Vimesh N Zaveri , Mumbai vs Assessee

सव ौी वजय पाल राव, याियक सदःय एवं नरे ि कुमार ब#लै%या, लेखा सदःय के सम'

BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND

SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER

आयकर अपील सं./I.T.A. No. 1597/Mum/2013 िनधा रण वष / Assessment Year : 2008-09 (िनधा Shri Vimesh N. Zaveri, बनाम The DCIT (OSD)-12, बनाम/ 114, Sunflower Apartments, Aaa yakar Bhavan, Vs. 99, Cuffe Parade, Mumbai-400 020 Mumbai-400 005 ःथायी ले खा सं . /जीआइआर सं . /PAN/GIR No. : AAAPZ 0367P (अपीलाथ+ /Appellant) .. (ू-यथ+ / Respondent) अपीलाथ+ ओर से/ Appellant by: Shri Dr. K. Shivaram Ms. Neelam C. Jadhav

ू-यथ+ क/ ओर से/Respondent by: Shri Sachchidanand Dube

सुनवाई क/ तार1ख / Date of Hearing :18.02.2015 घोषणा क/ तार1ख /Date of Pronouncement :25.02.2015

आदे श / O R D E R

PER N.K. BILLAIYA, AM:

This appeal by the assessee is preferred against the order of the Ld. CIT(A)-23, Mumbai dt. 03.12.2012 pertaining to assessment year 2008-09.

2. The assessee has raised only one ground of appeal and three additional grounds of appeal. The first ground relates to the treatment of Short Term Capital Gain as business income.

2 ITA No. 1597/M/2013 3. The assessee is an individual having income from salary, house property, business income and income from other sources. The return of income was filed on 12.9.2008 at total income of Rs. 1,01,51,528/-. The return of income was selected for scrutiny under CASS and accordingly statutory notices were issued and served upon the assessee. During the course of the assessment proceedings, the Assessing Officer noticed that the assessee has shown an amount of Rs. 77,35,979/- as Short Term Capital Gain . The assessee was asked to furnish details of Short Term Capital Gain. On perusing the details filed by the assessee, the Assessing Officer observed that the assessee was engaged in huge volumes of transactions for buying and selling of shares and securities with high frequency. The AO asked the assessee to show cause why the Short Term Capital Gain should not be treated as business income. The assessee filed a detailed reply dt. 25.11.2010. It was explained that the assessee have been engaged in purchase and sale of shares from past many years mainly dealings are delivery based and in the past the assessee was never treated as a trader. The assessee furnished a copy of the assessment order of previous assessment year to substantiate his claim that he has been accepted as an investor.

3.1. It was further explained that during the year, the assessee had sold 10000 shares of Jai Corp. Ltd. which were from the opening balance alongwith 10000 shares which were received as bonus shares on which the assessee earned Short Term Capital Gain of Rs. 1,63,18,147/-. It was further explained that the borrowed funds have been used for transaction in F&O segment.

3 ITA No. 1597/M/2013 3.2. The explanation of the assessee did not find any favour from the AO who after discussing certain judicial discussions concluded by holding the Short Term Capital Gain as business income of the assessee.

4. Aggrieved by this, the assessee carried the matter before the Ld. CIT(A) but without any success.

5. Before us, the Ld. Counsel for the assessee reiterated what has been submitted before the AO. It is the say of the Ld. Counsel that out of the total Short Term Capital Gain more than 50% has come from only one scrip i.e. Jai Corp Ltd and even in the case of M/s. Jai Corp Ltd., the shares were opening balance of 10000 shares were purchased on 4.1.2007 and 10000 shares were received as bonus. In support of his contention, the Ld. Counsel relied upon the decision in the case of Gopal Purohit 336 ITR 287(Bom) and Shri Rajesh C. Shah in ITA No. 4135/M/2012.

6. Per contra, the Ld. Departmental Representative strongly supported the orders of the lower authorities.

7. We have carefully considered the rival submissions and perused the orders of the authorities below. We have also considered the relevant documentary evidences brought on record before us. It is not in dispute that the assessee has been showing Short Term Capital Gain/ Long Term Capital Gain on sale of shares since past many years. It is also not in dispute that in assessment year 2004-05 i.e. previous to the year under consideration and in assessment year 2010-11 i.e. subsequent to the year under consideration, the department has accepted the claim of the assessee for Short Term Capital Gain. Thus, it is clear that prior as well as subsequent assessment year to year under consideration, the AO has 4 ITA No. 1597/M/2013

accepted the claim of the assessee regarding Short Term Capital Gain arising from sale of shares. There is nothing on record to show how the facts are different for the assessment year under consideration so that the rule of consistency should not be followed. The Hon'ble Jurisdictional High Court in the case of Gopal Purohit (supra) has emphasized the principle of consistency. The Hon'ble High Court dealing with similar issue held that "there should be uniformity in treatment and consistency when the facts and circumstances are identical". As income from sale of shares has been accepted as Short Term Capital Gain in preceding and succeeding years, in our considered opinion, we do not find any reason for departure for the current year. Considering the facts of the case in the light of the judicial decision discussed hereinabove, we set aside the order of the Ld. CIT(A) and direct the AO to treat the Short Term Capital Gains as declared by the assessee. Ground No. 1 is accordingly allowed.

8. The first additional ground relates to the claim of expenditure relating to the earning of income from Short Term Capital Gain.

9. The assessee prays that inadvertently these expenditure could not be claimed in the return of income but the details of expenditure were very much on the assessment record which were filed during the assessment proceedings and therefore does not require any further verification of the expenditure.

10. We have given a thoughtful consideration to this claim of the assessee. Since we have directed the AO to treat the income as Short Term Capital Gain. We, therefore, restore this issue to the file of the AO. The AO is directed to examine/verify the details and allow the claim as 5 ITA No. 1597/M/2013

per provisions of Sec. 48 of the Act. The additional ground No. 1 is therefore allowed for statistical purpose.

11. The second additional ground relates to the claim of set of off carried forward assessed business losses. The assessee prays that in an event the income from Short Term Capital Gain is to be assessed as "business income" then the carried forward assessed business losses may kindly be allowed to be set off against such assessed/assessable business income.

12. As we have directed the AO to treat the Short Term Capital Gain as such, this claim of the assessee does not arise. This additional ground of the assessee is dismissed.

13. The third additional ground relates to the disallowance made u/s. 14A r.w. Rule 8D of the Act.

14. A perusal of the assessment order shows that the AO has computed the disallowance by considering the interest payment on borrowings. It is the claim of the assessee that the income shown as under the head Short Term Capital Gain which is very much taxable though at special rate but certainly not an exempt income. Therefore, there is no question of any disallowance on expenditure for earning this income taxable income. However, we find that the assessee has also earned dividend income of Rs. 3,38,955/- and further Rule 8D is very much applicable for the year under consideration.

14.1. A perusal of the details filed before us shows that the assessee has computed the disallowance u/s. 14A r.w. Rule 8D at Rs. 49,190/-. However, we do not find any mention of assessee's working of 6 ITA No. 1597/M/2013

disallowance in the assessment order nor the AO has given any finding of assessee's computation of disallowance. Therefore, in the interest of justice and fair play, we restore this issue to the file of the AO. The AO is directed to verify and examine the claim of disallowance made by the assessee during the course of the assessment proceedings and decide the issue afresh as per provisions of law.

15. In the result, the appeal filed by the assessee is partly allowed for statistical purpose.

Order pronounced in the open court on 25th February, 2015

Sd/- Sd/-

(VIJAY PAL RAO ) (N.K. BILLAIYA) याियक सदःय/JUDICIAL MEMBER लेखा सदःय / ACCOUNTANT MEMBER

मुंबई Mumbai; 5दनांक Dated : 25th February, 2015 व.िन.स./ RJ , Sr. PS आदे श क/ ूितिल प अमे षत/Copy षत of the Order forwarded to :

1. अपीलाथ+ / The Appellant

2. ू-यथ+ / The Respondent.

3. आयकर आयु7(अपील) / The CIT(A)-

4. आयकर आयु7 / CIT

5. वभागीय ूितिनिध, आयकर अपीलीय अिधकरण, मुंबई / DR, ITAT, Mumbai

6. गाड फाईल / Guard file.

आदे शानुसार/ ार BY ORDER, स-या पत ूित //True Copy// उप/सहायक उप सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, अिधकरण मुंबई / ITAT, Mumbai