HASMUKH CHIMNALAL SHAH, MUMBAI V. ASST CIT 14(3), MUMBAI

ITA 8762/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 5089 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 12-11-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 27-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PITAMBAR DAS
• Assessee Lawyers: HITESH VASANT
• Keywords: Business income; Speculation loss
• Section: 80C; 143(3); 234B

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL H B ENCH, MUMBAI , , !' #$% , !& ! ' BEFORE SHRI VIJAY PAL RAO, JM AND SHRI N.K. BILLAIYA, AM ./ I.T.A. NO. 8762/MUM/2011 ( ( ( ( ( / ASSESSMENT YEAR :2008-09 SHRI HASMUKH CHIMANLAL SHAH 22, SHREEJI BHAVAN, 2 ND FLOOR, 51, MANGALDAS ROAD, MUMBAI-400 002 THE ACIT-14(3), MUMBAI ) !& ./ * ./PAN/GIR NO. : AAOPS7601M ( )+ /APPELLANT ) .. ( ,-)+ / RESPONDENT ) )+ . ! / APPELLANT BY : ` SHRI HITESH VASANT ,-)+ / . ! /RESPONDENT BY : SHRI PITAMBAR DAS / 01& / DATE OF HEARING :12.11.2013 23( / 01& / DATE OF PRONOUNCEMENT :20.11.2013 !4 / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE LD. CIT(A)-25, MUMBAI DT.17.10.2011 PERTAINING TO A.Y. 2008-09. 2. THE GRIEVANCE OF THE ASSESSEE CAN BE SUMMARIZED AS FOLLOWS: 1) TREATMENT OF SHORT TERM CAPITAL GAINS AS BUSINE SS INCOME. 2) NOT ALLOWING THE SET OFF OF BROUGHT FORWARD SHO RT TERM CAPITAL LOSS OF EARLIER YEARS. ITA NO.8762/M/2011 2 3) NOT ALLOWING CLAIMS U/S. 80D OF THE ACT. 4) NOT ALLOWING DEDUCTION U/S. 80C OF THE ACT 5) CHARGING OF INTEREST U/S. 234A AND 234B OF THE ACT. 3. THE MAIN GRIEVANCE OF THE ASSESSEE RELATES TO TH E TREATMENT OF SHORT TERM CAPITAL GAINS AS BUSINESS INCOME AND ALL OTHER GRIEVANCES ARE CONSEQUENTIAL TO THIS. 4. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PRO CEEDINGS, ON PERUSING THE COMPUTATION OF INCOME, THE ASSESSING O FFICER NOTICED THAT THE ASSESSEE HAS DECLARED SHORT TERM CAPITAL GAIN O N SALE OF SHARES. ON VERIFYING THE DETAILS, THE AO NOTICED THAT THE ASSE SSEE HAS ENTERED INTO LARGE VOLUME OF SHARE TRANSACTIONS AND HAS MANY TIM ES HELD THE SHARES FOR A FEW DAYS BEFORE SELLING THEM. THE AO FURTHER OBS ERVED THAT THE ASSESSEE IS ALSO A TRADER IN SHARES AND SECURITIES AS IT IS EVIDENT FROM THE AUDIT REPORT. THE ASSESSEE ALSO TRANSACTED IN DERI VATIVE MARKET AND HAS DERIVED SPECULATION LOSS ON THE SAME. THE ASSESSE E WAS ASKED TO EXPLAIN WHY SHORT TERM CAPITAL GAIN SHOULD NOT BE TREATED A S BUSINESS INCOME. THE ASSESSEE FILED A DETAILED REPLY DT. 22.10.2010 AND EXPLAINED THAT THE ASSESSEE IS ONLY AN INVESTOR AND THE SHORT TERM CAP ITAL GAINS HAVE BEEN DERIVED FROM SUCH INVESTMENTS. THE ASSESSEE ALSO R ELIED UPON THE DECISION OF THE LD. CIT(A) FOR A.Y. 2006-07 AND STA TED THAT IT HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE AND ASKED THE AO TO TAKE A SIMILAR VIEW. THE ASSESSEES REPLY WAS NOT ACCEPTED BY THE AO FOR THE REASONS THAT THE ASSESSEE DID NOT FURNISH THE STATEMENT OF SHORT TER M CAPITAL GAIN WITH DETAILS OF VOLUME OF TRANSACTIONS, HOLDING PERIOD, DATE OF SALE AND PURCHASE OF SHARES ETC. THE AO WENT ON TO DISCUSS CERTAIN JUDICIAL DECISIONS BEFORE COMING TO THE CONCLUSION THAT THE ACTIVITY INVOLVED IN BY ITA NO.8762/M/2011 3 THE ASSESSEE IS FOR EARNING PROFITS RATHER THAN DER IVING INCOME BY WAY OF DIVIDEND. THE AO WAS CONVINCED THAT THE ASSESSEE I S ENGAGED IN TRADING ACTIVITIES AND WENT ON TO TREAT THE SHORT TERM CAPI TAL GAIN UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION. 5. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. C IT(A) BUT WITHOUT ANY SUCCESS. 6. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUBM ITTED THAT THE FACTS FOR THE YEAR UNDER CONSIDERATION ARE IDENTICAL WITH THE FACTS OF EARLIER ASSESSMENT YEARS. IT IS THE SAY OF THE LD. COUNSE L THAT FOR A.Y. 2007-08 AND 2005-06, THE AO HAS ACCEPTED THE SHORT TERM CAP ITAL GAIN WHILE FRAMING THE ASSESSMENT ORDER U/S. 143(3) OF THE ACT . THE LD. COUNSEL FOR THE ASSESSEE PRAYED THAT ON IDENTICAL FACTS, THE RE VENUE AUTHORITIES CANNOT TAKE DIFFERENT VIEW. THE LD. COUNSEL FURTHER EXPLA INED THAT DURING THE ASSESSMENT PROCEEDINGS ITSELF, THE DETAILS PERTAINI NG TO SHARE TRANSACTIONS WERE FURNISHED TO THE AO AND THE SAID DETAILS ARE ALSO EXHIBITED IN THE PAPER BOOK FILED BEFORE THE TRIBUNAL. 7. THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY PLA CED RELIANCE ON THE ORDER OF THE LOWER AUTHORITIES AND DREW OUR ATT ENTION TO PAGE-46 OF THE PAPER BOOK AND SUBMITTED THAT A PERUSAL OF THIS EX HIBIT WOULD SHOW THAT THE ASSESSEE IS PURCHASING AND SELLING THE SCRIPS OF THE SAME COMPANY AGAIN AND AGAIN THEREBY CHURNING ITS PORTFOLIO FOR MAKING BUSINESS PROFITS. THE LD. DR POINTED OUT THE CASE OF BOSCH LTD., AND DECCAN CHRONICLE TO EMPHASISE HIS POINT OF VIEW. IT IS THE SAY OF THE LD. DR THAT CONSIDERING THE VOLUME OF TRANSACTION, IT CANNOT BE SAID THAT THE ASSESSEE IS AN INVESTOR AND THE LD. CIT(A) HAS VERY CORRECTL Y CONFIRMED THE FINDINGS OF THE AO. ITA NO.8762/M/2011 4 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CAR EFULLY PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE RELEVAN T MATERIAL EVIDENCES BROUGHT ON RECORD IN THE FORM OF PAPER BOOK. WE AL SO HAVE THE BENEFIT OF THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FO R A.Y. 2006-07. THE ISSUE AS TO WHETHER THE PROFIT ON SALE OF SHARES CO NSTITUTES BUSINESS INCOME OF THE ASSESSEE OR CAPITAL GAIN DEPENDS ON W HETHER THE SAID SHARES WERE PURCHASED AND HELD BY THE ASSESSEE AS INVEST MENT OR STOCK-IN-TRADE. THE MOST RELEVANT ASPECT TO BE SEEN IS THE INTEN TION OF THE ASSESSEE TO PURCHASE AND HOLD THE SHARES AND SUCH INTENTION HAS TO BE GATHERED FROM THE FACTS OF THE CASE INCLUDING THE CONDUCT OF THE ASSESSEE. IN THIS CONTEXT, IT WOULD BE PERTINENT TO SEE THE FINDINGS OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2006-07 IN ITA NO. 232 1/M/2010 AT PARA-7 ON PAGE-8 OF ITS ORDER WHICH IS AS UNDER: A PERUSAL OF THE ORDERS PASSED BY THE LOWER AUTHOR ITIES IN THE PRESENT CASE SHOWS THAT NEITHER THE AO NOR THE LD. CIT(A) HAS DONE THE EXERCISE TO FIND OUT THE EXACT NATURE OF SHARE TRANSACTIONS CARRIED ON BY THE ASSESSEE IN A PROPER MANNER BY APPLYING THE RELEVANT CRITERIAS/PRINCIPLE S TO THE FACTS OF THE CASE. WE, THEREFORE, DEEM IT FIT AND PROPER AND IN THE INTEREST OF JUSTICE TO SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW ON THIS ISSUE AND RESTORE THE MAT TER TO THE FILE OF THE AO WITH DIRECTION TO DECIDE THE SAME AF RESH AFTER APPLYING THE PRINCIPLES/CRITERIAS LAID DOWN BY THE LUCKNOW BENCH OF THE TRIBUNAL IN THE CASE OF SARNATH INFRAS TRUCTURE (SUPRA) TO THE FACTS OF THE CASE. NEEDLESS TO OBSE RVE THAT THE AO SHALL AFFORD PROPER AND SUFFICIENT OPPORTUNITY T O THE ASSESSEE OF BEING HEARD. 9. ON PERUSAL OF THE FACTS OF THE CASE IN HAND SHOW THAT THERE IS A SIMILARITY WITH A.Y. 2006-07, THEREFORE, WE FOLLOW THE FINDINGS OF THE TRIBUNAL FOR A.Y. 2006-07 AND RESTORE THE MATTER TO THE FILES OF THE AO WITH A DIRECTION TO DECIDE THE SAME AFRESH AFTER AP PLYING THE ITA NO.8762/M/2011 5 PRINCIPLES/CRITERIAS CONSIDERED IN A.Y. 2006-07. T HE AO SHALL AFFORD PROPER AND SUFFICIENT OPPORTUNITY TO THE ASSESSEE O F BEING HEARD. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. 11. AS WE HAVE RESTORED THE ENTIRE ISSUE BACK TO TH E FILES OF THE AO, THE AO IS ALSO DIRECTED TO CONSIDER THE CLAIM OF THE AS SESSEE UNDER SECTIONS 80C AND 80D OF THE ACT AS PER LAW. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH NOVEMBER, 2011 . !4 / 3( &! 5 6 7 20.11.2013 3 / = SD/- SD/- ( VIJAY PAL RAO ) ( N.K. BILLAIYA ) /JUDICIAL MEMBER !& / ACCOUNTANT MEMBER MUMBAI; 6 DATED 20.11.2013 . . ./ RJ , SR. PS !4 / ,0 >!(0 !4 / ,0 >!(0 !4 / ,0 >!(0 !4 / ,0 >!(0 / COPY OF THE ORDER FORWARDED TO : 1. )+ / THE APPELLANT 2. ,-)+ / THE RESPONDENT. 3. ? ( ) / THE CIT(A)- 4. ? / CIT 5. @= ,0 , , / DR, ITAT, MUMBAI 6. =A B / GUARD FILE. !4 !4 !4 !4 / BY ORDER, -0 ,0 //TRUE COPY// C CC C / D D D D (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI