DCIT 17(1), MUMBAI v. GULAB NIHALCHAND JAIN, MUMBAI

ITA 2047/MUM/2010 | 2006-2007
Pronouncement Date: 24-02-2012 | Result: Allowed

Appeal Details

RSA Number 204719914 RSA 2010
Assessee PAN AABPJ1153E
Bench Mumbai
Appeal Number ITA 2047/MUM/2010
Duration Of Justice 1 year(s) 11 month(s) 13 day(s)
Appellant DCIT 17(1), MUMBAI
Respondent GULAB NIHALCHAND JAIN, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 24-02-2012
Appeal Filed By Department
Order Result Allowed
Bench Allotted G
Tribunal Order Date 24-02-2012
Date Of Final Hearing 08-02-2012
Next Hearing Date 08-02-2012
Assessment Year 2006-2007
Appeal Filed On 12-03-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G MUMBAI BEFORE SHRI B. RAMAKOTAIAH A.M. AND SHRI V. DURGA RAO J.M. ITA NO. 2047/MUM/2010 ASSESSMENT YEAR: 2002-03 DY. COMMISSIONER OF INCOME-TAX-17(1) APPELL ANT 1 ST FLOOR PIRAMAL CHAMBERS PAREL MUMBAI 12. VS. GULAB NIHALCHAND JAIN RESPONDENT FLAT NO. 3 3 RD FLOOR LATHIWALA APARTMENT MAZGAON MUMBAI 400 010. (PAN AABPJ1153E) APPELLANT BY : MR. JITENDRA YADAV RESPONDENT BY : MR. B.N. RAO DATE OF HEARING : 08/02/2012 DATE OF PRONOUNCEMENT : 24/02/2012 ORDER PER V. DURGA RAO J.M.: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAI NST THE ORDER OF CIT(A)-29 MUMBAI PASSED ON 15/12/2009 FOR THE ASS ESSMENT YEAR 2006-07 WHEREIN THE REVENUE HAS RAISED THE FOLLOWI NG GROUNDS OF APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT(A) ERRED IN DIRECTING THE AO TO TREAT A N AMOUNT OF RS. 7 75 670/- AS SHORT TERM CAPITAL GAIN AND RS. 89 02 144/- AS LONG TERM CAPITAL GAIN AS AGAINST BUSINESS INCOME T REATED BY THE AO WITHOUT TAKING INTO CONSIDERATION THE FACTS OF T HE CASE AS CITED BY AO IN THE ASSESSMENT ORDER. 2. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUND BE REVERSED AND THAT OF THE AO BE RESTORED. ITA NO. 2047/MUM/2010 GULAB NIHALCHAND JAIN 2 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE FILED HIS RETURN OF INCOME ON 31/10/2006 DECLARING TOTAL INCOME OF RS. 16 97 488/- WHEREIN THE ASSESSEE HAD SHOWN INCOME FROM BUSINESS AND PROFESSION OF RS. 1 39 410/- INCOME FROM CAPITAL GAIN OF RS. 14 27 873/- AND INCOME FROM OTHER SOURCE OF RS. 2 17 395/- AND IN S UPPORT OF THE SAID INCOMES THE ASSESSEE HAD FILED AUDIT REPORT AS REQ UIRED U/S 44AB OF THE ACT IN FORM NO. 3CB STATEMENT OF PARTICULARS IN FORM NO. 3CD TRADING PROFIT & LOSS ACCOUNT AND BALANCE SHEETS. THE AO NOTICED THAT THE ASSESSEE IS ENGAGED IN SHARE TRADING ACTIVITIES AND THEREFORE HE TREATED THE SHORT TERM CAPITAL GAIN AND LONG TERM C APITAL GAIN DISCLOSED BY THE ASSESSEE AS BUSINESS INCOME ON THE GROUND THAT THE ASSESSEE HAD MADE VOLUMINOUS TRANSACTIONS IN SHARES THROUGH OUT THE YEAR AT FREQUENT SHORT INTERVALS AS THE MAIN AC TIVITY OF THE ASSESSEE IS ONLY TRADING OF SHARES AND THEREFORE HELD AS BUSINESS INCOME. AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). AFTER CONSIDERING THE SUBMISSIONS OF TH E ASSESSEE THE CIT(A) OBSERVED THAT NORMALLY ANY BUSINESS ACTIVITY WOULD INVOLVE TURNOVER OF STOCK WHICH COULD BE HELD FOR A PERIOD OF 15 DAYS TO 45 DAYS. HE FURTHER OBSERVED THAT AFTER CAREFUL EXAMIN ATION OF THE FACTS OF THE CASE IT IS SEEN THAT WHERE TRADING HAS BEEN DONE WITHIN A SHORT PERIOD OF HOLDING THIS CAN BE TERMED AS BUSINESS AC TIVITY. ACCORDINGLY THE CIT(A) HELD THAT THE TRANSACTIONS OF PURCHASE A ND SALE WHICH HAD BEEN DONE WITHIN A PERIOD OF 45 DAYS HAS TO BE TREA TED AS BUSINESS INCOME AND THE SHORT TERM CAPITAL IN CASES WHERE HO LDING PERIOD EXCEEDED 45 DAYS AMOUNTED TO RS. 7 75 670/- WHICH DIRECTED TO TREAT AS SHORT TERM CAPITAL GAIN. AS REGARDS LONG TERM CA PITAL GAINS THE CIT(A) DIRECTED THE AO TO TREAT THE LONG TERM CAPIT AL GAIN OF RS. 89 02 144/- AS THE TRANSACTIONS OF WHICH HAD EXCEE DED THE HOLDING PERIOD OF TWO YEARS. AGGRIEVED BY THE ORDER OF THE CIT(A) THE REVENUE IS IN APPEAL BEFORE US. ITA NO. 2047/MUM/2010 GULAB NIHALCHAND JAIN 3 3. BEFORE US THE LEARNED DR SUBMITTED THAT THE MET HOD ADOPTED BY THE LEARNED CIT(A) THAT THE SHARE TRANSACTIONS DONE WITHIN 45 DAYS ARE TO BE TREATED AS BUSINESS INCOME THE TRANSACT IONS DONE ABOVE 45 DAYS ARE TO BE TREATED AS SHORT TERM CAPITAL GAIN A ND THE TRANSACTIONS EXCEEDING A PERIOD OF TWO YEARS ARE TO BE TREATED A S LONG TERM CAPITAL GAIN HAS NO BASIS AT ALL. HE THEREFORE SUBMITTE D THAT THE ORDER OF THE CIT(A) MAY BE SET ASIDE AND THAT OF THE AO IS R ESTORED. 4. ON THE OTHER HAND THE LEARNED COUNSEL FOR THE ASSESSEE SUPPORTED THE ORDER OF THE CIT(A). HOWEVER BOTH TH E PARTIES AGREED THAT THE ISSUE MAY BE RESTORED TO THE FILE OF THE A O FOR FRESH ADJUDICATION. 5. WE HAVE HEARD BOTH THE PARTIES PERUSED THE RECO RD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE IS SUE INVOLVED IN THIS APPEAL IS WHETHER THE INCOME OF THE ASSESSEE IS A B USINESS OR SHORT TERM CAPITAL GAIN/LONG TERM CAPITAL GAIN. WE FIND T HAT THE AO AS WELL AS CIT(A) FAILED TO EXAMINE THE INTENTION OF THE A SSESSEE WHETHER THE ASSESSEE IS A TRADER OR INVESTOR. APART FROM THAT WHETHER THE ASSESSEE HAS DAY TRADING WITHOUT DELIVERY OR NOT HAS ALSO NOT BEEN EXAMINED BY THE AUTHORITIES BELOW. WE ARE OF THE VIEW THAT T O DECIDE THE ISSUE INVOLVED IN THIS APPEAL WHETHER THE ASSESSEE IS A T RADER OR INVESTOR IT IS NECESSARY TO EXAMINE THE INTENTION OF THE ASSESS EE AND ALSO DAY TRADING TRANSACTIONS OF THE ASSESSEE. IN VIEW OF TH E ABOVE WE SET ASIDE THE ORDER OF THE CIT(A) AND RESTORE THE ISSU E TO THE FILE OF THE WITH A DIRECTION TO DECIDE THE ISSUE AFRESH IN THE LIGHT OF THE ABOVE OBSERVATIONS AFTER PROVIDING REASONABLE OPPORTUNI TY OF HEARING TO THE ASSESSEE IN THE MATTER. ITA NO. 2047/MUM/2010 GULAB NIHALCHAND JAIN 4 6. IN THE RESULT APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 24 TH DAY OF FEBRUARY 2012. SD/- SD/- (B. RAMAKOTAIAH) (V. DURGA RAO) ACCOUNTANT MEMBER JUDI CIAL MEMBER MUMBAI DATED: 24 TH FEBRUARY 2012 KV COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE G BENCH I.T .A.T. MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR I.T.A.T. MUMBAI.