Income Tax Appellate Tribunal - Mumbai
Janak S. Rangwalla vs Asstt. Cit, Range-12(2) on 19 December, 2006
ORDER
Sushma Chowla, Judicial Member
1. This appeal filed by the assessee is against the order of Commissioner (Appeals)-V, Mumbai, dated 19-1-2004 relating to assessment year 2000-01 against the order under Section 143(3) of the Income Tax Act, 1961.
2. The assessee has raised the following grounds of appeal.
"1. On the facts and in the circumstances of the case, the learned Commissioner (Appeals) legally erred in confirming the action of the assessing officer in not allowing the set off of long-term capital loss of Rs. 1,02,31,691 against the short term capital gains of Rs. 1,47,15,196.
2. Without prejudice to the above and in the alternative, the appellant submits that the learned Commissioner (Appeals) legally erred in confirming the action of the assessing officer in treating the short-term capital gains of Rs. 1,47,15,196 as profit from share trading business.
3. On the facts and in the circumstances of the case, the learned Commissioner (Appeals) legally erred in not disposing of the additional grounds of appeal filed by the appellant on 19-10-2003.
4. On the facts and in the circumstances of the case, the learned Commissioner (Appeals) legally erred in not giving relief in respect of alternative plea of the appellant that the learned assessing officer ought to have applied the ratio of the appellant being held as trader in respect of the activities in the purchase and sale of shares carried on by the appellant.
4.1 In other words, the learned assessing officer ought not have held the appellant partially as trader and partially as investor.
5. On the facts and in the circumstances of the case, the learned Commissioner (Appeals) legally erred in confirming the action of the assessing officer in charging interest under Sections 234B and 234C of the Income Tax Act, 1961."
3. Shri Jignesh Shah, learned Counsel appeared for the assessee and Shri D.K. Rao, departmental Representative appeared for the revenue and put forward their rival submissions.
4. The brief facts of the case are that the assessee is in the business of Trading of Import and Export of Dyes and Chemicals and having turnover of about Rs. 6,34,00,000. For the purpose of carrying of his business of Trading/Export of Dyes and Chemicals, the assessee is maintaining full-fledged office infrastructure. The books of account are audited. In addition, the assessee is also investing in shares of various companies, wherein the income from Long Term Capital Gains, Short Term Capital Gains and Speculative Gain/Loss is being shown by the assessee from year to year. It is the claim of the assessee that all the holdings in shares of Indian companies from year to year is reflected as investment in the Balance Sheet of the assessee. During the course of hearing, the asscssee has filed the computation of income along with working of accounts for assessment year beginning from 1995-96 onwards till up-to-date wherein similar transactions in sale and purchase of shares both on Long Term and Short Term basis have been categorically shown by the assessee as income from Capital Gains and accepted by the Income-tax department. The copies of Assessment Orders ranging from assessment year 1993-96 to assessment year 1999-2000 have been filed on record and it has been brought to our notice that the assessment in some of the years have been completed under Section 143(3) of the Act, wherein the total income disclosed under the head Capital Gains both on account of Short Term or Long Term has been assessed as income from Capital Gains.
5. The learned AR for the assessee pointed out that during the year under consideration the assessee had shown Long Term Capital Loss of Rs. 1,02,31,69 1, which was adjusted against the Short Term Capital Gains of Rs. 1,47,15,196. The Long Term Capital Loss has been accepted by the assessing officer but the adjustment against Short Term Capital Gain has opt been allowed, as according to the assessing officer the assessee is a trader in Shares and not an Investor in shares. The learned AR further brought to our attention that copies of details of Short Term Capital Gains for the year under consideration and also Comparative working of Short Term Capital Gains in earlier years wherein similar type of transactions in huge numbers have been carried out and have been accepted. Reliance was placed on various judicial pronouncements of the Apex court and various High Courts and also the decisions of the Tribunal for the Oroposition that 'the question as to whether the shares assets sold was an Investment stock-in-trade was determined on the basis of entries made by the assessee in the books of account when the said shares assets were purchased as the said entries demonstrated the intention with which the said shares assets were purchased. List of decisions were also filed for the proposition that 'the question in the current year as to whether the assessee was an investor or dealer in shares or whether the shares assets sold was an investment stock-in-trade was determined on the basis of the position treatment given by the department in preceding years'. On conclusion, the learned AR for the assessee also drew our attention to various judicial pronouncements wherein the findings in the current year were based on the position in the earlier years. The learned DR on the other hand vehemently relying on the order of Commissioner (Appeals) and the assessing officer stated that the mere investment shown in the books of account does not mean anything and the frequency of transaction and the conduct of the party clearly shows that he is a Trader in shares and not an Investor in shares.
6. We have heard the rival submissions and perused the records. The facts of the present case are that the assessee had earned income from Short Term Capital Gains amounting to Rs. 1,47,15,196 on sale of shares in the year under consideration, which was claimed to be adjusted against Long Term Capital Loss. The assessee has also declared income from speculation gains/loss which are on account of sale and purchase of shares without delivery of the shares. During the year under consideration, the assessee had also claimed Long Term Capital Loss of Rs. 11,02,31,691 on sale of shares which were hold by the assessee as investment and duly reflected in his Balance Sheet as investment. Similar transaction of sale and purchase of shares are being carried out by the assessee in preceding years, details of which have been filed on record. In addition to the Capital Gains received from Sale of Shares the assessee had declared income from dividend received from the said shares being held as investment by the assessee. The mere volume of transaction transacted by the assessee would not alter the nature of transaction. It is an established principle that income is to be computed with regard to the transaction. The transaction in whole has to be taken into consideration and the magnitude of the transaction does not alter the nature of transaction. Though the principle of res judicata does not apply to the Income-tax Proceedings as each year is an independent year of the assessment but in order to maintain Jew consistency, it is a judicially accepted principle that same view should be adopted for the subsequent years, unless there is a material change in the facts. Their Lordships of Hon'ble Supreme Court in the Radhasoalni Satsang v. CIT ( 1992) 193 ITR 32 11 have categorically held as under:
"... Strictly speaking, resiudicatadoes not apply to income-tax proceedings. Though, each assessment year being a unit, what was decided in one year might not apply in the following year; where a fundamental aspect permeating through different assessment 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".
The same view has been taken by the Hon'ble Delhi High Court in CITv. Neo Poly Pack (P.) Ltd. .
7. In the facts of the present case, the assessee is holding the shares as investment from year to year. It is the intention of the assessee which is to be seen to determine the nature of transaction conducted by the assessee. Though the investment in shares is on a large magnitude but the same shall not decide the nature of transaction. Similar transactions of sale and purchase of shares in the preceeding years have been held to be income from Capital Gains both on Long Term and Short Term basis. The transaction in the year under consideration on account of sale and purchase of shares is same as in the preceding years and the same merits to be accepted as Short Term Capital Gains. There is no basis for treating the assessee as a Trader in shares, when his intention was to hold the shates in Indian companies as an investment and not as stock-in-trade. The mere magnitude of the transaction does not change the nature of transaction, which are being assessed as Income from Capital Gains in the past several years. The assessing officer is directed to set off the Long Term Capital Loss against the Short Term Capital Gain of the year under consideration. The grounds of appeal raised by the assessee are allowed.
8. The assessee has also raised the issue of charging of interest under Sections 234B and 234C of the Act, which is consequential in nature. The ground of appeal raised by the assessee is dismissed.