SUBHASH N SHAH (HUF), MUMBAI v. ACIT 25(2), MUMBAI

ITA 1989/MUM/2012 | 2007-2008
Pronouncement Date: 17-11-2017 | Result: Allowed

Appeal Details

RSA Number 198919914 RSA 2012
Assessee PAN AAAHS5954D
Bench Mumbai
Appeal Number ITA 1989/MUM/2012
Duration Of Justice 5 year(s) 7 month(s) 21 day(s)
Appellant SUBHASH N SHAH (HUF), MUMBAI
Respondent ACIT 25(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 17-11-2017
Appeal Filed By Assessee
Tags No record found
Order Result Allowed
Bench Allotted G
Tribunal Order Date 17-11-2017
Date Of Final Hearing 11-07-2017
Next Hearing Date 11-07-2017
First Hearing Date 11-07-2017
Assessment Year 2007-2008
Appeal Filed On 26-03-2012
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH MUMBAI BEFORE SHRI D.T.GARASIA JM AND SHRI RAJESH KUMAR AM I.T.A. NO. 1989 /MUM/20 1 2 ( / ASSESSMENT YEAR : 20 07 - 08 ) SUBHASH N SHAH (HUF) FLAT NO.1303 RAGHUNATH TOWER DEVIDAS LANE BORIVALI (W) MUMBAI - 400103 . ( / APPELLANT / VS. ASSTT. COMMISSIONER OF INCOME TAX - 25(2) MUMBAI. / RESPONDENT ) ./ PAN : A AA HS5954D / APPELLANT BY : DINKLE HARIA / RESPONDENT BY : SHRI PURUSHOTTAM KUMAR / DATE OF HEARING : 21.9 .2017 / DATE OF PRONOUNCEMENT : 17. 11 . 201 7 / O R D E R PER RAJESH KUMAR A. M: TH IS IS AN APPEAL FILED BY THE ASSESSEE CHALLENGING THE ORDER OF THE LD.CIT(A) - 35 MUMBAI DATED 5.12.2011 WHEREBY THE LD.CIT(A) HAS CONFIRMED THE ASSESSMENT ORDER PASS ED BY THE AO IN VIOLATION OF PRINCIPLE OF NATURAL JUSTICE WITHOUT GIVING PROPER OPPORTUNITY OF BEING HEARD AND FRAMING THE 2 I.T.A. NO. 1989/MUM/2012 ASSESSMENT AT AN INCOME OF RS.13 92 230/ - BY TREATING IT AS INCOME FROM BUSINESS OR PROFESSION INSTEAD OF CAPITAL GAIN. 2 . AFTER HEARING BOTH THE PARTIES AND ON PERUSAL OF MATERIAL PLACED BEFORE US WE FIND THAT THE ASSESSEE DID NOT PRODUCE ANY MATE RIAL WHICH PROVE S THAT THE AO DID NOT PROVIDE OPPORTUNITY TO THE ASSESSEE AND PASSED THE ORDER IN VIOLATION OF PRINCIPLE OF NATURAL JUSTICE. HENCE THE FIRST GROUND RAISED BY THE ASSESSEE STANDS DISMISSED. 3 . THE SECOND GROUND RAISED BY THE ASSESSEE IS AG AINST UPHOLDING THE ORDER OF AO OF TREATING INCOME OF RS.13 92 230/ - AS BUSINESS INCOME INSTEAD OF CAPITAL GAINS. 4 . THE FACTS LEADING TO THIS ISSUE ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO OBSERVED THAT THE ASSESSEE HAS SHOWN SURPLUS OF RS.13 9 0 227/ - AND RS.2003/ - AS SHORT TERM CAPITAL GAINS (STCG) AND LONG TERM CAPITAL GAINS (LTCG) RESPECTIVELY ON THE SALE OF SHARES. THE AO FURTHER OBSERVED THAT THE TRANSACTIONS IN TRADING ACTIVITIES DONE BY THE ASSESSEE WERE AT FREQUENT I NTERVAL AND PROFIT EARNED FROM SHARE TRANSACTIONS UNDER THE HEAD STCG WAS NOT ACCEPTABLE. THE AO NOTED THAT IN VIEW OF VOLUME OF TRADING ACTIVITIES THE PROFIT EARNED FROM THE SALE AND PURCHASES OF THE SHA R ES CANNOT BE TREATED AS INCOME FROM THE STCG . AC CORDINGLY THE ASSESSEE WAS ISSUED SHOW CAUSE NOTICE TO SHOW CAUSE AS TO WHY THE PROFIT DECLARED FROM THE STCG SHOULD NOT BE TREATED AS INCOME FROM BUSINESS AND 3 I.T.A. NO. 1989/MUM/2012 BE ADDED TO THE TOTAL INCOME OF THE ASSESSEE . THE ASSESSEE REPLIED THE SAID SHOW CAUSE NOTICE VIDE HIS SUBMISSIONS DATED 12.11.2009 BY SUBMITTING THAT ALL THE SHARES PURCHASED WERE H E LD AS INVESTMENT S AND SOLD AS INVESTMENT S AND DULY REFLECTED SO IN THE BALANCE SHEET OF THE ASSESSEE . THE SAME TREATMENT WAS GIVEN TO SIMILAR TRANSACTIONS INVESTMENT S IN THE PRECEDING AND SUCCEEDING YEARS. THE ASSESSEE ALSO REFERRED TO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT V/S ASSOCIATED INDUSTRIAL ( 1971 ) 82 ITR 586 SC WHEREIN IT HAS BEEN HELD WHETHER A PARTICULAR HOLDING OF SHARES IS BY WAY OF INVESTMENT OR FORMS PART OF THE STOCK - IN - TRADE IS A MATTER WHICH IS WITHIN THE KNOWLEDGE OF THE ASSESSEE WHO HOLDS THE SHARES AND IT SHOULD IN NORMAL CIRCUMSTANCES BE IN A POSITION TO PRODUCE EVIDENCE FROM ITS RECORDS AS TO WHETHER IT HAS MAINTAINED ANY DISTINCTION BETWEEN THOSE SHARES WHICH ARE ITS STOCK - IN - TRADE AND THOSE WHICH ARE HELD BY WAY OF INVESTMENT . THE ASSESSEE ALSO SUBMITTED THAT IN THE PURCHASE AND SALE OF SHARES THERE IS NO MOTIVE OF EARNING THE PROFIT WOULD RESULT IN THE TRANSAC TION S BEING IN THE NATURE OF TRADING ACTIVITY BUT THE OBJECT IS TO EARN DIVIDEND AND APPRECIATION IN THE VALUE OF INVESTMENT S AND THEREFORE THE SAME HAS TO BE TREATED AS INVESTMENT S . THE ASSESSEE ALSO FILED THE PERIODICITY OF TRANSACTIONS . T HE AO WAS N OT CONVINCED WITH THE SUBMISSIONS OF THE ASSESSEE AND TREATED THE INCOME FROM SHARE TRANSACTION S AS BUSINESS INCOME BY FRAMING THE 4 I.T.A. NO. 1989/MUM/2012 ASSESSMENT UNDER SECTION 143(3) OF THE ACT VIDE ASSESSMENT ORDER DATED 20.11.2009. 5 . IN THE APPELLATE PROCEEDINGS THE F AA DISMISSED THE APPEAL OF THE ASSESSEE AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE BY OBSERVING AND HOLDING THAT THE PERIOD OF HOLDING OF THE ASSESSEE WAS VERY S HORT AND BY JUST SHOWING THAT THE SHARES WERE PURCHASED AS INVESTMENT S AND WERE SHOWN AS SUCH IN THE BOOKS OF ACCOUNT DID NOT MEAN THAT THE ASSESSEE WA S AN INVESTOR WHEREAS THE VOLUME UNDERTAKEN BY THE ASSESSEE WERE HUGE AND WE R E RIGHTLY TREATED BY THE AO AS TRADING ACTIVITY AND THUS UPHELD THE ORDER OF AO. AGGRIEVED BY THE ORDER OF T HE FAA THE ASSESSEE IS IN APPEAL BEFORE US. 6 . THE LD. AR VEHEMENTLY ARGUED BEFORE US THAT THE ASSESSEE IS A HUF AND HAS BEEN MAKING INVESTMENT S ON REGULAR BASIS RIGHT FROM THE AY - 2003 - 04 AND ALSO IN THE SUCCEEDING YEARS . THE LD AR ALSO SUBMITTED THAT OVER THE YEARS THE PUR CHASES OF THE SHARES WE R E SHOWN AS INVE STMENT S AND T HE RESULTANT PROFIT OR LOSS WERE SHOWN AS STCG AND LTCG AS THE CAPITAL GAIN AS THE CASE MAY BE AND THE DEPARTMENT HAS ACCEPTED THE SAME FOR ALL THE YEARS EXCEPT THE PRESENT ONE. EVEN IN THE SUCCEEDING YEARS FROM THE ASSESSMENT YEAR 2008 - 09 TILL AY 20010 - 11 THE REVENUE HAS ACCEPTED THE GAIN OF THE AS STCG O R LTCG WHERE THE VOLUME OF TRANSACTIONS AND RESULTANT GAIN WAS MUCH MORE THAN THE CURRENT YEAR. WHEREAS THE LD. DR RELIE D ON THE ORDERS 5 I.T.A. NO. 1989/MUM/2012 OF AUTHORITIES BELOW AND SUBMITTED HAT THERE IS NO WEIGHT IN THE ARGUMENT S OF THE ASSESSEE AS IN ALL THE PRECEDING AND SUCCEEDING YEARS WERE COMPLETED IN A SUMMARY MANNER AND NOT SCRUTINY U/S 143( 3 ) OF THE ACT . THEREFORE THE ORDER OF LD.CIT(A) SHOULD BE UPHELD. 7 . WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL PLACED BEFORE US . THE UNDISPUTED FACTS ARE THAT THE ASSE SSEE HAS BEEN MAKING INVESTMENT S IN THE SHARES SINCE ASSESSMENT YEAR 2003 - 04 WHICH HAVE B EEN HELD AS INVESTMENTS IN THE BALANCE SHEET AND GAIN FROM SALE OF SUCH INVESTMENT S WERE BEING SHOWN AS STCG AND LTCG AS THE CASE MAY BE RIGHT FROM ASSESSMENT YEAR 2003 - 04 TO 2010 - 11 WHICH THE REVENUE HAS ACCEPTED THOUGH IN ALL THE SE YEARS ASSESS ME NTS WERE COMPLETED IN THE SUMMARY MANNER UNDER SECTION 143( 1 ) OF THE ACT. THE CONCLUSION OF THE LD CIT(A) CAN NOT BE ACCEPTED PARTICULARLY IN VIEW OF THE FACT THAT EVEN IN THE SUCCEEDING YEARS THE SAME STAND HAS BEEN ACCEPTED BY THE DEPARTMENT DESPITE THE ASSESSEE HAVING MUCH MORE INCOME THAN THE CURRENT YEAR BY WAY OF SHORT TERM AND LONG TERM CAPITAL GAIN . MOREOVER THE MERE FACT THAT THE ASSESSEE HAS MADE SHORT TERM GAIN FROM SHARES AND THE FREQUENT TRANSACTIONS ARE NOT ENOUGH TO TREAT THE ASSESSEE AS A TRADER. WE HAVE ALSO PERUSED T HE BALANCE SHEET OF THE ASSESSEE AND PROFIT AND LOSS ACCOUNT ATTACHED THEREWITH AND FIND THAT THE ACTIVITIES OF THE ASSESSEE HAS NOT BEEN THAT OF A TRADER BUT AS INVESTMENT. MOREOVER THE ASSESSEE HAS NOT USED ANY 6 I.T.A. NO. 1989/MUM/2012 INTERES T BEARING FUNDS FOR THE PURPOSES OF INVESTMENT S FOR THE PURPOSE OF SHARE ACTIVITY. LOOKING AT THE OVER ALL SCENARIO AND CIRCUMSTANCES WE ARE OF THE VIEW THAT THE ASSESSEE IS NOT A TRADER AND NOT ENGAGED IN THE BUSINESS OF TRADING IN SHARES AND SECURITIE S BUT ASSESSEE IS A N INVESTOR AND WE ACCORDING LY SET ASIDE T HE ORDER OF THE FAA AND DIRECT THE AO TO TREAT THE INCOME OF THE ASSESSEE AS STCG AND LTCG AND NOT FROM BUSINESS OR PROFESSION. 8. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17TH NOV 2017 . S D SD ( D.T.GARASIA ) ( RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 17. 11. 2017 SR.PS:SRL: / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CI T(A) 4. / CIT CONCERNED 5. / DR ITAT MUMBAI 6. / GUARD FILE / BY ORDER T RUE COPY / (DY./ASSTT. REGISTRAR) / ITAT MUMBAI