ASST CIT 25(3), V. NILAY NAILESH DALAL,

MA 302/MUM/2016

• Counselvise Citation: [2017] 124 COUNSELVISE.COM (IT) 5999 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 11 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 19-12-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2010-2011
• Appeal Filed On: 08-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V JUSTIN
• Assessee Lawyers: DEEPAK KANABAR
• Keywords: Business income; Tax effect

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES H , MUMBAI BEFORE S HRI G.S. PANNU (AM) AND SHRI RAM LAL NEGI (JM) MA NO 302/MUM/2016 & ITA N O. 6168 /MUM /201 4 ) ( ASSESSMENT YEAR : 2010 11 ) THE ACIT, 25(3), C - 10, PRATYAKSHAR BHAWAN, BANDRA KURLA COMPLEX , MUMBAI - 400051 VS. SHRI NILAY NAILESH DALAL, 5 - 6, VIRAM 62, HATKESH SOC., N.S. ROAD., JVPD SCHEME, MUMBAI - 400049 PAN: AXHPD7502N (APPELLANT) (RESPONDENT) APPELLANT BY : SH. V. JUSTIN (DR) RESPONDENT BY : SHRI DEEPAK KANABAR (AR) DATE OF HEARING: 29/09 /201 7 DATE OF PRONOUNCEMENT: 19 / 12 /201 7 O R D E R PER RAM LAL NEGI, JM THIS APPEAL WAS DISMISSED BY THIS BENCH ON 28.12.2015 IN VIEW OF THE CBDT CIRCULAR NO. 21/2015 DATED 10/12/2015 H OLDING THAT THE TAX EFFECT IS BELOW RS. 10 LACS. HOWEVER, THE DEPARTMENT MOVED MISCELLANEOUS APPLICATION 302/M/2016 FOR RECALLING THE ORDER DATED 2 8/12/2015 PASSED IN ITA NO. 6168/MUM/2014 ON THE GROUND THAT THE TRIBUNAL HAS DISMISSED THE APPEAL OF THE REV ENUE AS WITHDRAWN/NOT PRESSED ON A WRONG ASSUMPTION THAT THE TAX EFFECT INVOLVED WAS LESS THAN THE LIMIT PRESCRIBED VIDE CBDT CIRCULAR NO.21/2015 DATED 10/12/2015. 2 . AFTER HEARING THE LD. DEPARTMENTAL REPRESENTATIVE (DR) AND THE COUNSEL FOR THE ASSESSEE , WE PRIMA FACIE F OU ND THAT THE TAX EFFECT IN THIS CASE WAS ABOVE 2 M.A. NO . 302 /MUM/2016 ASSESSMENT YEAR S : 2010 - 11 TEN LACS. ACCORDINGLY, WE RECALL ED OUR ORDER DATED 28.12.2015 PASSED IN ITA NO 6168/MUM/14 FOR THE ASSESSMENT YEAR 2010 - 11 AND HEARD THE APPEAL ON MERITS WITH THE CONSENT OF BOTH THE PARTIES . ITA N O. 6168/MUM /201 4 ) 3. BRIEF FACTS OF THE CAS E ARE THAT THE ASSESSEE FILED ITS RETURN FOR THE ASSESSMENT YEAR 2010 - 11 DECLARING THE TOTAL INCOME OF RS. 64,07,305/ - . THE CASE WAS SELECTED FOR SCRUTINY AND AO ISSUED NOTICE U/S 143 (2) AND 142 (1) TO T HE ASSESSEE . IN RESPONSE THEREOF THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE FURNISHED THE DETAILS AND DISCUSSED THE CASE. 4. THE ASSESSEE HAD CLAIMED INCOME FROM SHARE TRADING AS CAPITAL GAIN. IN VIEW OF THE FREQUENCY OF TRANSACTIONS, VOLUME OF TRANSAC TION, HOLDING PERIOD FOR DIFFERENT SCRIPTS ETC., THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY THE INCOME CLAIMED AS CAPITAL GAIN SHOULD NOT BE TREATED AS INCOME FROM SHARE TRADING BUSINESS. THE ASSESSEE CONTENDED THAT IT HAD RECEIVED RS. 1,80,000/ - AS SALAR Y FROM DALAL AND BROCHA STOCK BROKING PVT. LTD. THE ASSESSEE OCCASIONALLY USED TO INVEST IN INDIVIDUAL CAPACITY. THE DEPARTMENT HAS ACCEPTED THE ASSESSEE AS INVESTOR IN THE LAST FIVE YEARS . T HE INVESTMENT WAS MADE BY THE ASSESSEE OUT OF ITS OWN FUNDS. THE INTENTION OF THE ASSESSEE WAS TO INVEST AND EARN DIVIDEND OVER A SUBSTANTIAL PERIOD OF TIME AND IT HAD NEVER BEEN ENGAGED IN THE BUSINESS OF TRADING SECURITIES. REJECTING THE CONTENTION OF THE ASSESSEE, THE AO DETERMINED THE INCOME OF THE ASSESSEE AT RS. 80,31,788/ - HOLDING THAT THE ASSESSEE HAS EARNED INCOME FROM BUSINESS AND PROFESSION. THE ASSESSEE CHALLENGED THE ASSESSMENT ORDER BEFORE THE FIRST APPELLATE AUTHORITY. 5. IN THE FIRST APPEAL, THE LD. CIT (A) ALLOWED THE APPEAL AND DIRECTED THE AO TO TR EAT THE LOSS OR GAIN EARNED BY THE ASSESSEE AS LONG TERM AND SHORT TERM 3 M.A. NO . 302 /MUM/2016 ASSESSMENT YEAR S : 2010 - 11 CAPITAL GAIN IN VIEW OF THE HOLDING PERIOD OF THE SHARES. THE REVENUE IS IN APPEAL AGAINST THE SAID ORDER BY RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMS TANCES OF THE CASE AND IN LAW, THE LD. CIT (A) HAS ERRED IN NOT TREATING THE PROCEEDS FROM SALE OF BUSINESS INCOME. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) HAS ERRED IN NOT CONSIDERING THAT THE ASSESSEE WAS ENGAGED IN ONLY ACTIVITY OF EARNING PROFIT THROUGH PURCHASE & SALE OF SHARES, BE IT DERIVATIVES, INTRA - DAY, PURCHASE & SALE WITHIN SHORT PERIOD OR LONG PERIOD. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) HAS ERRED IN TREATING PROFI TS ON SHARE TRANSACTIONS AS CAPITAL GAINS IGNORING THAT THE INTENTION OF THE ASSESSEE WAS TO MAKE PROFIT AND NOT INVESTMENT.? 6. BEFORE US, THE DEPARTMENTAL REPRESENTATIVE (DR) RELYING ON THE ORDER PASSED BY AO SUBMITTED THAT THE AO H AS RIGHTLY HELD TH E INCOME IN QUESTION AS INCOME FROM THE BUSINESS KEEPING IN VIEW THE FREQUENCY OF TRANSACTIONS, VOLUME OF TRANSACTIONS AND HOLDING PERIOD FOR DIFFERENT SCRIPTS. THE LD. DR FURTHER SUBMITTED THAT IN ORDER TO ASCERTAIN AS TO WHETHER THE SHARES WERE PURCHASED BY THE ASSESSEE AS INVESTMENT OR STOCK - IN - TRADE. THE RELEVANT FACTS TO BE SEEN IS THE INTENTION OF THE ASSESSEE BEHIND PURCHASING AND HOLDING THE SHARES AND SUCH INTENTION HAS TO BE GATHERED THE FACTS AND CONDUCT OF THE ASSESSEE. SO , THE AO HAS RIGHTLY HE LD THE SALE PROCEEDS AS BUSINESS INCOME TAKING INTO CONSIDERATION THE INTENTION OF THE ASSESSEE IN THE LIGHT OF THE FREQUENCY AND VOLUME OF TRADING. 7. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE RELYING ON THE ORDER PASSED BY THE LD. CIT(A) SUBMI TTED THAT SINCE THE FINDINGS OF THE LD. CIT(A) ARE IN ACCORDANCE WITH THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL RENDERED 4 M.A. NO . 302 /MUM/2016 ASSESSMENT YEAR S : 2010 - 11 IN THE CASE OF GOPAL PUROHIT VS. JCIT, 20 DTR, THERE IS NO MERIT IN THE REVENUES APPEAL THEREFORE, THE PRESENT APPEAL IS LIABLE TO BE DISMISSED. 8 . WE HAVE PERUSED THE ORDERS PASSED BY THE AUTHORITIES BELOW IN THE LIGHT OF THE ARGUMENTS OF THE LD. DR AND CONTENTION OF THE ASSESSEE MADE BEFORE THE AUTHORITIES BELOW. THE LD. CIT (A) HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AN ALYZING ALL THE FACTS AND CIRCUMSTANCES OF THE CASE IN THE LIGHT OF THE DECISIONS OF THE VARIOUS BENCHES OF THE ITAT. THE OPERATIVE PART OF THE ORDER OF THE LD. CIT (A) READS AS UNDER: - XIV IT CAN BE SEEN THAT IN THE ASSESSMENT YEAR 2006 - 07 THE NUMBER OF TRANSACTION UNDERTAKEN BY THE APPELLANT WERE FAR LESS AND THAT THE NUMBER OF TRANSACTION ALMOST INCREASED MORE THAN 4 TIMES (PURCHASES) AND MORE THAN 6 TIMES (SALES) IN THE YEAR UNDER CONSIDERATION COMPARED TO TRANSACTIONS UNDERTAKEN IN A.Y. 2006 - 07. FU RTHER THERE WAS NO TRANSACTION OF PURCHASE AND SALE WITHIN THE PERIOD OF 30 DAYS IN THE ASSESSMENT YEAR 2006 - 07, IN WHICH YEAR THE APPELLANTS EARNING FROM THE SHARE ACTIVITY WAS HELD AS CAPITAL GAINS. IT IS FURTHER NOT THE SUBMISSION OF THE APPELLANT THAT AFTER A.Y. 2006 - 07, THERE WAS ANY ORDER U/S 143 (3) OF THE ACT WAS PASSED IN THE CASE OF THE ASSESSEE TILL THE YEAR UNDER CONSIDERATION. ACCORDINGLY THE PRINCIPLES OF CONSISTENCY AS CONTENDED BY THE APPELLANT CANNOT BE APPLIED IN ENTIRETY AND TO THE CHANG ED FACTS OF THE CASE, IN THE YEAR UNDER CONSIDERATION. XV. IN SUCH FACTS AND CIRCUMSTANCES OF THE CASE IT IS HELD THAT IN RESPECT OF SHARES AND TRANSACTIONS, WHERE THE HOLDING PERIOD OF SHARES HAS BEEN BELOW 30 DAYS, THE ASSESSEE HAS ACTED AS A TRADER. F OR THE OTHER TRANSACTIONS, WHERE THE INCOME HAS BEEN GENERATED FROM TRANSACTIONS WHERE PERIOD OF HOLDING IS MORE THAN 31 DAYS THE APPELLANT IS TO BE TREATED AS INVESTOR. THE AFORESAID FINDINGS IS ALSO IN CONSONANCE AND CONFORMITY WITH THE DECISION IN THE C ASE OF GOPAL PUROHIT VS. JCIT, (SUPRA) AND ALSO CBDTS CIRCULAR NO. 4/2007 DATED 15.6.2007, WHICH RECOGNIZES THE POSITION THAT AN INDIVIDUAL COULD BOTH BE TRADER AS WELL AS INVESTOR INTO THE STOCKS. XVI IN VIEW OF THE FACTS OF THE CASE AND DISCUSSION HERE INABOVE, IT IS DIRECTED THAT THE CONSEQUENT GAIN OR LOSS EARNED BY THE ASSESSEE FROM THE 5 M.A. NO . 302 /MUM/2016 ASSESSMENT YEAR S : 2010 - 11 TRANSACTIONS OF THE SHARES WHERE THE HOLDING PERIOD IS EQUAL TO OR LESS THAN 30 DAYS SHOULD BE TREATED AS TRADING IN NATURE AND THE CONSEQUENT INCOME OR LOSS SHOULD BE TAXED AS INCOME OR LOSS FROM BUSINESS. FOR THE GAINS RESULTING FROM THE SHARE TRANSACTIONS WHICH WERE HELD FOR THE PERIOD BEYOND 30 DAYS OF TIME, THE ASSESSEE SHOULD BE TREATED AS INVESTOR AND THE CONSEQUENT GAIN SHOULD BE TAXED AS CAPITAL GAIN, WHICH IS FURTHER TO BE BIFURCATED AS LONG TERM OR SHORT TERM CAPITAL GAIN DEPENDING ON THE PERIOD OF HOLDING OF SHARE BY THE ASSESSEE AND TAXED ACCORDINGLY. XVII. ACCORDINGLY GROUND OF THE APPEAL IS PARTLY ALLOWED. 9 . WE NOTICE THAT THE ASSESSEE HAS NOT ONLY EAR NED LONG TERM CAPITAL GAIN BUT HAS ALSO EARNED FROM H OLDING S CRIPTS FOR THE PERIOD MORE THAN 30 DAYS. THE SAID ACTIVITY OF THE ASSESSEE DOES NOT SUGGEST THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF SHARE TRANSACTIONS. AS POINTED OUT BY THE LD. CIT (A), THE ASSESSEE EARNED RS. 8,42,763/ - FROM 34 TRANSACTIONS BY HOLDING THE SCRIPTS FOR 30 DAYS. THE ASSESSEE FURTHER EARNED SHO R T TERM CAPITAL GAIN OF RS. 22,82,671/ - FROM 84 TRANSACTIONS BY HOLDING SCRIPTS FROM 31 TO 90 DAYS AND RS. 14,74,682/ - FROM 100 TRANS ACTIONS FROM HOLDING THE SCRIPTS 90 DAYS AND ABOVE. AS POINTED OUT BY THE LD.CIT (A), T HERE WAS NO BORROWED FUND IN THE HANDS OF THE APPELLANT. THIS FACT FURTHER INDICATES THAT THE ENTIRE HOLDING/INVESTMENT IN SHARES IS FROM OWN MONEY OF THE APPELLANT, WH ICH FURTHER CORROBORATE THE FACT THAT THE NATURE OF ACTIVITY OF THE ASSESSEE IS AS AN INVESTOR. IT HAS BEEN POINTED OUT BY THE LD.CIT (A) THAT THE CASE OF THE ASSESSEE WAS SCRUTINIZED AND ORDER U/S 143 (3) WAS PASSED FOR THE A.Y. 2006 - 07 AND THE CAPITAL GA IN OR LOSS DECLARED BY THE ASSESSEE WAS ACCEPTED AS SUCH. T HE LD. CIT (A) HAS FOLLOWED THE PRINCIPLES OF CONSISTENCY LAID DOWN BY THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF GOPAL PUROHIT VS. JCIT, 20 DTR 99 . IN VIEW OF THE AFORESAID FACTS AND CIRC UMSTANCES , WE ARE OF THE CONSIDERED VIEW THAT THE FINDINGS OF THE LD.CIT (A) ARE BASED ON THE EVIDENCE ON RECORD AND AS PER THE ESTABLISHED PRINCIPLES OF LAW. HENCE, WE DO NOT FIND ANY INFIRMITY IN THE FINDINGS OF THE LD CIT(A) WE THEREFORE, UPHOLD THE FIN DINGS OF THE LD. CIT (A) 6 M.A. NO . 302 /MUM/2016 ASSESSMENT YEAR S : 2010 - 11 AND DISMISS THE APPEAL FILED BY THE REVENUE. AO IS DIRECTED TO FOLLOW THE DIRECTIONS GIVEN BY THE LD.CIT (A) AND COMPUTE THE TAX LIABILITY. IN THE RESULT, APPEAL FILED BY THE REVENUE FOR ASSESSMENT YEAR 2010 - 2011 IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH DECEMBER, 2017 SD/ - SD/ - ( G.S. PANNU ) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 19 / 12 / 2017 ALINDRA, PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI