CIT Vs. Gopal Purohit – (Supreme Court) – The Supreme Court vide order dated 15.11.2010 dismissed the Department’s Special Leave Petition against the judgment of the Bombay High Court in CIT vs. Gopal Purohit 228 CTR 582 (Bom).
In an appeal u/s. 260A of the Income-tax Act, 1961 by the Revenue before the Bombay High Court, the following two queries were raised:
“a) Whether, on the facts and circumstances of the case and in law, the Hon’ble ITAT was justified in treating the income from sale of 7,59,003 shares for Rs. 5,00,12,879/- as an income from short-term capital gain, and the sale of 3,88,797 shares for Rs. 6,65,02,340/- as long-term capital gain, as against the “Income from business” assessed by the A.O.
b) Whether, on the facts and circumstances of the case and in law, the Hon’ble ITAT was justified in holding that the principles of consistency must be applied here as the authorities did not treat the assessee as a share trader in preceding year, in spite of existence of a similar transaction, which cannot in any way operate as res judica to preclude the authorities from holding such transactions as business activities in current year
The Bombay High Court held as here under:
“i) The Tribunal has achieved 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 purpose of business. The tribunal has correctly applied the principle of law in accepting the position that it is open to an assessee maintaining two separate portfolios: one relating to investment in shares and another relating to business activities involving dealing in shares. The tribunal held that delivery based transactions in the present case should be treated as those in the nature of investment transactions, and the profit received thereof should be treated either as short-term or, as the case may be, long-term capital gain, depending on the period of holding. A finding of fact has been arrived at by the Tribunal as regards the existence of two distinct types of transactions, namely, those by way of investment on the one hand, and those for the purposes of business on the other hand. Query (a) above, does not raise any substantial question of law.
ii) In so far as query (b) is concerned, the Tribunal has observed in paragraph 8.1 of its judgment that the assessee has followed a consistent practice with 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. Query (b), therefore, does not also raise any substantial question.”
FULL TEXT OF THE SUPREME COURT JUDGEMENT IS FOLLOWS
SUPREME COURT OF INDIA
RECORD OF PROCEEDINGS
Petition(s) for Special Leave to Appeal (Civil)…… /2010
(From the judgement and order dated 06/01/2010 in ITA No. 1121/2009 of The HIGH COURT OF BOMBAY)
GOPAL PUROHIT Respondent(s)
(With appln(s) for c/delay in filing SLP)
Date: 15/11/2010 This Petition was called on for hearing today.
HONORABLE THE CHIEF JUSTICE
HONORABLE MR. JUSTICE K.S. PANICKER RADHAKRISHNAN HONORABLE MR. JUSTICE SWATANTER KUMAR
For Petitioner(s) Mr. Goolam E. Vahanvati,AG. Mr. Deva Datt Kamat,Adv. Mr. Anoopam N. Prasad,Adv. Mr. B.V. Balaram Das,Adv.
UPON hearing counsel the Court made the following
O R D E R
Heard learned counsel for the petitioner. Delay condoned.
The special leave petition is dismissed.
[ T.I. Rajput ] [ Madhu Saxena ]
A.R.-cum-P.S. Assistant Registrar