UPENDRA K. DOSHI, MUMBAI V. ACIT RG -4(2), MUMBAI

ITA 3541/MUM/2009

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70835 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 08-08-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 29-05-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANURAG SRIVASTAV
• Assessee Lawyers: R MURLIDHAR
• Keywords: Capital asset; Business income; Rule of consistency; Speculation loss
• Section: 143(3); 14A; 43(5)

Judgement Text

, , , , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F, MUMBAI . .. . . . . . ! ! ! !, ,, , ' #$ ' #$ ' #$ ' #$ , , ,, , . .. . . . . . $ $ $ $ , % #$ % #$ % #$ % #$ & & & & BEFORE SHRI R.K.GUPTA JM AND SHRI R.S.SYAL, AM ITA NO. 1499 /MUM/2009 A.Y. 2005-06 ACIT CIRCLE-4(2), R.NO.642, 6 TH FLOOR, AAYAKAR BHAVAN, M.K.RAOD, MUMBAI-400020 ' ' ' ' / VS. UPENDRA K.DOSHI, B-30, PARMESHWAR DHAM, ROAD NO.7, RAJAWADI, GHARKOPAR(E), MUMBAI-400077 PAN-AABPD4155E ( )$ )$ )$ )$ / // / REVENUE) ( *+,- / RESPONDENT) ITA NO. 3541 /MUM/2009 A.Y. 2006-07 UPENDRA K.DOSHI, B-30, PARMESHWAR DHAM, ROAD NO.7, RAJAWADI, GHARKOPAR(E), MUMBAI-400077 PAN-AABPD4155E ' ' ' ' / VS. ACIT CIRCLE-4(2), R.NO.642, 6 TH FLOOR, AAYAKAR BHAVAN, M.K.RAOD, MUMBAI-400020 ( ,- / // / ASSESSEE) ( )$ )$ )$ )$ / REVENUE) ITA NO.7854/MUM/2011 A.Y. 2008-09 UPENDRA K.DOSHI, B-30, PARMESHWAR DHAM, ROAD NO.7, RAJAWADI, GHARKOPAR(E), MUMBAI-400077 PAN-AABPD4155E ' ' ' ' / VS. ACIT CIRCLE-4(2), R.NO.642, 6 TH FLOOR, AAYAKAR BHAVAN, M.K.RAOD, MUMBAI-400020 ( ,- / // / ASSESSEE) ( )$ )$ )$ )$ / REVENUE) )$ )$ )$ )$ . .. . / / / / / REVENUE BY : SHRI ANURAG SRIVASTAV '' 01 '' 01 '' 01 '' 01 . / . / . / . / / ASSESSEE BY : SRI R. MURLIDHAR ' . 1% / / / / DATE OF HEARING :08.08.2013 234 . 1% / DATE OF PRONOUNCEMENT : 14.08.2013 ITA NO. 1499,3541/MUM/09 & ITA NO.7854/MUM/11 UPENDRA K. DOSHI 2 #5 #5 #5 #5 / / / / O R D E R PER R.S.SYAL ( AM) : THIS BATCH OF THREE APPEALS COMPRISES OF ONE APPEAL BY THE REVENUE FOR A.Y.2005-06 AND TWO BY THE ASSESSEE FOR THE A.YS. 2006-07 AND 2008-09. SINCE, SOME OF THE ISSUES RAI SED IN THESE APPEALS ARE COMMON, WE THEREFORE, PROCEEDING TO DIS POSE THEM OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVE NIENCE. A.Y.-2006-07 2. FIRST ISSUE RAISED BY THE REVENUE THROUGH GROUND NOS. 1 TO 5 AND 8 IS AGAINST THE DIRECTION OF THE LD. CIT(A) TO TREAT THE AMOUNT OF PROFIT FROM SALE OF SHARES AS SHORT TERM CAPITAL GAIN AS AGAINST THE `BUSINESS INCOME HELD BY THE AO. 3. BRIEFLY STATED THE FACTS OF THESE GROUNDS ARE TH AT THE ASSESSEE PURCHASED AND SOLD CERTAIN SHARES, PROFIT FROM WHICH WAS CLAIMED AS SHORT TERM/LONG TERM CAPITAL GAIN DE PENDING UPON THE PERIOD OF HOLDING. THE ASSESSING OFFICER DID NOT DISPUTE THE LONG TERM CAPITAL GAIN. HOWEVER, DUE TO REASONS DISCUSSED IN THE ASSESSMENT ORDER, HE TREATED THE A SSESSEE AS A TRADER INSTEAD OF INVESTOR AND ACCORDINGLY RECHARAC TERIZED THE AMOUNT SHOWN AS `SHORT TERM CAPITAL GAIN AS `BUSIN ESS ITA NO. 1499,3541/MUM/09 & ITA NO.7854/MUM/11 UPENDRA K. DOSHI 3 INCOME. THE LD. CIT(A) NOTICED THAT THE ASSESSEE CONSISTENTLY HELD THE SHARES AS `INVESTMENT AND THIS TREATMENT OF PROFIT FROM SALE OF SHARES AS `CAPITAL GAIN STOOD ACCEPTED BY THE ASSESSING OFFICER IN EARLIER YEAR AS WELL. HE, THEREFORE, D IRECTED TO TREAT THE AMOUNT OF RS.90.45 LAKHS AS SHORT TERM CAPITAL GAIN AS AGAINST THE `BUSINESS INCOME HELD BY THE ASSESSING OFFICER. 4. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD, WE FIND IT AS UNDISPUT ED FACT THAT THE ASSESSEE CONSIDERED THESE SHARES AS `INVESTMENT AN D ACCORDINGLY DECLARED CAPITAL GAIN FROM THEIR TRANSF ER AS LONG TERM/SHORT TERM CAPITAL GAIN DEPENDING UPON THE PE RIOD OF HOLDING. THE TREATMENT OF LONG TERM CAPITAL GAIN H AS BEEN ACCEPTED BY THE ASSESSING OFFICER. THE ONLY DISPUTE IS ABOUT THE TREATMENT OF PROFIT FROM SALE OF SHARES ETC., OTHER THAN LONG TERM CAPITAL ASSETS, WHICH THE ASSESSING OFFICER TREATED IT AS `BUSINESS INCOME. THE ASSESSEE GAVE SIMILAR TREAT MENT TO THE SHARES BY KEEPING IT AS `INVESTMENT ON THE LINES A S WAS DONE IN THE EARLIER YEARS. FOR THE IMMEDIATELY PRECEDING A SSESSMENT YEAR I.E. 2004-05, THE ASSESSEE SHOWED LONG TERM CA PITAL GAIN AND SHORT TERM CAPITAL GAIN FROM THE TRANSFER OF S HARES. THE AO ACCEPTED PROFIT FROM TRANSFER OF SHARES AS SHORT TE RM/LONG TERM CAPITAL GAIN RESPECTIVELY IN THE ASSESSMENT MADE U/ S 143(3) OF THE ACT FOR SUCH EARLIER YEAR. A COPY OF THE ASSE SSMENT ORDER FOR THE A.Y. 2004-05 PASSED U/S 143(3) IS AVAILABLE ON PAGE NOS. 69 TO 71 OF THE PAPER BOOK. SIMILAR IS THE POSITIO N FOR THE A.Y. ITA NO. 1499,3541/MUM/09 & ITA NO.7854/MUM/11 UPENDRA K. DOSHI 4 2003-04 IN WHICH THE ASSESSEE AGAIN SHOWED PROFIT F ROM THE TRANSFER OF SHARES AS LONG TERM CAPITAL GAIN AND SH ORT TERM CAPITAL GAIN WHICH WAS ASSESSED BY THE ASSESSING O FFICER AS SUCH IN ASSESSMENT MADE U/S 143(3) OF THE ACT. A C OPY OF THE SUCH ASSESSMENT ORDER HAS ALSO BEEN PLACED ON PAGE NOS. 81 TO 84 OF THE PAPER BOOK. THIS SHOWS THAT THE ASSESSEE HELD AND DECLARED THE SHARES AS `INVESTMENT AND THIS STAND CAME TO BE ACCEPTED BY THE REVENUE. WE FAIL TO UNDERSTAND AS TO HOW A DIFFERENT TREATMENT CAN BE GIVEN IN THE PREVIOUS YE AR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. THE HONBL E JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. GOPAL PUROHIT (2010) 336 ITR 287 (BOM) APPROVED THE VIEW TAKEN BY THE TRIBUNAL IN WHICH THE PRINCIPLE OF CONSISTENCY WAS FOLLOWED AND THE PROFIT FROM TRANSFER OF SHARES WAS ACCEPTED AS CAPITAL GAIN ON THE STRENGTH OF SIMILAR VIEW TAKEN AND ACCEPTED IN THE EARLIER ORDERS. THE MUMBAI BENCH OF THE TRIBUNAL IN SRI HARDIK BHARAT PATEL VS. DCIT (ITA NO. 2274/MUM/2011) (TO WHICH ONE OF US, NAMELY, THE LD. J.M. IS PARTY) HAS HELD VIDE ITS RECENT ORDER DATED 01.05.2013 THAT THE PROFIT FROM TRANSFE R OF SHARES SHOULD BE CONSIDERED AS CAPITAL GAIN WHEN SHORT TER M CAPITAL GAIN SHOWED BY THE ASSESSEE IN EARLIER YEARS WAS AC CEPTED BY THE REVENUE. A COPY OF THE SAID ORDER IS AVAILABLE ON PAGES 121 ONWARDS OF THE PAPER BOOK AND RELEVANT DISCUSSION I S CONTAINED IN PARA 10 OF THE ORDER. IN VIEW OF THE FOREGOING DISCUSSION, WE ARE OF THE CONSIDERED OPINION THAT THE LD. CIT(A) H AS TAKEN AN UNIMPEACHABLE VIEW ON THIS ISSUE. THE IMPUGNED ORD ER IS ITA NO. 1499,3541/MUM/09 & ITA NO.7854/MUM/11 UPENDRA K. DOSHI 5 UPHELD AND THE RELEVANT GROUNDS TAKEN BY THE REVENU E IN THIS REGARD, ARE DISMISSED. 5. GROUND NOS. 6 AND 7 ARE AGAINST THE DIRECTION OF THE LD. CIT(A) TO TREATED F/O LOSSES AS BUSINESS LOSS AGAIN ST THE ASSESSING OFFICERS VIEW OF IT BEING A SPECULATIVE LOSS. 6. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD, WE FIND THAT THIS ISSU E IS NO MORE RES INTEGRA IN VIEW OF THE JUDGMENT OF THE HONBLE JURISDICTIO NAL HIGH COURT IN THE CASE OF CIT V/S BHARAT R. RUIA (HUF )(2011) 337 ITR 452(BOM.). THE HONBLE JURISDICTIONAL HIGH COURT HAS HELD THAT THE LOSS ON ACCOUNT TRANSACTIONS IN DERIV ATIVES IS SPECULATIVE UP TO A.Y. 2005-06 AND FURTHER THAT THE INSERTION OF CLAUSE (D) TO THE PROVISO TO THE SECTION 43(5) IS P ROSPECTIVE AND HENCE APPLICABLE FROM ASSESSMENT YEAR 2006-07. A S PECIAL BENCH OF THE TRIBUNAL IN SHREE CAPITAL SERVICES LTD. VS. ACIT (2009) 124 TTJ 740 (KOL)(SB) HAS ALSO DECIDED THIS ISSUE AGAINST THE ASSESSEE. AS THE ASSESSMENT YEAR UNDER CONSIDERATION IS PRIOR TO THE INSERTION OF CLAUSE ( D), WE OVERTURN THE IMPUGNED ORDER AND RESTORE THE ASSESSMENT ORDER ON THIS ISSUE. THE LD. AR WAS FAIR ENOUGH TO ACCEPT THIS P OSITION. THESE TWO GROUNDS OF THE REVENUES APPEAL ARE ALLOW ED. 7. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ITA NO. 1499,3541/MUM/09 & ITA NO.7854/MUM/11 UPENDRA K. DOSHI 6 A.Y.-2006-07 8. THIS APPEAL BY THE ASSESSEE HAS BEEN FILED AGAIN ST THE ORDER PASSED BY THE LD. CIT(A) IN ASSESSING INCOME OF RS.1.24 CRORES AS `BUSINESS INCOME INSTEAD OF `SHORT TERM CAPITAL GAIN. 9. FILTERING OUT UNNECESSARY DETAILS, IT IS SEEN TH AT THE ASSESSEE CONTINUED TO MAKE INVESTMENT IN SHARES AS WAS DONE IN EARLIER YEARS AND EARNED LONG TERM/ SHORT TERM CAPI TAL GAIN. THE ASSESSING OFFICER, FOLLOWING HIS VIEW TAKE IN T HE PRECEDING YEAR, TREATED THE AMOUNT OF SHORT TERM CAPITAL GAIN AS `BUSINESS INCOME. HOWEVER, THE LD. CIT(A) TOOK A DIFFERENT STAND IN THE CURRENT YEAR VIS-A-VIS THE EARLIER YEAR AND UPHELD THE IMPUGNED ORDER ON THIS POINT. BOTH THE SIDES ARE IN AGREEME NT THAT THE FACTS AND CIRCUMSTANCES OF THIS ISSUE ARE MUTATIS MUTANDIS SIMILAR TO THOSE FOR THE ASSESSMENT YEAR 2005-06. WHILE DISPOSING OF THE APPEAL FOR THE A.Y.2005-06, WE HAV E ACCEPTED THAT SIMILAR AMOUNT SHOULD BE CONSIDERED AS SHORT T ERM CAPITAL GAIN INSTEAD OF `BUSINESS INCOME. FOLLOWING THE V IEW TAKEN HEREINABOVE, WE OVERTURN THE IMPUGNED ORDER ON THI S SCORE AND DIRECT THAT THE AMOUNT IN QUESTION FROM TRANSFER OF SHARES BE TREATED AS SHORT TERM CAPITAL GAIN AND NOT AS `BUSI NESS INCOME. 10. NO ARGUMENTS WERE ADVANCED BY THE LD. AR IN SUP PORT OF GROUND NOS. 2 TO 4 WHICH ARE `WITHOUT PREJUDICE TO THE FIRST ITA NO. 1499,3541/MUM/09 & ITA NO.7854/MUM/11 UPENDRA K. DOSHI 7 GROUND, WHICH HAS BEEN DECIDED SUPRA IN FAVOUR OF THE ASSESSEE. SUCH OTHER GROUNDS, THEREFORE, STAND DIS MISSED. 11. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED IN ABOVE TERMS. A.Y.-2008-09 12. FIRST GROUND OF THE ASSESSEES APPEAL IS AGAIN ST THE TREATMENT OF SHORT TERM CAPITAL GAIN OF RS.1.42 CRO RES AS `BUSINESS INCOME AGAINST THE CLAIM OF SHORT TERM C APITAL GAIN. BOTH THE SIDES ARE FAIR ENOUGH TO ACCEPT THAT THE F ACTS AND CIRCUMSTANCES OF THIS GROUND ARE SIMILAR TO THOSE F OR EARLIER TWO YEARS. FOLLOWING THE VIEW TAKEN HEREINABOVE, WE AL LOW THIS GROUND OF APPEAL AND HOLD THAT AMOUNT OF RS.1.42 CR ORES SHOULD BE CONSIDERED AS SHORT TERM CAPITAL GAIN AND NOT AS `BUSINESS INCOME. 13. GROUND NO. 2 ABOUT THE CONFIRMATION OF DISALLOW ANCE OF RS.1,87,734/- U/S 14A WAS NOT PRESSED BY THE LD. AR . THE SAME IS, THEREFORE, DISMISSED. 14. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ITA NO. 1499,3541/MUM/09 & ITA NO.7854/MUM/11 UPENDRA K. DOSHI 8 ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH AUGUST 2013 #5 . 234 % 6 7#'8 14 TH AUGUST .2013 3 . SD/- SD/- (R.K.GUPTA) (R.S.SYAL) ' #$ ' #$ ' #$ ' #$ / JUDICIAL MEMBER % #$ % #$ % #$ % #$ / ACCOUNTANT MEMBER / MUMBAI ; 7#' / DATED : 14 TH AUGUST , 2013 . SHEKHAR. P.S. #5 . * #5 . * #5 . * #5 . *'19: ;:41 '19: ;:41 '19: ;:41 '19: ;:41/ COPY OF THE ORDER FORWARDED TO : 1. ,- / THE APPELLANT 2. *+,- / THE RESPONDENT. 3. < ( ) / THE CIT , MUMBAI. 4. < / CIT(A)- , MUMBAI 5. :? *'1'' , , / DR, ITAT, MUMBAI 6. @ / GUARD FILE. #5' #5' #5' #5' / BY ORDER, +:1 *'1 //TRUE COPY// A AA A/ // /B ) B ) B ) B ) ( DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI