Delhi High Court
Commissioner Of Income Tax Delhi vs R K Dhawan on 3 October, 2008
Author: Rajiv Shakdher
* THE HIGH COURT OF DELHI AT NEW DELHI
Judgment reserved on : 25.09.2008
% Judgment delivered on : 03.10.2008
+ ITA 381/2003
COMMISSIONER OF
INCOME TAX DELHI ..... Revenue
versus
R.K.DHAWAN ..... Respondent
Advocates who appeared in this case:
For the Revenue : Mr R.D.Jolly
For the Respondent : Mr Hemant Kr Chaudhary
CORAM :-
HON'BLE MR JUSTICE BADAR DURREZ AHMED
HON'BLE MR JUSTICE RAJIV SHAKDHER
1. Whether the Reporters of local papers may
be allowed to see the judgment ? Yes
2. To be referred to Reporters or not ? Yes
3. Whether the judgment should be reported
in the Digest ? Yes
RAJIV SHAKDHER, J
1. This is an appeal under Section 260A of the Income Tax Act, 1961
(hereinafter referred to as "the Act") preferred by the Revenue against the
judgment dated 10th December, 2002 passed by the Income Tax Appellate
Tribunal (hereinafter referred to in short as "Tribunal") in ITA No.
2994/Del/95, in respect of, assessment year 1992-93. The only issue which
arises in the appeal is the treatment of sum of Rs.15,06,253/- by the
Assessing Officer as business income, as against, long term capital gain as
claimed by the assessee.
2. In coming to the aforesaid conclusion the Assessing Officer vide order
dated 30th December, 1994 passed under Section 143(3) of the Act took into
account the following circumstances:-
(i) the assessee had debited in his „income and expenditure account‟ for
the financial year ending 31st March, 1991 relevant to the assessment
year 1991-92 a sum of Rs.14,826/- with a narration "long term losses in
sale of securities". It is important to note that return for the assessment
year 1991-92 was processed and accepted under Section 143(1)(a) of
the Act;
(ii) the nature of expenses and the volume of shares dealt with by the
assessee reflected a full fledged business of trade in shares and;
(iii) lastly, the assessee had failed to maintain a separate account, in
respect of, those shares which were traded, as against the ones, held as
investment.
1.1 By virtue of the aforesaid assessment order a sum of Rs.15,06,253/-
was added back to the income of the assessee for assessment year 1992-93 as
income from business.
2. Being aggrieved, the assessee preferred an appeal before the
Commissioner of Income Tax (Appeals) (hereinafter referred in short as
CIT(A)). The CIT(A) by his order dated 24th March, 1993 directed the
Assessing Officer to treat the sum of Rs.15,06,253/- as long term capital gain
and not as income from business in the shares. The CIT(A) in coming to this
conclusion returned the following findings:-
(i) that the assessee had been investing in shares from 1980 till the
assessment year 1990-91;
(ii) the assessee had commenced the business of dealing in shares in
the assessment year 1992-93;
(iii) separate accounts were maintained, in respect of, the assessee‟s
business in shares and those purchased as investment;
(iv) the shares which were sold, and on which, profit to the tune of
Rs.15,06,253/- had been earned by the assessee were shares which
had been purchased by the assessee between 1980 to 1991 and;
(v) lastly, there was no evidence on record to show, that the shares
which had been kept for investment, had been converted into
„stock-in-trade of business at any point of time‟.
3. The Revenue being aggrieved by the aforesaid order of the CIT(A)
preferred an appeal to the Tribunal. The Tribunal by the impugned judgment
sustained the order of the CIT(A). The Tribunal categorically noted that
there was no dispute that the assessee had been holding shares both as stock-
in-trade, as well as, investments. It also noted that the books of accounts in
respect of shares which were part of the assessee‟s stock in trade were
maintained separately; which were duly audited, as also in respect of, which
tax audit reports had been generated and placed on record. The Tribunal also
returned a finding of fact that there was no dispute that the shares held by the
assessee in respect of which, capital gain earned was offered for tax were
purchased from 1980 onwards and had been shown as investment in earlier
years. The Tribunal pointedly made a reference to the entry in the „income
and expenditure account‟ for the immediately preceding assessment year i.e.,
1991-92 and observed it was not relevant in respect of assessment year under
consideration i.e., assessment year 1992-93. Furthermore, in view of the fact
that the assessee had been able to satisfy the Tribunal that account with
respect to shares which were traded was kept separately, and also, that no
evidence whatsoever, had been placed on record by the Assessing Officer
that the shares in respect of which, profit was made and offered to tax under
the head „capital gains‟ by the assessee, had been treated by the Assessing
Officer, as stock in trade in the earlier years - it found no difficulty in
concurring with the opinion of the CIT(A) that the profit from sale of shares
held as investment was liable to be taxed under the head „capital gains‟ in the
hands of the assessee.
4. Having heard learned counsel for both the Revenue, as well as, the
assessee, we are of the view that the orders of the Tribunal and CIT(A) do not
call for any interference. Both the Tribunal and the CIT(A) have returned
findings of fact that assessee had sold, in the assessment year under
consideration, i.e., 1992-93, shares which were held as investment between
1980 and assessment year 1991-92, and that, these shares had not been
treated as stock-in-trade by the Assessing Officer in the earlier assessment
years. In view of the said finding, which, undoubtedly is a pure finding of
fact, in our opinion, no question of law, much less, a substantial question of
law arises for our consideration. In the result the appeal is dismissed.
RAJIV SHAKDHER, J
BADAR DURREZ AHMED, J
October 03, 2008
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