ADDL CIT RG 25(3), MUMBAI v. GOPAL R. PUROHIT, MUMBAI

ITA 4957/MUM/2009 | 2006-2007
Pronouncement Date: 14-05-2010 | Result: Dismissed

Appeal Details

RSA Number 495719914 RSA 2009
Assessee PAN AAGPP1987K
Bench Mumbai
Appeal Number ITA 4957/MUM/2009
Duration Of Justice 8 month(s) 13 day(s)
Appellant ADDL CIT RG 25(3), MUMBAI
Respondent GOPAL R. PUROHIT, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 14-05-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted G
Tribunal Order Date 14-05-2010
Assessment Year 2006-2007
Appeal Filed On 31-08-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E MUMBAI BEFORE SHRI R.V. EASWAR SR. VICE PRESIDENT & SHRI R.K.PANDA AM I.T.A. NO. 4957/MUM/2009 (ASSESSMENT YEAR 2006-07) ACIT-25(3) C-11 R. NO. 308 PRATYAKSH KAR BHAVAN BANDRA-KURLA COMPLEX BANDRA (E) MUMBAI-400 051 VS. SHRI GOPAL R. PUROHIT C-702 MHATRE PLAZA DAHANUKAR WADI M.G. ROAD KANDIVALI (WEST) MUMBAI-400 067 PAN: AAGPP1987K APPELLANT RESPONDENT APPELLANT BY : SHRI NAVEEN GUPTA RESPONDENT BY : SHRI S.C. TIWARI ORDER DATE OF HEARING: 05.05.2010 DATE OF ORDER: 14.05.2010 PER R.K.PANDA AM THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER DATED 18 TH JUNE 2009 OF THE CIT(A)-XXV MUMBAI RELATING TO A SSESSMENT YEAR 2006-07. 2. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A) ERRED IN DIRECTING THE AO TO ASSESS INCOME FROM SHARE INVESTMENT ACTIVITIES AS INCOME FROM LONG TERM AND SHORT TERM CAPITAL GAIN INSTEAD OF BUSINESS INCOME WITHOUT APPRECIATING THE FACTS THAT ASSESSEE HAS SUBSTANTIAL VOLUME AND HUGE NUMBER OF SHARE TRANSACTIONS AND REPEATED TRANSACTIONS IN SINGLE SCRIP WHICH DENOTE THAT THE MOTIVE OF THE ASSESSEE IS TO CARRY ON BUSINESS IN S HARES RATHER THAN INVESTMENT IN SHARES TO EARN DIVIDEND. ITA NO. 4957/MUM/2009 SHRI GOPAL R. PUROHIT =================== 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A) ERRED IN NOT APPRECIATING TH E FACTS THAT THE INCOME FROM SHORT TERM AND LONG TERM CAPITAL GAINS ON SALE OF SHARES WAS SHOWN AT RS.89 27 753/- AND RS.3 25 03 877/- RESPECTIVELY WHEREIN DIVIDEND EARNED FROM SHARES IS MERELY SHOWN AT RS.14 62 921/- WHICH CLEARLY STATES THAT THE DIVIDEND EARNED BY THE ASSESSEE IS ONLY INCIDENTAL AND NOT SOLE MOTTO. THIS PROVES THE FACTS THAT THE ASS ESSEE IS NOT INDULGED IN INVESTMENT ACTIVITIES BUT INTEND S TO EARN QUICK PROFITS FROM SHARE TRADING. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT(A) ERRED IN ALLOWING THE CLAIM OF LONG TERM CAPITAL GAIN ON SALE OF SHARES AT RS.3 25 03 877/- AND EXEMPTION U/S. 10(38) OF THE I .T. ACT 1961 WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE IS INVOLVED IN BUSINESS OF SHARE TRADING A ND NOT INVESTMENT. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT(A) ERRED IN HOLDING THAT THE ASSESSEE INDULGED IN INVESTMENT IN SHARES WITHOUT CONSIDERING THE FACT THAT THE ASSESSEE HAS DEVOTED MOST OF HIS TIME IN ONLY ONE ACTIVITY I.E. ACTIVIT Y OF EARNING PROFIT THROUGH SALE AND PURCHASE OF SHARES BE IT DERIVATIVES INTRA DAY TRADING OR PURCHASE AND S ALE WITHIN SHORT PERIOD OR LONG PERIOD. 5. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUNDS TO BE SET ASIDE AND THAT OF THE A O BE RESTORED. 3. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE IS ENGAGED IN F&O TRADING AND SHARE TRADING. APART FROM ABOVE HE HA S CLAIMED THAT HE IS ENGAGED IN INVESTMENT IN SHARES. DURING THE YEAR U NDER CONSIDERATION THE ASSESSEE HAD SHOWN INCOME OF RS.1 33 39 568 FRO M F&O AND COMMODITIES TRADING AND RS.54 644 FROM SHARE TRADIN G. APART FROM THE ABOVE THE ASSESSEE HAD SHOWN SHORT TERM CAPITAL GA IN ON SHARES (U/S. 111A) OF RS.89 27 753 AND SHORT TERM CAPITAL GAIN O N MUTUAL FUNDS OF RS.17 757. LONG TERM CAPITAL GAIN ON SHARES HAD AL SO BEEN SHOWN AT RS.3 25 03 877. DIVIDEND INCOME OF RS.14 62 921 P PF INTEREST OF ITA NO. 4957/MUM/2009 SHRI GOPAL R. PUROHIT =================== 3 RS.75 000 AND AGRICULTURAL INCOME OF RS.2 15 850 WA S ALSO SHOWN IN THE RETURN BUT CLAIMED EXEMPT U/S. 10 OF THE INCOME-TAX ACT 1961 (THE ACT). 4. THE ASSESSING OFFICER IN THE ASSESSMENT MADE U/S. 1 43(3) OF THE ACT TAXED INCOME FROM SHORT TERM CAPITAL GAIN AND L ONG TERM CAPITAL GAIN AS BUSINESS INCOME BY HOLDING THAT INVESTMENT IN SH ARES SHOWN IN BOOKS OF ACCOUNT IS NOTHING BUT STOCK-IN-TRADE. WHILE DO ING SO THE ASSESSING OFFICER DISCUSSED HIGH VOLUME OF SHARE TRANSACTIONS REGULARITY IN SHARE DEALING BUSINESS RISK INVOLVED AND INFRASTRUCTURE MAINTAINED BY THE ASSESSEE FOR THIS PURPOSE. RELYING ON A COUPLE OF DECISIONS QUOTED IN THE ASSESSMENT ORDER HE TREATED THE CAPITAL GAIN AS BUS INESS INCOME AS HAS BEEN DONE IN THE PRECEDING YEAR. 5. IN APPEAL THE CIT(A) FOLLOWING THE ORDER OF THE TR IBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2005-06 DECIDED THE IS SUE IN FAVOUR OF THE ASSESSEE AND DIRECTED THE ASSESSING OFFICER TO TAX INCOME FROM INVESTMENT IN SHARES AS LONG TERM CAPITAL GAIN OR S HORT TERM CAPITAL GAIN ACCORDING TO THE PERIOD OF HOLDING. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVENUE IS IN APPEAL BEFORE US. 6. AFTER HEARING BOTH THE SIDES WE FIND THE ISSUE STA NDS DECIDED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONB LE BOMBAY HIGH COURT IN ASSESSEES OWN CASE VIDE INCOME TAX APPEAL NO. 1 121 OF 2009 ORDER DATED 6.1.2010 WHERE THE HONBLE HIGH COURT UPHELD THE DECISION OF THE TRIBUNAL FOR THE A.Y. 2005-06 AND HELD AS UNDER: 2. THE TRIBUNAL HAS ENTERED A PURE FINDING OF FACT THAT THE ASSESSEE WAS ENGAGED IN TWO DIFFERENT TYPES OF TRANSACTIONS. THE FIRST SET OF TRANSACTIONS INVOLVE D INVESTMENT IN SHARES. THE SECOND SET OF TRANSACTIONS INVOLVED DEALING IN SHARES FOR THE PURPOSES OF BUSINESS (DESCRIBED IN P ARAGRAPH 8.3 OF THE JUDGEMENT OF THE TRIBUNAL AS TRANSACTION S PURELY OF JOBBING WITHOUT DELIVERY). THE TRIBUNAL HAS CORREC TLY APPLIED THE PRINCIPLE OF LAW IN ACCEPTING THE POSITION THAT IT IS OPEN TO AN ASSESSEE TO MAINTAIN TWO SEPARATE PORTFOLIOS ON E RELATING TO INVESTMENT IN SHARES AND ANOTHER RELATING TO BUS INESS ACTIVITIES INVOLVING DEALING IN SHARES. THE TRIBUN AL HELD THAT ITA NO. 4957/MUM/2009 SHRI GOPAL R. PUROHIT =================== 4 THE DELIVERY BASED TRANSACTIONS IN THE PRESENT CASE SHOULD BE TREATED AS THOSE IN THE NATURE OF INVESTMENT TRANSA CTIONS AND THE PROFIT RECEIVED THEREFROM SHOULD BE TREATED EIT HER AS SHORT TERM OR AS THE CASE MAY BE LONG TERM CAPITA L GAIN DEPENDING UPON THE PERIOD OF THE HOLDING. A FINDIN G FACT HA BEEN ARRIVED AT BY THE TRIBUNAL AS REGARDS THE EXIS TENCE OF TWO DISTINCT TYPES OF TRANSACTIONS NAMELY THOSE BY WAY OF INVESTMENT ON ONE HAND AND THOSE FOR THE PURPOSES O F BUSINESS ON THE OTHER HAND. QUESTION (A) ABOVE DO ES NOT RAISE ANY SUBSTANTIAL QUESTION OF LAW. 3. IN SO FAR AS QUESTION (B) IS CONCERNED THE TRIB UNAL HAS OBSERVED IN PARAGRAPH 8.1 OF ITS JUDGEMENT THAT THE ASSESSEE HAS FOLLOWED A CONSISTENT PRACTICE IN REGARD TO THE NATURE OF THE ACTIVITIES THE MANNER OF KEEPING RECORDS AND T HE PRESENTATION OF SHARES AS INVESTMENT AT THE END OF THE YEAR IN ALL THE YEARS. THE REVENUE SUBMITTED THAT A DIFFER ENT VIEW SHOULD BE TAKEN FOR THE YEAR UNDER CONSIDERATION S INCE THE PRINCIPLE OF RES JUDICATA IS NOT APPLICABLE TO ASSESSMENT PROCEEDINGS. THE TRIBUNAL CORRECTLY ACCEPTED THE P OSITION THAT THE PRINCIPLE OF RES JUDICATA IS NOT ATTRACTED SINCE EACH ASSESSMENT YEAR IS SEPARATE IN ITSELF. THE TRIBUNA L HELD THAT THERE OUGHT TO BE UNIFORMITY IN TREATMENT AND CONSI STENCY WHEN THE FACTS AND CIRCUMSTANCES ARE IDENTICAL PAR TICULARLY IN THE CASE OF THE ASSESSEE. 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 QUESTION. QUESTION (B) THEREFO RE DOES NOT ALSO RAISE ANY SUBSTANTIAL QUESTION. 4. IN SO FAR AS QUESTION (C) IS CONCERNED AGAIN TH ERE CANNOT BE ANY DISPUTE ABOUT THE BASIC PROPOSITION T HAT ENTRIES IN THE BOOKS OF ACCOUNT ALONE ARE NOT CONCL USIVE IN DETERMINING THE NATURE OF INCOME. THE TRIBUNAL HA S APPLIED THE CORRECT PRINCIPLE IN ARRIVING AT THE DECISION I N THE FACTS OF THE PRESENT CASE. THE FINDING OF FACT DOES NOT CAL L FOR INTERFERENCE IN AN APPEAL UNDER SECTION 260A. NO S UBSTANTIAL QUESTION OF LAW IS RAISED. THE APPEAL IS ACCORDING LY DISMISSED. 7. SINCE THE CIT(A) HAS GIVEN A FINDING THAT THE FACTS OF THE CASE FOR THE IMPUGNED ASSESSMENT YEAR ARE IDENTICAL TO THAT OF THE FACTS IN A.Y. 2005-06 ON ACCOUNT OF NATURE OF BUSINESS QUANTUM O F TURNOVER REGULARITY FREQUENCY AND INFRASTRUCTURE THEREFORE FOLLOWING THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN ASSESSE ES OWN CASE AND IN ITA NO. 4957/MUM/2009 SHRI GOPAL R. PUROHIT =================== 5 ABSENCE OF ANY CONTRARY MATERIAL BROUGHT TO OUR NOT ICE THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 8. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS D ISMISSED. PRONOUNCED ON 14 TH MAY 2010 SD/- (R.V. EASWAR) SR. VICE PRESIDENT SD/- (R.K. PANDA) ACCOUNTANT MEMBER MUMBAI DATED 14 TH MAY 2010 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A)-XXV MUMBAI 4. THE CIT MUMBAI CITY-25 MUMBAI 5. THE DR E BENCH. //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI TPRAO