Jaybeear Investments & Finance Pvt. Ltd., Bangalore V. ACIT, Bangalore

ITA 930/BANG/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5578 (ITAT-BANGALORE)
• Duration Of Justice: 10 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 04-05-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 26-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JACINTA ZIMIK VASHAI
• Assessee Lawyers: G SITARAMAN
• Keywords: Business income
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH A BEFORE SMT. P MADHAVI DEVI, JUDICIAL MEMBER AND SHRI A MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA NO. 930/BANG/2010 (ASST. YEARS 2006-07) M/S JAYBEEAR INVESTMENTS & FINANCE PVT. LTD., D10, 2 ND FLOOR, DEVATHA PLAZA, 131 RESIDENCY ROAD, BANGALORE. . APPELLANT VS. THE ASST.. COMMISSIONER OF INCOME-TAX, CIRCLE-11(5), BANGALORE. . RESPONDENT APPELLANT BY : SHRI G SITARAMAN RESPONDENT BY : SMT. JACINTA ZIMIK VASHAI O R D E R PER SMT. P MADHAVI DEVI, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEV ANT ASSESSMENT YEAR IS 2006-07. THE APPEAL IS DIRECTED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) I AT BANGALO RE DATED 28.05.2010. THE APPEAL ARISES OUT OF THE ASSESSMENT COMPLETED U/S 143(3) OF THE INCOME-TAX ACT, 1961. ITA NO.930/B/10 2 2. IN THIS APPEAL, THE ASSESSEE IS AGGRIEVED BY THE ORDER OF THE CIT(A) IN CONFIRMING THE ORDER OF THE AO CONSIDERIN G THE PROFIT OF RS.11,38,485/- ON THE SALE OF SHARES AS BUSINESS I NCOME AND NOT AS CAPITAL GAINS AS CLAIMED BY THE ASSESSEE. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A NON-BANKING FINANCIAL COMPAN Y AND FILED ITS RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR O N 11/11/2006 DECLARING A TOTAL INCOME OF RS.43,22,679/-. 3. DURING THE ASSESSMENT PROCEEDINGS U/S 143(3), TH E ASSESSING OFFICER HAS OBSERVED THAT THE ASSESSEE WAS ENGAGED IN TWO MAIN ACTIVITIES I.E 1) TRADING IN SHARES AND MUTUAL FUND S AND 2) LETTING OUT OF PROPERTY. HE OBSERVED THAT THE ASSESSEE IS AN INVE STMENT COMPANY AND HAS BEEN ENGAGED IN THE BUSINESS OF TRADING IN SHARES FOR ALL THE YEARS AND, THEREFORE, HE ISSUED SHOW CAUSE NOTICE T O THE ASSESSEE AS TO WHY THE INCOME EARNED FROM TRADING IN SHARES AND ST OCK SHOULD NOT BE TREATED AS INCOME. VIDE LETTER DATED 14.11.2008, T HE ASSESSEE SUBMITTED THAT THE ASSESSEE COMPANY WAS DEALING IN SHARES AND SECURITIES AS A TRADING ACTIVITY UNTIL 31.3.05, BUT AS PER THE DIRECTIONS OF THE RBI, THE ASSESSEE HAS CONVERTED ALL ITS STOC K-IN TRADE INTO INVESTMENTS AND THERE WERE NO FRESH PURCHASE OR SAL E OF STOCK DURING THE YEAR AND WHAT WERE SOLD WERE ONLY OLD SHARES HE LD AS INVESTMENTS. ITA NO.930/B/10 3 HOWEVER AFTER TAKING THESE SUBMISSIONS INTO CONSIDE RATION, THE ASSESSING OFFICER HELD THAT THE PROFIT EARNED FROM THE SALE OF SHARES IS NOTHING BUT BUSINESS INCOME AND NOT CAPITAL GAINS A S CLAIMED BY THE ASSESSEE. 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE P REFERRED AN APPEAL BEFORE THE CIT(A) STATING THAT THE ASSESSEE HAS HELD SHARES AS INVESTMENTS AND ALSO STOCK-IN-TRADE. HE SUBMITTED THAT THE SHARES SOLD DURING THE RELEVANT FINANCIAL YEAR WERE SHARES HELD AS INVESTMENTS IN THE EARLIER YEARS AND NOT THE SHARES HELD AS STOCK -IN-TRADE IN THE EARLIER YEARS, WHICH HAVE BEEN CONVERTED INTO INVESTMENT DU RING THE RELEVANT ASSESSMENT YEAR. THE DETAILS OF THE SAID SHARES HE LD AS INVESTMENT IN THE EARLIER YEARS WERE ALSO SUBMITTED BEFORE THE CI T(A). THE CIT(A) HOWEVER FAILED TO CONSIDER THIS ARGUMENT OF THE ASS ESSEE AND PROCEEDED ON PRESUMPTION THAT THE SHARES SOLD BY T HE ASSESSEE WERE FROM AS STOCK-IN-TRADE OF EARLIER YEARS, WHICH WERE CONVERTED INTO INVESTMENT DURING THE RELEVANT ASSESSMENT YEAR. HE , THUS CONFIRMED THE ORDER OF THE AO. 5. AGGRIEVED BY THE CONFIRMATION OF THE ASST. ORDER , THE ASSESSEE IS IN SECOND APPEAL BEFORE US. ITA NO.930/B/10 4 6. THE LEARNED COUNSEL FOR THE ASSESSEE FILED A PAP ER BOOK CONTAINING PAGES 1 TO 7 GIVING THE DETAILS OF SHARE S WHICH WERE SOLD DURING THE RELEVANT FINANCIAL YEAR AND ALSO GIVING THE DATE OF PURCHASE AND DATE OF SALE TO SHOW THAT THESE SHARES WERE HEL D FOR MORE THAN ONE YEAR AND ALSO HAS FILED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDING 31.3.06, WHEREIN THE PROFIT ON SALE OF INVESTMENTS ARE SHOWN AT RS.20,96,516/- AND SALE OF SHARES IS SHOWN AT RS.4, 09,631/-. AS PER THE BALANCE SHEET AS ON 31.3.2006, INVESTMENTS IN M UTUAL FUNDS, AND QUOTED AND UNQUOTED SHARES ARE SHOWN AND STOCK IN TRADE ARE ALSO SHOWN UNDER THE CURRENT ASSETS. HE HAS ALSO FILED THE DETAILS OF THE INVESTMENT ACCOUNT. THE ASSESSEE HAS ALSO FILED CO PY OF THE DIRECTION OF THE RBI DATED 12 TH MAY 2009 SIGNED BY THE ASST. GENERAL MANAGER, STATING THAT THE ASSESSEE HAS TO CLOSE ITS NON-BANK ING FINANCIAL INSTITUTIONS AND TO DISPOSE OFF THE FINANCIAL ASSET S WITHIN THREE YEARS FROM THE DATE OF CANCELLATION OF CERTIFICATE OF REG ISTRATION U/S 45 IA(6) OF THE R.B.I ACT. 7. THE LEARNED COUNSEL FOR THE ASSESSEE SHRI G SITA RAMAN REITERATED THE SUBMISSIONS MADE BY THE ASSESSEE BEF ORE THE AUTHORITIES BELOW AND SUBMITTED THAT THOUGH THE ASSESSEE HAS FI LED ALL THE DETAILS ITA NO.930/B/10 5 BEFORE THE AO AS WELL AS CIT(A), THEY HAVE GONE ON THE WRONG PREMISE THAT THE SHARES SOLD BY THE ASSESSEE WERE T HE SHARE, WHICH WERE HELD AS STOCK-IN-TRADE AND THUS TREATED IT AS BUSINESS INCOME. 8. THE LEARNED DR HOWEVER, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. AS REGARDING THE DETAILS FILED BY THE ASSESSEE RELATING TO THE SHARES HELD AS INVESTMENTS IN THE E ARLIER YEAR, THE LEARNED DR SUBMITTED THAT THE SAME WILL HAVE TO BE CONSIDERED AND VERIFIED BY THE AO. 9. HAVING HEARD BOTH THE PARTIES AND HAVING CONSIDE RED THEIR RIVAL CONTENTION, WE FIND THAT BOTH THE AO AS WELL AS THE CIT(A) HAVE IN WRONGLY PRESUMED THAT THE ASSESSEE HAS SOLD AND THE SHARES, WHICH WERE HELD AS STOCK-IN-TRADE AND NOT THE SHARES HEL D AS INVESTMENTS IN THE EARLIER YEARS. IN VIEW OF THE SAME, WE DEEM IT FIT AND PROPER TO REMIT THE ISSUE BACK TO THE FILE OF THE AO TO VERIF Y THE DETAILS FILED BY THE ASSESSEE AND ALSO VERIFY AS TO WHETHER THE SHAR ES WHICH ARE SOLD DURING THE RELEVANT ASSESSMENT YEAR WERE IN FACT HE LD AS INVESTMENTS IN THE EARLIER YEARS. IN CASE, IT IS FOUND THAT THE SHARES SOLD WERE IN FACT HELD AS INVESTMENT AND DURING THE EARLIER FINANCIAL YEARS ALSO, THEN THE ITA NO.930/B/10 6 ASSESSING OFFICER SHALL TREAT THE INCOME FROM SALE OF SUCH INVESTMENT AS CAPITAL GAINS. IT IS ORDERED ACCORDINGLY. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES ONLY. ORDER PRONOUNCED IN THE OPEN COURT ON 31ST MAY, 2011. SD/- SD/- (A MOHAN ALANKAMONY) (P MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER VMS. BANGALORE DATED : 31/05/2011 COPY TO : 1. THE ASSESSEE 2. THE REVENUE 3.THE CIT CONCERNED. 4.THE CIT(A) CONCERNED. 5.DR 6.GF BY ORDER ASST. REGISTRAR, I TAT, BANGALORE.