ACIT, New Delhi V. Sh. M.L. Thukral, New Delhi

ITA 896/DEL/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3961 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 05-05-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 04-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KISHORE B
• Assessee Lawyers: V MOHAN C AS
• Keywords: Business income; Search and seizure
• Section: 143(3)

Judgement Text

ITA NO. 896/DEL/2010 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E NEW DELHI BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 896/DEL/2010 A.Y. : 2006-07 ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE-23(1), ROOM NO. 190, C.R. BLDG., I.P. ESTATE, NEW DELHI VS. SH. M.L. THUKRAL, S-121, G.K.-II, NEW DELHI (PAN/GIR NO. : AACPT6228R) (APPELLANT ) (APPELLANT ) (APPELLANT ) (APPELLANT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) ASSEESSEE BY : SH. VED JAIN, & SH. V. MOHAN, CAS DEPARTMENT BY : SH. KISHORE B. , SR. D.R. ORDER ORDER ORDER ORDER PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) DATED 24.12. 2009 PERTAINING TO ASSESSMENT YEAR 2006-07. 2. THE GROUNDS READ AS UNDER:- ON THE FACTS AND ON THE CIRCUMSTANCES OF THE CASE T HE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LA W AND ON FACTS IN TREATING THE SUM OF ` 12,93,100/- AS SHORT TERM CAPITAL GAIN AS AGAINST HELD BY THE ASSESSING OFFICER AS I NCOME FROM BUSINESS AND PROFESSION OVER LOOKING THE FACT THAT THE ASSESSEE HAS NOT MAINTAINED SEPARATE BOOKS OF ACCOUNT TO DIF FERENTIAL BETWEEN THE UNITS WHETHER HELD FOR INVESTMENTS, OR HELD FOR THE PURPOSE OF HIS BUSINESS. ITA NO. 896/DEL/2010 2 ON THE FACTS AND ON THE CIRCUMSTANCES OF THE CASE T HE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LA W AND ON FACTS THAT THE ASSESSEE HAS FAILED TO SUBSTANTIATE HIS CLAIM THAT THE SHARES/ MUTUAL FUNDS WERE NOT ALLOCATED TO BUSI NESS OR INVESTMENT AT THE TIME OF PURCHASE AND IN SHOWING T HAT THE INCOME FROM SALE PURCHASE OF SHARES UNDER THE HEAD SHORT TERM CAPITAL GAIN IS WITH THE MOTIVE OF AVOIDING HIGHER RATE OF TAX. 3. THE ASSESSEE IN THIS CASE WAS FOUND TO BE ENGAG ED IN THE BUSINESS OF PURCHASE AND SALE OF SHARES / MUTUAL F UNDS. FROM THE PERUSAL OF THE RECORDS, IT WAS FOUND THAT ASSESSEE HAS ALSO SHOWN SHORT TERM CAPITAL GAIN FROM MUTUAL FUNDS/ SHARES . IT WAS FOUND THAT ASSESSEE IS MAINTAINING THREE PORTFOLIO ACCOUNTS. T HE FIRST PORTFOLIO IS PRUDENTIAL ICICI ACCOUNT NO. D100675A HAS BEEN SHOWN AS BUSINESS. FURTHER, RELIANCE PORTFOLIO ACCOUNT NO. DIR 0241 AND P RUDENTIAL ICICI PORTFOLIO ACCOUNT NO. D101320 HAVE BEEN SHOWN AS INV ESTMENT. ON QUERY, IN THIS REGARD THE ASSESSEE SUBMITTED THAT TH E INVESTMENTS ARE MADE THROUGH BANKS WHERE THE ASSESSEE HAS BANK ACCOU NTS. THE PORTFOLIO MANAGERS HAD INVESTMENT ADVISORY MANGERS TO ADVISE AND RECOMMEND FOR DIFFERENT INVESTMENTS. THE DIFFERENT ACCOUNT STATEMENTS CARRYING THE NAME OF THE BROKERS OR DEAL ER WHERE THE ASSESSEE IS HAVING ACCOUNTS. THE ASSESSEE TAKES TH E INDIVIDUAL DECISION THAT A PARTICULAR SHARE OR MUTUAL FUND UNI TS NEEDS TO BE KEPT AS INVESTMENT OR FOR THE PURPOSE OF BUSINESS. THE ASSESSING OFFICER CONSIDERED THE ABOVE REPLY. THE ASSESSING OFFICER POINTED THAT IN THE ABSENCE OF THE SEPARATE BOOK OF ACCOUNTS, IT WAS FO UND NOT POSSIBLE TO DIFFERENTIATE BETWEEN THE UNITS HELD AS INVESTMENT OR HELD FOR THE PURPOSE OF BUSINESS. MOREOVER, ASSESSEE HIMSELF CO NSIDERED ONE PORTFOLIO AS A BUSINESS. HENCE, ASSESSING OFFICER PROCEEDED TO ASSESS ITA NO. 896/DEL/2010 3 THE INCOME FROM ALL THE THREE PORTFOLIO AS BUSINESS INCOME OF THE ASSESSEE. 4. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOME TAX (APPEALS) NOTED THAT IT IS NOT DISPUTED THAT ASSESS EE HAS THREE PORTFOLIO. ONE PORTFOLIO HAS BEEN REFLECTED BY THE ASSESSEE FOR THE PURPOSE OF BUSINESS, WHICH IS NOT IN DISPUTE. THE ONLY BONE OF CONTENTION IS WITH REGARD TO THE SECOND AND THIRD P ORTFOLIO, FROM WHICH THE ASSESSEE HAS SHOWN AS SHORT TERM CAPITAL GAINS/ LOSS ON TRANSACTION OF SHARES / MUTUAL FUNDS. ASSESSING OFFICER HA S TAKEN THIS AS TRADING ACTIVITY. LD. COMMISSIONER OF INCOME TAX (APPEALS) THEREAFTER OBSERVED THAT IT IS A SETTLED LAW THAT ASSESSEE CAN BOTH BE A INVESTOR AS WELL AS A TRADER IN STOCKS/MUTUAL FUNDS. LD. CO MMISSIONER OF INCOME TAX (APPEALS) OBSERVED THAT HE HAS GONE THR OUGH THE TRANSACTIONS. FROM THE SAME, HE FOUND THAT IT WAS C RYSTAL CLEAR THAT THE INTENTION OF THE ASSESSEE IS APPRECIATION OF CA PITAL AND NOT BOOKING FREQUENT PROFITS. SECONDLY, HE OBSERVED THAT THE RE IS NO EVIDENCE THAT ASSESSEE HAS BORROWED MONEY TO FINANCE THE TRANSACTI ON. THIRDLY, LD. COMMISSIONER OF INCOME TAX (APPEALS) GAVE A FINDING THAT ASSESSEE HAD ALSO KEPT SEPARATE ACCOUNTS OF THE BUSINESS DEA LINGS IN SHARES/ MUTUAL FUNDS FOR TRADING ACTIVITY AND INVESTMENT PURP OSES, IN AS MUCH AS THE SECOND AND THIRD PORTFOLIO ARE SHOWN AS INVE STMENT WHILE THE FIRST ONE IS FOR TRADING ACTIVITY. THEREAFTER, LD . COMMISSIONER OF INCOME TAX (APPEALS) ELABORATE UPON THE ISSUE AND HELD AS UNDER:- FROM THE FACTS AS ENUMERATED IN PARA 6 ABOVE, IT IS CLEAR THAT THE ASSESSEE IS BOTH A TRADER AND AN INVESTOR, A PR INCIPLE WHICH ALSO HAS THE APPROVAL OF THE CBDT IN CIRCULAR NO. 4 OF 2007 DATED 15.6.2007. IN OTHER WORDS, THE BASIC PREMISE OF TH E ASSESSEE ITA NO. 896/DEL/2010 4 THAT JUST BECAUSE THE ASSESSEE HAS REFLECTED TRANSAC TION FROM ONE PORTFOLIO AS BUSINESS ACTIVITY, THE OTHER TWO PORTFOLIOS ARE OUGHT TO BE BUSINESS, I AM AFRAID IS FAULTY. SECOND LY, THE ASSESSEES INTENTION IS THAT OF APPRECIATION OF T HE VALUE OF THE CAPITAL. THIRDLY, THERE IS NO EVIDENCE ON RECORD , BROUGHT BY THE ASSESSING OFFICER THAT THERE IS ABNORMALLY HIGH FRE QUENCY OF SALE AND PURCHASE OF SHARES/ UNITS. FOURTHLY, THERE IS N O EVIDENCE ON RECORD THAT THE ASSESSEE HAD BORROWED MONEY FOR THE TRADING / INVESTMENT. LASTLY, THE ASSESSEE HAS TREATED THE BU SINESS AND THE INVESTMENT AS DIFFERENT IN THE RETURN OF INCOME . THUS, IT IS HELD THAT IN SO FAR AS THE SECOND AND THIRD PORTFOL IO IS CONCERNED, THE ASSESSEE IS AN INVESTOR. 5. AGAINST THIS ORDER THE REVENUE IS IN APPEAL BE FORE US. 6. WE HAVE HEARD THE RIVAL CONTENTIONS IN LIGHT OF THE MATERIAL PRODUCED AND PRECEDENT RELIED UPON. WE NOTE THAT AS SESSING OFFICER HAS MADE HIS ASSESSMENT ON THE PREMISE THAT ASSESS EE HAS HIMSELF REFLECTED TRANSACTION FROM ONE PORTFOLIO AS BUSINES S ACTIVITY, THE OTHER TWO PORTFOLIOS ARE OUGHT TO BE BUSINESS ACTIVITY. LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS GIVEN A FINDING THAT ASSES SEE IS BOTH TRADER AND AN INVESTOR. HE ALSO FIND THAT ASSESSEES INTEN TION WAS APPRECIATION OF THE VALUE OF THE CAPITAL. ASSESSI NG OFFICER HAS NOT BROUGHT ON RECORD ANY MATERIAL THAT THERE IS ABNOR MAL HIGHER FREQUENCY OF SALE AND PURCHASE OF SHARES/ UNITS. MO REOVER, IT HAS BEEN NOTED THAT ASSESSEE HAD NOT BORROWED THE MONEY FOR THE TRADING /INVESTMENT . THE ASSESSEES ACCOUNTS SHOW BUSINES S AND INVESTMENT AS DIFFERENT ITEMS. WE HAVE FURTHER NOTED THAT AS SESSEE HAS REFLECTED SIMILAR NATURE OF ACCOUNTS FOR PAST SEVERA L YEARS. THE ITA NO. 896/DEL/2010 5 ASSESSMENT YEAR FOR A.Y. 2004-05 WAS PASSED UNDER S ECTION 143(3) OF THE IT ACT WHEREIN ASSESSEES COMPUTATION ON THE SAME LINES AS IN THE CURRENT YEAR WERE ACCEPTED. IN THESE CIRCUMSTANCE S, IN OUR CONSIDERED OPINION, THERE IS NO ILLEGALITY OR INFIR MITY IN THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS). ACCORDINGLY , WE UPHOLD THE SAME. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13/05/2011. SD/- SD/- [ [[ [RAJPAL YADAV RAJPAL YADAV RAJPAL YADAV RAJPAL YADAV] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 13/05/2011 SRB COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES