M/s. Snajay Kumar Jaisansaria, HUF, Churu V. Assistant Commissioner Of Income Tax, Circle, , Jhunjhunu

ITA 852/JPR/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 5164 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 29-06-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K MAHLA JCIT DHK
• Keywords: Business income; Wrong claim; Sham transactions; Capital Gains
• Section: 143(3)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR JH JES'K LH 'KEKZ] YS[KK LNL; DS LE{K BEFORE: SHRI RAMESH C SHARMA , ACCOUNTANT MEMBER VK;DJ VIHY LA -@ ITA NO. 852/JP/2018 FU/KZKJ.K O'KZ@ ASSESSMENT YEAR : 2013-14 M/S SANJAY KUMAR JAISANSARIA HUF, WARD NO. 13, BAIDJI KI GALI, SARDARSHAR, CHURU. C UKE VS. A.C.I.T., CIRCLE- JHUNJHUNU. LFKK;H YS[KK LA -@THVKBZVKJ LA -@ PAN/GIR NO.: AACHS 6218 Q VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKS J LS @ ASSESSEE BY : SHRI ASHISH SHARMA (ADV) JKTLO DH VKSJ LS @ REVENUE BY : SHRI A.K. MAHLA (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 22/08/2019 MN?KKS 'K.KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 30/10/2019 VKNS'K@ ORDER PER: R.C. SHARMA, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD.CIT(A)-3, JAIPUR DATED 15/05/2018 FOR THE A.Y. 2013-14 IN THE MATTER OF ORDER PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT, THE ACT). 2. THE ONLY GRIEVANCE OF THE ASSESSEE RELATES TO TREATMENT OF LONG TERM AND SHORT TERM CAPITAL GAIN OFFERED BY THE ASSESSEE AS BUSINESS INCOME INSTEAD OF TREATING THE SAME AS CAPITAL GAIN. ITA 852/JP/2018 M/S SANJAY KUMAR JAISANSARIA HUF VS ACIT 2 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT THE ASSESSEE WAS INVESTING IN SHARES. SOME OF SHARES WERE SOLD AFTER ONE YEAR GAIN AROSE ON SALE OF SUCH SHARES WERE OFFERED AS LONG TERM CAPITAL GAIN, HOWEVER, IN RESPECT OF SHARES HELD FOR LESS THAN ONE YEAR WAS OFFERED AS SHORT TERM CAPITAL GAIN. THE ASSESSEE WAS INVESTING IN SHARES SINCE LONG BACK AND THE SAME WAS ACCEPTED BY THE DEPARTMENT EVEN IN THE ASSESSMENT FRAMED U/S 143(3) OF THE ACT. I FOUND THAT IN THE EARLIER YEAR ALSO SHARES HELD AS INVESTMENT AND NOT AS STOCK IN TRADE. 3.1 THE CENTRAL BOARD OF DIRECT TAXES ('CBDT'), THE APEX BODY ADMINISTERING DIRECT TAXES, HAS ISSUED NEARLY 22 CIRCULARS DURING THE SHORT PERIOD OF FOUR MONTHS BEGINNING FROM FEBRUARY 2016. TIME AND AGAIN, THE GOVERNMENT HAS INSISTED ON THAT IT IS ENDEAVOURING TO PROMOTE A NON-ADVERSARIAL TAX ENVIRONMENT. WITH THIS INTENT, IT RECENTLY ISSUED CIRCULAR NO. 6 OF 2016, DATED 29-2-2016 AND AN INTERNAL INSTRUCTION ON 2-5-2016 TO PROVIDE MUCH-REQUIRED CLARITY ON THE TAXABILITY OF SURPLUS ON THE SALE OF LISTED SHARES AND SECURITIES AND UNLISTED SHARES AS CAPITAL GAINS VERSES BUSINESS INCOME. 2. UNDER THE INCOME-TAX LAW, INCOME EARNED FROM THE SALE OF SHARES CAN BE TAXED EITHER AS BUSINESS INCOME OR CAPITAL GAINS, DEPENDING UPON THE FACTS OF EACH CASE, LEADING TO EXTENSIVE LITIGATION OVER MANY YEARS. ITA 852/JP/2018 M/S SANJAY KUMAR JAISANSARIA HUF VS ACIT 3 3.1 CIRCULAR NO. 6 OF 2016, DATED 29-2-2016: IN ORDER TO REDUCE LITIGATION AND UNCERTAINTY OVER THE MATTER, THE CBDT ISSUED ANOTHER CIRCULAR ON 29-2-2016 WITH RESPECT TO SURPLUS FROM SALE OF LISTED SHARES AND SECURITIES. AS PER THE CIRCULAR, WHERE THE TAXPAYER ITSELF TREATS THE LISTED SHARES AND SECURITIES AS STOCK-IN-TRADE, THE INCOME ARISING FROM TRANSFER OF SUCH SHARES AND SECURITIES SHALL BE CONSIDERED AS BUSINESS INCOME, IRRESPECTIVE OF THE PERIOD OF HOLDING. THE CIRCULAR FURTHER PROVIDES THAT IN CASE THE TAXPAYER SO DESIRES THAT SURPLUS FROM TRANSFER OF LONG-TERM LISTED SHARES AND SECURITIES, I.E., HELD FOR MORE THAN 12 MONTHS, SHOULD BE TREATED AS CAPITAL GAINS, SUCH STAND TAKEN BY THE TAXPAYER SHALL THE BE DISPUTED BY THE ASSESSING OFFICER. HOWEVER, THE TAXPAYER SHOULD MAINTAIN THE STAND TAKEN AND NOT ADOPT A CONTRARY STAND IN SUBSEQUENT YEARS. ALL OTHER CASES, I.E., GAIN FROM SHORT-TERM LISTED SHARES/SECURITIES SHALL CONTINUE TO BE GOVERNED BY THE PRECEDING CIRCULARS. THE ABOVE SITUATIONS CAN BE FURTHER ILLUSTRATED WITH THE HELP OF A TABLE AS UNDER: STAND TAKEN BY THE TAXPAYER HOLDING PERIOD TREATMENT AS PER CIRCULAR TAXPAYER OPTS TO TREAT LISTED SHARES/SECURITIES AS STOCK-IN- TRADE SHORT - TERM OR LONG-TERM BUSINESS INCOME ITA 852/JP/2018 M/S SANJAY KUMAR JAISANSARIA HUF VS ACIT 4 TAXPAYER OPTS TO TREAT LISTED SHARES/SECURITIES AS CAPITAL GAINS LONG-TERM (MORE THAN 12 MONTHS) CAPITAL GAINS (SUBJECT TO CONSISTENT STAND IN SUBSEQUENT YEARS) TAXPAYER OPTS TO TREAT LISTED SHARES/SECURITIES AS CAPITAL GAINS SHORT-TERM (12 MONTHS OR LESS THAN 12 MONTHS) TO BE DECIDED IN VIEW OF EARLIER CIRCULARS THE CIRCULAR FURTHER CLARIFIES THAT THE ABOVE SITUATIONS SHALL NOT APPLY IN RESPECT OF TRANSACTIONS WHERE THE GENUINENESS OF THE TRANSACTION IS ITSELF QUESTIONABLE, SUCH AS BOGUS CLAIM OF LONG-TERM CAPITAL GAINS OR SHORT-TERM CAPITAL LOSS OR IN CASE OF SHAM TRANSACTIONS. WE FOUND THAT SINCE THE ASSESSEE HAS DULY DISCLOSED IN THE BALANCE SHEET AS THE INVESTMENT IN THE SHARES AND NOT AS STOCK IN TRADE. ASSESSEE HAS ALSO HAVING THE INCOME FROM CAPITAL GAINS IN THE EARLIER YEAR ALSO WHICH HAS DULY BEEN ASSESSED AS THE CAPITAL GAINS. ACCORDINGLY, I DO NOT FIND ANY MERIT IN THE CONTENTS FOR NOT ACCEPTING THE ASSESSEES CLAIM OF CAPITAL GAIN EARNED ON SALE OF INVESTMENT. 4. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH OCTOBER, 2019 SD/- JES'K LH 'KEKZ ( RAMESH C SHARMA ) YS[KK LNL; @ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 30 TH OCTOBER, 2019 *RANJAN ITA 852/JP/2018 M/S SANJAY KUMAR JAISANSARIA HUF VS ACIT 5 VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- M/S SANJAY KUMAR JAISANSARIA HUF, CHURU. 2. IZR;FKHZ @ THE RESPONDENT- THE A.C.I.T., CIRCLE- JHUNJHUNU. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 852/JP/2018) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR