GIRDHARILAL K . AGARAWAL, MUMBAI V. DCIT 12(3), MUMBAI

ITA 3828/MUM/2012

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 2169 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 26-08-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 30-05-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Capital asset; Business income; Treatment of capital gains as business income; Rule of consistency
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH G, MUMBAI BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI SANDEEP GOSAIN, JUDICIAL MEMBER ITA NO.3828/M/2012 ASSESSMENT YEAR: 2008-09 SHRI GIRDHARILAL K. AGRAWAL, 302 VIKAS, 11 BANK STREET, FORT, MUMBAI 400 001 PAN: AABPA 1257E VS. DY. COMMISSIONER OF INCOME- TAX, 12(3), ROOM NO.658, 6 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020 (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI K. GOPAL, A.R. REVENUE BY : SHRI MAURYA PRATAP, D.R. DATE OF HEARING : 21.12.2015 DATE OF PRONOUNCEMENT : 21.12.2015 O R D E R PER N.K. BILLAIYA, ACCOUNTANT MEMBER: WITH THIS APPEAL THE ASSESSEE HAS CHALLENGED THE CO RRECTNESS OF THE ORDER OF THE LD. CIT(A)-23, MUMBAI DATED 09.03.2012 PERTA INING TO A.Y. 2008-09. THE FIRST GRIEVANCE OF THE ASSESSEE RELATES TO THE TREATMENT OF CAPITAL GAINS AS BUSINESS INCOME. 2. THE RETURN FOR THE YEAR UNDER CONSIDERATION WAS SELECTED UNDER CASS AND ACCORDINGLY STATUTORY NOTICES WERE ISSUED AND S ERVED UPON THE ASSESSEE. 3. WHILE SCRUTINISING THE RETURN OF INCOME THE AO N OTICED THAT THE ASSESSEE HAS OFFERED INCOME UNDER THE HEAD CAPITAL GAINS. THE ASSESSEE WAS ASKED TO FURNISH REASONS AS TO WHY THE INCOME FROM SHORT TER M CAPITAL GAINS SHOULD NOT BE TREATED AS INCOME FROM BUSINESS. VIDE A LETTE R DATED 11.12.10, THE ASSESSEE STRONGLY CONTENDED THAT HE HAS BEEN SHOWIN G INVESTMENT IN SHARES AND IN UNITS OF MUTUAL FUNDS FOR THE LAST SO MANY YEARS AND HAS BEEN CONSISTENTLY OFFERING GAINS UNDER THE HEAD SHORT TERM CAPITAL G AINS. THE CLAIM OF THE ITA NO.3828/M/2012 SHRI GIRDHARILAL K. AGRAWAL 2 ASSESSEE DID NOT FIND ANY FAVOUR WITH THE AO WHO WA S OF THE STRONG BELIEF THAT PRINCIPLES OF RES ADJUDICATA DO NOT APPLY ON TAX PR OCEEDINGS. FURTHER, THE AO WAS OF THE OPINION THAT THE ASSESSEE IS ACTUALLY EN GAGED IN THE BUSINESS OF SHARE TRADING SINCE HE IS ALSO DOING BUSINESS IN FUTURE A ND OPTIONS SEGMENT OF THE SHARE MARKET. THE AO FURTHER OBSERVED THAT THE HOL DING PERIOD OF THE ASSESSEE RANGES FROM A SHORT PERIOD OF ONE DAY TO 200 DAYS, THEREFORE, THE CONTENTION OF THE ASSESSEE THAT HE IS AN INVESTOR CANNOT BE ACCEP TED. THE AO ACCORDINGLY TREATED THE CAPITAL GAINS OFFERED AS STCG/LTCG AS BUSINESS INCOME OF THE ASSESSEE. 4. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A ) AND REITERATED HIS CLAIM. HOWEVER, THE LD. CIT(A) DID NOT CONCUR WITH THESE SUBMISSIONS OF THE ASSESSEE AND DRAWING SUPPORT FROM VARIOUS JUDICIAL DECISIONS THE LD. CIT(A) CONFIRMED THE ASSESSMENT. AGGRIEVED BY THIS, THE A SSESSEE BEFORE US. 5. THE LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENT ION TO THE ASSESSMENT ORDERS MADE UNDER SECTION 143(3) OF THE ACT FOR ASS ESSMENT YEARS 2004-05, 2006-07 & 2007-08. THE LD. COUNSEL POINTED OUT THAT IN ALL THESE YEARS THE OFFICER HAS ACCEPTED THE SHARE TRANSACTIONS UNDER T HE HEAD CAPITAL GAINS. THEREFORE, ON IDENTICAL SET OF FACTS THE AO SHOULD NOT TAKE ANY DIFFERENT VIEW AS TAKEN IN EARLIER YEARS. THE LD. COUNSEL FURTHER POINTED OUT THAT THE LD. CIT(A) HAS ERRED IN STATING THAT THE ASSESSEE HAS U SED BORROWED FUNDS. DRAWING OUR ATTENTION TO THE BALANCE SHEET, THE LD. COUNSEL POINTED OUT THAT THE ASSESSEE WAS HAVING SUFFICIENT OWN FUNDS FOR MAKING INVESTMENTS IN THE SHARES. IT IS THE SAY OF THE LD. COUNSEL THAT CONSIDERING T HE PAST HISTORY OF THE ASSESSEE THE CLAIM OF STCG/LTCG SHOULD BE ACCEPTED. 6. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF THE A UTHORITIES BELOW. WE HAVE ALSO GONE THROUGH THE RELEVANT DOCUMENTARY EVI DENCES BROUGHT ON RECORD BEFORE US. THERE IS NO DISPUTE THAT IN THE ASSESSM ENT YEARS 2004-05, 2006-07 & 2007-08 THE STCG/LTCG HAVE BEEN ASSESSED AS SUCH WHILE MAKING THE ITA NO.3828/M/2012 SHRI GIRDHARILAL K. AGRAWAL 3 ORDER UNDER SECTION 143(3) OF THE ACT. WE ALSO FIN D THAT THE FACTS AND ISSUES BEFORE US ARE IDENTICAL TO THE FACTS CONSIDERED IN EARLIER ASSESSMENT YEARS. THEREFORE, IN OUR CONSIDERED OPINION ON IDENTICAL S ET OF FACTS WHEN THE LAW HAS NOT CHANGED THE REVENUE AUTHORITIES SHOULD NOT TAKE A DIFFERENT VIEW. THIS IS AGAINST THE RULE OF CONSISTENCY AS LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF RADHASOAMI SATSANG SAOMI BAGH V. COMMI SSIONER OF INCOME TAX [1992] 193 ITR 321 (SC). 7. CONSIDERING THE FACTS IN TOTALITY IN THE LIGHT O F THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT (SUPRA), WE DIRECT THE AO TO TREAT THE GAINS UNDER THE HEAD STCG/LTCG. GROUND NO.1 IS ACCORDINGLY ALLOW ED. 8. GROUND NO.2 RELATES TO THE DIRECTION OF THE LD. CIT(A) TO TREAT ALL GAINS FROM PMS AS INCOME FROM BUSINESS. THIS ISSUE FINDS PLACE AT PAGE 7 OF THE LD. CIT(A)S ORDER WHEREIN THE LD. CIT(A) HAS HEAVILY R ELIED UPON THE DECISION OF THE TRIBUNAL-DELHI BENCH IN THE CASE OF RADIALS IN TERNATIONAL IN ITA NO.1368/DEL/2010. THE LD. CIT(A) HAS ALSO INCORPOR ATED THE RELEVANT FINDINGS OF THE TRIBUNAL IN THE BODY OF THE ASSESSM ENT ORDER AND AT PAGE 9 THE LD. CIT(A) OBSERVED THAT IN VIEW OF THE ABOVE SAID DECISION IT IS CLEAR THAT THE PMS MANAGER ENTERS INTO TRANSACTIONS ON BEHALF OF I TS CLIENT, AND BUYS AND SELLS SHARES ON BEHALF OF THE CLIENT. THE LD. CIT(A) AT PAGE 10 FURTHER OBSERVED THAT RESPECTFULLY FOLLOWING THE CASE OF DELHI ITAT, THE AO IS ALSO DIRECTED TO TREAT ALL GAINS FROM PMS AS INCOME FROM BUSINESS. 9. AT THE VERY OUTSET, WE HAVE TO STATE THAT SINCE THE LD. CIT(A) HAS HEAVILY RELIED UPON THE DECISION OF THE TRIBUNAL IN THE CAS E OF RADIALS INTERNATIONAL (SUPRA) WE HAVE TO SEE FROM THE OUTCOME OF THE DECI SION OF THE TRIBUNAL. WE FIND THAT THE SAID DECISION OF THE TRIBUNAL HAS BEE N REVERSED BY THE HONBLE HIGH COURT OF DELHI IN ITA NO.485/2012 DATED 25.04. 14. THE CONCLUDING PART OF THE HONBLE HIGH COURT READS AS UNDER: ITA NO.3828/M/2012 SHRI GIRDHARILAL K. AGRAWAL 4 THIS COURT IS THUS OF THE OPINION THAT THE LD. ITA T ERRED IN HOLDING THE TRANSACTIONS TO BE INCOME FROM BUSINESS AND PROFESSION. THE ORD ER OF THE ITAT IS CONSEQUENTLY SET ASIDE AND THE APPEAL IS ANSWERED IN FAVOUR OF T HE ASSESSEE 10. AS MENTIONED ELSEWHERE SINCE THE FINDING OF THE LD. CIT(A) IS BASED ON THE DECISION OF THE TRIBUNAL AND SINCE THE DECISION OF THE TRIBUNAL HAS BEEN REVERSED BY THE HONBLE HIGH COURT, RESPECTFULLY FO LLOWING THE DECISION OF THE HONBLE HIGH COURT OF DELHI (SUPRA), WE DIRECT THE AO TO TREAT THE GAINS UNDER THE HEAD STCG/LTCG. GROUND NO.2 IS ACCORDINGLY A LLOWED. 11. GROUND NO.3 RELATES TO THE ADDITIONS MADE BY TH E AO BY TREATING EXEMPT PROFIT ON SALE OF AGRICULTURAL LAND AS TAXABLE INCO ME. 12. DURING THE COURSE OF THE SCRUTINY OF ASSESSMENT PROCEEDINGS AND AFTER PERUSING THE DETAILS FILED BY THE ASSESSEE, THE AO FOUND THAT THE ASSESSEE HAS SOLD 2 PLOTS OF LAND DURING THE YEAR. THESE PLOTS ARE SITUATED AT RAMSHEJ VILLAGE, DINDORI TALUKA, DISTRICT NASHIK. THE AO F URTHER FOUND THAT THE ASSESSEE HAS CLAIMED PROFIT ON SALE OF THESE LANDS AS EXEMPT. HOWEVER, THE AO FOUND THAT THE ASSESSEE HAS NOT CLAIMED THE SAID EX EMPTION IN THE RETURN OF INCOME FILED BY HIM IN ITR-3. THE ASSESSEE WAS ASK ED TO JUSTIFY HIS CLAIM AND TO FURTHER EXPLAIN WHY THE CAPITAL GAIN ON SALE OF LAND SHOULD NOT BE TAXED. THE AO ALSO DEPUTED INCOME TAX INSPECTOR TO VERIFY LAND RECORDS. THE AO ALSO CALLED FOR THE REPORT FROM THE TAHASILDAR. THE AO FOUND THAT THE TAHASILDARS REPORT STATES THAT THE LAND IS 5 KMS FROM THE MUNIC IPAL CORPORATION. THE ASSESSEE WAS MADE AVAILABLE THIS REPORT OF THE TAHA SILDAR AND WAS ASKED TO EXPLAIN AS TO WHY THE GAINS SHOULD NOT BE TAXED. O N RECEIVING NO PLAUSIBLE REPLY, THE AO TREATED THE GAINS AS THE STCG. AGGRI EVED BY THIS, THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) BUT WITHOU T ANY SUCCESS. 13. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE DRE W OUR ATTENTION TO THE PROVISIONS OF SECTION 2(14)(III)(A). IT IS THE SAY OF THE LD. COUNSEL THAT THE REVENUE AUTHORITIES HAVE MISINTERPRETED THE PROVISI ONS OF SECTION 2(14)(III)(A). THE LD. COUNSEL VEHEMENTLY STATED THAT THE LAND IS AN AGRICULTURAL LAND AND IS ITA NO.3828/M/2012 SHRI GIRDHARILAL K. AGRAWAL 5 WITHIN THE EXEMPTION CLAUSE OF THE DEFINITION OF CA PITAL ASSET. PER CONTRA, THE LD. D.R. HAS STRONGLY SUPPORTED THE FINDINGS OF THE LOWER AUTHORITIES. 14. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF THE AUTHORITIES BELOW. WE HAVE ALSO GONE THROUGH THE PROVISIONS OF SECTION 2( 14)(III)(A) OF THE ACT AS IT STOOD DURING THE ASSESSMENT YEAR UNDER CONSIDERATIO N AND WHICH READS AS UNDER: 14(III) AGRICULTURAL LAND IN INDIA, NOT BEING LAN D SITUATE (A) IN ANY AREA WHICH IS COMPRISED WITHIN THE JURI SDICTION OF A MUNICIPALITY (WHETHER KNOWN AS A MUNICIPALITY, MUNICIPAL CORPORA TION, NOTIFIED AREA COMMITTEE, TOWN AREA COMMITTEE, TOWN COMMITTEE, OR BY ANY OTHER NAME) OR A CANTONMENT BOARD AND WHICH HAS A POPULAT ION OF NOT LESS THAN TEN THOUSAND 11 [***] 15. WE HAVE ALSO GONE THROUGH THE CONTENTS OF THE L ETTER/REPORT OF THE TAHASILDAR, DINDORI DATED 20.12.10 WHEREIN HE HAS S TATED THAT POPULATION OF VILLAGE RAMSHEJ WHERE THE IMPUGNED LAND IS SITUATED IS 2929 AS PER THE CENSUS. THE REPORT ALSO SAYS THAT THE SAID LAND WAS SOLD AS AGRICULTURAL LAND AND TILL DATE IT HAS NOT BEEN CONVERTED FOR NON AGRICULTURAL DUES . IN OUR CONSIDERED OPINION, FOR CLAIMING THE EXEMPTION AS AGRICULTURAL LAND EIT HER OF THE TWO CONDITIONS HAS TO BE FULFILLED. A) IT SHOULD NOT BE IN ANY AREA WITHIN SUCH DISTANC E NOT BEING MORE THAN 8 KMS FROM THE LOCAL LIMITS AND ANY MUNICIPALI TY OR CANTONMENT BOARD AND; B) WHICH HAS A POPULATION OF NOT LESS THAN 10,000. 16. SINCE THE POPULATION OF VILLAGE RAMSHEJ WHERE T HE IMPUGNED LAND IS SITUATED IS ONLY 2929 AS PER THE REPORT OF THE TAHA SILDAR, IN OUR UNDERSTANDING OF LAW THE SAID LAND HAS TO BE TREATED AS AGRICULTU RAL LAND OUTSIDE THE PURVIEW OF THE DEFINITION OF CAPITAL ASSET. WE ACCORDINGLY SE T ASIDE THE FINDING OF THE LD. CIT(A) AND DIRECT THE AO TO DELETE THE ADDITION OF RS.1,15,28,650/-. GROUND NO.3 IS ACCORDINGLY ALLOWED. ITA NO.3828/M/2012 SHRI GIRDHARILAL K. AGRAWAL 6 17. GROUND NO.4 IS NOT PRESSED BEFORE US AND THE SA ME IS DISMISSED AS NOT PRESSED. 18. ACCORDINGLY APPEAL FILED BY THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21.12.2015. SD/- SD/- (SANDEEP GOSAIN) (N.K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 22.12.2015. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.