Shri Kiritkumar Ambalal Shah,HUF, Ahmedabad V. The Addl.CIT.,Range-7, Ahmedabad

ITA 1097/AHD/2013

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 3988 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 6 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 20-07-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 18-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LALIT P JAIN
• Assessee Lawyers: BHAVESH SHAH
• Keywords: Business income; Rule of consistency
• Section: 11

Judgement Text

, M MM MH HH H IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD LKOZJH OLHE VGEN] YS[KK LNL; ,OA EK/KQFERK JKW;] U; KF;D LNL; LKOZJH OLHE VGEN] YS[KK LNL; ,OA EK/KQFERK JKW;] U; KF;D LNL; LKOZJH OLHE VGEN] YS[KK LNL; ,OA EK/KQFERK JKW;] U; KF;D LNL; LKOZJH OLHE VGEN] YS[KK LNL; ,OA EK/KQFERK JKW;] U; KF;D LNL; DS LE{KA DS LE{KA DS LE{KA DS LE{KA BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SMT MADHUMITA ROY, JUDICIAL MEMBER ./ I.T.A. NO. 1097/AHD/2013 ( / ASSESSMENT YEAR : 2008-09) KIRITKUMAR AMBALAL SHAH- HUF PROP. OF M/S. TUBE CORPORATION, 14, ARCHANA, SHANTINAGAR SOCIETY, ASHRAM ROAD, AHMEDABAD 13 / VS. ACIT, RANGE 7, AHMEDABAD. ./ ./ PAN/GIR NO. : AABHK 6259 E ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI BHAVESH SHAH, A.R. / RESPONDENT BY : SHRI LALIT P. JAIN, SR. D.R. / DATE OF HEARING 16/08/2018 ! / DATE OF PRONOUNCEMENT 01/11/2018 '# / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEAL)-XIV, AHMEDABAD [CIT(A) IN SHORT] VIDE APPEAL NO.CIT(A) X IV/ADDL. CIT R - 7/256/2010-11 DATED 18.02.2013 ARISING IN THE MATTE R OF ASSESSMENT ORDER PASSED UNDER S.143(3) OF THE INCOME TAX ACT, 1961(H ERE-IN-AFTER REFERRED TO AS 'THE ACT') DATED 16.12.2010 RELEVANT TO ASSES SMENT YEAR (AY) 2008-09. ITA NO.1097/AHD/2013 KIRITKUMAR AMBALAL SHAH HUF VS. ACIT A .Y. 2008-09 - 2 - 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE A RE AS UNDER:- 1. THE LD. CIT (A) HAS GROSSLY ERRED IN LAW AND ON FACTS IN PARTLY ALLOWING THE APPEAL. HE OUGHT TO HAVE ALLOWED THE A PPEAL FULLY IN ACCORDANCE WITH THE GROUNDS OF APPEAL RAISED BY THE APPELLANT BEFORE HIM. I. ADDITION ON ACCOUNT OF LOSS ON TRADING IN SHARES - RS. 10,81,852/- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS. 10,81,852/- ON ACCOUNT OF LOSS ON T RADING IN SHARES TREATING THE SAME AS SHORT TERM CAPITAL GAIN. 2. THE LD. A.O AS WELL AS THE LD. CIT (A) ERRED IN LAW AND ON FACTS IN FAILING TO CONSIDER APPELLANT HUF'S SUBMISSIONS IN PROPER PERSPECTIVE FILED BEFORE THEM. 3. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS WH ILE FAILING TO CONSIDER THE FACT THAT THE APPELLANT HUF HAS CARRIE D OUT NUMBER OF TRANSACTION IN SHARES AND SECURITIES WHICH REVEALS THE INTENTION OF APPELLANT OF EARNING THE BUSINESS PROFITS FROM SUCH TRANSACTION. 4. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS WH ILE FAILING TO CONSIDER THE FACT THAT THE APPELLANT HUF IS A TRADE R IN SHARES IN SECURITIES AND ACCORDINGLY THE APPELLANT HAS RIGHTL Y SHOWN THE PROFIT/LOSS EARNED FROM THE TRADING ACTIVITIES UNDE R THE HEAD 'BUSINESS INCOME' WHILE GETTING ITS BOOKS OF ACCOUNTS AUDITED U/S.44AB OF THE ACT. THE APPELLANT RESERVES ITS RIGHT TO ADD, AMEND, ALT ER OR MODIFY ANY OF THE GROUNDS STATED HEREINABOVE EITHER BEFORE OR AT THE TIME OF HEARING. 3. THE SOLITARY ISSUE RAISED BY THE ASSESSEE IN THI S APPEAL IS THAT LD CIT(A) ERRED IN TREATING THE BUSINESS LOSS ON TRADI NG IN SHARES AMOUNTING TO RS. 10,81,852 AS SHORT TERM CAPITAL LOSS. ITA NO.1097/AHD/2013 KIRITKUMAR AMBALAL SHAH HUF VS. ACIT A .Y. 2008-09 - 3 - 4. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IN TH E PRESENT CASE IS A HUF AND ENGAGED IN TRADING OF GALVANISHED & BLACK / IRON PIPES. THE ASSESSEE DURING THE YEAR HAS SHOWN LOSS OF RS.10,81 ,852/- UNDER THE HEAD BUSINESS AND PROFESSION. THIS LOSS WAS INCURRED BY THE ASSESSEE ON ACCOUNT OF SALE PURCHASE OF SHARES. 4.1 THE AO DURING THE ASSESSMENT PROCEEDINGS OBSERV ED CERTAIN FACTS AS DETAILED UNDER: I. THE ASSESSEE BESIDES THE BUSINESS LOSS HAS ALSO SHO WN SHORT TERM CAPITAL GAIN ON ACCOUNT OF SALE PURCHASE OF SH ARES. THUS, THE SHARES ACQUIRED IN THE EARLIER YEAR AND SOLD IN THE YEAR UNDER CONSIDERATION WERE SUBJECT TO THE PROVISIONS TO CAP ITAL GAIN. II. TILL THE LAST YEAR, THE ASSESSEE WAS SHOWING ONLY C APITAL GAIN INCOME ON THE SALE PURCHASE OF THE SHARES. III. THE TRANSACTIONS IN RESPECT OF WHICH THE LOSS WAS S HOWN BY THE ASSESSEE WERE NOT CARRIED OUT THROUGHOUT THE YEAR B UT THESE WERE MAINLY CARRIED OUT AT THE FAG END OF THE FINAN CIAL YEAR UNDER CONSIDERATION. IV. THE ASSESSEE AT THE TIME OF FILING OR RETURN CHANGE D ITS MIND TO SHOW BUSINESS LOSS INSTEAD OF SHORT TERM CAPITAL LO SS IN ORDER TO CLAIM SET OFF AGAINST THE BUSINESS OF INCOME. IN VIEW OF ABOVE, THE AO TREATED THE LOSS CLAIMED B Y THE ASSESSEE AS SHORT TERM CAPITAL LOSS. 5. AGGRIEVED ASSESSEE PREFERRED AN APPEAL TO LD CIT (A). THE ASSESSEE BEFORE THE LD CIT(A) SUBMITTED THAT THE NUMBER OF T RANSACTIONS IN SYSTEMATIC MANNER PROVE THAT IT HAS CARRIED OUT THE BUSINESS ACTIVITIES IN SHARES. ITA NO.1097/AHD/2013 KIRITKUMAR AMBALAL SHAH HUF VS. ACIT A .Y. 2008-09 - 4 - 5.1 THE PERIOD OF HOLDING OF THE SHARES WAS LESS TH AN 3 MONTHS WHICH INDICATES THAT THE SHARES WERE NEVER HELD FOR A LON G TIME. HAD THE ASSESSEE BEEN TO INTENDING TO EARN CAPITAL GAIN INC OME THEN IT WOULD HAVE HELD THE SHARES FOR THE LONGER TIME. 5.2 THE ASSESSEE IN ITS BOOKS OF ACCOUNTS HAS SHOWN SALE PURCHASE OF SHARES AS BUSINESS TRANSACTIONS WHICH WERE DULY AUD ITED AND NO DEFECT WAS POINTED OUT THEREIN. 5.3 THE ASSESSEE IN SUPPORT OF HIS CLAIM RELIED ON THE CBDT INSTRUCTION NO.1827& CIRCULAR NO.4 DATED 15.06.2007 . THE ASSESSEE ALSO SUBMITTED THAT IT IS THE ASSESSEE WHO WILL DECIDE W HETHER HE HAS DEALING IN SHARES AS A TRADER OR AN INVESTOR. THE AO CANNOT ENTER IN THE SHOES OF THE ASSESSEE TO DECIDE THE NATURE OF ACTIVITIES OF ITS ASSESSEE. HOWEVER, THE LD CIT(A) DISREGARDED THE CONTENTION OF THE ASS ESSEE AND CONFIRMED THE ORDER OF AO BY OBSERVING AS UNDER: I HAVE CAREFULLY PERUSED THE ASSESSMENT ORDER AND THE SUBMISSIONS GIVEN BY THE APPELLANT. I HAVE GONE THR OUGH THE CIRCULAR NO. 1827 AND FURTHER GUIDELINES FOR DETERMINING WHE THER A PERSON IS A TRADER IN SHARES AND SECURITIES OR AS AN INVESTOR I N SHARES AND SECURITIES ISSUED BY CBDT, NEW DELHI. AS CAN BE SEEN THE PURCHASE AND SALE OF SECURITIES WAS NOT ALLIED ACTIVITY TO THE USUAL ACTIVITY OF THE APPELLANT. NO BORROWED FUNDS USED FOR ACQUISITION OF SHARES AS IS THE CASE IN BUSINES S OF DEALING IN SHARES AND SECURITIES. THERE IS NO CLOSING STOCK OF SHARES AND SECURITIES AND NEITHER IN A. Y. 2007-08 NOR IN A. Y. 2009-10 WAS A NY BUSINESS INCOME / LOSS ON TRADING IN SHARES DECLARED BY THE APPELLANT . THIS WAS NOT REGULAR ACTIVITY BUT AN OCCASIONALLY ACTIVITY OF DE ALING IN SHARES AND SECURITIES. THERE IS NO DENYING THE FACT THAT THE D ELIVERY OF SHARES HAS BEEN TAKEN AND THE TRANSACTIONS HAVE BEEN ROUTED TH ROUGH D-MAT ITA NO.1097/AHD/2013 KIRITKUMAR AMBALAL SHAH HUF VS. ACIT A .Y. 2008-09 - 5 - ACCOUNT AND THAT IS PRECISELY THE REASON THAT THE A O HAS NOT TREATED IT TO BE SPECULATIVE ACTIVITY BUT SIMPLY HAS CONCLUDED TH AT THIS WAS SHORT TERM ACTIVITY TO EARN SOME CAPITAL GAINS. THEREFORE, TRE ATING THE SAME AS SHORT TERM CAPITAL GAIN / LOSS BY THE AO DOES NOT S UFFER FROM ANY INFIRMITY ESPECIALLY IN VIEW OF GUIDELINES ISSUED B Y CBDT. THE AO'S STAND HAS BEEN SUPPORTED BY THE SAID CIRCULAR. THE APPELLANT IS ADVANCING THE RULE OF INCONSISTENCY AS CAN BE SEEN FROM THE AFFAIRS IN A. Y. 2007-08 TO A. Y. 2009-10. IN VIEW OF THE ABOVE F ACTS, I AM INCLINED TO ACCEPT THE VIEW TAKEN BY THE AO IN THE ASSESSMENT O RDER AND THE GROUND OF APPEAL IS ACCORDINGLY DISMISSED. BEING AGGRIEVED BY THE ORDER OF LD. CIT(A) ASSESSEE IS IN APPEAL BEFORE US. 6. LD AR BEFORE US FILED A PAPER BOOK RUNNING FROM PAGES 1-128 AND SUBMITTED THAT THE ASSESSEE IN ALL THE SUBSEQUENT Y EARS BEGINNING FROM 2010-11 TO 2017-18 HAS DECLARED THE INCOME FROM BUS INESS AND PROFESSION WHICH WAS ACCEPTED BY THE REVENUE. THERE FORE THE ACTIVITY OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION SHOUL D BE TREATED AS BUSINESS LOSS ON THE BASIS OF PRINCIPLE OF CONSISTE NCY. 7. ON THE OTHER HAND, LD DR VEHEMENTLY SUPPORTED TH E ORDERS OF AUTHORITIES BELOW. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, THE DISP UTE RELATES WHETHER THE ASSESSEE IS CARRYING OUT SALE PURCHASE OF SHARES AC TIVITY AS TRADER OR INVESTOR. ITA NO.1097/AHD/2013 KIRITKUMAR AMBALAL SHAH HUF VS. ACIT A .Y. 2008-09 - 6 - 8.1 FROM THE AFORESAID DISCUSSION, WE NOTE THAT TIL L THE LAST FINANCIAL YEAR THE ASSESSEE WAS CARRYING THE ACTIVITY OF SALE PURCHASE OF SHARES AS AN INVESTOR. HOWEVER, THE ASSESSEE IN THE YEAR UNDE R CONSIDERATION HAS ALSO STARTED THE ACTIVITY OF DEALING IN THE SHARES AS TRADER AND THIS ACTIVITY CONTINUED TILL THE A.Y. 2017-18. THE STAND TAKEN BY THE ASSESSEE WAS NOT DISTURBED BY THE REVENUE IN ALL THESE ASSESSMENT YE ARS. THEREFORE, THE PRINCIPLE OF CONSISTENCY ARE APPLICABLE IN THE CASE ON HAND AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF RADHASOAMI SA TSANG REPORTED IN 60 TAXMAN 248 WHERE IN IT WAS HELD AS UNDER: 13. WE ARE AWARE OF THE FACT THAT STRICTLY SPEAKING RE S JUDICATA DOES NOT APPLY TO INCOME-TAX PROCEEDINGS. AGAIN, EACH AS SESSMENT YEAR BEING A UNIT, WHAT IS DECIDED IN ONE YEAR MAY NOT A PPLY IN THE FOLLOWING YEAR BUT WHERE A FUNDAMENTAL ASPECT PERMEATING THRO UGH THE DIFFERENT ASSESS MENT YEARS HAS BEEN FOUND AS A FACT ONE WAY OR THE OTHER AND PARTIES HAVE ALLOWED THAT POSITION TO BE SUSTAINED BY NOT CHALLENGING THE ORDER, IT WOULD NOT BE AT ALL APPROPRIATE TO ALLOW THE POSITION TO BE CHANGED IN A SUBSEQUENT YEAR. 14. ON THESE REASONINGS IN THE ABSENCE OF ANY MATERIAL CHANGE JUSTIFYING THE REVENUE TO TAKE A DIFFERENT VIEW OF THE MATTERAND IF THERE WAS NO CHANGE IT WAS IN SUPPORT OF THE ASSESSEEWE DO NOT THINK THE QUESTION SHOULD HAVE BEEN REOPENED AND CONTRARY TO WHAT HAD BEEN DECIDED BY THE COMMISSIONER IN THE EARLIER PROCEEDI NGS, A DIFFERENT AND CONTRADICTORY STAND SHOULD HAVE BEEN TAKEN. WE ARE, THEREFORE, OF THE VIEW THAT THESE APPEALS SHOULD BE ALLOWED AND THE Q UESTION SHOULD BE ANSWERED IN THE AFFIRMATIVE, NAMELY, THAT THE TRIBU NAL WAS JUSTIFIED IN HOLDING THAT THE INCOME DERIVED BY THE RADHASOAMI SATSANG WAS ENTITLED TO EXEMPTION UNDER SECTIONS 11 AND 12. 8.2 WE ALSO NOTE THAT THE GENUINENESS OF THE LOSSES WAS NOT DOUBTED BY THE AUTHORITIES BELOW. THEREFORE, WE ARE OF THE VIE W THERE WAS NO LOSS TO THE REVENUE ON ACCOUNT OF LOSS IN SHARE ACTIVITY TR EATED AS BUSINESS LOSS. IT IS BECAUSE, THE ASSESSEE HAS EARNED SHORT TERM C APITAL GAIN INCOME IN ITA NO.1097/AHD/2013 KIRITKUMAR AMBALAL SHAH HUF VS. ACIT A .Y. 2008-09 - 7 - THE SUBSEQUENT YEARS WHICH WAS DULY OFFERED TO TAX. HAD THIS LOSS BEEN TREATED AS SHORT TERM CAPITAL LOSS THEN IT WOULD HA VE SET OFF AGAINST THE SHORT TERM CAPITAL GAIN INCOME EARNED BY THE ASSESS EE IN THE SUBSEQUENT YEARS. IN VIEW OF ABOVE, WE HOLD THAT THE LOSS DECL ARED BY THE ASSESSEE UNDER THE HEAD BUSINESS AND PROFESSION WAS CORRECT AND WITHIN THE PROVISION OF LAW. THUS, WE SET ASIDE THE ORDER OF L D CIT(A) AND DIRECT THE AO TO TREAT THE LOSS OF RS.10,81,852/- AS BUSINESS LOSS OF THE ASSESSEE. HENCE, THE GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 01/11/2018 SD/- S D/- E/KQFERK JKW; E/KQFERK JKW; E/KQFERK JKW; E/KQFERK JKW; OLHE VGEN OLHE VGEN OLHE VGEN OLHE VGEN U;KF;D LNL; YK S[KK LNL; U;KF;D LNL; YK S[KK LNL; U;KF;D LNL; YK S[KK LNL; U;KF;D LNL; YK S[KK LNL; (MADHUMITA ROY) (WASEEM AHMED ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 01/11/2018 PRITI YADAV, SR.PS !' #' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. % &' ( / CONCERNED CIT 4. ( () / THE CIT(A)-XIV, AHMEDABAD. 5. +,- ..&' , &'! , 01'%' / DR, ITAT, AHMEDABAD. 6. -23 4 / GUARD FILE. $ % / BY ORDER, + . //TRUE COPY// &/% () ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD