ACIT,-18(1), MUMBAI V. SMT JAYA TALAKSHI CHHEDA, LEGAL HEIR OF HITESH BHAGAT, MUMBAI

ITA 6354/MUM/2011

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2563 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 27-05-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 15-09-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VIKAS AGARWAL
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI , , BEFORE SHRI SHAILENDRA KUMAR YADAV, JM AND SHRI RAMIT KOCHAR , AM ./ ITA NO. 6354/MUM/2011 ( / ASSESSMENT YEAR: 2008 - 09 ) A C I T - 211 ) (ERSTWHILE ACIT - 18(1) /APPELLANT 1ST FLOOR, PIRAMAL CHAMBERS PAREL, MUMBAI 400012 / VS. SMT. JAYA TALAKSHI CHHEDA / RESPONDENT LEGAL HEIR OF HITESH BHAGAT 126/3518, PANT NAGAR, VISHAL CHSL GHATKOPAR (E), MUMBAI 400007 ./ PAN - ADIPB1557C / APPELLANT BY: SHRI VIKAS AGARWAL / RESPONDENT BY : SHRI BHUPENDRA SHAH / DATE OF HEARING : 26.10. 2015 / DATE OF PRONOUNCEMENT : 30 .10.2015 / O R D E R PER SHAILENDRA KUMAR YADAV, JM THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER CIT(A) ON FOLLOWING GROUND: - I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN ALLOWING THE APPEAL OF THE ASSESSEE AND DIRECTING THE A.O. TO TREAT THE INCOME OF RS.1,08,74,670/ - AS SHORT TERM CAPITAL GAIN U/S. 111A OF THE I.T. ACT, 1961 INSTEAD OF BUSINESS INCOME AS TREATED BY THE AO. 2. SIMILAR ISSUE AROSE BEFORE ITAT F BENCH IN THE CASE OF ACIT VS. HITESH S. BHAGAT IN ITA NO. 6586/MUM/20 HAS SET ASIDE THE ISSUE AGAINST THE ASSESSEE BY OBSERVING AS UNDER: 5 WE HAVE CONSIDERED THE RIVAL CONTENTION AS WELL AS THE RELEVANT MATERIAL ON RECORD. THE QUESTION BEFORE US IS REGARDING THE NATURE OF TRANSACTION OF PURCHASE AND SALE OF SHARES CARRIED OUT BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. THE ASSESSING OFFICER HAS GIVEN THE DETAILS OF THE TRANSACTION CARRIED OUT BY THE ASSESSEE AT PAGES 5 TO 7 OF THE ASSESSMENT ORDER AS UNDER; 2 ITA NO. 6354/MUM/2011 SMT. JAYA TALAKSHI CHHEDA SIMILAR ISSUE AROSE BEFORE ITAT F BENCH IN THE CASE OF ACIT VS. HITESH S. BHAGAT IN ITA NO. 6586/MUM/20 10 WHEREIN THE TRIBUNAL HAS SET ASIDE THE ISSUE AGAINST THE ASSESSEE BY OBSERVING AS UNDER: WE HAVE CONSIDERED THE RIVAL CONTENTION AS WELL AS THE RELEVANT MATERIAL ON RECORD. THE QUESTION BEFORE US IS REGARDING THE NATURE OF TRANSACTION OF PURCHASE AND SALE OF SHARES CARRIED OUT BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. THE OFFICER HAS GIVEN THE DETAILS OF THE TRANSACTION CARRIED OUT BY THE ASSESSEE AT PAGES 5 TO 7 OF THE ASSESSMENT ORDER AS ITA NO. 6354/MUM/2011 SMT. JAYA TALAKSHI CHHEDA SIMILAR ISSUE AROSE BEFORE ITAT F BENCH IN THE CASE OF ACIT 10 WHEREIN THE TRIBUNAL HAS SET ASIDE THE ISSUE AGAINST THE ASSESSEE BY OBSERVING AS UNDER: - WE HAVE CONSIDERED THE RIVAL CONTENTION AS WELL AS THE RELEVANT MATERIAL ON RECORD. THE QUESTION BEFORE US IS REGARDING THE NATURE OF TRANSACTION OF PURCHASE AND SALE OF SHARES CARRIED OUT BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. THE OFFICER HAS GIVEN THE DETAILS OF THE TRANSACTION CARRIED OUT BY THE ASSESSEE AT PAGES 5 TO 7 OF THE ASSESSMENT ORDER AS 3 ITA NO. 6354/MUM/2011 SMT. JAYA TALAKSHI CHHEDA ITA NO. 6354/MUM/2011 SMT. JAYA TALAKSHI CHHEDA 5.1 THERE ARE 86 TRANSACTIONS OF SALE CARRIED BY THE ASSESSEE DURING THE YEAR. THE HOLDING PERIOD OF THE TRANSACTION FROM ONE DAY TO 244 DAYS. OUT OF 86 TRANSACTIONS, THE HOLDING PERIOD IN RESPECT OF 42 TRANSACTIONS IS UPTO 7 DAYS. THUS, IT IS CLEAR THAT ABOUT 50% OF THE TOTAL TRANSACTIONS OF SALE OF SHARE DURING THE YEAR, THE HOLDING PERIOD IS ONLY UPTO 7 DAYS. AS POINTED OUT BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS CARRIED OUT REPETITIVE TRANSACTIONS OF PURCHASE AND SALE IN THE SAME SCRIPS E.G THE SHARES OF AUROBINDO PHARMA WERE PURCHASED ON 21.4.2006 AND THEN SOLD ON 27.4.2006 AND THEREAFTER AGA 24.5.2006. THUS, THE REPETITIVE TRANSACTIONS IN THE SAME SCRIP SHOWS THE ASSESSEES INTENTION OF PURCHASE OF THE SHARES FOR RESALE PURPOSES AND BOOK PROFITS AT THE EARLIEST OCCASION. THE HOLDING PERIOD IS UPTO ONE WE 86 TRANSACTIONS CLEARLY SHOW THAT THE ASSESSEE IS EARNING PROFIT BY TAKING ADVANTAGE OF THE VOLATILE MARKET CONDITION AND THUS IT CANNOT BE SAID THAT THE TRANSACTIONS CARRIED ON 42 OCCASION WERE WITH THE INTENTION TO HOL OWNERSHIP AND YIELDING OF DIVIDEND INCOME. FURTHER, THE ASSESSEE IS ALSO ENGAGED IN THE SPECULATIVE TRANSACTIONS AND OFFERED THE INCOME OF RS. 4,70.553/ AS BUSINESS INCOME ON ACCOUNT OF SPECULATIVE TRANSACTIONS OUT OF THE INCOME OFFERED BY THE ASSESSEE AT RS 9,52,507/ THE OBSERVATIONS OF THE CIT(A) IS THAT THE ASSESSEE IS NOT IN THE BUSINESS OF TRADING OF SHARES IS CONTRADICTORY TO THE FACTS. FURTHER, THE CIT(A) HAS ALSO OBSERVED THAT THE ASSESS EMPLOYED ANY PERSON FOR THE PURCHASE OF SALE OF THE SHARES 4 ITA NO. 6354/MUM/2011 SMT. JAYA TALAKSHI CHHEDA 5.1 THERE ARE 86 TRANSACTIONS OF SALE CARRIED BY THE ASSESSEE DURING THE YEAR. THE HOLDING PERIOD OF THE TRANSACTION FROM ONE DAY TO 244 DAYS. OUT OF 86 TRANSACTIONS, THE HOLDING PERIOD IN RESPECT OF 42 TRANSACTIONS IS UPTO 7 DAYS. THUS, IT IS CLEAR THAT ABOUT 50% OF THE TOTAL TRANSACTIONS OF SALE OF SHARE DURING THE YEAR, THE HOLDING PERIOD IS ONLY UPTO 7 DAYS. AS POINTED OUT BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS CARRIED OUT REPETITIVE TRANSACTIONS OF PURCHASE AND SALE IN THE SAME SCRIPS E.G THE SHARES OF AUROBINDO PHARMA WERE PURCHASED ON 21.4.2006 AND THEN SOLD ON 27.4.2006 AND THEREAFTER AGA IN PURCHASED ON 22.5.2006 AND RESOLD ON 24.5.2006. THUS, THE REPETITIVE TRANSACTIONS IN THE SAME SCRIP SHOWS THE ASSESSEES INTENTION OF PURCHASE OF THE SHARES FOR RESALE PURPOSES AND BOOK PROFITS AT THE EARLIEST OCCASION. THE HOLDING PERIOD IS UPTO ONE WE EK AS FAR AS 42 TRANSACTIONS OUT OF 86 TRANSACTIONS CLEARLY SHOW THAT THE ASSESSEE IS EARNING PROFIT BY TAKING ADVANTAGE OF THE VOLATILE MARKET CONDITION AND THUS IT CANNOT BE SAID THAT THE TRANSACTIONS CARRIED ON 42 OCCASION WERE WITH THE INTENTION TO HOL D THESE SHARES FOR ENJOYING OF THE OWNERSHIP AND YIELDING OF DIVIDEND INCOME. FURTHER, THE ASSESSEE IS ALSO ENGAGED IN THE SPECULATIVE TRANSACTIONS AND OFFERED THE INCOME OF RS. 4,70.553/ AS BUSINESS INCOME ON ACCOUNT OF SPECULATIVE TRANSACTIONS OUT OF THE TOTAL BUSINESS INCOME OFFERED BY THE ASSESSEE AT RS 9,52,507/ THE OBSERVATIONS OF THE CIT(A) IS THAT THE ASSESSEE IS NOT IN THE BUSINESS OF TRADING OF SHARES IS CONTRADICTORY TO THE FACTS. FURTHER, THE CIT(A) HAS ALSO OBSERVED THAT THE ASSESS EMPLOYED ANY PERSON FOR THE PURCHASE OF SALE OF THE SHARES ITA NO. 6354/MUM/2011 SMT. JAYA TALAKSHI CHHEDA 5.1 THERE ARE 86 TRANSACTIONS OF SALE CARRIED BY THE ASSESSEE DURING THE YEAR. THE HOLDING PERIOD OF THE TRANSACTION S VARIES FROM ONE DAY TO 244 DAYS. OUT OF 86 TRANSACTIONS, THE HOLDING PERIOD IN RESPECT OF 42 TRANSACTIONS IS UPTO 7 DAYS. THUS, IT IS CLEAR THAT ABOUT 50% OF THE TOTAL TRANSACTIONS OF SALE OF SHARE DURING THE YEAR, THE HOLDING PERIOD IS ONLY UPTO 7 DAYS. FURTHER, AS POINTED OUT BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS CARRIED OUT REPETITIVE TRANSACTIONS OF PURCHASE AND SALE IN THE SAME SCRIPS E.G THE SHARES OF AUROBINDO PHARMA WERE PURCHASED ON 21.4.2006 AND THEN SOLD ON 27.4.2006 AND IN PURCHASED ON 22.5.2006 AND RESOLD ON 24.5.2006. THUS, THE REPETITIVE TRANSACTIONS IN THE SAME SCRIP SHOWS THE ASSESSEES INTENTION OF PURCHASE OF THE SHARES FOR RESALE PURPOSES AND BOOK PROFITS AT THE EARLIEST OCCASION. THE EK AS FAR AS 42 TRANSACTIONS OUT OF 86 TRANSACTIONS CLEARLY SHOW THAT THE ASSESSEE IS EARNING PROFIT BY TAKING ADVANTAGE OF THE VOLATILE MARKET CONDITION AND THUS IT CANNOT BE SAID THAT THE TRANSACTIONS CARRIED ON 42 OCCASION D THESE SHARES FOR ENJOYING OF THE OWNERSHIP AND YIELDING OF DIVIDEND INCOME. FURTHER, THE ASSESSEE IS ALSO ENGAGED IN THE SPECULATIVE TRANSACTIONS AND OFFERED THE INCOME OF RS. 4,70.553/ AS BUSINESS INCOME ON TOTAL BUSINESS INCOME OFFERED BY THE ASSESSEE AT RS 9,52,507/ - . THEREFORE, THE OBSERVATIONS OF THE CIT(A) IS THAT THE ASSESSEE IS NOT IN THE BUSINESS OF TRADING OF SHARES IS CONTRADICTORY TO THE FACTS. FURTHER, THE CIT(A) HAS ALSO OBSERVED THAT THE ASSESS EE HAS NOT EMPLOYED ANY PERSON FOR THE PURCHASE OF SALE OF THE SHARES 5 ITA NO. 6354/MUM/2011 SMT. JAYA TALAKSHI CHHEDA WHICH IS ALSO APPARENTLY NOT CORRECT BECAUSE BEFORE THE ASSESSING OFFICER ONE SHRI JAYESH SANGOI, ACCOUNTANT OF THE ASSESSEE COMPANY APPEARED FROM TIME TO TIME AND PARTICIPATED IN THE AS SESSMENT PROCEEDINGS. 5.2 THE ASSESSEES CASE IS MAINLY BASED ON THE PLEA THAT THE CLAIM OF LTCG AND STCG WAS ACCEPTED BY THE ASSESSING OFFICER IN THE AY 2005 - 06 AND 2006 - 07. THEREFORE, THE ASSESSING OFFICER CANNOT DENY THE SAME IN THE YEAR UNDER CONSIDERAT ION. THE CIT(A) HAS ALSO GIVEN MUCH EMPHASIS ON THIS POINT AND RELIED UPON THE DECISION OF THIS TRIBUNAL AS WELL AS THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF GOPAL PUROHIT. 5.3 IT IS SETTLED PROPOSITION OF LAW THAT THE PRINCIPLES OF RESJUDICATA AS WELL AS ESTOPELL IS NOT APPLICABLE IN THE MATTER OF TAXATION BECAUSE EACH ASSESSMENT YEAR IS A SEPARATE UNIT AND HAS TO BE ASSESSED AS PER THE PECULIAR FACTS OF THE CASE IN THE SAID ASSESSMENT YEAR. THE DECISION IN THE CASE OF GOPAL PUROHIT HAS REASSER TED THE PRINCIPLES OF CONSISTENCY, IF THE FACTS AND CIRCUMSTANCES ARE IDENTICAL. THE CIT(A) HAS SIMPLY OBSERVED THAT THE CLAIM OF THE ASSESSEE WAS ACCEPTED FOR THE AY 2005 - 06 AND 2006 - 07; THEREFORE, THE ASSESSING OFFICER CANNOT DISTURB THE SAME IN THE YEAR UNDER CONSIDERATION WITHOUT ANALYSING THE FACTS AND PARTICULARLY THE DETAILS OF PURCHASE AND SALE OF SHARE TRANSACTIONS BY COMPARING THE EARLIER ASSESSMENT YEARS WITH THE ASSESSMENT YEAR UNDER CONSIDERATION. EVEN BEFORE US, IT HAS NOT BEEN BROUGHT OUT THA T THE FACTS ARE IDENTICAL IN THE EARLIER YEARS AS WELL AS IN THE YEAR UNDER CONSIDERATION. ONCE THE DISTINGUISHING FACT HAS BEEN BROUGHT TO OUR NOTICE REGARDING THE HOLDING PERIOD IN THE CASE OF ABOUT 50% OF THE TRANSACTION IS WITHIN 7 DAYS AND THERE ARE R EPETITIVE TRANSACTIONS IN THE SAME SCRIPS AS WELL AS THE ASSESSEE HAS ALSO CARRIED OUT SPECULATIVE TRANSACTIONS; THEN THE ISSUE OF NATURE OF TRANSACTION WHETHER TRADING OR INVESTMENT HAS TO BE DECIDED ON THE BASIS OF PECULIAR FACTS OF PARTICULAR CASE. IN O RDER TO DETERMINE THE NATURE OF TRANSACTION, NO SINGLE FACTOR CAN BE SAID TO BE A DECISIVE AND THE ISSUES CAN BE ADJUDICATED ONLY BY TAKING INTO ACCOUNT ALL RELEVANT FACTS, FACTORS, CRITERIA AND PRINCIPLES, WHICH ARE RELEVANT AND DECISIVE AND CAN BE APPLIE D AS GUIDELINES. THUS, THERE IS NO SINGLE OR STRICT JACKET FORMULA TO DECIDE THE NATURE OF TRANSACTION OF PURCHASE AND SALE OF SHARES WHETHER TRADE OR INVESTMENT. 5.4 IN THE CASE OF MOTHER OF THE ASSESSEE MRS JAYA TALAKSHI CHHEDA (SUPRA) THE TRIBUNAL HAS CONSCIOUSLY OBSERVED THAT EACH ISSUE HAS TO BE BASED ON ITS OWN FACTUAL SITUATION AND THE ISSUE 6 ITA NO. 6354/MUM/2011 SMT. JAYA TALAKSHI CHHEDA IN THE SAID CASE WAS DECIDED ON THE BASIS OF THE FACTS EXITS IN THAT CASE. THEREFORE, THE FINDING OF FACT GIVEN BY THE TRIBUNAL AND BASED ON THE SPECIFIC FACT OF THE CASE CANNOT BE STRAIGHTAWAY APPLIED ON THE FACTS OF THE OTHER CASE. EVEN THE CLAIM OF THE ASSESSEE ACCEPTED BY THE ASSESSING OFFICER IN THE EARLIER YEAR CANNOT BE BINDING ON THE ASSESSING OFFICER BEING RULE OF RESJUDICATA OR ESTOPPEL AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF NEW JEHANGIR VAKIL MILLS CO. LTD. (SUPRA) AT PAGE 143 & 144 AS UNDER: ON THE PRINCIPLE STATED ABOVE, IT SEEMS TO US THAT IT WAS OPEN TO THE TAXING AUTHORITIES TO CONSIDER THE POSITION OF THE ASSESSEE IN 1943 FOR THE P URPOSE OF DETERMINING HOW THE GAINS MADE IN 1944 SHOULD BE COMPUTED, EVEN THOUGH THE SUBJECT OF THE ASSESSMENT PROCEEDINGS WAS THE COMPUTATION OF THE PROFITS MADE IN 1944. THE CIRCUMSTANCE THAT IN AN EARLIER ASSESSMENT RELATING TO 1943, THE ASSESSEE WAS TR EATED AS AN INVESTOR WOULD NOT IN OUR OPINION ESTOP THE ASSESSING AUTHORITIES FROM CONSIDERING, FOR THE PURPOSE OF COMPUTATION OF THE PROFITS OF 1944, AS TO WHEN THE TRADING ACTIVITY OF THE ASSESSEE IN SHARES BEGAN. THE ASSESSING AUTHORITIES FOUND THAT IT BEGAN IN 1943. ON THAT FINDING THE PROFITS WERE CORRECTLY COMPUTED AND THE ANSWER GIVEN BY THE HIGH COURT TO THE QUESTION OF THE COMPUTATION OF THE PROFITS WAS CORRECTLY GIVEN. 5.5 THE QUESTION BEFORE THE HONBLE SUPREME COURT COMPRISES THE BENCH OF THREE JUDGES, WAS WHETHER THERE WAS ANY EVIDENCE TO JUSTIFY THE JUDGEMENT OF THE TRIBUNAL AND CONFIRMATION OF THE HONBLE HIGH COURT THAT THE ASSESSEE COMPANY WAS ALSO IN DEALING IN SHARE NOT ONLY IN THE YEAR UNDER CONSIDERATION BUT ALSO IN THE PAST. THIS QUESTION WAS DECIDED BY THE HONBLE SUPREME COURT AFTER CONSIDERING THE FACT THAT IN THE EARLIER YEAR, THE ASSESSING OFFICER ACCEPTED THAT THE ASSESSEE AS AN INVESTOR IN SHARES; BUT SUBSEQUENTLY THE ASSESSING OFFICER TREATED THE INCOME ARISING FROM SALE OF SHARES AS BUSINESS INCOME AND THE ACTIVITY OF TRADING COMMENCES IN THE YEAR WHEN THE SHARES WERE PURCHASED. THEREFORE, DESPITE THE FACT THAT IN THE EARLIER YEAR, THE ASSESSING OFFICER ACCEPTED THE ASSESSEE AS AN INVESTOR IN SHARES, THE FINDING OF THE AUTH ORITIES BELOW AND THE HONBLE HIGH COURT WAS UPHELD BY THE HONBLE SUPREME COURT AND HELD THAT THE PROFITS WERE CORRECTLY COMPUTED IN THE YEAR UNDER CONSIDERATION. 7 ITA NO. 6354/MUM/2011 SMT. JAYA TALAKSHI CHHEDA 2.1 NOTHING CONTRARY WAS BROUGHT TO OUR KNOWLEDGE ON BEHALF O ASSESSEE. SINCE THE FACTS ARE SIMILAR SO FOLLOWING THE SAME REASONING WE ARE OF THE VIEW THAT ACCEPTANCE OF THE CLAIM FOR EARLIER YEAR WOULD NOT OPERATE RESJUDICATA OR ESTOPPEL ON ASSESSING OFFICER FOR DECIDING THE ISSUE FOR YEAR UNDER CONSIDERATION WHEN THE FACTS ARE NOT STRICTLY IDE NTICAL. ACCORDINGLY WE SET ASIDE THE ORDER OF CIT(A) AND RESTORE THE ORDER OF ASSESSING OFFICER WHEREIN THE INCOME ARISING FROM SALE OF SHARES HAS BEEN RIGHTLY ASSESSED AS BUSINESS INCOME. 3. IN THE RESULT, APPEAL FILED BY REVENUE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH OCTOBER, 2015. 30.10.2015 SD/ - SD/ - ( RAMIT KOCHAR ) ( SHAILENDRA KUMAR YADAV ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI , DATED 30 TH OCTOBER, 2015 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) - 29 , MUMBAI 4. / THE CIT - 18 , MUMBAI 5. , , / DR, H BENCH ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER //TRUE COPY// /ASSTT. REGISTRAR) , /ITAT, MUMBAI