R NATVARLAL PAREKH, MUMBAI V. ITO 15 (1)(4), MUMBAI

ITA 7820/MUM/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 9208 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-08-2021
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 19-12-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Business income; Earning of tax free income; Validity of assessment; Capital Gains
• Section: 143(3); 14A; 201; 13

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI , , BEFORE HONBLE SHRI MAHAVIR SINGH, VP AND HONBLE SHRI MANOJ KUM AR AGGARWAL, AM (HEARING THROUGH VIDEO CONFERENCING MODE) 1 . ./ I.T.A. NO. 7820 / MUM/ 201 9 ( / ASSESSMENT YEAR : 2011 - 12 ) & 2 . ./ I.T.A. NO. 7821 / MUM/ 201 9 ( / ASSESSMENT YEAR : 2012 - 13 ) & 3 . ./ I.T.A . NO. 7822 / MUM/ 201 9 ( / ASSESSMENT YEAR : 2013 - 14 ) M/S R. NATVARLAL PAREKH 1 ST FLOOR, 55/6, RAJBA U G ESTATE, TAMBAKANTA, MUMBAI - 400 003 / VS. ITO WARD - 17(3)(1), KAUTILYA BHAVAN, 1 ST FLOOR 125, BANDRA KURLA COMPLEX, MUMBAI - 400 051 ./ ./ PAN/GIR NO. AAFFR - 8461 - H ( / APPELLANT ) : ( / RESPONDENT ) ASSESSEE BY : NONE REVENUE BY : SHRI BHARAT ANDHALE LD. D R / DATE OF HEARING : 04 /08 /2021 / DATE OF PRONOUNCEMENT : 04/08 /2021 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEALS BY ASSESSEE FOR ASSESSMENT YEAR S (AY) 2011 - 12 TO 2013 - 14 CONTEST SEPARATE ORDERS OF LEARNED FIRST APPELLATE AUTHORITY. HOWEVER, THE FACTS AS WELL AS ISSUES ARE FOUND TO BE COMMON. 2 THEREFORE, THE APPEALS WERE CONSOLIDATED AND BEING DISPOSED - OFF BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE & BREVITY. THE APPEAL FOR AY 2011 - 12 ARISES OUT OF THE ORDER OF LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) - 28 , MUMBAI [CIT (A)], DATED 0 9/10/2019 IN THE MATTER OF ASSESSMENT FRAMED BY LD. ASSESSING OFFICER (AO) U/S 143(3) ON 28/03/2014. FROM THE GROUNDS OF APPEAL, IT IS EVIDENT THAT THE ASSESSEE IS AGGRIEVED BY THE FACT THAT CAPITAL GAINS EARNED ON SALE OF SHARES HAVE BEEN ASS ESSED AS BUSINESS INCOME. THE ASSESSEE IS ALSO AGGRIEVED BY CERTAIN DISALLOWANCE U/S 14A. THE ASSESSEE HAS ALSO ASSAILED THE ASSESSMENT PROCEEDINGS ON LEGAL GROUNDS OF JURISDICTION OF LD. AO. 2. AT THE TIME OF HEARING, NONE APPEARED FOR ASSESSEE. HOWEVER, IT TRANSPIRES THAT ONE OF THE ISSUES HAS ALREADY BEEN DEALT BY THE SMC BENCH OF TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2010 - 11, ITA NO.888/MUM/2018 ORDER DATED 25/10/2018. THE COPY OF THE SAME IS ON RECORD. IN FACT, LD. CIT(A) HAS FOLLOWED THE ORDER OF TRI BUNAL WHILE ADJUDICATING THE APPEAL. IN THE ABOVE BACKGROUND, WE PROCEED WITH ADJUDICATION OF THESE APPEALS. 3.1 THE MATERIAL FACTS ARE THAT THE ASSESSEE BEING RESIDENT FIRM IS STATED TO BE ENGAGED AS COMMISSION AGENT AS WELL AS TRADING IN SECURITIES. THE ASSESSEE EARNED GAIN ON SALE AND PURCHASE OF SHARES. THE GAIN OF RS.18.21 LACS WAS SHOWN AS LONG - TERM CAPITAL GAINS WHICH WAS CLAIMED TO BE EXEMPT. THE GAIN OF RS.1.23 LACS WAS OFFERED AS SHORT - TERM CAPITAL GAINS. THE ASSESSEE DERIVED DIVIDEND INCOME OF R S.20.65 LACS. THE LD. AO SHOW - CAUSED ASSESSEE AS TO WHY THE GAIN SO EARNED W AS NOT TO BE TREATED AS BUSINESS INCOME. 3 3.2 THOUGH THE ASSESSEE DEFENDED ITS STAND, HOWEVER, LD. AO NOTED THAT THE NUMBER AND FREQUENCY OF TRANSACTIONS WAS VOLUMINOUS. THE TRANSA CTIONS WERE REGULAR BESIDES BEING SYSTEMATIC. THE ASSESSEE OBTAINED UNSECURED LOANS OF MO RE THAN RS.679.18 LACS AND THEREOF, THE GAINS WERE TO BE ASSESSE D AS BUSINESS INCOME. 3.3 AS A CONSEQUENT THEREFORE, SINCE ASSESSEE EARN E D EXEMPT INCOME, LD. AO COMPU TED DISALLOWANCE U/S 14 A R.W.R. 8D FOR RS.26.03 LACS WHICH COMPRISED - OFF OF INTEREST DISALLOWANCE U/R 8D(2)(II) FOR RS.23.11 LACS AND EXPENSE DISALLOWANCE U/R 8D(2)(III) FOR RS.2.92 LACS . THE SAME WAS ADJUSTED BY SUO - MOTO DISALLOWANCE OF RS.4.19 LACS AS OF FERED BY THE ASSESSEE IN THE COMPUTATION OF INCOME. 4. DURING APPELLATE PROCEEDINGS, THE ASSESSEE ASSAILED THE ACTION OF LD. AO, INTER - ALIA, BY SUBMITTING THAT TRADES WERE DELIVERY BASED AND SHARES AND SECURITIES WERE SHOWN AS INVESTMENT IN BALANCE SHEET. SIMILAR GAINS EARNED IN EARLIER YEARS WERE ACCEPTED UNDER THE HEAD CAPITAL GAINS. 5. THE LD. CIT(A) RELYING UPON THE CITED ORDER OF TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2010 - 11 DIRECTED LD. AO TO ACCEPT THE GAINS UNDER THE HEAD CAPITAL GAINS SUBJECT TO VERIFICATION OF THE FACT THAT THE TRADES WERE DELIVERY BASED. REGARDING DISALLOWANCE U/S 14A, LD. AO WAS DIRECTED TO RE - COMPUTE THE DISALLOWANCE U/R 8D(2)(II) BY CONSIDERING ONLY THOSE INVESTMENTS WHICH HAD DIRECT AND PROXIMATE NEXUS WITH EXEMPT INCOME. 6 . THE AFORESAID ADJUDICATION HAS GIVEN RISE TO ASSESSEES APPEAL BEFORE US. 7. IT IS QUITE EVIDENT THAT LD. CIT(A), RELYING UPON TRIBUNALS ORDER, HAS ACCEPTED THE CLAIM OF THE ASSESSEE UNDER THE HEAD CAPITAL GAINS 4 SUBJECT TO VERIFICATION OF THE FACT THAT THE TRADES WERE DELIVERY BASED. THEREFORE, NO INFIRMITY COULD BE FOUND IN THE SAME. THE DIRECTIONS GIVEN WITH RESPECT TO DISALLOWANCE U/S 14A ARE ALSO IN ACCORDANCE WITH LAW. THEREFORE, NO INFIRMITY COULD BE FOUND IN THE SAME. 8. IN THE LEGAL GROUNDS, THE ASSESSEE HAS ASSAILED THE VALIDITY OF ASSESSMENT PROCEEDINGS FOR WANT OF ISSUE AND SERVICE OF NOTICE U/S 143(2). HOWEVER, THERE IS NO SUCH MATERIAL ON RECORD TO CORROBORATE THIS PLEA. THE LD. AO, IN THE ASSESSMENT ORDER, HAS CLEARLY RECORDED THE FACT O F I SSUE AND SERVICE OF NOTICE U/S 143(2). THEREFORE, WE DO NOT FIND ANY ILLEGALITY I N THE ORD E R. 9. THE APPEAL STAND DISMISSED IN TERMS OF OUR ABOVE ORDER. ASSESSMENT YEAR 2012 - 13 10. FAC TS ARE SIMILAR IN THIS YEAR. THE CAPITAL GAINS HAVE BEEN ASSESSED AS BUS INESS INCOME. THE DISALLOWANCE U/S 14A WAS COMPUTED AT RS.21.31 LACS. THE APPE LLATE ORDER IS ON SIMILAR LINES. FACTS BEING PARI - MATERIA THE SAME, TAKING THE SAME VIEW AS IN AY 2011 - 12, WE DISMISS THE APPEAL. ASSESSMENT YEAR 2013 - 14 11. FACTS ARE SIMILAR IN THIS YEAR. THE CAPITAL GAINS HAVE BEEN ASSESSED AS BUSINESS INCOME. THE DISALLOWANCE U/S 14A WAS COMPUTED AT RS.10.34 LACS. THE APPELLATE ORDER IS ON SIMILAR LINES. FACTS BEING PARI - MATERIA THE SAME, TAKING THE SAME VIEW AS IN AY 2011 - 12, WE DISMISS THE A PPEAL. 5 CONCLUSION 12. ALL THE THREE APPEALS STAND DISMISSED. ORDER PRONOUNCED ON 04 TH AUGUST , 2021. SD/ - SD/ - (MAHAVIR SINGH) (MANOJ KUMAR AGGARWAL) / VICE PRESIDENT / ACCOUNTANT MEMBER MUMBAI; DATED : 04 /0 8 /2021 SR.PS, DHANANJAY / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.