ITO, Ward - 44(4), Kolkata, Kolkata V. M/s. Sunil Rungta, Kolkata

ITA 291/KOL/2012

• Counselvise Citation: 29123514 RSA 2012
• Duration Of Justice: 1 year(s) 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 22-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R P NAG
• Assessee Lawyers: M L RAWAT
• Keywords: Business income; Treatment of capital gains as business income; Rule of consistency

Judgement Text

I.T.A. NO.: 291/KOL./2012 AS SESSMENT YEAR : 2007-08 PAGE 1 TO 5 1 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA B BENCH, KOLKATA CORAM : SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI SHAMIM YAHYA (ACCOUNTANT MEMBER) I.T.A. NO.: 291/KOL./ 2012 ASSESSMENT YEAR : 2007-2008 INCOME TAX OFFICER,...........................,.... ...........APPELLANT WARD-44(4), KOLKATA, 3, GOVERNMENT PLACE, (GR. FLOOR) KOLKATA-700 001 -VS.- M/S. SUNIL RUNGTA,................................. ......................RESPONDENT 20, M.D. ROAD, KOLKATA-700 007 [PAN : AAEHS 6030 G] APPEARANCES BY: SHRI R.P. NAG, JCIT, SR. D.R., FOR THE DEPARTMENT SHRI M.L. RAWAT, C.A. FOR THE ASSESSEE DATE OF CONCLUDING THE HEARING : DECEMBER 23, 2013 DATE OF PRONOUNCING THE ORDER : DECEMBER 23, 2013 O R D E R PER SHAMIM YAHYA: 1. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST T HE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-XXX, KOLKATA D ATED 19.10.2011 FOR THE ASSESSMENT YEAR 2007-08. 2. THE ISSUE RAISED IN THIS APPEAL IS THAT LD. CIT( APPEALS) ERRED IN HOLDING THAT GAIN FROM SHARE TRANSACTION IS TO BE T REATED AS CAPITAL GAIN INSTEAD OF BUSINESS INCOME. I.T.A. NO.: 291/KOL./2012 AS SESSMENT YEAR : 2007-08 PAGE 1 TO 5 2 3. IN THIS CASE, IN THE RETURN OF INCOME ASSESSEE S HOWED LONG-TERM CAPITAL GAIN (IN SHORT LTCG) OF RS.6,20,333.86 AN D SHORT-TERM CAPITAL GAIN (IN SHORT STCG) OF RS.7,12,670.86. THE ABOVE AMOUNTS TOTALLING TO RS.13,33,005/- WERE TREATED AS BUSINESS INCOME BY T HE ASSESSING OFFICER. THE ASSESSING OFFICER HAS OBSERVED THAT THE ASSESSE E HAS BORROWED RS.50,00,000/- FROM GREEN VIEW INVESTMENT & TRADING CO. (P) LTD. AND RS.13,65,000/- FROM SMT. VIDYA RUNGTA DURING THE RE LEVANT YEAR AND ITS UNSECURED BORROWING WERE RS.1,24,50,160/- AS ON 31. 03.2006 AND RS.1,47,34,516/- ON 31.03.2007 RESPECTIVELY AND FUR THER THAT THE INVESTMENT AS ON THE ABOVE DATES WAS RS.88,71,930/- AND RS.1,30,77,218/- RESPECTIVELY. HE HAS RELIED ON THE DECISION IN CIT VS.- GODAVARI CORPORATION LTD. 156 ITR 835 (MP) AND PUSH PABEN H. KOTICHA VS.- CIT 2 SOT 904 (RAJKOT) TO HOLD THAT BORROWING OF MONEY FOR PURCHASE OF SHARES WOULD BE A STRONG CIRCUMSTANCES THAT DEAL ING IN SHARES WAS IN A COMMERCIAL SPIRIT. FURTHER THE ASSESSING OFFICER RE LIED ON THE SUPREME COURT DECISION IN RAJA BAHADUR VISHESHWARA SINGH V S.- CIT 41 ITR 685 AND OBSERVED THAT PURCHASE AND SALE OF SHARES FOR S UBSTANTIAL AMOUNT AT FREQUENT INTERVENE CANNOT BE TREATED A CHANGE IN IN VESTMENT BUT HAS TO BE TREATED AS DEALING IN SHARES. HE HAS ON THE BASIS O F CBDT CIRCULAR NO. 4/2007 DATED 15.06.2007 HAS HELD THAT THE SALES TO PURCHASE RATIO OF SHARES FOR STCG TO BE SUBSTANTIALLY HIGH FOR CONSID ERING THE ASSESSEES TRANSACTION AS BUSINESS TRANSACTION. IT WAS FURTHER OBSERVED THAT ORDINARILY THE PURCHASE AND SALE OF SHARES WITH THE MOTIVE OF EARNING A PROFIT WOULD RESULT THE TRANSACTION BEING IN THE NA TURE OF TRADE/ADVENTURE IN THE NATURE OF TRADE. HE HAS HELD THAT THE ASSESSEE HAS ONLY EARNED DIVIDEND OF RS.1,60,464/- DURING THE YE AR ON HIS OPENING SHARES WAS RS.88,71,930/- AND THEREFORE, THE CONDUC T OF PARKING MONEY OF SHARES DID NOT SHOW THAT ITS EYE WAS ON THE DIVIDE ND AND NOT ON THE PROFIT. IT WAS THEREFORE, HELD BY HIM THAT IF THE P ROFIT MOTIVE AND ELEMENT OF RISK ARE PRESENT IN ANY TRANSACTION EVEN A SINGL E TRANSACTION OF PURCHASE AND SALE WILL BE COVERED WITHIN THE MEANIN G OF AN ADVENTURE IN THE NATURE OF TRADE AND ACCORDINGLY WITHIN THE DEF INITION OF BUSINESS. THE I.T.A. NO.: 291/KOL./2012 AS SESSMENT YEAR : 2007-08 PAGE 1 TO 5 3 ASSESSING OFFICER RELIED ON THE DECISION OF HONBLE KOLKATA ITAT IN ITO, WARD 6(2) VS.- M/S. LILY EXPORTERS (P) LTD. IN ITA NO. 1005/KOL/2008 TO HOLD THAT THE ASSESSEE HAS FAILED TO PROVE THAT HIS INTENTION IS PURCHASE AND SALES OF SHARES WERE NOT IN THE NATURE OF DEALI NG IN STOCK-IN-TRADE AND WAS ESSENTIALLY IN THE NATURE OF INVESTMENT AND CON SIDERING THE ASSESSEES DOMINANT INTENTION AND SALE IN PURCHASE RATIO THE TRANSACTION WAS TO BE TAKEN AS BUSINESS ACTIVITY AND THE PROFIT IS TO BE TAXED AS BUSINESS INCOME AND NOT CAPITAL GAINS. 4. AGAINST THE ABOVE ORDER OF ASSESSING OFFICER, AS SESSEE MOVED IN APPEAL BEFORE LD. CIT(APPEALS). IT WAS SUBMITTED TH AT TREATMENT OF CAPITAL GAINS AS BUSINESS INCOME BY THE ASSESSING OFFICER W AS NOT JUSTIFIED UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. IT WAS SUB MITTED THAT ASSESSEE WAS AN INVESTOR AND NOT A TRADER IN SHARES. IT WAS SUBMITTED THAT FIVE TRANSACTIONS WERE MADE IN APRIL AND MAY, SIX TRANSA CTIONS IN JUNE, THREE TRANSACTIONS IN DECEMBER AND ONE TRANSACTION EACH I N THE MONTH OF JULY, NOVEMBER AND JANUARY. THAT APART FROM THESE, THERE WERE NO OTHER TRANSACTIONS. FURTHER IT WAS SUBMITTED THAT ASSESSE E HAS BEEN INVESTING ITS FUNDS SINCE ASSESSMENT YEAR 1990-91 AND NEVER S HOWN SUCH ACQUISITION OF SHARES AS STOCK-IN-TRADE. THE ASSESS EE HAD BEEN RETURNING ANY GAIN ARISING ON SALE OF ANY OF SHARES AND OF TH E UNITS OF MUTUAL FUNDS AS CAPITAL GAIN AND NOWHERE HAS RETURNED SUCH GAIN AS BUSINESS INCOME. FURTHER, CIRCULAR NO. 4/2007 DATED 15.06.2007 OF CB DT, SUPREME COURT DECISION IN THE CASE OF CIT VS.- H. HOLCK LARSEN [ 160 ITR 67] AND DECISION OF ITAT, KOLKATA ILN ITA NO. 1779/KOL/2009 IN THE CASE OF ITO, WARD-12(3), KOLKATA VS.- M/S. APEX HOLDINGS LTD. V IDE ORDER DATED 26.05.2010 WERE REFERRED. 5. IT WAS, THEREFORE, SUBMITTED THAT THESE TRANSACT IONS WERE NOT IN THE NATURE OF TRADE, MORE SO WHEN THERE WAS NO PURCHASE OF SHARES AFTER SALE THEREOF. IT WAS ALSO SUBMITTED THAT ASSESSEE HAD BE EN RETURNING CAPITAL I.T.A. NO.: 291/KOL./2012 AS SESSMENT YEAR : 2007-08 PAGE 1 TO 5 4 GAIN ON SALE OF SHARES AS AN INVESTORS WHICH HAD NO T BEEN QUESTIONED EARLIER BY THE TAX AUTHORITIES. 6. CONSIDERING THE ABOVE SUBMISSION OF ASSESSSEE, L D. CIT(APPEALS) AGREED WITH THE SAME. HE WAS OF THE OPINION THAT TH E ASSESSING OFFICER WAS NOT JUSTIFIED IN TAKING THE SHARE TRANSACTIONS DISCLOSED AS CAPITAL GAIN AS BUSINESS INCOME. THEREFORE, LD. CIT(APPEALS) DIR ECTED THE ASSESSING OFFICER TO TREAT THE ABOVE AMOUNT AS DISCLOSED BY T HE ASSESSEE AS STCG AND LTCG RESPECTIVELY. 7. AGAINST THE ABOVE ORDER OF LD. CIT(APPEALS), REV ENUE IS IN APPEAL BEFORE THE TRIBUNAL. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. FROM THE RECORD, WE FIND THAT THE ASSESSEE HAS BEEN CONSISTENTLY SHOWING SHARES AS INVESTMENT AND THE S AME HAS BEEN ACCEPTED AS SUCH BY THE DEPARTMENT IN EARLIER YEARS . ASSESSING OFFICER HAS NOT BEEN ABLE TO BRING ANY EVIDENCE IN HIS ASSESSME NT ORDER TO WARRANT A CHANGE IN THE METHOD OF TREATMENT OF INCOME. ASSESS ING OFFICER HAS SIMPLY REFERRED TO THE MAGNITUDE OF SHARE TRANSACTI ON AND COME TO HIS CONCLUSION ABOUT THE INTENTIONS OF THE ASSESSEE. TH E SHARES BEING SOLD WERE OF LIMITED COMPANIES AND INVESTMENTS WERE BEIN G MADE AFTER DETAILED AND PROPER STUDY CONSIDERING THE FURTHER P ROSPECTS OF SUCH COMPANIES. LD. CIT(APPEALS) HAS NOTED THAT THE ASSE SSEE HAS GIVEN DETAILS OF FUNDS UTILISED FOR PURCHASE AND SALE OF SHARES A ND IT WAS FOUND THAT AFTER MAKING INVESTMENT IN SHARES, THE MARKET VALUE OF SHARES HAD APPRECIATED SUBSTANTIALLY. WE FIND THAT IT IS TRUE THAT RES JUDICATE DOES NOT APPLY TO THE INCOME-TAX PROCEEDINGS STILL PRINCIPLE OF CONSISTENCY CANNOT BE GIVEN A COMPLETE GO BYE. IN EARLIER YEAR SIMILAR INCOME RETURNED BY THE ASSESSEE AS CAPITAL GAINS HAS BEEN ACCEPTED BY THE REVENUE. ASSESSING OFFICER HAS HIMSELF ACCEPTED THIS PROPOSITION IN TH E ASSESSMENT ORDER, BUT ASSESSING OFFICER HAS NOT BEEN ABLE TO BRING ANY CO GENT MATERIAL ON I.T.A. NO.: 291/KOL./2012 AS SESSMENT YEAR : 2007-08 PAGE 1 TO 5 5 RECORD TO ENABLE HIM TAKING A CONTRARY VIEW THAT AS SESSEES INCOME WAS BUSINESS INCOME. UNDER THE CIRCUMSTANCES, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LD. CIT(APPEALS). ACCORDI NGLY WE UPHOLD THE SAME. 9. IN THE RESULT, APPEAL FILED BY REVENUE STANDS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD DAY OF DECEMBER, 2013. SD/- SD/- MAHAVIR SINGH SHAMIM YAHYA (JUDICIAL MEMBER) (ACC OUNTANT MEMBER) KOLKATA, THE 23 RD DAY OF DECEMBER, 2013 COPIES TO : (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ETC ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.