DARSHANA B. DOSHI, MUMBAI V. A.C.I.T. CIRCLE 13(3), MUMBAI

ITA 5462/MUM/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3315 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-06-2016
• Appeal Filed By: Assessee
• Bench Allotted: D
• Next Hearing Date: 08-12-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 30-08-2012
• Court: TRIBUNAL
• Assessee Lawyers: MAHURIA
• Keywords: Business income; Maximum Marginal Rate; Rule of consistency
• Section: 10

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER ITA NO.5462/MUM/2012 ASSESSMENT YEAR: 2008-09 SMT. DARSHANA B. DOSHI 31, BROACH STREET, DEVRAJ RATANSHI MARG, IRON MARKET, MASJID BUNDER, MUMBAI 400009. / VS. ACIT, CIRCLE-13(3), 430, AAYAKAR BHAVAN, 4 TH FLOOR, M.K. MARG, MUMBAI 400 020. PAN. NO. AABPD7806Q ( / REVENUE ) ( !' # /ASSESSEE) / REVENUE BY MS. SURBHI SHARMA (DR) !' # / ASSESSEE BY SHRI M.S. MAHURIA $ % & # ' / DATE OF HEARING : 06/06/2016 & # ' / DATE OF ORDER: 07/06/2016 ITA NO.5462/MUM/2012 SMT. DARSHANA B. DOSHI 2 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE ONLY GROUND RAISED IN THE PRESENT APPEAL PERTAI NS TO SUSTENANCE OF SHORT TERM CAPITAL GAINS OF RS.45,8 6,071/- TREATING THE SAME AS INCOME FROM BUSINESS AND PROF ESSION AND CONSEQUENT COMPUTING TAX THEREON AT MAXIMUM MARGINAL RATE. 2. DURING HEARING THE CRUX OF ARGUMENTS ADVANCED BY SHRI M.S. MAHURIA, LD. COUNSEL FOR THE ASSESSEE IS THAT THE INCOME MAY BE TREATED AS INCOME FROM SHORT TERM CAPITAL GA INS BY EXPLAINING THAT THE INTENTION OF THE ASSESSEE IS ME RELY INVESTMENT OF ALL SURPLUS FUNDS IN EQUITY SHARES OF DOMESTIC COMPANIES AND NO INTEREST BEARING FUNDS WERE INVEST ED BY THE ASSESSEE. IT WAS ALSO CONTENDED THAT NONE OF T HE PUBLIC LIMITED COMPANY, WHERE INVESTMENT WAS MADE, IS CONT ROLLED BY THE ASSESSEE AND ALL THE SHARES ARE QUOTED AT RE COGNIZED STOCK EXCHANGE. THE LEARNED COUNSEL FURTHER EXPLAI NED THAT ALL THE SHARES WERE SHOWN AS INVESTMENT IN THE BALA NCE SHEET AND THE DIVIDEND INCOME WAS SHOWN BY THE ASSESSEE A S INCOME FROM OTHER SOURCES AND CLAIMED EXEMPT U/S 10 (34) OF THE ACT. THE SHARES WERE CLAIMED TO BE ROUTED THRO UGH DEMAT ACCOUNT AND STT TAX WAS PAID ON SALE AND PURCHASES. THE LEARNED COUNSEL ALSO EXPLAINED THAT THERE WAS A LOS S ON THE TRANSACTION FOR A.Y 2009-10 WHICH WAS ALLOWED TO BE CARRIED FORWARD BY THE DEPARTMENT. ON THE RULE OF CONSISTEN CY RELIANCE WAS PLACED UPON THE DECISIONS IN GOPAL PUR OHIT VS. ITA NO.5462/MUM/2012 SMT. DARSHANA B. DOSHI 3 JCIT (2009) 29 SOT 117 (MUM) (WHICH WAS AFFIRMED BY HONBLE JURISDICTIONAL HIGH COURT IN 336 ITR 287 (B OM) AND SLP WAS DISMISSED BY HONBLE APEX COURT IN (2011) 3 34 ITR (ST.) 308 (SC)), SHANTILAL JAIN VS. ACIT (2011) 132 ITD 466 (MUM), DHARMESH R. SHAH VS. JCIT (2013) 60 SOT 182 (MUM), KUNVERJI NANJI KENIA VS. ADDL. CIT (2010) 13 1 TTJ 87 (MUM) AND ANOTHER DECISION FROM HONBLE JURISDICTIO NAL HIGH COURT IN CIT VS. NAISHADH V. VACHHARAJANI (ITA NO. 1042 OF 2011), ORDER DTD. 22.9.2011. ON THE OTHER HAND, TH E LD. DR, MS. SURBHI SHARMA DEFENDED THE CONCLUSION DRAWN IN THE IMPUGNED ORDER. IN REPLY THE LEARNED COUNSEL FOR T HE ASSESSEE PLACED RELIANCE UPON CBDT CIRCULAR NO. 6/2 016 BY CLAIMING THAT IN ALL EARLIER 5 YEARS IT WAS SHOWN A S INVESTMENT. IT WAS ALSO CLAIMED THAT THE ISSUE IS COVERED BY THE DECISION OF THE TRIBUNAL IN THE CASE OF ALKA K. UPADHAYA VS. ACIT (ITA NO. 3520/MUM/2010) DT. 17.3.2016. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON RECORD. THE FACTS IN BRI EF ARE THAT THE ASSESSEE IN ITS RETURN OF INCOME HAS CLAIMED SH ORT TERM CAPITAL GAIN OF RS.45,86,071/- AND LONG TERM CAPITA L GAIN OF RS.58,002/- AND FURTHER INCOME FROM OTHER SOURCES W AS SHOWN AT RS.2,40,566/- AND THE SAME WAS CLAIMED AS EXEMPT. HOWEVER, THE LEARNED ASSESSING OFFICER TRE ATED THE SAME AS BUSINESS INCOME ON THE GROUND THAT THE ASSE SSEE IS EARNING INCOME BY DEALING IN SHARES AND IS ROUTINEL Y INVOLVED IN SHARE TRANSACTION. IN REPLY TO THE QUERY RAISED BY THE LEARNED ASSESSING OFFICER, THE ASSESSEE CLAIMED THA T SHE IS A ITA NO.5462/MUM/2012 SMT. DARSHANA B. DOSHI 4 HOUSEWIFE AND NOT HAVING ANY PROFESSIONAL KNOWLEDGE OF SHARE MARKET. IT WAS ALSO EXPLAINED THAT NO LOANS WERE TAKEN BY THE ASSESSEE FOR MAKING THE INVESTMENT IN SHARES AND FURTHER, THE ASSESSEE IS NOT INDULGED IN ANY DERIVA TE TRANSACTIONS. THE CONTENTION OF THE ASSESSEE WAS N OT ACCEPTED BY THE ASSESSING OFFICER ON THE REASONS ST ATED IN THE ASSESSMENT ORDER WHICH BROADLY ARE THAT THE ASSESSE E IS REGULARLY AND FREQUENTLY DEALING IN SHARES AND IS D OING SYSTEMATIC AND ORGANIZED ACTIVITY OF TRADING. IT W AS FURTHER OBSERVED THAT THE VOLUME OF TRANSACTION IS HUGE, TH EREFORE, THE ASSESSEE IS ENGAGED IN COMMERCIAL ACTIVITY AND THE INTENTION OF THE ASSESSEE IS TO EARN PROFIT. ON AP PEAL BEFORE THE LEARNED CIT(A) THE STAND TAKEN IN THE ASSESSMEN T ORDER WAS AFFIRMED AGAINST WHICH THE ASSESSEE IS IN APPEA L BEFORE THIS TRIBUNAL. WE NOTE THAT THE ASSESSING OFFICER HAS ALSO ANALYSED THE HOLDING PERIOD WHICH AS PER THE REVENU E IS LESS THAN 90 DAYS. WE HAVE ALSO ANALYSED THE FACTUAL MA TRIX OF LAST 5 YEARS OF THE ASSESSEE WHICH HAS BEEN PROVIDE D IN THE PAPER BOOK. IT IS NOTED THAT FOR A.YS 2006-07 TO 2 010-11 THE SHORT TERM CAPITAL GAIN ON SALE OF INVESTMENT IN SH ARES OF DOMESTIC COMPANIES WAS ALLOWED BY THE DEPARTMENT AN D THE ASSESSEE DULY PAID THE STT ON SALE OF SUCH SHARES. THE CLAIM OF THE ASSESSEE IN THE PRESENT ASSESSMENT YEAR WAS DENIED BY THE ASSESSING OFFICER MERELY ON THE PREMISE THAT TH E ASSESSEE IS INVOLVED IN SYSTEMATIC AND ORGANIZED TRADING ACT IVITY AND HUGE QUANTITY OF SHARE WAS PURCHASED. SO FAR AS TH E FREQUENCY AND HOLDING PERIOD IS CONCERNED, THIS ISS UE HAS BEEN DULY DELIBERATED UPON BY THE TRIBUNAL IN THE C ASE OF ITA NO.5462/MUM/2012 SMT. DARSHANA B. DOSHI 5 GOPAL PUROHIT WHICH WAS AFFIRMED BY THE HONBLE JURISDICTIONAL HIGH COURT IN 228 CTR 582 (BOM) AND SLP OF THE DEPARTMENT WAS DISMISSED BY HONBLE APEX COURT. THE CASE OF THE ASSESSEE IS FURTHER FORTIFIED BY THE DE CISION OF THE TRIBUNAL IN THE CASE OF RAMESH BABURAO VS. ACIT (IT A NO. 3719, 4084, 5318 AND 5319/MUM/2009, ORDER DT. 13.4.2011), WHEREIN IT WAS HELD THAT LARGE VOLUME O F SHARE IS NOT THE ONLY DECIDING FACTOR TO HOLD THE ASSESSEE A TRADER. IT IS ALSO NOTED THAT OWN FUNDS WERE INVESTED BY THE A SSESSEE AND NO BORROWED FUNDS WERE UTILIZED, THEREFORE, THE DECISION IN NAGINDAS P. SHETH (HUF) VS. ACIT (ITA NO. 961 AN D 1836/MUM/2010, ORDER DT. 5.4.2011) SUPPORTS THE CAS E OF THE ASSESSEE. IT IS ALSO NOTED THAT THE ASSESSEE W AS HOLDING THE SHARES IN ITS BOOKS AS INVESTMENT AND DID NOT H AVE ANY OFFICE OR ADMINISTRATIVE SET UP. THERE WAS NOT A S INGLE INSTANCE WHERE THE ASSESSEE HAD SQUARED UP THE TRAN SACTION ON THE SAME DAY WITHOUT TAKING DELIVERY OF THE SHAR ES. SO FAR AS THE CONTENTION OF THE ASSESSING OFFICER AS WELL AS OF THE LD. DR THAT THERE WAS LARGE VOLUME OF PURCHASE AND SALE OF SHARES BY THE ASSESSEE IS CONCERNED, WE ARE OF THE VIEW THAT THE LARGE VOLUME PER SE DOES NOT MEAN ACTIVITY OF BUSINESS AS THE ASSESSEE HAS TO MAINTAIN THE DISTINCTION BETWEE N SHARES HELD AS STOCK AND THOSE HELD AS INVESTMENT IN ITS B OOKS. THOUGH VOLUME OF TRANSACTION IS AN IMPORTANT INDICA TOR OF THE INTENTION OF THE ASSESSEE, BUT WHETHER TO DEAL IN S HARES AS TRADING ASSET OR TO HOLD THE SHARES AS INVESTOR IS CERTAINLY NOT THE SOLE CRITERIA. A PRUDENT INVESTOR ALWAYS KEEPS A WATCH ON THE MARKET TREND, THEREFORE, IS NOT BARRED UNDER TH E LAW FROM ITA NO.5462/MUM/2012 SMT. DARSHANA B. DOSHI 6 LIQUIDATING HIS INVESTMENT IN SHARES. THE LAW ITSE LF HAS RECOGNIZES THIS FACT BY TAXING THESE TRANSACTIONS U NDER THE HEAD SHORT TERM CAPITAL GAINS AND IF THE REASONIN G OF THE ASSESSING OFFICER/LD. DR IS ACCEPTED, THAT WOULD IT SELF BE AGAINST THE LEGISLATIVE INTENT. THE FACT THAT THE ASSESSEE DID NOT BORROW FUNDS FOR MAKING THE INVESTMENT IN SHARE S IS ALSO AN IMPORTANT ASPECT WHICH CANNOT BE LOST SIGHT OF W HILE DECIDING THE TRUE INTENTION OF THE ASSESSEE, MORE S PECIFICALLY WHEN THE ASSESSING OFFICER HIMSELF ACCEPTED IDENTIC AL CLAIM OF THE ASSESSEE IN EARLIER YEARS. WE ARE AWARE THAT P RINCIPLE OF RES JUDICATA IS STRICTLY NOT APPLICABLE IN INCOME TAX PROCEEDINGS AND EACH YEAR IS INDEPENDENT AND FURTHE R IT IS SETTLED PRINCIPLE OF LAW THAT CONSISTENCY CANNOT BE IGNORED. UNIFORMITY IN TREATMENT AND CONSISTENCY UNDER THE S AME FACTS AND CIRCUMSTANCES IS ONE OF THE FUNDAMENTALS OF THE JUDICIAL PRINCIPLES WHICH CANNOT BE BRUSHED ASIDE W ITHOUT PROPER REASONING. IN THE EARLIER ASSESSMENT YEAR, THE ASSESSING OFFICER ACCEPTED OFFERING OF LTCG AND ALS O ACCEPTED THE CLAIM OF THE ASSESSEE IN THE STATUS OF INVESTOR . THEREFORE, WITHOUT BRINGING ANY CONTRARY MATERIAL/FACTS, THE S TAND OF THE ASSESSING OFFICER IS NOT PERMISSIBLE. AS THE MODUS OPERANDI OF THE ASSESSEE REMAINED THE SAME WITH RESPECT TO O THER SHARES, THE CLAIM OF THE ASSESSEE CANNOT BE NEGATED ONLY ON THE BASIS OF FREQUENCY OF TRANSACTIONS AS WAS HELD BY HONBLE JURISDICTIONAL HIGH COURT IN GOPAL PUROHIT (228 CTR 582 (BOM)). THE RATIO LAID DOWN IN SMT. GEETA DEVI MAH IPAL VS. ITO (2004) 1 SOT 468 (JD) SUPPORTS THE CASE OF THE ASSESSEE. IDENTICAL RATIO WAS LAID DOWN IN VINOD K. NEVATIA V S. ACIT ITA NO.5462/MUM/2012 SMT. DARSHANA B. DOSHI 7 (2011) 49 DTR (MUM) (TRIB) 16 AND JANAK S. RANGWALL A VS. ACIT (2007) 11 SOT 627 (MUM), PARESH D. SHAH VS. JC IT (2010) 2 ITR (TRIB) 311 (MUM), SURESH KUMAR SEKSARI A VS. ACIT (2010) 1 ITR (TRIB) 783 (MUM). IDENTICAL RATI O WAS LAID DOWN IN ACIT VS. DINESH K. MEHTA (HUF) (2010) 39 SO T 488 (MUM). CONSIDERING THE TOTALITY OF FACTS, WE ARE OF THE VIEW THAT WHERE THE ASSESSEE HAS SHOWN INVESTMENT IN SHA RES UNDER THE HEAD INVESTMENT IN THE BALANCE SHEET FO R MANY YEARS AND SAME IS ACCEPTED BY THE ASSESSING OFFICER IN THE PAST, THERE IS NO JUSTIFICATION FOR TREATING THE AC TIVITY OF ASSESSEE OF PURCHASE AND SALE OF SHARES AS BUSINESS PARTICULARLY WHEN NO MONEY HAS BEEN BORROWED FOR MA KING INVESTMENT IN SHARES. IN SUCH A SITUATION THE DECI SION IN CIT VS. GIRISH MOHAN GANERIWALA (2003) 260 ITR 417 (P&H ), CIT VS. S. RAMAAMIRTHAM (2008) 306 ITR 239 AND CIT VS. ESS JAY ENTERPRISES (P) LTD. (2008) 173 TAXMAN 1 (DEL) SUPPORTS THE CASE OF THE ASSESSEE. THE RATIO LAID DOWN IN C IT VS. ROHIT ANAND (2010) 327 ITR 445 (DEL) FURTHER SUPPORTS THE CASE OF THE ASSESSEE. IN CIRCULAR DT. 15 TH JUNE, 2007 THE CBDT HAS CLARIFIED THAT IT IS POSSIBLE FOR A TAX PAYER TO HA VE TWO PORTFOLIO, I.E., AN INVESTMENT PORTFOLIO AND A TRAD ING PORTFOLIO AND INCOME UNDER THE HEAD CAPITAL GAINS AS WELL A S BUSINESS INCOME. THOUGH THE MAIN OBJECT IS BUYIN G AND SELLING OF SHARES, BUT THE NATURE OF ACTIVITY, INTE NTION AND CONDUCT HAS SIGNIFICANT ROLE TO PLAY IN THE ENTIRE TRANSACTION. THUS, THE GAIN HAS TO BE ASSESSED AS SHORT TERM CAP ITAL GAIN/LONG TERM CAPITAL GAIN, AS THE CASE MAY BE. ITA NO.5462/MUM/2012 SMT. DARSHANA B. DOSHI 8 4. SO FAR AS THE RULE OF CONSISTENCY IS CONCERNED, WE NOTE THAT IN THE PREVIOUS AND SUBSEQUENT ASSESSMENT YEAR S, THE ASSESSING OFFICER TREATED THE ASSESSEE AS AN INVEST OR, THEREFORE, WE ARE OF THE VIEW THAT UNLESS AND UNTIL CONTRARY FACTS ARE BROUGHT ON RECORD BY THE REVENUE, NO U-TU RN IS PERMISSIBLE. THE LEARNED ASSESSING OFFICER IS BOUND BY RULE OF CONSISTENCY. THE FOLLOWING CASES SUPPORT THE CASE OF THE ASSESSEE : I. PARSHURAM POTTERY WORKS LTD. VS ITO 106 ITR 1 (SC) II. SECURITY PRINTERS 264 ITR 276(DEL.) III. CIT VS NEO POLYPACK PVT. LTD. 245 ITR 492 (DEL.) IV. CWT VS ALLIED FINANCE PVT. LTD. 289 ITR 318 (DEL.) V. BERGER PAINTS INDIA LTD. VS CIT 266 ITR 99 (SC) VI. DCIT VS UNITED VANASPATI (275 ITR 124) (AT)(CHANDIGARH ITAT) VII. UNION OF INDIA VS KUMUDINI N. DALAL 249 ITR 219 (SC ) VIII. UNION OF INDIA VS SATISH PANNALAL SHAH 249 ITR 221 IX. B.F.VARGHESE VS STATE OF KERALA 72 ITR 726 (KER.) X. CIT VS NARENDRA DOSHI 254 ITR 606 (SC) XI. CIT VS SHIVSAGAR ESTATE 257 ITR 59 (SC) XII. PRADIP RAMANLAL SETH VS UOI 204 ITR 866 (GUJ.) XIII. RADHASWAMY SATSANG VS CIT 193 ITR 321 (SC) XIV. AGGARWAL WAREHOUSING & LEASING LTD. 257 ITR 235 (MP) 5. THE SUM AND SUBSTANCE OF THE AFORESAID JUDICIAL PRONOUNCEMENTS IS THAT ON THE BASIS OF PRINCIPLE OF JUDICIAL DISCIPLINE, CONSISTENCY HAS TO BE FOLLOWED AND ONCE IN A PARTICULAR YEAR, IF ANY VIEW IS TAKEN, IN THE ABSEN CE OF ANY CONTRARY MATERIAL, NO CONTRARY VIEW IS TO BE TAKEN AS FINALITY ITA NO.5462/MUM/2012 SMT. DARSHANA B. DOSHI 9 TO THE LITIGATION IS ALSO A PRINCIPLE WHICH HAS TO BE FOLLOWED. BEFORE US, NO CONTRARY FACTS OR ANY ADVERSE MATERIA L WAS BROUGHT ON RECORD BY THE REVENUE, THEREFORE, ON THE PRINCIPLE OF CONSISTENCY ALSO, THE ASSESSEE IS HAVING A GOOD CASE IN HER FAVOUR. THUS, CONSIDERING THE TOTALITY OF FACTS AN D THE JUDICIAL PRONOUNCEMENTS DISCUSSED HEREINABOVE, THE APPEAL OF THE ASSESSEE IS HEREBY ALLOWED. THIS ORDER WAS PRONOUNCED IN THE OPEN IN THE PRESEN CE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCL USION OF THE HEARING ON 06/06/2016. SD/- SD/- ( ASHWANI TANEJA ) (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER $ % MUMBAI; ) DATED : 07/06/2016 *SSL* %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. *+,- / THE APPELLANT 2. ./,- / THE RESPONDENT. 3. 0 0 $ 1# ( *+ ) / THE CIT, MUMBAI. 4. 0 0 $ 1# / CIT(A)- , MUMBAI 5. 23 .# , 0 *+' * 4 , $ % / DR, ITAT, MUMBAI 6. ! 5% / GUARD FILE. / BY ORDER, /2+# .# //TRUE COPY// / (DY./ASSTT. REGISTRAR) , $ % / ITAT, MUMBAI