ASST CIT 14(3), MUMBAI V. SUMANDEVI S. RUIA, MUMBAI

ITA 6322/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8914 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2008-2009
• Appeal Filed On: 13-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V KRISHNAMOORTHY
• Assessee Lawyers: SANJIV M SHAH
• Keywords: Business income
• Section: 143(3)

Judgement Text

ITA NO.6322 OF 2011 SUMANDEVI S RUIA MUMBAI PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL 'E' BENCH, MUMBAI BEFORE SHRI B.R. MITTAL, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO.6322/MUM/2011 (ASSESSMENT YEAR: 2008-09) ASST. CIT -14(3), 6 TH FLOOR, EARNEST HOUSE, NARIMAN POINT, MUMBAI 400021 VS. SMT. SUMANDEVI S. RUIA, 74, GYAN BUILDING, 25, RAMWADI, KALBADEVI ROAD, MUMBAI 400002 PAN: AADPR 7860 E (APPELLANT) (RESPONDENT) DEPARTMENT BY: SHRI V. KRISHNA MOORTHY, DR ASSESSEE BY: SHRI SANJIV M. SHAH DATE OF HEARING: 07/08/2012 DATE OF PRONOUNCEMENT: 12/09/2012 O R D E R PER B. RAMAKOTAIAH, A.M. THIS IS A REVENUE APPEAL AGAINST THE ORDER OF THE C IT (A)-25 MUMBAI, DATED 27.07.2011. THE REVENUE HAS RAISED TH E FOLLOWING GROUNDS WHICH ARE MATERIAL FOR DECIDING THE ISSUE: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LEARNED CIT (A) HAS ERRED IN FACT AS WELL AS IN LAW IN TREATING THE INCOME FROM FREQUENT SALES AND PURCHAS E OF SHARES AS STCG INSTEAD OF BUSINESS INCOME IGNORING THE FACT THAT ASSESSEE HAS BEEN FREQUENTLY SELLING ANDPURCHASING THE SHARES WITH SMALL SPAN OF HOLDING INCLUDING THE INTRADY TRANSACTION. 2. ALSO THE LEARNED CIT (A) HAS ERRED IN LAW TO APP LY THE PRINCIPLE OF RES JUDICATA BY STATING THAT SHARE ACT IVITY TREATED AS INVESTMENT IN EARLIER YEARS CANNOT BE TR 5EATED AS BUSINESS INCOME IN SUBSEQUENT YEARS WHEREAS THE RES JUDICATA DOES NOT STRICTLY APPLY TO THE PROCEEDINGS OF INCOME TAX BEING EACH AND EVERY ASSESSMENT AS A SEPARATE ENTITY AS HELD BY HON'BLE SUPREME COURT IN THE CASE OF BRITISH PAINTS INDIA LTD VS. CIT (1991) 188 ITR 44 (SC). ITA NO.6322 OF 2011 SUMANDEVI S RUIA MUMBAI PAGE 2 OF 5 2. BRIEFLY STATED ASSESSEE IS AN INDIVIDUAL AND DECLAR ED CAPITAL GAINS BOTH ON LONG TERM AND SHORT TERM ALONG WITH I NTEREST AND DIVIDENDS. AO CONSIDERED THAT ASSESSEE WAS INVOLVED IN TRADING IN SHARES AND ACCORDINGLY TREATED THE ENTIRE SHORT TER M CAPITAL GAIN RECEIVED AS BUSINESS INCOME. IN ARRIVING AT THE ABO VE DECISION AO EXAMINED THE TRANSACTIONS TO ARRIVE AT THE RELEVANT FINDINGS THAT THE TOTAL SALES MADE DURING THE YEAR WAS TO THE TUNE OF ` 63,83,821/- RESULTING SHORT TERM CAPITAL GAIN OF ` 26,92,604/-. ACCORDING TO AOS ANALYSIS ASSESSEE TRADED ON 63 DAYS IN 34 SCRIPS AG GREGATING TO 35022 SHARES. 3. BEFORE THE CIT (A) ASSESSEE SUBMITTED THAT SHE IS A HOUSEWIFE AND HAS INVESTED IN SHARES AND SECURITIES FOR MORE THAN 15 YEARS AND SHE IS OFFERING THE INCOME ALWAYS AS CAPITAL GA IN. IT IS ALSO FURTHER SUBMITTED THAT SHE WAS ALSO NOT ENGAGED IN ANY OTHER BUSINESS ACTIVITY AND HER INCOMES ARE ONLY FROM INV ESTMENTS IN THE SHARES, DEPOSITS ETC., NOT ONLY THAT, IT WAS FURTHE R SUBMITTED THAT THERE ARE NO BORROWINGS AND ALL THE INVESTMENTS ARE FROM HER OWN FUNDS GENERATED YEAR AFTER YEAR. FURTHER IT IS ALSO SUBMITTED THAT IN THE PRECEDING YEAR ITSELF AO ACCEPTED HER AS AN INV ESTOR ON SHORT TERM GAIN AND SALE OF SHARES WAS TAXED AS SUCH. COP Y OF THE ORDER UNDER SECTION 143(3) FOR ASSESSMENT YEAR 2007-08 WA S PLACED AND RELIED ON THE JUDGMENT OF THE HON'BLE BOMBAY HIGH C OURT IN THE CASE OF CIT VS. GOPAL PUROHIT ( 228 CTR 582) ON THE PRINCIPLES OF CONSISTENCY. 4. AFTER CONSIDERING THE CONTENTIONS OF ASSESSEE AND E XAMINING THE DETAILS OF THE SHARE TRANSACTIONS, THE CIT (A) REJECTED AOS CONTENTIONS AND ALLOWED THE INCOME TO BE TAXED AS S HORT TERM CAPITAL GAIN. THE ORDER OF THE CIT (A) IN PARA 6 IS AS UNDER: 6. AFTER HAVING HEARD THE ARGUMENTS AND ON PERUSAL OF MATERIAL ON RECORDS AND DULY CONSIDERING THE APPLICABLE LEGAL POSITION AND ALSO FACTUAL MATRIX O F THE CASE, I AM OF THE CONSIDERED VIEW THAT THE ITA NO.6322 OF 2011 SUMANDEVI S RUIA MUMBAI PAGE 3 OF 5 ASSESSEE'S GRIEVANCE IS LEGALLY SUSTAINABLE ON MERITS. IT IS UNDISPUTED THAT THE ASSESSEE IS DERIV ING INCOME IN NATURE OF CAPITAL GAIN AND BANK INTEREST AND DIVIDEND INCOME ONLY. THERE IS NO EVIDENCE THAT THE ASSESSEE HAD UTILIZED ANY BORROWED FUND. IT IS ALSO UNDISPUTED THAT ASSESSEE HAD HELD SHARES FROM THE YEAR 1994-95 ONWARDS. THE BALANCE AS ON 31/03/2008 REFLECTS THE HOLDING OF SHARES, WHICH WERE ACQUIRED IN THE YEAR 1993- 94 , 1994-95, 1989-90, 1991-92, 2000-01, 2001-02, 2005-06 AND SO ON. IT IS ALSO UNDISPUTED THAT THE SCRUTINY ASSESSMENT HAD TAKEN PLACE IN IMMEDIATELY PRECEDING YEAR I.E. ASSESSMENT YEAR 2007-08. I HAVE VERIFIED THE CASE RECORDS FOR ASSESSMENT YEAR 2007- 08 WHICH DIVULGES THAT AFTER THOROUGH VERIFICATION AND ANALYSIS OF ALL THE TRANSACTIONS CARRIED OUT IN SHARES, AO HAD TREATED ALL TRANSACTIONS AS INVESTMENT TRANSACTIONS AND ALLOWED THE SHORT TERM CAPITAL GAIN AS SUCH. IN THE SAID YEAR TOTAL SALES WERE TO THE EXTENT OF `.3.69 CRORES, WHEREAS IN INSTANT YEAR, TOTAL SALES ARE AT `.63.80 LAKHS. SIMILARLY, THE SHORT TERM CAPITAL GAIN IN PRECEDING YEAR WAS AT `.80.74 LAKHS, WHEREAS IN THE INSTANT YEAR, SHORT TERM CAPITAL GAIN IS AT RS. 26.92 LAKHS . THE NUMBER OF SALES TRANSACTIONS ARE 34 AS AGAINST 37 TRANSACTIONS IN PRECEDING YEAR. SIMILARLY, PURCHASES DURING THE YEAR ARE AT RS. 36.91 LAKHS AS AGAINST PRECEDING YEAR PURCHASES OF RS. 2.77 CRORES . THUS, THE FACTS OF INSTANT YEAR ARE MORE FAVOURABLE TO THE ASSESSEE. NEEDLESS TO SAY THAT THE ASSESSMENT IN PRECEDING YEAR WAS COMPLETED UNDER SECTION 143(3) OF THE IT ACT. THE DECISION OF HON'B LE HIGH COURT OF MUMBAI IN THE CASE OF GOPAL PUROHIT AND CONFIRMED BY THE HON'BLE SUPREME COURT IS SQUARELY APPLICABLE TO THE FACTS OF THIS CASE. EVEN OTHERWISE, THE HON'BLE ITAT HAD DECIDED THE IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE IN THE CA SE OF ACIT-14(3) VIS. MANISH D. DESAI (ITA NO.3661/MUM/ 2010 DATED 27/5/2011 FOR A.Y. 2006-07). IN THE CASE OF MANISH D. DESAI, SCRUTINY ASSESSMENT HAD TAKEN PLACE FOR A.Y. 2008-09, WHEREIN THE ASSESSEE'S CLAIM WAS ACCEPTED AS SUCH. THE HON'BLE IT AT DECIDED THE ISSUE IN FAVOUR OF TH E ASSESSEE FOR A.Y. 2006-07 ON THE BASIS OF A.O. U/S. 143(3) IN A.Y. 2008-09 HOLDING THAT ALL OF A SUDDEN IN THE INSTANT YEAR ALONE IT CAN NOT BE HELD THAT ASSESSEE WAS TRADER IN SHARES. SIMILARLY, THE ITA NO.6322 OF 2011 SUMANDEVI S RUIA MUMBAI PAGE 4 OF 5 HON'BLE ITAT HAD DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE IN THE CASE OF ACIT-14(2) VIS. RAJKISHORE MUNDRA (ITA NO. 2143/MUM/2010 DATED 20112/2010 FOR A.Y. 2006-07). IN THIS CASE, IT WAS HELD THAT ASSESSEE INVESTED ONLY OWN/SURPLUS FUND IN SHARES AND NOT TAKEN BORROWINGS FOR THE PURPOSE OF ANY INVESTMENT IN SHARES AND SUCH INVESTMENT WERE MADE IN PAST MANY YEARS I.E. 2001 ONWARDS. IN THE GIVEN FACTS, THE HON'BLE IT AT HELD THAT INC OME FROM TRANSFER OF SUCH SHARES CANNOT BE HELD AS BUSINESS INCOME. IN VIEW OF THE PECULIAR FACTS OF T HE INSTANT CASE AND JUDICIAL PRONOUNCEMENTS DISCUSSED AS ABOVE AND IN PARTICULAR ACCEPTANCE AS AN INVESTOR/ SHORT TERM CAPITAL GAIN IN SCRUTINY ASSESSMENT OF IMMEDIATELY PRECEDING YEAR, IT IMMENSELY TRANSPIRES THAT ASSESSEE IS AN INVESTOR AND IS ELIGIBLE FOR SHORT TERM CAPITAL GAIN ON TRANSACTIONS WHICH ARE DELIVERY BASED. AS HELD BY THE AO, THE ASSESSEE HAD CARRIED OUT INTRA DAY TRANSACTIONS IN 5 SCRIPTS AS MENTIONED ON PAGE 10 O F THE' ASSESSMENT ORDER, WHEREIN NO DELIVERY IS POSSIBLE. HENCE, THE GAINS OF ` 30,8701 - IN THESE TRANSACTIONS SHOULD BE TREATED AS BUSINESS INCOME. FOR REMAINING TRANSACTIONS, THE ASSESSEE'S CLAIM OF SHORT TERM CAPITAL GAIN IS ALLOWABLE IN VIEW OF DISCUSSION MADE HEREINABOVE. IN TERMS OF DISCUSSION AS ABOVE, ASSESSEE IS ENTITLED FOR CLAIM OF SHORT T ERM CAPITAL GAIN ON SALE TRANSACTIONS MADE BY THE ASSESSEE DURING THE YEAR AS SUCH. REVENUE IS AGGRIEVED AND ACCORDINGLY RAISED THE GRO UNDS. 5. AFTER HEARING BOTH THE LEARNED COUNSELS, WE ARE OF THE OPINION THAT THERE IS NO NEED TO DIFFER FROM THE FINDINGS O F THE CIT (A). THE LEARNED CIT (A) NOT ONLY ANALYZED THE ISSUE BASED O N THE PAST RECORD, BUT ALSO ON THE TRANSACTIONS UNDERTAKEN IN THE IMMEDIATELY PRECEDING YEAR IN COMPARISON TO THE TRANSACTIONS IN THIS YEAR. IT IS AN ADMITTED FACT THAT AO IN AY 2007-08 HAS ACCEPTED ASSESSEE AS AN INVESTOR AND SHORT TERM CAPITAL GAIN TO AN EXTEN T OF ` .80,74,939/- WAS ACCEPTED AS SUCH IN THE SCRUTINY A SSESSMENT, WHEREAS IN THIS YEAR THE SHORT TERM CAPITAL GAIN WA S ONLY ` .26,92,605/-. WE ALSO PERUSED THE STATEMENT OF SHOR T TERM CAPITAL ITA NO.6322 OF 2011 SUMANDEVI S RUIA MUMBAI PAGE 5 OF 5 GAIN AND NOTICED THAT THE CAPITAL GAIN OF ` .20,44,108/- HAS ARISEN ONLY ON SHARES OF PSTL PURCHASED ON 18.01.2007 AND SOLD ON 10.04.2007. REST OF THE TRANSACTIONS ARE SMALL TRAN SACTIONS YIELDING CAPITAL GAIN REGULARLY AND EXCEPT IN ONE OR TWO TIM ES, THERE ARE NO REPEATED PURCHASE AND SALE OF THE SAME SHARES. THER E IS A CONSIDERABLE PERIOD OF HOLDING ALSO IN THE SHARES A ND NOT TRADED IMMEDIATELY. THEREFORE, THERE ARE NO INDICATIONS TH AT ASSESSEE IS INVOLVED IN TRADING OF SHARES. IN VIEW OF THESE FAC TS, WE UPHOLD THE ORDER OF THE CIT (A) AND REJECT THE REVENUE GROUNDS . ACCORDINGLY APPEAL IS DISMISSED. 6. IN THE RESULT APPEAL FILED BY THE REVENUE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH SEPTEMBER, 2012. SD/- SD/- (B.R. MITTAL) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACC OUNTANT MEMBER MUMBAI, DATED: 12 TH SEPTEMBER, 2012. VNODAN/SPS COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, E BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI