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TMI Blog2014 (1) TMI 1175X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A) has held that such income/loss was to be assessed as business loss in view of section 43(5) of the Act. The assessee has earned an amount of Rs.5,85,40,417/- from sale and purchase of shares which is shown as short term capital gain. The AO required the assessee to explain as to why such short term capital gain should not be treated as income from business. In response to such query the assessee contended that the shares were shown as "investment" in the books of account and such income was being offered as short term capital gain in the earlier years also. Evidence was submitted to prove that delivery of shares were given and taken. It was submitted that the assessee did not have infrastructure employed for the purpose of investment. Thus, it was pleaded that income was rightly offered as capital gain. The AO did not accept such submission of the assessee on the ground that from certain transaction of shares, income had been shown as income from business and from rest of the transactions such income is shown as short term capital gain and this differentiation is only as per convenience of the assessee. 2.1 So far as it relates to contention of the assessee that these shares ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wn as investment in the books of account. As at the end of the year the investment in shares is Rs.4.93 crores which is shown as "investment". Dividend received during the year was Rs.3.92 lacs. Short term capital gain earned by the assessee from sale of shares is an amount of Rs.6,05,88,315/- and after claiming expenditure the net short term capital gain is shown at Rs.5,85,40,417/-. It was submitted that AO could not rely on the F&O transactions to hold that assessee is engaged in the activity of business regarding shares for which delivery was taken and given. According to well established law the discretion is vested in the assessee to decide whether holding of shares is by way of investment or forms part of stock in trade. In this regard reference was made to Circular No.4/2007 dated 15/6/2007. In the said circular reference is made to the decision of Hon'ble Supreme Court in the case of CIT vs. Associated Industrial Development Assessee (P) Ltd. (82 ITR 586), wherein Hon'ble Apex Court has observed that particular holding of share, whether it is by way of investment or forms part of stock in trade is a matter which is within the knowledge of the assessee, who hold the shares ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owed, the AO was incorrect in observing that the assessee has used borrowed funds for the purpose of investment in shares. It was further submitted that no nexus has been established by the AO to prove that amount borrowed by the assessee was used in the investment of shares. 3.4 It was further submitted that sole factor of huge number of transactions within a short period of time and frequency, though can be relevant factors but the nature of transactions has to be determined according to the facts of the case and according to the facts of the case assessee is an investor and not trader. Reference was made to various decisions to contend that AO was wrong in treating the gain of the assessee from sale and purchase of shares as business income against the claim of the assessee that such income was assessable under the head "capital gain". Ld. CIT(A) after considering all these submissions of the assessee has finally come to the conclusion that assessee's only source of income effectively is from dealing in shares, both in F&O segment or otherwise. The assessee has carried out business in the F&O segment on a very large scale and dealing in shares outside the F&O segment cannot sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chart was also given to Ld. DR. The said chart read as under: "Statement showing details regarding capital gains transactions of scrutiny assessment years: S. No. A.Y No of scrips No of transactions Investment (Rs. In lakhs) Capital (Rs. In lakhs) Average period of holding(No of days) Interest Expenditure (Rs. In lakhs) 1. 2007-08 58 93 332.00 335.00 53 2.12 2. 2008-09 102 222 493.00 833.00 99 3.35 3. 2009-10 14 21 297.40 685.68 91 10.35 4. 2010-11 36 84 1296.92 627.48 118 11.98 4.1 He submitted that though number of transactions in the year under consideration may be higher but solely that cannot be considered to be material factor to hold otherwise as the nature of transactions remains the same in all these years. He submitted that if the facts are same then higher volume of investment and sale cannot alter the nature of the transaction during the year under consideration, more particularly when similar transactions have been accepted by the revenue in other years as giving rise to the income assessable under the head "capital gain". Reference i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olding ranged between 1 to 147 days. In both the years the department has accepted the claim of the assessee that activity of sale and purchase entered into by the assessee is an activity giving rise to capital gain. For subsequent years also i.e. A.Y 2007-08 the assessee has declared short term capital gain of Rs.8,48,176/- dealing in 19 scrips where holding period is between 3 to 363 days. The assessee had purchased shares for an aggregate sum of Rs.1,05,02,162/- and sold the same for Rs.1,13,40,081/-. Thus assessee is consistent in investing in the shares and such activity of the assessee remains the same for the year under consideration. There is no material difference in the facts of the case except that for the year under consideration the volume of investment and sale is high. If it is so, the arguments of Ld. AR regarding consistency has to be accepted. As per decision of Hon'ble Bombay High Court in the case of CIT vs. Gopal Purohit, 336 ITR 287, wherein it has been held that where assessee has followed consistent practice in regard to the nature of the activities, the manner of keeping records and presentation of shares as investment at the end of the year in all the year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted that for the year under consideration the department has deviated from its stand without bringing any difference of facts in the year under consideration when they are compared with other years which are decided by way of scrutiny assessment. He submitted that in accordance with the decision of Hon'ble Jurisdictional High court in the case of DCIT vs. Gopal Purohit (supra) the claim was to be accepted on the ground of uniformity and consistency. He submitted that the facts of the present case are similar to the facts of Mrs. Sejal Dalal vs. ACIT(supra) and under similar circumstances it was held that to maintain consistency, the gain from the transactions should be accepted as giving rise to "capital gain". 4.4 Ld. AR also relied upon the following decisions: (i) Decision in the case of ACIT vs. Upendra K. Doshi order dated 14/8/2013 in ITA No.1499/Mum/2009 and others, wherein finding that the AO had accepted these transactions giving rise to long term "capital gain" in earlier years, it was held that on the basis of consistency the claim of the assessee should have been accepted. A copy of this order was placed on our record and was also given to Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profit from transfer of shares should be considered as capital gain when short term capital gain showed by the assessee in earlier years was accepted by the Revenue. A copy of the said order is available on pages 121 onwards of the paper book and relevant discussion is contained in para 10 of the order. In view of the foregoing discussion, we are of the considered opinion that the ld. CIT(A) has taken an unimpeachable view on this issue. The impugned order is upheld and the relevant grounds taken by the Revenue in this regard, are dismissed." (emphasis provided) ii. ACIT vs. Smt. Varsha J. Ashar, order dated 23/08/2013 in ITA No.953/Mum/2011, copy was placed on our record and was also given to Ld. DR. Reference was invited to the following observations: 3. After considering the rival submissions and perusing the relevant material on record, it is observed that the learned CIT(A) has recorded a categorical finding on page 12 of the impugned order that in the earlier years such profit on short term capital asset was treated as short term capital gain. The learned AR has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed at p. 47 onwards of the paper book. There is a categorical discussion about the capital gain earned by the assessee from sale of shares held on long-term and short-term basis. The long-term capital gain on sale of shares in the last year was declared at Rs. 9.27 crores and short-term capital gain on sale of shares etc. was offered at Rs. 51.55 lakhs. The AO has thoroughly discussed the issue of capital gain and thereafter determined the short-term capital gain at Rs. 79.38 lakhs by not allowing the set off of loss to the extent of Rs. 27.83 lakhs. Page No. 7 of the paper book is a chart showing comparison of volumes of the investments in shares etc. for the instant year vis-avis the immediately preceding year. Number of scrips purchased and sold in this year are at 213 and 173 respectively as against 194 and 177 respectively for the asst. yr. 2004-05. The value of purchase and sale of shares in total is at Rs. 20.08 crores and Rs. 10.59 crores in this year as against Rs 8.23 crores and Rs. 5.84 crores in the immediately preceding year. It shows that the pattern in which the shares were purchased and sold in this year is almost similar to that of the preceding year. The assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been made available by the learned Authorised Representative, we find that the facts and circumstances are similar and even the assessment year is also the same i.e. asst. yr. 2005-06. In this case also the Department sought to change the treatment to be given to the profit on sale of shares from short-term capital gains to 'Profits and gains of business or profession", which was not allowed by the Tribunal. On the same pattern some other orders have also been placed on record which have the same ratio decidendi. In view of this overwhelming position settled in favour of the assessee and the learned Authorised Representative not bringing on record any contrary view, we hold that since in identical circumstances the Revenue authorities have accepted the profit arising from the sale of shares as short-term capital gain in the assessment made under s. 143(3), there is no reason as to why a different treatment be given in this year. It is true that res judicata is not applicable in the income-tax proceedings, but at the same time we cannot brush aside the 'principle of consistency', which requires that when the facts and circumstances continue to remain the same, then there should n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s shown as investment give rise to an income which is assessable under the head "capital gain". 6.2 Another reason provided by the AO is that principle of res-judicata does not apply to Income Tax proceedings. It is true that principle of res-judicata does not apply to Income Tax proceedings but at the same time it is also well established that there ought to be uniformity in treatment and consistency when the facts and circumstances are identical particularly in the case of assessee. This principle has been accepted by the Hon'ble Jurisdictional High Court in the case of CIT vs. Gopal Purohit (supra) as per following observations: "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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t years 2007-08, 2009-10 and 2010-11 respectively. However, the number of transactions and number of scrips dealt by the assessee is on higher side but that alone cannot be said to be a factor to deviate from the view taken in earlier and subsequent years. For this purpose reference can be made to the decision of ITAT in the case of Mrs. Sejal Dalal vs. ACIT (supra), the relevant portion of the observations have already been reproduced in para 4.1 of this order. 6.5 We have also gone through the assessment orders for assessment years 2007-08, 2009-10 and 2010-11 and the relevant papers filed in the paper book to show that under identical facts the AO in earlier as well as subsequent years has accepted this claim of the assessee by way of order passed under section 143(3) of the Act. The details of these orders have already been described in Para 4.2 of this order. 6.6 The principle approved by Hon'ble Bombay High Court in the case of CIT vs. Gopal Purohit (supra) has been applied by Mumbai ITAT in other decisions also which have been relied upon by Ld. AR, wherein finding that in earlier year/subsequent year similar claim was accepted by the revenue, the Tribunal has granted the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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