ASST CIT 25(2), MUMBAI V. RAJESH D NANDU (HUF), MUMBAI

ITA 1721/MUM/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3587 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-03-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 12-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R M MADHAVI
• Assessee Lawyers: MANISH SANGHAVI
• Keywords: Business income; Rule of consistency; Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUM BAI BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI SANDEEP GOSAIN, JM ./ I.T.A. NO. 1721/MUM/2014 ( / ASSESSMENT YEAR: 2010-11) ASSTT. COMMISSIONER OF INCOME TAX-25(2), ROOM NO. 108, 1 ST FLOOR, BLDG. NO. C- 11, PRATYAKSHAKAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (EAST), MUMBAI-400 051. / VS. RAJESH D NANDU(HUF) C-103, SHAILESH APARTMENT SVP ROAD, BORIVALI(W), MUMBAI-400 092. ./ ./PAN/GIR NO. AAAHR 1531H ( /APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : MISS. R.M. MADHAVI / RESPONDENT BY : SHRI MANISH SANGHAVI / DATE OF HEARING : 11/01/2016 !'# / DATE OF PRONOUNCEMENT : 02/03/2016 $% / O R D E R PER SANDEEP GOSAIN, J. M.: THE PRESENT APPEAL HAS BEEN FILED BY THE REVENUE AG AINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)- 35, DATED 24. 12.2013 FOR A.Y. 2010-11 ON THE FOLLOWING GROUNDS OF APPEAL. 2 ITA NO. 1721/MUM/2014 (A.Y. 2010-11) ACIT VS. RAJESH D. NANDU 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN HOLDING THE INCOME OF THE ASESSEE FROM SHA RE TRANSACTION AS PROFITS FROM CAPITAL GAIN AND NOT AS BUSINESS INCOME. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT IN THE PROC EEDINGS YEARS ALSO I/E/ A.Y. 2005-06 TO 2009-10, THE MAJOR ACTIVITY OF THE ASSES SEE IS SHARE TRADING AND FOR A.Y. 2008-09 THE ASSESSEE HAS ACCEPTED THE FACT AND WITHDRAWN THE APPEAL ON THIS GROUND. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LEARNED CIT(A) ERRED IN DELETING THE DISALLOWANCE RS.84,13,028/- W HICH WAS MADE U/S 14A R.W.R.8D. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE RETURN OF INCOME DECLARING TOTAL INCOME OF RS.86,10,747/- WAS E-FILED ON 21.09.2010. THE CASE WAS SELECTED FOR SCRUTINY THROUGH CASS AND ACCORDINGLY REQUIRED STAT UTORY NOTICES U/S 143(2) OF THE ACT WERE ISSUED AND SERVED UPON THE ASSESSEE. AFTER CONSIDERING THE REPLY OF THE ASSESSEE, IT WAS HELD BY THE AO THAT THE SHORT TER M CAPITAL GAIN OF RS.57,196,225/- AND LONG TERM CAPITAL GAIN OF RS.74,44,211/- AMOUNT ING TO RS.6,46,40,436/- IS TO BE TAXED AS INCOME FROM BUSINESS OR PROFESSION. APART FROM THAT DISALLOWANCE OF RS. 84,13,028/- U/S 14A R.W. RULE8D WAS MADE WHILE PASS ING ORDER OF ASSESSMENT. 3 ITA NO. 1721/MUM/2014 (A.Y. 2010-11) ACIT VS. RAJESH D. NANDU 3. AGGRIEVED BY THE ORDER OF THE AO, ASSESSEE FILED THE APPEAL BEFORE CIT(A) AND THE CIT(A) AFTER CONSIDERING THE CASE OF THE AS SESSEE HAD ALLOWED THE APPEAL VIDE ITS ORDER DATED 24.12.13. 3.1 AGGRIEVED BY THE ORDER OF CIT(A) THE REVENUE FI LED THE PRESENT APPEAL BEFORE US ON THE GROUNDS MENTIONED HEREIN ABOVE. GROUND NO. 1,2 &3 4. SINCE ALL THE GROUNDS RAISED BY THE ASSESSEE ARE INTER-CONNECTED AND INTER- RELATED THEREFORE WE THOUGHT IT FIT TO DISPOSE OFF THE SAME THROUGH THE PRESENT COMMON ORDER. 4.1 AT THE VERY OUTSET LD. DR SUBMITTED THAT THE AS SESSEE HAD OFFERED RS.10,108,850/- FOR TAXATION UNDER THE HEAD SHORT T ERM CAPITAL GAIN AFTER SETTING OFF THE BROUGHT FORWARD LOSS OF RS.47,087,374/- AGAINST THE TOTAL SHORT TERM CAPITAL GAIN OF RS.57,196,225/- THROUGH SHARE TRANSACTION. THE ASSESSE HAD ALSO CLAIMED EXEMPT INCOME TOWARDS LONG TERM CAPITAL GAINS OF RS .74,44,211/-. WHILE SUPPORTING THE ORDER OF THE AO IT WAS SUBMITTED THA T THE AO HAS RIGHTLY NOTED THAT THE ACTIVITY UNDERTAKEN BY THE ASSESSEE WAS VERY HI GH AS THE ASSESSEE WAS 4 ITA NO. 1721/MUM/2014 (A.Y. 2010-11) ACIT VS. RAJESH D. NANDU CONSISTENTLY ENGAGED IN THE BUSINESS OF DEALING IN SHARES IN THE PRECEDING A.YS., I.E. 2005-06 TO 2009-10. THEREFORE, CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE THE AO HAS RIGHTLY TREATED THE ASSESSEES INC OME SHOWN AS CAPITAL GAINS TO BE A INCOME FROM BUSINESS. THE LD. DR FURTHER SUBMITTE D THAT DURING THE COURSE OF ASSESSMENT PROCEEDING IT WAS NOTICED BY THE AO THAT THE ASSESSEE HAD DEBITED A SUM OF RS.2,17,57,184/- ON ACCOUNT OF INTEREST PAYM ENT. IN THIS CONNECTION NO EVIDENCE WAS SUBMITTED BY THE ASSESSEE AND SINCE TH E ASSESSE HAS SHOWN EXEMPT INCOME OF RS.40,14,086/-, THEREFORE DISALLOWANCE O F RS.84,13,028/- WAS RIGHTLY MADE U/S 14A READ WITH RULE 8D. 5. ON THE CONTRARY LD. AR REPRESENTING THE ASSESSEE SUBMITTED THAT THE PRINCIPLES OF RES JUDICATA OR ESTOPPELS BY RECORD H AS NO APPLICATION TO THE DECISIONS OF INCOME TAX AUTHORITIES. INCOME TAX AUTHORITIES A RE NOT COURTS, AND SECONDLY, THE PURPOSE AND SUBJECT MATTER OF THE PROCEEDINGS IN A SUBSEQUENT YEAR ARE NOT THE SAME AS THOSE IN THE PREVIOUS YEARS AND THEREFORE A N ASSESSMENT FOR A PARTICULAR YEAR IS FINAL AND CONCLUSIVE BETWEEN THE PARTIES ON LY IN RELATION TO THAT YEAR. IT WAS FURTHER ARGUED BY LD. AR THAT THE DECISIONS GIVEN I N AN ASSESSMENT FOR AN EARLIER YEAR ARE NOT BINDING EITHER ON THE ASSESSEE OR ON T HE DEPARTMENT IN SUBSEQUENT YEARS. IT WAS FURTHER POINTED OUT THAT THE AO IN TH E PRESENT CASE HAS HIMSELF ADMITTED THAT THE ACTIVITIES UNDERTAKEN BY THE ASSE SSEE WAS LOW WHICH SHOWS THAT 5 ITA NO. 1721/MUM/2014 (A.Y. 2010-11) ACIT VS. RAJESH D. NANDU THE UNDERLYING FACTS HAVE UNDERGONE MAJOR CHANGES A ND AS SUCH RULE OF CONSISTENCY WAS NOT WARRANTED. AS PER LD. AR, ASSESSEE IS AN I NVESTOR AND NOT A TRADER AS ASSUMED BY THE AO. LD. AR FURTHER RELIED UPON THE JUDGEMENT RENDERED BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. HOLCK LARSEN (160 ITR67)(SC) AND SUBMITTED THAT THE HONBLE SUPREME COURT HAS LA ID DOWN ADEQUATE GUIDELINES TO DETERMINED THE ISSUE INVOLVE IN THE CASE. APPLYI NG THE PRINCIPLES AS WELL AS GUIDELINES LAID DOWN BY THE HONBLE SUPREME COURT I N THE AFORESAID MENTIONED CASE THE ASESSEE IS AN INVESTOR ONLY. 5.1 LD. AR FURTHER RELIED UPON THE JUDGEMENT RENDE RED BY THE HONBLE ITAT IN THE CASE OF GOPAL PUROHIT VS. JCIT (29 SOT 117) ( MUM) WHERE THE ITAT HAS ALSO CONSIDERED ALL THE DECISION AND CBDT CIRCULAR IN THIS REGARD AND SINCE THE ACTIVITIES OF THE ASSESSEE ARE SIMILAR TO THE FACTS OF THE CASE RELIED UPON BY THE LD. AR. HENCE, LD. AR SUPPORTED THE ORDERS PASSED BY T HE CIT(A) AND REQUESTED TO DISMISS THE PRESENT APPEAL FILED BY THE REVENUE AT THE END LD. AR FURTHER RELIED UPON THE FOLLOWING JUDGEMENTS. 1. MS. KARISHMA V. SHAH V/S ADDL. CIT (ITA NO. 2735 /MUM/2009, A.Y. 2005-06, DATED 23-7-10). 2. MR. NEHAL V. SHAH V/S ACIT (ITA NO. 2733/MUM/200 9, A.Y. 2005-06, DATED 15-12-10). 6 ITA NO. 1721/MUM/2014 (A.Y. 2010-11) ACIT VS. RAJESH D. NANDU 3. VINOD K. NEVATIA V/S ACIT (ITA NO. 6556/MUM/2009 , A.Y. 2005-06, DATED 3-12-10). 4. CIT V/S PNB FINANCE & INDUSTRIES LTD. (DELHI HIG H COURT, ITA NO. 306/MUM/2010, DATED 18-10-10). 5. DY. CIT V/S SMK SHARES & STOCK BROKING PVT. LTD. (ITA NO. 799/MUM/2010, A.Y. 2005-06, DATED 24-11-10). 6. MANAGEMENT STRUCTURE & SYSTEM PVT. LTD. V/S ITO (ITA NO. 6966/MUM/2007, DATED 30-04-10). 7. SMT. SADHANA NABERA V/S ACIT (ITA NO.2566/MUM/20 09, DATED 26-3-10) 8. SARNATH INFRASTRUCTURE (P) LTD. V/S ACIT 124 ITD 71 (LUCK.). 6. WE HAVE HEARD THE COUNSELS FOR BOTH THE PARTIES AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD AS WELL AS THE ORDERS PASSED BY THE LOWER AUTHORITIES AND AFTER CONSIDERING THE SAME, WE FOUND THAT SINCE THE LD. CIT(A) HAS BASED HIS ENTIRE FINDINGS BY PASSING A REASONED AND SPEAKING ORDER AND ALSO BY TAKING INTO CONSIDERATION THE PRINCIPLES OF CONSISTENCY AS SIMI LAR SITUATION WAS FOUND IN THE CASE OF RAJESH. D. NANDU, AN INDIVIDUAL IN WHICH SI MILAR ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSE VIDE ORDER DATED 12.2.2010 AN D 11.7.2013. SUBSEQUENTLY THOSE ORDERS WERE ALSO UPHELD BY THE ITAT (MUM) BEN CH IN ITA NO. 4330/MUM/2009 (A.Y. 2006-07) AND IN ITA NO. 3384/MU M/2010 (A.Y. 2007-08). 7 ITA NO. 1721/MUM/2014 (A.Y. 2010-11) ACIT VS. RAJESH D. NANDU AND SINCE THE FACTS OF THE PRESENT CASE ARE IDENTIC AL THEREFORE CIT(A) HAS RIGHTLY HELD THAT THERE IS NO REASON TO TAKE DIFFERENCE DEC ISION IN THE CASE OF HUF AND CIT(A) HAS ALSO FOLLOWED THE CASE OF GOPAL PUROHIT . IN VIEW OF THE ABOVE, WE ARE OF THE VIEW THAT THE ORDER PASSED BY THE LEARNED CI T(A) DO NOT REQUIRE ANY INTERFERENCE FROM US THEREFORE, WE UPHOLD THE SAME. 7. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 2 ND MARCH, 2016 SD/- SD/- (D. KARUNAKARA RAO) (SANDEEP GOSAIN) $ / ACCOUNTANT MEMBER &' $ / JUDICIAL MEMBER ( ) MUMBAI; *$ DATED :02.03.2016 PS. ASHWINI / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. + ( ) / THE CIT(A) 4. + / CIT - CONCERNED 5. ./0 ''12 , 12# , ( ) / DR, ITAT, MUMBAI 6. 045 6 / GUARD FILE / BY ORDER, / !'# (DY./ASSTT. REGISTRAR) #$ %, ( ) / ITAT, MUMBAI