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Income Tax Appellate Tribunal, MUMBAI BENCH “I”, MUMBAI
Before: SHRI G.S. PANNU & SHRI AMARJIT SINGH
These are a bunch of four appeals by the Revenue relating to a single assessee for Assessment Years 2006-07, 2007-08, 2008-09 and 2012-13. In all the appeals, the issues raised by the Revenue are similar, therefore, they have been clubbed and heard together and a consolidated order is being passed for the sake of convenience and brevity.
First, we may take up the appeal of Revenue for Assessment Year 2006-07 which is directed against the order of CIT(A)-49, Mumbai dated 07.09.2015, which in turn has arisen from order dated 30.03.2014
2 Shri Pravinchandra N. Kamdar to 5483 & 5487/Mum/2015 passed by the Assessing Officer, Mumbai under section 153A r.w.s 143(3) of the Income Tax Act, 1961 (in short ‘the Act’).
In this appeal, Revenue has raised the following Grounds of appeal :-
“1. On facts and in the circumstances of the case and in law, the CIT(A) erred in directing the AO to assess the income from purchase & sale of shares under the head income from Short Term Capital Gain and Long Term Capital Gain and not business income as the assessment had been finalized and not abated on account of the search and relying on the decision of the Bombay High Court in the case of All Cargo Global Logistics Ltd. without appreciating the fact that the decision of the Bombay High Court in the case of All Cargo Global Logistics Ltd. has not been accepted by the department and SLP has been filed.
2. On the facts and in the circumstances of the case and in law, the CIT(A) erred in directing the AO to assess the income from purchase and sale of shares under the head income from Short Term Capital Gain and Long Term Capital Gain and not business income relying on the decision of the ITAT in the assessee’s own case of A.Y 2007-08 without appreciating the fact that the decision of the ITAT in the assessee’s own case for A.Y 2007-08 has not been accepted by the department and appeal u/s 260 has been filed in the High Court and the same is pending.”
Briefly put, the relevant facts are that assessee individual, is connected to one K. Amishkumar Trading Pvt. Ltd. group, which was covered under a search and seizure action carried out by the Department u/s 132(1) of the Act on 24.11.2011 in the Bharti Shipyard Group of cases. As a consequence, assessee was issued a notice u/s 153A(1) of the Act and in response, assessee filed a return of income declaring total income of Rs.56,52,422/- which was the same as 3 Shri Pravinchandra N. Kamdar to 5483 & 5487/Mum/2015 declared by him in the return filed u/s 139 of the Act on 20.10.2006. The return of income so filed by the assessee was subject to scrutiny assessment by the Assessing Officer u/s 153A r.w.s. 143(3) of the Act whereby the total income has been assessed at Rs.60,99,811/-. The assessee carried the assessment in appeal before the CIT(A), who has allowed certain reliefs and Revenue is in appeal before us against the order of CIT(A) on the above stated Grounds of appeal.
5. Insofar as the aforesaid Grounds are concerned, the pertinent facts are that assessee had declared profit on sale and purchase of shares as Short Term Capital Gain – Rs.50,37,333/- and Long Term Capital Gain – Rs.2,18,682/-, which has since been treated by the Assessing Officer as an income liable to be taxed as Business income. This stand of the Assessing Officer has since been negated by the CIT(A), which is being assailed by the Revenue before us.
6. The Assessing Officer has treated the income from sale and purchase of shares as Business income on the ground that the assessee has acted as a trader in the course of such activity and, therefore, according to the Assessing Officer, such income was liable to be assessed as Business income. The CIT(A) noticed that in the assessment finalised u/s 143(3) of the Act dated 14.11.2008 in pursuance to the original return filed u/s 139(1) of the Act on 20.10.2006, the Long Term as well as Short Term Capital Gains earned on the sale of shares has been accepted as such. The CIT(A) further noticed that as on the date of search, i.e., 24.11.2011 the assessment for the instant Assessment Year of 2006-07 was not pending and, therefore, the same does not 4 Shri Pravinchandra N. Kamdar to 5483 & 5487/Mum/2015 abate in terms of the second proviso to Sec. 153A(1) of the Act. For this reason, Assessing Officer held that following the decision of Special Bench of the Tribunal in the case of All Cargo Global Logistics Ltd. v. DCIT, 137 ITD 287 (Mum-SB), the Assessing Officer was required to assess the income in the assessment u/s 153A(1) r.w.s 143(3) of the Act based only on the incriminating material revealed in the course of search. As per the CIT(A), the additions made to the total income by treating the income earned on capital gains as Business income was not on the basis of any incriminating material found in the course of search and, therefore, the same could not have been added by the Assessing Officer in the assessment finalised u/s 153A(1) r.w.s. 143(3) of the Act. Notably, the decision of the Special Bench of the Tribunal in the case of All Cargo Global Logistics Ltd. (supra) has since been affirmed by the Hon'ble Bombay High Court in the case reported at CCI Ltd. v JCIT, 250 CTR 291. It is also noticed that CIT(A) was conscious of the decision of Tribunal in the case of assessee for Assessment Year 2007-08 vide dated 27.5.2014 wherein the income of assessee from sale and purchase of shares has been held to be assessable as Capital Gains.
Before us, the only point made by the ld. DR, which is also manifested in the Grounds of appeal, is that the decision of Hon'ble Bombay High Court in the case of All Cargo Global Logistics Ltd. (supra) has not been accepted by the Department and further that the decision of the Tribunal in assessee’s own case for Assessment Year 2007-08 relied upon by CIT(A) has also not been accepted by the Department and an appeal against it has been filed in the Hon'ble High Court.
5 Shri Pravinchandra N. Kamdar to 5483 & 5487/Mum/2015
Having regard to the point raised by Revenue, we find no reason to interfere with the conclusion of CIT(A). We have perused the assessment order and find that there is no reference made to any material or evidence found in the search, which has a bearing on the issue in order to treat the Capital Gains declared by the assessee to be assessed as Business income. Therefore, the CIT(A) has correctly applied the decision of Special Bench of the Tribunal in the case of All Cargo Global Logistics Ltd. (supra) which has further been approved by the Hon'ble Bombay High Court. Thus, insofar as appeal of the Revenue for Assessment Year 2006-07 is concerned, same is without any merits and is accordingly dismissed.
We may now take up the appeal of Revenue for Assessment Year 2007-08 which is directed against the order of CIT(A)-49, Mumbai dated 07.09.2015, which in turn has arisen from order dated 30.03.2014 passed by the Assessing Officer, Mumbai under section 153A r.w.s 143(3) of the Act.
In this appeal, Revenue has raised the following Grounds of appeal :-
"1. On facts and in the circumstances of the case and in law, the CIT(A) erred in directing the AO to assess the income from purchase & sale of shares under the head income from Short Term Capital Gain and Long Term Capital Gain and not business income as the assessment had been finalized and not abated on account of the search and relying on the decision of the Bombay High Court in the case of All Cargo Global Logistics Ltd. without appreciating the fact that the decision of the Bombay High Court in the case of All Cargo
6 Shri Pravinchandra N. Kamdar to 5483 & 5487/Mum/2015 Global Logistics Ltd. has not been accepted by the department and SLP has been filed.
2. On the facts and in the circumstances of the case and in law, the CIT(A) erred in directing the AO to assess the income from purchase and sale of shares under the head income from Short Term Capital Gain and Long term Capital Gain and not business income relying on the decision of the ITAT in the assessee's own case of A.Y. 2007-08 without appreciating the fact that the decision of the ITAT in the assessee's own case for A.Y. 2007-08 has not been accepted by the department and appeal u/s 260 has been filed in the High Court and the same is pending."
The Grounds raised by Revenue in the present appeal are similar to those raised in Assessment Year 2006-07. The relevant facts in Assessment Year 2007-08 are that a return was filed by the assessee in response to notice u/s 153A(1) of the Act declaring income at Rs.2,06,73,550/-, which was same as the income declared in the return of income originally filed u/s 139(1) of the Act dated 25.10.2007. In the ensuing assessment u/s 153A r.w.s. 143(3) of the Act, the Assessing Officer treated the Short Term Capital Gain of Rs.48,98,969/- and Long Term Capital Gain of Rs.10,36,681/- as Business income. CIT(A) has since disagreed with the Assessing Officer and held that the profit received from sale of shares is liable to be assessed as Short Term Capital Gain or Long Term Capital Gain, depending upon the period of holding of shares. In coming to such a conclusion, CIT(A) has adopted the same reasoning as he did for Assessment Year 2006-07, which we have already dealt with in the earlier paras.
At the time of hearing, both parties advanced similar arguments which have been considered by us in the appeal for Assessment Year
7 Shri Pravinchandra N. Kamdar to 5483 & 5487/Mum/2015 2006-07. The learned representative for the respondent-assessee pointed out that originally in the assessment finalised u/s 143(3) of the Act the Short Term Capital Gain declared by the assessee was treated as Business income by the Assessing Officer, whereas the Long Term Capital Gain declared by the assessee was assessed as such. The Tribunal in its order dated 27.5.2014 (supra) upheld the stand of the assessee and directed the Assessing Officer to treat the income from sale of shares as Capital Gains and not Business income. The learned representative pointed out that in the impugned assessment finalised u/s 153A(1) r.w.s. 143(3) of the Act, the Assessing Officer not only treated the Short Term Capital Gain as Business income, but also Long Term Capital Gain as Business income. It was pointed out that there was no justification for such departure, as the search did not reveal any incriminating material on this aspect.
Having regard to the rival submissions, we find that the appeal of assessee for Assessment Year 2007-08 is also liable to be decided in the same manner as for Assessment Year 2006-07, which has been dealt with by us in the earlier paras. Notably, the finding of CIT(A) is that the assessment for Assessment Year 2007-08 was also not pending on the date of search, i.e., 24.11.2011. This CIT(A)’s finding has not been negated by the Revenue before us and under these circumstances, in our view, CIT(A) made no mistake in applying the ratio of decision of the Special Bench of Tribunal in the case of All Cargo Global Logistics Ltd. (supra) in holding that the instant addition was unsustainable as there was no incriminating material found in the course of search in connection with such addition.
8 Shri Pravinchandra N. Kamdar to 5483 & 5487/Mum/2015
In view of our decision in the appeal for Assessment Year 2006-07 herein also, the order of CIT(A) is affirmed and Revenue fails in its appeal.
In the other two appeals, which relate to Assessment Year 2008- 09 and 2012-13, similarly worded Ground of appeal has been raised which reads as under :-
1. On the facts and in the circumstances of the case and in law, the CIT(A) erred in directing the AO to assess the income from purchase and sale of shares under the head income from Short Term Capital Gain and Long term Capital Gain and not business income relying on the decision of the ITAT in the assessee's own case of A.Y. 2007-08 without appreciating the fact that the decision of the ITAT in the assessee's own case for A.Y. 2007-08 has not been accepted by the department and appeal u/s 260 has been filed in the High Court and the same is pending.
16. In these two years also, the solitary dispute relates to the treatment of income from sale and purchase of shares. The assessee has declared such income as Short Term/Long Term Capital Gain whereas the same has been assessed as Business income by the Assessing Officer. The CIT(A) has allowed the claim of assessee based on the decision of the Tribunal in assessee’s own case for Assessment Year 2007-08 (supra). Since the said decision of the Tribunal continues to hold the field and has not been altered by any higher authority, we find no reason to interfere with the decision of CIT(A). Thus, the appeals of the Revenue for Assessment Years 2008-09 and 2012-13 are also dismissed.
9 Shri Pravinchandra N. Kamdar to 5483 & 5487/Mum/2015
Resultantly, all the appeals of the Revenue are dismissed.
Order pronounced in the open court on 30th September, 2016.