ACIT 13(2), MUMBAI V. CHANDULAL MONJI HURBADA, MUMBAI

ITA 3895/MUM/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92647 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 09-02-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 04-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PREMANAND
• Assessee Lawyers: MATHURIA
• Keywords: Business income; Rule of consistency
• Section: 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI . . , . , BEFORE SHRI I.P. BANSAL, JM AND RAJENDRA, AM ./ I.T.A. NO.3895/MUM/2012 ( / ASSESSMENT YEAR : 2008-09 ASSISTANT COMMISSIONER OF INCOME TAX 13(2), ROOM NO.421, 4 TH FLR. ,AAYKAR BHAVAN, MK ROAD, MUMBAI 20 / VS. CHANDULAL MONJI HURBADA, 332, 3 RD FLOOR, VYAPAR BHAVAN, CARNAC BUNDER, 49, P.DMELLO ROAD, MUMBAI 400 009. ./ ./ PAN/GIR NO. : AAAPH 1528C ( / APPELLANT ) .. ( / RESPONDENT ) A PPELLANT BY SHRI PREMANAND RESPONDENT BY SHRI MATHURIA ' #$ / DATE OF HEARING : 13/05/2015 ' #$ / DATE OF PRONOUNCEMENT : 13/05/2015 / O R D E R PER I.P.BANSAL, J.M: THIS IS AN APPEAL FILED BY THE REVENUE AND IT IS DIRECTED AGAINST ORDER PASSED BY LD. CIT(A)-24, MUMBAI DATED 15/3/2012 FOR ASSESSMENT YEAR2008-09. GROUNDS OF APPEAL READ ASUNDER: 1. (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN TREATING THE PROFIT OF RS.1,34,32,517/- ON SALE OF SHARES UNDER THE HEAD SHORT TERM CAPITAL G AINS INSTEAD OF BUSINESS INCOME. (II) WHILE DOING SO, THE LD. CIT(A) HAS FAILED TO APPRECIATE THE FACTORS LIKE VOLUME, FREQUENCY AND CONTINUITY OF HOLDING, A S ALSO THE FACT THE ASSESSEE WAS ALSO TRANSACTING IN F & O SEGMENT. 2. THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUND(S) BE SET ASIDE AND THAT OF THE ASSESSMENT OFFICER BE RESTORE. 2. THE ASSESSEE IS AN INDIVIDUAL. IT EARNED INCOME FROM EXPORT OF ONIONS, CHARTERS OF SHIPPING AND FROM MUTUAL FUNDS AND SHARE INVESTMENTS. ./ I.T.A. NO.3895/MUM/2012 ( / ASSESSMENT YEAR : 2008-09 2 FROM THE DETAILS SUBMITTED BY THE ASSESSEE, THE AO NOTED THAT TOTAL INCOME WAS SHOWN AT RS.3,66,25,680/-, WHICH INCLUDE LONG T ERM CAPITAL GAIN OF RS.4,63,916/- AND SHORT TERM CAPITAL GAIN OF RS.1,3 8,24,364/- AND OTHER INCOME WAS AT RS.2,23,37,400/-. THE ASSESSEE ALSO E ARNED DIVIDEND INCOME OF RS.2,52,807/- AND MUTUAL FUNDS DIVIDEND OF RS.10 ,85,492/-. THE AO ALSO NOTED THE PATTERN OF THE ASSESSEE REGARDING I NVESTMENT AND SALE AND PURCHASE OF SHARES. THE TRANSACTIONS HAVE BEEN DE SCRIBED IN PARA-9 OF THE ASSESSMENT ORDER. FROM THE TRANSACTIONS, THE AO N OTED THAT ASSESSEE HAS CARRIED OUT THE ACTIVITY OF SALE AND PURCHASE OF SH ARES IN SYSTEMATIC MANNER WHICH IS A CONTINUOUS ACTIVITY. THE AO ALSO NOTED THAT FOR ASSESSMENT YEAR 2007-08, THE SHORT TERM CAPITAL GAIN WAS SHOWN AT R S.6,53,796/- AND LONG TERM CAPITAL GAIN AT RS.74,06,719/-. THUS, THE AO OBSERVED THAT THE DEALING DONE BY THE ASSESSEE IN SHARES AND MUTUAL FUNDS WAS IN THE NATURE OF TRADING CONDUCTED WITH THE IDEA OF PROFIT MAKING AN D THUS, IT IS IN THE NATURE OF BUSINESS ACTIVITY. THEREFORE, AO HAS ASS ESSED THE SAME AS BUSINESS INCOME. THE TREATMENT BY THE AO WAS AGITA TED BEFORE LD. CIT(A). IN SHORT, SUBMISSIONS OF THE ASSESSEE BEFORE LD. CI T(A) HAVE BEEN SUMMARIZED BY LD. CIT(A) IN PARA 2.2.1 AND READ AS UNDER: I) HE HAD NOT TAKEN ANY LOAN FOR THE PURPOSE OF AC QUIRING SHARES II) LONG TERM CAPITAL GAINS CANNOT BE TREATED AS BU SINESS MERELY ON THE BASIS OF VOLUME OF TRANSACTIONS, NOR ON FREQUENCY OR CONT INUITY III)I THE ASSESSEE'S MAIN BUSINESS WAS EXPORT OF ON ION, POTATO, FRUITS AND JUTE BAGS. THE TOTAL INCOME RETURNED WAS RS. 45,25,862/- AND, THEREFORE, WAS NOT DEPENDENT 'ON THE INCOME ARISING FROM SHARES. IV) THE DAY TO DAY TRANSACTIONS WAS NOT THE DECISIV E FACTOR TO DETERMINE WHETHER A PERSON WAS DOING BUSINESS IN SHARES. 2.1 IN ADDITION TO THE ABOVE SUBMISSIONS, THE AS SESSEE FILED ASSESSMENT ORDER FOR ASSESSMENT YEAR 2006-07, IN WHICH THE ASS ESSEE WAS HELD AS INVESTOR IN SHARES AND LONG TERM CAPITAL GAIN AND S HORT TERM CAPITAL GAIN OF RS.49,19,146/- AND RS.4,58,572/-WAS CONSIDERED AN D ASSESSED UNDER THE HEAD CAPITAL GAIN. ./ I.T.A. NO.3895/MUM/2012 ( / ASSESSMENT YEAR : 2008-09 3 2.2 UPON THESE SUBMISSIONS OF THE ASSESSEE LD. CIT( A) HAS ANALYSED THE POSITION AND HAS GIVEN HIS FINDING PARA 2.3.3, WHE REIN HE HAS FOUND THAT THE HOLDING PERIOD OF THE ASSESSEE BETWEEN 1 TO 30 DAYS WAS WITH RESPECT TO 50 ITEMS WHICH ARE 33% OF THE TOTAL TRANSACTIONS. THE NUMBER OF TRANSACTIONS FOR WHICH HOLDING PERIOD WAS BETWEEN 31 DAYS TO 365 DAYS WERE101 WHICH TRANSLATE INTO 67% OF THE TOTAL NUM BER OF TRANSACTIONS AND HE HAS GIVEN NAME OF THE SCRIPS AND PERIOD OF HOLDI NG AND HAS COME TO A CONCLUSION THAT THE PERIOD OF HOLDING IN MAJORITY OF SHARES IS FAIRLY SUBSTANTIAL. HE FURTHER ANALYZED THE TRANSACTION AN D FROM THE DETAILS AND HE HAS ARRIVED AT A FINDING THAT 52 TRANSACTIONS OF SALE DURING THE YEAR, ON WHICH CAPITAL GAIN HAS BEEN CLAIMED, WERE BOUGHT IN THE IMMEDIATE PRECEDING YEAR AND NOT DURING THE PRESENT YEAR AND WERE SHOWN AS INVESTMENT IN BALANCE SHEET AS ON 31/3/2007 AND AFT ER ANALYZING ALL THESE DETAILS, HE HAS COME TO A CONCLUSION THAT OUT OF TO TAL SHORT TERM CAPITAL GAIN OF RS.1,38,24,364/-ONLY A SUM OF RS.3,91,847/- CAN BE CONSIDERED TO BE SPECULATIVE INCOME AS THE SAME WAS IN RESPECT OF N IFTY CALL OPT AND DETAILS OF THESE TRANSACTIONS HAVE BEEN GIVEN IN PARA 3.2.1 2. THUS, HE HAS DELETED THE ACTION OF THE AO IN TREATING THE SHORT TERM CAP ITAL GAIN AS BUSINESS INCOME TO THE EXTENT OF A SUM OF RS.1,34,32,517/-. THE REVENUE IS AGGRIEVED AND HAS FILED AFOREMENTIONED GROUNDS OF A PPEAL. 3. AFTER NARRATING THE FACTS LD.DR RELIED UPON THE ORDER PASSED BY AO. 4. ON THE OTHER HAND, IT WAS SUBMITTED BY LD. AR TH AT LD. CIT(A) HAS CARRIED OUT DETAILED EXAMINATION OF THE TRANSACTION S ENTERED INTO BY THE ASSESSEE AND AFTER PROPER ANALYSIS HE HAS RIGHTLY HELD THAT THE SHORT TERM CAPITAL GAIN SHOWN BY THE ASSESSEE TO THE EXTENT O F RS.1,35,32,517/- WAS ASSESSABLE UNDER THE HEAD CAPITAL GAIN. 4.1 LD. AR FURTHER SUBMITTED THAT FOR ASSESSMENT YE AR 2006-07, & 2007- 08 UNDER SIMILAR FACTS AND CIRCUMSTANCES, ACTIVITY OF THE ASSESSEE OF SALE AND PURCHASE OF SHARES HAS BEEN ACCEPTED BY THE AO TO BE ASSESSABLE ./ I.T.A. NO.3895/MUM/2012 ( / ASSESSMENT YEAR : 2008-09 4 UNDER THE HEAD CAPITAL GAIN BY WAY OF ORDERS PASSED UNDER SECTION 143(3) OF THE ACT. HE HAS PRODUCED BEFORE US COPY OF ASSESSM ENT ORDER. ASSESSMENT ORDER FOR A.Y 2006-07 IS DATED 29/12/2008 AND FOR A SSESSMENT YEAR 2007- 08 IT IS DATED 9/12/2009. IN BOTH THESE ASSESSMENT ORDERS, THE AO HAS ACCEPTED THE CLAIM OF THE ASSESSEE THAT ACTIVITY OF SALE AND PURCHASE OF SHARES HAS GIVEN RISE TO INCOME ASSESSABLE UNDER TH E HEAD CAPITAL GAIN. COPIES OF THESE ORDERS WERE ALSO GIVEN TO LD. DR. THUS, IT WAS PLEADED BY LD. AR THAT NOT ONLY ON MERITS BUT ON THE BASIS OF PRINCIPLE OF CONSISTENCY THE REVENUES APPEAL SHOULD BE DISMISSED AND FOR T HIS PURPOSE LD. AR PLACED RELIANCE ON THE DECISION IN THE CASE OF CIT VS. GOPAL PUROHIT, 336 ITR287(BOM). 5. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTEN TIONS HAVE CAREFULLY BEEN CONSIDERED. WE HAVE CAREFULLY GONE THROUGH THE ASSESSMENT ORDER AS WELL AS ORDER PASSED BY LD. CIT(A). THOUGH AO HAS MENTIONED ABOUT THE SHORT TERM CAPITAL GAIN AND LONG TERM CAPITAL GAIN EARNED BY THE ASSESSEE IN ASSESSMENT YEAR 2007-08, BUT HE HAS NOT MENTIONED THAT IN THE SAID YEAR THIS ACTIVITY OF SALE AND PURCHASE OF SHARE WAS TR EATED BY THE AO TO HAVE GIVEN RISE TO INCOME UNDER THE HEAD CAPITAL GAIN. IT IS NOT A CASE WHERE AO WAS NOT AWARE OF THE FACT THAT IN EARLIER TWO ASSES SMENT YEARS THIS ACTIVITY OF THE ASSESSEE WAS TREATED BY THE DEPARTMENT TO BE ASSESSABLE UNDER THE HEAD CAPITAL GAIN. THIS YEAR AO HAS DEVIATED FROM THE EARLIER ASSESSMENT ORDERS WITHOUT GIVING REASONS FOR DEVIATING FROM TH E EARLIER STAND. THE ACTIVITY OF THE ASSESSEE REMAINS SAME AS IT WAS IN EARLIER ASSESSMENT YEARS. THEREFORE, APART FROM THE MERITS, WHICH HAVE BEEN DISCUSSED IN DETAILS BY LD. CIT(A), THE CLAIM OF THE ASSESSEE HAS TO BE ACC EPTED THAT HIS INCOME FROM SALE AND PURCHASE OF SHARES AND MUTUAL FUNDS HAS TO BE ASSESSED UNDER THE HEAD CAPITAL GAIN IN VIEW OF THE DECISION OF HONBL E BOMBAY HIGH COURT IN THE CASE OF CIT VS. GOPAL PUROHIT (SUPRA), WHEREIN IT HAS BEEN HELD THAT THERE OUGHT TO BE UNIFORMITY IN TREATMENT AND CONSI STENCY IN VARIOUS YEARS WHEN THE FACTS AND CIRCUMSTANCES ARE IDENTICAL. ./ I.T.A. NO.3895/MUM/2012 ( / ASSESSMENT YEAR : 2008-09 5 THEREFORE, WE HOLD THAT LD. CIT(A)DID NOT COMMIT AN Y ERROR IN GRANTING THE IMPUGNED RELIEF TO THE ASSESSEE. WE DECLINE TO INT ERFERE. 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13/05/2015 ' + ,- 13/05/2015 ' SD/- SD/- (RAJENDRA) . . (I.P.BANSAL) /ACCOUNTANT MEMBER /JUDICIAL MEMBER MUMBAI; , DATED 13/05/2015 !'# $#! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. 0# ( ) / THE CIT(A)- 4. 0# / CIT 5. 12 #34 , $ 34 , / DR, ITAT, MUMBAI 6. 5 / GUARD FILE. / BY ORDER, 1# # //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI . . .VM , SR. PS