ACIT 25(3), MUMBAI V. USHA B MADAN, MUMBAI

ITA 4258/MUM/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62579 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-06-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 22-05-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 25-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: H N MOTIWALLA
• Keywords: Capital asset; Gift; Business income; Rule of consistency; Additional evidence; Cost of acquisition; Corroborative evidences
• Section: 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI F BENCH MUMBAI BENCHES, MUMBAI BEFORE SHRI VIJAY PAL RAO, JM & SHRI N K BILLAIYA, AM ITA NO. 4258/MUM/2011 (ASSESSMENT YEAR 2008--09) THE ASST COMMR OF INCOME TAX 25(3), MUMBAI VS SMT USHA B MADAN 502/A OBEROI GARDEN COOP HSG 5 TH FLOOR, THAKUR VILLAGE W E HIGHWAY MANDIVALI (E) MUMBAI 400 101 (APPELLANT ) (RESPONDENT) PAN NO. AFDPM3946H ASSESSEE BY SH H N MOTIWALLA REVENUE BY SH M MURALI DT.OF HEARING 22 ND MAY 2012 DT OF PRONOUNCEMENT 13 TH , JUNE 2012 ORDER PER VIJAY PAL RAO, JM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 26.4.2011 OF THE CIT(A) FOR THE AY 2008-09. 2 THE REVENUE HAS RAISED THE FOLLOWING EFFECTIVE GR OUNDS IN THIS APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO AC CEPT THE ASSESSEES CLAIM OF INDEXATION WITH REFERENCE TO YEAR IN WHICH THE PROPE RTY WAS ACQUIRED BY THE PREVIOUS OWNER WITHOUT APPRECIATING THE UNAMBIGUOU S PROVISIONS OF SECTION 48 OF THE INCOME TAX ACT 1961. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE ID. CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW EXEMPTION UNDER SECTION 54 OF THE INCOME TAX ACT. 1961 ON PURCHASE O F PARKING SPACE WITHOUT APPRECIATION THE UNAMBIGUOUS PROVISIONS OF SECTION 54 OF THE INCOME TAX ACT-I 961 . SMT USHA B MADAN ITA NO. 4258/MUM/2011 2 3. ON THE FACT AND IN THE CIRCUMSTANCES OF THE CAS E, AND IN LAW, THE ID. CIT(A) ERRED IN ACCEPTING ADDITIONAL EVIDENCE WITH R EGARD TO COST OF IMPROVEMENT AND ALLOWING THE SAME UNDER SECTION 54 OF THE INCOME TAX ACT 1961 . 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE A.O. TO ACCEPT THE CLA IM OF SHORT TERM CAPITAL GAIN OF ` . 85,42,914!- ON PROFIT ARRIVING FROM PURCHASE & SALE OF SHARES INSTEAD OF BUSINESS INCOME TREATED BY THE A.O. WITHOUT APPRE CIATING THE FACT THAT THE ASSESSEE IS DEALING IN LARGE VOLUME OF SHARES, MOST O F THE SHARES ARE BOUGHT AND SOLD WITHIN SHORT PERIOD, WHILE SOME ARE NOT SOLD DUE TO MARKET CONDITIONS AND THEIR HOLDING WITH ASSESSEE REMAINS BEYOND FEW D AYS, IT WILL NOT CHANGE THE NATURE OF TRANSACTIONS AND THE ASSESSEE IS VERY WELL ENGAGED IN THE BUSINESS OF SHARE TRADING, WHICH DENOTE THAT THE MOTI VE OF THE ASSESSEE IS TO CARRY ON BUSINESS IN SHARES TO BOOK PROFIT RATHER THAN INVESTMENT IN SHARES. 3 GROUND NO.1 IS REGARDING INDEXATION OF PROPERTY. 3.1 THE ASSESSING OFFICER NOTICED THAT THE ASSESS EE SOLD HER SHARES OF THE PROPERTY IN QUESTION WHICH WAS RECEIVED BY HER AND HER SON AS PER THE FAMILY ARRANGEMENT DT 15.6.2006. THE ASSESSEE CLAIMED IND EXATION COST OF ACQUISITION WITH REFERENCE TO 1.4.1981 ON THE GROUND THAT THE PREVIO US OWNER PURCHASED THE PROPERTY BEFORE 1.4.81. THE ASSESSING OFFICER DID NOT ALLOW THE CLAIM OF INDEXATION WITH REFERENCE TO 1.4.81 AS HE WAS OF THE OPINION THAT T HE BENEFIT OF INDEXATION WAS TO BE ALLOWED ONLY WITH REFERENCE TO THE DATE ON WHICH TH E ASSESSEE BECAME THE OWNER AS PER EXPLANATION III OF SEC 48 OF THE I T ACT. 3.2 ON APPEAL, THE CIT(A) HAS ALLOWED THE CLAIM OF THE ASSESSEE BY FOLLOWING THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN TH E CASE OF DCIT VS MANJULA J SHAH REPORTED IN 318 ITR (AT)417. 4 BEFORE US, THE LD DR HAS SUBMITTED THAT THE CIT(A ) HAS DECIDED THE ISSUE WITHOUT CONSIDERING THE PROVISIONS OF SEC. 48 OF TH E I T ACT. AS PER THE SAID PROVISIONS, THE INDEXATION COST OF ACQUISITION OF THE PROPERTY IS REQUIRED TO BE DONE WITH SMT USHA B MADAN ITA NO. 4258/MUM/2011 3 REFERENCE TO THE YEAR IN WHICH THE ASSESSEE HAS ACQ UIRED THE PROPERTY. HE HAS RELIED UPON THE ORDER OF THE ASSESSING OFFICER. 4.1 ON THE OTHER HAND, THE LD AR OF THE ASSESSEE HA S SUBMITTED THAT THE ASSESSEE HAS ACQUIRED THE PROPERTY BY WAY OF FAMILY ARRANGEM ENT AND THEREFORE, IN VIEW OF THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL I N THE CASE OF MANJULA J SHAH (SUPRA), THE INDEXATION COST OF ACQUISITION HAS TO BE ALLOWED WITH REFERENCE TO 1.4.81 AS THE PROPERTY WAS ORIGINALLY ACQUIRED BEFORE 1.4. 81. 5 WE HAVE CONSIDERED THE RIVAL CONTENTION AS WELL A S THE RELEVANT MATERIAL ON RECORD. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE ACQUIRED THE PROPERTY IN QUESTION BY WAY OF FAMILY ARRANGEMENT DT 15.6.2006. THUS, TH E MODE OF ACQUISITION FALLS UNDER SECTION 49(1)(I) OF THE I T ACT. WE QUOTE SEC. 49(1 ) (A) SECTION 49 (1) WHERE THE CAPITAL ASSET BECAME THE PROPERTY OF THE ASSESSEE: (I) ON ANY DISTRIBUTION OF ASSETS ON THE TOTAL OR PAR TIAL PARTITION OF A HINDU UNDIVIDED FAMILY; I) UNDER A GIFT OR WILL; (III) (A) BY SUCCESSION, INHERITANCE OR DEVOLUTION, OR (B) ON ANY DISTRIBUTION OF ASSETS ON THE DISSOLUTION OF A FIRM, BODY OF INDIVIDUALS, OR OTHER ASSOCIATION OF PERSONS, WHERE SUCH DISSOLUTION HAD TAKEN PLACE AT ANY TIME BEFORE THE 1ST DAY OF APRIL, 1987 OR (C} ON ANY DISTRIBUTION OF ASSETS ON THE LIQUIDATION OF A COMPANY, OR (D) UNDER A TRANSFER TO A REVOCABLE OR AN IRREVOCABLE TRUST, OR (E) UNDER ANY SUCH TRANSFER AS IS REFERRED TO IN CLAUS E (IV) 26[OR CLAUSE (V)] 27[OR CLAUSE (VI)] 28[OR CLAUSE (VIA)] 29[OR CLA USE (VIAA)] 30[OR CLAUSE (VICA) OR 30A[CLAUSE (VICB)] OF SECTION 47]; (IV) SUCH ASSESSEE BEING A HINDU UNDIVIDED FAMILY, BY THE MODE REFERRED IN SUB-SECTION (2) OF SECTION 64 AT ANY TIME AFTER THE 31ST DAY OF DECEMBER, 1969,] THE COST OF ACQUISITION OF THE ASSET SHALL BE DEEM ED TO BE THE COST FOR WHICH THE PREVIOUS OWNER OF THE PROPERTY ACQUIRED IT, AS INC REASED BY THE COST OF ANY IMPROVEMENT OF THE ASSETS INCURRED OR BORNE BY TH E PREVIOUS OWNER OR THE ASSESSEE, AS THE CASE MAY BE. EXPLANATION: - IN THIS SUB-SECTION THE EXPRESSION PREVIOUS OWNER OF THE PROPERTY IN RELATION TO ANY CAPITAL ASSET OWNED BY AN ASSESSEE MEANS THE SMT USHA B MADAN ITA NO. 4258/MUM/2011 4 LAST PREVIOUS OWNER OF THE CAPITAL ASSET WHO ACQUIRE D IT BY A MODE OF ACQUISITION OTHER THAN THAT REFERRED TO IN CLAUSE (I) OR CLAUSE (II) OR CLAUSE (III) OR CLAUSE (IV) OF THIS SUB SECTION. 5.1 THE COST OF ACQUISITION OF THE ASSET WHICH IS A CQUIRED BY MEANS OF INTER-ALIA ANY DISTRIBUTION OF ANY ASSET ON THE TOTAL OR PARTI AL PARTITION OF A HUF, SHALL BE DEEMED TO BE THE COST WHICH THE PREVIOUS OWNER OF T HE PROPERTY ACQUIRED IT, AS INCREASED BY THE COST OF ANY IMPROVEMENT OF THE ASS ET INCURRED OR BORNE BY THE PREVIOUS OWNER OR THE ASSESSEE, AS THE CASE MAY BE. THUS, WHEN THE COST OF PROPERTY IS DEEMED TO BE THE COST FOR WHICH THE PREVIOUS OWN ER HAS ACQUIRED, THEN THE INDEXATION COST OF ACQUISITION OF THE PROPERTY AS P ER EXPLANATION TO SEC. 48 OF THE I T ACT IS REQUIRED TO BE COMPUTED WITH REFERENCE TO TH E DATE OF ACQUISITION WHEN THE PREVIOUS OWNER HAS ACQUIRED THE PROPERTY OR ON 1.4. 81 WHICHEVER IS LATER. IT IS NOT DISPUTED THAT THE PROPERTY WAS ACQUIRED BY THE PREV IOUS OWNER BEFORE 1.4.81. THEREFORE, INDEXATION COST OF ACQUISITION IS REQUIR ED TO BE DONE WITH REFERENCE TO 1.4.81. THE SPECIAL BENCH OF THE TRIBUNAL IN THE C ASE OF MANJULA J SHAH (SUPRA) HAS CONSIDERED AND DECIDED AN IDENTICAL ISSUE. THE CON CLUSION PART OF THE DECISION IN PARA 21 IS AS UNDER: FOR THE REASONS GIVEN ABOVE, WE ARE OF THE VIEW THAT FOR THE PURPOSE OF COMPUTING LONG TERM CAPITAL GAINS ARISING FROM THE T RANSFER OF A CAPITAL ASSET WHICH HAD BECOME PROPERTY OF THE ASSESSEE UNDER GIFT, THE FIRST YEAR IN WHICH THE CAPITAL ASSET WAS HELD BY THE ASSESSEE HAS TO B E DETERMINED TO WORKOUT THE INDEXED COST OF ACQUISITION AS ENVISAGED IN EX PLANATION(III) TO SECTION 48 AFTER TAKING INTO ACCOUNT THE PERIOD FOR WHICH THE SA ID CAPITAL ASSET WAS HELD BY THE PREVIOUS OWNER. IN THAT VIEW OF THE MATTER, W E HOLD THAT THE INDEXED COST OF ACQUISITION OF SUCH CAPITAL ASSET HAS TO BE COMPUTED WITH REFERENCE , TO THE YEAR IN WHICH THE PREVIOUS OWNER FIRST HELD T HE ASSET. ACCORDINGLY, WE ANSWER THE QUESTION REFERRED TO JUS N FAVOUR OF THE ASS ESSEE AND UPHELD THE IMPUGNED ORDER OF THE LD COMMISSIONER OF INCOME TAX( APPEALS) ON THIS ISSUE. 5.2 FOLLOWING THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL SUPRA), WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST TH E REVENUE. THE ORDER OF THE CIT(A) , QUA THIS ISSUE IS UPHELD. SMT USHA B MADAN ITA NO. 4258/MUM/2011 5 6 GROUND NO.2 IS REGARDING EXEMPTION U/S 54 ON PURC HASE OF PARKING SPACE. 7 WE HAVE HEARD THE LD DR AS WELL AS THE LD AR OF T HE ASSESSEE AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE ASSESSEE HAS CLAIMED EXEMPTION U/S 54 IN RESPECT OF INVESTMENT IN NEW FLAT ALONG WITH CAR PA RKING IN OBEROI GARDEN COOP SOCIETY KANDIVALI. THE ASSESSING OFFICER HELD THAT THE CAR PARKING WAS NOT ENTITLED FOR EXEMPTION U/S 54 OF THE I T ACT. 7.1 ON APPEAL, THE CIT(A) HAS ALLOWED THE CLAIM OF THE ASSESSEE BY HOLDING THAT CAR PARKING WILL FORM AN INTEGRAL PART OF THE FLA T IN QUESTION. THEREFORE, COST OF PURCHASE OF FLAT ALSO INCLUDES THE COST OF CAR PARK ING AND THEREFORE, ALLOWED EXEMPTION U/S 54 IN RESPECT OF THE AMOUNT WHICH WA S PAID FOR CAR PARKING. THE FINDINGS OF THE CIT(A) IN PARA 4.3 OF THE IMPUGNED ORDER IS REPRODUCED AS UNDER: 4.3 I HAVE CONSIDERED THE SUBMISSIONS OF THE REPRES ENTATIVE AND THE STAND TAKEN BY THE ASSESSING OFFICER I ACCEPT THE PLEA OF THE REPRESENTATIVE THAT THE PAYMENT TOWARDS CAR PARKING WILL FORM AN INTEGRAL PART OF THE COST OF PURCHASE OF THE FLAT. THE APPELLANT CANNOT PARK THE C AR INSIDE THE FLAT AND NATURALLY HAS TO PURCHASE SEPARATELY THE CAR PARKING A REA. THE APPELLANT HAS ALSO FILED A SEPARATE AGREEMENT FOR CAR PARKING AREA FROM THE SAME BUILDER FROM WHOM THE FLAT WAS PURCHASED. IN THE CIRCUMSTAN CES, THERE IS NO JUSTIFICATION FOR NOT ALLOWING EXEMPTION U/S.54 IN RE SPECT OF RS.1,00,000/- PAID TOWARDS CAR PARKING AREA AND THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE SAME. 7.1 IT IS AN UNIVERSALLY ACCEPTED FACT THAT THE CAR PARKING IN A SOCIETY CANNOT BE SEPARATELY PURCHASE BUT IT IS ATTACHED WITH THE FLA T IN THE SOCIETY. THEREFORE, WHEN ANY FLAT IN THE SOCIETY IS PURCHASED ALONG WITH CAR PARKING, THEN THE INVESTMENT IN THE FLAT AND CAR PARKING WILL BE CONSIDERED AS INVE STMENT IN THE RESIDENTIAL HOUSE. IN VIEW OF THE SETTLED PROPOSITION, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE IMPUGNED ORDER OF THE CIT(A), QUA THIS ISSUE AND THE SAME IS UPHELD. 8 GROUND NO.3 IS REGARDING EXEMPTION U/S 54 ON COST OF IMPROVEMENT. SMT USHA B MADAN ITA NO. 4258/MUM/2011 6 8.1 THE ASSESSEE CLAIMED EXEMPTION U/S 54 ON THE CO ST OF PURCHASE OF NEW FLAT, CAR PARKING AND COST OF IMPROVEMENT IN THE NEW FLAT OF ` . 2,97,459/- THE ASSESSING OFFICER DISALLOWED THE EXEMPTION WITH REGARD TO TH E COST OF IMPROVEMENT OF ` . 2,94,429/-. 8.2 ON APPEAL, THE CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE BY OBSERVING THAT THE ASSESSING OFFICER DID NOT EVEN EXAMINE THE BOO KS OF ACCOUNT FOR VERIFICATION OF THE EXPENDITURE INCURRED BY THE ASSESSEE ON IMPROVE MENT. 9 BEFORE US, THE LD DR HAS SUBMITTED THAT THE CIT (A) HAS CONSIDERED ADDITIONAL EVIDENCE IN VIOLATION OF RULE 46A OF I T RULES. HE HAS FURTHER SUBMITTED THAT THE ASSESSEE HAS NOT PRODUCED ANY EVIDENCE BEFORE THE A SSESSING OFFICER IN SUPPORT OF THE CLAIM OF EXPENDITURE MADE. THEREFORE, BY CONSID ERING THE FRESH MATERIAL, THE CIT(A) HAS VIOLATED THE PROVISIONS OF RULE 46A. 9.1 ON THE OTHER HAND, THE LD AR OF THE ASSESSEE HA S SUBMITTED THAT THE CIT(A) HAS NOT CONSIDERED ANY FRESH MATERIAL BUT THE MATE RIAL ALREADY AVAILABLE ON RECORD BEING THE BOOKS OF ACCOUNT WAS CONSIDERED. THE LD A R FURTHER SUBMITTED THAT THE ASSESSING OFFICER HAS NOT EVEN ASKED THE ASSESSEE T O SHOW ANY EVIDENCE IN SUPPORT OF THE CLAIM AND WITHOUT EXAMINING THE RELEVANT REC ORDS, THE CLAIM OF THE ASSESSEE WAS DISALLOWED. 10 AFTER CONSIDERING THE RIVAL CONTENTION AND CAREF ULLY PERUSAL OF THE RELEVANT MATERIAL ON RECORD, WE NOTE THAT THE AO HAD DISCUSS ED AND DECIDED THIS ISSUE WITHOUT RAISING ANY QUERY AND GIVING OPPORTUNITY TO THE ASSESSEE TO JUSTIFY THE CLAIM. THE RELEVANT PART OF THE ASSESSMENT ORDER IN PARA 4 .4. 2 IS REPRODUCED HEREUNDER: 4.4.2 ASSESSEE HAS ALSO CLAIMED ` ` 2,97,459/- TOWARDS COST OF IMPROVEMENT AND ` ` 1,00,000/- TOWARDS PURCHASE OF CAR PARK. WITH REGARD TO COST OF SMT USHA B MADAN ITA NO. 4258/MUM/2011 7 IMPROVEMENT NO SUPPORTING EVIDENCE HAVE BEEN FILED AN D PURCHASE OF CAR PARK IS INELIGIBLE FOR EXEMPTION U/S 54. THEREFORE, BOTH THESE AMOUNTS OF ` ` 2,97,459/- AND ` 1,00,000/- ARE HEREBY DISALLOWED FOR EXEMPTION U/S 54. 10.1 FROM THE ORDER OF THE ASSESSING OFFICER, IT IS CLEAR THAT THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE IN SUMMARY WIT HOUT GIVING ANY OPPORTUNITY TO THE ASSESSEE TO EXPLAIN AND JUSTIFY THE CLAIM AND A LSO WITHOUT EXAMINING THE RELEVANT MATERIAL. THE CIT(A) HAS DECIDED THIS ISSUE IN PARA 4.4 AS UNDER: 4.4. REGARDING COST OF IMPROVEMENT, IT IS SEEN THAT THE A.O. DID RIOT EVEN EXAMINE THE BOOKS OF ACCOUNTS. THE APPELLANT HAS AN D THE EXPENDITURE WAS INCURRED BY MEANS OF ACCOUNT PAYEE CHEQUES FOR PURCHA SING ALUMINIUM MATERIAL AND OTHER FITTINGS FROM M/S B. .P TECHNO PR ODUCTS PVT LTD AND PURCHASE OF CENTRAL AIR-CONDITIONING PLANT FROM WHETH ERITE AIR CONDITIONING PVT LTD AND FURTHER TOWARDS CARPENTRY WORK. FURTHER, IT IS SEEN THAT THE APPELLANT HAS FILED BALANCE SHEET ALONGWITH THE RETU RN OF INCOME. AS PER THE ABOVE BALANCE SHEET THE VALUE OF KANDIVALI FLAT IS SHOWN AT RS.97,68,219/- WHICH MEANS THAT THE APPELLANT ACTUALLY INCURRED THE COST OF IMPROVEMENT BUT THE A.O. DID NOT CONDUCT ANY ENQUIRY WITH REFEREN CE TO THE BOOKS OF ACCOUNTS AND REJECTED THE CLAIM OF COST OF IMPROVEM ENT ON THE GROUND THAT NO DOCUMENTARY EVIDENCE WAS FILED EVEN WITHOUT INDI CATING WHEN HE REQUIRED THE APPELLANT TO FILE DOCUMENTARY EVIDENCE. I N THE ABOVE CIRCUMSTANCES, 1 FIND THAT THE APPELLANT IS ENTITLE D TO COST OF IMPROVEMENT EXCEPT THE AIR-CONDITIONING PLANT WHICH CANNOT HE T REATED AS INTEGRAL PART OF THE FLAT. ACCORDINGLY, I DIRECT THE A.O. TO ALLOW EX EMPTION U/S.54 IN RESPECT OF THE COST OF IMPROVEMENT OF RS. 1,97,459/-. FURTHER, THE ASSESSING OFFICER. SHALL ADOPT THE CORRECT FIGURE OF RS.93,40,760/- TOWARDS C OST OF THE FLAT AS AGAINST RS.90,70,760/- WRONGLY ADOPTED IN THE ASSESSMENT OR DER. 10.2 OUT OF ` 2,97,459/- THE CIT(A) HAS ALLOWED THE COST OF IMPRO VEMENT OF `.1,97,459/- BY EXCLUDING THE COST OF AIR-CONDITION ING PLANT. THUS, IT IS CLEAR FROM THE FINDINGS OF THE CIT(A) THAT THE ASSESSEE HAS DULY R ECORDED ALL THE EXPENDITURE IN THE BOOKS OF ACCOUNT AND THE PAYMENTS WERE MADE BY ACCO UNT PAYEE CHEQUE. THEREFORE, THERE WAS NO SCOPE OF ANY DOUBT OR GENUI NENESS ON THIS ACCOUNT. SMT USHA B MADAN ITA NO. 4258/MUM/2011 8 10.3 IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES O F THE CASE, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE IMPUGNED ORDER OF THE CI T(A) ON THIS ISSUE; ACCORDINGLY, THE SAME IS UPHELD. 11 GROUND NO.4 IS REGARDING SHORT TERM CAPITAL GAIN OFFERED BY THE ASSESSEE WAS TREATED AS BUSINESS INCOME BY THE ASSESSING OFFICER AND THE SAME WAS ALLOWED BY THE CIT(A) 11.1 THE ASSESSEE HAS OFFERED SHORT TERM CAPITAL GA INS AT ` 85,42,914/- ARISING FROM THE TRANSACTIONS IN SHARES AND SECURITIES. THE ASSE SSING OFFICER OBSERVED THAT IN MOST OF THE SCRIPTS THE PERIOD OF HOLDING WAS ONLY FEW D AYS; SAY WITHIN A PERIOD OF 2 TO 5 MONTHS. THE ASSESSING OFFICER HAS FURTHER OBSERVE D THAT THE ASSESSEE HAS BEEN ENGAGED IN BUYING AND SELLING OF SHARES ON REGULAR BASIS AND EARNED DIVIDEND INCOME OF ` . 3,40,385/- AGAINST SHORT TERM CAPITAL GAINS OF ` . 85,42,914/-. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE DIVIDEND INCOME IS ONLY INCIDENTAL AND THE MAIN INTENTION IS EARNING PROFIT ON PURCHASE OF SHA RES. 12 AFTER DISCUSSING VARIOUS DECISIONS, THE ASSESSIN G OFFICER HELD THAT THE ASSESSEE IS UNDOUBTEDLY DEALING IN LARGER VOLUME OF SHARES A ND THE HOLDING PERIOD IS ONLY FEW DAYS. THEREFORE, THE ASSESSEE IS VERY WELL ENGAGED IN THE BUSINESS OF SHARE TRADING WHICH INCLUDES SPECULATION. ACCORDINGLY, THE ASSESS ING OFFICER TREATED THE PROFITS ARISING FROM PURCHASE AND SALE OF SHARES AS BUSINES S INCOME. 12.1 ON APPEAL, THE COMMISSIONER OF INCOME TAX(APPE ALS) HAS ACCEPTED THE CLAIM OF THE ASSESSEE AS SHORT TERM CAPITAL GAIN. 13 BEFORE US THE LD DR HAS SUBMITTED THAT THE ASSES SING OFFICER HAS DISCUSSED THE ISSUE IN DETAIL AND RECORDED THE FACTS THAT THE ASS ESSEE HAS CARRIED OUT SALE AND SMT USHA B MADAN ITA NO. 4258/MUM/2011 9 PURCHASE TRANSACTION IN SHARES IN LARGE VOLUME. HE HAS POINTED OUT THAT THE ASSESSEE HAS PURCHASED 1072750 SHARES OF ` . 13,96,79,729/- AND SOLD AT 9,72,390 SHARES OF ` . 14,52,98,229/- DURING THE YEAR UNDER CONSIDERATIO N. THE VOLUME OF THE TRANSACTION AND THE PERIOD OF HOLDING CLEARLY SHOWS BY THE ASSESSEE WAS PRIMARILY ENGAGED IN THE ACTIVITY OF TRADING IN SHARES AND NO T INVESTMENT. THE INTENTION OF THE ASSESSEE WAS NOT TO RETAIN OR HOLD THE SHARES FOR A LONG TIME TO EARN THE DIVIDEND OR APPRECIATION IN THE VALUE; BUT TO EARN PROFIT AT TH E EARLIEST POSSIBLE TIME PERIOD. HE HAS RELIED UPON THE ORDER OF THE ASSESSING OFFICER. 13.1 ON THE OTHER HAND, THE LD AR HAS SUBMITTED THA T THE ASSESSEE HAS CARRIED OUT ONLY 109 TRANSACTIONS OF PURCHASE AND SALE. HE HAS REFERRED THE DETAILS RECORDED BY THE CIT(A) AND SUBMITTED THAT ONLY IN CASE OF FEW TRANSACTION, HOLDING PERIOD IS LESS THAN ONE MONTH AND EVEN ONLY FEW TRANSACTIONS, HOL DING PERIOD IS LESS THAN THREE MONTHS. IN CASE OF OTHER TRANSACTIONS, THE HOLDING PERIOD IS MORE THAN 3 MONTHS AND UPTO ONE YEAR. THEREFORE, THE MAJORITY PORTION OF T HE SHORT TERM CAPITAL GAIN WAS EARNED BY HOLDING THE SHARES FOR MORE THAN 5 TO 7 MONTHS. HE HAS FURTHER SUBMITTED THAT THE ASSESSEE HAS NOT BORROWED ANY FUNDS FOR IN VESTMENT IN SHARES BUT HER OWN FUND WAS USED. HE HAS FURTHER CONTENDED THAT IN THE EARLIER YEARS, THE REVENUE HAS ACCEPTED THE CAPITAL GAINS OFFERED BY THE ASSESSEE ON SALE AND PURCHASE OF SHARES. THEREFORE, AS PER RULE OF CONSISTENCY, THE REVENUE CANNOT DENY THE CLAIM OF THE ASSESSEE FOR THIS YEAR WHEN THE CLAIM OF THE ASSESS EE WAS ACCEPTED IN EARLIER YEARS. HE HAS RELIED UPON THE DECISION OF THE TRIBUNAL AS WELL AS HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX V. GOPAL PUROHIT REPORTED IN 336 ITR 287(BOM) SMT USHA B MADAN ITA NO. 4258/MUM/2011 10 14 WE HAVE CONSIDERED THE RIVAL CONTENTION AS WELL AS RELEVANT MATERIAL ON RECORD. IN ORDER TO DECIDE THE ISSUE OF NATURE OF T RANSACTIONS IN PURCHASE AND SALE OF SHARES WHETHER INVESTMENT OR TRADING, VARIOUS FACTO RS ARE TO BE TAKEN INTO CONSIDERATION. BROADLY SPEAKING THESE FACTORS ARE; THE INTENTION OF THE ASSESSEE AT THE TIME OF PURCHASE OF SHARES WHETHER THE ASSESSE E HAS BORROWED MONEY FOR PURCHASE OF SHARES AND PAID INTEREST THEREIN, WHAT IS THE FREQUENCY OF SUCH PURCHASE AND SALE IN THAT PARTICULAR ITEM OR WHETHER THE ASS ESSEE HAS CARRIED OUT REPETITIVE TRANSACTIONS IN SINGLE SCRIPTS, WHETHER THE PURCHAS E AND SALE IS FOR REALISING PROFITS OR PURCHASES ARE MADE FOR RETENTION AND APPRECIATION I N ITS VALUE, HOW THE ASSESSEE HAS VALUED THE ITEMS IN THE BOOKS OF ACCOUNT, THE VOLUME OF TRANSACTIONS ETC. THUS, NO SINGLE FACTOR IS DECISIVE IN DETERMINING THE NAT URE OF THE TRANSACTION WHETHER TRADING OR INVESTMENT. 14.1 IN THE CASE IN HAND THE ASSESSING OFFICER HAS TREATED THE TRANSACTION AS TRADING ON THE GROUNDS VIZ THE HOLDING PERIOD IS VE RY LESS TO SAY WITHIN 2 TO 5 MONTHS., THE ASSESSEE IS ENGAGED IN BUYING AND SELLING OF SH ARE ON REGULAR BASIS, THE DIVIDEND INCOME IS VERY LESS IN COMPARISON TO THE CAPITAL GA IN, THE ASSESSEE DEALING IN LARGE VOLUME OF SHARES AND ALSO INCLUDES SPECULATION. 15 ON OUR DIRECTIONS THE ASSESSEE HAS FILED THE DET AILS OF THE TRANSACTIONS OF SALE AND PURCHASE GIVING RISE TO SHORT TERM CAPITAL GAIN . FROM THE DETAILS OF TRANSACTIONS, WE FIND THAT THE ASSESSEE HAS CARRIED OUT 109 TOTAL TRANSACTIONS DURING THE YEAR. THE HOLDING PERIOD IS RANGING FROM FEW DAYS TO ONE YEAR . OUT OF 109 TRANSACTIONS, THE HOLDING PERIOD IN RESPECT OF 8 TRANSACTIONS IS LESS THAN ONE MONTH WHICH HAS RESULTED A CAPITAL GAIN OF ` . 9,045/-. SMT USHA B MADAN ITA NO. 4258/MUM/2011 11 15.1 SIMILARLY, 15 TRANSACTIONS HAVING HOLDING PERI OD FROM ONE MONTH TO 2 MONTHS AND THE REST OF THE TRANSACTIONS, THE HOLDING PERIO D IS FROM 3 MONTHS TO ONE YEAR. WE FURTHER NOTE THAT THERE IS NO CASE OF REPETITIVE TR ANSACTIONS IN SAME SCRIPT. THOUGH THE ASSESSEE HAS PURCHASED THE SHARES OF SAME SCRIP T ON MORE THAN ONE OCCASION AND ALSO SOLD ON MORE THAN ONE OCCASION; BUT THE SA LE IS ONLY SUBSEQUENT TO THE PURCHASE OF PARTICULAR SHARES. THEREFORE, EVEN THE SALE AND PURCHASE IN THE SINGLE SCRIPT IS MADE ON MORE THAN ONE OCCASION BUT IT WAS NOT IN REPETITIVE NATURE; TO SAY THAT THE ASSESSEE HAS PURCHASED THE SHARES OF A PAR TICULAR SCRIPT THEN SOLD IT AND THEN AGAIN PURCHASED IT. 16 IN THE CASE OF THE ASSESSEE, THE SHARES OF SCRIP TS WERE FIRST PURCHASED AND ONLY AFTER THE LAST PURCHASE, THE ASSESSEE HAS SOLD THE SHARES IN PARTS AND NOT IN ONE GO. FURTHER, THERE IS NO DISPUTE ON THE POINT THAT THE ASSESSEE HAS NOT TAKEN ANY LOAN FOR PURCHASE OF SHARES. IT IS CLEAR THAT THE NUMBER OF TRANSACTIONS DURING THE YEAR IS ONLY 109 THEREFORE IT CANNOT BE SAID THAT THE ASSESSEE H AS CARRIED OUT LARGE NUMBER OF TRANSACTIONS. THE ASSESSEE HAS SHOWN THE SHARES AS INVESTMENT IN THE BOOKS OF ACCOUNTS AND NOT AS STOCK IN TRADE. THE VALUATION O F THE SHARES SHOWN BY THE ASSESSEE WAS AT COST AND NOT AS IN THE CASE OF STOC K-IN-TRADE. THUS, IF WE APPLY THE VARIOUS CRITERIA, WHICH ARE RELEVANT FOR DECIDING T HE NATURE OF TRANSACTION, THAN EXCEPT THE VOLUME, ALL OTHER FACTORS ARE SUPPORTING THE CASE OF THE ASSESSEE; TO SAY THAT THE NATURE OF TRANSACTION IS INVESTMENT AND NO T TRADING. IT IS WELL SETTLED PROPOSITION THAT NO SINGLE CRITERIA CAN BE A DECISI VE FACTOR FOR DETERMINING THE NATURE OF TRANSACTION. 16.1 AS EVIDENT FROM THE PATTERN OF TRANSACTIONS TH AT THE MOTIVE OF THE ASSESSEE IS NOT TO EARN THE PROFIT AT THE EARLIEST POSSIBLE OPP ORTUNITY AVAILABLE. IT IS NOT THE CASE SMT USHA B MADAN ITA NO. 4258/MUM/2011 12 WHERE IT CAN BE SAID THAT THE INTENTION OF THE ASSE SSEE WAS NOT TO HOLD THE SHARES FOR A LONGER PERIOD BUT TO EARN PROFIT IN THE SHORT PER IOD AS PER THE VOLATILE CONDITION OF SHARE MARKET. WHEN THE HOLDING PERIOD OF THE SHARE S GIVING RISE TO SHORT TERM CAPITAL GAIN IN THE MAJORITY OF CASES IS MORE THAN THREE MO NTHS, THAN IT IS CLEAR THAT THE INTENTION OF THE ASSESSEE WAS TO EARN THE GAIN DUE TO APPRECIATION OF VALUE OF CAPITAL ASSETS. 16.2 FURTHER, WHEN THE CLAIM OF THE ASSESSEE WAS AC CEPTED IN THE EARLIER YEARS BY THE REVENUE AND TREATED THE SURPLUS FROM SALE AND P URCHASE OF SHARES AS CAPITAL GAIN, THEN THERE IS NO JUSTIFICATION IN REFUSING TH E SAME FOR THE YEAR UNDER CONSIDERATION. THOUGH THE PRINCIPLE OF RESJUDICATA IS NOT APPLICABLE IN THE MATTER OF TAXATION; HOWEVER, WHEN THE FACTS AND CIRCUMSTANCES ARE IDENTICAL, THEN THE ASSESSING OFFICER IS NOT PERMITTED TO TAKE A DIVERG ENT VIEW. THUS THE PRINCIPLE OF UNIFORMITY AND CONSISTENCY HAS TO BE MAINTAINED WHE N THE FACTS AND CIRCUMSTANCES ARE IDENTICAL. IN VIEW OF THE FACTS AND CIRCUMSTAN CES OF THE CASE, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF COMMISSIONE R OF INCOME TAX(APPEALS) IN HOLDING THAT THE CLAIM OF THE ASSESSEE BE ACCEPTED AS SHORT TERM CAPITAL GAIN. ACCORDINGLY, WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 17 IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED ON THIS 13 TH , DAY OF JUNE 2012 SD/ SD/- ( N K BILLAIYA ) ACCOUNTANT MEMBER ( VIJAY PAL RAO ) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 13 TH ,JUNE 2012 RAJ* SMT USHA B MADAN ITA NO. 4258/MUM/2011 13 COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI