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Income Tax Appellate Tribunal, DELHI BENCH: ‘D’ NEW DELHI
Before: SHRI R. K. PANDA & MS SUCHITRA KAMBLE
This appeal has been filed by the assessee against the order dated 30/03/2015 passed by CIT (A) –XIII, New Delhi for Assessment Year 2010-11.
The grounds of appeal are as under:-
"1. That having regards to facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of the Ld. AO in treating the income of Rs.6,98,161/- as business income instead of short term capital gain as claimed by the assessee that too by recording incorrect facts and findings and without considering the submissions of the assessee.
2. That having regards to the facts and circumstances of the case, Ld. C1T(A) has erred in law and on facts in confirming the action of the Ld. AO in disallowing of Rs.8,000/- u/s 14A of Income Tax Act, 1961.
3. That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the additions/disallowance and passing the impugned assessment order being contrary to law and facts and without providing adequate opportunity of hearing and without considering the principles of natural justice and the same is not sustainable on various legal and factual grounds.
4. That having regards to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not reversing the action of the Ld. AO in charging interest u/s 234A, 234B, 234C and 234D of the Income Tax Act, 1961.”
The assessee is in the business of advertisement and publicity under the name of M/s Infotainment Media Network. The assessee also entered into various transactions of shares viz. sale purchase of shares, future option and derivative transaction. The assessee is also working partner in M/s Pashupati Nath Jee Tours & Travels. During the present assessment year, the assessee filed return of income electronically dated 11/10/2010 declaring total income of Rs.1,43,44,290/-, as per ITR filed by the assessee. The Assessing Officer observed that the assessee claimed a set off speculation loss of Rs.69,28,855/- pertaining to Assessment Year 2009-10. The same was disallowed by the Assessing Officer to the extent of Rs.2,16,946/-. The Assessing Officer further observed that the assessee has shown short term capital gain of Rs.6,98,161/- on account of sale of shares in his ITR as per the audit report filed by the assessee for Assessment Year 2010-11. The Assessing Officer further observed that the statement of particulars at Serial No. 8(a) of Form 3CD reveals that the assessee is into business of sale/purchase of shares. After going through the reply of the assessee the Assessing Officer made disallowance of Rs.6,98,161/- and treated the same as business income of the assessee. The Assessing Officer also added Rs. 3,31,544/- in respect of credit card expenses as well as made disallowance of Rs.8,000/- in respect of Section 14A of the Income Tax Act, 1961.
Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee.
The Ld. AR submitted that the assessee has two portfolio, i.e. an investment portfolio comprising of securities which are to be treated as capital assets and trading portfolio comprising stock in trade which is to be treated as trading assets. When an assessee has two portfolio, the assessee may have income under both the heads i.e. capital gain and business income. The Ld. AR further submits that the assessee is putting all those shares in the portfolio where the shares are being acquired by taking delivery and making full payment whereas in those cases where full payment is not made and delivery is not taken, those shares are put in trading portfolio. The Ld. AR submitted that the Assessing Officer has himself accepted the fact that the assessee has taken physical delivery of the shares, which further proves that the intention of the assessee was to hold these shares for investment purposes and not for trading purposes. On the other hand the Assessing Officer has considered the same as book entries. Thus, the Assessing Officer has contradicted the Revenue’s stand. The Ld. AR pointed out that investment was made but the same had to be sold quickly as the markets were swinging and there was fear of losses. Moreover, the law itself permits the shares to be held for less than 12 months for giving rise to short term capital gain. Thus, shares sold within a period of 12 months may not be viewed otherwise than as sale of investment because if it is taken that shares sold within a period of 12 months would give rise to business profits, it would make the provision of short term gain on shares as redundant and completely meaningless. The Ld. AR submitted that the Security Transaction Tax (STT) is paid when the transactions in shares are routed through stock exchange, whereas the assessee had undertaken physical purchase and sale of its shares. The Ld. AR submitted that the dividend income received during the impugned year but the same has been earned on investments made during Assessment Year 2006-07. The assessee has not sold any of his long term investments during the impugned year. The Ld. AR also relied upon the decision of the Tribunal in the assessee’s own case for Assessment Year 2006-07 & 2007-08 wherein this issue has been decided in favour of the assessee.
As regards Ground No. 2, the Ld. AR submitted that the CIT(A) erred in confirming the action of the Assessing Officer in disallowing of Rs. 8,000/- u/s 14A of the Income Tax Act, 1961.
As regards Ground No.4, the Ld. AR submitted that the same is consequential.
The Ld. DR submitted that the CIT(A) has given a categorical finding that no STT was paid by the assessee.
We have heard both the parties and perused the material available on record. The CIT(A) held as under:-
“ 6.3 The reasons given by the AO and the submission of the appellant are considered. It is not in dispute that the appellant is in the same business even in the preceding years as well. It is observed from the details brought on record that assessee purchased 50000 shares of MBL Infrastructure Limited on 13.1.2010 for a total consideration of Rs.1,04,48,220/-, and sold the same for Rs.1,11,73,409/-, and claimed to have paid STT amounting to Rs. 27,028/- on these shares (PB 21), and thus earned a short term capital gain of Rs 6,98,161/-. On the contrary, in the written submissions filed, appellant has confirmed that no STT is paid. Thus, there are two different statements of the appellant in this regard. Payment of STT on these shares is not supported by any documentary evidences. Furthermore, neither during the course of assessment proceedings nor at the stage of appellate proceedings, appellant submitted any evidence to justify that any STT has been paid on these shares, and these shares were routed through any stock exchange. No contract notes in this regard were filed by the appellant either before the AO during the course of assessment proceedings or even before me. Therefore, the observations made by the AO in his order that assessee has himself contended that the transaction in shares was not routed through his Demat account and that these shares were physically held by the broker only cannot be overlooked and ignored. Nothing specific is brought on record by the Appellant to establish that any specific payment was made for these shares purchased, and amount received on sale of such shares. Thus, in fact assessee has failed to establish as to how these shares form part of his investment portfolio and were not for trading purpose only. Merely because, assessee’s claim in the previous years is considered for some shares held and sold, and profit or loss on such shares is considered as short term capital loss or gain cannot be applied in the assessment year under consideration as well in the absence of bringing-on record such evidences to establish the nature of investments made in such shares. Every year is an independent assessment year, and rule of res-judicata cannot be applied. These shares were sold by the assessee after keeping the same for 15 to 38 days i.e. for a very short period. No doubt that assessee is maintaining two portfolios i.e. one for Investment purpose and other for trading. I have also examined the case laws referred by the appellant in the written submissions filed but in the absence of above evidences brought on records, the facts of the case of the assessee and those cases cannot be compared. During the course of appellate * proceedings Ld. AR also referred me to order passed by Ld. CIT(A) for AY 2007-08 and AY 2008-09, (Refer PB 30-43), but I find that these orders do not help the assessee for the reasons discussed supra. In view of this, I do not find any reason to differ from the observations made by the A.O in his order. Accordingly, this ground of appeal is decided against the assessee.”
It is pertinent to note that though, the assessee has relied upon the earlier Assessment Year in assessee’s own case, from the perusal of the order of the CIT(A) as well as of the Assessing Officer it was found that the relevant evidences was not verified relating to the payment of STT in the present Assessment Year. The Ld. AR also submitted during the hearing that the same will be produced before the authorities, if the matter is remanded back. Therefore, in the interest of justice, it will be appropriate to remand back this issue to the file of the Assessing Officer afresh. Needless to say, the assessee be given opportunity of hearing by following principals of natural justice. Therefore, Ground No. 1 is partly allowed for statistical purpose.
As regards Ground No.2, the Assessing Officer as well as the CIT(A) has properly made disallowance and confirmed the same u/s 14A. Therefore, Ground No.2 is dismissed.
As regards, Ground No.3, the same is general in nature, hence, dismissed.
As regards, Ground No.4, the same is consequential. Therefore, there is no need to adjudicate this ground at this stage.
In result, the appeal of the assessee is partly allowed for statistical purpose.
Order pronounced in the Open Court on 15th OCTOBER, 2018.