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Income Tax Appellate Tribunal, “C” BENCH : KOLKATA
Before: Hon’ble Shri Aby. T. Varkey, JM & Shri M.Balaganesh, AM ]
IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH : KOLKATA [Before Hon’ble Shri Aby. T. Varkey, JM & Shri M.Balaganesh, AM ] I.T.A No. 181/Kol/2016 Assessment Year : 2012-13 ACIT, Circle-29, Kolkata -vs- Smt. Surjit Kaur Uberoi [PAN: AANUP 4301 P] (Appellant) (Respondent) C.O. No. 13/Kol/2016 (Arising out of I.T.A No. 181/Kol/2016 ) Assessment Year : 2012-13 Smt. Surjit Kaur Uberoi -vs- ACIT, Circle-29, Kolkata [PAN: AANUP 4301 P] (Appellant) (Respondent)
For the Appellant : Shri Saurabh Kumar, Addl. CIT Sr. DR For the Respondent : Shri Akkal Dudhwewala, FCA Date of Hearing : 20.02.2018 Date of Pronouncement : 07.03.2018 ORDER Per M.Balaganesh, AM
This appeal by the Revenue and the Cross Objection by the Assessee arise out of the order of the Learned Commissioner of Income Tax(Appeals)-9, Kolkata [in short the ld CIT(A)] in Appeal No.741/CIT(A)-9/Cir-33/2014-15/Kol dated 23.11.2015 against the order passed by the DCIT, Circle-33, Kolkata [ in short the ld AO] under section 143(3) of the Income Tax Act, 1961 (in short “the Act”) dated 02.02.2015 for the Assessment Year 2012-13.
2 ITA No.181/Kol/2016& C.O.13/Kol/2017 Smt. Surjit Kaur Oberoi A.Yr.2012-13 2. The only issue to be decided in this appeal of the revenue is as to whether the ld CITA was justified in directing the ld AO to take the value of opening stock at Rs 5,91,73,606/- instead of Rs 4,16,12,081/- in the facts and circumstances of the case.
The brief facts of this issue is that the assessee is an individual engaged in the business of share dealing. The return of income for the Asst Year 2012-13 was filed by the assessee on 12.11.2012 declaring total income of Rs 5,67,808/-. The assessee derived rental income from a house property located at Flat 2C, Diamond Heights, 20/1, Chetla Road, P.S.Chetla, Kolkata – 700027. She also had income from share trading, share speculation, short term capital gains (STCG) and dealt in commodity trading. In her return, she claimed Rs 2,02,86,075.91 as income from long term capital gains (LTCG) on the following scrips :- Name of the Scrips Number of Shares Bajaj Finance 34777 Coal India 73165 Gitanjali 30000 Prakash Industries 25000 Nifty April 2011 15000
Apart from this, she claimed long term capital gains of Rs 2,02,86,075/- (exempt) and short term capital gains of Rs 3,49,119/- (after adjustment of commodity & F&O loss). The ld AO observed that despite repeated opportunities given to the assessee, she could not establish the claim of LTCG and STCG made in the return with necessary documents. The ld AO observed that assessee had maintained its shares and derivative transactions with one depository account i.e. M/s Anand Rathi Share and Stock Brokers Ltd. The details were obtained from M/s Anand Rathi Share and Stock Brokers Ltd by the ld AO and he observed that the assessee had declared long term capital gains from sale of shares of Coal India, Gitanjali, Prakash Industries and Bajaj Finance where the holding period of shares were ranging from 4 to 7 days only. Besides this, he noticed that assessee had claimed LTCG on sale of Nifty 2011, to
3 ITA No.181/Kol/2016& C.O.13/Kol/2017 Smt. Surjit Kaur Oberoi A.Yr.2012-13 which he observed that Nifty 2011 is not a share scrip but F&O transaction and hence the claim of LTCG is not proper. In respect of Bajaj Finance shares, the ld AO observed that the assessee had treated STCG of Rs 64,44,808.68 as LTCG in the return of income. He also found that the closing stock of shares shown by the assessee was Rs 3,10,28,404.62 as against that shown by the broker at Rs 3,28,23,785.50 thereby leading to a difference of Rs 17,95,381.50, which was added by the ld AO as unexplained investment. Besides this, the ld AO added the value of Rs 13,83,500/- to the total income , being the holding of 10000 scrips of Nifty April 12 having value of Rs 13,83,500/-. The ld AO observed that the entire funding of purchase of shares, derivatives and futures were conducted by taking loan from HDFC Bank and pledging the shares to HDFC. The assessee had sold majority of shares before the record date of dividend and accordingly observed that the intention of the assessee was not to earn any dividend. Based on huge volume of transactions and minimum holding period, he held that the assessee had carried out the activities of purchase and sale of shares, derivatives only as an adventure in the nature of trade and accordingly the same is to be taxed only as business income. In respect of cash segment of transactions, the ld AO reworked the profit from delivery based transaction of all the shares at Rs 77,41,409.16 and since he proposed to separately tax the sum of Rs 64,44,808.68 as STCG in respect of sale of shares of Bajaj Finance , the same was reduced and the remaining sum of Rs 12,96,600.48 was taxed as business income of the assessee. Apart from this, the ld AO observed that the assessee had earned profit from Intra day transactions at Rs 63,82,744.55 which was also taxed as business income. Based on aforesaid observations, he completely recomputed the gains from shares, derivatives, etc into business income and STCG separately.
The ld CITA treated the entire gains from sale of shares and derivatives as business income without any bifurcation into business income and capital gains, by observing as under:- 3
4 ITA No.181/Kol/2016& C.O.13/Kol/2017 Smt. Surjit Kaur Oberoi A.Yr.2012-13 “4. Conclusion: It is seen that the appellant has shown long term capital gain on shares of Rs. 2,02,86,075/- and a short term capital gain of Rs. 3,49,119/-. Out of the long term capital gain the AO treated Rs. 64,44,808/- as short term capital gain as the appellant did not produce the relevant details. The AO called for the information u/s 133(6) from the broker and on the basis of information so obtained the AO found that the appellant had total purchases in the relevant financial year for intraday and delivery transactions of Rs. 117,20,05,213/- and the corresponding Sales of Rs. 120,60,96,443/-. The AO has observed that the purchase and sale of these shares were more of adventure in nature of trade rather than investment. The AO has further increased the value of the closing stock by the value shown by the share broker in his books; the net addition on this point was Rs. 17,95,381/-. The AO has further added Rs. 13,83,500/- as the stock of NIFTY shown in the balance sheet but not shown by the broker. Additionally, the AO calculated the business income from intraday transactions in the shares at Rs. 63,82,744/-. It is seen that the transactions obtained from the broker u/s 133(6) included the transactions on which the appellant has claimed long term or short term capital gain. It is further seen that in absence of details the treatment of the gain as short term or long term is without any basis. It has been observed by the AO that the frequency and volume of transactions in shares make the activity and enterprise of the nature of trade rather than investment. In view of this the assessment order is cancelled. The AO is directed to compute the income from trading in shares as business income and ignore any claim of short or long term capital gain. For this computation, the AO is directed to take opening stock at Rs. 5,91,73,606/-, purchases of Rs. 117,20,05,213/- closing stock of Rs. 3,10,28,404/- and sales of Rs. 120,60,96,443/- the values as obtained from broker u/s 133(6) except the value of closing stock which has to be as per balance sheet of the appellant. The AO is directed to allow the security transaction tax (STT) paid as deduction from the income so computed.
4.1. The addition of Rs. 17,95,381/- made in the assessment order on the basis of the stock reflected in the books of accounts of broker is uncalled for because the quantity of shares is same in the balance sheet of the appellant and the information provided by the broker u/s 133(6). The valuation has to be done as per the method adopted consistently by the appellant. The value of the shares in the books of accounts of broker is of no relevance as long as the quantity is same.
4.2. Similarly, the addition of Rs. 13,83,500/- as the value of stock of NIFTY shown in the balance sheet of the appellant but not informed u/s 133(6) by the broker is without any basis. The appellant has submitted that the broker does
5 ITA No.181/Kol/2016& C.O.13/Kol/2017 Smt. Surjit Kaur Oberoi A.Yr.2012-13 not show the contract of sale/purchase of the scrips which are not settled through actual delivery.
4.3. After considering all the these issues the AO is directed to compute the income as under:
4.3.1 Income from House Property (as per assessment order) Rs. 3,10,318/-.
4.3.2. Income from Business (as per assessment order) a. Profit from commodity (MCDX) Rs. 2,89,155/- b. Profit from commodity NCX futures Rs. 9,873/- c. F & O Income (-) Rs. 10,80,117/-
4.3.3. Income from other sources (as per assessment order) a. Bank Interest Rs. 14,014/- b. Interest Rs. 4,620/- c. PPF Interest (exempt) Rs. 81,948/- d. Dividend (exempt) Rs. 4,14,897/-
4.3.4. Disallowance u/s 14A (as per assessment order ) Rs. 2,28,227/-
4.3.5. Income from trading in shares by taking sales at Rs. 120,60,96,443/-, closing stock at Rs. 3,10,28,404/- opening stock of Rs. 5,91,73,606/- purchases of Rs. 117,20,05,213/-. The AO is directed to allow the STT paid as deduction from the resultant income.
In the said order, the ld CITA adopted the opening balance of shares as on 1.4.2011 at Rs 5,91,73,606/- which was the same figure adopted by the ld AO also in his computation of business income on sale of shares. The revenue being aggrieved, had filed an appeal before us on the following grounds:- 1. From the facts and circumstances of the case and in law whether the Ld. CIT(A) was correct in directing to take the value of opening stock at Rs. 5,91,73,606/- instead of Rs. 4,16,12,081/-, resulting in perversity. 2. From the facts and circumstances of the case and in law whether the Ld. CIT(A) was correct in accepting entirely new grounds of arguments and adjudication summarily without giving the opportunity to the AO, clearly violating the principle of Natural Justice and Rule 46A of the I.T. Rules. 5
6 ITA No.181/Kol/2016& C.O.13/Kol/2017 Smt. Surjit Kaur Oberoi A.Yr.2012-13 3. That the above ground of appeal would be argued in detail at the time of hearing and the appellant crave leave to submit additional grounds of appeal, if any, at or before the time of hearing and/or alter, modify, reframe any grounds of appeal at or before the time of hearing.
We have heard the rival submissions. At the outset, the ld DR was not able to point out what were the evidences and documents that were filed by the assessee before the ld CITA so as to seek an opportunity for the ld AO and alleging violation of provisions of Rule 46A of the Rules. The ld CITA had actually recomputed the entire gains as business income without any bifurcation of gains into business or capital gains, by actually enhancing the income of the assessee , from the very same materials that were available on record. There was no additional evidence filed by the assessee. It is only better appreciation of the facts already available on record which warranted re- computation of income by the ld CITA. The revenue cannot be aggrieved on the same. Hence the Ground No. 2 raised by the revenue is rejected outrightly. We find that the revenue had pleaded in Ground No.1 that the opening stock of shares as on 1.4.2011 should be taken at Rs 4,16,12,081/-, for which no workings were provided by the ld DR before us. We find that this figure does not emanate either from the assessment order or from the appellate order. No workings for the same in any manner whatsoever were furnished by the ld DR before us to address the grievance of the revenue in this regard. On the contrary, we find that the ld CITA had adopted the figure of opening stock of shares as on 1.4.2011 at Rs 5,91,73,606/- which was the same figure used by the ld AO also for computing the business income in his assessment order. Hence we hold that there cannot be any grievance for the revenue in this regard. Accordingly, the Ground No. 1 raised by the revenue is dismissed.
The Ground No. 3 raised by the revenue is general in nature and does not require any specific adjudication.
7 ITA No.181/Kol/2016& C.O.13/Kol/2017 Smt. Surjit Kaur Oberoi A.Yr.2012-13 7. The Cross Objection preferred by the assessee is only supportive of the order of the ld CITA and does not require any adjudication.
In the result, the appeal of the revenue is dismissed and cross objection of the assessee is allowed.
Order pronounced in the Court on 07.03.2018
Sd/- Sd/- [A.T. Varkey] [ M.Balaganesh ] Judicial Member Accountant Member Dated : 07.03.2018 SB, Sr. PS Copy of the order forwarded to: 1. ACIT, Circle-29, Kolkata, Aayakar Bhawan, Dakshin, 2, Gariahat Road South, Kolkata-700068. 2. Smt. Surjit Kaur Oberoi, F1, 2C, Diamond Heights, 20/1, Chetla Road, Kolkata- 700027. 3. C.I.T(A)- , Kolkata 4. C.I.T.- Kolkata. 5. CIT(DR), Kolkata Benches, Kolkata.