AMOL CAPITAL MARKETS P.LTD, MUMBAI V. DCIT 4(1), MUMBAI

ITA 882/MUM/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88590 (ITAT-MUMBAI)
• Duration Of Justice: 1 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-03-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 09-02-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V K VORA
• Assessee Lawyers: VENUGOPAL C NAIR
• Keywords: Business income; Transactions in derivatives

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - F BENCH , ! , BEFORE S/SH. I P BANSAL,JUDICIAL ME MBER & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO.883/MUM/2015, ' ' ' ' # # # # / ASSESSMENT YEAR-2010-11 APOORVA L. SANGHVI WADIA BUILDING, 22 DR. S.A. BRELVI ROAD, FORT, MUMBAI-21 PAN:AACPS0302D VS DCIT - 4(1) 640,AAYKAR BHAVAN,M K ROAD, MUMBAI-20 ( $% / ASSESSEE) ( &'$% / RESPONDENT) /. ITA NO.882/MUM/2015, ' ' ' ' # # # # / ASSESSMENT YEAR-2010-11 M/S AMOL CAPITAL MARKETS P. LTD. 106, MOTABAI WADIA BLDG. 1ST FLOOR, 22D, S A BRELVI ROAD, FORT, MUMBAI-01 PAN:AADCS8022N VS DCIT - 4(1) 640,AAYKAR BHAVAN,M K ROAD, MUMBAI-20 ( $% / ASSESSEE) ( &'$% / RESPONDENT) ' () ' () ' () ' () * * * * /ASSESSEE BY :SHRI VENUGOPAL C. NAIR + * / REVENUE BY :SHRI V.K. VORA ' ' ' ' + ++ + ), ), ), ), / DATE OF HEARING :19 - 03 -2015 -.# + ), / DATE OF PRONOUNCEMENT :19 -03-2015 ' ' ' ' , 1961 + ++ + 254 )1 ( )/) )/) )/) )/) 0 0 0 0 ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER BENCH ' ' ' ' : CHALLENGING THE ORDERS DATED 21.02.2015 OF THE CIT( A)-9,MUMBAI,ASSESSEES HAVE RAISED IDENTICAL 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. REASONS GIVEN BY LEARNED CIT(A) IN CONFIRMING THE A CTION 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. AS BOTH THE CASES ARE INTER-CONNECTED,SO,FOR SAKE O F CONVENIENCE WE ARE ADJUDICATING THEM BY PASSING A COMMON ORDER. ITA/883/MUM/20015: ASSESSEE,AN INDIVIDUAL IS ALSO ENGAGED IN THE BUSI NESS OF INVESTMENT,SUB-BROKERAGE AND FINANCIAL CONSULTANCY.HE FILED HIS RETURN OF INCOME ON 04.10. 2010 DECLARING TOTAL INCOME OF RS. 29,85, 958/-.ASSESSING OFFICER(AO)FINALISED THE ASSESSMENT U/S.143(3) OF THE ACT,ON 23.02.2013, DETERM -INING THE TOTAL INCOME OF THE ASSESSEE AT RS. 32, 78,920/- 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.48,01,090/-.VIDE ORDER SHEET NOTING,DT.07/09/201 2,HE ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE STCG SHOULD NOT BE TREATED AS BUSINESS INCOME A S HE WAS MAINLY INVOLVED IN TRADING OF SHARES AND MOTIVE WAS TO EARN PROFIT AND NOT DIVIDE ND INCOME. ITA/882-3/MUM/2011-AY.2008-09 ALS & ACMPL 2 IN HIS RESPONSE THE ASSESSEE STATED THAT GAINS FOR LESS THAN 30 DAYS WAS LESS THAN 5.45% OF TOTAL STCG,THAT THE TOTAL STCG OFFERED WAS RS.48,01,090/- ,THAT HE HAD DEALT WITH SHARES OF JAIN IRRIGATION SYSTEMS LTD. MAINLY, THAT THOSE SHARES W ERE HELD APPROXIMATELY FOR 11 MONTHS, THAT ALL OTHER TRANSACTIONS IRRESPECTIVE OF ANY PERIOD OF FR EQUENCY HAD BEEN ONLY A MARGINAL GAIN OF RS. 4. 44 LAKHS ONLY,THAT DURING EARLIER ASSESSMENT U/S.14 3(3) FOR 2007-08 AND 2008-09,THE AO HAD ACCEPTED HIS CONTENTION THAT GAINS/LOSS FROM DEALIN GS IN SHARES WHERE DELIVERY HAD BEEN TAKEN AS STCG/STCL,THAT THE BALANCE SHEETS FILED FOR THOS E YEARS CLEARLY INDICATED INVESTMENTS AND STOCK IN TRADE,THAT THE LOANS AVAILED EARLIER Y EARS HAD ALSO GONE DOWN SUBSTANTIALLY,THAT NO FRESH LOAN WAS AVAILED FOR ACQUISITION OF SHARES DURING THE YEAR,THAT FROM THE SHARES IN THE BALANCE SHEET TRANSACTIONS IN THE YEAR UNDER AP PEAL HAD BEEN MADE GIVING RISE TO STCG/ 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). 2.1. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE,T HE AO HELD THAT HE HAD BORROWED FUND ON WHICH SUBSTANTIAL INTEREST WAS PAID,THAT THE UTILIS ATION OF BORROWED FUND COULD NOT BE SEGREGATED, THAT THE ASSESSEE'S P&L A/C CONSISTED OF DIVIDEND I NCOME AND INCOME FROM OTHER SOURCES , THAT HE WAS REGULARLY AND FREQUENTLY DEALING WITH T HE 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 WAS A SYSTEMATIC & ORGANI ZED ACTIVITY OF THE ASSESSEE WHICH WAS EVIDENT FROM THE BROKER'S NOTE & RECORDS RELATING T O SHARE TRANSACTION BEING MAINTAINED BY THE ASSESSEE,THAT THERE WAS CONTINUITY IN SHARE TRA NSACTION OVER A PERIOD OF TIME WHICH WAS EVIDENT FROM THE RETURN OF INCOME FILED BY THE ASSE SSEE OF THE EARLIER YEARS & SUBSEQUENT YEAR WHERE INCOME FROM SHARE TRADING HAD BEEN CONTI NUOUSLY APPEARING AS A SOURCE OF INCOME,THAT THE QUANTITY OF SHARE TRANSACTED AND THE QUANTUM OF AMOUNT INVOLVED WAS SUBSTANTIAL,THAT HIGH VOLUME OF TRANSACTION WAS A CHARACTERISTIC 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 INCOME WAS EARNED,THAT EARNIN G DIVIDEND WAS NOT THE PRIMARY MOTIVE WHICH INDICATED THAT THE ASSESSEE WAS ENGAGED IN SH ARE TRANSACTION 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 ASSESS EE 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 ASSESSEE HAD DEALT IN SCRIPS OF ONE COMPANY ONLY ,THAT A TRADER USUALLY DEALT IN SAME I TEMS AGAIN AS HE 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 HE WAS NEVER INTERESTED IN MAKING LONG TERM INVESTMENTS IN SHARES,THAT THERE WAS A HIGH FREQUENCY AND REPETITION IN THE SALE AND PURCHASE OF SHARES,THAT THE ASSESSEE HAD BEEN DEALING IN SHARES OF THE SAME SCRIP MANY T IMES DURING THE YEAR UNDER APPEAL. FINALLY, CONSIDERING VOLUME,INVOLVEMENT OF THE 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 MATTER OF GOPAL PUROHIT(228CTR582)DELIVERED BY TH E HONBLE MUMBAI HIGH COURT.THE FAA DISMISSED THE APPEAL FILED BY THE ASSESSEE. ITA/882-3/MUM/2011-AY.2008-09 ALS & ACMPL 3 4. BEFORE US,THE AUTHORISED REPRESENTATIVE(AR)CONTENDE D THAT THE ASSESSEE WAS AN INVESTOR,THAT IN THE EARLIER YEARS HIS CLAIM AS INVESTOR WAS ACCEPTE D BY THE AO WHILE PASSING ORDER U/S. 143(3)OF THE ACT,THAT HE HAD TRADED IN ONE SCRIPTS ONLY,THAT SHARES OF THAT COMPANY WERE TRADED AFTER A PERIOD OF ELEVEN MONTHS,THAT PROFIT OR LOSS OF THE SCRIPTS WHERE DELIVERY WAS NOT TAKEN WAS OFFERED UNDER THE BUSINESS HEAD,THAT THE FAA PASSED TWO LIN E ORDER AND HAD NOT CONSIDERED ANY OF THE ARGUMENTS RAISED BY THE ASSESSEE.DEPARTMENTAL REPRE SENTATIVE (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). WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WHILE DECIDING THE APPEAL FILED BY VIBHA APOORVA SANGHVI,WIFE OF THE ASSESSEE (ITA/// DATED 18.03.2015),WE HAVE HELD THAT THE ORDER PASSED BY THE FAA IS NOT A SPEAKING AND R EASONED ORDER.WE HAVE REMITTED BACK THE ISSUE TO THE FILE OF THE FAA FOR FRESH ADJUDICATION . AS THE FAA HAS NOT PASSED SPEAKING ORDER IN THE CASE OF THE ASSESSEE ALSO,THEREFORE,MATTER IS S ENT BACK TO HIS FILE.HE IS DIRECTED TO PASS A REASONED AND SPEAKING ORDER AFTER HEARING THE ASSES SEE.EFFECTIVE GROUND OF APPEAL RAISED BY THE ASSESSEE IS DECIDED IN ITS FAVOUR, IN PART. ITA/882/MUM/2015: THE FACTS AND CIRCUMSTANCES OF THE CASE ARE ALMOST IDENTICAL TO THE FACTS OF VIBHA APOORVA SANGHVI (SUPRA)-THE ONLY DIFFERENCE IS OF AMOUNTS I NVOLVED AND THE SCRIPTS TRADED BY THE ASSESSEE.IN THE CASE UNDER CONSIDERATION,THE ASSESS EE-COMPANY HAD SHOWED STCG OF RS.87.68 LAKHS AND IT HAS TRADED IN THREE SCRIPTS ONLY.FOLL OWING OUR ORDER PASSED IN CASE OF VIBHA APOORVA SANGHVI(SURPA),WE DIRECT THE FAA TO PASS A REASONED ORDER AND AFFORD A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. AS A RESULT,APPEALS FILED BY BOTH THE ASSESSEES STAND PARTLY ALLOWED. )1 .'2 ' ()2 3 4 + / 5 0 )1 6 + ) 78. ORDER PRONOUNCED IN THE OPEN COURT ON 19TH, MARCH ,2015. 0 + -.# 5 :' 19 =,2015 . + / B SD/- SD/- ( /I P BANSAL) ( ! / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / MUMBAI, :' /DATE: 19.03.2015 SK 0 0 0 0 + ++ + &)C &)C &)C &)C D C#) D C#) D C#) D C#) / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / $% 2. RESPONDENT / &'$% 3. THE CONCERNED CIT(A)/ E F , 4. THE CONCERNED CIT / E F 5. DR F BENCH, ITAT, MUMBAI / CG/ &)' , , . . . 6. GUARD FILE/ / 'C) &) //TRUE COPY// 0' / BY ORDER, H / 7 DY./ASST. REGISTRAR , /ITAT, MUMBAI