ASST. COMM. OF INCOME-TAX, RANGE-21(3), MUMBAI V. KRISHNAKUMAR NATRAJAN, MUMBAI

ITA 7663/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75917 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 19-02-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 11-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M L PERUMAL
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI . . , , BEFORE SHRI I. P. BANSAL, JM AND SHRI SANJAY ARORA, AM ./I.T.A. NO. 7663/MUM/2011 ( / ASSESSMENT YEAR: 2007-08) ASST. CIT, CRICLE-21(3), C-11BLDG, 5 TH FLOOR, PRATYAKASH KAR BHAVAN, BKC, BANDRA(E), MUMBAI-51 / VS. KRISHNAKUMAR NATRAJAN, B-2079, 2 ND FLOOR, OBEROI GARDENS, CHANDIVALI FARMS ROAD, ANDHERI (EAST), MUMBAI-400 072 ./PAN : ADTPK 9861 F ( /APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI M. L. PERUMAL / RESPONDENT BY : NONE ! '# $ % & /DATE OF HEARING : 19/02/2014 '() % & / DATE OF PRONOUNCEMENT : 27/03/2014 * / O R D E R PER SANJAY ARORA, AM. THIS IS AN APPEAL BY THE REVENUE DIRECTED AGAINST T HE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-32, MUMBAI (C IT(A) FOR SHORT) DATED 11/08/2011, ALLOWING THE ASSESSEES APPEAL CONTESTI NG ITS ASSESSMENT FOR ASSESSMENT YEAR (AY) 2007-08 U/S.143(3) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) DATED 21/12/2009. 2. NONE APPEARED ON BEHALF OF THE RESPONDENT-ASSESS EE WHEN ITS APPEAL WAS CALLED OUT FOR HEARING. A PERUSAL OF THE RECORD REVEALS TH AT THE NOTICE OF HEARING, SENT THROUGH REGISTERED POST ON 29/08/2013, HAS BEEN RETURNED BA CK UN-SERVED WITH THE POSTAL REMARK REFUSED. IN FACT, DIRECTIONS WERE ALSO GIV EN BY THE BENCH TO THE LD. 2 ITA NO.7663/MUM/2011 (A.Y. 2007-08) ASST. CIT VS. KRISHNAKUMAR NATRAJAN. DEPARTMENTAL REPRESENTATIVE (DR FOR SHORT) ON AN EARLIER DATE OF HEARING, I.E., 27/08/2013, FOR THE SERVICE OF NOTICE OF HEARING, A ND WHICH HAS ALSO BEEN SOUGHT BY THE REVENUE, AND TOWARD WHICH A COPY OF THE SAME ST ANDS PLACED ON RECORD. FURTHER, THE ADDRESS ON BOTH THE COMMUNICATIONS IS ALSO AS P ER FORM NO. 36, AND WHICH WE FIND TO BE IN AGREEMENT WITH THAT MENTIONED IN FORM 35 FILED BY THE ASSESSEE BEFORE THE FIRST APPELLATE AUTHORITY. UNDER THE CIRCUMSTAN CES, THEREFORE, WE ONLY CONSIDER IT FIT AND PROPER TO PROCEED IN THE MATTER AND DECIDE THE APPEAL AFTER HEARING THE PARTY BEFORE US. THE LD. DR WOULD RELY ON THE ASSESSMENT ORDER. 3.1 WE HAVE HEARD THE PARTY BEFORE US AS WELL AS PE RUSED THE MATERIAL ON RECORD. THE SOLE ISSUE ARISING IN THE INSTANT APPEAL BY THE REVENUE IS THE ASSESSMENT OF THE PROFIT AND GAINS ARISING ON THE PURCHASE AND SALES OF SHARES BY THE ASSESSEE, AN INDIVIDUAL, AS SHORT TERM CAPITAL GAINS (STCG FOR SHORT) AND LONG TERM CAPITAL GAINS (LTCG FOR SHORT), I.E., AS RETURNED, AS AGA INST BUSINESS INCOME BY THE ASSESSING OFFICER (AO FOR SHORT) ON THE DIRECTION BY THE LD. CIT(A). THE RELEVANT FINDINGS OF THE FIRST APPELLATE AUTHORITY ARE AT PA RA 3.4 (PAGES 6 AND 7) OF HIS ORDER, WHICH READS AS UNDER 3.4 DURING THE COURSE OF APPELLATE PROCEEDINGS THE ASS ESSEE WAS REQUIRED TO FURNISH THE DETAILS OF THE SHARE TRANSA CTIONS. IF THE ABOVE PARAMETERS ARE APPLIED TO FACTS OF APPELLANT, THEN IT SHOWS THAT THE TOTAL NUMBER OF TRANSACTIONS DONE BY THE APPELLANT DURING THE YEAR ARE 56 TRANSACTIONS ONLY AND OUT OF WHICH ONLY 12 TRANSACT ION (21%) ARE SUCH WHERE THE PERIOD OF HOLDING IS LESS THAN 30 DAYS. O UT OF 56 TRANSACTIONS, THERE ARE ONLY 3 TRANSACTIONS WHERE THE TRANSACTION S HOLDING IS FOR 10 DAYS. ONLY 13% OF CAPITAL GAINS IS EARNED ON SHARES HELD FOR LESS THAN 30 DAYS. IT IS FURTHER NOTED THAT 84% OF THE TOTAL SHORT TERM CAPITAL GAIN HAS BEEN EARNED ON THE SHARES WHICH HAVE BEEN HELD FOR MORE THAN 6 MONTHS SUGGESTING THAT MAJORITY OF SHARES ARE BEI NG HELD FOR LONGER PERIODS. THE NUMBER OF SCRIPTS DEALT BY THE ASSESS EE IS 31 COMPANIES. IN CASE OF LONG TERM CAPITAL GAIN SHOWN BY THE APPE LLANT, THERE IS ONLY A SINGLE TRANSACTION THAT TOO WHERE THE ASSESSEE H AS SOLD THE SHARES AFTER HOLDING IT FOR MORE THAN 2 YEARS. THE ABOVE F ACTS AND FIGURES CLEARLY SUGGEST THAT THE FREQUENCY OF THE TRANSACTI ONS IS NOT VERY HIGH AND MOREOVER THE AVERAGE PERIOD OF HOLDING OF THE S HARES IS ALSO VERY HIGH UNLIKE A TRADER. SO FAR AS THE SPECULATION TRA NSACTIONS ARE CONCERNED, THE ASSESSEE HAS DONE ONLY ONE SPECULATI ON TRANSACTION THAT TOO WHERE THE ASSESSEE HAD INCURRED A LOSS OF RS.80 0/-. IT IS AN ADMITTED FACT THAT THERE HAS BEEN NO BORROWING OF THE FUNDS FOR MAKING INVESTMENT 3 ITA NO.7663/MUM/2011 (A.Y. 2007-08) ASST. CIT VS. KRISHNAKUMAR NATRAJAN. IN THE SHARES. IT HAS BEEN FURTHER STATED THAT IN THE EARLIER YEARS ALSO THE ASSESSEE HAS BEEN HELD TO BE AN INVESTOR IN SHARES AND TAXED ON CAPITAL GAINS AS SUCH. THE APPELLANT IS NOT DOING ANY OTHER ACTIVITY AND THERE IS NO INTRA-DAY TRADING. UNDER THESE CIRCUMSTANCES, TH E ASSESSEE CANNOT BE HELD TO BE A TRADER IN SHARES. HENCE THE ASSESSMENT OF LTCG AND STCG AS BUSINESS INCOME BY THE AO IS NOT CORRECT. HE IS DIRECTED TO ASSESS THE PROFITS FROM SALE OF SHARES AS STCG AND LTCG ONLY. 3.2 NO CONTENTION, MUCH LESS MATERIAL, REBUTTING TH E DEFINITE FINDINGS OF FACT/S ISSUED BY THE LD. CIT(A), REVERSING, ON ITS BASIS, THE DECISION IN THE MATTER BY THE AO, HAS BEEN BROUGHT ON RECORD BY THE REVENUE. UNDER TH E CIRCUMSTANCES, WE, THEREFORE, FIND NO REASON TO DISTURB THE SAME. WE ACCORDINGLY DECLINE INTERFERENCE. WE DECIDE ACCORDINGLY. 4. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . +) %, # + % -. ORDER PRONOUNCED IN THE OPEN COURT ON MARCH 27, 201 4 SD/- SD/- (I. P. BANSAL) (SANJAY ARORA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER ! $ /MUMBAI; /' /DATED. 27/03/2014 SHEKHAR, P.S./ ' . . !'#$ %$' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ! 0% ( ) / THE CIT(A)- CONCERNED, MUMBAI 4. ! 0% / CIT CONCERNED, MUMBAI 5. 1#2 3 % '45 , & 45) , ! $ / DR, ITAT, MUMBAI BENCH 6. 3 67 8 $ / GUARD FILE. & / BY ORDER, ' / &( ) (DY./ASSTT. REGISTRAR) , ! $ / ITAT, MUMBAI,