Shri Mulchandbhai S.Amin, Surat V. The ACIT.,Circle-3, Surat

ITA 127/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6635 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 11-05-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 12-01-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S P TALATI
• Keywords: Business income; Rule of consistency; Question of law; Speculation loss
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : AH MEDABAD ( BEFORE HONBLE SHRI T.K.SHARMA, J.M. & HONBLE SHRI A.N.PAHUJA, A.M.) I.T.A.NO. 127/AHD./2009 : ASSESSMENT YEAR 2005- 06 SHRI MULCHANBHAI S. AMIN, SURAT VS- ACIT, CIRCLE-3, SURAT (PAN : ABWPA 7967M`) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI HARDIK VORA, A.R. RESPONDENT BY: SHRI S.P.TALATI, D.R. O R D E R PER SHRI T.K.SHARMA, JUDICIAL MEMBER : THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER OF LD. CIT(A)-II, SURAT DATED 07.11.2008 FOR THE ASSESSMENT YEAR 2005-2006. 2. GROUND NO.1 READS AS UNDER: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WE LL AS LAW ON THE SUBJECT, THE LEARNED CIT(APPEALS) HAS ERRED IN CONFIRMING THE A CTION OF THE ASSESSING OFFICER IN MAKING ADDITION OF RS.68,87,173/- BY TR EATING SHORT-TERM CAPITAL GAIN AS BUSINESS INCOME. 3. BRIEF FACTS RELATING TO THE CONTROVERSY INVOLVED IN THE AFORESAID APPEAL ARE THAT THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN MANUFACTUR ING AND TRADING OF CI CASTING AND JOB WORK ON C.I. CASTING IN HIS PROPRIETARY CONCERN , NAMELY, M/S. SHIVA ENGINEERING WORKS. FOR THE ASSESSMENT YEAR UNDER APPEAL, HE FIL ED THE RETURN OF INCOME DECLARING TOTAL INCOME AT RS.10,32,420/- ON 29.10.2005. IN TH IS RETURN OF INCOME, THE ASSESSEE DECLARED INCOME UNDER THE HEAD INCOME FROM HOUSE P ROPERTY, INCOME FROM BUSINESS, INCOME FROM SHORT-TERM CAPITAL GAIN AN D INCOME FROM OTHER SOURCES. THE AO FRAMED THE ASSESSMENT UNDER SECTION 143(3) AT TO TAL INCOME OF RS.79,28,750/- WHEREIN HE TREATED THE SHORT-TERM CAPITAL GAIN OF R S.68,87,173/- AS BUSINESS INCOME. THE REASONING GIVEN BY THE AO FOR TREATING SHORT-TE RM CAPITAL GAIN AS BUSINESS INCOME ARE THAT THE ASSESSEE EARNED DIVIDEND OF RS.2,93,49 1/- WHEREAS THE PROFIT FROM SALE OF SHARE WAS RS.68,87,173/-. ACCORDING TO THE AO, THIS SHOWS THAT MAIN PURPOSE OF ITA NO.127/AHD/2009 2 INVESTMENT WAS TO EARN PROFIT FROM TRANSACTION IN S HARES. THE RATIO OF DIVIDEND TO PROFIT WAS 1:24. 3.1 THE SECOND REASON GIVEN BY THE AO WAS FREQUENCY OF TRANSACTION. THERE ARE 533 TRANSACTIONS IN TOTAL DURING THE YEAR. THE NEXT REASON TAKEN BY THE AO WAS PERIOD OF HOLDING OF SHARES. THE AO NOTICED THAT THE ASSES SEE HELD 75% OF SCRIP FOR LESS THAN 45 DAYS AND HAD TRANSACTED AS AND WHEN THERE WAS SC OPE TO EARN PROFIT. APART FROM THIS, THE AO MENTIONED THAT THE ASSESSEE HAD TAKEN UNSECURED LOANS AMOUNTING TO RS.37,43,772/- DURING THE YEAR FOR ENGAGING IN SHAR E TRANSACTIONS AND MAINTAINED ACCOUNTS WITH SURAT PEOPLES CO-OPERATIVE BANK (2 AC COUNTS), CENTRAL BANK OF INDIA, BANK OF BARODA AND ICICI BANK (3 ACCOUNTS). ON THE BASIS OF SUCH FINDING, THE AO TREATED THE SUM OF RS.68,87,173/- AS INCOME FROM BU SINESS. 4. ON APPEAL BEFORE THE LD. CIT(A), IT WAS CONTENDE D THAT THE ASSESSEE WAS DOING INVESTMENT IN SHARES AND NOT TRADING. THE AO HAD DR AWN ADVERSE INFERENCE ONLY IN RESPECT OF SHARES HELD FOR LESS THAN ONE YEAR. THE ASSESSEE AHS EARNED DIVIDEND OF RS.2,93,491/- DURING THE YEAR WHICH WAS AN AVERAGE OF RS.25,000/- PER MONTH. THIS MONTHLY INCOME CLEARLY INDICATES THAT THE ASSESSEE IS AN INVESTOR AND PURPOSE WAS TO EARN GOOD DIVIDENDS. INITIALLY SHARES WERE PURCHASE D FOR HOLDING BUT ON NOTICING THE MOVEMENT OF SCRIP AFTER PURCHASE, DECISION WAS TAKE N TO DISPOSE OFF THOSE SHARES WHICH ARE NOT PERFORMING WELL. THE ASSESSEE ALSO CO NTENDED THAT SHARES HAD BEEN PURCHASED BY THE ASSESSEE OUT OF HIS OWN FUNDS AND HAD SHOWN SUCH PURCHASES UNDER THE HEAD INVESTMENT AND NOT STOCK-IN-TRADE, WHICH HAS BEEN ACCEPTED BY THE DEPARTMENT. IT WAS ALSO POINTED OUT THAT OUT OF THE SHORT-TERM CAPITAL GAIN OF RS.68,87,173/-, GAIN OF RS.30,59,947/- PERTAINS TO SHARE AND SECURITIES PURCHASED IN THE PRECEDING YEAR, WHICH HAD BEEN ACCEPTED AS INVESTME NTS IN THE PRECEDING ASSESSMENT YEAR. TO BUTTRESS HIS ARGUMENT, THE A.R. OF THE ASS ESSEE RELIED ON THE FOLLOWING DECISIONS. (I) KARAM CHAND THAPAR AND BROTHERS (P) LTD. VS- CIT (1971) 83 ITR 899, (SC) (II) ARJUN KAPUR VS- DCIT 70 ITD 161 (DEL) (III) JANAK RANGWALLA VS- ACIT 11 SOT 627 (BOM.) ITA NO.127/AHD/2009 3 4.1 FINALLY, BEFORE THE LD. CIT(A), IT WAS CONTENDE D THAT MERE VOLUMES WOULD NOT ALTER THE NATURE OF TRANSACTIONS AND THAT, INCOME I S TO BE COMPUTED WITH REGARD TO THE NATURE OF TRANSACTIONS. 4.2 AFTER CONSIDERING THE AFORESAID SUBMISSIONS, TH E LD. CIT(A) UPHELD THE ACTION OF AO FOR THE DETAILED REASONS GIVEN IN PARA 6 TO 6 .6 OF THE IMPUGNED ORDER. 6. I HAVE CAREFULLY CONSIDERED THE DETAILED FINDING S AND CONCLUSION OF THE AO ON ONE HAND, AND THE EQUALLY DETAILED SUBMISSIONS OF THE ASSESSEE/AR, BOTH IN COURSE OF THE ASSESSMENT PROCEEDINGS, AS ALSO IN T HE APPELLATE PROCEEDINGS. WHAT WE ARE DEALING HERE IS A TOTAL ADDITION OF RS .68,87,173. THERE ARE TWO ISSUES HERE. FIRSTLY, AS THE AO HAS CLEARLY POINTE D OUT, THE ASSESSEE HAD TRANSACTED ON AN AVERAGE AT LEAST IN TWO SCRIPS IN MORE THAN TWO TRANSACTIONS ON THE SAME WORKING DAY, THE TOTAL NUMBER OF TRANS ACTIONS BEING 533 DURING THE YEAR. SECONDLY, THE MOTIVE BEHIND THE TRANSACTION IS NOT FOR THE ASSESSEE OR THE AR TO DECLARE, AND THE DEPARTMENT IS NOT BOUND TO ACCEPT SUCH A DECLARATION. AS CLEARLY LAID DOWN IN CIRCULAR NO.4 ISSUED BY TH E CBDT, THERE ARE SEVERAL FACTORS OR PARAMETERS WHICH HAVE TO BE EXAMINED FO R THE PURPOSE OF DECIDING AS TO WHETHER A SET OF TRANSACTIONS IS IN THE NATU RE OF BUSINESS TRANSACTIONS OR MERE INVESTMENTS. 6.1 BOTH THE A.O. AND THE ASSESSEE HAVE REFERRED TO AND RELIED EXTENSIVELY ON CBDT'S CIR. NO.4 OF 2007 DTD, 15.6.2007 WHICH EXHA USTIVELY LAYS DOWN THE PARAMETERS FOR DETERMINING AS TO WHETHER A SET OF TRANSACTIONS IS IN THE NATURE OF BUSINESS TRANSACTIONS OR MERE INVESTMENTS. THE AO HAS REFERRED TO AND PLACED RELIANCE UPON THE DECISION OF THE HON'BLE S UPREME COURT IN THE CASE OF H. HOLCK LARSEN (1986) 160 ITR 67, ON WHICH ALSO W AS THE CIRCULAR NO.4 BASED. IN THIS CASE, THE HON'BLE SUPREME COURT OBS ERVED THAT THE QUESTION WHETHER THE TRANSACTIONS OF SALE AND PURCHASE OF S HARES ARE TRADING TRANSACTIONS OR ARE IN THE NATURE OF INVESTMENTS, IS A MIXED QUESTION OF LAW AND FACT. HOWEVER, THE REAL QUESTION IS NOT 'WHETHER T HE TRANSACTION OF BUYING AND SETTING THE SHARES LACKS THE ELEMENT OF TRADING, B UT WHETHER THE LATER STAGES OF THE WHOLE OPERATION SHOW THAT THE FIRST STEP - THE PURCHASE OF THE SHARES - WAS NOT TAKEN AS, OR IN THE COURSE OF, A TRADING TRANS ACTION'. IN THE CASE OF THE ASSESSEE CASE, THE LARGE NUMBER OF TRANSACTIONS I. E. 533 DURING THE YEAR IN 275 SCRIPS WITH AVERAGE HOLDING TIME OF LESS THAN 45 D AYS IN MAJORITY CASES, CLEARLY SHOWED THAT THE FIRST STEP I.E., THE PURCHASE OF T HE SHARES, WAS TAKEN AS A TRADING TRANSACTION. IN OTHER WORDS, THE INTENT AN D PURPOSE OF PURCHASING THE SHARES WAS CLEARLY TO EARN PROFITS AS AND WHEN THE OPPORTUNITY AROSE. IT IS SEEN THAT THE ASSESSEE PURCHASED THE SHARES WHEN THE PR ICES WERE LOW, AND SOLD THE SHARES WHEN THE PRICES WERE HIGH ENOUGH TO EARN A PROFIT. DEPENDING ON THE MOVEMENT IN THE PRICES OF SHARES OF DIFFERENT COMP ANIES, THE ASSESSEE INDULGED ITA NO.127/AHD/2009 4 IN BUYING AND SELLING, WHICH DEARLY INDICATED THAT THE ACTIVITY ENGAGED IN BY THE ASSESSEE WAS PURELY A BUSINESS ACTIVITY. THERE WA S A SYSTEM AND A CONSISTENCY IN EARNING PROFITS. 6.2 ON HIS PART, THE AO VERY CLEARLY LAID DOWN T HE VARIOUS PARAMETERS WHICH HE CULLED OUT FROM DIFFERENT CASE-LAWS INCLUDING T HE DECISION OF THE AUTHORITY FOR ADVANCED RULINGS (AAR) IN THE CASE OF FIDELITY NORTH STAR FUND AND ORS., (2007) 288 ITR 641. THUS, APART FROM THE MOTIVE I. E. THE FIRST STEP TAKEN IN THE PURCHASE OF SHARES AND THE FREQUENCY OF THE TRANSA CTIONS, THE MAGNITUDE OF THE SALE AND PURCHASE OF SHARES AS ALSO THE SHORT HOLD ING PERIODS, CLEARLY SHOWED THAT THE PROFITS EARNED FROM THE SALE OF SHARES WA S IN THE NATURE OF BUSINESS INCOME. THE AO ALSO PLACED STRONG RELIANCE O N CIRCULAR NO.4 OF 2007, WHERE IT HAS BEEN STATED THAT IT IS POSSIBLE FOR A TAX PAYER TO HAVE TWO PORTFOLIOS, ONE COMPRISING OF SECURITIES AND CAPIT AL ASSETS, AND THE OTHER BEING A TRADING PORTFOLIO COMPRISING OF TRADING ASSETS. THERE IS NO RIGHT VESTED ON ANY ASSESSEE TO 'TREAT' THE TRANSACTIONS IN SHARES IN A PARTICULAR MANNER. THE NATURE OF THE TWO PORTFOLIOS HAVE TO BE DISTINGUISHED AND DECIDED ON THE BASIS OF THE SURROUNDING FACTS AND CIRCUMSTANCES OF THE CASE, A ND NOT WHAT THE ASSESSEE DECIDES IT SHOULD BE. IN THE CASE OF THE ASSESSEE, THE FACTS AND CIRCUMSTANCES, AND HENCE, ALL THE RELEVANT PARAMETERS CLEARLY SHO WED THAT THE ACTIVITY OF THE ASSESSEE OF PURCHASING AND SELLING SHARES DURING THE YEAR, WAS CLEARLY A BUSINESS ACTIVITY. 6.3 THE MOST SIGNIFICANT FACT BOUGHT OUT BY THE AO WAS THAT THE ASSESSEE WAS TRANSACTING THROUGH A RENOWNED SHARE BROKING FIRM. IF HE WAS INDEED AN ORDINARY INVESTOR HE WOULD NOT HAVE ENGAGED SUCH A MAJOR SHARE-BROKING FIRM FOR TRANSACTING IN SHARES . FURTHER, HE MAINTAINED FIVE ACCOUNTS IN FOUR DIFFERENT BANKS FOR THE PURPOSE OF HIS SHARE DEALI NGS. THESE FACTS CLEARLY SHOWED THAT THE ASSESSEE WAS NOR AN ORDINARY 'INVE STOR' BUT WAS RUNNING A REGULAR BUSINESS ESTABLISHMENT, AND HIS MAIN BUSIN ESS ACTIVITY WAS TRANSACTING IN SHARES. 6.4 THE AO OBSERVED THAT THE SHARE TRADING A CTIVITY WAS THE MAIN ACTIVITY ENGAGED IN BY HIM. INSPITE OF SUCH LARGE SCALE N INVESTMENTS', THE ASSESSEE HAD EARNED DIVIDEND OF ONLY RS.2,93,491 WHEREAS, THE P ROFIT/GAIN ON THE SALE OF SHARES WAS RS.68,87,173, THE RATIO OF DIVIDEND TO PROFIT WAS THUS ONLY 1:24. THIS WAS INSPITE OF THE FACT THAT IT WAS ONLY THE PROFIT AND NOT THE TOTAL SALE CONSIDERATION, SUCH PROFIT HAVING BEEN COMPUTED AF TER ADJUSTING FOR LOSSES INCURRED FROM SUCH TRANSACTIONS. THE AR HAS NOT BEEN ABLE TO REBUT SUCH FINDINGS OF THE A,O. IF THE ASSESSEE WAS INDEED AN INVESTOR AS CLAIMED, THEN IT DOES NOT NEED ROCKET SCIENCE TO APPRECIATE THAT HI S EARNINGS FROM DIVIDEND WOULD BE SUBSTANTIAL, IF NOT MORE THAN THE GAIN EA RNED FROM APPRECIATION, ESPECIALLY IN CASES WHERE THE HOLDING PERIOD WAS L ONGER. ITA NO.127/AHD/2009 5 6.5 I FIND THAT THE AR HAS MADE VERY BASIC SUBMI SSIONS WHICH ARE ESSENTIALLY REPETITIONS OF WHAT HAD BEEN STATED BEFORE THE AO. IT HAS BEEN SUBMITTED BY THE AR THAT THE STCG OF RS 68,87,173 EARNED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION INCLUDED A GAIN OF RS 30,59,94 7 WHICH PERTAINED TO SHARES AND SECURITIES PURCHASED IN THE PRECEDING YEAR WHE N THE SAME HAD BEEN ACCEPTED AS INVESTMENTS. THIS POINT IS NOT AT ALL RELEVANT SINCE SUCH SHARES WERE ALSO SOLD WITHIN A SPAN OF ONE YEAR AND THE PROCEE DS THERE FROM CONSTITUTED BUSINESS INCOME DURING THIS YEAR. IT IS WELL KNOWN TO THE AR THAT THE PRINCIPAL OF RES JUDICATA DOES NOT APPLY TO INCOME-TAX PROCE EDINGS AND EVEN THOUGH THE PURCHASES HAD BEEN ACCEPTED AS 'INVESTMENTS' LAST YEAR, NOTHING PREVENTED THE AO FORM TREATING THE SALE OF THE SAME SHARES AND S ECURITIES AS CONSTITUTING BUSINESS INCOME DURING THE YEAR UNDER CONSIDERATIO N. THE AR HAS NOT BEEN ABLE TO REBUT THE DETAILED FINDINGS AND SPECIFIC O BSERVATIONS OF THE AO ON VARIOUS POINTS. IT HAS THUS BEEN POINTED OUT BY TH E AO THAT THE ASSESSEE HAD DEALT IN 275 SCRIPS AND HAD ENGAGED IN MORE THAN 5 33 TRANSACTIONS DURING THE YEAR, WHICH AVERAGED ABOUT 2 TRANSACTIONS PER WORKING DAY IN MORE THAN 2 SCRIPS RESULTING IN EACH SCRIP BEING BOUGHT AND SOLD SEVERAL TIMES IN A DAY. THIS ISSUE HAS NOT BEEN ADDRESSED BY THE AR. AS ALREADY POINTED OUT ABOVE, IN THE WORDS OF THE ASSESSES AND THE AR THEMSELVES, S UCH TRANSACTIONS WOULD CLEARLY BE IN THE NATURE OF BUSINESS. DEALING IN THE SAME SHARES OR PURCHASING AND SELLING THE SAME SHARES MORE THAN ONCE ON THE SAME DAY MEANS THAT THE OWNER OF THE SHARES HAD BEEN ATTEMPTING TO RIDE TH E VOLATILITY IN THE MARKET, SINCE, MULTIPLE TRANSACTIONS WOULD MEAN BUYING THE SHARES WHEN THE PRICE IS LOW AND SELLING WHEN THE PRICE IS HIGH. THIS COU LD BE DONE ONLY WHEN THE MARKET GOES UP AND DOWN SEVERAL TIMES ON THE SAME DAY. WHAT IS FREQUENTLY STATED BY INVESTMENT GURUS IS THAT, WHEN THE MARK ET IS VOLATILE, ANY RETAIL OR SMALL TIME INVESTOR SHOULD STAY AWAY FROM THE MARKET AND HOLD ON TO THE INVESTMENTS UNTIL THE MARKET STABILISES. A PERSON WHO TRANSACTS IN TIMES OF MARKET VOLATILITY IS A HIGH-RISK TAKER WHO SEEKS T O REAP PROFITS FROM SUCH TURBULENCE. A NORMAL HOUSEHOLD INVESTOR CANNOT BE EXPECTED TO RIDE SUCH A VOLATILE MARKET. THUS, THE VOLUME OF THE TRANSACT IONS, THE FREQUENCY, AS ALSO THE MAGNITUDE OF THE TRANSACTIONS CLEARLY INDICATE AND POINT TO THE FACT THAT THE ASSESSEE WAS NOT A SMALL TIME HO USEHOLD INVESTOR, BUT A PERSON WHO WAS INVOLVED IN THE BIG TIME BUSINESS OF SHARE TRADING . 6.6 IT WAS ALSO CLEARLY BROUGHT OUT BY THE AO THAT THE ASSESSEE HAD TAKEN UNSECURED LOANS FROM VARIOUS PARTIES TOTALLING RS. 37,43,772 FOR THE PURPOSE OF TRADING IN THE SHARES. THE AR HAS HOWEVER STATED T HAT THE ASSESSEE HAD TRANSACTED IN SHARES WITH HIS OWN FUNDS. BUT HE HA S NOT FURNISHED ANY DETAIL OR EVIDENCE TO SUPPORT SUCH A CLAIM. THIS IMPORTANT F INDING OF THE AO CLEARLY CONTRADICTS THE ASSESSEE'S AND THE AR'S CLAIM THAT HE HAD INVESTED HIS OWN FUNDS. THE FACT THAT THE ASSESSEE HAD TAKEN SUCH S UBSTANTIAL LOANS TO BUY THE SHARES, CLEARLY SHOWS THAT IT WAS ESSENTIALLY A BU SINESS ACTIVITY THAT HE WAS ENGAGED IN. NO PRUDENT PERSON WOULD TAKE LOANS FR OM THE MARKET OR EVEN FROM KNOWN PERSONS AND RELATIVES WHERE INTEREST RATES A RE 15% AND UPWARDS, TO ITA NO.127/AHD/2009 6 EARN SIMPLE APPRECIATION ON INVESTMENTS WHICH IN P ERCENTAGE TERMS WOULD ALWAYS BE BELOW THE COST OF SUCH BOR ROWINGS, UNLESS OF COURSE SUCH BORROWINGS ARE MADE FOR THE PURPOSE OF EARNIN G PROFITS FROM A VOLATILE MARKET. THIS FACT OF THE BORROWINGS BY THE ASSESSE E, ALONG WITH THE OTHER FACTS SUCH AS THE ELABORATE ESTABLISHMENT MAINTAINED BY THE ASSESSEE, THE ENGAGEMENT OF A RENOWNED BROKER AND THE MAINTENANC E OF FIVE DIFFERENT BANK ACCOUNTS WITH FOUR DIFFERENT BANKS, AND THE OTHER FACTS PERTAINING TO THE LARGE NUMBER OF TRANSACTIONS INVOLVING A LARGE NUMBER OF SCRIPS WITH AVERAGE HOLDING PERIOD OF LESS THAN 45 DAYS, AS ALSO THE T OTAL TURNOVER OF THE TRANSACTIONS, CLEARLY LEAD TO THE IRREFUTABLE CONC LUSION THAT THE STCG THAT THE ASSESSEE HAD CLAIMED OF RS.68,87,173 WAS ESSENTIA LLY THE ASSESSEE'S INCOME FROM THE BUSINESS OF SHARE DEALINGS/TRANSACTIONS. THE AO'S ACTION IN TREATING THE SUM OF RS.68,87,173 AS INCOME FROM BU SINESS IS THEREFORE, SUSTAINED. THE EXPENSES CLAIMED WILL NOT BE ALLOWE D SINCE, AS MENTIONED BY THE A.O. THE SAME HAD BEEN CLAIMED AND ALLOWED AGAINST SPECULATION INCOME. 4.3 AGGRIEVED WITH THE ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 5. AT THE TIME OF HEARING BEFORE US, ON BEHALF OF T HE ASSESSEE, SHRI HARDIK VORA APPEARED AND FILED A PAPER BOOK CONTAINING 86 PAGES WHICH, INTER ALIA , INCLUDE SUBMISSIONS MADE BEFORE THE LD. CIT(A), THE COPY OF ASSESSMENT ORDER AND COMPUTATION OF INCOME FOR THE LAST THREE ASSESSMENT YEARS. THE COUNSEL OF THE ASSESSEE DREW OUR ATTENTION TO COPIES OF RETURN AND ASSESSMENT ORDER FOR THE EARLIER YEARS AND POINTED OUT THAT IN THE ASSESSMENT YEAR 2 003-04, THE ASSESSEE HAS SHOWN SHORT-TERM LOSS ON SHARE AMOUNTING TO RS.75,779/-. IN THE ASSESSMENT YEAR 2001-02, THE ASSESSEE HAS SHOWN THE SHORT-TERM CAPITAL LOSS ON SALE OF SHARES RS.5,42,683/-. IN BOTH OF THESE ASSESSMENT YEARS, THE CAPITAL GAIN/LO SS ON SALE AND PURCHASE OF SHARES HAS BEEN ACCEPTED. ATTENTION WAS ALSO DRAWN TO COPY OF ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2003-04 (PAGE 48 OF THE PAPER BOOK) WHICH WAS FRAMED UNDER SECTION 143(3) ON 08.03.2006. IN THIS ASSESSMENT ORDER, THE AO HAS ACCEPTED THE INCOME FROM CAPITAL GAIN RS.88,12,255/-. THE COUNSEL OF THE ASS ESSEE ARGUED THAT IN THE PAST, THE AO HAS ACCEPTED THAT THE ASSESSEE IS NOT IN THE BUS INESS OF PURCHASE AND SALE OF SHARES BUT ONLY AN INVESTOR. THEREFORE, IN THE ASSESSMENT YEAR UNDER APPEAL, THERE IS NO JUSTIFICATION FOR ADOPTING A DIVERGENT APPROACH. FO R THIS PROPOSITION, RELIANCE WAS PLACED ON THE JUDGMENT OF THE HONBLE BOMBAY HIGH C OURT IN THE CASE OF CIT-VS- ITA NO.127/AHD/2009 7 GOPAL PUROHIT REPORTED IN 228 CTR (BOM) 582. THE CO UNSEL OF THE ASSESSEE ALSO RELIED ON THE DECISION OF ITAT E BENCH, MUMBAI IN THE CASE OF SHANTILAL M. JAIN VS- ACIT IN ITA NO.2690/MUM/2010 DELIVERED ON 27.04 .2011 (COPY PLACED AT PAGE 73 OF THE PAPER BOOK). THE RELEVANT PARA RELIED ON BY THE LD. COUNSEL OF THE ASSESSEE IS PARA 8, WHICH READS AS UNDER: 8. IN THE INSTANT CASE, WE FIND THE ASSESSMENT ORDE R WAS PASSED ON 31.12.2008 FOR THE ASSESSMENT YEAR 2006-07 WHEREIN THE ASSESSI NG OFFICER HAS TREATED THE STCG AS BUSINESS INCOME. AGAINST THIS, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A), WHO VIDE ORDER DATED 17.2.2010 UPHELD THE A CTION OF THE ASSESSING OFFICER. WE FIND THE ASSESSING OFFICER IN THE ORDER PASSED U/S 143(3) ON 29.10.2009 FOR ASSESSMENT YEAR 2007-08 HAS ACCEPTED THE STCG DECLARED BY THE ASSESSEE. THE ABOVE ORDER OF THE ASSESSING OFFI CER WAS AFTER THE ORDER PASSED U/S 143(3) FOR THE ASSESSMENT YEAR 2006-07 A ND BEFORE THE ORDER PASSED BY THE CIT(A) UPHOLDING THE ACTION OF THE ASSESSING OFFICER. HOWEVER, WE FIND, THE ASSESSING OFFICER IN THE ORDER PASSED U/S 143(3 ) DATED 17.12.2010 FOR THE ASSESSMENT YEAR 2008-09 HAS ACCEPTED THE STCG OF RS .69,39,985/- WHICH IS AFTER THE ORDER PASSED BY THE CIT(A) ON 17.2.2010. WHEN THE ABOVE ASPECT WAS CONFRONTED TO THE LD. DR BY THE BENCH DURING THE CO URSE OF HEARING, THE LD. DR COULD NOT SAY ANYTHING. THUS, FROM THE DETAILS FURN ISHED BY THE LD. COUNSEL FOR THE ASSESSEE, WE FIND FROM ASSESSMENT YEARS 2003-04 TO 2008-09, THE ASSESSING OFFICER HAS CONSISTENTLY ACCEPTED THE STCG SHOWN BY THE ASSESSEE EXCEPT FOR ASSESSMENT YEAR 2006-07 I.E. THE IMPUGNED ASSESSMEN T YEAR. UNDER THESE CIRCUMSTANCES, WE ARE OF THE CONSIDERED OPINION THA T RULE OF CONSISTENCY AS PROPOUNDED BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF GOPAL PUROHIT (SUPRA) WILL SQUARELY BE APPLICABLE TO THE FACTS OF THE PRESENT CASE. 5.1 THE COUNSEL OF THE ASSESSEE SUBMITTED THAT THE RATIO OF THE AFORESAID DECISION IS SQUARELY APPLICABLE TO THE FACTS OF THE ASSESSEES CASE AND ON THE BASIS OF RULE OF CONSISTENCY, THE AO BE DIRECTED TO ACCEPT THE SHORT -TERM CAPITAL GAIN AS DECLARED IN THE RETURN OF INCOME. 5.2 FINALLY, THE COUNSEL OF THE ASSESSEE ALSO RELIE D ON THE LATEST DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT-VS- N IRAJ AMIDHAR SURTI REPORTED IN (2011) 238 CTR (GUJ) 294 WHEREIN IT WAS HELD THAT C APITAL GAINS EITHER SHORT-TERM OR LONG-TERM, WHICH WAS ACCEPTED IN EARLIER YEARS, THE INTENTION OF THE ASSESSEE HAS ALWAYS BEEN THAT OF MAKING INVESTMENT IN SHARES AND NOT DEALING IN SHARES- PROFIT WAS, THEREFORE, ASSESSABLE AS CAPITAL GAINS. ITA NO.127/AHD/2009 8 6. ON THE OTHER HAND, SHRI S.P.TALATI, APPEARING ON BEHALF OF THE REVENUE, VEHEMENTLY SUPPORTED THE ORDER OF THE LD. CIT(A). H E POINTED OUT THAT LOOKING TO THE VOLUME OF TRANSACTION, MOTIVE BEHIND MAKING PURCHAS E AND SALE OF SHARES IS TO EARN PROFIT. THEREFORE, THE AO RIGHTLY TREATED THE SHORT -TERM CAPITAL GAINS ON SALE AND PURCHASE OF SHARES AS BUSINESS INCOME. 7. HAVING HEARD BOTH THE SIDES, WE HAVE CAREFULLY G ONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE LATEST DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF NIRAJ AMIDHAR SURTI ( SUPRA ), RELIED ON BY THE LD. COUNSEL OF THE ASSESSEE. ADMITTEDLY, IN THE PAST, THE ASSESSEE WAS DECLARING SHORT-TERM/LONG-TERM CAPITAL GAINS IN SALE AND PURCHASE OF SHARES WHICH HAS BEEN ACCEP TED BY THE AO. EVEN IN THE ASSESSMENT ORDER UNDER SECTION 143(3) FOR THE ASSES SMENT YEAR 2003-04, THE AO HAS ACCEPTED THE INCOME DECLARED UNDER THE HEAD CAPITA L GAINS ON SALE AND PURCHASE OF SHARES. THE FACTS AND CIRCUMSTANCES OF THIS YEAR AR E THE SAME AS IN THE EARLIER YEAR. THEREFORE, THE RATIO OF JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE CIT-VS- GOPAL PUROHIT ( SUPRA ) AS WELL AS THE HONBLE GUJARAT HIGH COURT IN THE CASE OF NIRAJ AMIDHAR SURTI ( SUPRA ) ARE SQUARELY APPLICABLE TO THE FACTS OF ASSESSEE S CASE. WE, THEREFORE, FOLLOWING THE AFORESAID DECISIONS, DIREC T THE AO TO ACCEPT THE SHORT-TERM CAPITAL GAIN AMOUNTING TO RS.68,87,173/- DECLARED B Y THE ASSESSEE IN THE RETURN OF INCOME. THIS GROUND OF APPEAL TAKEN BY THE ASSESSEE IS ALLOWED. 8. GROUND NO.2 IS AGAINST CONFIRMING THE DISALLOWAN CE OF CLAIM OF LOSS ON SHARE TRANSACTIONS AMOUNTING TO RS.20,500/-. IN VIEW OF T HE SMALLNESS OF THE AMOUNT INVOLVED, THIS GROUND OF APPEAL WAS NOT PRESSED AT THE TIME OF HEARING BY THE LD. COUNSEL OF THE ASSESSEE. THEREFORE, THE SAME IS DIS MISSED AS BEING NOT PRESSED FOR. 9. GROUND NO.3 OF THE APPEAL OF THE ASSESSEE IS AS UNDER: ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LEARNED CIT (APPEALS) HAS ERRED IN CONFIRMING THE A CTION OF THE ASSESSING OFFICER IN MAKING DISALLOWANCE OF LOSS ON DERIVATIV ES OF RS.26,14,405/- BY TREATING IT AS SPECULATIVE LOSS. ITA NO.127/AHD/2009 9 10. AT THE TIME OF HEARING BEFORE US, THE LD. COUNS EL OF THE ASSESSEE POINTED OUT THAT THE CONTROVERSY INVOLVED IN THE AFORESAID GROU ND IS COVERED AGAINST THE ASSESSEE BY THE DECISION OF ITAT, SPECIAL BENCH, KOLKATA IN THE CASE SHREE CAPITAL SERVICES LTD. VS- ACIT REPORTED IN (2009) 124 TTJ (KOL)(SB) 740. WE, THEREFORE, FOLLOWING THE ORDER OF THE LD. CIT(A), HOLD THAT THE LD. CIT( A) IS JUSTIFIED IN CONFIRMING THE ACTION OF AO IN MAKING DISALLOWANCE OF LOSS ON DERI VATIVES OF RS.26,14,405/- BY TREATING IT AS SPECULATIVE LOSS. HENCE, WE DECLINE TO INTERFERE. THIS GROUND OF APPEAL IS ACCORDINGLY REJECTED. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 13.05.2011 SD/- SD/- (A.N.PAHUJA) (T.K.SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 13/05/2011 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE 2) THE DEPARTMENT 3) CIT(A) CONCERNED 4) CIT CONCERNED 5) D.R., ITAT, AHMEDABAD TRUE COPY BY ORDER DEPUTY REGISTRAR, ITAT, AHMEDABAD TALUKDAR/SR.P.S.