Income Tax Appellate Tribunal - Ahmedabad
Shri Kiritkumar Ambalal Shah,Huf, ... vs The Addl.Cit.,Range-7,, Ahmedabad on 1 November, 2018
आयकर अपील
य अ धकरण, अहमदाबाद यायपीठ 'Mh' अहमदाबाद ।
IN THE INCOME TAX APPELLATE TRIBUNAL
" D " BENCH, AHMEDABAD
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BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER
And SMT MADHUMITA ROY, JUDICIAL MEMBER
आयकर अपील सं./I.T.A. No. 1097/AHD/2013
( नधा रण वष / Assessment Year : 2008-09)
Kiritkumar Ambalal बनाम/ ACIT,
Shah- HUF Vs. Range - 7,
Prop. of M/s. Tube Ahmedabad.
Corporation, 14,
"Archana", Shantinagar
Society, Ashram Road,
Ahmedabad - 13
थायी ले खा सं . /जीआइआर सं . / PAN/GIR No. : AABHK 6259 E
(अपीलाथ /Appellant) .. ( यथ / Respondent)
अपीलाथ ओर से/ Appellant
by : Shri Bhavesh Shah, A.R.
यथ क ओर से/Respondent by: Shri Lalit P. Jain, Sr. D.R.
सन
ु वाई क तार ख/Date of Hearing 16/08/2018
घोषणा क तार ख /Date of Pronounce ment 01/11/2018
आदे श / O R D E R
PER WASEEM AHMED, ACCOUNTANT MEMBER:
The captioned appeal has been filed at the instance of the assessee against the order of the Commissioner of Income Tax(Appeal)-XIV, Ahmedabad [CIT(A) in short] vide appeal no.CIT(A) XIV/Addl. CIT R - 7/256/2010-11 dated 18.02.2013 arising in the matter of assessment order passed under s.143(3) of the Income Tax Act, 1961(here-in-after referred to as "the Act") dated 16.12.2010 relevant to Assessment Year (AY) 2008-09.
ITA No.1097/Ahd/2013Kiritkumar Ambalal Shah - HUF vs. ACIT A.Y. 2008-09 -2-
2. The grounds of appeal raised by the assessee are as under:-
"1. The Ld. CIT (A) has grossly erred in law and on facts in partly allowing the appeal. He ought to have allowed the appeal fully in accordance with the grounds of appeal raised by the appellant before him.
I. ADDITION ON ACCOUNT OF LOSS ON TRADING IN
SHARES - RS. 10,81,852/-
1. The Ld. CIT(A) has erred in law and on facts in confirming the addition of Rs. 10,81,852/- on account of loss on trading in shares treating the same as short term capital gain.
2. The Ld. A.O as well as the Ld. CIT (A) erred in law and on facts in failing to consider appellant HUF's submissions in proper perspective filed before them.
3. The Ld. CIT(A) has erred in law and on facts while failing to consider the fact that the appellant HUF has carried out number of transaction in shares and securities which reveals the intention of appellant of earning the business profits from such transaction.
4. The Ld. CIT(A) has erred in law and on facts while failing to consider the fact that the appellant HUF is a trader in shares in securities and accordingly the appellant has rightly shown the profit/loss earned from the trading activities under the head "Business Income" while getting its books of accounts audited U/S.44AB of the Act.
The appellant reserves its right to add, amend, alter or modify any of the grounds stated hereinabove either before or at the time of hearing."
3. The solitary issue raised by the assessee in this appeal is that ld CIT(A) erred in treating the business loss on trading in shares amounting to Rs. 10,81,852 as short term capital loss.
ITA No.1097/Ahd/2013Kiritkumar Ambalal Shah - HUF vs. ACIT A.Y. 2008-09 -3-
4. Briefly stated facts are that the assessee in the present case is a HUF and engaged in trading of Galvanished & Black / Iron pipes. The assessee during the year has shown loss of Rs.10,81,852/- under the head business and profession. This loss was incurred by the assessee on account of sale purchase of shares.
4.1 The AO during the assessment proceedings observed certain facts as detailed under:
i. The assessee besides the business loss has also shown short term capital gain on account of sale purchase of shares. Thus, the shares acquired in the earlier year and sold in the year under consideration were subject to the provisions to capital gain. ii. Till the last year, the assessee was showing only capital gain income on the sale purchase of the shares.
iii. The transactions in respect of which the loss was shown by the assessee were not carried out throughout the year but these were mainly carried out at the fag end of the financial year under consideration.
iv. The assessee at the time of filing or return changed its mind to show business loss instead of short term capital loss in order to claim set off against the business of income.
In view of above, the AO treated the loss claimed by the assessee as short term capital loss.
5. Aggrieved assessee preferred an appeal to ld CIT(A). The assessee before the ld CIT(A) submitted that the number of transactions in systematic manner prove that it has carried out the business activities in shares.
ITA No.1097/Ahd/2013Kiritkumar Ambalal Shah - HUF vs. ACIT A.Y. 2008-09 -4- 5.1 The period of holding of the shares was less than 3 months which indicates that the shares were never held for a long time. Had the assessee been to intending to earn capital gain income then it would have held the shares for the longer time.
5.2 The assessee in its books of accounts has shown sale purchase of shares as business transactions which were duly audited and no defect was pointed out therein.
5.3 The assessee in support of his claim relied on the CBDT instruction No.1827& Circular No.4 dated 15.06.2007. The assessee also submitted that it is the assessee who will decide whether he has dealing in shares as a trader or an investor. The AO cannot enter in the shoes of the assessee to decide the nature of activities of its assessee. However, the ld CIT(A) disregarded the contention of the assessee and confirmed the order of AO by observing as under:
"I have carefully perused the assessment order and the submissions given by the appellant. I have gone through the Circular No. 1827 and further guidelines for determining whether a person is a trader in shares and securities or as an investor in shares and securities issued by CBDT, New Delhi.
As can be seen the purchase and sale of securities was not allied activity to the usual activity of the appellant. No borrowed funds used for acquisition of shares as is the case in business of dealing in shares and securities. There is no closing stock of shares and securities and neither in A. Y. 2007-08 nor in A. Y. 2009-10 was any business income / loss on trading in shares declared by the appellant. This was not regular activity but an occasionally activity of dealing in shares and securities. There is no denying the fact that the delivery of shares has been taken and the transactions have been routed through D-Mat ITA No.1097/Ahd/2013 Kiritkumar Ambalal Shah - HUF vs. ACIT A.Y. 2008-09 -5- Account and that is precisely the reason that the AO has not treated it to be speculative activity but simply has concluded that this was short term activity to earn some capital gains. Therefore, treating the same as short term capital gain / loss by the AO does not suffer from any infirmity especially in view of guidelines issued by CBDT. The AO's stand has been supported by the said circular. The appellant is advancing the rule of inconsistency as can be seen from the affairs in A. Y. 2007-08 to A. Y. 2009-10. In view of the above facts, I am inclined to accept the view taken by the AO in the assessment order and the ground of appeal is accordingly dismissed."
Being aggrieved by the order of ld. CIT(A) assessee is in appeal before us.
6. Ld AR before us filed a paper book running from pages 1-128 and submitted that the assessee in all the subsequent years beginning from 2010-11 to 2017-18 has declared the income from business and profession which was accepted by the Revenue. Therefore the activity of the assessee for the year under consideration should be treated as business loss on the basis of principle of consistency.
7. On the other hand, ld DR vehemently supported the orders of authorities below.
8. We have heard the rival contentions and perused the materials available on record. In the instant case, the dispute relates whether the assessee is carrying out sale purchase of shares activity as trader or investor.
ITA No.1097/Ahd/2013Kiritkumar Ambalal Shah - HUF vs. ACIT A.Y. 2008-09 -6- 8.1 From the aforesaid discussion, we note that till the last financial year the assessee was carrying the activity of sale purchase of shares as an investor. However, the assessee in the year under consideration has also started the activity of dealing in the shares as trader and this activity continued till the A.Y. 2017-18. The stand taken by the assessee was not disturbed by the Revenue in all these assessment years. Therefore, the principle of consistency are applicable in the case on hand as held by the Hon'ble Supreme Court in the case of Radhasoami Satsang reported in 60 Taxman 248 where in it was held as under:
"13. We are aware of the fact that strictly speaking res judicata does not apply to income-tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assess ment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year.
14. On these reasonings in the absence of any material change justifying the revenue to take a different view of the matter--and if there was no change it was in support of the assessee--we do not think the question should have been reopened and contrary to what had been decided by the Commissioner in the earlier proceedings, a different and contradictory stand should have been taken. We are, therefore, of the view that these appeals should be allowed and the question should be answered in the affirmative, namely, that the Tribunal was justified in holding that the income derived by the Radhasoami Satsang was entitled to exemption under sections 11 and 12."
8.2 We also note that the genuineness of the losses was not doubted by the authorities below. Therefore, we are of the view there was no loss to the Revenue on account of loss in share activity treated as business loss. It is because, the assessee has earned short term capital gain income in ITA No.1097/Ahd/2013 Kiritkumar Ambalal Shah - HUF vs. ACIT A.Y. 2008-09 -7- the subsequent years which was duly offered to tax. Had this loss been treated as short term capital loss then it would have set off against the short term capital gain income earned by the assessee in the subsequent years. In view of above, we hold that the loss declared by the assessee under the head business and profession was correct and within the provision of law. Thus, we set aside the order of ld CIT(A) and direct the AO to treat the loss of Rs.10,81,852/- as business loss of the assessee. Hence, the ground of appeal of the assessee is allowed.
9. In the result, appeal of the assessee is allowed.
This Order pronounced in Open Court on 01/11/2018
Sd/- Sd/-
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(MADHUMITA ROY) (WASEEM AHMED)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Ahmedabad; Dated 01/11/2018
Priti Yadav, Sr.PS
आदे श क त!ल"प अ#े"षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent.
3. संबं&धत आयकर आयु(त / Concerned CIT
4. आयकर आय(
ु त(अपील) / The CIT(A)-XIV, Ahmedabad.
5. +वभागीय .त.न&ध, आयकर अपील य अ&धकरण, अहमदाबाद / DR, ITAT, Ahmedabad.
6. गाड3 फाईल / Guard file.
आदे शानुसार/BY ORDER, स या+पत .त //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad