ACIT 25(3), MUMBAI v. KALPESH J SHAH, MUMBAI

ITA 6010/MUM/2009 | 2005-2006
Pronouncement Date: 31-07-2013 | Result: Partly Allowed

Appeal Details

RSA Number 601019914 RSA 2009
Assessee PAN AMDPS0203N
Bench Mumbai
Appeal Number ITA 6010/MUM/2009
Duration Of Justice 3 year(s) 8 month(s) 18 day(s)
Appellant ACIT 25(3), MUMBAI
Respondent KALPESH J SHAH, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 31-07-2013
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted D
Tribunal Order Date 31-07-2013
Date Of Final Hearing 25-07-2013
Next Hearing Date 25-07-2013
Assessment Year 2005-2006
Appeal Filed On 12-11-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D MUMBAI .. ! ' #. . $.. % & ' ' BEFORE SHRI R.S.SYAL AM AND DR.S.T.M.PAVALAN JM ITA NO.6010/MUM/2009 : ASST.YEAR 2005-2006 THE ASSTT.COMMISSIONER OF INCOME-TAX CIRCLE 25(3) MUMBAI. SHRI KALPESH J.SHAH D-804 VEENA SANGEET MAHAVIR NAGAR DAHANUKAR WADI KANDIVLI (WEST) MUMBAI 400 067. PAN : AMDPS0203N. ( () / // / APPELLANT) % % % % / VS. ( + ()/ RESPONDENT) () - -- - . . . . / APPELLANT BY : SHRI D.K.SINHA + () - . - . - . - . / RESPONDENT BY : SHRI PRADIP KEDIA % - /! / / / / DATE OF HEARING : 25.07.2013 012 - /! / DATE OF PRONOUNCEMENT : 31.07.2013 ' ' ' ' 3 3 3 3 / / / / O R D E R PER R.S.SYAL (AM) : THIS APPEAL BY THE REVENUE ARISES OUT OF THE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) ON 28.08.2009 IN RELATION TO THE ASSESSMENT YEAR 2005-2006. 2. FIRST GROUND OF THE APPEAL IS AGAINST THE DIRECT ION OF THE LEARNED CIT(A) TO ACCEPT THE CLAIM OF `SHORT TERM CAPITAL G AIN ON PROFIT ARISING FROM PURCHASE AND SALE OF SHARES INSTEAD OF `BUSINESS INCOME TREATED BY THE ASSESSING OFFICER. BRIEFLY STATED TH E FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN T HE BUSINESS OF ARBITRAGE AND JOBBING IN HIS PROPRIETORSHIP CONCERN UNDER THE NAME ITA NO.6010/MUM/2009. SHRI KALPESH J.SHAH. 2 AND STYLE OF M/S. ADI INVESTMENT. APART FROM BUSI NESS INCOME OF ` 10.57 LAKH RESULTING FROM SUCH ARBITRATE BUSINESS THE ASSESSEE ALSO SHOWED SHORT TERM CAPITAL GAIN OF ` 15.91 LAKH FROM SALE OF SHARES. THE ASSESSING OFFICER OBSERVED THAT THERE WAS NO OP ENING AND CLOSING STOCK OF SHARES WHICH DEPICTED THAT ALL THE SHARES PURCHASED DURING THE YEAR WERE SOLD. CONSIDERING THE FACT THA T THE ASSESSEE PURCHASED/SOLD 34 SCRIPS AND THE FURTHER FACT THAT THE ASSESSEE BORROWED UNSECURED LOANS WHICH WERE UTILIZED FOR T HE BUSINESS/SHARE TRANSACTIONS THE ASSESSING OFFICER HELD THAT SUCH AMOUNT OF PROFIT FROM SALE OF SHARES WAS TO BE CONSIDERED AS `BUSINE SS INCOME INSTEAD OF `CAPITAL GAIN AS CLAIMED BY THE ASSESSEE. THE LEARNED CIT(A) NOTICED CERTAIN APPARENT FALLACIES IN THE ASSESSMEN T ORDER AND OVERTURNED THE SAME ON THIS POINT. 3. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD WE OBSERVE THAT THE AS SESSEE WAS MAINLY ENGAGED IN THE BUSINESS OF ARBITRAGE AND JOBBING FO R WHICH HE MAINTAINED HIS OFFICE AND KEPT STAFF FOR WHICH CERT AIN EXPENSES WERE INCURRED. IT APPEARS THAT THE ASSESSING OFFICER CON FUSED THE ARBITRAGE BUSINESS WITH SALE AND PURCHASE OF CERTAIN SHARES. IT IS SO BECAUSE HE HAS HELD THAT THE ASSESSEE DID NOT HAVE OPENING AND CLOSING STOCK OF SHARES. WHEN THE BUSINESS OF THE ASSESSEE IS EXCLUSI VELY OF ARBITRAGE AND JOBBING THERE COULD HAVE BEEN NO QUESTION OF A NY OPENING AND CLOSING STOCK OF SHARES. THERE WERE ONLY 34 SCRIPS FROM WHOSE TRADING THE ASSESSEE EARNED PROFIT OF ` 15.91 LAKH BY RETAINING THEM AS ITA NO.6010/MUM/2009. SHRI KALPESH J.SHAH. 3 CAPITAL ASSETS. THE DETAILS OF SUCH SALE AND PURCHA SE OF SHARES IS AVAILABLE ON PAGES 1 AND 2 OF THE PAPER BOOK. FIRST TRANSACTION IS THE CASE OF AGRO TECH FOODS SHARES WHICH WERE PURCHASED ON 17.11.2004 AND SOLD ON 17.12.2004. IN THE LIKE MANNER SECOND I S THE TRANSACTION OF SHARES OF BIHAR SPONGE WHICH WERE PURCHASED ON 1 7.11.2004 AND SOLD BETWEEN 29.11.2004 AND 14.12.2004. SOME OF THE SHARES HAVE BEEN RETAINED BY THE ASSESSEE FOR A STILL LONGER PE RIOD. FOR EXAMPLE SHARES OF ESSAL PACK WERE PURCHASED ON 27.08.2004 B UT SOLD BETWEEN THE PERIOD 27.12.2004 AND 10.02.2005. IN ALL THERE ARE TOTAL 34 SCRIPS WHICH HAVE BEEN PURCHASED AND SOLD BY THE ASSESSEE RESULTING INTO PROFIT OF ` 15.91 LAKH. THE FACTS AND CIRCUMSTANCES AMPLY SHOW THAT THE PORTFOLIO OF SHARES WAS MAINTAINED BY THE ASSES SEE SIMPLY AS AN `INVESTOR AND NOT AS A `TRADER. THE BUSINESS OF A RBITRAGE AND JOBBING IS DISTINCT FROM THAT OF INVESTMENT IN THE PURCHASE AND SALE OF SHARES. SUCH BUSINESS RESULTED INTO BUSINESS INCOM E OF ` 10.57 LAKH WHICH THE ASSESSEE DECLARED AS BUSINESS INCOME. APA RT FROM THAT THE ASSESSEE REALIZED PROFITS OF ` 15.91 LAKH FROM SALE AND PURCHASE OF CERTAIN SHARES WHICH WERE HELD BY HIM AS SHORT TERM CAPITAL ASSETS. WE ARE OF THE CONSIDERED OPINION THAT IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE SUCH SHARES WERE HELD BY THE ASSESSEE AS INVESTMENT AND NOT STOCK IN TRADE. WE THEREFORE U PHOLD THE IMPUGNED ORDER ON THIS ISSUE. THIS GROUND FAILS. ITA NO.6010/MUM/2009. SHRI KALPESH J.SHAH. 4 4. SECOND GROUND IS AGAINST DELETION OF ADDITION OF ` 7 28 900 MADE ON ACCOUNT OF ARBITRATION CHARGES DEBITED BY T HE ASSESSEE IN HIS BOOKS OF ACCOUNT. THE FACTS APROPOS THIS GROUND ARE THAT THE ASSESSEE CLAIMED DEDUCTION OF ` 7.28 LAKH AS ARBITRATION CHARGES PAID. IN THE ABSENCE OF ANY DETAIL OR CONFIRMATION OR SUPPORTING EVIDENCE REGARDING THESE PAYMENTS THE A.O. MADE DISALLOWANC E OF THE EQUAL AMOUNT. THE LEARNED CIT(A) ON APPRECIATION OF CERT AIN MATERIAL DELETED THE ADDITION. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE RELEVANT MATERIAL ON RECORD. ON A PERTINENT QUERY IT WAS AD MITTED BY THE LEARNED AR THAT THE DETAILS PLACED BEFORE THE LEARN ED FIRST APPELLATE AUTHORITY IN SUPPORT OF CLAIM FOR DEDUCTION ON ACCO UNT OF ARBITRATION CHARGES WERE NOT FILED BEFORE THE ASSESSING OFFICE R AND FURTHER THE LEARNED CIT(A) DID NOT OBTAIN ANY REMAND REPORT FRO M THE A.O. UNDER THESE CIRCUMSTANCES WE ARE OF THE CONSIDERED OPINION THAT IT WOULD BE IN THE FITNESS OF THE THINGS IF THE IMPUGN ED ORDER ON THIS ISSUE IS SET ASIDE AND THE MATTER RESTORED TO THE F ILE OF A.O. THE ASSESSEE IS DIRECTED TO PLACE NECESSARY EVIDENCE BE FORE THE A.O. IN SUPPORT OF CLAIM FOR DEDUCTION OF ARBITRATION CHARG ES PAID AT ` 7 28 900. THE ASSESSING OFFICER WILL DECIDE THIS IS SUE AFRESH AS PER LAW AFTER ALLOWING A REASONABLE OPPORTUNITY OF BEIN G HEARD TO THE ASSESSEE. ITA NO.6010/MUM/2009. SHRI KALPESH J.SHAH. 5 6. 4 /5 6 73 / - 8/ 9: ; IN THE RESULT THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 31 ST DAY OF JULY 2013. ' 3 - 012 <'%5 1 - = SD/- SD/- (DR.S.T.M.PAVALAN) (R.S.SYAL) & ' & ' & ' & ' / JUDICIAL MEMBER ! ' ! ' ! ' ! ' / ACCOUNTANT MEMBER MUMBAI ; <'% DATED : 31 ST JULY 2013. DEVDAS* ' 3 - +&/7> ? >2/ ' 3 - +&/7> ? >2/ ' 3 - +&/7> ? >2/ ' 3 - +&/7> ? >2// COPY OF THE ORDER FORWARDED TO : 1. () / THE APPELLANT 2. + () / THE RESPONDENT. 3. @ () / THE CIT THANE. 4. @ / CIT(A) XXV MUMBAI. 5. >C= +&/&% / DR ITAT MUMBAI 6. = D / GUARD FILE. ' 3% ' 3% ' 3% ' 3% / BY ORDER >/ +&/ //TRUE COPY// E E E E/ // /9 8 9 8 9 8 9 8 ( DY./ASSTT. REGISTRAR) / ITAT MUMBAI