Income Tax Appellate Tribunal - Mumbai
Vaishali V.Shah , Mumbai vs Department Of Income Tax on 12 March, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH "F", MUMBAI
BEFORE SHRI RAJENDRA SINGH, ACCOUNTANT MEMBER AND
DR. S.T.M. PAVALAN, JUDICIAL MEMBER
ITA No.5645/Mum/2010
Assessment Year : 2007-08
Asstt. Commissioner of Shri Vipul C. Shah
Income tax -15(2) 15/7, Navjeevan Society
Matru Mandir Vs. Lamington Road
Room No.113, Tardeo Mumbai-400 008.
Mumbai-400 008. PAN :AJFPS 8772 H
(Appellant) (Respondent)
ITA No.5647/Mum/2010
Assessment Year : 2007-08
Asstt. Commissioner of Shri Vimal C. Shah
Income tax -15(2) 15/7, Navjeevan Society
Matru Mandir Vs. Lamington Road
Room No.113, Tardeo Mumbai-400 008.
Mumbai-400 008. PAN :AMWPS 3500 P
(Appellant) (Respondent)
ITA No.5649/Mum/2010
Assessment Year : 2007-08
Asstt. Commissioner of Smt. Vaishali V. Shah
Income tax -15(2) 15/7, Navjeevan Society
Matru Mandir Vs. Lamington Road
Room No.113, Tardeo Mumbai-400 008.
Mumbai-400 008. PAN :AQPPS 2455 Q
(Appellant) (Respondent)
Assessee by : Shri M. Subramanian
Revenue by : Shri O.P. Meena
Date of hearing : 12.03.2013
Date of Pronouncement : 15.03.2013
2 ITA No.5645, 47 & 49/M/10
AY .07-08
ORDER
PER RAJENDRA SINGH, AM:
These appeals by the revenue are directed against different orders all dated 5.5.2010 of CIT(A) for the assessment year 2007-08. The dispute raised by the revenue is regarding nature of income from purchase and sale of shares. Since issue raised is identical in all the appeals, these are being disposed off by a single consolidated order for the sake of convenience.
2. The facts in brief are that all the three assessees who belong to the same family had earned income from purchase and sale of shares which had been declared as short term capital gain amounting to Rs.93,19,053/-, Rs.92,79,500/- and Rs.92,76,076/- respectively. The AO during the assessment proceedings asked the assessee to file details of transactions including copies of demat accounts and proof of payment. All the assessees replied that the transactions had been made through the broker i.e. M/s. Alliance Intermediateries and Network Pvt. Ltd. who had taken delivery of shares on behalf of the assessee . The AO thereafter sought information from M/s. Alliance Intermediateries and Network Pvt. Ltd. who replied that it had not maintained the DP account of clients and no delivery had been taken on their behalf. The assessees were confronted with the replies received from the broker but the assessee had not denied the fact that transactions of the shares were made without actual delivery of shares either by the assessee or the broker. The AO therefore asked the broker to explain the modus operandi in respect of share transactions executed on behalf of the assessee to which the broker replied vide letter dated 30.10.2009 that since transactions were for short period there was no need to take delivery from the principal broker and to give delivery to the client. Considering all these factors the AO concluded that income from share transactions had to be taxed either as speculation income or business income. Since there was no evidence of delivery of shares, the AO treated the nature of income as speculative income under section 43(J) of the Act and assessed the income accordingly.
3 ITA No.5645, 47 & 49/M/10AY .07-08
3. The assessee disputed the decision of AO and submitted before CT(A) that from the replies given by the broker, it could not be concluded that transactions were speculative in nature and, on the contrary, the reply indicated that the delivery had been taken by the main broker. It was pointed out that the reply given by the sub-broker i.e. M/s. Alliance Intermediateries and Network Pvt. Ltd. showed that the delivery had been obtained by the main broker and delivery from the main broker had not been taken as no instructions had been received by the client. It was also submitted that the assessees had decided to keep shares with the main broker for the sake of convenience as they were not aware of the intricacies of the market and in case of sale it would be convenient to transfer shares through main broker. It was further submitted that the delivery of shares to and by broker is sufficient to prove that the assessee had taken constructive delivery and transactions of purchase and sale of shares could not be speculative. Reliance for this proposition was placed on the judgment of Hon'ble High Court of Calcutta in the case of CIT vs. All India Tea & Trading Co. Ltd. (117 ITR 525). Reliance was also placed on the judgment of Hon'ble High Court of Rajasthan in the case of CIT vs. Aditya Mills Ltd. (209 ITR 933) in which it was held that actual delivery was not restricted to delivery to assessee itself and that delivery could be through agent also. After considering the submissions of the assessee, CIT(A) observed that assessee had transacted in the scripts in the normal segment and not derivative segment. It was also observed by him that in dematerialized settlement (T + 2) rolling settlement was followed. CIT(A) also observed that there was no dispute that sub-broker had confirmed that delivery of share had not been taken by the assessee in his demat account but remained with the main broker. Thus there was no dispute that there was delivery of shares to demat account of assessee's broker. CIT(A) agreed that the submission of the assessee that delivery did not mean delivery to the assessee itself but delivery to agents which was supported by the decision of the Tribunal in case of Jayshree Roy Chowdhary vs. ACIT (92 ITD 400) and by the judgment of Hon'ble High Court of Rajasthan in the case of CIT vs. Aditya Mills Ltd. (supra), CIT(A) therefore held that there being delivery by main broker it had to be considered as delivery by assessees and therefore 4 ITA No.5645, 47 & 49/M/10 AY .07-08 the transactions could not be considered as speculative. CIT(A) thus accepted the short term capital gain declared by the assessee aggrieved by which the revenue is in appeal in all the cases before the Tribunal.
4. Before us, the ld. DR appearing on behalf of the revenue assailed the order of CIT(A). It was submitted that the AO had treated the transactions as speculative on the ground that there was no evidence of delivery and, therefore, CIT(A) was not correct in stating that there was no dispute, that delivery had been taken by main broker. It was pointed out that there was no evidence placed by the assessee to show that delivery had been taken by main broker and only on the statement of sub-broker issue of delivery could not be decided. Further the AO had held that the transactions had to be considered either as speculative or normal business income and therefore, even if delivery had been taken CIT(A) was required to go into the other aspect as to whether transactions could be considered as trading or investment which had not been done. It was pointed out that the revenue had raised a specific ground to the effect that CIT(A) was not justified treating income as short term capital gain and not as speculation/business income over looking the fact that no demat account of any of the assessees were produced. He also referred to the dates of purchase and sales made by the assessee placed on record in the paper book which shows shares purchased had been sold after very short span and in some cases the assessee after selling a particular share had also purchased the same again which can not be the attribute of an investor. For instance in case of Vimal Shah, the assessee after selling shares of Shree Precoated Steel on 11.10.2006 had again purchased the same shares on 12.10.2006 and sold the same in November, 2006. It was therefore, urged that the income should be treated as business income even if delivery was established which in this case was not substantiated by any evidence. The ld. AR for the assessee on the other hand strongly supported the orders of CIT(A) and placed reliance on the findings given in appellate order.
5. We have perused the records and considered the rival contentions carefully. The dispute is regarding nature of income from purchase and sale 5 ITA No.5645, 47 & 49/M/10 AY .07-08 of shares by the assessees who belonged to the same group. The assessees had purchased shares from the same sub-broker who in turn had purchased the shares from the main broker. The enquiry from the sub-broker revealed that it had not taken delivery on behalf of the assessees. The sub-broker had only stated that the shares remained with main broker as there were no instructions for the clients to take delivery. It was also submitted by sub- broker that it had not maintained any demat account of the clients. After considering the material on record, the AO observed that the income from share transaction had to be considered either as speculation or normal business income but since there was no evidence of delivery, the AO treated the income as speculation income. In appeal CIT(A) observed that sub-broker had stated that the shares remained with main broker and from this he concluded that delivery had been taken by the main broker which has to be considered as delivery by the assessee. CIT(A) also observed that there was no dispute that delivery had been taken by main broker. However we note that there is no evidence that the delivery had been taken by main broker. Since the issue of delivery was still in dispute we agree with the submission of ld. DR that finding of CIT(A) that there was no dispute of delivery was not correct. No enquiry has been made from the main broker confirming that it had taken delivery on behalf of the assessee. Moreover even if delivery had been taken CIT(A) was required to examine the other aspect as to whether income from share transaction could be considered as business income or not as AO clearly indicated as it could be considered as speculative income or normal business income. Details of share transactions placed in paper book reveal that shares have been sold after holding for a short period and in some cases there are repeated purchases and sale of shares in same scrips which apparently are not attributes of an investor. Considering the facts and circumstances of the case the matter requires fresh examination at the level of CIT(A). We, therefore set aside the order of CIT(A) and restore the matter to him for passing a fresh order after necessary examination in the light of the observations made above and after allowing opportunity of hearing to the assessee.
6 ITA No.5645, 47 & 49/M/10AY .07-08
6. In the result, all the appeals of the revenue are allowed for statistical purposes.
Order pronounced in the open court on 15.03.2013.
Sd/- Sd/-
(DR. S.T.M. PAVALAN) (RAJENDRA SINGH)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai, Dated: 15.03.2013.
Jv.
Copy to: The Appellant
The Respondent
The CIT, Concerned, Mumbai
The CIT(A) Concerned, Mumbai
The DR " " Bench
True Copy
By Order
Dy/Asstt. Registrar, ITAT, Mumbai.