ACIT, CHENNAI V. Meenakshi Narayanan Investments Pvt. Ltd., CHENNAI

ITA 127/CHNY/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7922 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2016
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 20-10-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 22-01-2016
• Court: TRIBUNAL
• Assessee Lawyers: B RAMAKRISHNAN
• Keywords: Business income; Rule of consistency; Reasonable cause

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI , . ! ' , # '$ BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER . /ITA NO. 127/MDS/2016 / ASSESSMENT YEAR : 2008-09 THE ASSISTANT COMMISSIONER OF INCOME-TAX, CORPORATE CIRCLE-4(1), CHENNAI. ( /APPELLANT) V. M/S. MEENAKSHI NARAYANAN INVESTMENTS PVT. LTD., NO.12, OLD NO. 71, 3 RD MAIN ROAD, KASTURIBAI NAGAR, ADYAR, CHENNAI 600 020. PAN AAACC3032B RESPONDENT) / APPELLANT BY : SHRI CLEMENT RAMESH KUMAR, ADDL.CIT / RESPONDENT BY : SHRI B. RAMAKRISHNAN, FCA ! / DATE OF HEARING : 1 0.10.2016 '# ! / DATE OF PRONOUNCEMENT : 30.11.2016 % / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) DATED 26 .10.2015. - - ITA 127/16 2 2. THE GROUND RAISED BY THE REVENUE IN THIS APPEAL IS AS FOLLOWS: 2.1 THE CIT(A) ERRED IN HOLDING THAT THE ENTIRE P ROFIT ON BUYING AND SELLING THE SHARES HELD AS INVESTMENTS I N A SHORT TERM IS TO BE CONSIDERED AS SHORT TERM CAPIT AL GAIN. 3. THE LD. DR SUBMITTED THAT THE FINDINGS OF THE AO THAT THE INTENTION OF THE ASSESSEE IS TO EARN PROFIT FROM BU YING AND SELLING OF SHARES AND SECURITIES IN A SHORT TERM. HENCE, T HE INCOME OF THE ASSESSEE BY RESORTING TO BUYING AND SELLING THE SHARES HELD AS INVESTMENTS IN A SHORT TERM REPEATEDLY IS TO BE TAXED AS INCOME FROM BUSINESS BEING IN THE NATURE OF ADVENTU RE OR IN THE NATURE OF TRADE. THE LD. DR, FURTHER SUBMITTED THA T THE TRANSACTIONS IN PURCHASE AND SALES WERE FAR HIGHER COMPARED TO INVESTMENTS AND THE ASSESSEE HAD BOUGHT AND SOLD IN VESTMENTS IN SHORT TERM ALSO, IN CONTRARY TO ITS CLAIM THAT T HE INVESTMENTS ARE MADE IN A LONG TERM PERSPECTIVE OF 2 TO 3 YEARS . ACCORDING TO THE D.R., THE CIT(APPEALS) ERRED IN ACCEPTING TH E CONTENTION OF THE ASSESSEE THAT IT HAS BEEN ACCEPTED CONSISTENTLY BY THE AO THAT THE PROFIT OR LOSS FROM SALE OF INVESTMENTS HA S BEEN TAXED AND ASSESSED UNDER CAPITAL GAIN SINCE AN ASSESSMENT YEAR IS A - - ITA 127/16 3 SELF CONTAINED ASSESSMENT PERIOD AND A DECISION IN ONE ASSESSMENT YEAR DOES NOT ORDINARILY OPERATE AS RES JUDICATA IN RESPECT OF A MATTER DECIDED IN ANY SUBSEQUENT YEAR AS HELD BY THE APEX COURT IN THE CASE OF ITO V. MB DAS, 52 ITR 335. ACCORDINGLY, THE CIT(APPEALS) IS NOT JUSTIFIED IN H OLDING THAT THE AO ERRED IN TREATING THE SHORT TERM CAPITAL GAIN OF THE ASSESSEE AS BUSINESS INCOME. 4. ON THE OTHER HAND, THE LD. AR SUBMITTED THAT THO UGH THE PRINCIPLES OF RES JUDICATA DOES NOT APPLY FOR THE TAXING STATUTES, RULE OF CONSISTENCY CANNOT BE VITIATED I.E., A VIEW TAKEN IN EARLIER YEARS WITH THE SAME SET OF FACTS, CANNOT BE CHANGED IN THE SUBSEQUENT YEARS WITHOUT A REASONABLE CAUSE. TO SU PPORT HIS VIEW, THE LD. AR RELIED ON THE FOLLOWING JUDICIAL P RECEDENTS : 1 . NEW JEHANGIR VAKIL MILLS CO. LTD. V. CIT, 49 ITR 13 7, THE SUPREME COURT HELD THAT THE PRINCIPLE OF RES JUDIC ATA DOES NOT APPLY TO TAXATION MATTERS, HOWEVER WHERE THERE HAS BEEN NO CHANGE IN FACTS, ON GROUNDS OF CONSISTENCY, THE POSITION CANNOT BE CHANGED IN A SUBSEQUENT YEAR. 2. RADHASOAMI SATSANG V. CIT, 193 ITR 321(SC) OBSERVED THAT WHAT IS DECIDED IN ONE YEAR MAY NOT APPLY IN THE FOLLOWING YEAR, BUT WHERE A FUNDAMENTAL ASPECT - - ITA 127/16 4 PERMEATING THROUGH THE DIFFERENT ASSESSMENT YEARS H AS BEEN FOUND AS A FACT ONE WAY OR THE OTHER AND PARTI ES HAVE ALLOWED THAT POSITION TO BE SUSTAINED BY NOT CHALLENGING THE ORDER, IT WOULD NOT AT ALL BE APPRO PRIATE TO ALLOW THE POSITION TO BE CHANGED IN A SUBSEQUENT YE AR. 3. CIT VS. ARJ SECURITY PRINTERS, 264 ITR 276, THE DEL HI HIGH COURT HELD THAT THOUGH IT WAS TRUE THAT THE PRINCIP LE OF RES JUDICATA OR ESTOPPELS BY RECORD WAS NOT APPLICABLE TO INCOME TAX PROCEEDINGS, YET FOR THE SAKE OF CONSIST ENCY AND FOR THE PURPOSE OF FINALITY OF ALL LITIGATIONS, INCLUDING LITIGATIONS ARISING OUT OF FISCAL STATUTES, EARLIER DECISIONS ON THE SAME QUESTION SHOULD NOT BE REOPENED UNLESS SOM E FRESH FACTS ARE FOUND IN THE SUBSEQUENT YEAR. 4. MUMBAI SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF M/S. B. SORABJI VS. ITO (ITA NO.6503/MUM/2002 AND THE TH IRD MEMBER OF CHENNAI BENCH IN THE CASE OF ACIT VS. M.N.RAJENDHRAN, 130 TTJ 15, ALSO HELD THAT ON THE S AME SET OF FACTS, A CO-ORDINATE BENCH OF THE TRIBUNAL C ANNOT COME TO A DIAMETRICALLY OPPOSITE CONCLUSION THAN AR RIVED AT IN THE EARLIER CASE. 5. CIT VS. GODAVARI CORPORATION LTD., 156 ITR 835, THE MADHYA PRADESH HIGH COURT HELD THAT THOUGH THE PRINCIPLES OF RES JUDICATA DO NOT APPLY, THE RULE O F CONSISTENCY DOES APPLY. 6. CIT VS. BELPAHAR REFRACTORIES LTD., 128 ITR 610 (OR ISSA), HAS HELD THAT ALTHOUGH THE PRINCIPLE OF RES JUDICAT A IS NOT - - ITA 127/16 5 APPLICABLE TO ASSESSMENT PROCEEDINGS BUT WHERE THE BASIC FACTS REMAIN THE SAME, IT WOULD NOT BE APPROPRIATE TO DIFFER FROM THE EARLIER CONCLUSION. 7. OF CIT VS. S. DEVARAJ, 73 ITR 1(MAD.), HAS PASSED A N OBITER TO THE FOLLOWING EFFECT: WE FOUND IN THIS CASE THAT THE SAME TRIBUNAL, THOU GH MANNED BY DIFFERENT OFFICER ON DIFFERENT OCCASIONS, AND WITH REFERENCE TO THE SAME ASSESSEE AND ASSESSMENTS RELATING TO TWO D IFFERENT YEARS, HAS COME TO CONFLICTING DECISIONS ON THE SCO PE AND EFFECT OF SEC.12(2), WHICH, ON THE FACE OF IT, SHOU LD BE EMBARRASSING TO THE REVENUE AND THE ASSESSEE IN GEN ERAL. THERE IS OF COURSE NO PROVISION IN THE IT ACT RELAT ING TO THE MATTER AND THE DOCTRINE OF RES JUDICATA ALSO MAY NO T BE APPLICABLE TO ORDERS OF THE TRIBUNAL. EVEN SO, IN OUR OPINION, IT IS PROPER AND DESIRABLE THAT WHEN THE TRIBUNAL TAKE S A PARTICULAR VIEW ON THE SCOPE AND EFFECT OF A STATUT ORY PROVISION, IT DOES NOT CONTRADICT ITSELF AND COME TO A DIAMETR ICALLY OPPOSITE VIEW LATER; BUT IN SUCH A CASE, IT FOLLOWS THE EARL IER VIEW AND, IF AND WHEN THE AGGRIEVED PARTLY APPLIES, SHOULD MAKE A REFERENCE TO THIS COURT OF THE QUESTION. 4.1 FURTHER, THE LD. AR HAS DRAWN OUR ATTENTION TO THE FOLLOWING DECISIONS : I) DCIT V. K.B.CAPITAL MARKETS (P.) LTD., 71 TAXMA NN.COM 354 (KOLAOTTA), HAS HELD THAT IN ASSESSMENT YEARS 2006- 07 & 2007-08 THE ASSESSING OFFICER ACCEPTED THE PLE A OF THE ASSESSEE AND ASSESSED INCOME DECLARED ON PURCHA SE AND SALE OF SHARES AS GIVING RISE TO STCG IN ASSESS MENT - - ITA 127/16 6 COMPLETED UNDER SECTION 143(3). THE FACTS AND CIRCUMSTANCES IN THE PRESENT ASSESSMENT YEAR AND TH E ASSESSMENT YEARS REFERRED TO ABOVE WERE IDENTICAL. THOUGH THE RULE OF RES JUDICATA IS NOT APPLICABLE B UT THE PRINCIPLE OF CONSISTENCY WILL DEFINITELY APPLY AND ON THAT BASIS THE CLAIM OF THE ASSESSEE SHOULD BE HELD TO B E PROPER. II) DCIT VS. LOKENATH SARAF SECURITIES (P.) LTD., 73 TAXMANN.COM 234 (KOLKATA) HAS HELD THAT THOUGH THE PRINCIPLE OF RES JUDICATA DOES NOT APPLY TO INCOME TAX PROCEEDINGS, THE PRINCIPLE OF CONSISTENCY CANNOT BE GIVEN A GO BY. RELIANCE IN THIS REGARD IS PLACED ON THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF RADHASOAMI SATSANG V. CIT (1992) 193 ITR 321/60 TAXMAN 248. III) CIT V. GOPAL PUROHIT IN [2010] 188 TAXMAN 140( BOMBAY) HAS HELD THAT THOUGH PRINCIPLE OF RES JUDICATA IS NOT APPLICABLE TO ASSESSMENT PROCEEDINGS, YET THERE OUG HT TO BE UNIFORMITY IN TREATMENT AND CONSISTENCY WHEN FAC TS AND CIRCUMSTANCES ARE IDENTICAL IV) H.A.SHAH & CO. V. CIT, 30 ITR 618 (BOMBAY), HA S HELD THAT THOUGH THE RULE OF RES JUDICATA IS ALSO KNOWN AS ESTOPPEL BY RECORD. COURTS HAVE BEEN GENERALLY INC LINED NOT TO DISTURB THE FINDING GIVEN IN A PARTICULAR AS SESSMENT IN SUBSEQUENT YEARS. HOWEVER, IF FRESH FACTS COME TO LIGHT THEN BOTH THE INCOME TAX OFFICER AND THE TAXPAYER A RE FREE TO AGITATE THE MATTER AFRESH. - - ITA 127/16 7 V) THE MADRAS HIGH COURT IN THE CASE OF T.M.M.SANK ARLINGA NADAR & BROTHER V. CIT, 4 ITC 226 HAS HELD THAT WHE RE ANY QUESTION RELATING TO ASSESSMENT DOES NOT VARY WITH THE INCOME EVERY YEAR BUT DEPENDS ON THE NATURE OF THE PROPERTY OR ANY OTHER QUESTION ON WHICH THE RIGHTS OF THE PARTIES TO BE TAXED ARE BASED, E.G. WHETHER A CERTA IN PROPERTY IS TRUST PROPERTY OR NOT, IT HAS NOTHING T O DO WITH THE FLUCTUATION IN THE INCOME; SUCH QUESTION IF DEC IDED BY A COURT ON A REFERENCE MADE TO IT WOULD BE RES JUDICA TA IN THAT THE SAME QUESTION CANNOT BE SUBSEQUENTLY AGITA TED. BUT, IF THE QUESTION IS DECIDED BY A COURT ON A REF ERENCE, WHICH DEPENDS ON CONSIDERATIONS WHICH MAY VARY FROM YEAR TO YEAR, E.G. THE CASE IN WHICH THE AVERAGE VA LUATION HAS TO BE TAKEN, THERE COULD BE NO QUESTION OF RES JUDICATA. 4.2 ACCORDING TO THE LD. AR, THE ABOVE DECISIONS CL EARLY SHOW THAT DIFFERING VIEWS CANNOT BE TAKEN IN DIFFERENT Y EARS BASED ON THE SAME SET OF FACTS. HE ALSO RELIED ON THE DECI SION OF THE SUPREME COURT IN THE CASE OF M.M.IPOH & ORS. V. CIT , 67 ITR 106, WHEREIN IT WAS HELD THAT THOUGH RES JUDICATA D OES NOT APPLY TO TAXING STATUTES THE FINDING OF FACT IN ONE YEAR IS A GOOD AND COGENT EVIDENCE IN SUBSEQUENT YEARS. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. ADMITTEDLY, THE REVENUE HAS ACCEPTED THA T THE - - ITA 127/16 8 ASSESSEE WAS AN INVESTOR WHOSE INCOME IS CHARGEABLE UNDER THE HEAD CAPITAL GAIN IN EARLIER ASSESSMENT YEARS, PA RTICULARLY A.YS 2005-06 & 2007-08 EARLIER TO THE ASSESSMENT YEAR UN DER CONSIDERATION. THE ASSESSEES MAIN CONTENTION IS T HAT THE DEPARTMENT CANNOT CHANGE THE METHOD OF TREATMENT FR OM EARLIER ASSESSMENT YEAR TO THIS ASSESSMENT YEAR. ONCE THE D EPARTMENT HAS ACCEPTED THAT THE ASSESSEE WAS ONLY INVESTING I N SHARES AS AN INVESTOR AND THE PROFIT FROM SELLING OF SHARES A ND SECURITIES SHOULD BE TAXED UNDER THE HEAD CAPITAL GAIN, WHIC H CANNOT BE CHANGED IN SUBSEQUENT ASSESSMENT YEARS. IN THE CASE OF CIT VS. ESCORTS LTD. REPORTED IN [2011] 338 ITR 435 (DEL) W HEREIN HELD THAT: ALTHOUGH PRINCIPLE OF RES JUDICATA DID NOT APPLY T O THE INCOME TAX PROVISIONS, THE REVENUE CANNOT ALLOW TO CHANGE ITS VIEW WITH REGARD TO FUNDAMENTAL ASPECT OF TRANSACTIONS, TAKEN IN EARLIER ASSESSMENT YEAR UNLESS IT IS ABLE TO DEMONS TRATE A CHANGE IN CIRCUMSTANCES IN A SUBSEQUENT ASSESSMENT YEAR. IT ALSO HELD THAT WHERE THE FUNDAMENTAL ASPECT PERMEAT ING THROUGH THE DIFFERENT ASSESSMENT YEARS HAS BEEN FOU ND AS A FACT ONE WAY OR THE OTHER, THE PARTIES ARE ALLOWED THAT POSITION TO BE SUSTAINED BY NOT CHALLENGING THE ORDER, IT WO ULD NOT BE AT ALL APPROPRIATE TO ALLOW THE POSITION TO BE CHANGED IN A SUBSEQUENT YEAR IN VIEW OF THE ABOVE, WE ARE OF THE OPINION THAT HA S TAKEN CORRECT DECISION IN HOLDING THAT INCOME FROM BUYING AND SEL LING OF SHARES AND SECURITIES, WHICH IS TREATED AS INVESTMENT BY T HE ASSESSEE, - - ITA 127/16 9 THE SURPLUS GENERATED FROM THE SAME ACTIVITY TO BE TREATED AS INCOME FROM CAPITAL GAINS ONLY AND IT IS TO BE CONFIRMED. ACCORDINGLY, WE CONFIRM THE ORDER OF TH E LD.CIT(A) ON THIS ISSUE. 6 . IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSE D. ORDER PRONOUNCED ON 30 TH NOVEMBER, 2016 AT CHENNAI. SD/- SD/- ( $% & ) ( ' ( ) $ ) *%+,-,./01,2345,.62,+778,293 : ;< /JUDICIAL MEMBER ! ;<=>>70.?,.?@A1BA2 ': /CHENNAI, C; /DATED, THE 30 TH NOVEMBER, 2016. K S SUNDARAM ;D EFGF /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. H3 /CIT(A) 4. H /CIT 5. FIJ K /DR 6. JLM /GF.