Dr. Rajeev Choudhary v. Assistant Commissioner Of Income Tax-2(1), Indore

HIGH COURT OF MADHYA PRADESH : BENCH AT INDORE D.B.: HON'BLE MR. S. C. SHARMA ANDHON'BLE MR. VIRENDER SINGH, JJ INCOME TAX APPEAL No. 54 / 2019 DR. RAJEEV CHOUDHARYVS.ASSISTANT COMMISSIONER OF INCOME TAX-2(1), INDORE * * * * * O R D E R( 17/09/2019) PER : S. C. SHARMA, J:- The present appeal has been filed u/S. 260A theIncome Tax Act, 1961 against the order dated 10/01/2019passed by the Income Tax Appellate Tribunal, IndoreBench, Indore in I.T.A.No. 293/Ind/2012 for the assessmentyear 2008-09. Facts of the case as stated in the appeal reveal that theappellant is an Eye Surgeon and is running Centre in thename of Choudhary Eye & Retina Research Centre and is anIncome Tax Payee. The appellant filed his Income TaxReturn for the Assessment Year 2008-09 on 29/5/2008declaring total income at Rs.3,14,17,278/- which, inter-alia,included income from his profession as an Eye Surgeon, Long Term Capital Gain, derived as a result of equity share,as also short term capital at Rs.1,18,57,282/- derived as aresult of purchase and sale of shares. The case of theassessee was selected for scrutiny and the Assessing Officercompleted the assessment u/S. 143(3) the Income Tax Act,1961 vide assessment order dated 21/12/2010. It has beenstated in the appeal that the Assessing Officer, whilecompleting the assessment, accepted and assessed the longterm capital gain derived as a result of sale of shares, buttreated the short term capital gain derived from purchase andsale of shares, as income from business only on the groundthat there were large number of transactions and ignoringthe fact that the appellant is a regular investor in shares forpast many years. The assessing officer levied tax at higher rate of 30%on such income and against 10% leviable on short term gainwhich resulted in additional demand of Rs.37,33,743/-. Being aggrieved by the assessing order dated21/12/2010, the appellant preferred an appeal before theCommissioner of Income Tax (Appeals) on various grounds and the Commissioner of Income Tax (Appeals), as earliersimilar orders were passed on 30/5/2011 in the case of theassessee for the assessment year 2004-05, has allowed theappeal by an by order dated 5/3/2012. The Department being aggrieved by order dated5/3/2012 passed by the Commissioner of Income Tax(Appeals) for the assessment year 2008-09, preferred anappeal before the Income Tax Appellate Tribunal and thematter was heard at length. The Income Tax AppellateTribunal has allowed the appeal and has restored the orderof the Assessing Officer treating short term capital gain asbusiness income of the appellant. Mr. P. M. Choudhary, learned senior counselappearing with Mr. Anand Prabhawalkar, Advocate for thepetitioner has vehemently argued before this Court thatearlier also the Commissioner of Income Tax (Appeals) haspassed an order on 30/5/2011 in respect of the financial year2004-05 and a similar view was taken by the Commissionerof Income Tax (Appeals) by passing the subsequent orderdated 5/3/2012 and, therefore, the Income Tax Appellate --- 4 --- Tribunal should not have interfered with the order passed bythe Commissioner of Income Tax (Appeals). It has beenargued that once the issue was already decided in favour ofthe appellant which was consistently accepted and followedby the Department for various assessment years, non-acceptance of the same by the impugned order isunsustainable. The appellant has filed a chart in respect ofthe earlier assessment years and has stated that once in hisown case the findings have been arrived at by the appellateauthority, a different view could not have been taken in themanner and method it has been done. --- 4 --- Tribunal should not have interfered with the order passed bythe Commissioner of Income Tax (Appeals). It has beenargued that once the issue was already decided in favour ofthe appellant which was consistently accepted and followedby the Department for various assessment years, non-acceptance of the same by the impugned order isunsustainable. The appellant has filed a chart in respect ofthe earlier assessment years and has stated that once in hisown case the findings have been arrived at by the appellateauthority, a different view could not have been taken in themanner and method it has been done. Learned counsel for the petitioner has placed relianceupon the judgment delivered in the case of Commissioner ofIncome Tax Vs. Om Prakash Suri reported in (2012) 19 ITJ326 (MP); Deepaben Amitbhai Shah Vs. Dy. Commissionerof Income Tax reported in (2017) 397 ITR 687 (Gujarat);Commissioner of Income Tax Vs. Gopal Purohitreported in(2011) 336 ITR 287 (Bombay); Principal Commissioner ofIncome Tax Vs. Hiren M. Shah reported in (2019) 413 ITR143 (Bom); and a judgment delivered by this Court in the --- 5 --- case of Income Tax Vs. Anoop Karwa(I.T.A.No. 47 / 2014,decided on 19/12/2014) and it has been argued thatsubstantial questions of law arise in the present appeal and,therefore, the appeal should be admitted. Learned counsel for the respondent Department hasvehemently opposed the prayer made by the petitioner and ithas been argued that the assessee has not borrowed themoney from investing into the business of shares and he wascarrying out regular business of trading of shares. He has notkept designated employees / portfolio managers to take careof investment and as there were huge number of transactionsof regular purchase / sale of equity shares of various listedCompanies which were carried out by the assessee and theassessee has earned income from futures and optiontransaction of equity shares, the same has to be assessed asbusiness of share trading. He has also argued that thefrequency of transactions carried out during the year showsthat approximately 288 transactions took place for thepurchase of equity shares through out the year and about162 transactions of sale have been entered with various --- 6 --- share brokers including Arihant Capital; JM Finance P. Ltd.,etc., and in those circumstances the assessee has entered intomultiple transactions for various listed Companies and inthose circumstances it was a regular feature of the assesseeto trade in shares to obtain short term gain and, therefore,short term gain has rightly been included as businessadventure and had rightly been included in the income of theassessee. It has been argued that the Assessing Officer andthe Tribunal were justified in treating the income arrived atfrom the short term gain as income keeping in view theintention behind the gain and intention behind the sale. Ithas been stated that no question of law arise in the presentappeal and as no question of law arise, the appeal deservesto be dismissed. It has been further argued that only because theappellate authority, in case some other assessment order hasgranted relief, it does not mean that the assessee can escapefrom paying income tax for the financial year which issubject matter of the present appeal and the orders passed bythe Commissioner (Appeals) are not at all binding upon the Income Tax Appellate Tribunal. Learned counsel for the respondent – Department hasplaced reliance upon the following judgments : 1.Manoj Kumar Samdaria Vs. Commissioner of IncomeTax-I reported in MANU/DE/1115/2014; 2.P.V.S.Raju Vs. The Addl. Commissioner of IncomeTaxreported in MANU/AP/457/2011; 3.Commissioner of Income Tax (Central) Calcutta Vs.Associated Industrial Development Co. P. Ltd., reported inMANU/SC/0268/1971; 4.P. M. Mohammad Meerakhan Vs. Commissioner ofIncome Tax, Kerala reported in MANU/SC/0227/1969; 5.Khan Bahadur Ahmed Alladin & Sons Vs.Commissioner of Income Tax, Andhra Pradesh reported inMANU/SC/0161/1967; Income Tax Appellate Tribunal. Learned counsel for the respondent – Department hasplaced reliance upon the following judgments : 1.Manoj Kumar Samdaria Vs. Commissioner of IncomeTax-I reported in MANU/DE/1115/2014; 2.P.V.S.Raju Vs. The Addl. Commissioner of IncomeTaxreported in MANU/AP/457/2011; 3.Commissioner of Income Tax (Central) Calcutta Vs.Associated Industrial Development Co. P. Ltd., reported inMANU/SC/0268/1971; 4.P. M. Mohammad Meerakhan Vs. Commissioner ofIncome Tax, Kerala reported in MANU/SC/0227/1969; 5.Khan Bahadur Ahmed Alladin & Sons Vs.Commissioner of Income Tax, Andhra Pradesh reported inMANU/SC/0161/1967; 6.G. Venkataswami Naidu & Co. Vs. The Commissionerof Income Tax reported in MANU/SC/0065/1958;of Income Tax reported in MANU/SC/0065/1958; 7.Municipal Corporation of City of Thane Vs. VidyutMetallics Ltd., and ors., reported in MANU/SC/7899/2007;and,Metallics Ltd., and ors., reported in MANU/SC/7899/2007;and, --- 8 --- 8.Premji Bhimji Vs. Commissioner of Income Taxreported in MANU/WB/0144/1970 Heard learned counsel for the parties at length andperused the record. The undisputed facts of the case reveal that for theassessment year 2008-09, the assessee has filed a return ofincome on 29/5/2008 declaring total income ofRs.3,14,17,278/- which included income from his Eyeprofession as a Surgeon, long term capital gain derived as aresult of capital equity as also the short term capital ofRs.1,18,57,282/- derived as a result of purchase and sale ofshares. The case of the assessee was selected for scrutinyand an order was passed u/S. 143(3) on 21/12/2010. TheAssessing Officer while passing an order accepted theassessed long term capital gain derived as a result of sale ofshares but treated the short term capital gain derived frompurchase and sale of shares as income from business only.The assessing officer levied tax @ 30% on such incomeagainst 10% leviable on short term gain and the same hasresulted in additional demand of Rs.37,33,743/-. Against the order dated 21/12/2010 an appeal was preferred and thesame was allowed against which the Department haspreferred an appeal and the appeal preferred by theDepartment has been allowed by the Income Tax AppellateTribunal. The order passed by the Income Tax AppellateTribunal, in paragraphs 10, 12, 16, 17, 18 and 19 reads asunder: 12. It is an established fact that the issue relating totaxability of gain/loss from purchase/sale of equityshares is purely a matter of fact and the treatment ofsuch gain/loss can be decided only on the basis of thefacts of the particular assessee. Though the Ld. Counselfor the assessee has relied on many judgments but in ourhumble view the decision cannot be applied squrely onthe facts of the Rajeev Choudhary ITANos.293/Ind/2012& C.O.No.65/Ind/2012 assessee.Though the facts before the Hon'ble High Court ofBombay in the case of ITO vs. Gopal Purohit are similarto a considerable extent but the view cannot be appliedon the facts of the assessee because it does not fulfill therule of consistency. In the case of assessee in thepreceding year there was meager income from purchaseand sale of equity shares which considerably increasedfrom year to year with the fact that the assessee also startshare trading business as well as trading of future &options (F&O). For this very reason the rule ofconsistency cannot be applied. Even otherwise the caseof assessee was never subject to scrutiny for examiningthis issue of purchase and sale of shares and it was onlyfor A.Y. 2004-05 that the case was reopened and theassessing officer therein has decided that the gain frompurchase and sale of shares held for less then one year isto be taxed as business income. Therefore, we areinclined to adjudicate the issue raised before us by the Revenue purely on the basis of the following facts of theinstant appeal emerging from perusal of the records:- a.Paper book page 117 reveals that the assessee soldsecurities worth Rs. 12,41,10,593/- and claimeddeduction for purchase valuing at Rs.11,17,26,044/- andcost of transfer at Rs.5,27,267/-. b. In the audited profitand loss account appearing at page 50 of the paper bookdated 23.05.2018, equity shares held as on 1st April,2007 have been shown under the head opening stockalong with purchase of Rs.12,02,54,265/-, sales atRs.14,20,85990/- and Rajeev Choudhary ITANos.293/Ind/2012& C.O.No.65/Ind/2012 closing stockat Rs.3,99,59,591/-. c. On the income side of the profitand loss account along with opening stock, purchasessales and closing stock of equity shares, income fromdividend, assessee has also shown profit from sharetrading byway of profit and loss from future & option (F& O) transactions, Profit and loss account JMMSFS Ltd.F & O, shown under the head share trading, profit/loss.It shows that the assessee is suo moto accepting thatregular business transactions of share trading are carriedout by him. d. The profit and loss account has beenaudited by Chartered Accountant firm in order to certifythe transactions shown under the head opening stock,purchase direct expenses, indirect income, share tradingprofit, F & O profit and closing stock. e. Moving on tothe frequency of transactions carried out during the yearledger account of investment in shares purchases placedat pages 24 to 39 of the paper book dated 23.05.2018shows that approx. 288 transactions took place for thepurchase of equity shares which have been carried outthroughout year. Similarly, around 162 transactions forsales have been entered with various share brokersincluding Arihant Capital Market Ltd., J.M. Finance P.Ltd. etc. Undisputedly the assessee had entered intomultiple transactions for various listed companieshowever in the case of BOC India Ltd. around 70transactions of sales took place during the year and theassessee purchased 1,07,640 equity share valuing atRajeevChoudharyITANos.293/Ind/2012&C.O.No.65/Ind/2012 Rs.1,58,73,054/- and sold theequity shares of the same quantity. In the case of EscortsLtd. 253934 equity shares were purchased and soldduring the year on 52 occasions. In case of Fortis HealthCare Ltd. 1,88,690 equity shares were purchased and --- 11 --- sold scattered over on 31 transactions. 16. Frequency of transactions also plays vital role inexamining taxability of such transactions. Though it ispleaded that the assessee is a very busy Doctor engagedin the professional work but what transpires from therecords is that the assessee is devoting his time andknowledge for regular purchase and sale of equity sharesround the year. Even otherwise there is no Estoppel bylaw on the Rajeev Choudhary ITA Nos.293/Ind/2012&C.O.No.65/Ind/2012 1 assessee to carry more than onebusiness or profession. There are innumerable instanceswhere a particular individual carries on multiplebusinesses from multiple locations then why cannot theassessee. 17. There seems to be a consistent touch of assesseewith the equity market as frequent transactions ofpurchase and sale of the same script are done during theyear which normally is not a practice of an investorbecause the investor usually invests and then wait forconsiderable time and the reason for such waiting is thatthe investor who is normally engaged in other businessor profession make such investments to fetch someincome without investing much time on trading suchinvestments on regular basis. For this reason theinvestors invests the money in fixed deposits PublicProvident funds as well as equity shares and otherinvestments options. 17. There seems to be a consistent touch of assesseewith the equity market as frequent transactions ofpurchase and sale of the same script are done during theyear which normally is not a practice of an investorbecause the investor usually invests and then wait forconsiderable time and the reason for such waiting is thatthe investor who is normally engaged in other businessor profession make such investments to fetch someincome without investing much time on trading suchinvestments on regular basis. For this reason theinvestors invests the money in fixed deposits PublicProvident funds as well as equity shares and otherinvestments options. 18. But the situation in the case of assessee seems to bedifferent because assessee is keeping continuous watchon the share market. He selects various scripts forregular purchase and sale and he is also engaged in thefuture and option market. Hundreds of transactions havebeen entered with the same brokers for purchase/sale.No separate demat account have been kept by theassessee relating to the alleged investment in equityshares and profit and sale from share trading and futureand option. In these given facts it is hard to believe thatsuch gain from such magnitude Rajeev Choudhary ITANos.293/Ind/2012& C.O.No.65/Ind/2012 2 oftransactions can be taxed under the head of short termcapital gain. 19. Ld. AO was fair enough to give the benefit ofexemption for the long term capital gain but as regardsthe alleged income of Rs.1,18,57,282/-, we find merit inthe finding of Ld. AO and are inclined to hold that thealleged income of Rs.1,18,57,282/- is purely incomefrom business from purchase/sale of shares andtherefore, is to be taxed as a business income. We,therefore, allow the grounds raised by the revenue anddismiss the ground no.1 raised in the cross objectionfiled by the assessee. The Tribunal, thus, keeping in view the number offrequency of transaction has rightly arrived at a conclusionthat the Assessing Officer was justified in giving the benefitof exemption for long term capital gain and was alsojustified in treating the income as business income in respectof purchase / sale of shares (short term gain). The aforesaidfindings of the Assessing Officer which have been affirmedby the Income Tax Appellate Tribunal are purely thefindings of facts. Learned counsel for the appellant placed reliance uponthe judgment delivered in the case of Hiren M. Shah(supra)and the facts of the case are distinguishable especiallykeeping in view the frequency of the transactions in respectof the short term gain as it was certainly a businessadventure on the part of the assessee. --- 13 --- In the case of Gopal Purohit(supra), the frequency ofpurchase of share has not at all been considered. Similarly,in the case of Om Prakash Suri(supra) and in the case ofAnoop Karwa(supra), decided by this Court, similar issuewas not at all involved. The findings of fact in respect of thenumerous transactions have not been touched in any of thejudgment relied upon by the learned senior counsel for theappellant and, therefore, the judgment relied upon by thelearned counsel for the petitioner are of no help to thepetitioner. On the other hand, learned counsel for the respondent– Department has placed reliance upon the judgmentdelivered in the case of Manoj Kumar Samdaria Vs.Commissioner of Income Tax-I reported in MANU/DE/1115/2014;P.V.S.Raju Vs. The Addl. Commissioner ofIncome Taxreported in MANU / AP / 457 / 2011;Commissioner of Income Tax (Central) Calcutta Vs.Associated Industrial Development Co. P. Ltd., reported inMANU/SC/0268/1971;P. M. Mohammad Meerakhan Vs.Commissioner of Income Tax, Kerala reported in --- 14 --- On the other hand, learned counsel for the respondent– Department has placed reliance upon the judgmentdelivered in the case of Manoj Kumar Samdaria Vs.Commissioner of Income Tax-I reported in MANU/DE/1115/2014;P.V.S.Raju Vs. The Addl. Commissioner ofIncome Taxreported in MANU / AP / 457 / 2011;Commissioner of Income Tax (Central) Calcutta Vs.Associated Industrial Development Co. P. Ltd., reported inMANU/SC/0268/1971;P. M. Mohammad Meerakhan Vs.Commissioner of Income Tax, Kerala reported in --- 14 --- MANU/SC/0227/1969;Khan Bahadur Ahmed Alladin &Sons Vs. Commissioner of Income Tax, Andhra Pradeshreported in MANU/SC/0161/1967;G. Venkataswami Naidu& Co. Vs. The Commissioner of Income Tax reported inMANU/SC/0065/1958;Municipal Corporation of City ofThane Vs. Vidyut Metallics Ltd., and ors., reported inMANU/SC/7899/2007;and, Premji Bhimji Vs.Commissioner of Income Taxreported inMANU/WB/0144/1970. This Court has carefully gone through the aforesaidjudgments and is of the considered opinion that nosubstantial question of law arises in the present appeal. Thefrequency of transaction carried out during the year showsthat approximately 288 transactions took place for thepurchase of equity shares through out the year and about162 transactions of sale have been entered with variousshare brokers including Arihant Capital; JM Finance P. Ltd.,etc., and, therefore, as the assessee has entered into multipletransactions for various listed Companies, it was a regularfeature of the assessee to trade in shares to obtain short term KR --- 15 --- gain and, therefore, the short term gain has rightly beenincluded as business adventure and has rightly beenincluded in the income of the assessee. It is purely a findingof fact arrived at by the Assessing Officer as well as by theIncome Tax Appellate Tribunal. No substantial question of law arises in the present appeal. Accordingly, the admission is declined. (S. C. SHARMA)(VIRENDER SINGH)J U D G EJ U D G E Digitally signed by Kamal Rathor Date: 2019.09.19 12:37:57 +05'30'