RAJAN M. SHAH, MUMBAI v. ACIT, MUMBAI

CO 233/MUM/2009 | 2005-2006
Pronouncement Date: 21-05-2010 | Result: Partly Allowed

Appeal Details

RSA Number 23319923 RSA 2009
Assessee PAN AKJPS7525D
Bench Mumbai
Appeal Number CO 233/MUM/2009
Duration Of Justice 5 month(s) 6 day(s)
Appellant RAJAN M. SHAH, MUMBAI
Respondent ACIT, MUMBAI
Appeal Type Cross Objection
Pronouncement Date 21-05-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted Not Allotted
Tribunal Order Date 21-05-2010
Assessment Year 2005-2006
Appeal Filed On 15-12-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH MUMBAI BEFORE SHRI N.V. VASUDEVAN JM & SHRI R.K. PANDA A M BEFORE SHRI N.V. VASUDEVAN JM & SHRI R.K. PANDA A M BEFORE SHRI N.V. VASUDEVAN JM & SHRI R.K. PANDA A M BEFORE SHRI N.V. VASUDEVAN JM & SHRI R.K. PANDA A M I.T.A. NO. 25/MUM/2009 (ASSESSMENT YEAR 2005-06) ACIT 25(3) C-11 R. NO. 308 PRATYAKSHA- KAR BHAVAN BANDRA-KURLA COMPLEX BANDRA (EAST) MUMBAI-400 051 VS. VS. VS. VS. SHRI RAJAN M. SHAH 4 HEM NIWAS CHAWL KILACHAND ROAD OPP. SHANKAR LANE KANDIVALI (W) MUMBAI-400 067 PAN: AKJPS7525D APPELLANT APPELLANT APPELLANT APPELLANT RESPONDENT RESPONDENT RESPONDENT RESPONDENT C.O. NO. 233/MUM/2009 ARISING OUT OF I.T.A. NO. 25/MUM/2009 (ASSESSMENT YEAR 2005-06) SHRI RAJAN M. SHAH 4 HEM NIWAS CHAWL KILACHAND ROAD OPP. SHANKAR LANE KANDIVALI (W) MUMBAI-400 067 PAN: AKJPS7525D VS. VS. VS. VS. ACIT 25(3) C-11 R. NO. 308 PRATYAKSHA- KAR BHAVAN BANDRA-KURLA COMPLEX BANDRA (EAST) MUMBAI-400 051 CROSS OBJECTOR CROSS OBJECTOR CROSS OBJECTOR CROSS OBJECTOR APPELLANT IN APPEAL APPELLANT IN APPEAL APPELLANT IN APPEAL APPELLANT IN APPEAL REVENUE BY: SHRI ANURAG SRIVASTAVA ASSESSEE BY: SHRI KETAN L. VAJANI O R D E R O R D E R O R D E R O R D E R DATE OF HEARING: 11.05.2010 DATE OF ORDER: 21.05.2010 2010 PER R.K. PANDA AM: PER R.K. PANDA AM: PER R.K. PANDA AM: PER R.K. PANDA AM: THE APPEAL FILED BY THE REVENUE AND THE CROSS OBJE CTION (CO) FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDE R DATED 23 RD OCTOBER 2008 OF THE CIT(A)-XXV MUMBAI RELATING TO ASSESSME NT YEAR 2005-06. FOR THE SAKE OF CONVENIENCE THESE WERE HEARD TOGETH ER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. I.T.A. NO. 25/MUM/2009: 2. THE ONLY EFFECTIVE GROUND RAISED BY THE REVENUE REA DS AS UNDER: I.T.A. NO. 25 & CO NO. 233/MUM/2009 SHRI RAJAN M. SHAH ============================== 2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN DIRECTING THE AO TO TR EAT THE INCOME FROM PURCHASE AND SALE OF SHARES AS SHORT TE RM CAPITAL GAIN AS AGAINST THE INCOME FROM BUSINESS AN D PROFESSION TREATED BY THE AO WITHOUT APPRECIATING T HE FACTS THAT THE APPELLANT IS DEALING IN LARGE VOLUME OF SHARES AND MOST OF THE SHARES ARE BOUGHT AND SOLD I N A SHORT PERIOD OF TIME THUS INDICATING THAT THE MAIN INTENTION WAS NOT TO HOLD THE SHARES AS INVESTMENT BUT RATHER THE PRIMARY AND MAIN INTENT WAS TO BOOK PROFITS. 2.1 FACTS OF THE CASE IN BRIEF ARE THAT IN THE RETURN OF INCOME THE ASSESSEE HAS DECLARED INCOME FROM BUSINESS AND PROF ESSION FROM PROPRIETARY CONCERN M/S. R.M. INVESTMENTS AT RS.1 3 3 48 057 AND INCOME FROM SHORT TERM CAPITAL GAINS AT RS.49 84 32 5. THE ASSESSEE HAS ALSO CLAIMED EXEMPTION OF DIVIDEND AT RS.1 31 1 01. 2.2 THE ASSESSING OFFICER NOTED THAT THE ASSESSEE IS AN INDIVIDUAL AND THE ASSESSEE IS REGULARLY TRADING IN SHARES AND DERIVATIVES AND F&O. THE ASSESSEE HAS SUBMITTED THE AUDIT REPORT O F M/S. R.M. INVESTMENTS IN FORM 3CB ALONG WITH THE RETURN OF IN COME WHEREIN THE NATURE OF BUSINESS OR PROFESSION IS STATED AS INVE STMENT BUYING AND SELLING OF SHARES AND SECURITIES. THE ASSESSEE IS MAINTAINING REGULAR BOOKS OF ACCOUNT FOR THIS PURPOSE WHICH HAVE BEEN A UDITED. THE ASSESSING OFFICER FURTHER NOTED FROM THE DETAILS OF SHARE TRANSACTIONS FOR THE YEAR UNDER CONSIDERATION THAT THE ASSESSEE IS FREQUENTLY BUYING AND SELLING SHARES. THIS TREND OF FREQUENTLY BUYIN G AND SELLING OF SHARES WAS ALSO SEEN IN THE RETURN OF INCOME OF THE EARLIER YEAR. FROM THE PROFIT AND LOSS A/C. OF THE ASSESSEE HE NOTED T HAT THERE IS NO OPENING STOCK AND CLOSING STOCK OF SHARES. THIS AC CORDING TO THE ASSESSING OFFICER MEANS THAT ALL THE SHARES PURCHAS ED DURING THE YEAR ARE SOLD DURING THE YEAR AND NONE OF THE SHARES PUR CHASED DURING THE YEAR WAS REMAINING IN THE STOCK OF THE ASSESSEE. S AME IS THE CASE WITH THE SHARES ON WHICH THE INCOME IS SHOWN AS CAP ITAL GAINS. IN REALITY ALL THE SHARES STATED TO BE STOCK IN TRADE AS WELL AS THE SHARES STATED TO BE INVESTMENT ARE BOTH PURCHASED AND SOLD IN THE SAME YEAR. THERE IS NO DIFFERENCE IN THE MANNER IN WHICH THESE TRANSACTIONS ARE CARRIED OUT OTHER THAN PRESENTATION IN THE BOOKS OF ACCOUNT AND I.T.A. NO. 25 & CO NO. 233/MUM/2009 SHRI RAJAN M. SHAH ============================== 3 THEREFORE THE INTENTION OF THE ASSESSEE EVEN WITH REGARD TO SCRIPS SHOWN AS CAPITAL ASSETS IS NOT HOLDING THEM AS AN I NVESTMENT BUT EARNING PROFITS BY SELLING THEM. 2.3 THE ASSESSING OFFICER ALSO NOTED THAT AS PER THE ST ATEMENT OF SHORT TERM CAPITAL GAINS AFTER 1.10.2004 FILED ALON G WITH THE RETURN OF INCOME THE ASSESSEE HAS TRANSACTED IN SHARES AS UND ER: NO. OF SHARES BOUGHT AND SOLD 72 805 PURCHASE AMOUNT 31 59 701 SALES AMOUNT 81 44 026 NO. OF SCRIPS 152 2.4 THE ASSESSING OFFICER OBSERVED FROM THE DETAILS FIL ED BY THE ASSESSEE THAT THE FREQUENCY OF TRANSACTIONS CARRIED OUT BY THE ASSESSEE IS VERY HIGH WITH LARGE VOLUME OF SHARES I NVOLVED. THE ASSESSING OFFICER ALSO OBSERVED FROM THE AUDIT REPO RT THAT THE ASSESSEE HAS BORROWED MONEY FROM B HAVANA SHAH M.C. SHAH R .M. SHAH (HUF) AND S.M. SHAH WHICH WAS UTILISED FOR THE BUSI NESS. THE ASSESSEE HAS MAINTAINED FULL OFFICE INFRASTRUCTURE FOR THE PURPOSE OF BUSINESS OF SHARE TRADING AND HAS DEBITED RS.80 14 614 IN THE PROFIT AND LOSS A/C. UNDER VARIOUS HEADS. THUS FROM THE A BOVE FACTS THE ASSESSING OFFICER WAS OF THE OPINION THAT IN MOST O F THE CASES THE SHARES WERE HELD FOR A SHORT PERIOD AND WERE SOLD O FF TO BOOK PROFITS THUS INDICATING THAT THE MAIN INTENTION OF THE ASSE SSEE WAS NOT TO HOLD THE SHARES AS INVESTMENT BUT RATHER THE PRIMARY AND MAIN INTENT WAS TO BOOK PROFITS. 2.5 THE ASSESSING OFFICER HELD THAT IT IS WELL ESTABLIS HED THAT MERE ENTRIES IN THE BOOKS OF ACCOUNT SHOWING SHARES AS INVESTMENT IS NOT DETERMINATIVE FACTOR TO DECIDE REAL NATURE OF TRANS ACTION. HE HELD THAT ENTRIES IN THE BOOKS OF ACCOUNT ALONE ARE NOT CONCL USIVE PROOF TO DECIDE THE NATURE OF INCOME. 2.6 FOR THIS PROPOSITION THE ASSESSING OFFICER RELIED ON A COUPLE OF DECISIONS. THE ASSESSING OFFICER FURTHER NOTED THA T THE ASSESSEE IS VERY WELL ENGAGED IN THE BUSINESS OF SHARE TRADING. HE IS NOT DOING ANY I.T.A. NO. 25 & CO NO. 233/MUM/2009 SHRI RAJAN M. SHAH ============================== 4 OTHER ACTIVITY TO EARN INCOME OTHER THAN PURCHASE A ND SALE OF SHARES. EVEN IN THE PROPRIETARY CONCERN THE NATURE OF BUSI NESS IS THE SAME. HE OBSERVED THAT THE INCOME OF THE ASSESSEE CANNOT BE TREATED AS SHORT TERM CAPITAL GAIN AND BUSINESS INCOME WHEN AL L THE SHARES WERE SOLD WITHIN TWO DAYS. REFERRING TO THE CBDT CIRCUL AR NO. 4/2007 DATED 15 TH JUNE 2007 AND A NUMBER OF DECISIONS HE CAME TO T HE CONCLUSION THAT THE ASSESSEE HAS WRONGLY CLASSIFIED HIS INCOME UNDER TWO HEADS I.E. BUSINESS INCOME AND CAPITAL GAINS. HE AC CORDINGLY TREATED THE ENTIRE INCOME ARISING OUT OF PURCHASE AND SALE OF A LL SHARES AS BUSINESS INCOME. 2.7 BEFORE CIT(A) IT WAS SUBMITTED THAT THE BUSINESS OF THE ASSESSEE IS DEALING IN BONDS AND HE IS DOING THE AB OVE BUSINESS SINCE MANY YEARS. HE NEVER DEALT WITH SHARES EARLIER. THIS IS THE FIRST YEAR IN WHICH HE INVESTED HIS HARD EARNED MONEY IN SHARES. THE ASSESSEE FILED THAT HE HAD ONLY 152 TRANSACTIONS IN SHARES. HENCE THE VERSION OF THE ASSESSING OFFICER THAT THE ASSESSEE DEALT WITH SHARES REGULARLY IS WRONG. THE ASSESSEE ALSO FILED THAT HE HAS NOT TAK EN ANY LOAN FOR INVESTMENT IN SHARES. HE FILED THE BALANCE SHEET F OR THE YEAR UNDER CONSIDERATION AS WELL AS OF THE PRECEDING YEAR TO S HOW THAT UNSECURED LOANS AS ON 31.3.2004 WERE OF RS.11 30 000 AND THE SAME LOAN CONTINUED AS ON 31.03.2005. IT WAS ARGUED THAT AS NO SHARES WERE PURCHASED AND SOLD IN EARLIER YEARS IT PROVED THAT NO BORROWED FUNDS ARE UTILISED IN INVESTMENT IN SHARES. THE ASSESSEE FURTHER FILED DETAILS OF PURCHASE AND SALE OF SHARES FOR LAST TWO YEARS A ND SUBSEQUENT TWO YEARS WHICH ARE AS UNDER: ASSESSMENT YEAR PURCHASES AMOUNT SALES AMOUNT PROFIT ON SALE OF SHARES 2003-04 NIL NIL NIL 2004-05 NIL NIL NIL 2005-06 3159701 8144026 SHORT TERM CAPITAL GAIN 4984325.00 2006-07 SHORT TERM 9 31 779.19 25 52 777.19 16 20 998.00 LONG TERM 4 57 359.24 20 39 989.03 15 82 629.79 32 03 627.79 2007-08 SHORT TERM 43 247.30 45 597.12 2 349.82 I.T.A. NO. 25 & CO NO. 233/MUM/2009 SHRI RAJAN M. SHAH ============================== 5 2.8 IT WAS POINTED OUT THAT THE ASSESSEE WAS NOT DEAL ING IN SHARES IN LAST TWO YEARS. HENCE FINDING OF AO IN THE ASS ESSMENT ORDER THAT THE ASSESSEE IS DEALING IN SHARES FOR EARLIER YEARS IS BAD. IT WAS SUBMITTED THAT THE ASSESSEE DEALT IN SHARES IN ONE MORE YEAR AND THEN DISCONTINUED. THE ASSESSEE IS DOING HIS BUSINESS O F BONDS AND IS EARNING SUBSTANTIAL PROFIT OUT OF IT. 2.9 BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE AND VARIOUS DECISIONS CITED BEFORE HIM THE CIT(A) DIRECTED THE ASSESSING OFFICER TO TREAT THE INCOME FROM PURCHASE AND SALE OF SHARES AS SHORT TERM CAPITAL GAIN. WHILE DOING SO HE HELD THAT THE VARI OUS DETAILS FILED BY THE ASSESSEE SHOW THAT THE ASSESSEE IS NOT A TRADER IN SHARES BUT IS A GENUINE INVESTOR. HE INVESTED IN SHARES AND BOOKED SOME GAINS FROM INVESTMENT IN THE YEAR UNDER CONSIDERATION AND TOOK THE BALANCE TO THE NEXT YEAR. HE MADE INVESTMENT IN SHARES IN NEXT YE AR ALSO AND THEN DISCONTINUED INVESTMENT IN SHARES. HE FURTHER HELD THAT THE ASSESSING OFFICER IN A HURRY TO TAX THE INCOME OF THE ASSESSE E AS BUSINESS INCOME PASTED THE LANGUAGE USED IN THE ASSESSMENT ORDER OF SOME OTHER ASSESSEES WITHOUT LOOKING INTO THE FACT THAT THOSE FACTS DO NOT APPLY TO THE CASE OF THE ASSESSEE. FURTHER HE GAVE A FINDIN G THAT SHARE DEALING DOES NOT HAVE REGULARITY CONTINUITY AND HIGH VOLUM E IN THE CASE OF THE ASSESSEE WHOSE BUSINESS ACTIVITY IS BOND DISCOUNTIN G. 2.10 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVENU E IS IN APPEAL BEFORE US. 2.11 THE LEARNED DR STRONGLY RELIED ON THE ORDER OF THE ASSESSING OFFICER. 2.12 THE LEARNED COUNSEL FOR THE ASSESSEE ON THE OTHER HAND WHILE RELYING ON THE ORDER OF THE CIT(A) ALSO RELIED ON T HE VARIOUS DECISIONS INCLUDING THE DECISION OF THE TRIBUNAL IN THE CASE OF GOPAL PUROHIT VS. JCIT REPORTED IN 29 SOT 117 WHICH HAS BEEN AFFIRMED BY THE JURISDICTIONAL HIGH COURT. HE ALSO FILED A DETAILE D NOTE DISTINGUISHING THE VARIOUS DECISIONS RELIED ON BY THE ASSESSING OF FICER. I.T.A. NO. 25 & CO NO. 233/MUM/2009 SHRI RAJAN M. SHAH ============================== 6 2.13 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE BY BO TH THE SIDES PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. 2.14 BEFORE PROCEEDING FURTHER WE FIND THE CIT(A) AT PAR A 3.9 OF HER ORDER GAVE THE FOLLOWING FACTUAL FINDINGS: (1) A.Y. 2005-06 IS THE FIRST YEAR IN WHICH APPELL ANT DEALT IN SHARES. (2) APPELLANT DEALT IN SHARES ONLY FOR TWO YEARS I .E. PERIOD RELEVANT TO A.Y. 2005-06 AND 2006-07 AND THEN DISCONTINUED. (3) APPELLANT HAD ONLY 152 TRANSACTIONS OF SHARES DURING THE YEAR. HIS TOTAL PURCHASE OF SHARES DURING THE WHOLE YEAR IS OF RS.31.59 LACS AND SALES OF RS.81.44 LACS. (4) HE HAS NOT BORROWED ANY LOAN IN THIS YEAR. HEN CE INVESTMENT IN SHARES IS OUT OF HIS OWN CAPITAL. (5) HE IS DOING BONDS DISCOUNTING BUSINESS SINCE SEVERAL YEARS. HIS PROFIT FROM BONDS DISCOUNTING I S AS UNDER: A.Y. 2003-04 - RS.2.98 LACS A.Y. 2004-05 - RS.8.26 LACS A.Y. 2005-06 - RS.133.48 LACS A.Y. 2006-07 - RS.137.28 LACS A.Y. 2006-08 - RS.122.32 LACS 2.15 WE FURTHER FIND THE CIT(A) HAS MENTIONED THAT THE ASSESSING OFFICER IN A HURRY TO TAX INCOME OF THE ASSESSEE AS BUSINESS INCOME PASTED THE LANGUAGE USED IN THE ASSESSMENT ORDER OF ANOTHER ASSESSEE WITHOUT LOOKING INTO THE FACT THAT THESE F ACTS DO NOT APPLY TO THE CASE OF THE ASSESSEE. HE HAS GIVEN A FINDING T HAT WRONG FACTS HAVE BEEN DISCUSSED BY THE ASSESSING OFFICER THE DETAIL S OF WHICH ARE AS UNDER: (1) A.O. MENTIONED THAT THE APPELLANT IS REGULARLY TRADING IN SHARES AND DERIVATIVES AND F&O (PAGE 2 OF ASSESSMENT ORDER). TRUTH IS THAT THE APPELLANT DID NOT DEAL IN DERIVATIVES AND F&O AND HE IS ALSO NOT DEALING REGULARLY IN SHARES. I.T.A. NO. 25 & CO NO. 233/MUM/2009 SHRI RAJAN M. SHAH ============================== 7 (2) AO MENTIONED IN THE ASSESSMENT ORDER THAT TREND OF BUYING AND SELLING OF SHARES BY THE APPELLANT IS ALSO SEEN IN THE RETURN OF EARLIER YEARS (PAGE 2 OF ASSESSMENT ORDER). TRUTH IS THAT APPELLANT NEVER DEALT IN SHARES IN EARLIER YEARS. (3) AO MENTIONED IN THE ASSESSMENT ORDER THAT THE APPELLANT BORROWED MONEY FROM BHAVANA SHAH M.C. SHAH R.M. SHAH (HUF) AND S.M. SHAH WHICH WAS UTILISED FOR BUSINESS (PAGE 3 OF ASSESSMENT ORDER) TRUTH IS THAT THE APPELLANT HAD NOT BORROWED ANYTHING NEW IN THIS YEAR. THE ABOVE STATED LOANS ARE OLD LOANS AND IN EARLIER YEARS APPELLANT DID NO T BUY EVEN A SINGLE SHARE. (4) AO DISCUSSED THAT THE APPELLANT IS NOT DOING AN Y OTHER ACTIVITY TO EARN INCOME OTHER THAN SHARES (PAGE 6 OF ASSESSMENT ORDER) TRUTH IS THAT THE MAIN ACTIVITY OF APPELLANT IS BON D DISCOUNTING. HE EARNED RS.133.48 LACS OUT OF ABOVE ACTIVITY IN THE YEAR UNDER CONSIDERATION. 2.16 THE LEARNED DR COULD NOT CONTROVERT THE ABOVE FACTU AL FINDINGS GIVEN BY THE CIT(A). 2.17 FURTHER FROM THE VARIOUS DETAILS FURNISHED BY THE ASSESSEE WE FIND THAT THE ASSESSEE HAS SHOWN INVESTMENT OF RS.1 79 94 820 UNDER THE HEAD INVESTMENT AS ON 31 ST MARCH 2005 (PAPER BOOK PAGE 4) WHICH WAS AT RS.96 000 AS ON 31.3.2004 (PAPER BOOK PAGE 21). WE FURTHER FIND THE ASSESSEE HAS RECEIVED DIVIDEND OF RS.1 30 101 DURING THE YEAR ENDING 31 ST MARCH 2005 WHICH HAS GONE UP TO RS.14 13 588.79 FOR THE YEAR ENDING 31 ST MARCH 2006 WHICH ARE EVIDENT FROM PAPER BOOK PAGES 3 AND 27 RESPECTIVEL Y. WE ALSO FIND MERIT IN THE SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT BOND DISCOUNTING IS THE MAIN BUSINESS OF THE ASSESS EE THE INCOME OF WHICH IS MORE THAN RS. 133.48 LAKHS DURING THE RELE VANT ASSESSMENT YEAR. THEREFORE THE OBSERVATION OF THE ASSESSING OFFICER THAT THE ASSESSEE IS NOT DOING ANY OTHER ACTIVITY TO EARN TH E INCOME OTHER THAN I.T.A. NO. 25 & CO NO. 233/MUM/2009 SHRI RAJAN M. SHAH ============================== 8 SHARES IS FACTUALLY INCORRECT. FURTHER WE ALSO FIN D MERIT IN THE SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE ASSESSEE HAS NOT BORROWED ANY MONEY FOR INVESTMENT IN SHARES DURING THE YEAR SINCE HIS UNSECURED LOAN AS ON 31 ST MARCH 2004 AT RS.11 30 000 HAS GONE UP TO RS.13 33 400 AND THE DIFFERENCE IS DUE T O THE INTEREST AMOUNT OF RS.2 03 400 WHEREAS THE INVESTMENT IN SHA RES AS ON 31 ST MARCH 2004 AT RS.96 000 HAS GONE UP TO RS.1 79 94 820 FOR THE YEAR ENDING 31.3.2005. WE FURTHER FIND MERIT IN THE ARG UMENTS ADVANCED BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE ASSES SEE HAS NOT SOLD THE SHARES IMMEDIATELY AND THEY HAVE BEEN HELD BY H IM FOR A PERIOD OF LESS THAN 30 DAYS TO A PERIOD OF MORE THAN 200 DAYS AND THE DETAILS OF WHICH ARE AS UNDER: PERIOD (NO. OF DAYS) SALE PROCEEDS COST OF THE ITEMS SOLD CAPITAL GAINS LESS THAN 30 DAYS 33 21 583 14 09 846 19 11 737 31 TO 100 DAYS 27 80 641 10 88 764 16 91 877 101 TO 200 DAYS 17 51 875 5 17 184 12 34 691 MORE THAN 200 DAYS 2 52 480 1 06 460 1 46 020 TOTAL 49 84 325 2.18 IN VIEW OF THE ABOVE AND IN VIEW OF THE DETAILED DI SCUSSION BY THE CIT(A) WE ARE SATISFIED THAT THE ASSESSEE IS A GEN UINE INVESTOR. THE SHARE DEALING DOES NOT HAVE REGULARITY CONTINUITY AND HIGH VOLUME AS ALLEGED BY THE ASSESSING OFFICER IN HIS ORDER. IN THIS VIEW OF THE MATTER WE UPHOLD THE ORDER OF THE CIT(A) TREATING THE INCO ME FROM PURCHASE AND SALE OF SHARES AS SHORT TERM CAPITAL GAIN. THE GROUND RAISED BY THE REVENUE IS ACCORDINGLY DISMISSED. C.O. NO. 233/MUM/2009: 3. THE ASSESSEE IN HIS VARIOUS GROUNDS OF APPEAL HAS C HALLENGED THE ORDER OF THE CIT(A) IN DIRECTING THE ASSESSING OFFICER TO ALLOCATE PROPORTIONATE EXPENSES DEBITED TO THE PROFIT AND LO SS A/C. TOWARDS SHORT TERM CAPITAL GAIN WHILE COMPUTING THE INCOME FROM BUSINESS. 3.1 AFTER HEARING BOTH THE SIDES WE FIND THE LEARNED C IT(A) WHILE DIRECTING THE ASSESSING OFFICER TO TREAT THE INCOME FROM PURCHASE AND SALE OF SHARES AS SHORT TERM CAPITAL GAIN DIRECTED TO ALLOCATE I.T.A. NO. 25 & CO NO. 233/MUM/2009 SHRI RAJAN M. SHAH ============================== 9 PROPORTIONATE EXPENSES DEBITED TO PROFIT AND LOSS A /C. TO SHORT TERM CAPITAL GAIN AND THEN RECALCULATE THE INCOME OF THE ASSESSEE FROM BOND DISCOUNTING AND INVESTMENT IN SHARES. 3.2 THE LEARNED COUNSEL FOR THE ASSESSEE AT THE TIME OF HEARING BEFORE US SUBMITTED THAT THE ASSESSEE HAS NOT DEBIT ED ANY EXPENSES TO THE PROFIT AND LOSS A/C. ON ACCOUNT OF SHORT TERM C APITAL GAIN. THEREFORE THE DIRECTION OF THE CIT(A) TO THE ASSES SING OFFICER TO CALCULATE PROPORTIONATE EXPENSES AND ADJUST THE SAM E FROM SHORT TERM CAPITAL GAIN IS ERRONEOUS AND AMOUNTS TO ENHANCEMEN T OF INCOME. HOWEVER FROM THE PROFIT AND LOSS A/C. WE FIND THE ASSESSEE HAS DEBITED DEMAT CHARGES AMOUNTING TO RS.58 026 WHICH RELATES EXCLUSIVELY FOR PURCHASE AND SALE OF SHARES. SIMIL ARLY IT ALSO CANNOT BE SAID THAT NO EXPENDITURE HAS BEEN INCURRED BY THE A SSESSEE ON ACCOUNT OF PURCHASE AND SALE OF THOSE SHARES THE INCOME OF WHICH HAS BEEN DECLARED UNDER THE HEAD SHORT TERM CAPITAL GAIN E SPECIALLY WHEN THE ASSESSEE HAS MAINTAINED A FULL FLEDGED OFFICE AND H AS INCURRED VARIOUS EXPENSES E.G. POSTAGE RS.14.98 LAKHS STAFF WEL FARE RS.9.98 LAKHS PRINTING AND STATIONERY - RS.9.70 LAKHS OFFICE EXP ENSES RS.12.19 LAKHS ETC. CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE AND IN ABSENCE OF ANY EXPENDITURE SHOWN BY THE ASSESSEE TO WARDS INCOME FROM SHORT TERM CAPITAL GAIN ON ACCOUNT OF PURCHASE AND SALE OF SHARES AN ALLOCATION OF RS. 3 LAKHS ON ESTIMATE AS EXPENDI TURE FOR EARNING THE SHORT TERM CAPITAL GAIN ON ACCOUNT OF PURCHASE AND SALE OF SHARES IN OUR OPINION WILL BE JUST REASONABLE. WE HOLD AND DIRECT ACCORDINGLY. THE C.O. FILED BY THE ASSESSEE IS ACCORDINGLY PARTL Y ALLOWED. 4. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS D ISMISSED AND THE C.O. FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON 21ST MAY 2010. SD/ SD/ SD/ SD/- -- - (N.V. VASUDEVAN) (N.V. VASUDEVAN) (N.V. VASUDEVAN) (N.V. VASUDEVAN) JUDICIAL MEMBER SD/ SD/ SD/ SD/- -- - ( (( (R.K. PANDA R.K. PANDA R.K. PANDA R.K. PANDA) )) ) ACCOUNTANT MEMBER MUMBAI DATED 21ST 21ST 21ST 21ST MAY 2010 MAY 2010 MAY 2010 MAY 2010 I.T.A. NO. 25 & CO NO. 233/MUM/2009 SHRI RAJAN M. SHAH ============================== 10 COPY TO: (1) THE APPELLANT (2) THE RESPONDENT (3) THE CIT(A)-XXV MUMBAI (4) THE CIT CITY-25 MUMBAI (5) THE DR D BENCH ITAT MUMBAI. //TRUE COPY// //TRUE COPY// //TRUE COPY// //TRUE COPY// / / TRUE COPY / / / / TRUE COPY / / / / TRUE COPY / / / / TRUE COPY / / BY ORDER ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI TPRAO I.T.A. NO. 25 & CO NO. 233/MUM/2009 SHRI RAJAN M. SHAH ============================== 11 DATE INITIALS DRAFT DICTATED ON 14. 10.2010 SR. P.S. DRAFT PLACED BEFORE THE AUTHOR 14.10.2010 SR. P. S. DRAFT PROPOSED AND PLACED BEFORE THE SECOND MEMBER AM/JM DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/JM APPROVED DRAFT COMES TO THE SR. PS SR. P.S. KEPT FOR PRONOUNCEMENT ON SR. P.S. FILE SENT TO THE BENCH CLERK SR. P.S. DATE ON WHICH FILE GOES TO THE HEAD CLERK DATE OF DISPATCH