ACIT 25(2), MUMBAI V. JAGDISH MASTER HUF, MUMBAI

ITA 7122/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3000 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Assessment Year: 2010-2011
• Appeal Filed On: 27-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: M ANISH DESAI
• Keywords: Business income; Rule of consistency
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH J, MUMBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ITA NO.7122/M/2014 ASSESSMENT YEAR: 2010-11 ACIT 25(2), 6 TH FLOOR, C-10, PRATYAKSH KAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI 400 051 VS. SHRI JAGDISH MASTER, HUF 14, LAXMI NIWAS, CHURCH ROAD, VILE PARLE (W), MUMBAI 400 056 PAN: AACHJ 5352E (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI MANISH DESAI, A.R. REVENUE BY : SHRI JEEVAN LAL, D.R. DATE OF HEARING : 27.06.2016 DATE OF PRONOUNCEMENT : 29.06.2016 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVEN UE AGAINST THE ORDER DATED 30.04.2013 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT Y EAR 2010-11. 2. THE SOLE ISSUE TAKEN BY THE REVENUE IN THIS APPE AL IS AS TO WHETHER THE INCOME EARNED BY THE ASSESSEE FROM PURCHASE & SALE OF SHARES IS TO BE TAXED AS UNDER THE HEAD CAPITAL GAINS OR BUSINESS INCOME OF THE ASSESSEE. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A HUF AND DERIVED INCOME FROM HOUSE PROPERTY, INTEREST INCOME AND INC OME FROM SHARE TRANSACTION ACTIVITY. THE ASSESSEE TREATED THE INC OME FROM SHARE TRANSACTION ACTIVITY AS SHORT TERM AND LONG TERM CAPITAL GAINS. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER (HEREINAFTER REF ERRED TO AS THE AO), HOWEVER, NOTED THAT THE ASSESSEE HAD DEALT IN TOTAL 23 SCRIPS REGARDING WHICH HE CLAIMED LTCG AND WITH REGARD TO 26 SCRIPS, INCOME W AS CLAIMED AS STCG. ITA NO.7122/M/2014 SHRI JAGDISH MASTER, HUF 2 TOTAL QUANTITY OF THESE ALL SCRIPS WHICH WERE TRADE D WAS ABOVE 12 LAKHS. TOTAL NUMBER OF TRANSACTION WERE AROUND 1000. THE AO OBS ERVED THAT ALL THESE NUMBERS POINT TO THE SCALE OF MASSIVE TRANSACTION G IVING IT AN OBVIOUS CHARACTER OF TRADING THEN INVESTMENT. HE FURTHER O BSERVED THAT WHEN A PERSON ACTS AS AN INVESTOR HE/SHE IS NOT EXPECTED TO CARRY OUT THESE MANY TRANSACTIONS OF SALES AND PURCHASE WITH SUCH A HIGH FREQUENCIES AND VOLUME. THE AO FURTHER OBSERVED THAT IN CERTAIN SCRIPS, THE ASSESS EE HAD DONE RETRADING ACTIVITY I.E. THE SHARES OF A SCRIPT ONCE PURCHASED THEN SOL D AND THEN REPURCHASED AND RESOLD. HE, CONSIDERING THE FREQUENCY OF TRANSACTI ONS, VOLUME TRANSACTIONS, SHORT HOLDING PERIOD IN CERTAIN SCRIPS WHICH WAS AS SHORT AS TWO DAYS AND CONSIDERING OF THE RETRADING ACTIVITY IN CERTAIN SC RIPS, TREATED THE INCOME RECEIVED FROM THE SHARE TRANSACTIONS DONE BY THE AS SESSEE AS BUSINESS INCOME OF THE ASSESSEE. BEING AGGRIEVED AGAINST THE ORDER OF THE AO, THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A). 4. THE ASSESSEE MADE DETAILED SUBMISSION BEFORE THE LD. CIT(A). THE LD. CIT(A), AFTER CONSIDERING THE OVERALL FACTS AND CIR CUMSTANCES OF THE CASE, OBSERVED THAT ON THE IDENTICAL FACTS, THE DEPARTMEN T HAD TREATED THE ASSESSEE AS AN INVESTOR IN THE PAST IN THE ASSESSEES OWN CASE FOR A.Y. 2006-07. HOWEVER, IN APPEAL, ON THE IDENTICAL ISSUE AND IN THE IDENTI CAL FACTS AND CIRCUMSTANCES, HIS PREDECESSOR CIT(A) HAD DECIDED THE ISSUE IN FAV OUR OF THE ASSESSEE AND THAT FINDING HOLDING THE ASSESSEE AS AN INVESTOR WAS ALS O UPHELD BY THE TRIBUNAL. EVEN IN THE ASSESSMENT YEAR 2009-10, THE AO HIMSELF HAD ACCEPTED THE ASSESSEE AS AN INVESTOR AND ACCEPTED THE SHORT TERM AND LONG TERM CAPITAL GAINS RETURNED BY THE ASSESSEE AS SUCH, IN THE SCRUTINY A SSESSMENT PROCEEDINGS UNDER SECTION 143(3) OF THE ACT. HE, FURTHER OBSERVED TH AT THE PRINCIPLES OF CONSISTENCY SHOULD BE APPLIED AND THE SHORT TERM CA PITAL GAINS DECLARED IN THE YEAR UNDER CONSIDERATION SHOULD ALSO BE ACCEPTED AS SUCH. HE, FURTHER OBSERVED THAT ALMOST IDENTICAL PATTERNS INCLUDING THE HOLDIN G PERIOD OF SHARES, THE VOLUME OF INVESTMENT AND THE NUMBER OF TRANSACTIONS CARRIED OUT ETC. WERE ITA NO.7122/M/2014 SHRI JAGDISH MASTER, HUF 3 THERE IN ASSESSMENT YEARS 2006-07 AND A.Y. 2009-10. HE, ADOPTING THE PRINCIPLE OF CONSISTENCY AND TAKING INTO THE OVERAL L FACTS AND CIRCUMSTANCES OF THE CASE, HELD THAT THE ASSESSEE AN INVESTOR AND DI RECTED THE AO TO TREAT THE INCOME EARNED FROM THE SHARE TRANSACTIONS AS UNDER THE HEAD CAPITAL GAINS. THE REVENUE HAS, THUS, COME IN APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND HAVE ALS O GONE THROUGH THE RECORDS. THE LD. D.R. HAS VEHEMENTLY CONTENDED THAT THE VOLUME OF TRANSACTIONS IN THE CASE OF THE ASSESSEE WAS VERY H IGH AND THAT IN RELATION TO CERTAIN SCRIPS, THERE WAS CHURNING OF THE PORTFOLIO I.E. THE ASSESSEE HAS PURCHASED, SOLD AND THEN REPURCHASED AND RESOLD CER TAIN SCRIPS WHICH SHOWED THAT THE ASSESSEE WAS ACTING AS A TRADER AND NOT AN INVESTOR. HE HAS FURTHER STATED THAT IN SOME OF THE SCRIPS, THE HOLDING PERI OD WAS VERY LOW AND THAT THE VOLUME OF THE INVESTMENT WAS VERY HIGH. HE, THEREF ORE, HAS SUBMITTED THAT THE INCOME FROM THE SHARE TRANSACTIONS IS REQUIRED TO B E TREATED AS BUSINESS INCOME OF THE ASSESSEE. 6. ON THE OTHER HAND, THE LD. A.R. OF THE ASSESSEE HAS REITERATED HIS SUBMISSIONS AS WERE MADE BEFORE THE LD. CIT(A). HE HAS FURTHER SUBMITTED THAT THE ASSESSEE FROM THE INVESTMENT ACTIVITY HAD EARNED SUFFICIENT DIVIDEND INCOME. APART FROM SHORT TERM CAPITAL GAINS OF RS. 1,79,75,676/-, THE ASSESSEE HAD EARNED LONG TERM CAPITAL GAINS OF RS.1,89,59,87 9/- WHICH SHOWED THAT THE INTENTION OF THE ASSESSEE WAS OF INVESTMENT AND NOT OF TRADING AS MANY SCRIPS WERE HELD FOR A MUCH LONGER PERIOD. HE HAS FURTHER STATED THAT THE ASSESSEE HAD HIS PERSONAL CAPITAL AT RS.25,41,57,149/- WHEREAS T HE INVESTMENT IN SHARES AS ON 31.03.10 WAS AT RS.19,19,46,641/-. FURTHER, THE INVESTMENTS IN FDR AND UNITS ON MF, PPF, LIC BONDS ETC. WAS AT RS.2,26,48, 989/-. FURTHER, THE DIVIDEND INCOME EARNED DURING THE YEAR WAS AT RS.33 ,59,489/-. HE HAS FURTHER STATED THAT ALMOST SAME PATTERN OF INVESTMENT WAS M ADE BY THE ASSESSEE IN THE EARLIER ASSESSMENT YEAR. HE HAS FURTHER SUBMITTED THAT AVERAGE HOLDING PERIOD OF THE SCRIPS IN CASE OF SHORT TERM CAPITAL GAINS W AS 191 DAYS AND IN CASE OF ITA NO.7122/M/2014 SHRI JAGDISH MASTER, HUF 4 LONG TERM CAPITAL GAINS WAS 960 DAYS. NO BORROWED FUNDS WERE USED BY THE ASSESSEE FOR PURCHASING THE SHARES. ASSESSEE, SINC E LONG, HAS BEEN TREATED AS AN INVESTOR AND THE INCOME FROM THE SHARES HAS CONSIST ENTLY BEEN OFFERED AND ACCEPTED AS SHORT TERM AND LONG TERM CAPITAL GAINS. HE HAS FURTHER RELIED UPON THE DECISION OF THE TRIBUNAL IN THE OWN CASE OF THE ASSESSEE FOR A.Y. 2006-07 DATED 18.05.11 PASSED IN ITA NO.3233/M/09 AND ITA N O.3420/M/09 VIDE WHICH THE TRIBUNAL HAS DISMISSED THE APPEAL OF THE REVENUE AGITATING THE ACTION OF THE LD. CIT(A) IN TREATING THE INCOME FRO M SHARE TRANSACTIONS OF THE ASSESSEE AS CAPITAL GAINS. FURTHER, IN THE IMMEDIA TE PRECEDING YEAR, THE ASSESSEE UNDER THE SAME FACTS AND CIRCUMSTANCES HAS BEEN TREATED AS AN INVESTOR. 7. FRO THE APPRAISAL OF ABOVE FACTUAL ASPECTS, IN O UR VIEW, THE LD. CIT(A) HAS RIGHTLY TREATED THE SHARE TRANSACTIONS ACTIVITY OF THE ASSESSEE AS INVESTMENTS. MOREOVER, THE DEPARTMENTS CONDUCT OF CHANGING ITS STAND IN EVERY YEAR IS NOT APPRECIABLE AS IT WOULD NOT ONLY CREATE UNCERTAINTY EACH YEAR ABOUT THE HEAD OF SUCH INCOME BUT MAY DEPRIVE THE ASSESSEE FROM CLAIMING SET OFF OF CAPITAL LOSSES OF A PREVIOUS YEAR IN THE SUBSEQUENT YEAR BECAUSE OF CHANGE OF HEAD OF SUCH INCOME. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. GOPAL PUROHIT (2011) 336 ITR 287 (BOM. ) HAS HELD THAT THOUGH PRINCIPLE OF RESADJUDICATA IS NOT APPLICABLE TO INC OME TAX PROCEEDINGS, AS EACH YEAR IS A SEPARATE YEAR, HOWEVER, THE PRINCIPLE OF CONSISTENCY IS TO BE FOLLOWED, IF THERE IS NO CHANGE IN FACT AND CIRCUMSTANCES IN THE SUBSEQUENT YEAR. 8. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY MERIT I N THE APPEAL OF THE REVENUE AND THE SAME IS ACCORDINGLY DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29.06.2016. SD/- SD/- (G.S. PANNU) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 29.06.2016. * KISHORE, SR. P.S. ITA NO.7122/M/2014 SHRI JAGDISH MASTER, HUF 5 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.