DCIT 5(2), MUMBAI V. PAYASH SECURITIES P.LTD, MUMBAI

ITA 706/MUM/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93230 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-07-2015
• Appeal Filed By: Department
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 31-01-2014
• Court: TRIBUNAL
• Department Lawyers: VIDYA BHASKAR JAKKE
• Assessee Lawyers: C B R MURTHY
• Keywords: Business income; Rule of consistency
• Section: 143(3); 14A

Judgement Text

IN THE INCO ME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER I.T.A. NO. 706/MUM/2014 (AY:2010 - 2011 ) DCIT - 5(2), R.NO.571, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 020. / VS. M/S. PAYASH SECURITIES PVT LTD., 17/19, 2 ND FLOOR, KHATAU BUILDING, 44 BANK STREET, OFF: S.B.S. ROAD, MUMBAI - 23. ./ PAN : AABCP8975B ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI VIDYA BHASKAR JAKKE, DR / RESPONDENT BY : SHRI C.B.R. MURTHY / DATE OF HEARING : 13 .07.2015 / DATE OF PRONOUNCEMENT : 13 .07.2015 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE REVENUE ON 31.1.2014 IS AGAINST THE ORDER OF THE CIT (A) - 9, MUMBAI DATED 13.11.2013 FOR THE ASSESSMENT YEAR 2010 - 2011. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) HAS ERRED IN HOLDING ASSESSEES SHARE ACTIVITY AS INVESTMENT, ALTHOUGH THERE ARE VOLUMINOUS TRANSACTIONS DURING THE YEAR AND HOLDING PERIOD ALSO IS LESS THAN ONE YEAR. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) HAS FAILED TO APPRECIATE THE FACT THAT RES - JUDICATA IS NOT APPLICABLE ON INCOME TAX PROCEEDINGS AND FACTS OF EACH YEAR ARE DIFFERENT. HENCE, APPEAL CANNOT BE DECIDED ON THE BASIS OF AY 2006 - 2007. 2. BRIEFLY STATED, RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF INVESTMENT AND TRADING IN SHARES ANDS SECURITIES. ASSESSEE FILED THE RETURN OF INCOME DECLARING THE TOTAL INCOME OF RS. 41,31,13,604/ - . ASSESSMENT WAS COMPLET ED U/S 143(3) OF THE ACT AND THE ASSESS ED INCOME WAS DETERMINED AT RS.90,45,25,555/ - WHICH INCLUDE THE DISALLOWANCE OF RS. 2,14,93,338/ - U/S 14A OF THE ACT. AGGRIEVED ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 2 3. DURING TH E PROCEEDINGS BEFORE THE FIRST APPELLATE AUTHORITY, AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, CIT (A) PARTLY ALLOWED THE APPEAL AND RESTRICTED THE DISALLOWANCE TO RS. 2,08,335/ - . AGGRIEVED WITH THE SAID DECISION OF THE CIT (A), REVENUE IS IN APPE AL BEFORE THE TRIBUNAL BY RAISING THE ABOVE MENTIONED GROUNDS. 4. DURING THE PROCEEDINGS BEFORE US, AT THE OUTSET, LD COUNSEL FOR THE ASSESSEE BROUGHT OUT ATTENTION TO THE ABOVE GROUNDS AND MENTIONED THAT THE ISSUE RAISED IN THE GROUNDS RELATES TO THE CORR ECT TREATMENT TO THE SALE TRANSACTIONS OF SHARES. IN THIS REGARD, LD COUNSEL SUBMITTED THAT THE ASSESSEE OFFERED THE SAID TRANSACTIONS UNDER THE HEAD CAPITAL GAINS. ON THE OTHER HAND, AO TREATED THE SAME AS BUSINESS ACTIVITY. CIT (A) GRANTED RELIEF CONSIDERING THE DECISION TAKEN BY HIM PREDECESSORS IN THE EARLIER YEARS. BUT THE FACT IS THAT THE DECISION OF THE AO IN THE EARLIER YEARS WERE NOT REVERSED AND IT IS THE FINDING OF THE TRIBUNAL THAT THE IMPUGNED TRANSACTIONS SHOULD BE TREATED AS INVESTMEN T ACTIVITY. IN THIS REGARD, LD COUNSEL FOR THE ASSESSEE FILED COPY OF THE ORDER OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE AYS 2006 - 07 AND 2009 - 2010 IN ITA NO.650/M/2013 AND ITA NO.6370/M/2013. 5. ON THE OTHER HAND LD DR FOR THE REVENUE RELIED ON T HE ORDER OF THE AO. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS CITED DECISIONS OF THE TRIBUNAL AND THE RELEVANT MATERIAL PLACED BEFORE US. ON PERUSAL OF THE SAID ORDER OF THE TRIBUNAL FOR THE AY 2008 - 200 9, WE FIND THE IDENTICAL ISSUES WERE ADJUDICATED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE DISMISSING THE REVENUES APPEAL. FOR THE SAKE OF COMPLETENESS OF THIS ORDER, RELEVANT PORTIONS OF THE SAID TRIBUNALS ORDER FOR THE AY 2009 - 2010 (SUPRA), DATED 30.6 .2015 IS EXTRACTED AS UNDER: IN THIS APPEAL, REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING ASSESSEES SHARE ACTIVITY AS INVESTMENT, ALTHOUGH THERE A RE VOLUMINOUS TRANSACTIONS DURING THE YEAR AND HOLDING PERIOD ALSO IS LESS THAN ONE YEAR? WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS FAILED TO APPRECIATE THE FACT THAT RES JUDICATA IS NOT APPLICABLE ON INCOME TAX PROCEEDINGS AND FACTS OF EACH YEAR ARE DIFFERENT, HENCE APPEAL CANNOT BE DECIDED ON THE BASIS OF A.Y. 2006 - 07? 2. ALTHOUGH THE REVENUE HAS RAISED TWO GROUNDS OF APPEAL BUT THE SOLITARY GRIEVANCE IS AGAINST THE ACTION OF THE CIT(A) IN HOLDING THAT THE ASSESSEES ACTIVITY OF PURCHASE AND SALE OF SHARES WAS AN INVESTMENT ACTIVITY AND NOT AN ACTIVITY OF TRADE. THE ASSESSING OFFICER HELD THAT 3 ASSESSSEE WAS A TRADER IN SHARES AND SECURITIES AND NOT AN INVESTOR AND THUS THE PROFIT/ LOSS ON SUCH ACTIVITY WAS ASSESSABLE AS BUSINESS INCOME INSTEAD OF CAPITAL GAINS SHOWN BY THE ASSESSEE IN THE RETURN OF INCOME. 3. THE CIT(A) DIFFERED WITH THE ASSESSING OFFICER PRIMARILY ON THE GROUND THAT IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2006 - 07, THE TRIBUNAL VIDE ITS ORDER DATED 19.04.2013 IN ITA NO. 650/MUM/2013 HAD UPHELD THE STAND OF THE ASSESSEE THAT THE TRANSACTIONS OF PURCHASE AND SALE OF SHARES AND SECURITIES WERE IN THE NATURE OF CAPITAL GAINS. 4. AGAINST THE AFORESAID DECISION OF CIT(A), REVENUE IS IN APPEAL BEFORE US. THE LD. REPRESENTATIVE FOR THE RESPONDENT - ASSESSEE SUBMITTED THAT THE CIT(A) HAS FOLLOWED THE DECISION OF THE TRIBUNAL DATED 19.04.2013 (SUPRA) WHICH CONTINUES TO HOLD THE FIELD AND, THEREFORE, THE APPEAL BY THE REVENUE LACKS MERIT. 5. THE LD. DR APPEARING FOR THE REVENUE HAS NOT CONTESTED THE FACTUAL MATRIX BROUGHT OUT BY THE LD. REPRESENTATIVE FOR THE RESPONDENT - ASSESSEE. 6. IN THE CONTEXT OF THE ABOVE CONTROVERSY, WE FIND THAT T HE CIT(A) IN PARA 5.1 OF HIS ORDER COMPARED THE FACTUAL POSITION OF THE INSTANT YEAR WITH THAT OF THE ASSESSMENT YEAR 2006 - 07 (SUPRA) AND FOUND THAT THE SAME WAS IDENTICAL. THE CIT(A) HAS SPECIFICALLY NOTED THAT THERE IS NO CHANGE OF FACTS IN RELATION TO ASSESSMENT YEAR 2006 - 07 AND, THEREFORE, HE HAS FOLLOWED THE DECISION OF THE TRIBUNAL FOR ASSESSMENT YEAR 2006 - 07 (SUPRA) AND HELD THAT THE ASSESSEE HAS EARNED INCOME FROM PURCHASE AND SALE OF SHARES IN THE CAPACITY OF AN INVESTOR AND, THEREFORE, SUCH INCOM E/LOSS IS TAXABLE UNDER THE HEAD CAPITAL GAINS. THE RELEVANT DISCUSSION IN THE ORDER OF THE CIT(A) IS AS UNDER: - AFTER CONSIDERING THE RIVAL SUBMISSIONS IT IS OBSERVED THAT THE ONLY DISPUTE BETWEEN THE A.O AND APPELLANT IS THE TREATMENT OF THE PROFIT/L OSS ON THE SHARE TRANSACTIONS. THE APPELLANT HAS CONTENDED THAT IT IS AN INVESTOR IN SHARES WHEREAS THE A.O. HAS OPINED THAT THE APPELLANT IS A TRADER OF SHARES. IT IS NOTED THAT THIS ISSUE IN THE CASE OF THE APPELLANT ALSO AROSE IN EARLIER YEARS. THE HON BLE ITAT IN A.Y. 2006 - 07 VIDE ITS ORDER DATED 19.04.2013 HAS DECIDED THAT THE TRANSACTIONS OF PURCHASE AND SALE OF SHARES AND SECURITIES ARE IN THE NATURE OF CAPITAL GAINS. WHILE DECIDING THIS ISSUE THE ITAT HAS OBSERVED THAT 'WE NOTE THAT THE TRANSACT ION IN EARLIER AS WELL AS IN SUBSEQUENT YEARS ARE SIMILAR....... WE FURTHER NOTE THAT IF THE AVERAGE HOLDING PERIOD IS CALCULATED FROM' THE OLD TRANSACTIONS IT WILL BE MORE THAN 60 DAYS IN RESPECT OF THE SALE AND PURCHASE OF TRANSACTIONS GIVING RISE TO THE STCG....... THE ASSESSEE IS TREATING THE SAME AS INVESTMENT IN BOOKS OF ACCOUNTS, THESE ARE DELIVERY TRANSACTIONS........ THE BORROWED FUND IS NOT INTEREST BEARING AS IT HAS BEEN ARRANGED FROM THE SHARE HOLDERS'. ON THE BASIS OF THESE FACTS AND IN VIEW OF PRINCIPLE OF CONSISTENCY THE ITAT HAS ACCEPTED THE CONTENTION OF THE APPELLANT. ON THE SAME ANALOGY, I ALSO AGREE WITH THE CONTENTION OF THE APPELLANT THAT DURING THE YEAR UNDER CONSIDERATION ALSO FACTS ARE ALMOST IDENTICAL TO THE ASSESSMENT YEAR 2006 - 07 AS DURING THE YEAR UNDER CONSIDERATION THE APPELLANT HAS DEALT ONLY IN SMALL NUMBER OF SCRIPS (TOTALING TO 38 SCRIPS AS COMPARED TO 65 SCRIPS IN A.Y. 2006 - 07) TOTAL NUMBER OF TRANSACTIONS ARE ONLY 85 (AS COMPARED TO 182 IN A.Y. 2006 - 07) AND THE AVERAGE H OLDING IS 152 DAYS FOR SHORT TERM CAPITAL GAINS AND 703 DAYS IN LONG TERM CAPITAL GAINS ( AS COMPARED TO 138 AND 807 4 DAYS IN A.Y. 2006 - 07). UNDER THESE CIRCUMSTANCES, WHEN THERE IS NO CHANGE OF FACTS OF DECISION OF HONBLE ITAT IN A.Y. 2006 - 07 IS APPLICABL E DURING THIS YEAR ALSO. RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE ITAT IN A.Y. 2006 - 07, IT IS HELD THAT THE APPELLANT HAS EARNED THIS INCOME IN THE CAPACITY OF INVESTOR, ACCORDINGLY INCOME /LOSS ON THE SHARE TRANSACTION OF THE APPELLANT IS TAXABL E UNDER THE HEAD CAPITAL GAINS. THE A.O. IS DIRECTED TO ASSESS THE SAME ACCORDINGLY. THIS GROUND IS THEREFORE, ALLOWED. 7. THE AFORESAID FINDINGS OF THE CIT(A) HAVE NOT BEEN CONTROVERTED BY THE LD. DR BEFORE US AND ARE ACCORDINGLY AFFIRMED. THERE IS ALS O NO CONTROVERSION BY THE REVENUE TO THE ASSERTIONS OF THE RESPONDENT - ASSESSEE THAT THE ORDER OF THE TRIBUNAL DATED 19.04.2013 (SUPRA), APPLIED BY THE CIT(A), CONTINUES TO HOLD THE FIELD. IN THE ABOVE BACKGROUND, WE HEREBY AFFIRM THE DECISION OF CIT(A) AN D ACCORDINGLY REVENUE FAILS. 7. CONSIDERING THE ABOVE SETTLED POSITION OF THE ISSUE, WE RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL FOR THE AY 2009 - 2010 AND ALSO FOLLOWING THE PRINCIPLE OF CONSISTENCY, THE ISSUE RAISED BY THE REVENUE IS DECIDED IN FAVOUR OF THE ASSESSEE. ACCORDINGLY, GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH JULY, 2015 . SD/ - SD/ - (AMIT SHUKLA) (D. KARUNAKRA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 13.7 .2015 . . ./ 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// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI