D.b.income Tax Appeal v. D.b.income Tax Appeal

D.B.INCOME TAX APPEAL NO.108/2014Commissioner of Income Tax, Udaipurvs.Smt.Sonal Abhay Mehta 1 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN ATJODHPURJUDGMENT D.B.INCOME TAX APPEAL NO.108/2014 Commissioner of Income Tax, Udaipurvs.Smt.Sonal Abhay Mehta Date of judgment :19 August 2015 PRESENT HON'BLE MR JUSTICE AJAY RASTOGIHON'BLE MR JUSTICE VIJAY BISHNOI Mr K.K.Bissa for appellant BY THE COURT:(PER HON'BLE BISHNOI,J.) This Income Tax Appeal has beenpreferred under section 260-A of the IncomeTax Act, 1961 (hereinafter referred to as'the Act of 1961') against the order dated28.11.2013 passed by the Income Tax AppellateTribunal, Jodhpur Bench Jodhpur (hereinafterreferred to as 'the Tribunal'). Brieffacts,necessaryfor adjudication of the appeal, are that theincome of the respondent-assessee wasassessed by the assessing authority for the assessment year 2006-2007. The Return filedby the assessee was rejected and theAssessing Officer, while exercising powersunder section 143(3) of the Act of 1961 hasassessed Rs.48,34,762/- as business incomeinstead of short term capital gain. TheAssessing Officer has held that it isestablished that assessee was dealing inshares as trader and shares were held by heras stock-in-trade. The Assessing Officertreated the amount of Rs.48,34,762/- astrading income instead of short term capitalgain and held that such trading income isliable to be taxed under the head “incomefrom business and profession”. Being aggrieved with the decisionof the Assessing Officer, the respondent-assessee had preferred an appeal before theCommissioner, Income Tax (Appeals), Udaipur(hereinafter referred to as 'the CIT(A)'),which was accepted vide order dated13.05.2011. The CIT(A) has observed as under: “From the submissions made by the appellant,it is seen that assessee was holding shares as 3 investment from year to year which showsintention of the assessee i.e. to be of aninvestor. The securities transactions tax waspaid and shares were received in the De-mataccount & sold later on. In the earlier yearsalso, the similar shares transactions have beenaccepted as an investment leading to shortterm capital gain and these shares were nottreated as stock-in-trade. In fact, some ofshares sold were purchased last year andshown as investment before selling them thisyear. These shares were never shown in thebalance sheet as stock-in-trade nor valuationwas made as a stock-in-trade. The dividendswere received over the years which have beenoffered for the tax. It is not the case of theA.O. that shares shown as investment havebeen converted into stock-in-trade as persection 45(2) at any point of time. Assesseehas pointed out that she has dealt in 42 casesand has not carried out activity continuouslyand he has made share transactions only on 47days out of 261 working days that too tomaintain diversified that portfolio so as toprevent loss depending upon marketconditions. It is seen that assessee has been aregular investor and has remained investedover a long period of time and has receiveddividends continuously in from year to year.One of the significant points is that assesseehas purchased shares out of his own funds and no funds were borrowed fromcommercial bank or institutions forpurchasing shares. Further it is noted thatassessee has been filing return from year toyear and similar transaction of the sale andpurchase have been accepted by thedepartment treating the assessee as investor.The ratio of total purchase/sales is 0.55 andratio of sales/stock is 3.10 only. The holdingperiod on an average for the short term capitalgain transaction has been more than sixmonths and for the long term capital gain 2-3years. The assessee has received dividends ofRs.42,989/-. All these factors go to show thatassessee is an investor.” and no funds were borrowed fromcommercial bank or institutions forpurchasing shares. Further it is noted thatassessee has been filing return from year toyear and similar transaction of the sale andpurchase have been accepted by thedepartment treating the assessee as investor.The ratio of total purchase/sales is 0.55 andratio of sales/stock is 3.10 only. The holdingperiod on an average for the short term capitalgain transaction has been more than sixmonths and for the long term capital gain 2-3years. The assessee has received dividends ofRs.42,989/-. All these factors go to show thatassessee is an investor.” The CIT(A) has decided that the addition madeby the Assessing Officer treating the incomeof Rs.48,34,762/- as business is liable to bedeleted and the said income is liable to beheld as short term capital gain. The appeal preferred against theorder passed by the CIT(A) dated 13.05.2011came to be dismissed by the Tribunal videorder dated 28.11.2013 while observing asunder: “5. After considering the rivalsubmissions, we have found that theintention of the assessee was to be investor from the beginning itself asthe purchases were made through De-mat account from his own funds andthe holding period of the shares andtreatment given the books of account.Therefore, the finding of ld. CIT(A)cannot be faulted with. The only factthat the assessee has done voluminousactivities of investing itself cannot beconverted into business. Accordingly,by the supporting reasoning of the ld.CIT(A), we have found that theassessee is a regular investor and inthe past whatever profit earned onpurchase/sale were assessed, it wasassessed under the head 'capital gain'.In the past any such STCG or LTCGwere never treated as business incomeof the assessee. Accordingly, byfollowing the rule of consistency laiddown in the decision of Radha SwmiSatsang vs. CIT, 1993 ITR 321 (S.C.),we have to affirm the impugnedfinding. The ld. AuthorisedRepresentative has placed reliance onvarious other decisions including thatof this very Bench in this regard andwhich we need not be repeated in viewof the main decision of Hon'bleSupreme Court (supra). Accordingly,we do not find any merit in this appeal of the Revenue and dismiss the same.” Learned counsel for the appellanthas argued that the learned Tribunal hasgrossly erred in dismissing the appeal of thedepartment while ignoring the fact thatduring the year under consideration totalpurchase have been made to the extent ofRs.69,90,137/- and total sale have been madeto the extent of Rs.1,27,62,936/-. It iscontended that the purchases and sales ofmore than one crore itself speaks the volumeand substantial nature of transaction andsuch transaction cannot be treated in thenature of investment. It is contended thatthe principle of res judicata is notapplicable in the income as each assessmentis separate year and even if in the previousyears, such transaction has been treated asshort term capital gain or long term capitalgain, then also the same does not entitle theassessee to claim that the same yardstick beapplied. Heard learned counsel for the appellant. D.B.INCOME TAX APPEAL NO.108/2014Commissioner of Income Tax, Udaipurvs.Smt.Sonal Abhay Mehta It is not in dispute that in theprevious years, the similar transaction wereaccepted as an investment leading to theshort term capital gain by the department. Asper the facts of the case, the respondent hasdealt in 42 cases and has not carried outactivity continuously and she has made sharetransactions only on 47 days out of 261working days. It is also noticed that theassessee has been regular investor and hasremained invested over a long period of timeand has received dividends continuously infrom year to year. The assessee haspurchased shares out of her own funds and nofunds were borrowed from commercial bank orinstitutions for purchasing shares. appellant. D.B.INCOME TAX APPEAL NO.108/2014Commissioner of Income Tax, Udaipurvs.Smt.Sonal Abhay Mehta It is not in dispute that in theprevious years, the similar transaction wereaccepted as an investment leading to theshort term capital gain by the department. Asper the facts of the case, the respondent hasdealt in 42 cases and has not carried outactivity continuously and she has made sharetransactions only on 47 days out of 261working days. It is also noticed that theassessee has been regular investor and hasremained invested over a long period of timeand has received dividends continuously infrom year to year. The assessee haspurchased shares out of her own funds and nofunds were borrowed from commercial bank orinstitutions for purchasing shares. Looking to the factsandcircumstances of the case, we do not find anyillegality in the findings arrived at by theTribunal that the assesee was a regularinvestor and whatever profit, earned onpurchase or sale of the shares, cannot beliable to be termed as business income andhas rightly been treated as short term D.B.INCOME TAX APPEAL NO.108/2014Commissioner of Income Tax, Udaipurvs.Smt.Sonal Abhay Mehta capital gain by the CIT(A) and the Tribunal.In view of the above facts, we donot find any substantial question of law.Hence, the appeal fails and is herebydismissed. ,J. ,J. -m.asif/