Jay Investments Pvt.Ltd., Ahmedabad V. The Income tax Officer,Ward-4(2), Ahmedabad

ITA 1764/AHD/2009

• Counselvise Citation: 176420514 RSA 2009
• Duration Of Justice: 2 year(s) 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-11-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 09-11-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 28-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: URVASHI SHODHAN A R; S N SOPARKAR
• Keywords: Business income; Opportunity of being heard; Rule of consistency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH AHMEDABAD (BEFORE SHRI BHAVNESH SAINI, JM AND A. MOHAN ALANKA MONY, AM) ITA NO.1764/AHD/2009 A. Y.: 2006-07 JAY INVESTMENTS PVT. LTD., SAGAR, NR. SAHAJANAND COLLEGE, AMBAWADI, AHMEDABAD VS THE INCOME TAX OFFICER, WARD-4 (2),AHMEDABAD , NAVJIVAN BUILDING, AHMEDABAD PA NO. AAACJ 3627 P (APPELLANT) (RESPONDENT) APPELLANT BY SHRI S. N. SOPARKAR AND MS. URVASHI SHODHAN,AR DEPARTMENT BY SHRI SAMIR TEKRIWAL, SR. DR DATE OF HEARING: 09-11-2011 DATE OF PRONOUNCEMENT: 09-11-2011 O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A)- V III, AHMEDABAD DATED 25-03-2009 FOR ASSESSMENT YEAR 2006-07, ON TH E FOLLOWING GROUNDS: (1) THE LEARNED COMMISSIONER (APPEALS) HAS FAILED TO UNDERSTAND THE FACTS AND CIRCUMSTANCES OF THE CASE. (2) THE LEARNED COMMISSIONER (APPEAL) ERRED IN NOT ACCEPTING THE APPELLANTS PLEA THAT THE INCOME FROM SALE/REDEMPTION OF INVESTMENTS IN SHARES/UNITS OF MUTUAL FUND IS ASSESSABLE UNDER THE HEAD CAPITAL GAIN. ITA NO.1764/AHD/2009 JAY INVESTMENTS PVT. LTD. VS ITO, WARD 4 (2), AHMED ABAD 2 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSE SSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF DEALING IN MUTUAL FUNDS AND SHARE MARKET. THE ASSESSEE CHALLENGED THE DIREC TION OF THE AO BEFORE THE LEARNED CIT(A) FOR TREATING THE ASSESSEE S INCOME FROM SALE OF SHARES/UNITS OF MUTUAL FUNDS AS BUSINESS IN COME AS AGAINST ASSESSEES CLAIM FOR CAPITAL GAIN. THE AO NOTED THA T THE ASSESSEE HAD CARRIED OUT VARIOUS TRANSACTIONS OF SALE AND PU RCHASE OF SHARES FREQUENTLY. SHOW CAUSE NOTICE WAS ISSUED AS TO WHY THE SAID TRANSACTIONS SHOULD NOT BE TREATED AS BUSINESS INCO ME. THE ASSESSEE FILED DETAILED REPLY WHICH WAS NOT ACCEPTE D AND THE ACTIVITY OF THE ASSESSEE WAS HELD TO BE BUSINESS INCOME. THE LEARNED CIT(A) NOTED THE TRANSACTIONS IN THE APPELLATE ORDER AND F OUND THAT PERIOD OF HOLDING OF SOME UNITS/SHARES WAS LESS THAN FIFTEEN DAYS WHICH WOULD INDICATE THAT THE ASSESSEE CARRIED OUT THE TRANSACT IONS OF BUSINESS. THE CLAIM OF THE ASSESSEE FOR CAPITAL GAIN WAS NOT ACCEPTED. THE ASSESSEES SECOND CONTENTION THAT IN THE PAST, THE ASSESSEES INCOME ON THE SAME HEADS WAS HELD TO BE CAPITAL GAIN WAS R EJECTED ON THE GROUND THAT PRINCIPLE OF RES JUDICATA WOULD NOT APP LY TO THE PROCEEDINGS UNDER INCOME TAX ACT. 2.1 THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES ARE HEARD AND ORDERS OF THE AUTHORITIES BELOW PERUSED. 3. ON CONSIDERATION OF THE RIVAL SUBMISSION WE ARE OF THE VIEW THE MATTER REQUIRES RECONSIDERATION AT THE LEVEL OF THE LEARNED CIT(A). IT IS WELL SETTLED LAW THAT THE LEARNED CIT(A) WHILE DISP OSING OF THE APPEAL OF THE ASSESSEE SHALL HAVE TO GIVE REASONS FOR DECI SION IN ACCORDANCE ITA NO.1764/AHD/2009 JAY INVESTMENTS PVT. LTD. VS ITO, WARD 4 (2), AHMED ABAD 3 WITH SECTION 250 (6) OF THE IT ACT. THE LEARNED CIT (A) MERELY BY GOING THROUGH THE FREQUENCY OF THE TRANSACTIONS DENIED TH E CLAIM OF THE ASSESSEE. THERE ARE SEVERAL PRINCIPLES WHICH SHALL HAVE TO BE CONSIDERED WHILE DECIDING THE ISSUE ON CONSIDERATIO N OF THE FACTS WHETHER TRANSACTION WAS IN THE NATURE OF TRADE OR M ERELY INVESTMENT? SUCH PRINCIPLES IN BRIEF ARE, WHAT IS THE INTENTION OF THE ASSESSEE AT THE TIME OF PURCHASE OF SHARES AND WHAT IS THE TREA TMENT GIVEN IN THE BOOKS OF ACCOUNTS WHETHER STOCK IN TRADE OR INVESTM ENT? WHETHER THE ASSESSEE BORROWED FUNDS FOR THE PURPOSE OF INVESTME NT OR TRADING? WHAT IS THE ASSESSMENT YEAR OF PURCHASE AND DISPOSA L AND THE RATIO BETWEEN THE SAME? WHETHER PURCHASE AND SALES ARE FO R REGULARIZING PROFITS OR PURCHASES ARE MADE FOR RETENTION AND APP RECIATION IN ITS VALUE? HOW THE VALUE OF ITEMS HAS BEEN SHOWN IN THE BALANCE SHEET? HOW THE ASSESSEE COMPANY IS AUTHORIZED IN MEMORANDU M OF ASSOCIATION/ARTICLES OF ASSOCIATION TO DEAL WITH TH E SHARES AND THE EVIDENCES IN SUPPORT OF THE SAME AND HOW THE SALE P ROCEEDS HAVE BEEN DEALT WITH? LIKEWISE, CBDT CIRCULAR IS ALSO IS SUED HOW TO DEAL WITH THE MATTER IN ISSUE. IT, THEREFORE, APPEARS FR OM THE FINDINGS OF THE LEARNED CIT(A) THAT THE LEARNED CIT(A) DID NOT DEAL WITH ANY OF THE POINTS IN THE APPELLATE ORDER AND JUST BY GOING THR OUGH THE FREQUENCY OF THE TRANSACTIONS AND WITHOUT PASSING ANY SPEAKIN G ORDER REJECTED THE CLAIM OF THE ASSESSEE. THE LEARNED CIT(A) ALSO FAILED TO NOTE THAT THOUGH THE PRINCIPLE OF RES JUDICATA DOES NOT APPLY TO THE INCOME TAX PROCEEDINGS BUT THE PRINCIPLE OF CONSISTENCY SHALL HAVE TO BE FOLLOWED BY THE REVENUE DEPARTMENT WHILE MAKING ASSESSMENTS. WE RELY UPON THE DECISION OF THE HONBLE M. P. HIGH COURT IN THE CASE OF CIT VS GODAVARI CORPORATION LTD., 156 ITR 835, DECISION OF THE HONBLE ITA NO.1764/AHD/2009 JAY INVESTMENTS PVT. LTD. VS ITO, WARD 4 (2), AHMED ABAD 4 SUPREME COURT IN THE CASE OF BERGER PAINTS INDIA LT D. VS CIT, 266 ITR 99 AND THE DECISION OF THE HONBLE PUNJAB & HAR YANA HIGH COURT IN THE CASE OF CIT VS VIKASH CHEMI GUM INDIA, 276 I TR 32. THE LEARNED DR STATED THAT IN SUBSEQUENT ASSESSMENT YEA RS SUBSEQUENTLY THE TRIBUNAL DECIDED THE INCOME AGAINS T THE ASSESSEE, HOWEVER, THE ASSESSEE SUBMITTED BEFORE THE LEARNED CIT(A) THAT IN THE PAST ASSESSEES INCOME HAS BEEN TAXED UNDER THE HEAD CAPITAL GAIN. THEREFORE, THE LEARNED CIT(A) SHALL HAVE TO G IVE FINDINGS ON THAT MATTER ALSO. THE LEARNED CIT(A) MAY ALSO TAKE INTO CONSIDERATION THE ORDER OF THE TRIBUNAL WHILE PASSING THE ORDER. IN VIEW OF THE DISCUSSIONS, WE ARE OF THE VIEW THAT THE MATTER REQ UIRES RECONSIDERATION AT THE LEVEL OF THE LEARNED CIT(A). WE ACCORDINGLY SET ASIDE THE ORDER OF THE LEARNED CIT(A) AND RESTORE T HIS ISSUE TO HIS FILE WITH DIRECTION TO RE-DECIDE THIS ISSUE BY PASSING A SPEAKING ORDER ON EACH AND EVERY ASPECT OF THE MATTER. THE LEARNED CI T(A) SHALL GIVE REASONABLE SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 4. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT SD/- SD/- (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER LAKSHMIKANT/- ITA NO.1764/AHD/2009 JAY INVESTMENTS PVT. LTD. VS ITO, WARD 4 (2), AHMED ABAD 5 COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR, ITAT, AHMEDABAD