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Income Tax Appellate Tribunal, DELHI BENCH: ‘C’ NEW DELHI
Before: SHRI H. S. SIDHU & SHRI L.P. SAHU
ORDER
PER H.S. SIDHU, JM
This appeal is filed by assessee against the Order dated 04.8.2015 passed by the Ld. CIT(A)-16), New Delhi relating to Assessment Year 2011-12 on the following grounds:-
1. The Ld. CIT(A) erred in law and on facts and circumstances of the case in converting the investment activities of the assessee into trading activities.
2. The Ld. CIT(A) erred in law and on facts and circumstances of the case in treating the capital gain of Rs. 36,02,216/- earned on sale of shares and mutual funds, as business income. 3. The Ld. CIT(A) erred in law and facts and circumstances of the case in confirming the addition of Rs. 36,02,216/- as business income, rejecting the assessee’s claim of capital gain.
4. The Ld. CIT(A) erred in law and on facts of the case, while confirming the assessment has also violated the rule of consistency.
5. That on facts and circumstances of the case, the order of the CIT(A) is based on irrelevant evidences and considerations ignoring the relevant evidence and considerations and non-reasoned, mechanical and also perverse. 6. The assessee craves to be allowed to add any fresh grounds of appeal and / or delete or amend any of the grounds of appeal before or at the time of hearing.
Facts narrated by the revenue authorities are not disputed by both the parties, hence, the same are not repeated here for the sake of brevity.
Ld. Counsel for the assessee submitted that Ld. CIT(A) erred in law and on facts and circumstances of the case in converting the investment activities of the assessee into trading activities; in treating the capital gain of Rs. 36,02,216/- earned on sale of shares and mutual funds, as business income; in confirming the addition of Rs. 36,02,216/- as business income, rejecting the assessee’s claim of capital gain; while confirming the assessment has also violated the rule of consistency and the order of the Ld. CIT(A) is based on irrelevant evidences and considerations ignoring the relevant evidence and considerations and non- reasoned, mechanical and also perverse. During the hearing, Ld. Counsel for the assessee filed a small Paper Book containing the copy of CBDT Circular No. 6/2016 dated 29th February, 2016 on the issue of taxability of surplus on sale of shares and securities – Capital Gains or Business Income – Instructions in order to reduce litigation – reg.; copy of decision reported 183 ITR 1 (SC) in the case of Keshavji Ravji & Co. Vs. CIT; 400 ITR 0009 (SC) in the case of Director Income Tax vs. SRMB Dairy Farming Pvt. Ltd; 130 ITR 471 in the case of CWT(a) vs. Gammon India (P) Ltd.; 178 ITR 481 (MP) in the case of Jaikishan Gopikishan & Sons & Ors. Vs. CIT; 196 ITR 216 (SC) in the case of CIT vs. Vasudeo vs. Dempo and submitted that that Ld. CIT(A) while deciding the issue in dispute has wrongly upheld the order of the AO and did not consider the aforesaid documents and dismiss the appeal of the Assessee, which are very essential to discuss while adjudicating the issue in dispute. Therefore, Ld. Counsel for the assessee has requested to remit back the issue in dispute to the file of the Ld. CIT(A) with the directions to decide the same afresh, after considering the aforesaid documents.
Ld. Sr. DR, however, relied upon the orders of the authorities below, but did not have any serious objection to the request of the Ld. Counsel for the assessee for remitting back the issue to the file of the Ld. CIT(A) for deciding the issue in dispute.
We have heard both the parties and perused the records. We find that Ld. CIT(A) while deciding the issue in dispute has adjudicated the same as under:-
“Before me also the Ld. AR has reiterated his submission which be forwarded before the AO. I have considered all the facts and circumstances the assessment order and the submission of Ld. AR. In my opinion, I find force in the conclusion drawn by AO. My decision is based on following reasons:- i) Assessee is proprietor of Pankaj Electronics and is also indulging in sale and purchase of shares. Proprietor and individual is one and the same thing. There could be no hypothetical line separating the two. Therefore the argument of the Ld AR that investment in sale and purchase of share and other derivatives was done in the individual capacity is rejected. ii) The argument of Ld AR that no borrowed funds were used is also of no consequence and one is not barred from utilizing her own fund for business purpose. Whether funds were borrowed or not is not going to change the nature of transaction. iii) The fact that the assessee has also earned dividend on certain investment also is of no help. If the shares are held for a longer period, then dividend is bound to flow in. iv) Assessee herself in her submission before AO admitted as under:-
“Investment in share is made with the intention of resale at a profit or for long term appreciation and /or for earning dividends.”
Various courts have held that intention at the time of investment is an indicator of whether the activity is of the nature of business investment. v) Lastly the contention of the assessee saying that in earlier years same activity has been held to be investment sale of which resulted in capital gain. The Assessing officer has rightly pointed out that there is no res judicata in income tax proceedings. Further perpetuating the wrong done in the past is not judicious. It has to be set right, which has been done this year.
To perpetuate an error in no heroism to rectify it, is a compulsion of the judicial conscience [Distributors (Baroda) Pvt Ltd vs Union of India 1985 115 ITR 120 (SC)].
Therefore on the basis of reasons discussed above, the action of AO in treating the profit of Rs. 36,02,216/- as business income is sustained.”
5.1 After perusing the aforesaid finding of the Ld. CIT(A), we find that Ld. CIT(A) while deciding the issue in dispute has not at all considered the law laid down by the Hon’ble Supreme Court of India as well as Hon’ble High Courts as cited by the Ld. Counsel of the assessee, as aforesaid viz. decision reported 183 ITR 1 (SC) in the case of Keshavji Ravji & Co. Vs. CIT; 400 ITR 0009 (SC) in the case of Director Income Tax vs. SRMB Dairy Farming Pvt. Ltd; 130 ITR 471 in the case of CWT(a) vs. Gammon India (P) Ltd.; 178 ITR 481 (MP) in the case of Jaikishan Gopikishan & Sons & Ors. Vs. CIT; 196 ITR 216 (SC) in the case of CIT vs. Vasudeo vs. Dempo, which is very essential to be considered for deciding the issue in dispute. Therefore, we find force in the contention of the Ld. Counsel for the assessee and accordingly, remit back the issue in dispute to the file of the Ld. CIT(A) with the directions to decide the same afresh, after considering the aforesaid documentary evidences; case laws cited above and the Instructions of the CBDT contained in Circular No. 6/2016 dated 29.2.2016 and give adequate opportunity of being heard to the assessee.
In the result, the appeal filed by the assessee stand allowed for statistical purposes.
Order pronounced on 25/10/2018.