ALKA K. UPADHYAYA, MUMBAI V. ACIT CIR 19(2), MUMBAI

ITA 6227/MUM/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3431 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 17-03-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 10-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M MURLIDR
• Keywords: Business income; Rule of consistency
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI RAJENDRA, ACCOUNTANT MEMBER ITA NO.6227/MUM/2012 ASSESSMENT YEAR-2007-08 ALKA K. UPADHAYA, 6-ALKA BUILDING, 15 TH ROAD, SOUTH AVENUE, SANTACRUZ (W), MUMBAI-400054 / VS. ACIT, CIRCLE-19(2), AAYKAR BHAVAN, M.K.ROAD, MUMBAI-400020 PAN NO. AAAPU 0288Q ( / APPELLANT) ( / RESPONDENT) ! / ASSESSEE BY SHRI NISHIT GANDHI ' / REVENUE BY SHRI M.MURLI-DR # '$ % !& / DATE OF HEARING : 17/03/2016 % !& / DATE OF ORDER: 17/03/2016 ITA NO.6227/MUM/2012 ALKA K. UPADHYAYA 2 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE ASSESSEE IS AGGRIEVED BY THE IMPUGNED ORDER DATED 03/08/2012 OF THE LD. FIRST APPELLATE AUTHORI TY, MUMBAI. THE ONLY GROUND RAISED IN THIS APPEAL PERTA INS TO ASSESSING RS.29,64,051/-, BEING GAIN ARISING FROM S ALE OF SHARES, UNDER THE HEAD PROFESSION AND GAINS ARISIN G FROM BUSINESS OR PROFESSION AGAINST THE SHORT TERM CAP ITAL GAINS OFFERED BY THE ASSESSEE UNDER THE HEAD CAPI TAL GAINS. 2. DURING HEARING, THE LD. COUNSEL FOR THE ASSESSE E, SHRI NISHIT GANDHI, CLAIMED THAT THE IMPUGNED ISSUE , ON IDENTICAL FACTS WAS DECIDED BY THE TRIBUNAL IN THE CASE OF ASSESSEE ITSELF FOR A.Y. 2006-07 VIDE ORDER DATED 18/02/2015 (ITA NO.3520/MUM/2010). THIS FACTUAL MAT RIX WAS CONSENTED TO BE CORRECT BY THE LD. DR, SHRI M. MURLI. 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS , IN BRIEF, ARE THAT THE ASSESSEE IS RETIRED DIRECTOR, DECLARED INCOME OF RS.33,36,300/- IN HER RETURN ON 28/07/2007, WHICH W AS COMPLETED U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT) ASSESSING THE TOTAL INCOME AT RS.33,36,300/- ITSELF. DURING THE YEAR UNDER CONSI DERATION, THE ASSESSEE CLAIMED/SHOWED SHORT TERM CAPITAL GAIN S AMOUNTING TO RS.29,64,051/-, ON SALE OF SHARES. SUC H SHARES WERE SHOWED AS INVESTMENT AND IN EARLIER YEA RS WERE ITA NO.6227/MUM/2012 ALKA K. UPADHYAYA 3 ASSESSED UNDER THE HEAD CAPITAL GAINS. THE INVESTME NT WAS MADE OUT OF SURPLUS FUNDS AVAILABLE WITH THE ASSESS EE. THE ASSESSING OFFICER WAS OF THE VIEW, THAT THE ASSESSE E HAD BEEN CARRYING OUT SYSTEM ACTIVITY OF PURCHASE AND S ALE OF SHARES BY KEEPING A CLOSE WATCH ON THE MARKET SITUA TION, THEREFORE, CONSIDERING THE FREQUENCY AND VOLUME OF TRADE, HE TREATED THE GAIN AS BUSINESS INCOME. 2.2. ON APPEAL, BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS), IT WAS CONCLUDED THAT THE CAP ITAL GAIN WAS EARNED WITH PROFIT MOTIVE WITHIN A SHORT S PAN OF PERIOD, THUS, THE INTENTION OF THE ASSESSEE WAS TO GAIN PROFIT BY DEALING IN SHARES, THUS, THE CONCLUSION DRAWN IN THE ASSESSMENT ORDER WAS AFFIRMED. THE ASSESSEE IS IN F URTHER APPEAL BEFORE THIS TRIBUNAL. 2.3. AS ASSERTED BY THE LD. COUNSEL FOR THE ASSESS EE, THAT THE IMPUGNED ISSUE ON IDENTICAL FACT IS COVERE D BY THE DECISION OF THE TRIBUNAL DATED 18/02/2015, WE ARE REPRODUCING HEREUNDER THE FACTUAL MATRIX FROM THE AFORESAID ORDER FOR READY REFERENCE AND ANALYSIS:- THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A), DATED 16-2-2010 FOR THE ASSESSMENT YEAR 2006-07, IN THE MATTER OF ORDER PASSED U/S.143(3) OF THE I.T. ACT, WHEREIN FO LLOWING GROUNDS HAVE BEEN TAKEN BY THE REVENUE :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DIRECTING TO TREAT THE STC GAIN ON SALE OF SHARES OF RS.13,60,155/ - AS A STC GAIN INSTEAD OF BUSINESS ITA NO.6227/MUM/2012 ALKA K. UPADHYAYA 4 INCOME MADE BY AO IN HIS ASSESSMENT ORDER, IGNORING THE FACT THAT:- A) THE ASSESSEE HAS DEPLOYED HIS FUND WITH AN INTEN TION OF EARNING PROFIT OF SUCH FUNDS AND THERE WAS NO INTENTION OF THE ASSESSEE TO APPRECIATE THE INVESTMENT SO MADE DURING THE YEAR. B) THE ASSESSEE HAD NO INTENTION TO HOLD HER SHARES IN ORDER TO EARN REGULAR INCOME OUT OF SUCH PURCHASES. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) HAS FAILED TO APPRECIATE THE IN DEPT H ANALYSIS MADE BY THE AO BEFORE TREATING THE GAINS AS BUSINESS INC OME AND THAT CIRCULAR NO. 4 OF 2007 HAS BE TAKEN INTO CONSIDERAT ION TO DECIDE WHETHER THE GAINS ARE TO BE TREATED AS SUCH OR AS B USINESS. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) FAILED TO APPRECIATE THE FACT THAT T HE TRANSACTION IS SHOWN WHETHER BY HIMSELF OR THROUGH HIS AGENT HAS T O BE TREATED AS ASSESSEE'S OWN TRANSACTION AND THE MOTIVE BEHIND SUCH TRANSACTION WAS TO EARN MAXIMUM PROFIT AND NOT INVE STMENT. 4. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE AO BE RESTORED. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. THE SHORT TERM CAPITAL GAIN DECLARED BY THE ASSESSEE WA S TREATED BY THE AO AS BUSINESS INCOME. BY THE IMPUGNED ORDER, THE C IT(A) DIRECTED THE AO TO TREAT THE SAME AS SHORT TERM CAPITAL GAIN AFTER HAVING THE FOLLOWING OBSERVATIONS :- 3.3 I HAVE CAREFULLY PERUSED THE ASSESSMENT ORDER, SUBMISSIONS MADE BY THE A.R ON BEHALF OF THE APPELLANT AND THE FACTS OF THE CASE. THE ISSUE INVOLVED IS IN RESPECT OF TREATMENT OF LO NG TERM CAPITAL GAINS ON SALE OF SHARES AND SALE OF MUTUAL FUNDS, S OLD AFTER 01.10.2004 AGGREGATING TO RS.14,10,430/- [ON SALE O F SHARES RS.5,87,180/- & ON MUTUAL FUNDS RS.8,23,250/- AS BU SINESS INCOME BY THE A.O AND THEREBY DENYING EXEMPTION TO THE APP ELLANT ULS.10(38) OF THE ACT. THE OTHER ISSUE INVOLVED IS IN RESPECT OF ITA NO.6227/MUM/2012 ALKA K. UPADHYAYA 5 TREATMENT OF SHORT TERM CAPITAL GAINS ON SALE OF SH ARES AND REDEMPTION OF MUTUAL FUNDS SOLD AFTER 01.10.2004 AG GREGATING TO RS.15,25,348/- [ON SALE OF SHARES RS.13,60,155/- & REDEMPTION OF MUTUAL FUNDS RS.1,65,193/-] AS BUSINESS INCOME BY T HE A.O INSTEAD OF APPLYING A SPECIAL RATE @ 10% AS PROVIDED ULS.111A OF THE ACT. THE A.R OF THE APPELLANT VIDE HIS LETTER DTD. 20.12.09 CONTENDED THAT THE SHORT TERM CAPITAL GAIN OF RS.15,25,348/- [13,60,15 5/- + 1,65,193] IS NOT CORRECT AND IN SUPPORT OF HIS CLAIM HE HAS CONT ENDED THAT THE CORRECT FIGURE OF SHORT TERM CAPITAL GAIN SHALL BE RS.12,86,854/- [11,21,661+1,65,193]. THE AO AFTER RELYING ON THE C BDT'S CIRCULAR BEARING NO.4/2007 DATED 15.6.2007 AND AFTER HAVING GIVEN OTHER REASONINGS TREATED THE LONG TERM CAPITAL GAIN OF RS .14,10,430/- AND SHORT TERM CAPITAL GAIN OF RS.15,25,348/- AS BUSINE SS INCOME IN THE HANDS OF THE APPELLANT. THE A.R OF THE APPELLANT HA S CONTENDED BEFORE ME THAT IN THE EARLIER ASST. YEAR THE APPELL ANT WAS TREATED AS AN INVESTOR AND NOT A TRADER OF THE SHARES AND ACCO RDINGLY PROFIT AND GAINS ARISING ON SALE OF THOSE INVESTMENT WERE OFFE RED FOR TAXATION UNDER THE HEAD CAPITAL GAINS AND HAS BEEN ASSESSED AS SUCH. THE A.R OF THE APPELLANT HAS ALSO PRODUCED COPY OF THE ASSE SSMENT ORDERS PASSED U/S.143(3) FOR EARLIER TWO YEARS VIZ. A.Y. 2 004-05 & 2005-06. THE A.R OF THE APPELLANT HAS RELIED ON THE HON'BLE BOMBAY HIGH COURT'S JUDGEMENT IN THE CASE OF CIT VS. GOPAL PURO HIT DELIVERED ON 6TH JANUARY, 2010' AND HAS PRAYED THAT INCOME DERIV ED BY THE APPELLANT FROM INVESTMENT ACTIVITY BE TREATED AS LO NG TERM AND SHORT TERM CAPITAL GAINS RESPECTIVELY AND THE SAME SHOULD NOT BE TREATED AS INCOME FROM BUSINESS. BASED ON THE FINDING RECORDED BY ITAT IN THE CASE OF CIT VS. GOPAL PUROHIT 122 TTJ MUMBAI 87, 'I T IS OPEN TO AN ASSESSEE TO MAINTAIN TWO SEPARATE PORTFOLIOS ONE RE LATING TO INVESTMENTS IN SHARES AND OTHER RELATING TO BUSINES S ACTIVITIES INVOLVING DEALING IN SHARES. THE ONLY DELIVERY BASE D TRANSACTIONS FALL ITA NO.6227/MUM/2012 ALKA K. UPADHYAYA 6 WITHIN THE PURVIEW OF NATURE OF INVESTMENT TRANSACT IONS GIVING RISE TO CAPITAL GAINS'. AS STATED ABOVE, IN THE PAST THE DE PARTMENT HAS ACCEPTED THE CLAIM OF THE APPELLANT OF BEING AN INV ESTOR. DURING THE YEAR UNDER CONSIDERATION, THE AO HAS TREATED THE AP PELLANT AS A TRADER WITHOUT BRINGING ON RECORD ANY REASON FOR DE VIATING FROM THE EARLIER STAND OF THE DEPARTMENT. I HAVE OBSERVED TH AT THE CASE OF THE APPELLANT IS SQUARELY COVERED BY THE RATIO LAID DOW N IN THE CASE OF CIT VS. GOPAL PUROHIT MENTIONED SUPRA, THEREFORE, T HE AO IS DIRECTED TO TREAT THE LONG TERM CAPITAL GAINS ON SALE OF SHA RES AND SALE OF MUTUAL FUNDS, SOLD AFTER 01.10.2004 AGGREGATING TO RS.14,10,430/- [ON SALE OF SHARES RS.5,87,180/- & ON MUTUAL FUNDS RS.8,23,250/-] AS SUCH AND ALLOW THE EXEMPTION TO THE APPELLANT U/S.1 0(38) OF THE ACT. APART FROM THE ABOVE, THE AO IS ALSO DIRECTED TO VE RIFY THE TRANSACTION OF SHARES AND MUTUAL FUNDS WHICH ARE DE LIVERY BASED AND TREAT THE SAME AS GIVING RISE TO CAPITAL GAINS AND CHARGE THE STCG AT CONCESSIONAL RATE OF 10% AS PROVIDED U/S.111A OF TH E ACT. THE OTHER TRANSACTIONS INVOLVING NON-DELIVERY SPECULATIVE TRA NSACTIONS WILL BE TREATED AS FORMING PART OF SPECULATION BUSINESS AND WILL BE TAXED AS SUCH. THE AO IS DIRECTED TO VERIFY AND QUANTIFY THE PROFIT/LOSS IN NON- DELIVERY BASED TRANSACTION AND CHARGE IT AS BUSINES S INCOME/LOSS. THE GROUNDS OF APPEAL ARE, ACCORDINGLY, ALLOWED. 4. GROUND NO.4 READS AS UNDER: 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN IAW:- THE LEARNED ITO ERRED IN CONSIDERING SHARES & MUTUAL FU NDS AS STOCK IN TRADE INSTEAD HELD AS INVESTMENTS IN THE BOOKS OF A CCOUNTS AND THEREBY GAIN MADE ON THE TRANSFER/REDEMPTION AS BUS INESS PROFIT IN DISREGARD OF THE FACTS OF THE CASE OF APPELLANT. HE FAILED TO APPRECIATE THE FACTS THAT THE APPELLANT IS NOT A TR ADER IN SHARES & THE ITA NO.6227/MUM/2012 ALKA K. UPADHYAYA 7 UNITS OF MUTUAL FUNDS IN INVESTOR. IN THIS RESPECT HE OUGHT TO HAVE APPRECIATED THAT THERE IS NO JUSTIFICATION FOR CONS IDERING SHARES AS STOCK IN TRADE AS PER CIRCULAR NO. 4/2007, DATED 15 .6.2007. 4.1 WHILE DISPOSING OFF GROUND NO. 2& 3, NECESSARY RELIEF HAS BEEN ALLOWED TO THE APPELLANT. THEREFORE, THIS GROUND OF APPEAL HAS BECOME INFRUCTUOUS AND IS DISMISSED. 3. AGAINST THE ABOVE ORDER OF CIT(A), THE REVENUE I S IN FURTHER APPEAL BEFORE US. 4. WE HAVE CONSIDERED RIVAL CONTENTIONS, CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND FROM THE RECORD THAT THE ASSESSEE WAS CONSISTENTLY INVESTING IN SHARES. CAPITAL GAINS OFFERED BY THE ASSESSEE EITHER AS LONG TERM OR SHOR T TERM WAS ACCEPTED BY THE DEPARTMENT IN ALL THE EARLIER ASSES SMENT YEARS U/S.143(3). THE ASSESSEE HAS ALSO PLACED ON RECORD THE ASSESSMENT ORDER FRAMED U/S.143(3) FOR THE A.Y.2005-06 & 2006- 07. AFTER GIVING DETAILED FINDING AT PARA 4, THE CIT(A) FOUND THAT ASSESSEE HAS EARNED LONG TERM CAPITAL GAINS OF RS.14,10,430/ - ON SALE OF SHARES AND MUTUAL FUNDS WHICH IS LIABLE TO EXEMPTIO N U/S.10(38). THE CIT(A) HAS ALSO DIRECTED AO TO VERIFY THE TRANS ACTION OF SHARES AND MUTUAL FUNDS HELD FOR LESS THAN TWELVE MONTHS, WHICH ARE DELIVERY BASED AND TREAT THE SAME AS GIVING RISE TO SHORT TERM CAPITAL GAINS. THE FINDINGS RECORDED BY CIT(A) HAVE NOT BEEN CONTROVERTED BY LD. DR. ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A) FOR ALLOWING ASSES SEES CLAIM OF LONG TERM AND SHORT TERM CAPITAL GAINS EARNED ON SA LE OF SHARES AND MUTUAL FUNDS. 5. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ITA NO.6227/MUM/2012 ALKA K. UPADHYAYA 8 2.4. IN THE AFORESAID ORDER OF THE TRIBUNAL, IT IS NOTED THAT THERE IS CATEGORICAL FINDING THAT THE DEPARTME NT HAD BEEN ACCEPTING THE STAND THAT THE ASSESSEE WAS CONS ISTENTLY INVESTING IN SHARES AND THE CAPITAL GAINS, OFFERED BY THE ASSESSEE WAS ASSESSED EITHER AS LONG TERM GAIN OR S HORT TERM GAIN WHILE PASSING ORDER U/S 143(3) OF THE ACT . IDENTICAL WAS THE SITUATION FOR A.YS.2005-06 AND 20 06-07 FRAMED U/S 143(3) OF THE ACT AND THE SAME WERE FOUN D EXEMPTED U/S 10(38) OF THE ACT. THESE FINDINGS OF T HE LD. COMMISSIONER OF INCOME TAX (APPEALS) AS WELL AS OF THIS TRIBUNAL WERE NOT CONTRADICTED BEFORE US, THUS, IN THE ABSENCE OF ANY CONTRARY MATERIAL, ON THE PRINCIPLE OF CONSISTENCY, THE DEPARTMENT IS NOT EXPECTED TO TAKE A U- TURN AND ASSESS THE INCOME AS BUSINESS INCOME. SO F AR AS THE CONTENTION OF THE LD. DR AND ALSO THE OBSERVATI ON OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) THAT THERE WAS A PROFIT MOTIVE, WE ARE NOT IMPRESSED BY THIS SUBMISS ION, BECAUSE, EVERY INVESTOR INVEST THE MONEY FOR GAIN A ND NOT FOR LOSS. THE ISSUE OF CONSISTENCY AND FREQUENCY OF SHARES HAS BEEN DEALT WITH IN DETAIL BY HONBLE JURISDICTI ONAL HIGH COURT IN THE CASE OF GOPAL PUROHIT, WHICH COMES TO THE RESCUE OF THE ASSESSEE. 2.5. SO FAR AS, THE ISSUE OF CONSISTENCY IS CONCER NED, WE ARE OF THE VIEW THAT IN THE ABSENCE OF CONTRARY MATERIAL, CONSISTENCY HAS TO BE MAINTAINED. FOR WHICH WE ARE FORTIFIED BY FOLLOWING DECISIONS:- ITA NO.6227/MUM/2012 ALKA K. UPADHYAYA 9 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) 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 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 ITA NO.6227/MUM/2012 ALKA K. UPADHYAYA 10 PRINCIPLE OF CONSISTENCY ALSO, THE ASSESSEE IS HAVI NG A GOOD CASE IN HER FAVOUR. FINALLY, THE APPEAL OF THE ASSESSEE IS ALLOWED. THIS ORDER WAS PRONOUNCED IN THE OPEN IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 17/03/2016. SD/- SD/- (RAJENDRA) (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER # $ MUMBAI; ) DATED : 17/03/2016 F{X~{T? P.S/. . . %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT (RESPECTIVE ASSESSEE) 2. / THE RESPONDENT. 3. + + # ,! ( ) / THE CIT, MUMBAI. 4. + + # ,! / CIT(A)- , MUMBAI, 5. /'01 !2 , + & 23 , # $ / DR, ITAT, MUMBAI 6. 14 5$ / GUARD FILE. / BY ORDER, /! ! //TRUE COPY// / (DY./ASSTT. REGISTRAR) , # $ / ITAT, MUMBAI