TaxTMI 
TaxTMI 
2011 (11) TMI 499
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....g shares since Assessment Year 2002-03. The assessee has admitted short term capital gain on sale of shares since beginning i.e. Assessment Year 2002-03 and the same was accepted by the department except for the two AYs under consideration. The Assessing Officer was of the view that the assessee was involved in the business of share trading since the assessee has done the purchase and sale of shares in a large scale at high frequency and period of holding is also not very long. Accordingly, the Assessing Officer held that the income shown by the assessee under the head 'short term capital gain' is taxed as business income. 4.1 On appeal, the CIT(A) confirmed the action of the assessee for the Assessment Year 2005-06 but allowed the claim of the assessee for the Assessment Year 2006-07. Hence, both assessee for Assessment Year 2005-06 and the revenue for Assessment Year 2006-07 filed the respective appeals. 4.2 Before us, the ld AR of the assessee has submitted that the Assessing Officer has accepted long term capital gains for the Assessment Year 2005-06 but treated the short term capital gains as business income. He has further submitted that long term capital gains was accepted....
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....ion for taxing the capital gains w.e.f 1.10.1994, the Assessing Officer has treated the short term capital gains for asst years 2005-06 and 2006-07 as business income, though he has accepted the long term capital gains as exempt as per the amended provisions. Further, for the Assessment Year 2008-00, while passing the order u/s 143(3), the Assessing Officer has accepted the short term capital gain. He has relied upon the following decisions of the Tribunal in the following cases: (i) CIT v. Naishad V. Vachharajani [IT Appeal No 6429/M/2009] (ii) CIT v. SMK Shares & Stock Broking [No. 799/M/2009] (iii) Nahal V Shah v. ACIT [No. 2733/MUM/2009] (iv) Vinod K. Nevatia v. Asstt. CIT [IT Appeal No. 6556/Mum/2009, dated 3-12-2010] 4.4 On the other hand, the ld DR has submitted that the assessee was doing regular and systematic transactions. Each year is a separate unit and principle of res judicata is not applicable in the matter of income tax. The ld DR has submitted that there was only one transaction of long term capital gain. He has submitted that excluding a few transactions, the maximum period for which the shares were held was a period of about thr....
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....CIT(A) is that for the AY 2005-06, the claim of the assessee was rejected because the decision in the case of Gopal Purohit (supra) was not available at that point of time. Undisputedly, the claim of short term capital gain was accepted by the Assessing Officer for the AYs 2003-04, 2004-05 before disallowing the same for the AY 2005-06 and 2006-07. Further, the claim of the assessee has been allowed for the AY 2008-09. Though the principle of res judicata is not applicable in tax matter; however, when the Assessing Officer has not pointed out any material change or diversion in the activity of the assessee then, the rule of consistency demands that the Assessing Officer can't take a different view in selective assessment year. Once the Assessing Officer accepted the transaction as investment in the earlier year and also in the subsequent years, then, in the absence of any glaring material change in the facts and circumstances, the Assessing Officer ought to have maintained the consistent view on the issue. In the case of Gopal Purohit (supra), the Hon'ble Jurisdictional High Court while upholding the decision of the Tribunal has observed as under: "2. The Tribunal has entered a pu....
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....e deserves to be decided on the basis of rule of constancy in favour of the assessee and against the revenue. 6. On merit, both the parties placed reliance on a series of decisions; but the issue of capital gain or business income has to be decided on the basis of the facts of each case. Therefore, the rule of precedent is not much helpful in such cases though it provides significant guiding principle. The revenue has also recognized those guiding principle and criteria as the CBDT has issued circular dated 15.6.2007. 7. In the case in hand, the comparative details of funds, investment, capital gain and dividend income as given at page 25 of the paper book are as under: Asst. Year Capital Share Investment Govt. of India Bonds Bank Fixed Deposits Capital Gain Dividend 2002-03 32,894,080 1,148,910 9,500,000 31,332,413 - 5,190 2003-04 31,374,229 13,848,881 9,700,000 - 193,964 (Short Term) 475,169 2004-05 55,180,315 30,589,345 9,700,000 - 1,786,666 (Short Term) 27,585,285 2005-06 72,128,377 35,766,812 24,700,000 - 20,406,277 1,081,261 (Short Term) (Long Term) 1,322,754 7.1 It is clear from the above details that the assessee wa....
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....y also considering the CBDT Circular No. 4 of 2007, has thus, summarized the principles. If the facts of the appellant's case are examined, 1 find that the appellant has been giving the treatment to the purchase of shares in its books of account by reflecting it as investments and not stock in trade. The appellant is found having not borrowed any money to purchase shares and paid any interest thereon. Further, the holding of the shares by the appellant as compared to the transaction is also found to be high as the investment in shares on the year ending 31-03-06 was at Rs. 8,81,63,005/-, as on 31-03-05 it was at Rs. 3,57,66,812/- and as on 31-03-04 it was at Rs. 3,05,89,345/- as compared to the transaction of shares of Rs. 4,42,97,510/-, Rs. 2,94,87,538/-and Rs. 17,86,666/- respectively. The appellant also is found having enjoyed dividend income and not merely earned profit and gains on sale and purchase of shares. As already held, the shares in question have consistently been shown as investment and valued at cost and not at cost or market value or any realizable value, whichever is less. Moreover, the Assessing Officer himself in his order has admitted that 62% of shares had been....