Appeal Details
Counselvise Citation
[2019] 115 COUNSELVISE.COM (IT) 5571 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 3 month(s) 5 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
29-08-2019
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
D
Assessment Year
2013-2014
Appeal Filed On
24-05-2018
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D , MUMBAI BEFORE S HRI RAJESH KUMAR (AM ) AND SHRI RAM LAL NEGI (JM) ITA NO. 3572/MUM/2018 ASSESSMENT Y EAR: 2013 - 14 THE ASSISTANT COMMISSIONER OF INCOME TAX - 24, ROOM NO. 604, PIRAMAL CHAMBERS, LALBAUG, PAREL, MUMBAI - 400012 VS. SHRI DIPAK KANAYALAL SHAH, 31 - B, 1 ST FLOOR, LAXMI ESTATE, AZAD ROAD, ANDHERI (EAST), MUMBAI - 400069 PAN: AVEPS4654B (APPELLANT) (RESPONDENT) REVENUE BY : SHRI D.G. PANSARI (DR) ASSESSEE BY : SHRI M.P. LOHIA (A R ) DATE OF HEARING: 06/06 /201 9 DATE OF PRONOUNCEMENT: 29 / 0 8 /201 9 O R D E R PER RAM LAL NEGI, JM THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER DATED 08.02.2018 PASSED BY THE COMMIS SIONER OF INCOME TAX (APPEALS) - 36 (FOR SHORT THE CIT(A) , MUMBAI, FOR THE ASSESSMENT YEAR 2013 - 14 , WHEREBY THE LD. CIT(A) HAS PARTLY ALLOWED T HE APPEAL FILED BY THE ASSESSEE AGAINST THE ASSESSMENT ORDER PASSED U/S 143 (3) OF THE INCOME TAX ACT, 1961 (FOR S HORT THE ACT). 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION DECLARING THE TOTAL INCOME OF RS. 45,13,520/ - . THE AO COMPLETED THE ASSESSMENT U/S 143 (3) OF THE ACT AND DETERMINED THE TOTAL INCOME OF RS. 4,05,56,740/ - AFTER MAKING ADDITION OF RS. 3,60,21,982/ - TREATING THE LONG TERM CAPITAL GAIN CLAIMED BY THE ASSESSEE AND EXCLUDING THE LOSS OF RS. 88,881/ - CLAIMED BY THE ASSESSEE AS SHORT TERM CAPITAL LOSS TREATING THE SAME AS BUS INESS LOSS. THE ASSESSEE CHALLENGED THE ASSESSMENT ORDER BEFORE THE LD. CIT (A). THE LD. CIT (A) AFTER HEARING THE 2 ITA NO. 3572 / MUM/2018 ASSESSMENT YEAR: 2013 - 14 ASSESSEE DIRECTED THE AO TO ALLOW THE CLAIM OF LONG TERM CAPITAL GAIN OF RS. 3,60,21,982/ - AND COMPUTE THE TOTAL INCOME OF THE ASSESSEE ACCOR DINGLY. THE REVENUE IS IN APPEAL AGAINST THE SAID FINDINGS OF THE LD. CIT (A). 3 . T HE REVENUE HAS CHALLENGED THE IMPUGNED ORDER PASSED BY THE LD. CIT (A ) ON THE FOLLOWING EFFECTIVE GROUNDS : - 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) HAS ERRED IN ALLOWING BUSINESS INCOME OF RS. 3,60,21,982/ - AS LONG TERM CAPITAL GAINS IGNORING THE DECISION OF GUJARAT HIGH COURT IN THE CASE OF CIT VS. MOTILAL HIRABHAI SPG. & WVG. CO. LTD. [1978] 113 ITR 173 (GUJ) AND RAJA BAHADUR VISHESHWAR SINGH VS. CIT [1961] 41 ITR 685 (SC) WHERE IT WAS HELD THAT IF THE VOLUME, FREQUENCY & REGULARITY WITH WHICH TRANSACTIONS ARE CARRIED OUT INDICATE SYSTEMATIC AND ORGANIZED ACTIVITY WITH PROFIT MOTIVE, THEN IT WOULD BE A CASE OF BUSINESS PROFIT AND NOT CAPITAL GAIN. 2. WHETHER ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) HAS ERRED IN DIRECTING THE AO TO TREAT THE INCOME EARNED BY THE ASSESSEE FROM TRANSACTING IN SHARES AS CAPITAL GAINS AND NOT BUSINESS INCOME BY RELYING UPON HIS DECISION IN THE CASE OF THE ASSESSEE FOR AY 2010 - 11, IGNORING THE FACT THAT THE NATURE OF THE ISSUE IS SUCH THAT THE PRINCIPAL OF RES JUDICATA CANNOT BE APPLIED AND THE LD. CIT (A) HAS FAILED TO ESTABLISH THAT THE FACTS OF THE PRESENT YEAR ARE SIM ILAR TO THAT OF AY 2010 - 11 3. WHETHER ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) HAS ERRED IN DIRECTING THE AO TO TREAT THE INCOME EARNED BY THE ASSESSEE FROM TRANSACTING IN SHARES AS CAPITAL GAINS AND NOT BUSINESS INCOME BY REL YING UPON HIS DECISION IN THE CASE OF ASSESSEE FOR AY 2010 - 11 WITHOUT ANALYZING THE FACTS PERTAINING TO THE TRANSACTIONS IN SHARES FOR THE YEAR UNDER CONSIDERATION. 4. WHETHER ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) HAS ERRED IN DIRECTING THE AO TO TREAT THE INCOME EARNED BY THE ASSESSEE FROM TRANSACTING IN SHARES AS CAPITAL GAINS AND NOT BUSINESS INCOME BY RELYING UPON HIS DECISION IN THE CASE OF THE ASSESSEE FOR AY 2010 - 3 ITA NO. 3572 / MUM/2018 ASSESSMENT YEAR: 2013 - 14 11 IGNORING THE FACT THAT THE ASSESSEE HAS CARRIED OUT V OLUMINOUS NUMBER OF TRANSACTIONS IN VARIOUS SCRIPTS AND THE SAID SHARES HAVE BEEN BOUGHT AND SOLD AGAIN AND AGAIN RENDERING THE CLASSIFICATION OF THE SHARES AS STOCK - IN - TRADE. 4. AT THE OUTSET, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE MUMBAI BENCH OF THE TRIBUNAL RENDERED IN ASSESSEES OWN CASE ITA NO. 3661/MUM/2015 FOR THE AY 2010 - 11. THE LD. COUNSEL FURTHER SUBMITTED THAT THE ORDER PASSED BY THE LD. CIT (A) IS IN ACCORDANCE WIT H THE FINDINGS OF THE MUMBAI TRIBUNAL AND HENCE THERE IS NO INFIRMITY IN THE ORDER OF THE LD. CIT (A) TO INTERFERE WITH THE SAME. 5. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTATIVE (DR) DID NOT CONTROVERT THE FACTS NARRATED BY THE LD. COUNSEL FOR T HE ASSESSEE, HOWEVER, SUPPORTED THE ASSESSMENT ORDER PASSED BY THE AO. 6. WE HAVE PERUSED THE ORDERS PASSED BY THE AUTHORITIES BELOW AND THE ORDER PASSED BY THE COORDINATE BENCH IN THE ASSESEES OWN CASE FOR THE AY 2010 - 11. AS POINTED OUT BY THE LD. COUNS EL, THE LD. CIT (A) HAS DECIDED THE ISSUE INVOLVED IN THIS APPEAL IN FAVOUR OF THE ASSESSEE BY FOLLOWING THE DECISION OF HIS PREDECESSOR PASSED IN THE ASSESSEES OWN CASE FOR THE AY 2010 - 11 CONFIRMED BY THE ITAT, MUMBAI VIDE ORDER DATED 12.04.2017. THE OPE RATIVE PART OF THE ORDER PASSED BY THE LD. CIT (A) READS AS UNDER: - 4.2. IN GROUND NO. 3 TO 7 APPELLANT HAS CHALLENGED THAT THE ACTIVITY OF PURCHASE AND SALE OF SHARES IS NOT ADVENTURE IN THE NATURE OF TRADE AND THE INCOME FROM THE SAME IS NOT BUSINESS INCOME BUT CAPITAL GAIN. AO HAS WRONGLY TREATED THE PLANT AS TRADER IN SHARE AS AGAINST INVESTOR IN SHARE. THIS ISSUE HAS ALREADY BEEN DECIDED IN FAVOUR OF THE APPELLANT BY THE CIT(A) - 39, MUMBAI IN THE CASE OF THE APPELLANT IN APPEAL NO.CIT(A) - 39/I T - 03/AC - 20(2)/2013 - 14 FOR AY 2010 - 11 DATED 31.03.2015 . BY FOLLOWING EARLIER DECISIONS, IT IS HELD THAT THE APPELLANT IS AN INDIVIDUAL 4 ITA NO. 3572 / MUM/2018 ASSESSMENT YEAR: 2013 - 14 CARRYING ON BUSINESS AS INTER - CORPORATE FINANCE BROKER, LENDER AND HAD DEALT IN SHARES, DEBENTURES SINCE LAST SO MANY YEAR S. DURING THE YEAR UNDER CONSIDERATION, THE APPELLANT HAS SHOWN SHORT TERM CAPITAL LOSS AT RS. 88,881/ - U/S 111A OF THE ACT AND LONG TERM CAPITAL GAIN OF RS. 3,60,21,982/ - U/S 10(38) OF THE ACT FROM SALE OF SHARES. HOWEVER, AO IN THE ASSESSMENT ORDER TREATE D SUCH CAPITAL GAINS AS BUSINESS INCOME AND COMPUTED THE TOTAL INCOME OF THE APPELLANT ACCORDINGLY. THERE IS NO CASE OF THE AO FOR TREATING LONG - TERM CAPITAL GAIN AS BUSINESS INCOME. IN VIEW OF EARLIER DECISIONS, THE SAME IS DIRECTED TO BE ASSESSED AS LONG TERM CAPITAL GAIN AS SHOWN BY THE APPELLANT. I OF THE VIEW THAT THE AO WAS NOT JUSTIFIED IN TREATING THE INCOME SHOWN BY THE APPELLANT UNDER THE HEAD CAPITAL GAINS BOTH LTGC AND STCG/L AS BUSINESS INCOME. IN MY CONSIDERED VIEW, THERE IS NO REASON AND GROU ND FOR THE AO TO DEVIATE FROM THE PAST STAND OF THE DEPARTMENT OF TREATING THE APPELLANT IS AN INVESTOR IN SHARES. THEREFORE, AO IS DIRECTED TO TREAT THE CAPITAL GAINS OF THE APPELLANT BOTH LONG - TERM AND SHORT - TERM LOSS/GAIN AS SUCH TREATING THE APPELLANT IS AN INVESTOR IN SHARES AND NOT AS BUSINESS INCOME. THE GROUNDS OF APPEAL ARE ALLOWED. THIS VIEW IS ALSO CONFIRMED BY THE HONBLE ITAT IN ITA NO. 3661/M/2015(AY 2010 - 11 VIDE ORDER DATED 12.04.2017 . 7. WE NOTICE THAT THE COORDINATE BENCH HAS DECIDED THE I DENTICAL ISSUE IN FAVOUR OF THE ASSESSEE IN ASSESSEES OWN CASE ITA NO.3661/M/2015 PERTAINING TO THE ASSESSMENT YEAR2010 - 11 BY UPHOLDING THE FINDINGS OF THE LD. CIT(A). THE OPERATIVE PART OF THE DECISION OF THE COORDINATE BENCH READS AS UNDER: - 16. FURTH ER, WE HAVE ALSO EXAMINED THE REASONING GIVEN BY THE CIT(A) IN HIS ORDER VIDE PARAS 6.21 TO 6.29 WHICH RELATE TO STCG AND FIND THE SAME IS RELEVANT. CONSIDERING THE SIGNIFICANCE, THE FINDINGS OF THE CIT(A), GIVEN IN PARA 6.29 OF HIS ORDER IS EXTRACTED AND THE SAME READS AS UNDER: - 6.29. IN VIEW OF THE ABOVE DISCUSSION AND CONSIDERING THE WHOLE GAMUT OF FACT, THE EXHAUSTIVE SUBMISSIONS OF THE 5 ITA NO. 3572 / MUM/2018 ASSESSMENT YEAR: 2013 - 14 APPELLANT, THE VARIOUS CASE LAWS CITED BY THE AO AS WELL AS THE APPELLANT, I OF THE VIEW THAT THE AO WAS NOT JUSTIF IED IN TREATING THE INCOME SHOWN BY THE APPELLANT UNDER THE HEAD CAPITAL GAINS BOTH LTCG AND STCG AMOUNTING TO RS.4,19,33,271/ - AS BUSINESS INCOME. IN MY VIEW, THERE IS NO REASON AND GROUND FOR THE AO TO DEVIATE FROM THE PAST STAND OF THE DEPARTMENT OF TREA TING THE APPELLANT AS AN INVESTOR IN SHARES. THEREFORE, THE AO IS DIRECTED TO TREAT THE CAPITAL GAINS OF THE APPELLANT BOTH LONG - TERM AND SHORT - TERM AMOUNTING TO RS.4,19,33,271/ - AS SUCH TREATING THE APPELLANT AS AN INVESTOR IN SHARES AND NOT AS BUSINESS I NCOME. THE FINDINGS OF THE AO IN THIS REGARD ARE REVERSED. THE GROUNDS OF APPEAL ARE ALLOWED. 17. AFTER EXAMINING THE SAID PARAS 6.21 TO 6.29 OF THE CIT(A)S ORDER, WE FIND THAT THE CIT (A) HAS APPLIED THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. GOPAL PUROHIT [336 ITR 287] (MUM) BEFORE COMING TO THE CONCLUSION THAT THE STCG SHOULD BE TREATED AS BUSINESS INCOME OF THE ASSESSEE. 18. TO SUM UP, WE FIND THE VIEW OF THE AO IN TREATING THE LTCG AND STCG AS BUSINESS INCOME OF THE ASSESSEE IS NOT PROPER. CONSIDERING STATUTORY PROVISIONS REGARDING THE DEFINITION OF LTCG, WE ARE CONVINCED THAT THE VIEW OF CIT(A) ARE SUSTAINABLE. SIMILARLY, REGARDING THE CLAIM OF STCG ALSO, WE FIND THAT (I) THE CONSISTENCY PRINCIPLES ; (II) USE OF OWN FUNDS OF RS. 54 CRS. (III) EARNING OF GROSS DIVIDEND INCOME OF RS. 1.20 CRS OR RS. 30 LAKH ON ACCOUNT OF SHORT - TERM CAPITAL ASSETS; (IV) DETAILS GIVEN IN THE CONTRACT NOTES REGARDING INTENTION OF CERTAIN SHARES IN PHYSICAL FORM ETC., SUGGEST THAT THE STCG IN QUESTION CANNOT BE HELD AS BUSINESS INCOME. 19. THEREFORE, IN OUR OPINION THE DECISION OF THE CIT(A) ON THIS ISSUE IS FAIR AND REASONABLE AND DOES NOT CALLED FOR ANY INTERFERENCE. ACCORDINGLY, GROUNDS RAISED BY THE REVENUE WITH REGARD TO BOTH THE STCG AND LTCG ARE DISMISSED. 8. THE COORDINATE BENCH HAS DECIDED THE IDENTICAL ISSUE BY UPHOLDING THE FINDINGS OF THE LD. CIT (A) IN ASSESSEES OWN CASE FOR THE AY 2010 - 11 DISCUSSED ABOVE. SINCE, THIS ISSUE HAS BEEN DECIDED BY THE COORDINATE BENCH IN FAVOUR OF 6 ITA NO. 3572 / MUM/2018 ASSESSMENT YEAR: 2013 - 14 THE ASSESS EE AND SINCE THE FINDINGS OF THE LD. CIT (A) ARE BASED ON THE DECISION OF THE COORDINATE BENCH RENDERED IN THE ASSESSEES OWN CASE FOR THE AY 2010 - 11 DISCUSSED ABOVE, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDINGS OF THE LD.CIT (A). HENCE, RESPE CTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCH, WE UPHOLD THE FINDINGS OF THE LD. CIT (A) AND DISMISS THIS GROUND OF APPEAL OF THE REVENUE. ACCORDINGLY, WE DIRECT THE AO TO COMPUTE THE INCOME OF THE ASSESSEE IN TERMS OF THE ORDER PASSED BY THE LD. CIT (A). IN THE RESULT, APPEAL FILED BY THE REVENUE FOR ASSESSMENT YEAR 2013 - 2014 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH AUG. , 2019 . SD/ - SD/ - ( RAJESH KUMAR ) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 29 / 08 / 201 9 ALINDRA, PS / COPY OF THE ORDER FORWARDE D TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI
