2017 (12) TMI 672 - HC - Income Tax

Income from the share trading - Capital gain or business income - Held that - The number of scrips purchased and sold during the year was 100% more than the last assessment year. As also observed that in the turnover of purchase value and sale, there is a huge increase from ₹ 2.37 crores to 5.98 crores. It was found as a matter of fact that the assessee earned ₹ 16.10 lakhs on the trading of shares which were held by him only for a period of one to seven days. Thus, a finding of fact was recorded that major portion of STCG was out of the sale of shares that were held only for a maximum period of one week. Thereafter, the Appellate Tribunal referred to the finding of the first Appellate Authority. Short holding period, volume of the scrips and frequency of the transactions are major factors to decide the issue as to whether the assessee is an investor or was doing business in shares and security. After considering the peculiar facts of the relevant assessment year namely that the STCG of ₹ 16.62 lacs was from the shares which were held for a maximum period of one week, the finding of fact recorded by the first Appellate Authority has been upheld by the Appellate Tribunal. As already quoted above, a sum of ₹ 16,62,262/was held as business income. In our view, the findings of fact recorded by the Appellate Tribunal are based on record.

Summary

Issues:
1. Challenge to the Judgment and order dated 18th June 2014 passed by the Income Tax Appellate Tribunal.
2. Determination of total income for the assessment year 2008-2009.
3. Treatment of income accrued from shares as income from business.
4. Consistency in approach by the Assessing Officer in previous assessment years.
5. Application of principles of consistency and res judicata.
6. Confirmation of the order of the first Appellate Authority by the Appellate Tribunal.
7. Consideration of submissions made by the authorized representative of the appellant.
8. Analysis of facts and circumstances relevant for the assessment year.
9. Decision based on turnover, holding period, and frequency of transactions.
10. Upholding of the finding of fact recorded by the first Appellate Authority by the Appellate Tribunal.
11. Absence of perversity in the findings of fact by the Appellate Tribunal.
12. Dismissal of the appeal with no order as to costs.

Analysis:

The High Court of Bombay addressed the challenge to the Judgment and order of the Income Tax Appellate Tribunal concerning the assessment year 2008-2009. The appellant, engaged in financing and trading business in shares, filed a return declaring total income, which was subsequently determined by the Assessing Officer. The Commissioner of Income Tax modified the order, bifurcating Short Term Capital Gains (STCG) into investment and trade components. The appellant's appeal before the Appellate Tribunal confirmed the first Appellate Authority's order, leading to the dismissal of the respondent-revenue's appeal.

The appellant argued for consistency in the treatment of STCG income based on previous assessment years, highlighting the principle of consistency and res judicata. The Appellate Tribunal considered the submissions and facts of the case, noting a significant increase in the number of scrips traded and turnover value compared to the previous year. It was found that a substantial portion of STCG was derived from shares held for a short period, indicating frequent trading activity. The Appellate Tribunal upheld the first Appellate Authority's finding that &8377; 16,62,262 was business income, based on the turnover, holding period, and frequency of transactions.

The Court affirmed the Appellate Tribunal's decision, stating that the findings were based on record evidence without any perversity or legal errors. Consequently, no substantial question of law arose, leading to the dismissal of the appeal with no costs imposed. The judgment emphasized the importance of assessing each year's facts independently to determine the nature of income from share trading accurately.