ACIT CIR 1, MUMBAI V. ANKOLA PAPER MILLS P. LTD, MUMBAI

ITA 2358/MUM/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92247 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-04-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 06-04-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 10-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR P DANIEL; S M MAKHIJA
• Assessee Lawyers: SACHCHIDANAND DUBE
• Keywords: Rule of consistency
• Section: 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI . . , . , BEFORE SHRI I.P. BANSAL, JM AND RAJENDRA, AM ./I.T.A. NO.2358/MUM/2012 ( / ASSESSMENT YEAR : 2008-09 ASSTT.CIT CIR.1, THANE, MIDC VARDAAN BLDG., WAGLE ESTATE, LOWER GROUND FLOOR, THANE (W) / VS. M/S. ANKOLA PAPER MILLS PVT.LTD., 505, MAKER BHAVAN III, NEW MARINE LINES, MUMBAI 400020 ./ ./PAN/GIR NO. : AADCA 5682N ( /APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY SHRI SACHCHIDANAND DUBE REVENUE BY DR. P. DANIEL & SHRI S.M.MAKHIJA ' $ / DATE OF HEARING : 09/04/2015 ' $ / DATE OF PRONOUNCEMENT : 09/04/2015 / O R D E R PER I.P.BANSAL, J.M: THIS IS AN APPEAL FILED BY THE REVENUE AND IT IS DIRECTED AGAINST THE ORDER PASSED BY LD. CIT(A)-II, MUMBAI DATED 14/11/2011 FO R ASSESSMENT YEAR 2008- 09. GROUNDS OF APPEAL READ AS UNDER. 1. ON THE FACTS OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN TREATING THE INCOME ARISING OUT OF TRADING IN SHARES AS 'INCOME FROM CA PITAL GAINS' AS AGAINST 'INCOME FROM BUSINESS' AS PER THE STAND TAKEN BY THE ASSESS ING OFFICER. ./I.T.A. NO.2358/MUM/2012 ( / ASSESSMENT YEAR : 2008-09 2 2. ON THE FACTS OF THE CASE AND IN LAW, THE LD. CIT (A) ERRED IN NOT CONSIDERING THE FACT THAT TO DISTINGUISH WHETHER A PERSON IS CARRYING IN A BUSINESS CAN BE JUDGED FROM THE VOLUME OF TRANSACTIONS, FREQUENCY, CONTINUITY AND REGULARITY AND THE MOTIVE INVOLVED. IN THIS CASE ALL THESE POINT TO THE FACT THAT THE A SSESSEE WAS INVOLVED IN THE BUSINESS OF TRADING IN SHARES AS A BUSINESS AND NOT AN INVESTME NT. 3. ON THE FACTS OF THE CASE AND IN LAW, THE LD. CIT (A) ERRED IN NOT CONSIDERING THE FACT THAT THE MAIN SOURCE OF INCOME OF THE COMPANY IS AN ACCOUNT OF DEALING IN SHARES AND MUTUAL FUNDS AND OUT OF THE TOTAL INCOME OF RS. 1,5 1,09,753/- ONLY RS. 30,250/- REPRESENTS INCOME OUT OF INTEREST, THE BALANCE PROF IT IS OUT OF SHARE TRADING. 2. DURING THE YEAR UNDER CONSIDERATION ASSESSEE HAS SHOWN LONG TERM CAPITAL GAIN OF RS.73,32,120/- AND SHORT TERM CAPITAL GAIN OF RS.63,76,130/- ON ACCOUNT OF TRANSACTION OF THE SALE / PURCHASE OF SHARES. THE ASSESSEE HAS ENTERED INTO DELIVERY BASED TRANSACTION OF SHARES WHICH HAVE BEE N TREATED AS INVESTMENT IN THE BOOKS ACCOUNTS MAINTAINED BY THE ASSESSEE. TH E AO DID NOT ACCEPT THE CLAIM OF THE ASSESSEE THAT INCOME ARISING OUT OF SA LE AND PURCHASE OF SHARES WAS ASSESSABLE UNDER THE HEAD CAPITAL GAIN FOR VARIOUS REASONS DESCRIBED IN THE ASSESSMENT ORDER AND HE ASSESSED THE SAME AS INCOME FROM BUSINESS. THE ACTION OF THE AO WAS CHALLENGED IN THE APPEAL FILED BEFORE LD. CIT(A). ONE OF THE BASIS ON WHICH LD. CIT(A) HAS HELD THAT THE INCOME ARISING TO THE ASSESSEE CANNOT BE ASSESSED AS INCOME FROM BUSINESS IS THAT THE ASSESSEE HAS BEEN CONSISTENTLY SHOWING INCOME FROM SALE AND PURCHASE OF SHARES UNDER THE HEAD CAPITAL GAIN IN PRECEDING AND SUCCEEDING YEARS IN THE MANNER IN WHICH THIS INCOME WAS SHOWN IN THE YEAR UNDER CONSIDERATION .S UCH TREATMENT BY THE ASSESSEE HAS BEEN ACCEPTED BY THE DEPARTMENT AND NO EVIDENCE HAS BEEN PLACED ON RECORD BY THE AO THAT AS TO WHY THE ASSESSEE COM PANY SHOULD BE TREATED AS A TRADER IN SHARES AND NOT AN INVESTOR DURING THE YEA R UNDER CONSIDERATION. THIS IS RECORDED IN PARA 4.19 OF THE ORDER PASSED BY LD. CI T(A) AND RELIANCE IS PLACED ON THE DECISION IN THE CASE OF GOPAL PUROHIT VS. JC IT OF ITAT MUMBAI REPORTED IN 20 DTR (MUM) 1999, WHEREIN IT WAS HELD BY THE TR IBUNAL THAT: 4.21. IN THE CASE OF GOPAL PUROHIT VS. JOINT COMMIS SIONER OF INCOME TAX, ITAT MUMBAI BENCH IN ITA NO. 4854/MUM/2008 DATED 10 .02.2009 REPORTED AT 20 DTR (MUM)(TRIB) 99, ON THE ISSUE THE HON'BLE ITAT M UMBAI HAS HELD THAT ./I.T.A. NO.2358/MUM/2012 ( / ASSESSMENT YEAR : 2008-09 3 'CONSIDERING THE NATURE OF ACTIVITIES, MODUS OPERAN DI OF THE APPELLANT, THE MANNER OF KEEPING RECORDS AND PRESENTATION OF THE SHARES AS I NVESTMENTS AT THE YEAR END IS SAME IN ALL THE EARLIER YEARS AS SHOWN IN THE RELEVANT A SSESSMENT YEAR, THEREFORE, APPARENTLY THERE APPEARS TO BE NO REASON AS TO WHY THE CLAIM OF THE APPELLANT IS REJECTED BY THE DEPARTMENTAL AUTHORITIES'. 2.1 IT IS ALSO MENTIONED THAT THE AFOREMENTIONED DE CISION OF TRIBUNAL WAS LATER ON FOLLOWED BY MUMBAI ITAT IN VARIOUS OTHER C ASES AND THIS IS RECORDED IN PARA 4.22 WHICH IS REPRODUCED BELOW: 4.22. THE SAME PRINCIPLE AS ENUNCIATED IN THE CASE OF GOPAL PUROHIT VS. JOINT COMMISSIONER OF INCOME TAX (SUPRA) HAS BEEN FOLLOWE D IN MANY SUBSEQUENT DECISIONS BY THE JURISDICTIONAL ITAT, MUMBAI IN THE CASES OF PARDESH D. SHAH VS. JOINT COMMISSIONER OF INCOME TAX, (2010) 2 DTR (TRIB.) 31 1 (MUMBAI) AND MANAGEMENT STRUCTURE AND SYSTEMS (P) LTD. VS. ITO, (2010) 41 D TR (MUMBAI)(TRIB.) 426, DCIT 4(2) VS M/S. SMK SHARES AND STOCK BROKING (2010), I TA NO. 799/MUM/2009 DATED 24.11.2010 ETC. 2.3 IT IS ALSO MENTIONED THAT THE AFOREMENTIONED DE CISION OF THE TRIBUNAL HAS BEEN AFFIRMED BY JURISDICTIONAL HIGH COURT IN THE C ASE OF CIT VS. GOPAL PUROHIT, 228 CTR 582 AND HONBLE SUPREME COURT HAS ALSO DISM ISSED THE APPEAL FILED BY THE REVENUE ON 15/11/2010. LD. CIT(A) HAS ALSO GIVEN RELIEF TO THE ASSESSEE ON MERITS AND THOSE POINTS HAVE BEEN SUMMARIZED IN THE LAST PARA OF THE ORDER OF LD. CIT(A) WHICH READ AS UNDER: A) THE APPELLANT HAS BEEN SHOWING REGULARLY THE IN COME FROM PURCHASE/SALE AS SHORT-TERM/LONG-TERM CAPITAL GAINS IN THE EARLIER YEARS. B) THEY ARE NO DERIVATIVE TRANSACTIONS BY THE APPEL LANT DURING THE PERIOD UNDER CONSIDERATION. THERE ARE NO INTRADAY TRANSACT IONS. C) THERE ARE NO TRANSACTIONS OF THE APPELLANT WITHO UT DELIVERY OF SHARES. D) THE APPELLANT HAS NOT BORROWED ANY OUTSIDE FUNDS FOR INVESTING IN SHARES AND MADE THE INVESTMENT OUT OF HIS SURPLUS. E) THE APPELLANT HAS EARNED SUBSTANTIAL DIVIDEND IN COME AMOUNTING TO RS.9,25,059/- WHICH SHOWS THAT THE INVESTMENTS HAVE BEEN MADE FOR PERSONAL POSSESSION AND ENJOYMENT. ./I.T.A. NO.2358/MUM/2012 ( / ASSESSMENT YEAR : 2008-09 4 F) THE APPELLANT HAS SHOWN THESE AS INVESTMENT IN H IS BALANCE SHEET AS ON 31.03.2008. THUS, LD. CIT(A) HAS DECIDED THE ISSUE IN FAVOUR OF ASSESSEE AND AFOREMENTIONED ORDER PASSED BY LD. CIT(A) IS CHALLE NGED BY THE REVENUE BEFORE US. 3. LD. DR SUBMITTED THAT AO HAS RIGHTLY TREATED THE INCOME ARISING TO ASSESSEE FROM SALE AND PURCHASE OF SHARES AS BUSINE SS INCOME AND LD. CIT(A) HAS COMMITTED AN ERROR IN ACCEPTING THE CLAIM OF TH E ASSESSEE. THEREFORE, LD. DR SUBMITTED THAT ORDER PASSED BY LD. CIT(A) SHOULD BE SET ASIDE AND THAT OF AO SHOULD BE RESTORED. 4. ON THE OTHER HAND, IT WAS SUBMITTED BY LD. AR TH AT REFERRING TO THE CBDT CIRCULAR, LD. CIT(A) DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE ON MERITS POINT BY POINT AND THESE FACTORS HAVE BEEN SUMMARIZED BY LD. CIT(A) IN PARA-5 OF HIS ORDER. HE SUBMITTED THAT THE FINDING OF LD. CIT(A) ARE BASED ON FACTS AND CIRCUMSTANCES WHICH HAVE NOT BEEN SHOWN TO BE INCOR RECT BY THE REVENUE. HE FURTHER SUBMITTED THAT ONLY DURING THE YEAR UNDER CONSIDERATION. REVENUE HAS CHANGED ITS STAND AS IN EARLIER YEARS AS WELL AS IN SUBSEQUENT YEARS ON SAME FACTS THE REVENUE HAS ACCEPTED THE CLAIM OF THE ASSESSEE THAT INCOME FROM SALE AND PURCHASE OF SHARES IS ASSESSABLE UNDER THE HEAD CAPITAL GAIN AND THAT TOO BY THE ORDER PASSED UNDER SECTION 143(3) OF THE INCOM E TAX ACT, 1961(THE ACT). HE SUBMITTED THAT THE IMPUGNED ASSESSMENT ORDER PAS SED BY THE AO IS DATED 30/12/2010 AND IN RESPECT OF SUBSEQUENT YEARS DESPI TE EXISTENCE OF THE IMPUGNED ASSESSMENT ORDER THE INCOME FROM SALE AND PURCHASE OF SHARES ON SIMILAR FACTS HAVE BEEN ACCEPTED AS INCOME FROM CAP ITAL GAIN. LD. AR REFERRED TO THE ASSESSMENT ORDER PASSED BY AO IN RESPECT OF A.Y 2010-11 WHICH IS DATED 26/3/2013 PASSED UNDER SECTION 143(3) OF THE ACT, C OPY OF WHICH IS PLACED AT ./I.T.A. NO.2358/MUM/2012 ( / ASSESSMENT YEAR : 2008-09 5 PAGE 97 AND 98 OF THE PAPER BOOK, WHERE INCOME FROM SALE AND PURCHASE OF SHARES HAS BEEN ASSESSED UNDER THE HEAD CAPITAL GAI N. LD. AR HAS ALSO SUBMITTED THE LATEST ASSESSMENT ORDER PASSED BY AO FOR A.Y 2012-13 DATED 19/2/2015 PASSED UNDER SECTION 143(3) OF THE ACT, WHEREIN ALSO THE CLAIM OF THE ASSESSEE IN RESPECT OF SALE AND PURCHASE OF SHA RES HAVE BEEN ACCEPTED AS GIVING RISE TO THE CAPITAL GAIN. HE HAS SUBMITTED THE COPY OF THE SAID ORDER WHICH WAS ALSO GIVEN TO LD. DR. 4.1 IT WAS FURTHER SUBMITTED BY LD. AR THAT NOT ON LY IN SUBSEQUENT YEARS BUT IN EARLIER YEARS ALSO SIMILAR CLAIM OF THE ASSESSEE HAS BEEN ACCEPTED AND REFERENCE IN THIS REGARD WAS MADE TO ASSESSMENT OR DER FOR A.Y 2006-07 WHICH IS DATED 24/10/2008 PASSED UNDER SECTION 143(3) OF THE ACT, COPY OF THIS ORDER IS PLACED AT PAGE 64AND 65 OF THE PAPER BOOK, WHERE IN ALSO THE CLAIM OF THE ASSESSEE REGARDING ASSESSABILITY OF INCOME UNDER TH E HEAD CAPITAL GAIN WAS ACCEPTED. THUS, IT WAS SUBMITTED BY LD. AR THAT LD . CIT(A) DID NOT COMMIT ANY ERROR IN GRANTING THE RELIEF TO THE ASSESSEE W HICH WAS IN ACCORDANCE WITH THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN TH E CASE OF CIT VS. GOPAL PUROHIT (SUPRA). 5. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTENT IONS HAVE CAREFULLY BEEN CONSIDERED. APART FROM CONSIDERING THE ISSUE ON ME RITS, FOR WHICH LD. CIT(A) HAS RECORDED HIS FINDING IN DETAIL, RELIEF HAS ALSO BEEN GIVEN TO ASSESSEE ON THE GROUND THAT REVENUE NOT ONLY IN THE EARLIER YEARS BUT ALSO IN THE SUBSEQUENT YEARS HAS TAKEN CONSISTENT VIEW THAT INCOME OF THE ASSESSEE FROM SALE AND PURCHASE OF SHARES IS ASSESSABLE UNDER THE HEAD CA PITAL GAIN. ONLY DURING THE YEAR UNDER CONSIDERATION THE REVENUE HAS DEVIATED FROM ITS STAND TAKEN IN THE EARLIER YEARS AS WELL AS IN SUBSEQUENT YEARS. THE PATTERN OF INVESTMENT OF THE ASSESSEE REMAINS THE SAME. THE SHARES HAVE BEEN C ONSIDERED AS INVESTMENT IN ./I.T.A. NO.2358/MUM/2012 ( / ASSESSMENT YEAR : 2008-09 6 THE BOOKS OF ACCOUNT AND ASSESSEE HAS ITS OWN SUFFI CIENT FUNDS TO MAKE THE INVESTMENT AND THERE IS NO TRANSACTION WITHOUT THE DELIVERY OF THE SHARES. THERE ARE NO DERIVATIVE TRANSACTIONS AND THERE ARE NO IN TRA-DAY TRANSACTIONS. THE ASSESSEE HAS ALSO EARNED SUBSTANTIAL DIVIDEND ON TH E INVESTMENT MADE BY THE ASSESSEE. ALL THESE FACTS ARE NOT DISPUTED THE RE VENUE. TAKING INTO ACCOUNT ALL THESE FACTS AND ALSO PRINCIPLE OF CONSISTENCY WHICH HAS BEEN ACCEPTED BY HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CI T VS. GOPAL PUROHIT(SUPRA), WE ARE OF THE OPINION THAT LD.CIT(A) HAS NOT COMMIT TED ANY ERROR IN GRANTING RELIEF TO THE ASSESSEE. WE DECLINE TO INTERFERE AN D THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 09/04/2015 . ' + ,- 09/04/2015 ' SD/- SD/- (RAJENDRA) . . (I.P.BANSAL) /ACCOUNTANT MEMBER /JUDICIAL MEMBER MUMBAI; , DATED 09/04/2015 !'# $#! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. 0 ( ) / THE CIT(A)- 4. 0 / CIT 5. 12 34 , $ 34 , / DR, ITAT, MUMBAI 6. 5 / GUARD FILE. / BY ORDER, 1 //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI . . .VM , SR. PS