ADDL CIT 13(2), MUMBAI V. SANTOSH S. GOENKA, MUMBAI

ITA 799/MUM/2010

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9422 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 11 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 19-01-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 02-02-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SACCHIDANAND DUBEY
• Keywords: Business income; Source of fund
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH I, MUMBAI BEFORE SHRI D. KARUNAKAR RAO, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ITA NOS. 775 & 799/MUM/2010 ASSESSMENT YEAR: 2006-07 ADDL CIT 13(2) MUMBAI VS. SANTOSH S. GOENKA (HUF) 204, POPATLAL CHAMBERS, 4 TH FLOOR, CROSS CLIVE ROAD. DANA BUNDER, MUMBAI 400 009 PAN: - AACHG 6589 G (APPELLANT) (RESPON DENT) ITA NO. 614/MUM/2010 ASSESSMENT YEAR: 2006-07 SANTOSH S. GOENKA (HUF) 204, POPATLAL CHAMBERS, 4 TH FLOOR, CROSS CLIVE ROAD. DANA BUNDER, MUMBAI 400 009 PAN:- AACHG 6589 G VS. ADDL CIT 13(2) MUMBAI (APPELLANT) (RESPON DENT) ASSESSEE BY : SHRI NISHIT GANDHI REVENUE BY : SHRI SACCH IDANAND DUBEY DATE OF HEARING : 20.01.2015 DATE OF PRONOUNCEMENT : 20.01.2015 PER AMIT SHUKLA, JM: IN THE CASE OF SANTOSH S. GOENKA (HUF), CROSS APPEA LS HAVE BEEN FILED BY THE ASSESSEE AS WELL AS BY THE DEPARTMENT AGAINST THE ORDER DATED 30.11.2009, PASSED BY LD. CIT(A)-24, MUMBAI F OR THE QUANTUM OF ASSESSMENT PASSED U/S 143(3) FOR THE A.Y. 2006-07. IN THE CASE OF SANTOSH S. GOENKA (HUF) INDIVIDUAL, THE DEPARTMENT HAS PREFERRED ITA NOS. 775 & 799/MUM/2010 ITA NO. 614/MUM/2010 SANTOSH S. GOENKA (HUF) ASSESSMENT YEAR: 2006-07 2 APPEAL AGAINST ORDER DATED 30.11.2009 PASSED BY LD. CIT(A)-24, MUMBAI FOR THE QUANTUM OF ASSESSMENT PASSED U/S 143(3) FOR THE A.Y. 2006-07. SINCE THE ISSUES INVOLVED IN THE AFORESAID APPEALS ARE COMMON, THEREFORE, SAME WERE HEARD TOGETHER AND ARE BEING D ISPOSED OF BY WAY OF THIS CONSOLIDATED ORDER. 2. FIRST WE WILL TAKE UP CROSS APPEALS IN THE CASE OF SANTOSH S. GOENKA (HUF). IN ASSESSEES APPEAL, FOLLOWING GROUN D HAS BEEN RAISED:- THE LEARNED CIT(APPEALS) ERRED IN CONFIRMING THE O RDER OF THE ASSESSMENT OFFICER IN TREATING THE SHORT TERM CAPIT AL GAINS OF RS.29,20,827/- AS BUSINESS INCOME. WHEREAS THE REVENUE HAS RAISED FOLLOWING GROUNDS:- (1) (A) THE LD. CIT(A), ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, ERRED IN DELETING THE ADDITION OF RS.75,04,322/- MADE BY THE AO AS BUSINESS INCOME AS AGAINST LTCG SHOWN BY THE ASSESSEE. (B) THE LD. CIT(A), ON THE FACTS AND IN THE CIRCUM STANCES OF THE CASE IN LAW, ERRED IN NOT APPRECIATING THE F ACTORS LIKE VOLUME, FREQUENCY, PERIOD OF HOLDING AS CRITERION T O DETERMINE THE NATURE OF TRANSACTION. 3. AT THE OUTSET, THE LEARNED COUNSEL SUBMITTED THA T IN CASE OF FAMILY MEMBER SMT. SUNITA S. GOENKA (WIFE OF SANTOSH S. GO ENKA) FOR THE A.YS. 2005-06 & 2006-07, THE TRIBUNAL VIDE ORDER DA TED 02.03.2012, PASSED IN ITA NOS. 4193 & 6208/MUM/2009, HAD DECIDE D THIS ISSUE ON SIMILAR SET OF FACTS, IN FAVOUR OF THE ASSESSEE IN THE APPEAL FILED BY THE DEPARTMENT. THEREFORE, THE MATTER IS COVERED AND TH E SAID APPEALS MAY BE DECIDED IN LIGHT OF THE ORDER OF THE TRIBUNAL. ITA NOS. 775 & 799/MUM/2010 ITA NO. 614/MUM/2010 SANTOSH S. GOENKA (HUF) ASSESSMENT YEAR: 2006-07 3 4. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE HAS EA RNED INCOME FROM SHORT TERM AND LONG TERM CAPITAL GAINS ON SALE OF S HARES, ALONG WITH SOME MINOR DIVIDEND INCOME. IN THE COMPUTATION OF I NCOME THE ASSESSEE HAD SHOWN FOLLOWING INCOME IN THE CURRENT YEAR:- I) SHORT TERM CAPITAL GAINS RS.29,20,827 II) LONG TERM CAPITAL GAINS RS.75,04,322 III) DIVIDEND INCOME RS. 1,82,475 FROM THE PERUSAL OF THE DETAILS FURNISHED BY THE AS SESSEE DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT CERTAIN SHARES HAVE BEEN BOUGHT AND SOLD ON SAME DA Y AND ARE ACCORDINGLY SPECULATIVE IN NATURE. THE DEMAT ACCOUN T FOR THE FULL YEAR WAS ALSO NOT FURNISHED. HE REJECTED THE ASSESSEES CONTENTION THAT SHARES WERE FOR THE INVESTMENT PURPOSE, MAINLY ON T HE GROUNDS THAT:- FIRSTLY, ASSESSEE HAS UNDERTAKEN TRANSACTION OF SHARES INCL UDING SHORT TERM AND LONG TERM, IN MORE THAN 330 COMPANY SCRIPS AND ALSO THE VOLUME OF TRANSACTION IS QUITE HIGH. THE TOTAL INCO ME FROM TRANSACTION OF SUCH SHARES WAS AT RS.1,04,25,149/- AND THEREFORE, IT IMPLIES THAT ASSESSEE WAS CARRYING SHARE TRADING ACTIVITY; SECONDLY, THE SOURCE OF FUNDS HAS BEEN MAINLY FROM BORROWING S FROM SCHEDULE BANKS AND OTHER PARTIES. THE ASSESSEE COUL D NOT SUBMIT THE DETAILS FOR WHICH LOANS HAVE BEEN SANCTIONS BY THE BANK, WHICH FACT ESTABLISHES IT CLEAR THAT THE PURPOSE OF THE ASSESS EE TO BUY AND SELL SHARES WAS TO CARRY ON SHARE TRADING ACTIVITY; ITA NOS. 775 & 799/MUM/2010 ITA NO. 614/MUM/2010 SANTOSH S. GOENKA (HUF) ASSESSMENT YEAR: 2006-07 4 THIRDLY, THE SHARES HAVE BEEN REGULARLY PURCHASED AND SOLD FROM THE SECONDARY MARKET AND THIS IS A REGULAR ACTIVITY OF THE ASSESSEE WHICH CLEARLY GOES TO SHOW THAT MOTIVE WAS TO EARN BUSINE SS INCOME; LASTLY, DIVIDEND EARNED DURING THE YEAR IS ALSO VERY LESS AS COMPARED TO THE INVESTMENT SHOWN IN THE BALANCE SHEET. THUS, FOLLOWING THE CBDT CIRCULAR NO. 4 OF 2007 DAT ED 16.06.2007, HE HELD THAT ASSESSEES INCOME FROM TRANSACTION OF SHA RES IS TO BE TREATED AS BUSINESS INCOME AND NOT UNDER THE HEAD CAPITAL G AIN. ACCORDINGLY, HE TREATED THE SHORT TERM AND LONG TERM CAPITAL GAIN A S BUSINESS INCOME. 5. THE LD. CIT(A), SO FAR AS SHARES SHOWN UNDER THE HEAD LONG TERM CAPITAL GAIN, HELD THAT THE SHARES WERE FOR THE INV ESTMENT PURPOSE AND THE GAIN FROM SUCH TRANSACTION IS TO BE ASSESSED AS LONG TERM CAPITAL GAIN. WHEREAS, THE SHORT TERM CAPITAL GAIN IS PUREL Y FOR BUSINESS PURPOSE. 6. BEFORE US, LD. DR SUBMITTED THAT THE ASSESSING O FFICER HAS ANALYZED THE TRANSACTIONS AND ALSO THE SOURCE OF FU NDING TO COME TO THE CONCLUSION THAT ASSESSEE IS DERIVING BUSINESS INCOM E FROM TRANSACTION OF SHARES. AS REGARDS THE TRIBUNAL ORDER IN THE CASE O F SUNITA S. GOENKA, HE SUBMITTED THAT THE FACTS OF EACH CASE HAS TO BE ANALYZED AND IN SUCH CASES, THE DECISION CANNOT BE FOLLOWED BLINDLY. 7. ON THE OTHER HAND, LEARNED COUNSEL SUBMITTED THA T SIMILAR FACTS WERE THEREIN SUNITA S. GOENKAS CASE AND THEREFORE, THE APPEAL SHOULD BE DECIDED ON THE BASIS OF THE TRIBUNAL ORDER IN TH E CASE OF SUNITA S. GOENKA. ITA NOS. 775 & 799/MUM/2010 ITA NO. 614/MUM/2010 SANTOSH S. GOENKA (HUF) ASSESSMENT YEAR: 2006-07 5 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO THE PERUSED THE IMPUGNED ORDER AS WELL AS THE TRIBUNAL ORDER IN CAS E OF SUNITA S. GOENKA AS RELIED UPON BY THE LEARNED COUNSEL. FROM THE PERUSAL OF THE ASSESSMENT ORDER IT SEEMS THAT AO HAS GIVEN CERTAIN CATEGORICAL FINDING WHICH HAS NOT BEEN PROPERLY REBUTTED BY THE ASSESSE E EITHER BEFORE THE LD.CIT(A) OR BEFORE US. FROM THE ORDER OF THE TRIBU NAL IN THE CASE OF SUNIA S. GOENKA (SUPRA), IT IS SEEN THAT TRIBUNAL HAS ENDORSED THE FINDING OF THE LD.CIT(A), WITHOUT ANALYZING THE FAC TS. IN SUCH KIND OF CASES THE FACTS OF EACH CASE IS TO BE ANALYZED AND THEN ONLY A DEFINITE CONCLUSION CAN BE ARRIVED, WHETHER INCOME IS TO BE ASSESSED UNDER THE HEAD BUSINESS INCOME OR CAPITAL GAINS. HERE IN THIS CASE, LD. CIT(A) HAS ALSO MERELY ENDORSED THE VIEW TAKEN BY THE AO. UNDE R THESE FACTS AND CIRCUMSTANCES, WE ARE OF THE OPINION THAT MATTER SH OULD BE RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER TO CONSID ER AND ANALYZE THE FACTS OF THE CASE OF SUNITA S. GOENKA AND THAT OF THE ASS ESSEE TO SEE, WHETHER THERE IS SIMILARITY OF FACTS. IF FACTS AND CIRCUMSTANCES ARE PARI- MATERIA, THEN SAID DECISION SHOULD BE CONSIDERED. T HE ASSESSING OFFICER WILL ALSO CONSIDERED DECISION OF HONBLE BOMBAY HIG H COURT IN THE CASE OF CIT VS. GOPAL PUROHIT REPORTED IN (2009) 20 DTR (MUM) AND OTHER RELEVANT DECISIONS TO ARRIVE AT HIS CONCLUSION. THU S, THE GROUNDS RAISED BY THE ASSESSEE AS WELL AS BY THE DEPARTMENT ARE S ET ASIDE TO THE FILE OF THE AO, TO DECIDE THE MATTER FRESH IN VIEW OF THE D IRECTIONS GIVEN ABOVE AND IN ACCORDANCE WITH THE LAW, AFTER GIVING DUE AN D EFFECTIVE OPPORTUNITY OF HEARING TO THE ASSESSEE TO SUBSTANTI ATE ITS CASE. 9. IN THE RESULT APPEAL FILED BY THE ASSESSEE AS WE LL AS BY THE DEPARTMENT STANDS ALLOWED FOR STATISTICAL PURPOSES. ITA NOS. 775 & 799/MUM/2010 ITA NO. 614/MUM/2010 SANTOSH S. GOENKA (HUF) ASSESSMENT YEAR: 2006-07 6 ITA NO. 799/MUM/2010 10. IN THIS APPEAL, REVENUE HAS RAISED THE FOLLOWIN G GROUNDS OF APPEAL:- (1) (A) THE LD. CIT(A), ON THE FACTS AND IN THE CI RCUMSTANCES OF THE CASE AND IN LAW, ERRED IN DELETING THE ADDITION OF RS.93,74,268/- MADE BY THE AO AS BUSINESS INCOME AS AGAINST STCG SHOWN BY THE ASSESSEE. (B) THE LD. CIT(A), ON THE FACTS AND IN THE CIRCUM STANCES OF THE CASE AND IN LAW, ERRED IN NOT APPRECIATING T HE FACTORS LIKE VOLUME, FREQUENCY, PERIOD OF HOLDING AS CRITERION T O DETERMINE THE NATURE OF TRANSACTIONS. 11. HERE ALSO, THE ASSESSING OFFICER HAS TREATED TH E GAIN FROM TRANSACTION OF SHARES AS BUSINESS INCOME, INSTEAD O F CAPITAL GAINS AS CLAIMED BY THE ASSESSEE. FINDING OF THE ASSESSING O FFICER IN THIS CASE ALSO IS BY AND LARGE SIMILAR TO THE FINDING GIVEN IN THE CASE OF SANTOSH S. GOENKA (HUF), EXCEPT THAT THE ASSESSING OFFICER IN THIS CASE HAS ONLY TREATED INCOME FROM SHORT TERM CAPITAL GAIN AS BUSI NESS INCOME. SO FAR AS LONG TERM CAPITAL GAIN IS CONCERNED, SAME HAS BE EN ACCEPTED BY HIM. SINCE WE HAVE SET ASIDE THE MATTER IN THE CASE OF S ANTOSH S. GOENKA (HUF) TO THE FILE OF THE AO, THEREFORE, THIS APPEAL IS ALSO SET ASIDE TO THE FILE OF THE AO, TO BE DECIDED IN LIGHT OF THE DIREC TIONS AS GIVEN ABOVE. ACCORDINGLY, REVENUES APPEAL IS TREATED IS ALLOWED FOR STATISTICAL PURPOSE. ITA NOS. 775 & 799/MUM/2010 ITA NO. 614/MUM/2010 SANTOSH S. GOENKA (HUF) ASSESSMENT YEAR: 2006-07 7 12. IN THE RESULT, THE APPEAL FILED BY THE REVENUE AS WELL AS BY THE ASSESSEE ARE TREATED ALLOWED FOR STATISTICAL PURPOS E . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 20 TH DAY JANUARY, 2015. SD/- SD/- (D. KARUNAKA RAO) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 20.01.2015 *SRIVASTAVA COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR I BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.