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TMI Blog2016 (5) TMI 690X X X X Extracts X X X X X X X X Extracts X X X X ..... lter, amend and/or withdraw any ground or grounds of appeal either before or at the time of hearing of the appeal. 3. The assessee has raised following grounds of appeal for Assessment Year 2008-09:- 1. On the facts and in the circumstances of the case, the learned CIT(A) erred in confirming the Assessing Officer's finding that the assessee earned business income from sale of shares at Rs. 65,61,832/- as against the claim of the assessee that the aforesaid income was in the nature of short term capital gain. 2. The appellant craves leave to add, alter, amend and/or withdraw any ground or grounds of appeal either before or at the time of hearing of the appeal. 4. We take the lead case as ITA No.2131/Ahd/2014 for Assessment Year 2006-07. The brief facts of the case are that, during the year under consideration, the assessee had income by way of profit from partnership firm, capital gain on sale of shares and income from other sources. During the year under consideration, the assessee returned Short Term Capital Gains (STCG) of Rs. 2,00,41,453/- and Long Term Capital Gains (LTCG) of Rs. 70,64,982/-, income from other sources of Rs. 36,63,405/- and tax free dividend of Rs. 6,63,6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ck market in the relevant year by pledging his entire share portfolio to borrow equivalent funds. The Assessing Officer also observed from the ratio of purchases (Rs.38.66 crore) to opening stock (Rs.2.81 crore) that the income earned from share transactions was nothing but income from business as primary aim was to roll over the shares number of times like any other stock-in-trade and to earn business income from such roll over. The Assessing Officer also noted increase in closing stock (Rs.9.98 crore) from the opening stock (Rs.2.81 crore), i.e., ratio of 4:1 to infer that during the year, the assessee reinvested income derived from dealing in shares to increase his stock-in-trade. Further, the Assessing Officer noted that ratio of sale/purchase was 0.85, which also indicated that main intention of buying of shares was to roll them over like other stock-in-trade and earn business income. The Assessing Officer also observed that against income of Rs. 2.77 crore from dealing in shares, other income of the assessee was Rs. 1,07,676/- earned as partner from M/s. Urvakunj Nicotine Industries, thereby indicating that business of dealing in shares was means of livelihood of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TCG. Assessing Officer is directed accordingly. 6.1 With regard to STCG of Rs. 2,00,41,453/- claimed by the assessee and treated the same as business income by the Assessing Officer, the stand of the assessee has been that facts of the assessee are identical to the facts of the assessee's wife Smt. Chandrikaben Rashmikant Patel for AYs 2006-07 & 2007- 08, for which the assessee drew our attention to main finding of the ITAT's order dated 31.12.2013 in ITA Nos. 3006 & 3007/Ahd/2010, which reads as under :- "..................... therefore, in light of various case laws referred to hereinabove, both the criteria i.e. holding period as well as frequency of the transactions, in the facts and circumstances of the present case are to be adopted. For determining the criteria adopted, depending upon the frequency of certain transactions, it is observed that purchasing of particular script and selling the whole quantity would comprise a cycle, if such cycle is repeated for more than four times, then the script would be as stock-in-trade. In such a situation, the intention of the assessee cannot be held that the shares as investment. In case, where holding period is more than a month, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 16 6.3 We find that Hon'ble Bombay High court in the case of CIT vs. Smt. Datta Mahendra Shah [2015] 378 ITR 304 (Bom.) decided the issue in favor of the assessee. In said decision of Bombay High court, the CIT(A) had laid down certain parameters for trading in sale of shares as capital gain which has been confirmed by ITAT and ultimately, by the Bombay High court. 6.4 We find that the Ld. CIT(A) confirmed the finding of the Assessing Officer ignoring important relevant factors which goes to the root of the question raised before us and hence, we reproduce the same as under:- (a) The appellant has always been an investor in shares and during the preceding several assessment years income on sale of shares was disclosed in the returns of income as short term capital gains or long term capital gains depending upon the period of holding. These returns of income were accepted by the Department either u/s. 143(1) or u/s. 143(3) of the Income-tax Act The learned CIT(A) failed to appreciate that during the present assessment year the facts and circumstances have not undergone any material change. (b) The appellant has maintained separate books of account in respect of busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome for earlier years and there was no material change in the facts in subsequent years. It was held by the Hon'ble High Court that the view taken by the Department for earlier years should continue on principles of consistency. Similar view has been reiterated by the Hon'ble Delhi High Court in the case of CIT vs. Allied Finance Pvt. Ltd. 289 ITR 318. Wherein it was observed that even though the doctrine of res judicata is not applicable to tax proceedings, where an issue has been considered and decided consistently in a number of earlier assessment years in a particular manner, then for the sake of consistency, the same view should continue to prevail in subsequent years unless there is some material change in the facts. Same view has been corroborated by the Hon'ble Kerala High Court in the case of CIT vs. N. P. Mathew (Deed.) 280 ITR 44. The relevant part of the ratio is reproduced from the Head note: "Held, dismissing the appeal, that with regard to another assessee, the same view was taken by the Tribunal and the Department accepted it for earlier years in the assessee's case also. Those orders were allowed to become final. The Department should be consisten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... effected subsequently ; (c) the third test is as to how the assessee dealt with the subject matter of transaction during the time the asset was with the assessee, whether it has been treated as stock-in-trade, or been shown in the books of account and balance sheet as an investment. This inquiry, though relevant, is not conclusive ; (d) the fourth test is how the assessee himself has returned the income from such activities and how the Department has dealt with the same in the course of preceding and succeeding assessments. This factor, though not conclusive, can afford good and cogent evidence to judge the nature of transaction and would be a relevant circumstance to be considered in the absence of any satisfactory explanation ; (e) the fifth test, normally applied in cases of firms and companies, is whether the deed of partnership or the memorandum of association, as the case may be, authorises such an activity ; (f) the most important test is as to the volume, frequency, continuity and regularity of transactions of purchase and sale of the goods concerned. In a case where there is repetition and continuity, coupled with the magnitude of the transaction, bearing reasonable p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding that principle of res judicata was not applicable to the assessment proceedings. There could not be any dispute on this aspect, but there is also another judicial thought that there should be uniformity in treatment and consistency under the same facts and circumstances and it was already found that facts and circumstances were identical, even though a different stand had been taken by the revenue authorities. In that view of the matter, the action of the revenue authorities in disallowing the claim of the assessee In the relevant year needed verification. In the process to find the answer, it was noted that there was a change in the scheme of taxation relating to short-term capital gains and long-term capital gains. Through the Finance Act, 2004, the Legislature imposed securities transaction tax on the sale and purchase of shares and other derivative transactions and, simultaneously, the Legislature exempted long-term capital gain under section 10(38) from the levy of tax and on short-term capital gain, a concessional rate of tax i.e., 10 per cent has been levied subject to the condition that transactions resulting into this type of gain must have suffered securities transac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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