Satish Kumar Gupta v. Assistant Commissioner Of Income Tax

$~*IN THE HIGH COURT OF DELHI AT NEW DELHI 1.+ ITA 550/2015 SATISH KUMAR GUPTA .....Appellant Through: Mr. Ajay Vohra, Senior Advocate withMs. Kavita Jha, Mr. Gaurav Jain, Advocates. versus ASSISTANT COMMISSIONER OF INCOME TAX Respondent Through:Mr. Rahul Chaudhary, Advocate withMr. Ruchir Bhatia, Advocate. With 1.^ur ITA 551/2015 SATISH KUMAR GUPTA Appellant Through: Mr. Ajay Vohra, Senior Advocate withMs. Kavita Jha, Mr. Gaurav Jain, Advocates. versus ASSISTANT COMMISSIONER OF RICOME TAX RespondentThrough:Mr. Rahul Chaudhary, Advocate withMr. Ruchir Bhatia, Advocate. 3..+ ITA 552/2015 SATISH KUMAR GUPTA Appellant Through: Mr. Ajay Vohra, Senior Advocate withMs. Kavita Jha, Mr. Gaurav Jain, Advocates. versus ITA Nos. 550, 551 and 552/2015 ASSISTANT COMMISSIONER OF INCOME TAX RespondentThrough:Mr. Rahul Chaudhary, Advocate withMr. Ruchir Bhatia, Advocate. CORAM:JUSTICE S.MURALIDHARJUSTICE VIBHU BAKHRUORDER%19.10.2015 1. These appeals by the Appellant Assessee under Section 260A of theIncome Tax Act ('Act) are directed against a common order dated 13^^January 2015 passed by the Income Tax Appellate Tribunal ('ITAT') in ITANos. 895/Del/2000, 6806/Del/2010 and 4946/Del/2011 for the AssessmentYears ('AYs') 2006-07, 2007-08 and 2008-09 respectively. 2. The common issue involved in the appeals before the ITAT was theaction of the Commissioner of Income Tax (Appeals) [CIT (A)] in treatingthe income of the Appellant Assessee as short term capital gains and longterm capital gains instead of business income as determined by theAssessing Officer ('AO'). 3. The Assessee is engaged in the business of export of hand knittedcarpets and handicrafts for over thirty years. According to the Appellant,simultaneous with the said business, he also invested surplus funds in shares and mutual funds including investment through portfoliomanagement schemes ('PMS') for earning capital appreciation and dividend.4. The manner of treatment of the purchase and sale of shares by theAssessee formed the subject matter of the assessment for the aforementionedAYs. The AO was of the view that the income earned from the sale of sharesand mutual funds was business income on account of the large number ofscrips in which the Assessee had dealt with and the frequency of thetransactions. 5. The CIT (A), after seeking a remand report from the AO, accepted theplea of the Assessee that in some of the instances, even though the volumeswere heavy, the period of retention was such that the the trading in sharescould be viewed as a business activity. 6. In the impugned order the ITAT has while remanding the case back tothe CIT (A) observed that the question as to whether income from PMS wasin the nature of capital gains or business income has not been addressed. TheITAT further observed that given the number of scrips dealt with by theAssesseee coupled with frequent trades and changes in scrips, the Assesseecould not be held to be only an investor but a trader as well. The ITAT held: " From the above facts and circumstances, we are of the considered opinion " From the above facts and circumstances, we are of the considered opinionthat the assessee though had classified all unsold shares as on the close ofaccounting year as investments yet he was a both trader and an investor".While setting aside the order of the CIT (A), the ITAT directed the CIT (A)to re-examine the three AYs independently as the entire facts in one yearmay not be available in another year. 7. Having heard learned counsel for the parties, the Court finds merit in thecontention of learned Senior counsel for Assessee that the ITAT appears tohave prejudged the issue whether the Assessee was also a trader in sharesapart from being an investor. That conclusion was required to be arrived atby the CIT (A) after re-examining the matter in the light of the issueshighlighted by the ITAT. The CIT (A) should have been given a free hand toarrive at an independent decision uninfluenced by the observations of theITAT on merits. 7. Having heard learned counsel for the parties, the Court finds merit in thecontention of learned Senior counsel for Assessee that the ITAT appears tohave prejudged the issue whether the Assessee was also a trader in sharesapart from being an investor. That conclusion was required to be arrived atby the CIT (A) after re-examining the matter in the light of the issueshighlighted by the ITAT. The CIT (A) should have been given a free hand toarrive at an independent decision uninfluenced by the observations of theITAT on merits. til til8. Accordingly, the impugned order dated dated 13 January 2015 passed bythe ITAT in ITA Nos. 895/Del/2000, 6806/Del/2010 and 4946/Del/2011 forAYs 2006-07, 2007-08 and 2008-09 is modified by directing that the CIT(A) will undertake the exercise of examining the materials de novo and ( arriving at a decision uninfluenced by the observations and/or conclusions ofthe ITAT including whether the Assessee was both a trader and an investor.Needless to that this Court has also not on thesay expressed any opinion above issue. 9. The appeals are disposed of in the above terms. S.MURALIDHAR, J VIBHU BAKHRU, J OCTOBER 19, 2015 mg