2014 (5) TMI 622 - AT - Income Tax

Sale of shares LTCG OR business income Held that - Following CIT Vs. Darius Pandole (2010 (6) TMI 405 - Bombay High Court - income from sale of shares treated as business income in earlier years by way of assessment u/s 143(3) cannot be taken as capital gain in subsequent year - the principle of consistency should be followed and the parties should not be allowed to register departure from the existing position time and again also in CIT VS. Gopal Purohit 2010 (1) TMI 7 - BOMBAY HIGH COURT (Bom) it was held that income from shares as Business income on the basis of the rule of consistency - the view taken by the AO on similar issue has been reversed by the CIT(A) and no material has been brought on record by the revenue to demonstrate that the Tribunal tinkered with such view canvassed by the FAA for the earlier years Decided against Revenue.

Summary

Issues:
Characterization of income from sale of shares as Long Term Capital Gain or Business income.

Analysis:
The appeal by the Revenue challenged the CIT(A)'s order regarding the assessment year 2008-09, specifically focusing on the treatment of income from the sale of shares. The assessee, engaged in share transactions, declared a portion as Short Term Capital Gain and another portion as Long Term Capital Gain exempt under section 10(38) of the Act. The dispute arose when the Assessing Officer treated the entire amount as 'Business income,' contrary to the assessee's classification as 'Long Term Capital Gain.' The CIT(A) favored the assessee's stance, considering the consistent classification of securities as 'Investment' in the accounts.

The Tribunal noted the absence of the assessee during the hearing and proceeded ex-parte. The core issue revolved around the profit earned from the sale of shares held for over a year. The Tribunal highlighted the principle of consistency, emphasizing that the treatment of income should follow a uniform approach unless justified by factual or legal variations. Citing relevant precedents, including judgments from the Hon'ble Bombay High Court, the Tribunal upheld the CIT(A)'s decision, emphasizing the importance of maintaining consistency in income classification from share transactions.

Ultimately, the Tribunal dismissed the appeal, affirming the CIT(A)'s order to treat the income from the sale of shares as Long Term Capital Gain based on the principle of consistency. The judgment aligned with established legal principles and previous court decisions, emphasizing the significance of maintaining a consistent approach in income characterization from share transactions.

The judgment was delivered by Sh. R. S. Syal, AM, and Sh. A. D Jain, JM, JJ, on 9/5/2014 at the Appellate Tribunal ITAT DELHI, as per the citation 2014 (5) TMI 622 - ITAT DELHI.