Assistant Commissioner of Income-tax, V. Shri Ranjit Hanmantrao Mohite, Pune

ITA 1253/PUN/2015

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 3892 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-10-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 13-02-2018
• Assessment Year: 2011-2012
• Appeal Filed On: 11-09-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: GAURAV BATHAM
• Keywords: Capital asset; Business income; Salary income; Source of fund
• Section: 143(3); 15

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO.1253/PUN/2015 / ASSESSMENT YEAR : 2011-12 THE ASST. COMMISSIONER OF INCOME - TAX, CIRCLE 13, PUNE. . / APPELLANT V/S SHRI RANJIT HANMANTRAO MOHITE, KAH PLOT NO.3, IVORY ESTATES, BANER ROAD, BANER, AUNDH, PUNE 411 008. PAN : ABFPM2865F. . / RESPONDENT ASSESSEE BY : SHRI GAURAV BATHAM. REVENUE BY : SHRI SANKET JOSHI. / ORDER PER ANIL CHATURVEDI, AM : 1. THIS APPEAL FILED BY THE REVENUE IS EMANATING OUT OF THE O RDER OF COMMISSIONER OF INCOME TAX (A) 3, PUNE DT.12.05.2015 FOR THE ASSESSMENT YEAR 2011-12. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON R ECORD ARE AS UNDER :- ASSESSEE IS AN INDIVIDUAL STATED TO BE HAVING INCOME FROM SALARY, CAPITAL GAINS AND OTHER SOURCES. ASSESSEE FILED HIS RETURN OF / DATE OF HEARING : 28.08.2018 / DATE OF PRONOUNCEMENT: 26.10.2018 2 INCOME FOR A.Y. 2011-12 ON 28.07.2011 DECLARING TOTAL INCOME OF RS.63,50,270/-. THE CASE WAS SELECTED FOR SCRUTINY AND TH EREAFTER ASSESSMENT WAS FRAMED U/S 143(3) OF THE ACT VIDE ORDER DT.12.03.2014 AND THE TOTAL INCOME WAS DETERMINED AT RS.1,88,81,892/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO VIDE ORDER DT.12.05.2015 (IN AP PEAL PN/CIT(A)-3/CIR-7/666/2014-15) GRANTED PARTIAL RELIEF TO TH E ASSESSEE. AGGRIEVED BY THE ORDER OF LD.CIT(A), REVENUE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS : 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD.CIT(A) WAS RIGHT IN TREATING THE LOSS O N SHARE TRADING AS BUSINESS LOSS INSTEAD OF SHORT TERM CAPITAL LOSS AS RETURNED BY THE ASSESSEE. 2. THE ORDER OF THE LD.CIT(A) BE VACATED ON THIS IS SUE AND THAT OF AO TO BE RESTORED. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ON PER USING THE DETAILS FURNISHED BY THE ASSESSEE, AO NOTICED THAT ASSES SEE HAD INCURRED SHORT TERM CAPITAL LOSS OF RS.1,24,80,837/- AND HAD EARNED SPECULATION GAIN OF RS.1,23,99,314/-. HE NOTICED THAT ASSES SEE HAD ADJUSTED SHORT TERM CAPITAL LOSS AGAINST THE CAPITAL GAI NS. THE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO WHY THE SET OFF OF SHORT TERM CAPITAL LOSS AGAINST THE SPECULATION GAIN NOT BE DISALLOWED. THE ASSESSEE MADE SUBMISSIONS WHICH WERE NOT FOUND ACCEPTAB LE TO THE AO. THE ASSESSEE FURTHER SUBMITTED THAT THOUGH IN THE RETURN OF INCOME, THE LOSS WAS STATED AS SHORT TERM CAPITAL LOSS BU T IN FACT IT WAS A BUSINESS LOSS AND THAT HE MAY BE ALLOWED ITS SET OFF AGAINST THE SPECULATIVE GAIN. AO NOTICED THAT ASSESSEE HAD PURC HASED AND SOLD COMMODITIES / SCRIPS ON THE SAME DAY AND HAD EARNE D GAINS OF RS.1,25,31,622/- ON SUCH TRANSACTIONS, THE DETAILS OF WHICH ARE 3 LISTED AT PAGE 4 OF THE ASSESSMENT ORDER. AO HELD THE P ROFITS EARNED ON SUCH TRANSACTIONS TO BE SPECULATIVE GAIN. AO FURTHE R NOTED THAT ASSESSEES ARGUMENT OF TREATING THE SHORT TERM CAPITA L LOSS AS BUSINESS LOSS CANNOT BE ACCEPTED BECAUSE ASSESSEE HIMS ELF HAD TREATED THE TRANSACTIONS AS INVESTMENTS AND IN THE RE TURN OF INCOME ASSESSEE HAD TREATED IT AS SHORT TERM CAPITAL LOSS. HE ALSO NOTED THAT ASSESSEE HAD DONE SHARE TRADING ACTIVITY ONLY ON 6 DAYS AND THE REFORE THE ASSESSEES SUBMISSION OF THE ACTIVITY CANNOT BE TREA TED AS ADVENTURE IN THE NATURE OF TRADE. HE THEREFORE HELD T HAT THE SHORT TERM CAPITAL LOSS CANNOT BE ADJUSTED AGAINST THE SPECULA TIVE GAIN AND ACCORDINGLY ADDED BACK RS.1,25,31,622/- TO THE TOTAL INCOM E OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARR IED THE MATTER BEFORE LD.CIT(A), WHO DECIDED THE ISSUE IN FAVOUR OF THE ASSE SSEE BY OBSERVING AS UNDER : 3.4 I HAVE CONSIDERED THE SUBMISSION MADE BY THE A PPELLANT AND PERUSED MATERIAL ON RECORD. THE ONLY ISSUE CONTEST ED RELATES TO THE TREATMENT OF THE LOSS ON SHARES TRADING AS SHORT TE RM CAPITAL LOSS AS AGAINST BUSINESS LOSS CLAIMED BY THE APPELLANT AND THEREBY DENYING SET OFF OF LOSS INCURRED ON SHARES TRADING ACTIVITY AGAINST PROFIT FROM TRADING ON COMMODITY EXCHANGE AND F & O TRANSACTION . THE MATERIAL BROUGHT ON RECORD INDICATES THE APPELLANT TO HAVE E ARNED INCOME FROM COMMODITY TRADING AND F & O TRANSACTIONS OF RS.1,25 ,31,622/- AND IN THE SHARES TRADING ACTIVITY CARRIED OUT DURING THE YEAR RESULTED INTO A LOSS OF RS.1,24,80,837/-. THE AFORESAID LOSS ON SH ARES TRADING HAS BEEN INCURRED BY THE APPELLANT ON THE SHARES OF ONL Y ONE COMPANY VIZ CORE PROJECT LTD., IT IS NOTICED THAT NEARLY 3 LAC SHARES OF THE SAID COMPANY HAS BEEN PURCHASED ON 22/23/24 TH DECEMBER 2010 AND SOLD ON 20/21/24 TH JAN 2011 I.E., WITHIN A PERIOD OF NEARLY 1 MONTH. THE APPELLANT, HOWEVER, TREATED THE SAID LOSS AS SHORT TERM CAPITAL LOSS AND HAD SET IT OFF AGAINST THE SPECULATION INCOME F ROM THE COMMODITY AND F & O TRANSACTIONS IN THE RETURN OF INCOME. T HE APPELLANTS CONTENTION RAISED BEFORE THE AO THAT THE AFORESAID LOSS INCURRED ON THE TRANSACTION IN SHARES TRADING TO BE AN ADVENTURE IN THE NATURE OF TRADE THOUGH REFLECTED UNDER WRONG HEAD OF INCOME I.E., S HORT TERM CAPITAL LOSS AS AGAINST BUSINESS LOSS DID NOT FIND FAVOUR W ITH THE AO WHO TREATED THE SAME AS SHORT TERM CAPITAL LOSS AND DEN IED THE SET OFF AGAINST THE INCOME EARNED IN COMMODITY AND F & O TR ANSACTIONS. THE AO OBSERVED THAT AS THE APPELLANT HAD HIMSELF TREAT ED THE TRANSACTIONS AS AN INVESTMENT IN THE RETURN OF INCO ME HENCE HELD IT AS SHORT TERM CAPITAL LOSS. HOWEVER, THE CONTENTION R AISED BY THE APPELLANT THAT IT WAS ALWAYS INTENDED TO SET OFF TH E LOSS IN SHARES TRADING AGAINST THE BUSINESS INCOME OF F & O TRANSA CTIONS AND COMMODITY EXCHANGE CANNOT BE TOTALLY OVERLOOKED JUS T BECAUSE THE 4 APPELLANT HAD SHOWN THE SAID LOSS IN THE RETURN OF INCOME UNDER A WRONG HEAD OF INCOME. IT IS TRUE THAT THE RETURN O F INCOME OF THE APPELLANT WAS FILED BY ITS CONSULTANT AND THE COMPU TATION OF INCOME ALSO DONE BY HIM AND APPARENTLY THE MANNER AND PRES ENTATION BEING INCORRECT RESULTED IN THE DISALLOWANCE OF SET OFF O F LOSS. IT IS TRUE THAT THE APPELLANT BEING A TECHNICAL PERSON AND NOT FULL Y CONVERSANT WITH THE LAWS CERTAINLY RELIED IN GOOD FAITH UPON ITS CO NSULTANT WHO WAS A QUALIFIED PROFESSIONAL. THE AO IN THE GIVEN FACTS OF THE CASE OUGHT TO HAVE CONSIDERED THE CONTENTIONS RAISED BY THE APPEL LANT REGARDING TAXATION OF CORRECT INCOME. 3.5 THE APPELLANT HAS RAISED THE GROUND WITH REGAR D TO THE CLAIM OF CAPITAL LOSS WHICH HAD BEEN ERRONEOUSLY WORKED OUT AS PER LAW LAID DOWN AND NOT CONSIDERED BY THE ASSESSING OFFICER. THE GROUND RAISED BY THE APPELLANT RELATES TO THE ISSUE AT HAND AND I N THIS REGARD IT IS RELEVANT TO DISCUSS THE JUDICIAL VIEW IN THE MATTER . THE BOMBAY HIGH COURT IN THE CASE OF PRUTHVI BROKERS AND SHAREHOLDE RS LTD (2012) 349 ITR 336 (BOM) HAS HELD THAT THE APPELLATE AUTHORITI ES HAVE THE JURISDICTION TO CONSIDER ADDITIONAL GROUNDS/CLAIM W HICH WERE AVAILABLE AT THE TIME OF FILING RETURNS BUT WERE NOT CLAIMED IN THE RETURN FILED BY THE ASSESSEE. THE HONBLE COURT AFTER REFERRING TO THE VARIOUS DECISIONS HAS HELD THAT THE ASSESSEE CAN MAKE A NEW CLAIM BEFORE THE APPELLATE AUTHORITY. MOREOVER, IN PARTICULAR THE C OURT HAS RELIED UPON THE DECISIONS OF THE HONBLE SUPREME COURT IN THE C ASE OF JUTE CORPORATION OF INDIA LTD., 187 ITR 688 ALSO RELIED UPON BY THE APPELLANT WHEREIN IT WAS HELD THAT THE CIT(A) CAN A DMIT A NEW/FRESH CLAIM WHICH WAS NOT MADE BY THE ASSESSEE IN THE RET URN OF INCOME OR IN THE ASSESSMENT PROCEEDINGS AND THAT THE POWER OF THE AAC IS CO- TERMINUS WITH THAT OF THE ITO. THE APEX COURT IN T HE CASE OF CIT VS. NIRBHERAM DALURAM 224 ITR 610 (SC) RELYING ON THE D ECISION OF THE JUTE CORPORATION OF INDIA LTD., VS. CIT, 187 ITR 68 8 (SC), HELD THAT THE FIRST APPELLATE AUTHORITY HAS PLENARY POWERS IN DIS POSING AN APPEAL AND THE SCOPE OF HIS POWER IS CO-TERMINUS WITH THAT OF ITO. HE CAN DO WHAT THE ITO CAN DO AND ALSO DIRECT HIM TO DO WHAT HE HAS FAILED TO DO. IN THE CASE OF CHICAGO PNEUMATIC INDIA LTD., V S. DCIT (2007) 15 SOT 252 (MUM), THE ITAT AFTER CONSIDERING CIRCULAR DATED 11.04.1955 HELD THAT THE ASSESSING OFFICER IS BOUND TO COMPUTE THE CORRECT INCOME ONLY. THUS, IN VIEW OF THE ABOVE FACTS, THE CLAIM RAISED IS BEING CONSIDERED. HOWEVER, BEFORE DETERMINING THE AFORES AID ISSUE IT IS RELEVANT TO LOOK INTO THE MERITS OF THE CONTENTION RAISED REGARDING THE ACTIVITY BEING AN ADVENTURE IN THE NATURE OF TRADE AND LOSS ON SALE OF SHARES AS BUSINESS LOSS. THE MATERIAL FACT CLEARLY INDICATE THE APPELLANT TO HAVE TRADED IN THE SHARES OF ONLY ONE COMPANY AND FOR THAT PURPOSE THE APPELLANT IS SEEN TO HAVE BORROWED FUNDS TO THE EXTENT OF RS.10 CRORES IN THE FORM OF SHORT TERM LO AN CARRYING INTEREST @ 13% FROM SURAKSHA REALITY LTD., AND ON WHICH A SUM OF RS.15,58,932/- HAS BEEN PAID AS INTEREST AS IS EVID ENT FROM THE LEDGER ACCOUNT EXTRACT. THE AO IT APPEARS HAS NOT CONSIDE RED THE AFORESAID FACT WHILE DECIDING THE ISSUE AT HAND. THE MATERIA L ON RECORD ALSO INDICATES THAT THE APPELLANT EXPECTING SUBSTANTIAL RISE IN THE PRICE OF SHARES WITHIN A SHORT PERIOD TOOK THE RISK AND BORR OWED FUNDS WITH INTEREST AND PURCHASED NEARLY 3 LACS SHARES WITH A SPAN OF 3-4 DAYS, HOWEVER, AS THE PRICES STARTED GOING DOWN THE APPEL LANT HAVING NO OPTION BUT TO SELL THEM IN ORDER TO REDUCE FURTHER LOSS SO AS TO REPAY THE SHORT TERM LOAN TAKEN FOR THE PURPOSE. THE TOTAL H OLDING PERIOD OF THE SHARES ITSELF WAS LESS THAN 2 MONTHS WHICH INDICATE THE PURCHASE / SALE AND SUCH AN ISOLATED TRANSACTION TO DO NOTHING WITH THE INVESTMENT ACTIVITY OF THE APPELLANT RATHER THE INT ENTION APPEARS TO BE OF EARNING PROFIT. 5 3.5.1 THE JUDICIAL AUTHORITIES IN SUCH SITUATION HA VE DECIDED THE CHARACTER OF THE ASSET ON THE BASIS OF THE FACT OF THE CASE AND WHILE DOING SO THEY HAVE CONSIDERED AND TAKEN INTO ACCOUN T THE BACKGROUND OF THE ASSESSEE, PERIOD OF HOLDING, SURROUNDING CIR CUMSTANCES AND ALSO THE NATURE AND SOURCE OF FUNDS & CAPITAL AS TO WHETHER OWN FUNDS OR BORROWED MONEY ETC AS DECISIVE FACTORS. TH E ASSESSING OFFICER HAS NOT EVALUATED THE AFORESAID FACTORS BEF ORE ARRIVING AT THE CONCLUSION AND ALSO NOT CONSIDERED THE CONTENTION R AISED BY THE APPELLANT. THE MENTION OF THE APPELLANT AS IS EVIDE NT FROM THE MATERIAL FACT BROUGHT ON RECORD ESTABLISH THAT THE TRADING O F SHARES HAD BEEN UNDERTAKEN ONLY WITH THE INTENTION OF MAKING PROFIT IN THE SHORT TERM AND THE SAME HAD NEVER BEEN DONE WITH A VIEW TO MAK E AN INVESTMENT FURTHER, THE PERIOD OF HOLDING AND THE F UNDS UTILIZED IN THE SAID SHARES BY THE APPELLANT IS ALSO AN INDICATION OF THE INTENTION OF THE APPELLANT TO TRADE IN THEM AND NOT MAKE ANY INVESTMENT FOR EARNING LONG TERM GAINS OR EARN DIVIDED INCOME, THE HEADS OF INCOME ARE SPECIFIED U/S.14. THE SCHEME OF HEAD OF INCOME IS STATUTORY. IT IS NOT OPTIONAL. FOR E.G. IF SHARES ARE HELD AS STOCK IN TRADE THE PROFIT HAVE TO THE TAXED AS 'BUSINESS INCOME'. ON THE OTHER HAND IF SHARES ARE HELD AS INVESTMENTS THEIR PROFITS HAVE TO TAXED AS 'CAPITAL GAINS'. THERE IS NO OPTION. THUS, FROM T E MATERIAL ON RECORD IT IS APPARENT THAT THE SHARES HAVE BEEN ACQUIRED WITH THE INTENTION TO EXPLOIT THE SAME FOR THE PURPOSE OF EARNING QUICK PROFIT HENCE IN THE INSTANT CASE THE OBJECTIVE PRIMA FACIE IS EXPLOITATION FOR MAKING SUBSTANTIAL PROFIT AND I T IS ACCEPTED PROPOSITION THAT INTENTION AT THE TIME OF ACQUISITI ON IS IMPORTANT AND INTENTION BEHIND THE TRANSACTION DECIDES CHARACTER OF THE ASSETS IN THE CASE OF DALMIA CEMENTS VS CIT. 105 ITR 633 (SC), THE ASSESSEE KNEW FROM THE BEGINNING THAT HE CANNOT USE THE MACHINERY AS A CAPITAL ASSET AND HE ACQUIRED THE MACHINERY ONLY WITH THE INTENTION TO R ESELL AT A PROFIT. HENCE IT WAS HELD THAT LOOKING AT THE INTEN TION, EVEN THOUGH IT WAS AN ISOLATED TRANSACTION IT WAS IN NATURE OF ADVENTURE OF TRADE AND COULD BE TAXED AS BUSINESS INCOME. IN THE CASE OF CIT VS ANANDLAL BECHARTAL & CO. 107 ITR 677 (BOM.) LAND WAS PURCHASED TO CONSTRUCT HOUSES FOR THE PARTNERS WHICH WERE THE ORIGINAL INT ENTION THEREAFTER, DUE TO ADVERSE CIRCUMSTANCES THE LAND WAS SOLE ON PROFIT. THE ASSESSEE CLAIMED IT TO BE 'ADVENTURE IN THE NATURE OF TRADE.THE ASSESSEES CLAIM WAS REJECTED HOLDING THAT INITIALLY THE LAND WAS NOT ACQUIRED FOR 'BUSINESS' BUT, WAS ACQUIRED FOR CONSTRUCTION FOR HOUSES, LATER, EVEN IF INTENTION IS CHANGED BECAUSE OF ADV ERSE FACTORS, ACCORDING TO THE ORIGINAL INTENTION . IT SHOULD BE TAXED AS CAPITAL GAIN. SIMILAR VIEW HAS ALSO BEEN HELD BY THE PUNE ITAT IN THE DECISIONS IN THE CASE OF ITO VS. BAGUIO INVESTMENT (P) LTD. 127 TTJ 423 (PUNE) AND S HANT BUILDERS VS. JCIT, 88 TTJ 519 (PUNE). THUS, CHARACTER OF THE ASS ET IS GOVERNED BY THE MOTIVE BEHIND THE TRANSACTION AND IN THE INSTANT CA SE THE FACTS BROUGHT ON RECORD NEVER INDICATED THE INTENTION BEHIND THE SHA RE TRADING TRANSACTION TO BE FOR THE PURPOSE OF INVESTMENT BY THE APPELLAN T. 3.6 MERE HOLDING OF PROPERTY OR INVESTMENTS DOES N OT AMOUNT TO A BUSINESS. A PERSON, WHO MERELY INVESTS IN SHARES FO R THE PURPOSE OF EARNING DIVIDENDS, DOES NOT CARRY ON BUSINESS. HOWE VER, IT IS IMPORTANT TO REMEMBER THAT THE DEFINITION OF BUSIN ESS IN SECTION 2(13) IS INCLUSIVE AND INCLUDES ADVENTURE OR CONCERN IN THE NATURE OF TRADE, COMMERCE OR MANUFACTURE. THOUGH A SINGLE SPARROW M AY NOT MAKE A MANNER, A SINGLE ACTIVITY OF PURCHASE AND SALE MAY STILL BE TREATED AS BUSINESS IF THE PURCHASE WAS INTENDED FOR RESALE AN D NOT AS AN INVESTMENT. IF THE GAIN UNDER SECTION 45 REALISED O N SALE IS PART OF AN OPERATION OF PROFIT MAKING, IT REPRESENTS BUSINESS GAIN LIABLE TO BE CHARGED TO TAX UNDER SECTION 28. INVESTMENT POSTULA TES EMPLOYMENT OF MONEY IN SOME OF WEALTH OR SECURITY, USUALLY OF A S OMEWHAT PERMANENT NATURE, SO AS TO ENSURE SAFETY OF MONEY A ND A REASONABLE 6 YIELD. IF THE MONEY IS INVESTED IN SHARES WITH A VI EW TO EARN DIVIDEND, IT WILL BE IN THE NATURE OF INVESTMENT. HOWEVER, IF THE MONEY IS INVESTED IN SHARES WITH A VIEW TO EARN PROFITS BY S ELLING THEM AS PART OF PROFIT MAKING ACTIVITY; THE RESULTANT GAIN WOULD BE IN THE NATURE OF BUSINESS PROFITS. LIKEWISE, IF A PERSON DEALS WITH THE COMMODITY PURCHASED BY HIM IN THE SAME WAY AS A DEALER IN IT WOULD ORDINARILY DO, SUCH DEALING WOULD BE A TRADING ADVENTURE. THE APPELLANT IS A TECHNICAL PERSON AND HAS PURCHASED THE SHARES ONLY WITH THE INTENTION OF EARNING MAXIMUM PROFIT OUT OF THE TRANSACTIONS A ND HENCE NOT PURCHASED FOR THE SAKE OF EARNING DIVIDENDS OR TO H OLD THEM AS INVESTMENTS BUT FOR SELLING THEM TO EARN SUBSTANTIA L PROFIT. 3.6.1. IN THE CASE OF SMT. NEERJA BIRLA VS. ACIT (S UPRA) RELIED UPON BY THE APPELLANT THE MUMBAI ITAT HAS HELD THAT WHEN A BIG BLOCK OF SHARE WAS PURCHASED WITH BORRO WED FUNDS ON WHICH SUBSTANTIAL INTEREST LIABILITY WAS I NCURRED. IT WAS INDICATIVE OF A TRADING TRANSACTION PROFITS WER E TAXABLE AS BUSINESS INCOME AND NOT AS CAPITAL GAINS. 3.6.2. FURTHER IN THE DECISION OF THE ITAT, MUNMBA I IN THE CASE OF IMMORTAL FINANCIAL SERVICES (I) LTD., VS. DCIT (CITE D SUPRA) ALSO RELIED UPON BY THE APPELLANT IT HAS BEEN HELD THAT - THE SUBMISSION OF THE COUNCIL FOR THE ASSESSEE THA T IN THE PRECEDING YEAR THE AO HAS ACCEPTED TILE SHORT TERM AND LONG TERM CAPITAL GAIN ON SALE OF SHARES AND THEREFORE, THE SAME SHOULD BE FOLLOWED THIS YEAR IS ALSO WITHOUT MUCH FORCE SINCE THE PRINCIPLE OF RES JUDICATA DOES NOT APPLY TO INC OME TAX PROCEEDINGS AND EVERY ASSESSMENT IS INDEPENDENT. IN THIS VIEW OF THE MATTER, THE ACTIVITY OF FREQUENT BUYING AND SELLING OF SHARES OVER A SHORT SPAN OF PERIOD DURING THE IMPUG NED YEAR HAS TO BE TREATED AS BUSINESS BEING ADVENTURE M THE NATURE OF TRADE AND THE INCOME HAS TO BE TREATED AS BUSINESS INCOME AND NOT AS CAPITAL GAIN AS CLAIMED BY THE COUNCIL FOR THE ASSESSEE. THEREFORE THERE IS NO INFIRMITY IN THE OR DER OF THE CIT(A) HOLDING THE PROFIT FROM PURCHASE AND SALE OF SHARES AS BUSINESS INCOME AS AGAINST CAPITAL GAIN TREATED BY THE ASSESSEE. THE SAME IS ACCORDINGLY UPHELD ... '. 3.6.3. MOREOVER, IN THE OTHER DECISION RELIED BY T HE APPELLANT IN THE CASE OF HARSH N. MEHTA VS. DCIT, THE TRIBUNAL CONCL UDED THAT- ....WHERE SHARES WERE PURCHASED AND SOLD WITHIN A SHORT PERIOD OF A FEW DAYS, THE PROFIT ON ACCOUNT OF PURC HASE AND SALE OF SHARES BY THE ASSESSEE IN THE FACTS AND CIRCUMSTANCES OF THE CASE HAS TO BE TREATED AS 'INCOME FROM BUSIN ESS' AND NOT AS 'INCOME FROM SNORT TERM CAPITAL GAINS' AS CLAIMED BY THE ASSESSEE ' IN ANOTHER DECISION OF ITAT MUMBAI BENCH IN THE CAS E OF ACIT VS. VINOD K. NEVATIA (2011) 49 DTR 16 (MUM.) (TRIB.), I T WAS HELD THAT NO SINGLE FACTOR CAN BE SAID TO BE DECISIVE AND FURTHE R HELD- IF THE ASSESSEE PURCHASES THE SHARES FROM ITS OWN FUNDS, WITH A VIEW TO KEEP THE FUNDS IN EQUITY SHARES TO EARN CONSIDER ABLE RETURN ON ACCOUNT OF ENHANCEMENT IN THE VALUE OF SHARES OVER A PERIOD, THEN MERELY BECAUSE THE ASSESSEE LIQUIDATES ITS INVESTME NTS WITHIN SIX MONTHS OR EIGHT MONTHS WOULD NOT LEAD TO THE CONCLU SION THAT THE ASSESSEE HAD NO INTENTION TO KEEP THE FUNDS AS INVE STED IN EQUITY 7 SHARES BUT WAS ACTUALLY INTENDED TO TRADE IN SHARES . MERE INTENTION TO LIQUIDATE THE INVESTMENT AT HIGHER VALUE DOES NOT IM PLY THAT THE INTENTION WAS ONLY TO TRADE IN SECURITY. HOWEVER, IF THE ASSESSEE, ON THE OTHER HAND, BORROWS FUNDS FOR MAKING INVESTMENT IN SHARES THEN DEFINITELY IT IS A VERY IMPORTANT INDICATOR OF ITS INTENTION TO TRADE IN SHARES. 3.6.4. THUS, THE CUMULATIVE EFFECT OF THE FACTS BR OUGHT ON RECORD AND THE JUDICIAL VIEW IN THE MATTER CLEARLY ESTABLISH T HAT THE SHAREHOLDING WAS NOT IN THE NATURE OF INVESTMENT BUT IN THE NATU RE OF BUSINESS OR ADVENTURE IN THE NATURE OF TRADE. THE MERE FACT TH AT THE APPELLANT HAS SHOWN THE LOSS ON SHARES IN SHORT TERM CAPITAL LOSS IS NOT AT ALL DECISIVE OF THE TRANSACTIONS AND IT IS NOT THE FORM BUT THE SUBSTANCE WHICH IS DECISIVE IN ASCERTAINING THE TRUE NATURE O F TRANSACTION. THUS, ON FACT THE ACTIVITY CARRIED OUT BY THE APPELLANT D URING THE YEAR WAS AN ADVENTURE IN THE NATURE OF TRADE AND HENCE THE LOSS SUFFERED WAS A BUSINESS LOSS AND ACCORDINGLY LIABLE TO BE SET OFF AGAINST INCOME FROM COMMODITY TRADING AND F & O TRANSACTIONS. 3.6.5. NOW COMING TO THE ISSUE REGARDING THE CLAIM OF LOSS WRONGLY REFLECTED UNDER THE HEAD CAPITAL GAINS WHILE FILIN G THE RETURN OF INCOME ON ACCOUNT OF INCORRECT AND WRONG PRESENTATION MADE IN THE COMPUTATION OF INCOME BY ITS CONSULTANT, IT IS NOTI CED THAT THE SAID PRESENTATION MADE IN THE COMPUTATION OF INCOME BY I TS CONSULTANT, IT IS NOTICED THAT THE SAID PRESENTATION WAS INDEED NOT C ORRECT HENCE RESULTED INTO THE DISALLOWANCES MADE BY THE AO, HOW EVER, THE APPELLANTS CONTENTION THAT LACK OF PROPER ADVICE A ND GUIDANCE AND ALSO NOT BEING FULLY CONVERSANT WITH THE TAXATION L AWS AND THEREBY MISUNDERSTANDING OF THE PROVISIONS OF LAW AND WRON G PRESENTATION OF FACT ALSO CANNOT BE OVERLOOKED WHILE DECIDING THE I SSUE. MOREOVER, THE CONTENTION OF THE APPELLANT REGARDING THE CORRECT W ORKING OF CAPITAL GAIN IS CONCERNED, IT IS SEEN THAT THE APPELLANT HA S WORKED OUT LOSS ON TRADING OF SHARES AND SHOWN IT AS SHORT TERM CAPITA L LOSS THOUGH ACTUALLY AS DISCUSSED ABOVE THE SAID TRANSACTION IS AN ADVENTURE IN NATURE OF TRADE AND THEREFORE IS PURELY A CASE OF I NCORRECT AND WRONG PRESENTATION MADE IN THE COMPUTATION OF TOTAL INCOM E. IT IS TRUE THAT THE RETURN OF INCOME HAS BEEN FILED BY THE APPELLAN TS CONSULTANT WHO ALSO PREPARED THE COMPUTATION OF INCOME WHICH IS NO W APPARENTLY FOUND TO BE INCORRECT AND WRONGLY PRESENTED AND THE APPELLANTS CONTENTION THAT LACK OF PROPER ADVICE AND GUIDANCE AND NOT BEING FULLY CONVERSANT WITH THE TAXATION LAWS AND THEREBY MISUN DERSTANDING OF THE PROVISIONS OF LAW CANNOT BE OVERLOOKED WHILE DE CIDING THE ISSUE. MOREOVER, THE CONTENTION OF THE APPELLANT THAT THE MANNER OF THE PRESENTATION OF THE COMPUTATION OF INCOME WAS WRONG AND DEFINITELY INCORRECT AND THE ISSUE RAISED IN THIS REGARD DURIN G ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER OUGHT TO HAVE MAD E CORRECTIONS AND TAXED THE CORRECT INCOME CERTAINLY DESERVES MERIT I N VIEW OF THE CBDT CIRCULAR NO.14 DATED 11-4-1955 RELIED BY THE APPELL ANT AND WHICH READS AS UNDER : OFFICERS OF THE DEPARTMENT MUST NOT TAKE ADVANTAGE OF IGNORANCE OF AN ASSESSEE AS TO HIS RIGHTS. IT IS ONE OF THEIR DUTIES TO ASSIST A TAXPAYER IN EVERY REASONABLE WAY, PARTICULARLY IN T HE MATTER OF CLAIMING AND SECURING RELIEFS AND IN THIS REGARD TH E OFFICERS SHOULD TAKE THE INITIATIVE IN GUIDING A TAXPAYER WHERE PRO CEEDINGS OR OTHER PARTICULARS BEFORE THEM INDICATE THAT SOME REFUND O R RELIEF IS DUE TO HIM. THIS ATTITUDE WOULD, IN THE LONG RUN, BENEFIT THE DEPARTMENT FOR IT WOULD INSPIRE CONFIDENCE IN HIM THAT HE MAY BE SURE OF GETTING A SQUARE DEAL FROM THE DEPARTMENT. ALTHOUGH, THEREF ORE, THE 8 RESPONSIBILITY FOR CLAIMING REFUNDS AND RELIEFS REST S WITH ASSESSEES ON WHOM IT IS IMPOSED BY LAW, OFFICERS SHOULD : (A) DRAW THEIR ATTENTION TO ANY REFUNDS OR RELIEFS TO W HICH THEY APPEAR TO BE CLEARLY ENTITLED BUT WHICH THEY HAVE O MITTED TO CLAIM FOR SOME REASON OR OTHER; (B) .. 3.6.6. THE BOMBAY HIGH COURT IN THE CASE OF NIRMAL A MEHTA VS. CIT (2004) 269 ITR 1 (BOM) HAS HELD THAT THERE CANNOT B E ANY ESTOPPELS AGAINST THE STATUTE. ARTICLE 265 OF THE CONSTITUTI ON OF INDIA IN UNMISTAKABLE TERMS PROVIDE THAT NO TAX SHALL BE LEV IED OR COLLECTED EXCEPT BY AUTHORITY OF LAW. THE APEX COURT AND VAR IOUS HIGH COURTS HAVE RULED THAT THE AUTHORITIES UNDER THE ACT ARE U NDER AN OBLIGATION TO ACT IN ACCORDANCE WITH LAW. TAX CAN BE COLLECTED O NLY AS PROVIDED UNDER THE ACT. IF ANY ASSESSEE UNDER A MISTAKE, MI SCONCEPTION OR ON NOT BEING PROPERLY INSTRUCTED IS OVER ASSESSED, THE AUTHORITIES UNDER THE ACT ARE REQUIRED TO ASSIST HIM AND ENSURE THAT ONLY LEGITIMATE TAX DUES ARE COLLECTED UNDER THE I.T. ACT., REAL INCOME IS CHARGED TO TAX AND NOT NOTIONAL INCOME. THE COURTS HAVE USED THIS CONCEPT FOR ENSURING THAT WHAT IS TAXED IS AS NEARLY REAL AS PO SSIBLE WITHIN THE OF CONSTRAINT OF STATUTORY LIMITATION. THE APEX COURT IN THE CASE OF AJMERA HOUSING CORPORATION & ANR ETC., VS. CIT (2010) 326 ITR 642 (SC) CONSIDERED THE SCOPE OF INTERPRETATION OF TAXING ST ATUTES AND HAS OBSERVED THAT A TAXING STATUTE IS TO BE CONSTRUE S TRICTLY AND IN A TAXING ACT ONE HAS TO LOOK MERELY AT WHAT IS SAID IN THE R ELEVANT PROVISION. THERE IS NO PRESUMPTION AS TO TAX. NOTHING IS TO B E READ IN, NOTHING IS TO BE IMPLIED. THERE IS NO ROOM FOR ANY INTENDMEN T. THERE IS NO EQUITY ABOUT A TAX. THUS, THE ASSESSING OFFICER O UGHT TO HAVE CONSIDERED THE CONTENTION RAISED BY THE APPELLANT O F WRONGLY REFLECTING OF LOSS ON SHARE TRADING UNDER THE WRONG HEAD OF IN COME I.E., SHORT TERM CAPITAL LOSS AS AGAINST BUSINESS INCOME. 3.7 IN VIEW OF THE ABOVE FACTS, THE CBDT CIRCULAR A ND THE JUDICIAL DECISIONS ON THE SUBJECT AS DISCUSSED ABOVE, THE AP PELLANT IS LIABLE TO SET OFF LOSS INCURRED IN SHARES TRADING AGAINST THE INCOME FROM COMMODITY TRADING AND F & O TRANSACTIONS. ACCORDIN GLY. AGGRIEVED BY THE ORDER OF LD.CIT(A), REVENUE IS NOW IN APPE AL BEFORE US. 4. BEFORE US, LD.D.R. SUPPORTED THE ORDER OF AO. HE FURTH ER SUBMITTED THAT IN THE RETURN OF INCOME THE ASSESSEE HAD SHOWN THE LOSS AS SHORT TERM CAPITAL LOSS AND ASSESSEE CHANGED HIS STANCE OF THE LOSS BEING A BUSINESS LOSS AND NOT CAPITAL GAINS ONLY WHEN CONFRONTED BY THE AO. HE SUBMITTED THAT IT WAS NEVER T HE INTENTION 9 OF THE ASSESSEE TO BE IN THE BUSINESS OF SHARES AND TH E AO HAS ALSO POINTED OUT THAT ONLY IN 6 INSTANCES, THE ASSESSEE TRA DED THE SHARES. IN SUCH A SITUATION, IT CANNOT BE SAID THAT THE ACTIVITY O F THE ASSESSEE WAS ADVENTURE IN THE NATURE OF TRADE. HE FURTHER SUBM ITTED THAT ONCE ASSESSEE HAS DECIDED THE ASSET TO BE AS INVESTME NT OR A PROPERTY, HE CANNOT GO BACK AND CHANGE HIS STANCE. HE FURTHER SUBMITTED THAT THE STANCE OF THE ASSESSEE OF INCOME BE ING A BUSINESS LOSS CANNOT BE ACCEPTED IN VIEW OF THE FACT THAT ASSESSEE HAS ALSO NOT GET THE BOOKS OF ACCOUNTS AUDITED. HE TH US SUPPORTED THE ORDER OF AO. 5. LD.A.R. ON THE OTHER HAND, REITERATED THE SUBMISSIONS MADE BEFORE AO AND LD.CIT(A) AND SUBMITTED THAT ASSESSEE BE ING A TECHNICAL PERSON DID NOT HAVE KNOWLEDGE ABOUT THE ACCOU NTANCY AND HE WAS FULLY DEPENDENT ON TAX CONSULTANT. HE SUBMITTED THAT TAX CONSULTANT WRONGLY CONSIDERED THE LOSS TO BE SHORT TER M CAPITAL LOSS. HE FURTHER SUBMITTED THAT ASSESSEE HAD PURCHASED THE SHARES AND SOLD IT AND NO DIVIDEND WAS EARNED WHICH ALSO PROVE THA T THE ACTIVITY WAS IN THE NATURE OF TRADE. HE FURTHER SUBMITTED THAT THE ASSESSEE HAS BORROWED FUNDS OF AROUND RS.10 CRORES FOR MAKING INVE STMENTS AND HAD PAID INTEREST OF AROUND RS.15,58,000/- WHICH ALSO GOES TO PROVES THAT THE ACTIVITY OF PURCHASE AND SALE OF SHARES BY ASSESSEE WAS A BUSINESS ACTIVITY. HE ALSO RELIED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. SUTLEJ COTTON MILLS REPORTED IN 1975 100 ITR 706, DECISION OF BANGALORE TRIBUNAL IN THE CASE OF C. NIRANJAN AND ANOTHER VS. ITO REPORTED IN (1994) 49 TTJ (B ANG) 1. HE FURTHER SUBMITTED THAT ENTRIES IN THE BOOKS OF ACCOUNTS ARE NOT DETERMINATIVE AND FOR THIS PROPOSITION, HE RELIED ON THE DE CISION OF 10 HONBLE APEX COURT IN THE CASE OF KEDARNATH JUTE MANUFA CTURING & CO., VS. CIT REPORTED IN (1971) 82 ITR 363. HE THUS SUPP ORTED THE ORDER OF LOWER AUTHORITIES. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS THE TREATM ENT OF LOSS INCURRED ON SALE OF SHARES. IT IS REVENUES CONTENTION T HAT THE LOSS IS SHORT TERM CAPITAL LOSS AS AGAINST ASSESSEES STAND TH AT THE LOSS IS BUSINESS LOSS. IT IS AN UNDISPUTED FACT THAT IN THE RETU RN OF INCOME ASSESSEE HAD SHOWN IT AS SHORT TERM CAPITAL LOSS. BUT S UBSEQUENTLY BEFORE THE AO, ASSESSEE CORRECTED HIMSELF AND SUBMITTED THAT IT IS IN THE NATURE OF BUSINESS LOSS. WE FIND THAT LD.CIT(A) WHILE DE CIDING THE ISSUE IN FAVOUR OF ASSESSEE HAS GIVEN A FINDING THAT TH E LOSS HAS BEEN INCURRED ON SALE AND PURCHASE OF ONLY ONE COMPANY I.E., CORE PROJECTS LTD., THE SHARES WERE SOLD WITHIN ONE MONTH OF ITS PURCHASE, ASSESSEE HAD BORROWED FUNDS TO THE EXTENT OF RS.10 CRO RE AND ON WHICH HE HAD PAID INTEREST OF RS.15.58 LACS (ROUNDED OFF), THE BORROWING WAS FROM AN UNRELATED PARTY. HE HAS FURTHER, A FTER CONSIDERING THE TOTALITY OF FACTS, HELD THAT THE SHARES WER E ACQUIRED WITH THE INTENTION OF EARNING QUICK PROFITS AND NOT FOR THE PURPOSE OF INVESTMENTS. HE HAS HELD THE ACTIVITY OF THE PURCHASE / S ALE OF SHARES TO BE AN ADVENTURE IN THE NATURE OF TRADE AND THERE FORE THE RESULTANT LOSS HAD TO BE SET OFF AGAINST INCOME FROM COMMO DITY TRADING AND F & O TRANSACTIONS. WITH RESPECT TO ASSESS EE SUO MOTO DISCLOSURE OF LOSS IN THE RETURN OF INCOME AS CAPITAL LOSS AND SUBSEQUENTLY BEFORE AO CONTENDING IT TO BE BUSINESS LOSS , HE DID NOT FIND THE SUBMISSION OF THE ASSESSEE THAT DUE TO IMPROPER ADVICE AND MISUNDERSTANDING OF PROVISIONS ASSESSEE HAD WRONGLY SHOW N THE 11 AMOUNT AS CAPITAL LOSS IN THE RETURN OF INCOME TO BE WR ONG. HE ALSO RELIED ON VARIOUS DECISIONS OF HIGH COURTS AND TRIBUNALS TO DECIDE THE ISSUE IN ASSESSEES FAVOUR. BEFORE US, LD.D.R. SUBMITTE D THAT ONLY IN SIX INSTANCES, ASSESSEE HAD TRADED IN SHARES AND THEREFORE THE ACTIVITY OF THE ASSESSEE CANNOT BE CONSIDERED TO BE AD VENTURE IN NATURE OF TRADE. WE FIND THAT HONBLE APEX COURT IN THE CASE OF G. VENKATASWAMI NAIDU & CO., (1959) 35 ITR 594 (SC) HAS HELD TH AT EVEN ON ISOLATED TRANSACTION CAN SATISFY THE DESCRIPTION OF AN ADVENTURE IN THE NATURE OF TRADE PROVIDED AT LEAST SO ME OF THE ESSENTIAL FEATURES OF TRADE ARE PRESENT IN THE ISOLATED OR SINGLE TRANSACTION. BEFORE US, REVENUE HAS NOT POINTED OUT A NY FALLACY IN THE FINDINGS OF LD.CIT(A). WE THEREFORE FIND NO REASON TO INT ERFERE WITH THE ORDER OF LD.CIT(A) AND THUS, THE GROUNDS OF REVENUE ARE DISMISSED. 6. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED ON 26 TH DAY OF NOVEMBER, 2018. SD/- SD/- ( SUSHMA CHOWLA ) ( ANIL CHATURVEDI ) ! / JUDICIAL MEMBER '! / ACCOUNTANT MEMBER PUNE; DATED : 26 TH NOVEMBER, 2018. YAMINI 12 #$%&'('% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4 5. 6. THE CIT(APPEALS)-3, PUNE. . THE PR.CIT-2, PUNE. '#$ %%&',) &', / DR, ITAT, B PUNE; $*+,/ GUARD FILE. / BY ORDER // TRUE COPY // -./%0&1 / SR. PRIVATE SECRETARY ) &', / ITAT, PUNE.