ACIT, Ahmednagar Range, Ahmednagar V. Shri Wahi Baldevsingh Santsingh-HUF, Ahmednagar

ITA 1634/PUN/2013

• Counselvise Citation: 163424514 RSA 2013
• Duration Of Justice: 11 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 28-08-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P S NAIK
• Keywords: Capital asset converted into stock in trade; Capital asset; Business income; Rule of consistency; Transactions in derivatives
• Section: 45(2); 143(3); 145; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER ITA NO.1634/PN/2013 (ASSESSMENT YEAR : 2008-09) INCOME TAX OFFICER, WARD 2, AHMEDNAGAR. . APPELLANT VS. SHRI WAHI BALDEVSINGH SANTSINGH-HUF, RAJ CHAMBERS, NEAR KOTHLA ROAD, AHMEDNAGAR 414 001. PAN : AADHB5922R . RESPONDENT C.O. NO.80/PN/2014 (ARISING OUT OF ITA NO.1634/PN/2013) (ASSESSMENT YEAR : 2008-09) SHRI WAHI BALDEVSINGH SANTSINGH-HUF, RAJ CHAMBERS, NEAR KOTHLA ROAD, AHMEDNAGAR 414 001. PAN : AADHB5922R . CROSS OBJECTOR VS. INCOME TAX OFFICER, WARD 2, AHMEDNAGAR. . APPELLANT IN APPEAL ITA NO.1635/PN/2013 (ASSESSMENT YEAR : 2008-09) INCOME TAX OFFICER, WARD 2, AHMEDNAGAR. . APPELLANT VS. SHRI WAHI BALDEVSINGH SANTSINGH (INDL.), RAJ CHAMBERS, NEAR KOTHLA ROAD, AHMEDNAGAR 414 001. PAN : AALPW7424K . RESPONDENT C.O. NO.81/PN/2014 (ARISING OUT OF ITA NO.1635/PN/2013) (ASSESSMENT YEAR : 2008-09) SHRI WAHI BALDEVSINGH SANTSINGH (INDL.), RAJ CHAMBERS, NEAR KOTHLA ROAD, AHMEDNAGAR 414 001. PAN : AALPW7424K . CROSS OBJECTOR VS. INCOME TAX OFFICER, WARD 2, AHMEDNAGAR. . APPELLANT IN APPEAL ITA NO.1601/PN/2013 A.Y. : 2005-06 DEPARTMENT BY : SHRI P. S. NAIK ASSESSEE BY : SHRI S. N. PURANIK DATE OF HEARING : 20-08-2014 DATE OF PRONOUNCEMENT : 26-08-2014 ORDER PER G. S. PANNU, AM THE CAPTIONED APPEALS BY THE REVENUE AND THE RESPE CTIVE CROSS- OBJECTIONS RELATE TO TWO DIFFERENT ASSESSEE BELONGI NG TO ONE FAMILY AND PERTAIN TO SAME ASSESSMENT YEAR I.E. 2008-09. SINCE THE FA CTS AND ISSUES INVOLVED ARE COMMON THE CAPTIONED APPEALS HAVE BEEN CLUBBED AND HEARD TOGETHER AND A CONSOLIDATED ORDER IS BEING PASSED FOR THE SA KE OF CONVENIENCE AND BREVITY. 2. ITA NO.1634/PN/2013 IN THE CASE OF WAHI BALDEVSI NGH SANTSINGH (HUF) IS AN APPEAL BY THE REVENUE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-I, PUNE DATED 19.06.2013 WHICH, IN TURN, HAS ARISEN FROM AN ORDER DATED 15.12.2010 PAS SED BY THE ASSESSING OFFICER U/S 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT) PERTAINING TO THE ASSESSMENT YEAR 2008-09. 3. THE ONLY ISSUE RAISED IS AS TO WHETHER THE GAIN DERIVED BY THE ASSESSEE ON SALE OF SHARES IS ASSESSABLE UNDER THE HEAD CAPI TAL GAINS OR BUSINESS INCOME. THE STAND OF THE ASSESSEE IS THAT THE SAME IS ASSESSABLE UNDER THE HEAD CAPITAL GAINS WHEREAS AS PER THE REVENUE SUCH GAINS ARE ASSESSABLE AS BUSINESS INCOME. 4. THE CIT(A) NOTED THAT IDENTICAL CONTROVERSY IN T HE ASSESSEES OWN CASE FOR ASSESSMENT YEARS 2006-07 AND 2007-08 WAS CONSID ERED BY THE TRIBUNAL VIDE ITS ORDER IN ITA NO.80 & 1331/PN/2011 DATED 22 .03.2013. AS PER THE TRIBUNAL, THE GAIN ON SALE OF SHARES WAS ASSESSABLE AS CAPITAL GAINS. THE ITA NO.1601/PN/2013 A.Y. : 2005-06 CIT(A) FOUND THAT IN VIEW OF THE DECISION OF THE TR IBUNAL IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 2006-07 AND 2007-08 D ATED 22.03.2013 (SUPRA) THE STAND OF THE ASSESSEE IS LIABLE TO BE U PHELD SINCE THE FACTS ARE SIMILAR IN THIS YEAR ALSO. AGAINST SUCH DECISION O F THE CIT(A), REVENUE IS IN APPEAL BEFORE US. 5. AT THE TIME OF HEARING, IT WAS A COMMON POINT BE TWEEN THE PARTIES THAT THE ORDER OF THE TRIBUNAL DATED 22.03.2013 (SUPRA) WHICH HAS BEEN FOLLOWED BY THE CIT(A) TO DECIDE THE ISSUE IN FAVOUR OF THE ASS ESSEE CONTINUES TO HOLD THE FIELD AS IT HAS NOT BEEN ALTERED BY ANY HIGHER AUTH ORITY. OUR ATTENTION WAS DRAWN TO THE FOLLOWING DISCUSSION IN THE ORDER OF T HE TRIBUNAL DATED 22.03.2013 (SUPRA) WHICH COVERS THE CONTROVERSY BEFORE US :- 10. WE HAVE HEARD THE RIVAL SUBMISSION OF THE PART IES AND PERUSED THE RECORD. THE LEARNED COUNSEL ARGUED THAT WITHOU T AFFORDING OPPORTUNITY TO THE ASSESSEE, THE LD. CIT(A) RELIED ON ONE DECISION IN THE CASE OF ABBOTT HOTELS PVT. LTD. HE SUBMITS THAT THE ASSESSEE IS I NVESTING IN SHARES FOR LAST 25 YEARS AND EVEN FOR THE A.Y. 2005-06, IN THE SCRUTIN Y ASSESSMENT MADE U/S. 143(3) THE ASSESSING OFFICER ACCEPTED THAT THE NATU RE OF THE SHARE TRANSACTIONS ARE INVESTMENT AND ALSO ACCEPTED THE C APITAL GAIN DECLARED BY THE ASSESSEE. HE ARGUES THAT IN THE ASSESSMENT ORD ER FOR A.Y. 2006-07 THE ASSESSING OFFICER HAS OBSERVED THAT THE ASSESSEE WA S MAKING THE INVESTMENT UP TO LAST YEAR. THE ASSESSEE HAS MAINTAINED SEPAR ATE ACCOUNTS FOR INVESTMENT IN SHARES AS WELL AS FOR THE TRADING IN SHARES. HE SUBMITS THAT WHEREVER THERE ARE DERIVATIVES TRANSACTIONS PROFIT OR LOSS ON THE SAME IS OFFERED AS BUSINESS INCOME. HE ARGUES THAT THE I NVESTMENT IN THE SHARES MAY BE FOR THE SHORT TERM AND LONG TERM DEPENDING O N POSSIBILITY OF APPRECIATION AS WELL AS STOCK MARKET INDICATORS. H E FURTHER SUBMITS THAT DIVIDEND FACTOR CANNOT BE THE SOLE CRITERIA FOR DEC IDING WHETHER IT IS AN INVESTMENT OR IT IS A STOCK IN TRADE. LEARNED COUN SEL SUBMITS THAT IN THE CBDT CIRCULAR NO. 4/2007 DT. 15-06-2007 THE BOARD H AS MADE THE CLEAR DISTINCTION BETWEEN CAPITAL ASSET AND THE TRADING A SSET. HE ARGUES THAT LAW IS KNOW WELL SETTLED BY THE DECISION OF THE HON'BLE HI GH COURT OF MUMBAI IN THE CASE OF CIT VS. GOPAL PUROHIT-336 ITR 287 (BOM). H E SUBMITS THAT EVEN UNDER THE RULE OF CONSISTENCY THE PLEA OF THE ASSES SEE MAY BE ACCEPTED AS IT IS NOT DISPUTED THAT THE ASSESSING OFFICER HAS ASSE SSED CONSISTENTLY THE GAINS FROM THE SHARE TRANSACTIONS UNDER THE HEAD CAPITAL GAINS. HE FURTHER SUBMITS THAT THE DECISION IN THE CASE OF GOPAL PURO HIT (SUPRA) HAS REACHED THE FINALITY AS SLP FILED BY THE REVENUE HAS BEEN DISMI SSED BY THE HON'BLE SUPREME COURT REPORTED IN (2011) 334 ITR (ST) 308). PER CONTRA THE LD.DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 11. IN THE PRESENT CASE UP TO THE A.Y. 2005-06 DEPA RTMENT HAS CONSISTENTLY ACCEPTED THE CAPITAL GAINS I.E. SHORT TERM AS WELL AS LONG TERM DECLARED BY THE ASSESSEE FROM SHARE TRANSACTIONS WH ICH IS ALSO NOT DISPUTED IN THIS CASE. WE FIND THAT WHENEVER THERE ARE DERI VATIVE TRANSACTIONS, THE ITA NO.1601/PN/2013 A.Y. : 2005-06 ASSESSEE HAS DECLARED THE PROFIT OR LOSS UNDER THE HEAD BUSINESS. BOTH THE AUTHORITIES BELOW HAVE GONE ON HIGH VOLUME AND FREQ UENCY OF THE TRANSACTIONS BUT AT THE SAME TIME WE FIND THAT EVEN IN PRECEDING YEARS, THE ASSESSEE HAS SUBSTANTIAL VOLUME OF TRANSACTIONS BUT THIS ISSUE N EVER AROSE. AS RIGHTLY ARGUED BY THE LEARNED COUNSEL IN THE CIRCULAR NO. 4 /2007 THE BOARD HAS GIVEN SOME GUIDELINES BUT ULTIMATELY IT IS AN INTENTION O F THE ASSESSEE WHICH IS DECISIVE. WE FIND THAT THE LAW IS WELL SETTLED IN T HE DECISION OF THE GOPAL PUROHIT (SUPRA) AND THE SLP FILED BY THE REVENUE HA S BEEN DISMISSED BY THE HON'BLE SUPREME COURT (333 ITR (ST) 308). WE THER EFORE FOLLOWING THE RULE OF CONSISTENCY SET ASIDE THE ORDER OF THE LD. CIT(A ) IN BOTH ASSESSMENT YEARS AND ACCEPT THE PLEA OF THE ASSESSEE FOR TREATING TH E GAIN/PROFIT AS SHORT TERM AS WELL AS LONG TERM CAPITAL GAIN AS DECLARED BY TH E ASSESSEE IN THE RETURNS OF INCOME AND ACCORDINGLY DIRECT THE ASSESSING OFFI CER TO RECOMPUT THE INCOME. 12. IN THE RESULT, BOTH THE APPEAL OF THE ASSESSEE ARE ALLOWED. THE ASSESSEE HAS FILED THE MODIFIED GROUND MORE PARTICU LARLY GROUND NO. 3. THE ASSESSEE HAS SUCCEEDED ON HIS ORIGINAL PLEA I.E. GR OUND NOS. 1, 2 AND 4 AND GROUND NO. 3 BELOW IS AN ALTERNATE PLEA. HENCE, TH E GROUND NO. 3 BECOMES ACADEMIC, SAME WAY GROUND NO. 5 IS ALSO ACADEMIC AN D ACCORDINGLY SAME ARE NOT DEALT WITH BEING ACADEMIC IN NATURE. 6. FOLLOWING THE AFORESAID PRECEDENT IN THE ASSESSE ES OWN CASE, WE HEREBY AFFIRM THE ORDER OF THE CIT(A) AND AS A RESU LT, THE APPEAL OF THE REVENUE IN ITA NO.1634/PN/2013 IS DISMISSED. 7. NOW, WE MAY TAKE-UP THE APPEAL IN ITA NO.1635/PN /2013 IN THE CASE OF WAHI BALDEVSINGH SANTSINGH (INDL.) DIRECTED AGAI NST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-I, PUNE DATED 19.06.2013 WHICH, IN TURN, HAS ARISEN FROM AN ORDER DATED 28.12.2010 PAS SED BY THE ASSESSING OFFICER U/S 143(3) OF THE ACT PERTAINING TO THE ASS ESSMENT YEAR 2008-09. 8. IN THIS APPEAL ALSO, THE ONLY ISSUE RAISED IS AS TO WHETHER THE GAIN DERIVED BY THE ASSESSEE ON SALE OF SHARES IS ASSESS ABLE UNDER THE HEAD CAPITAL GAINS OR BUSINESS INCOME. THE STAND OF THE ASSESSEE IS THAT THE SAME IS ASSESSABLE UNDER THE HEAD CAPITAL GAINS WHEREAS AS PER THE REVENUE SUCH GAINS ARE ASSESSABLE AS BUSINESS INCOME. 9. HEREIN ALSO, A COMMON POINT BETWEEN THE PARTIES IS THAT THE ORDER OF THE TRIBUNAL IN ITA NO.81/PN/2011 FOR ASSESSMENT YEAR 2 006-07 DATED ITA NO.1601/PN/2013 A.Y. : 2005-06 22.03.2013 (SUPRA), WHICH HAS BEEN FOLLOWED BY THE CIT(A) TO DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE CONTINUES TO HOLD THE FIE LD. OUR ATTENTION WAS DRAWN TO THE FOLLOWING DISCUSSION IN THE ORDER OF THE TRI BUNAL DATED 22.03.2013 WHICH COVERS THE CONTROVERSY BEFORE US :- 23. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PAR TIES AND PERUSED THE RECORD. IN THE PRESENT CASE UP TO THE A.Y. 2005-06 DEPARTMENTS HAS CONSISTENTLY ACCEPTED THE TERM GIVEN TO THE PRO FIT/GAIN FROM THE SHARE TRANSACTIONS IT IS ALSO NOT DISPUTED IN THIS CASE. WHENEVER THERE ARE DERIVATIVE TRANSACTIONS THE ASSESSEE IS DECLARING THE PROFIT O R LOSS UNDER THE HEAD BUSINESS. BOTH THE AUTHORITIES BELOW HAVE GONE ON TWO VOLUME AND FREQUENCY OF THE TRANSACTIONS BUT AT THE SAME TIME WE FIND TH AT EVEN IN THE PAST THE ASSESSEE HAS SUBSTANTIAL VOLUME OF TRANSACTIONS BUT IN THE PRECEDING YEAR THIS ISSUE NEVER AROSE AS RIGHTLY ARGUED BY THE LEARNED COUNSEL IN THE CIRCULAR NO. 4/2007 THE BOARD HAS GIVEN SOME GUIDELINES BUT ULTI MATELY IT IS AN INTENTION OF THE ASSESSEE I.E. A DECISIVE. WE FIND THAT THE LAW IS WELL SETTLED IN THE DECISION OF THE GOPAL PUROHIT (SUPRA) AND THE SLP FILED BY T HE REVENUE HAS BEEN DISMISSED BY THE HON'BLE SUPREME COURT (333 ITR (S T) 308). WE THEREFORE FOLLOWING THE RULE OF CONSISTENCY SET ASIDE THE ORD ER OF THE LD. CIT(A) AND ACCEPT THE PLEA OF THE ASSESSEE FOR TREATING THE SH ORT TERM AS WELL AS LONG TERM CAPITAL GAIN DECLARED BY THE ASSESSEE BY THE R ETURN OF INCOME AND ACCORDINGLY DIRECT THE ASSESSING OFFICER TO RECOMPU TED THE INCOME OF THE ASSESSEE. IN THE RESULT, BOTH THE APPEAL OF THE AS SESSEE ARE ALLOWED. THE ASSESSEE FILED THE MODIFIED GROUND MORE PARTICULARL Y GROUND NO. 3 THE ASSESSEE HAS SUCCEEDED ON HIS ORIGINAL GROUNDS I.E. GROUND NOS. 1, 2 AND 4 AND GROUND NO. 3 BELOW AN ALTERNATE PLEA HENCE, THE GROUND NO. 3 BECOMES ACADEMIC, SAME WAY GROUND NO. 5 IS ALSO ACADEMIC. 10. FOLLOWING THE AFORESAID PRECEDENT IN THE ASSESS EES OWN CASE, WE HEREBY AFFIRM THE ORDER OF THE CIT(A) AND AS A RESU LT, THE APPEAL OF THE REVENUE IN ITA NO.1635/PN/2013 IS DISMISSED 11. NOW, WE MAY TAKE-UP THE CROSS-OBJECTIONS PREFER RED BY THE RESPECTIVE ASSESSEES VIDE C.O. NOS.80 & 81/PN/2014 FOR ASSESSM ENT YEAR 2008-09. AT THE TIME OF HEARING, THE LEARNED COUNSEL FOR THE AS SESSEE SUBMITTED THAT IF THE APPEALS OF THE REVENUE ARE DISMISSED, THE FOLLOWING GROUNDS OF CROSS- OBJECTION RAISED BY THE CROSS-OBJECTOR SHALL BE REN DERED ACADEMIC :- 1. CROSS OBJECTOR PRAYS TO UPHOLD THE ORDERS PASSE D BY CIT(A) HOLDING THAT SHARES SALE TRANSACTION IS INVESTMENT HENCE TAXABLE AS CAPITAL GAIN AND NOT BUSINESS INCOME. ITA NO.1601/PN/2013 A.Y. : 2005-06 2. WITHOUT PREJUDICE TO 1 ABOVE, FOR ANY REASON IF IT IS HELD TO BE BUSINESS INCOME, THEN APPELLANT PRAYS FOR COMPUTATI ON OF INCOME U/S 28 TO 44, SECTION 45(2) AND SECTION 145 OF THE ACT. 12. SINCE THE APPEALS OF THE REVENUE HAVE BEEN DISM ISSED IN THE EARLIER PARAGRAPHS, THE AFORESAID CROSS-OBJECTIONS DO NOT R EQUIRE ANY SPECIFIC ADJUDICATION. THE SAME ARE ACCORDINGLY DISMISSED A S INFRUCTUOUS. 13. RESULTANTLY, ALL THE FOUR CAPTIONED APPEALS AR E DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH AUGUST, 2014. SD/- SD/- (SHAILENDRA KUMAR YADAV) (G . S. PANNU) JUDICIAL MEMBER ACCOUNT ANT MEMBER PUNE, DATED : 26 TH AUGUST, 2014. SUJEET COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-I, PUNE; 4) THE CIT-I, PUNE; 5) THE DR B BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// SR. PRIVATE SECRETARY I.T.A.T., PUNE