASSESSEE IS THAT THE INCOME TO TH E TUNE OF RS.1,76,66,937/- IS THE INCOME FROM SHORT TERM CAPI TAL GAIN AND ACCORDINGLY LIABLE TO BE TAXED. IT IS ARGUED THAT THE REVENUE HAS TREATED THE INCOME OF THE ASSESSEE AS SHORT TERM CAPITAL GA IN AND LONG TERM CAPITAL GAIN FOR THE A.Y.2008-09 AND 2009-10 BUT CH ANGED THE VIEW FOR THE PRESENT ASSESSMENT YEAR WITHOUT ANY CHANGE OF CIRCUMSTANCES THEREFORE THE ORDER OF CIT(A) IN QUESTION IS WRONG AGAINST LAW AND FACTS. IT IS ALSO ARGUED THAT THE ASSESSEE WAS DEA LING IN THE DIFFERENT ACTIVITIES AND IN TRADING INVESTMENT AND THE ASSESS EE CAN MAINTAIN THE ITA NO.7318/M/2013 A.Y. 2010-11 4 TWO ACCOUNTS ONE FOR THE BUSINESS PURPOSE AND THE O THER FOR THE INVESTMENT PURPOSE BUT THE ASSESSING OFFICER AS WEL L AS CIT(A) DIVERTED THEIR VIEWS FROM THE EARLIER ASSESSMENT YE ARS WITHOUT ANY JUSTIFIABLE GROUND, THEREFORE, THE ORDER IN QUESTIO N IS WRONG AGAINST LAW AND FACTS AND IS LIABLE TO BE SET ASIDE. IN SU PPORT OF THESE CONTENTIONS THE REPRESENTATIVE OF THE ASSESSEE HAS PLACED RELIANCE UPON THE LAW SETTLED IN CIT VS. AVINASH JAIN (2012) (DEL HI HIGH COURT) AND COMMISSIONER OF INCOME TAX (CENTRAL), CALCUTTA VS. ASSOCIATED INDUSTRIAL DEVELOPMENT CO. (P.) LTD. [1971] 82 ITR 586 AND CIT VS. CONSOLIDATED FINVEST & HOLDING LTD. (2012) 337 ITR 264 (DELHI). 5. ON THE OTHER HAND THE LEARNED REPRESENTATIVE OF THE DEPARTMENT HAS STRONGLY RELIED UPON THE ORDER PASSED BY THE CI T(A). COPY OF ORDER FOR A.Y.2008-09 LIES AT PAGE NOS.75 TO 77 AND COPY FOR A.Y.2009-10 LIES AT PAGE NOS. 65 TO 74 SPEAKS ABOUT THESE FACTS THAT THE ASSESSEES INCOME ON THE SHARES HAS BEEN TREATE D AS SHORT TERM CAPITAL GAIN / LONG TERM CAPITAL GAIN AND ACCORDING LY, THE TAX HAS BEEN ASSESSED. IT IS REQUIRED TO BE ASCERTAIN WHET HER THE ACTIVITY OF THE ASSESSEE IS THE BUSINESS ACTIVITY OR INVESTMENT ACT IVITY. THE ORDER OF THE ASSESSING OFFICER SPEAKS THAT THE AVAILABLE CAP ITAL WAS TO THE TUNE OF RS.18 CRORES WITH THE ASSESSEE AND THE ASSESSEE INVESTED AN AMOUNT OF RS.5.48 CRORES. THE ASSESSEE INVESTED HIS OWN F UNDS IN SHARES. THE ASSESSING OFFICER DECLINED THE CONTENTION OF THE AS SESSEE ON THE GROUND OF THIS FACT THAT THE ASSESSEE ROTATED HIS F UNDS AVAILABLE WITH ITA NO.7318/M/2013 A.Y. 2010-11 5 HIM FOR SEVERAL TIMES IN THE SALE PURCHASE OF SHARE S AND THE ASSESSEE DID NOT PROVE ALL TRANSACTIONS. ROTATING THE INCOM E IN THE SHARES DOES NOT ITSELF A CRITERIA TO TREAT THE INCOME FROM THE SHARES AS BUSINESS SHARES. THE ACTIVITY SHOULD BE ENTIRELY BE DIFFERE NT TO ARRIVE AT THIS CONCLUSION THAT THE ASSESSEE IS DOING THE TRADING O F SHARES AND ACCORDINGLY INCOME FROM SHARES ARE LIABLE TO BE TRE ATED AS BUSINESS INCOME. THE FACTS AND CIRCUMSTANCES FOR THE A.Y.20 08-09 AND 2009- 10 IS REQUIRED TO BE DIFFERENTIATE WITH THE CURRENT ASSESSMENT YEAR TO ARRIVE AT THIS CONCLUSION THAT THE INCOME OF THE AS SESSEE IS FROM THE SHARE TRADING. THE HOLDING PERIOD OF THE SHARES OF THE ASSESSEE IS LESS THAN 12 MONTHS IN CONNECTION WITH THE 98% SHARES. N O REASONS HAVE BEEN MENTIONED ON RECORD TO DIFFERENTIATE THE CIRCU MSTANCES OF THE ASSESSMENT YEAR OF 2008-09 AND 2009-10 WITH THE REL EVANT ASSESSMENT YEAR. THE INVESTMENT MADE BY THE ASSESSEE IS FROM H IS OWN FUND. NO DOUBT TRADING CAN BE DONE WITH HIS OWN FUND BUT THE TRADING SHOULD BE PROVED ON RECORD BEYOND THE SHADOW OF REASONABLE DO UBT. CHANGING CIRCUMSTANCES FROM THE PREVIOUS YEAR IS NOT ON RECO RD. MOREOVER, THE CONTENTION OF THE ASSESSEE IS THAT HE IS MAINTAININ G THE SEPARATE TRADING ACCOUNT AND THE INVESTMENT ACCOUNT. IF IT IS ON TH E PARAMETER OF THE ASSESSEE TO MAINTAIN THE ACCOUNT THEN NO DOUBT THE ASSESSEE CAN MAINTAIN BOTH THE ACCOUNTS AND IN THIS REGARD WE AR E FOUND SUPPORT OF LAW RELIED IN CIT VS. AVINASH JAIN (2012) (DELHI H IGH COURT) AND COMMISSIONER OF INCOME TAX (CENTRAL), CALCUTTA VS. ASSOCIATED INDUSTRIAL DEVELOPMENT CO. (P.) LTD. [1971] 82 ITR 586 AND CIT VS. ITA NO.7318/M/2013 A.Y. 2010-11 6 CONSOLIDATED FINVEST & HOLDING LTD. (2012) 337 ITR 264 (DELHI). IN VIEW OF THE DISCUSSION MADE ABOVE WE ARE OF THE VIE W THAT THE ORDER PASSED BY THE CIT(A) IS WRONG AGAINST LAW AND FACTS AND IS NOT LIABLE TO BE SUSTAINABLE IN THE EYES OF LAW THEREFORE THE ORDER UNDER CHALLENGED ON THIS POINT IS HEREBY ORDER TO BE SET ASIDE. THIS ISSUE IS HEREBY RESTORED TO THE FILE OF ASSESSING OFFICER TO COMPUTE THE INCOME OF THE ASSESSEE BY DELETING AMOUNT TO THE TUNE OF R S.1,76,66,937/- AS SHORT TERM CAPITAL GAIN. ISSUE NO.4:- 6. THE ISSUE NO.4 IS NOT PRESSED BY THE ASSESSEE, T HEREFORE, THIS ISSUE IS DECIDED IN FAVOUR OF THE REVENUE AGAINST T HE ASSESSEE BEING NOT PRESSED. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS HEREBY PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH JULY , 2016. SD/- SD/- (R.C.SHARMA) (AMARJIT SINGH) # / ACCOUNTANT MEMBER %& # /JUDICIAL MEMBER ' ( MUMBAI; )# DATED : 13 TH JULY, 2016 MP MP MP MP ITA NO.7318/M/2013 A.Y. 2010-11 7 * +%'#, -,(' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. * ( ) / THE CIT(A)- 4. * / CIT 5. -./ &&01 , 01' , ' ( / DR, ITAT, MUMBAI 6. /34 5 / GUARD FILE. ' / BY ORDER, - & //TRUE COPY// ./$ ! /(DY./ASSTT. REGISTRAR) , ' ( / ITAT, MUMBAI