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Income Tax Appellate Tribunal, PUNE BENCH “A”, PUNE
Before: SHRI ANIL CHATURVEDI, AM & SHRI VIKAS AWASTHY, JM
आदेश / ORDER PER ANIL CHATURVEDI, AM :
This appeal filed by the Revenue u/s 253 of the Income Tax 1. Act is emanating out of the order of Commissioner of Income Tax (A) - Pune – 11 dt.21.12.2015 for the assessment year 2006-07.
The relevant facts as culled out from the material on record are as under :-
2.1 Assessee is a company engaged in the business of manufacturing and sale of PVC Resin, PVC Pipes etc. A search and seizure action was carried out on 18.11.2010 in the Finolex
group of companies. Consequently, notice u/s 153A of the Act
was issued on 22.08.2012 and in compliance to which assessee
furnished return of income on 10.08.2011 disclosing total income
of Rs.66,38,77,799/-. Thereafter, assessment was framed u/s
143(3) r.w.s. 153A of the Act vide order dt.28.03.2013 and the
total taxable income was determined at Rs.67,55,19,067/-.
Aggrieved by the order of AO, assessee carried the matter before
Ld.CIT(A), who vide order dt.21.12.2015 (in appeal No.Pn/CIT(A)-
11/DCIT, Cen. Cir.1(2), Pune/407/2014-15) decided the issue in
favour of the assessee. Aggrieved by the order of Ld.CIT(A),
Revenue is now in appeal before us and has raised the following
grounds :
“1) On the facts and the circumstances of the case and in law, the Ld. CIT(A) has erred in accepting the plea of the assessee that "Mutual Funds" is not a trading investment whereas no such distinction has been provided in the Act to ascertain whether any activity is a "Business" as per Sec. 2(13) of the Income Tax Act, 1961. 2) On the facts and the circumstances of the case and in law, although the Ld. CIT(A) has held that issues, which have been concluded during proceedings u/s 143(3) cannot be revisited u/s. 153A of the Income Tax Act, 1961 'based on the decision of the Hon'ble Bombay High Court in the case of Continental Warehousing Corporation (374 ITR 64 5) and Murali Agro Products (49 Taxmann. com.172), when these decisions have not reached finality and have been admitted in SLP by the Hon'ble Supreme Court. 3) On the facts and the circumstances of the case and in law, the Ld. CIT(A) has erred in overlooking the Non- obstante nature of Section 153A, which treats the return filed or relied upon by the assessee as a fresh return and in consequence the Assessing Officer was well within his rights to assume jurisdiction over the said filed or relied upon return u/s.143(2) of the Income Tax Act,1961 notwithstanding the fact that an order u/s. 143(3) had been passed in respect of the original return. 4) The order of the Ld. CIT(A) may be vacated and the Assessing Officer be restored.
5) The appellant craves leave to add, alter amend and modify any of the above grounds of appeal.”
Before us, at the outset, Ld.D.R. submitted that though
Revenue has raised various grounds but all the grounds are inter-
connected and can be considered together.
AO noticed that assessee had offered short term capital
gains of Rs.19,95,85,093/-, out of which on the amount of capital
gains of Rs.5,29,56,697/-, assessee had paid tax at 10% u/s
111A of the Act. The assessee was asked to show cause as to
why the income not be treated as business income and taxed at
30%. The submission of the assessee was not found acceptable to
the AO. AO noticed that assessee company has done substantial
investments in units of Mutual Funds and had entered into more
than 200 transactions. AO therefore concluded that the intention
of the assessee was to trade with a view to earn profits rather than
to keep it as investments. AO held the transactions of purchase
and sale of mutual funds entered into by the assessee to be
adventure in the nature of trade and therefore the submission
that the profit should be considered as short term capital gain was
not acceptable. AO accordingly held that the profits earned of
Rs.5,29,56,697/- as income from “business and profession” as
against the claim of assessee of “short term capital gains.”
Aggrieved by the order of AO, assessee carried the matter before
Ld.CIT(A), who decided the issue in favour of the assessee by
holding as under :
“7.2 have considered the facts of the case and the appellant's submissions. The short term capital gains in question were accepted as such in the original asst order by the AO. There is no mention in the present asst order that any new facts in this regard had come to light as a result of the search or during the reassessment proceedings.
7.3 The appellant explained to the AO that there are about 10 transactions of investment in the units of the mutual funds and redemption of the same, Investment in units of mutual funds is generally not a trading investment because the units of mutual funds can only be redeemed. It was also stated that on an average there was holding period of more than 30 days for such transactions, It was also explained that the investment was out of- the surplus funds of the company and was akin to parking of the surplus funds in FDs etc. The appellant also relied on various court decisions in this regard before the AO. The AO however brushed aside all these arguments and facts as explained by the appellant without accepting or rejecting any of the contention directly. The AO accepted the claim of the assessee with respect to investment in Debt Oriented MFs etc but refused the same with respect to investment in Equity Oriented Funds that also only 9 M Fs which resulted into short term gain of 5.29 crs. It is also seen that in some of the future asst years the AO has accepted the appellant’s claim of short term gains. The AO thus has made the addition in this year because in his opinion the transactions looked like a business transaction and not investment.
7.4 Thus, it is a clear case of change of opinion by the AO about the issue without any change in the law or the facts of the case. This type of review of any issue concluded in an earlier scrutiny assessment is not permissible in the reassessment to be framed under section 153A of the Act. The law in this regard has been laid down very clearly by the jurisdictional High Court in the case of Continental Warehousing Corporation (374 ITR 645) and Murali Agro Products (49 taxmann.com 172). The ground of appeal is therefore allowed and the AO is directed to not to tax the short term capital gains as business income.”
Aggrieved by the order of Ld.CIT(A), Revenue is now in appeal
before us.
Before us, Ld.D.R. supported the order of AO. Ld.A.R. on the
other hand, reiterated the submissions made before AO and
Ld.CIT(A) and further submitted that similar transactions of
profits offered by the assessee as capital gains in earlier years and
subsequent years have not been disputed by the Revenue. He
further submitted that no incriminating material was found
during the course of search and therefore the Ld.CIT(A) has rightly
following the decision of Hon’ble Bombay High Court in the case of
Continental Warehousing Corporation (374 ITR 645), had decided
the issue in favour of the assessee. He therefore submitted that in
view of the aforesaid facts, no interference to the order of Ld.CIT(A)
is called for.
We have heard the rival submissions and perused the
material on record. The issue in the present case is with respect
to the taxability of capital gains earned on sale of mutual funds.
Assessee had offered the gain as short term capital gain whereas
in the assessment proceedings u/s 153A of the Act, AO held it as
business income. We find that Ld.CIT(A) while deciding the issue
noted that while passing the original assessment order, the short
term capital gains offered by the assessee was accepted and that
no new facts with respect to the short term capital gains had come
to light as a result of search. He has also noted that AO accepted
the claim of assessee of short term capital gains in respect of
profits of ‘debt oriented mutual funds’ but refused the contention
of assessee with respect to profits earned from ‘equity oriented
mutual funds’ and therefore it was a case of change of opinion
without any change in law and the facts of the case. The aforesaid
finding of Ld.CIT(A) has not been controverted by Revenue. Before
us, Revenue has neither placed any contrary binding decisions in
its support nor pointed out any fallacy in the findings of Ld.CIT(A).
In view of the aforesaid facts, we find no reason to interfere with the order of Ld.CIT(A). Thus, the grounds of the Revenue are dismissed.
In the result, the appeal of Revenue is dismissed.
Order pronounced on 9th day of February, 2018.
Sd/- Sd/- (VIKAS AWASTHY) (ANIL CHATURVEDI) �या�यक सद�य / JUDICIAL MEMBER लेखा सद�य / ACCOUNTANT MEMBER
पुणे Pune; �दनांक Dated : 9th February, 2018. Yamini
आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent 3. CIT(A), Pune-11, Pune. 4. Pr.CIT, (Central), Pune. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “ए” / DR, 5 ITAT, “A” Pune; गाड� फाईल / Guard file. 6.
आदेशानुसार/ BY ORDER // True Copy // / // True Copy //
व�र�ठ �नजी स�चव / Sr. Private Secretary आयकर अपील�य अ�धकरण ,पुणे / ITAT, Pune.