M/S KANJI LILADHAR, MUMBAI v. ACIT-12(1), MUMBAI

ITA 4316/MUM/2013 | 2008-2009
Pronouncement Date: 14-10-2016

Appeal Details

RSA Number 431619914 RSA 2013
Assessee PAN AAAFK6871D
Bench Mumbai
Appeal Number ITA 4316/MUM/2013
Duration Of Justice 3 year(s) 4 month(s) 15 day(s)
Appellant M/S KANJI LILADHAR, MUMBAI
Respondent ACIT-12(1), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 14-10-2016
Appeal Filed By Assessee
Bench Allotted A
Tribunal Order Date 14-10-2016
Date Of Final Hearing 17-03-2015
Next Hearing Date 17-03-2015
Assessment Year 2008-2009
Appeal Filed On 30-05-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH MUMBAI BEFORE SHRI MAHAVIR SINGH (JM) & SHRI B.R. BASKARAN (AM) I.T.A. NO. 4316 /MUM/ 20 1 3 (ASSESSMENT YEAR 200 8 - 0 9 ) M/S. KANJI LILADHAR 713 STOCK EXCHANGE 7 TH FLOOR ROTUNDA BLDG. B.S. MARG MUMBAI - 400 022. VS. ACIT 12(1) AAYAKAR BHAVAN M.K. ROAD MUMBAI - 400 020. ( APPELLANT ) ( RESPONDENT ) PAN NO . AAAFK6871D ASSESSEE BY SHRI NITESH JOSH DEPARTMENT BY SHRI K RAVI RAMACHANDRAN DATE OF HEARING 10 .10 . 201 6 DATE OF PRONOUNCEMENT 10 . 10. 201 6 O R D E R PER B.R. BASKARAN (AM) : - THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 4.3.2013 PASSED BY LEARNED CIT(A) - 23 MUMBAI FOR A.Y. 2008 - 09 IN RESPECT OF FOLLOWING ISSUES : - A) ASSESSMENT OF SHORT TERM CAPITAL GAINS AS BUSINESS INCOME B) DISA LLOWANCE MADE U/S. 14A OF THE I.T. ACT C) INTEREST CHARGED U/S. 23 4 A & 234B OF THE ACT. 2. THE ASSESSEE IS A PARTNE RSHIP FIRM ENGAGED IN TRADING AND INVESTMENT IN SHARES. DURING THE YEAR UNDER CONSIDERATION IT DECLARED SHORT TERM CAPITAL GAIN OF ` 8 10 573/ - AND LONG TERM CAPITAL GAIN OF ` 72 24 140/ - . THE ASSESSING OFFICER ACCEPTED THE LONG TERM CAPITAL GAIN BUT DID NOT ACCEPT SHORT TERM CAPITAL GAIN. HE TOOK THE VIEW THAT THE FREQUENCY AND VOLUME OF TRANSACTION S IN RESPECT OF SHORT TERM CAPITAL GAIN WERE VERY HIGH AND ASSESSEE H AS CARRIED OUT TH OS E TRANSACTIONS AS A TRADER. ACCORDINGLY HE ASSESSED THE SHORT TERM CAPITAL GAIN OF ` 8 10 573/ - AS PROFIT AND GAINS OF BUSINESS AND THE SAME WAS M/S. KANJI LILADHAR 2 ALSO CONFIRMED BY LEARNED CIT(A). AGGRIEVED THE ASSESSEE HAS FI LED THIS APPEAL BEFORE US. 3. THE L EARNED AR SUBMITTED THAT THE ASSESSEE HAS MAINTAINED TWO SEPARATE PORTFOLIOS NAMELY ONE F OR TRADING ACTIVITY AND ANOTHER FOR INVESTMENT ACTIVITY. HE SUBMITTED THAT EARLIER YEAR S AS WELL AS IN THE SUBSEQUENT YEAR S THE CA PITAL GAIN DECLARED BY THE ASSESSEE HAS BEEN ACCEPTED BY THE ASSESSING OFFICER. HE SUBMITTED THAT THE ASSESSING OFFICER HAS ACCEPTED CAPITAL G AINS IN THE ASSESSMENT DONE U/S 143(3) OF THE ACT FOR A.Y. 2004 - 05 AND 2006 - 07. 4. THE A.R FURTHER SUBMITTED T HAT THE ASSESSEE HAS NOT USED ANY INTEREST BEARING BORROWED FUNDS FOR PURCHASING SHARES HELD AS INVESTMENT. HE FURTHER SUBMITTED THAT THE HOLDING PERIOD RANGES FROM FOUR TO TEN MONTHS AND THE SAME SHOWS THAT THE ASSESSEE INTENDED TO HOLD THE SHARES AS ITS INVESTMENT. THE ASSESSEE HAS RECEIVED DIVIDEND INCOME OF ` 5.26 LAKHS FROM 119 COMPANIES WHICH ALSO PROVE THE INTENTION OF THE ASSESSEE . HE SUBMITTED THAT THE ASSESSEE HAS DEALT IN SHARES OF 52 COMPANIES DURING THE YEAR UNDER CONSIDERATION WHEREAS IT HA D DEALT IN SHARES OF 77 COMPANIES IN A.Y. 2006 - 07. ACCORDINGLY BY PLACING RELIANCE ON THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF GOPAL PUROHIT (228 CTR 582) THE LEARNED AR SUBMITTED THAT SHORT TERM CAPITAL GAIN DECLARED BY THE ASSES SEE SHOULD BE ACCEPTED. LEARNED AR FURTHER SUBMITTED THAT LEARNED CIT(A) HAS GIVEN IMPORTANCE TO CERTAIN REPETITIVE TRANSACTIONS CARRIED ON BY THE ASSESSEE. LEARNED AR SUBMITTED THAT THERE IS A TIME GAP B ETWEEN ONE SET OF TRANSACTION S AND OTHER SET OF TRA NSACTION S. ACCORDINGLY HE SUBMITTED THAT THE SAME SHOULD NOT BE USED TO DECIDE THIS ISSUE AGAINST THE ASSESSEE. 5 . ON THE CONTRARY LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE VOLUME AND FREQUENCY OF TRANSACTIONS WERE VERY HIGH AND HENCE THE ASSESSING OFFICER HAS TREATED THE ASSESSEE AS A TRADER IN SHARES. HE SUBMITTED THAT THE ASSESSING OFFICER HAS PLACED RELIANCE ON THE DECISION RENDERED BY THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF HARSHA N. MEHTA VS. DCIT (ITA NO. M/S. KANJI LILADHAR 3 1859/MUM/2009 DATED 16.7.2010) TO SUPPORT HIS CASE. HE FURTHER SUBMITTED THAT THE PRINCIPLE OF RES JUDICATA WILL NOT APPLY TO THE INCOME TAX PROCEEDINGS AND HENCE ACCEPTANCE OF CAPITAL GAIN IN OTHER YEARS SHOULD NOT BARRED BY ASSESSING OFFICER TO EXAMINE THE TRANSACTION DURIN G THE YEAR UNDER CONSIDERATION. HE ALSO TOOK SUPPORT OF THE DECISION RENDERED BY THE CO - ORDINATE BENCH OF TRIBUNAL IN THE CASE OF HARSHA L TAHILRAMAN (ITA NO.7516/M/2010 DATED 17.10.2014). 6. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD. THE QUE STION AS TO WHETHER A PERSON HAS HELD THE SHARES AS AN INVESTOR OR TRADER IS TO BE DECIDED ON THE BASIS OF VARIOUS FACTORS THAT WERE LISTED OUT BY THE HONBLE COURTS WHICH HAVE ALSO BEEN SUMMARIZED BY THE CBDT IN ITS CIRCULAR. IN PARTICULAR THE INTENTIO N OF THE ASSESSEE AT THE TIME OF PURCHASE OF SHARES HAS TO BE ASCERTAINED ON THE BASIS OF SURROUNDING CIRCUMSTANCES. IN THE INSTANT CASE WE NOTICE THAT THE ASSESSEE HAS MAINTAINED TWO SEPARATE PORTFOLIOS I.E. ONE FOR TRADING SHARES AND ANOTHER FOR INVE STMENT SHARES. THE BALANCE SHEET OF THE ASSESSEE SHOWS THE INVESTMENT SEPARATELY. THE ASSESSEE HAS NOT USED ANY INTEREST BEARING FUNDS FOR MAKING INVESTMENTS. THE HOLDING PERIOD OF THE SHARES WAS ALSO FOUND TO BE REASONABLE. THE VERY FACT THAT THE ASSE SSEE HAS DECLARED LONG TERM CAPITAL GAINS (WHICH HAS SINCE BEEN ACCEPTED BY THE AO) IN OUR VIEW SUPPORT THE CASE OF THE ASSESSEE THAT HE HAS PURCHASED THE SHARES FOR HOLDING THEM AS INVESTMENTS. HENCE IN OUR VIEW THE SHORT TERM CAPITAL GAINS DECLARED BY THE ASSESSEE SHOULD NOT BE DOUBTED WITH SINCE THEY HAVE BEEN SOLD WITHIN A PERIOD OF ONE YEAR. EVEN THOUGH THERE IS REPETITION OF PURCHASES THE LD A.R DEMONSTRATED THAT THE REPETITION HAS TAKEN PLACE IN SETS AFTER CONSIDERABLE TIME GAP. IT WAS ALSO STATED THAT THE CAPITAL GAINS DECLARED BY THE ASSESSEE IN THE PAST HAS BEEN ACCEPTED. HENCE WE ARE OF THE VIEW THAT THERE IS NO JUSTIFICATION FOR NOT ACCEPTING SHORT TERM CAPITAL GAINS IN THIS YEAR ALONE. ACCORDINGLY WE SET ASIDE THE ORDER PASSED BY LD CIT(A) ON THIS ISSUE AND DIRECT THE AO TO ASSESS THE SHORT TERM CAPITAL GAINS ARISING ON SALE OF SHARES UNDER THE HEAD CAPITAL GAINS. M/S. KANJI LILADHAR 4 7. THE NEXT ISSUE RELATES TO THE DISALLOWANCE MADE U/S 14A OF THE ACT. AT THE TIME OF HEARING THE LD A.R DID NOT P RESS THIS GROUND IN VIEW OF THE SMALLNESS OF THE AMOUNT. ACCORDINGLY WE DISMISS THE GROUND RELATING TO THE SAME. 8. THE NEXT ISSUE RELATES TO CHARGING OF INTEREST U/S 234A & 234B. IT IS CONSEQUENTIAL IN NATURE AND HENCE REQUIRES NO ADJUDICATION. 9. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 10 . 10 .2016 SD/ - SD/ - (MAHAVIR SINGH ) (B.R.BASKARAN ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 10 / 10 / 20 1 6 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR ITAT MUMBAI 6. GUARD FILE. BY ORDER //TRUE COPY// ( DY./ASSTT . REGISTRAR) PS ITAT MUMBAI