DCIT 20(2), MUMBAI V. MANISHA RAMESH RAO, MUMBAI

ITA 2011/MUM/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0012 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 10 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 08-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR
• Assessee Lawyers: SHAILESH N DOSHI
• Keywords: Business income

Judgement Text

IN THE INC OME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE SHRI G. S. PANNU , AM & SH. SANDEEP GOSAIN, JM ./ I.T.A. NO . 2011/MUM/2015 ( / ASSESSMENT YEAR: 2011 - 12 ) DCIT 20(2 ) ROOM NO. 217 , 2 ND FLOOR, P IRAMAL CHAMBERS, LALBAUG PAREL, MUMBAI - 4000 12 / VS. SMT. MANISHA RAMESH RAO, 21 BIT BLDG, LAMINARAYAN LANE, MATUNAG(E) , MUMBAI - 400019 ./ ./ PAN NO. A CCPR8031Q ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI SUMAN KUMAR / RESPONDENTBY : SHRI SHAILESH N. DOSHI / DATE OF HEARING : 2 6/02 /201 8 / DATE OF PRONOUNCEMENT : 28/02/2018 / O R D E R PER SANDEEP GOSAIN, J UDICIAL MEMBER : THE P RESENT APPE AL FILED BY THE REVENUE IS AGAINST THE ORDER OF LD. CIT (APPEAL) 32, MUMBAI DATED 22.01.15 F OR AY 2011 - 12 ON THE GROUNDS MENTIONED HEREIN BELOW: - 2 I.T.A. NO. 2011 /MUM/201 5 SMT. MANISHA RAMESH RAO (1) 'ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD.CIT(A) HAS FAILED TO APPRECIATE THAT LOOKING AT THE VOLUME, FREQUENCY, CONTINUITY AND REGULARITY OF THE TRANSACTIONS OF PURCHASE AND SALE IN SHARES BY THE ASSESSEE, IT CANNOT BE SAID THAT THESE TRANSACTIONS WERE ENTERED INTO ONLY FOR THE PURPOSE OF INVESTMENT AND THERE WAS NO MOTIVE OF THE ASSESSEE TO EARN PROFIT' (2) 'ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN TREATING BUSINESS INCOME AS STCG WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS ALSO TREATED THE PROFITL LOSS FROM THE TRANSACTIONS WHERE THE SHARES WERE SOLD WIT HIN VERY SHORT HOLDING PERIOD.' - (3) 'ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ALSO ERRED IN TREATING BUSINESS INCOME AS STCG WITHOUT APPRECIATING THE FACT THAT THE TRANSACTION IN QUESTION ARE NOT ISOLATED ONES. RATHER TH ERE IS A REGULARITY IN THESE TRANSACTIONS AND THE ASSESSEE'S INTENTION TO CONTINUE THESE TRANSACTIONS IN FUTURE IS ALSO DISCERNIBLE.' 2. THE B RIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A N INDIVIDUAL AND FILED ITS RETURN OF INCOME ON 28.07.11 DECLARING 3 I.T.A. NO. 2011 /MUM/201 5 SMT. MANISHA RAMESH RAO TOTAL INCOME AT RS. 89,30,743/ - . THE SAME WAS PROCESSED U/S 143(1) OF THE I.T. ACT, 1961. LATER ON, THE CASE WAS SELECTED FOR SCRUTINY UNDER CASH IN THE COMPUTATION OF INCOME, THE ASSESSEE H AS INCOME FROM STCG AND INCOME FROM OTHER SOURCES. THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS, CALLED FOR THE DETAILS OF STCG AND AFTER CONSIDERING THE DETAILS FILED BY THE ASSESSEE, THE AO HELD THAT THE ACTIVITIES IN WHICH THE ASSESSEE IS INVOLVED I.E. PURCHASE AND SALE OF SHARES, IN REALITY, REPRESENT A TRADE OR BUSINESS, THEREFORE THE PROFITS WERE ASSESSED UNDER THE HEAD BUSINESS INCOME. AGGRIEVED BY THE ORDER OF AO, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A) AND LD. CIT(A) AFTER CONSIDERI NG THE CASE OF BOTH THE PARTIES PARTLY ALLOWED THE APPEAL OF THE ASSESSEE THEREBY HOLDING THAT THE GAIN ON SALE /PURCHASE OF SHARES WERE TREATED AS STCG. NOW BEFORE US, THE REVENUE HAS PREFERRED THE PRESENT APPEAL BY RAISING THE ABOVE GROUNDS. GROUND NO. 1 TO 3 3. THESE GROUND S RAISED BY THE REVENUE RELATES TO CHA LLENGING THE ORDER OF LD. CIT(A) IN TREATING THE GAIN ON SALE /PURCHASE AS 4 I.T.A. NO. 2011 /MUM/201 5 SMT. MANISHA RAMESH RAO SHORT TERM CAPITAL GAIN (STCG), THEREFORE WE THOUGHT IT FIT TO DISPOSE OF THESE GROUNDS BY THIS COMMON ORDER. 4. WE HAVE HEARD COUNSELS FOR BOTH THE PARTIES AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD AS WELL AS THE ORDERS PASSED BY REVENUE AUTHORITIES. BEFORE WE DECIDE THE MERITS OF THE CASE, IT IS NECESSARY TO EVALUATE THE ORDERS PASSED BY LD. CIT(A ). THE LD. CIT(A) HAS DEALT WITH THE ABOVE GROUNDS RAISED BY THE REVENUE IN ITS DETAILED ORDER. THE OPERATIVE PORTION OF THE ORDER OF LD. CIT (A) IS CONTAINED IN PARA NO. 4 .3 OF ITS ORDER AND THE SAME IS REPRODUCED BELOW: - 4.3 I HAVE PERUSED FACTS OF THE CASE AND APPELLANT'S SUBMISSIONS CAREFULLY. I FIND THAT THE CIT(A) - 29 VIDE ORDER DATED 30.05.2014 [APPEAL NO. C1T(A) - 29/ RG.17/ 39/ 13 - 14] IN APPELLANT'S OWN CASE FOR A.Y. 2010 - 11 HAS HELD IN PARA 30 OF THE SAID ORDER AS UN DER: I N VIEW OF THE FA CT S AND CIRCUMSTANCES EXPLAINED ABOVE, IT IS CLEAR THAT THE APPELLANT IS AN INVESTOR IN SHARES AND NOT THE TRADER DURING THE PERIOD TINDER 5 I.T.A. NO. 2011 /MUM/201 5 SMT. MANISHA RAMESH RAO CONSIDERATION. THIS IS THE VIEW OF THE DEPARTMENT IN THE CASE OF THE APPELLANT IN ALL THE EARL IER YEARS. THEREFORE THE ACTION OF THE AO TREATING THE CAPITAL GAIN OF RS. 1,33,11,982/ - US THE BUSINESS INCOME OF THE APPELLANT IS NOT CORRECT AND THE SUCH CONCLUSIONS ARRIVED AT BY THE ,40 ARE NOT BASED ON ANY FACTS BROUGHT ON RECORD AND THERE/ORE CANNOT BE ACCEPTED. ..111 THE ACTIONS OF THE APPELLANT DURING THE PERIOD IN RESPECT OF THE ,SALEI PURCHASE OF SHARES IS THAT OF AN INVESTOR AND SHE CANNOT BE TERMED AS TRADER IN SHARES IN VIEW OF THE ABOVE SLATED FACTS. THIS GROUND 0/ APPEAL IS ACCORDINGLY, DECI DED INFIIVEUR OF THE APPELLANT. BEFORE GIVING THE AFORESAID JUDGMENT, THE CIT(A) - 29 DISCUSSED THE SUBMISSIONS OF THE APPELLANT IN DETAIL. IN THE SAID ASSESSMENT YEAR ALSO THE OBSERVATION REGARDING PERIOD OF HOLDING, AND FREQUENCY OF TRADES WERE ALMOST SIMI LAR, AS IN PRESENT ASSESSMENT YEAR. IT WAS HELD 'THAT THE HOLDING PERIOD CANNOT HE CRITER IA FOR TERMING THE TRANSACTIONS AS BUSINESS TRANSACTIONS, AS THE MORE IMPORTANT TO SEE IS AS TO WHETHER THE APPELLANT HAD TAKEN DELIVERY OF SHARES TRANSACTED OR NOT TH E APPELLANT IS AN ACTIVE INVESTOR AND MODIFIES HER PORTFOLIO FROM TIR16IFNE WITH THE INTENTION TO GET MAXIMUM GAINS FROM SUCH INVESTMENTS. THE CIT(A) RELYING UPON THE DECISION OF HON'BLE 1TAT, MUMBAI IN THE CASE OF SHRI BHARAT KUNVERJI KENIA VS. ACIT (ITA 6 I.T.A. NO. 2011 /MUM/201 5 SMT. MANISHA RAMESH RAO NO. 65441MUML2008 DATED 15.05.2009) AND SOME OTHER CASE LAWS HELD THAT FREQUENCY AND VOLUME OF SHARE SALE/PURCHASE CANNOT HE THE CRITERIA FOR TERMING ANY INVESTOR AS TRADER. IT WAS HELD THAT BORROWING OF MONEY FOR THE PURPOSE OF MAKING TRANSACTIONS OF SAL E/PURCHASE IS ANOTHER CRITERIA WHICH INDICATES THE INTENTION OF A PERSON AS INVESTOR OR TRADER, AND IN THAT CASE IT WAS OBSERVED THAT THE APPELLANT IS USING HER OWN FUNDS OUT OF THE ACCRETION OF SHARE TRANSACTIONS AND MAKING RE - INVESTMENTS TO EARN FURTHER GAINS THROUGH THE SALE/PURCHASE OF SHARES. IT WAS HELD THAT THERE IS NO JUSTIFICATION FOR TREATING THE CAPITAL GAINS AS BUSINESS INCOME IGNORING THE HOOKS OF ACCOUNTS OF APPELLANT. IT WAS ALSO CONSIDERED THAT THE APPELLANT IS A HOUSEWIFE WITH NO OFFICE OR BUSINESS INFRASTRUCTURE. IT WAS ALSO OBSERVED THAT THE APPELLANT HAS BEEN SHOWING THE CAPITAL GAINS ON SIMILAR SHARE SALE/PURCHASE TRANSACTIONS SINCE A.Y. 1997 - 98, WHICH HAS BEEN ACCEPTED ALL ALONG, AND EVEN IN SCRUTINY ASSESSMENT ORDERS FOR 2005 - 06 & 2007 - 08, THE APPELLANT WAS EXPLICITLY ACCEPTED AS AN INVESTOR. THE. C!T(A) BSEIVED THAT THERE WAS NO MATERIAL CHANGE IN FLICTS OF THE CASE DURING THAT YEAR. HENCE 15111R.E UPON VARIOUS CASE LAWS IT WAS HELD THAT ON THE PRINCIPAL OF CONSISTENCY TOO THE ' APPEL LA NT NEED TO BE TREATED AS AN INVESTOR BECAUSE THE DEPARTMENT HAS ACCEPTED THAT POSITION 7 I.T.A. NO. 2011 /MUM/201 5 SMT. MANISHA RAMESH RAO T HE APPELLANT AS AN INVESTOR IN SHARES FOR LAST MANY YEARS, AND THAT THE SAME POSITION CANNOT BE CHANGED ALL OF A SUDDEN WITH THE SAME SET OF FACTS WITHOUT PLACING ON RE CORD ANY CONCRETE EVIDENCE FOR ADOPTING A DIFFERENT VIEW IN THE MATTER. I CONCUR WITH THE AFORESAID DECISION OF CIT(A) - 29 ON THE IDENTICAL ISSUE IN APPELLANT'S OWN CASE FOR A. Y. 20L0 - I, AND OBSERVE THAT NO CONCRETE EVIDENCE HAS BEEN BROUGHT ON RECORD BY ,,THE AO IN A.Y. 2011 - 12 UNDER CONSIDERATION SO AS TO CHANGE THE AFORESAID STAND. HENCE, THE TREATMENT GIVEN IN THE ASSESSMENT ORDER IS REVERSED AND THE GAIN ON SALE/PURCHASE OF SHARES IS TO BE TREATED AS SHORT TERM CAPITAL GAIN AS RETURNED. THEREFORE, THE GROUND NO 2 OF APPEAL IS ALLOWED. ' APART FROM ABOVE, IT WAS POINTED OUT BY LD. AR THAT IDENTICAL ISSUE HAS ALREADY BEEN DECIDED BY THE COORDINATE BENCH OF HONBLE ITAT IN ITA NO. 4851/MUM/2014 FOR AY 2010 - 11. THE OPERATIVE PORTION OF THE ORDER OF HONBLE ITAT IS REPRODUCED BELOW: - 6. WE HEARD THE PARTIES AND PERUSED THE RECORD. THE DISPUTE IS WITH REGARD TO THE NATURE OF RECEIPT OF PROFIT 8 I.T.A. NO. 2011 /MUM/201 5 SMT. MANISHA RAMESH RAO ARISING ON SALE OF SHARES. THE ASSESSEE CLAIMS THE SAME TO BE CAPITAL GAINS, WHEREAS THE AO HAS ASSESSED THE SAME AS BUSINESS INCOME OF THE ASSESSEE. IT IS WELL SETTLED THAT THE TRUE NATURE OF THE TRANSACTIONS HAS TO BE DETERMINED BY CONSIDERING VARIOUS FA CTORS. IN THIS REGARD, THE HONBLE COURTS AS WELL AS THE CBDT HAS PRESCRIBED VARIOUS CRITERIA ON THE BASIS OF WHICH THE TRUE NATURE OF TRANSACTIONS COULD BE ASCERTAINED. HENCE THE NATURE OF TRANSACTIONS WOULD BE DEPENDENT UPON THE FACTS PREVAILING IN EACH CASE. THOUGH THE PRACTICE ADOPTED IN THE PAST YEARS MAY BE A GUIDING FACTOR IN DETERMINING THE TRUE NATURE OF TRANSACTIONS, YET IT IS NOT NECESSARY THAT THE NATURE OF TRANSACATIONS SHALL ALWAYS REMAIN CONSTANT. ONE OF THE MOST IMPORTANT CRITERIA IS THE INT ENTION OF THE ASSESSEE AT THE TIME OF PURCHASE OF SHARES. IF THE ASSESSEE HAD PURCHASED THE SHARES AS A DEALER, THEN THE PROFIT SHOULD BE ASSESSED AS BUSINESS INCOME OF THE ASSESSEE. ON THE CONTRARY, IF THE INTENTION WAS TO HOLD THE SHARES AS INVESTMENT, T HEN THE PROFIT SHALL BE ASSESSED AS CAPITAL GAINS. THE INTENTION OF THE ASSESSEE SHOULD BE ASCERTAINED BY HIS CONDUCT AND OTHER CRITERIA PRESCRIBED BY THE COURTS AND CBDT. 7. WE NOTICE THAT THE ASSESSEE HAS MADE INVESTMENT IN SHARES FROM OUT OF HIS CAPITA L BALANCE ONLY, I.E. THE ASSESSEE HAS NOT BORROWED ANY INTEREST BEARING FUNDS 9 I.T.A. NO. 2011 /MUM/201 5 SMT. MANISHA RAMESH RAO FOR THE PURPOSE OF MAKING INVESTMENT IN SHARES. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS DEALT IN 94 SCRIPS ONLY. ACCORDING TO LD. AR THE BROKER HAS SOME TIMES EXECU TED SINGLE ORDER IN MORE THAN ONE INSTALMENT. THE AVERAGE HOLDING PERIOD IS ABOUT 30 DAYS. FURTHER, IT IS AN UNDISPUTED FACT THAT THE ASSESSEES DECLARTIONA OF CAPITAL GAINS FROM INVESTMENT MADE IN SHARES HAS BEEN ACCEPTED BY THE AO IN THE SCRUTINY ASSESSM ENT COMPLETED FOR AY 2005 - 06 AND 2007 - 08 AND ALSO IN OTHER YEARS SINCE AY 1997 - 98. 8. ALL THE FACTORS DISCUSSED ABOVE, IN OUR VIEW, SHOWS THAT THE INTENTION OF THE ASSESSEE WAS MAINLY TO ACT AS INVESTOR ONLY. ACCORDINGLY, WE ARE OF THE VIEW THAT THE GAINS ARISING ON SALE OF SHARES SHOULD BE ASSESSED UNDER THE HEAD CAPITAL GAINS ONLY. ACCORDINGLY, WE ARE OF THE VIEW THAT THE LD. CIT(A) WAS JUSTIFIED IN DIRECTING THE AO TO ASSESS THE PROFITS ARISING ON SALE OF SHARES AS CAPITAL GAINS ONLY. AFTER HAVING GONE THROUGH THE FACTS OF THE PRESENT CASE AS WELL AS CONSIDERING THE ORDERS PASSED BY REVENUE AUTHORITIES AND HONBLE ITAT AS MENTIONED ABOVE IN ASSESSEES OWN CASE , WE FIND THAT THE IDENTICAL ISSUE HAS ALREADY BEEN DECIDED BY THE HONBLE ITA T IN ASSESSEE S OWN CASE IN ITA NO. 10 I.T.A. NO. 2011 /MUM/201 5 SMT. MANISHA RAMESH RAO 4851/MUM/2014 FOR AY 2010 - 11. THEREFORE RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCH AND IN ORDER TO MAINTAIN JUDICIAL CONSISTENCY WHICH IS AP PLICABLE MUTATIS MUTANDIS IN THIS CASE , WE SEE NO REASONS TO INTERFERE INTO OR DEVIATE FROM THE FINDINGS RECORDED BY THE LD. CIT (A). HENCE , WE ARE OF THE CONSIDERED VIEW THAT THE FINDINGS SO RECORDED BY THE LD. CIT (A) ARE JUDICIOUS AND ARE WE LL REASONED. RESULTANTLY, THESE GROUND S RAISED BY THE REVENUE STANDS DISMISSED . 5. IN THE NET RESULT THE APPEAL FILED BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH FEB. 2018 SD/ - SD/ - (G. S. PANNU) (SANDEEP GOSAIN) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 28 . 0 2 .201 8 SR.PS . DHANANJAY 11 I.T.A. NO. 2011 /MUM/201 5 SMT. MANISHA RAMESH RAO / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F I LE / BY ORDER, . / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI