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2016 (10) TMI 6

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..... he AO ) u/s 143(3) of the Income Tax Act,1961 (Hereinafter called the Act ). 2. The grounds of appeal raised by the Revenue before Income Tax Appellate Tribunal, Mumbai (hereinafter called the Tribunal ) in the memo of appeal filed with the Tribunal read as under:- 1. On the facts and in the circumstances of the case and in law, the Learned CIT(A) has erred in directing the Assessing Officer to treat the Short Term Capital Gain declared by the assessee at ₹ 44,97,330/- as such and not as business income without appreciating the fact that the magnitude of transactions are voluminous in very frequent interval which clearly establish that the motive for transactions was to earn profit by persuing an adventure in the nature of trade. 2. On the facts and in the circumstances of the case and in law, the Learned CIT(A) has failed to appreciate the fact that the decision in the case of Gopal Purohit [ 122 TTJ (Mum)87] and in the assessee's own case have not been accepted by the Department. 3. On the facts and in the circumstances of the case and in law, the learned CIT(A) failed to appreciate the guidelines laid down in CBDT Circular No. 4/2007 dated 15-06-2007. .....

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..... sion of Hon ble Supreme Court in the case of Tuticorin Alkali Chemicals and Fertilisers Ltd. v. CIT, 227 ITR 172 and observed that the facts and circumstances of the case were to be taken into consideration to come to any conclusion regarding the real nature of transaction and entries in the books of accounts are not conclusive proof to decide income and consequently its chargeability to tax. The A.O. by relying on several case laws observed that in assessee s case scale of activity is definitely substantial as quantum of transactions are substantial , there is very high regularity in the trading and the shares have been purchased and sold at regular intervals in an organized manner indicating business activity. The holding period is very short in all the transactions whereby most of the shares were held for less than 180 days and the motive of the assessee is to earn profit and shares were not purchased by the assessee for investment but were purchased and sold with the sole intention of earning profit. He held that the dividend income declared by the assessee was only ₹ 19,21,018/- which also included dividend earned out of shares held for a period of more than one year whi .....

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..... as capital gains arising from sale of investments in the assessment orders framed u/s 143(3) of the Act . The copies of the assessment order passed u/s. 143(3) of the Act for the said assessment years were also produced before the ld. CIT(A). The details of transactions which were 87 transactions during the year were submitted along with month wise details of the share transactions. It was submitted that the learned CIT(A) has accepted the facts in the earlier year and granted relief to the assessee. The long term capital gains are accepted by the AO even in the impugned assessment year while the AO erred in treating the short term capital gain arising from the sale of shares as income from business. The assessee rerlied on the decision of Hon ble Bombay High Court in the case of CIT v. Gopal Purohit (supra). The ld. CIT (A) considered the submissions of the assessee and observed that the AO has brought to tax short term capital gains of ₹ 44,97,330/- earned by the assessee on sale of shares as income from business . It was observed by the learned CIT(A) that in the assessment year 2006-07 on similar set of facts and circumstances, the ld. CIT(A) in assessee s own case dec .....

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..... /2010 vide orders dated 18th February, 2015 has dismissed the appeal of the Revenue whereby the gains arising from sale of the shares held for a period of not more than one year from the date of purchase were held to be capital gains and gain arising was directed to be treated as short term capital gain. 9. The ld. D.R. relied on the order of the A.O., however, he fairly conceded that the issue is covered by the decision of the Tribunal for the assessment years 2006-07 and 2007-08 in ITA No. 3520/Mum/2010 vide orders dated 18-02-2015 and ITA No. 6227/Mum/2012 vide orders dated 17-03-2016 respectively in assessee favour. 10. We have considered the rival contentions and also perused the material available on record including the afore-stated Tribunal orders. We have observed that the assessee has purchased and sold the shares for a period of not more than one year for which no borrowings were made and the investments have been made out of her own funds and no interest was paid. The average holding period of the shares was less than 180 days and the shares were reflected as investment in books of accounts and were valued at cost . We have observed that the Tribunal in assessee s .....

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..... d 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 .....

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..... 8377; 13,60,155/- redemption of mutual funds ₹ 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 ₹ 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 ₹ 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 ₹ 14,10,430/- and short term capital gain of ₹ 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 .....

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..... 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 ₹ 14,10,430/- on sale of shares a .....

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..... 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. Respectfully following the afore-stated decision of the co-ordinate Bench of this Tribunal in assessee s own case in preceding assessment year 2007-08 in ITA no. 6227/Mum/2012 for the assessment year 2007-08 vid .....

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