Acit Circle 45 Kolkata Kolkata v. Shri Kishan Saraf Kolkata

In The Income Tax Appellate Tribunal B Bench Kolkata Before Shri A T Varkey Jm Dr A L Saini Am Ita No 2265 Kol 2014 Assessment Year 2008 09 Shri Kishan Saraf Krishna Building Room No 817 224 A J C Bose Road Kolkata 700 020 Vs A C I T Cir 45 Kolkata Govt Place West Kolkata 700 001 Pan Gir No Akups 4979 C Assessee Revenue Ita No 27 Kol 2015 Assessment Year 2008 09 A C I T Cir 45 Kolkata Govt Place West Kolkata 700 001 Vs Shri Kishan Saraf Krishna Building Room No 817 224 A J C Bose Road Kolkata 700 020 Pan Gir No Akups 4979 C Revenue Assessee Assesseeby Shri S D Varma Adv Revenue By Shri Saurabh Kumar Acit Dr Date Of Hearing 05 09 2017 Date Of Pronouncement 04 12 2017 O R D E R Per Dr Arjun Lal Saini Am The Captioned Cross Appeal Filed By The Assessee And Revenue Pertaining To Assessment Year 2008 09 Are Directed Against An Order Passed By The Ld Commissioner Of Income Tax Appeals Xxx Kolkata In Appeal No 238 Cit A Xxx Cir 45 2013 14 Dated 29 10 2014 Which In Turn Arises Out Of An Order Passed Shri Kishan Saraf Ita No 2265 Kol 2014 27 Kol 2015 Assessment Year 2008 09 Page 2 By The Assessing Officer Under Section 143 3 263 143 3 Of The Income Tax Act 1961 Hereinafter Referred To As The Act Dated 31 01 2014 2 Since These Two Cross Appeals Relate To Same Assessee Same Assessment Year Identical Issues Involved Therefore These Have Been Clubbed And Heard Together And A Consolidated Order Is Being Passed For The Sake Of Convenience And Brevity 3 The Grounds Of Appeal Raised By The Assessee In Ita No 2265 Kol 2014 Are As Follows 1 That The Ld Commissioner Of Income Tax Appeal Xxx Has Erred In Law And In Facts In Treating A Sum Of Rs 380455 As Business Income Which In Fact And Law Is Part Of Short Term Capital Gain Of Rs 6094446 Derived By The Assessee During Previous Year Relevant To Assessment Year 2008 09 Para 1 At Page 10 Of Appeal Order 2 That The Ld Cit A Xxx Was Not Justified In Treating Short Term Capital Gain Of Rs 380445 Which Arose For Holding Period Varying From 3 Days To 90 Days As Business Income Ignoring The Facts And Assessment Records Of The Assessee 3 The Assessee Craves Leave To Add Alter Modify Any Other Grounds Of Appeal At The Hearing Stage 4 The Grounds Of Appeal Raised By The Revenue In Ita No 27 Kol 2015 Reads As Under 1 For That The Ld Cit A Xxx Kolkata Has Erred In Law And On Facts By Holding That Rs 3 80 455 Out Of Total Rs 60 94 446 Is To Be Assessed As Business Income And The Balance Rs 57 13 991 Is To Be Assessed As Short Term Capital Gain 2 For That The Ld Cit A Xxx Kolkata Has Erred In Law And On Facts In Holding That Income Arising Out Of Sale Of Shares Held Up To 90 Days Or Less Is To Be Taxed As Business Income And The Income Arising Out Of Sale Of Shares Held For More Than 90 Days Is To Be Taxed As Capital Gains 3 For That The Ld Cit A Xxx Kolkata Has Erred In Law And In Facts In Deleting The Addition Of Rs 2 09 691 Made U S 40 A Ia Of The Act For Non Deduction Tds Against Payment Of Interest On Loan Shri Kishan Saraf Ita No 2265 Kol 2014 27 Kol 2015 Assessment Year 2008 09 Page 3 4 For That The Ld Cit A Xxx Kolkata Has Erred In Law Facts In Deleting The Addition Of Rs 2 71 000 Made On Account Of Low Drawing By The Assessee Without Considering The Relevant Facts Of The Case 5 For That The Assessee Craves The Leave To Add Alter Modify Include Or Delete Any Ground Of Appeal 5 Ground No 1 And 2 Raised By The Assessee In Ita No 2265 Kol 14 Are Identical With Ground No 1 And 2 Raised By The Revenue In Ita No 27 Kol 15 Therefore These Are Being Adjudicated Together The Main Grievance Of The Assessee In These Grounds Is That Amount Of Rs 3 80 455 Was Not A Business Income And It Was Part Of Short Term Capital Gain Of Rs 60 94 446 6 The Brief Facts Qua The Issue Are That The Assessee Filed Its Return Of Income For The Assessment Year 2008 09 Declaring A Total Income Of Rs 68 02 415 And The Same Was Assessed U S 143 3 Of The Income Tax Act 1961 On 02 11 2010 With Assessed Income Of Rs 68 92 560 Subsequently The Ld Cit A Had Exercised Its Jurisdiction U S 263 Of The I T Act Stating That The Order U S 143 3 Was Erroneous In So Far As It Was Prejudicial To The Interest Of Revenue On Theground That The A O Failed To Examine The Records Properly The Gist Of The Findings Of The Order U S 263 Passed By The Ld C I T Xv Kol Dated 15 03 2013 Is As Under I Failure To Verify Trading Results And Whether The Gain On The Sale Of Shares Andsecurities Is Business Profit Or Short Term Capital Gain Ii Failure To Apply Provisions Of Sec 2 22 E Of L T Act On Loan From M S Acknitknitting Ltd In Which Assessee Has Substantial Interest Iii Failure To Invoke Provision Of Sec 40 A Ia On Non Deduction Of Tax At Source Onthe Interest Paid Iv Failure To Verify The Loan Given To Wife And Its Consequences In View Of Sec 64 1 Iv Of It Act V Failure To Verify Household Expenses Shri Kishan Saraf Ita No 2265 Kol 2014 27 Kol 2015 Assessment Year 2008 09 Page 4 Therefore The Ld Cit A Exercising The Power U S 263 Had Set Aside The Order Dated 02 11 2010 Only To The Extent Indicated In The Foregoing Paragraphs And Directed The Assessing Officer To Pass A Fresh Assessment Order During The Assessment Proceedings The Assessing Officer Noted That Since More Than 85 Of The Gross Total Income Shown By The Assessee Consisted Of Income Related To Share The Nature Of Transactions That Gave Rise To The Short Term Capital Gain Stcg Were Sought To Be Examined Vis A Vis The Various Factors Involved To Determine Whether They Are Actually In The Nature Of Investments Considering The Volume Of Shares Dealt With The Assessing Officer Led To The Conclusion That Purchase And Sale Of Shares By The Assessee Constituted An Activity In The Nature Of Business Therefore The Assessing Officer Asked The Assessee That Income From The Purchase And Sale Of Shares Should Be Considered In The Nature Of Business Or Trade As Against The Claim Of Investment During The Assessment Proceedings The Assessee Submitted That During The Relevant Assessment Year Short Term Capital Gain Of Rs 60 94 446 Was Arised On Purchase And Sale Of Reputed Blue Chip Companies Shares Including Govt And Semi Govt Companies The Purchase And Sale Of Share Were Not The Business Of The Assessee But To Invest Surplus Money Into Capital Market The Gain Was Arised Due To The Rarest Opportunity An Unimagined Movement In The Capital Market Therefore Assessee Submitted That Investment In Shares And Securities Is Merely An Investment And Not A Business Of The Assessee However The Assessing Officer Rejected The Claim Of The Assessee And Treated The Assessee As A Trader 7 Aggrieved By The Order Of The Assessing Officer The Assessee Filed An Appeal Before The Ld Cit A Who Has Allowed The Assessees Appeal Partly During The Appellate Proceedings The Ld Cit A Noted That Assessee Earned Income Of Rs 3 80 455 On Shares Sold After Holding Period Varying From 3 Days To 90 Days Shri Kishan Saraf Ita No 2265 Kol 2014 27 Kol 2015 Assessment Year 2008 09 Page 5 Therefore This Amount Of Gain Of Rs 3 80 455 Was Treated As Business Income And Cit A Directed The Ao To Treat The Amount Of Rs 3 80 455 As Business Income As Regards The Rest Amount Of Short Term Capital Gain Of Rs 57 13 991 60 94 446 3 80 455 The Same Was Decided To Be Treated As Short Term Capital Gain 8 Not Being Satisfied With The Order Of The Ld Cit A The Assessee Is In Further Appeal Before Us In Respect Of Income Of Rs 3 80 455 The Ld Counsel Submitted That The Assessee Earned Income Of Rs 3 80 455 In Respect Of Shares Sold After Holding Period Varying From 3 Days To 90 Days Therefore This Amount Of Gain Of Rs 3 80 455 Is To Be Treated As A Part Of The Short Term Capital Gain That Is The Ld Counsel Pointed Out That The Income Of Rs 3 80 455 Was Part Of Rs 60 94 446 And Therefore It Should Be Treated As A Short Term Capital Gain The Ld Counsel For The Assessee Had Also Pointed Out That From Assessment Year 2005 06 To 2007 08 The Assessments Had Been Completed U S 143 3 143 1 Of The Act And The Department Had Been Accepting The Said Account Of Income As Short Term Capital Gain Vide P B 32 9 On The Other Hand The Ld Dr For The Revenue Has Primarily Reiterated The Stand Taken By The Ao Which We Have Already Noted In Our Earlier Para And Is Not Being Repeated For The Sake Of Brevity 10 Having Heard The Rival Submissions Perused The Materials Available On Record We Are Of The View That In Assessees Case Under Consideration The Department Had Been Accepting The Same Account Of Income As Short Term Capital Gain In Assessment Years 2005 06 To 2007 08 We Note That The Department Has Been Consistently Accepting The Assessee As An Investor And Not A Trader In Past Assessment Years Therefore We Do Not Uphold The Order Of The Ld Cit A Following The Rule Of Consistency The Revenue Should Follow The Consistency In Taxing A Particular Income Of The Assessee For That We Rely On The Judgment Of The Honble Shri Kishan Saraf Ita No 2265 Kol 2014 27 Kol 2015 Assessment Year 2008 09 Page 6 Supreme Court In Radhasoamisatsang Vs Cit 193 Itr 321 Sc So We Do Not Uphold The Order Of The Ld Cit A And We Direct The Cit A To Treat The Assessee As An Investor Therefore We Allow The Ground No 1 And 2 Raised By The Assessee In Ita No 2265 Kol 14 And We Dismiss The Ground No 1 And 2 Raised By The Revenue In Ita No 27 Kol 2015 11 In The Result Appeal Filed By The Assessee Ground No 1 And 2 In Ita No 2265 Kol 14 Are Allowed Whereas Appeal Filed By The Revenue Ground No 1 And 2 In Ita No 27 Kol 2015 Are Dismissed 12 Groundno 3 Raised By The Revenue Relates To Addition Of Rs 2 09 691 Made U S 40 A Ia Of The Act For Non Deduction Of Tds Against Payment Of Interest On Loan 13 The Brief Facts Qua The Issue Are That This Ground Of Revenue Relates To Disallowance Of Interest Paid To Upkar Distributors P Ltd Of Rs 87 508 And Sarada Trade Fin P Ltd Of Rs 1 22 183 U S 40 A Ia Of The I T Act The Assessee Had Debited In His Income Expenditure A C Rs 87 508 And Rs 1 22 183 Under The Head Interest On Loan To Upkar Distribution Pvt Ltd And Sarada Trade Fin Pvt Ltd However No Tax Was Deducted On Source On The Amount Paid As Interest The Ao Noted That The Said Expenditures Were Indeed Debited In His Income Expenditure A C Further It Was Also Established Fact That The Assessee Had Business Income In Excess Of The Limit Stated In The Sec 44 Ab Of The Act Therefore The Interest Paid On Loan Was Liable To Be Deducted Tax At Source As Per Proviso Of Sec 194 A Failure To Deduct Tax At Source Invokes The Proviso Of Sec 194 A And The Provisions Of Sec 40 A Ia Of The Act Therefore Ao Disallowed Such Expenses Of Rs 2 06 691 Added Back To The Income Of The Assessee 14 The Counsel For The Assessee Submitted Before Us That Section 44 Ab Is Not Applicable Because The Assessee Has Always Acted As Investor In Shares This Fact Was Established With Reference To Past Assessment Records And Activities Of The Shri Kishan Saraf Ita No 2265 Kol 2014 27 Kol 2015 Assessment Year 2008 09 Page 7 Assessee As Such Provisions Of Sec 194 A Is Not Applicable Therefore Disallowance U S 40 A Ia For Rs 209691 Is Unjustified The Ld Dr For The Revenue Did Not Controvert The Submissions Of The Ld Counsel For The Assessee 15 Having Heard The Rival Submissions And Perused The Material Available Of Record We Note That The Computation Of Income Contained In The Return Of Income Does Not Show Any Income Under The Head Business Or Profession The Assessee Has Not Claimed Deduction Of Interest So There Is No Question Of Making Addition The Borrowings Were Not Utilized In Acquisition Of Shares As The Transactions Of Shares Have Mostly Been Treated As Done On Investment Account Therefore There Is No Basis For Addition Of Interest U S 40 A Ia And Hence We Confirm The Order Passed By Cit A 16 In The Result The Appeal Filed By The Revenue On This Issue Is Dismissed 17 Ground No 4 Raised By The Revenue Relates To Addition Of Rs 2 71 000 Made On Account Of Low Drawing By The Assessee 18 The Brief Facts Qua The Issue Are That Assessing Officer Made The Addition On Account Of Low Drawings The Assessee Submitted That Considering The Total Drawing Of All The Family Members Namely Himself Kusumsaraf Wife Abhishek Saraf Son And Aditya Saraf Son Besides L I C Income Tax Mediclaim Etc Only For Household Expense Amounting To Rs 5 57 Lakh Were As Per Their Standard Of Living The Ao Noted That No Documentary Evidence Had Been Produced As To What Were The Drawings Of Other Members Of The Family A Mere Statement Will Not Hold Good The Counsel Submitted That During The Year Under Consideration The Assessee Had Drawn A Sum Of Rs 281000 For Drawing And His Other Family Members Had Following Withdrawals I Smt Kusumsaraf Wife Rs 84000 00 Ii Abhishek Saraf Son Rs 98958 00 Iii Aditya Saraf Son Rs 96000 00 Total Rs 278958 00 Thus The Total Drawing Comes To Rs 5 59 958 It Was Explained To A O That Total Withdrawal By Assessee And By Other Family Members Is Sufficient To Cover House Hold Expenses All Family Members Are Assessed To Income Tax Since All Members Shri Kishan Saraf Ita No 2265 Kol 2014 27 Kol 2015 Assessment Year 2008 09 Page 8 Are Staying In A Joint Family The Total Amount Of Contribution By All Members Towards Drawing Should Be Considered As Fair We Have Heard Both The Parties And Perused The Material Available On Record We Note That The A O Has Not Brought On Record Unusually High Level Of Standard Of Living If Any In The Family Of 4 5 Persons Drawing Aggregating To Rs 5 59 958 Appears Reasonable On The Facts On Record Therefore Considering The Factual Position We Do Not Find Any Infirmity In The Order Passed By The Cit A Therefore We Confirm The Order Passed By The Cit A 19 In The Result Appeal Filed By The Revenue On This Issue Is Dismissed Order Pronounced In The Open Court On This 04 12 2017 Sd A T Varkey Sd Dr A L Saini Judicial Member Accountant Member Kolkata Dated 04 12 2017 Rs Sps Copy Of The Order Forwarded To True Copy By Order Senior Private Secretary Head Of Office D D O I T A T Kolkata Benches Kolkata 1 The Assessee Shri Kishan Saraf 2 The Revenue Department A C I T Cir 45 Kolkata 3 The Cit A Kolkata 4 Cit 5 Dr Itat Kolkata 6 Guard File