Shri. K.T. Sanath, Bangalore V. Addl..C.I.T., Bangalore

ITA 1185/BANG/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8557 (ITAT-BANGALORE)
• Duration Of Justice: 3 year(s) 6 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 15-02-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 13-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: V S YOGESH KUMAR
• Keywords: Capital asset; Business income; Rule of consistency; Source of fund; Question of law
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA NO.1185/BANG/2012 ASSESSMENT YEAR : 2006-07 SHRI K.T. SANATH, NO.26, S-5, 2 ND FLOOR, ESTEEM PLAZA, RACE COURSE ROAD, BANGALORE 560 001. PAN: ALXPS 3665H VS. THE ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE 6, BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI V.S. YOGESH KUMAR, CA RESPONDENT BY : SHRI G. MANOJ KUMAR, ADDL. CIT(DR) DATE OF HEARING : 15.02.2016 DATE OF PRONOUNCEMENT : 31.03.2016 O R D E R PER VIJAY PAL RAO, JUDICIAL MEMBER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER DATED 31.7.2012 OF THE CIT(APPEALS)-III, BANGALORE FOR TH E ASSESSMENT YEAR 2006-07. 2. THE ASSESSEE HAS RAISED THE FOLLOWING CONCISE G ROUNDS:- ITA NO.1185/BANG/2012 PAGE 2 OF 16 1. THE ORDER OF THE LEARNED CIT (A) IS OPPOSED TO THE FACTS OF THE CASE AND LAW APPLICABLE TO IT. 2. THE LEARNED CIT(A) ERRED IN UPHOLDING THE ASSESSING OFFICER ORDER HOLDING THAT THE SHORT TERM CAPITAL GAINS FRO M SHARES IS ASSESSABLE UNDER THE HEAD INCOME FROM BUSINESS. 3. THE LEARNED CIT (A) ERRED IN HOLDING THAT THE PERIO D OF HOLDING AND FREQUENCY OF TRANSACTION OF SHARES ALON E WOULD DECIDE THE HEAD OF INCOME. IT IS THE NATURE OF HOLD ING AS TO WHETHER IT IS STOCK IN TRADE OR INVESTMENT WHICH DE CIDES BY HEAD OF INCOME TO BE EITHER BUSINESS OR CAPITAL GAI NS. THE PERIOD OR THE QUANTUM IS NEVER THE CRITERIA. 4. THE LEARNED CIT (A) FAILED TO APPRECIATE THE FACT T HAT THE LAW DOES NOT PRECLUDE AN APPELLANT FROM HOLDING SHARES AS INVESTMENT THOUGH HE IS ALSO IN THE ACTIVITY OF TRA DING IN THE SAME COMMODITY. THE LEARNED CIT(A) SHOULD HAVE APPRECIATED THE FACT THAT THE APPELLANT HAS BEEN HO LDING SHARES OF HUGE QUANTUM'S EVEN IN THE EARLIER YEARS AS INVE STMENT AND HAS DECLARED NOT ONLY INCOME UNDER THE HEAD LONG TE RM CAPITAL GAINS & SHORT TERM CAPITAL GAIN BUT ALSO DI VIDENDS. 5. THAT THE APPELLANT CRAVES LEAVE TO ADD TO, ALTER, A ND AMEND MODIFY, SUBSTITUTE, DELETE AND OR RESCIND ALL OR AN Y OF THE GROUNDS OF APPEAL ON OR BEFORE THE FINAL HEARING, I F NECESSARY SO ARISES. THE APPELLANT REQUEST THE HONBLE TRIBUNAL TO SET A SIDE THE IMPUGNED ORDER PASSED BY THE ASSESSING OFFICER IN T HE INTEREST OF JUSTICE. 3. THE ONLY ISSUE THAT ARISES FOR CONSIDERATION AND ADJUDICATION IN THE FACTS AND CIRCUMSTANCES IS, WHETHER THE GAIN ARISIN G FROM PURCHASE AND SALE OF SHARES IS SHORT TERM CAPITAL GAIN OR BUSINE SS INCOME? 4. THE ASSESSEE IS AN INDIVIDUAL AND A PARTNER IN M /S. ASTRA EXPORTS AND M/S. ASTRA PROCESSORS PARTNERSHIP FIRMS ENGAGED IN THE BUSINESS OF ITA NO.1185/BANG/2012 PAGE 3 OF 16 PROCESS AND EXPORT OF COFFEE. THE ASSESSEE IS ALSO ENGAGED IN THE ACTIVITY OF PURCHASE AND SALE OF SHARES AND SECURITIES. IN ITS RETURN OF INCOME, THE ASSESSEE DECLARED TOTAL INCOME OF RS.2,21,31,800 AN D AGRICULTURAL INCOME OF RS.7,59,579. THE TOTAL INCOME OF THE ASSESSEE C OMPRISES INCOME FROM HOUSE PROPERTY, INCOME FROM BUSINESS, INCOME FROM S HORT TERM CAPITAL GAIN AND LONG TERM CAPITAL GAIN. THE ASSESSEE HAS SHOWN LOSS FROM TRADING IN SHARES AND DERIVATIVES OF RS.15,56,600; SHORT TERM CAPITAL GAIN ON SALE OF SHARES OF RS.2,35,49,225 AND LONG TERM CAPITAL GAIN ON SALE OF SHARES OF RS.2,87,57,549. THE AO ACCEPTED THE LONG TERM CAPIT AL GAIN ON SALE OF SHARES. HOWEVER, IN THE SCRUTINY ASSESSMENT, THE A O PROPOSED TO TREAT THE SHORT TERM CAPITAL GAIN ON SALE OF SHARES AS BUSINE SS INCOME. THE AO NOTED THAT THE SHORT TERM CAPITAL GAIN ARISES FROM THE SHARES HELD BY THE ASSESSEE FOR A VERY SHORT PERIOD RANGING FROM 20 DA YS TO 180 DAYS. ACCORDINGLY, THE AO DOUBTED THAT ASSESSEE HAS PURCH ASED THE SHARES FOR EARNING DIVIDEND INCOME, BUT THE SHARES WERE PURCHA SED AND SOLD FOR EARNING THE PROFIT. THE AO FURTHER OBSERVED THAT 9 0% OF SHARES HAVE BEEN PURCHASED WITHIN THE FINANCIAL YEAR AND EVEN SOLD W ITHIN THE FINANCIAL YEAR, RATHER WITHIN COUPLE OF MONTHS. THESE WERE NOT INV ESTMENT OF THE ASSESSEE OR INVESTMENT THEREIN WAS NOT WITH A VIEW TO EARN DIVIDEND INCOME. SINCE THE ASSESSEE IS ALSO ENGAGED IN THE TRADING OF SHARES AND SECURITIES BEING DERIVATIVE TRANSACTION, THE AO HAS HELD THAT THE PURCHASE AND SALE OF SHARES GIVING RISE TO THE SHORT TERM CA PITAL GAIN ARE TRADING ITA NO.1185/BANG/2012 PAGE 4 OF 16 ACTIVITY AND THEREFORE THE PROFIT ARISING FROM THIS PURCHASE AND SALE IS BUSINESS INCOME AND NOT CAPITAL GAIN. 5. THE ASSESSEE CHALLENGED THE ACTION OF THE ASSESS ING OFFICER BEFORE THE CIT(APPEALS), BUT COULD NOT SUCCEED. 6. BEFORE US, THE LD. AR OF THE ASSESSEE SUBMITTED THAT OUT OF THE TOTAL SHORT TERM CAPITAL GAIN OF RS.2.35 CRORES, CAPITAL GAIN OF RS.1,12,85,681 WAS EARNED ON THE SHARES HELD BY THE ASSESSEE FOR A PERIOD OF 100 DAYS TO 365 DAYS. THUS, THE LD. AR HAS SUBMITTED THAT ABOU T 50% OF SHORT TERM CAPITAL GAIN HAS BEEN EARNED BY THE ASSESSEE IN RES PECT OF THE SHARES HELD FOR A PERIOD OF 100 TO 365 DAYS. FURTHER, SHORT TE RM CAPITAL GAIN OF RS.76,88,322 WAS EARNED IN RESPECT OF SHARES HELD F OR A PERIOD OF 60 TO 100 DAYS AND THE REMAINING SMALL AMOUNT OF ABOUT RS .45 LAKHS OF SHORT TERM CAPITAL GAIN WAS EARNED BY THE ASSESSEE IN RES PECT OF THE SHARES, WHICH WERE HELD UPTO 60 DAYS. THUS, THE LD. AR HAS SUBMITTED THAT MAJORITY OF SHARES HELD BY THE ASSESSEE WAS FOR MORE THAN 2 MONTHS AND UPTO 365 DAYS, WHICH HAS RESULTED IN MAXIMUM SHORT TERM CAPI TAL GAIN IN QUESTION. HE HAS FURTHER CONTENDED THAT ASSESSEE IS PRIMARILY AN INVESTOR IN SHARES AND SECURITIES. INVESTMENTS OF THE ASSESSEE ARE MAN AGED BY THE PROFESSIONAL MANAGERS OF VARIOUS BANKS. HE HAS REF ERRED TO THE DETAILS REGARDING THE INVESTMENT OF ASSESSEE WHICH ARE MANA GED BY PROFESSIONAL MANAGERS (PMS). THUS, ASSESSEE HAS INVESTED MONEY IN THE STOCK MARKET THROUGH PMS SERVICES, WHO ARE MANAGING THE PORTFOLI O AND THE ITA NO.1185/BANG/2012 PAGE 5 OF 16 INVESTMENT/WEALTH OF THE ASSESSEE. THE INVESTMENT MADE THROUGH PMS IS NOT DIRECTLY CONTROLLED BY THE ASSESSEE, AS BUYING AND SELLING OF SHARES IS CONTROLLED BY PMS, WHO WILL TAKE AN APPROPRIATE DEC ISION AS WHAT TO DO WITH THE INVESTMENT OF ASSESSEE. THEREFORE, PMS HAVE MA NAGED THE ASSETS OF PORTFOLIO OF ASSESSEE TO MAXIMIZE INVESTMENTS. ASS ESSEE HAS DECLARED SHORT TERM CAPITAL GAIN AS WELL AS LONG TERM CAPITA L GAIN ON SALE OF SHARES SINCE A.Y. 2001-02. THE DEPARTMENT HAS ACCEPTED TH E INVESTMENT IN SHARES AND SHORT TERM CAPITAL GAIN IN THE EARLIER A SSESSMENT YEARS AND ONLY DURING THE YEAR UNDER CONSIDERATION, THE AO HAS TAK EN A DIFFERENT VIEW BECAUSE OF AMENDMENT IN THE RELEVANT PROVISIONS OF THE ACT WHEREIN A DIFFERENTIAL TAX TREATMENT HAS BEEN GIVEN TO THE SH ORT TERM CAPITAL GAIN. THUS, THE LD. AR HAS SUBMITTED THAT WHEN THE SAME T RANSACTIONS WERE ACCEPTED AS INVESTMENT IN THE EARLIER ASSESSMENT YE AR, THEN THE AO CANNOT TAKE A DIFFERENT VIEW WITHOUT POINTING OUT THE CHAN GE IN THE NATURE OF TRANSACTIONS MERELY BECAUSE THERE IS A DIFFERENTIAL TAX CHARGEABLE ON SHORT TERM CAPITAL GAIN. HE HAS FURTHER CONTENDED THAT O UT OF THE ENTIRE SHORT TERM CAPITAL GAIN, A SUM OF RS.84,08,390 RESULTED AS SAL E OF SHARES HELD AND PURCHASED IN THE PREVIOUS YEAR AND SHOWN AS INVESTM ENT IN THE BALANCE SHEET AT THE END OF THE EARLIER YEAR. THEREFORE, T HE SHARES WHICH ARE HELD AS AN INVESTMENT AND SHOWN IN THE BOOKS OF ACCOUNT AS INVESTMENT ACCEPTED BY THE AO CANNOT BE TREATED AS STOCK-IN-TR ADE IN THE SUBSEQUENT YEAR, WHEN THE SAME WERE SOLD BY THE ASSESSEE. ITA NO.1185/BANG/2012 PAGE 6 OF 16 7. THE LD. AR HAS POINTED OUT THAT EVEN IN THE SUBS EQUENT ASSESSMENT YEAR WHILE PASSING THE ASSESSMENT ORDER U/S. 143(3) , THE AO HAS ACCEPTED THE SHORT TERM CAPITAL GAIN ARISING FROM PURCHASE A ND SALE OF SHARES. THE AR HAS REFERRED AND FILED THE ASSESSMENT ORDER PASS ED U/S. 143(3) FOR THE AY 2009-10 AND 2010-11, WHEREIN THE AO HAS ACCEPTED THE SHORT TERM CAPITAL GAIN ARISING FROM PURCHASE AND SALE OF SHAR ES. 8. HE HAS FURTHER CONTENDED THAT SO FAR AS THE TRAN SACTIONS IN THE DERIVATIVES ARE CONCERNED, THE ASSESSEE IS MAINTAIN ING TWO PORTFOLIOS AND AS PER JUDGMENT OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT V. GOPAL PUROHIT V. JCIT, 336 ITR 287 (BOM) , THERE IS NO BAR FOR MAINTAINING TWO PORTFOLIOS BY THE ASSESSEE, ONE IN TRADING ACTIVITY AND ANOTHER IN INVESTMENT IN SHARES. THUS, THE LD. AR HAS SUBMITTED THAT WHE N ALL THE TRANSACTIONS OF PURCHASE AND SALE OF SHARES RESULTING IN SHORT TERM CAPITAL GAIN AS WELL AS LONG TERM CAPITAL GAIN ARE DELIVERY BASED AND SAME ARE HELD AS INVESTMENT IN THE BOOKS OF ACCOUNT, THEN THE AO CANNOT TREAT S UCH INVESTMENT AS STOCK-IN-TRADE. HE HAS FURTHER POINTED OUT THAT TH E ENTIRE INVESTMENT IN SHARES HAS BEEN MADE BY THE ASSESSEE FROM HIS OWN F UNDS AND NO BORROWED FUND HAS BEEN USED FOR THE PURPOSE OF INVE STMENT IN SHARES. IN SUPPORT OF THIS CONTENTION, HE HAS RELIED ON THE FO LLOWING DECISIONS:- (1) ACIT V. P. BHASKAR RAO, ITA NO.1284/HYD/2010 DA TED 4.3.2015. (2) DCIT V. KAPUR INVESTMENTS (P) LTD., ITA NOS. 1 188 & 1189/BANG/2012 DATED 29.11.2013. ITA NO.1185/BANG/2012 PAGE 7 OF 16 (3) VINOD K. NEVATIA V. ACIT, ITA NO.6556/MUM/2009 DATED 3.12.2010. (4) NEHAL V. SHAH V. ACIT, ITA NO.2733/MUM/2009 DA TED 15.12.2010. 9. ON THE OTHER HAND, THE LD. DR HAS SUBMITTED THAT THE ASSESSEE HAS CARRIED OUT HUGE NUMBER OF TRANSACTIONS OVER 245 T RANSACTIONS INVOLVING MORE THAN 25,000 SHARES OF DIFFERENT COMPANIES. FU RTHER, THE VOLUME OF THE TRANSACTIONS AND CONSIDERATION IS ALSO VERY HIG H WHICH IS MORE THAN RS.16.68 CRORES. THE HOLDING PERIOD OF THE SHARES RESULTING IN SHORT TERM CAPITAL GAINS IS VERY LESS AS IT IS NOT DISPUTED TH AT THE HOLDING PERIOD IS 22 TO 60 DAYS IN MOST OF THE CASES AND MAJORITY OF THE TR ANSACTIONS OF PURCHASE AND SALE HAVE BEEN CARRIED OUT WITHIN THE FINANCIAL YEAR. THEREFORE, THE INTENTION OF THE ASSESSEE IS MANIFEST FROM THE SHOR T TERM HOLDING PERIOD OF THE SHARES THAT THE ASSESSEE HAS PURCHASED AND SOLD THE SHARES WITH THE INTENTION OF EARNING THE PROFIT ON THESE TRANSACTIO NS INSTEAD OF HOLDING THE SAME AS INVESTMENT AND EARNING THE DIVIDEND INCOME. HE HAS RELIED ON THE ORDERS OF AUTHORITIES BELOW AND SUBMITTED THAT THE AO AS WELL AS CIT(A) HAVE ANALYSED THE PECULIAR FACTS OF THE CASE AND AR RIVED AT THE CONCLUSION THAT THE TRANSACTIONS IN QUESTION CANNOT BE HELD AS INVESTMENT, BUT THE SAME ARE IN THE NATURE OF TRADING. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS RELEVANT MATERIAL ON RECORD. WHILE DECIDING THE ISSUE WHETH ER THE TRANSACTION OF PURCHASE AND SALE OF SHARES IN QUESTION GIVING RISE TO SHORT TERM CAPITAL GAINS ARE INVESTMENT OR TRADING, THE AO IS GUIDED B Y THE FACT THAT SINCE THE ITA NO.1185/BANG/2012 PAGE 8 OF 16 HOLDING PERIOD IS VERY SHORT RANGING FROM 20 TO 180 DAYS, THEREFORE THE ASSESSEE HAS NOT EARNED ANY DIVIDEND INCOME ON THES E SHARES AND HENCE THE MOTIVE FOR PURCHASE OF SHARES IN QUESTION WAS N OT TO EARN DIVIDEND INCOME, BUT TO EARN THE PROFIT FROM SALE OF SHARES. IT IS PERTINENT TO NOTE THAT EARNING OF DIVIDEND INCOME IS NOT THE SOLE MOTIVE F OR MAKING INVESTMENT IN SHARES BECAUSE THE DIVIDEND INCOME IS NOT CERTAIN O N THE SHARES, AS IT DEPENDS ON THE PERFORMANCE OF THE COMPANY AND ALSO THE POLICY OF THE COMPANY TO DECLARE DIVIDEND OR NOT. THEREFORE, DIV IDEND ALONE CANNOT BE THE CRITERION FOR DECIDING THE NATURE OF TRANSACTIO N OF PURCHASE OF SHARE. FURTHER, EVEN IF A SHARE IS HELD FOR FEW DAYS, ONE CAN EARN DIVIDEND IF IT IS PURCHASED JUST PRIOR TO THE RECORD DATE AND THEN SO LD AFTER THE RECORD DATE. THEREFORE, DIVIDEND CANNOT BE CONSIDERED AS DETERMI NATIVE CRITERION FOR THE NATURE OF TRANSACTION. THERE IS NO DISPUTE THAT OU T OF THE TOTAL SHORT TERM CAPITAL GAIN OF RS.2.35 CRORES, AN AMOUNT OF SHORT TERM CAPITAL GAINS OF RS.84 LAKHS WAS EARNED FROM THE SHARES WHICH WERE P URCHASED IN EARLIER YEAR AND SHOWN IN THE BALANCE SHEET AS INVESTMENT. THE AO HAS ACCEPTED THE INVESTMENT IN THE BALANCE SHEET IN THE EARLIER YEAR AS THERE IS NO DISALLOWANCE OF ANY CLAIM OF SHORT TERM CAPITAL GAI N. THEREFORE, THE SHARES WHICH WERE PURCHASED IN THE EARLIER YEAR AND ACCEPT ED BY THE AO AS INVESTMENT CANNOT BE TREATED AS STOCK-IN-TRADE IN T HE SUBSEQUENT YEAR, WHEN THESE SHARES WERE SOLD. IN OTHER WORDS, THE A O IS NOT PERMITTED TO TREAT THE INVESTMENT ACCEPTED IN THE EARLIER YEAR A S STOCK-IN-TRADE IN THE SUBSEQUENT YEAR, WHEN THE ASSESSEE HAS BEEN SHOWING THE SHARES IN THE ITA NO.1185/BANG/2012 PAGE 9 OF 16 BOOKS OF ACCOUNT AS INVESTMENT. FURTHER, ALL THE T RANSACTIONS IN THE INVESTMENT PORTFOLIO ARE DELIVERY BASED AND THE ASS ESSEE HAS SHOWN THE SAME AS INVESTMENT IN THE BOOKS OF ACCOUNT AND PART ICULARLY IN THE BALANCE SHEET AS ON 31 ST MARCH OF EACH YEAR. THE AO HAS NOT DISPUTED THAT THE HOLDING PERIOD IS RANGING FROM 20 TO 180 DAYS. THE ASSESSEE HAS GIVEN THE DETAILS REGARDING HOLDING PERIOD OF THE SHARES WHIC H HAS RESULTED IN SHORT TERM CAPITAL GAINS AS UNDER:- 11. THUS, IT IS CLEAR THAT ABOUT 50% OF THE SHORT T ERM CAPITAL GAIN IS ARISING FROM THE SHARES WHICH WERE HELD FOR A PERIO D OF MORE THAN 100 DAYS AND UPTO 365 DAYS, WHICH SHOWS THAT THE INTENTION O F THE ASSESSEE WAS TO HOLD SHARES FOR CONSIDERABLE LONG PERIOD. NEEDLESS TO SAY THAT AS PER PROVISIONS OF INCOME-TAX ACT, IF THE SHARES OF LIST ED COMPANY AT THE STOCK EXCHANGE HELD FOR MORE THAN ONE YEAR, THEN IT WILL BE TREATED AS LONG TERM CAPITAL GAIN. THERE IS NO MINIMUM PERIOD PRESCRIBE D FOR THE PURPOSE OF SHORT TERM CAPITAL GAIN OR SHORT TERM CAPITAL ASSET . THEREFORE, THE SHARES ITA NO.1185/BANG/2012 PAGE 10 OF 16 WHICH ARE HELD LESS THAN ONE YEAR FALL UNDER THE CA TEGORY OF SHORT TERM CAPITAL ASSET. ACCORDINGLY, THE HOLDING PERIOD ALO NE CANNOT BE A CRITERION OR PARAMETER TO DECIDE THE NATURE OF TRANSACTION, WHEN THE STATUTE DOES NOT PRESCRIBE ANY MINIMUM PERIOD OF HOLDING FOR AN ASSE T. IN ORDER TO DETERMINE THE NATURE OF TRANSACTION OF PURCHASE AND SALE OF SHARES, WHETHER TRADING OR INVESTMENT, THERE ARE NUMBER OF CRITERIA OR PARAMETERS WHICH ARE REQUIRED TO BE CONSIDERED. THESE CRITERI A INCLUDES THE INTENTION OF ASSESSEE, FREQUENCY OF TRANSACTION, VOLUME OF TH E TRANSACTION, WHETHER INVESTMENT IS MADE FROM ASSESSEES OWN FUND OR FROM BORROWED FUND, HOLDING PERIOD, TREATMENT IN BOOKS OF ACCOUNT, VALU ATION, SOURCE OF FUND, ETC. IN THE CASE IN HAND, THERE IS NO DISPUTE THAT THAT ASSESSEE HAS USED ITS OWN FUND AND INVESTMENTS ARE MADE THROUGH PMS AS WE LL AS BY ASSESSEE HIMSELF. THE DETAILS OF INVESTMENT MADE THROUGH PM S AND BY THE ASSESSEE ARE AS UNDER:- ITA NO.1185/BANG/2012 PAGE 11 OF 16 12. THUS, IT IS CLEAR THAT OUT OF TOTAL SHORT TERM CAPITAL GAIN OF RS.2.35 CRORES; CAPTIAL GAIN OF RS.1.32 CRORES WAS EARNED B Y THE ASSESSEE ON INVESTMENT THROUGH PORTFOLIO MANAGERS. IN THE CASE OF KAPUR INVESTMENTS (P) LTD., ITA NOS. 1188 & 1189/BANG/2012 DATED 29.1 1.2013, THE COORDINATE BENCH OF THE TRIBUNAL WHILE DEALING WITH IDENTICAL ISSUE HAD IN PARAS 6 TO 6.2 HELD AS UNDER:- 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS, PERUSED THE RELEVANT MATERIALS ON CASE RECORDS AND ALSO THE CASE LAWS ON WHICH THE LEARNED AR HAD PLACED STRONG RELI ANCE. AS A MATTER OF FACT, THE ISSUE HAS SINCE BEEN DELIBERATE D EXHAUSTIVELY BY THE CIT (A) AND CAME TO THE RIGHT CONCLUSION THA T THE ASSESSEE HAD INVESTED IN SHARES WITH AN INTENTION OF HOLDING THEM AS INVESTMENTS AND THE SURPLUS ON ACCOUNT OF SALE OF T HESE SHARES HAVE TO BE TREATED AS SHORT-TERM OR LONG TERM CAPIT AL GAINS DEPENDING ON THE PERIOD OF HOLDING. THE ABOVE FINDI NG OF THE CIT (A) IS IN CONFORMITY WITH THE GUIDELINES ISSUED BY THE BOARD VIDE ITS CIRCULAR NO.4 OF 2007 DATED 15.6.2007. LIKEWISE , FOR THE AY 2008-09, THE CIT (A) TOOK A STAND THAT THE INCOME F ROM CAPITAL GAINS, SHORT-TERM OR LONG-TERM CAPITAL BASED ON THE PERIOD OF HOLDING OF SUCH ASSETS CANNOT BE TREATED AS BUSINE SS INCOME. THE REVENUE HAS NOT BROUGHT ANY DOCUMENTARY EVIDENC E OR PROOF TO CONTRADICT THE CONCLUSION ARRIVED AT BY THE CIT( A). PHOTOCOPY OF THE AGREEMENTS ENTERED BY THE ASSESSEE COMPANY W ITH THE PORTFOLIO MANAGER (M/S. KOTAK SECURITIES LTD) HAS B EEN PLACED ON RECORD. ON PERUSAL OF THE SAME, IT IS EVIDENT TH AT THE PORTFOLIO MANAGER IS TRADING IN SHARES/SCRIPTS/MUTUAL FUNDS A ND THE ASSESSEE COMPANY DOES HAVE ANY SAY. IN THE INSTANT CASE ASSESSEE COMPANY HAD INVESTED ITS FUNDS WITH THE PORTFOLIO M ANAGEMENT SCHEME FOR MAXIMIZATION OF WEALTH. THE ASSESSEE COM PANY CANNOT BE SAID TO BE SYSTEMATICALLY DEALING IN SHAR E TO TERM THE ACTIVITIES OF THE ASSESSEE AS IN NATURE OF BUSINES S. 6.1 THE LEARNED AR HAS PLACED RELIANCE ON NUMBER O F JUDICIAL VIEWS IN SUPPORT OF THE ASSESSEES CONTENTIONS. TO ILLUSTRATE FURTHER, THE VIEWS OF JUDICIARIES ARE ANALYZED AS U NDER: ITA NO.1185/BANG/2012 PAGE 12 OF 16 (I) IN THE CASE OF ITO V. RADHA BIRJU PATEL REPOR TED IN A(2011) 11 TAXMANN.COM 293(MUM), THE HONBLE MUMBAI TRIBUNAL HAS HELD, ON A SIMILAR ISSUE, AS UNDER: IT WAS APPARENT FROM THE RECORD THAT THE SHARE TRANSACTIONS IN QUESTION WERE CARRIED OUT BY THE AS SESSEES PMS MANAGER. THEREFORE, THESE TRANSACTIONS WERE CLE ARLY IN THE NATURE OF TRANSACTIONS MEANT FOR MAXIMIZATIO N OF WEALTH RATHER ENCASHING THE PROFITS ON APPRECIATION IN VALUE OF SHARES. THE VERY NATURE OF PORTFOLIO MANAG EMENT SCHEME IS SUCH THAT THE INVESTMENT MADE BY AN ASSES SEE IS PROTECTED AND ENHANCED AND IN SUCH A CIRCUMSTANCE, IT CANNOT BE SAID THAT IT IS SCHEME OF TRADING IN SHAR ES AND STOCK. WHETHER, AN ASSESSEE IS ENGAGED IN THE BUSIN ESS OF DEALING IN SHARES OR INVESTMENT IN SHARES IS ESSENT IALLY A QUESTION OF FACT AND IT HAS TO BE DETERMINED WITH R EGARD TO THE ENTIRETY OF THE CIRCUMSTANCES. IN CIRCUMSTANCE, IN WHICH THE ASSESSEE WAS ENGAGED IN A SYSTEMATIC ACTI VITIES OF HOLDING PORTFOLIO THROUGH THE PMS MANAGER, IT CO ULD NOT BY ANY STRETCH OF IMAGINATION, BE SAID THAT THE MAIN OBJECT OF HOLDING THE PORTFOLIO WAS TO MAKE PROFIT BY SALE OF SHARES DURING THE COURSE OF MAINTAINING THE PORT FOLIO INVESTMENT OVER THE PERIOD. THEREFORE, THE COMMISSI ONER (APPEALS) WAS JUSTIFIED IN ACCEPTING THE GAIN ON SAL E OF SHARES AS SHORT-TERM CAPITAL GAIN AS CLAIMED BY THE ASSESSEE. (II) YET ANOTHER FINDING, THE HONBLE H BENCH OF MUMBAI TRIBUNAL IN THE CASE OF MAHENDRA C SHAH V. ADDL. CI T REPORTED IN (2012) 19 TAXMANN.COM 350 (MUM) HAS HELD THAT PRIMA FACIE THERE WAS ENOUGH EVIDENCE TO SHOW THAT THE ASSESSEE WAS AN INVESTOR IN SHARES AND, THEREFORE, THE SURPLUS ARIS ING ON THE SALE OF SHARES SHOULD BE ASSESSED AS SHORT-TERM OR LONG- TERM CAPITAL GAINS, DEPENDING ON THE PERIOD OF HOLDING AND NOT A S BUSINESS INCOME. (III) THE HONBLE GUJARAT HIGH COURT IN THE CIT V. NIRAJ AMIDHAR SURTI REPORTED IN (2012) 20 TAXMANN.COM 579 (GUJ) HAS RULED AS UNDER: ITA NO.1185/BANG/2012 PAGE 13 OF 16 THAT IN THE LIGHT OF THE FINDINGS RECORDED BY COMMISSIONER (APPEALS) THAT THE ASSESSEE HAD HELD TH E SHARES IN QUESTION FOR FOURTEEN MONTHS WHICH IS ALO NG PERIOD FOR THE PURPOSE OF LONG-TERM CAPITAL GAIN, T HE INTENTION OF THE ASSESSEE HAD ALWAYS BEEN THAT OF M AKING INVESTMENT IN SHARES AND NOT DEALING IN SHARES, WHI CH WAS ALSO APPARENT FROM THE FACT THAT THE SHARES HAD NOT BEEN TREATED AS STOCK IN TRADE BY THE ASSESSEE; EVEN AFT ER THE SALE, THE ASSESSEE HAD MADE INVESTMENT IN BONDS OF NABARD, INDICATING THAT HE HAD TREATED THE SAME AS LO NG- TERM CAPITAL GAIN; AS WELL AS THE FACT THAT THE ASS ESSEE HAD NOT SPLIT THE SHARES IN LOTS BUT HAD SOLD THE SAME IN ONE LOT; IT WAS NOT POSSIBLE TO AGREE WITH THE CONTENTI ON RAISED ON BEHALF OF THE REVENUE THAT THE TRANSACTION IN Q UESTION WAS AN ADVENTURE IN THE NATURE OF TRADE AND, THER EFORE, INCOME DERIVED BY THE ASSESSEE FROM THE SAID TRANSA CTION WAS A BUSINESS INCOME AND COULD NOT BE TREATED AS C APITAL GAINS. 6.2. TAKING INTO ACCOUNT ALL THE FACTS AND CIRCUMS TANCES OF THE ISSUE AS DISCUSSED ABOVE AND ALSO IN CONFORMITY WIT H THE RATIOS LAID DOWN BY THE HONBLE HIGH COURT OF GUJARAT AND ALSO THE HONBLE MUMBAI TRIBUNAL (SUPRA), WE ARE OF THE VIEW THAT THE CIT (A) WAS JUSTIFIED IN COMING TO RIGHT CONCLUSION WHICH DOES NOT WARRANT ANY INTERFERENCE. IN ESSENCE, THE FINDI NGS OF THE CIT (A) FOR BOTH THE ASSESSMENT YEARS UNDER DISPUTE ARE UPHELD. 13. THUS, IT IS CLEAR THAT THE TRIBUNAL HAS BEEN CO NSISTENTLY TAKING A VIEW THAT THE INVESTMENT MADE THROUGH PMS CANNOT BE TREA TED AS TRADING ACTIVITY, UNLESS AND UNTIL APPARENT FACT ON RECORD IS BROUGHT BY THE AO TO SHOW THAT THE VERY NATURE OF TRANSACTION IS TRADING . FURTHER, WHEN THE ASSESSEE HAS SHOWN THESE TRANSACTIONS AS INVESTMENT IN ITS BOOKS OF ACCOUNT AND VLAUED THE SAME AT COST, THEN THE SAME CANNOT BE TREATED AS STOCK-IN-TRADE AS THE INTENTION OF THE ASSESSEE IS CLEAR FROM THE TREATMENT OF ITA NO.1185/BANG/2012 PAGE 14 OF 16 THE SHARES IN BOOKS OF ACOCUNT AND VALUATION OF THE SAME AT COST, INSTEAD OF COST OR REALISATION, WHICHEVER IS LESS IN THE CASE OF STOCK-IN-TRADE. 14. THE ASSESSEE HAS BEEN CONSISTENTLY SHOWING THE SHARES HELD AS INVESTMENT IN THE BALANCE SHEET RIGHT FROM THE BEGI NNING WHICH HAS NOT BEEN DISPUTED BY THE AO IN THE EARLIER ASSESSMENT Y EAR. IT IS NOT THE CASE OF THE AO THAT DURING THE YEAR UNDER CONSIDERATION, THE ACTIVITY OF PURHCASE AND SALE OF SHARES HAS ANY DEPARTURE FROM THE EARLI ER YEARS AS WELL AS FROM THE SUBSEQUENT YEARS. THE AO HAS ACCEPTED THE CLAI M OF SHORT TERM CAPITAL GAIN OF ASSESSEE IN THE EARLIER YEARS AS WELL AS IN THE SUBSEQUENT YEARS. WE FIND THAT FOR THE AY 2008-09, 2009-10 AND 2010-1 1, THE AO WHILE PASSING ASSESSMENT U/S. 143(3) HAS ACCEPTED THE SHO RT TERM CAPITAL GAIN OFFERED BY THE ASSESSEE ARISING FROM PURCHASE AND S ALE OF SHARES. THEREFORE, EVEN IF THE DOCTRINE OF RES JUDICATA IS NOT APPLICBLE IN THE MATTER OF TAXATION, WHEN THE FACTS ARE IDENTICAL, THE AO I S REQUIRED TO MAINTAIN THE RULE OF CONSISTENCY AS HELD BY THE HON'BLE BOMBAY H IGH COURT IN THE CASE OF CIT V. GOPAL PUROHIT, 336 ITR 287 (BOM) AT PARA 3 & 4 AS UNDER:- 3. INSOFAR AS QUESTION (B) IS CONCERNED, THE TRIBUNA L HAS OBSERVED IN PARA 8.1 OF ITS JUDGMENT THAT THE ASSES SEE HAS FOLLOWED A CONSISTENT PRACTICE IN REGARD TO THE NAT URE OF THE ACTIVITIES, THE MANNER OF KEEPING RECORDS AND THE P RESENTATION OF SHARES AS INVESTMENT AT THE END OF THE YEAR, IN ALL THE YEARS. THE REVENUE SUBMITTED THAT A DIFFERENT VIEW SHOULD BE T AKEN FOR THE YEAR UNDER CONSIDERATION, SINCE THE PRINCIPLE OF RE S JUDICATA IS NOT APPLICABLE TO ASSESSMENT PROCEEDINGS. THE TRIB UNAL CORRECTLY ACCEPTED THE POSITION THAT THE PRINCIPLE OF RES JUDICATA IS NOT ITA NO.1185/BANG/2012 PAGE 15 OF 16 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 ID ENTICAL, PARTICULARLY IN THE CASE OF THE ASSESSEE. THIS APPR OACH OF THE TRIBUNAL CANNOT BE FAULTED. THE REVENUE DID NOT FUR NISH ANY JUSTIFICATION FOR ADOPTING A DIVERGENT APPROACH FOR THE ASSESSMENT YEAR IN QUESTION. QUESTION (B), THEREFORE, DOES NOT ALSO RAISE ANY SUBSTANTIAL QUESTION. 4. INSOFAR AS QUESTION (C) IS CONCERNED, AGAIN THERE CANNOT BE ANY DISPUTE ABOUT THE BASIC PROPOSITION THAT ENTRIE S IN THE BOOKS OF ACCOUNT ALONE ARE NOT CONCLUSIVE IN DETERMINING THE NATURE OF INCOME. THE TRIBUNAL HAS APPLIED THE CORRECT PRINCI PLE IN ARRIVING AT THE DECISION IN THE FACTS OF THE PRESENT CASE. T HE FINDING OF FACT DOES NOT CALL FOR INTERFERENCE IN AN APPEAL UNDER S . 260A. NO SUBSTANTIAL QUESTION OF LAW IS RAISED. THE APPEAL I S ACCORDINGLY DISMISSED. 15. WE FURTHER NOTE THAT IT IS NOT A CASE OF REPETI TIVE TRANSACTION OF PURHCASE AND SALE IN THE SAME SCRIP. THE AO HAD ALS O NOT ALLEGED ANY SUCH TRANSACTION BY THE ASSESSEE DURING THE YEAR UN DER CONSIDERATION. THEREFORE, IN THE TOTALITY OF FACTS AND CIRCUMSTANC ES OF THE CASE AS DISCUSSED ABOVE, WE ARE OF THE CONSIDERED OPINION T HAT WHEN THE CLAIM OF THE ASSESSEE WAS ACEPTED IN THE EARLIER YEAR AS WEL L AS IN THE SUBSEQUENT YEARS, THE AO IS NOT PERMITTED TO TAKE A DIFFERENT VIEW FOR THE YEAR UNDER CONSIDERATION. HENCE, WE SET ASIDE THE ORDERS OF A UTHORITIES BELOW ON THIS ISSUE AND HOLD THAT THE GAIN ARISING FROM THE SALE AND PURHCASE OF SHARES IS SHORT TERM CAPITAL GAIN. ACCORDINGLY THE AO IS DIR ECTED TO TREAT THE SAME AS SHORT TERM CAPITAL GAIN. ITA NO.1185/BANG/2012 PAGE 16 OF 16 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. PRONOUNCED IN THE OPEN COURT ON THIS 31 ST DAY OF MARCH, 2016. SD/- SD/- ( INTURI RAMA RAO ) (VIJAY PAL R AO ) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE, DATED, THE 31 ST MARCH, 2016. /D S/ COPY TO: 1. APPELLANT 2. RESPONDENTS 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.