ULHAS N DEOSTHALE, MUMBAI V. ACIT 22(2), MUMBAI

ITA 820/MUM/2013

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0580 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-04-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 12-11-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 31-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Business income; Rule of consistency
• Section: 68

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F MUMBAI . . , , BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI N.K.BILLAIYA, ACCOUNTANT MEMBER . / ITA NO. 820/MUM/2013 / ASSESSMENT YEAR 2006-07 SHRI ULHAS N. DEOSTHALE, A/404, SAI SANKAR, SION TROMBAY ROAD, DEONAR, MUMBAI 400088 / VS. THE ACIT-22(2), MUMBAI. ! ./ ./ PAN/GIR NO. : AFHPD4239C ( !$ / APPELLANT ) .. ( %&!$ / RESPONDENT ) ASSESSEE BY SHRI PRAMOD KUMAR PARIDA RESPONDENT BY : SHRI PAWAN KUMAR BEERLA ( ) * / DATE OF HEARING : 22/04/2015 ( ) * / DATE OF PRONOUNCEMENT : 22/04/2015 / O R D E R PER I.P.BANSAL, JM: THIS IS AN APPEAL FILED BY THE ASSESSEE AND IT IS DIRECTED AGAINST ORDER PASSED BY LD. CIT(A)-19 MUMBAI DATED 22/11/2012 FOR ASSESSMENT YEAR 2006- 07. GROUNDS OF APPEAL READ AS UNDER: 1. SHORT TERM CAPITAL GAINS TREATED AS ALLEGED BUSINES S INCOME - RS.9,40,304/- A) THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER WITHOUT APPRECIATING THAT BY VIRTUE OF CBOT CIRCULA R NO. 4 DTD. 15.06.2007 [291 ITR (ST) 384] THE INDIVIDUAL APPELLANT IS ALLO WED TO MAINTAIN MULTIPLE . / ITA NO. 820/MUM/2013 / ASSESSMENT YEAR 2006-07 2 PORTFOLIO AND WHEN ALL THE INVESTED SHARES WERE SOL D AND PURCHASED THROUGH DEMAT ACCOUNT CONFIRMING DELIVERY, TREATING THE RESULT OF THESE TRANSACTIONS AS BUSINESS INCOME IS CONTRARY TO THE PROVISIONS OF LAW U/S. 2(14), 2(41A) AND 2(42B) AND THE APPELLANT'S DECLAR E OF STCG MAY BE ACCEPTED. . B) WITHOUT PREJUDICE TO ABOVE, UNDER THE CIRCUMST ANCES AND ON THE FACE IN EXTREME VOLATILITY, THE APPELLANT HAS ACTED AS A PR UDENT INVENTOR WHICH SHOULD NOT BE CONSTRUED NARROWLY AS AN ACT OF CARRY ING BUSINESS ACTIVITIES. THEREFORE, STCG DECLARED MAY BE ACCEPTED. C) WITHOUT PREJUDICE TO ABOVE, CASE LAWS RELIED UPO N BY THE ASSESSING OFFICER AND CIT(A) ARE NOT APPLICABLE. 2.ADDITION ON ACCOUNT OF ALLEGED UNEXPLAINED CREDIT - RS. 3,95,000/- THE LD. CIT(A) ERRED IN NOT CONSIDERING THE ADDITI ONAL GROUND FILED BY THE APPELLANT BEFORE HER PREDECESSOR WHO HAD, AFTER ADM ITTING, SENT FOR REMAND REPORT WHICH WAS ALSO OBTAINED AND THE APPEL LANT HAD FILED HIS REPLY THERETO, IN RESPECT OF THE ALLEGED ADDITION U /S. 68 RECEIVED FROM 7 PARTIES SUCH AS FATHER, MOTHER, BROTHER AND TWO FRI ENDS WHO ARE IDENTIFIED WITH THEIR GENUINENESS. AS ALL EVIDENCES WERE ON TH E RECORD, NON- CONSIDERATION OF THE ISSUE AMOUNTS TO ATTACHING SER IOUS PREJUDICE TO THE INTEREST OF YOUR APPELLANT. THE ADDITION SUFFERS FR OM SERIOUS LACUNAE AND THE SAME MAY BE DELETED. LEVY OF PENAL INTEREST APPELLANT, ON MERITS, DENIES HIS LIABILITY TO PENAL INTEREST. 2. APROPOS GROUND NO.1; SHORT TERM CAPITAL GAIN SHO WN BY THE ASSESEE HAS BEEN ASSESSED BY THE AO AS BUSINESS INCOME AND THE ACTION HAS BEEN CONFIRMED BY LD. CIT(A). THE ASSESSEE IS AGGRIEVE D, HENCE, HAS FILED AFOREMENTIONED GROUNDS OF APPEAL. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTICED THAT ALL THE SHARES WERE SOLD BY THE ASSESSEE WITHIN 30 DAYS. H E, THEREFORE, REQUIRED THE ASSESSEE TO EXPLAIN AS TO WHY THE SALE AND PURCHASE TRANSACTIONS OF SHARES ENTERED INTO BY THE ASSESSEE SHOULD NOT BE TREATED AS ADVENTURE IN THE NATURE OF TRADE. REFERRING TO THE VARIOUS DECISIONS AO HA S COME TO THE CONCLUSION THAT . / ITA NO. 820/MUM/2013 / ASSESSMENT YEAR 2006-07 3 ALL THESE TRANSACTIONS ARE IN THE NATURE OF TRADING , THEREFORE, HE TREATED THE SAME AS BUSINESS INCOME AGAINST THE CLAIM OF THE AS SESSEE THAT IT IS GIVING RISE TO SHORT TERM CAPITAL GAIN. 4. LD. CIT(A) HAS ANALYSED THE SHARE TRANSACTIONS O F THE ASSESSEE WITH REFERENCE TO PERIOD OF HOLDING AND HE HAS DESCRIBED THE SAME IN TABULATION FORM, WHICH IS REPRODUCED BELOW: PERIOD OF HOLDING NO. OF TRANSACTIONS 1 TO 15 DA YS 69 16 TO 30 DAYS 29 31 TO 60 DAYS 16 61 TO 154 DAYS 15 THOUGH LD. CIT(A) HAS OBSERVED THAT NUMBER OF DAYS ON WHICH THE ASSESSEE HAS ENTERED INTO TRANSACTIONS, THOUGH THE IMPORTANT INDICATOR WILL NOT BE THE DETERMINING FACTOR OF THE NATURE OF THE ACTIVITIES. RATHER, IT IS THE NATURE OF THE TRANSACTION THAT HOW THE ASSESSEE HAS DEALT WITH TH E ASSETS IN QUESTION WOULD BE DETERMINATIVE TO ANSWER THE QUESTION. FROM THE FACTS OF THE CASE IT APPEARS THAT ASSESSEE HAS DEVOTED SUBSTANTIAL TIME TO THOSE ACTIVITY WITH THE INTENTION TO MAXIMIZE THE PROFITS. LD. CIT(A) FURTHER OBSERV ED THAT THE INTENTION OF THE ASSESSEE AT THE TIME OF PURCHASE IS ALSO AN IMPORTA NT CRITERIA AND THE MANNER IN WHICH ASSESSEE HAS SHOWN THESE IN THE BOOKS OF A CCOUNT IS NOT DETERMINATIVE. HE OBSERVED THAT ACCORDING TO THE F ACTS OF THE CASE, THE ACTIVITY APPEARS TO BE OF A TRADER AND NOT INVESTOR. IT IS IN THIS MANNER LD. CIT(A) HAS CONFIRMED THE ACTION OF THE AO. 5. IT WAS SUBMITTED BY LD. AR THAT ALL THE INVESTM ENTS HAVE BEEN SHOWN IN THE BOOKS OF ACCOUNT UNDER THE HEAD INVESTMENT. T HE ASSESSEE IS NOT A TRADER IN THE SHARES. THE VOLUME OF TRANSACTIONS ENTERED INTO BY THE ASSESSEE ARE ALSO NOT LARGE. IN RESPECT OF ALL THE SHARES DELI VERY HAS TAKEN PLACE AND SALE AND PURCHASE HAS BEEN ROUTED THROUGH D-MAT ACCOUNT ON WHICH STT HAS BEEN . / ITA NO. 820/MUM/2013 / ASSESSMENT YEAR 2006-07 4 PAID. THUS, IT WAS SUBMITTED THAT LD. CIT(A) HAS C OMMITTED AN ERROR IN CONFIRMING THE ACTION OF THE AO. LD. AR REFERRED TO THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. GOPAL PURO HIT, 336 ITR 287(BOM), WHEREIN IT HAS BEEN HELD THAT RULE OF CONSISTENCY W OULD APPLY. HE SUBMITTED IN EARLIER YEARS AS WELL AS IN SUBSEQUENT YEARS SIM ILAR ACTIVITY OF THE ASSESSEE HAS BEEN ACCEPTED TO GIVE RISE TO CAPITAL GAIN. H E SUBMITTED THAT THOUGH ORDERS FOR EARLIER YEARS AS WELL AS SUBSEQUENT YEAR S ARE NOT MADE IN SCRUTINY BUT NEVERTHELESS REVENUE HAS NOT REOPENED ANY O F THE CASE AFTER TAKING THE AFOREMENTIONED VIEW. IT WAS SUBMITTED THAT THE AS SESSEE WAS NEITHER A TRADER NOR A DEALER. THE ASSESSEE IS AN INDIVIDUAL WHO IS MAKING INVESTMENT. EVEN CBDT VIDE ITS CIRCULAR NO.4 DATED 15/6/2007, 291 I TR (ST) 384, HAS MENTIONED THAT ASSESSEE CAN MAINTAIN MULTIPLE PORTF OLIOS. ALL THE TRANSACTIONS ARE EFFECTED BY DELIVERY AND THE PERIOD OF HOLDING IS ALSO SUBSTANTIAL AND THE NUMBER OF TRANSACTIONS ARE ALSO NOT LARGE. LD. AR REFERRED TO THE DETAILS OF TRANSACTION WITH REFERENCE TO PROFIT EARNED THEREO N AND NUMBER OF DAYS FOR WHICH THE TRANSACTION HAVE BEEN HELD AND SUCH DETAI L IS FIELD AT PAGE 20 TO 25 OF THE PAPER BOOK. THUS, IT WAS PLEADED BY LD. AR THAT THE INCOME EARNED BY THE ASSESSEE FROM SALE AND PURCHASE OF SHARES SHOUL D BE CONSIDERED TO BE ASSESSABLE UNDER THE HEAD CAPITAL GAIN. 6. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDER PASSED BY AO AND LD. CIT(A). 7. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTENT IONS HAVE CAREFULLY BEEN CONSIDERED. IN THE PRESENT CASE ASSESSEE HAS SHOWN THE INVESTMENT IN SHARES UNDER THE HEAD INVESTMENT. ALL THE DETAILS HAVE BE EN FILED BEFORE AO AND LD. CIT(A). ACCORDING TO THE FACTS OF THE CASE, THE AS SESSEE DID NOT ENTER INTO MUCH TRANSACTION SO AS TO GIVE IT THE COLOUR OF BUSINESS . AS AN INDIVIDUAL INVESTOR THE ASSESSEE IS PURCHASING AND SELLING THE SHARES. THOUGH THE AO HAS OBSERVED THAT ALL THE SHARES HAVE BEEN SOLD WITHIN 30 DAYS, BUT THIS STATEMENT . / ITA NO. 820/MUM/2013 / ASSESSMENT YEAR 2006-07 5 OF AO IS INCORRECT. FOR EXAMPLE SHARES OF EASUN RE YROLLE LIMITED WERE HELD FOR 61 DAYS, ON WHICH PROFIT HAS BEEN EARNED BY THE ASS ESSEE AT RS.2,99,448/-. SIMILARLY THE SHARES FOR GUJRAT APOLLO EQUIP LIMITE D WERE HELD BY THE ASSESSEE FOR 143 DAYS, 127 DAYS AND 60 DAYS ON WHICH PROFIT OF RS.1,63,170/- IS SHOWN. SIMILARLY THE SHARE OF PHARMAID PHARMA LTD WERE HE LD FOR 42 AND 43 DAYS ON WHICH THE PROFIT HAS BEEN EARNED AT RS.1,35,509/-. THERE ARE SIMILAR OTHER TRANSACTIONS WHERE ASSESSEE HAS HELD THE SHARES FOR MORE THAN 100 DAYS, 50 DAYS AND THUS, THE ALLEGATION OF AO THAT ASSESSEE H AS SOLD ALL THE SHARES WITHIN 30 DAYS IS NOT CORRECT. THE ASSESSEE IS INDIVIDUAL INVESTOR AND CANNOT BE TERMED TO A TRADER WHO HAS CARRIED OUT THIS ACTIVIT Y IN THE NATURE OF BUSINESS. KEEPING IN VIEW THE SMALLNESS OF THE ACTIVITY AND O THER FACTS OF THE CASE, WE ARE OF THE OPINION THAT THE GAIN BY THE ASSESSEE FROM S ALE AND PURCHASE OF SHARES HAS WRONGLY BEEN TREATED AS BUSINESS INCOME AGAINST THE CLAIM OF THE ASSESSEE THAT THE SAME HAS GIVEN RISE TO CAPITAL GAIN. WE, THEREFORE, ALLOW GROUND NO.1. 8. ON GROUND NO.2, IT WAS SUBMITTED BY LD. AR THAT THOUGH THE SAME WAS ARGUED BEFORE LD. CIT(A) AND REMAND REPORT WAS ALSO CALLED UPON , WHICH WAS SUBMITTED BY AO BUT LD. CIT(A) HAS NOT ADJUDICATED THE SAME AND THE SAME MAY BE SENT BACK TO THE FILE OF LD. CIT(A) FOR ADJU DICATION. 9. LD. DR DID NOT HAVE ANY OBJECTION TO SUCH REQUES T OF THE ASSESSEE. 10. ACCORDINGLY, AFTER HEARING BOTH THE PARTIES, WE RESTORE THIS ISSUE TO THE FILE OF LD. CIT(A) WITH A DIRECTION TO ADJUDICATE T HE SAME AFTER GIVING THE ASSESEE A REASONABLE OPPORTUNITY OF HEARING. WE DIRECT ACC ORDINGLY AND THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. . / ITA NO. 820/MUM/2013 / ASSESSMENT YEAR 2006-07 6 11. OTHER GROUNDS WERE NOT ARGUED BY LD. AR, THEREF ORE, NOT ADJUDICATED. 12. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED IN THE MANNER AFORESAID. ORDER PRONOUNCED IN THE OPEN COURT ON 22/04/2015 ( 0 1 2 22/04/2015 ( SD/- SD/- ( / N.K.BILLAIYA ) ( . . / I.P. BANSAL ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; 1 DATED 22/04/2015 / COPY OF THE ORDER FORWARDED TO : 1. !$ / THE APPELLANT 2. %&!$ / THE RESPONDENT. 3. 4) ( ) / THE CIT(A)- 4. 4) / CIT 5. 56 %)78 , * 78 , / DR, ITAT, MUMBAI 6. 9 / GUARD FILE. / BY ORDER, & 5) %) //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI . . ./ VM , SR. PS