ACIT 25(2), MUMBAI v. RAJESH D. NANDU HUF, MUMBAI

ITA 2456/MUM/2011 | 2005-2006
Pronouncement Date: 10-10-2013 | Result: Partly Allowed

Appeal Details

RSA Number 245619914 RSA 2011
Assessee PAN AAAHR1531H
Bench Mumbai
Appeal Number ITA 2456/MUM/2011
Duration Of Justice 2 year(s) 6 month(s) 11 day(s)
Appellant ACIT 25(2), MUMBAI
Respondent RAJESH D. NANDU HUF, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 10-10-2013
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted D
Tribunal Order Date 10-10-2013
Date Of Final Hearing 08-11-2012
Next Hearing Date 08-11-2012
Assessment Year 2005-2006
Appeal Filed On 29-03-2011
Judgment Text
INCOME TAX APPELLATE TRIBUNAL MUMBAI - D BENCH. . .. . . .. . !'# !'# !'# !'# ' ' ' ' BEFORE S/SH. I.P. BANSAL JUDICIAL MEMBER & RAJENDRA ACCOUNTANT MEMBER /. ITA NO.2456/MUM/2011 $ $ $ $ % % % % / ASSESSMENT YEAR-2005-06 ACIT 25(2) C-11 1 ST FLOOR PRATYAKSHKAR BHAVAN BANDRA (E) MUMBAI- 400051 VS. RAJESH D. NANDU HUF C-109 SHAILESH APARTMENTS S.V.P.ROAD BORIVALI (W) MUMBAI-400103 PAN:AAAHR1531H /. ITA NO.2457/MUM/2011 $ $ $ $ % % % % / ASSESSMENT YEAR-2006-07 ACIT 25(2) C-11 1 ST FLOOR PRATYAKSHKAR BHAVAN BANDRA (E) MUMBAI- 400051 VS. RAJESH D. NANDU HUF C-109 SHAILESH APARTMENTS S.V.P.ROAD BORIVALI (W) MUMBAI-400103 PAN: AAAHR1531H /. ITA NO.3383/MUM/2010 $ $ $ $ % % % % / ASSESSMENT YEAR-2007-08 DCIT 25(2) C-11 1 ST FLOOR PRATYAKSHKAR BHAVAN BANDRA (E) MUMBAI- 400051 VS. RAJESH D. NANDU HUF C-109 SHAILESH APARTMENTS S.V.P.ROAD BORIVALI (W) MUMBAI-400103 PAN: AAAHR1531H ( &' / APPELLANT) ( ()&' / RESPONDENT) &' &' &' &' * * * * ' '' ' / APPELLANT BY : SHRI SANJEEV JAIN & SHRI SANTOSH KUMAR ()&' + * ' / RESPONDENT BY : SHRI FARROKH IRANI & MANISH SANGHAVI $ $ $ $ + ++ + / DATE OF HEARING : 10-10-2013 -.% + / DATE OF PRONOUNCEMENT : 10-10-2013 $ $ $ $ 1961 + ++ + 254(1) ' '' ' / / / / '0 '0 '0 '0 ORDER U/S.254(1)OF THE INCOME-TAX ACT 1961(ACT) PER RAJENDRA AM CHALLENGING THE ORDER OF THE CIT(A)-35 MUMBAI ASSES SING OFFICER (AO) HAS FILED FOLLOWING COMMON GROUNDS OF APPEAL FOR THE ASSESSMENT YEARS(A YS.) 2005-06 AND 2006-07: (I)ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD.CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO TREAT THE BUSINESS INCOME FROM SHARES/MUTUAL FUNDS AS CAPITAL GAINS WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS DEVOTED MOST OF ITS TIME IN THIS ACTIVITY COMPARED TO OTHE R ACTIVITIES. (II)ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE LD.CIT(A) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO TREAT THE BUSINE SS INCOME FROM SHARES/MUFUAJ FUNDS AS CAPITAL GAINS WITHOUT APPRECIATING THE FACT THAT THE ASSESS EE HAS OBTAINED HUGE LOANS TO CARRY OUT TRADING IN SHARES. (III)ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD.CIT(A) HAS ERRED IN 2 ITA NO.2456/MUM/2011 RAJESH D. NANDU HUF . DIRECTING THE ASSESSING OFFICER TO TREAT THE BUSINE SS INCOME FROM SHARES/MUTUAL FUNDS AS CAPITAL GAINS WITHOUT APPRECIATING THE FACT THAT THE ASSESS EES INTENTION WAS TO EARN QUICK PROFITS OUT OF TRADING ACTIVITY AND NOT TO EARN DIVIDEND OUT OF IN VESTMENT IN SHARES. (II)THE APPELLANT PRAYS THAT THE ORDER OF THE LD.C IT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE A.O. BE RESTORED. (III)THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND. AO HAS FILED FOLLOWING GROUNDS OF APPEAL FOR THE AY 2007-08: I)ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD.CIT(A) ERRED IN DIRECTING THE A.Q. TO TREAT THE ASSESSEE AS INVESTOR AND ASSESS T HE PROFIT ON SALE OF DELIVERY BASED SHARES AS SHORT/LONG TERM CAPITAL GAINS AS DECLARED BY THE AS SESSEE WITHOUT APPRECIATING THE FACTS THAT THE ASSESSEE HAS DEVOTED MOST OF ITS TIME IN THIS ACTIV ITY COMPARED TO OTHER ACTIVITIES OBTAINED HUGE LOANS TO CARRY OUT TRADING IN SHARES AND THE ASSESS EES INTENTION WAS TO EARN QUICK PROFITS OUT OF TRADING ACTIVITY AND NOT TO EARN DIVIDEND OUT OF IN VESTMENT IN SHARES. II)THE APPELLANT PRAYS THAT THE ORDER OF THE ID. CI T (A) ON THE ABOVE GROUNDS TO BE SET ASIDE AND THAT OF THE A.O. BE RESTORED. III) THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER A NY GROUND OR ADD A NEW GROUND 2. AS THE ISSUE INVOLVED ALL THE THREE AYS.ARE COMMON SO FOR THE SAKE OF CONVENIENCE WE ARE ADJUDICATING ALL THE APPEALS BY A SINGLE ORDER.EFFE CTIVE GROUND OF APPEAL IS ABOUT HEAD OF INCOME UNDER WHICH PROFIT ARISING OUT OF SHARE TRANSACTION S SHOULD BE ASSESSED.ASSESSEE-HUF IS ENGAGED IN THE BUSINESS OF BROKERAGE APART FROM INVESTMENTS IN SHARES AND UNIT.DETAILS OF DATES OF FILING OF RETURNS INCOMES RETURNED DATES OF ASSESSMENT ASSES SED INCOMES DATES OF ORDERS OF THE CIT(A)CAN BE SUMMARISED AS UNDER : DT.OF FILING OF RETURN RETURNED INCOME (RS.) DATE OF ASSESSMENT ASSESSED INCOME DT. OF ORDERS OF CIT(A) AY2005-06 31.08.2005 1 40 393 25.10.2010 1 8 6 23 970/- 07.01.2011 AY2006-07 21.09.2006 22 07 36 196 25.10.2010 26 48 38 970/- 07.01.2011 AY2007-08 31.07.2007 1 77 18 242 04.12.2009 2 51 31 823/- 12.02.2010 ITA NO. 2456/MUM/2011-AY 2005-06- FIRST WE WOULD LIKE TO GIVE THE BRIEF HISTORY OF TH E CASE.RETURN OF INCOME FILED BY THE ASSESSEE WAS ACCEPTED U/S.143(1) OF THE ACT.LATER ON THE CASE WA S SELECTED FOR SCRUTINY AND THE ASSESSMENT WAS COMPLETED U/S.143(3).ACT.DURING THE YEAR UNDER CONS IDERATION ASSESSEE HAD SOLD SHARES AND INCOME ARISING FROM SUCH TRANSACTIONS WAS SHOWN AS SHORT T ERM CAPITAL GAIN(STCG)/LONG TERM CAPITAL GAIN (LTCG).AO WAS OF THE OPINION THAT INCOME ON SA LE OF SHARES SHOULD BE ASSESSED UNDER THE HEAD INCOME FROM BUSINESS AND PROFESSION.ASSESSEE P REFERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA)WHO DISMISSED THE APPEAL VIDE HIS OR DER DATED 21.04.2008.ASSESSEE CHALLENGED THE ORDER OF THE FAA BEFORE THE TRIBUNAL AND THE MATTER WAS REMITTED BACK TO THE FILE OF THE AO BY THE TRIBUNAL VIDE ITS ORDER DATED 21.07.2009(ITA NO.428 9-4290/ MUM/2008).WHILE REMITTING THE MATTER TRIBUNAL HELD AS UNDER: 6.THE LD.COUNSEL FOR THE ASSESSEE SHRI FAROOKH IRAN I SUBMITTED THAT UNDER IDENTICAL FACTS AND CIRCUMSTANCES THE HONBLE MUMBAI TRIBUNAL HAS IN TH E CASES OF JANAK RANGWALLA IN ITA NO.1163/M/04 DT.19.2.06 J.M. SHARE & STOCK BROKERS LTD IN ITA N O. 2801/M/2000 DT.30. 11. 2007AND GOPAL PUROHIT VS JCIT IN ITA NO. 4854/M/08 DT.10.2.2009 HELD THAT TH E PROFIT ON SALE OF SHARES MUST BE TREATED AS CAPIT AL GAIN AND HAS DECIDED THE ISSUE IN APPEAL IN FAVOUR OF THE ASSESSEE. IN THESE CIRCUMSTANCES WE DEEM IT FIT TO REMIT THE ISSUE TO THE FILE THE AO TO REDO THE ASSESSMENT IN THE LIGHT OF THE DECISION OF GOPAL PUROHIT (SUPRA)AFTER GIVIN G A REASONABLE OPPORTUNITY TO THE ASSESSEE. 3 ITA NO.2456/MUM/2011 RAJESH D. NANDU HUF . WHILE MAKING THE FRESH ASSESSMENT U/S. 143(3) R.W.S .254 OF THE ACT AO AGAIN TREATED LTCG AND STCG AS BUSINESS INCOME.WHILE FINALISING THE ASSESS MENT AO DISCUSSED THE FOLLOWING PRINCIPLES MENTIONED IN ORDER OF GOPAL PUROHIT (ITA NO. 4854/M UM/2008): INTENTION OF THE ASSESSEE AT THE TIME OF PURCHASE O F SHARES BORROWAL OF MONEY AND PAYMENT OF INTEREST FOR PURCHASING SHARES INTENTION OF THE ASS ESSEE IN RETAINING THE SHARES METHOD OF VALUING THE SHARES. AFTER CONSIDERING THE SUBMISSION MADE BY TH E ASSESSE-HUF HE HELD THAT ACTIVITIES CARRIED OUT BY IT WERE IN NATURE OF TRADING IN SHARES AND N OT MAKING INVESTMENTS. 2.1. ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPEL LATE AUTHORITY(FAA).AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE HE HELD THAT HE HAD DE CIDED THE ISSUE OF STCG/LTCG WHILE ADJUDICATING THE APPEAL FOR THE AY 2007-08.FOLLOWIN G HIS ORDER OF THE AY-2007-08 HE DIRECTED THE AO TO ACCEPT THE CLAIM OF THE ASSESSEE AND TO TREAT THE SHARE TRANSACTION AS STCG/LTCG DEPENDING ON THE PERIOD OF HOLDING. AS A RESULT APPEAL FILED BY THE ASSESSEE WAS ALLOWED. 2.2. BEFORE US DEPARTMENTAL REPRESENTATIVE (DR) SUBMITTE D THAT THE ORDER OF THE FAA FOR THE YEAR 2007 -08 WAS BASED ON INCORRECT ASSUMPTIONS THAT TR IBUNAL HAD NEVER DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE THAT FAA HAD NOT GIVEN ANY FINDING HOW THE FACTS OF THE CASE OF GOPAL PUROHIT WERE APPLICAB-LE IN THE CASE UNDER CONSIDERATION.AUTHORI SED REPRESENTATIVE (AR) SUBMITTED THAT FAA HAD CONSIDERED ORDERS OF THE GOPAL PUROHIT JANAK R ANGWALLA THAT HE HAS ALSO RELIED UPON OTHER 7 CASES THAT APPEAL FILED BY THE AO AGAINST THE ORDER OF THE ITAT WAS DISMISSED BY THE HONBLE HIGH COURT OF MUMBAI THAT THE FACTS OF THE CASE UNDER C ONSIDERATION AND THOSE OF GOPAL PUROHIT WERE IDENTICAL THAT FAA FOR BOTH THE CASES WERE SAME T HAT IDENTICAL ORDER WAS PASSED BY FAA IN BOTH THE CASES. 2.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.FIRST WE WILL LIKE TO REPRODUCE THE ORDER OF THE FAA FOR THE AY 2007-08 S PECIFICALLY PARA NO.8 WHICH READS AS UNDER: 8.I HAVE CAREFULLY CONSIDERED THE FINDINGS AND CON CLUSION OF THE AO CONTAINED IN THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE APPELLANT AND THE FACTS OF T HE CASE I FIND THAT THE ISSUE IN APPEAL IS ALREADY DECIDED IN FAVOUR OF THE APPELLANT BY THE HONBLE ITAT MUMBAI VIDE ORDER NO.ITA.NO4289&4290/ MUM /2008 DATED 21-7-200 IN APPELLANTS OWN CASE (EMPHASIS BY US). THE HONBLE MUMBAI ITAT CONSIDERED THE FACTS OF THE APPELLANTS CASE AND THE FACTS OF THE CASE O F THE GOPAL PUROHIT AS ALSO THE FACTS OF THE CASE O F JANAK RANGWALA AND J. M. SHARES & STOCK BROKERS LTD. IN T HE APPEALS FOR A.Y. 2005-06 AND 2006-07. THE HONBL E MUMBAI ITAT FOUND THAT THE FACTS OF THE CASE OF THE APPELL ANT WERE IDENTICAL TO THE FACTS OF THE CASE OF SHRI GOPAL PUROHIT. THE HBLE ITAT ALLOWED THE APPE AL OF THE APPELLANT (EMPHASIS BY US) AND HAS DIRECTED THAT THE AO TO REDO IN THE LIGHT OF THE DECISION OF GOPAL PUROHIT. THE HONBLE ITAT HAS THUS DIRECTED THE AO TO ASSESS THE DELIVERY BASED TRANSACTION AS CAPITAL GAINS (EMPHASIS BY US) . WE HAVE AT PARAGRAPH 2OF OUR ORDER REPRODUCED THE O RDER OF THE ITAT DATED.21.07.2009(SUPRA).WE FIND THAT ITAT HAD NOT DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE.THEREFORE OBSERVATION OF THE FAA THAT ISSUE IN APPEAL WAS ALREADY DECIDED IN FAV OUR OF THE ASSESSEE BY THE TRIBUNAL VIDE ORDER DATED 21.07.2009 IS FACTUALLY INCORRECT AS SUBMITTE D BY THE DR. WE ALSO FIND THAT TRIBUNAL HAD NOT GIVEN ANY FINDING THAT THE FACTS OF THE CASE OF APP ELLANT WERE IDENTICAL TO THE FACTS OF THE CASES OF GOPAL PUROHIT AND JANAK RANGWALLA J.M. SHARES AND STOCK BROKERS LTD.WE ALSO FIND THAT ITAT HAD ALSO NOT DIRECTED THE AO TO ASSESS DELIVERY BAS IS TRANSACTION AS CAPITAL GAINS. AS THE BASIS OF TH E ORDER OF THE FAA IS NOT IN ACCORDANCE WITH THE FIND ING OF THE TRIBUNAL THEREFORE IN OUR OPINION HIS ORDER CANNOT BE ENDORSED. IN OUR OPINION IN THE INT EREST OF JUSTICE MATTER SHOULD BE REMITTED BACK TO THE FILE OF THE FAA FOR FRESH ADJUDICATION.HE IS DI RECTED TO DECIDE THE ISSUE AFRESH AFTER AFFORDING A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE-H UF.HE SHOULD TO DECIDE THE ISSUE AS WHETHER THE FACTS OF GOPAL PUROHIT WERE APPLICABLE OR NOT IN TH E CASE UNDER CONSIDERATION.HE SHOULD ALSO DECIDE AS WHETHER THE PRINCIPLES PROPO -UNDED IN THE CASE OF GOPAL PUROHIT(SUPRA)WERE APPLIED OR NOT. AS A RESULT EFFECTIVE GROUND OF APPEAL FOR THE AY.2 005-06 IS DECIDED IN FAVOUR OF THE AO IN PART. ITAS NO.2457/MUM/2011-AY.2006-07 & 3383/MUM/2011-AY .2007-08 : 4 ITA NO.2456/MUM/2011 RAJESH D. NANDU HUF . AS THE FACTS AND CIRCUMSTANCES OF THE CASES FOR BOT H THE YEARS ARE IDENTICAL TO THE FACTS OF THE AY.2005 -06;EXCEPT FOR THE AMOUNTS INVOLVED;THEREFO RE FOLLOWING OUR ORDERS FOR THAT AY. WE ARE RESTORING BACK THE MATTE TO THE FILE OF THE FAA FOR FRESH ADJUDICATION.HE IS DIRECTED TO FOLLOW THE INSTRUCTIONS GIVEN IN THE ORDER FOR THE YEAR 2005-0 6. EFFECTIVE GROUNDS OF APPEAL FOR BOTH THE YE ARS ARE ALLOWED IN FAVOUR OF THE AO IN PART. AS A RESULT APPEAL FILED BY THE AO STAND PARTLY ALLOWED. 1 2 $1 3 4 0 2 ' !5 + ! 67. ORDER PRONOUNCED IN THE OP EN COURT ON 10 TH OCTOBER 2013. '0 + -.% ' 8 9: 5 9: 5 9: 5 9: 5 10 2013 . + /. SD/- SD/- ( . .. . . .. . / I.P.BANSAL ) ( !'# !'# !'# !'# / RAJENDRA) / JUDICIAL MEMBER ' ' ' ' /ACCOUNTANT MEMBER / MUMBAI ;$ /DATE:10.10 .2013 SK '0 '0 '0 '0 + ++ + ( < ( < ( < ( < ='<% ='<% ='<% ='<% / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / &' 2. RESPONDENT / ()&' 3. THE CONCERNED CIT(A)/ > ? 4. THE CONCERNED CIT / > ? 5. DR D BENCH ITAT MUMBAI / <@/ ( $ . . . . 6. GUARD FILE/ / A )< ( //TRUE COPY// '0$ / BY ORDER B / 6 ! DY./ASST. REGISTRAR /ITAT MUMBAI