Satish Kumar Gupta v. Assistant Commissioner of Income Tax

1. These appeals by the Appellant Assessee under Section 260A of the Income Tax Act ('Act) are directed against a common order dated 13^^ January 2015 passed by the Income Tax Appellate Tribunal('ITAT')in ITA Nos. 895/Del/2000, 6806/Del/2010 and 4946/Del/2011 for the Assessment Years ('AYs')2006-07,2007-08 and 2008-09 respectively.

2. The common issue involved in the appeals before the ITAT was the action ofthe Commissioner ofIncome Tax(Appeals)[CIT(A)]in treating the income ofthe Appellant Assessee as short term capital gains and long term capital gains instead of business income as determined by the Assessing Officer('AO').

3. The Assessee is engaged in the business of export of hand knitted carpets and handicrafts for over thirty years. According to the Appellant, simultaneous with the said business, he also invested surplus funds in ITA Nos.550,551 and552/2015 Page2of[5] shares and mutual funds including investment through portfolio managementschemes('PMS')forearning capital appreciation and dividend.

4. The manner of treatment of the purchase and sale of shares by the Assesseeformed the subject matter ofthe assessmentforthe aforementioned AYs.The AO was ofthe view thatthe income earnedfrom the sale ofshares and mutual funds was business income on account ofthe large number of scrips in which the Assessee had dealt with and the frequency of the transactions.

5. The CIT(A), after seeking a remand report from the AO,accepted the plea ofthe Assessee thatin some ofthe instances,even though the volumes were heavy,the period ofretention was such that the the trading in shares could be viewed as a business activity.

6. In the impugned order the ITAT has while remanding the case back to the CIT(A)observed thatthe question asto whetherincomefrom PMS was inthe nature ofcapital gains or businessincome has notbeen addressed.The ITAT further observed that given the number of scrips dealt with by the Assesseee coupled with frequent trades and changes in scrips,the Assessee could notbe held to be only an investor butatrader as well. TheITAT held: ITA Nos.550,551and552/2015 3of[5] "From the above facts and circumstances, we are ofthe considered opinion that the assessee though had classified all unsold shares as on the close of accounting year as investments yet he was a both trader and an investor". While setting aside the order ofthe CIT(A),theITAT directed the CIT(A) to re-examine the three AYs independently as the entire facts in one year may not be available in another year.

7. Having heard learned counsel for the parties,the Court finds merit in the contention oflearned Senior counsel for Assessee that the ITAT appears to have prejudged the issue whether the Assessee was also a trader in shares apart from being an investor. That conclusion was required to be arrived at by the CIT (A) after re-examining the matter in the light of the issues highlighted by the ITAT.The CIT(A)should have been given a free hand to arrive at an independent decision uninfluenced by the observations of the ITAT on merits. til

8. Accordingly,the impugned order dated dated 13 January 2015 passed by the ITAT in ITA Nos.895/Del/2000,6806/Del/2010 and 4946/Del/2011 for AYs 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 ITA Nos.550,551 and 552/2015 Page4of[5] ( arrivingatadecisionuninfluenced bytheobservationsand/orconclusionsof theITAT including whetherthe Assessee was both atrader and an investor. Needless to say that this Court has also not expressed any opinion on the above issue.

9. The appeals are disposed ofinthe aboveterms.

S.MURALIDHAR,J VIBHU BAKHRU,J OCTOBER 19,2015 mg