ACIT 18(1), MUMBAI V. SURESH MEHTA, MUMBAI

ITA 6584/MUM/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 2112 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-11-2016
• Appeal Filed By: Department
• Bench Allotted: E
• Assessment Year: 2007-2008
• Appeal Filed On: 08-11-2013
• Court: TRIBUNAL
• Department Lawyers: AKHILENDRA YADAV
• Assessee Lawyers: ANUJ KISNADWLA
• Keywords: Capital asset; Business income; Rule of consistency
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI, JUDICIAL MEMBER I.T.A. NO.6584/M/2013 (ASSESSMENT YEAR: 2007 - 2008) I.T.A. NO.6585/M/2013 (ASSESSMENT YEAR: 2008 - 2009) ACIT - 18(1), R.NO.116, 1 ST FLOOR, PIRAMAL CHAMBERS, PAREL, MUMBAI 400 012. / VS. SHRI SURESH MEHTA, 101/102, ROYAL ACCORD, GOKHLE ROAD, DADAR (W), MUMBAI 400 028. ./ PAN : AAEPM5840N ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI AKHILENDRA YADAV, DR / RESPONDENT BY : SHRI ANUJ KISNADWLA & GOVIND JAVERI / DATE OF HEARING : 03.11.2016 / DATE OF PRONOUNCEMENT : 04 .11.2016 / O R D E R PER D. KARUNAKARA RAO, AM: THERE ARE TWO APPEALS UNDER CONSIDERATION. BOTH THESE APPEALS ARE FILED BY THE REVENUE INVOLVING THE ASSESSMENT YEARS 2007 - 08 AND 2008 - 09. SINCE, THE ISSUES INVOLVED IN THESE APPEALS ARE IDENTICAL, THEREFORE, FOR THE SAKE OF CONVENIENCE, THEY ARE CLUBBED, HEARD COMBI NEDLY AND DISPOSED OFF IN THIS CONSOLIDATED ORDER. APPEAL WISE ADJUDICATION IS GIVEN IN THE FOLLOWING PARAS OF THIS ORDER. 2. SINCE, THE GROUNDS RAISED IN BOTH THE APPEALS ARE IDENTICAL, THEREFORE, FOR THE SAKE OF REFERENCE AND ADJUDICATION PURPOSE, GROUN DS RAISED BY THE REVENUE IN THEIR APPEAL FOR THE AY 2007 - 2008 ARE EXTRACTED WHICH READ AS UNDER: - 1. HOLDING THAT ASSESSEES OWN CAPITAL WAS USED IN INVESTMENT WITHOUT APPRECIATING THE FACT THAT THE OPENING CAPITAL OF THE ASSESSEE WAS RS. 6.48 CRS AND OPENIN G INVESTMENT IN SHARES IS RS. 8.12 CRS. THUS, INVESTMENT OF RS. 1.63 CRS WAS MADE FROM BORROWED CAPITAL. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) HAS ERRED IN HOLDING THAT THE SHARES APPEARING UNDER INVESTMENTS IN THE B ALANCE SHEET OF THE APPELLANT AS ON 31.3.2007 HAVE BEEN SHOWN AT COST AND NOT MARKET VALUE WHICH IS SHOWED THAT THE TREATMENT GIVEN TO THESE SECURITIES IS AS A CAPITAL ASSET RATHER THAN TRADING ASSET AND INDICATED THAT THE APPELLANT HAS MAINTAINED SEPARAT E PORTFOLIOS FOR TRADING SHARES AND SHARES KEPT FOR INVESTMENT PURPOSE WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS 2 MAINTAINED ONLY ONE PORTFOLIO AND THE SAME IS SHOWN AS INVESTMENT. NO SECOND PORTFOLIO IE INVESTMENT AND TRADING HAS BEEN SHOWN. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) HAS ERRED IN RELYING ON THE CASE OF GOPAL PUROHIT VS JOINT CIT, [ ITA NO.4854/M/2008, DATED 10.2.2008) WITHOUT APPRECIATING THE FACTS IN THE CASE OF SHRI GOPAL PUROHIT ARE DIFFERENT FROM THE FACTS IN THE CASE OF SHRI SURESH MEHTA AS SHRI GOPAL PUROHIT WAS MAINTAINING TWO PORTFOLIOS AND SEPARATE LEADERS WERE MAINTAINED FOR INVESTMENTS AND STOCK IN TRADE, WHEREAS SHRI SURESH MEHTA MAINTAINED ONLY ONE PORTFOLIO AND THE PURCHASE OF SHARES HAS BEEN SHOWN IN ONE LEDGER. IN LEDGER NO DISTINCTION IS MADE BETWEEN INVESTMENT AND STOCK IN TRADE. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) HAS ERRED IN HOLDING THAT THE INCOME EARNED ON SALE OF SHARES IS LONG TERM CAPITAL GAIN INSTEAD OF BUSINESS INCOME AS HELD BY AO WITHOUT APPRECIATING THE FACT THAT THE PRINCIPLE OF CONSISTENCY IS NOT APPLICABLE TO THIS CASE AS NO SCRUTINY ASSESSMENT WAS DONE U/S 143(3) IN THE EARLIER ASSESSMENT YEARS. 5. ON THE FACTS AND IN THE CIRC UMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) HAS ERRED IN HOLDING THAT THE DEPARTMENT HAS ACCEPTED THE CONTENTION OF THE ASSESSEE IN EARLIER YEAR U/S 143(1) OF THE ACT WITHOUT APPRECIATING THE FACT THAT SECTION 143(1) IS A SUMMARY ASSESSMENT PROCEEDING WITHOUT APPLICATION OF MIND BY THE AO. 3. AT THE OUTSET, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE ABOVE GROUNDS AND MENTIONED THAT IN BOTH THE APPEALS UNDER CONSIDERATION, REVENUE IS AGGRIEVED WITH THE DECISION OF THE CIT (A), WHICH CONF IRMS THE TREATMENT GIVEN BY THE ASSESSEE IN RESPECT OF THE GAINS EARNED ON SALE OF INVESTMENTS. LD COUNSEL FOR THE ASSESSEE BRIEFLY NARRATED THE FACTS OF THE CASE AND MENTIONED THAT IN THE RETURN OF INCOME A SSESSEE CLAIMED THE GAINS UNDER THE HEAD CAPITA L GAINS WHEREAS THE ASSESSING OFFICER THRUST THE BUSINESS INCOME IN RESPECT OF THE GAINS IN THE ASSESSMENT MADE U/S 143(3) OF THE ACT . MATTER TRAVELLED TO THE FIRST APPELLATE AUTHORITY. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE IN THIS REGARD, THE CIT (A) GRANTED RELIEF TO THE ASSESSEE BASED ON THE PRINCIPLE OF CONSISTENCY AND THE APPLICABILITY OF THE HONBLE BOMBAY HIGH COURT JUDGMENT IN THE CASE OF BOMBAY HIGH COURT IN CIT VS. GOPAL PUROHIT ( 228 CTR 582 ) ( BOM) . AGGRIEVED WITH THE SAME, REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 4. DURING THE PROCEEDINGS BEFORE US, LD COUNSEL FOR THE ASSESSEE DEFENDED THE DECISION OF THE CIT (A) AND MENTIONED THAT THE SAID DECISION IS IN TUNE WITH THE CBDT CIRCULAR NO.6/2016 , DATED 29.2.2016. IN THIS REGARD, BRINGING OUR ATTENTION TO PARA 3(B) OF THE SAID CIRCULAR (SUPRA), LD COUNSEL FOR THE ASSESSEE MENTIONED THAT THE ASSESSEE OPTED FOR TREATING THE GAINS UNDER THE HEAD CAPITAL GAINS. IN SUCH CIRCUMSTANCES, AO CANNOT DI SHONOUR THE DECISION OF THE ASSESSEE. 5. AFTER HEARING BOTH THE PARTIES AND ON PERUSAL OF THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE RELEVANT PARA 3(B) OF THE SAID CIRCULAR (SUPRA), WE FIND IT 3 RELEVANT TO EXTRACT THE SAID PARA FROM THE CBDT CIRCULAR NO.6/2016 (SUPRA) FOR THE SAKE OF COMPLETENESS OF THIS ORDER AND THE SAME READ S AS UNDER: - 3(B) IN RESPECT OF LISTED SHARES AND SECURITIES HELD FOR A PERIOD OF MORE THAN 12 MONTHS IMMEDIATELY PRECE DING THE DATE OF IT TRANSFER, IF THE ASSESSEE DESIRES TO TREAT THE INCOME ARISING FROM THE TRANSFER THEREOF CAPITAL GAIN, THE SAME SHALL NOT BE PUT TO DISPUTE BY THE ASSESSING OFFICER. HOWEVER, THIS STAND, ONCE TAKEN BY THE ASSESSEE IN A PARTICULAR ASSESS MENT YEAR, SHALL REMAIN APPLICABLE IN SUBSEQUENT ASSESSMENT YEARS ALSO AND THE TAXPAYERS SHALL NOT BE ALLOWED TO ADOPT A DIFFERENT / CONTRARY STAND IN THIS REGARD IN SUBSEQUENT YEARS. 6. FROM THE ABOVE, IT IS CLEAR THAT IF THE ASSESSEE TREATS THE INCOME ARISES FROM THE TRANSFER OF SHARES, HAVING MORE THAN ONE YEAR OF HOLDING PERIOD, AS CAPITAL GAINS, AO IS RESTRAINED FROM DISTURBING THE SAME. IN THIS REGARD, LD DR HAS NOTHING CONTRARY TO SUGGEST THAT THE CONTENTS OF THE ABOVE PARA OF THE BOARD CIRCULAR (SUPRA) ARE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. THEREFORE, IN OUR OPINION, THE DISCUSSION AND THE CONCLUSIONS GIVEN BY THE CIT (A) ARE FAIR AND REASONABLE AND IT DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 7. IN THE RESULT, BOTH THE APPEAL S OF THE REVENUE ARE DISMISSED. ORDER PRONOU NCED IN THE OPEN COURT ON 0 4 T H NOVEMBER, 2016. S D / - S D / - ( RAM LAL NEGI ) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 04.11 .2016 . . ./ OKK , 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 . //TRUE COPY// 4 / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI