Appeal Details
Counselvise Citation
[2019] 112 COUNSELVISE.COM (IT) 1869 (ITAT-HYDERABAD)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
6 year(s) 6 month(s) 6 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
06-12-2019
Appeal Filed By
Assessee
Order Result
Dismissed
Bench Allotted
DB-B
Assessment Year
2008-2009
Appeal Filed On
30-05-2013
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B , HYDERABAD BEFORE SHRI D. KARUNAKARA RAO , ACCOUNTANT MEMBER AND SHRI V. DURGA RAO, JUDICIAL MEMBER ITA NO. 907 /HYD/201 3 ASSESSMENT YEAR: 20 08 - 09 SRI RAJENDRA PRASAD AGARWAL, HY DERABAD. PAN AA KPA 8671 K VS. ASST. COMMISSIONER OF INCOME - TAX, CIRCLE 10(1), HYDERABAD. ( APPELLANT ) (RESPONDENT) ASSESSEE BY : SHRI TEJ PRAKASH TOSHNIWALA REVENUE BY : S HRI NILANJAN DEY DATE OF HEARING : 02 / 1 2 /201 9 DATE OF PRONOUNCEMENT : 06 / 1 2 / 201 9 O R D E R PER V. DURGA RAO , J .M. : T H IS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF CIT(A) VI , DATED 11 / 02 /201 3 , HYDERABAD FOR AY 20 08 - 09 . 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED HIS RETURN OF INCOME FOR THE AY 2008 - 09 ON 09/09/2008 ADMITTING TOTAL INCOME OF RS. 68,82,285/ - , WHICH WAS PROCESSED U/S 143(1) OF THE IT ACT. SUBSE QUENTLY, THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS BY ISSUE OF NOTICE U/S 143(2) OF THE ACT. IN RESPONSE TO THE NOTICE, THE AR OF THE ASSESSEE FILED THE REQUISITE DETAILS AS CALLED FOR. THE AO COMPLETED THE ASSESSMENT BY ASSESSING THE INCOME OF THE AS SESSEE AT RS. 71,05,108/ - AS AGAINST THE RETURNED INCOME OF RS. 68,82,285/ - . IN ADDITION, THE AO TREATED THE SHORT TERM CAPITAL GAINS OF RS. 48,75,642/ - AS INCOME FROM BUSINESS AND ASSESSED TO TAX @ 30% INSTEAD OF 10% AS CLAIMED BY THE ASSESSEE. 2 ITA NO. 907 /HYD/1 3 SRI RAJENDRA PRASAD AGARWAL. . 3. WHEN THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A), THE CIT(A) PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 4. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. THAT THE ORDER OF THE COM MISSIONER OF INCOME TAX (APPEALS). VI, HYDERABAD, IN CONFIRMING THE ASSESSMENT ORDER PASSED BY THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE10(1), HYDERABAD, FOR THE ASSESSMENT YEAR 2008 - 09 UNDER THE INCOME TAX ACT, 1961, IS CONTRARY TO LAW, AGAINST THE WEI GHT ~F EVIDENCE AND PROBABILITIES OF THE CASE. 2. TH AT THE RETURN OF INCOME FILED FOR THE ASSESSMENT YEAR 2008 - 09 BY THE PETITIONER ON 09.09.2008. THE SAID RETURN OF INCOME WAS PROCESSED UNDER SECTION 143(1) OF THE I. T. ACT, 1961. SUBSEQUENTLY THE SAID RETURN OF INCOME WAS SELECTED ~OR SCRUTINY AS PER THE C ASS GUIDELINES CONTAINED IN THE ACTION PLAN FOR THE FINANCIAL YEAR 2008 - 09. IT IS RESPECTFULLY SUBMITTED THAT THE SCRUTINY GUIDELINES CONTAINED IN THE ACTION PLAN CANNOT GO BEYOND THE SCRUTINY GUIDELINES. HENCE THE BASIS OF SCRUTINY IS QUITE CONTRARY TO LA W . 3. THAT THE ASSESSMENT ORDER PASSED BY THE ASST. COMMISSIONER OF INCOME TAX WITHOUT SERVING THE SCRUTINY NOTICE TO THE PETITIONER WITHIN THE PERIOD PRESCRIBED AND SERVING THE ASSESSMENT ORDER DT.15 - 12 - 20 10 ON 10 - 1 - 2011 IS AN ORDER ANTI DATED PASSED IN THE MONTH OF JANUARY, 2011 BY PUTTING THE DATE AS 15 - 12 - 2010 UNDER THE INCOME TAX ACT, AS SUCH THE SAME IS EX - FACIE BARRED BY LIMITATION. 4. THAT THE PETITIONER WHO IS CARRYING ON THE BUSINESS IN MANUFACTURING OF IRON AND STEEL PRODUCTS AND TRADE IN THE ABOVE SAID COMMODITY ONLY. INVESTMENTS IN EQUITY SHARES AND INCOME EARNED FROM EQUITY INVESTMENT CANNOT. BE SUBJECTED TO HIGHER RATE OF INCOME TAX AS BUSINESS INCOME, SPECIAL CHARGING PROVISION SECTION 111 A OVERRIDES GENERAL CHARGING PROVISION. 5. DISAL LOWANCE OF EXPENSES WITH THE OBSERVATION THAT VOUCHERS ARE SELF MADE WITHOUT FINDING FAULT IN IT OR DISCREPANCY IN IT, DISALLOWANCE IS QUITE CONTRARY TO LAW AND LIABLE TO BE SET ASIDE. THAT THE PETITIONER CRAVES LEAVE OF THE HON'BLE TRIBUNAL TO PERMIT TH E PETITIONER TO ADD, ALTER OR AMEND THE GROUNDS OF APPEAL DURING PENDENCY OF THE SAM E. 3 ITA NO. 907 /HYD/1 3 SRI RAJENDRA PRASAD AGARWAL. . 5. AS REGARDS THE 1 ST GROUND OF APPEAL RELATING TO VALIDITY OF ASSESSMENT, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSMENT ORDER WAS PASSED ON 15/12/2010 AND THE ORDER WAS SERVED ON THE ASSESSEE ON 10/01/2011. HE SUBMITTED THAT THE ORDER MUST HAVE BEEN PASSED IN JANUARY, 2011 WITH AN ANTE - DATE, AS SUCH IT WAS BARRED BY LIMITATION AND NOT VALID. THE LD. AR OF THE ASSESSEE HAS NOT PLACED ANY EVIDENCE IN THIS REGARD. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE ASSESSEE SUBMITTED THAT THE ASSESSMENT ORDER MIGHT HAVE PASSED IN THE MONTH OF JANUARY, 2011 , WITH AN ANTE - DATE, BUT, THERE IS NO EVIDENCE TO SUPPORT HIS ARGUMENT. WE ARE OF THE VIEW THAT THERE IS NO BASIS FOR THE ASSESSEE TO RAISE THIS GROUND AND HENCE, THE SAME IS DISMISSED. 7. AS REGARDS 2 ND GROUND OF THE ASSESSEE, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY UNDER CASS AND IT IS NOT CLEAR WHETHER IT IS SELECTED FOR A PARTICULAR ISSUE OR IN GENERAL AND THEREFORE, THE ORDER PASSED U/S 143(3) OF THE ACT IS NOT VALID. 8. THE LD. DR, ON OTHER HAND, SUBMITTED THA T THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS AND NOT FOR PARTICULAR PURPOSES AND NOT RELATED TO PARTICULAR ISSUE AND, THEREFORE, THE AO HAS POWER TO ADJUDICATE ALL THE ISSUES AND PASS ORDER U/S 143(3) OF THE ACT. 9. AFTER HEARING BOTH THE PARTIES, WE FIND THAT AS PER THE RECORD, THE ASSESSEES CASE WAS SELECTED FOR SCRUTINY UNDER CASS AND NOT FOR ANY SPECIFIC PURPOSE. THE AO HAS POWER UNDER JURISDICTION TO SCRUTINIZE THE ENTIRE OF THE ASSESSEE AND, THEREFORE, THIS GROUND OF THE ASSESSEE IS DISMISSED. 4 ITA NO. 907 /HYD/1 3 SRI RAJENDRA PRASAD AGARWAL. . 10. GROUND NO. 3 IS SIMILAR TO GROUND NO. 1, THEREFORE, THIS GROUND IS DISMISSED AS IT HAS ALREADY BEEN ADJUDICATED. 11. A S REGARDS GROUND NO. 4, THE AO OBSERVED THAT DURING THE YEAR THE ASSESSEE HAS SHOWN SHORT TERM CAPITAL GAIN OF RS. 48,75,642/ - ON PROFIT ON SHARES. ON VERIFICATION OF THE SHARE TRANSACTIONS DONE BY THE ASSESSEE, THE AO NOTICED THAT THE ASSESSEE HAS MADE FR EQUENT SALE AND PURCHASES OF SHARES IN HIGH VOLUMES THROUGH BROKERS POOL ACCOUNT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO ASKED TO SUBMIT THE RELEVANT DETAILS AND ON EXAMINATION OF THE SAME, THE AO NOTICED THAT THE ASSESSEE IS PURCHASING AND SE LLING THE SHARES ON REGULAR BASIS. THE AO OBSERVED THAT IN MOST OF THE CASES, THOUGH THE MODE OF TRADE WAS DELIVERY TRADING, THE PERIOD OF HOLDING OF STOCK IS FOR SHORT PERIOD. FURTHER, IN MOST OF THE TRADES, THE ASSESSEE DID NOT EVEN HOLD ON TO ATLEAST SO ME PART OF HUGE PURCHASES EVEN THOUGH THE MODE OF TRADE WAS DELIVERY AND INSTEAD OF RENTERED INTO THE SAME SCRIPS IN A SHORT SPAN OF TIME. IN VIEW OF THE ABOVE OBSERVATIONS, THE AO HELD THE ASSESSEE AS A TRADER AND NOT AN INVESTOR IN RESPECT OF TRANSACTION S. RELYING ON THE CIRCULAR NO. 4/2007, DATED 15/06/2007 ISSUED BY THE CBDT, THE AO HELD THAT GAINS ON TRANSACTIONS HELD BY THE ASSESSEE CANNOT BE TREATED AS SHORT TERM CAPITAL GAINS TO BE TAXED AT THE SPECIAL RATE OF 10%, AS PRESCRIBED U/S 111A AND ACCORD INGLY, TAXED THE SAID PROFITS OF RS. 48,75,642/ - @ 30% AS PROFITS OF BUSINESS. 12. WHEN THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A), THE CIT(A) CONFIRMED THE ADDITION MADE BY THE AO BY OBSERVING AS UNDER: 9.4 PERUSED THE OBSERVATIONS OF THE A.O AND SUBMISSIONS OF THE APPELLANT. AS COULD BE SEEN FROM THE FACTS OF THE CASE THAT THE APPELLANT IS INTO THE REGULAR BUSINESS OF MANUFACTURING AND TRADING IN VARIOUS STEEL PRODUCTS. HOWEVER, DURING THE YEAR IT WAS OBSERVED THAT ASSESSEE PURCHASED AND SOLD CERTAIN SHARES AND DERIVED A NET PROFIT OF RS. 48,75,642/ - FROM SUCH TRANSACTIONS AND OFFERED AS SHORT TERM CAPITAL GAINS FOR TAXING AT SPECIAL RATE OF 100/0 AS PER THE PROVISIONS OF SEC. 111A. HOWEVER, AS PER THE TRADING ACCOUNT OF SHARES OF THE APPELLAN T, 5 ITA NO. 907 /HYD/1 3 SRI RAJENDRA PRASAD AGARWAL. . AS DONE BY THE ASSESSING OFFICER, THERE ARE PURCHASES TO THE EXTENT OF RS. 3,18,34,275/ - AND THE SALES OF RS.3,67,23,437/ - OF SHARES DURING THE YEAR. AS PER THE INFORMATION BROUGHT ON THE RECORD/ ASSESSMENT ORDER, T HE IMPORTANT DETAILS OF PURCHASES AND SALES OF THE SHARES MADE DURING THE YEAR ARE AS UNDER: NAME OF THE SCRIP PURCHASES SALES PROFIT DATE AMOUNT (RS.) DATE AMOUNT (RS.) (RS.) ABG SHIPYARD 24/07/2007 10,65,128 26/07/2007 12,69,376 2,04,248 ABCOM SOLUTIONS 24/07/2007 19,56,853 26/07/2007 22,49,311 2,92,458 EASUN REYROL 25/07/2007 11,53,416 25/07/2007 13,04,260 1,50,843 ACC LTD. 26/07/2007 11,60,951 26/07/2007 12,50,337 89,386 THUS, THE INFORMATION BROUGHT ON RECORD CLEARLY INDICATES THAT THE APPELLANT WAS INDULGED IN PURCHASE AND SALE OF SHARES, ON SHORT TERM BASIS, ON REGULAR NOTE AND DERIVED PROFITS FROM SUCH SALES. THERE IS NO INDICATION OF EARNING OF DIVIDEND BY THE ASSESSE E FROM SUCH INVESTMENTS. IT IS ALSO A FACT THAT THE INVESTMENTS ARE MADE FOR A LIMITED PERIOD OF FEW DAYS AND FOR PURPOSE OF EARNING PROFIT ON SALE OF SHARES. THE FACTS OF THE CASE INDICATE CLEARLY THAT THE APPELLANT WAS PURCHASING AND SELLING SHARES WITH THE INTENTION OF DERIVING PROFITS BUT NOT THE DIVIDEND AND THERE IS NO INDICATION OF MAKING THE INVESTMENTS FOR A LONG PERIOD, WITH THE FREQUENCY OF BUYING AND SELLING OF SHARES REMAINED VERY HIGH AND PERIOD OF HOLDING IS VERY SHORT, RESULTING IN HIGH VOLU MES OF TRANSACTIONS AND THE SAME INDICATE THE INTENTION OF THE APPELLANT THAT THE INVESTMENTS WERE MADE FOR DERIVING THE PROFIT IN TRADING OF THE SHARES. FURTHER, THE APPELLANT DID NOT CONTEST THE DETAILS OF PURCHASES AND SALE OF SHARES AS ENUMERATED IN AS SESSMENT ORDER WHICH HAS INDICATED THE FREQUENCY OF TRANSACTIONS. FURTHER, THE SUBMISSIONS OF THE APPELLANT WHEREIN IT WAS CLEARLY INDICATED THAT HE DID NOT HOLD THE SHARES FOR LONGER PERIOD FOR FEAR OF L OSSES ON ACCOUNT OF FLUCTUATIONS IN THE MARKET, ALSO INDICATE THE REAL INTENTION OF THE ASSESSEE IN THIS REGARD. 9.5 IN LIGHT OF THE ABOVE FACTS OF THE CASE, IT IS RELEVANT TO REFER TO THE ORDER OF ITAT, HYDERABAD ON THE SIMILAR LINES AND ISSUES IN THE CASE OF MR. S.RAVINDRANATH TAGORE, HYDERABAD IN ITA N O.1161 OF 2009 DATED 31.01.2013, WHEREIN THE DECISION OF HON'BLE ITAT REFER TO THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF P .V.S.RAJU VS. ADD!. CIT (340 ITR 75) WHEREIN THE HON'BLE HIGH COURT HAS FURTHER LAID DOWN THE TESTS AND GUIDELINES , TO DETERMINE WHETHER THE GAINS FROM SALE OF SHARES, CONSTITUTE INCOME FROM CAPITAL GAINS OR INCOME FROM BUSINESS, WHICH RUN AS UNDER: 6 ITA NO. 907 /HYD/1 3 SRI RAJENDRA PRASAD AGARWAL. . A) THE FREQUENCY OF BUYING AND 'SELLING OF SHARES BY THE APPELLANTS WERE HIGH; B) THE PERIOD O F HOLDING WAS LESS; C ) THE QUANTUM OF TURNOVER WAS ON ACCOUNT OF FREQUENCY OF TRANSACTIONS AND NOT BECAUSE OF HUGE INVESTMENT; D) THE INTENTION OF THE ASSESSEE TO MAKE QUICK PROFITS ON A HUGE TURNOVER; E) NO. OF SCRIPS SHARES HELD FOR FEWER DAYS; F) WHETHER ENGAGED IN DEALING IN THE SAME SCRIPS FREQUENTLY; G) INTENTION O F THE ASSESSEE IN BUYING SHARES IS NOT TO DERIVE INCOME BY WAY OF DIVIDEND ON SUCH SHARES, BUT TO EARN PROFITS ON THE SALE OF THE SHARES; H) WHETHER THE ASSES S EEE HAD INDULGED I N MULTIPLE TRANSACTIONS OF LARGE QUANTITIES WITH HIGH PERIODICITY. THESE PERIODIC TRANSACTIONS SELECTING THE TIME OF ENTRY AND EXIT IN EACH SCRIP, CALLED FOR REGULAR' DIRECTION AND MANAGEMENT WHICH WOULD INDICATE THAT IT WAS IN THE NATURE OF TRADE; I) RE PEATED TRANSACTIONS, COUPLED WITH THE SUBSEQUENT CONDUCT OF THE ASSESSEE TO RE - ENTER THE SAME SCRIP OR SOME OTHER SCRIP, IN ORDER TO TAKE ADVANTAGE OF MARKET FLUCTUATIONS LENT THE FLAVOR OF TRADE TO SUCH TRANSACTIONS; - J) THE ASSESSES WERE PURCHASING AN D SELLING THE SAME SCRIPS REPEATEDLY, AND WERE SWITCHING FROM ONE SCRIP TO ANOTHER; K) MERE CLASSIFICATION OF THESE SHARE TRANSACTIONS AS INVESTMENT IN THE ASSESSEE'S BOOKS OF ACCOUNTS WAS NOT CONCLUSIVE. I) THE INTENTION OF THE ASSESSEE AT THE TIME OF PURCHASE WAS ONLY TO SELL THE SHARES IMMEDIATELY AFTER PURCHASES; M) FREQUENCY OF PURCHASE AND SALE OF SHARES SHOWED THAT THE ASSESSEE NEVER INTENDED TO KEEP THESE SHARES AS INVESTMENT; AND N) IT IS ONLY FOR THE PURPOSE OF CLAIMING BENEFIT OF LOWER RA TE OF TAX, UNDER SEC. 111 A OF THE ACT, THAT THEY HAD CLAIMED CERTAIN SHARES TO BE INVESTMENT, THOUGH THESE TRANSACTIONS WERE ONLY IN THE NATURE OF TRADE.' 7 ITA NO. 907 /HYD/1 3 SRI RAJENDRA PRASAD AGARWAL. . 9.6 H LON'BLE ITAT DEALT UPON THE ISSUE OF SALE OF SHARES WITH HIGH FREQUE NCY AND HIGH VOLUMES WITH LOW PERIOD OF HOLDING AND FURTHER OPINED THAT THERE WAS INTENTION OF THE ASSESSEE TO EARN THE PROFIT THAN TO DERIVE DIVIDEND. THE DECISION OF HON'BLE !TAT IN THE CASE REFERRED ABOVE (SUPRA) RUNS AS UNDER, WHERE THE FACTS OF THE CASE ARE SIMILAR TO THE FACT S OF THE CASE UNDER REFERENCE. 'CONSIDERING IN THE LIGHT OF THE PARAMETERS LAID DOWN BY THE JURISDICTIONAL HIGH COURT IN CASE OF PVS RAJU (SUPRA), IT IS SEEN THAT AS PER THE ASSESSEE'S OWN ADMISSION, DURING THE YEAR HE HAS DEALT WITH 95 NUMBER OF SCRIPS OF DIFFERENT COMPANIES. THE ASSESSING OFFICER IN THE ASSESSMENT ORDER HAS MENTIONED SPECIFIC INSTANCES WHERE THE ASS E SSEE HAS SOLD SHARES EITHER ON THE SAME DAY OR WITHIN A VERY SHORT PERIOD OF 7 TO 15 DAYS. IT IS ALSO A FACT ON RECORD THAT THE VOLUME OF T URNOVER WAS BECAUSE OF THE FREQUENCY AND REGULARITY OF TRANSACTIONS AND NOT DUE TO HUGE INVESTMENT. EVEN THE C IT (A) IN PARA 8.4 OF HIS ORDER HAS ACCEPTED THE FACT THAT THERE WERE NOT ONLY NUMEROUS TRANSACTIONS BUT VOLUME OF TRANSACTIONS WERE ALSO MORE. THE CIT(A) ALSO ADMITS THE FACT THAT CERTAIN SHARES WERE PURCHASED AND SOLD ON THE SAME DAY BY THE ASSESSEE. IT IS ALSO REVEALED FROM THE ORDER OF THE CIT(A) THAT CERTAIN SHARES PURCHASED ON 2 - 11 - 2004 AND 9 - 112004 WERE SOLD WITHIN A SHORT SPAN ON 19 - 11 - 2004. THESE FACTS CLEARLY SHOW THAT THE INTENTION OF THE ASSESSEE IN INVESTING IN SHARES IS FOR THE PURPOSE OF EARNING PROFIT AND NOT TO EARN DIVIDEND. IT IS ALSO A FACT ON RECORD T HAT THE DIVIDEND EARNED BY THE ASSESSEE DURING THE RELEVANT FINANCIAL YEAR IS MEA GER CONSIDERING THE QUANTUM OF TURNOVER. IF THE INTENTION OF THE ASSESSEE WOULD HAVE BEEN TO HOLD THE SHARES AS INVESTMENT FOR THE PURPOSE OF EARNING DIVIDEND, THEN THE ASSESSEE WOULD NOT HAVE INDULGED IN TRANSACTIONS OF PURCHASE AND SALE OF SHARES IN SUCH FREQUENCY AND REGULARITY AND IN A SYSTEMATIC MANNER. THIS SHOWS THAT THE INTENTION OF THE A SSESSEE IS TO EARN PROFIT. IT IS IMMATERIAL WHETHER THE ASSESSEE TREATS THE SHARES AS INV ESTMENTS OR STOCK IN TRADE IN ITS BOOKS OF ACCOUNTS.' FURTHER , BY CONSIDE RING THE FACTS OF THE CASE, IN THE CASE OF S. RAVINDRANATH T AGORE AND TAKING THE GUIDELINES AS LAID DOWN BY JURISDICTIONAL HIGH COURT (S UPRA), HON'BLE ITAT ARRIVED AT THE FOLLOWING CONCLUSIONS WHICH ARE APPLICABLE TO THE FACTS OF THE CASE UNDER REFERENCE. THE DECISION RUNS AS UNDER: 'THE ONLY RELEV ANT FACTOR IS WHETHER THE INTENTION OF THE ASSESSEE IS TO HOLD THE SHARES FOR EARNING DIVIDEND OR FOR THE PURPOSE OF EARNING PROFIT. THE ASSESSEE HAS NOT 8 ITA NO. 907 /HYD/1 3 SRI RAJENDRA PRASAD AGARWAL. . PRODUCED ANY MATERIAL BEFORE US.TO PROVE THAT THE FINDING OF THE ASSESSING OFFICER THAT THE ASSESSEE H AS SOLD SHARES EITHER ON THE SAME DAY OR WITHIN VERY SHORT PERIOD OF PURCHASE IS NOT CORRECT. IN THE FACTS OF THE PRESENT CASE, WE ARE OF THE VIEW THAT THE ACTIVITY OF THE ASSESSEE IN PURCHASE AND SELL OF SHARES IS IN THE NATURE OF BUSINESS AND THEREFORE T HE INCOME DERIVED FROM SALE OF SHARES HAS TO BE ASSESSED AS BUSINESS INCOME. THE FACT THAT THE ASSESSEE HAS PAID SECURITY TRANSACTION TAX WILL NOR BE DETERMINATIVE FACTOR TO HOLD THAT THE INCOME EARNED BY THE ASSESSEE IS TO BE TREATED AS SHORT TERM CAPITAL GAIN. THE ASSESSEE HAS RELIED UPON A NUMBER OF DECISIONS OF THE HON'BLE SUPREME COURT, DIFFERENT HIGH COURTS AND ALSO DIFFERENT BENCHES OF INCOME - TAX APPELLATE TRIBUNAL. IT IS NEITHER NECESSARY NOR REQUIRED TO DEAL WITH EACH OF THOSE CASES IN THIS ORDER. SUFFICE IT TO SAY, WE FULLY ACCEPT THE RATIO LAID DOWN IN THOSE DECISION. HOWEVER, AS ALREADY OBSERVED BY US HEREINBEFORE THE RATIO LAID DOWN IN A PARTICULAR DECISION IS IN THE CONTEXT OF THE FACTS INVOLVED IN THAT CASE. THEREFORE, IT CANNOT APPLY UNIFORML Y UNLESS THE FACTS ARE AKIN AND IDENTICAL IN NATURE. WE DO NOT AGREE WITH THE CONTENTION OF THE LEARNED AR THAT THE DECISION OF JURISDICTIONAL HIGH COURT IN CASE OF PVS RAHU (S U PRA) DOES NOT LAY D O WN ANY RATIO OF BINDING NATURE. ON THE CONTRARY, THE TESTS/ GUIDELINES LAID DOWN BY THE JURISDICTIONAL HIGH COURT IN THAT CASE FULLY APPLIES TO THE FACTS OF THE PRESENT CASE. CONSIDERED IN THE LIGHT OF THE AFORESAID DECISION OF THE JURISDICTIONAL HIGH COURT, WE ARE OF THE VIEW THAT THE INCOME DERIVED BY THE ASSESSE E FROM SALE OF SHARES HAS TO BE TREATED AS PROFIT FROM BUSINESS . ' 9.7 THUS, BASED ON THE FACTS OF THE CASE WHICH ARE SIMILAR TO THE FACTS OF THE CASE OF THE DECISION OF THE HON'BLE !TAT, HYDERABAD AND ALSO RESPECTFULLY FOLLOWING THE RATIO OF THE DECISIO N OF JURISDICTIONAL HIGH COURT (SUPRA), I AM OF THE CONSIDERED OPINION THAT IN THE INSTANT CASE, SHARES WERE PURCHASED AND SOLD AT HIGH FREQUENCY RESULTING IN HIGHER VOLUMES AND BY HOLDING THEM FOR SHORTER PERIOD, MORE SPECIFICALLY RESTRICTED TO FEW DAYS, RESULTED IN EARNING OF THE PROFITS ON SALE OF THE SHARES AS TRADING PROFITS THAN THE GAINS ON SALE OF THE SHORT TERM CAPITAL ASSET. UNDER THE CIRCUMSTANCES, I AM OF THE CONSIDERED OPINION THAT THE A O IS JUSTIFIED IN HOLDING THE SAID PROFITS AS GAINS OF THE BUSINESS THAN THE CAPITA LGAINS FROM THE SALE OF SHORT TERM CAPITAL ASSET. ACCORDINGLY, THE ADDITION OF RS. 48,75,642/ - IS UPHELD AND DIRECTED TO BE ASSESSED @ 30% AS AGAINST 10% CLAIMED BY THE APPELLANT AS PER THE PROVISIONS OF SEC. 111A. IN THE RESULT, THIS GROUND OF APPEAL IS TREATED AS DISMISSED. 9 ITA NO. 907 /HYD/1 3 SRI RAJENDRA PRASAD AGARWAL. . 13. THIS APPEAL WAS HEARD ON 28/11/2019 AND WHEN THIS APPEAL WAS TAKEN UP FOR DICTATION, WE FIND THAT THE ARGUMENTS SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE ARE CONTRARY TO THE FACTS AVAILABLE AND ON R ECORD. THEREFORE, IN THE INTEREST OF JUSTICE AND FAIRNESS OF JUDICIAL PR OCEEDING , THE CASE WAS FIXED FOR CLARIFICATION BY INTIMATING BOTH THE PARTIES ON 03/12/2019. THE LD. COUNSEL FOR THE ASSESSEE APPEARED AND REQUESTED FOR ADJOURNMENT, WHICH WAS REJECTED BY THE BENCH FOR THE REASON THAT THIS APPEAL WAS ADJOURNED UMPTEEN NUMBER OF TIMES (NEARLY 13 TIMES) FROM 16/08/2013 TILL THE LAST HEARING I.E. 28/11/2019, AT THE PRETEXT OR OTHER, PARTICULARLY, ON MOST OF THE OCCASIONS, THE ADJOURNMENTS TOOK PLACE ON THE REQUEST OF THE ASSESSEE. ALSO, THIS CASE WAS EARLIER DISMISSED FOR NON - PROSECUTION OF THE ASSESSEE AND WAS RECALLED AGAINST THE MA FILED BY THE ASSESSEE. UNDER THESE CIRCUMSTANCES, WE ARE NOT INCLINED TO GRANT ADJOURNMENT AND ASKED THE LD. COUNSEL TO ARGU E HIS CASE. THEREFORE, HE WANTED TO FILE WRITTEN SUBMISSIONS AND FILED THE SAME ON 04/12/2019 AND THE WERE CONSIDERED WHILE ADJUDICATING THE APPEAL. 14. THE LD. DR, ON THE OTHER HAND, RELIED ON THE ORDERS OF REVENUE AUTHORITIES. 15. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD AS WELL AS GONE THROUGH THE ORDERS OF REVENUE AUTHORITIES. THE DETAILS OF PURCHASES AND SALES OF THE SHARES MADE DURING THE YEAR ARE AS UNDER: NAME OF THE SCRIP PURCHASES SALES PROFIT DATE AMOUNT (RS.) DATE AMOUNT (RS.) (RS.) ABG SHIPYARD 24/07/2007 10,65,128 26/07/2007 12,69,376 2,04,248 ABCOM SOLUTIONS 24/07/2007 19,56,853 26/07/2007 22,49,311 2,92,458 EASUN REYROL 25/07/2007 11,53,416 25/07/2007 13,04,260 1,50,843 ACC LTD. 26/07/2007 11,60,951 26/07/2007 12,50,337 89,386 10 ITA NO. 907 /HYD/1 3 SRI RAJENDRA PRASAD AGARWAL. . FROM THE ABOVE TABLE, IT IS CLEAR THAT THE ASSESSEE IS BUYING SHARE S AND SELLING THE SAME WITHIN 2 DAYS FOR PROFIT. ALL THE SHARES IN THE ABOVE TABLE EXCEPT ONE SCRIP PERTAINING TO EASUN REYROL, WHICH IS PURCHASED ON 25/07/2007 AND SOLD ON THE SAME DAY, THE ASSESSEE PURCHASED ON 24/07/2007 AND SOLD ON 206/07/2007 I.E. W ITHIN TWO DAYS. THEREFORE, IT IS VERY MUCH EVIDENT THAT THE INTENTION OF THE ASSESSEE IS ONLY TO MAKE THE PROFIT BY BUYING AND SELLING THE SHARES IN A SYSTEMATIC MANNER. THE ASSESSEE DID NOT HOLD ANY SHARES FOR A LONGER PERIOD THAT MEANS, THE ASSESSEES I NTENTION IS NOT AT ALL EARN DIVIDEND INCOME, BUT, ONLY HE WANTED TO MAKE PROFIT. IN THE WRITTEN SUBMISSIONS, THE LD. COUNSEL FOR THE ASSESSEE RELIED ON VARIOUS CASE LAW AS WELL AS CBDT CIRCULAR NO. 6 OF 2016, DATED 29/02/2016. IN OUR VIEW, THE SAME ARE NOT RELEVANT TO THE FACTS OF THE CASE OF THE ASSESSEE. THEREFORE, THE REVENUE AUTHORITIES TREATED THE ASSESSEE AS A TRADER AND NOT AN INVESTOR IS PROPER AND ACCORDINGLY, WE UPHOLD THE ORDER OF THE CIT(A) AND DISMISS THE GROUND RAISED BY THE ASSESSEE IN THIS R EGARD. 16. AS REGARDS GROUND NO. 5 RELATING TO DISALLOWANCE OF EXPENSES UNDER THE HEAD CONVEYANCE & TRAVELLING AND VEHICLE MAINTENANCE, THE AO MADE THE DISALLOWANCE ON THE GROUND THAT SOME OF THE VOUCHERS ARE SELF MADE AND NOT SUPPORTED BY BILLS AND DI SALLOWANCE WAS TO THE EXTENT OF 30% OF THE AMOUNTS UNDER THE SAID HEADS OF EXPENSES. 17 BEFORE THE CIT(A), THE ASSESSEE CONTENDED THAT THE DISALLOWANCES WERE MADE ON VAGUE BASIS, WITHOUT INDICATING OR ATTRIBUTING THE DIFFICULTIES IN VERIFICATION OF SUCH VOUCHERS AS SUCH, SUCH DISALLOWANCE ARE BAD IN LAW AND LIABLE TO BE SET ASIDE. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE CIT(A) RESTRICTED THE DISALLOWANCE TO 15% AS AGAINST 30% MADE BY THE AO BY OBSERVING AS UNDER: 11 ITA NO. 907 /HYD/1 3 SRI RAJENDRA PRASAD AGARWAL. . 7.3 PERUSED THE OBSERVATIONS OF THE AO IN ASSESSMENT ORDER AND THE SUBMISSIONS OF THE APPELLANT. AS COULD BE SEEN FROM THE FACTS OF THE CASE, THE APPELLANT CLAIMED EXPENSES OF RS. 1,64,036/ - UNDER THE HEAD CONVEYANCE & TRAVELLING AND RS. 2,37,837/ - UNDER THE HEAD VEHICLE MAINTENANCE', FOR THE YEAR UNDER REFERENCE. 30% OF SUCH EXPENSES WERE DISALLOWED BY THE A. O ON THE GROUND THAT SOME OF SUCH EXPENSES ARE SUPPORTED BY SELF MADE VOUCHERS, RESULTING IN ADDITION OF RS. 49,210/ - AND RS. 71,351/ - , UNDER THE RESPECTIVE HEADS. THE REMARKS OF THE A. O. ARE' TOO BRIEF TO INDICATE THE PERCENTAGE OF THE SELF MADE VOUCHERS, UNDER THE RESPECTIVE HEADS OF EXPENSES, FOR WHICH THE A. O FOUND IT TO BE DIFFICULT FOR VERIFYING THE SAME. IT IS ALSO NOT VERY UNUSUAL TO HAVE SUCH VOUCHERS TO SUPPORT THE EXPENSES UNDER THE HEADS OF EXPENSES OF REFERENCE, AS THE SAME HEADS INDICATE THE NATURE OF EXPENSES. AT THE SAME TIME IT IS ALSO A FACT THAT WHERE THE EXPENSES ARE NOT SUPPORTED BY PROPER BILLS, BUT BY SE LF MADE VOUCHERS WITH PAYMENTS MADE IN CASH, CARRY THE ELEMENT OF INFLATION WITH THEM. UNDER THE. CIRCUMSTANCES IT IS RELEVANT TO HOLD THAT POSSIBILITY OF INFLATION OF EXPENSES UNDER THE HEADS 'CONVEYANCE & TRAVELLING' AND 'VEHICLE MAINTENANCE' IS NOT RULE D OUT, IN THE INSTANT CASE. HOWEVER, IT IS' TOO EXORBITANT TO PUT SUCH PERCENTAGE AT 30%, AS ADOPTED BY THE A. O IN ASSESSMENT ORDER. IT HAS BEEN HELD BY JUDICIAL RULINGS THAT WHERE EXPENSES ARE SUPPORTED BY SELF MADE VOUCHERS OR NOT SUPPORTED BY PROPER BIL LS, IT IS REASONABLE TO RESTRICT THE DISALLOWANCE TO 15%. THE DECISION OF HON'BLE ITAT, HYDERABAD IN THE CASE OF SRI KAVURI PRASAD IN ITA NO. 1176/HYD/2011, IS RELEVANT IN THIS CONTEXT, WHEREIN THE HON'BLE TRIBUNAL WAS REFERRING TO THE DECISION OF COORDINA TE BENCH, WHICH WAS CONSISTENTLY DISALLOWING THE 15% OF THE EXPENDITURE CLAIMED BY THE ASSESSEES ON SIMILAR CIRCUMSTANCES AND WAS IN TURN BASED ON THE RATIO OF THE DECISION OF HON'BLE A.P.HIGH COURT IN THE CASE OF CIT VS. TRANSPORT CORPORATION OF INDIA (25 6 ITR 701). HENCE, BY CONSIDERING THE FACTS OF THE CASE AS WELL AS THE RATIO OF THE JUDICIAL DECISION IN THIS REGARD, ON THE SUBJECT MATTER, THE A. O IS DIRECTED TO RESTRICT THE DISALLOWANCES OF EXPENSES UNDER THE HEADS OF 'CONVEYANCE & TRAVELLING' AND VEH ICL E MAINTENANCE' TO 15% OF THE TOTAL EXPENSES UNDER RESPECTIVE HE ADS , AS AGAINST 30% ADOPTED IN THE ASSESSMENT ORDER. THE APPELLANT GETS PART RELIEF IN THIS REGARD, AGAINST THE DISALLOWANCES UNDER BOTH THE HEADS OF EXPENSES. ACCORDINGLY, THESE GROUNDS OF APPEAL ARE TREATED AS PARTLY ALLOWED. 18. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD AS WELL AS GONE THROUGH THE ORDERS OF REVENUE 12 ITA NO. 907 /HYD/1 3 SRI RAJENDRA PRASAD AGARWAL. . AUTHORITIES. THE AO MADE THE DISALLOWANCES @ 30% OF THE EXPENDITURE ON THE GROUND THAT TH E SOME OF THE VOUCHERS SUBMITTED BY THE ASSESSEE ARE SELF - MADE VOUCHERS. THE CIT(A) RESTRICTED THE DISALLOWANCE TO 15%. THEREFORE, WE FIND NO INFIRMITY IN THE ORDER OF CIT(A) AND THEREFORE, THE SAME IS HEREBY UPHELD DISMISSING THE GROUND RAISED BY THE ASSE SSEE ON THIS ISSUE. 19. AS REGARDS, ADDITIONAL GROUND RAISED BY THE ASSESSEE IN RESPECT OF INCOME FROM HOUSE PROPERTY, THE CIT(A) HAS ALREADY REMITTED THIS ISSUE BACK TO THE FILE OF THE AO TO EXAMINE ALL THE DETAILS AND DECIDE THE ISSUE IN ACCORDANCE WIT H LAW, BY OBSERVING AS UNDER: 8. THE NEXT GROUND OF APPEAL LIES AGAINST THE COMPUTATION OF I NCOME FROM HOUSE PROPERTY AT RS. 1,55,400/ - , ON THE GROUND THAT THE TOTAL INCOME FURNISHED BY THE APPELLANT INCLUDE INCOME FROM HOUSE PROPERTY AND COMPUTATION OF INCOME UNDER THE SAID HEAD SEPARATELY, AMOUNTS TO DOUBLE ADDITION. AS COULD BE SEEN FROM THE COMPUTATION OF TOTAL INCOME ADOPTED BY THE A. O. IN ASSESSMENT ORDER, INCOMES UNDER VARIOUS HEADS WERE RECOMPUTED, BASED ON THE FACT THAT THE SHORT TERM CAPITAL GAINS WERE TREATED AS INCOME FROM BUSINESS. AS PER THE APPELLANT, THE INCOME FROM THE BUSINES S AS COMPUTED BY A. O IN ASSESSMENT ORDER WAS ALREADY INCLUDED THE INCOME FROM HOUSE PROPERTY, SINCE THE SAME EMBEDDED IN THE INDIRECT INCOMES OF RS. 5,35,067/ - IN THE FORM OF GROSS INCOME FROM HOUSE PROPERTY OF RS. 2,22,000/ - , WHICH HAS BEEN COMPUTED AT RS . 1,55,400/ - AFTER CLAIMING DEDUCTION U/S. 24. THE XEROX COPY OF THE STATEMENT OF INCOME STATED TO HAVE ENCLOSED WITH THE SUBMISSIONS NOT FOUND ON RECORD. 8.1 AS COULD BE SEEN FROM THE RECORD, THE TOTAL INCOME COMPUTED I NCLUDE THE INCOMES UNDER VARIOUS H EADS, COMPUTED SEPARATELY. IN ABSENCE OF THE COPY OF COMPUTATION MADE BY THE APPELLANT, IT IS NOT CLEAR WHETHER. THE INCOME FROM BUSINESS A~ COMPUTED BY A. O AT RS. 19,53,463/ - INCLUDE THE INCOME FROM HOUSE PROPERTY OR NOT. UNDER THE CIRCUMSTANCES, THE A. O IS DIRECTED TO EXAMINE THIS ASPECT AND DEDUCT THE INCOME OF RS. 1,55,400/ - , B EINQ THE INCOME FROM PROPERTY, FROM THE TOTAL INCOME, IF THE SAME FOUND CLUBBED WITH THE BUSINESS INCOME OF RS. 19,53,463/ - . ACCORDINGLY, THIS GROUND OF APPEAL IS TREATED AS ALLOW ED SUBJECT TO THE FINDINGS OF THE VERIFICATION. 13 ITA NO. 907 /HYD/1 3 SRI RAJENDRA PRASAD AGARWAL. . THEREFORE, THE ADDITIONAL GROUND RAISED BY THE ASSESSEE IS REJECTED IN VIEW OF THE FACT THAT THE CIT(A) HAS ALREADY ADJUDICATED THE SAME BY REMITTING THE SAME TO THE FILE OF THE AO. THIS GROUND IS DISMISSED . 20. IN THIS RESULT, APPEAL OF THE ASSESSEE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 6 TH DECEMBER , 201 9 . SD/ - SD/ - ( D. KARUNAKARA RAO ) ( V. DURGA RAO ) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 6 TH DECEMBER , 201 9 KV C OPY TO: - 1) RAJENDRA PRASAD AGARWAL, PROP. M/S GARG STEELS, 5 - 2 - 196/2, DISTILLERY ROAD, RANIGUNJ, SECUNDERABAD. 2) AC IT, CIRCLE 1 0 ( 1 ), HYDERABAD. 3) CIT(A) VI , HYDERABAD. 4) CIT - V , HYD. 5 ) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERABAD. 6 ) GUARD FILE
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