The DCIT, Central Circle3, Surat V. Shri Pushpavadan G.Sheth, Surat

ITSSA 650/AHD/2010

• Counselvise Citation: [2015] 122 COUNSELVISE.COM (IT) 0681 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 8 month(s) 17 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 24-04-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 16-04-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 06-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income
• Section: 6; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI G.D. AGARWAL , VICE PRESIDENT AND SHRI S.S. GODARA JUDICIAL MEMBER IT (SS) A NO S . 649, 650 /AHD/20 1 0 A. Y S . 200 3 - 0 4, 2005 - 06 DY. CIT, SURAT. VS SHRI PUSHPAVADAN G. SETH. 20, GOKUL APARTMENT, PAGATHIA SHERI, WADI FALIA, SURAT. PAN: ADJPS 0755J (APPELLANT) (RESPONDENT) IT(SS)A NO.651/AHD/2010 A.Y .2003 - 04 DY. CIT, SURAT. VS SHRI AKSHAY P. SHETH (HUF) 24, TRINIDHI APARTMENT, GHOD - DOD ROAD, SURAT. PAN: AABHA 8863J (A PPELLANT) (RESPONDENT) REVENUE BY : SHRI SUBHASH BAINS , CIT - D.R. ASSESSEE(S) BY : SHRI MEHUL SHAH, A.R. / DATE OF HEARING : 16 / 0 4 /201 5 / DATE OF PRONOUNCEMENT : 24 / 04 /201 5 / O R D E R PER: S. S. GODARA , JUDICIAL MEMBER TH ESE THREE REVENUE S A PPEAL S IN CASES OF TWO DIFFERENT ASSESSEES FOR A.Y S .200 3 - 0 4 AND 2005 - 06 , ARISE FROM ORDER S OF CIT (A) - I I , AHMEDABAD ALL DATED 2 4. 0 5 .20 1 0 , IN PROCEEDINGS U/S. 143 ( 3) R.W.S. 1 53C OF THE INCOME TAX ACT IN SHORT THE ACT . I T (SS) A NO. 649, 650, 651 / /AHD /20 1 1 SHRI PUSHPAVADAN G. SHETH & SHRI AKSHAY P. SHET H (HUF) . FOR A.Y S . 20 0 3 - 0 4 & 2005 - 06 - 2 - 2. T HE REVENUE S IDENTICAL GRIEVANCE IN ALL THREE CASES CHALLENGE S THE CIT(A) S ORDER TREATING INCOME OF RS.5,36,400/ - , RS.14,04,190/ - AND RS.15,61,200/ - ARISING FROM SHARES TRANSACTION IN RESPECTIV E CASES AS LONG TERM CAPITAL GAINS INSTEAD OF BUSINESS INCOME , IN THE HANDS OF TH ESE ASSESSEES. ITS SECOND IDENTICAL GROUND IN THE FORMER TWO CASES CHALLENGE S LOWER APPELLATE ORDER DELETING HOUSE HOLD WITHDRAWAL ADDITIONS OF RS.20,000/ - EACH. 3. FIRST, W E COME TO THE ISSUE OF LONG TERM CAPITAL GAINS IDENTICAL IN ALL THREE CASES. T HE INDIVIDUAL ASSESSEE IN THE FIRST TWO APPEALS AND HUF - ASSESSEE IN THE LAST CASE ARE PART OF THE SAME FAMILY. THE DEPARTMENT HAD CONDUCTED A SEARCH DATED 16.03.2007. THIS CULM INATED IN INITIATION OF SECTION 153C PROCEEDINGS ALL CASE S . THESE ASSESSEES HAD EARNED PROFITS FROM SHARE TRADING TO THE EXTENT INDICAT ED HEREINABOVE. THE ASSESSING OFFICER TOOK INTO ACCOUNT THEIR MOTIVE BEHIND THE IMPUGNED SHARE INVESTMENT , FREQUENCY OF SHARE TRANSACTIONS , MAGNITUDE OF SALE AND PURCHASE OF SHARES, THEIR BOOKS OF ACCOUNT , LENGTH OF THE SHARES HOLDING PERIOD , INFRASTRUCTURE EMPLOYED FOR THE SHARE TRANSACTION S IN QUESTION, USAGE OF BORROWED FUNDS AND PROFITS DERIVED IN EARLIER YEARS TO HOLD THE SAME TO BE BUSINESS INCOME . T HESE ASS ESSEES HAD ADMITTED THE IMPUGNED PROFITS AS LONG TERM I T (SS) A NO. 649, 650, 651 / /AHD /20 1 1 SHRI PUSHPAVADAN G. SHETH & SHRI AKSHAY P. SHET H (HUF) . FOR A.Y S . 20 0 3 - 0 4 & 2005 - 06 - 3 - CAPITAL GAINS. THE ASSESSING OFFICER FRAMED ASSESSMENT IN THESE CASES ON 30.12.2008 ACCORDINGLY . 4. T HESE ASSESSEES FILED SEPARATE APPEALS. THE CIT(A) HAS DIR ECTED THE ASSESSING AUTHORITY THAT THE IMPUGNED SHARE PROFIT S AS LONG TERM CAPITAL GAINS AND NOT BUSINESS INCOME BY OBSERVING AS UNDER: I HAVE CONSIDERED THE FACTS AND THE SUBMISSION, I AGREE WITH THE APPELLANT S VIEW. SIMILAR ISSUE AROSE IN THE CASE OF S HRI AKSHAY SHETH WHEREIN THE UNDERSIGNED HAS DECIDED THE ISSUE IN FAVOUR OF THE APPELLANT IN ORDER NO.CIT(A) - II/CC.1/586TO589/2008 - 09 DTD. 16.10.2009 FOR A.YS.2003 - 04 TO 2006 - 07 AS UNDER: - 'IN THE STATEMENT RECORDED ON THE DATE OF SEARCH, THE APPELLANT CLARIFIED THAT THE TRANSACTIONS OF VARIOUS SCRIPS ARE GENUINE SUPPORTED BY PROPER DOCUMENTS BUT CONSIDERING THE LITIGATION ALREADY FACED IN CASE OF HIS WIFE, HE WAS MAKING DECLARATION. HOWEVER, IN THE SETTLEMENT APPLICATION FILED ON 29.05.20 07, THE DECLARATION WAS RETRACTED. THIS SETTLEMENT APPLICATION WAS ABATED. THEREFORE NO DISCLOSURE WAS MADE BY ASSESSEE IN THE RETURN OF INCOME FILED AFTER SEARCH ON THIS ISSUE. THE ASSESSING OFFICER ACCEPTED THE TRANSACTION OF CAPITAL GAIN AS GENUINE BUT TREATED THE INCOME FROM CAPITAL GAIN AS BUSINESS INCOME. THE ASSESSEE SOLD ALL THE SHARES THROUGH CALCUTTA STOCK EXCHANGE SUPPORTED BY THE BILLS OF THE BROKER, CONTRACT NOTE, PROCEEDS BY ACCOUNT PAYEE CHEQUE, PAYMENT OF STT, ETC. THERE IS NO FREQUENCY OF T HE TRANSACTIONS AND THE MOTIVE BEHIND THE INVESTMENT IS NOT OF MAKING PROFIT. ASSESSEE HAS SHOWN THE TRANSACTION OF PURCHASE OF SHARES AS INVESTMENT IN BALANCE SHEET AND NOT AS STOCK IN TRADE. THE OWNERSHIP OF SHARES IS ALSO LONG TERM AND NO INFRASTRUCTURE WAS EMPLOYED BY ASSESSEE. ASSESSEE HAS DEPLOYED HIS OWN FUNDS. ASSESSEE HAS NEVER TRADED IN SHARES BEFORE AND THERE WAS NOT EVEN SHORT TERM CAPITAL GAIN IN THE PAST OR IN THE YEAR UNDER APPEAL. THERE IS NO DOUBT THAT EVEN A SINGLE TRANSACTION CAN BE IN TH E NATURE OF TRADE BUT THE ASSESSEE HAS DEMONSTRATED THAT HIS INTENTION WAS NEVER TO TRADE IN SHARES. THE INTENTION IS MANIFESTED BY TREATMENT GIVEN TO SUCH INVESTMENT THAT THE INVESTMENT IS OUT OF OWN FUNDS AND NOT BORROWED FUNDS; THAT THE INVESTMENTS ARE NOT ROTATED FREQUENTLY; THAT THE TOTAL NUMBER OF TRANSACTIONS ARE VERY FEW. IN ALL SUCH CASES THE INTENTION IS I T (SS) A NO. 649, 650, 651 / /AHD /20 1 1 SHRI PUSHPAVADAN G. SHETH & SHRI AKSHAY P. SHET H (HUF) . FOR A.Y S . 20 0 3 - 0 4 & 2005 - 06 - 4 - MANIFESTED BY THE ASSESSEE HIMSELF BY HIS CONDUCT AND OTHER RELEVANT FACTORS. IT IS ALSO SEEN THAT SHARES WERE TREATED AS INVESTMENT IN EARLIER Y EARS AND WHICH FACT HAS BEEN - ACCEPTED BY THE ASSESSING OFFICER. THE ASSESSING OFFICER MERELY BECAUSE .OF THE TOTAL VOLUME OF TRANSACTIONS IS SUBSTANTIAL, IS GUIDED TO HOLD THE INCOME AS BUSINESS INCOME. IF THE VOLUME OF TRANSACTION IS THE CRITERIA, WHAT IS TO BE EXAMINED IS HOW FREQUENTLY THE TRANSACTION IS DONE, WHETHER THE TRANSACTION IS SETTLED IN THE COURSE OF THE DAY OF TRADING ITSELF OR IN THE SETTLEMENT PERIOD ITSELF SO AS TO AVOID PAYMENT OF FULL PURCHASE PRICE. HERE THE ASSESSEE HAS BEEN HOLDING TH E SHARES BY TAKING DELIVERY AND MAKING FULL PAYMENT FOR SUCH INVESTMENT. IN SUCH CIRCUMSTANCES, THE TRANSACTIONS ARE TO BE TREATED AS GIVING RISE TO THE CAPITAL GAIN AND CANNOT BE BRANDED AS TRADING IN SHARES. WHAT IS RELEVANT IS THE INTENTION OF THE ASSES SEE HIMSELF AT THE TIME OF MAKING INVESTMENT SO AS TO DETERMINE WHETHER THE TRANSACTION WAS FOR DEALING IN SHARES OR MAKING INVESTMENT FOR EARNING DIVIDEND AND APPRECIATION FROM SUCH INVESTMENT. THE TOTAL NUMBER OF SHARES DEALT IN RESPECT OF LONG TERM PORT FOLIO IS VERY FEW. THEREFORE, THIS TRANSACTION IN SHARES CANNOT BE SAID TO BE WITH INTENTION TO DEAL IN SUCH SHARES. THEREFORE, THE SAME ARE ASSESSABLE AS CAPITAL GAIN AND NOT AS PROFITS AND GAINS OF BUSINESS.' AS THE FACTS ARE SAME, IT IS HELD THAT THE IN COME SHOWN BY THE APPELLANT AS CAPITAL GAIN IS ASSESSABLE AS CAPITAL GAIN AND NOT AS PROFIT AND GAINS OF BUSINESS. THIS LEAVES THE REVENUE AGGRIEVED. 5 . WE HAVE HEARD BOTH SIDES. RECORD S PERUSED. THE REVENUE S ONLY ENDEAVOUR IS TO TREAT IMPUGNED SHARE PROFITS IN ALL THREE CASES AS BUSINESS INCOME. T HIS FAMILY CONSISTS OF SIX ASSESSEES INCLUDING ONE HUF IN HAND. O THER FAMILY MEMBERS ARE AKSHAY P. SHETH, PRITESH A. SHETH, MITESH A. SHETH, AKSHAY P. SHETH (HUF), HEENA A. SHETH. ALL THESE ASSESSEE S HAD EAR NED PROFITS FROM SHARE TRADING TO THE TUNE OF RS.96,66,361 / - INCLUDING THE THREE INSTANCES BEFORE US UPTO 30.09.2004. POST 30.09.2004, THEY EARNED SIMILAR PROFIT S AMOUNTING TO I T (SS) A NO. 649, 650, 651 / /AHD /20 1 1 SHRI PUSHPAVADAN G. SHETH & SHRI AKSHAY P. SHET H (HUF) . FOR A.Y S . 20 0 3 - 0 4 & 2005 - 06 - 5 - RS.1,47,41,392/ - . IT IS NOT THE REVENUE S CASE THAT THE FACTS AND CIRCUMSTANCES RELATING TO THE IMPUGNED PROFITS CASES ARE DIFFERENT THAN THOSE INVOLVED IN CASE OF OTHER CONNECTED ASSESSEES. THE CIT(A) OBSERVES IN THE LOWER APPELLATE ORDER THAT SIMILAR SHARE S PROFIT S IN CASE OF CONNECTED ASSESSEES STAND TREATED AS LONG TERM CAPITAL GA INS. THE ASSESSEE S FILE S A COPY OF THE TRIBUNAL ORDER IN CASE OF DCIT VS. SHRI AKSHAY PUSHPAVADAN SETH (IT(SS)A NO.2,3,4 & 5/AHD/2010 DATED 21.02.2013, A.Y.2003 - 04 TO 2006 - 07) UPHOLDING THE CIT(A) S ORDER DATED 16.10.2009 (SUPRA) . THE REVENUE HAS NOT BEE N ABLE TO REBUT THIS FACTUAL POSITION. IN THESE CIRCUMSTANCES, WE OBSERVE THAT FACTS OF THESE THREE CASES ARE SIMILAR TO THOSE INVOLVED BEFORE THE CO - ORDINATE BENCH . W E DRAW SUPPORT THEREFROM AND UPHOLD THE CIT(A) S FINDINGS UNDER CHALLENGE IN ALL TH E SE CA SES. 6 . NOW , WE COME TO THE REVENUE S SECOND GROUND SEEKING RESTORATION OF ADDITION AMOUNTING TO RS.20,000/ - IN FORMER TWO CASES ON ACCOUNT OF LOW HOUSE HOLD WITHDRAWAL. THE REVENUE FAILS TO POINT ANY FACTUAL OR LEGAL INFIRMITY IN THE CIT(A) S ORDER GRANTING REL IEF TO THE FORMER ASSESSEES. THEREFORE , TH IS REVENUE S GROUND ALSO FAILS. THE CIT(A) S FINDINGS ARE CONFIRMED IN ALL CASES . THE REVENUE S GROUNDS ARE REJECTED. I T (SS) A NO. 649, 650, 651 / /AHD /20 1 1 SHRI PUSHPAVADAN G. SHETH & SHRI AKSHAY P. SHET H (HUF) . FOR A.Y S . 20 0 3 - 0 4 & 2005 - 06 - 6 - 8. THE REVENUE S THREE APPEALS ITAS 649, 650 & 651/AHD/2010 ARE DISMISSED. ORDER PRONOUNCED I N THE COURT ON THIS DAY, THE 24 APRIL, 201 5 AT AHMEDABAD. SD/ - SD/ - ( G.D. AGARWAL ) ( S.S. GODARA ) VICE PRESIDENT J UDICIAL MEMBER AHMEDABAD; D ATED 24 / 0 4 / 20 1 5 PRABHAT KR. KESARWANI , SR. P . S . S / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) - III, AHMEDABAD 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE . / BY ORDER, / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD