ACIT 19(2), MUMBAI V. PARUL S. SHAH, MUMBAI

ITA 4103/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7263 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-03-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 23-03-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 03-07-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARAMJEET SINGH
• Keywords: Business income; Rule of consistency; Speculation loss; Set aside; Capital Gains
• Section: 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NO. 4103/M/2009 ASSESSMENT YEAR: 2006-07 ASSTT. COMMISSIONER OF INCOME-TAX, APPELLANT 19(2), ROOM NO. 315, 3 RD FLOOR, PIRAMAL CHAMBERS, LALBAUG, PAREL, MUMBAI 400 012 VS. SMT. PARUL S. SHAH, RESPONDENT 602, EXCLUSIVE, 30, TAGORE ROAD, SANTACRUZ (W), MUMBAI 400 054 (PAN ACUPS1691K) APPELLANT BY : MR. PARAMJEET SINGH ASSESSEE BY : MR. HITESH SHAH ORDER PER A.L. GEHLOT, A.M.: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER OF CIT(A)- XIX, MUMBAI, PASSED ON 15 TH APRIL, 2009 FOR THE ASSESSMENT YEAR 2006-07, WHEREIN THE REVENUE HAS RAISED THE FO LLOWING GROUNDS OF APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DIRECTING TO TREAT THE AMOUNT OF RS. 24,38,489/- AS SHORT TERM CAPITAL GAIN AS AGAIN ST THE BUSINESS INCOME TREATED BY THE AO WITHOUT APPRECIAT ING THE FACT THAT: (A) WHETHER OR NOT A PERSON CARRIES ON BUSINESS IN A PARTICULAR COMMODITY CAN BE INFERRED FROM THE VOLUME, FREQUENC Y, CONTINUITY AND REGULARITY OF THE TRANSACTIONS AND MOTIVE INVOL VED. RELIANCE IS PLACED ON THE LD. ITAT, AHMEDABAD BENCH IN THE C ASE OF DCIT VS. SMT. DEEPABEN A. SHAH [2006 100 TTJ(AHD) 1065]. (B) MAGNITUDE OF PURCHASE AND SALE AND THE RATIO B ETWEEN PURCHASE AND SALES AND HOLDING INDICATES THAT THE A SSESSEE IS DEALING IN SHARES AS BUSINESS THEN THE INCOME FROM SUCH ACTIVITY ITA NO. 4103/M/09 SMT. PARUL S. SHAH. 2 HAS TO BE TAXED AS BUSINESS INCOME. RELIANCE IS PLA CED ON DECISION OF THE SUPREME COURT IN THE CASE OF RAJA B AHADUR VISHESHWARA SINGH (DECEASED & ORS. VS. CIT, [41 ITR 68]. 2. THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE AO BE RESTORED . 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSE SSEE IS ENGAGED IN PROVIDING FINANCIAL ADVISORY SERVICES FOR CARRYING INVESTMENTS IN PRIMARY MARKET. THE ASSESSEE ALSO ENGAGED IN SHARE TRADING AS AN INVESTMENT ACTIVITY IN HER INDIVIDUAL CAPACITY. SHE EARNED A BOUQUET OF INCOME CONSISTING OF SHARE TRADING INCOME, DIVID END INCOME, INTEREST INCOME, CAPITAL GAINS [BOTH LONG TERM AS W ELL AS SHORT TERM] SPECULATION LOSS. SHE HAD OFFERED ON ITS OWN INCOME UNDER THE BUSINESS HEAD IN RESPECT OF CERTAIN SHARE TRADING A CTIVITY AMOUNTING TO RS. 63,30,315/-. HOWEVER, THE SHORT TERM CAPITAL GAIN ON SALE OF SHARES SHOWN AT RS. 24,38,489/- HAS BEEN TREATED AS BUSINESS INCOME BY THE AO. THE CIT(A) ALLOWED THE APPEAL OF THE ASS ESSEE BY OBSERVING AS UNDER:- 4. I HAVE PERUSED THE ASSESSMENT ORDER AS WELL AS W RITTEN SUBMISSIONS GIVEN BY THE APPELLANT AND FIND THAT TH E FACTS OF THIS CASE IS IDENTICAL TO EARLIER YEARS OF AY 2005-06. THE DIFFERENCE IS MAINLY ON FIGURES OF INCOME EARNED UNDER DIFFERENT HEADS. IN MY DETAILED ORDER FOR THAT YEAR, IN PARA 2.3 TO 2.5 [P AGES 2 TO 8], I EXAMINED THE ISSUE COMPREHENSIVELY AND COME TO THE CONCLUSION THAT THE SHORT TERM CAPITAL GAIN CANNOT BE TREATED AS BUSINESS INCOME. SINCE THE FACTS OF THE CASE REMAIN THE SAME ONLY ASSESSMENT YEAR IS DIFFERENT, I AM INCLINED TO FOLL OW THE STAND TAKEN FOR THE IMMEDIATELY PRECEDING YEAR. IN ADDITI ON TO THE CITATIONS REFERRED IN THE EARLIER YEAR APPELLATE OR DER, RELIANCE IS ALSO PLACED ON THE RECENT DECISIONS OF THE MUMBAI I TAT IN THE CASES OF MRS. AMITA A. KAPADIA [ ITA NO. 7054/MUM/0 7 FOR AY 2005-06 ] DATED 3 RD FEBRUARY, 2009 AND SHRI GOPAL PUROHIT (ITA NO. 4854/MUM/2008 FOR AY 2005-06) DATED 12.2.2009 W HICH FURTHER REINFORCES MY FINDINGS GIVEN IN THIS CASE F OR EARLIER YEAR AND FOLLOWED THIS YEAR. THIS GROUND OF THE APPELLAN T IS THEREFORE DECIDED IN HER FAVOUR. 3. THE LEARNED DR SUBMITTED THAT THE AO EXAMINED TH E FACTS OF THE CASE OF ASSESSEE AND FOUND THAT THE ASSESSEE HAS SH OWN BUSINESS INCOME AS SHORT TERM CAPITAL GAIN FROM BUSINESS OF SHARES. THE LEARNED DR FURTHER SUBMITTED THAT THE CBDT HAS ISSU ED A CIRCULAR ITA NO. 4103/M/09 SMT. PARUL S. SHAH. 3 WHERE IN A DETAILED GUIDELINES ARE PROVIDED WHETHER IN SUCH CIRCUMSTANCES THE SALE OF SHARES HAS TO BE ASSESSED AS BUSINESS INCOME OR INCOME FROM CAPITAL GAIN. THE LEARNED DR SUBMITTED THAT THE AO MADE OUT A CASE ON THE BASIS OF CBDT CIRCULA R. THE LEARNED DR SUBMITTED THAT SUCH ISSUE DEPENDS UPON THE FACTS OF EACH CASE. 4. THE LEARNED AR, ON THE OTHER HAND, RELIED UPON T HE ORDER OF CIT(A) AND SUBMITTED THAT ON IDENTICAL SET OF FACTS THE ITAT HAS DECIDED THE ISSUE IN FAVOUR OF ASSESSEE IN ASSESSEE S OWN CASE FOR AY 2005-06 VIDE ITA NO. 7340/M/2008 ORDER DATED 18.1.2 010. THE LEARNED AR HAS MADE SUBMISSION ON MERIT. 5. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES, RECORD PERUSED AND GONE THROUGH THE DECISIONS OF ITAT. THE JUDGMENTS CITED IN GROUNDS OF APPEAL ARE DISTINGUISHABLE ON FACTS. WE NOTICED THAT FACTS OF THE CASE UNDER CONSIDERATION & FACTS OF TH E CASE OF AY 2005- 06, WHICH HAS BEEN DECIDED BY THE ITAT ARE IDENTICA L. THE AO AND CIT(A) BOTH RELIED UPON THE FACTS NOTED IN AY 2005- 06. WE NOTICED THAT THE ITAT IN ASSESSEES OWN CASE FOR AY 2005-06 VIDE ORDER DATED 18/1/2010 HAS DECIDED THE ISSUE AS UNDER:- 7. WE HAVE PERUSED THE ORDERS OF THE AO AND CIT(A) AND FIND THAT THE CIT(A) HAS ANALYSED ALL THE FACTS OF THE C ASE AND THEN ONLY CAME TO THE CONCLUSION THAT THE SHORT-TERM CAP ITAL GAIN SHOWN BY THE ASSESSEE WAS CORRECT. WE FURTHER FIND THAT ON SIMILAR FACTS IN THE CASE OF GOPAL PUROHIT(SUPRA), THE TRIBUNAL HAS ALLOWED THE CLAIM OF THE ASSESSEE BY OBSERVING THAT THE ASSESSEE BY OBSERVING THAT THE ASSESSEES CLAIM OF SHORT-TER M AND LONG- TERM CAPITAL GAINS FROM TRANSACTIONS IN SHARES HAVI NG BEEN ALLOWED ON IDENTICAL FACTS IN EARLIER ASSESSMENT YE ARS COULD NOT BE DISALLOWED MERELY BECAUSE IN THE YEAR UNDER CONS IDERATION THE FINANCE ACT, 2004 HAD CONFERRED CERTAIN BENEFITS ON THE ASSESSEE OF SUCH TRANSACTIONS. MODUS OPERANDI OF THE ASSESSE E REMAINING SAME, THE ASSESSEES CLAIM DESERVED TO BE ACCEPTED BY FOLLOWING THE RULE OF CONSISTENCY. THE FACTS IN THE PRESENT C ASE ARE SIMILAR AS IN THE EARLIER YEARS, THE SYSTEM OF ACCOUNTING O F THE ASSESSEE DEALING IN SHARE TRADING AND INVESTMENT IN SHARES H AVING BEEN ACCEPTED. THEREFORE, IN VIEW OF THESE FACTS AND CIR CUMSTANCES AND IN VIEW OF THE DECISION OF THE LD. CIT(A) WHICH REM AINED UNCONTROVERTED, WE CONFIRM HIS ORDER. ITA NO. 4103/M/09 SMT. PARUL S. SHAH. 4 6. SINCE FACTS OF THE CASE UNDER CONSIDERATION ARE IDENTICAL TO THAT OF AY 2005-06 SUPRA, TO MAINTAIN CONSISTENCY, WE RE SPECTFULLY FOLLOW THE ABOVE ORDER OF ITAT AND IN THE LIGHT OF THAT TH E ORDER OF CIT(A) IS CONFIRMED. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. PRONOUNCED ON THIS 24 TH DAY OF MARCH, 2010 SD/- SD/- (D. MANMOHAN) (A.L. GEHLOT) VICE PRESIDENT ACCOUNTAN T MEMBER DATED: 24 TH MARCH, 2010 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE, C BENCH, I.T .A.T., MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR, I.T.A.T., MUMBAI. KV S.NO. DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON 23.03.10 SR.P.S./P.S 2. DRAFT PLACED BEFORE AUTHOR 23.03.10 SR.P.S/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S./P.S 6. KEPT FOR PRONOUNCEMENT ON SR. P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER