DCIT 4(2)(1), MUMBAI V. SURESH K JAJOO, MUMBAI

ITA 514/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0266 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 31-01-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 22-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR A K NAYAK
• Assessee Lawyers: MRS INDIRA G ANAND
• Keywords: Business income; Rule of consistency; Cost of acquisition

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUM BAI BEFORE SRI G.S. PANNU, AM AND SRI PAWAN SINGH, JM ITA NO. 514/MUM/2015 (A.Y:2011-12) DY. COMMISSIONER OF INCOME TAX 4(2)(1) ROOM NO. 642, 6 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-20 VS. SHRI SURESH K. JAJOO 7/10, BOTAWALA BLDG, 1 ST FLOOR, HORNIMAN CIRCLE, MUMBAI-400 001 PAN NO.ADFPJ0070J APPELLANT .. RESPONDENT REVENUE BY .. SHRI DR. A.K. NAYAK, DR ASSESSEE BY .. MRS. INDIRA G ANAND, AR DATE OF HEARING .. 22 - 06 - 2017 DATE OF PRONOUNCE MENT .. 22 - 06 - 2017 O R D E R PER PAWAN SINGH, JM : THIS APPEAL BY REVENUE UNDER SECTION 253 OF INCOME TAX ACT IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOM E TAX (APPEALS)-8 [CIT(A)-8, MUMBAI] DATED 14-11-2014 FOR AY 2011-12. THE REVENUE HAS RAISED FOLLOWING GROUNDS: - 1. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING T HE DISALLOWANCE MADE A.O. OF SHORT TERM CAPITAL GAIN AMOUNTING TO RS.2,62,66,810/- AS BUSINESS INCOME DESPITE THE FACT THAT THE SHARES WERE PURCHASES AND SOLD DURING THE YEAR AND HOLDING PERIOD OF THE SHARES TRANSACTED WAS ALSO VERY LOW?' 2. WE HAVE HEARD THE LEARNED REPRESENTATIVE OF PART IES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. AT THE OUTSET, TH E LEARNED AR OF THE ASSESSEE WOULD SUBMIT THAT THE GROUND OF APPEAL RAISED BY THE REVENUE IS COVERED IN FAVOUR OF ASSESSEE BY THE DEC ISION OF ITA NO. 514/MUM/2015 SHRI SURESH K. JAJOO A.Y:11-12 PAGE 2 OF 7 TRIBUNAL IN ASSESSEES OWN CASE I.E. FOR AYS. 2005- 06, 2006-07, 2007-08 AND 2008-09 IN ITA NO(S). 5442/M/2008, 4475 /MUM/2012, 3053 AND 5303/MUM/2011, 4366/MUM/2012 RESPECTIVELY. THE LEARNED DR FOR THE REVENUE NOT DISPUTING THE SUBMIS SIONS OF THE LEARNED AR OF THE ASSESSEE. 3. WE HAVE CONSIDERED THE SUBMISSIONS OF LD REPRESE NTATIVES OF BOTH THE PARTIES AND FIND THAT THE GROUND OF APPEAL RAI SED BY THE REVENUE IS SQUARELY COVERED BY THE DECISION OF TRIB UNAL IN ASSESSEES OWN CASE FOR EARLIER YEARS I.E. AYS. 200 5-06, 2006-07, 2007-08 AND 2008-09. THE CO-ORDINATE BENCH OF TRIBU NAL WHILE CONSIDERING THE IDENTICAL GROUND OF APPEAL HELD AS UNDER: - 1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THERE IS NO DISPUTE RELATING TO THE FACT THAT THE ASSESSEE IN EARLIER YEARS HAS BEEN TREATED BY THE DEPARTMENT AS AN INVESTOR. THE ASSESSEE, AS DISCUSSED ABOVE, HAS BEEN CONTINUOUSLY ALLOWED THE SET OFF OF SHORT TERM CAPITAL LOSS AND LONG TER M CAPITAL LOSS IN THE EARLIER ASSESSMENT YEARS. THE ASSESSEE HAD BEEN DEALING IN TWO TYPES OF TRANSACTIONS IN SECURITIES. THE ASSESSEE HAD SHOWN INVESTMENTS AND HAD CLAIMED CAPITAL GAINS RELATING TO THE SHARES. IT IS ALSO A FACT ON THE FILE THAT B Y THE AMENDMENT BROUGHT BY FINANCE ACT, 2004, BY INSERTION OF PROVISIONS OF SECTION 111A AND SECTION 10(38), THE LEVY OF TAX HAS BEEN REDUCED TO 10% ON SHORT TERM CAPITAL GAINS AND LONG TERM CAPITAL GAIN S HAVE BEEN MADE EXEMPT. UNDER THE OLD PROVISIONS OF THE ACT, PROFITS OR GAINS ARISING TO AN INVESTOR FROM THE TRANSFER OF SECURITIES WERE CHARGED DEPENDING ON THE PERIOD OF HOLDING OF THE SAID SECURITIES. SH ORT TERM CAPITAL GAINS WERE TAXED AT APPLICABLE RATES (NORMAL RATES) AND LONG TERM CAPITAL GAINS WERE TAXED AT THE RATE OF 20% AFTER ADJUSTING FOR INFLAT ION ITA NO. 514/MUM/2015 SHRI SURESH K. JAJOO A.Y:11-12 PAGE 3 OF 7 BY INDEXING THE COST OF ACQUISITION. FOR LISTED SECURITIES, THE TAX PAYER HAD AN OPTION TO PAY TAX ON LONG TERM CAPITAL GAINS AT THE RATE OF 10% BUT WITHOUT INDEXATION. IN CASE OF TRADER IN SECURITIES , HOWEVER, THE CAPITAL GAINS WERE TAXED AS ANY OTHER NORMAL BUSINESS INCOME. THUS, TAX LIABILITY ON THE INCOME FOR SALE AND PURCHASE OF SHARES AS REGARDS TO SHORT TERM CAPITAL GAINS AND BUSINESS INCOME WAS AT PAR. THE ISSUE OF TREATMENT OF INCOME FROM SHARE TRANSACTION AS SHORT TERM CAPITAL GAINS OR BUSINESS INCOME HAS IN FACT ARISEN AFTER THE AMENDMENT BROUGHT WITH FINANCE ACT, 2004 W.E.F. 01.10.2004. I T IS AN ADMITTED FACT ON THE FILE THAT PRIOR TO THE AMENDMENT WHEN THE TAX OF SHORT TERM CAPITAL GAINS, AS DISCUSSED ABOVE, WAS AT PAR WITH THAT OF BUSINESS INCOME, THE DEPARTMENT HAS BEEN CONSISTENTLY ACCEPTING THE TREATMENT OF INCOME BY THE ASSESSEE AS CAPITAL GAINS. MERELY BECAUSE THE RATE OF TAX HAS BEEN REDUCED IN RESPECT OF SHORT TE RM CAPITAL GAINS AND LONG TERM CAPITAL GAINS HAVE BEEN EXEMPT DURING THE YEAR BY WAY OF AN AMENDMENT TO THE PROVISIONS AS DISCUSSED ABOVE, THAT ITSELF, CANNOT BE A GROUND FOR THE AO TO DEPART FROM ITS CONSISTENT STAND OF TREATING THE ASSESSEE AS AN INVESTOR AND THEREBY TO CHARGE THE INCOME EARNED BY THE ASSESSEE FROM SHARE TRANSACTIONS AS BUSINESS INCOME. AS DISCUSSED ABOVE, AT THE TIME OF PURCHASE OF SHARES EVEN DURING THE YEAR BUT PRIOR T O 01.10.2004, THE ASSESSEE WAS NOT GUIDED OR INFLUENCED BY LOWER TAX RATE IN CASE OF SHORT TERM CAPITAL GAINS AS THE RATE FOR BUSINESS INCOME AND SHORT TERM CAPITAL GAINS WAS AT PAR. THE ASSESSEE, HOWEVER, WAS TREATING HIMSELF AS AN INVESTOR AND KEEPING THE SHARES AS INVESTMENTS IN HIS ACCOUNT IRRESPECTIVE OF THE PROBABLE TAX IMPLICATION AS THE RE ITA NO. 514/MUM/2015 SHRI SURESH K. JAJOO A.Y:11-12 PAGE 4 OF 7 WERE NO SUCH TAX IMPLICATIONS AS DISCUSSED ABOVE. THE INTENTION OF THE ASSESSEE, WHILE PURCHASING THE SHARE, IS THE IMPORTANT AND GUIDING FACTOR AS TO WHETHER THE SAME WAS PURCHASED WITH AN INTENTION OF INVESTMENT OR FOR TRADING. THE FACTS OF THE CASE AS DISCUSSED ABOVE, CLEARLY REVEAL THAT THE ASSESSEE HAD TREATED THE SHARES AS INVESTMENTS IN HIS ACCOUNT. AS DISCUSSED ABOVE, IF DURING THE MID OF THE RELEVANT FINANCIAL YEAR, CERTAIN TAX BENEFITS HAVE BEEN GIVEN IN RESPECT OF CAPITAL GAINS, THAT CANNOT, IN ANY WAY, LEAD TO AN ASSUMPTION OR PRESUMPTION THAT THE INTENTION OF THE ASSESSEE AT T HE TIME OF PURCHASE OF SHARES WAS THAT OF A TRADER AND NOT OF AN INVESTOR. THE TREATMENT OF THE INVESTMENT IN THE ACCOUNT BOOKS OF THE ASSESSEE WAS ALSO A RELEVANT GUIDING FACTOR. THE AO HAS ALSO NOT POINTE D OUT AS TO IN WHAT MANNER THE ACTIVITY OF THE ASSESS EE FOR THE YEAR UNDER CONSIDERATION HAD BEEN CHANGED FROM INVESTOR TO THAT OF A TRADER ESPECIALLY WHEN T HE DEPARTMENT HAD CONSISTENTLY BEEN TREATING HIM AS AN INVESTOR. IT IS ALSO PERTINENT TO MENTION HERE THAT AS DISCUSSED ABOVE, IN SUBSEQUENT ASSESSMENT YEARS THE DEPARTMENT HAS AGAIN ACCEPTED THE ASSESSEE AS AN INVESTOR. IT IS FOR THE FIRST TIME THAT IN THIS YEAR UNDER CONSIDERATION I.E. A.Y. 2005-06 THE ASSESSEE HAD BEEN TREATED AS A TRADER BECAUSE OF CERTAIN TAX BENEFITS GRANTED TO AN INVESTOR IN SECURITIES BY WA Y OF AMENDMENT IN THE RELEVANT PROVISIONS OF THE INCOME TAX ACT AND SUBSEQUENTLY FOR THE A.YS 2006-07 TO 2008-09, THE ASSESSEE WAS TREATED AS TRADER. HOWEVER, THE LD. CIT(A) FOLLOWING THE PRINCIPLE OF CONSISTENCY HAS HELD THE ASSESSEE FOR THE IMPUGNED ASSESSMENT YEARS I.E. A.Y. 2005-06 TO A.Y. 2008-09 AS INVESTOR. THOUGH THE PRINCIPLE OF RESJUDICATA IS NOT APPLICABLE IN INCOME TAX ITA NO. 514/MUM/2015 SHRI SURESH K. JAJOO A.Y:11-12 PAGE 5 OF 7 PROCEEDINGS BUT THE PRINCIPLE OF CONSISTENCY REQUIRES THAT THE VIEW TAKEN IN ONE YEAR SHOULD BE FOLLOWED IN SUBSEQUENT YEARS UNLESS THE FACTS OR TH E LEGAL POSITION JUSTIFY DEPARTURE THERE FROM; RELIAN CE CAN BE PLACED IN THIS RESPECT ON THE AUTHORITIES OF THE HONBLE BOMBAY HIGH COURT IN CIT VS. DARIUS PANDOLE [(2011 330 ITR 485 (BOM.)] AND IN CIT VS. GOPAL PUROHIT [(2011) 336 ITR 287 (BOM.). 9. IN VIEW OF OUR ABOVE DISCUSSION OF THE MATTER, W E ARE OF THE VIEW THAT THE ASSESSEE IS TO BE TREATED AS AN INVESTOR FOR THE A.Y. 2005-06 TO A.Y. 2008-09 ALSO. WE HOLD ACCORDINGLY. THE AO, THEREFORE, IS DIRECTED TO TREAT THE INCOME FROM SALE AND PURCHASE OF SHARES AS SHORT TERM CAPITAL GAINS AND LONG TERM CAPITAL GAINS ACCORDING TO THE PERIOD OF HOLDING AS PER THE PROVISIONS OF LAW FOR THESE ASSESSMENT YEARS ALSO. ' CONSIDERING THE ABOVE REFERRED DECISION OF THE FOR AYS. 2005-06, 2006- 07, 2007-08 AND 2008-09, WE FIND THAT THE GROUND OF APPEAL RAISED BY REVENUE IS SQUARELY COVERED IN FAVOUR OF ASSESSEE A ND AGAINST REVENUE. THUS, WE DO NOT FIND ANY ILLEGALITY OR INF IRMITY IN THE ORDER PASSED BY LD CITA). HENCE, THE GROUND OF APPEAL RA ISED BY THE REVENUE IS DISMISSED. 4. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 -06-2017 . SD/- SD/- (G.S. PANNU) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 22-06-2017 SUDIP SARKAR /SR.PS ITA NO. 514/MUM/2015 SHRI SURESH K. JAJOO A.Y:11-12 PAGE 6 OF 7 COPY OF THE ORDER FORWARDED TO : //TRUE COPY// BY ORDER, ASSISTANT REGISTRAR ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT (A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE.