VIBHA A SANGHVI, MUMBAI V. DCIT 4(1), MUMBAI

ITA 880/MUM/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88606 (ITAT-MUMBAI)
• Duration Of Justice: 1 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Assessment Year: 2010-2011
• Appeal Filed On: 09-02-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PAWAN KUMAR BIRLA
• Assessee Lawyers: VENUGOPAL C NAIR
• Keywords: Business income; Rule of consistency; Transactions in derivatives; Non passing of speaking order

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - F BENCH , ! , BEFORE S/SH. I P BANSAL,JUDICIAL ME MBER & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO.880/MUM/2015, ' ' ' ' # # # # / ASSESSMENT YEAR-2010-11 VIBHA APOORVA SANGHVI FLAT NO.5,1 ST FLOOR, KARIM MANDIR 8 KRISHNA SANGHVI,GAMDEVI, MUMBAI-84 PAN:AACPS0301A VS DCIT-4(1) 640,AAYKAR BHAVAN,M K ROAD, MUMBAI-20 ( $% / ASSESSEE) ( &'$% / RESPONDENT) ' () ' () ' () ' () * * * * /ASSESSEE BY :SHRI VENUGOPAL C. NAIR + * / REVENUE BY :SHRI PAWAN KUMAR BIRLA ' ' ' ' + ++ + ), ), ), ), / DATE OF HEARING :18 - 03 -2015 -.# + ), / DATE OF PRONOUNCEMENT :18 -03-2015 ' ' ' ' , 1961 + ++ + 254 )1 ( )/) )/) )/) )/) 0 0 0 0 ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,A.M. ! ! ! ! ' ' ' ' : CHALLENGING THE ORDER DATED 21.01.2015 OF THE CIT(A )-3,MUMBAI,ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: THE LEARNED CIT(A) ERRED IN FACTS AND CIRCUMSTANCES AND IN LAW IN CONFIRMING THE ACTION OF AO HOLDING ST CAPITAL GAINS AS BUSINESS INCOME OVERLOO KING CONSISTENT TREATMENT OF THE APPELLANT OF THE GAINS MADE ON INVESTMENTS HAVE BEEN ACCEPTED BY AO OF PRECEDING ASSESSMENT YEAR WHILE FRAMING ASSESSMENT ORDER U/S 143 (3). REASONS GIVEN BY LEARNED CIT (A) IN CONFIRMING THE ACTION OF AO ARE WRONG, INSUFFICIENT AND CONTRARY TO FACTS AND EVIDENCE ON RECORD AND IN LAW . THE APPELLANT CRAVES LEAVE TO ADD, MODIFY, ALTER OR DELETE ALL OR ANY OF THE AFORESAID GROUNDS. ASSESSEE,AN INDIVIDUAL IS A WHOLE TIME DIRECTOR/DIR ECTOR OF CERTAIN COMPANIES.SHE IS ALSO ENGAGED IN THE BUSINESS OF INVESTMENT,SUB-BROKERAGE AND FIN ANCIAL CONSULTANCY.SHE FILED HER RETURN OF INCOME ON 04.10.2010 DECLARING TOTAL INCOME OF RS.2 4,10,000/-ASSESSING OFFICER (AO)FINALISED THE ASSESSMENT U/S.143(3) OF THE ACT,ON 23.02.2013, DETERMINING THE TOTAL INCOME AT RS.24,92, 450/-. 2. EFFECTIVE GROUND OF APPEAL PERTAINS TO TREATING SH ORT TERM CAPITAL GAINS(STCG)AS BUSINESS INCOME.DURING THE ASSESSMENT PROCEEDINGS,THE AO FOU ND THAT THE ASSESSEE HAD CLAIMED STCG OF RS.43,34,504/-.VIDE ORDER SHEET NOTING,DT.02/11/201 2,HE ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE STCG SHOULD NOT BE TREATED AS BUSINESS INCOME A S SHE WAS MAINLY INVOLVED IN TRADING OF SHARES AND MOTIVE IS TO EARN PROFIT AND NOT DIVIDEN D INCOME. IN HER RESPONSE THE ASSESSEE STATED THAT STCG WAS A RISING OUT OF TWO SCRIPTS ONLY NAMELY FDC AND JINDAL STEEL,THAT ON FDC, GAINS FOR LESS THAN 30 DA YS WAS LESS THAN 4% OF TOTAL STCG,THAT THE TOTAL STCG OFFERED WAS RS.45,13,248/-,THAT ON JINDAL STEE LS ENTIRE STCG WAS OF MORE THAN 103 DAYS,THAT DURING EARLIER ASSESSMENT U/S.143(3) FOR 2007-08 AND 2008-09 THE AO HAD ACCEPTED HER CONTENTION THAT GAINS/LOSS FROM DEALINGS IN SHARES WHERE DELIVERY HAD BEEN TAKEN AS ST CG/STCL,THAT THE THE BALANCE SHEETS FILED FOR THOSE YEARS CLEARLY INDICATED INVESTMENTS AND STOCK IN TRADE,THAT TE LOANS AVAILED EARLIER YEARS HAD ALSO GONE DOWN SUBSTANTIALLY,THAT NO FRESH LOAN WAS AVAILED FOR ACQUISITION OF SHARES DU RING THE YEAR,THAT FROM THE SHARES IN THE BALANCE SHEET TRANSACTIONS IN THE YEAR UNDER APPEAL HAD BEEN MADE GIVING RISE TO STCG/ ITA/880/MUM/2015,AY-2010-11,VAS 2 STCL,THAT THE ASSESSEE HAD BEEN CONSISTENTLY BEEN F OLLOWING A TREATMENT AS TO CAPITAL GAIN AND BUSINESS LOSS WHICH HAD BEEN ACCEPTED IN ASSESSMENT U/S. 143(3).THE ASSESSEE FURNISHED FOLLOWING CHART: 2.1. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE T HE AO HELD THAT SHE HAD BORROWED FUND ON WHICH SUBSTANTIAL INTEREST WAS PAID,THAT THE UTILIS ATION OF BORROWED FUND COULD NOT BE SEGREGAT - ED,THAT THE ASSESSEE'S P&L A/C CONSISTED OF DIVIDEN D INCOME AND INCOME FROM OTHER SOURCES I.E. INTEREST AND TRADING PROFIT TOTALING TO RS.71, 489/-,THAT OUT OF THAT DIVIDEND INCOME CONSISTED OF RS.52,182/-,THAT THE ASSESSEE HAD INCURRED AN EX PENDITURE OF RS. 11, 88, 859/- UNDER THE HEAD INTEREST PAYMENT,THAT SHE WAS REGULARLY AND FR EQUENTLY DEALING WITH THE ACTIVITY OF SALE AND PURCHASE OF SHARES WHICH WAS EVIDENT FROM THE D'MAT ACCOUNT, BROKERS NOTE & THE CORRESPONDING BANK ACCOUNTS,THAT THE ACTIVITY OF SHARE TRADING WA S A SYSTEMATIC & ORGANIZED ACTIVITY OF THE ASSESSEE WHICH WAS EVIDENT FROM THE BROKER'S NOTE & RECORDS RELATING TO SHARE TRANSACTION BEING MAINTAINED BY THE ASSESSEE,THAT THERE WAS CON TINUITY IN SHARE TRANSACTION OVER A PERIOD OF TIME WHICH WAS EVIDENT FROM THE RETURN OF INCOME FILED BY THE ASSESSEE OF THE EARLIER YEARS & SUBSEQUENT YEAR WHERE INCOME FROM SHARE TRA DING HAD BEEN CONTINUOUSLY APPEARING AS A SOURCE OF INCOME,THAT THE QUANTITY OF SHARE TRANSAC TED AND THE QUANTUM OF AMOUNT INVOLVED WAS SUBSTANTIAL,THAT HIGH VOLUME OF TRANSACTION WAS A C HARACTERISTIC FEATURE OF ANY COMMERCIAL ACTIVITY,THAT THE INTENTION OF THE ASSESSEE WAS TO EARN PROFIT AS THE ASSESSEE WAS NOT INTERESTED IN HOLDING THE SHARES FOR LONG TIME TO EARN DIVIDEND I NCOME,THAT AGAINST THE PURCHASE OF SHARES OF RS.1,78,744/-, AND THE SALE PROCEEDS FROM THE SA ME WAS OF RS.45,13,248/-,THAT DIVIDEND INCOME OF RS.52,182/- WAS EARNED,THAT EARNING DIVID END WAS NOT THE PRIMARY MOTIVE WHICH INDICATED THAT THE ASSESSEE WAS ENGAGED IN SHARE TR ANSACTION WITH A PROFIT MOTIVE AND THE SAME WAS IN THE NATURE OF TRADING,THAT THE FREQUENT PURCHASE AND SALE OF SHARES WAS GENERALLY CLASSIFIED UNDER BUSINESS APPROACH,THAT THE ASSESSEE HAD BEEN CONTINUOUSLY ENGAGED IN THE SHARE TRADING ACTIVITY AS WELL AS IN SPECULATION BUSINESS AND F&O . AFTER PERUSAL OF THE STATEMENT OF STCG PROVIDED BY THE ASSESSEE,THE AO HELD THAT THE ASSES SEE HAD DEALT IN SCRIPS OF ONLY TWO COMPANIES,THAT A TRADER USUALLY DEALT IN SAME ITEMS AGAIN AS SHE WOULD GET AN EXPERTISE ON THOSE ITEMS AND MAKES PROFITS ON THE BASIS OF SHORT TERM PRICE MOVEMENTS,THAT . AN INVESTOR WOULD NOT HAVE ANY IDEA ABOUT THE SHORT TERM PRICE MOVEMENTS, THAT THE ASSESSEE WAS CAPITALIZING ON SHORT TERM PRICE MOVEMENT OF THE SH ARES OF THE SELECT FEW COMPANIES,THAT THE SALE AND PURCHASE OF SHARES IN THE CASE OF ASSESSEE WERE DETERMINED BY THE VOLATILITY OF THE MARKET WHICH WAS AGAINST THE BASIC FEATURE OF INVESTOR WHO WAS RECOGNIZED BY DISCIPLINE IN THE MARKET AND WAS NOT EASILY SWAYED BY THE MOVEMENTS O F THE MARKET,THAT SHARES WERE NOT HELD AS INVESTMENTS,THAT SHE WAS NEVER INTERESTED IN MAKING LONG TERM INVESTMENTS IN SHARES,THAT THERE WAS A HIGH FREQUENCY AND REPETITION IN THE SA LE AND PURCHASE OF SHARES,THAT THE ASSESSEE HAD BEEN DEALING IN SHARES OF THE SAME SCR IP MANY TIMES DURING THE YEAR UNDER APPEAL.FINALLY,CONSIDERING VOLUME,INVOLVEMENT OF T HE ASSESSEE IN TRADING IN SHARE ACTIVITY AND THE UTILIZATION OF BORROWED FUND WHICH WAS NOT POSSIBLE TO SEGREGATE, THE AO TREATED THE STCG AS BUSINESS INCOME. 3. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE FIRST APPEAL AUTHORITY(FAA).THE ASSESSEE MADE DETAILED SUBMISSIO N BEFORE HIM AND ALSO RELIED UPON THE SCRIPT PERIOD OF HOLDING CAPITAL GAIN % OF TOTAL FDC 1 DAY RS.25,989/ - 0.58 3 DAYS RS.5,145/- 0.11 24-28 DAYS RS.1,00,852/- 2.23 BALANCE UP TO 100 DAYS RS.22,72,798/- 57.56 JINDAL STEEL 103-271 DAYS RS.20,26,351/- 44.90 ITA/880/MUM/2015,AY-2010-11,VAS 3 MATTER OF GOPAL PUROHIT(228CTR582)DELIVERED BY TH E HONBLE MUMBAI HIGH COURT.THE FAA DISMISSED THE APPEAL FILED BY THE ASSESSEE. 4. BEFORE US,THE AUTHORISED REPRESENTATIVE(AR)CONTENDE D THAT THE ASSESSEE WAS AN INVESTOR,THAT IN THE EARLIER YEARS HER CLAIM AS INVESTOR WAS ACCEPTE D BY THE AO WHILE PASSING ORDER U/S. 143(3)OF THE ACT,THAT SHE HAD TRADED IN TWO SCRIPTS ONLY,THA T PROFIT OR LOSS OF THE SCRIPTS WHERE DELIVERY WAS NOT TAKEN WAS OFFERED UNDER THE BUSINESS HEAD,THAT THE FAA PASSED TWO LINE ORDER AND HAD NOT CONSIDERED ANY OF THE ARGUMENTS RAISED BY THE ASSES SEE.DEPARTMENTAL REPRESENTATIVE (DR)SUPPORTED THE ORDER OF THE FAA AND STATED THAT PRINCIPLES OF RES JUDICATA DID NOT APPLY TO THE INCOME TAX PROCEEDINGS.HE RELIED UPON THE JUDGMENT OF G. VENKATASWAMI NAIDU & CO. (35 ITR 594). 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE FAA HAD REPRODUCED THE ORDER OF THE AO AND THE SUBMISSI ONS OF THE ASSESSEE IN HIS FOURTEEN PAGE ORDER.BUT, DECIDED THE APPEAL IN FOLLOWING MANNER: AFTER CONSIDERING THE FACTS OF THE CASE, SUBMISSIO NS MADE BY THE APPELLANT AND DETAILED REASONS GIVEN BY THE AO, I AM OF THE OPINION THAT THE AO HA D RIGHTLY TREATED STCG AS BUSINESS INCOME. IN VIEW OF THIS, THE STAND OF THE AO IS UPHELD AND THI S GROUND OF APPEAL IS TREATED AS DISMISSED. WE FIND THAT THE ASSESSEE HAD CLAIMED BEFORE THE FA A THAT IN THE EARLIER YEARS,SIMILAR TRANSACTIONS WERE TREATED AS STCG OR LTCG,THAT SHE HAD NOT UTILI SED BORROWED FUNDS,THAT SHE HAD DEALT IN TWO SCRIPTS ONLY,THAT SHARE WERE PART OF INVESTMENT IN THE BALANCE-SHEET,THAT PRINCIPLE OF CONSISTENCY SHOULD BE FOLLOWED.BESIDES THESE BROADER SUBMISSION S,THE ASSESSEE HAD MADE SPECIFIC SUBMISSIONS WITH REGARD TO THE SHARE TRANSACTION OF THE YEAR UNDER APPEAL.THE FAA HAD NOT DEALT ANY OF THE ARGUMENTS AND HAD PASSED A VERY CRYPTIC AND NON-SPEAKING ORDER WITHOUT GIVING ANY REASON FOR AGREEING WITH THE ORDER OF THE AO.AS A S ENIOR OFFICER OF THE DEPARTMENT HE IS SUPPOSED TO PASS A REASONED AND SPEAKING ORDER AND NOT TO DE CIDE THE APPEAL IN A SUMMARY MANNER.IT IS SAID THE FAA PERFORMS A JUDICIAL FUNCTION UNDER THE ACT AND IT IS INVESTED WITH AUTHORITY TO DETERMINE ALL QUESTIONS ALL THE ISSUES RAISED BEFORE HIM.THER EFORE,THE FAA MUST,IN DECIDING AN APPEAL,CONSIDER WITH DUE CARE ALL THE MATERIAL FACT S AND RECORD ITS FINDINGS ON ALL CONTENTIONS RAISED BY THE ASSESSEE AND THE AO IN THE LIGHT OF T HE EVIDENCE AND THE RELEVANT LAW. AN ORDER PASSED WITHOUT DEALING WITH THE CONTENTIONS RAISED BY EITHER OF THE PARTIES WOULD BE A NON SPEAKING ORDER AND THE COURTS ARE OF THE FIRM VIEW THAT SUCH ORDERS ARE OF NO JUDICIAL VALUE.IN THE MATTER OF BUILDWELL ASSAM (P.)LTD.(133ITR 736)HONB LE GAUHATI HIGH COURT HAS DELIBERATED UPON THE QUESTION OF PASSING A REASON ORDER AND HAS HELD AS UNDER: SECTION 250(6) OF THE I.T. ACT, 1961, PRESCRIBES T HE MANNER OF DISPOSAL OF AN APPEAL. AN ORDER MUST BE IN WRITING CONTAINING THE POINTS FOR DETERM INATION AND DECISION. THE OBJECT IS OBVIOUS. IT ENABLES A PARTY TO KNOW THE PRECISE POINTS DECIDED IN HIS FAVOUR OR AGAINST HIM. ABSENCE OF FORMULATION OF POINTS FOR DECISION OR WANT OF CLARI TY IN DECISION PUTS A PARTY IN A QUANDARY. A DECISION AGAINST A PARTY ENABLES HIM TO GO UP IN AP PEAL. A DECISION BY ITS VERY NATURE MUST BE FIRM AND SHOULD NOT BE VAGUE AND UNCLEAR. THE HONBLE COURT FURTHER HELD THAT THE TENOR AND C OLOUR OF THE ORDER MUST BE FIRM,CLEAR, CERTAIN, DEFINITE AND WITHOUT ANY AMBIGUITY.CONSIDERING THE ABOVE,WE ARE OF THE OPINION THAT,IN THE INTEREST OF JUSTICE,THE MATTER SHOULD BE RESTORED B ACK TO THE FILE OF THE FAA FOR FRESH ADJUDICATION OF THE ISSUE.HE IS DIRECTED TO PASS A REASONED AND SPEAKING ORDER AND TO MEET ALL THE ARGUMENTS RAISED BY THE ASSESSEE BEFORE HIM.HE WILL AFFORD A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE.EFFECTIVE GROUND OF APPEAL IS ALLOWED IN F AVOUR OF THE ASSESSEE,IN PART. AS A RESULT,APPEAL FILED BY THE ASSESSEE STANDS PAR TLY ALLOWED. ITA/880/MUM/2015,AY-2010-11,VAS 4 )1 ' () 2 3 + / 0)1 4 + ) 56. ORDER PRONOUNCED IN THE OPEN COURT ON 18TH, MARCH,2 015. 0 + -.# 8 9' 18 , EKPZ , ,, , 21 5 . + / ; SD/- SD/- ( /I P BANSAL) ( ! / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / MUMBAI, 9' /DATE: 18.03.2015 SK 0 0 0 0 + ++ + & && &)< )< )< )< = <#) = <#) = <#) = <#) / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / $% 2. RESPONDENT / &'$% 3. THE CONCERNED CIT(A)/ > ? , 4. THE CONCERNED CIT / > ? 5. DR F BENCH, ITAT, MUMBAI / <@/ &)' , , . . . 6. GUARD FILE/ / '<) &) //TRUE COPY// 0' / BY ORDER, A / 5 DY./ASST. REGISTRAR , /ITAT, MUMBAI