ACIT 11(3), MUMBAI V. MALLIKA M. MADHANI, MUMBAI

ITA 5603/MUM/2011

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0942 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 8 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-04-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 19-03-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 02-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PAWAN KU MAR BEERLA
• Assessee Lawyers: K SHIVARAM SHRI AJAY SINGH
• Keywords: Capital asset; Business income; Rule of consistency
• Section: 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI N.K . BILLAIYA, A CCOUNTANT M EMBER / I .T.A. NO . 5603/MUM/2011 ( / ASSESSMENT YEAR : 2007 - 08 THE ACIT 11(3), AAYAKAR BHAVAN, MUMBAI - 400 020 / VS. SMT. MALLIKA M. MADHANI, 1202, ADINATH BLDG., SHANTIPATH, SUDHA PARK, GHATKOPAR (E), MUMBAI - 400 077 ./ ./ PAN/GIR NO. : ACYPM 5610Q ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY: SHRI PAWAN KUMAR BEERLA / RESPONDENT BY : SHRI K. SHIVARAM SHRI AJAY SINGH / DATE OF HEARING : 31 . 0 3 .2015 / DATE OF PRONOUNCEMENT : 08 .0 4 .2015 / O R D E R PER N.K. BILLAIYA, AM: THIS IS AN APPEAL BY THE REVENUE PREFERRED AGAINST THE ORDER OF THE LD. CIT(A) - 2, MUMBAI DT. 25.5.2011 PERTAINING TO ASSESSMENT YEAR 2007 - 08. ITA. NO. 5603/M/2011 2 2. THE SOLE GRIEVANCE OF THE REVENUE IS THAT THE LD. CIT(A) ERRED IN TREATING INCOME OF RS. 2,09,80,137/ - EARNED BY THE ASSESSEE AS INCOME CHARGEABLE UNDE R THE HEAD CAPITAL GAIN AND NOT UNDER THE HEAD BUSINESS INCOME. 3. FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL DENTIST BY PROFESSION. THE RETURN FOR THE YEAR WAS FILED ON 27.7.2007 DECLARING TOTAL INCOME OF RS. 2,10,83,720/ - . THE RETURN WA S SELECTED FOR SCRUTINY ASSESSMENT. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD EARNED INCOME FROM PROFESSION OF RS. 7 9 ,100/ - , FROM SPECULATIVE PROFIT OF RS. 73,396/ - AND SHORT TERM CAPIT AL GAIN OF RS. 2,09,80,137/ - . THE ASSESSEE WAS ASKED TO EXPLAIN WHY SHORT TERM CAPITAL GAIN EARNED BY HER SHOULD NOT BE TREATED AS INCOME DERIVED FROM HER BUSINESS OF SHARE TRADING. 3.1. IN HER REPLY, IT WAS EXPLAINED THAT SHE IS DENTIST BY PROFESSION AND HER MAIN PROFESSION IS DENTIST ONLY. IT WAS FURTHER EXPLAINED THAT DUE TO BOON IN THE STOCK MARKET SHE STARTED INVESTING IN SHARES. IT WAS EXPLAINED THAT PURCHASES ARE OF DELIVERY BASED ON WHICH STT HAS BEEN PAID. 3.2. AFTER CONSIDERING THE SUB MISSIONS MADE BY THE ASSESSEE, THE AO OBSERVED THAT FROM THE PROFESSION THE ASSESSEE HAS SHOWN ONLY INCOME AT RS. 79,100/ - WHEREAS SHORT TERM CAPITAL GAIN IS AT RS. 2,09,80,137/ - . THE AO FURTHER OBSERVED THAT THE ASSESSEE HAS ALSO SHOWN SPECULATION PROF IT O N NON DELIVERY BASED SHARE TRANSACTION. MERE PRODUCTION OF BILLS AND DEMAT ACCOUNT DO NOT ESTABLISH THAT SHE WAS AN INVESTOR. THE ASSESSEE HAS ALSO TAKEN LOAN FROM TWO PARTIES. THE AO FURTHER OBSERVED THAT THE LEDGER ACCOUNT OF THE STOCK BROKER SHOWS SUBSTANTIAL ENTRIES OF SEVERAL COMPANIES W HICH CLEARLY ESTABLISH THAT THE ASSESSEE IS A TRADER. ITA. NO. 5603/M/2011 3 3.3. AFTER GIVING A DETAILED DISCUSSION, THE AO FINALLY CONCLUDED BY TREAT ING THE ENTIRE SHORT TERM CAPITAL GAIN AS BUSINESS PROFIT DERIVED FROM TRADING IN SHARES AND COMPLETED THE ASSESSMENT BY TREATI NG RS. 2,09,80,137/ - AS INCOME FROM SPECULATION BUSINESS. 4. AGGRIEVED BY THIS, THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) AND REITERATED WHAT HAS BEEN STATED DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS. 4.1. AFTER CONSIDERING THE ENTIRE FACTS AND THE SUBMISSIONS MADE BY THE ASSESSEE, THE LD. CIT(A) OBSERVED THAT IF THE ASSESSEE WANTED TO CARRY OUT ACTIVITIES IN THE NATURE OF BUSINESS AND/OR TRADING WITH THE INTENTION OF DOING BUSINESS, THEN ASSESSEE WOULD HAVE SET UP AN OFFICE AND WOUL D HAVE INCURRED OFFICE EXPENSES FOR DOING BUSINESS ACTIVITY IN THE SHARES. THE LD. CIT(A) FURTHER OBSERVED THAT SHARES OF RS. 75,33,905/ - WERE CARRY FORWARD TO THE SUBSEQUENT YEAR FROM EARLIER ASSESSMENT YEAR AND IN THE EARLIER ASSESSMENT YEAR, THE ASSESSE E HAS BEEN ACCEPTED AS AN INVESTOR IN THE SHARES. ACCORDING TO THE LD. CIT(A), THE SAME CONSISTENCY SHOULD HAVE BEEN FOLLOWED BY THE REVENUE . A LL THE TRANSACTIONS IN SHARES ARE DELIVERY BASED , WHICH SHOW THAT THE INTENTION OF THE ASSESSEE WAS TO INVEST AND NOT TO TRADE IN SHARES. AFTER CONSIDERING VARIOUS DECISIONS DISCUSSED BY THE LD. CIT(A) FROM PAGE - 10 TO 18 OF HIS ORDER, THE LD. CIT(A) WAS CONVINCED THAT THE INCOME OF THE ASSESSEE EARNED FROM SHARES SHOULD BE ASSESSED UNDER THE HEAD CAPITAL GAIN AND ACCORDINGLY DIRECTED THE AO TO ASSESS THE INCOME UNDER THE HEAD CAPITAL GAIN. 5. AGGRIEVED BY THIS, THE REVENUE IS BEFORE US. ITA. NO. 5603/M/2011 4 6. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED UPON THE FINDINGS AND THE OBSERVATIONS MADE BY THE AO IN HIS ASSESSMENT ORDER. 7. THE LD. COUNSEL FOR THE ASSESSEE REITERATED WHAT HAS BEEN SUBMITTED BEFORE THE LOWER AUTHORITIES. 8. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE REL EVANT DOCUMENTARY EVIDENCES BROUGHT ON RECORD AND REFERRED TO DURING THE COURSE OF THE PROCEEDINGS. THE ASSESSEE IS A DENTIST BY PROFESSION THEREFORE IT CANNOT BE EXPECTED FROM THE ASSESSEE TO DEVOTE FULL TIME IN SHARE TRADING BUSINESS. WE FIND THAT THE SHARES HAVE BEEN SHOWN UNDER THE HEAD INVESTMENT IN EARLIER ASSESSMENT YEARS AND THE SHARES SHOWN AS INVESTMENT DURING THE YEAR UNDER CONSIDERATION ARE MOSTLY BROUGHT FORWARD FROM EARLIER ASSESSMENT YEARS. WE FIND THAT IN EARLIER ASSESSMENT YEARS, THE ASS ESSEE HAS BEEN ACCEPTED AS AN INVESTOR AND THE ASSESSMENTS HAVE BEEN MADE BY TREATING THE INCOME FROM SHARES UNDER THE HEAD CAPITAL GAIN. SIMILARLY, WE FIND THAT IN SUBSEQUENT ASSESSMENT YEAR ALSO THE ASSESSEE HAS BEEN TAXED UNDER THE HEAD CAPITAL GAINS E VEN THE VOLUME OF TRANSACTIONS ARE SAME AS COMPARED TO PREVIOUS ASSESSMENT YEARS AND SUBSEQUENT ASSESSMENT YEAR , THEREFORE, IN OUR CONSIDERED OPINION, THE ASSESSING OFFICER ERRED IN TAKING A DIFFERENT VIEW ON SAME SET OF FACTS THEREBY BREACHING THE RULE OF CONSISTENCY. THERE IS NO DISPUTE THAT THE ASSESSEE HAS BEEN CONSISTENTLY OFFERING THE INCOME FROM SALE OF SHARES AS CAPITAL GAINS AND THE SAME HAS BEEN ACCEPTED BY THE DEPARTMENT FROM YEAR TO YEAR EXCEPT IN THE YEAR UNDER CONSIDERATION. THE TRIBUNAL IN THE CASE OF SMT. VARSHA J. ASHAR IN ITA NO. 959/M/2011 HAS CONSIDERED AND DECIDED AN IDENTICAL ISSUE IN PARA - 3 AS UNDER: ITA. NO. 5603/M/2011 5 AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERUSING THE RELEVANT MATERIAL ON RECORD, IT IS OBSERVED THAT THE LEARNED CIT(A) HAS RE CORDED A CATEGORICAL FINDING ON PAGE 12 OF THE IMPUGNED ORDER THAT IN THE EARLIER YEARS SUCH PROFIT ON SHORT TERM CAPITAL ASSET WAS TREATED AS SHORT TERM CAPITAL GAIN. THE LD. AR HAS PLACED ON RECORD COPY OF THE ORDER PASSED BY THE AO U/S. 143(3) IN RESPE CT OF THE IMMEDIATELY SUCCEEDING ASSESSMENT YEAR I.E. 2008 - 09 IN WHICH INCOME FROM SALE OF SHARES UNDER SIMILAR CIRCUMSTANCES DECLARED AS SHORT TERM CAPITAL GAIN HAS BEEN ACCEPTED AS SUCH. A COPY OF SUCH ASSESSMENT ORDER DT. 31.12.2010 HAS BEEN PLACED ON RECORD. THE LD. AR DREW OUR ATTENTION TO THE FACT THAT THE NUMBER OF SHARES DEALT WITH IN THE INSTANT YEAR IS LESS THAN THOSE IN THE SUCCEEDING ASSESSMENT YEAR. WE FIND THAT THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS GOPAL PUROHIT (2011) 336 ITR 287 (BOM) HAS EMPHASIZED ON THE PRINCIPLE OF CONSISTENCY. IN THIS CASE THE HONBLE HIGH COURT, DEALING WITH SIMILAR ISSUE, HELD THAT: THERE OUGHT TO BE UNIFORMITY IN TREATMENT AND CONSISTENCY WHEN THE FACTS AND CIRCUMSTANCES ARE IDENTICAL. AS INCOME FROM SALE OF SHARES HAS BEEN CONSISTENTLY ACCEPTED AS SHORT TERM CAPITAL GAIN IN PRECEDING AND SUCCEEDING YEARS, WE SEE NO REASON FOR OBSERVING DEPARTURE FOR THE CURRENT YEAR. RESPECTFULLY FOLLOWING THE PRECEDENT, WE UPHOLD THE IMPUGNED ORDER. I N THE FACTS AND THE CIRCUMSTANCES OF THE CASE, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF THE LD. CIT(A) ACCORDINGLY THE ORDER OF THE LD. CIT(A) IS UPHELD. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. OR DER PRONOUNCED IN THE OPEN COURT ON 8 TH APRIL , 2015 SD/ - SD/ - ( JOGINDER SINGH ) (N.K. BILLAIYA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 8 TH APRIL , 2015 . . ./ RJ , SR. PS ITA. NO. 5603/M/2011 6 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI