Shri Pradipkumar A.Chopra L/h of Late Amarchand F.Chopra, Ahmedabad V. The Dy.CIT.,Circle-11, Ahmedabad

ITA 1611/AHD/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0693 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 08-08-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 24-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: K M MEHTA
• Keywords: Business income; Principle of natural justice; Rule of consistency; Reasonable cause

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH AHMEDABAD , BEFORE SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ITA NO. 1611/AHD/2012 ASSESSMENT YEAR :2008-09 AMARCHAND FATEHCHAND CHOPRA, L/H PRADIPKUMAR A CHOPRA, 320, NEW CLOTH MARKET, O/S RAJPUR GATE, AHMEDABAD V/S . DCIT, CIRCLE-11, NARAYAN CHAMBER, AHMEDABAD PAN NO. A BXPC 4060 E (APPELLANT) .. (RESPONDENT) /BY ASSESSEE SHRI K..M. MEHTA, CA / BY REVENUE SHRI PRASOON KABRA, SR. D.R. /DATE OF HEARING 08.08.2016 /DATE OF PRONOUNCEMENT 24.08.2016 O R D E R PER : SHRI MAHAVIR PRASAD, JUDICIAL MEMBER THIS APPEAL FILED BY ASSESSEE IS AGAINST THE ORDER OF CIT(A)-XVI, AHMEDABAD, DATED 25.05.2012 FOR THE ASSESSMENT YEAR 2008-09. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI ALS ON RECORD ARE AS UNDER: IN THIS CASE, ORIGINALLY, THE ASSESSEE HAS FILED H IS RETURN OF INCOME ON 30 TH OCTOBER, 2008 DECLARING TOTAL INCOME AT RS.13,73,8 01/-. THE ADDITION MADE BY THE ASSESSING OFFICER OF RS.8,18,068/-. AG GRIEVED BY THE ORDER OF ASSESSING OFFICER, ASSESSEE CARRIED THE MATTER BEFO RE THE LD. CIT(A) WHO GRANTED RELIEF TO THE ASSESSEE. THEREAFTER, MATTE R WAS CARRIED BEFORE THE PAGE 2 TRIBUNAL WHEREIN VIDE ORDER DATED 30.11.2015, THE T RIBUNAL HAS DISMISSED THE APPEAL OF ASSESSEE FOR WANT OF PROSECUTION. AGAINST THE SAID TRIBUNAL ORDER ASSESSEE FILED A MISCELLANEOUS PETITION WHICH WAS A LLOWED AND FIXED THE APPEAL FOR HEARING. ASSESSEE IS NOW IN APPEAL BEFOR E US AND HAS RAISED FOLLOWING GROUNDS: 1. THAT ON FACTS AND IN LAW CIT (A) HAS ERRED IN U PHOLDING, GAIN IN SALE OF SHARES AS BUSINESS INCOME AS THE ACQUISITIO N AND SALE OF SHARES ARE NOT AS A TRADER BUT ARE AS INVESTOR, LIA BLE TO CAPITAL GAIN, AS ACCEPTED SINCE LAST 30 YEARS IN CASE OF TH E ASSESSEE. 2. THAT ON FACTS AND IN LAW THE LEARNED CIT (APPEA LS) HAS ERRED IN UPHOLDING, GAIN ON SALE OF SHARES HELD FOR LESS THA N ONE MONTH AS INCOME FROM BUSINESS AND NOT THE SHORT TERM CAPI TAL GAIN. 3. THAT LEARNED CIT (APPEALS) HAS ERRED IN RELYING ON THE DECISION OF HONORABLE ITAT, AHMEDABAD IN SUGAMCHAND JAIN V/S ACIT, AS THE FACTS OF THE CASE OF THE ASSESSEE ARE DIFFER ENT, AS TO MAGNITUDE, REPETITIVENESS AND FREQUENCY OF TRANSACT IONS, RATIO OF HOLDING AND INTENTION TO GAIN FROM FLUCTUATION O F MARKET PRICES ETC. 3. LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE DR AWN OUR ATTENTION TO PAGES 1 TO 41 OF THE PAPER BOOK IN WHICH DETAILED E XPLANATION HAVE BEEN GIVEN BY THE ASSESSEE. 4. WE NOTED THAT T HE ASSESSING OFFICER HAS ERRED IN TREATING THE INCOME AS BUSINESS INCOME WITHOUT PROVIDING OPPORTU NITY. THE ASSESSEE COULD NOT SUBMIT ANY EXPLANATION BUT THE ASSESSING OFFICER OUGHT TO HAVE GIVEN AN OPPORTUNITY AS ASSESSEE WAS DEPENDENT ON THE INFORMATION FROM OUTSIDE SOURCE. WE FURTHER NOTED T HAT REPRESENTATIVE OF THE ASSESSEE MET THE ASSESSING OFFICER ON 08/09/201 0, HE INFORMED THAT ASSESSMENT ORDER HAS ALREADY BEEN PASSED AND DID NO T TAKE THE REPLY, HE SUBMITTED THE SAID REPLY DATED 05/09/2010 BY REG ISTERED POST TO ASSESSING OFFICER, AS THE ASSESSEE HAS BONAFIDE AND REASONABLE CAUSE PAGE 3 FOR NOT SUBMITTING THE REPLY BEFORE THE ASSESSING O FFICER PASSED THE ORDER OF ASSESSMENT. 5. LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE ST ATED THAT ASSESSEE IS AGED ABOUT 84 YEARS HAS SUBMITTED THE M INUTEST DETAILS IN RELATION TO SHARES IN THE AFORESAID 4 LETTERS MENTI ONED IN PARA 1 ABOVE AND CONSIDERING THE VOLUME OF DETAILS INCLUDING TO BE COLLECTED FROM THIRD PARTY, LETTER WAS SUBMITTED ON 19/08/2010 TO ASSESS ING OFFICER. THE ASSESSING OFFICER OUGHT TO HAVE GIVEN ANOTHER OPPOR TUNITY OR SHOW CAUSE BEFORE PASSING ASSESSMENT U/S 143 (3) OF THE ACT ON 07/08/2010. THE ASSESSE HAS MAINLY THE INCOME FROM LONG TERM CAPITA L GAIN AND THE SAME HAS ABOUT LAST 30 YEARS BEEN ASSESSED AS CAPIT AL GAIN IN THE ORDER OF ASSESSMENTS INCLUDING U/S 143 (3). SINCE THEN TH E ASSESSEE IS HOLDING SHARES AND MUTUAL FUNDS INVESTMENTS AS INVESTMENT AND TAXED AS CAPITAL GAIN AND IN NONE OF THE YEAR THE SAME IS AS SESSED AS BUSINESS INCOME. THE ASSESSING OFFICER HAVING ACCEPTED THE L ONG TERM CAPITAL GAIN OF RS.32,24,895/- AS LONG TERM CAPITAL GAIN IN THE ORDER OF ASSESSMENT, HOLDING SHORT TERM CAPITAL GAIN OF RS.8,81,068/-. 6. AGAINST THE SAID ASSESSMENT ORDER ASSESSEE PREFE RRED AN APPEAL BEFORE THE CIT(A) WITH THE SUBMISSION THAT THE ASSE SSMENT ORDER WAS AGAINST THE PRINCIPLES OF NATURAL JUSTICE AS THE AS SESSE WAS NOT PROVIDED ADEQUATE OPPORTUNITY FOR FILING THE SUBMISSIONS. TH E CIT(A) HAS ALLOWED THE PART RELIEF TO THE ASSESSEE. 7. LD. AUTHORIZED REPRESENTATIVE HAS CITED AN ORDER OF ITAT MUMBAI BENCH IN THE CASE OF ACIT VS. SMT. MONICA B. SHAH I N ITA NO. 6406/MUM/2010 VIDE ORDER DATED 22.07.2015 WHICH REA DS AS UNDER:- 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND AL SO PERUSED THE RELEVANT MATERIAL ON RECORD. THE ISSUE INVOLVED IN THE PRESENT APPEAL IS WHETHER THE SHARES SOLD BY THE ASSESSEE DURING T HE YEAR UNDER CONSIDERATION GIVING RISE TO SHORT TERM CAPITAL GAI NS WERE PURCHASED AND HELD BY HER AS INVESTMENT OR STOCK IN TRADE. IF THEY WERE PURCHASED AND HELD BY THE ASSESSEE AS INVESTMENT, T HE PROFIT ARISING FROM SALE THEREOF WOULD BE CHARGEABLE TO TAX IN THE HANDS OF THE PAGE 4 ASSESSEE UNDER THE HEAD 'CAPITAL GAINS' WHEREAS IF THE SAME WERE HELD BY HER AS STOCK IN TRADE, THE PROFIT ARISING F ROM SALE THEREOF WOULD BE CHARGEABLE TO TAX IN THE HANDS OF THE ASSE SSEE UNDER THE HEAD 'PROFITS & GAINS OF BUSINESS OR PROFESSION'. I T IS, THEREFORE, NECESSARY TO ASCERTAIN WHETHER THE SHARES WERE PURC HASED AND HELD BY THE ASSESSEE AS INVESTMENT OR STOCK IN TRADE AND THIS WILL DEPEND UPON THE INTENTION OF THE ASSESSEE AT THE TIME OF P URCHASE OF RELEVANT SHARES. IT IS WELL SETTLED THAT SUCH INTEN TION IS TO BE GATHERED FROM THE RELEVANT FACTS OF EACH CASE AND AS SUBMITT ED BY THE LEARNED REPRESENTATIVES OF BOTH THE SIDES, THERE ARE CERTAI N GUIDELINES LAID DOWN IN THE CIRCULARS/INSTRUCTIONS ISSUED BY THE CB DT FROM TIME TO TIME. THE COORDINATE BENCHES OF THIS TRIBUNAL HAVE ALSO SUMMARIZED SOME OF THE IMPORTANT ASPECTS WHICH ARE RELEVANT TO ASCERTAIN THE INTENTION OF THE ASSESSEE SO AS TO DECIDE WHETHER T HE TRANSACTIONS IN SHARES ARE UNDERTAKEN BY THE ASSESSEE AS INVESTOR O R AS A TRADER. AT THE TIME OF HEARING BEFORE US, THE LEARNED REPRESEN TATIVES OF BOTH THE SIDES HAVE ARGUED THEIR RESPECTIVE CASES IN THE LIG HT OF THESE GUIDELINES. HOWEVER, BEFORE WE EXAMINE THE FACTS OF THE PRESENT CASE IN THE LIGHT OF THE SAID GUIDELINES, THERE IS ONE PECULIAR FACT INVOLVED IN THE PRESENT CASE WHICH, IN OUR OPINION, HAS A MATERIAL BEARING ON THE ISSUE INVOLVED IN THE PRESENT APPEAL . 9. IT IS OBSERVED THAT THE CLAIM OF THE ASSESSEE RI GHT FROM THE BEGINNING WAS THAT ALL THE SHARES WERE BEING PURCHA SED AND HELD BY HER AS INVESTOR AND THERE WAS NO INTENTION ON HER P ART TO TRADE IN THE DELIVERY BASED SHARES. ACCORDINGLY THE PROFIT ARISI NG FROM SALE OF SHARES WAS OFFERED BY THE ASSESSEE AS CAPITAL GAINS , EITHER SHORT TERM OR LONG TERM, DEPENDING UPON THE PERIOD FOR WH ICH THE RESPECTIVE SHARES WERE HELD BY HER. THE AO, HOWEVER , TREATED SHORT TERM AS WELL AS LONG TERM CAPITAL GAINS DECLARED BY THE ASSESSEE AS HER BUSINESS INCOME. ON APPEAL, THE LEARNED CIT(APP EALS) TREATED THE ASSESSEE AS INVESTOR IN SHARES AND DIRECTED THE AO TO ACCEPT THE CLAIM OF THE ASSESSEE FOR SHORT TERM AND LONG T ERM CAPITAL GAINS. IN THE PRESENT APPEAL, THE DEPARTMENT HAS CHALLENGE D THE DECISION OF THE LEARNED CIT(APPEALS) ONLY TO THE EXTENT IT I S IN RESPECT OF SHORT TERM CAPITAL GAINS. IN SO FAR AS THE CLAIM OF THE A SSESSEE FOR LONG TERM CAPITAL GAINS IS CONCERNED WHICH HAS BEEN ACCE PTED BY THE LEARNED CIT(APPEALS),THE DEPARTMENT HAS NOT CHALLEN GED THE DECISION OF THE LEARNED CIT(APPEALS) AND THIS IS A PECULIAR FACT INVOLVED IN THE PRESENT CASE HAVING MATERIAL AND DI RECT BEARING ON THE ISSUE UNDER ITA/6406/MUM/2010,AY.07-08-MONICA CONSIDERATION. THIS IS BECAUSE IF THE DEPARTMENT HA S ACCEPTED THAT SOME OF THE SHARES WERE PURCHASED AND HELD BY THE A SSESSEE AS INVESTMENT WHILE ACCEPTING THE DECISION OF THE LEAR NED CIT(APPEALS) ALLOWING THE CLAIM OF THE ASSESSEE FOR LONG TERM CA PITAL GAIN ARISING FROM SALE THEREOF, THERE IS NO JUSTIFICATION FOR TH EM TO CONTEND THAT THE ASSESSEE HAD PURCHASED AND HELD OTHER SHARES AS STO CK IN TRADE MERELY BECAUSE THEY WERE SOLD WITHIN A PERIOD OF ON E YEAR ESPECIALLY PAGE 5 WHEN OTHER FACTS ARE ALMOST SIMILAR. FOR INSTANCE, IF ONE LOT OF 1000 SHARES OF A PARTICULAR COMPANY WAS PURCHASED BY THE ASSESSEE IN THE EARLIER YEAR AND 500 SHARES OF THE SAID LOT WER E SOLD BY HER IN THE YEAR UNDER CONSIDERATION BEFORE A PERIOD OF ONE YEA R ANDTHE BALANCE 500 SHARES WERE SOLD AGAIN IN THE YEAR UNDER CONSID ERATION BUT AFTER THE PERIOD OF ONE YEAR, IT CANNOT BE SAID THAT THER E WERE TWO DIFFERENT INTENTIONS OF THE ASSESSEE BEHIND PURCHASE OF THE S AME LOT OF SHARES. THE INTENTION OF THE ASSESSEE IN SUCH CASE CANNOT BE DIFFERENT AND THE SAME IN ANY CASE, CANNOT BE DECID ED MERELY ON THE BASIS OF PERIOD OF HOLDING ESPECIALLY WHEN OTHER MA TERIAL FACTS RELEVANT TO THE ISSUE ARE SIMILAR. MOREOVER, THE AS SESSEE WAS CONSISTENTLY TREATED AS INVESTOR IN SHARES BY THE D EPARTMENT AND AS RIGHTLY HELD BY THE LEARNED CIT(APPEALS)RELYING ON THE DECISION IN THE CASE OF GOPAL PUROHIT (SUPRA), THERE WAS NO REASON TO CHANGE THE SAID TREATMENT IN THE YEAR UNDER CONSIDERATION AS P ER THE RULE OF CONSISTENCY ESPECIALLY WHEN THERE WAS NO CHANGE IN THE RELEVANT FACTS. WE, THEREFORE, FIND NO INFIRMITY IN THE IMPU GNED ORDER OF THE LEARNED CIT(APPEALS) TREATING THE ASSESSEE AS INVES TOR IN SHARES AND DIRECTING THE AO TO BRING TO TAX THE PROFIT ARI SING FROM THE TRANSACTIONS OF SHARES UNDER THE HEAD 'CAPITAL GAIN S' AS SHORT TERM AND LONG TERM CAPITAL GAINS DEPENDING ON THE PERIOD OF HOLDING.' 8. WE HAVE GONE THROUGH THE RELEVANT RECORDS, IMPUG NED ORDERS OF THE AUTHORITIES BELOW AND ORDER OF THE ITAT MUMBAI BENCH IN THE CASE OF ACIT VS. SMT. MONICA B. SHAH (SUPRA), WE FIND FORCE IN T HE SUBMISSION OF LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE. WE ALSO DRAW SUPPORT FROM THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN TH E CASE OF CIT VS. GOPAL PUROHIT REPORTED IN 336 ITR 287 (BOM) WHEREIN HONBLE BOMBAY HIGH COURT INTERALIA HELD THAT WHEN SHARE ACTIVITY WAS TREATED AS INVESTMENT IN EARLIER YEARS IT COULD NOT BE TREATED AS BUSINESS IN SUBSEQUENT YEARS IF THE FACTS ARE SAME. THE RELEVAN T FINDING OF HONBLE HIGH COURT IS REPRODUCED HEREIN UNDER FOR READY REF ERENCE: BUSINESS INCOME OR CAPITAL GAINS-TRADING IN SHARES OR INVESTMENT- TWO SEPARATE PORTFOLIOS- PERMISSIBLE -INCOME TAX ACT, 1961. INCOME-TAX GENERAL PRINCIPLES-CONSISTENT PRACTICE OF TREATING TRANSACTIONS IN SHARS AS INVESTMENT - PRINCIPLE OF CONSISTENCY- DIFFERENT VIEW SHOULD NOT BE TAKEN FOR YEAR UNDER CONSIDERATION - INCOME TAX ACT, 1961. PAGE 6 INCOME- NATURE OF INCOME- ENTRIES IN BOOKS OF ACCOUNT NOT CONCLUSIVE -INCOME TAX ACT, 1961. 9. WE FURTHER NOTED THAT AGAINST THE ORDER OF THE H ONBLE BOMBAY HIGH COURT, REVENUE CARRIED THE MATTER BEFORE THE H ONBLE SUPREME COURT BY FILING SLP. THE HONBLE SUPREME COURT VIDE ORDER DATED 15.11.2010 DISMISSED THE DEPARTMENTS SPECIAL LEAVE PETITION AGAINST THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN CI T VS. GOPAL PUROHIT (SUPRA). THEREFORE, RESPECTFULLY FOLLOWING THE ABO VE CITED ORDER OF THE HONBLE BOMBAY HIGH COURT AND TRIBUNAL, WE SET ASID E THE ORDER OF THE CIT(A) AND DECIDE THE ISSUE IN FAVOUR OF THE ASSESS EE. 10. IN THE RESULT, APPEAL OF THE ASSESSE IS ALLOWED . THIS ORDER PRONOUNCED IN OPEN COURT ON 24.08.2016 SD/- SD/ - (ANIL CHATURVEDI) (MAHAVIR PR ASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER ( ) ( ) 24.8.2016 AKS PAGE 7 !'# 1) $ %&' 2) ()* 3) +,+-$ . 4) . -( ! ' )- 5) / 0' -$ , ! ' !-$ , !12 , 6) 0 3% 4 5 6 // ( // , 1 7 8 , ! ' !-$ , !12 , 6 STRENGTHEN PREPARATION & DELIVERY OF ORDERS IN THE IT AT 1) DATE OF TAKING DICTATION 10 .08.2016 2) DIRECT DICTATION BY MEMBER STRAIGH T ON COMPUTER/LAPTOP/DRAGON DICTATE DICT. ON COMPUTER 3) DATE OF TYPING & DRAFT ORDER PLACE BEFORE MEMBER 16 .08.2016 4) DATE OF CORRECTION 17.08.2016 5) DATE OF FURTHER CORRECTION 6) DATE OF INITIAL SIGN BY MEMBERS 7) ORDER UPLOADED ON 8) ORIGINAL DICTATION PAD HAS BEEN ENCLOSED IN THIS FILE 9) FINAL ORDER AND 2 ND COPY SEND TO BENCH CLERK ON