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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
Before: SHRI R.C.SHARMA, AM & SHRI AMARJIT SINGH, JM
Assessee by: Shri Chetan A. Karia Department by: Smt. Pooja Swaroop सुनवाई क" तार"ख / Date of Hearing: 22.04.2016 घोषणा क" तार"ख /Date of Pronouncement: 13.07.2016 आदेश / O R D E R PER AMARJIT SINGH, JM:
This is an appeal against the order dated 07.10.2013 passed by the Commissioner of Income Tax (Appeals) 4, Mumbai [hereinafter referred to as the CIT(A)”] relevant to the A.Y.2010-11. 2. The assessee has raised the following grounds:-
A.Y. 2010-11 “1. The learned Commissioner of Income Tax (Appeals) erred in upholding the action of the learned Assessing Officer in treating capital gain on transactions in shares amounting to Rs,1,76,66,937/- as business income.
2. The learned Commissioner of Income Tax (Appeals) failed to appreciate that on same facts in the earlier previous year, the transaction were treated as investment.
3. The learned Commissioner of Income Tax (Appeal) failed to appreciate that disallowance u/s.14A was not called for if the holding of shares was held to be stock in trade.
4. The appellant prays that: (i) It may be held that gains on transaction in shares is assessable as capital gains; (ii) Disallowance u/s.14A may be deleted; (iii) Personal hearing may be granted, (iv) Any other relief your honours may deem fit.”
The brief facts of the case are that the assessee filed his return of income on 14.10.2010 declaring total income to the tune of Rs.1,22,44,600/-. The return was processed u/s.143(1) of the Income Tax Act, 1961 (in short “the Act”). The case was selected for scrutiny, therefore notice u/s.143(2) of the Act dated 02.09.2011 was issued and served upon the assessee. Notices u/s.143(2) and 142(1) of the Act were also issued which were served upon the assessee. The assessee has disclosed the Short Term Capital Gain of Rs.1,76,66,937/- but the Assessing Officer was of the view that the assessee was doing the business of share trading, therefore the said income was treated as business income and accordingly taxed.
2 A.Y. 2010-11 Thereafter, the Assessing Officer also applied the section 14A r.w. Rule 8D of the Act in connection with the expenditure to earn the exempt income to the tune of Rs.3,10,002/-. Since the assessee was not satisfied, therefore, filed an appeal before the CIT(A) who confirmed the order of the Assessing Officer on the above said issues, therefore, the assessee has filed the present appeal before us.
ISSUE NO.1:-
The issue no.1 is not pressed by the assessee, therefore, this issue is decided in favour of the revenue against the assessee being not pressed.
ISSUE NO.2 & 3:-
The issue no.2 & 3 are interconnected therefore, these issues are being taken up together for adjudication. Under these issues the main contention of the assessee is that the income to the tune of Rs.1,76,66,937/- is the income from Short Term Capital Gain and accordingly liable to be taxed. It is argued that the revenue has treated the income of the assessee as Short Term Capital Gain and Long Term Capital Gain for the A.Y.2008-09 and 2009-10 but changed the view for the present assessment year without any change of circumstances therefore the order of CIT(A) in question is wrong against law and facts. It is also argued that the assessee was dealing in the different activities and in trading investment and the assessee can maintain the 3 A.Y. 2010-11 two accounts one for the business purpose and the other for the investment purpose but the Assessing Officer as well as CIT(A) diverted their views from the earlier assessment years without any justifiable ground, therefore, the order in question is wrong against law and facts and is liable to be set aside. In support of these contentions the representative of the assessee has placed reliance upon the law settled in CIT Vs. Avinash Jain (2012) (Delhi High Court) and Commissioner of Income Tax (Central), Calcutta Vs. Associated Industrial Development Co. (P.) Ltd. [1971] 82 ITR 586 and CIT Vs. Consolidated Finvest & Holding Ltd. (2012) 337 ITR 264 (Delhi).
5. On the other hand the learned representative of the department has strongly relied upon the order passed by the CIT(A). Copy of order for A.Y.2008-09 lies at page nos.75 to 77 and copy for A.Y.2009-10 lies at page nos. 65 to 74 speaks about these facts that the assessee’s income on the shares has been treated as Short Term Capital Gain / Long Term Capital Gain and accordingly, the tax has been assessed. It is required to be ascertain whether the activity of the assessee is the business activity or investment activity. The order of the Assessing Officer speaks that the available capital was to the tune of Rs.18 crores with the assessee and the assessee invested an amount of Rs.5.48 crores. The assessee invested his own funds in shares. The Assessing Officer declined the contention of the assessee on the ground of this fact that the assessee rotated his funds available with 4 A.Y. 2010-11 him for several times in the sale purchase of shares and the assessee did not prove all transactions. Rotating the income in the shares does not itself a criteria to treat the income from the shares as business shares. The activity should be entirely be different to arrive at this conclusion that the assessee is doing the trading of shares and accordingly income from shares are liable to be treated as business income. The facts and circumstances for the A.Y.2008-09 and 2009- 10 is required to be differentiate with the current assessment year to arrive at this conclusion that the income of the assessee is from the share trading. The holding period of the shares of the assessee is less than 12 months in connection with the 98% shares. No reasons have been mentioned on record to differentiate the circumstances of the assessment year of 2008-09 and 2009-10 with the relevant assessment year. The investment made by the assessee is from his own fund. No doubt trading can be done with his own fund but the trading should be proved on record beyond the shadow of reasonable doubt. Changing circumstances from the previous year is not on record. Moreover, the contention of the assessee is that he is maintaining the separate trading account and the investment account. If it is on the parameter of the assessee to maintain the account then no doubt the assessee can maintain both the accounts and in this regard we are found support of law relied in CIT Vs. Avinash Jain (2012) (Delhi High Court) and Commissioner of Income Tax (Central), Calcutta Vs. Associated Industrial Development Co. (P.) Ltd. [1971] 82 ITR 586 and CIT Vs. 5 A.Y. 2010-11 Consolidated Finvest & Holding Ltd. (2012) 337 ITR 264 (Delhi). In view of the discussion made above we are of the view that the order passed by the CIT(A) is wrong against law and facts and is not liable to be sustainable in the eyes of law therefore the order under challenged on this point is hereby order to be set aside. This issue is hereby restored to the file of Assessing Officer to compute the income of the assessee by deleting amount to the tune of Rs.1,76,66,937/- as Short Term Capital Gain.
ISSUE NO.4:-
The issue no.4 is not pressed by the assessee, therefore, this issue is decided in favour of the revenue against the assessee being not pressed.
In the result, the appeal filed by the assessee is hereby partly allowed.
Order pronounced in the open court on 13th July, 2016. (R.C.SHARMA) (AMARJIT SINGH) लेखा सद"य / ACCOUNTANT MEMBER "या"यक सद"य/JUDICIAL MEMBER मुंबई Mumbai; "दनांक Dated : 13th July, 2016 MP MP MP MP