2019 (12) TMI 760 - AT - Income Tax

Tribunal confirms short-term gains as business income, reduces expenses disallowance, dismisses additional ground.

The Tribunal upheld the assessment order, confirming the treatment of short-term capital gains as business income due to the systematic trading approach ... Validity of assessment - HELD THAT:- We find that the assessee submitted that the assessment order might have passed in the month of January, 2011, with an ante-date, but, there is no evidence to support his argument. We are of the view that there is no basis for the assessee to raise this ground and hence, the same is dismissed. Case was selected for scrutiny under CASS and not for any specific purpose. The AO has power under jurisdiction to scrutinize the entire of the assessee and, therefore, this ground of the assessee is dismissed. Short term capital gain on profit on shares - Period of holding - HELD THAT:- The assessee is buying shares and selling the same within 2 days for profit. All the shares in the above table except one scrip pertaining to EASUN Reyrol, which is purchased on 25/07/2007 and sold on the same day, the assessee purchased on 24/07/2007 and sold on 206/07/2007 i.e. within two days. Therefore, it is very much evident that the intention of the assessee is only to make the profit by buying and selling the shares in a systematic manner. The assessee did not hold any shares for a longer period that means, the assessee’s intention is not at all earn dividend income, but, only he wanted to make profit. In the written submissions, the ld. counsel for the assessee relied on various case law as well as CBDT Circular No. 6 of 2016, dated 29/02/2016. In our view, the same are not relevant to the facts of the case of the assessee. Therefore, the revenue authorities treated the assessee as a trader and not an investor is proper and accordingly, we uphold the order of the CIT(A) and dismiss the ground raised by the assessee in this regard. Disallowance of expenses under the head ‘conveyance & travelling’ and vehicle maintenance - AO made the disallowance on the ground that some of the vouchers are self made and not supported by bills and disallowance was to the extent of 30% of the amounts under the said heads of expenses - HELD THAT:- AO made the disallowances @ 30% of the expenditure on the ground that the some of the vouchers submitted by the assessee are self-made vouchers. The CIT(A) restricted the disallowance to 15%. Therefore, we find no infirmity in the order of CIT(A) and therefore, the same is hereby upheld dismissing the ground raised by the assessee on this issue. Income from house property - HELD THAT:- Additional ground raised by the assessee is rejected in view of the fact that the CIT(A) has already adjudicated the same by remitting the same to the file of the AO. This ground is dismissed. Issues Involved:1. Validity of the assessment order.2. Scrutiny selection under CASS.3. Treatment of short-term capital gains as business income.4. Disallowance of expenses.5. Additional ground regarding income from house property.Issue-wise Detailed Analysis:1. Validity of the Assessment Order:The assessee contended that the assessment order dated 15/12/2010 was served on 10/01/2011, suggesting it was ante-dated and thus barred by limitation. However, the Tribunal found no evidence supporting this claim and dismissed the ground, stating, 'there is no basis for the assessee to raise this ground and hence, the same is dismissed.'2. Scrutiny Selection under CASS:The assessee argued that the scrutiny selection under CASS was not clear whether it was for a specific issue or general, questioning the validity of the order u/s 143(3). The Tribunal dismissed this ground, noting, 'the AO has power under jurisdiction to scrutinize the entire case of the assessee,' and therefore, the order was valid.3. Treatment of Short-term Capital Gains as Business Income:The AO treated the short-term capital gains of Rs. 48,75,642/- as business income based on frequent and high-volume transactions, holding periods being short, and the intention to earn profits rather than dividends. The CIT(A) upheld this view, referencing the jurisdictional High Court's guidelines in P.V.S. Raju Vs. Addl. CIT (340 ITR 75). The Tribunal agreed, noting, 'the intention of the assessee is only to make the profit by buying and selling the shares in a systematic manner,' and upheld the assessment at 30% tax rate.4. Disallowance of Expenses:The AO disallowed 30% of expenses under 'conveyance & travelling' and 'vehicle maintenance' due to self-made vouchers. The CIT(A) reduced this to 15%, referencing judicial rulings that support a 15% disallowance in such cases. The Tribunal upheld this decision, stating, 'we find no infirmity in the order of CIT(A) and therefore, the same is hereby upheld.'5. Additional Ground Regarding Income from House Property:The CIT(A) had already remitted this issue back to the AO for verification to ensure no double addition of income from house property. The Tribunal dismissed this additional ground, noting, 'the additional ground raised by the assessee is rejected in view of the fact that the CIT(A) has already adjudicated the same by remitting the same to the file of the AO.'Conclusion:The Tribunal dismissed the appeal of the assessee, upholding the decisions of the CIT(A) and the AO on all grounds. The judgment emphasized the systematic approach of the assessee in trading shares, the validity of the assessment process, and the reasonableness of expense disallowances. The decision was pronounced in the open court on 6th December, 2019.