SMT. SHARMILA SHYAM MELWANI, MUMBAI V. ITO 19(1)-2, MUMBAI

ITA 7552/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8306 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-11-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2006-2007
• Appeal Filed On: 09-11-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: V KRISHNAMOORTHY
• Assessee Lawyers: PRAKKASH MUNI
• Keywords: Business income
• Section: 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E MUMBAI . . , . / BEFORE SHRI B.R. MITTAL, JUDICIAL MEMBER / AND , . . SHRI RAJENDRA, ACCOUNTANT MEMBER . / ITA NO. 7552/M/2011 / ASSESSMENT YEAR 2006-07 SMT. SHARMILA SHYAM MELWANI, 5, HIRA, 4 TH ROAD, OPP. CESARS PALACE, KHAR (WEST), MUMBAI-400 052. PAN: AAAPM 9174 B VS. ITO 19(1) - 2, MUMBAI. ( / APPELLANT ) ( ! / RESPONDENT ) ' / APPELLANT BY : SHRI PRAKKASH MUNI ! # ' /RESPONDENT BY : SHRI V. KRISHNAMOORTHY # $%& / DATE OF HEARING : 17-10-2012 '( # $%& / DATE OF PRONOUNCEMENT : 07-11-2012 )* / O R D E R PER RAJENDRA, AM THE APPELLANT HAS FILED THIS APPEAL AGAINST THE ORD ER DT. 26-08-2011 OF THE CIT(A)-22, MUMBAI ON THE FOLLOWING GROUNDS OF APPEA L: GROUND I: 1.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN THE LAW, THE LEARNED COMMISSIONER OF THE INCOME TAX (APPEALS) ERRED IN C ONFIRMING THE ACTION OF THE ASSESSING OFFICER IN TAXING A SUM OF RS. 8,01,642/- AS BUSINESS INCOME INSTEAD OF CAPITAL GAIN. GROUND II: 2.1.1 THE APPELLANT PRAYS THAT APPELLANT INVESTED IN SHAR ES AND SECURITIES, AUDIT UNDER SECTION 44AB OF THE INCOME TAX ACT, 1961 IS NOT APP LICABLE. GROUND III: 3.1 THE APPELLANT PRAYS THAT THE PENALTY U/S. 271 B OF THE INCOME TAX ACT, 1961 SHALL NOT BE LEVIED. THE APPELLANT CRAVES, LEAVE TO ADD, ALTER OR MODIFY ANY GROUND OF APPEAL BEFORE OR AT THE TIME OF HEARING OF APPEAL. ITA NO. 7552/M/2011 SMT. SHARMILA SHYAM MELWANI, 2 2. ASSESSEE AN INDIVIDUAL, FILED HER RETURN OF INCOME ON 31-07-2006 DECLARING TOTAL INCOME OF RS. 8.01 LAKHS. INITIALLY THE RETU RN HAD PROCESSED U/S. 143(1) OF THE INCOME TAX ACT, 1961 (ACT) ACCEPTING THE RETURN OF INCOME. LATER ON THE CASE WAS SELECTED FOR SCRUTINY AND ASSESSMENT WAS FINALIZED U/S. 143(3) OF THE ACT ON 28-11- 2008. DURING THE ASSESSMENT PROCEEDINGS, ASSESSING OFFICER (AO) FOUND THAT ASSESSEE HAD SHOWN INCOME UNDER THE HEAD CAPITAL G AINS ON ACCOUNT OF SALE OF SHARES. HE FOUND THAT SHE HAD SOLD SHARES AMOUNTIN G TO RS. 83.38 LAKHS AND HAD PURCHASED THE SHARES OF RS. 75.36 LAKHS DURING THE YEAR UNDER CONSIDERATION. HE ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE AS TO WH Y THE INCOME DECLARED UNDER THE HEAD SHORT TERM CAPITAL GAIN SHOULD NOT BE TREATE D AS BUSINESS INCOME. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, HE HEL D THAT CONSIDERING THE VOLUME AND FREQUENCY OF TRANSACTION, RATIO BETWEEN PURCHASE/SA LE AND THE PERIOD OF HOLDING, MOTIVE OF THE ASSESSEE COULD BE ARRIVED AT. CONSID ERING THESE FACTS, HE HELD THAT ASSESSEE WAS CARRYING OUT SYSTEMATIC BUSINESS OF SH ARE TRADING AND HENCE THE INCOME COULD NOT TO BE ASSESSED UNDER THE HEAD INCOME FRO M OTHER SOURCES. 3. ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPEL LATE AUTHORITY (FAA). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE A ND ASSESSMENT ORDER, HE HELD THAT ASSESSEE HAD TRADED IN 9 SCRIPS DURING THE YEAR UND ER CONSIDERATION, THAT IN 7 SCRIPS PERIOD OF HOLDING WAS LESS THAN 30 DAYS, SHARES OF NTPC AND TASC PHARMA WERE PURCHASED AND SOLD ON THE SAME DATE THAT INTENTION OF THE APPELLANT WAS NOT TO HOLD SHARES AS INVESTMENT THAT TRANSACTION IN SHARES ARE RELATED TO THE PERIOD NOVEMBER 2005 TO MARCH 2006 (I.E., PERIOD OF LESS THAN 5 MON THS), THAT APPELLANT MADE AN ATTEMPT TO EARN MAXIMUM PROFIT, THAT TURN-OVER OF RS. 83 LAKHS IN SHARES WAS WITHIN A SPAN OF LESS THAN 3 MONTHS, THAT APPELLANT HAD BO RROWED LOANS OF RS. 62.76 LAKHS FOR ACQUIRING SHARES. RELYING UPON THE ORDER OF THE SM T. SADHANA NABERA (ITA NO. 2586/M/09 DT. 26-03-2010) AND V. NAGESH (ITA NO. 5410/M/08 DT. 24-09-2009) HE HELD THAT TRANSACTIONS CARRIED OUT BY THE ASSESSEE HAD TO BE TAXED UNDER THE HEAD BUSINESS INCOME. HE UPHELD THE ORDER OF THE AO. 4. BEFORE US, AUTHORISED REPRESENTATIVE (AR) SUBMITTED THAT LOANS WERE TAKEN FROM ARE FROM THE HUSBAND OF THE ASSESSEE ONLY THAT SHARES WERE HELD AS INVESTMENT, THAT THERE WAS NO BUSINESS ACTIVITY, THAT ASSESSEE HAD NO INFRASTRUCTURE OR STAFF TO CARRY OUT BUSINESS. HE RELIED UPON THE CASE OF SUGAM CHA ND C. SHAH (37 DRT 345), GOPAL PUROHIT (122 TTJ 87); MAHENDRA C. SHAH (ITA NO. 4932/M/09 AY 2006-07). DEPARTMENTAL REPRESENTATIVE (DR) SUBMITTED THAT SHA RES WERE PURCHASED WITH BORROWED MONEY, THAT VOLUME OF THE TRANSACTIONS AND FREQUENCY PROVED THAT TRANSACTION IN QUESTIONS WERE NOT INVESTMENT, THAT CUMULATIVE EFFECT OF THE VARIOUS FACTS DISCUSSED AT LENGTH BY THE AO CLEARLY PROVED THAT ASSESSEE WAS CARRYING OUT SYSTEMATIC BUSINESS ACTIVITY. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL PUT BEFORE US. WE FIND THAT ASSESSEE WAS REGULARLY BUYING AND SELL ING SHARES THROUGHOUT THE YEAR AND THUS TO EARN PROFIT FROM THE SAID BUSINESS ACTIVITY WAS THE MOTIVE BEHIND THE TRANSACTIONS. THE SHARES WERE NOT HELD AS INVESTME NT BY THE ASSESSEE AS POINTED OUT BY THE AO AND FAA. A FEW SHARES WERE PURCHASED AND SOLD ON THE SAME DAY. SYSTEMATIC SELLING AND PURCHASING OF THE SHARES ARE INDICATION THAT THEY WERE STOCK-IN- TRADE FOR THE ASSESSEE IN THE YEAR UNDER CONSIDERAT ION. THE ASSESSEE HAD TAKEN A LOAN OF RUPEES MORE THAN 62 LAKHS FOR THE SAID TRANSACTI ONS. IT CLEARLY SHOWS THE INTENTION OF THE ASSESSEE WAS TO CARRY OUT BUSINESS IN SHARES RATHER THAN HOLDING THEM ITA NO. 7552/M/2011 SMT. SHARMILA SHYAM MELWANI, 3 AS INVESTMENT. THE ASSESSEE HAS NOT PRODUCED ANY E VIDENCE BEFORE FAA OR US TO SHOW THAT SHARES WERE HELD AS INVESTMENT AND NOT AS STOC K IN TRADE. WE ARE OF THE OPINION THAT THE ORDER PASSED BY THE FAA DOES NOT SUFFER FR OM ANY FACTUAL OR LEGAL INFIRMITY. THEREFORE, DOES NOT NEED ANY INTERFERENCE FROM OUR SIDE. WE HAVE GONE THROUGH THE CASES RELIED UPON BY THE AR. IN THE CASE OF MAHEND RA C. SHAH (SUPRA) ASSESSEE WAS FOR THE LAST SEVERAL YEARS SHOWING THE INVESTMENT I N SHARES AND AO HAD NEVER CHALLENGED THE BOOK KEEPING OR ACCOUNTING OF THE SH ARES AS INVESTMENT. THUS, THE FACTS OF MAHENDRA C. SHAH (SUPRA) ARE NOT APPLICABLE TO THE CASE UNDER CONSIDERATION. SIMILARLY, FACTS OF THE CASES OF GOPAL PUROHIT, SU GAM CHAND C. SHAH AND MAHENDRA C. SHAH (SUPRA) ARE CLEARLY DISTINGUISHABLE FROM FA CTS UNDER CONSIDERATION. CASES RELIED BY THE FAA ARE SQUARELY APPLICABLE TO THE FA CTS OF THE PRESENT CASE. GROUND NO.1 IS DECIDED AGAINST THE ASSESSEE. 6. GROUND NO.2 IS IN THE RESTRICTING DEDUCTION UNDER C HAPTER VI-A OF THE ACT AMOUNTING TO RS. 92,153/- OUT OF DEDUCTION OF RS. 1 .20 LAKHS. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE THE FAA, ASSESSEE DID NOT PRESS THIS GROUND FOR ADJUDICATION AND SAME WAS DISMISSED. IN OUR OPINIO N, THIS GROUND IS INFRUCTUOUS, AS IT IS NOT ARISING OUT OF THE ORDER OF THE FAA. 7. GROUND NO.3 IS CONSEQUENTIAL TO GROUND NO.1 AND WE HAVE HELD THAT THE INVESTMENT MADE IN SHARES AND SECURITY HAD TO BE TR EATED AS INVESTMENT IN STOCK IN TRADE. IN THESE CIRCUMSTANCES, FOLLOWING THE DECIS ION OF GROUND NO.1, WE DISMISS GROUND NO.3 ALSO. 8. GROUND NO. 4 IS ABOUT PENALTY U/S. 271B OF THE ACT. BEFORE US, AR CONCEDED THAT IT IS NOT ARISING OUT OF THE ORDER OF THE FAA. IN OUR OPINION, IF AO HAS LEVIED PENALTY U/S. 271B OF THE ACT, SEPARATE APPEAL HAS T O BE FILED. ISSUE OF LEVY OF PENALTY U/S. 271B CANNOT BE AGITATED BEFORE US IN THE QUANT UM OF APPEAL. AS GROUND NO.4 IS INFRUCTUOUS, SAME STANDS REJECTED. AS A RESULT, APPEAL FILED BY THE ASSESSEE IS DISMI SSED. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH NOVEMBER, 2012. SD/- SD/- ( . . / B.R. MITTAL ) ( / RAJENDRA ) )+ / JUDICIAL MEMBER & )+ / ACCOUNTANT MEMBER MUMBAI, ,) DATE: 7 TH NOVEMBER, 2012 TNMM ITA NO. 7552/M/2011 SMT. SHARMILA SHYAM MELWANI, 4 )* )* )* )* # ## # $- $- $- $- .-$ .-$ .-$ .-$ / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. THE CONCERNED CIT (A) 4. THE CONCERNED CIT 5. DR E BENCH, ITAT, MUMBAI 6. GUARD FILE !-$ $ //TRUE COPY// )* )* )* )* / BY ORDER, / // / / 0 0 0 0 DY./ASSTT. REGISTRAR , / ITAT, MUMBAI