ACIT 32(2), MUMBAI V. LAXMI M CHATURVEDI, MUMBAI

ITA 7457/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2549 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 15-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.7457/MUM/2014 ASSESSMENT YEAR: 2010-11 A C I T - 32(2) PRATYAKSHA KAR BHAVAN ROOM NO. 202, 2 ND FLOOR BANDRA KURLA COMPLEX BANDRA (E), MUMBAI 400051 / VS. SMT. LAXMI M. CHATURVEDI TARA-1002, TARA APT. DHRUV TARA CHS, SHIV VALLABH ROAD, ASHOKVAN BORIVALI (E), MUMBAI 400066 ( / REVENUE) ( !'# $ /ASSESSEE) PAN. NO. AACPC3302M / REVENUE BY SHRI KAILASH KANOJIYA !'# $ / ASSESSEE BY NONE % & $ ' / DATE OF HEARING : 18/07/2016 & $ ' / DATE OF ORDER: 18/07/2016 ITA NO. 7457/MUM/2014 SMT. LAXMI M. CHATURVEDI 2 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DATED 19/09/2014 OF LD. COMMISSIONER OF INCOME TAX, MUMBAI. THE SOLE GROUND AGITATED BY THE REVENUE, BE FORE THIS TRIBUNAL, IS WITH RESPECT TO TREATING THE BUSI NESS INCOME AS SHORT TERM CAPITAL GAINS BY THE CIT(A) IG NORING THE SALE PATTERN OF SALES, FROM SALE OF 106634 UNIT S OF SALES ON WHICH THE ASSESSEE HAD HARDLY EARNED ANY DIVIDEN D. 2. DURING HEARING THE LEARNED D.R., SHRI KAILASH KA NOJIYA, DEFENDED THE ADDITION MADE BY THE ASSESSING OFFICER . ON THE OTHER HAND NONE WAS PRESENT FOR THE ASSESSEE IN SPI TE OF ISSUANCE OF REGISTERED AD NOTICE. THE ASSESSEE NEIT HER PRESENTED HERSELF NOR MOVED ANY ADJOURNMENT PETITIO N. IT SEEMS THAT THE ASSESSEE HAS NOTHING TO SAY, THEREFO RE, WE HAVE NO OPTION BUT TO PROCEED EX-PARTE, QUA THE ASS ESSEE AND TEND TO DISPOSE OF THIS APPEAL ON THE BASIS OF MATE RIAL AVAILABLE ON RECORD. 2.1 THE FACTS IN BRIEF ARE THAT THE ASSESSEE DECLAR ED INCOME OF RS.1,59,46,840/- IN HER RETURN FILED ON 08.10.20 10, THE INCOME INCLUDES SHORT TERM CAPITAL GAINS ON SALE OF SHARES OF RS.1,03,50,765/-. THE DETAILS FILED BY THE ASSESSEE WERE SUBMITTED DURING ASSESSMENT PROCEEDINGS AND THUS TH E LEARNED ASSESSING OFFICER ASSESSED THE TOTAL INCOME AT RS.1,60,96,901/-. THE ASSESSEE IN HER RETURN DECLAR ED SHORT TERM CAPITAL GAIN OF RS.1,03,50,765/- ON THE SALE O F SHARES ITA NO. 7457/MUM/2014 SMT. LAXMI M. CHATURVEDI 3 WHICH WAS TREATED AS BUSINESS INCOME BY THE ASSESSI NG OFFICER. ON APPEAL BEFORE THE LEARNED CIT(A) THE FA CTUAL MATRIX ALONG WITH VARIOUS CASE LAWS WAS DISCUSSED B Y THE LEARNED CIT(A) ALONG WITH THE SUBMISSIONS OF THE AS SESSEE AND ULTIMATELY FOUND THAT THE ASSESSEE WAS DEALING IN SHARES BOTH AS TRADER AS WELL AS HOLDING THE SHARES AS INV ESTMENT AND KEPT BOTH THE PORTFOLIO SEPARATELY AND THE MODE OF VALUATION OF STOCK WAS AS INVESTMENT AND THE STOCK HELD AS STOCK-IN-TRADE WAS TREATED DIFFERENTLY. THE CBDT CI RCULAR NO. 4 OF 2007 DATED 15.06.2007 WAS ALSO CONSIDERED AND FINALLY CONSIDERING THE DECISION FROM HON'BLE JURISDICTIONA L HIGH COURT IN YATISH TRADING CO. P. LTD. ALONG WITH THE DECISION FROM HON'BLE APEX COURT IN CIT VS. ASSOCIATE INDUST RIAL DEVELOPMENT CO. 82 ITR 586 AND HELD THAT THERE WAS NO REASON TO TREAT THE CAPITAL GAIN COMPONENT AS PART OF INCOME. THE REVENUE IS AGGRIEVED AND IS IN APPEAL BEFORE TH IS TRIBUNAL. 2.2 IF THE OBSERVATION MADE IN THE ASSESSMENT ORDER , LEADING TO ADDITION MADE TO THE TOTAL INCOME, CONCLUSION DR AWN IN THE IMPUGNED ORDER, MATERIAL AVAILABLE ON RECORD, ASSER TIONS MADE BY THE LD. RESPECTIVE COUNSEL, IF KEPT IN JUXT APOSITION AND ANALYZED, WE FIND THAT THERE WERE 160 SCRIPS. I T WAS OBSERVED BY THE ASSESSING OFFICER THAT OUT OF 10663 64 UNITS 608956 UNITS WERE SOLD WITHIN 15 DAYS AND 724123 UN ITS WERE SOLD WITHIN 30 DAYS AND 840593 UNITS WERE SOLD WITHIN THREE MONTHS. THE ASSESSING OFFICER ASKED THE ASSES SEE AS TO WHY THE INCOME FROM THESE UNITS SHOULD NOT BE TREAT ED AS BUSINESS INCOME. THE STAND OF THE ASSESSEE WAS THAT THE ITA NO. 7457/MUM/2014 SMT. LAXMI M. CHATURVEDI 4 ASSESSEE IS TRADING IN SHARES AS WELL AS MAKING INV ESTMENT AND WHATEVER INVESTMENT IS MADE THAT IS WITH INTENT ION TO EARN DIVIDEND. THE ASSESSING OFFICER WAS OF THE VIE W THAT MOTIVE FOR PURCHASING THE ORIGINAL SCRIPS WAS NOT I NVESTMENT SINCE THE HOLDING PERIOD IS LESS. THE LEARNED ASSES SING OFFICER RELIED UPON VARIOUS JUDICIAL PRONOUNCEMENTS AS MENT IONED IN THE ASSESSMENT ORDER AND CONSIDERING THE FREQUENCY OF SALE OF SHARES TOOK A PARTICULAR VIEW. WE NOTE THAT THE LEA RNED ASSESSING OFFICER HAS NOT QUANTIFIED THE SCRIPS IN A JUSTIFIABLE MANNER AS IS OOZING OUT FROM PARA 3(4), PAGE 2 OF T HE ASSESSMENT ORDER AND IF THE TOTAL FIGURES ARE ANALY SED THESE GOES MORE THAN THE TOTAL CLAIMED SCRIPS OF 1066364. IDENTICAL MISTAKE HAS BEEN REPEATED IN THE IMPUGNED ORDER. TH E STAND OF THE ASSESSEE BEFORE THE LEARNED CIT(A) AS WELL B EFORE THIS TRIBUNAL IS THAT SEPARATE ACCOUNTS HAVE BEEN MAINTA INED BY THE ASSESSEE, I.E. FOR TRADING AS WELL AS INVESTMEN T. AS SOON AS A PARTICULAR SCRIP IS PURCHASED IMMEDIATELY IT IS B OOKED EITHER AS STOCK IN TRADE OR AS INVESTMENT MEANING T HEREBY A PARTICULAR TREATMENT IS GIVEN TO A PARTICULAR SCRIP . SO FAR AS FREQUENCY OF SALES IS CONCERNED THE ASSESSEE FINDS SUPPORT FROM THE DECISION OF IN THE CASE OF ASHOK WADIA 45 TAXMANN.COM 182 (DEL.) AND THE DECISION FROM HON'BL E JURISDICTIONAL HIGH COURT IN GOPAL PUROHIT 228 CTR 582. THE LEARNED CIT(A) HAS DELIBERATED UPON THE ISSUE WITH RESPECT TO MAGNITUDE OF PURCHASE AND SALE OF SHARES, DIVIDEND INCOME IN RELATION TO HOLDINGS. IT IS A WELL SETTLED PRINCIPL E THAT THE TOTAL TURNOVER AND THE FREQUENCY OF SALE IS NOT THE SOLE INDICATOR TO PROVE THAT THE ASSESSEE IS TRADER IN SHARES. IT HAS BEEN WELL ITA NO. 7457/MUM/2014 SMT. LAXMI M. CHATURVEDI 5 DEFINED BY HON'BLE APEX COURT IN CIT VS. ASSOCIATED INDUSTRIAL DEVELOPMENT CO. 82 ITR 586 AND HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF GOAPL PURO HIT WHEREIN IT WAS HELD AS UNDER: - DELIVERY BASED TRANSACTION SHOULD BE TREATED AS OF THE NATURE OF INVESTMENT TRANSACTION AND PROFIT THEREFROM SHOU LD BE TREATED AS SHORT TERM CAPITAL GAIN OR LONG TERM CAP ITAL GAINS DEPENDING UPON THE PERIOD OF HOLDING. THERE IS UNCONTROVERTED FINDING IN THE IMPUGNED OR DER THAT THE ASSESSEE MAINTAINED SEPARATE PORTFOLIO AND MODE OF VALUATION OF STOCK HELD AS INVESTMENT AND THE STOCK HELD AS TRADE AND THE SAME WERE TREATED DIFFERENTLY. THE IN VESTMENT WAS VALUED AT COST AND WAS DULY SHOWN IN THE BALANC E SHEET WHEREAS STOCK IN THE TRADE WAS VALUED AT THE COST O R MARKET PRICE WHICHEVER WAS LOWER AND THE LOSS, IF ANY, WAS ACCORDINGLY CLAIMED IN THE P & L ACCOUNT. IT IS ALS O AN ADMITTED POSITION THAT THE SALES, HELD AS INVESTMEN T, WERE SOLD BY THE ASSESSEE AND WAS NOT CLAIMED UNDER SECT ION 88E OF THE ACT MEANING THEREBY THE ASSESSEE HAS NOT CLA IMED BENEFICIAL PROVISION WHICH WERE APPLICABLE TO THE S HARES HELD AS STOCK IN TRADE. SO FAR AS THE OBSERVATION THAT Q UANTUM BEING HIGH CANNOT BE THE SOLE CRITERIA TO TREAT THE PORTFOLIO AS BUSINESS INCOME. THE CBDT CIRCULAR NO. 4 OF 2007 DA TED 15.06.2007 CLARIFIES THE POSITION. THE DECISION IN CIT VS. MADAN GOPAL RADHALAL 73 ITR 62 CLARIFIES THAT THERE CANNOT BE A PRESUMPTION THAT EVERY ACQUISITION BY A DEALER IN THE PARTICULAR COMMODITY IS AN ACQUISITION FOR THE PURP OSES OF HIS BUSINESS. IN EACH CASE THE INTENTION HAS TO BE GATH ERED FROM THE CONDUCT AND FACTS OF THE CASE. THE HON'BLE JUDI CDICTIONAL ITA NO. 7457/MUM/2014 SMT. LAXMI M. CHATURVEDI 6 HIGH COURT IN YATISH TRADING COMPANY HAS LAID DOWN A PRINCIPLE. THE CLOSING STOCK VALUATION HAS BEEN DON E AT THE TIME OF PURCHASE. CONSIDERING THE TOTALITY OF FACTS AND THE JUDICIAL PRONOUNCEMENTS AND ON THE BASIS OF BROAD P RINCIPLE TAKEN IN THE IMPUGNED ORDER AND VARIOUS JUDICIAL PR ONOUNCE- MENTS AVAILABLE AND THE CONSISTENT STAND TAKEN BY T HE TRIBUNAL IN IDENTICAL SITUATION ON THE ISSUE IN HAN D, WE FIND NO INFIRMITY IN THE CONCLUSION OF THE LEARNED CIT(A ). IN VIEW OF THE ABOVE THE APPEAL FILED BY THE REVENUE IS DISMIS SED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVE FROM BOTH SIDES AT T HE CONCLUSION OF THE HEARING ON 18/07/2016. SD/- SD/- ( RAJESH KUMAR ) (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER % MUMBAI; ) DATED : 18/07/2016 AA P.S/. . . %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. +,-. / THE APPELLANT 2. /0-. / THE RESPONDENT. 3. 1 1 2$ ( +, ) / THE CIT-25, MUMBAI. 4. 1 1 2$ / CIT(A)-35, MUMBAI 5. 45 /$ ! , 1 +,' +! 6 , % / DR, ITAT, MUMBAI 6. 7' 8% / GUARD FILE. / BY ORDER, 04,$ /$ //TRUE COPY// / (DY./ASSTT. REGISTRAR) , % / ITAT, MUMBAI