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Income Tax Appellate Tribunal, MUMBAI BENCHES “A”, MUMBAI
Before: Shri Joginder Singh & Shri Rajendra
आदेश / O R D E R Per Joginder Singh (Judicial Member) The assessee is aggrieved by the impugned order dated 03/08/2012 of the ld. First Appellate Authority, Mumbai. The only ground raised in this appeal pertains to assessing Rs.29,64,051/-, being gain arising from sale of shares, under the head “profession and gains arising from business or profession” against the “short term capital gains” offered by the assessee under the head “capital gains”.
During hearing, the ld. counsel for the assessee, Shri Nishit Gandhi, claimed that the impugned issue, on identical facts was decided by the Tribunal in the case of assessee itself for A.Y. 2006-07 vide order dated 18/02/2015 (ITA No.3520/Mum/2010). This factual matrix was consented to be correct by the ld. DR, Shri M. Murli.
2.1. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that the assessee is retired director, declared income of Rs.33,36,300/- in her return on 28/07/2007, which was completed u/s 143(3) of the Income Tax Act, 1961 (hereinafter the Act) assessing the total income at Rs.33,36,300/- itself. During the year under consideration, the assessee claimed/showed short term capital gains amounting to Rs.29,64,051/-, on sale of shares. Such shares were showed as investment and in earlier years were assessed under the head capital gains. The investment was made out of surplus funds available with the assessee. The Assessing Officer was of the view, that the assessee had been carrying out system activity of purchase and sale of shares by keeping a close watch on the market situation, therefore, considering the frequency and volume of trade, he treated the gain as business income.
2.2. On appeal, before the ld. Commissioner of Income Tax (Appeals), it was concluded that the capital gain was earned with profit motive within a short span of period, thus, the intention of the assessee was to gain profit by dealing in shares, thus, the conclusion drawn in the assessment order was affirmed. The assessee is in further appeal before this Tribunal.
2.3. As asserted by the ld. counsel for the assessee, that the impugned issue on identical fact is covered by the decision of the Tribunal dated 18/02/2015, we are reproducing hereunder the factual matrix from the aforesaid order for ready reference and analysis:-
“This is an appeal filed by the Revenue against the order of CIT(A), dated 16-2-2010 for the Assessment Year 2006-07, in the matter of order passed u/s.143(3) of the I.T. Act, wherein following grounds have been taken by the Revenue :-
On the facts and in the circumstances of the case and in law, the Learned CIT(A) has erred in directing to treat the STC Gain on sale of shares of Rs.13,60,155/ - as a STC Gain instead of business income made by AO in his assessment order, ignoring the fact that:- a) The assessee has deployed his fund with an intention of earning profit of such funds and there was no intention of the assessee to appreciate the investment so made during the year. b) The assessee had no intention to hold her shares in order to earn regular income out of such purchases.
2. On the facts and in the circumstances of the case and in law, the Learned CIT(A) has failed to appreciate the in depth analysis made by the AO before treating the gains as business income and that circular no. 4 of 2007 has be taken into consideration to decide whether the Gains are to be treated as such or as business. 3. On the facts and in the circumstances of the case and in law, the learned CIT(A) failed to appreciate the fact that the transaction is shown whether by himself or through his agent has to be treated as assessee's own transaction and the motive behind such transaction was to earn maximum profit and not investment. 4. The appellant prays that the order of the CIT(A) on the above ground be set aside and that of the AO be restored. 2. Rival contentions have been heard and record perused. The short term capital gain declared by the assessee was treated by the AO as business income. By the impugned order, the CIT(A) directed the AO to treat the same as short term capital gain after having the following observations :-
3.3 I have carefully perused the assessment order, submissions made by the A.R on behalf of the appellant and the facts of the case. The issue involved is in respect of treatment of long term capital gains on sale of shares and sale of mutual funds, sold after 01.10.2004 aggregating to Rs.14,10,430/- [on sale of shares Rs.5,87,180/- & on mutual funds Rs.8,23,250/- as business income by the A.O and thereby denying exemption to the appellant uls.10(38) of the Act. The other issue involved is in respect of treatment of short term capital gains on sale of shares and redemption of mutual funds sold after 01.10.2004 aggregating to Rs.15,25,348/- [on sale of shares Rs.13,60,155/- & redemption of mutual funds Rs.1,65,193/-] as business income by the A.O instead of applying a special rate @ 10% as provided uls.111A of the Act. The A.R of the appellant vide his letter dtd. 20.12.09 contended that the short term capital gain of Rs.15,25,348/- [13,60,155/- + 1,65,193] is not correct and in support of his claim he has contended that the correct figure of short term capital gain shall be Rs.12,86,854/- [11,21,661+1,65,193]. The AO after relying on the CBDT's circular bearing No.4/2007 dated 15.6.2007 and after having given other reasonings treated the long term capital gain of Rs.14,10,430/- and short term capital gain of Rs.15,25,348/- as business income in the hands of the appellant. The A.R of the appellant has contended before me that in the earlier Asst. year the appellant was treated as an investor and not a trader of the shares and accordingly profit and gains arising on sale of those investment were offered for taxation under the head capital gains and has been assessed as such. The A.R of the appellant has also produced copy of the assessment orders passed u/s.143(3) for earlier two years viz. A.Y. 2004-05 & 2005-06. The A.R of the appellant has relied on the Hon'ble Bombay High Court's judgement in the case of CIT vs. Gopal Purohit delivered on 6th January, 2010' and has prayed that income derived by the appellant from investment activity be treated as long term and short term capital gains respectively and the same should not be treated as income from business. Based on the finding recorded by ITAT in the case of CIT vs. Gopal Purohit 122 TTJ Mumbai 87, it is open to an assessee to maintain two separate portfolios one relating to investments in shares and other relating to business activities involving dealing in shares. The only delivery based transactions fall within the purview of nature of investment transactions giving rise to capital gains". As stated above, in the past the Department has accepted the claim of the appellant of being an investor. During the year under consideration, the AO has treated the appellant as a trader without bringing on record any reason for deviating from the earlier stand of the Department. I have observed that the case of the appellant is squarely covered by the ratio laid down in the case of CIT vs. Gopal Purohit mentioned supra, therefore, the AO is directed to treat the long term capital gains on sale of shares and sale of mutual funds, sold after 01.10.2004 aggregating to Rs.14,10,430/- [on sale of shares Rs.5,87,180/- & on mutual funds Rs.8,23,250/-] as such and allow the exemption to the appellant u/s.10(38) of the Act. Apart from the above, the AO is also directed to verify the transaction of shares and mutual funds which are delivery based and treat the same as giving rise to capital gains and charge the STCG at concessional rate of 10% as provided u/s.111A of the Act. The other transactions involving non-delivery speculative transactions will be treated as forming part of speculation business and will be taxed as such. The AO is directed to verify and quantify the profit/loss in non- delivery based transaction and charge it as business income/loss. The grounds of appeal are, accordingly, allowed.”
4. Ground No.4 reads as under:
"On the facts and circumstances of the case as well as in Iaw:- The learned ITO erred in considering shares & mutual funds as stock in trade instead held as investments in the books of accounts and thereby gain made on the transfer/redemption as business profit in disregard of the facts of the case of appellant. He failed to appreciate the facts that the appellant is not a trader in shares & the units of mutual funds in investor. In this respect he ought to have appreciated that there is no justification for considering shares as stock in trade as per circular No. 4/2007, dated 15.6.2007.
4.1 While disposing off Ground No. 2& 3, necessary relief has been allowed to the appellant. Therefore, this ground of appeal has become infructuous and is dismissed.”
3. Against the above order of CIT(A), the Revenue is in further appeal before us.
4. We have considered rival contentions, carefully gone through the orders of the authorities below and found from the record that the assessee was consistently investing in shares. Capital gains offered by the assessee either as long term or short term was accepted by the department in all the earlier assessment years u/s.143(3). The assessee has also placed on record the assessment order framed u/s.143(3) for the A.Y.2005-06 & 2006-07. After giving detailed finding at para 4, the CIT(A) found that assessee has earned long term capital gains of Rs.14,10,430/- on sale of shares and mutual funds which is liable to exemption u/s.10(38). The CIT(A) has also directed AO to verify the transaction of shares and mutual funds held for less than twelve months, which are delivery based and treat the same as giving rise to short term capital gains. The findings recorded by CIT(A) have not been controverted by ld. DR. Accordingly, we do not find any reason to interfere in the order of CIT(A) for allowing assessee’s claim of long term and short term capital gains earned on sale of shares and mutual funds.
In the result, appeal of the Revenue is dismissed.
2.4. In the aforesaid order of the Tribunal, it is noted that there is categorical finding that the Department had been accepting the stand that the assessee was consistently investing in shares and the capital gains, offered by the assessee was assessed either as long term gain or short term gain while passing order u/s 143(3) of the Act. Identical was the situation for A.Ys.2005-06 and 2006-07 framed u/s 143(3) of the Act and the same were found exempted u/s 10(38) of the Act. These findings of the ld. Commissioner of Income Tax (Appeals) as well as of this Tribunal were not contradicted before us, thus, in the absence of any contrary material, on the principle of consistency, the Department is not expected to take a U- turn and assess the income as business income. So far as the contention of the ld. DR and also the observation of the ld. Commissioner of Income Tax (Appeals) that there was a profit motive, we are not impressed by this submission, because, every investor invest the money for gain and not for loss. The issue of consistency and frequency of shares has been dealt with in detail by Hon’ble jurisdictional High Court in the case of Gopal Purohit, which comes to the rescue of the assessee.
2.5. So far as, the issue of consistency is concerned, we are of the view that in the absence of contrary material, consistency has to be maintained. For which we are fortified by following decisions:- i. Parshuram Pottery Works Ltd. vs ITO 106 ITR 1 (SC) ii. Security Printers 264 ITR 276(Del.) iii. CIT vs Neo Polypack Pvt. Ltd. 245 ITR 492 (Del.) iv. CWT vs Allied Finance Pvt. Ltd. 289 ITR 318 (Del.) v. Berger Paints India Ltd. vs CIT 266 ITR 99 (SC) vi. DCIT vs United Vanaspati (275 ITR 124) (AT)(Chandigarh ITAT) vii. Union of India vs Kumudini N. Dalal 249 ITR 219 (SC) viii. Union of India vs Satish Pannalal Shah 249 ITR 221 ix. B.F.Varghese vs State of Kerala 72 ITR 726 (Ker.) x. CIT vs Narendra Doshi 254 ITR 606 (SC) xi. CIT vs Shivsagar Estate 257 ITR 59 (SC) xii. Pradip Ramanlal Seth vs UOI 204 ITR 866 (Guj.) xiii. Radhaswamy Satsang vs CIT 193 ITR 321 (SC) xiv. Aggarwal warehousing & Leasing Ltd. 257 ITR 235 (MP)
The sum and substance of the aforesaid judicial pronouncements is that on the basis of principle of judicial discipline, consistency has to be followed and once in a particular year, if any view is taken, in the absence of any contrary material, no contrary view is to be taken as finality to the litigation is also a principle which has to be followed. Before us, no contrary facts or any adverse material was brought on record by the Revenue, therefore, on the principle of consistency also, the assessee is having a good case in her favour.
Finally, the appeal of the assessee is allowed.
This order was pronounced in the open in the presence of ld. representatives from both sides at the conclusion of the hearing on 17/03/2016.