Chandrika Rashmikant Patel, Dharmaj vs Assessee

(BEFORE SHRI PRAMOD KUMAR, A.M. AND SHRI S.S. GODARA, J.M.)

ITA No.2483/Ahd/2011 A.Y. 2008-09

Smt. Chandrika Rahmikant Patel vs. ACIT, Baroda. c/o, Prannath Petroleum, Nr. Jalaram Mandir, Dharmaj, Chokdi, Dharmaj (PAN: AERPP 3062N)

(Appellant) (Respondent)

Assessee/Appellant by : Shri P.L. Kureel, Sr. D.R.

Revenue/Respondent by : Ms. Urvashi Shodhan, A.R.

Date of hearing : 22.04.2015

Date of pronouncement : 30 .04.2015

PER S.S. GODARA, JUDICIAL MEMBER:

This assessee's appeal for A.Y. 2008-09 arises from order of the CIT(A)-I,

Baroda dated 19.8.2011 passed in case no.166/2010-11 affirming the Assessing

Officer's action assessing income from sale transactions at Rs.1,37,07,905/- as

business income instead of short term capital gains, in proceedings u/s. 143(3)

of the Income Tax Act, 1961 (in short 'the Act') 2

2. The assessee-individual earns income from share in profits of firm, capital

gains and "other sources". She filed her return on 31.7.2008 admitting income of

Rs.1,44,94,890/-. The Assessing Officer took up scrutiny. He come across

assessee's short term capital gains amounting to Rs.1,37,07,905/- declared from

share transactions. Per Assessing Officer, the assessee had large number of

transactions in numerous and varied scripts almost on daily basis. And also

multiple transactions on a single day. He sought to treat these short term capital

gains as her business income.

3. The assessee appears to have filed her response. She pleaded that

purchase and sale of shares with profit motive would result in the transaction

being in the nature of trade as against investment in shares of a company

wherein the motive is to earn profits by way of dividends. She claimed to be

covered by the latter instance being a case of personal investments made in

shares. The Assessing Officer took into account various determining factors in

deciding the nature of the income in question, i.e. frequency /volume of

transactions, purchase of 28,83,782 and sale of 27,33,760 shares in the relevant

previous years, opening and closing stock reading 3,52,978 shares and 4,94,000

shares respectively relating to 112 scrips as well total turnover reading Rs.68.25

crores. The assessee's action of having purchased and sold a number of scripts

within a day or two was also taken note of. It need not be emphasized that

holding period of the shares in question was not more than one year. The 3

Assessing Officer in these circumstances observed that the assessee had engaged

herself in a systematic activity in sales and purchases of shares, her primary aim

was to roll over the shares a number of times alike stock in trade and earned

consequential profits. And also that she had declared meagre dividend income of

Rs.1,50,928/- to hold that the impugned income had to be treated as business

income of instead of short term capital gains. He acted accordingly in assessment

order dated 22.12.2010.

4. The assessee preferred an appeal. The CIT(A) quotes his predecessor's

orders dated 30 and 31st of August, 2010 relating to assessment years 2006-07

and 2007-08 respectively following the same course of action. Thereafter, he

affirms the Assessing Officer's action reiterating the aforesaid corroborative

circumstances. The assessee raised an alternate plea seeking deduction of

interest expenses of Rs.86,63,474/- incurred towards funds borrowed from GM

Financial and Kotak Mahindra Bank for purchasing shares and other expenses

debited in the profit and loss account. The CIT(A) has directed the Assessing

Officer to verify the correctness thereof. Therefore the assessee has filed the

instant appeal.

5. We have heard both sides and gone through the case file. The sole question

that arises for our consideration is as to whether the assessee's income from

share transactions reading Rs.1,37,07,905/- is short term capital gains or

business income. It is made clear that answer to this question is purely a factual

one keeping in mind facts and circumstances of each case. The assessee has filed 4

a paper books before us. It transpires that she came in appeal in assessment

years 2006-07 and 2007-08 against the CIT(A)'s appeal dated 30 and 31st August,

2010 (supra) raising a very similar grievance. A coordinate bench in ITAs

no.3006 & 3007/Ahd/2010 decided on 31.12.2013 has restored the issue back to

the Assessing Officer for a fresh decision. The assessee informs us that the

Assessing Officer is yet to pass his consequential order. It has come on record

that the lower authorities have quoted similarity of facts involved in the

impugned assessment year vis-a-vis those in the earlier ones. The Revenue fails

to rebut this factual position. Therefore, we feel that interest of justice would be

met in case the issue raised in the present case is also remitted back to the

Assessing Officer for a fresh decision in the light of his consequential order being

passed in earlier assessment years. We order accordingly. The assessee's

grounds stand set aside to the file of Assessing Officer.

6. The assessee's appeal is allowed for statistical purposes.

Order pronounced in the court on this day the 30th April, 2015 in Ahmedabad.

Sd/- Sd/-

(PRAMOD KUMAR) (S.S. GODARA) Accountant Member Judicial Member Ahmedabad; Dated : 30 April, 2015 Prabhat Kumar Kesarwani Copy of the order forwarded to: 1. The Appellant 2. The Respondent 3. Concerned CIT 4. CIT(A) 5. D.R., ITAT, Ahmedabad 6. Guard File 5

By order,

Dy./Asstt. Registrar

ITAT, Ahmedabad