ACIT, Cir-10(1), Hyderabad V. Smt. Anju Gaggar, Secunderabad

ITA 1215/HYD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66107 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 1 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-08-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 22-06-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR M SRINIVASA RAO
• Keywords: Capital asset; Business income; Opportunity of being heard; Rule of consistency; Question of law
• Section: 10; 2; 11; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER AND SHRI D.KARUNAKARA RAO, ACCOUNTANT MEMBER ITA NO.1215/HYD/2011 : ASSESSMENT YEAR 2008 -09 ASSTT. COMMISSI ONER OF INCOME - TAX CIRCLE 10(1), HYDERABAD (APPELLANT) V/S SMT. ANJU GAGGAR, SECU N D ERABAD. (PAN - ADJPG 5923 C ) (RESPONDENT) APPELLANT BY : DR M.SRINIVASA RAO, CIT-DR RESPONDENT BY : MS. JAYA PRABHAKARA RAO ON BEHALF OF SHRI C.P.RAMASWAMY DATE OF HEARING 6 . 6 .2012 DATE OF PRONOUNCEMENT 3.8.2012 O R D E R PER D.KARUNAKARA RAO, ACCOUNTANT MEMBER: THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORDE R OF THE CIT(A) VI, HYDERABAD DATED 7.4.2011 FOR THE ASSESSM ENT YEAR 2008-09. 2. EFFECTIVE GROUNDS OF THE REVENUE IN THIS APPEAL READ AS FOLLOWS- 1. .. 2. THE CIT(A) ERRED IN DIRECTING THE ASSESSING O FFICER TO TREAT THE INCOME AS CAPITAL GAINS INSTEAD OF BUSINESS INCOME AS ASSE SSED BY THE ASSESSING OFFICER. 3. THE CIT(A) OUGHT TO HAVE APPRECIATED THE FACT THAT THE ASSESSING OFFICER HAS CORRECTLY TREATED THE INCOME AS BUSINES S INCOME AS THE INTENTION OF THE ASSESSEE WAS CLEAR FROM THE TRANSA CTIONS THAT THIS INVESTMENT IN SHARES IS NOT FOR HOLDING THE SHARES FOR A LONG TIME TO EARN DIVIDENDS BUT HIS INVESTMENT IN SHARES IS TO T RADE IN SHARES AND EARN PROFITS IN SHORT TIME. THE VOLUME, THE FREQUEN CY AND THE AMOUNT OF TRANSACTIONS CLEARLY SHOWS THE INTENTION OF THE ASSESSEE. 4. THE CIT(A) ERRED IN DIRECTING THE ASSESSING OFFI CER TO TREAT THE GAINS AS CAPITAL GAINS AS THE WAS COMPLETED KEEPING IN VIEW THE BOARD CIRCULAR NO.4/2007 DT.15/06/2007 WHEREIN THE PARAMETERS LAID DOWN TO ITA NO.1215/HYD/2011 SMT. ANJU GAGGAR, SECUNDERABAD. 2 DETERMINE WHETHER THE SHARES WERE HELD AS STOCK-IN- TRADE OR INVESTMENT. 3. BRIEFLY STATED, FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL. SHE FILED HER RETURN OF INCOME FOR THE ASSESSMENT YEAR 2008- 09 ON 30.10.208 ADMITTING AN INCOME OF RS.4,25,05,7 40 CONSISTING OF INCOME FROM HOUSE PROPERTY, INCOME FROM OTHER SOURC ES, DIVIDEND AND SHORT TERM CAPITAL GAINS. DURING THE COURSE OF SCRU TINY ASSESSMENT, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE DECLARE D SHORT TERM CAPITAL GAINS AMOUNTING TO RS.4,29,47,752 ON PURCHASE AND S ALE OF SHARES. AFTER EXAMINING THE DETAILS OF SHARES PURCHASED AND SOLD DURING THE YEAR, ASSESSING OFFICER TREATED SUCH ACTIVITY OF THE ASSE SSEE AS BUSINESS TRANSACTIONS AND REJECTED THE ASSESSEES CLAIM OF C APITAL GAINS TRANSACTIONS. ASSESSING OFFICER NOTED THAT THE ASS ESSEE PURCHASED 8,16,051 SHARES FOR THE VALUE OF RS 16,37,53,967/- DURING THE YEAR AND SOLD 8,19,701 SHARES FOR THE VALUE OF RS 20,67,09,0 31/- DURING THE YEAR EARNING THE PROFIT OF RS 4,29,55,064/-. ALL THE SHA RES PURCHASED DURING THE YEAR WERE FULLY SOLD IN ADDITION TO SOME OF THE SHARES BROUGHT FORWARDED FROM THE EARLIER YEAR. THE HOLDING PERIOD OF IMPUGNED SHARES IS AROUND 60 DAYS. ASSESSING OFFICER DID NOT APPRECIAT E THE ASSESSEES ASSERTION THAT THE ASSESSEE CONSISTENTLY ADMITTED S IMILAR SHORT TERM CAPITAL GAINS SINCE ASSESSMENT YEAR 2004-05 AND FOR THE FIRST TIME, THE AO DISTURBED THE ASSESSEES CLAIM IN THIS ASSESSMEN T YEAR. IT IS ALSO A FACT THAT THE ASSESSEE REFLECTED THE ABOVE TRANSACT IONS AS INVESTMENTS IN THE BOOKS OF ACCOUNT. REJECTING THE ASSESSEES ABOV E SAID ASSERTIONS AND THE CLAIM OF INVOKING THE PROVISIONS OF SECTION 111 A OF THE ACT IN RESPECT OF SHORT TERM CAPITAL GAINS, ASSESSING OFFICER CO MPLETED THE ASSESSMENT MAKING AN ADDITION OF RS.4,34,76,048 UNDER THE HEAD PROFITS AND GAINS FROM BUSINESS OR PROFESSION UNDER S.143(3) OF THE ACT ON 13.12.2010. 4. ON APPEAL, THE CIT(A) AFTER DETAILED CONSIDERATI ON OF THE FACTS OF THE CASE AND THE SUBMISSIONS MADE BEFORE HIM, OBSER VED THAT THE ITA NO.1215/HYD/2011 SMT. ANJU GAGGAR, SECUNDERABAD. 3 MAGNITUDE AND FREQUENCY OF TRANSACTIONS ARE NO GROU NDS TO DETERMINE WHETHER THE SAME IS CAPITAL GAIN OR BUSINESS INCOME , AND WHAT IS IMPORTANT IS THE INTENTION OF THE ASSESSEE AND THE TREATMENT GIVEN BY HER IN HER BOOKS OF ACCOUNT. EXAMINING THE MATTER IN T HAT CONTEXT, AND REFERRING TO THE DECISION OF THE APEX COURT IN THE CASE OF CIT V/S. ASSOCIATED INDUSTRIAL DEVELOPMENT CO. PVT. LTD. (82 ITR 586), THE CIT(A) NOTED ON PERUSAL OF THE ASSESSEES RETURN THAT DIV IDEND HAS BEEN DECLARED AS THE SHARES ARE HELD AS INVESTMENT AND T HERE ARE NO SHARES HELD AS STOCK IN TRADE. THE INTENTION AT THE TIME OF ACQUIRING THE SHARES IS MOST PREDOMINANT AND A REVIEW OF THE TRANSACTIONS S HOWS THAT THE ASSESSEE CONDUCTED HERSELF MERELY AS AN INVESTOR. THE ASSESSING OFFICER DID NOT POINT OUT ANYTHING FROM THE RECORDS TO COME TO ANY CONTRARY TO THE CLAIM OF THE ASSESSEE THAT SHE DID NOT INTEND T O PURCHASE THE SHARES AS AN INVESTMENT, BUT TO TRADE THEM AS STOCK IN TRA DE ON FREQUENT BASIS AND ON HIGH VOLUMES. MERE INTENTION TO EARN PROFIT AT A LATER DATE DOES NOT CONVERT AN INVESTMENT INTO TRADING TRANSACTIONS . THE CIT(A) NOTED THAT DURING THE ASSESSMENT PROCEEDINGS IN HER REPL Y TO THE SHOW CAUSE NOTICE, ASSESSEE ALSO CATEGORICALLY STATED THAT HE R INTENTION IS TO HOLD THE SHARES AND EARN AN ENDURING BENEFIT AS AN INVESTMEN T. HE NOTED THAT THERE IS NO SYSTEMATIC, ORGANISED ACTIVITY WITH PRO FIT MOTIVE TO INDICATE A REGULARITY IN FREQUENCY AND VOLUME. THE CIT(A) OB SERVED THAT THERE ARE NO ANALYSTS, DEALING ASSISTANTS OR THE APPELLANT AC QUIRED ASSETS LIKE COMPUTER HARDWARE AND SOFTWARE, ETC. TO INDICATE AN ORGANIZED ACTIVITY SUPPORTING THE PRESUMPTION OF BUSINESS. ON THE OTH ER HAND, THE CIT(A) NOTED, INVESTING THROUGH A DISCRETIONARY PORTFOLIO MANAGER IS INDICATIVE OF AN INVESTMENT WHICH THE ASSESSEE DID. THE CIT(A) FURTHER NOTED THAT THE TERM FREQUENCY IS A VAGUE TERM AND FRANKLY NU MBER OF TRANSACTIONS CANNOT BE SPECIFIED, AND ONE HAS TO TAKE INTO ACCOU NT, THE NATURE, SOURCE AND COMPOSITION OF INCOME AND THE FUNDING PATTERN O F SHARE TRANSACTIONS AMONG OTHER FACTORS. IN HIS BEHALF, HE MADE REFERE NCE TO THE DECISION OF THE APEX COURT IN THE CASE OF JANKI RAM BAHADUR RAM V/S. CIT (57 ITR ITA NO.1215/HYD/2011 SMT. ANJU GAGGAR, SECUNDERABAD. 4 21), DULY EXTRACTING THE RELEVANT PORTION THEREOF F ROM PAGE 27 OF THE REPORTS (57 ITR). FOR THESE AND FURTHER REASONS DIS CUSSED IN PARA 6.9 OF THE IMPUGNED ORDER, THE CIT(A) CONCLUDED THAT THE PROFIT FROM SALE OF SHARES SHOULD BE CONSIDERED AS INCOM E FROM SHORT TERM CAPITAL GAINS AND DIRECTED THE ASSESSING OFFICER ACCORDINGLY. 5. AGGRIEVED BY THE ABOVE ORDER OF THE CIT(A), RE VENUE IS IN APPEAL BEFORE US. 6. LEARNED DEPARTMENTAL REPRESENTATIVE, STRONGLY S UPPORTING THE ORDER OF THE ASSESSING OFFICER, FILED WRITTEN S UBMISSIONS AND EXPLAINED THAT THE ASSESSEE HAS BEEN INDULGING IN PURCHASE AN D SALE OF SHARES AS IN THE NATURE OF ADVENTURE IN THE NATURE OF TRADE. HE HIGHLIGHTED THE FOLLOWING FACTORS NOTED BY THE ASSESSING OFFICER FO R ARRIVING AT THE CONCLUSION THAT THE ASSESSEE HAS BEEN INDULGING IN BUSINESS IN SHARES- (A) FREQUENT PURCHASE AND SALE OF SHARES (B) ALL THE SCRIPS PURCHASED DURING THE YEAR HAVE BEEN SOLD BY THE END OF THE YEAR. (C) THE ARGUMENTS OF THE ASSESSEE THAT THERE IS NO STOCK IN TRADE HAS NO MERIT SINCE ALL THE SHARES PURCHASED DURING THE YEAR WERE SOLD OFF DURING THE YEAR ITSELF, MEANING THEREBY TH AT THERE WAS NOTHING LEFT TO BE IN STOCK AT THE END OF THE YEAR. (D) THERE IS NO MERIT IN THE ASSESSEES CONTENTION THAT THE SHARES WERE BROUGHT FORWARD FROM EARLIER YEARS AND THAT T HEY SUPPORT THEORY OF INVESTMENT AS THOSE SHARES WERE ONLY BROU GHT FORWARD AND THEY DO NOT DETERMINE THE CONDUCT AND INTENT. (E) THE SHARES WERE PURCHASED AND SOLD WITHIN SHORT INT ERVALS. HE SUBMITTED THAT THE ASSESSING OFFICER HAS FOLLOWE D THE GUIDELINES ISSUED BY THE BOARD VIDE CIRCULAR NO.4 OF 2007, BY CONSIDE RING THE MAGNITUDE, ITA NO.1215/HYD/2011 SMT. ANJU GAGGAR, SECUNDERABAD. 5 PERIOD OF HOLDING, FREQUENCY AND MOTIVE BEHIND PURC HASE, BEFORE ARRIVING AT THE CONCLUSION THAT THE ASSESSEE ENGAGED HERSELF IN BUSINESS OF DEALING IN SHARES. THE ASSESSING OFFICER ALSO DEMONSTRATED THE BUSINESS CARRIED ON BY THE ASSESSEE IN SHARES BY LISTING OUT THE TRA NSACTIONS WHEREIN THE SHARES WERE PURCHASED AND SOLD WITHIN A PERIOD OF L ESS THAN 60 DAYS. THE LEARNED DEPARTMENTAL REPRESENTATIVE FURTHER SUBMITT ED THAT THE EVIDENCE ON RECORD CLEARLY POINTS OUT THAT THE ASSESSEE HAS BEEN MAINTAINING TWO PORTFOLIOS AND IN THE TRADING PORTFOLIO THERE IS EV IDENCE OF ADVENTURE IN THE NATURE OF TRADE AS THERE WAS PURCHASE AND SALE OF S HARES FOR PROFIT OR LOSS. HE SUBMITTED THAT THE ORDER OF THE CIT(A) IS ALSO CONTRADICTORY AS THE MATERIAL FACTS GATHERED BY THE ASSESSING OFFICE R POINTING OUT THE INTENTION OF THE ASSESSEE WERE IGNORED, AND THE CIT (A) HAS GONE BY THE ASSERTIONS OF THE ASSESSEE BEFORE HIM THAT SHE IS A N INVESTOR WITHOUT PROVING THE SAME. 7. THE LEARNED COUNSEL FOR THE ASSESSEE ON THE OTH ER HAND, REITERATING THE CONTENTIONS URGED BEFORE THE LOWER AUTHORITIES, STRONGLY SUPPORTED THE ORDER OF THE CIT(A). LD AR ALSO FILED WRITTEN SUBMISSION AND ENCLOSED THE LIST OF TRANSACTIONS HIGHLIGHTING THE FREQUENCY OF THE TRANSACTIONS. HE SUBMITTED THAT THE ASSESSEE HAS A LWAYS BEEN TREATED AS AN INVESTOR AND NOT AS A TRADER, AND EVEN IN THE RE TURNS OF INCOME FOR ALL THE YEARS, INCLUDING THE YEAR UNDER CONSIDERATION, THE ASSESSEE DECLARED THE SHARES PURCHASED AS INVESTMENT ONLY, AND NEVER TREATED AS STOCK-IN- TRADE. AS SUCH, THERE WAS NO REQUIREMENT OF VALUING THE SHARES HELD AS INVESTMENT AT THE END OF THE FINANCIAL YEAR AT COST OR MARKET PRICE WHICHEVER IS LESS, AND CLAIMING ANY RESULTANT LOSS THEREFROM. HE POINTED OUT THAT THERE ARE CONTRADICTIONS IN THE OBSERVATIO NS OF THE ASSESSING OFFICER ON PAGES 2 AND 3 OF THE ASSESSMENT ORDER. HE SUBMITTED THAT THE ASSESSEE GOT ALL THE PURCHASES CREDITED TO HER DP A CCOUNT MAINTAINED WITH THE BROKER. CONSEQUENTLY, ALL THE PURCHASES MA DE EVEN THROUGH THE POOL ACCOUNT ARE SOLD ONLY AFTER CREDITING SUCH PUR CHASES INTO HER DP ITA NO.1215/HYD/2011 SMT. ANJU GAGGAR, SECUNDERABAD. 6 ACCOUNT AND DEBITING SUCH DP ACCOUNT AT THE TIME OF SALE OF SUCH SHARES. THERE WAS NO DIRECT SALE FROM BROKERS POOL ACCOUNT , AS SUGGESTED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE. HE POINTED OU T THAT THERE WAS NO INTRA-DAY PURCHASE AND SALE OF ANY SCRIP AND THIS I S AN IMPORTANT FACTOR IN FAVOUR OF THE ASSESSEE, WHICH CONFIRMS THE STATUS O F THE ASSESSEE AS AN INVESTOR. THE ASSESSING OFFICER, ACCORDING TO THE LEARNED COUNSEL, ASSUMED HIMSELF AND REMARKED THAT MANY SCRIPS WERE HELD EVEN FOR SIXTY DAYS. IN TERMS OF THE PROVISOS TO S.2(4A), ANY SHA RE IN A COMPANY LISTED IN A RECOGNISED STOCK EXCHANGE AND HELD FOR NOT MOR E THAN 12 MONTHS WOULD BE A SHORT TERM CAPITAL ASSET. RELYING ON TH E DECISION OF THE PUNJAB AND HARYANA HIGH COURT IN THE ASSESSEE OF CI TV/S. VED PRAKASH(207 ITR 148), HE SUBMITTED THAT THE TERM H ELD SIMPLY MEANS A RIGHT HELD AND NEED NOT NECESSARILY BE OWNED. HE A LSO PLACED RELIANCE ON THE DECISIONS OF THE BOMBAY HIGH COURT IN THE CASE OF CIT V/S. GOPAL PUROHIT (336 ITR287), WHICH ACCORDING TO HIM SQUARE LY COVERS THE ISSUE IN FAVOUR OF THE ASSESSEE. 8. WE HEARD BOTH THE PARTIES AND PERUSED THE IMPUG NED ORDERS OF THE LOWER AUTHORITIES AND OTHER MATERIAL AVAILAB LE ON RECORD. WE HAVE ALSO GONE THROUGH THE WRITTEN SUBMISSION FILED BY T HE PARTIES, REITERATING THEIR RESPECTIVE CONTENTIONS URGED BEFORE US. WE FI ND THAT THE CIT(A) HAS MORE OR LESS DETERMINED THE NATURE OF THE AMOUNTS R EALIZED BY THE ASSESSEE ON THE SALE OF SCRIPS BASED ON THE INTENTION OF THE ASSESSEE IN ACQUIRING THE RELEVANT SCRIPS AND THE SAID INTENTIO N IS DISPLAYED BY VIRTUE OF THE ENTRIES IN BOOKS. THE IMPUGNED ORDER INDICA TES THAT THE ASSESSEE WAS HAVING TWO PORT FOLIOS OUT OF WHICH ONLY ONE IS FOR INVESTMENT AND THE THE INTENTION OF THE ASSESSEE AT THE TIME OF ACQUIS ITION OF SHARES ALSO CONTRIBUTES TO THE DECISION ON THE NATURE OF THE TR ANSACTION, VIZ. WHETHER IT IS BY WAY OF INVESTMENT OR AS PART OF A BUSINESS STOCK. HOWEVER, THAT INTENTION IS ONLY ONE OF THE SEVERAL CONTRIBUTORY F ACTORS THAT HAVE TO BE EXAMINED HAS TO BE EXAMINED BEFORE ARRIVING AT ANY CONCLUSION AS TO THE ITA NO.1215/HYD/2011 SMT. ANJU GAGGAR, SECUNDERABAD. 7 NATURE OF A TRANSACTION. EVEN THE INTENTION OF THE ASSESSEE AT THE TIME OF ACQUISITION HAS TO BE ASCERTAINED BY EXAMINING THE CONDUCT OF THE ASSESSEE THROUGH THE TREATMENT GIVEN AT THE TIME OF PURCHASE, PERIODICITY OF HOLDING AND THE SUBSEQUENT CONDUCT, BESIDES MULT IPLICITY TRANSACTIONS IN THE PURCHASE AND SALE OF SHARES NOT ONLY IN TERM S OF VOLUME BUT ALSO FREQUENCY. FURTHER, THE ASSESSEE MAY ALSO HOLD SO ME SCRIPS BY WAY OF INVESTMENT AND OTHERS AS PART OF BUSINESS CARRIED O N IN SHARES, IN WHICH CASE THE MATTER HAS TO BE EXAMINED MORE DEEPLY TO A RRIVE AT THE NATURE OF RESULTANT GAIN/LOSS IN RESPECT OF EACH SALE TRAN SACTION. INTENTION TO EARN PROFIT BY SELLING IS ALSO NOT A CLINCHING FACT OR, BECAUSE SUCH INTENTION WOULD BE PREVALENT IN ALMOST ALL THE CASES. SOMETI MES, THE INTENTION OF THE ASSESSEE AT THE TIME OF PURCHASE OF A SCRIP MAY CHANGE SUBSEQUENTLY, IN WHICH CASE AGAIN, THE MATTER HAS TO BE EXAMINED LOOKING TO THE BONA FIDE CONDUCT OF THE ASSESSEE AT THE RELEVANT POINT OF T IME. 9. THUS, IT IS THE COMBINATION OF SEVERAL SUCH FACT ORS THAT DETERMINES THE NATURE OF A TRANSACTION, BESIDES THE INTENTION OF THE ASSESSEE AT THE TIME OF PURCHASE AS COULD BE ASCERTAINED FROM THE S URROUNDING FACTS AND CIRCUMSTANCES OF THE CASE AND THE OVERALL CONDUCT O F THE ASSESSEE IN THE MATTER OF ONES TRANSACTIONS IN SHARES. IN THIS REG ARD OUR OBSERVATIONS/DECISIONS IN THE CASES OF INDIVIDUALS NAMELY, SMT.NANDURY SOBHA RANI, HYDERABAD (IN ITA NO.332/HYD/2011) AN D SHRI NANDURY TEJASWY(ITA NO333/HYD/2011), ARE RELEVANT. IN THE SAID CASES, FOR WANT OF BASIC FACTS AND FINDINGS ON CERTAIN ISSUES, WE SET ASIDE THE MATTER TO THE FILE OF THE ASSESSING OFFICER TO RE-EXAMINE THE MATTER WITH CERTAIN DIRECTIONS FOR ASSESSMENT YEAR 2007-08, VIDE OUR OR DER DATED 2.7.2012. RELEVANT PORTION OF THE SAID ORDER IS REPRODUCED BE LOW FOR COMPLETENESS OF THIS ORDER- 16. .THE CASE OF THE ASSESSEE IS THAT WHETHER TH E TRANSACTIONS IN QUESTION SHOULD BE TREATED AS BUSINESS OR INVEST MENTS IS THE QUESTION OF FACT OR AT THE MOST A MIXED QUESTION OF LAW AND FAC T AND THE SAME VARY ITA NO.1215/HYD/2011 SMT. ANJU GAGGAR, SECUNDERABAD. 8 FROM CASE TO CASE. TRANSACTIONS OF EACH CASE HAVE T O BE DECIDED INDEPENDENTLY BASED ON MATERIAL FACTS OF THAT CASE. WE HAVE PERUSED VARIOUS CITATIONS PLACED BY THE PARTIES BEFORE US. 17. THE GIST OF THE SOME OF THE CITATIONS QUOTED B EFORE ARE AS FOLLOWS. IN THE CASE OF CIT V/S. PNB FINANCE & INDUSTRIES LT D.(46 DTR 345), WHEREIN SHARES WERE HELD FOR SEVEN YEARS, THE DELHI HIGH COURT HELD THE SAME AS INVESTMENT AND PROFIT ON SALE IS ASSESSABLE AS CAPITAL GAINS, NOTWITHSTANDING THE FACT THAT THE OBJECT INCORPORAT ED IN ITS MEMORANDUM OF ASSOCIATION STATES THAT THE ASSESSEE CAN DEAL IN SH ARES. IT WAS HELD THAT A TAX PAYER CAN HAVE TWO PORTFOLIOS, I.E. AN INVESTME NT PORTFOLIO COMPRISING OF SECURITIES WHICH ARE TO BE TREATED AS CAPITAL AS SETS, AND A TRADING PORTFOLIO COMPRISING OF STOCK IN TRADE, WHICH ARE T O BE TREATED AS TRADING ASSETS. SIMILAR IS THE VIEW TAKEN BY THE GUJARAT HIGH COURT IN THE CASE OF CIT V/S. NIRAJ AMIDHAR SURTI(48 DTR 33), WHERE SHAR ES WERE HELD FOR 14 MONTHS. SIMILARLY, IN THE CASE OF CIT V/S. N.S.S.I NVESTMENTS (P) LTD., MADRAS HIGH COURT, BASED ON THE BOOK ENTRIES MADE A ND CONSIDERING THE FACT THAT THE SHARES IN QUESTION WERE NEVER TREATED BY THE ASSESSEE AS STOCK-IN-TRADE AND THEY WERE HELD FOR EARNING DIVID END ONLY, HELD THE SHARES IN QUESTION AS INVESTMENT AND THE RESULTANT PROFIT ON SALE AS ASSESSABLE UNDER THE HEAD CAPITAL GAINS, AS AGAIN ST THE ACTION OF THE DEPARTMENT IN ASSESSING THEM AS INCOME FROM BUSINES S. IN THE CASE OF CIT V/S. TRISHUL INVESTMENTS LTD.(305 ITR 434), THE MADRAS HIGH COURT, OBSERVING THAT THE ASSESSEE-COMPANY HAVING BEEN INC ORPORATED TO ENGAGE IN THE BUSINESS OF INVESTMENT IN SHARES AND SECURIT IES, HELD THAT SHARES PURCHASED COULD NOT BE A BUSINESS ASSET IN THE HAND S OF THE ASSESSEE, AND HENCE THE ASSESSEE RIGHTLY OFFERED THE RESULTANT GA IN ON SALE UNDER THE HEAD CAPITAL GAINS. IN THE CASE OF JANAK S.RANG WALLA VS/ ACIT(11 SOT 627), MUMBAI BENCH OF THE TRIBUNAL HELD THAT MERE M AGNITUDE OF THE TRANSACTION DOES NOT CHANGE THE NATURE OF TRANSACTI ON, WHICH IS BEING ASSESSED AS INCOME FROM CAPITAL GAINS IN THE PAST S EVERAL YEARS. ON THE FACTS OF THE DISCLOSURE OF PROFITS PARTLY AS BUSINE SS INCOME AND PARTLY AS SHORT TERM CAPITAL GAINS, HON BLE AP HIGH COURT HELD IN THE CASE OF PVS RAJU 340 ITR 75 THAT THE IMPUGNED SHORT TERM CAPITAL GAINS ARE ASSASSABLE AS BUSINESS PROFITS. SAID HIGH COURT OBSERVED THAT WHEN THE FREQUENCY OF TRANSACTIONS ARE HIGH AND THE DOMINANT INTENTION IN PURCHASE OF SHARE IS RESALE AND NOT FOR EARNING OF THE DIVIDEND AND OF COURSE, THE FIGURES RELATING TO THE FREQUENCY OR VOLUME ARE NOT MENTIONED IN THE SAID JUDGMENT. SIMILARLY, THE COORDINATE BENCH DECISION IN THE CASE OF A SPECTRA SHARES AND SCRIPS (P) LTD VIDE ITA NO 748/HYD/2011 HAS BEEN EXPLAINED BY THE ASSESSEE AS DISTINGUISHABLE ON FACTS FROM THAT OF THE ASSESSEE IN VIEW OF THE EXTR EMELY HIGH FREQUENCY OF SHARES TRANSACTION. ASSESSEE FILED A CHART SHOWING THE NINE DISTINCT DIFFERENCES FROM THE FACTS OF THIS CASE AND WE FIND THAT THE SCALE OF TRANSACTIONS AND THE VOLUME IS RELATIVELY MORE VIS A VIS THE FACTS OF THE INSTANT CASE. 18. THE DECISION OF THE TRIBUNAL IN THE CASE OF HA RSHA MEHTA DATED 16.7.2010 IN ITA NO.1859/MUM/2009, WAS PRONOU NCED ON THE FACTS OF 70 TRANSACTIONS INVOLVING 35 SCRIPS WITH THE TUR NOVER OF NEARLY RS.3- ITA NO.1215/HYD/2011 SMT. ANJU GAGGAR, SECUNDERABAD. 9 CRORES. TRIBUNAL CAME TO THE CONCLUSION THAT THE GAIN ON SA LE OF THE SHARES HAS TO BE TREATED AS BUSINESS INCOME, WHEN T HE HOLDING PERIOD IS ONE MONTH TO SEVEN MONTHS. IN THE CASE OF HARSHA MEHTA (SUPRA), THE BOMBAY BENCH OF THE TRIBUNAL HAS DECID ED THE ISSUE BASED ON THE FACT THAT THE ASSESSING OFFICER ARTIFICIALLY CA TEGORIZED THE TRANSACTIONS BASED ON THE HOLDING PERIOD, BY CONSIDERING THE GAI N ON SALE OF SHARES HELD FOR MORE THAN 30 DAYS AS CAPITAL GAIN ARISING FROM INVESTMENT, AND ON SALE OF SHARES HELD FOR LESS THAN 30 DAYS AS BUSINESS IN COME. HOWEVER, THE TRIBUNAL HAS NOT APPROVED SUCH CATEGORIZATION MADE BY THE ASSESSING OFFICER. TRIBUNAL DECIDED THE SAME CONSIDERING THE WELL ESTABLISHED LEGAL PRINCIPLES ON THE ISSUE AND PARAGRAPH 12 IS RELEVAN T, WHICH IS AS UNDER. 12. . (A) IT IS POSSIBLE FOR AN ASSESSEE TO BE BOTH AN INVEST OR AS WELL AS DEALER IN SHARES; (B) WHETHER A TRANSACTION OF SALE AND PURCHASE OF SHARE S IS A TRADING OR INVESTMENT TRANSACTION IS A MIXED Q UESTION OF LAW AND FACT. (C) WHETHER A PARTICULAR HOLDING IS BY WAY OF INVESTMEN T OR OF STOCK OF STOCK IN TRADE IS A MATTER WITHIN T HE KNOWLEDGE OF THE ASSESSEE AND IT IS FOR THE ASSESSEE TO PROD UCE EVIDENCE FROM THE RECORDS AS TO WHETHER HE MAINTAINED ANY DI STINCTION BETWEEN SHARES HELD AS INVESTMENTS AND THOSE HELD A S STOCK IN TRADE. (D) THE TREATMENT IN THE BOOKS OF AN ASSESSEE IS NOT CONCLUSIVE AND IF THE VOLUME, FREQUENCY AND REGULAR ITY AT WHICH TRANSACTIONS ARE CARRIED OUT INDICATE SYSTEMA TIC AND ORGANISED ACTIVITY WITH PROFIT MOTIVE, THEN IT BECO MES BUSINESS PROFIT & NOT CAPITAL GAIN. (E) PURCHASE WITH INTENTION TO RESELL CAN CONSTITUTE CA PITAL GAIN OR BUSINESS PROFIT DEPENDING ON CIRCUMSTANCES LIKE QUANTITY OF PURCHASE AND NATURE OF ACTIVITY. (F) NO SINGLE FACT HAS ANY DECISIVE SIGNIFICANCE AND TH E QUESTION MUST BE ANSWERED DEPENDING UPON SELECTIVE EFFECT OF ALL RELEVANT MATERIALS BROUGHT ON RECORD. 19. FROM THE ABOVE, IT IS EVIDENT THAT THERE IS NO ONE FIXED CRITERION TO DECIDE THE ISSUE ON HAND AND THERE IS NEED FOR CONSIDERING THE VARIOUS FACETS AND WEIGH ALL OF THEM BEFORE DECIDI NG THE GROUNDS. APEX COURT DECISION IN THE CASE OF ASSOCIATED INDUSTRIAL DEVELOPMENT CO. P. LTD. (82 ITR 586); IN THE CASE OF HOLCK LARSEN (168 ITR 67); AAR DECISION IN THE CASE OF 288 ITR 641 AND CBDT CIRCULAR NO.4 OF 2007 DATED 15.6.2007 ARE HELPFUL FOR RELEVANT GUIDELINES FOR DECIDING WHETHE R A PARTICULAR TRANSACTION RESULTED IN CAPITAL GAINS OR OTHERWISE. GIVEN THE PECULIAR FACTS OF THE CASES, IN OUR OPINION, ALL THE AVAILABLE FACETS CAN BE SUM MARIZED UNDER THE ITA NO.1215/HYD/2011 SMT. ANJU GAGGAR, SECUNDERABAD. 10 FOLLOWING HEADINGS FOR THE PURPOSE OF THE ANALYSIS AND ADJUDICATION AND THEY ARE: (A) TREATMENT AS GIVEN IN THE BOOKS OF ACCOUNT IN RESPE CT OF THE IMPUGNED TRANSACTIONS. (B) FREQUENCY, MAGNITUDE AND REGULARITY OF THE IMPUGNED TRANSACTIONS; (C) OTHER ISSUES SUCH AS WHETHER THE DIVIDEND IS EARNED OR WHETHER THE TRANSACTIONS ARE DELIVERY BASED OR OTHERWISE; THE C ONDUCT OF THE ASSESSEE; (D) ORIGINAL AND DOMINANT INTENTION; AND (E) CONSISTENCY OF THE REVENUE APPROACH IN ACCEPTING TH E CLAIM OF THE ASSESSEE DESPITE THE APPLICABILITY OF THE PRINCIPLE OF RES JUDICATA ROLE OF JUDGMENT OF THE APEX COURT IN THE CASE OF G OPAL PUROHIT (SUPRA) 20. LET US EXAMINE HEREUNDER, THE ABOVE ASPECTS I N THE LIGHT OF THE FACTS OF THE PRESENT CASES. (A) TREATMENT GIVEN IN THE BOOKS OF ACCOUNT: IT IS AN UNDISPUTED FACT THAT BOTH THE ASSESSEES UNDER CONSIDERATION HA VE BEEN CONSISTENTLY SHOWING THE IMPUGNED TRANSACTIONS AS INVESTMENTS AN D CONSEQUENTLY, THE PROFITS ON SALE OF SUCH INVESTMENTS HAVE TO BE TREA TED AS CAPITAL GAINS. THERE IS ALSO NO DISPUTE SO FAR AS CLAIM ON LONG TE RM CAPITAL GAINS IS CONCERNED, AS THE AO ACCEPTED WITHOUT DISTURBING TH E CLAIM OF THE ASSESSEES. THE DISPUTE RELATES TO THE SHORT TERM CA PITAL GAINS SEGMENT ONLY. THE ASSESSING OFFICER TOOK THE VIEW THAT CONS IDERING THE HOLDING PERIOD OF THE SHARES IN QUESTION, THE PROFIT ON THE SALE OF THE SHARES HAS TO BE TREATED AS BUSINESS INCOME. THE ASSESSING OFFICE R ANALYSED THAT IN THE CASE OF SMT.SHOBHA RANI, OUT OF 174 TRANSACTIONS, 4 3 TRANSACTIONS INVOLVED THE SHARES HELD FOR A PERIOD LONGER THAN 4 MONTHS A ND REST OF 131 TRANSACTIONS RELATE TO SHARES WERE HELD FOR PERIOD LESS THAN FOUR MONTHS ONLY. IN THE CIRCUMSTANCES, THE ASSESSING OFFICER CAME TO THE CONCLUSION THAT THE TRANSACTIONS HELD FOR LESS THAN FOUR MONTH HAVE TO BE HELD AS BUSINESS TRANSACTIONS AND THE SAME WAS CONFIRMED BY THE CIT(A). BUT, THE FACT IS THAT ALL THESE TRANSACTIONS WERE SHOWN AS I NVESTMENTS SO FAR AS THE ENTRIES IN THE BOOKS OF ACCOUNT ARE CONCERNED. THE CIT(A) DISCUSSED THIS FACTUAL POSITION STATING THAT THE ENTRIES IN THE BO OKS OF ACCOUNT ARE NOT DECISIVE FACTOR. IN THE PROCESS, THE CIT(A) IGNORE D THE LEGAL POSITION THAT NO SINGLE CRITERION OF THIS KIND IS GOING TO DECIDE THE NATURE OF THE TRANSACTION AND THERE IS NEED FOR WEIGHING ALL THE FACETS BOTH QUANTITATIVE AND QUALITATIVE FACETS OF THE TRANSACTIONS. IN THE PROCESS, HE IGNORED THE SET LEGAL PRINCIPLE THAT THE VARIOUS ASPECTS NOTED ABOVE HAVE TO BE CUMULATIVELY CONSIDERED FOR DECIDING THE ISSUE AND NO SINGLE ASPECT LIKE ENTRIES IN THE BOOKS CAN BE CONSIDERED AS A CLINCHI NG ONE TO BE VIEWED IN ISOLATION. THEREFORE, WE CANNOT APPROVE THIS KIND OF STAND-ALONE BASED DECISION OF THE CIT(A). HE SHOULD HAVE CONSIDERED O THER PARAMETERS ALSO WHILE DECIDING THE NATURE OF THE TRANSACTIONS IN TH E INSTANT CASES AND THE PARAMETERS MAY BE BOOK ENTRIES, DIVIDEND EARNINGS, FACT OF DELIVERY BASED TRANSACTIONS, IMPUGNED INVESTMENTS ARE MADE OUT OF THE OWN FUNDS AND NOT OUT OF THE BORROWINGS ETC. IT IS A WELL ESTABLI SHED LEGAL PRINCIPLE THAT THE ITA NO.1215/HYD/2011 SMT. ANJU GAGGAR, SECUNDERABAD. 11 ENTRIES IN THE BOOKS OF ACCOUNT ARE NOT DECISIVE BU T IT IS EQUALLY A SETTLED LEGAL PRINCIPLE VIDE THE JUDGMENT IN THE CASE OF PV S RAJU, SUPRA THAT CERTAINLY IT IS ONE OF THE CRITERIA WHICH MUST BE C ONSIDERED FOR DECIDING THE NATURE OF THE TRANSACTIONS. IN THE SAID JUDGMENT, H ONBLE AP HIGH COURT COMMENTED THAT NO SINGLE CRITERION IS DECISIVE IN D ETERMINING THE QUESTION WHETHER A PARTICULAR RECEIPT IS CAPITAL OR REVENUE. THE ANSWER TO THE QUESTION MUST ULTIMATELY DEPEND ON THE FACTS OF EAC H PARTICULAR CASE AS HELD BY THE SUPREME COURT IN THE CASE OF SAURASHTRA CEMENT LTD 325 ITR 422. THEREFORE, CONSIDERING THE ENTRIES IN THE BOOK S OF THE ASSESSEES, THE ORIGINAL INTENTION IS DISPLAYED AND ON THIS SCORE, THE ASSESSEE CLAIM GETS STRENGTH. (B) FREQUENCY, MAGNITUDE AND REGULARITY OF THE TRANSACTIONS : WE HAVE NOTED HEREINABOVE, THE NUMBER OF TRANSAC TIONS, FREQUENCY, VOLUME AND REGULARITY OF THE IMPUGNED TR ANSACTIONS RELATING TO SHARES HELD FOR PERIOD LESS THAN 12 MONTHS. PARA 6. 2 OF THE CIT(A) ORDERS IN BOTH THE CASES PROVIDES NUMERICAL OF THE TRANSACTIO NS AND ACCORDINGLY, THE RS 29.55 CRORES IS THE TOTAL TURNOVER AND IT INCLUD ES BOTH PURCHASES AND SALES IN THE CASE OF SOBHA RANI AND IN THE CASE OF TEJESWY, THE PURCHASES ARE TO THE TUNE OF RS 77 CRORES AND SALES OF RS 80 CRORES. AO IS OF THE VIEW THESE FIGURES DENOTE HUGE AND HIGH FREQUENCY. FURTH ER, SCRIPS TRANSACTED ARE ONLY 138 IN THE CASE OF TEJESWY AND 54 IN THE C ASE OF SOBHA RANI. AO DESCRIBED THEM AS VERY HIGH AND THE SAME WAS CONFIR MED BY THE CIT(A). BUT NEITHER OF THE ORDERS CONTAINS THE REASONS FOR OPINING OR DESCRIBING IT SO. WE HAVE TO EXAMINE THE SCALE OF FREQUENCY OF SH ARE TRANSACTIONS AND FIND THAT THERE IS THE TERM HIGH FREQUENCY IS UND EFINED. HOWEVER, IT WAS HELD BY THE MUMBAI BENCH OF EH TRIBUNAL IN THE CASE OF NAGINDAS P.SHETH (ITA NO.961 & 1836/MUM/10), COPY OF WHICH IS FILED AT PAGE 48 OF THE PAPER-BOOK THAT MERELY BECAUSE THE ASSESSEE TRANSA CTED IN 158 SHARES, IT SHOULD NOT BE TAKEN AS SOLE CRITERIA TO COME TO THE CONCLUSION THAT THE ASSESSEE IS A TRADER IN SHARES. THUS PARA 7 OF THE SAID ORDER IS RELEVANT IN THIS REGARD, AND RELEVANT PORTION OF THE SAME IS EX TRACTED BELOW- 7. ...SUCH BEING THE CASE, MERELY BECAUSE ASSESS EE TRANSACTED IN 158 SHARES THAT SHOULD NOT BE TAKEN A S A SOLE CRITERION TO COME TO THE CONCLUSION THAT ASSESSEE I S A TRADER IN SHARES. IT IS NOT IN DISPUTE THAT IN THE BOOKS OF ACCOUNTS ASSESSEE HAS DECLARED THE SHARES AS AN INVESTMENT AND THE FI NDING OF THE LEARNED CIT(A) THAT ONLY OWN FUNDS WERE UTILISED FO R PURCHASE OF SHARES WAS NOT CONTRADICTED BY THE LEARNED DR. IT WAS ALSO HIGHLIGHTED BY THE LEARNED CIT(A) THAT ASSESSEE HAD NOT INDULGED IN ANY SQUARING-UP OF THE TRANSACTIONS ON THE SAME DAY. ON A CONSPECTUS OF THE MATTER, WE ARE OF THE VIEW THAT T HE TRANSACTIONS OF PURCHASE AND SALE OF SHARES, IN THE INSTANT CASE , DESERVES TO BE CONSIDERED AS INVESTMENT AND PROFIT THEREON HAS TO BE ASSESSED TO TAX UNDER THE HEAD CAPITAL GAINS. WE DIRECT THE ASSESSING OFFICER ACCORDINGLY. SIMILAR VIEWS WERE EXPRESSED BY THE MUMBAI BENCH OF THE TRIBUNAL IN ANOTHER CASE OF JANAK S. RANGWALA (11 SOT 627)(MUM) , COPY OF WHICH IS ITA NO.1215/HYD/2011 SMT. ANJU GAGGAR, SECUNDERABAD. 12 FILED AT PAGE 10 OF THE PAPER-BOOK. AT PARA 6 OF TH E SAID ORDER OF THE TRIBUNAL, IT IS HELD THAT MERE VOLUME OF TRANSACTIO NS ENTERED INTO BY THE ASSESSEE WOULD NOT ALTER THE NATURE OF THE TRANSACT IONS. IN PARA 7 OF THE SAID JUDGMENT IT IS HELD AS FOLLOWS- 7. IN THE FACTS OF THE PRESENT CASE, THE ASSESSEE IS HOLDING THE SHARES AS INVESTMENT FROM YEAR TO YEAR. IT IS THE INTENTION OF THE ASSESSEE WHICH IS TO BE SEEN TO DETERMINE THE NATUR E OF TRANSACTION CONDUCTED BY THE ASSESSEE. THOUGH THE I NVESTMENT IN SHARES IS ON A LARGE MAGNITUDE BUT THE SAME SHALL N OT DECIDE THE NATURE OF TRANSACTION. SIMILAR TRANSACTIONS OF SALE AND PURCHASE OF SHARES IN THE PRECEDING YEARS HAVE BEEN HELD TO BE INCOME FROM CAPITAL GAINS BOTH ON LONG TERM AND SHORT TERM BASI S. THE TRANSACTION IN THE YEAR UNDER CONSIDERATION ON ACCO UNT OF SALE AND PURCHASE OF SHARES IS SAME AS IN THE PRECEDING YEAR S AND THE SAME MERITS TO BE ACCEPTED AS SHORT TERM CAPITAL GA INS. THERE IS NO BASIS FOR TREATING THE ASSESSEE AS A TRADER IN SH ARES, WHEN HIS INTENTION WAS TO HOLD THE SHARES OF INDIAN COMPANIE S AS AN INVESTMENT AND NOT AS STOCK IN TRADE. THE MERE MAGN ITUDE OF THE TRANSACTIONS DOES NOT CHANGE THE NATURE OF TRANSACT ION, WHICH ARE BEING ASSESSED AS INCOME FROM CAPITAL GAINS IN THE PAST SEVERAL YEARS. THE ASSESSING OFFICER IS DIRECTED TO SET OFF THE LONG TERM CAPITAL GAINS AGAINST THE SHORT TERM CAPITAL GAINS O F THE YEAR UNDER CONSIDERATION. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE ALLOWED. THUS, MERELY 158 SCRIPS WERE TRANSACTED AS IN THE C ASE OF NAGINDAS P.SHETH (SUPRA), THE TRIBUNAL CAME TO THE CONCLUSIO N THAT THE ORIGINAL INTENTION WHICH IS DISPLAYED BY THE ENTRIES IN THE BOOKS SHOULD BE GIVEN MORE WEIRTAGE OVER THE FREQUENCY OF TRANSACTIONS. A S SUCH, THERE ARE NO STANDARDS TO DESCRIBE PARTICULAR NUMBER OF TRANSACT IONS SHOULD BE DESCRIBED AS LOW OR AVERAGE OR HIGH OR VERY HIGH. LOW OR HIGH FREQUENCIES DEPEND HEAVILY ON THE EXTENT OF CAPITAL INFUSED BY THE ASS ESSEE AND IT VARY FROM ONE PERSON TO THE OTHER. IN THIS INSTANT CASE, THE FREQUENCY CANNOT BE DESCRIBED HIGH AS ON AN AVERAGE, THE ASSESSEE ENTER ED IN THE PURCHASE TRANSACTION NOT EVEN ONCE EVERY ACTIVE DAY. SAME IS THE DISCUSSION WITH REGARD TO OTHER FACETS SUCH AS MAGNITUDE AND REGULA RITY OF THE TRANSACTIONS. (C) ORIGINAL AND DOMINANT INTENTION: THIS IS ANOTHER ASPECT THE AP HIGH COURT HAS CONSIDERED IN THE CASE OF P V S R AJU SUPRA WHILE DECIDING THAT CASE. THE HONBLE HIGH COURT IS OF THE VIEW THE PURCHASES OF S HARES MADE WITH A VIEW TO RESELL FOR PROFIT FREQUENTLY SH OULD BE DESCRIBED AS BUSINESS TRANSACTIONS AND NOT THE CAPITAL GAINS TRA NSACTION. THUS, THE ISSUE OF DOMINANT INTENTION IS CLOSELY LINKED TO FREQUEN CY, MAGNITUDE AND TURNOVER OF THE TRANSACTIONS AS THE FREQUENCY IS DE PENDENT ON THE RESELL TRANSACTIONS. (D) OTHER ISSUES SUCH AS WHETHER THE DIVIDEND IS EA RNED OR WHETHER THE TRANSACTIONS ARE DELIVERY BASED OR OTHE RWISE; THE CONDUCT OF THE ASSESSEE: THERE IS NO DISPUTE ON THE FACT THAT THE ITA NO.1215/HYD/2011 SMT. ANJU GAGGAR, SECUNDERABAD. 13 ASSESSEES BEING INDIVIDUALS ARE NEITHER BROKERS OR SUB-BROKERS NOT THE CORPORATE BODIES. HOWEVER, IT APPEARS THAT THEY AR E WELL INFORMED INDIVIDUALS ABOUT THE CAPITAL MARKET TRENDS. REGAR DING DIVIDENDS, IT IS AN UNDISPUTED FACT THAT SOBHA RANI REGISTERED DIVIDEND S TO THE TUNE OF RS.2,38,408/- AND THE TRANSACTIONS IN QUESTIONS ARE ENTIRELY DELIVERY BASED. RS 8,38,073/- IS THE DIVIDEND EARNED BY TEJESWY, WH O ALSO REGISTERED THE DEALINGS WITH FUTURES AND OPTIONS IN THE YEAR UNDER CONSIDERATION. THUS, THESE FACTS GO TO SUPPORT AND STRENGTHEN THE STAND OF THE ASSESSEE THAT THEY ARE ONLY INVESTORS AND HELD THE SHARES IN QUES TION ONLY AS INVESTMENTS. (F) CONSISTENCY OF THE REVENUE APPROACH IN ACCEPTIN G THE CLAIM OF THE ASSESSEE DESPITE THE APPLICABILITY OF THE PR INCIPLE OF RES JUDICATA ROLE OF JUDGMENT OF THE APEX COURT IN TH E CASE OF GOPAL PUROHIT (SUPRA): THE JUDGMENT IN THE CASE OF GOPAL PUROHIT IS RELEV ANT FOR THE RATIO THAT THE REVENUE OUGHT TO MAINTAIN CONSIS TENCY OF TREATMENT TO THE CLAIMS OF THE ASSESSEE SO LONG AS THE MATERIAL FACTS OF ISSUE OVER THE AYS ARE IDENTICAL. THE CASE OF THE ASSESSEES BEFORE US IS THAT THE DECISION OF BOMBAY HIGH COURT AND APEX COURT IN THE CASE OF GOPAL PUROHIT (SUPRA) APPLIES. ON THE OTHER HAND, THE CASE OF THE REVENUE IS ENTIRELY OPPOSITE. IN THIS CONTEXT, WE HAVE EXAMINED THE FACTS OF THE CAS E OF SOBHA RANI AND CONSIDERED THE ASSESSEES ARGUMENT THAT THE ASSESSEE S HAVE BEEN CONSISTENTLY PURCHASING THE SHARES AND SELLING THE SAME, AND THE CLAIM OF THE ASSESSEES WAS ACCEPTED OVER THE YEARS BY THE AS SESSING OFFICER AND WITH THE EXCEPTION OF THE CURRENT AY AND SUBSEQUENT ONES. IN THIS YEAR AND THAT TOO ONLY IN THE SEGMENT OF SHORT TERM CAPI TAL GAINS, THE ASSESSING OFFICER HAS NOT ACCEPTED THE CLAIM OF THE ASSESSEE IN RESPECT OF SHARES HELD FOR LESS THAN ONE YEAR. THIS KIND OF INCONSISTENCY FROM THE POINT OF VIEW OF THE REVENUE IS NOT APPRECIATED IN VIEW OF THE DECIS ION OF THE APEX COURT IN THE CASE OF GOPAL PUROHIT (SUPRA). IT IS SO HELD BY THE COURT DESPITE THE SETTLED POSITION IN LAW THAT THE PRINCIPLE OF RES J UDICATA DOES NOT APPLY TO THE INCOME-TAX PROCEEDINGS. 10. WHILE DEALING WITH THE FACTS OF THAT CASE IN THE LIGHT OF THE ABOVE LEGAL PRINCIPLES, THE TRIBUNAL IN THOSE C ASES, DEALING WITH THE ALLEGATIONS BASED ON THE VOLUME AND FREQUENCY O F TRANSACTIONS, ETC., HELD THAT THE SAME HAVE TO BE AGAIN JUDGED ON CASE-TO-CASE BASIS. IN THIS BEHALF, THE TRIBUNAL OBSERVED AS FO LLOWS- 23. REGARDING THE ALLEGATION OF HIGH FREQUENCY, HIGH VOLUME OR MAGNITUDE, REGULARITY ETC, AS ALREADY DISCUSSED, TH ERE IS NO DEFINITION FOR THESE EXPRESSIONS. IT IS THE OPINION OF THE AO/CIT( A) WHICH IS FORMED NOT BASED ON ANY COMPARABLE CASES OR CASE LAWS. FOR SOM EBODY, ONE TRANSACTION FOR A DAY AND MAY NOT BE HIGH FOR THE O THERS, IT IS MAY BE A CASE OF INSIGNIFICANCE. NEITHER THE CIT(A) NOR TH E AO HAS BROUGHT OUT ANY COMPARABLE CASES TO DEMONSTRATE THAT THE TRANSACTI ONAL FREQUENCY OR ITA NO.1215/HYD/2011 SMT. ANJU GAGGAR, SECUNDERABAD. 14 NUMBER OF TRANSACTIONS HAVE TO BE BRACKETED AS HIG H AND THEREFORE, THE DOMINANT INTENTION OF THE ASSESSEE IN PURCHASE OF T HE SHARES IS TO RESELL THE SAME AND NOT FOR INVESTMENT. THE JURISDICTIONAL JUD GMENT IN THE CSE OF BVS RAJU SUPRA DOES NOT REFER TO THE NUMBER OF TRANSACT ION TO CATEGORISE THE FREQUENCY OF TRANSACTIONS AS HIGH. THEREFORE, IN OU R OPINION, WITH 174 TRANSACTIONS INVOLVING AROUND 58 SCRIPS IN THE CASE OF SOBHA RANI AND 138 SCRIPS IN THE CASE OF TEJESWY, THE SAME OUGHT NOT T O HAVE BEEN CONSIDERED TOO HIGH FOR AN YEAR AS ON AN AVERAGE BASIS AND AS THE ASSESSEES ENTERED INTO NOT EVEN ONE TRANSACTION PER ANY WORKING DAY. IT IS NOT THE CASE IN THE INSTANT CASES THAT THE ASSESSEES ENTERED INTO 10S O R 100S OR 1000S OF TRANSACTIONS EACH AND EVERY DAY. THEREFORE, THE ONE TRANSACTION EVERY ALTERNATE DAY SHOULD BY NO MEANS BE CONSIDERED HIGH . AT THE MAXIMUM, IN THE SCALE OF LOW, MIDDLE, HIGH AND VERY HIGH, THE A FOREMENTIONED TRANSACTIONAL FREQUENCIES OF THE PRESENT ASSESSEES MAY FALL SOME WHERE IN THE CATEGORIES OF LOW AND THE MIDDLE LEVELS AND CER TAINLY NOT IN HIGH AS HELD BY THE REVENUE AUTHORITIES. HOWEVER, OUR OBSER VATION IS SUBJECTED TO OUTCOME OF THE EXERCISE OF DELVING OF ANY COMPARABL E CASES BY THE CIT(A) IN THE REMAND PROCEEDINGS. 24. REGARDING VOLUME/TURNOVER, AROUND 25 CRORES I N THE CASE OF SOBHA RANI AND RS 70 CRORES OF PURCHASES + RS 88 CR ORES OF SALES IN THE CASE OF TEJESWY, IN OUR OPINION, WE NEED TO EXAMINE IF IT CONSTITUTES VERY HIGH OR OTHERWISE. IT IS A FACT THAT THE SIZE OF TH E TRANSACTIONAL VOLUME AND THE TURNOVERS ARE DEPENDENT ON TYPE SHARES TOO. THE ORDERS OF THE CIT(A) DOES NOT DISCUSS THE TYPE OF SHARES AND IF THE HIGH VALUE SCRIPS ARE INVOLVED. 25. IT IS ALSO RELEVANT TO MENTION HERE THAT THE MERE HIGH FREQUENCY DOES NOT DECIDE THE NATURE OF THE TRANSAC TION AS MERE BOOK ENTRIES DOES NOT DO SO. REGARDING TURNOVER, VOLUME AND FREQUENCY, IN THE CASE OF ACIT V/S. BRIGHT STAR INVESTMENT (P)LTD. (2 4 SOT 288), THE BOMBAY BENCH OF THE TRIBUNAL HAS HELD THAT THESE P ARAMETERS ARE NOT DETERMINANTS AND DECISIVE. AS PER THIS JUDGMENT, TH E BOOK ENTRIES AND THE INTENTION OF THE ASSESSEE ASSUMES VERY SIGNIFICANT. PROFIT EARNING MOTIVE OF THE ASSESSEE IS ALSO HELD TO BE NOT A DECIDING FACT OR. AS FOR THE PRINCIPLE OF CONSISTENCY AND APPLICABILITY OF THE DECISION OF TH E BOMBAY IN THE CASE OF GOPAL PUROHIT (SUPRA), WE FIND THAT THE SAME IS NOT PRIMA FACIE APPLICABLE TO THE FACTS OF THE PRESENT CASES IN VIEW OF THE MA TERIAL DIFFERENCES ON FACTS. THEREFORE, WE ARE OF THE OPINION, THE ISSUE HAS TO BE EXAMINED AGAIN BY THE CIT(A) TO ASSESS AND EVALUATE IF THE TRANSAC TIONAL FREQUENCY IN QUESTION FALL IN THE CATEGORY OF HIGH OR MIDDLE OR LOW. CIT(A) MAY ATTEMPT TO COLLECT REQUISITE DATA FOR DESCRIBING THE IMPUGN ED FREQUENCY AS HIGH AND THEREFORE GIVE FINDING ON THE DOMINANT INTENTION AS OUTLINED BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF BVS RAJU S UPRA. 26. DELIVERY BASED TRANSACTION OF SHARES TOGETHER WITH THE FACT OF ORIGINAL INTENTION OF TREATING THE SAME AS INVES TMENTS IN THE BOOKS OF ACCOUNTS STRENGTHEN THE ASSESSEES CLAIMS AS INVEST MENT. FACT OF EXISTENCE OF EARNING OF DIVIDEND IN BOTH THE CASES CEMENTS TH E ASSESSEES CLAIM. IT IS ALSO UNDISPUTED FACT THAT THE ASSESSEES OWN FUNDS WERE INVESTED IN THE ITA NO.1215/HYD/2011 SMT. ANJU GAGGAR, SECUNDERABAD. 15 SHARES AND NOT THE BORROWED FUNDS. IN OUR OPINION, THESE FINDINGS CERTAINLY GO IN FAVOUR OF THE ASSESSEES CLAIM. REGARDING THE CRITERION OF DIVIDEND EARNED BY THE ASSESSEE, WE FIND THAT THE ASSESSEE-S OBHA RANI EARNED THE DIVIDEND OF RS 2,38,408/- AND IT IS NOT KNOWN IF AN Y PART OF THE SAME RELATES TO THE IMPUGNED SHORT TERM CAPITAL ASSETS HELD AS STOCK IN TRADE BY THE AO. SIMILARLY, ASSESSEE- TEJESWY REGISTERED THE DIVIDEND AROUND RS 8 LAKHS AND THERE IS NO BREAK FOR THIS TOO. CIT(A) SHOULD OBTAIN THE SAME BEFORE COMMENTING ON THE ISSUE BASED THIS CRITERION TOO. 27. FURTHER, IT IS A SETTLED LEGAL PROPOSITION THA T MERE ENTRY OF TRANSACTIONS AS INVESTMENT IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE IS NOT CONCLUSIVE IN MATTERS OF DECIDING THE CAPITAL N ATURE OF THE SHARES TRANSACTIONS. HOWEVER, IT IS ALSO SETTLED LEGAL PRI NCIPLE, THE ENTRIES IN THE BOOKS AS INVESTMENT IS JUST ONE OF FACETS HELPFUL F OR DECIDING THE SAID NATURE. IT IS SO CONSIDERING THE INITIAL INTENTION AND MINDSET OF THE ASSESSEE. WHEN THE ASSESSEE ENTER INTO THE TRANSACT ION OF PURCHASE OF THE SHARE ON A PARTICULAR DAY/TIME AND THE ASSESSEE OR HIS ACCOUNTANT HAS TO PASS ENTRY OF SUCH TRANSACTION IN THE BOOKS OF ACCO UNTS, HE HAS TO TAKE A CONSCIOUS DECISION TO TREAT THE SAME EITHER AS INVE STMENT OR TRADING TRANSACTION AND THIS CONSCIOUS DECISION REFERS TO T HE INITIAL INTENTION MENTIONED ABOVE AND ASSUME VERY SIGNIFICANT FOR DEC IDING THE TRANSACTIONAL NATURE, WHETHER INVESTMENT OR TRADING ONE. IN THE I NSTANT CASE, THE UNDISPUTEDLY, THE ASSESSEE IS ENGAGED IN INVESTMENT PORTFOLIO AS ACCEPTED BY THE REVENUE WITH REGARD TO THE LONG TERM HELD SC RIPS. WE ALSO FIND THE REVENUE ARTIFICIALLY DIVIDED THE SAME BUNDLE OF SCR IPS OF THE SAME COMPANY INTO LONG TERM CAPITAL ONES AND THE STOCK IN TRADE SOLELY BASED ON THE HOLDING PERIOD. IN THE PROCESS, THE AO AND THE CIT( A) GAVE A SLIP TO THE SET PRINCIPLE THAT NO ONE FACET OR CRITERION LIKE HOLDING PERIOD SHALL DECIDE THE NATURE OF THE TRANSACTION. REVENUE OUGHT TO CON SIDERED ALL THE ABOVE MENTIONED FACETS CUMULATIVELY OF THE IMPUGNED TRANSACTION AND WEIGH THE SAME BEFORE OPINING THAT THE SHARE HELD FOR LESS TH AN 12 MONTHS CONSTITUTES STOCK IN TRADE OF THE ASSESSEE AND NO T THE INVESTMENT AS CLAIMED IN THE BOOKS BY THE ASSESSEE. 28. THEREFORE, THE INITIAL INTENTION AND CONSEQUEN TIAL ENTRIES OF TRANSACTION IN THE BOOKS OF THE ASSESSEE SUPPORT TH E CLAIM OF THE ASSESSEE WITH REGARD TO THE SHORT TERM CAPITAL GAINS. FURTHE R, CONSIDERING NOT EVEN ONE SHARE TRANSACTION PER ANY WORKING DAY OF THE CA PITAL MARKET OPERATIONS, ON AN AVERAGE, THE VOLUME, FREQUENCY, M AGNITUDE AND REGULARITY IS NO SO HIGH AND THEREFORE THE REVENUE HAS WRONGLY HELD THAT THE FREQUENCY AND VOLUME IS HIGH. 29. THEREFORE, WE ARE OF THE OPINION THAT THE VIEW TAKEN BY THE REVENUE AUTHORITIES CANNOT BE OUTRIGHT WHEN THERE ARE NO FINDING ON VARIOUS ASPECTS OR CRITERIA SET BY THE JURISDICTION AL HIGH COURT IN THE CASE OF BSV RAJU SUPRA . WE ACCORDINGLY SET ASIDE THE IMPUGNED ORDERS TO THE FILES OF THE CIT(A) ON THIS ISSUE, AND DIREC T HIM DEFINE THE HIGH FREQUENCY WITH THE HELP OF THE COMPARABLE CASES ON HAND. ASSESSEE IS ALSO DIRECTED TO ASSIST THE CIT(A) IN THIS REGARD. IF NE EDED, HE MAY FILE ANY FRESH DOCUMENTS BEFORE THE CIT(A) THAT WOULD HELP THE CIT (A) TO COME TO THE ITA NO.1215/HYD/2011 SMT. ANJU GAGGAR, SECUNDERABAD. 16 CORRECT CONCLUSIONS. ON THE ISSUE OF APPLICABILITY OF THE APEX COURTS JUDGMENT IN THE CASE OF GOPAL PUROHIT SUPRA, THERE IS NO ADEQUATE DATA BEFORE US AT LEAST IN THE CASE OF ASSESSEE-TEJESWY. CIT(A) IS DIRECTED TO EXAMINE THE APPLICABILITY OF THE SAID CASE AFTER OB TAINING ADEQUATE AND RELEVANT DATA. CIT(A) IS ALSO DIRECTED TO EXAMINE E ACH OF THE CRITERIA SET BY VARIOUS COURTS IN VARIOUS CASES INCLUDING THE CRITE RION OF DOMINANT INTENTION. IT GOES WITHOUT SAYING THAT THE CIT(A) SHALL GRANT REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEES WITHOUT FAIL. ACCORDINGLY, THE ASSESSEES GROUNDS ON THIS ISSUE ARE ADJUDICATED PR O-TANTO. 11. FROM THE ABOVE EXTRACTS FROM THE DECISION OF A COORDINATE BENCH, TO WHICH ONE OF US A PARTY, IT IS EVIDENT THAT THERE IS NEED FOR CONSIDERING VARIOUS PARAMETERS SUCH AS INTENTION & PROFIT MOTIVE ON ONE SIDE AND THE TURNOVER MAGNITUDE- F REQUENCY VOLUME ON THE OTHER. THE BINDING JUDGMENT OF THE J URISDICTIONAL HIGH COURT IN THE CASE OF BSV RAJU (SUPRA) IS RELEVANT F OR THE PREFERRING PARAMETERS OF TURNOVER MAGNITUDE- FREQUENCY VOLUME TO THE OTHER FACTORS RELATING TO INTENTION & PROFIT MOTIV E. THE SAME PRINCIPLE WAS UNDERLINED BY THE COORDINATE BENCH DE CISION IN THE CASE OF SPECTRA SHARES & SCRIPS LTD (SUPRA). FURTHE R, IT IS RELEVANT TO MENTION THAT, WITH NOT EVEN ONE TRANSACTION PER DAY, THE FREQUENCY OF THE TRANSACTIONS CANNOT BE RATED HIGH AS HELD BY US IN THE CASE OF SMT. NANDURY SOBHA RANI (SUPRA), VIDE P ARAGRAPHS EXTRACTED ABOVE. FOR REDECIDING THE MATTER IN THE LIGHT OF THE ABOVE LEGAL PRINCIPLES AND THE FACTS OF THE CASE BEFORE I T, THE TRIBUNAL HAS SET ASIDE THE ORDERS IMPUGNED IN THOSE APPEALS, AND RESTORED THE MATTER TO THE FILE OF THE ASSESSING OFFICER WITH CE RTAIN DIRECTION FOR RE-EXAMINATION OF THE MATTER AND DETERMINATION OF T HE HEAD UNDER WHICH GAIN ON THE SALE OF SHARES COULD BE ASSESSED IN THAT CASE. 12. DATA RELATING TO THE PURCHASE AND SALE OF THE SHARES IN THE INSTANT CASE : IN THE PRESENT CASE, THE ASSESSEE PURCHASED 8,16, 051 SHARES FOR THE VALUE OF RS 16,37,53,967/- DURING TH E YEAR AND SOLD ITA NO.1215/HYD/2011 SMT. ANJU GAGGAR, SECUNDERABAD. 17 8,19,701 SHARES FOR THE VALUE OF RS 20,67,09,031/- DURING THE YEAR EARNING THE PROFIT OF RS 4,29,55,064/-. THE HOLDING PERIOD IS MERELY 60 DAYS. THERE IS NO FACT OF FINDING ON THE ISSUE OF F REQUENCY OF TRANSACTIONS I.E. HOW MANY TIMES, THE SHARE WERE PURCHASED AND SOLD IN THE YEAR UNDER CONSIDERATION. THERE IS NEED FOR FACTS ON THE EXTENT OF LOAN USED FOR THE IMPUGNED SHARE TRANSACTIONS. OF COURSE, LEARNE D COUNSEL FILED DATE- WISE DETAILS OF TRANSACTIONS TO DEPICT THE FREQUENC Y PARAMETER, BUT IT IS NOT KNOWN IF THE SAID DETAILS ARE AVAILABLE TO THE ASSESSING OFFICER AT THE RELEVANT POINT OF TIME. EVEN IF THE ASSESSING OFFIC ER IS IN POSSESSION OF THEM, THERE IS NO FINDING ON THE FREQUENCY PARAMETE RS. 13. CONSIDERING THE TOTALITY OF FACTS AND CIRCUMST ANCES OF THE PRESENT CASE AND THE NON-CONSIDERATION OF THE RATIO ENUNCIATED IN THE JURISDICTIONAL HIGH COURT JUDGMENT IN THE CASE OF B .S.V. RAJU (SUPRA) WE FIND THAT THE CIT(A) IS NOT CORRECT IN PROCEEDING T O JUDGE THE NATURE OF THE TRANSACTIONS, BASED MERELY ON THE INTENTION OF THE ASSESSEE AT THE TIME OF PURCHASE OF THE SHARES, WHICH IS ONLY ONE OF THE SE VERAL FACTORS THAT CLINCH THE ISSUE AS TO THE NATURE OF THE TRANSACTIONS IN S HARES AND THE HEAD UNDER WHICH THE RESULTANT GAINS MAY BE ASSESSED. E VEN THOUGH IT IS A SIGNIFICANT FACTOR, IT IS NOT A CLINCHING FACTOR CO NSIDERING THE HONBLE HIGH COURTS JUDGMENT IN THE CASE OF B.S.V.RAJU (SUPRA). IN THIS VIEW OF THE MATTER, WE SET ASIDE THE IMPUGNED ORDER OF THE CIT( A), AND RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER TO RE-E XAMINE THE SAME ISSUE AFRESH IN THE LIGHT OF THE VARIOUS FACTORS DISCUSSE D, AS EXTRACTED ABOVE, IN OUR ORDER DATED 2.7.2012 IN THE CASE OF SMT.NANDURY SOBHA RANI (SUPRA) AND OTHER BINDING DECISIONS/JUDGMENTS IN FORCE. THE ASSESSING OFFICER SHALL EXAMINE THE MATTER BESIDES ON THE BASIS OF CR ITERION OF ORIGINAL INTENTION, WHICH IS DECIPHERABLE FROM THE ENTRIES O F THE IMPUGNED TRANSACTIONS IN THE BOOKS OF ACCOUNT AT THE TIME OF EFFECTING PURCHASES, AND ALSO VARIOUS OTHER SIGNIFICANT FACTORS SUCH AS FREQUENCY, VOLUME OF TRANSACTIONS, AND THE PERIOD OF HOLDING, CONSISTENC Y OF THE PRACTICE ITA NO.1215/HYD/2011 SMT. ANJU GAGGAR, SECUNDERABAD. 18 FOLLOWED IN THE PRECEDING AS WELL AS SUCCEEDING YEA RS AND SO ON. THE ASSESSING OFFICER MAY GARNER RELEVANT DATA ON THE ABOVE SAID PARAMETERS FROM COMPARABLE CASES OR THE CITED CASES OF THIS OR DER FOR DECIDING WHAT CONSTITUTES HIGH OR LOW FREQUENCY OR VOLUME OR MAGNITUDE ETC. OF COURSE, THE ASSESSEE, WHO IS CLAIMING CONCESSIONAL RATE OF TAXATION U/S 111A OF THE ACT, IS UNDER OBLIGATION TO ASSIST THE ASSESSING OFFICER IN THIS EXERCISE. ASSESSING OFFICER MUST DECIDE THE ISSUE B Y PASSING A SPEAKING ORDER, NOT BASING SOLELY ON ANY ONE OF THE CRITERIO N; BUT BASED ON THE HARMONIOUS ANALYSIS OF DATA RELATING TO MULTIPLE PA RAMETERS INDICATED BY VARIOUS JUDICIAL FORA ON THE TOPIC. THE SAID MULTIP LE PARAMETERS ARE INCLUSIVE AND THEY INCLUDE INTENTION, PROFIT MOTIV E, MOTIVE TO RESELL, TURNOVER, VOLUME, MAGNITUDE, FREQUENCY, SOURCE OF F UNDS OWN OR BORROWED, DAY TRADING, DELIVERY BASED OR OTHERWISE ETC. ACCORDINGLY, GROUNDS OF THE REVENUE IN THIS APPEAL ARE SET ASIDE . 14. IN THE RESULT, REVENUES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 03 AUGUST 201 2. SD/- S D/- ( ASHA VIJAYARAGHAVAN) (D.KARUNAKARA RAO) JUDICIAL MEMBER. ACCO UNTANT MEMBER. DT/- 3RD AUGUST, 2012 COPY FORWARDED TO: 1. SMT. ANJU GAGGAR, PLOT NO.3 AND 4, PADMAJA COLONY, TARBUND, SECUNDERABAD. 2. 3. ASSGTT. COMMISSIONER OF INCOME-TAX CIRCLE 1(1), HYDERABAD COMMISSIONER OF INCOME-TAX(APPEALS)-VI , HYDERABAD 4. COMMISSIONER OF INCOME-TAX V, HYDERABAD 5. DEPARTMENTAL REPRESENTATIVE ITAT, HYDERABAD B.V.S.