COMMISSIONER OF INCOME TAX AHMEDABAD III vs. NITA M PATEL

O/TAXAP/751/2013 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 751 of 2013

FOR APPROVAL AND SIGNATURE:

HONOURABLE MR.JUSTICE M.R. SHAH and HONOURABLE MR.JUSTICE R.P.DHOLARIA

====================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ====================================== COMMISSIONER OF INCOME TAX AHMEDABAD III....Appellant(s) Versus NITA M PATEL....Opponent(s) ====================================== Appearance: MS PAURAMI B SHETH, ADVOCATE for the Appellant(s) No. 1 ====================================== CORAM: HONOURABLE MR.JUSTICE M.R. SHAH and HONOURABLE MR.JUSTICE R.P.DHOLARIA

Date : 25/11/2013

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O/TAXAP/751/2013 JUDGMENT ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE M.R. SHAH) 1. Being aggrieved and dissatisfied with the impugned judgment and order passed by the Income Tax Appellate Tribunal (hereinafter referred to as “ITAT”) dated 31/01/2013 in ITA No. 1964/Ahd/2012 for the Assessment Year 2009-10 the revenue has preferred the present appeal with the following substantial question of law; “Whether the appellate tribunal is right in law and on facts in confirming the order of the CIT(A) deleting the addition of Rs.32,56,559/- made by the AO on account of business income and directing the AO to treat the same as long term capital gain as claimed by he assessee, without discussing the merits & findings of the A.O. in the assessment order?” 2. The assessee filed the return of income for the Assessment Year 2009-10 declaring the total income of Rs.3,85,000/-. The return of income was processed under Section 143(1) of the Income Tax Act and thereafter notice under Section 143(2) of the Income Tax Act was issued and served upon the assessee. The notice under Section 142(1) in the form of detailed questionnaire was issued and served upon the assessee. In response to the notice issued, the representative of the assessee appeared and showed the long term capital gain of Rs.32,56,559/- on sale of shares. On verification of records, the Assessing Officer was of the opinion that the assessee is indulged in the business of share trading by way of frequent sale and purchase of shares. On scrutiny of Page 2 of 6

O/TAXAP/751/2013 JUDGMENT the return filed by the assessee, the Assessing Officer found that the assessee has shown the income of Rs.32,56,559/- for long term capital gain from the activities of purchase and sale of shares of Reliance Group of Companies. On perusal of the chart submitted alongwith the return of income, the Assessing Officer noticed that the magnitude of some transaction are very high and, therefore, the assessee was requested to show cause as to why the income from the activities of purchase and sale of the shares may not be treated as income from business and not the income from investment activities. The assessee vide reply dated 15/11/2011 submitted that the income from the activities should not be treated as business income and has contented that similar treatment was given by the Assessing Officer in her case for the Assessment Year 2005-06 and the CIT(A) has decided the issue in favour of the assessee. It was also submitted that for the Assessment Year 2004-05 the proceedings under Section 263 of the Income Tax Act were dropped. However, the Assessing Officer did not accept the explanation given by the assessee. With respect to the reliance placed on the decision of the CIT(A) for the Assessment Year 2005-06, the Assessing Officer observed that as the Department has not accepted the same, the appeal before the ITAT has been filed and, therefore, it cannot be said that the order passed by the CIT(A) for the Assessment Year 2005-06 has attained the finality. Consequently, the Assessing Officer while passing the assessment order treated Rs.32,56,559/- as income from business and passed the consequential order of treating the aforesaid amount as long term capital gain as business income. Being aggrieved and dissatisfied with the order passed by the Assessing Officer in considering the income of Rs.32,56,559/- as business income, Page 3 of 6

O/TAXAP/751/2013 JUDGMENT the assessee preferred appeal before the CIT(A) and the CIT(A) allowed the said appeal preferred by the assessee and directed the Assessing Officer to treat the income from the share transactions as long term capital gain instead of business income. 2.1. Being aggrieved and dissatisfied with the order passed by the CIT(A), the revenue preferred appeal before the ITAT, being ITA No. 1964/Ahd/2012 and by impugned judgment and order and relying upon the decision of the coordinate Bench in the case of the very assessee on the similar issue respect to the Assessment Year 2005-06, dismissed the said appeal. Being aggrieved and dissatisfied with the impugned judgment and order passed by the ITAT, the revenue has preferred the present Tax Appeal with the following proposed question of law; “Whether the appellate tribunal is right in law and on facts in confirming the order of the CIT(A) deleting the addition of Rs.32,56,559/- made by the AO on account of business income and directing the AO to treat the same as long term capital gain as claimed by he assessee, without discussing the merits & findings of the A.O. in the assessment order?” 3. Heard Ms. Paurami Sheth, learned Counsel appearing on behalf of the appellant and perused the impugned judgment and order passed by the ITAT, CIT(A) as well as the order passed by the Assessing Officer. At the outset, it is required to be noted that in the present case the dispute is with respect to the Assessment Year 2009-10 with respect to the share Page 4 of 6

O/TAXAP/751/2013 JUDGMENT transactions and treating the same as business income. Identical question came to be considered with respect to the Assessment Year 2005-06 and similar treatment was given by the Assessing Officer treating the income from the shares as business income, which came to be deleted by the CIT(A), which further came to be confirmed by the ITAT against which the revenue preferred Tax Appeal No. 71/2013 before this Court and this Court has dismissed the said appeal preferred by the revenue confirming the judgment and order passed by the ITAT with respect to the Assessment Year 2005-06. As stated hereinabove, by passing the impugned judgment and order, ITAT has relied upon the decision in ITA No. 937/Ahd/2009 for the Assessment Year 2005-06 in the case of the very assessee and the said order has been confirmed by this Court vide impugned judgment and order dated 19/08/2013 in Tax Appeal No. 71/2013. It is also required to be noted that in the present case also and it is not in dispute that with respect to the very shares, which were sold during the Assessment Year in question in the earlier assessment order, the same were treated as investment in shares. Under the circumstances, when in the earlier assessment order i.e for the Assessment Years 2004-05 and 2005-06 the same were treated as investment in shares and the Assessing Officer accepted the same as investment in shares, no error has been committed by the ITAT as well as the CIT(A) in deleting the addition made by the Assessing Officer in treating it as business income for the purpose of short term capital gain and long term capital gain. 4. Under the circumstances, we see no reason to interfere with the impugned judgment and order passed by the ITAT. Page 5 of 6

O/TAXAP/751/2013 JUDGMENT No question of law, much less substantial question of law arises in the present appeal. Hence, the present appeal deserves to be dismissed and is accordingly dismissed. (M.R.SHAH, J.) (R.P.DHOLARIA,J.) Siji Page 6 of 6