Ms. Sangeeta Mangal, New Delhi v. ITO, New Delhi

ITA 4470/DEL/2009 | 2006-2007
Pronouncement Date: 30-04-2010 | Result: Allowed

Appeal Details

RSA Number 447020114 RSA 2009
Assessee PAN AAPPM0546E
Bench Delhi
Appeal Number ITA 4470/DEL/2009
Duration Of Justice 5 month(s) 5 day(s)
Appellant Ms. Sangeeta Mangal, New Delhi
Respondent ITO, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 30-04-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted G
Tribunal Order Date 30-04-2010
Date Of Final Hearing 26-04-2010
Next Hearing Date 26-04-2010
Assessment Year 2006-2007
Appeal Filed On 24-11-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH `G : NEW DELHI) BEFORE SHRI R.P. TOLANI JUDICIAL MEMBER AND SHRI K.D. RANJAN ACCOUNTANT MEMBER ITA NO.4470/DEL./2009 (ASSESSMENT YEAR : 2006-07) MS. SANGEETA MANGAL VS. ITO WARD 35(4) A-22 ANAND VIHAR NEW DELHI. DELHI-110 092. (PAN/GIR NO.AAPPM0546E) (APPELLANT) (RESPONDENT) ASSESSEE BY : S/SHRI NEERAJ JAIN/P.K. MISRA REVENUE BY : SHRI A.K. SINHA SR.DR ORDER PER K.D. RANJAN: AM THIS APPEAL BY THE ASSESSEE FOR AY 2006-0 7 ARISES OUT OF THE ORDER OF THE CIT(A)- XXVII NEW DELHI. DURING THE COURSE OF HEARING GRO UND NO.3 WAS NOT PRESSED AND CONSEQUENTLY THE SAME IS DISMISSED AS NOT PRESSED. THE ONLY REMAINING ISSUE FOR CONSIDERATION RELATES TO DISALLOWING THE CLAIM OF R S.4 04 473/- ON ACCOUNT OF LONG TERM CAPITAL GAINS TREATED AS BUSINESS INCOME BY THE AO. THE GROUNDS OF APPEAL ARE REPRODUCED AS UNDER: 1.THAT THE ORDER OF THE LD.CIT(A) IS BAD IN LAW AN D ON FACTS OF THE CASE. 2. THAT THE LD.CIT(A) HAS ERRED IN CONFIRMING THE D ISALLOWANCE OF CLAIM OF RS.4 04 473/- ON ACCOUNT OF LONG TERM CAPITAL GAIN TREATED AS BUSINESS INCOME BY THE AO. 3. THE ORDER OF THE LD.CIT(A) HAS ERRED IN CONFIRMI NG THE ADDITION OF RS.71 400 ON ACCOUNT OF UNDISCLOSED INVESTMENT IN 10 000 SHAR ES OF M/S AMCO VINYL LTD. U/S 69 OF THE ACT. 2. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT T HE ASSESSEE IN THE RETURN OF INCOME CLAIMED THE CAPITAL GAIN OF RS.4 04 473/- AS EXEMPT BEING LONG TERM CAPITAL GAINS. THE AO ON THE BASIS OF INFORMATION AVAILABLE IN RETURN OF INCOME WAS OF THE VIEW THAT THE ITA NO.4470/DEL./2009 (AY : 2006-07) 2 ASSESSEE WAS ENGAGED IN THE BUSINESS OF TRADING IN SHARES AND THEREFORE THE INCOME WAS TO BE ASSESSED AS BUSINESS INCOME. THE AO ALSO REL IED ON THE REPORT OF AUDITORS TO SUPPORT HIS VIEW THAT THE ASSESSEE WAS ENGAGED IN T RADING IN SHARES. HE ALSO NOTED THAT IN P&L A/C ASSESSEE HAD CLAIMED DEDUCTION ON ACCOUNT O F SECURITY TRANSACTION TAX(STT) WHEREAS IN CASE OF LONG TERM CAPITAL GAIN THE DEDU CTION SHOULD HAVE BEEN CLAIMED U/S 88E OF THE ACT. THE AO ALSO NOTED THAT THE LD.COUN SEL OF THE ASSESSEE DID NOT FURNISH EVEN THE DATE OF ACQUISITION OF SHARES STATED TO BE LONG TERM EARNING SHARES QUALIFYING FOR EXEMPTION U/S 10(38) OF THE ACT. THE AO THEREFORE TREATED THE PROFITS DERIVED ON PURCHASE AND SALE OF SHARES AS BUSINESS INCOME AND DISALLOWED THE CLAIM OF THE ASSESSEE AS LONG TERM CAPITAL GAINS. 3. ON APPEAL IT WAS SUBMITTED THAT THE P&L A/C FIL ED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS DULY SHOWED THE IN COME EARNED FROM SALE AND PURAHCASE OF SHARES AND PROFIT WAS DULY BIFURCATED AS LONG TERM PROFIT AND SHORT PROFIT. THE LONG TERM PROFIT WAS IN RESPECT OF LONG TERM CA PITAL GAIN ON THE SHARES WHICH WAS HELD BY THE ASSESSEE AS INVESTMENT SINCE THE P&L A/ C WAS PREPARED ON CONSOLIDATED BASIS. THEREFORE THE COMPUTATION OF INCOME FOR LO NG TERM CAPITAL GAIN WAS DULY REDUCED FROM THE PROFIT AND THE SAME WAS SHOWN UNDER THE HE AD CAPITAL GAINS AND DEDUCTION WAS DULY CLAIMED IN ACCORDANCE WITH PROVISIONS OF INCOM E-TAX ACT. IT WAS ALSO SUBMITTED THAT ASSESSEE WAS HAVING COMMON PORTFOLIO FOR THE SHARES HELD BY HER AS LONG TERM INVESTMENT AS WELL AS SHARES HELD FOR TRADING PURPOSES I.E. FO R SHORT TERM PROFITS (TRADING INVESTMENT). THE TOTAL INVESTMENTS IN SHARES PORTFOLIO WAS SHOWN UNDER THE HEAD CLOSING STOCK IN THE BALANCE SHEET. HOWEVER FOR THE PURPOSE OF AUDITOR S REPORT U/S 44AB THE PROFITS/LOSSES WERE DULY BIFURCATED IN THE LONG TERM/SHORT TERM. THE AUDITOR HAS SUBMITTED HIS REPORT BASED ON CONSOLIDATED STATEMENT OF INCOME EARNED FR OM SALE AND PURCHASE OF SHARES IN RESPECT OF COMPLETE PORTFOLIO OF THE ASSESSEE. THE REFORE HE HAS MENTIONED THE ACTIVITY OF THE ASSESSEE AS SALE AND PURCHASE OF SHARES WHICH M AINLY RELATED TO SHORT TERM TRADING ACTIVITIES IN SHARES ASSESSABLE AS BUSINESS PROFIT. IF THE AUDITOR HAD TO RELATE THE SAME TO THE ENTIRE PURCHASE AND SALE OF SHARES HE SHOULD N OT HAVE BIFURCATED THE PROFIT EARNED ON PURCHASE AND SALE OF SHARES INTO LONG TERM AND SHO RT TERM. THEREFORE THE AUDIT REPORT RELIED UPON BY THE AO WAS RELEVANT FOR SHORT TERM P ROFIT ON SALE AND PURCHASE OF SHARES WHICH COULD BE TERMED AS TRADING ACTIVITIES ASSESSA BLE AS BUSINESS INCOME. THEREFORE THE ITA NO.4470/DEL./2009 (AY : 2006-07) 3 AO HAD WRONGLY INTERPRETED CLAUSE 8(A) OF FORM 3CD AND APPLIED THE SAME TO THE LONG TERM CAPITAL GAIN EARNED ON SHARES HELD AS INVESTME NT. AS REGARDS THE CLAIM OF STT IN P&L A/C THE CONTENTION OF THE ASSESSING OFFICER WA S NOT CORRECT BECAUSE REBATE U/S 88E IS AVAILABLE AGAINST INCOME-TAX LIABILITY IN RESPECT O F INCOME ARISING FROM TAXABLE SECURITIES TRANSACTION COVERED BY CLAUSE (B) OF PROVISO TO SEC TION 43(5) OF I.T. ACT I.E. OF TRADING IN DERIVATIVE. SINCE THE ASSESSEE HAD NOT TRADED IN DERIVATIVE. THEREFORE THE CLAIM OF DEDUCTION U/S 88E DID NOT ARISE. ACCORDINGLY THE S TT PAID BY HER WAS TO BE CLAIMED AS EXPENDITURE IN THE P&L A/C WHICH HAS BEEN DULY CLAI MED BY HER. HOWEVER THE STT PERTAINING TO THE SHARES ENTITLED TO LONG TERM CAPI TAL GAIN WAS NOMINAL AND LONG TERM CAPITAL GAIN HAS BEEN CALCULATED CONSIDERING THE SA ME IN THE SALES VALUE AND THE STT PAID HAS BEEN SHOWN AS DEBIT TO THE P&L A/C. THEREFORE THERE WAS NO RESULTANT EFFECT ON THE INCOME DECLARED BY THE ASSESSEE. AS REGARDS THE CL AIM FOR EXEMPTION U/S 10(38) IT WAS SUBMITTED THAT SHARES HAD BEEN BROUGHT FROM EARLIER YEARS AND HAVE BEEN HELD FOR MORE THAN A YEAR AND THE DATE OF ACQUISITION WAS AVAILAB LE WITH THE ASSESSEE WHICH WAS NEVER CALLED BY THE AO. 4. THE CIT(A) HOWEVER REJECTED THE CLAIM OF THE A SSESSEE ON THE GROUND THAT THE ASSESSEE HAD HIMSELF TREATED THE INCOME IN TRADING IN SHARES AS BUSINESS INCOME. THE AUDIT REPORT IN FORM NO.3CD CLEARLY ESTABLISHED THA T THE ASSESSEE WAS DURING THE YEAR ENGAGED IN THE BUSINESS OF TRADING OF SHARES. THER EFORE THE CLAIM OF THE ASSESSEE FOR LONG TERM CAPITAL GAIN WAS NOT JUSTIFIED. HE ACCORDINGL Y UPHELD THE STAND OF THE AO TREATING THE INCOME FROM PURCHASE AND SALE OF SHARES AS BUSI NESS INCOME. 5. BEFORE US LD.AR OF THE ASSESSEE SUBMITTED THAT THE AO HAD NOT APPRECIATED THE FACTS OF THE CASE PROPERLY. THE ASSESSEE WAS HOLDI NG THE SHARES IN EARLIER YEARS ALSO. THE ASSESSEE WAS NOT ENGAGED IN THE BUSINESS OF TRADING IN SHARES. THE INVESTMENT HAS BEEN MADE IN SHARES AND INVESTMENTS HAVE BEEN HELD AS SU CH. THEREFORE THE PROFIT ARISING FROM SALE OF SHARES HAS TO BE ASSESSED AS CAPITAL G AINS I.E. SHORT TERM OR LONG TERM CAPITAL GAINS. ON THE OTHER HAND LD.SR.DR SUPPORTED THE O RDER OF THE CIT(A). 6 WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH T HE MATERIAL AVAILABLE ON RECORD. FROM THE ABOVE FACTS IT IS CLEAR THAT THE AO HAD M AINLY RELIED ON THE AUDIT REPORT WITHOUT EXAMINING THE CONTENTION OF THE ASSESSEE. WE THER EFORE SET ASIDE THE ISSUE TO THE FILE OF THE AO WITH THE DIRECTIONS TO EXAMINE THE NATURE OF INVESTMENTS MADE BY THE ASSESSEE ITA NO.4470/DEL./2009 (AY : 2006-07) 4 WHETHER THE PURCHASE AND SALE OF SHARES REPRESENT T HE INVESTMENT OR THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF TRADING IN SHARES. THE A O WILL PROVIDE NECESSARY OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 7 IN THE RESULT THE APPEAL FILED BY THE ASSESSEE I S ALLOWED FOR STATISTICAL PURPOSES. 8. ORDER PRONOUNCED IN OPEN COURT ON 30.04.2010. SD/- SD/- (R.P. TOLANI) (K.D. RANJAN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED APRIL 30 2010. SKB COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XXVII NEW DELHI 5.CIT(ITAT) NEW DELHI. AR/ITAT