NEETA HARESH DADIA, MUMBAI V. ACIT CEN CIR-3, MUMBAI

ITA 1070/MUM/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 55285 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 08-09-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 17-02-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: NATASHA MANGAT
• Keywords: Unexplained cash credit; Capital asset; Business income; Search and seizure; Share purchase agreement; Question of law; Corroborative evidences; Retraction
• Section: 54F; 234B; 205; 131; 132; 68

Judgement Text

1 ITA NO.483/MUM/2009 (AY 2004-05) ITA NO. 1069/MUM/29 (AY 2005-06) & ITA NO. 1070/MUM/2009 (AY 2006-07 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI B BENCH MUMBAI BENCHES, MUMBAI BEFORE SHRI R S SYAL, AM & SHRI VIJAY PAL RAO, JM ITA NO.483/MUM/2009 (AY 2004-05) ITA NO. 1069/MUM/2009 (AY 2005-06) & ITA NO. 1070/MUM/2009 (AY 2006-07 MRS NEETA HARESH DAIDA 401 MEET APARTMENTS KHOKANI LANE GHATKOPAR (E) MUMBAI 77 VS THE ASST COMMR OF INCOME TAX CEN.CIR 3 MUMBAI (APPELLANT) (RESPONDENT) PAN NO. AACPD0683J ASSESSEE BY MS NATASHA MANGAT REVENUE BY S MT REENA HA TRIPATHI DT.OF HEARING 8 TH SEPT 2011 DT OF PRONOUNCEMENT 16 TH , SEPT 2011 PER VIJAY PAL RAO, JM THESE APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST THREE SEPARATE ORDERS DATED 19.11.2008, 11,12.2008 AND 24.12.2008 OF THE CIT(A) FOR THE AYS 2004-05, 2005-06 AND 2006-07 RESPECTIVELY. 2 THE ASSESSEE HAS RAISED VARIOUS GROUNDS IN THESE APPEALS; HOWEVER, THE GROUNDS RAISED FOR THE AY 2004-05 AND 2006-07 ARE COMMON TO THE RESPECTIVE GROUNDS OF AY 2005-06; THEREFORE, SOME OF THE GROUN DS RAISED IN THE AY 2005-06 INCLUDES THE GROUND RAISED IN THE AY 2004-05 AND 20 06-07; THE GROUNDS RAISED IN THE AY 2005-06 ARE AS UNDER: 2 ITA NO.483/MUM/2009 (AY 2004-05) ITA NO. 1069/MUM/29 (AY 2005-06) & ITA NO. 1070/MUM/2009 (AY 2006-07 I)ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS. 91,56,485/- MADE U/S 68 OF THE ACT BY THE LD ASSESSING OFFICER ON ACCOUNT OF SALE PROCEEDS RECEI VED BY THE APPELLANT ON SALE OF SHARE IN BOLTON PROPERTIES LTD (BOLTON) HOLDING THE SAME TO BE UNEXPLAINED CASH CREDIT INSTEAD OF LONG TERM CAPITAL GAINS DECLARED BY THE APPELLANT. II) ON THE FACT AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS. 24,92,823/- MADE U/S 68 OF THE ACT BY THE LD ASSESSING OFFICER ON ACCOUNT OF SALE PROCEEDS RECEI VED BY THE APPELLANT ON SALE OF SHARES IN FAST TRACK LTD (FTL) HOLDING THE SAME TO BE UNEXPLAINED CASH CREDIT INSTEAD OF LONG TERM CAPITAL GAINS DECLARED BY THE APPELLAN T. III) ON THE FACT AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD CIT(A) ERRED IN HOLDING THE TRANSACTIONS OF SALE OF SHARES IN BOLTON AND FTL AS STAGE-MANAGED AND MANIPULATED, WHICH FINDING IS CONTRARY TO THE D OCUMENTARY EVIDENCE ON RECORD AND IS BASED ON MERE SUSPICION, SURMISES AND CONJEC TURES AND IS WITHOUT ANY SUPPORTING EVIDENCE. IV) ON THE FACT AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD CIT(A) ALSO ERRED IN RELYING ON THE ADMISSION OF ANOTHER ASSESSEE TO THE EFFECT THAT HIS TRANSACTIONS IN THESE SHARES WERE NOT GENUINE, WITH OUT APPRECIATING THAT THE LD ASSESSING OFFICER DID NOT PROVIDE THE APPELLANT ANY MATERIAL IN THAT REGARD, NOR ANY OPPORTUNITY TO CROSS EXAMINE THE SAID ASSESSEE V) ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) ERRED IN RELYING ON THE APPELLANT HUSBANDS STATEM ENT RECORDED AT THE TIME OF SEARCH MAKING AN OFFER TO DECLARE UNDISCLOSED INCO ME IN RESPECT OF THE ABOVE TRANSACTIONS, WITHOUT APPRECIATING THAT THE SAME WA S DULY RETRACTED BY HIM BY SUBMITTING A SWORN AFFIDAVIT, EXPLAINING THE FACTS AND CIRCUMSTANCES FOR SUCH RETRACTION. IN VIEW OF THE ABOVE, THE APPELLANT PRA YS THAT THE ADDITION OF RS. 91,56,485/- AND RS. 24,92,823/- MADE U/S 68 OF THE ACT BE DELETED AND THE PROFIT OF THE ABOVE TRANSACTIONS BE CONSIDERED AS LONG TERM C APITAL GAIN. VI) ON THE FACT AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD CIT(A) ERRED IN CONFIRMING THE ASSESSMENT OF CAPITAL GAIN S ON SALE OF SHARES ( OTHER THAN SHARES IN BOLTON AND FTL) AS BUSINESS INCOME, WITHO UT APPRECIATING THAT THE APPELLANT IS ONLY AN INVESTOR AND NOT A TRADER IN SHARES. IN VIEW OF THE ABOVE, THE APPELLANT PRAYS THAT THE PROFIT ON SALE OF SHARES BE ASSESSE D UNDER THE HEAD CAPITAL AND NOT AS BUSINESS INCOME. VII) ON THE FACT AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD CIT(A) ERRED IN CONFIRMING THE DENIAL OF EXEMPTIONS U/S 1 0(38) AND U/S 54EC OF THE ACT CLAIMED BY THE APPELLANT IN RESPECT OF THE LONG TER M CAPITAL GAINS THAT AROSE ON SALE OF SHARES INCLUDING THOSE IN BOLTON AND FTL. IN VIE W OF THE ABOVE, THE APPELLANT PRAYS THAT EXEMPTION U/S 10(38) AND U/S 54EC OF THE ACT B E ALLOWED TO THE APPELLANT IN RESPECT OF LONG TERM CAPITAL GAINS ON SALE OF SHARE S INCLUDING THOSE IN BOLTON AND FTL. VIII) ON THE FACT AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD CIT(A) ERRED IN CONFIRMING THE LEVY OF INTEREST U/S 234B F OR WHICH NO SPECIFIC DIRECTION WAS GIVEN BY THE LD ASSESSING OFFICER IN THE BODY OF TH E ASSESSMENT ORDER. IN VIEW OF THE ABOVE, THE APPELLANT PRAYS THAT THE LEVY OF INTERES T U/S 234B B CANCELLED. 3 ITA NO.483/MUM/2009 (AY 2004-05) ITA NO. 1069/MUM/29 (AY 2005-06) & ITA NO. 1070/MUM/2009 (AY 2006-07 3 WE HAVE HEARD THE LD AR OF THE ASSESSEE AS WELL A S THE LD DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET, W E FIND THAT ALL THE ISSUES RAISED IN THESE APPEALS OF THE ASSESSEE ARE CONSIDERED AND D ECIDED BY THE TRIBUNAL IN THE CASE OF THE HUSBAND OF THE ASSESSEE SHRI HARESH P DADIA IN ITA NO 484,1067 AND 1194/MUM/2009 FOR AY 2004-05 TO 2006-07 VIDE ORDER DATED 15.6.2011. WE FURTHER NOTE THAT THE APPEALS OF THE ASSESSEE AS WELL AS IN THE CASE OF THE ASSESSES HUSBAND HAVE ARISEN FROM THE SAME SEARCH AND SEIZURE ACTION U/S 132 DATED 24.3.2006. THE CIT(A) HAS ALSO DECIDED THE APPEALS OF THE ASSESSEE BY FOLLOWING THE ORDER IN THE CASE OF ASSESSEES HUSBAND SHRI HARESH P DADIA (SUP RA) AS EVIDENT FROM PARA 2.1 OF THE IMPUGNED ORDER. THUS, IT IS CLEAR THAT THE FAC TS AND THE ISSUES INVOLVED IN THE CASE OF THE ASSESSEE ARE IDENTICAL TO THAT OF THE C ASE OF THE ASSESSEES HUSBAND SHRI HARESH P DAIDA. 4 THE COORDINATE BENCH OF THE TRIBUNAL HAD ADJUDICA TED THE ISSUES IN CASE OF THE ASSESSEES HUSBAND SHRI HARESH P DAIA IN PARAS 19 TO 27 OF ITS ORDER AS UNDER. 19. RIVAL CONTENTIONS WERE HEARD. ON A CAREFUL CONS IDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND ON PERUSAL OF THE PAP ERS ON RECORD, AS WELL AS THE CASE LAWS CITED BEFORE US, WE HOLD AS FOLLOWS:- (I) THE FIRST ISSUE (IN ASSESSMENT YEAR 2004-05 G ROUNDS NO.1 TO 4) THAT COMES UP FOR OUR ADJUDICATION IS, WHETHER THE ASSES SING OFFICER WAS CORRECT IN RELYING ON THE RETRACTED STATEMENT MADE BY THE ASSE SSEE. ON THE DATE OF SEARCH, THE ASSESSEE, IN REPLY TO QUESTION NO.23, S TATES AS FOLLOWS:- Q.23 SINCE YOU HAVE CLAIMED LONG TERM CAPITAL GAIN ON SALE OF SHARES OF BOLTON PROPERTIES LTD., AND FAST TRACK LTD., IT IS YOUR OB LIGATION TO PROVE GENUINENESS OF THE TRANSACTION BY PROVIDING THE DETAILS OF MR. PRAKASH NAHATA AND PRODUCING HIM FOR CROSS-VERIFICATION. PLEASE STATE WHEN YOU WOULD BE ABLE TO PRODUCE MR. PRAKASH NAHATA TO PROVE THE GENUINENESS OF THE TRANSACTION OF BOLTON PROPERTIES LTD., AND FAST TRACK LTD. ANS. AS I WOULD NOT BE ABLE TO PRODUCE MR. PRAKASH NAHATA FOR VERIFICATION AND SUBSTANTIATE MY CLAIM FOR LONG TERM CAPITAL GAIN ON SALE OF SHARES OF BOLTON PROPERTIES LTD., AND FAST TRACK LTD., I OFFER THE SALE PROCEED S OF THESE TWO SHARES AS UNDISCLOSED INCOME. I UNDERTAKE TO FURNISH DETAILED WORKING OF UNDISCLOSED INCOME BY 31 ST MARCH 2006. I HAVE ALSO CONSULTED MY BROTHER MR. UPENDRA DADIA WHO IS SITTING BESIDE ME. 4 ITA NO.483/MUM/2009 (AY 2004-05) ITA NO. 1069/MUM/29 (AY 2005-06) & ITA NO. 1070/MUM/2009 (AY 2006-07 (II) A PLAIN READING OF THE ABOVE SHOWS THAT THE DI SCLOSURE WAS MADE NOT BECAUSE THE ASSESSEE AGREED THAT THIS IS A NON-GENU INE TRANSACTION BUT BECAUSE HE HAD DIFFICULTY IN PRODUCING MR. PRAKASH NAHATA. THE PURCHASE OF SHARES, IN THIS CASE, WAS NOT THROUGH MR. PRAKASH N AHATA, BUT WAS THROUGH M/S. BUBNA STOCK BROKER SERVICES LTD. ONLY SALE WAS THROUGH MR. PRAKASH NAHATA. THERE ARE NO TRANSACTION THIS YEAR IN PURCH ASE AND SALE OF SHARES OF FAST TRACK LTD. BUT A DISCLOSURE IS MADE ON THE SAM E. IN OUR VIEW, THERE IS SHRI HARESH P. DADIA A.YS 04-05, 05-06 & 06-07 NO ADMISSION OF UNDISCLOSED INCOME. IN AN AFFIDAVIT SWORN ON 27 TH APRIL 2006, THE ASSESSEE STATES AS FOLLOWS:- 2) THE SEARCH STARTED AT 8.30AM ON 24 TH MARCH 2006, IN THE MORNING AND CONTINUED UPTO 7.30PM OF 25 TH MARCH 2006. THE STATEMENT UNDER SECTION 132(4) WAS RECORDED VERY LATE IN THE NIGHT. TO THE BEST OF OUR MEMORY, THE FINAL REPLY WAS RECORDED AT ABOUT EARLY MORNING 3.00 AM OF THE 25.3.2006. DUE TO SUCH ODD TIMING OF RECORDING OF THE STATEMENT WE WERE TOTALLY EXHAUSTED. I DID NOT REME MBER AS TO WHAT WAS RECORDED IN THE STATEMENT. 3) VIDE LETTER DATED 28.3.2006, WE APPLIED FOR A CO PY OF THE SAID STATEMENT. TILL DATE THE COPY IS NOT GIVEN. 4) ON 3.5.2006, I WAS ALLOWED TO SEE THE STATEMENTS IN THE PRESENCE OF MY C.A. IT WAS SEEN THAT AT THE TIME OF CONCLUSION (AT ABOUT 3.00P M), I HAD STATED THAT I WILL NOT BE ABLE TO PRODUCE MR. PRAKASH FOR VERIFICATION AND SU BSTANTIATE MY CLAIM FOR LONG TERM CAPITAL GAIN ON SALE OF SHARES OF BOLTON PROPERTIES LTD. AND FAST TRACK LTD. AND HENCE, I OFFERED THE SALE PROCEEDS OF THOSE TWO COMPANIES AS UNDISCLOSED INCOME. 5) ON SEEING THIS STATEMENT, I WAS SHOCKED AND DIST URBED. INSPITE OF THE FACT THAT ALL SUPPORTING DOCUMENTS RELATING TO THE CAPITAL GAIN W ERE FOUND AT THE TIME OF SEARCH. MY STATEMENT WAS RECORDED AS STATED ABOVE. UNDER TERRI BLE PRESSURE TO PRODUCE MR. PRAKASH IMMEDIATELY, I MUST HAVE SAID THAT I CANNOT PRODUCE MR. PRAKASH AND SUBSTANTIATE THE CLAIM. 6) MR. PRAKASH IS ONE OF THE STOCK BROKERS WHOSE FU L NAME IS MR. PRAKASH NAHATA. HE IS OPERATING FROM KOLKATA AND HAS A BRANCH IN ANDHE RI, MUMBAI, AND ALL TRANSACTIONS DONE THROUGH HIM ARE DULY AND PROPERLY EXECUTED. 7) MY DISTURBED MIND IS EVIDENT FROM MY STATEMENT I TSELF. I STATED THAT FAST TRACK LTD. IS LISTED AT KOLKATTA. IN FACT, THIS IS LISTED AT B OMBAY STOCK EXCHANGE. BUT I MIXED UP THIS WITH THE LISTING OF SHARES OF BOLTON STOCK EXC HANGE AT KOLKATA. FURTHER, SHARES OF FAST TRACK LTD. WERE NOT DEALT WITH THROUGH SHRI PR AKASH NAHATA. SIMILARLY, SHARES OF BOLTON PROPERTIES LTD. WERE NOT PURCHASED THROUGH S HRI PRAKASH NAHATA BUT WERE ONLY SOLD THROUGH HIM AND ALSO THROUGH OTHER BROKERS. AL L THESE SHOW AND PROVE ABOUT MY MENTAL TENSION AND ABSENCE OF BALANCE OF MIND AND P RESSURE THAT I HAD UNDERGONE. 8) IMMEDIATELY AFTER 3 RD MAY 2006 I.E., AFTER READING MY STATEMENT RECORDED UNDER SECTION 132(4), I WENT TO KOLKATA AND I HAVE TAKEN CONFIRMATORY PRINTOUTS OF ACCOUNT FROM BOOKS OF ACCOUNT OF MR. PRAKASH NAHATA AND ALS O CERTIFICATE OF OUR HOLDING FROM COMPANY SECRETARY OF BOLTON PROPERTIES LTD. 5 ITA NO.483/MUM/2009 (AY 2004-05) ITA NO. 1069/MUM/29 (AY 2005-06) & ITA NO. 1070/MUM/2009 (AY 2006-07 9)SINCE THE STATEMENT WAS MADE UNDER PRESSURE AND T HE FACTS ARE CRYSTAL CLEAR, MY AND MY BROTHERS FAMILY MEMBERS RETURNS ARE CORREC TLY FILED. THERE IS NO UNDISCLOSED INCOME ON SALE OF THE SHARES. SHRI HARESH P. DADIA A.YS 04-05, 05-06 & 06-07 10) I HAVE SUFFERED FROM THE DISEASE KNOWN AS GUIL LIAN BARRY SYNDROME. THIS IS A PECULIAR DISEASE WHEREIN A PERSON MOMENTARILY LOOSE S HIS MEMORY AND CONTROL OVER THE BODY. I SUFFERED FROM THIS ATTACK IN 203. I WAS HOSPITALIZED AT BOMBAY HOSPITAL. AFTER THAT ATTACK, I HAVE MIRACULOUSLY RECOVERED. B UT THE NIGHTMARE OF THAT ATTACK IS NOT FORGOTTEN. EVEN TODAY, I SUFFER FROM BLOOD PRESSURE AND WHENEVER I GET TENSION, MY HANDS AND LEGS START SHIVERING AND AT TIME MEMORY I S ALSO LOST MOMENTARILY. IN ORDER TO AVOID ANY REPEAT ATTACK, I AND ALL MY FAMILY MEM BERS TRY TO TAKE CARE TO AVOID ANY SUCH APATHY. DUE TO THIS, I HAVE BECOME FORGETFUL A ND ALWAYS TRY TO AVOID A SITUATION WHICH CAN CREATE MENTAL DISTURBANCE OR INCREASE MY BLOOD PRESSURE. MY STATEMENT TAKEN LATE IN THE NIGHT NEEDS TO BE VIEWED AND APPR ECIATED IN LIGHT OF THIS BACKGROUND AND THE SUPPORTING DOCUMENTS NEED TO BE BELIEVED AN D ACCEPTED. III) ON 3 RD JUNE 2006, THE AFFIDAVIT IS FILED WITH DDIT, UNIT-8 (INVESTIGATION), STATING THAT THE TRANSACTIONS IN QUESTION ARE GENUI NE AND THAT HE WOULD PRODUCE NECESSARY CONFIRMATIONS. REASONS WERE GIVEN AS TO WHY HE HAD TO WAIT UPTO 3 RD JUNE 2006, TO FILE THE AFFIDAVIT. HE ALSO MENTIONS THAT THE STATEMENT WAS RECORDED AT MIDNIGHT. IN OUR VIEW, EV EN IF IT IS TAKEN THAT THERE IS AN ADMISSION MADE AT THE TIME OF SEARCH, THIS IS A VALID RETRACTION. ON THE FACE OF SUCH RETRACTION, IN OUR CONSIDERED OPINION, THE ASSESSING OFFICER WAS NOT RIGHT IN RELYING SOLELY ON THE STATEMENT FOR MAKING THE ADDITION IN THIS CASE. THE JUDGMENT IN MEGHRAJ S. JAIN (SUPRA), RELIED UPON BY THE LEARNED DEPARTMENTAL REPRESENTATIVE, DOES NOT COME TO THE RESCUE OF THE REVENUE FOR THE REASON THAT THE HIGH COURT HELD THAT, A RETRACTED CONFESSI ON CAN BE ACTED UPON ONLY WHEN THERE IS CORROBORATIVE EVIDENCE GATHERED BY TH E AUTHORITIES. IN THIS CASE, THERE IS NO CORROBORATIVE EVIDENCE. THE ASSESSING O FFICER HAS NOT DONE ANY INVESTIGATION OR COLLECTED ANY EVIDENCE. ON THE OTH ER HAND, CBDT HAS, IN ITS CIRCULAR, DIRECTED THEIR OFFICERS TO BASE THEIR ASS ESSMENTS ON THE EVIDENCE COLLECTED DURING THE COURSE OF SEARCH AND DURING TH E COURSE OF ASSESSMENT PROCEEDINGS. IT WAS SPECIFICALLY DIRECTED THAT NO A DDITION SHOULD BE BASED SOLELY ON CONFESSION OR DISCLOSURES MADE AT THE TIM E OF SEARCH. THE HONBLE GUJARAT HIGH COURT IN KAILASHBEN MANHARLAL CHOKSHI (SUPRA), HAS HELD THAT A STATEMENT RECORDED AT MIDNIGHT NEED NOT BE GIVEN AN Y CREDIT AS THE PERSON MAY NOT BE IN A POSITION TO MAKE ANY CORRECT OR CON SCIOUS DISCLOSURE IN A STATEMENT, IF SUCH SHRI HARESH P. DADIA A.YS 04-05, 05-06 & 06-07 STATEMENT IS RECORDED AT SUCH ODD HOURS. IN VIEW OF THE ABOVE AN D ALSO IN VIEW OF THE FACT THAT THE ASSESSEE HAS NEVER, AT ANY GIVEN POINT OF TIME, STATED OR AGREED THAT THE PURCHASE AND SALE OF SHARES WERE NOT GENUINE, W E ARE OF THE OPINION THAT THE ASSESSING OFFICER WAS WRONG IN BASING HIS ENTIR E ASSESSMENT ORDER ON THIS ONE ANSWER GIVEN BY THE ASSESSEE AT THE TIME OF SEA RCH, THAT TOO, WITHOUT INVESTIGATION, SUBSEQUENT TO A RETRACTION. COMING T O THE VARIATION IN STATEMENT RECORDED UNDER SECTION 131 OF THE ACT DURING THE CO URSE OF ASSESSMENT PROCEEDINGS, WE DO NOT FIND ANY MERIT IN THECONCLUS IONS DRAWN BY THE ASSESSING OFFICER WHICH ARE PRESUMABLY, BASED ON TH E PURPORTED VARIATIONS IN THE REPLIES TO QUESTIONS, ESPECIALLY WHEN THE ASSES SEE HAS FURNISHED EVIDENCE TO SHOW THAT HE HAD, IN FACT, PURCHASED AND SOLD SH ARES OF M/S. BOLTEN PROPERTIES LTD. THE EVIDENCE PRODUCED ARE LISTED OU T BY THE LEARNED CIT(A) AT 6 ITA NO.483/MUM/2009 (AY 2004-05) ITA NO. 1069/MUM/29 (AY 2005-06) & ITA NO. 1070/MUM/2009 (AY 2006-07 PARA-2.1.3 / PAGE-7, WHICH IS EXTRACTED FOR READY R EFERENCE. 2.1.3 DURING THE COURSE OF POST-SEARCH INVESTIGATIONS AS ALSO DURING THE ASSESSMENT PROCEEDINGS, THE APPELLANT FURNISHED THE FOLLOWING DOCUMENTARY EVIDENCE IN SUPPORT OF THE ABOVE TRANSACTIONS, WHICH REMAINS UNCONTROVERTED._ COPIES OF THE CONTRACT NOT ES AND BILLS ISSUED BY BUBNA STOCK BROKING SERVICES LTD. FOR PURCHASE OF THE SHARES IN BOLTON (PP OF PAPER BOOK); _ COPIES OF THE CONTRACT NOTES AND BILLS ISSUED BY M/S. PRAKASH NAHATA & CO., FOR SALE OF THE SHARES IN BOLTON (PP OF PAPER BOOK); _ COPY OF DEMAT ACCOUNT FOR THE PERIOD JAN 2003 OF ICICI BANK EVIDENCING THE PURCHASE OF THE SHARES IN BOLTON (PP OF PAPER BOOK); _ COPY OF DEMAT ACCOUNT FOR THE PERIOD 1.4.2003 TO 31.3.2004 OF ICICI BANK EVIDENCING THE SALE OF THE SHARES IN BOLTON (PP OF PAPER BOOK); _ COPY OF THE BANK STATEMENT EVIDENCING THE RECEIPT OF SALE CONSIDERATION OF 25,000 SHARES IN BOLTON BY A/C PAYEE CHEQUE (PP OF PAPER BOOK); _ COPY OF THE APPELLANTS A/C WITH BUBNA STOCK BROKING SERVICES L TD. CONFIRMING THE PURCHASE OF SHARES IN BOLTON (PP OF PAPER BOOK); SHRI HARESH P. DADIA A.YS 04-05, 05-06 & 06-07 _ COPY OF THE APPELLANTS A/C WITH M/S PRAKASH NAHA TA & CO. CONFIRMING THE SALE OF SHARES IN BOLTON (PP OF PAPER BOOK); _ COPY OF THE CERTIFICATE ISSUED BY SAROJ RAY & ASSOCIATES,COMPANY SECRETARY, KOLKATA, CERTIFYING T HE HOLDING OF 25,000 SHARES IN BOLTON BY THE APPELLANT (PP OF PAPER BOOK). _ COPY OF THE APPELLANTS BALANCE SHEET AS AT 31.3.2003, SHOWING THE SHARES IN BOLTON HELD AS INVESTMENTS (PP OF PAP ER BOOK). IV) FROM THE ABOVE, IT CAN BE SEEN THAT IT WRONG ON THE PART OF THE REVENUE AUTHORITIES TO HOLD THAT THE ASSESSEE HAS PURCHASED SHARES THROUGH MR. PRAKASH NAHATA. IN FACT, THE SHARES WERE PURCHASED FROM BUBNA STOCK BROKING. THE CONTRACT NOTES AND BILLS ISSUED WERE P RODUCED BY THE ASSESSEE. EVIDENCE WAS PRODUCED THAT THE AMOUNT WAS PAID ON T HE VERY SAME DAY THROUGH CROSS CHEQUE BY PRODUCING COPIES OF THE BAN K ACCOUNT. SIMILAR EVIDENCE WAS PRODUCED THAT THE SHARES CAME INTO THE DEMAT ACCOUNT OF THE ASSESSEE. THE SHARES WERE REFLECTED AS INVESTMENTS IN THE BALANCE SHEET AND THIS IS ACCEPTED AS SUCH BY THE ASSESSING OFFICER. THE FACTUM OF PURCHASE CANNOT BE DISPUTED ON THE FACE OF THE EVIDENCES. V) CONTRACT NOTES AND BILLS ISSUED BY MR. PRAKASH N AHATA, FOR SALE OF SHARES OF M/S. BOLTEN PROPERTIES LTD. WERE PRODUCED ALONG WIT H EVIDENCE OF HAVING RECEIVED THE MONEY THROUGH BANKING CHANNELS. DEMAT ACCOUNT WAS ALSO PRODUCED IN EVIDENCE FOR SALE OF SHARES. SAROJ RAY & ASSOCIATES, COMPANY SECRETARY, KOLKATA, CERTIFIED THE HOLDING THE SHARE S OF M/S. BOLTEN PROPERTIES LTD. BY THE ASSESSEE. ON THE FACE OF THESE EVIDENCE S, IT WAS NOT PROPER ON THE PART OF THE ASSESSING OFFICER TO SIMPLY REJECT THES E EVIDENCES AND FASTEN LIABILITY ON ASSESSEE BY RELYING ON MIDNIGHT STATEM ENT TAKEN FROM THE ASSESSEE. ONCE THE ASSESSEE RETRACTED FROM THE STAT EMENT, THE ASSESSING OFFICER SHOULD HAVE INVESTIGATED AND GATHERED EVIDE NCE TO PROVE HIS ARGUMENT THAT THE TRANSACTION IS NOT A GENUINE ONE. THE ADDI TION IS MADE BY THE ASSESSING OFFICER BASED ON SURMISES AND CONJECTURES AND WITHOUT AN IOTA OF EVIDENCE. APPARENT HAS TO BE HELD AS TRUE UNLESS TH E CONTRARY IS PROVED. CONCLUSION SHOULD BE BASED ON EVIDENCE. SHRI HARESH P. DADIA A.YS 04-05, 05- 06 & 06-07 VI) SIMILAR ISSUE HAS COME UP BEFORE DIFFERENT BENC HES OF THE TRIBUNAL AND THE COURTS. HONBLE PUNJAB & HARYANA HIGH COURT IN CIT V/S ANUPAM KAPOOR, (2008) 299 CTR 179 (P&H), HELD AS FOLLOWS:- 7 ITA NO.483/MUM/2009 (AY 2004-05) ITA NO. 1069/MUM/29 (AY 2005-06) & ITA NO. 1070/MUM/2009 (AY 2006-07 HELD : THE TRIBUNAL ON THE BASIS OF THE MATERIAL O N RECORD, HELD THAT PURCHASE CONTRACT NOTE, CONTRACT NOTE FOR SALES, DISTINCTIVE NUMBERS OF SHARES PURCHASED AND SOLD, COPY OF SHARE CERTIFICATES AND THE QUOTAT ION OF SHARES ON THE DATE OF PURCHASE AND SALE WERE SUFFICIENT MATERIAL TO SHOW THAT THE TRANSACTION WAS NOT BOGUS BUT A GENUINE TRANSACTION. THE PURCHASE OF SHARES WAS MADE ON 28TH APRIL, 1993 I.E., ASST. YR. 1993-94 AND THAT ASSESSMENT WAS ACCEPTED BY THE DEPARTMENT AND THERE WAS NO CHALLENGE TO THE PURCHASE OF SHARES IN THAT YEAR . IT WAS ALSO PLACED BEFORE THE RELEVANT AO AS WELL AS BEFORE THE TRIBUN AL THAT THE SALE PROCEEDS HAVE BEEN ACCOUNTED FOR IN THE ACCOUNTS OF THE ASSESSEE AND WERE RECEIVED THROUGH ACCOUNT PAYEE CHEQUE. THE TRI BUNAL WAS RIGHT IN REJECTING THE APPEAL OF THE REVENUE BY HOLDING THAT THE ASSES SEE WAS SIMPLY A SHAREHOLDER OF THE COMPANY. HE HAD MADE INVESTMENT IN A COMPANY IN WHICH HE WAS NEITHER A DIRECTOR NOR WAS HE IN CONTROL OF THE COMPANY. THE ASSESSEE HAD TAKEN SHARES FROM THE MARKET, THE SHARES WERE LISTED AND THE TRANSACTION TOOK PLACE THROUGH A REGISTERED BROKER OF THE STOCK EXCHANGE. THERE WAS NO MATERIAL BEFORE THE AO, WHICH COULD HAVE LEAD TO A CONCLUSION THAT THE TRANSACTIO N WAS SIMPLICITIER A DEVICE TO CAMOUFLAGE ACTIVITIES, TO DEFRAUD THE REV ENUE. NO SUCH PRESUMPTION COULD BE DRAWN BY THE AO MERELY ON SURM ISES AND CONJECTURES. IN THE ABSENCE OF ANY COGENT MATERIAL IN THIS REGARD, HAVING BEEN PLACED ON RECORD, THE AO COULD NOT HAVE REOPENED THE ASSESSMENT. THE ASSESSEE HAD MADE AN INVESTMENT IN A COMPANY, EVIDENCE WHEREOF WAS WITH THE AO. THEREFORE, THE AO COULD NOT HAVE ADDED INCOME, WHICH WAS RIGHTLY DELETED BY THE CIT( A) AS WELL AS THE TRIBUNAL. IT IS SETTLED LAW THAT SUSPICION, HOWSOEV ER STRONG CANNOT TAKE THE PLACE OF LEGAL PROOF. CONSEQUENTLY, NO QUESTION OF LAW, MUCH LESS A SUBSTANTIAL QUESTION OF LAW, ARISES FOR ADJUDICATION.C. VASANT LAL & CO. VS. CIT (1962) 45 ITR 206 (SC), M.O. THOMAKUTTY VS. CIT (1958) 34 ITR 501 (KER) AND MUKAND SINGH VS. SALES TAX TRIBUNAL (1998) 107 STC 300 (PUNJAB) RELIED ON; UMACHARAN SHAW & BROS. VS. CIT (1959) 37 ITR 271 (SC) APPLIED; JASPAL SINGH VS CIT (2006) 205 CTR (P&H) 624 DISTINGUISHED. V) THE DELHI C BENCH OF THE TRIBUNAL IN ITO V/S N AVIN GUPTA, HELD THAT WHEN THE ASSESSING OFFICER HAS NOT BROUGHT ON RECORD ANY MATERIAL TO SHOW THAT THE ASSESSEE HAD SURREPTITIOUSLY INTRODUCED HIS UNACCOU NTED MONEY IN THE GUISE OF SALE PROCEEDS, SALE PROCEEDS COULD NOT BE ADDED UNDER SECTION 68 OF THE ACT AND THE ASSESSEE CANNOT BE DENIED EXEMPTION UND ER SECTION 54F. SHRI HARESH P. DADIA A.YS 04-05, 05-06 & 06-07 VI) THE AGRA BENCH OF THE TRIBUNAL IN MEMODEVI V/S ITO, 7 DTR 158, HELD AS FOLLOWS:- HELD : THE ASSESSEE SUBMITTED ALL THE EVIDENCE WHIC H WAS WITHIN HER CAPACITY AND POWER. THE BROKER HBR & CO. THROUGH WHOM THE SH ARES HAD BEEN SOLD CONFIRMED TWICEFIRST UPON REQUEST OF THE APPELLANT AND AGAIN IN RESPONSE TO THE SUMMON OF THE AOSALE OF SHARES WITH DISTINCTIVE NU MBERS AND HAVING PAID THE SALE PROCEEDS TO THE APPELLANT. DURING APPELLATE PR OCEEDINGS ASSESSEE ALSO SUBMITTED DOCUMENTS TO SHOW THAT THE COMPANY WAS A GENUINE COMPANY WITH SUBSTANTIAL CAPITAL BASE AND WAS NOT A SMALL COMPAN Y. THIS ALSO SHOWS THAT THE ASSESSEE WAS ALL THROUGH KEEN TO CO- OPERATE AND DI SCHARGE HER ONUS TO THE MAXIMUM AS COULD BE POSSIBLE WITHIN HER CAPACITY AN D POWER. THE ASSESSEE HAS NO RELATION WITH THE DIRECTORS OF THE COMPANY AND W AS IN NO WAY IN THE CAPACITY TO AFFECT THE MARKET PRICE OF THE SHARES. THE INCREASE IN SHARE PRICES BY MORE THAN 25 TIMES TOO CANNOT BE THE BASIS TO ASSUME THAT THE TRANSACTION WAS BOGUS. ABNORMAL FLUCTUATION IN SHARE PRICES IS A NORMAL PH ENOMENA. THE DEPARTMENTAL 8 ITA NO.483/MUM/2009 (AY 2004-05) ITA NO. 1069/MUM/29 (AY 2005-06) & ITA NO. 1070/MUM/2009 (AY 2006-07 ENQUIRIES IN THE CASE OF SOME OTHER PERSONS AND STA TEMENTS OF JRD OR Y & CO IN THAT ENQUIRY TOO HAVE NO BEARING ON THE ASSESSEE S CASE. THE ASSESSEE HAS NOT DEALT WITH ANY OF THEM. THE EVIDENCES SUBMITTED BY THE ASSESSEE ARE NOT PROVED TO BE BOGUS, FALSE OR INCORRECT. ASSESSEE HAS NO OT HER SOURCE OF INCOME EXCEPT RENTAL INCOME AND SHARE FROM PARTNERSHIP FIRM. THE REVENUE TOO HAS NOT BROUGHT ON RECORD ANY SOURCE FROM WHICH THE ASSESSEE COULD HAVE EARNED THIS ALLEGED UNDISCLOSED INCOME AND THERE IS NO MATERIAL ON RECO RD TO ESTABLISH OR EVEN SUGGEST THAT CASH ACTUALLY FLOWED FROM THE ASSESSEE TO PURCHASE THE DEMAND DRAFTS AS ALLEGED BY THE REVENUE. ON THE OTHER HAND THE BROKER HAS CATEGORICALLY CONFIRMED THAT HE MADE THE PAYMENT OF SALE PROCEEDS . THERE CANNOT BE ANY DISPUTE THAT THE DEPARTMENT IS FULLY EMPOWERED TO L IFT THE VEIL TO ESTABLISH THE CORRECT NATURE OF TRANSACTION, BUT THERE WAS NOTHIN G HIDDEN WHICH REQUIRED PENETRATION. FURTHER, AFTER LIFTING THE VEIL DEPART MENT S ENQUIRY SHOULD HAVE GONE TO ESTABLISH LOGICALLY, FROM THE RECORDS, THAT SALE CONSIDERATION WAS ACTUALLY THE MONEY OF THE ASSESSEE CONVERTED UNDER THE GUISE OF SHARE TRANSACTION. SIMILARLY, HERE THERE WAS NO TAX PLANNING FOR WHICH ANY COLOUR ABLE DEVICE OR COLLUSION COULD HAVE BEEN USED. IT WAS A SIMPLE TRANSACTION OF SALE OF SHARES AT THE MOST OPPORTUNE TIME WHICH PERFECTLY IS IN TUNE WITH THE HUMAN NATURE. AS A MATTER OF FACT THE ENTIRE APPROACH AND FINDINGS OF THE LOWER AUTHORITIES ARE BASED ON SUSPICION, SURMISES AND CONJECTURES AND BADLY AFFEC TED BY VARIOUS OTHER CASES, WHICH HAVE NO APPLICATION TO THE ASSESSEE S CASE. THE ACTION OF THE REVENUE AUTHORITIES IN CONCLUDING THAT THE SALE VALUE OF SH ARES IS INCOME OF THE ASSESSEE FROM UNDISCLOSED SOURCES CANNOT BE ACCEPTED. IN VIE W OF THE ABOVE, THE INCOME DECLARED BY THE ASSESSEE UNDER THE HEAD LONG-TERM C APITAL GAIN IS DIRECTED TO BE ASSESSED AS SUCH. SHRI HARESH P. DADIA A.YS 04-05, 05-06 & 06-07 VII) NAGPUR BENCH OF HON'BLE BOMBAY HIGH COURT IN C IT V/S SMT. JAMUNADEVI AGRAWAL & ORS., (2010) 46 DTR 271 (BOM.) HAS, UNDER SIMILAR CIRCUMSTANCES, UPHELD THE ORDER OF THE TRIBUNAL BY HOLDING THAT TH E ASSESSEE HAVING ESTABLISHED THE GENUINENESS OF PURCHASE AND SALE OF SHARES BY PRODUCING DOCUMENTARY EVIDENCE AND DECLARING PURCHASE AND SAL E PRICE OF SHARES IN CONFORMITY WITH THE MARKET RATES PREVAILING ON THE RESPECT DATES, THE FINDING OF THE TRIBUNAL THAT THE TRANSACTIONS WERE GENUINE, IS A FINDING OF FACT BASED ON DOCUMENTARY EVIDENCE ON RECORD. IT ALSO HELD THAT T HE FACT THAT THE ASSESSEE HAS PURCHASED AND SOLD SHARES OF SIMILAR COMPANIES THROUGH THE SAME BROKER CANNOT BE A GROUND TO HOLD THAT THE TRANSACTIONS AR E SHAM AND BOGUS ESPECIALLY WHEN DOCUMENTARY EVIDENCE WAS PRODUCED T O ESTABLISH THE GENUINENESS OF THE CLAIM. THEY HELD THAT RELIANCE P LACED BY THE REVENUE IN THE CASE OF SUMATI DAYAL (SUPRA) IS WHOLLY MISPLACE D AS THERE WAS DOCUMENTARY EVIDENCE IN THE CASE ON HAND. VIII) APPLYING THE PROPOSITION LAID DOWN IN THESE C ASE LAWS BY THE HONBLE COURTS AND TRIBUNAL, TO THE FACTS OF THE CASE AND I N VIEW OF THE UNCONTROVERTED DOCUMENTARY EVIDENCES FILED BY THE ASSESSEE, WE HOL D THAT THE ASSESSEE HAS PROVED THE GENUINENESS OF THE PURCHASE AND SALE OF SHARES AND THE ADDITION MADE UNDER SECTION 68 OF THE ACT IS HEREBY DELETED. THUS, THE ASSESSEE SUCCEEDS ON THIS GROUND. IX) NOW, COMING TO THE NEXT ISSUE (GROUND NO.5) AS TO WHETHER THE ASSESSEE IS AN INVESTOR OR TRADER IN SHARES, WE FIND THAT IN TH E YEAR UNDER ASSESSMENT, THE FIRST APPELLATE AUTHORITY HAD DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AND 9 ITA NO.483/MUM/2009 (AY 2004-05) ITA NO. 1069/MUM/29 (AY 2005-06) & ITA NO. 1070/MUM/2009 (AY 2006-07 THE REVENUE HAS NOT PREFERRED ANY APPEAL AGAINST TH E SAME. AT PARA-8/PAGE- 23, THE FIRST APPELLATE AUTHORITY HELD AS FOLLOWS:- HOWEVER, THE A.O IS NOT CORRECT IN ITS APPROACH TO ASSESS INCOME ALTERNATIVELY UNDER THE HEAD BUSINESS INCOME AND TAKE THE SAME BE CAUSE WHILE COMPUTING THE ENTIRE INCOME OF THE SAME ACCORDINGLY. THIS APP ROACH OF THE A.O. IS TOTALLY UNWARRANTED. THE A.O. IS DIRECTED TO RECOMPUTE THE INCOME OF THE APPELLANT AFTER TAKING INTO ACCOUNT THE LONG TERM CAPITAL GAIN AS S HOWN BY THE APPELLANT IN RESPECT OF TRANSACTIONS RELATING TO SALE OF SHARES OF M/S. BOLTON PROPERTIES LTD. AS UNDISCLOSED INCOME U/S 68. SHRI HARESH P. DADIA A.YS 04-05, 05-06 & 06-07 CONSEQUENTLY, WE HOLD THAT GROUND NO.5, IS MISCONCE IVED. X) COMING TO GROUND NO.6, THIS IS AGAINST THE DENIA L OF EXEMPTION UNDER SECTION 54F OF THE ACT. XI) THIS IS CONSEQUENTIAL IN NATURE. THE BENEFIT WA S DENIED BECAUSE THE REVENUE AUTHORITIES HAVE HELD THAT THE INCOME IN QU ESTION IS FROM UNDISCLOSED SOURCES. AS WE HAVE HELD THAT INCOME IN QUESTION IS FROM LONG TERM CAPITAL GAINS ON SALE OF SHARES, CONSEQUENTIAL RELIEF UNDER SECTION 54F HAS TO BE GIVEN TO THE ASSESSEE. THUS, THIS GROUND IS ALLOWED. XII) GROUND NO.7 IS ON THE ISSUE OF LEVY OF INTERES T UNDER SECTION 234B OF THE ACT. LEVY OF INTEREST IS MANDATORY AND CONSEQUENTIA L IN NATURE. ACCORDINGLY, THIS GROUND IS DISMISSED. 20. IN THE RESULT, ASSESSEES APPEAL FOR ASSESSMENT YEAR 2004-05 IS ALLOWED IN PART. ITA NO.1067/MUM./2009, FOR ASSESSMENT YEAR 2005-06 21. THE ISSUE IN GROUND NO.1 IS THAT, WHETHER THE I NCOME OF THE ASSESSEE ON SALE AND PURCHASE IS TO BE ASSESSED UNDER THE HEAD LONG TERM CAPITAL GAINS OR UNDER THE HEAD INCOME FROM BUSINESS. 22. THE UNDISPUTED FACTS ARE THAT, THE ASSESSEE HAS BEEN ACCEPTED AS AN INVESTOR BY THE REVENUE FOR THE ASSESSMENT YEARS 2000-01, 2001-02, 2002- 03 AND 2003-04 RESPECTIVELY IN THE ASSESSMENT ORDER PASSED BY THE SAME ASSESSING OFFICER ON THE SAME DAY UNDER SECTION 153 A R/W SECTION 143(3). FOR THE ASSESSMENT YEAR 2004-05, THE FINDINGS OF THE FI RST APPELLATEAUTHORITY HAVE NOT BEEN CHALLENGED AND CONSEQUENTLY THE CLAIM OF T HE ASSESSEE THAT HE IS AN INVESTOR AND NOT TRADER IN SHARES HAS NOT BEEN DIST URBED. ON THESE FACTUAL BACKGROUND, WE ARE OF THE CONSIDERED OPINION THAT I T IS NOT CORRECT FOR THE ASSESSING OFFICER TO TAKE A U TURN AND COME TO SHRI HARESH P. DADIA A.YS 04- 05, 05-06 & 06-07 A CONCLUSION THAT IN THIS PARTICULAR YEAR, THE ASS ESSEE HAS BECOME A TRADER IN SHARES. DURING THE YEAR, THE ASS ESSEE HAS PURCHASED ONLY 17 SCRIP AND HAS SOLD ABOUT 14 SCRIP. FROM THESE FI GURES, IT CANNOT BE SAID THAT THERE IS A HIGH VOLUME IN TRADING IN SHARES. AT PAR A-8, THE ASSESSING OFFICER HAS GIVEN THE REASONS FOR COMING TO A CONCLUSION TH AT THE ASSESSEE IS A TRADER IN SHARES. THEY ARE EXTRACTED FOR READY REFERENCE:- 10 ITA NO.483/MUM/2009 (AY 2004-05) ITA NO. 1069/MUM/29 (AY 2005-06) & ITA NO. 1070/MUM/2009 (AY 2006-07 8. THE SEQUENCE OF EVENTS INVOLVED IN THE PURCHASE AND SALE OF SHARES IS ENUMERATED IN CHRONOLOGICAL ORDER TO FURTHER UNDERS TAND THE REAL MOTIVE OF THE ASSESSEE BEHIND THE TRANSACTION. A) THE ASSESSEE CARRIES OUT A DISCUSSION WITH VARIO US PEOPLE WHO DEAL IN THE SHARE MARKET E.G. SHARE BROKERS; B) HE ALSO ANALYSES THE UPS AND DOWNS OF THE SHARE MARKET, CONSIDERS MEDIA ANALYSIS OF A PARTICULAR SCRIP AND ANALYSIS OF FUTURE PROSPE CTS OF THE COMPANY; C) AFTER THE DISCUSSION WITH THE VARIOUS PEOPLE AND DETAILED ANALYSIS OF SHARE MARKET, THE ASSESSEE IDENTIFIES THE POTENTIAL SCRIPT WHICH CAN EARN PROFIT IN SHORT PERIOD; D) AFTER THE IDENTIFICATION OF A PARTICULAR SCRIP T HE ASSESSEE PURCHASES THESE PARTICULAR SHARES; E) AFTER THE PURCHASE HE, KEEPS TRACK ON THE STOCK MARKET AND ANALYSES THE SHARE PRICE, WHICH HE HAS PURCHASED; F) WHENEVER THE SHARE PRICE OF A PARTICULAR SCRIP G OES UP, AT THIS STAGE HE TAKES DECISION TO SELL THAT PARTICULAR SCRIP; G) ASSESSEE TAKES DECISION TO SELL WHEN HE THINKS T HAT, HE CANNOT AFFORD TO WAIT FURTHER AS HE CAN SUFFER LOSS IF THE PRICE OF THAT PARTICUL AR SHARE GOES DOWN; H) THE ASSESSEE FURTHER PURCHASES THE SHARES AND TH E CYCLE GOES ON. 23. THE FIRST APPELLATE AUTHORITY HAS NOT GIVEN ANY ADDITIONAL REASONS FOR UPHOLDING THE FINDINGS OF THE ASSESSING OFFICER. IN OUR OPINION, THE REASONS CITED BY THE ASSESSING OFFICER DO NOT LEAD US TO A CONCLUSION THAT THE ASSESSEE IS A TRADER IN SHARES. THE ASSESSING OFFICER DID NO T RELY ON ANY OF THE PARAMETERS LAID DOWN BY THE CBDT IN ITS CIRCULAR FO R DETERMINING WHETHER A PERSON CAN BE CONSIDERED AS A TRADER OR AN INVESTOR IN SHARES. HAVING SHRI HARESH P. DADIA A.YS 04-05, 05-06 & 06-07 INTENTION TO EARN INCOME OR PROFIT, BY ITSELF DOES NOT MAKE AN INVESTOR A TRADER. IN FACT, SECTION 45, WHICH REFERS TO CAPITAL GAINS, STARTS WITH THE FOLLOWING WORDINGS ANY PROFITS OR GAINS ARISING FROM THE TRANSFER OF A CAPITAL ASSET EFFECTED IN TH E PREVIOUS YEAR SHALL, SAVE AS OTHERWISE PROVIDED IN SECTIONS 54, 54B, 54D, 54E, 5 4EA, 54EB, 54F, 54G AND 54H, BE CHARGEABLE TO INCOME-TAX UNDER THE HEAD CA PITAL GAINS, AND SHALL BE DEEMED TO BE THE INCOME OF THE PREVIOUS YEAR IN WHI CH THE TRANSFER TOOK PLACE. EVERY INVESTOR LOOKS FOR MAKING PROFITS. AL L THE REASONS GIVEN BY THE ASSESSING OFFICER ARE QUALITIES OF A GOOD INVESTOR. STUDY OF MARKETS MONITORING, SELLS AT OPPORTUNE TIME, ETC., IS THE H ALL MARK OF A GOOD INVESTOR. NEITHER THERE ARE ANY INTRA DAY SALES OR SPECULATIO N OF INCOME FROM FUTURE OPTIONS NOR HUGE TURNOVER OR INVESTMENT BY BORROWIN G FUNDS IN THIS CASE SO AS TO COME TO A CONCLUSION THAT THE ASSESSEE IS A TRAD ER AND NOT AN INVESTOR. IN VIEW OF THE ABOVE DISCUSSIONS, WE ALLOW THIS GROUND OF THE ASSESSEE AND HOLD THAT THE ASSESSEE IS AN INVESTOR AND NOT A TRADER. THE INCOME SHOULD BE ASSESSED UNDER THE HEAD INCOME FROM CAPITAL GAIN. 24. GROUND NO.2, READS AS FOLLOWS:- 11 ITA NO.483/MUM/2009 (AY 2004-05) ITA NO. 1069/MUM/29 (AY 2005-06) & ITA NO. 1070/MUM/2009 (AY 2006-07 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT(A) ERRED IN CONFIRMING THE DENIAL OF EXEMPTION UNDER SECTION 10(38) CLAIMED BY THE APPELLANT IN RESPECT OF THE LONG TERM CAPITA L GAIN THAT AROSE ON SALE OF SHARES. IN VIEW OF THE ABOVE, THE APPELLANT PRAYS THAT EXEMPTION UNDER SECTION 10(38) OF THE ACT BE ALLOWED TO THE APPELLANT IN RE SPECT OF LONG TERM CAPITAL GAIN ON SALE OF SHARES. 25. THE AFORESAID GROUND IS CONSEQUENTIAL TO THE GR OUND NO.1. AS WE HAVE HELD THAT INCOME IN QUESTION IS ASSESSABLE UNDER TH E HEAD CAPITAL ACCOUNT, EXEMPTION UNDER SECTION 10(38) OF THE ACT IS TO BE ALLOWED. 26. GROUND NO.3, IS ON THE ISSUE OF LEVY OF INTERES T UNDER SECTION 234B. THIS IS CONSEQUENTIAL AND MANDATORY. ACCORDINGLY, THIS GROU ND IS DISMISSED. 27. IN THE RESULT, ASSESSEES APPEAL FOR ASSESSMENT YEAR 2005-06 IS ALLOWED IN PART. THEREFORE, RESPECTFULLY FOLLOWING THE ORDER OF THE COORD INATE BENCH OF THE TRIBUNAL, THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. 4 RESPECTFULLY FOLLOWING THE ORDER OF THE COORDINAT E BENCH OF THE TRIBUNAL, THE ISSUE IN THE APPEALS OF THE ASSESSEE ARE ALSO ALLOW ED PARTLY. 5 IN THE RESULT, THE APPEALS FILED BY THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED ON THE 16 TH DAY OF SEPT 2011. SD/ SD/- ( R S SYAL ) ACCOUNTANT MEMBER ( VIJAY PAL RAO ) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 16 TH , SEPT 2011 RAJ* COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI