ASHOK SUNDERLAL DAGA,NAGPUR vs. ACIT-CENTRAL-CIRCLE-1(4), NAGPUR

029 ITA Nas 268 & 269/Nag/ZOI4 & 213/Nag/Z014 IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH; NAGPUR BEFORE SHRI P. K. BANSAL, VICE PRESIDENT AND SHRI AMARJIT SINGH, JUDICIAL MEMBER ITA No268 /Naq/2014 Asstt, Yrs 2010-11 DCIT. Vs. Shri Ashok Sunderlal DagaI(Indl:); Central Circle-1(4} 5thh Temple Road, CIvil lines Nagpur. Nagpur-440001 (Appellant) (Respondent) LLA No269/Nag/2014 Asstt_Yrs .2010-11 CIT Vs. Shri Ashok Sunderlal Daga(HUF); Central Circle-1(4) sthh Temple Road; Civil lines Nagpur. (Appellant) Nagpur-440001 (Respondent) LLANo213Nag/204 Asstt_Yr_2010-l1 Shri Ashok Sunderlal Daga, sthh Temple Road, Civil lines Vs. Dc,I,T, Central Circle-1(4) Nagpur-440001 Nagpur. 631 VA N {x% ZW')NaGJ214 & 213/Nve/2014 (Appellant) (Respondent) Appellant by Shri A.R, Ninawe- Respondent by Shri K. P. Dewani 2176/2017 Date of hearing Date of pronouncement 27/06/2017 QRDER PER P KBANSAL_VP ITANos268 & 269/Nag[2014 (AY2Q1@-LL}: ReLLA? ITA Nos. 268 & 269/Nag/2014 are the appeals filed against the order of 2 IT(Appeas) dated 5.2.2014. ITA No. 213/Nag/2014 is the appeal filed by he assessee; The only issue involved in [TA Nos. 268 and 2697Nag/2014 relates to the deletion of the addition of Rs. 2,38,86,809/- in the case of individual assessee and Rs. 2,37,67,809/- in the case of HUF, 2 The brief facts of the case are that during the course of search and seizure operatians certain cash, gold and gold ornaments were found and seized, the value of the same were determined at Rs. 2,38,86,809/- in the case of assessee individual and at Rs. 2,37,67,809/- in the case of HUF. As regards these cash, gold and gold jewell llery the assessee has stated that the same has been received a5 sale consideration of Artifacts which were inherited by assessee At the time of operation of the bqnk lockers of the 63 ITA Nos: 268 & 269/Nag/2014 & 213/Nag/z0l4 assessee, he had explained that he has sold the Artifacts namely, Bikaneri Carpets, atique, wrist watches, wall clocks, metal furniture etc For a sale consideration of Rs. 1,05,00,000/- in cash thraugh broker namely Shri HAJI Hasan Wadia of Mumbai: In addition to this the assessee had also sold antique chandellers, lighta , Bikaneri Carpets and wearing apparels etc far a sale consideration of 8166 Grams of gold amounting to Rs, 1,33,24,809/- through broker namely Shri Lokendra Mehta from Jaipur during the year, The A.0_ waS not convinced with the expianation and submission made by assessee and therefore, he added a sum of Rs. 2,,37,67,809/- as undisclosed incame in the case of assessee HUF. At the same time similar addition has pELL Reen made In the case of assessee individual as a unexplained investment In and gold prnaments. Both these additions have been made on 2 bstantive basus: When the matter went before CIT(Appeals) the CIT(Appeals) has deleted the said addition additions. In HUF case the revenue has come up in appeal before uS taking ground Nos, 1, 2 and 3 and in individual assessee's case the revenue has filed the appeal taking ground Nos 1, 2 and 3, 3 We have heard the rival submissions ad carefully considered the same along with the orders of tax authorities below. We noted that the CIT(A) has deleted the addition on the basis of appreciation af documents filed before him and facts on record, It was found that the assessee during the year under consideration had sald artifacts which he had inherited through broker and 622 ITA Nos. 268 & 269/Nag/2014 & 213/N.8/2014 Sale consideration of the same has been received in the form of cash; gold and gold ornaments the value of which is determined at Rs. 2,37,67,809/- in the case of assessee HUF , 4 sum pf Rs. 105 lakhs was received in cash through broker Shri Haji Hasan Ali Wadhia f Mumbai for sale of Bikaneri Carpets, wall clocks and furniture The net consideration after the payment of brokerage was Rs. 1044320/_ A Sum Qf.Rs. 13324809/- was received through brokerShri lokendra Mehta pf Jaipur for sale of Artifacts: The A.O, did not accept the submission made by the assessee and treated the brokerage note submitted by assessee as accommodation bill as the brokerage note was not found during the course of search and seizure proceedings but the same was submitted after opening of the locker. We noted that the fact that the ssee was the owner of the Artifacts is apparent as these artifacts had Dmi duly declared in the wealth tax returns submitted by the assessee and were also appearing in the balance sheet placed on record before the A.0, wherein the assessee had included the value of precious stones, gold and artifacts as per the provision of law. Copies of the wealthtax returns for the assessment years 2004-05 and 2008-09 which were available at pages 16, 20 24,29 and 30 of the paper book and the same were filed before Us which we have perused We notice that the A,o. has conducted the enquiry through investigation wing of the department at Jaipur where the transaction of sale of artifacts by the assessee has been confirmed by son of Shri Lokrndra Mehta before Investigation Wing of the Incometax Department._ In respect to sum of 62 ITA Nos. 268 & 269/Nag/2014 & 213/Nag/2014 R5. 1,05,00,000/ the son of Shri Haji Hasan Ali Wadhia has submitted evidence of receipt of commission on sale by his late father in respect to artifacts to the Investigation Department at Mumbai which was forwarded to the AO, This evidence procured by revenue corroborates the evidence submitted by assessee. The CIT(A) has correctly appreciated the evidence and deleted the addition made in respect of cash found on the date of search. In respect to value of gold ornaments ad gold coins and bars we note that the assessee has explained the same as sale proceeds of the artifacts through broker and the evidence in respect to the same has been placed on record. The A.O. also in the assessment order at page 22 has annexed the [ firmation Issued by Shri Lokendra Mehta as regard sale of artifacts through h vherein he has also given his PAN and also the details of the trasactions by him for the assessee_ This evidence has also been verified by the AO. through investigatlon wing of the department at Jaipur. The Investigation Wing of the Department has recorded the statement of Shri Lokendra Mehta as per Annexure G of the assessment order. This statement makes it evident that Shri Lokendra Mehta has affirmed the transaction in the statement recorded on Qath. The gold received in kind has alsp been observed in the commission blll on record. These evidences, in our opinion, clearly evidenced the possession and ownership of the gotd found during the course of search For which addition has been made We also noted that the AO. has referred the statement of Shri Lokendra Mehta wherein it has been observed that he 635 ITA Nos. 268 & 269/Na2/2014 & 213/Nag/2014 has yet to receive the commission in the form of gold from assessee. Thiese observation in our view is contrary to the written submission submitted by Shri Lokendra Mehta wherein it has been observed that he has received the commission in the form of gold coins: Even otherwise this observation, in our opinion; does not prove that the assessee has not sold the artifacts for gold received by assessee_ We are of the view that the CIT(A) was fair and reasonable in accepting the explanation of the assessee: The CIT(A) while accepting the explanation of the assessee has also noted that the assessee family is an old highly reputed family of city of Nagpur having industrial business history of over 100 years, The family was in traditional coal mining ess before nationalisation. One of the peredecessor of the family was a of then Bikaner State and different titles were awarded to them such P* Raja Rai Bahadur, Sir, Diwan Bahadur and KCE, The assessee's great grand father Shri Kasturchand Daga who donated the famous Kasturchad Park to the city of Nagpur, The assessee's grand mother Lady Amritabai Daga donated the LAD college for girls. The family also donated to the Government 'Daga Hospital for free treatment to the needy- The family name is also published in whose who book published by British India. In this case we also noted from the wealthtax order of the Father of the assessee for the assessment years 1962-63 that the assessee was in possession of 2.9 kgs of gold ornaments In view of this fact we do not find any infirmity in the order of the CIT(A) while accepting the evidence submitted by assessee by way of 636 ITA Nos. 268 & 269/Nag/2014 & 213/Nag/2014 broker note filed in respect to sale of artifacts. We therefore confirm the orders of the CIT(A) deleting the addition of Rs 2,37,67,809/- in the case of assessee HUF and addition of Rs. 2,38,86,809/- in the case of individual assessee. The ground Nos, 1, 2 and 3 of the revenue's appeal are dismissed The ground NVos. 4 and 5 in the appeal filed by the revenue in assessee HUF and individual cases relates to the direction given by the CIT(A) to assess the profit realizaed on sale of shares amounting to Rs. 3,73,209/- a5 short term capital gain as declared by assessee instead of business incore and similar direction given by CIT(A) to assess the profit realised on the sale of res amounting to Rs. 41,89,794/- 25 short term capital gain as declared by In his individual capacity instead of business income, Since the issue in individual and HUF cases of assessee is common except change in figure, therefore both the parties agreed that this issue be decided on the basis of the facts involved in the case of HUF and whatever view may be taken in the case of HUF, the same view may be taken in the case of individual assessee: In the case of HUF we noticed that the assessee during the year under consideration received net surplus On the sale of shares amountinig to Rs 3,73,209/- declared in Its return of income as short term capital gain; The Ao. treated the same as business income of the assessee HUF, In reply to the show cause notice the assessee submitted before the A,O. that the assessee family invested capital In shares as an investment in shares: The investment in shares are made in public limited companies duly 6a7 ITA Nos-268 & 269/Nag/ZO14 & 213/MaB/2014 listed in recognised stock exchanges of India, The investments are made through recognised and registered share brokers and STT has been duly charged by them_ The purchases ad sales are through account payee cheques. The investments in shares are duly appearing in De-mat account of the assessee and investments are appearing in the Balance sheet a5 investment and shown at cost. The- assessee during the period under consideration has earned dividend income from these investments. On this basis it was submitted that the facts and circumstances clearly show that the assessee is an investor in shares &d by no stretch of imaginatian it can be said that the assessee E5 engaged in the business of trading in shares and carrying on business activity in shares. Regarding the period of holding of Ires it was submitted that the principle of investments is safely and eciation in value of the investment as there is Increasing volatility in the are market due to globalization and various market uncertainties which has affected the length of holding period in the cases of investors also. There i5 no minimum period prescribed for short term capital gain. It was further submitted that the ITAT, Nagpur Bench in the case of Shri Ashok Sunderlal Daga for the assessmqent year 2006-07 has held that the surplus arising 0n the sale of shares is liable to be taxed &s short term capital gain. The A.O. did not agree with the assessee and when the matter went before the CIT(A) the CIT(A) treated the profit earned by assessee on the shale of shares as short term capital gain, 633 'TA Nps, 268 269/Nag/2o14 & 213/Nag/2014 5 We have heard rival submission and considered the same along with orders of lower tax authorities. We noted that under similar facts and circumstances in the case of assessee in ITA No_ 210/Nag/2009 vide order dated 29/7/2014 the ITAT, Nagpur Bench, Nagpur has taken the view that the profits earned by assessee on the Sale of shares is liable to be assessed as short term capital gain by observing as under: 8_ We have carefully considcrcd the rival submIssions. In lhis case; the assessee is an individual and it is revealed from the computation of income that he is deriving incomne from business conducted through proprietary concerns and share income from a partnership concern Apart thercfrom, the assessce also has rental income (rom house property and interest income from Bonds, etc In the immediately preceding assessment year 2005-06 alsu, we findl that the assessee has similar streams of income and also salary incomie from M/s. Daga Fuels & Binders F Lttl, Nagpur; During the ycar undcr considcralion, thc assessce sold some shares On which he earned long-term capital gains aS also short-term capital gains Thve long- termn cpital of Rs 11,78,779/- declared by Lhe asscssee has bcen accepted as such hy the Assessing Officer; whcreas the incume from short-terin capital gains on salc uf shares has bcen assessed as btusiness income According to the Assessing Officer; thc transaction of the sale of shares resulting In short-term capital gains Was in thc nature of trading activity and, thus liable to be assessed as business income 9 Notably, it is evident from thc fact-situation of the case that lhe primary business 0f the asscssee is 0f dealings in coal carried out through its proprietary concerns, Further mure, in thc immedialely prcceding assessment year 2005-06, which has ulso bcch taken nlote of by the Commissioner nf Incume-tax (Appeals), Lhe assessee had earned income on sale of shares which has been declared under the head 'capital gains' There is no disturbance to such claim of the assessee; In fact, during the year under assessment also in So far as the sale of shares resulting in long- term capital gain is coucerned, the Assessing Officcr has accepted the vcrsion Df the assessee and has treatctl sucil transaction as sale of investments. lt is only On account nfthc sale of shares resulting in short- term capital gain; the same has been considered by the Assessing Officer as sale of stock-in-tradle; thus treating lhe asscssee a5 a trader in sharcs. Considcring all the aforesaid factors, at the threshold, in our view, the onus is on the Revenule to establish thal the transactiuns resulling in short-term 639 ITA Nos. 268 & 269/NaB/2O4 & Z13/Nag/20l4 capilal gain were carried 0H by the assessee a5 a trader and not a5 am1 investor Wc say S0} Eor tlie rcasoi that other than the selected transactions; namely, short-Latn capital gain; nther similarly placedl ransactions carriedl out by lhe &ssessee during the year a5 well as in the earlier year have leen accepted hy the Assessing Officer as salc of invesiments, In So tar :S Lle dischargc of 0n1s is concerned. Jn cur view, the Assessing Officer has no1 tlischarged such DIlS DII the basis uf any cogent material. In this case; tle assessce has nnt used any borrowed fund to make thc invcstments. In facl; thc assessec has explained that only its surplus funds have heen utilized for making investments in shares as also in mutual (und, honds, etc. which have yielded income_ The assessee has also explained the frequency (f transactions it is claimed that purchascs have been macle it1 Sualler kts; whercas sales havc becn made 0n minimal tincs; Ostensibly, the assessee has been buying sharcs in smaller lots as and when considered appropriate for investinenl Evidently, considering the past history and also ihc fact that there is no establishment for trading in shares; thc assessee has becn} rightly regarded as an investor per se by the Commissioncr of Income-tax (Appcals} At this paint; we may also observe that in s0 far as certain rauisalctitns shown by the assessee Ot} day trading is concerncd; the same have becn directed to be assessed as business income by thc Commissioner (f Income-tax (Appeals} On certain occasions, the assessee has bought and sold shares 0n the same day which, according to) the Commissioner of Income-tax {Appeals} showed speculative activity which was assessahle 15 busincss incomes This aspect has not heen challenged by the assessce bcforc Us: We are only observing the same to point out that the Cummissioner of Income-tax (Appeals) has approprialely appreciated the eMllire factual position tq come t tle conclusion that the {ransactions in questi0n has bccn rightly claimed by the assessec as short-lerm capital gains and not as business incoma a5 treated by llic Assessing Otlicer. In the absence of any cogent malerial 0r reasoling t0 thc contrary, we hereby affirm the conclusions drawn by thc Commissioner O Income-tax (Appeals) As a rcsult thereof; thie order of tlic Commissioner f Incomne-tax (Appeals} is hereby confirmed:" Similar view has been taken by this Tribunal in ITA Nos. 188 & 189/Nag/2o14 in the assessee's own case for the assessment year 2007-08 and 2008-09 vide order dated 31/08/2016 under the similar facts and circunstances; We therefore respectfully following decisions of this Tribunal in the assessee's 4 632 ITA Nos. 268 & 269/Nag/2014 & 213/Napg/2014 own case for earlier vears dismiss the ground Nos. 4 and 5 taken by the revenue in the case of assessee HUF and individual case of assessee 63 Thus both the appeals of the revenue are dismissed ITA No_213/Nag/2014AY2010-11 7 This appeal has been filed by asessee against the order of CIT(A) dated 5/2/2014 The only issue involved in ground Nos: 1 and 2 taken by assessee relates to the addition Qf Rs.5,07,500/- in respect to gold jewellery and addition of Rs. 8,70,000/- in respect of silver confirmed by CIT(A): The brief facts relating to these grounds are that Appel the search and seizure preoceedings jewell Ilery amounting to Rs, 690/- and silver bars worth of Rs 8,70,000/- found from the residence of the assessee. Besides, jewellery worth of Rs. 12.24,915/- was also found from the assessee's locker with Dena Bank, Nagpur. The A,O_ held that the assessee cauld not discharge the onus of explaining the sarne and since these were jewellery items and were not declared in the wealthtax returns of the assessee and his family members, the A.O. treated the same as undisclosed income of the assessee The assessee went in appeal before the CIT(A() and submitted before the CIT(A) the total jewellery which was found during the course of search were to be explained at Rs. 26,13,565/-. During the course af assessment proceedings reconciled some jewellery items with the 631 ITA Nos Z68 & 763/Nap/2O14 & 213/N3p/ZO14 wealthtax returnIvaluation report: The items could not be reconciled are as under: 1 Jewellery item Rs. 10,15,860/- 2. Silver weighing 30 kg Rs. 8,70,000/- Total Rs, 18,85,860/- The assessee filed reconciled statement as per wealthtax returns 35 weli as details of the recan ciled jewellery and contended that the jewellery worth of Rs, 18.85 lakhs are the ancestral valuables and submitted the history of the assessee's famlly and also submitted that after the dealth of the assessee's father the jewellery; ornaments and ther valuables were not included in the ealthtax returns of the legal heirs for the simple reason that his tentative ities after the nationalisation of the cqal mines worked out by the ernment was more than the assets. The assessee also enclosed the copies of the wealthtax returns for the assessment year 1987-88 for hlmself and his late mother which contains a note that Is a5 under: "The assessee is a legal heir of late Shri Sunderlal Daga and since his liabilities exceeds his assets no portion of his wealth is included therein; The assessee also enclosed copies of computation of wealth of assessee as well as of his mother late Smt: Umadevi Daga. It was further contended before the CIT(A) that the jewellerylornaments and other valuables of late Shri Sunderlal Daga was in possession of his late mother Smt: Umadevi Daga. 533 n Nos.268 & 269/Nag/20l4 & 213/Nag/2014 The said jewellery came into possession of the assessee after the death of his mother in February, 2008. Most Of the above valuables were kept by the assessee'S mother In her lockers with Bank of India which were inherited by her From her Iate husband. The assessee and his family members were not aware of the lockers and its contents, The assessee came to know only after the death of his mother in discussion with his sisters, The lockers were opened and the contents of the lockers are in possession of assessee and not distributed amongst the legal heirs of his two sisters_ The assessee was not aware as to how much he will get on distribution and this is the reason the same were not included in his as well as his other family members in their wealthtax returns filed for the assessment vear 2009-10_ The assessee also osed 3 copy of declaration executed between him and his sisters dt; 6/ 2o08. Thus; it was contended before the CIT(A) that the source of lery and other valuables has been explained. The CIT(A} did not agree with the contention of the assessee but looking to the family history he treated 50% of the total jewellery of Rs 10,15,00/- i.e at Rs. 5,07,500/- to be ancestral jewellery and treated it as explained. The CIT(A) confirmed the balance addition of Rs, 5,07,500/- on account of jewellery: In So far as the addition with regard to the silver bars of 30 kgs found and seized amounting to Rs. 8,70,000/- is concerned, the CIT(A) held that the same have not been declared by assessee in wealth tax return: The CIT(A) confirmed the said addition to the extent of Rs. 8,70,000/-_ 632 ITA Nos. 268 & 269/Nagf2ol4 & 213/NaE/20l4 9 Before uS; the learned counsel for the assessee reiterated the subrission made before the CITAA) and has also given details of famity history by stating that Daga family Is an old highly reputed family of the city of Nagpur having industrial business history of over 100 vears, He has submitted certain photographs af family members ad articles possessed at pages 19 to 32 of the paper book: It was contended that jewellery and silver belonged to father of assessee Shri Sunderlai Daga. The weath tax assessment order of Shri Sunderlal Daga for the assessment vear 1962-63 are filed at pages 15 to 18 of the paper book which shows that Iate Shri Sunderlal Daga was possessing 2.5 kg of gold ornanents. It was submitted that the Filver was not included as the same was not chargeable to wealthtax upto issment year 1970-71. After the death of father of assessee the jewell lery silver were in possession 0f mother of assessee Smt; Umadevi Daga and after death of mother of assessee in February, 2008 the same Were in possession of assessee: The jewellery and silver of the mother of assessee were to be distributed amongst the assessee and his two sisters being legal heirs,_ The copy of the declaration with regard to the distribution of assets belonging to Smt: Umadevi was submitted on record before US and the same is placed at pages 39 to 47 of the paper book. Since the jewellery was not distributed therefore, the same was not included in the wealthtax return: It was further submitted that the CIT(A) hlmself accepted that 50% of the gold jewellery to be ancestral jewellery and deteted the addition of Rs.5,07,500/ 63h ITA Ncs. 268 & 269/Nag/z014 & 213/Nag/2014 10_ The learned Departmental Representative o the other hand relled on the orders of tax authorities below.