RUCHIT BHARAT PATEL, MUMBAI V. ACIT 12(1), MUMBAI

ITA 6381/MUM/2017

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 0218 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-12-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2012-2013
• Appeal Filed On: 30-10-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Rule of consistency; Futures and options; Set aside; Capital Gains
• Section: 142(1); 143(2); 13; 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHAMIM YAHYA , AM AND SHRI AMARJIT SINGH, JM / I .T.A. NO. 6381 /MUM/201 7 ( / ASSESSMENT YEAR: 20 12 - 13 ) RUCHIT BHARAT PATEL 3 - 3A, 1 ST FLOOR, 32 - 34, CHURCHGAT E HOUSE, VEER NARIMAN RD, FORT, MUMBAI - 400001 . / VS. ACIT 12(1) 137, 1 ST FLOOR, AAYAKAR BHAVAN, MAHARSHI KARVE ROAD NEW MARINE LINES, MUMBAI - 400020. ./ ./ PAN/GIR NO. : ANDPP9202F ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING : 1 5 / 10 /2020 / DATE OF PRONOUNCEMENT : 17 /12 /2020 / O R D E R PER AMARJIT SINGH, J M: THE ASSESSEE HAS FILED THE PRESENT APPEAL AGAINST THE ORDER DATED 18 .0 7 .201 7 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 28 , MUMBAI [HEREINAFTE R REFERRED TO AS THE CIT(A)] RELEVANT TO THE A.Y . 2012 - 13 . 2 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LD. CIT(A) ERRED IN UPHOLDING THE ASSESSMENT OF GAIN OF RS.66,50,725/ - THAT AROSE ON SALE OF SHARES AS BUSINESS INCOME INSTEAD OF SHORT TERM CAPITAL GAIN (STCG) AS DECLARED BY THE APPELLANT IN HIS RETURN OF INCOME. YOUR APPELLANT, THEREFORE, PRAYS TAT THIS GAIN BE ASSESSED AS STCG. ASSESSEE BY : SHRI KUMAR K ALE REVENUE BY: SHRI AKHTAR H. ANSARI ( SR. A R) ITA NO. 3757 / M/201 8 A.Y.2013 - 14 2 2. YOUR APPELLANT CRAVES LEAVE TO ALTER, MODIFY, AMEND OR DELETE ANY OF THE ABOVE GROUNDS OF APPE AL, OR TO ADD ONE OR MORE NEW GROUND(S) AS MAY BE NECESSARY. 3 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED HER RETURN OF INCOME ON 29 . 0 8 .20 1 2 DECLARING TO TAL INCOME TO THE TUNE OF RS .1,23,36,996 / - . THEREAFTER, THE RETURN WAS PROCESSED U/S 14 3(1) OF THE I. T. ACT, 1961. THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS. NOTICES U/S 143(2) & 142(1) OF THE ACT WERE ISSUED AND SERVED UPON THE ASSESSEE. IN THE YEAR UNDER CONSIDERATION, THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF INVESTMENT AND SECURIT IES. THE ASSESSEE DERIVED INCOME FROM CAPITAL GAIN AND OTHER SOURCES D URING THE ASSESSMENT YEAR . DURING THE PREVIOUS YEAR, THE ASSESSEE DERIVED SHORT TERM CAPITAL GAIN (STCG) AMOUNTING TO RS. 66,50,725/ - FROM DEALING IN SHARES & SECURITIES. THE CLAIM OF THE SHORT TERM CAPITAL GAIN ON SALE & PURCHASE OF SHARES WAS SCRUTINIZED ON THE BASIS OF VARIOUS PARAMETERS EMANATED FROM CBDTS INSTRUCTION NO. 1827 DATED 31.08.1989 AND CBDT OFFICE MEMORANDUM DATED 13.12.2005. TAKING INTO ACCOUNT ALL THE FACTS AND CIRCUMSTA NCES, THE SHORT TERM CAPITAL GAIN WAS TREATED AS BUSINESS INCOME AND ACCORDINGLY TAXED. THE ASSESSEE WAS NOT SATISFIED AND FILED AN APPEAL BEFORE THE CIT(A) WHO ALSO AFFIRM ED THE DECISION OF THE AO. FEELING AGGRIEVED, THE ASSESSEE FILED THE PRESENT APPEAL BEFORE US. ISSUE NO.1 4 . WE HAVE HEARD THE ARGUMENT S ADVANCED BY THE LD. REPRESENTATIVE OF THE PARTIES AND PERUSED THE RECORD . THE ONLY ISSUE WHICH HAS BEEN RAISED BY THE ASSESSEE BEFORE US IS IN CONNECTION WITH THE TREATMENT OF SHORT TERM CAPITAL GAIN AS BUSINESS INCOME. THE LD. REPRESENTATIVE OF THE ASSESSEE ITA NO. 3757 / M/201 8 A.Y.2013 - 14 3 HAS ARGUED THAT THE STATUS OF THE ASSESSEE HAS BEEN TREATED AS INVESTOR IN THE PAST I.E. ASSESSMENT YEAR W.E.F 2006 - 07 TO 2011 - 12 AND ALSO IN FUTURE FOR THE A.Y . 2013 - 14 TO 2017 - 18 EXCEPT THE YEAR UN DER ASSESSMENT Y EAR 2012 - 13 (YEAR UNDER APPEAL), T HEREFORE, THE CLAIM OF THE ASSESSEE IS NOT LIABLE TO BE CHANGED EVEN ON THE BASIS OF THE PRINCIPLE OF CONSISTENCY AND IN THIS REGARD THE LD. REPRESENTATIVE OF THE ASSESSEE HAS PLACED RELIANCE UPON THE DECIS ION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. GOPAL PUROHIT (2011) 336 ITR 287 (BOM). IT IS ALSO ARGUED THAT THE HONBLE ITAT IN THE CASE OF ASSESSEES FAMILY MEMBERS WHICH IS ON SIMILAR FACTS AND CIRCUMSTANCES H AS TREATED THE INCOME FROM SAL E OF SHARES AS CAPITAL GAIN BY VIRTUE OF ORDER DATED 11.05.2018 (ITA. NO. 204 & 723/M/2014 AND 4093, 4094, 4100 & 4887/M/2016) . IT IS ALSO ARGUED THAT THE CLAIM OF THE FAMILY MEMBERS OF THE ASSESSEE NAMELY HARDIK BHARAT PATEL HAS ALSO MADE ACCEPTED BY HON BLE ITAT IN ITA. NO.4605/M/2016 TITLED AS ACIT VS. HARDIK BHARAT PATEL. HOWEVER, ON THE OTHER HAND, THE LD. REPRESENTATIVE OF THE DEPARTMENT HAS REFUTED THE SAID CONTENTIONS. ON APPRAISAL OF THE RECORD AVAILABLE IN THE FILE, WE FIND THAT THE CLAIM OF THE A SSESSEE HAS BEEN TREATED AS INVESTOR IN THE PAST I.E. ASSESSMENT YEAR W.E.F 2006 - 07 TO 2011 - 12 . SUBSEQUENTLY, THE CLAIM OF THE ASSESSEE HAS BEEN ACCEPTED IN THE A.Y.2013 - 14 TO 2017 - 18. IT IS ONLY THE ASSESSMENT A.Y. 2012 - 13 IN WHICH THE CLAIM OF THE ASSESS EE HAS NOT BEEN ACCE PTED AND THE INCOME ON THE SALE/ PURCHASE OF SHARE S HAS BEEN TREATED AS BUSINESS INCOME. HOWEVER, THERE IS NO PLAUSIBLE REASON HAS BEEN GIVEN IN THE ORDER OF THE AO UNDER WHICH CIRCUMSTANCES THE CLAIM OF THE ASSESSEE HAS BEEN DECLINED AN D THE INCOME FROM THE SALE / PURCHASE OF THE SHARE HAS BEEN TREATED AS BUSINESS INCOME. THE CLAIM OF THE FAMILY MEMBERS OF THE ASSESSEE IN SIMILAR CIRCUMSTANCES HAS BEEN ACCEPTED ITA NO. 3757 / M/201 8 A.Y.2013 - 14 4 AS SHORT TERM CAPITAL GAIN IN ITA. NO.4605/M/2016 IN WHICH THE FOLLOWING FINDI NG HAS BEEN GIVEN IN PARA NO. 5, 5 .1 & 5.2 WHICH ARE REPRODUCED AS UNDER.: - 5. WE HAVE HEARD RIVAL SUBMISSIONS. WE FIND THAT THE LD. AO HAD TREATED THE ASSESSEE AS A TRADER IN SHARES AND NOT AS AN INVESTOR IN SHARES BY PLACING RELIANCE ON THE ORDERS PASS ED BY HIS PREDECESSOR FOR THE A.YRS. 2007 - 08 AND 2008 - 09. WE FIND THAT ASSESSEE HAS BEEN CONSISTENTLY SHOWING THE PURCHASE OF SHARES UNDER THE HEAD INVESTMENTS FROM THE INCEPTION AND HAD BEEN CONSISTENTLY REPORTING CAPITAL GAINS OR CAPITAL LOSS AS THE CA SE MAY BE. WE ALSO FIND THAT THE CBDT CIRCULAR NO.6/2016 DATED 29/02/2016 ALSO STATES THAT WHERE THE ASSESSEE HAS CONSISTENTLY REPORTED LONG TERM CAPITAL GAINS IN THE PAST AND DURING THE YEAR UNDER CONSIDERATION, THE SAME SHOULD NOT BE DISTURBED BY THE REV ENUE BY TREATING IT AS BUSINESS INCOME. WE HOLD THAT THE SAID ANALOGY WOULD APPLY WITH EQUAL FORCE FOR SHORT TERM CAPITAL GAINS ALSO. WE FIND THAT IN RESPECT OF PROFITS DERIVED FROM FUTURES AND OPTIONS, THE ASSESSEE HAD DECLARED THE SAME UNDER THE HEAD BU SINESS INCOME WHICH GOES TO PROVE THE BONAFIDE INTENTION OF THE ASSESSEE OF MAINTAINING DUAL PORTFOLIOS AND OFFERING TO TAX UNDER THE PROPER HEADS CORRECTLY. 5.1. WE ALSO FIND THAT THIS TRIBUNAL FOR A.YRS.2007 - 08 AND 2008 - 09 IN ITA NOS. 2274 & 8013/MUM/2 011 DATED 01/05/2013 HAD HELD THAT BOTH SHORT TERM CAPITAL GAINS AND LONG TERM CAPITAL GAINS SHOULD BE ASSESSED AS SUCH AND NOT TO BE TREATED AS BUSINESS INCOME. IN OTHER WORDS, THIS TRIBUNAL HAD GIVEN A CATEGORICAL FINDING FOR A.YRS.2007 - 08 & 2008 - 09 THAT ASSESSEE IS MERELY AN INVESTOR IN SHARES AND HENCE, THE GAINS DERIVED THERE FROM SHOULD BE ASSESSED ONLY UNDER THE HEAD CAPITAL GAINS. THE RELEVANT OPERATIVE PORTION OF THE SAID ORDER AS REPRODUCED IN THE ORDER OF THE LD. CIT(A) IS AS UNDER: - THEREFO RE, RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL AND THE HON'BLE HIGH COURT MENTIONED ABOVE, WE HOLD THAT THE LEARNED CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ORDER OF AO, WHO TOOK THE TRANSACTION AS BUSINESS TRANSACTION INSTEAD OF TREATING THE SA ME AS SHORT TERM CAPITAL GAIN. LEARNED CIT(A) HAS CONFIRMED THE ORDER OF AO BY OBSERVING THAT THE TRANSACTIONS ARE FREQUENT TRANSACTIONS, HOWEVER, WE ARE OF THE VIEW THAT THE HOLDING PERIOD CANNOT BE TAKEN INTO CONSIDERATION BECAUSE UNDER THE ACT ITSELF, I T HAS BEEN PROVIDED THAT WHERE THE HOLDING PERIOD OF SHARES ARE MORE THAN ONE YEAR THEN THE LONG TERM CAPITAL GAIN WILL BE APPLICABLE AND WHERE THE HOLDING PERIOD IS LESS THAN ONE YEAR, THEN THE SHORT TERM CAPITAL GAIN WILL BE APPLICABLE, SUBJECT TO THE TR ANSACTION ARE SHOWN UNDER THE HEAD INVESTMENT PORTFOLIO. THEREFORE, WHETHER THE TRANSACTION ARE FREQUENT OR ITA NO. 3757 / M/201 8 A.Y.2013 - 14 5 HOLDING PERIOD IS LESS, THEY ARE SHOWN UNDER THE HEAD INVESTMENT PORTFOLIO, THEREFORE, THE TRANSACTION WHICH HAVE BEEN SHOWN UNDER THE HEAD INVESTME NT PORTFOLIO AND, HENCE, THE SHORT TERM CAPITAL GAIN OR LONG TERM CAPITAL GAIN AS THE CASE MAY BE, WILL BE APPLICABLE. IN VIEW OF THESE FACTS AND CIRCUMSTANCES, WE ALLOW THE GROUNDS OF THE ASSESSEE FOR BOTH OF THE YEARS AND DIRECT THE AO TO ASSESS THE PROF IT UNDER THE HEAD SHORT TERM CAPITAL GAIN INSTEAD OF UNDER THE HEAD BUSINESS PROFIT. 5.2. THERE IS NO DISPUTE THAT THE FACTS ARE IDENTICAL IN THIS YEAR WHEN COMPARED TO THAT IN A.YRS.2007 - 08 AND 2008 - 09. WE FIND THAT THE LD. CIT(A) HAD MERELY FOLLOWED TH E ORDER OF THIS TRIBUNAL FOR EARLIER YEARS WHILE GRANTING RELIEF TO THE ASSESSEE AND WE ALSO FIND THAT THE HONBLE JURISDICTIONAL HIGH COURT IN ASSESSEES OWN CASE FOR A.Y.2008 - 09 AFTER CONSIDERING ALL THE ARGUMENTS OF THE REVENUE HAD UPHELD THE ORDER OF T HIS TRIBUNAL FOR A.Y.2008 - 09 AS REFERRED SUPRA AND BY DISMISSING THE APPEAL OF THE REVENUE IN ITA NO.390/MUM/2016 DATED 19/11/2018. RESPECTFULLY FOLLOWING THE AFORESAID ORDERS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) IN THIS REGARD. ACC ORDINGLY, THE GROUNDS RAISED BY THE REVENUE FOR THE A.Y.2010 - 11 IS DISMISSED. 5. THE CLAIM OF THE OTHER FAMILY MEMBERS OF THE ASSESSEE HAS ALSO BEEN ACCEPTED BY HONBLE ITAT IN THE ORDER DATED 28.12.2018 (ITA. NO.204 & 723/M/2014 AND 4093, 4094, 4095, 41 00 & 4887/M/2016) IN WHICH THE INCOME FROM THE SALE / PURCHASE HAS BEEN TREATED AS SHORT TERM CAPITAL GAIN. MOREOVER, ON THE BASIS OF THE PRINCIPLE OF CONSISTENCY THE NATURE OF INCOME IS NOT LIABLE TO BE CHANGED UNLESS THERE ARE PLAUSIBLE REASON S TO DO SO. T AKING INTO ACCOUNT, ALL THE FACTS AND CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE FINDING OF THE CIT(A) IS NOT JUSTIFIABLE, HENCE, ORDER TO BE SET ASIDE AND WE TREATED THE INCOME FROM THE ASSESSEE FROM THE SALE PURCHASE OF SHARE AS SHORT TERM CAPITAL GAIN. ACCORDINGLY, WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE. ITA NO. 3757 / M/201 8 A.Y.2013 - 14 6 6 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS HEREBY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 17 / 12 / 2020 SD/ - SD/ - - ( SHAMIM YAHYA ) (AMARJIT SINGH) / ACCOUNTANT MEMBER /JUDICIAL MEMBER MUMBAI; DATED : 17 /12 / 2020 VIJAY PAL SINGH/SR. PS / 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 C OPY// / /(DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI