Smt. Sushila H.Jariwala, Surat v. The ACIT.,Circle-3,, Surat

ITA 1493/AHD/2009 | 2006-2007
Pronouncement Date: 30-11-2011 | Result: Dismissed

Appeal Details

RSA Number 149320514 RSA 2009
Assessee PAN ABOPJ2393J
Bench Ahmedabad
Appeal Number ITA 1493/AHD/2009
Duration Of Justice 2 year(s) 6 month(s) 19 day(s)
Appellant Smt. Sushila H.Jariwala, Surat
Respondent The ACIT.,Circle-3,, Surat
Appeal Type Income Tax Appeal
Pronouncement Date 30-11-2011
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 30-11-2011
Date Of Final Hearing 03-11-2011
Next Hearing Date 03-11-2011
Assessment Year 2006-2007
Appeal Filed On 11-05-2009
Judgment Text
. .. . . .. . ! !! ! . .. .'# !'# '# !'# '# !'# '# !'# $ $ $ $ % % % % IN THE INCOME TAX APPELLATE TRIBUNAL : B BENCH : AHMEDABAD BEFORE HONBLE SHRI D.K.TYAGI J.M. & HONBLE SHRI A.MOHAN ALANKAMONY A.M.) ! ! ! !. ITA NO. 1493/AHD./2009 : # &'- 2006-2007 SMT. SUSHILA H. JARIWALA SURAT VS - ACIT CIRCLE-3 SURAT (PAN : ABOPJ 2393J) (*+ /APPELLANT) ( *+ /RESPONDENT ) *+ - . / APPELLANT BY : SHRI D.K.PARIKH *+ - . / RESPONDENT BY : SHRI SAMIR TEKRIWAL SR.D.R. /#0 - 1$ / DATE OF HEARING : 25/11/2011 2'& - 1$ / DATE OF PRONOUNCEMENT : 30/11/2011 3 3 3 3 / ORDER PER SHRI A.MOHAN ALANKAMONY ACCOUNTANT MEMBER : THIS APPEAL IS FILED BY THE ASSESSEE AGGRIEVED BY THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-V SURAT IN APP EAL NO.CAS- V/29/TRANS/2008-09 DATED 31.03.2009 FOR THE ASSESSM ENT YEAR 2006-2007 PASSED UNDER SECTION 250 R.W.S. 143(3) OF THE I.T. ACT 19 61. 2. THE ASSESSEE HAS RAISED AS MANY AS FOUR GROUNDS IN ITS APPEAL BUT GROUND NO.1 IS THE EFFECTIVE GROUND WHICH IS REPRODUCED HEREIN BELOW. 1. THAT THE CIT(A) ERRED IN CONFIRMING THE STCG INC OME OF RS.24 13 111/- AS BUSINESS INCOME. 3. DURING THE YEAR THE ASSESSEE HAS SHOWN LONG TER M AND SHORT TERM CAPITAL GAIN ON SALE OF SHARES. THE ASSESSEE ALSO DERIVES INTERE ST INCOME AND DIVIDEND INCOME. THE ASSESSEE FILED ITS RETURN OF INCOME ACCOMPANIED BY COMPUTATION OF INCOME COPY OF CAPITAL ACCOUNT BALANCE-SHEET ETC. ON 31.07.2006 DECLARING TOTAL INCOME AT ITA NO. 1493-AHD-09 2 RS.24 79 572/-. SUBSEQUENTLY THE CASE WAS TAKEN UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF TH E ACT ON 30.09.2008. DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND ON VERIFICATIO N OF BALANCE SHEET AND THE DETAILS FURNISHED BY THE ASSESSEE THE LD. AO OBSERVED THAT THE ASSESSEE HAS TREATED PROFIT FROM THE TRADING ACTIVITIES OF SHARES AND UNITS AS SHOR T TERM CAPITAL GAIN ON SHARES AND UNITS OF RS.24 13 111/- LONG TERM CAPITAL GAIN ON SHARES OF RS.4 26 711/- LONG TERM CAPITAL GAIN ON UNITS OF RS.6 70 449/- AND LONG TER M CAPITAL GAIN ON UNITS (OFF-MARKET) OF RS.44 747/-. THE LD. AO ASKED THE ASSESSEE TO SH OW CAUSE AS TO WHY THE ABOVE SAID SHORT TERM AND LONG TERM CAPITAL GAIN ON SHARES AND UNITS SHOULD NOT BE TREATED AS INCOME FROM BUSINESS. IN RESPONSE TO THE ABOVE SHOW -CAUSE NOTICE DATED 05.08.2008 THE A.R. OF THE ASSESSEE FAILED TO FURNISH ANY EXPL ANATION TO THE LD. A.O. HOWEVER SUBSEQUENT TO THE SHOW CAUSE NOTICED DATED 04.09.20 08 THE ASSESSEE SUBMITTED A DETAILED REPLY. AFTER CONSIDERING THE SUBMISSIONS O F THE ASSESSEE THE AO OBSERVED THAT THE ASSESSEES CLAIM TO TREAT PROFIT FROM THE TRADI NG ACTIVITIES OF SHARES AS LONG TERM /SHORT TERM GAINS IS NOT TENABLE DUE TO THE FOLLOWI NG REASONS: (I) THE MOTIVE OF THE ASSESSEE BEHIND THE TRANSACTIONS IS TO EARN TRADING PROFIT ONLY. (II) NATURE OF TRANSACTIONS CANNOT BE CONSIDERED AS INVE STMENT ACTIVITIES ON THE PARAMETERS OF FREQUENCY OF TRANSACTIONS. (III) THE OBSERVATIONS MADE BY THE HONBLE SUPREME COURT IN THE CASE OF CIT(CENTRAL) VS- ASSOCIATED INDUSTRIAL DEVELOPMENT COMPANY PVT. LTD. (82 ITR 586) SHOW THAT THE ONUS IS ON THE ASSE SSEE TO DEMONSTRATE WITH EVIDENCE TO ESTABLISH ITS CLAIM THAT THE SHARE S HELD ARE FOR INVESTMENT. (IV) THE POINTS MENTIONED IN THE CBDT CIRCULAR NO.4/2007 DATED 16.06.2007 AND THE DECISION OF THE AUTHORITY FOR ADVANCE RULIN GS CITED IN 288 ITR 641 ARE AGAINST THE CONTENTIONS OF THE ASSESSEE. (V) FROM THE EXPENSES SHOWN IN P&L A/C. IT IS EVIDENT THAT THE ASSESSEE HAS A WELL ESTABLISHED INFRASTRUCTURE FOR TRADING IN SH ARES AND THEREFORE IT COULD BE CONSTRUED THAT THE ACTIVITIES OF THE ASSES SEE ARE TO EARN PROFIT BY TRADING IN SHARES. ITA NO. 1493-AHD-09 3 (VI) THE ASSESSEE WAS EARNING HER INCOME FROM THE PROFIT ON SPECULATION TRANSACTION IN SHARES INTEREST DIVIDEND AND PROFI T FROM TRANSACTIONS RELATING TO TRADING IN THE SHARES ONLY WHICH SHOWS THAT THE NORMAL BUSINESS OF THE ASSESSEE IS NOTHING BUT THE TRADING OF SHARES. (VII) THE CONTENTION OF THE ASSESSEE THAT SHE IS INVESTIN G IN SHARES IS NOT TENABLE BECAUSE FOR INVESTING IN SHARES BORROWED FU NDS ARE NOT NORMALLY UTILIZED. 3.1 AFTER CONSIDERING THE SUBMISSION MADE BY THE AS SESSEE AND THE DECISIONS OF VARIOUS COURTS RELIED ON BY THE ASSESSEE AND FROM THE AFORESAID OBSERVATIONS THE LD. AO TREATED THE SUM OF RS.24 13 111/- CLAIMED UNDER THE HEAD SHORT TERM CAPITAL GAIN RS.4 26 711/- RS.6 70 449/- AND RS.44 747/-CLAIMED UNDER THE HEAD LONG TERM CAPITAL GAIN ON SALE OF SHARES UNITS AND UNITS (OFF-MARKET ) RESPECTIVELY AS BUSINESS INCOME. 4. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. C IT(A). THE LD. CIT(A) AFTER ANALYZING THE CONTENTION OF THE ASSESSEE AND CONSID ERING THE OBSERVATIONS MADE BY THE AO IN THE ASSESSMENT ORDER ARRIVED AT A FINDING TH AT THE CLAIM OF THE ASSESSEE ON SHORT TERM CAPITAL GAIN OF RS.24 13 111/- WAS NOT MAINTAI NABLE SINCE THE CIRCUMSTANCES REVEALED THAT THE ASSESSEES INCOME WAS FROM BUSINE SS OF TRADING IN SHARES. IN RESPECT OF OTHER ADDITIONS OF LONG TERM CAPITAL GAIN OF RS. 4 26 711/- ON SHARES AND OF RS.6 70 449/- ON UNITS AND RS.44 747/- ON UNITS (OF F-MARKET) THE LD. CIT(A) DELETED THE ADDITION MADE BY THE LD. A.O. THE RELEVANT PARA OF THE LD. CIT(A)S ORDER IS REPRODUCED HEREINBELOW FOR REFERENCE. I HAVE CAREFULLY CONSIDERED THE VIEW TAKEN BY THE AO ON THIS ISSUE THE WRITTEN SUBMISSIONS MADE BY THE APPELLANT AND THE JUDGMENTS RELIED UPON. FROM THE ENTIRE DISCUSSION ABOVE I OBSERVE THAT THERE ARE T WO ISSUES TO BE CONSIDERED. FIRSTLY FREQUENCY OF TRANSACTION AS DISCUSSED BY T HE AO ON PAGE 15 OF HIS ORDER. SECONDLY THE MOTIVE BEHIND THE TRANSACTION. ON AO'S PART HE HAS VERY CLEARLY ESTABLISHED .CERTAIN PARAMETERS ON THE BASI S OF THE JUDGEMENTS REFERRED BY HIM. IT IS NOT ONLY THE MOTIVE BUT THE FREQUENCY AND MAGNITUDE OF THE TRANSACTIONS IN SAME SCRIP AND ALSO THE SHORT HOLDI NG PERIOD TOO CLEARLY SHOWS THAT THE PROFIT EARNED FROM SALE OF SHARES WAS IN T HE NATURE OF BUSINESS INCOME. FURTHER TAKING INTO CONSIDERATION THE RATIO OF DIV IDEND TO PROFIT WHICH COMES TO 1:14 IT SEEMS THAT THE MOTIVE WAS NOT TO EARN DIVID END AND HOLD THE SCRIP FOR LONG BUT WAS TO EARN PROFIT. ITA NO. 1493-AHD-09 4 IT WAS ALSO CLEARLY BROUGHT OUT BY THE AO THAT THE APPELLANT HAD TAKEN LOANS FROM VARIOUS PARTIES FOR THE PURPOSE OF TRADI NG IN SHARES AND UNITS AS THERE IS NO OTHER SOURCE OF INCOME. THIS SHOWS THAT THE APPELLANT HAS TAKEN SUBSTANTIAL LOANS TO BUY THE SHARES FOR DOING BUSIN ESS AS NO PRUDENT PERSON WOULD TAKE LOANS FROM MARKET OR EVEN FROM KITH AND KIN WHERE I NTEREST RATES ARE 15% AND MORE TO EARN APPRECIATION ON INVESTMENTS. THIS FACT OF BORROWING ALONG WITH OTHER FACTS AS DISCUSSED ABOVE CLEARLY L EAD TO THE IRREFUTABLE CONCLUSION THAT THE CLAIM OF THE APPELLANT AGAINST STCG OF RS.24 13 111/- WAS ESSENTIALLY THE APPELLANT'S INCOME FROM BUSINESS OF SHARE DEALINGS. HENCE THE AO'S ACTION OF TREATING THE SAID AMOUNT AS BUSINESS INCOME IS SUSTAINED. HOWEVER THE AO SHOULD ALLOW THE DEDUCTION OF EXPEN SES AGAINST SUCH INCOME. AS REGARD LTCG OF RS.4 26 711/- ON SHARES AND OF RS.6 70 449/ - ON UNITS AND RS.44 747/- ON UNITS (OFF-MARKET) THE AO HAS T REATED THE SAME AS BUSINESS INCOME. THE AO HAS NOT DISCUSSED THIS ISSUE IN DETA IL. THE APPELLANT IN HER SUBMISSIONS HAS CONTENDED THAT THE UNITS WERE HELD BY THE APPELLANT PRIOR TO 31.3.2002 AND WERE PURCHASED IN 1998. I HAVE GONE T HROUGH THE SUBMISSIONS OF THE APPELLANT AND ALSO THE ASSESSMENT ORDER. I FIN D THAT NEITHER THE SALE NOR THE PURCHASE OF SUCH UNITS HAVE BEEN DISPUTED. IT IS CL EAR FROM THE LENGTH OF THE HOLDING PERIOD THAT THE GAIN EARNED FROM THE SALE OF SUCH UNITS COULD NOT BE TREATED AS BUSINESS INCOME. NONE OF THE CRITERIA OR PARAMETERS APPLIED BY THE AO IN KEEPING WITH CIRCULAR NO.4/2007 OF THE CBDT C AN BE APPLIED TO THE TRANSACTIONS INVOLVING SUCH UNITS. THE AO IS THEREF ORE DIRECTED TO ALLOW THE ENTIRE LTCG AS CLAIMED BY THE APPELLANT. HENCE THE AO'S STAND OF TREATING THE LTCG AS BUSINESS INCOME DOES NOT HOLD GOOD. 5. THE LD. A.R. REITERATED THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE LD. AO DURING THE ASSESSMENT PROCEEDINGS AND STOUTLY ARGUE D BEFORE US THAT THE IDENTICAL ISSUE WAS INVOLVED IN ASSESSEES OWN CASE FOR THE ASSESSM ENT YEAR 2005-06 IN WHICH THE SAME AO HAD TREATED SHORT TERM CAPITAL GAIN AS BUSI NESS INCOME AND THE HONBLE ITAT D BENCH AHMEDABAD IN ITA NO.3494/AHD/2008 DECIDED THE CASE VIDE ITS ORDER DATED 08.10.2010 IN FAVOUR OF THE ASSESSEE. T HE LD. A.R. FURTHER SUBMITTED THAT FOR THE ASSESSMENT YEAR 2004-05 THE SAME TREATMENT HAD BEEN GIVEN BY THE ASSESSEE AND IT HAS BEEN ACCEPTED BY THE AO IN THE SCRUTINY ASSESSMENT. THE LD. A.R. FURTHER RELIED ON THE FOLLOWING DECISIONS: I) ITAT SMC BENCH AHMEDABAD IN ITA NO.213/AHD/201 1 FOR THE ASSESSMENT YEAR 2006-07 IN THE CASE OF DISHA UTTAM SHAH S WETAMBER VS- ITO II) ITAT DBENCH AHMEDABAD IN ITA NO.127/AHD/20 09 FOR THE ASSESSMENT YEAR 2005-06 IN THE CASE OF SHRI MULCHANBHAI S.AMIN VS- ACIT ITA NO. 1493-AHD-09 5 HENCE THE LD. A.R. PRAYED THAT THE ORDER OF THE LD . CIT(A) MAY BE DELETED AND THE APPEAL OF THE ASSESSEE MAY BE ALLOWED. 6. THE LD. D.R. RELIED ON THE ORDER OF THE LD. AO A ND ELABORATELY ARGUED ON THE LINES OF THE LD. A.O. 7. WE HAVE HEARD RIVAL SUBMISSIONS AND CAREFULLY PE RUSED THE MATERIALS FROM THE RECORD. AT THE OUTSET IT IS OBSERVED THAT THE ISSU E IS NOT COVERED IN FAVOUR OF THE ASSESSEE VIDE DECISION DATED 08.10.2010 OF THE ITA T D BENCH AHMEDABAD. IN ITA NO.3494/AHD/2008 FOR THE ASSESSMENT YEAR 2005-06 AS STATED BY THE ASSESSEE. ON PERUSING THE ORDER THE TRIBUNAL HAD CATEGORICALLY MADE A FINDING THAT THE ASSESSEE HAD CONSISTENTLY TREATED INVESTMENT PORT FOLIO AS SEPAR ATE AND DISTINCT. IT WAS ALSO OBSERVED BY THE TRIBUNAL THAT THE ASSESSEE HAD NOT TAKEN THE LOAN TO BUY THE SHARES. IT WAS FURTHER NOTED BY THE TRIBUNAL THAT THE ASSESSEE HAS CONTINUOUSLY SHOWN INVESTMENT IN THE BALANCE-SHEET WHICH IS MADE OUT OF HER OWN CAP ITAL AND SHOWN GAIN ON SALE OF SHARES AS EITHER STCG OR LTCG EVEN FOR THE ASSESSM ENT YEARS 2003-04 AND 2004-05. THE RELEVANT PARA OF THE ORDER IS REPRODUCED HEREIN BELOW. 5. WE FIND FROM RECORD THAT THE ASSESSEE ALSO SUBMI TTED PAPER BOOK FROM WHERE AT PAGE 15 IT IS NOTICED THAT ASSESSEE HAD MA INTAINED BOTH THE PORTFOLIOS AND WHEN THESE SHARES WERE HELD FOR A PERIOD OF 4-5 YEARS OR EVEN 10-12 YEARS IT WAS ALWAYS TREATED AS INVESTMENTS ON LTCG BASIS AND IN RESPECT OF STCG THE INVESTMENT WAS REALIZED WHEN THERE WAS FAVOURABLE M ARKET QUOTATION. WE FIND THAT IN RESPECT OF LTCG WHEN THE HOLDING PERIOD HAS BEEN MORE THAN 365 TO 376 DAYS THAT THE ENTIRE GAIN HAS BEEN TREATED AND CONFIRMED AS BUSINESS INCOME BY THE' ASSESSING OFFICER AND THE CIT(A). WE FIND THAT THE ASSESSEE CONSISTENTLY HAD TREATED INVESTMENT PORTFOLIO AS SE PARATE AND DISTINCT AND EVEN IN EXACTLY IDENTICAL SITUATION FOR ASSESSMENT YEAR 2004-05 IN THE SCRUTINY ASSESSMENT U/S. 143(3} DATED 06-12-2006 THE INCOME FROM SHARE TRANSACTIONS HAS BEEN ACCEPTED AS CAPITAL GAIN. THE ASSESSMENT O RDER FOR ASSESSMENT YEAR 2004-05 IS PLACED AT PAGE 22 AND 23 OF ASSESSEE'S P APER BOOK WHEREIN AT PARA- 4 OF ASSESSMENT ORDER AFTER VERIFICATION OF DETAILS OF PURCHASE AND SALE OF SHARES AND DETAILS OF TRANSACTION WITH REGARD TO CAPITAL G AIN WAS ACCEPTED AS PER RETURN. THE DETAILED STATEMENT OF INCOME FOR ASSESS MENT YEAR 2004-05 IS AT PAGE 76-90 OF ASSESSEE'S PAPER BOOK WHEREIN ALSO EVEN W ITH THE FREQUENCY OF TRANSACTIONS THE TRANSACTIONS WERE ON INVESTMENT A CCOUNT STCG AND LTCG WERE ACCEPTED. WE ARE OF THE VIEW THAT EXACTLY ON T HE SAME FACTS THERE WAS NO JUSTIFICATION FOR TAKING DIFFERENT VIEW TO TREAT TH AT CAPITAL GAIN AS BUSINESS ITA NO. 1493-AHD-09 6 INCOME FOR THE YEAR UNDER CONSIDERATION. HOWEVER C IT(A) FAILED TO APPRECIATE THE VARIOUS CASE LAWS ON CONSISTENCY WHICH WEE BRO UGHT TO HIS NOTICE PARTICULARLY THE DECISION OF THE SUPREME COURT IN T HE CASE OF RADHASWAMI SATSANG V. CIT 100 CTR 367 (SC) 193 ITR 321 (SC) WH ICH WAS BROUGHT TO HIS NOTICE AT PAGE 14 OF ASSESSEE'S PAPER BOOK. HOWEVER THE CIT(A) ERRED IN HOLDING THAT THE ASSESSEE HAD TAKEN SUBSTANTIAL LOA N TO BUY THE SHARES AND INTEREST AT 15% WAS BORNE BY THE ASSESSEE AS THIS O BSERVATION IS WHOLLY INCORRECT AND QUITE CONTRARY TO THE FACTS ON RECORD . WE FIND FROM PROFIT AND LOSS ACCOUNT AT PAGE 29 OF ASSESSEES PAPER BOOK THAT NO T A SINGLE RUPEE BY WAY OF INTEREST HAS EVER BEEN EXPENDED OR PAID AND PARTICU LARS OF PROFIT AND LOSS ACCOUNT ARE ALREADY THERE AT PAGE 28 AND STATEMENT OF INCOME AT PAGE 52-75 CLEARLY SHOWS THAT OUT OF THE VARIOUS EXPENSES MENT IONED AT PAGE 28 OF ASSESSEE'S PAPER BOOK. THE ASSESSEE HAS CLAIMED ONL Y EXPENSES OF RS.35 546/- AND THAT TOO ONLY AGAINST OTHER INCOME OF SPECULATI ON WHICH IS SEPARATELY KEPT IN THE PORTFOLIO. IN THIS REGARD DECISION OF THE M UMBAI TRIBUNAL IN THE CASE OF CIT V. GOPAL PUROHIT 228 CTR 582 (BOM) WHICH IS PLA CED AT PAGE 13-14 OF ASSESSEE'S PAPER BOOK-II WHEREIN THE HON'BLE HIGH COURT HAS OBSERVED THAT THE TRIBUNAL WAS CORRECT IN HOLDING THAT THERE OUGHT TO BE UNIFORMITY IN TREATMENT AND CONSISTENCY WHEN THE FACTS AND CIRCUMSTANCES AR E IDENTICAL. UNDER THE ABOVE CIRCUMSTANCES THE CAPITAL GAIN OFFERED OUGHT TO HAVE BEEN ACCEPTED INSTEAD OF TREATING THE LTCG AS WELL AS STCG AS BUS INESS INCOME. WE FIND THAT CBDT CIRCULAR HAS LAID DOWN CRITERIA FOR ASSESSING SHARE INCOME AS LTCG AND STCG AND ALSO VARIOUS CASE LAW HAVE BEEN RELIED UPO N PARTICULARLY IN THE CASE OF GOPAL PUROHIT (SUPRA) AND IN THE CASE OF NSS INV ESTMENT 158 TAXMAN PAGE 38 (MAD). WE FIND THAT IN A SERIES OF CASES THE ISS UE HAS BEEN CONSIDERED BY VARIOUS BENCHES OF TRIBUNAL OF MUMBAI AS WELL AS AH MEDABAD AND HON'BLE COURTS HAVE TAKEN A VIEW THAT ONE CANNOT GO TO DECI DE MERELY ON THE BASIS OF FREQUENCY OR VOLUME OF TRANSACTIONS IN THE CURRENT SCENARIO IN WHICH THE PERSONS ARE INVESTING MORE AND MORE AS AN INVEST OR IN THE STOCK MARKET. MOST CRUCIAL IS THAT ASSESSEE HAS CONTINUOUSLY SHOWN INV ESTMENT IN THE BALANCE SHEET WHICH IS MADE OUT OF HER OWN CAPITAL AND SHOWN GAIN ON SALE OF SHARES AS EITHER STCG OR LTCG EVEN FOR ASSESSMENT YEARS 2003-04 AND 2004-05 AND HENCE WITHOUT THERE BEING ANY CHANGE IN THE FACTS A CONSI STENT VIEW NEEDS TO BE ADOPTED. THIS HAS BEEN SO HELD IN THE CASE OF GOPAL PUROHIT (SUPRA). 7.1 FOR THE ASSESSMENT YEAR 2005-06 IN THE ASSESSE ES OWN CASE THE HONBLE ITAT HELD THAT THE ASSESSEE HAD PURCHASED THE SHARES AND SCRIPS FOR THE PURPOSE OF INVESTMENT AND NOT FOR TRADING. HOWEVER THE FACTS AS EXPOSED BY THE REVENUE FOR THE RELEVANT ASSESSMENT YEAR CANNOT BE BRUSHED ASIDE. F OR THE PURPOSE OF ASSESSMENT IT IS UNDISPUTED THAT EVERY YEAR HAS TO BE DISTINCTLY SCR UTINIZED AND ASSESSMENT MADE ACCORDING TO THE FACTS AND LAW APPLICABLE FOR THE R ELEVANT ASSESSMENT YEAR. FOR THE ITA NO. 1493-AHD-09 7 RELEVANT PREVIOUS YEAR IN THE CASE OF THE ASSESSEE THE LD. A.OS FINDINGS ARE REPRODUCED HEREINBELOW: I) DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE H AD EARNED DIVIDEND FROM SHARES RS.1.54 LAKHS WHILE AS GAINED BY TRADIN G IN SHARES RS.22.63 LAKHS. THIS CLEARLY ESTABLISHES THAT THE ASSESSEES MOTIVE WAS TO TRADE IN SHARES AND NOT TO RETAIN AS INVESTMENTS. II) THE ASSESSEE HAD DEALT WITH 267 SCRIPS AND IN EVERY SCRIP THE ASSESSEE HAD TRANSACTED ON AN AVERAGE OF 10 TIMES WHICH SHOWS TH AT THE ASSESSEE WAS CARRYING OUT AT LEAST 10 TO 12 TRANSACTIONS EVERYDA Y. THE ASSESSEE WAS ALSO TRADING IN THE SAME SCRIPS SEVERAL TIMES. THEREFORE THE MOTIVE OF THE ASSESSEE WAS TO TRADE IN SHARES. III) THE ASSESSEES MAGNITUDE OF SALE AND PURCHAS E OF SHARES WAS RUNNING INTO CRORES OF RUPEES DURING THE YEAR. THE ASSESSEE WAS USING HER SOURCE OF FUNDS TO GENERATE PROFIT FROM THE SALE AND PURCHASE OF SHARE S. THE MAGNITUDE OF TRANSACTION QUANTITATIVELY WAS ALSO HIGH. IV) MOST OF THE SHARES WERE HELD FOR LESS THAN 45 DAYS MAKING IT OBVIOUS THAT THE INTENTION OF THE ASSESSEE WAS TO TRADE IN SHARE S. V) THE ASSESSEE WAS DEALING HER TRANSACTION THROU GH THE RENOWNED BROKER M/S. KOTAK SECURITIES AND ALSO INCURRING EXPENSES I N THE NATURE OF OFFICE EXPENSES SALARIES STAMP AND OTHER CHARGES TRAVEL LING EXPENSES ETC. VI) THE SCALE OF THE EXPENSES INCIDENTAL TO TRANSA CTION OF SHARES OF SALE AND PURCHASE SHOWS THAT THE ASSESSEE IS MAKING PURCHASE S AND SALES OF SHARES WITH THE INTENTION TO EARN PROFIT VII) TO SUM UP THE LD. A.O. TABULATED HIS FINDINGS WHICH ARE REPRODUCED HEREINBELOW: SR. PARAMETERS TO DECIDE BUSINESS NATURE NO. THE NATURE OF TRANSACTION 1. MOTIVE BEHIND SUCH INVESTMENT : PROFIT MOTIVE 2. FREQUENCY OF TRANSACTIONS : BUSINESS SCALE 3. MAGNITUDE OF SALE AND PURCHASE : SUBSTANTIAL 4. LENGTH OF PERIOD OF OWNERSHIP : LESS THAN 45-60 DAYS ITA NO. 1493-AHD-09 8 5. THE INFRASTRUCTURE EMPLOYED FOR : BUSINESS SCALE THE SHARE TRANSACTIONS 6. NORMAL BUSINESS OF ASSESSEE : SHARE TRANSACTION 7.2 BEFORE THE LD. CIT(A) THE ASSESSEE HAS NOT COM E OUT WITH ANY MATERIALS TO DISREGARD THE FINDINGS OF THE LD. A.O. EVEN BEFORE US AT THIS STAGE NO EVIDENCE WAS BROUGHT OUT TO SUBSTANTIATE THE CLAIM OF THE ASSESS EE THAT THE GAIN OF RS.24 13 111/- AROSE DUE TO SHORT TERM CAPITAL GAIN. SINCE THE LD. A.R. HAD AGAIN AND AGAIN SUBMITTED BEFORE US THAT FOR THE ASSESSMENT YEAR 2005-06 WITH REGARD TO THE SAME FACTS THE HONBLE ITAT IN ITA NO.3494/AHD/2008 DATED 08.10.20 10 ALLOWED THE APPEAL OF THE ASSESSEE IN HER FAVOUR THE BENCH THOUGHTFULLY REFI XED THE HEARING ON 25.11.2011 FOR FURTHER CLARIFICATION AND THE MATTER WAS HEARD. THE LD. A.R. SUBMITTED THE FOLLOWING CHART ALONG WITH CERTAIN DOCUMENTS AS DETAILED BELO W. CLARIFICATION IN THE MATTER OF SUSHILA H. JARIWALA ITA NO: 1493/A/09 ITAT AHMEDABAD 'B'BENCH ON 25/11/2011.ASS T.YEAR: 2006-07 FURTHER TO SUBMISSIONS MADE ON 03/11/2011 FOLLOWING CHART SHOWS THAT FACTS IN AY 2006-07 ARE IDENTICAL AS IN AY 2005-06 AS FINALL Y FOUND BY HONBLE ITAT IN ITA NO: 3494/AHD/2008 ORDER DATED 08/10/2010 ALREAD Y FURNISHED. NECESSARY PAPERS IN SUPPORT OF THIS CHART ARE ATTACHED. THUS THE FACTS ARE EXACTLY IDENTICAL WITH THAT OF A.Y. 2005-06 & THE PRESENT APPEAL IS S QUARELY COVERED BY SAID ORDER OF ITAT AS STATED BELOW. SR. NO. PARTICULARS- RELEVANT PAGE NO. A.Y. 2005- 2006 A RELEVANT PAGE NO. A.Y. 2006-2007 B 1. FREQUENCY OF TRANSACTIONS & NO. OF SCRIPTS AS NOTED BY AO 296 SCRIPTS -A-17 267 SCRIPTS- B- 10 2. MOTIVE OF THE ASSESSEE SUBMISSION TO CIT(A) A- 44 B-31 3. NO UNSECURED LOAN DURING THE YEAR BALANCE SHEET A- 63 B-45 4. NO INTEREST EXP. DURING THE YEAR P&L A/C A-62 B-44 5. INCORRECT FINDINGS BY CIT(A) REGARDIN G BORROWED FUND & INTEREST EXPS. A- 32 B-19 ITA NO. 1493-AHD-09 9 6. ABOVE FINDING OF CIT(A) NOT APPROVED BY ITAT IN ITA NO.3494/A/08 FOR A.Y.2005- 06 A -68 - 7. INCORRECT OBSERVATION OF A.O. REGARDING CLAIM OF OTHER EXPS. FOR EARNING PROFIT & INFRASTRUCTURE EMPLOYED A-20 B-13 8. ABOVE ERRONEOUS OBSERVATION OF A.O. NOT ACCEPTED BY ITAT IN ITA NO. 3494/A/08 FOR A.Y. 2005 -06 A-68 9. STATEMENT OF TOTAL INCOME SHOWING THAT SOME MINOR EXPENSES CLAIMED AGAINST SPECULATION PROFIT AND OTHER SOURCES A-54 & A-55 B-38 & B-39 10. INCORRECT FINDING OF A.O. TO HOLD THAT PROFIT WAS BUSINESS INCOME (NOT APPROVED BY ITAT) A-21 B-14 SAME CONCLUSION TO FOLLOW AS FOUND BY ITAT 11. MOST IMPORTANT :- HONOURABLE ITAT HAS NOTED PRINCIPLES OF CONSIS TENCY & THE CASE OF GOPAL PUROHIT 228 CTR 582 BOM. H.C. (AGAINST WHICH DEPARTMENT'S SLP DISMISSED BY SUPREME COURT & ALSO SUPREME COURT DECISION IN RADHA SWAMI SATSANG 193 ITR 321 A-67 & A-68 PARA - 5 - SAME CONCLUSION TO FOLLOW AS HELD BY ITAT 12. CONSISTENT TREATMENT RIGHT FROM 2001- 2002 ACCEPTED BY THE DEPARTMENT & ALSO 143(3) ORDER PASSED FOR A.Y. 2004- 2005 ACCEPTING CAPITAL GAIN NOTED BY ITAT GOPAL PUROHIT APPLIED BY ITAT IN AY 2005- 06 (NOW DEPT SLP DISMISSED BY SC) A- 70 (ASST. ORDER) A- 67 (ITAT FINDINGS) AY 2002- 03 TO 2004- 05 DEPT ACCEPTED AND AY 2005- 06 ITAT ALLOWED STCG 13 OBSERVATIONS OF A.O. (NOT APPRECIATING SUBMISSIONS) PARA 4.3/ PARA 4.3 (IDENTICALLY WORDED UPTO CLAUSE (VII) & ERRONEOUS CONCLUSION DRAWN WHICH IS NOT ACCEPTED BY ITAT IN AY 2005-06 A-16 B- 9 VERBATIM REPRODUCTION OF WORD TO WORD BY AO AS IN AY 2005- 06 LIST OF DOCUMENTS SUBMITTED SR. NO. DOCUMENTS A.Y. 2005-06 ANNEXURE-A PAGES A.Y. 2006-07 ANNEXURE-B PAGES 1. ASSESSMENT ORDER FOR THE A.Y.2005 - 06 1 TO 23 1 TO 16 2. CIT(A) ORDER 24 TO 33 17 TO 20 ITA NO. 1493-AHD-09 10 3. A.R. OF THE ASSESSEES LETTER 34 TO 52 22 TO 36 4. NOTICE OF DEMAND FROM ACIT CIRCLE-3 SURAT - 21 5. RETURN OF INCOME ALONG WITH THE CALCULATION SHEET 53 TO 61 37 TO 43 6. P&L A/C. 62 44 7. BALANCE SHEET 63 TO 64 45 TO 46 8. ORDER DATED 08.10.2010 OF THE ITAT D BENCH AHMEDABAD 65 TO 69 9. ASSESSMENT ORDER FOR THE A.Y. 2004-05 70 TO 71 10. NOTICE OF DEMAND UNDER SECTION 156 72 7.3 THE ABOVE DOCUMENTS FILED BY THE ASSESSEE DO NO T CATEGORICALLY DISESTABLISH THE FINDINGS OF THE LD. A.O. THE LD. A.O. HAD MADE A CL EAR FINDING WHICH IS ONCE AGAIN REPRODUCED HEREINBELOW FOR REFERENCE. I) DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE H AD EARNED DIVIDEND FROM SHARES RS.1.54 LAKHS WHILE AS GAINED BY TRADIN G IN SHARES RS.22.63 LAKHS. THIS CLEARLY ESTABLISHES THAT THE ASSESSEES MOTIVE WAS TO TRADE IN SHARES AND NOT TO RETAIN AS INVESTMENTS. II) THE ASSESSEE HAD DEALT WITH 267 SCRIPS AND IN EVERY SCRIP THE ASSESSEE HAD TRANSACTED ON AN AVERAGE OF 10 TIMES WHICH SHOWS TH AT THE ASSESSEE WAS CARRYING OUT AT LEAST 10 TO 12 TRANSACTIONS EVERYDA Y. THE ASSESSEE WAS ALSO TRADING IN THE SAME SCRIPS SEVERAL TIMES. THEREFORE THE MOTIVE OF THE ASSESSEE WAS TO TRADE IN SHARES. III) THE ASSESSEES MAGNITUDE OF SALE AND PURCHAS E OF SHARES WAS RUNNING INTO CRORES OF RUPEES DURING THE YEAR. THE ASSESSEE WAS USING HER SOURCE OF FUNDS TO GENERATE PROFIT FROM THE SALE AND PURCHASE OF SHARE S. THE MAGNITUDE OF TRANSACTION QUANTITATIVELY WAS ALSO HIGH. IV) MOST OF THE SHARES WERE HELD FOR LESS THAN 45 DAYS MAKING IT OBVIOUS THAT THE INTENTION OF THE ASSESSEE WAS TO TRADE IN SHARE S. V) THE ASSESSEE WAS DEALING HER TRANSACTION THROU GH THE RENOWNED BROKER M/S. KOTAK SECURITIES AND ALSO INCURRING EXPENSES I N THE NATURE OF OFFICE EXPENSES SALARIES STAMP AND OTHER CHARGES TRAVEL LING EXPENSES ETC. VI) THE SCALE OF THE EXPENSES INCIDENTAL TO TRANSA CTION OF SHARES OF SALE AND PURCHASE SHOWS THAT THE ASSESSEE IS MAKING PURCHASE S AND SALES OF SHARES WITH THE INTENTION TO EARN PROFIT. VII) TO SUM UP THE LD. A.O. TABULATED HIS FINDINGS WHICH ARE REPRODUCED HEREINBELOW: ITA NO. 1493-AHD-09 11 SR. PARAMETERS TO DECIDE BUSINESS NATURE NO. THE NATURE OF TRANSACTION 1. MOTIVE BEHIND SUCH INVESTMENT : PROFIT MOTIV E 2. FREQUENCY OF TRANSACTIONS : BUSINESS SCALE 3. MAGNITUDE OF SALE AND PURCHASE : SUBSTANTIAL 4. LENGTH OF PERIOD OF OWNERSHIP : LESS THAN 45-60 DAYS 5. THE INFRASTRUCTURE EMPLOYED FOR : BUSINESS SCALE THE SHARE TRANSACTIONS 6. NORMAL BUSINESS OF ASSESSEE : SHARE TRANSACTION 7.4 THE MAIN GROUSE OF THE REVENUE WAS THAT THE ASS ESSEE WAS DEALING IN LARGE NUMBER OF TRANSACTIONS AND THE SAME SCRIPS WERE TRA DED NUMBER OF TIMES PRECISELY THE ASSESSEE HAS DEALT IN 267 SCRIPS AND IN EVERY SCRIP THE ASSESSEE HAS TRANSACTED ON AN AVERAGE OF 10 TIMES. THE LD. A.R. DID NOT PRODUCE B EFORE US ANY MATERIAL TO CONTROVERT THIS ASSERTION OF THE REVENUE. FURTHER THE LD. A.O. HAS POINTED OUT THAT THE ASSESSEE HELD MAJORITY OF THE SCRIPS FOR LESS THAN 45 DAYS. THE LD. A.R. OF THE ASSESSEE HAS ALSO NOT BROUGHT ON RECORD ANY EVIDENCE TO PROVE THE FIN DINGS OF THE LD. A.O. OTHERWISE. THE LD. A.O. AND THE LD. CIT(A) HAVE ANALYSED THE I SSUE IN DETAIL AND THE LD. CIT(A) HAS ALSO GIVEN ADEQUATE RELIEF TO THE ASSESSEE WITH RESPECT TO CERTAIN SCRIPS VIZ. LONG TERM CAPITAL GAIN OF RS.4 26 711/- ON SHARES AND RS .6 70 449/- ON UNITS AND RS.44 747/- ON UNITS (OFF-MARKET). THEREFORE FROM THE FACTS AN D CIRCUMSTANCES OF THE CASE FOR THE RELEVANT PREVIOUS YEAR WE ARE LEFT WITH NO OTHER O PTION RATHER THAN TO CONFIRM THE ORDER OF THE LD. CIT(A). IT IS ORDERED ACCORDINGLY. 8. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. 4 3 - 2'& 5#!' 30 / 11 /2011 ' 6 - 0 7 SD/- SD/- (D.K.TYAGI) (A.MOHAN ALANKAMONY) JUDICIAL MEMBER ACCOUNTANT M EMBER DATED : 30/11/2011 ITA NO. 1493-AHD-09 12 3 3 3 3 - -- - 18 18 18 18 98&1' 98&1' 98&1' 98&1'- -- - 1. *+ 2. *+ 3. !! 1 /= 4. /=- - 5. 8@ 1# 7 6. B4 3 C/ !E 7 TALUKDAR/ SR. P.S.