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2017 (12) TMI 1357 - HC - Income TaxCain on sale of shares - capital gain or business income - period of holding - Held that - As referring to only 42 transactions out of 86, in respect of rest of the 44 transactions, without any examination of details and factual aspects, the Appellate Tribunal rejected the claim that it was STGC. There was no reason to treat other 44 transactions on par with 42 transactions in respect of which holding was only for 7 days. The Appellate Tribunal has noted that in the other transactions, the holding was upto 244 days. The entire data of each transaction was before the Appellate Tribunal as is clear from the chart incorporated in paragraph 5. Nothing prevented the Appellate Tribunal from looking into all the transactions and recording findings of fact. But the Appellate Tribunal has not done its duty and therefore, the finding recorded by the Appellate Tribunal in relation to the Assessment Year 2007-08 will have to be held as perverse. Now, coming to the assessee s appeal in relation to the Assessment Year 2008-09, after accepting that the formula of 30 days adopted by the CIT(A) was erroneous, the Appellate Tribunal ought to have considered the appeal on merits. The learned counsel appearing for the respondent Revenue tried to contend that the details of the sale and purchase transactions for the Assessment Year 2008-09 were not furnished to the Assessing Officer. The said submission appears to be factually incorrect as can be seen from the order of the Assessing Officer. Paragraph 4.1 of his order clearly shows that all the details were furnished as regards the transactions of share during the relevant year. Therefore, to reiterate, we find that the entire approach of the Appellate Tribunal while dealing with the cases for both the years is completely erroneous. The Appellate Tribunal has failed to perform its duty and therefore, the impugned judgment and order of the Appellate Tribunal cannot be sustained at all
Issues Involved:
1. Whether the impugned judgment of the Appellate Tribunal suffers from perversity. 2. Whether the Short Term Capital Gains (STCG) claimed by the assessee for the Assessment Years 2007-08 and 2008-09 should be treated as business income. Issue-wise Detailed Analysis: 1. Perversity of the Appellate Tribunal's Judgment: The primary issue was whether the judgment of the Appellate Tribunal was perverse. The court noted that the Appellate Tribunal had failed to apply its mind to the material facts and had adopted a "straight jacket formula" without proper examination of the transactions. The Tribunal's failure to individually assess each transaction and its reliance on a fixed holding period (7 days for 2007-08 and 30 days for 2008-09) led to the conclusion that the judgment was perverse. The Tribunal did not perform its duty to examine the details of all transactions, leading to an erroneous approach. 2. Treatment of STCG as Business Income: Assessment Year 2007-08: The assessee claimed STCG of ?3,44,93,842/-. The Assessing Officer treated this as business income due to the nature of the transactions, which involved repetitive trading in shares with short holding periods. The CIT(A) reversed this decision, noting that the assessee's claim of STCG in the previous year was accepted and that the average holding period was 69 days. However, the Appellate Tribunal upheld the Assessing Officer's decision, focusing on the fact that 42 out of 86 transactions had a holding period of up to 7 days, indicating an intention to trade rather than invest. The court found that the Appellate Tribunal erred by not examining the remaining 44 transactions, some of which had holding periods of up to 244 days. The Tribunal's failure to differentiate between short-term trading and longer-term investments led to the conclusion that its judgment was perverse. Assessment Year 2008-09: The assessee showed STCG of ?1,34,62,760/- on share transactions. The Assessing Officer treated ?25,88,046/- as business income due to the short holding period (within 30 days) and extended this treatment to the remaining ?1,08,74,670/- based on the previous year's assessment. The CIT(A) partly allowed the appeal, directing that the income from transactions held for more than 30 days should be treated as STCG. The Appellate Tribunal dismissed the assessee's appeal, despite acknowledging that the 30-day holding period should not be the sole criterion. The court noted that the Tribunal failed to examine the transactions in detail and relied on the previous year's findings, which were themselves flawed. Consistency and Res Judicata: The court emphasized the importance of consistency in tax treatment, citing the Division Bench's decision in "Commissioner of Income Tax-25 v/s. Gopal Purohit," which allowed for separate portfolios for investment and business activities in shares. The principle of res judicata, while not strictly applicable, suggested that a consistent approach should be maintained when facts and circumstances are identical. Conclusion: The court concluded that the Appellate Tribunal's approach was erroneous and failed to perform its duty. The impugned judgment was quashed, and the cases were remanded to the Appellate Tribunal for fresh consideration, with instructions to prioritize the appeals due to their age. Order: (i) The impugned order dated 15th May, 2013, by the Income Tax Appellate Tribunal is quashed. (ii) Income Tax Appeal nos. 6586/Mum/2010 and 5711/Mum/2011 are restored to the file of the Appellate Tribunal. (iii) The Appellate Tribunal shall decide the appeals afresh in accordance with the court's judgment. (iv) The Appellate Tribunal is expected to prioritize the disposal of these appeals. (v) The appeals are partly allowed with no orders as to costs.
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