Shri Dharmendra Kanaiyalal Patel, Kadi V. The ACIT.,Cent,Circle-1(4), Ahmedabad

ITSSA 675/AHD/2011

• Counselvise Citation: [2017] 122 COUNSELVISE.COM (IT) 3210 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 4 month(s) 22 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 18-05-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 12-04-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 26-12-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JAGADISH
• Assessee Lawyers: P M MEHTA
• Keywords: Business income; Salary income; Transactions in derivatives; Documents seized
• Section: 142(1); 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD IZNHI DQEKJ DSFM;K IZNHI DQEKJ DSFM;K IZNHI DQEKJ DSFM;K IZNHI DQEKJ DSFM;K , , BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER I.T.(SS)APPEAL NO.675/AHD/2011 ( / ASSESSMENT YEAR :2008-09) DHARMEDRA KANAIYALAL PATEL AHMEDABAD. / VS. ACIT, CENTRAL CR.1(4), AHMEDABAD ./ ./ PAN/GIR NO. : ABUPP 4537 C ( ! ' / APPELLANT ) .. ( #' / RESPONDENT ) ! ' $ / APPELLANT BY : SHRI P. M. MEHTA, A.R. #' % $ / RESPONDENT BY : SHRI JAGADISH, CIT D.R. & ' ( % ) * / DATE OF HEARING 12/04/2017 +,-. % ) * / DATE OF PRONOUNCEMENT 18/05/2017 / / O R D E R PER SHRI MAHAVIR PRASAD, JUDICIAL MEMBER : THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE I S DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS )-I, AHMEDABAD, DATED 21/10/2011 FOR THE ASSESSMENT YEAR (AY) 2008- 09. 2. ASSESSEE HAS BEEN TAKEN FOLLOWING GROUNDS OF APP EALS: (I). ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE CIT(A) ERRED IN NOT ACCEPTING THE ASSESSEES PLEA THAT IT WAS NOT AT ALL A FIT CASE FOR INVOKING THE PROVISIONS OF SECTION 153 A AND HE IT(SS)A NO.675/ AHD/2011 DHARMENDRA KANAIYALAL PATEL VS. ACIT ASST.YEAR 2008-09 - 2 - FURTHER ERRED IN UPHOLDING THE VALIDITY OF IMPUGNED ASSESSMENT ORDER UNDER SECTION 153A, DATED 29 TH DECEMBER, 2010. (II). WITHOUT PREJUDICE, THE CIT(A) SHOULD HAVE HEL D THAT IN AN ASSESSMENT MADE IN PURSUANCE TO SECTION 153A, NONE OF THE TWO ADJUSTMENTS WHICH ARE UPHELD BY THE CIT(APPEALS) CO ULD HAVE BEEN MADE BY THE AO. (III). WITHOUT PREJUDICE, ON THE FACTS AND IN THE C IRCUMSTANCES OF THE CASE, THE CIT(APPEALS) ERRED IN INFERRING THAT THE SALE OF EQUITY SHARES WHICH ARE HELD BY THE ASSESSEE FOR 30 DAYS O R LESS WOULD GIVE RISE TO BUSINESS INCOME AND FURTHER ERRED IN H OLDING THAT OUT OF SHORT TERM CAPITAL GAINS OF RS.4,52,154/-, A SUM OF RS.2,21,268/- BE TAXED AS BUSINESS INCOME. (IV). WITHOUT PREJUDICE, ON THE FACTS AND IN THE CI RCUMSTANCES OF THE CASE, THE CIT(A) ERRED IN UPHOLDING TOTAL DISALLOWA NCE OF CAR EXPENSES INCURRED BY THE ASSESSEE FOR SAFEGUARDING AND ENHANCING HIS SHARE OF INCOME FROM THE FIRMS IN WHI CH HE WAS A PARTNER. (V). ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE CIT(A) ERRED IN NOT ALLOWING RELIEF TO THE ASSESSEE IN REG ARD TO INTEREST UNDER SECTION 234B. 3. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI ALS ON RECORD ARE AS UNDER:- FROM THE DOCUMENTS SEIZED DURING THE COURSE OF SEAR CH PROCEEDINGS, IT IS NOTICED THAT THE ANNEXURES A-1 AND A-2 CONTAINS THE DETAILS OF SHARE TRANSACTIONS IN THE NAMES OF VARIOUS FAMILY MEMBERS OF THE ASSESSEE. ON PERUSAL OF THE ANNEXURE A-1, IT IS SEEN THAT PAGE N O. 67 TO 69 CONTAINS SOME CALCULATIONS. ON PAGE NO.69 SOME NOTING HAS BE EN MADE IN THE IT(SS)A NO.675/ AHD/2011 DHARMENDRA KANAIYALAL PATEL VS. ACIT ASST.YEAR 2008-09 - 3 - NAME OF THE ASSESSEE AND TILL DATE 22.03.2008 HAS B EEN SCRIBBLED. FURTHER ON PAGE NO.67 NOTING HAS BEEN MADE WHICH SHOWS SHOR T TERM CAPITAL GAIN OF RS.6,08,609/-. IT APPEARS THAT ON THESE PAGES SH ORT TERM CAPITAL GAIN OF SHRI DHARMENDRA K. PATEL HAS BEEN CALCULATED FOR TH E PERIOD TILL 22.03.2008. THE ASSESSEE HAS ALSO PRODUCED RETURN O F INCOME FOR A.Y. 2008-09, WHICH SHOW SHORT TERM CAPITAL GAIN OF RS.4 ,52,154/-. THE ASSESSEE HAS FILED A CHART WHICH SHOWS THE SALES AN D PURCHASE OF THE SHARES IN NUMBER AND AMOUNTS. IT ALSO SHOWS THE DET AILS OF THE PROFIT EARNED ON THE SAME. HOWEVER, THE REASON FOR THE DIF FERENCE IN THE CALCULATION OF THE SHORT TERM CAPITAL GAIN HAS STIL L NOT BEEN PROVIDED. CURIOUSLY A PRINTOUT OF THE ACCOUNT OF SHRI DHARMEN DRA K PATEL IN MONEYCON TROL.COM HAS ALSO BEEN PROVIDED WHICH AL SO CALCULATED THE SHORT TERM CAPITAL GAIN AT RS.6,08,609/-. THE ASSES SEE VIDE NOTICE U/S. 142(1) DATED 03/12/2010 WAS REQUESTED TO EXPLAIN WH Y THE DIFFERENCE OF RS.1,56,455/- SHOULD NOT BE ADDED AS UNACCOUNTED IN COME AND WHY THE CAPITAL GAIN OF RS.6,08,609/- SHOULD NOT BE TREATED AS BUSINESS INCOME LOOKING TO THE FREQUENCY OF THE TRANSACTIONS. IN RE PLY TO THE ISSUE OF DIFFERENCE OF RS.1,56,455/-, THE ASSESSEE VIDE HIS SUBMISSION DATED 24.12.2010 HAS SUBMITTED THAT ASSESSEE HAS MADE/PUR CHASED THE SHARES FOR THE PURPOSE OF INVESTMENT AND NOT FOR CARRYING ON TRADING ACTIVITIES. THE ASSESSEE VIDE ITS EARLIER LETTER HAS ALREADY SU BMITTED WHY PROFIT ON SALE OF SHARES SHOULD BE TREATED AS INCOME FROM CAP ITAL GAINS. CONSIDERING SUCH REPLY, PROFIT ON SALE OF SHARES NE ED TO BE TAXED AS IT(SS)A NO.675/ AHD/2011 DHARMENDRA KANAIYALAL PATEL VS. ACIT ASST.YEAR 2008-09 - 4 - INCOME FROM SHORT TERM CAPITAL GAIN AND NO ADVERSE INFERENCE IS CALLED FOR. 4. DURING THE YEAR THE ASSESSEE HAS SHOWN INTEREST INCOME OF RS.57015/- FROM SAVING ACCOUNTS, DEPOSITS WITH TWO FIRMS AND FROM SHRI AMIT R. PATEL. FURTHER THE ASSESSEE HAS DEBITED INT EREST OF RS.130000/- PAID ON CAR LOAN FROM THE TOTAL INTEREST EARNED AND SHOWN NET LOSS OF RS.(-)72985/- UNDER THIS HEAD. DURING THE COURSE OF PROCEEDING FOR ASSESSEE WAS REQUESTED TO JUSTIFY THE ALLOWABILITY OF THE EXPENSE IN RELATION TO INTEREST INCOME EARNED ALONG WITH NECES SARY EVIDENTIARY DOCUMENTS. HOWEVER THE ASSESSEE FAILED TO JUSTIFY T HE ALLOWABILITY OF THE EXPENSES. ALSO HE FAILED TO PRODUCE ANY EVIDENCES I N THIS REGARD. THEREFORE, THE SUM OF RS.130000/- CANNOT BE ALLOWED TO THE ASSESSEE AS IT WAS NOT INCURRED TO EARN THE INTEREST INCOME AS STA TED ABOVE AND DISALLOWED AS PER THE PROVISIONS OF SECTION 58(1)(A )(I) OF THE INCOME TAX ACT TREATING THEM AS OF PERSONAL NATURE AND ADDED T O THE TOTAL INCOME OF THE ASSESSEE. 5. WE HAVE HEARD BOTH THE COUNSELS AND LEARNED AR. LEARNED AR STATED THAT ASSESSEE IS NOT THE FULL TIME SHARE BRO KER OR IN THE BUSINESS OF SHARE PURCHASE. HE IS MERELY INVESTOR AS WELL AS HE IS ALSO WORKING IN A FIRM. IT(SS)A NO.675/ AHD/2011 DHARMENDRA KANAIYALAL PATEL VS. ACIT ASST.YEAR 2008-09 - 5 - 6. LEARNED AR CITED A JUDGMENT OF HONBLE ITAT MUMBAI DECISIONS IN THE CASE OF GOPAL PURHOTI VS. JCIT 29 SOT 117. THE FACTS AND RATIO ARE REPRODUCED BELOW FROM THE HEAD NOTES: IT WAS NOTED THAT THE ASSESSEE WAS ENGAGED IN THE ACTIVITY OF SALE AND PURCHASE OF SHARES FOR A QUITE LONG PERIOD. IT WAS ALSO NOTED THAT NON-DELIVERY BASED TRANSACTIONS HAD BEEN TREAT ED BY THE ASSESSEE AS BUSINESS ACTIVITY AND DELIVERY BASED TR ANSACTIONS HAD BEEN TREATED AS AN INVESTMENT ACTIVITY AND, ACCORDI NGLY, THE ASSESSEE HAD CLAIMED HIMSELF BOTH DEALER AS WELL AS INVESTOR AND HAD OFFERED INCOME FOR TAXATION ACCORDINGLY, WHICH HAD BEEN CLA IMED TO HAVE BEEN ACCEPTED BY THE REVENUE AUTHORITIES IN EARLIER YEARS AND, HENCE, IT BECAME IMPORTANT TO ANALYSE THE FACTS OF FEW EAR LIER YEARS. ON CONSIDERING THE FACTS OF THE EARLIER YEARS, THE FOL LOWING CONCLUSIONS EMERGED: (I) THE FACTS OF THE YEAR UNDER CONSIDERATION WITH REGA RD TO NATURE OF INCOME(S) EARNED BY THE ASSESSEE AND THE TRANSACTIO NS WERE SAME IN ALL THOSE YEARS, EXCEPT TRANSACTIONS IN F&O SEGMENT IN SOME OF THE YEARS WHEREIN THIS KIND OF ACTIVITY WAS STARTED BY THE STOCK EXCHANGE. (II) INTEREST ON BORROWED CAPITAL HAD BEEN ALLOWED AS BU SINESS EXPENDITURE AGAINST THE PROFIT ON JOBBING ACTIVITIE S SHOWN BY THE ASSESSEE AS BUSINESS PROFIT. (III) THE ASSESSEE HAD SHOWN SHARES PURCHASED ON DELIVERY BASIS AS INVESTMENT AT THE END OF THE YEAR AND NO STOCK-IN-T RADE EXISTED ON THAT DATE AND THE ASSESSEE HAD EARNED BOTH LONG-TER M AND SHORT-TERM CAPITAL GAIN WHICH MEANT THE ASSESSEE HAD ALSO HELD SHARES FOR THE PERIOD OF MORE THAN 12 MONTHS. 7. GROUND NO. 1 AND 2 ARE NOT PRESSED AS DISMISSED. IT(SS)A NO.675/ AHD/2011 DHARMENDRA KANAIYALAL PATEL VS. ACIT ASST.YEAR 2008-09 - 6 - 8. TWO SUBSTANTIAL ISSUES ARE INVOLVED IN THE APPEA L OF THE ASSESSEE. TREATMENT OF SHORT TERM CAPITAL GAIN AS BUSINESS IN COME, WHERE THE SAME ARE HELD FOR MORE THAN 30 DAYS OR LESS AND SAM E IS SQUARELY COVERED BY THE ORDER OF COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF CASE OF DIGVIJAY FINLEASE LTD. VS. DCIT [2017] 78 TAXMANN.C OM 272 (AHMEDABAD TRIB.) : I. (SECTION 14A OF THE INCOME-TAX ACT, 1961 READ WITH RULE 8D OF THE INCOME-TAX RULES, 1962 - EXPENDITURE INCURRED I N RELATION TO INCOME NOT INCLUDED IN TOTAL INCOME (DIVIDEND) - AS SESSMENT YEAR 2008-09 - ASSESSEE WAS ENGAGED IN BUSINESS OF SALES AND PURCHASE OF SHARES - IT DERIVED MAJOR INCOME BY WAY OF DIVIDEND INCOME FLOWING FROM INVESTMENT IN SHARES - IT DECLA RED CERTAIN INCOME AS DIVIDEND INCOME, WHICH WAS EXEMPT FROM TA X - ASSESSING OFFICER DISALLOWED EXPENDITURE INCURRED I N RELATION TO DIVIDEND INCOME NOT FORMING PART OF TOTAL INCOME IN TERMS OF SECTION 14A BY APPLYING FORMULA PRESCRIBED UNDER RU LE 8D(2)(II) - WHETHER ASSESSING OFFICER HAD CORRECTLY APPLIED F ORMULA PRESCRIBED UNDER RULE 8D(2)(II) FOR DETERMINATION O F EXPENDITURE ATTRIBUTABLE TO DIVIDEND INCOME - HELD, YES [PARA 1 1] [IN FAVOUR OF REVENUE] II. SECTION 2(42A)/(42B), READ WITH SECTION 28(I), OF THE INCOME-TAX ACT, 1961 - CAPITAL GAINS - SHORT-TERM CAPITAL ASSE TS/GAINS (SHARES, DEALING IN) - ASSESSMENT YEAR 2008-09 -ASS ESSEE DECLARED INCOME BOTH BY WAY OF LONG-TERM CAPITAL GA IN AS WELL AS BY WAY OF SHORT-TERM CAPITAL GAIN ARISING FROM SALE OF SHARES - LOWER AUTHORITIES TREATED SHORT-TERM CAPITAL GAIN A S BUSINESS INCOME ON PLEA THAT SHARES WERE HELD FOR LESS THAN 30 DAYS DURING YEAR - WHETHER LOWER AUTHORITIES WERE NOT JU STIFIED IN TREATING SHORT-TERM CAPITAL GAIN AS BUSINESS INCOME MERELY BECAUSE SHARES WERE HELD FOR LESS THAN 30 DAYS DURI NG YEAR - HELD, YES [PARAS 16 AND 17] [IN FAVOUR OF ASSESSEE] IT(SS)A NO.675/ AHD/2011 DHARMENDRA KANAIYALAL PATEL VS. ACIT ASST.YEAR 2008-09 - 7 - 9. ON FACTS WE FIND THAT THE TRANSACTIONS OF IMPUGN ED SHORT TERM CAPITAL GAIN INVOLVES ONLY 12 SCRIP WHICH COMPRISES OF HARDLY 28 PURCHASE TRANSACTION AND 17 SALES TRANSACTION, THER EFORE ONE CANNOT INFER FREQUENCY KEEN TO BUSINESS OR TRADE. IN PARITY WITH THE REASON PROVIDED BY THE COORDINATE BENCH IN DIGVIJAY FINLEASE LTD. (SUP RA). WE FIND MERIT IN THE GROUND RAISED BY THE ASSESSEE ON THIS CORE. IN THE RESULT GROUND NO.3 IS ALLOWED. 10. GROUND NO.4 IS CONCERNED CLAIM OF CAR INTEREST. THE ASSESSEE SEEKS TO CLAIM THE EXPENDITURE TOWARDS THE MAINTENA NCE OF CAR AGAINST INTEREST INCOME. WE FAILED TO UNDERSTAND SUCH CLAIM OF EXPENDITURE FOR THE PURPOSE OF DERIVING INTEREST INCOME. THE ASSESS EE HAS NOT BROUGHT ANY MATERIAL ON RECORD TO PROVE THAT EXPENDITURE TOWARD S HAS BEEN INCURRED FOR THE PURPOSE OF BUSINESS. ASSESSEE TO EARN INTER EST INCOME. THE INTEREST INCOME IS ORDINARILY EARNED WITH EFFLUX OF TIME HAV ING REGARD TO THE MONEY. HAVING REGARD TO THE FACT THAT ASSESSEE IS W ORKING SOMEWHERE AND DERIVING SALARY INCOME FROM HIS EMPLOYER. THERE FORE, IT IS APPARENT THAT CAR WAS USED FOR PERSONAL PURPOSE, ACCORDINGLY GROUND NO.4 IS DISMISSED. 11. ON THE BASIS OF FOREGOING OBSERVATION WE PARTLY ALLOW THE APPEAL OF THE ASSESSEE. IT(SS)A NO.675/ AHD/2011 DHARMENDRA KANAIYALAL PATEL VS. ACIT ASST.YEAR 2008-09 - 8 - 12. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 18/05/2017 SD/- SD/- IZNHI DQEKJ DSFM;K IZNHI DQEKJ DSFM;K IZNHI DQEKJ DSFM;K IZNHI DQEKJ DSFM;K EGKOHJ IZLKN EGKOHJ IZLKN EGKOHJ IZLKN EGKOHJ IZLKN YKS[KK LN YKS[KK LN YKS[KK LN YKS[KK LNL; L; L; L; U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; (PRADIP KUMAR KEDIA) ( MAHAVIR PRASAD ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 18/05/2017 PRITI YADAV, SR.PS !'# $#! / COPY OF THE ORDER FORWARDED TO : 1. ! ' / THE APPELLANT 2. #' / THE RESPONDENT. 3. 012) & 3) / CONCERNED CIT 4. & 3) ( !) / THE CIT(A)-I, AHMEDABAD. 5. 67 8 )'12 , !* 12. , 0 / DR, ITAT, AHMEDABAD 6. 8 9 : ( / GUARD FILE. % & / BY ORDER, # 6!) ) //TRUE COPY// '/& () ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD TRUE COPY 1. DATE OF DICTATION 12/04/2017 (DICTATION-PAD 5 P AGES ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 17/04/2017 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P .S./P.S 18/04/2017 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT18/04/2017 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S 11/05/2017 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 18/0 5/2017 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DISPATCH OF THE ORDER