Income Tax Appellate Tribunal - Mumbai
Jitednra V Shah, Mumbai vs Department Of Income Tax
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IN THE INCOME TAX APPELLATE TRIBUNAL "J", BENCH
MUMBAI
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BEFORE SHRI B.R.JAIN, AM & SHRI VIVEK VARMA, JM
ITA No.4644/Mum/2011
( Assessment Year :2008-2009)
ACIT-25(3), Mumbai Vs. Shri Jitendra V. Shah, 2-32,
Navjivan Society, Lamington
Road, Grant Road, Mumbai-
63.
PAN/GIR No. : AAJPS 8575 K
( Appellant) .. ( Respondent)
/Assessee by : Mr.Rakesh Ranjan
/Revenue by : Mr. V.P.Patel
Date of Hearing : 15th Oct., 2012
Date of Pronouncement : 17th Oct.,2012
ORDER
PER B.R.JAIN (A.M.) :
This appeal by revenue against the order dated 29-3-2011 of leaned CIT(A)-35, Mumbai, raises following grounds :-
1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in directing the A.O. to accept the claim of Short Term Capital Gain of Rs.79,40,046/- on profit arriving from purchase & sale of shares instead of business income treated by the Assessing Officer, without appreciating the fact that the assessee is dealing in large volume of shares, most of the shares are bought and sold within short period, while some are not sold due to market conditions and their holding with assessee remains beyond few days, it will not change the nature of transactions and the assessee is very well engaged in the business of share trading, which denote that the motive of the assessee is to carry on business in shares to book profit rather than investment in shares.2 ITA No.4644/2011
2. The appellant prays that the order of the ld. CIT(A) on the above grounds be set aside and that of the A.O. be restored.
2. Briefly the facts stated in assessment order are that the assessee is trading in shares and derivatives. He maintained regular books of accounts for this purpose. The Assessing Officer found that the earning of dividend income by the assessee is only incidental and not the main intention for purchasing the shares. The assessee held shares for a very short period. The frequency of the transactions carried out by the assessee is very high with large volumes of shares involved and as such the assessee was carrying out this as an organized activity with a profit motive. He, therefore, required the assessee to show cause as to why the income from capital gains declared by the assessee be not treated as his income from business. In response thereto, the assessee explained that the transactions are routed through the demat account. Volume and periodicity will not alter the nature of transactions. The assessee has accounted for these transactions in the investment account. Investment came to be made from his own capital. The assessee is purely an investor and sale and purchases transactions are delivery based. He therefore, stated that the claim of the assessee, being bonafide, needs to be accepted. This, however, did not find favour with the Assessing Authority. He recorded a finding that there is no intention of the assessee to hold the shares for the purpose of investment. The assessee is engaged in only one activity i.e. the activity of earning profit through sale and purchases of shares, be it 3 ITA No.4644/2011 derivatives, intra day trading or purchase and sale within short period or long period. The expenses incurred thereon are also inseparable. He, therefore, rejecting the claim of the assessee proceeded to assess the entire profits as arising from sale and purchases on shares and treated the same as assessee's income from business at Rs.79,40,046/-.
3. Learned CIT(A) took that the Assessing Officer has admitted the profit on sale of shares in the earlier years as assessee's income under the head capital gains. The shares held by the assessee at the end of the year, have also been admitted by the Assessing Officer, as investment by valuing them at cost and this fact is evident from the balance sheet filed by the assessee which is kept on record. He, therefore, took that the intention of the assessee is to treat such shares as investment. Going by the statement of the assessee that more than 95% of the short term capital gain, is admitted only from one script, he entertained the view that the assessee cannot be said to be a regular trader in shares. The Assessing Officer made the assessment by wrong assumption of facts in as much as the assessee did not sell his shares in a short period but effected sales after holding major portion of the shares for more than 60 days. Placing reliance on the judgment by Mumbai Bench of the Tribunal in the case of Gopal Purohit Vs. JCIT, reported in 29 SOT 117 and in the case of Janak S. Rangwalla Vs. ACIT, reported in 11 SOT 627 and also by the Mumbai Tribunal in the case of DCIT Vs. SMK Shares and Stock Broking Pvt. Ltd., passed 4 ITA No.4644/2011 in ITA No.799/2009, vide order dated 24-11-2010, he directed the Assessing Officer to accept the claim of the appellant under the head "income from short term capital gains", specifically, when there are no borrowed funds utilized for investments in shares.
4. Heard parties with reference to material on record. It appears to us that the authorities below have not examined the facts of this case in the right perspective. Learned CIT(A) felt persuaded merely on the saying of the assessee that the stock dealt or held by the assessee were his investments, but did not examine the material facts with reference to books of account or even with balance sheet that was laid on his record. The copy of balance sheet laid on record before us, reveals that the assessee has declared stock of shares held as at the end of the year at Rs.3,36,624/- as stock-in-trade, which is his current asset and not the investment. The finding, thus, reached by the learned CIT(A) is perverse on facts. We, therefore, set aside the order of learned CIT(A) and remit the issue back to the Assessing Authority so that the correct facts as to whether the assessee was holding the stock as investment or otherwise as stock-in-trade during the year as well as at the end of the year has to be examined with reference to the books of account and other relevant material that the assessee may bring on record and adjudicate the issue afresh in accordance with law after providing reasonable and effective opportunity of being heard to the assessee.
5ITA No.4644/2011
5. In the result, appeal by the revenue stands allowed for statistical purposes.
Order pronounced in the open court on this 17th day of Oct.,2012.
17th Oct., 2012
Sd/- Sd/-
( ) ( . )
(VIVEK VARMA) (B.R.JAIN)
/ JUDICIAL / ACCOUNTANT MEMBER
MEMBER
Mumbai; Dated : 17th Oct./ 2012.
/pkm, PS
Copy of the Order forwarded to :
1. / The Appellant
2. / The Respondent.
3. / The CIT(A)-X, Mumbai.
4. / CIT
5. / DR, ITAT, Mumbai
6. Guard file.
//True Copy//
/ BY ORDER,
(Dy./Asstt. Registrar)
/ ITAT, Mumbai