Income Tax Appellate Tribunal - Mumbai
Gopal R. Purohit, Mumbai vs Department Of Income Tax on 5 May, 2010
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH "E", MUMBAI
BEFORE SHRI R.V. EASWAR, SR. VICE PRESIDENT &
SHRI R.K.PANDA, AM
I.T.A. No. 4957/Mum/2009
(Assessment year 2006-07)
ACIT-25(3) Vs. Shri Gopal R. Purohit
C-11, R. No. 308, Pratyaksh Kar C-702, Mhatre Plaza,
Bhavan, Bandra-Kurla Complex, Dahanukar Wadi, M.G. Road,
Bandra (E), Mumbai-400 051 Kandivali (West),
Mumbai-400 067
PAN: AAGPP1987K
Appellant Respondent
Appellant by : Shri Naveen Gupta
Respondent by : Shri S.C. Tiwari
ORDER
Date of hearing: 05.05.2010
Date of order: 14.05.2010
PER R.K.PANDA, AM,
This appeal filed by the Revenue is directed against the order dated 18th June, 2009 of the CIT(A)-XXV, Mumbai relating to assessment year 2006-07.
2. The grounds raised by the Revenue are as under:
1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in directing the AO to assess income from share investment activities as income from long term and short term capital gain instead of business income without appreciating the facts that assessee has substantial volume and huge number of share transactions and repeated transactions in single scrip, which denote that the motive of the assessee is to carry on business in shares rather than investment in shares to earn dividend.2 ITA No. 4957/Mum/2009
Shri Gopal R. Purohit ===================
2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in not appreciating the facts that the income from short term and long term capital gains on sale of shares was shown at Rs.89,27,753/- and Rs.3,25,03,877/- respectively, wherein dividend earned from shares is merely shown at Rs.14,62,921/- which clearly states that the dividend earned by the assessee is only incidental and not sole motto. This proves the facts that the assessee is not indulged in investment activities but intends to earn quick profits from share trading.
3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing the claim of long term capital gain on sale of shares at Rs.3,25,03,877/- and exemption u/s. 10(38) of the I.T. Act, 1961, without appreciating the fact that the assessee is involved in business of share trading and not investment.
4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that the assessee indulged in investment in shares without considering the fact that the assessee has devoted most of his time in only one activity i.e., activity of earning profit through sale and purchase of shares, be it derivatives, intra day trading or purchase and sale within short period or long period.
5. The appellant prays that the order of the CIT(A) on the above grounds to be set aside and that of the AO be restored.
3. Facts of the case, in brief, are that the assessee is engaged in F&O trading and share trading. Apart from above, he has claimed that he is engaged in investment in shares. During the year under consideration, the assessee had shown income of Rs.1,33,39,568 from F&O and commodities trading and Rs.54,644 from share trading. Apart from the above, the assessee had shown short term capital gain on shares (u/s. 111A) of Rs.89,27,753 and short term capital gain on mutual funds of Rs.17,757. Long term capital gain on shares had also been shown at Rs.3,25,03,877. Dividend income of Rs.14,62,921, PPF interest of 3 ITA No. 4957/Mum/2009 Shri Gopal R. Purohit =================== Rs.75,000 and agricultural income of Rs.2,15,850 was also shown in the return but claimed exempt u/s. 10 of the Income-tax Act, 1961 (the Act).
4. The Assessing Officer in the assessment made u/s. 143(3) of the Act taxed income from short term capital gain and long term capital gain as business income by holding that investment in shares shown in books of account is nothing but stock-in-trade. While doing so, the Assessing Officer discussed high volume of share transactions, regularity in share dealing, business risk involved and infrastructure maintained by the assessee for this purpose. Relying on a couple of decisions quoted in the assessment order he treated the capital gain as business income as has been done in the preceding year.
5. In appeal, the CIT(A) following the order of the Tribunal in assessee's own case for A.Y. 2005-06 decided the issue in favour of the assessee and directed the Assessing Officer to tax income from investment in shares as long term capital gain or short term capital gain according to the period of holding. Aggrieved with such order of the CIT(A), the Revenue is in appeal before us.
6. After hearing both the sides, we find the issue stands decided in favour of the assessee by the decision of the Hon'ble Bombay High Court in assessee's own case vide Income Tax Appeal No. 1121 of 2009 order dated 6.1.2010 where the Hon'ble High Court upheld the decision of the Tribunal for the A.Y. 2005-06 and held as under:
"2. The Tribunal has entered a pure finding of fact that the assessee was engaged in two different types of transactions. The first set of transactions involved investment in shares. The second set of transactions involved dealing in shares for the purposes of business (described in paragraph 8.3 of the judgement of the Tribunal as transactions purely of jobbing without delivery). The Tribunal has correctly applied the principle of law in accepting the position that it is open to an assessee to maintain two separate portfolios, one relating to investment in shares and another relating to business activities involving dealing in shares. The Tribunal held that 4 ITA No. 4957/Mum/2009 Shri Gopal R. Purohit =================== the delivery based transactions in the present case, should be treated as those in the nature of investment transactions and the profit received therefrom should be treated either as short term or, as the case may be, long term capital gain, depending upon the period of the holding. A finding fact ha been arrived at by the Tribunal as regards the existence of two distinct types of transactions namely, those by way of investment on one hand and those for the purposes of business on the other hand. Question (a) above, does not raise any substantial question of law.
3. In so far as Question (b) is concerned, the Tribunal has observed in paragraph 8.1 of its judgement 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 accepted the position, that the principle of res judicata is not attracted since each assessment year is separate in itself. The Tribunal held that there ought to be uniformity in treatment and consistency when the facts and circumstances are identical, particularly in the case of the assessee. This approach of the Tribunal cannot be faulted. The revenue did not furnish any justification for adopting a divergent approach for the Assessment Year in question. Question (b), therefore, does not also raise any substantial question.
4. In so far as Question (c) is concerned, again there cannot be any dispute about the basic proposition that entries in the books of account alone are not conclusive in determining the nature of income. The Tribunal has applied the correct principle in arriving at the decision in the facts of the present case. The finding of fact does not call for interference in an appeal under Section 260A. No substantial question of law is raised. The appeal is accordingly dismissed."
7. Since the CIT(A) has given a finding that the facts of the case for the impugned assessment year are identical to that of the facts in A.Y. 2005-06 on account of nature of business, quantum of turnover, regularity, frequency and infrastructure, therefore, following the decision of the Hon'ble jurisdictional High Court in assessee's own case and in 5 ITA No. 4957/Mum/2009 Shri Gopal R. Purohit =================== absence of any contrary material brought to our notice, the grounds raised by the Revenue are dismissed.
8. In the result, the appeal filed by the Revenue is dismissed.
Pronounced on 14th May, 2010
Sd/- Sd/-
(R.V. EASWAR) (R.K. PANDA)
SR. VICE PRESIDENT ACCOUNTANT MEMBER
Mumbai, dated 14th May, 2010
Copy to:
1. The Appellant
2. The Respondent
3. The CIT(A)-XXV, Mumbai
4. The CIT, Mumbai City-25, Mumbai
5. The DR "E" Bench.
//True copy//
BY ORDER
ASSISTANT REGISTRAR
ITAT Mumbai Benches, Mumbai
Tprao