Venkateshwara Enterprises Private Ltd., Pune V. Assistant Commissioner of Income-tax,

ITA 472/PUN/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 2523 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 31-05-2018
• Assessment Year: 2008-2009
• Appeal Filed On: 16-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Rule of consistency
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUNE . , , , BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO . 472 /P U N/201 5 / ASSESSMENT YEAR : 20 0 8 - 09 VENKATESHWARA ENTERPRISES PRIVATE LIMITED, C/O RAJENDRA BHATTAD, PLOT NO. 21, KASTURI GOVARDHAN HOUSING SOCIETY, MAHARSHINAGAR, PUNE 411037 PAN : AACCV3888J ....... / APPELLANT / V/S. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 7, PUNE / RESPONDENT ASSESSEE BY : SHRI NIKHIL PATHAK REVENUE BY : SHRI A CHAL SHARMA / DATE OF HEARING : 3 1 - 05 - 2018 / DATE OF PRONOUNCEMENT : 24 - 0 8 - 201 8 / ORDER PER VIKAS AWASTHY, JM : TH IS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - 5, PUNE DATED 2 1 - 01 - 2015 FOR THE ASSESSMENT YEAR 20 0 8 - 09. THE ASSESSEE IN APPEAL HAS ASSAILED THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) IN CONFIRMING THE FINDINGS OF ASSESSING OFFICER IN 2 ITA NO . 472/PUN/2015, A.Y. 2008 - 09 TREATING THE SHARES HELD BY THE ASSESSEE AS STOCK - IN - TRADE , CONTRARY TO THE CLAIM OF ASSESSEE AS INVESTMENT. 2. SHRI NIKHIL PA THAK APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE COMPANY IS ENGAGED IN INVESTMENT OF SHARES, MUTUAL FUNDS AND SECURITIES. THE INVESTMENT ACTIVITIES ARE CARRIED OUT BY THE ASSESSEE COMPANY SINCE INCEPTION AND THE SHARES /SECURITIES ARE H ELD AS INVESTMENT AND NOT AS STOCK - IN - TRADE. THIS FACT IS EVIDENT FROM THE FINANCIAL STATEMENTS OF COMPANY. THE ASSESSEE IN ITS RETURN OF INCOME HAS BEEN CONSISTENTLY SHOWING SHARES AS INVESTMENTS. THE SHARE S PURCHASED/SOLD BY ASSESSEE ARE DELIVERY BASE D. THE ASSESSEE HAS NOT UTILIZED BORROWED FUNDS FOR THE PURPOSE OF MAKING INVESTMENT IN THE SHARES, MUTUAL FUNDS , SECURITIES ETC. THE ASSESSEE DURING THE ASSESSMENT YEAR UNDER APPEAL SOLD CERTAIN SECURITIES AND BOOKED SHORT TERM CAPITAL GAIN AMOUNTING TO RS.58,33,370/ - . THE ASSESSEE DULY PAID TAXES ON SHORT TERM CAPITAL GAIN EARNED. IN ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER TREATED THE SHORT TERM CAPITAL GAIN DISCLOSED BY THE ASSESSEE AS BUSINESS INCOME . THE LD. AR SUBMITTED THAT THE ASSESSEE H AS BEEN CONSISTENTLY DISCLOSING SHARES AS INVESTMENT AND REVENUE HAS ACCEPTED THE SAME IN THE PAST AS WELL AS IN THE FUTURE. THE LD. AR FURNISHED COPY OF THE ASSESSMENT ORDER DATED 30 - 06 - 2017 U/S. 143(3) FOR THE ASSESSMENT YEAR 2015 - 16. THE LD. AR ASSERT ED THAT RETURN OF INCOME FILED BY THE ASSESSEE HAS BEEN ACCEPTED WITHOUT DISTURBING THE HEAD OF INCOME IN RESPECT OF SALE OF SHARES IN EARLIER AND SUBSEQUENT ASSESSMENT YEARS . THE LD. AR TO SUPPORT HIS SUBMISSION PLACED RELIANCE ON THE DECISION OF TRIBUNA L IN THE CASE OF ITO VS. SHRI GAURAV ARVIND THAKKAR IN ITA NO. 247/PUN/2010 FOR ASSESSMENT YEAR 2006 - 07 DECIDED ON 10 - 11 - 2017. 3 ITA NO . 472/PUN/2015, A.Y. 2008 - 09 3. ON THE OTHER HAND SHRI ACHAL SHARMA REPRESENTING THE DEPARTMENT VEHEMENTLY DEFENDED THE IMPUGNED ORDER. THE LD. DR SUBMITT ED THAT THE MAGNITUDE AT WHICH THE ASSESSEE HAS CARRIED OUT TRANSACTIONS IN SALE AND PURCHASE OF SHARES CLEARLY INDICATE THAT THE SHARES WERE HELD BY THE ASSESSEE AS STOCK - IN - TRADE TO BOOK THE PROFITS AT THE EARLIEST POINT OF TIME . THE LD. DR REFERRING TO THE CHART GIVING DETAILS OF THE TRANSACTIONS IN ASSESSMENT YEARS 2008 - 09 AND 2009 - 10 AT PAGES 86 TO 91 OF THE PAPER BOOK SUBMITTED THAT THE ASSESSEE IS INDULGING IN VOLUMINOUS TRANSACTIONS OF SHARES AND THE HOLDING PERIOD OF THE SHARES IN SOME OF THE CASE S IS AS LOW AS 2 TO 6 DAYS. THE LD. DR CONTENDED THAT UNDER SUCH CIRCUMSTANCES THE AUTHORITIES BELOW HAVE RIGHTLY CONCLUDED THAT THE SHARES ARE HELD BY THE ASSESSEE AS STOCK - IN - TRADE. IN SUPPORT OF HIS SUBMISSIONS THE LD. DR PLACED RELIANCE ON THE DECISI ON OF HONBLE SUPREME COURT OF INDIA IN THE CASE OF MANOJ KUMAR SAMDARIA VS. COMMISSIONER OF INCOME TAX REPORTED AS 228 TAXMAN 63 AND THE DECISION OF TRIBUNAL IN THE CASE OF SHRI SUNIL MANAKCHAND KOTECHA VS. ACIT IN ITA NO. 691/PUN/2013 FOR ASSESSMENT YEAR 2006 - 07 DECIDED ON 12 - 01 - 2018. 4. W E HAVE HEARD THE SUBMISSIONS MADE BY REPRESENTATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF AUTHORITIES BELOW . WE HAVE ALSO CONSIDERED THE DECISIONS ON WHICH THE RIVAL SIDES HAVE PLACED RELIANCE. THE ONLY ISSUE RAISED IN THE PRESENT APPEAL BY THE ASSESSEE IS AGAINST THE REVENUES ACTION OF HOLDING INCOME FROM SALE OF SHARES AS BUSINESS INCOME AS AGAINST SHORT TERM CAPITAL GAIN DECLARED BY ASSESSEE. 5. THE DOCUMENTS ON RECORD INDICATE THAT THE ASSESSEE IS AN INVESTMENT COMPANY ENGAGED IN INVESTMENT OF SHARES, MUTUAL FUNDS AND SECURITIES ON BEHALF OF ITS SHAREHOLDERS. THE ASSESSEE IN ITS RETURN OF INCOME RI GHT FROM 4 ITA NO . 472/PUN/2015, A.Y. 2008 - 09 THE BEGINNING HAS BEEN DISCLOSING SHARES AS INVESTMENT AND THE REVENUE NEVER QUESTIONED IT. IT IS ONLY THE ASSESSMENT YEAR UNDER APPEAL THAT THE REVENUE HAS QUESTIONED THE NATURE OF HOLDING SHARES BY THE ASSESSEE. NO MATERIAL HAS BEEN BROUGHT ON RECORD BY THE REVENUE TO SHOW THAT IN THE PAST OR IN THE SUBSEQUENT ASSESSMENT YEAR S THE SHARE TRANSACTIONS ENTERED INTO BY THE ASSESSEE WAS EXAMINED AND THE SHARES WERE HELD TO BE IN THE NATURE OF BUSINESS ASSET RATHER THAN INVESTMENT. ON THE CONTRARY T HE ASSESSEE HAS FURNISHED ASSESSMENT ORDER FOR ASSESSMENT YEAR 2015 - 16 WHEREIN THE GAIN ARISING FROM SALE OF SHARES WAS RETURNED AS CAPITAL GAINS AND THE SAME WAS ACCEPTED BY THE ASSESSING OFFICER. WE ARE WELL AWARE OF THE FACT THAT THE PRINCIPLE OF RES J UDICATA DOES NOT APPLY IN INCOME TAX PROCEEDINGS. HOWEVER, THE PRINCIPLE OF CONSISTENCY EXPOUNDED BY THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF RADHASOAMI SATSANG VS. COMMISSIONER OF INCOME TAX REPORTED AS 193 ITR 321 HAS TO BE FOLLOWED. THUS, IN VIEW OF THE FACT THAT THE ASSESSEE HAS BEEN CONSISTENTLY DISCLOSING GAIN/INCOME FROM SALE OF SHARES UNDER THE HEAD CAPITAL GAINS CLEARLY SHOWS THAT THE INTENTION OF THE ASSESSEE IS TO HOLD THE SHARES AS INVESTMENT AND NOT AS BUSINESS ASSET . 6. WE FIND THA T IN THE CASE OF ITO VS. SHRI GAURAV ARVIND THAKKAR (SUPRA) , THE CO - ORDINATE BENCH IN SIMILAR FACTS WHERE THE ASSESSEE WAS CONSISTENTLY DISCLOSING GAIN FROM SALE OF SHARES AS CAPITAL GAIN AND THE REVENUE ACCEPTED THE SAME AND IN A PARTICULAR ASSESSMENT YEA R DISTURBED THE CLAIM OF ASSESSEE, THE TRIBUNAL HELD : 6. REGARDING THE AOS DECISION OF TREATING THE SHORT TERM CAPITAL GAINS AS BUSINESS INCOME, AO OPINED THAT THE SAID GAINS CONSTITUTES BUSINESS INCOME CONSIDERING THE LARGE NUMBER OF TRANSACTIONS I NVOLVING THE TURNOVER OF THE ASSESSEE. IN THE PROCESS, THE AO DISRESPECTED THE ENTRIES IN THE BOOKS OF ACCOUNT. ASSESSEE REFLECTED THE RELEVANT SHARES AS INVESTMENTS IN THE BOOKS. AO REJECTED THE ASSESSEES INTENTION OF BOOKING THE GAINS EARED IN TRADING O F THE SAID SHARES SHOWN AS INVESTMENT IN BOOKS. BEFORE US, IT IS THE CLAIM OF THE ASSESSEE, THAT THE ASSESSEE IS CONSISTENTLY BOOKING SUCH GAINS AS SHORT TERM CAPITAL GAINS OVER THE YEARS. IT IS SUBMITTED THAT SUCH CLAIMS ARE 5 ITA NO . 472/PUN/2015, A.Y. 2008 - 09 ALLOWED WITHOUT ANY DISTURBANC E. IN THE PROCESS, AO ALSO FAILED TO APPRECIATE THE JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. GOPAL PUROHIT 222 CTR 582 FOR RELIANCE TO THE PRINCIPLE OF CONSISTENCY. CIT(A) FOLLOWED THE SAID PRINCIPLE OF CONSISTENCY APART FROM OTHERS A ND GRANTED RELIEF TO THE ASSESSEE. IN OUR OPINION, THE ORDER OF THE CIT(A) ON THIS ISSUE IS ALSO FAIR AND REASONABLE AND IT DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. THUS, IN VIEW OF THE FACTS EMANATING FROM THE RECORDS IN THE INSTANT CASE , WE FIND MERIT IN THE SUBMISSIONS OF THE LD. AR OF THE ASSESSEE. ACCORDINGLY, THE IMPUGNED ORDER IS SET ASIDE AND THE APPEAL OF ASSESSEE IS ALLOWED. 7 . IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON FRIDAY, THE 24 TH DAY OF AUGUST, 201 8 . SD/ - SD/ - ( . /D. KARUNAKARA RAO ) ( / VIKAS AWASTHY) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE; / DATED : 24 TH AUGUST, 2018 RK / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 5, PUNE 4. / THE CIT - 4, PUNE 5. , , , / DR, ITAT, A BENCH, PUNE. 6. / GUARD FILE. / / // TRUE COPY// / BY ORDER, / PRIVATE SECRETARY, , / ITAT, PUNE