The Income-tax Officer, Kathua V. M/s. Smaa Enterprises P.Ltd, Kathua

ITA 317/ASR/2012

• Counselvise Citation: 31720914 RSA 2012
• Duration Of Justice: 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2004-2005
• Appeal Filed On: 30-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P N ARORA
• Keywords: Rule of consistency; Assessment record

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NOS. 317,318, 319 & 320((ASR)/2012 ASSESSMENT YEARS:2004-05, 2005-06, 2008-09 & 2009-2 010 PAN :AAGCS8815G INCOME TAX OFFICER VS. M/S. SMAA ENERPRISES PVT. L TD. WARD 1(4), KATHUA. KATHUA. (APPELLANT) (RESPONDENT) C.O.NOS. 25, 26,27, & 28(ASR)/2012 ARISING OUT OF I.T.A. NOS. 317,318, 319 & 320((ASR) /2012 ASSESSMENT YEARS:2004-05, 2005-06, 2008-09 & 2009-2 010 M/S. SMAA ENTERPRISES PVT. LTD. VS. INCOME TAX OFFI CER, KATHUA. WARD 1(4), KATHUA. (APPELLANT) (RESPONDENT) ASSESSEE BY SH. P.N. ARORA, ADVOCATE DEPARTMENT BY: SH. TARSEM LAL, DR DATE OF HEARING:19/09/2012 DATE OF PRONOUNCEMENT:24/09/2012 ORDER PER BENCH ; THE REVENUE HAS FILED THESE FOUR APPEALS AGAINST T HE CONSOLIDATED ORDER OF THE CIT(A), JAMMU, DATED 24.05.2012 FOR TH E ASSESSMENT YEARS 2004-05, 2005-06, 2008-09 & 2009-2010 RESPECTIVELY. SINCE THE ISSUES 2 INVOLVED IN ALL THESE APPEALS ARE IDENTICAL, THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR TH E SAKE OF CONVENIENCE. 2. THE GROUNDS RAISED BY THE REVENUE IN ALL THE APP EALS ARE COMMON. HOWEVER, FOR THE SAKE OF CONVENIENCE, WE REPRODUCE GROUNDS RAISED IN ITA NO.317(ASR)/2012 FOR THE ASSESSMENT YEAR 2004-05 BY THE REVENUE, AS UNDER: 1. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. CIT(A) WAS RIGHT IN DIRECTING THE A.O. TO TREAT THE ASSESSEE A S INVESTOR INSTEAD OF TRADER WHEN THE NATURE OF THE ASSESSEE B USINESS HAS BEEN MENTIONED AS GENERAL TRADING: AS PER THE REPO RT OF THE AUDITOR ON FORM NO.3CD. 2. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. C IT(A) WAS RIGHT IN DIRECTING THE A.O. TO TREAT THE ASSESSEE A S INVESTOR INSTEAD OF TRADER WHEN THE ASSESSEE HAS CLAIMED THE EXPENSES IN P&L ACCOUNT WHICH CLEARLY SHOW THAT THE ASSESSEE I S ENGAGED IN THE TRADING OF SHARES. 3. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. C IT(A) WAS RIGHT IN DIRECTING THE A.O. TO TREAT THE ASSESSEE A S INVESTOR INSTEAD OF TRADER WHEN THE ACCEPTANCE OF CLAIM OF T HE ASSESSEE U/S 143(1)(A) IN EARLIER YEARS DOES NOT CONSTITUTE A VIEW OF THE DEPARTMENT AND IN THE SUBSEQUENT YEAR, SUCH CLAIM O F THE ASSESSEE IS REJECTED IN ASSESSMENT U/S 143(3), THE RULE OF CONSISTENCY DOES NOT COME IN WAY. 4. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. C IT(A) WAS RIGHT IN DIRECTING THE A.O. TO TREAT THE ASSESSEE A S INVESTOR INSTEAD OF TRADER WHEN THE BOOKS OF ACCOUNT OF THE ASSESSEE AND STOCK SUMMARY CLEARLY SUGGEST THAT THE TRANSACTION AND STOCK SUMMARY CLEARLY SUGGEST THAT THE TRANSACTION MADE W ERE IN THE NATURE OF TRADE WITH A MOTIVE TO EARN BUSINESS PROF IT. 3 5. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. C IT(A) WAS RIGHT IN DIRECTING THE A.O. TO TREAT THE ASSESSEE A S INVESTOR INSTEAD OF TRADER WHEN THE FREQUENCY WITH WHICH THE SHARES HAVE BEEN PURCHASED/SOLD AND HELD BY THE ASSESSEE, SUGGE ST THE SAME ARE IN THE FORM OF STOCK IN TRADE AND NOT INVESTMEN T. 6. THE APPLICANT CRAVES TO AMEND OR ADD ANY ONE OR MORE GROUNDS OF APPEAL. 3. THE ASSESSEE HAS ALSO FILED CROSS OBJECTIONS. 4. THE FACTS NARRATED BY THE REVENUE AUTHORITY IN T HESE APPEALS ARE NOT DISPUTED. THEREFORE, THERE IS NO NEED TO REPEAT THE SAME FOR THE SAKE OF CONVENIENCE. 5. AT THE TIME OF HEARING, SH. P.N.ARORA, ADVOCATE, APPEARING FOR THE ASSESSEE STATED THAT THE ISSUES INVOLVED IN THE REV ENUE APPEALS HAVE ALREADY BEEN ADJUDICATED AND DECIDED BY THIS BENCH IN ASSE SSEES OWN CASE IN ITA NO.333(ASR)/2010 FOR THE ASSESSMENT YEAR 2006-07, VIDE ORDER DATED 11/04/2012 IN FAVOUR OF THE ASSESSEE AND AGAINST T HE REVENUE. HE FURTHER STATED THAT THE LD. CIT(A) HAS ALSO DECIDED THE ISS UE IN FAVOUR OF THE ASSESSEE BY FOLLOWING THE SAID ORDER OF THE TRIBUNA L AND REQUESTED THAT THE APPEALS FILED BY THE DEPARTMENT MAY BE DISMISSED. 6. THE LD. DR, MR. TARSEM LAL STATED THAT THE ARGUM ENTS ADVANCED BY HIM IN ITA NO. 333(ASR)/2010, WHICH HAS BEEN DE CIDED ON 11/04/2012 AGAINST THE REVENUE MAY BE ADOPTED IN THE PRESENT A PPEALS. 4 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ELEVANT MATERIALS AVAILABLE ON RECORD, ESPECIALLY THE ORDER PASSED BY THIS BENCH DATED 11.04.2012 IN ASSESSEES OWN CASE IN ITA NO.333(ASR )/2012, A COPY OF THE ORDER HAS BEEN PLACED IN THE PAPER BOOK BY THE LD. COUNSEL FOR THE ASSESSEE AT PAGES 52 TO 74. THE ARGUMENTS ADVANCED BY THE L D. DR HAVE ALREADY BEEN ADJUDICATED AND CONSIDERED IN DETAIL IN THE S AID CASE AND THIS BENCH HAS DECIDED THE ISSUES IN DISPUTE IN FAVOUR OF THE ASSESSEE. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE ISSUES IN DISPUTE H AVE ALREADY BEEN DECIDED BY THIS BENCH IN ASSESSEES OWN CASE IN FAVOUR OF T HE ASSESSEE IN ITA NO.333(ASR)/2012 (SUPRA). THE LD. CIT(A) HAS ALSO D ECIDED THE ISSUES IN DISPUTE BY FOLLOWING THE ORDER OF THIS BENCH (SUPRA ) IN FAVOUR OF THE ASSESSEE AND HAS ALSO REPRODUCED THE FINDINGS OF THIS BENCH IN HIS ORDER IN PARAS 4.1 TO 6, WHICH FOR THE SAKE OF CLARITY ARE REPRODUCED HEREUNDER: 4.1. IT WOULD BE QUITE RELEVANT AND USEFUL TO REPR ODUCE THE RELEVANT POINT OF THE DECISION OF HONBLE ITAT, AMRITSAR IN THE CASE OF ASSESSEE ITSELF. THEREFORE, WE ARE OF THE VIEW THAT THE ASSESSEE HA S BEEN DECLARING THE SHARES AS INVESTMENT IS A MATTER OF ASSESSMENT RECORD. THE ASSESSEE HAS BEEN DECLARING HOLDING OF SHARES AS IN VESTMENT SINCE ASSESSMENT YEAR 2001-02 TILL THE IMPUGNED YEAR. NOT HING HAS BEEN BROUGHT ON RECORD THAT THE ASSESSEE HAD BEEN VALUIN G THE HOLDING OF SHARES AS AT THE END OF EACH YEAR ON FIFO METHOD. A T THE SAME TIME, AS PER THE BALANCE SHEET AS ON 31 ST MARCH, 2006, IT IS EVIDENT THAT THE ASSESSEE HAD VALUED INVESTMENT AT COST AND DECLARED THE SAME AS INVESTMENT. THEREFORE, THE TREATMENT GIVEN IN THE B OOKS OF ACCOUNT BY 5 THE ASSESSEE IS INVESTMENT AND NOT AS STOCK-IN-TRAD E. THERE IS NO BORROWINGS TAKEN BY THE ASSESSEE AND THIS FACT HAS NOT BEEN SHOWN BY ANY OF THE AUTHORITIES BELOW. THEREFORE, IT CANNOT BE SAID THAT THE SHARES HAVE BEEN PURCHASED FROM BORROWED FUNDS. AS REGARDS THE FREQUENCY OF PURCHASE AND SALE OF SHARES, THERE IS NO DOUBT THAT THERE ARE CERTAIN SHARES WHICH HAVE BEEN PURCHASED AND SO LD ON THE SAME DAY OR WITHIN NEXT FEW DAYS. AS POINTED OUT BY THE LD. COUNSEL FOR THE ASSESSEE, MR. AJAY VOHRA, THESE TRANSACTIONS ARE 7. 52% OF THE TOTAL TRANSACTIONS, WHICH HAS ALSO BEEN POINTED OUT BY TH E LD. DR, MR. TARSEM LAL. ON FACTS, THERE IS NO DISPUTE TO EITHER OF THE PARTY. THE SHARES HAVE BEEN HELD FOR MORE THAN 30 NUMBER OF DA YS, AS IS EVIDENT FROM THE HOLDING PERIOD SHOWN BY THE ASSESSEE IN MO RE THAN 92% OF THE TRANSACTIONS. IT APPEARS THAT THE ASSESSEE HAD RETAINED THE SHARES FOR APPRECIATION IN VALUE AND NOT WITH THE INTENTIO N OF COMMERCIAL MOTIVE. THE SHARES HAVE BEEN VALUED AT COST. THE AS SESSEE HAD BEEN EARNING THE DIVIDEND INCOME HAS NOT BEEN REBUTTED B Y THE LD. DR. THE ASSESSEE HAS NOT BEEN MAINTAINING ANY OFFICE ESTABL ISHMENT. THE ASSESSEE IS NOT REGISTERED WITH ANY AUTHORITY OR BO DY SUCH AS SEBI ETC. THE ENTIRE PORTFOLIO IS NOT VALUED AT COST OR MARKET PRICE WHICHEVER IS LOWER BECAUSE THAT CAN ONLY BE APPLIED IF THE SHARES WERE SOLD AS STOCK-IN-TRADE BUT AT COST PRICE, AS IS DON E IN THE CASE OF INVESTMENT. THE ENTIRE INVESTMENT HAS BEEN MADE OUT OF OWNED FUNDS AND NOT OUT OF BORROWED FUNDS IS NOT UNDER DISPUTE. AS REGARDS THE MAGNITUDE OF TRANSACTION, THE TOTAL SHORT-TERM CAPI TAL GAINS EARNED BY THE ASSESSEE IS RS.1,80,75,100/- AND OUT OF THE SAM E RS.1,54,56,896/- IS EARNED FROM 30 SCRIPTS ONLY. IN OUR VIEW, AT TH E TIME OF SALE, THE COLOUR OF TRANSACTION CANNOT BE CHANGED. THE AO AN D SO THE LD. DR HAS NOT DOUBTED THE OTHER FACTS DISCLOSED BY THE AS SESSEE. AS REGARDS SECURITY TRANSACTION TAX, THE SAME IS PAYABLE ON EV ERY TRANSACTION WHETHER IT BE TRADER OR INVESTOR. AS REGARDS THE SE RVICE TAX, THE ASSESSEE IS NOT A BROKER. THE ASSESSEE HAS PURCHASE D SHARES WHICH ARE DELIVERY BASED AND MADE THE PAYMENT AND VICE VERSA IS NOT UNDER DISPUTE. WHEREAS THE TRADER NORMALLY MAKES THE PURC HASE AND SALE DURING THE DAY WITHOUT TAKING DELIVERY AND SETTLING THE TRANSACTIONS ULTIMATELY AS AT THE END OF THE DAY WITHOUT DELIVER Y, WHICH IS NOT THE CASE OF THE ASSESSEE. THE ASSESSEE HAS BEEN DECLARI NG THE SHARES AS INVESTMENT SINCE ASSESSMENT YEAR 2001-02 IS A MATTE R OF RECORD AND THE DEPARTMENT HAS NOT BROUGHT ON RECORD ANY DIFFER ENT FACTS AND IN THE ABSENCE OF ANY MATERIAL CHANGE JUSTIFYING THE D EPARTMENT TO TAKE DIFFERENT VIEW FROM THAT TAKEN IN EARLIER PROCEEDIN GS. THE DEPARTMENT 6 CANNOT CHANGE THE STAND IN THE SUBSEQUENT YEAR. IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE AND DECISIONS OF VARIOUS COURTS OF LAW RELIED UPON BY BOTH THE PARTIES, WE ARE OF THE VIEW THAT THE ASSESSEE IS A INVESTOR AND CANNOT BE TERMED AS A TR ADER IN SHARES. THEREFORE, THE AO IS DIRECTED TO ACCEPT THE CLAIM O F THE ASSESSEE. ACCORDINGLY, THE ORDER OF THE LD. CIT(A) ON THE ISS UE IS REVERSED AND GROUND NOS. 1(A), 1(B) AND 2(A), 2(B) OF THE ASSESS EE ARE ALLOWED. 5. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MADE , THE PAPER BOOK, THE ASSESSMENT ORDER AND THE DECISION OF HON BLE ITAT, AMRITSAR BENCH, AS CITED ABOVE, IN THE ASSESSEES O WN CASE AND FIND THAT FACTS ARE IDENTICAL WITH MINOR VARIATIONS IN F IGURES. THE ASSESSEE RIGHT FROM THE A.Y. 2001-2002 HAS BEEN DECLARING SH ARES HELD BY IT AS INVESTMENT. SHORT TERM CAPITAL GAINS/LONG TERMS CAP ITAL GAINS AS THE CASE MAY BE ARE RETURNED ALL ALONG. DIVIDEND INCOME IS ALSO SHOWN IN ALL THESE YEARS. THE INVESTMENT AT THE YEAR END IS VALUED INVARIABLY AT COST ONLY AND NOT AT COST OR MARKET VALUE WHICH EVER IS LESSER AS DONE IN CASES OF BUSINESS. MAJORITY OF SHARES IN E ACH ASSESSMENT YEAR HAS BEEN SOLD AFTER HOLDING THE SAME FOR AT LEAST 3 0 DAYS. THE NUMBER OF SCRIPTS HELD ARE ALSO AROUND 30 OR SO. 5.1. IT IS FOUND THAT IN THE ASSESSMENT YEARS INVOL VED IN APPEAL THE FACTS ARE NOT CHANGED AND ARE IDENTICAL IN TREATMEN T SINCE A.Y. 2001- 02 ONWARDS OTHER FACTORS THAT NO LOANS HAVE BEEN TA KEN VALUATION OF SHARES IS DONE AT COST AND THE VARIOUS ITEMS OF EXP ENDITURE DEBITED TO PROFIT AND LOSS ACCOUNT ARE NOT CONSIDERED IN COMPU TATION OF INCOME, A MINOR PERCENTAGE OF SHARES ARE SOLD WITHIN A PERIOD OF 30 DAYS ETC. ARE ALSO IDENTICAL. DIVIDEND INCOME IS ALSO SHOWN CONSI STENTLY. THE SHARES PURCHASES ARE DELIVERY BASED. AS HELD BY THE HONB LE ITAT, AMRITSAR IN VIEW OF NO MATERIAL CHANGE, HE DEPARTME NT CANNOT CHANGE ITS STAND, I FIND THAT THE FACTS ARE IDENTICAL THR OUGHOUT WITH MINOR CHANGES IN AMOUNTS INVOLVED AND IN VIEW OF THIS THE DECISION OF HONBLE ITAT, AMRITSAR, IS SQUARELY APPLICABLE TO A LL THE ASSESSMENT YEARS IN APPEAL BEFORE ME. 6. RESPECTFULLY FOLLOWING THE DECISION OF THE HONB LE ITAT, IN THE ASSESSEES OWN CASE IN ASSESSMENT YEAR 2006-07, THE ASSESSEE IS HELD TO BE A INVESTOR AND NOT A TRADER IN SHARES. 7 8. KEEPING IN VIEW THE FACT AND CIRCUMSTANCES OF TH E CASE NARRATED ABOVE, WE ARE OF THE CONSIDERED VIEW THAT THE LD. C IT(A) HAS PASSED A WELL REASONED AND DETAILED ORDER BY FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.333(ASR)/2010, WHICH REQUIRES NO INTERFERENCE. THEREFORE, WE UPHOLD THE SAME BY DISM ISSING THE APPEALS FILED BY THE REVENUE. 9. AS REGARDS C.OS, THE LD. COUNSEL FOR THE ASSESSE E, SH. P.N. ARORA, ADVOCATE SUBMITTED THAT HE IS NOT PRESSING THE C.OS FILED BY THE ASSESSEE AND HAS ALSO ENDORSED THE SAME ON THE ORIGINAL GROUNDS OF COS AT THE BAR. ACCORDINGLY, ALL THE COS FILED BY THE ASSESSEE ARE DISMISSED AS NOT PRESSED. 10. IN THE RESULT, ALL THE APPEALS FILED BY THE R EVENUE AND C.OS FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24TH SEPTEMBER, 2012. SD/- SD/- (B.P. JAIN) (H.S. SIDHU) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 24TH SEPTEMBER, 2012 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:M/S.SMAA ENTERPRISES PVT. LTD. KATHUA 2. THE ITO WARD 1(4), KATHUA. 3. THE CIT(A) 4. THE CIT 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY