D.C.I.T CC - VIII,kolkata, Kolkata v. M/s Purbanchal Leasing Ltd, Kolkata

ITA 1429/KOL/2013 | 2006-2007
Pronouncement Date: 19-10-2016

Appeal Details

RSA Number 142923514 RSA 2013
Assessee PAN AACCP9719J
Bench Kolkata
Appeal Number ITA 1429/KOL/2013
Duration Of Justice 3 year(s) 4 month(s) 29 day(s)
Appellant D.C.I.T CC - VIII,kolkata, Kolkata
Respondent M/s Purbanchal Leasing Ltd, Kolkata
Appeal Type Income Tax Appeal
Pronouncement Date 19-10-2016
Appeal Filed By Department
Bench Allotted C
Tribunal Order Date 19-10-2016
Date Of Final Hearing 19-09-2016
Next Hearing Date 19-09-2016
Assessment Year 2006-2007
Appeal Filed On 21-05-2013
Judgment Text
ITA NO.1429/KOL/2013-M/S. PURVANCHAL LEASING LTD. A .Y.2006-07 1 IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH C KOLKATA (BEFORE SHRI N. V. VASUDEVAN J.M. & SHRI M. BALAGAN ESH A.M.) ITA NO. 1429/KOL/2013 : ASSTT. YEAR : 2006-2007 DCIT CENTRAL CIRCLE-VIII KOLKATA. PAN: AACCP9719J VS M/S. PURVANCHAL LEASING LTD. 31 SHIBTOLLA STREET KOLKATA (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI A. K. TULSIYAN FCA. REVENUE BY : SHRI G. MALLIKARJUNA CIT DR DATE OF HEARING : 19.09.2016 DATE OF PRONOUNCEMENT : 19.10.2016 ORDER PER SHRI N. V. VASUDEVAN J.M . THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORDER DATED 18/03/2013 PASSED BY THE CIT(A)-CENTRAL-1 KOLKATA RELATING TO ASSESSM ENT YEAR 2006-07. 2. THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINES S OF MAKING INVESTMENT IN SHARES MUTUAL FUNDS AND DEBENTURE FOR THE PAST SEV ERAL YEARS. FOR THE ASSESSMENT YEAR 2006-07 THE ASSESSEE FILED RETURN OF INCOME O N 30.11.2006 DISCLOSING THE TOTAL INCOME OF RS.4 91 85 610/-. THE ASSESEE HAD DECLARE D SHORT TERM CAPITAL GAIN PURCHASE AND SALE OF SHARES AND MUTUAL FUNDS OF RS. 5 57 30 140/-. AN ORDER OF ASSESSMENT U/S.143(3) OF THE INCOME-TAX ACT 1961(AC T) WAS PASSED ON 30/06/2008 IN WHICH THE SHORT TERM CAPITAL GAIN DECLARED BY TH E ASSESSEE WAS ACCEPTED BY THE AO. ITA NO.1429/KOL/2013-M/S. PURVANCHAL LEASING LTD. A .Y.2006-07 2 3. THE CIT CIRCLE-1 KOLKATA IN EXERCISE OF HIS POW ERS U/S.263 OF THE ACT PASSED AN ORDER DATED 04/03/2011 WHEREBY THE CIT H ELD THAT THE AO WHILE CONCLUDING THE ASSESSMENT U/S.143(3) OF THE ACT DI D NOT PROPERLY EXAMINE THE QUESTION AS TO WHETHER THE GAIN ON PURCHASE OF SALE OF SHARES AND SECURITY HAD TO BE ASSESSED UNDER THE HEAD OF CAPITAL GAIN OR INCOM E FROM BUSINESS. THE CIT CIRCLE-1 DIRECTED THE AO TO MAKE AN ASSESSMENT AFRE SH AND CONSIDER THE QUESTION IN THE LIGHT OF CBDT CIRCULAR NO.4 DATED 15.06.2007. 4. IT IS PURSUANT TO THE AFORESAID ORDER OF THE CIT CIRCLE-1 KOLKATA DATED 04/03/2011 PASSED U/S.263 OF THE ACT THAT THE AO EX AMINED THE QUESTION AS TO WHETHER THE SHORT TERM GAIN DECLARED BY THE ASSESSE E HAS TO BE ASSESSED UNDER THE HEAD OF INCOME FROM BUSINESS. THE AO HELD THAT THE GAIN ON SALE OF SHARES HAD TO BE UNDER THE HEAD INCOME FROM BUSINESS AND IN COM ING TO THE ABOVE CONCLUSION THE AO MADE THE FOLLOWING OBSERVATIONS: THE A/RS ARGUMENT THAT THE ASSESSEE COMPANY DURIN G THE RELEVANT PERIOD HAD BEEN ENGAGED IN INVESTMENT IN SHARES AND NOT TRADIN G IN SHARES IS NOT ACCEPTABLE. IN ORDER TO DETERMINE WHETHER THE SECURITIES WERE P URCHASED FOR INVESTMENT OR FOR BUSINESS PURPOSES TO GET THE INCOME IN THE SHORTES T POSSIBLE PERIOD IT HAS TO BE SEEN FROM THE FREQUENCY AND NUMBER OF TRANSACTIONS CARRIED OUT BY THE ASSESSEE DURING THE YEAR. IT IS PERTINENT TO NOTE THAT THE A SSESSEE HAS CARRIED OUT THE TRANSACTIONS ON REGULAR BASIS AND MOST OF THE TIME ON DAILY BASIS WHICH CLEARLY GOES TO SHOW THAT THE ASSESSEE WAS ACTIVELY INVOLVE D IN THE PURCHASE AND SALE OF THE SHARES AND THERE CANNOT BE OTHER MOTIVE THAN TO EARN THE PROFIT IN THE SHORTEST POSSIBLE PERIOD. THERE WAS NO INTENTION ON PART OF THE ASSESSEE TO MAKE INVESTMENT AND EARN DIVIDEND. THOUGH THE ASSESEE HA S SHOWN THE SHARE TRANSACTION AS INVESTMENT THE TREATMENT IN THE BOO KS OF AN ASSESSEE IS NOT CONCLUSIVE AND IF THE VOLUME FREQUENCY AND REGULAR ITY AT WHICH TRANSACTIONS ARE ITA NO.1429/KOL/2013-M/S. PURVANCHAL LEASING LTD. A .Y.2006-07 3 CARRIED OUT INDICATE SYSTEMATIC AND ORGANIZED ACTIV ITY WITH PROFIT MOTIVE THEN IT BECOMES BUSINESS PROFIT NOT CAPITAL GAIN. FROM THE DETAILS OF SHARE TRANSACTIONS SUBMITTED BY THE ASSESSEE IT IS EVIDENT THAT THE ASSESSEE HAS CARRIED OUT AS MANY AS 490 TRANSAC TIONS OF PURCHASE AND 646 TRANSACTIONS OF SALE DURING THE PERIOD RELEVANT FOR ASSESSMENT YEAR UNDER CONSIDERATION. IT IS PERTINENT TO NOTE THAT NONE OF THE SCRIPT HAS BEEN RETAINED BY THE ASSESSEE UP TO ONE YEAR AND MOST OF THE SECURIT IES WHICH WERE PURCHASED BY THE ASSESSEE DURING THE YEAR WERE SOLD WITHIN THE Y EAR . THE HOLDING PERIOD OF SCRIPTS IN AROUND 207. THE A/RS ARGUMENT THAT THE ASSESSEE HAS BEEN SHOW ING GAIN ARISES ON SHARE TRANSACTIONS AS SHORT TERM CAPITAL GAIN OR LONG TER M CAPITAL GAIN FOR THE PAST SEVERAL YEARS AND THE DEPARTMENT HAS ACCEPTED THE A SSESSEES TREATMENT OF THE TRANSACTIONS IS ALSO NOT ACCEPTABLE. THE PRINCIPAL OF RESJUDICATA IS NOT STRICTLY APPLIED TO INCOME TAX PROCEEDINGS. EACH CASE HAS TO BE DECIDED ON THE BASIS OF ITS FACTS AND CIRCUMSTANCES. IN THIS CASE ASSESSEE WAS DOING HUGE NUMBER OF TRANSACTIONS AND NONE OF THE SECURITIES WERE RETAIN ED EVEN FOR ONE YEAR. THE FREQUENCY OF PURCHASE AND SALE AND THE SHORT DURATI ON OF THE HOLDING OF THE SHARES CLEARLY ESTABLISH THAT THE ACTIVITY OF THE ASSESSEE WAS FOR TRADING IN SHARES. THE A/R FOR THE ASESSEE HAS RELIED UPON SEVERAL DEC ISIONS OF ITAT AND COURTS AS MENTIONED ABOVE TO SUPPORT HIS CONTENTION THAT THE TRANSACTIONS OF PURCHASES AND SALES WERE NOT BUSINESS ACTIVITY. BUT THE FACTS OF THIS CASE AND THOSE REFERRED BY A/R ARE NOT IDENTICAL. RATHER IN THE SIMILAR FACTS AND CIRCUMSTANCES THE HONBLE ITAT MUMBAI BENCH IN THE CASE OF ACIT VS. TRUPURAP RASAD N PANDYA IN ITA NO.1336/MUM/2010 HAS HELD THAT WHEN THE ASSESSEE IS DOING HUGE NUMBER OF TRANSACTIONS AND NONE OF THE SECURITIES IS RETAINED EVEN FOR ONE YEAR THEN THE INCOME DERIVED BY THE ASSESEE FROM SHARE TRANSACTIO NS IS A BUSINESS INCOME. IN VIEW OF THE ABOVE DISCUSSION IT IS HELD THAT TH E PROFIT OF RS.5 57 30 140/- EARNED BY THE ASSESSEE ON SALE AND PURCHASE OF SHAR ES AND MUTUAL FUND IS BUSINESS INCOME OF THE ASSESSEE AND NOT SHORT TERM CAPITAL GAIN. 5. AGGRIEVED BY THE ORDER OF THE AO THE ASSESSEE P REFERRED APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A) THE ASSESSEE CONTENDED T HAT IN THE PAST SIMILAR TRANSACTIONS WERE CONSIDERED AS GIVING RAISE SHORT TERM CAPITAL GAIN IN THE ASSESSMENT OF THE ASSESSEE. THE ASSESSEE ALSO POINT ED OUT MERELY BECAUSE THERE WAS LARGE VOLUME AND FREQUENCY OF TRANSACTION IT CANNO T AUTOMATICALLY MAKE THE NATURE ITA NO.1429/KOL/2013-M/S. PURVANCHAL LEASING LTD. A .Y.2006-07 4 OF THE TRANSACTION AS TRADING IN SHARES. IN THIS RE GARD THE ASSESSEE RELIED ON THE DECISION OF THE HONBLE ITAT (MUMBAI) IN THE CASE O F JANAK S. RANGAWALA 11 SOT 627. THE ASSESSEE ALSO PLACED RELIANCE ON THE D ECISION OF HONBLE ITAT (MUMBAI) IN THE CASE OF GOPAL PUROHIT 122 TTJ 87 WH EREIN IT WAS HELD THAT IN INCOME TAX ASSESSMENT THE PRINCIPLE OF CONSISTENCY SHOULD BE FOLLOWED. THE TRIBUNAL HELD THAT THE REVENUE IF IT ACCEPTS SIMIL AR TRANSACTION AS GIVING RISE TO SHORT TERM CAPITAL GAIN CANNOT TAKE A CONTRARY VIE W IN ASSESSMENT FOR A SUBSEQUENT ASSESSMENT YEAR ON THE SAME SET OF FACTS. IT WAS PO INTED OUT THAT THE HONBLE MUMBAI HIGH COURT HAS ALSO CONFIRMED THE ORDER OF T HE TRIBUNAL AS REPORTED IN 336 ITR 287. THE ASSESSEE ALSO POINTED OUT THAT FOR ASSESSMENT YEAR 2007-08 PROCEEDINGS U/S. 263 OF THE ACT WERE INITIATED BY T HE CIT CIRCLE-1 KOLKATA. IN THOSE PROCEEDINGS THE ASSESSEE POINTED OUT THAT PRO FIT ON SALE OF SHARES WERE ACCEPTED BY THE REVENUE AS GIVING RAISE TO SHORT TE RM CAPITAL GAIN. THE CIT IN ASSESSMENT YEAR 2007-08 ACCEPTED THE CLAIM OF THE A SSESSEE AND DROPPED THE PROCEEDINGS U/S.263 OF THE ACT FOR THAT YEAR. 5. THE CIT AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE HELD AS FOLLOWS: I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT AND PERUSED THE ASSESSMENT ORDER. I HAVE ALSO GONE THROUGH THE JUDICIAL PRONOU NCEMENTS ON THE ISSUE INVOLVED RELIED UPON BY THE APPELLANT. IT IS OBSERVED THAT I N THE ORIGINAL ORDER PASSED U/S.143(3) THE AO HAD ACCEPTED THAT THE PROFIT EAR NED BY THE APPELLANT ON SALE OF SHARES AND MUTUAL FUNDS IS TAXABLE UNDER THE HEAD CAPITAL GAIN AS DECLARED IN THE RETURN OF INCOME. HOWEVER THE ASSESSMENT ON TH IS POINT WAS SET ASIDE BY THE CIT CENTRAL-1 KOLKATA FOR THE REASON THAT THE AO HAD NOT EXAMINED THIS POINT ITA NO.1429/KOL/2013-M/S. PURVANCHAL LEASING LTD. A .Y.2006-07 5 FROM THE ANGLE OF ITS TAXABILITY UNDER THE HEAD B USINESS INCOME. CONSEQUENTLY THE AO PASSED THE IMPUGNED ORDER U/S263/143(3) WHER EIN HE ASSESSED THE PROFIT ON SALE OF SHARE AND MUTUAL FUNDS AS BUSINESS INCOME I NSTEAD OF SHORT TERM CAPITAL GAIN. APPARENTLY THIS DECISION WAS TAKEN BY THE AO ONLY FOR THE REASON THAT THE ORIGINAL ORDER WAS SET ASIDE BY THE CIT U/S.263. HO WEVER IT IS OBSERVED THAT IN THE SUBSEQUENT YEAR I.E. IN THE ASSESSMENT YEAR 2007-08 ALSO THE CIT CENTRAL-1 KOLKATA HAD INITIATED THE PROCEEDINGS U/S.263 ON TH IS ISSUE. THE ORDER U/S.263 FOR THE ASSESSMENT YEAR 2007-08 WAS PASSED ON 22.02.201 2 WHEREIN THE CIT ACCEPTED THE FACT THAT THE PROFIT EARNED BY THE ASSESSES ON SALE OF INVESTMENT SHARES IS TAXABLE UNDER THE HEAD CAPITAL GAIN AND NOT BUSIN ESS INCOME. IN THAT ORDER THE CIT OBSERVED AS UNDER: THE ISSUE WHETHER SHORT TERM CAPITAL GAIN SHOWN B Y THE ASSESSEE WAS ASSESSABLE UNDER BUSINESS HEAD OR NOT IS COVERED BY THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF HIMALAYA FINANCE & INVEST MENT CO. IN ITA NO. 260 OF 2008 G. A. NO. 1271 OF 2008. THE AFORESAID DECISIO N OF THE JURISDICTIONAL HIGH COURT IS SQUARELY APPLICABLE IN THE INSTANT CASE. H ENCE THE PROPOSAL TO REVISE THE ASSESSMENT ORDER ON THE AFORESAID ISSUE IS ALSO DRO PPED. THE FACTS AND THE ISSUE INVOLVED IN THE YEAR UNDER APPEAL ARE IDENTICAL TO THOSE IN THE ASSESSMENT YEAR 2007-08; AND CONSEQUENTLY IN T HE YEAR UNDER APPEAL THE SHORT TERM CAPITAL GAIN CANNOT BE ASSESSED AS BUSINESS IN COME. MOREOVER ON PERUSAL OF THE BALANCE SHEET OF THE YEAR UNDER APPEAL PRECEDI NG YEARS AND SUBSEQUENT YEARS IT IS OBSERVED THAT THE APPELLANT COMPANY HAD REGUL ARLY MADE THE INVESTMENTS IN SHARES AND MUTUAL FUNDS WHICH WAS ACCORDINGLY REFLE CTED IN THE BALANCE SHEET UNDER THE HEAD INVESTMENTS. THERE WAS NO STOCK IN TRADE OF SHARES AND THERE IS NO EVIDENCE THAT THE APPELLANT HAD CONVERTED ITS IN VESTMENT INTO STOCK IN TRADE. IN ALL THE PRECEDING AND SUBSEQUENT YEARS THE APPELLA NT HAD DECLARED THE INCOME UNDER THE HEAD CAPITAL GAIN DEPENDING ON THE PERIOD OF HOLDING. THE CAPITAL GAIN SO DECLARED BY THE APPELLANT WAS ACCEPTED BY THE AO IN THE ASSESSMENT ORDERS PASSED BY HIM. IN THE YEAR UNDER APPEAL THERE IS NO CHANG E IN THE FACTS AND THEREFORE THE AO CANNOT TAKE A DIFFERENT VIEW UNLESS HE PROVES TH AT THE FACTS HAD BEEN CHANGED. MERELY FOR THE REASON THAT THERE WERE SEVERAL TRANS ACTIONS OF PURCHASE AND SALE OF SHARES THE INCOME UNDER THE HEAD CAPITAL GAIN CANN OT BE ASSESSED AS BUSINESS INCOME. THE VARIOUS JUDICIAL DECISIONS RELIED UPON BY THE APPELLANT INCLUDING THAT OF THE HONBLE SUPREME COURT IN THE CASE OF GOPAL P UROHIT(SUPRA) SUPPORT ITS CASE THAT THE PRIFT ARISING FROM SALE OF INVESTMENT SHAR ES IS TAXABLE UNDER THE HEAD CAPITAL GAIN AND NOT BUSINESS INCOME. MOREOVER THE JURISDICTIONAL CIT HAS ALSO ACCEPTED THE SAME VIEW FOLLOWING THE DECISION OF TH E HONBLE CALCUTTA HIGH COURT IN THE CASE OF HIMALAYA FINANCE & INVESTMENT COMPAN Y (SUPRA). IN VIEW OF THE ABOVE IT IS HELD THAT THE AO WAS NOT JUSTIFIED IN ASSESSING THE SHORT TERM CAPITAL GAIN SHOWN BY THE APPELLANT AS ITS BUSINESS INCOME. THE AO IS DIRECTED TO ASSESS THE SAME AS SHORT TERM CAPITAL GAIN. GROUND NO.1 IS ALLOWED. ITA NO.1429/KOL/2013-M/S. PURVANCHAL LEASING LTD. A .Y.2006-07 6 6. AGRIEVED BY THE ORDER OF THE CIT(A) THE REVENUE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 7. WE HAVE HEARD THE SUBMISSIONS OF THE LD. DR AND THE LD. COUNSEL FOR THE ASSESSEE. THE LD. DR RELIED ON THE ORDER OF THE AO. LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS THAT WERE MADE BEFORE TH E CIT. 8. WE HAVE GIVEN A VERY CAREFUL CONSIDERATION TO T HE RIVAL SUBMISSIONS. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE ISSUE TO BE D ECIDED IS AS TO WHETHER THE STCG ON TRANSACTION OF PURCHASE AND SALE OF UNITS OF MUTUAL FUNDS AND SHARES UNDERTAKEN BY THE ASSESSEE DURING THE PREVIOUS YEAR IS TO BE ASSESSED UNDER THE HEAD INCOME FROM BUSINESS AS CLAIMED BY THE REVENUE OR INCOME UNDER THE HEAD CAPITAL GAIN AS CONTENDED BY THE ASSESSEE. BEFORE WE DEAL WITH THE FACTS OF THE CASE OF THE ASSESSEE WE WILL BRIEFLY NARRATE THE PRINCIPLES APPLICABLE IN DECIDING THE ABOVE ISS UE AS LAID DOWN IN SEVERAL JUDICIAL PRONOUNCEMENT:- (A) WHETHER A TRANSACTION OF SALE AND PURCHASE OF SHARE S WERE TRADING TRANSACTIONS OR WHETHER THEY WERE IN THE NATURE OF INVESTMENTS I S MIXED QUESTION OF LAW AND FACT. CIT VS. HOLCK LARSEN 60 ITR 67 (SC). (B) IT IS POSSIBLE FOR AN ASSESSEE TO BE BOTH AN INVEST OR AS WELL AS A DEALER IN SHARES. WHETHER A PARTICULAR HOLDING IS BY WAY OF INVESTMEN T OR FORMED PART OF STOCK IN TRADE IS A MATTER WHICH IS WITHIN THE KNOWLEDGE OF THE ASSESSEE AND IT IS FOR THE ASSESSEE TO PRODUCE EVIDENCE FROM HIS RECORDS AS TO WHETHER HE MAINTAINED ANY DISTINCTION BETWEEN SHARES WHICH WERE HOLD BY HIM A S INVESTMENTS AND THOSE HOLD AS STOCK IN TRADE. (CIT VS. ASSOCIATED INDUSTR IAL DEVELOPMENT CO. LTD. 82 ITR 586 (SC). (C) TREATMENT IN THE BOOKS BY AN ASSESSEE WILL NOT BE C ONCLUSIVE. IF THE VOLUME FREQUENCY AND REGULARITY WITH WHICH TRANSACTIONS AR E CARRIED OUT INDICATE SYSTEMATIC AND ORGANIZED ACTIVITY WITH PROFIT MOTIV E THEN IT WOULD BE A CASE OF BUSINESS PROFITS AND NOT CAPITAL GAIN. CIT VS. MOT ILAL HIRABHAI SPG. AND WVG. CO. LTD. 113 ITR 173 (GUJ); RAJA BAHADUR VISWSHWAR A SINGH VS. CIT 41 ITR 685 (SC). ITA NO.1429/KOL/2013-M/S. PURVANCHAL LEASING LTD. A .Y.2006-07 7 (D) PURCHASE WITHOUT AN INTENTION TO RESELL WHERE THEY ARE SOLD UNDER CHANGED CIRCUMSTANCES WOULD BE CAPITAL GAINS. CIT VS. PKN 60 ITR 65 (SC). PURCHASE WITH AN INTENTION TO RESELL WOULD RENDER THE GAIN P ROFIT ON SALE BUSINESS PROFIT DEPENDING ON THE CIRCUMSTANCES OF THE CASE LIKE NAT URE AND QUANTITY OF ARTICLE PURCHASED NATURE OF THE OPERATION INVOLVED. SAROJ KUMAR MAZUMDAR VS. CIT 37 ITR 242 (SC). (E) NO SINGLE FACT HAS ANY DECISIVE SIGNIFICANCE AND TH E QUESTION MUST DEPEND UPON THE COLLECTIVE EFFECT OF ALL THE RELEVANT MATE RIALS BROUGHT ON RECORD. JANKI RAM BAHADUR RAM VS. CIT 57 ITR 21 (SC). 9. THE ABOVE TESTS HAVE AGAIN BEEN REITERATED BY T HE CBDT IN ITS INSTRUCTION NO.1827 DATED 31.8.1989 REFERRED TO BY THE AO IN THE ORDER OF ASSESSMENT AND CIRCULAR NO.4 OF 2007 DATED 15 JUNE 2007 . CBDT HAS RECENTLY ISSUED CIRCULAR NO.6/2016 DATE D 29.2.2016 CLARIFYING ON TAXABILITY ON INCOME EARNED FROM SA LE OF SHARES AND OTHER SECURITIES AND WHETHER TO TREAT IT AS CAPITAL GAINS OR BUSINESS INCOME. THE CIRCULAR GIVES A CHOICE TO THE ASSESSEE TO DEFINE THE INCOME EARNED FROM SHARE OR SECURITIES SALE AS CAPITAL GAINS OR B USINESS INCOME. THE TREATMENT IN THE BOOKS OF ACCOUNTS BY THE ASSESSEE OF THE SHARES/UNITS SOLD IN ITS BOOKS OF ACCOUNTS AS INVESTMENTS WOULD BE VERY IMPORTANT FACTOR TO BE CONSIDERED AND SHOULD BE SUFFICIENT TO HOLD THAT SH ARES/UNITS HELD AS INVESTMENTS CANNOT BE TREATED AS GIVING RAISE TO IN COME FROM BUSINESS. 10. KEEPING IN MIND THE ABOVE BROAD PRINCIPLES WE SHA LL NOW EXAMINE THE CASE OF THE ASSESSEE. IT IS NOT IN DISPUTE THAT THE SHARES AND MUTUAL FUNDS THAT WERE SOLD DURING THE PREVIOUS YEAR WHICH RESULTED IN THE INCOME IN QUES TION WERE HELD BY THE ASSESSEE AS INVESTMENTS AND NOT AS STOCK-IN-TRADE. THE ASS ESSEE DURING THE PREVIOUS YEAR HAD ENTERED INTO 490 TRANSACTIONS OF PURCHASE AND 646 T RANSACTIONS OF SALE OF SHARES UNITS OF ITA NO.1429/KOL/2013-M/S. PURVANCHAL LEASING LTD. A .Y.2006-07 8 MUTUAL FUNDS. OUT OF THE ABOVE IN RESPECT OF 207 T RANSACTIONS THE SALE WAS MADE WITHIN 30 DAYS OF PURCHASE. THE QUESTION IS AS TO WHETHER THE VOLUME AND FREQUENCY CAN FOR THE BASIS FOR DRAWING AN INFERENCE THAT THE ASSESSEE WA S ENGAGED IN BUSINESS. THE HONBLE ITAT MUMBAI BENCH IN THE CASE OF JANAK S.RANGWALA V S. ACIT 11 SOT 627 (MUM) HAS HELD THAT MAGNITUDE OF THE TRANSACTION DOES NOT ALT ER THE NATURE OF THE TRANSACTION. AS WE HAVE ALREADY SEEN IT IS NOT IN DISPUTE THAT THE ASS ESSEE HAD TREATED THE SHARES AND UNITS AS INVESTMENTS IN ITS BOOKS OF ACCOUNTS. SIMILAR TRAN SACTIONS HAVE BEEN ACCEPTED BY THE REVENUE IN ASSESSMENTS FOR AY 2005-06 AS GIVING RAI SE TO CAPITAL GAINS AND NOT AS BUSINESS INCOME IN THE ASSESSMENT COMPLETED U/S.143 (3) OF THE ACT AFTER SCRUTINY . THERE WAS NO BORROWING BY THE ASSESSEE OUT OF WHICH INVES TMENT IN SHARES AND UNITS WERE MADE. 11. IN ASSESSMENT YEAR 2007-08 ALSO THE CIT CENT RAL-1 KOLKATA HAD INITIATED PROCEEDINGS U/S.263 ON THIS ISSUE. THE ORDER U/S.26 3 FOR THE ASSESSMENT YEAR 2007- 08 WAS PASSED ON 22.02.2012 WHEREIN THE CIT ACCEPTE D THE FACT THAT THE PROFIT EARNED BY THE ASSESSES ON SALE OF INVESTMENT SHARES IS TAXABLE UNDER THE HEAD CAPITAL GAIN AND NOT BUSINESS INCOME. THE CIT IN THE SAID ORDER EXPRESSED THE VIEW THAT THE FACTS OF THE ASSESSEES CASE WERE SIM ILAR TO THE CASE DECIDED BY THE HONBLE KOLKATA ITAT IN THE CASE OF M/S.HIMALAYA FI NANCE & INVESTMENT CO.LTD. ITA NO.1708/KOL/2007 ORDER DATED 17.8.2007. THE DE CISION OF THE HONBLE ITAT IN THE CASE OF M/S.HIMALAYA FINANCE & INVESTMENT CO . LTD. (SUPRA) HAS BEEN APPROVED BY THE HONBLE KOLKATA HIGH COURT IN ITA N O.260 OF 2008 ORDER DATED 6.8.2008. IN THE LIGHT OF THE ABOVE CIRCUMSTANCES PREVAILING IN THE CASE OF THE ASSESSEE WE ARE OF THE VIEW THAT THE CONCLUSION OF THE CIT(A ) THAT THE INCOME FROM SALE OF SHARES AND UNITS DECLARED BY THE ASSESSEE AS CAPITAL GAIN HAS TO BE ACCEPTED IS CORRECT AND CALLS FOR NO INTERFERENCE. ITA NO.1429/KOL/2013-M/S. PURVANCHAL LEASING LTD. A .Y.2006-07 9 12. IN CIT VS. GOPAL PUROHIT 228 CTR 582 (BOM) TH E QUESTION OF LAW RAISED WAS REGARDING WHETHER STCG DECLARED BY THE ASSESSEE WAS TO BE ASSESSED AS BUSINESS INCOME OR NOT. QUESTION (B) CONSIDERED BY THE HONBLE BOM BAY HIGH COURT WAS AS FOLLOWS: (B) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE HONBLE ITAT WAS JUSTIFIED INHOLDING THAT PRINCIPLE OF CONS ISTENCY MUST BE APPLIEDHERE AS AUTHORITIES DID NOT TREAT THE ASSESSEE AS A SHARE T RADER IN PRECEDING YEAR IN SPITE OF EXISTENCE OF SIMILAR TRANSACTION WHICH CANNOT IN A NY WAY OPERATE AS RESJUDICATA TO PRECLUDE THE AUTHORITIES FROM HOLDING SUCH TRANSACT IONS AS BUSINESS ACTIVITIES IN CURRENT YEAR? THE HONBLE BOMBAY HIGH COURT HELD AS FOLLOWS: 3. IN SO FAR AS QUESTION (B) IS CONCERNED THE TRI BUNAL HAS OBSERVED IN PARAGRAPH 8.1 OF ITS JUDGMENT THAT THE ASSESSEE HAS FOLLOWED A CONSISTENT PRACTICE IN REGARD TO THE NATURE OF THE ACTIVITIES THE MANNER OF KEEPING RECORDS AND THE PRESENTATION OF SHARES AS INVESTMENT AT THE END OF THE YEAR IN ALL THE YEARS. THE REVENUE SUBMITTED THAT A DIFFERENT VIEW SHOULD BE TAKEN FOR THE YEAR UNDER CONSIDERATION SINCE THE PRINCIPLE OF RES JUDICATA IS NOT APPLICABLE TO ASSESSMENT PROCEEDINGS. THE TR IBUNAL CORRECTLY ACCEPTED THE POSITION THAT THE PRINCIPLE OF RES JUDICATA IS NOT ATTRACTED SINCE EACH ASSESSMENT YEAR IS SEPARATE IN ITSELF. T HE TRIBUNAL HELD THAT THERE OUGHT TO BE UNIFORMITY IN TREATMENT AND CONSISTENCY WHEN THE FACTS AND CIRCUMSTANCES ARE IDENTICAL PARTICULARLY IN THE CASE OF THE ASSE SSEE. THIS APPROACH OF THE TRIBUNAL CANNOT BE FAULTED. THE REVENUE DID NOT FURNISH ANY JUSTIFICATION FOR ADOPTING A DIVERGENT APPROACH FOR THE ASSESSMENT YEAR IN QUEST ION. QUESTION (B) THEREFORE DOES NOT ALSO RAISE ANY SUBSTANTIAL QUESTION. 14. THE ABOVE DECISION OF THE HONBLE BOMBAY HIGH COURT IS CLEARLY APPLICABLE IN THIS CASE. AS WE HAVE ALREADY SEEN THAT THE AO IN AY 05 -06 ACCEPTED SIMILAR INCOME AS CAPITAL GAIN. EVEN FOR AY 2006-07 THE AO ACCEPTED THE CLAIM OF THE ASSESSEE AND IT WAS ONLY PURSUANT TO THE ORDER U/S.263 OF THE ACT THE AO TOOK A DIFFERENT VIEW. IT IS NOT DISPUTED BY THE REVENUE THAT THE FACTS AND CIRCUMST ANCES IN THE AY 05-06 AND THE PRESENT AY 2006-07 ARE IDENTICAL. THOUGH THE RULE OF RES J UDICATA IS NOT APPLICABLE IN INCOME TAX ITA NO.1429/KOL/2013-M/S. PURVANCHAL LEASING LTD. A .Y.2006-07 10 PROCEEDINGS BUT THE PRINCIPLE OF CONSISTENCY WILL D EFINITELY APPLY AND ON THAT BASIS THE CLAIM OF THE ASSESSEE SHOULD BE HELD TO BE PROPER. 15. FOR THE REASONS GIVEN ABOVE WE CONFIRM THE OR DER OF THE CIT(A) AND DISMISS THE APPEAL BY THE REVENUE. 16. IN THE RESULT APPEAL BY THE REVENUE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 19.10.2016 SD/- SD/- (M. BALAGANESH) (N. V. VASUDEVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 19 /10/2016 S. SINHA(PS) COPY OF THE ORDER FORWARDED TO: 1. M/S. PURVANCHAL LEASING LTD. 31 SHIBTOLLA STRE ET KOLKATA-700007. 2 D.C.I.T. CENTRAL CIRCLE-VIII KOLKATA 3. THE CIT-CENTRAL-I 4. THE CIT(A)-CENTRAL-I 5. DR KOLKATA BENCHES KOLKATA TRUE COPY BY ORDER ASST. REGISTRAR ITAT KOLKATA BENCHES