Dr. Gulabchand J. Kasliwal, V. Assistant Commissioner of Income-tax,

CO 85/PUN/2014

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 9894 (ITAT-PUNE)
• Duration Of Justice: 19 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 22-09-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 03-09-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B C MALAKAR
• Keywords: Business income; Rule of consistency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 1793/PN/2013 (ASSESSMENT YEAR : 2010-11) ACIT, CIRCLE-1, SOLAPUR .. APPELLANT VS. DR. GULABCHAND JAGANNATH KASLIWAL, 196, BUDHWAR PETH, SOLAPUR 413002 PAN NO.ABIPK1337K .. RESPONDENT CO NO. 85/PN/2014 (ASSESSMENT YEAR : 2010-11) DR. GULABCHAND JAGANNATH KASLIWAL, 196, BUDHWAR PETH, SOLAPUR 413002 PAN NO.ABIPK1337K .. CROSS OBJECTOR VS. ACIT, CIRCLE-1, SOLAPUR .. RESPONDENT ASSESSEE BY : SHRI S.N. PURANIK REVENUE BY : SHRI B.C. MALAKAR DATE OF HEARING : 22-09-2014 DATE OF PRONOUNCEMENT : 22-09-2014 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE REVENUE AND CO FILED BY TH E ASSESSEE ARE DIRECTED AGAINST THE ORDER DATED 19-07-2013 OF THE CIT(A)-III, PUNE RELATING TO ASSESSMENT YEAR 2010-11. FOR THE SAKE OF CONVENIENCE, THE APPEAL AS WELL AS THE CO WERE HEAR D TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. 2 ITA NO.1793/PN/2013 (BY REVENUE) : 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE, WHO IS A DOCTOR BY PROFESSION, FILED HIS RETURN OF INCOME FOR THE I MPUGNED ASSESSMENT YEAR DECLARING TOTAL INCOME OF RS.66,36,430/-. DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE PROFESSIONAL RECEIPTS OF THE ASSESSEE IS ONLY AT RS .12,28,268/- OUT OF THE SURPLUS INCOME OF RS.91,79,572/-. THE SURPLUS INCOME MAINLY CONSISTS OF INCOME FROM SHARES AND CAPITAL GAINS. T HEREFORE, THE ASSESSING OFFICER WAS OF THE OPINION THAT THE MAIN ACTIVITY OF THE ASSESSEE IS TRADING IN SHARES RATHER THAN MEDICAL P ROFESSION. FROM THE DETAILS FURNISHED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS IN RESPECT OF INCOME FROM CAPITAL GAIN, HE OBSERVED THAT THERE ARE FREQUENCY OF TRANSACTION OF SHARES RESUL TING IN RECEIPT OF CONSIDERABLE INCOME BY WAY OF SHORT TERM CAPITAL GA IN. HE, THEREFORE, ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE SHORT T ERM CAPITAL GAIN SHOULD NOT BE TREATED AS ADVENTURE IN NATURE OF TRA DE IN RESPECT OF SHORT TERM CAPITAL GAIN CLAIMED. REJECTING THE VARIOUS E XPLANATIONS GIVEN BY THE ASSESSEE AND RELYING ON VARIOUS DECISIONS TH E ASSESSING OFFICER TREATED THE SHORT TERM CAPITAL GAIN OF RS.60,44,397 /- AS INCOME FROM TRADING IN SHARES. 3. IN APPEAL THE LD.CIT(A) FOLLOWING THE DECISION O F THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.Y. 2008-09 DIRECT ED THE ASSESSING OFFICER TO ALLOW THE CLAIM OF SHORT TERM CAPITAL GA IN AS AGAINST BUSINESS INCOME HELD BY THE ASSESSING OFFICER. THE RELEVANT OBSERVATION OF THE CIT(A) AT PARA 5 OF THE ORDER RE ADS AS UNDER : 3 5. I HAVE CONSIDERED THE SUBMISSIONS MADE ON BEHALF OF THE APPELLANT AND I HAVE ALSO PERUSED THE ORDER OF MY PRE DECESSOR WHICH HAS NOW BEEN OVER RULED BY THE HON'BLE PUNE ITAT IN THEIR ORDER ITA NO. 361/PN/2013 DATED 31/5/2013 FOR A.Y.2008-09. TH E APPELLANT'S CONTENTION THAT HE IS HOLDING TWO PORTFOLIOS, ONE FOR TRADING THE OTHER FOR INVESTMENT HAS BEEN ACCEPTED BY THE DEPARTMENT IN THE PAST AS NOTED BY THE HON'BLE ITAT. IN THE PRESENT CASE IT IS SE EN THAT THIS STAND OF THE APPELLANT HAS NOT BEEN ACCEPTED BY THE ASSESSING OFFICER AND HE HAS DIFFERENTIATED BETWEEN THE SHORT TERM CAPITAL GAI NS AND LONG TERMS CAPITAL GAINS, BY TREATING ONLY THE SHORT TERMS GAINS A S BUSINESS INCOME. THE A.O. HAS MADE A CASE THAT THE APPELLANT H AS BORROWED MONEY FOR PURPOSE OF SHARE TRADING. THIS IS SEEN TO BE P ATENTLY INCORRECT. THE BANK UTILIZATION STATEMENT SUBMITTED A T PAGES 13 OF THE PAPER BOOK CLEARLY SHOWS THAT THE BANK OF INDIA LOAN OF RS.4,00,000 TAKEN ON 23/3/2010 HAS BEEN UTILIZED FOR PAYMENT OF ADVANCE INCOME TAX OF EQUIVALENT AMOUNT ON 23/3/2010. THIS BANK LOA N WAS AN OVERDRAFT TAKEN ON FIXED DEPOSIT WHICH IS APPELLANT'S OWN MONEY AND CANNOT BE SAID TO BE BORROWING SO AS TO CONCLUDE THAT THE LOAN HAS BEEN UTILIZED FOR BUSINESS AND NOT FOR INVESTMENT. FURT HER AS HELD BY THE ITAT, ALTHOUGH THE VOLUME OF TRANSACTION IS HUGE, SIMILAR QUANTUM OF TRANSACTIONS WERE DONE IN THE PAST BY THE APPELLANT WHICH HAS BEEN ACCEPTED BY THE DEPARTMENT. THE CHART PRODUCED BY T HE APPELLANT IN THE WRITTEN SUBMISSIONS SHOW THAT THERE IS NOT MUCH DEVIA TION BETWEEN THE TRANSACTIONS UNDERTAKEN IN ALL THE FIVE A SSESSMENT YEARS, TWO OF WHICH HAVE BEEN COMPLETED UNDER SCRUTINY IN T HE PAST. SINCE THE FACTS AND CIRCUMSTANCES RELATING TO THE PRESENT ASSESSM ENT YEAR ARE ALMOST IDENTICAL AND THE APPELLANT HAS BEEN GIVEN A FAVORABLE ORDER IN HIS OWN CASE BY THE JURISDICTIONAL ITAT, IT I S TO BE HELD THAT THE ASSESSING OFFICER ERRED IN TREATING SHORT TERM CAPIT AL GAIN AS BUSINESS INCOME IN THE HANDS OF THE APPELLANT. GROUND NO. 1 IS ALLOWED. 4. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVE NUE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LEARNED CIT(A) HAS ERRED IN ALLOWING RELIEF TO THE ASSESSEE BY RELYING UPON THE ORDER OF HON'BLE ITAT IN THE ASSESSEE'S CASE FOR THE ASSESSMENT YE AR 2008- 09. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, LEARNED CIT(A) HAS ERRED IN NOT APPRECIATING THAT THE RATIO OF THE JUDGMENT OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF GOPAL PUROHIT 336 I TR 287 (BOM) RELIED UPON BY HON'BLE ITAT WAS NOT APPLICABLE TO TH E ASSESSEE'S CASE IN VIEW OF THE DISTINGUISHING FEATURES OF THE ASSESSEE'S C ASE HIGHLIGHTED BY THE LEARNED CIT(A)'S PREDECESSOR IN PAR A 5.10 OF CIT(A)'S ORDER FOR THE ASSESSMENT YEAR 2008-09 IN THE ASSE SSEE'S CASE. 3. THE ORDER OF THE CIT(A) BE VACATED AND THAT OF T HE AO BE RESTORED. 4. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTER ANY OF THE ABOVE GROUNDS OF APPEAL. 4 5. AFTER HEARING BOTH THE SIDES, WE FIND THE TRIBUN AL IN ASSESSEES OWN CASE FOR A.Y. 2008-09 HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY OBSERVING AS UNDER : 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E RECORD. IT IS TRUE THAT IN THIS CASE, THE FREQUENCY OF TRANSACTION IS MORE. THE CONTENTION OF THE ASSESSEE IS THAT THE ASSESSEE IS HOLDING TWO PORTFOLIOS WHICH HAVE BEEN ACCEPTED BY THE DEPARTMEN T CONSISTENTLY IN THE PAST BUT THERE IS DEVIATION FROM THE APPROACH OF THE A.O IN REJECTING THE PORTFOLIO MAINTAINED BY THE ASSESSEE IN T HE A.Y. 2008-09. HE HAS FILED DETAILS IN RESPECT OF SCRIPTS. HE HAS ALSO FI LED COPIES OF ASSESSMENT ORDERS FOR A.Y. 2001-02, 2004-05 AND 2007-08 IN THE COMPILATION. WE FIND THAT THE PORTFOLIO DECLARED BY THE ASSESSEE HAS BEEN ACCEPTED IN THE PAST IN SCRUTINY ASSESSMENT. THE MAI N RESERVATION OF THE A.O IN THIS ASSESSMENT YEAR IS THAT THE ASSESSEE HAS HUGE FREQUENCY OF TRANSACTIONS AND ASSESSEE HAS TAKEN A SMA LL OD FACILITIES OF RS.6,00,000/- AT THE FAG END OF MARCH 2 008 AND PAID INTEREST TO THE EXTENT OF RS. 9,961/- ON THE SAME. IN OUR OPINION, LAW IS WELL SETTLED BY THE DECISION OF THE HON'BLE BOMBAY HI GH COURT IN THE CASE OF GOPAL PUROHIT 336 ITR 287 (BOM) THAT THERE SH OULD BE CONSISTENCY IN THE APPROACH OF THE A.O. ADMITTEDLY, T HE ASSESSEE HAS REGULARLY ENTERED INTO THE SHARE TRANSACTIONS IN PAST. THERE IS NO MUCH MORE DEVIATION OF THE FACTS AS COMPARED TO THE PRECED ING YEARS. WE FURTHER FIND THAT IN THE IMMEDIATE PRECEDING YEAR, THE REVENUE HAS ACCEPTED THE PORTFOLIO DECLARED BY THE ASSESSEE. 8. THE COMPARATIVE SHARE TRANSACTIONS BY THE A SSESSEE FOR A.Y. 2006-07 TO 2008-09 ARE AS UNDER:- A.Y. NO. OF COMPANIES NO. OF TRANSACTIONS SALE PURCHASES SHORT TERM GAIN DIVIDEND 2006-07 99 206 12,756,654/- 1,639,291/- 300, 926/- 11,117,362/- 2007-08 71 125 12,982,263 1,870,788/- 443,482/- 11,111,475/- 2008-09 93 203 36,354,207/- 29,053,356/- 7,300,851/- 761,877/- 9. IT IS PERTINENT TO NOTE HERE THAT THE DECISION IN THE CASE OF GOPAL PUROHIT (SUPRA) HAS REACHED THE FINALITY AS THE SLP FIL ED BY THE DEPARTMENT HAS BEEN DISMISSED BY THE HON'BLE SUPREME COURT. WE THEREFORE, ON THE RULE OF CONSISTENCY, DECIDE THE ISSU E IN FAVOUR OF THE ASSESSEE AND HOLD THAT THE ASSESSEE IS NOT A TRADER TO THE EXTENT OF SHORT TERM CAPITAL GAIN DECLARED BY HIM BUT IS AN INVEST OR. 10. IT IS SEEN THAT THE ASSESSEE HAS ENTERED INTO HUG E SHARE TRANSACTIONS FOR A.Y.2006-2007 AND 2007-09 AND INSPITE OF THAT NO QUESTION IS RAISED BY THE AO AND THE GAIN/PROFIT FROM TH E SHARE TRANSACTION IS TREATED AS CAPITAL GAIN. IN THE RESULT, GROUND NO. 1 IS ALLOWED. 5 11. SO FAR AS THE GROUND NO. 2 IS CONCERNED, IT IS IN RESPECT OF INTEREST CHARGED U/S 234B. WE THEREFORE, DIRECT TO CHARGE, TH E INTEREST AFTER GIVING EFFECT TO THIS ORDER AS PER PROVISIONS OF LAW. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. 5.1 SINCE THE FACTS OF THE IMPUGNED CASE ARE IDENTI CAL TO THE FACTS OF THE CASE DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2008-09, THEREFORE, IN ABSENCE OF ANY DISTINGUISHAB LE FEATURES BROUGHT BEFORE US BY THE LD. DEPARTMENTAL REPRESENTATIVE AG AINST THE ORDER OF THE TRIBUNAL, WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) ALLOWING THE CLAIM OF SHORT TERM CAPITAL GAIN AS CLAIMED BY THE ASSESSEE. ACCORDINGLY, THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. CO NO.85/PN/2014 (BY ASSESSEE) : 6. THE LD. COUNSEL FOR THE ASSESSEE AT THE TIME OF HEARING SUBMITTED THAT THE CO FILED BY THE ASSESSEE IS IN S UPPORT OF THE ORDER OF THE CIT(A). 6.1 SINCE WE HAVE UPHELD THE ORDER OF THE CIT(A) IN THE PRECEDING PARAGRAPHS, THEREFORE, THE CO FILED BY THE ASSESSEE BECOMES INFRUCTUOUS. ACCORDINGLY, THE SAME IS DISMISSED. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE A S WELL AS THE CO FILED BY THE ASSESSEE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 22-09-2014. SD/- SD/- (SHAILENDRA KUMAR YADAV) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT ME MBER PUNE DATED: 22 ND SEPTEMBER, 2014 SATISH 6 COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. THE CIT(A)-III, PUNE 4. THE CIT-III, PUNE 5. THE D.R, A PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // ASSISTANT REGISTRAR ITAT, PUNE BENCHES, PUNE