TMI Blog2016 (10) TMI 1350X X X X Extracts X X X X X X X X Extracts X X X X ..... that magnitude of the transaction does not alter the nature of the transaction. As we have already seen it is not in dispute that the Assessee had treated the shares and units as investments in its books of accounts. Similar transactions have been accepted by the revenue in assessments for AY 2005-06 as giving raise 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 investment in shares and units were made. 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 circumstances in the AY 05-06 and the present AY 2006-07 are identical. Though the rule of res judicata is not applicable in income tax proceedings but the principle of consistency will definitely apply and on that basis the claim of the Assessee should be held to be proper. - Decided against revenue. - ITA No. 1429/Kol/2013 - - - Dated:- 19-10-2016 - SHRI N. V. VASUDEVAN, J.M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time on daily basis which clearly goes to show that the assessee was actively involved 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 has shown the share transaction as investment, the treatment in the books of an assessee is not conclusive and if the volume, frequency and regularity at which transactions are carried out indicate systematic and organized activity 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 transactions 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 securities which were purchased by the assessee during the year were sold within the year . The holding period of scripts in around 207. The A/R s argument that the assessee has been showing gain arises on sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contrary view in assessment for a subsequent assessment year on the same set of facts. It was pointed out that the Hon ble Mumbai High Court has also confirmed the order of the 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 the CIT, Circle-1, Kolkata. In those proceedings the assessee pointed out that profit on sale of shares were accepted by the Revenue as giving raise to short term capital gain. The CIT in assessment year 2007-08 accepted the claim of the assessee 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 pronouncements on the issue involved relied upon by the appellant. It is observed that in the original order passed u/s.143(3), the AO had accepted that the profit earned 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 this point was set aside by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the facts had been changed. Merely for the reason that there were several transactions of purchase and sale of shares, the income under the head capital gain cannot be assessed as business income. The various judicial decisions relied upon by the appellant including that of the Hon ble Supreme Court in the case of Gopal Purohit(Supra) support its case that the prift arising from sale of investment shares 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 the Hon ble Calcutta High Court in the case of Himalaya Finance Investment Company (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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e tests have again been reiterated by the 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 dated 29.2.2016 clarifying on taxability on income earned from sale 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 business 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 shares/units held as investments cannot be treated as giving raise to income from business. 10. Keeping in mind, the above broad principles, we shall 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 question, were held by the Assessee as Investments and not as Stock-in-trade . The assessee during the previous year had entered into 490 transac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sistency must be appliedhere as authorities did not treat the assessee as a share trader in preceding year, in spite of existence of similar transaction, which cannot in any way operate as resjudicata to preclude the authorities from holding such transactions as business activities in current year? The Hon ble Bombay High Court held as follows: 3. In so far as Question (b) is concerned, the Tribunal 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 Tribunal correctly accepted the position, that the principle of res judicata is not attracted since each assessment year is separate in itself. The 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 assessee. This approach of the Tribunal cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X
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