The ACIT, Central Circle-1(4), Ahmedabad V. Shri Ravindra M.Agrawal, Ahmedabad

ITA 1277/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 85588 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 28-01-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 29-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROOP CHAND
• Keywords: Business income; Salary income; Rule of consistency; Revised return
• Section: 153A

Judgement Text

, B IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI N.S. SAINI, ACCOUNTANT MEMBER ./ ITA NO.1277/AHD/2011 / ASSTT. YEAR: 2007-08 ACIT, CENT.1(4) AHMEDABAD. VS SHRI RAVINDRA M. AGRAWAL 70, VASANT BAHAR COLONY BOPAL, AHMEDABAD. PAN : ACIPA 6398 M ! / (APPELLANT) '# ! / (RESPONDENT) REVENUE BY : SHRI ROOPCHAND, SR ASSESSEE(S) BY : SHRI S.N.SOPARKAR, AR / DATE OF HEARING : 28/01/2015 / DATE OF PRONOUNCEMENT: 30/01/2015 $%/ O R D E R PER BENCH: THIS APPEAL IS FILED BY THE REVENUE AGAINST THE OR DER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-VI, AHM EDABAD DATED 28.2.2011 FOR ASSTT.YEAR 2007-08. THE ONLY GROUND RAISED IN THIS APPEAL OF THE REVENUE IS AS UNDER: 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN TREATING BUSINESS INCOME OF RS.63,60,801/- AS CAPITAL GAINS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE AO. 2. BRIEF FACTS OF THE CASE ARE THAT IN ASSTT.YEAR 2 007-08, THE AO OBSERVED THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS SHOWN SHORT TERM LOSS OF RS.16,90,286/- FROM SALE O F SHARES AND LONG ITA NO.1277/AHD/2011 2 TERM CAPITAL GAIN OF RS.80,43,087/-. THE VALUE OF SALE AND PURCHASES OF SHARES AND MUTUAL FUNDS ARE AS FOLLOWS: SR.NO. TRANSACTIONS THROUGH APPROX. PURCHASE APPROX. SALE 1. NORMAL TRADES 2090156 3078424 2. THROUGH PMS 12932124 18244259 3. MUTUAL FUNDS 12243552 12433136 TOTAL 27265832 33755019 THE AO OBSERVED THAT IN ASSTT.YEAR 2006-07, THE ASS ESSEE HAS INDULGED IN SIMILAR MODUS OPERANDI OF TRANSACTIONS IN SHARES THROUGH PMS AND THROUGH NORMAL SALES THROUGH BSE/NSE IN RESPECT OF SALE OF EQUITIES. ACCORDINGLY, HE HAD HELD THAT THE SHORT TERM AND LO NG TERM CAPITAL GAIN SHOWN BY THE ASSESSEE IS TAXED AS BUSINESS INCOME O F THE ASSESSEE. THEREFORE, IN THE CURRENT YEAR ALSO HE HELD THAT TH E GAIN FROM THE SHARE TRANSACTIONS IS TO BE ASSESSED AS BUSINESS INCOME. 3. ON APPEAL, THE CIT(A) ACCEPTED THE APPEAL OF THE ASSESSEE, AND DIRECTED THE AO NOT TO TREAT THESE TRANSACTION AS B USINESS AS AGAINST CAPITAL GAIN DISCLOSED BY THE ASSESSEE BY OBSERVING AS UNDER: 3.3 I HAVE CONSIDERED THE FACTS OF THE CASE, ASSESS MENT ORDER AND APPELLANT'S SUBMISSION. ASSESSING OFFICER TREAT ED INCOME FROM SHARE TRANSACTIONS DONE THROUGH PMS AND STOCK EXCHA NGE AS BUSINESS INCOME AS AGAINST CAPITAL GAIN DISCLOSED B Y THE APPELLANT. APPELLANT SUBMITTED THAT SIMILAR ISSUE C AME UP BEFORE MY LEARNED PREDECESSORS AND IT WAS HELD THAT TRANSA CTIONS WERE IN THE NATURE OF INVESTMENT AND RESULT OF THE SAME WER E TAXABLE IN THE CAPITAL GAIN HEAD AS AGAINST BUSINESS INCOME TR EATED BY THE ASSESSING OFFICER. THE RELEVANT EXTRACT OF THE ORDE R IS QUOTED BY THE APPELLANT IN THE SUBMISSION. APPELLANT FURTHER SUBMITTED THAT JURISDICTIONAL ITAT IN THE APPELLANTS OWN CASE IN EARLIER YEARS HELD THAT APPELLANT WAS MAKING INVESTMENT IN SHARES AND THE SAME WERE NOT SHOWN AS STOCK IN TRADE AND THEREFORE THE RESULT IS TAXABLE AS CAPITAL GAIN AND NOT BUSINESS INCOME. RE LEVANT EXTRACT OF THE ITAT'S ORDER IS ALSO QUOTED IN THE APPELLANT 'S SUBMISSION. SINCE TRANSACTIONS IN THIS YEAR ARE ALSO IDENTICAL, THESE GROUNDS ARE COVERED IN FAVOUR OF APPELLANT BY THE ORDER OF MY LEARNED PREDECESSORS AND ALSO BY JURISDICTIONAL ITAT. RESP ECTFULLY ITA NO.1277/AHD/2011 3 FOLLOWING THE SAME, ASSESSING OFFICER IS DIRECTED N OT TO TREAT THESE TRANSACTIONS AS BUSINESS AS AGAINST CAPITAL GAIN DI SCLOSED BY THE APPELLANT. THESE GROUNDS ARE THEREFORE ALLOWED. 4. AT THE OUTSET, THE AR OF THE ASSESSEE FILED BEFO RE US, A COPY OF THE ORDER OF THIS BENCH OF THE TRIBUNAL IN THE CASE OF THE ASSESSEE ITSELF FOR A.Y.2000-2001 TO 2004-05 IN ITA NO.3177 TO 3180/AHD /2008 AND 2113 AND 2114/AHD/2008 FOR A.Y.1999-2000 AND 2002-2003 O RDER DATED 28.1.2011 AND SUBMITTED THAT THE ISSUE IS COVERED I N FAVOUR OF THE ASSESSEE BY THIS ORDER OF THE TRIBUNAL. THE DR CO NCEDES TO THIS SUBMISSION OF THE ASSESSEE THAT THE ISSUE IS COVERE D IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL CITED SUPRA. 5. WE HAVE CONSIDERED SUBMISSIONS OF BOTH THE PARTI ES AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES. WE FIND THAT THE TRIBUNAL IN THE ASSESSEE ITSELF FOR A.Y.2000-2001 TO 2004-05 IN ITA NO.3177 TO 3180/AHD/2008 AND 2113 & 2114/AHD/2008 FOR A.Y.1999 -2000 AND 2002-2003 VIDE ORDER DATED 28.1.2011 DECIDED THE ID ENTICAL ISSUE IN FAVOUR OF THE ASSESSEE. THE RELEVANT PORTIONS OF T HE SAID ORDER OF THE TRIBUNAL ARE REPRODUCED HEREINBELOW|: 10. THE ONLY DISPUTE IN THIS APPEAL BY THE REVENUE IS WHETHER THE PROFIT FROM SALE OF SHARES IS TO BE ASSESSED AS BUSINESS INCOME OR AS INCOME FROM CAPITAL GAIN. TO DETERMINE THIS, THE MOST IMPORTANT TEST IS WHETHER THE INITIAL ACQUISITION O F THE SHARES WAS WITH THE INTENTION OF DEALING IN THE SHARES OR IT W AS MADE AS AN INVESTMENT. THE INTENTION OF THE ASSESSEE IS BEST KNOWN TO HIM AND THE DISPUTE COMES TO THE APPELLATE AUTHORITIES ONLY WHEN THE REVENUE AUTHORITIES DO NOT ACCEPT THE CLAIM OF THE ASSESSEE. THE APPELLATE AUTHORITIES HAVE LAID DOWN CERTAIN GUIDEL INES ON THE BASIS OF WHICH THE INTENTION OF THE ASSESSEE CAN BE INFER RED. IN THE CASE OF SARNATH INFRASTRUCTURE PVT. LTD. (SUPRA), THE LU CKNOW BENCH OF THE ITAT HAS LAID VARIOUS PRINCIPLES WHICH MAY BE A PPLIED TO DETERMINE WHETHER THE TRANSACTION OF PURCHASE AND S ALE OF SHARE IS IN THE NATURE OF TRADE OR INVESTMENT. THE RELEVANT FINDINGS OF THE ITAT READ AS UNDER: THE FOLLOWING PRINCIPLES CAN BE APPLIED ON THE FAC TS OF A CASE TO FIND OUT WHETHER TRANSACTION(S) IN QUESTION ARE IN THE NATURE OF ITA NO.1277/AHD/2011 4 TRADE OR ARE MERELY FOR INVESTMENT PURPOSES: (1) WHAT IS THE INTENTION OF THE ASSESSEE AT THE TIME OF PURCHASE OF THE SHARES. THIS CAN BE FOUND OUT FROM THE TREATMENT IT GIVES TO SUCH PURCHASE IN ITS BOOKS OF ACCOUNTW HETHER IT IS TREATED AS STOCK-IN-TRADE OR INVESTMENT; WHETHER SH OWN IN OPENING/CLOSING STOCK OR SHOWN SEPARATELY AS INVEST MENT OR NON- TRADING ASSET. (2) WHETHER ASSESSEE HAS BORROWED MONEY TO PURCHAS E AND PAID INTEREST THEREON. NORMALLY, MONEY IS BORROWED TO PURCHASE GOODS FOR THE PURPOSES OF TRADE AND NOT FOR INVESTI NG IN AN ASSET FOR RETAINING. (3) WHAT IS THE FREQUENCY OF SUCH PURCHASES AND DISPOSA L IN THAT PARTICULAR ITEM ? IF PURCHASES AND SALES ARE F REQUENT, OR THERE ARE SUBSTANTIAL TRANSACTIONS IN THAT ITEM, IT WOULD INDICATE TRADE. HABITUAL DEALING IN THAT PARTICULAR ITEM IS INDICAT IVE OF INTENTION OF TRADE. SIMILARLY, RATIO BETWEEN THE PURCHASES AND S ALES AND THE HOLDINGS MAY SHOW WHETHER THE ASSESSEE IS TRADING O R INVESTING (HIGH TRANSACTIONS AND LOW HOLDINGS INDICATE TRADE WHEREAS LOW TRANSACTIONS AND HIGH HOLDINGS INDICATE INVESTMENT) . (4) WHETHER PURCHASE AND SALE ARE FOR REALIZING PROFIT OR PURCHASES ARE MADE FOR RETENTION AND APPRECIATION I N ITS VALUE? FORMER WILL INDICATE INTENTION OF TRADE AND LATTER, AN INVESTMENT. IN THE CASE OF SHARES WHETHER INTENTION WAS TO ENJO Y DIVIDEND AND NOT MERELY EARN PROFIT ON SALE AND PURCHASE OF SHAR ES. A COMMERCIAL MOTIVE IS AN ESSENTIAL INGREDIENT OF TRA DE. (5) HOW THE VALUE OF THE ITEMS HAS BEEN TAKEN IN THE BA LANCE SHEET ? IF THE ITEMS IN QUESTION ARE VALUED AT COST , IT WOULD INDICATE THAT THEY ARE INVESTMENTS OR WHERE THEY AR E VALUED AT COST OR MARKET VALUE OR NET REALIZABLE VALUE (WHICH EVER IS LESS), IT WILL INDICATE THAT ITEMS IN QUESTION ARE TREATED AS STOCK-IN-TRADE. (6) HOW THE COMPANY (ASSESSEE) IS AUTHORIZED IN MEMORAN DUM OF ASSOCIATION/ARTICLES OF ASSOCIATION ? WHETHER FOR T RADE OR FOR INVESTMENT ? IF AUTHORIZED ONLY FOR TRADE, THEN WHE THER THERE ARE SEPARATE RESOLUTIONS OF THE BOARD OF DIRECTORS TO C ARRY OUT INVESTMENTS IN THAT COMMODITY ? AND VICE VERSA. (7) IT IS FOR THE ASSESSEE TO ADDUCE EVIDENCE TO SHOW T HAT HIS HOLDING IS FOR INVESTMENT OR FOR TRADING AND WHAT D ISTINCTION HE HAS KEPT TO THE RECORDS OR OTHERWISE, BETWEEN TWO T YPES OF HOLDINGS: IF THE ASSESSEE IS ABLE TO DISCHARGE THE PRIMARY ONUS AND COULD PRIMA FACIE SHOW THAT PARTICULAR ITEM IS HELD AS ITA NO.1277/AHD/2011 5 INVESTMENT (OR SAY, STOCK-IN-TRADE) THEN ONUS WOULD SHIFT TO REVENUE TO PROVE THAT APPARENT IS NOT REAL. (8) THE MERE FACT OF CREDIT OF SALE PROCEEDS OF SHARES (OR FOR THAT MATTER ANY OTHER ITEM IN QUESTION) IN A PARTICULAR ACCOUNT OR MUCH FREQUENCY OF SALE AND PURCHASE WILL ALONE WILL NOT BE SUFFICIENT TO SAY THAT ASSESSEE WAS HOLDING THE SHARES (OR THE IT EMS IN QUESTION) FOR INVESTMENT. (9) ONE HAS TO FIND OUT WHAT ARE THE LEGAL REQUISITES F OR DEALING AS A TRADER IN THE ITEMS IN QUESTION AND WHETHER TH E ASSESSEE IS COMPLYING WITH THEM. WHETHER IT IS THE ARGUMENT OF THE ASSESSEE THAT IT IS VIOLATING THOSE LEGAL REQUIREMENTS, IF I T IS CLAIMED THAT IT IS DEALING AS A TRADER IN THAT ITEM ? WHETHER IT HA D SUCH AN INTENTION (TO CARRY ON ILLEGAL BUSINESS IN THAT ITE M) SINCE BEGINNING OR WHEN PURCHASES WERE MADE ? (10) IT IS PERMISSIBLE AS PER CBDTS CIRCULAR NO. 4 OF 2 007 OF 15- 6-2007 THAT AN ASSESSEE CAN HAVE BOTH PORTFOLIOS, O NE FOR TRADING AND OTHER FOR INVESTMENT PROVIDED IT IS MAINTAINING SEPARATE ACCOUNT FOR EACH TYPE, THERE ARE DISTINCTIVE FEATUR ES FOR BOTH AND THERE IS NO INTERMINGLING OF HOLDINGS IN THE TWO PO RTFOLIOS. (11) NOT ONE OR TWO FACTORS OUT OF ABOVE ALONE WILL BE SUFFICIENT TO COME TO A DEFINITE CONCLUSION BUT THE CUMULATIVE EFFECT OF SEVERAL FACTORS HAS TO BE SEEN. THE ASSESSEE-COMPANY WAS DEALING IN SHARES AND IT H AD DEALT IN SHARES BOTH AS STOCK-IN-TRADE AS WELL AS INVESTMENT . IT SOLD SHARES FROM THE INVESTMENT PORTFOLIO AND CLAIMED THAT THE PROFIT ARISING THEREFROM WAS CAPITAL GAIN. THE ASSESSING OFFICER H ELD THAT MAIN BUSINESS OF THE ASSESSEE WAS PURCHASE AND SALE IN S HARES. IT WAS NEITHER A SHARE DEALER NOR A SHARE BROKER. THE DETA ILS FOR PURCHASE AND SALES AFFECTED BY THE ASSESSEE COMPANY REVEALED THAT SALES AND PURCHASES WERE QUITE SUBSTANTIAL AND WOULD NOT BE MADE BY A PERSON WHO INVESTED IN SHARES. FURTHER, T HE ASSESSEE DID NOT HAVE SUFFICIENT FUNDS TO MAKE SUCH INVESTME NTS AND THE ASSESSEE WAS CLAIMING TO HAVE MADE INVESTMENT OUT O F BORROWED CAPITAL. HE, THEREFORE, HELD THAT THE PROFIT IN QUE STION WAS ASSESSABLE AS BUSINESS INCOME. HELD THAT THE UNDISPUTED FACT WAS THAT THE ASSESSEE WAS DEALING IN SHARES BOTH AS BUSINESS AS WELL AS INVESTMENT. I T HAD KEPT SEPARATE ACCOUNTS IN RESPECT OF TWO PORTFOLIOS. NO MATERIAL WAS BROUGHT ON RECORD TO SHOW THAT DEMARCATION LINE BET WEEN ITA NO.1277/AHD/2011 6 BUSINESS AND INVESTMENT WAS HAZY OR THAT THE ASSESS EE HAD NOT MAINTAINED AN INVESTMENT PORTFOLIO AND IT WAS DEALI NG IN SHARES ONLY LIKE A TRADER. THUS, ON APPRECIATION OF CUMULA TIVE EFFECT OF SEVERAL FACTORS PRESENT IT WAS TO BE HELD THAT THE SURPLUS WAS CHARGEABLE TO CAPITAL GAINS ONLY AND THE ASSESSEE W AS NOT TO HE TREATED AS TRADER IN RESPECT OF SALE AND PURCHASE O F SHARES IN THE INVESTMENT PORTFOLIO. THE ITAT, MUMBAI BENCH IN THE CASE OF JANAK S. RANG WALA (SUPRA) HELD AS UNDER: THE MERE VOLUME OF TRANSACTION TRANSACTED BY THE A SSESSEE WOULD NOT ALTER THE NATURE OF TRANSACTION. IT IS AN ESTABLISHED PRINCIPLE THAT INCOME IS TO BE COMPUTED WITH REGARD TO THE TRANSACTION. THE TRANSACTION IN WHOLE HAS TO BE TAK EN INTO CONSIDERATION AND THE MAGNITUDE OF THE TRANSACTION DOES NOR AFTER THE NATURE OF TRANSACTION. THOUGH THE PRINCIPLE OF RES JUDICATA DOES NOT APPLY TO THE INCOME-TAX PROCEEDINGS AS EAC H YEAR IS AN INDEPENDENT YEAR OF THE ASSESSMENT BUT IN ORDER TO MAINTAIN CONSISTENCY, IT IS A JUDICIALLY ACCEPTED PRINCIPLE THAT SAME VIEW SHOULD BE ADOPTED FOR THE SUBSEQUENT YEARS UNLESS T HERE IS A MATERIAL CHANGE IN THE FACTS. (PARA 6] IN THE FACTS OF THE INSTANT CASE, THE ASSESSEE WAS HOLDING THE SHARES AS INVESTMENT FROM YEAR TO YEAR. IT WAS THE INTENTION OF THE ASSESSEE WHICH WAS TO BE SEERS TO DETERMINE THE NATURE OF TRANSACTION CONDUCTED BY THE ASSESSEE. THOUGH THE I NVESTMENT IN SHARES WAS ON A LARGE MAGNITUDE BUT THE SAME WOULD NOT DECIDE THE NATURE OF TRANSACTION. SIMILAR TRANSACTIONS OF SALE AND PURCHASE OF SHARES IN THE PRECEDING YEARS HAD BEEN HELD TO BE INCOME FRONT CAPITAL GAINS BOTH ON LONG-TERN AND SH ORT-TERM BASIS. TIRE TRANSACTION IN THE YEAR UNDER CONSIDERATION ON ACCOUNT OF SALE AND PURCHASE OF SHARES WAS SAME AS IN THE PRECEDING YEARS AND THE SAME WAS TO BE ACCEPTED AS SHORT-TERM CAPITAL G AINS. THERE WAS NO BASIS FOR TREATING THE ASSESSEE AS A TRADER IN SHARES, WHEN HIS INTENTION WAS TO HOLD SHARES ITS THE INDIAN COM PANIES AS AN INVESTMENT AND NOT AS STOCK-IN-TRADE. THE MERE MAGN ITUDE OF THE TRANSACTION DOES NOT CHANGE THE NATURE OF TRANSACTI ON, WHICH ARE BEING ASSESSED AS INCOME FROM CAPITAL GAINS IN THE PAST SEVERAL YEARS: THE ITAT, MUMBAI BENCH IN THE CASE OF GOPAL PUROHIT (SUPRA) FOLLOWED THE DECISION OF THE ITAT, LUCKNOW BENCH IN THE CASE OF SARNATH INFRASTRUCTURE PVT. LTD. (SUPRA) AND HELD A S UNDER: FURTHER, ON THE BASIS OF MERITS ALSO, IN VIEW OF THE RATIO OF THE DECISION OF SARNATH INFRASTRUCTURE P. LTD.S CASE ( SUPRA), IT WAS ITA NO.1277/AHD/2011 7 HELD THAT THE DELIVERY BASED TRANSACTION SHOULD BE TREATED AS OF THE NATURE OF INVESTMENT TRANSACTIONS AND PROFIT TH EREFROM SHOULD BE TREATED AS SHORT TERM CAPITAL GAIN OR LONG TERM CAPITAL GAIN DEPENDING UPON THE PERIOD OF HOLDING. IN ADDITION TO THE ABOVE, THE ITAT, MUMBAI BENCH AL SO ACCEPTED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT IN THE PRECEDING YEAR, SIMILAR CLAIM WAS ACCEPTED BY THE REVENUE. T HE RELEVANT FINDINGS OF THE ITAT ARE AS UNDER: THUS, THE NATURE OF ACTIVITIES, MODUS OPERANDI OF THE ASSESSEE, MANNER OF KEEPING RECORDS AND PRESENTATION OF SHARE S AS INVESTMENT AT THE YEAR END WERE SAME IN ALL THE YEA RS, AND, HENCE, APPARENTLY, THERE APPEARED NO REASON AS TO W HY THE CLAIMS MADE BY THE ASSESSEE SHOULD NOT BE ACCEPTED. HOWEV ER, THE REVENUE AUTHORITIES HAD TAKEN A DIFFERENT VIEW IN T HE YEAR UNDER CONSIDERATION BY HOLDING THAT PRINCIPLE OF RES JUDI CATA WAS NOT APPLICABLE TO THE ASSESSMENT PROCEEDINGS. THERE COU LD NOT BE ANY DISPUTE ON THIS ASPECT, BUT THERE IS ALSO ANOTHER J UDICIAL THOUGHT THAT THERE SHOULD BE UNIFORMITY IN TREATMENT AND CO NSISTENCY UNDER THE SAME FACTS AND CIRCUMSTANCES AND IT WAS A S ALREADY FOUND THAT FACTS AND CIRCUMSTANCES WERE IDENTICAL E VEN THOUGH A DIFFERENT STAND HAD BEEN TAKEN BY THE REVENUE AUTHO RITIES.: THE REVENUE FILED THE APPEAL BEFORE THE HONBLE BOM BAY HIGH COURT AGAINST THE DECISION OF THE ITAT IN THE CASE OF GOPAL PUROHIT (SUPRA) AND A SPECIFIC QUESTION WAS RAISED AGAINST THE RULE OF CONSISTENCY APPLIED BY THE ITAT. THE HONBLE HIGH COURT VIDE ORDER DATED 6-1-2010, 228 CTR 582 (BOM) UPHELD THE ORDER OF THE ITAT AND HELD AS UNDER: 3. IN SO FAR AS QUESTION (B) IS CONCERNED, THE TR IBUNAL HAS OBSERVED IN PARE 8. OF ITS JUDGMENT THAT THE AS SESSEE HAS FOLLOWED A CONSISTENT PRACTICE IN REGARD TO THE NATURE OF THE ACTIVITIES, THE MANNER OF KEEPING RECORDS AND T HE PRESENTATION OF SHARES AS INVESTMENT AT THE END OF THE YEAR, IN ALL THE YEAR THE REVENUE SUBMITTED THAT A DIFFER ENT VIEW SHOULD BE TAKEN FOR THE YEAR UNDER CONSIDERATION, S INCE THE PRINCIPLE OF RES JUDICATA IS NOT APPLICABLE TO ASSE SSMENT PROCEEDINGS. THE TRIBUNAL CORRECTLY ACCEPTED THE PO SITION THAT THE PRINCIPLE OF RES JUDICATA IS NOT ATTRACTED SINCE EACH ASSESSMENT YEAR IS SEPARATE IN ITSELF. THE TRIBUNAL HELD THAT THERE OUGHT TO BE UNIFORMITY IN TREATMENT AND CONSI STENCY WHEN THE FACTS AND CIRCUMSTANCES ARE IDENTICAL, PAR TICULARLY IN THE CASE OF THE ASSESSEE. THIS APPROACH OF THE T RIBUNAL CANNOT BE FAULTED. THE REVENUE DID NOT FURNISH ANY JUSTIFICATION FOR ADOPTING A DIVERGENT APPROACH FOR THE ITA NO.1277/AHD/2011 8 ASSESSMENT YEAR IN QUESTION. QUESTION (B), THEREFOR E, DOES NOT ALSO RAISE ANY SUBSTANTIAL QUESTION. 11. ON MERIT ALSO, THEIR LORDSHIPS UPHELD THE FINDI NGS OF THE ITAT HOLDING THE SAME TO BE PURE FINDING OF THE FAC T. 12. SIMILAR VIEW IS TAKEN BY THE OTHER BENCHES OF T HE ITAT IN VARIOUS DECISIONS RELIED UPON BY THE LEARNED COUNSE L. HOWEVER, FOR THE SAKE OF BREVITY, THE SAME ARE NOT DISCUSSED HERE IN DETAIL. 13. THE LEARNED DR HAD CONTENDED THAT THE ABOVE DEC ISIONS OF THE ITAT WOULD NOT BE APPLICABLE TO THE CASE UNDER APPEAL BEFORE US, BECAUSE, IN THESE CASES THE TRANSACTIONS OF THE PURCHASE AND SALE OF SHARES WERE DISCLOSED TO THE DEPARTMENT, WH ILE IN THE CASE OF THE ASSESSEE, THESE WERE UNDISCLOSED TRANSACTION S DETECTED BY THE REVENUE ONLY AS A RESULT OF SEARCH. TO VERIFY FACTUAL CORRECTNESS OF THE CONTENTION OF THE REVENUE, THE A SSESSEE WAS ASKED TO FURNISH THE COPY OF ORIGINAL COMPUTATION A S WELL AS REVISED COMPUTATION IN THE CASE OF RAVINDRA AGRAWAL FOR ANY ONE ASSESSMENT YEAR. THE ASSESSEE FURNISHED THE DETAIL FOR A.Y.2000- 2001 FROM WHICH WE FIND THAT THE ORIGINAL RETURN WA S FURNISHED BY THE ASSESSEE ON 7-11-2001 WHEREAS THE SEARCH HAS TA KEN PLACE AT THE ASSESSEES PREMISES ON 29-10-2004. IN THIS ORI GINAL RETURN LONG TERM CAPITAL GAIN OF RS.10,02,774/- WAS DISCLO SED. IN RESPONSE TO THE NOTICE UNDER SECTION 153A, THE ASSE SSEE FURNISHED RETURN DISCLOSING CAPITAL GAIN OF RS.7,31 ,096/- WHICH WAS FILED ON 30-11-206. THIS RETURN WAS AGAIN REVI SED ON 24-4- 2007 IN WHICH THE CAPITAL GAIN OF RS.7,33,450/- WAS DISCLOSED. THE FACT REMAINS THAT THE CAPITAL GAIN WAS DISCLOSE D BY THE ASSESSEE IN THE ORIGINAL RETURN AS WELL. OF COURSE THERE IS SOME VARIATION IN THE AMOUNT OF CAPITAL GAIN DISCLOSED. IN THE ORDER UNDER SECTION 153A ALSO THERE IS NO FINDING BY THE AO THAT THE TRANSACTION OF PURCHASE AND SALE OF SHARES WERE NOT DISCLOSED BY THE ASSESSEE. THE SAME IS NOT ASSESSED AS INCOME F ROM UNDISCLOSED SOURCES, BUT ASSESSED AS BUSINESS INCOM E. THEREFORE, THE CONTENTION OF THE LEARNED DR THAT TH E TRANSACTION OF PURCHASE AND SALE OF SHARES WAS NOT DISCLOSED TO THE DEPARTMENT IS FACTUALLY NOT CORRECT. MOREOVER, WHE THER THE TRANSACTION OF PURCHASE AND SALE OF SHARES WAS DISC LOSED BEFORE THE DATE OF SEARCH OR NOT WOULD NOT BE RELEVANT FOR DETERMINING WHETHER THE TRANSACTION WAS IN THE NATURE OF TRADIN G TRANSACTION OR IN THE NATURE OF INVESTMENT. THEREFORE, WHETHER THE TRANSACTION OF PURCHASE AND SALE OF SHARES WAS A TR ADING TRANSACTION OR INVESTMENT WILL HAVE TO BE EXAMINED CONSIDERING THE TOTALITY OF THE FACTS OF THE ASSESSEES CASE. WE FIND THAT SHRI RAVINDRA M. AGARWAL IS A CHARTERED ACCOUNTANT, COST ACCOUNTANT AS WELL AS COMPANY SECRETARY BY EDUCATION. HE WAS AN EXECUTIVE ITA NO.1277/AHD/2011 9 DIRECTOR IN SAURAHSTRA CHEMICALS LTD., PORBANDAR AT THE RELEVANT TIME. HE WAS NOT IN THE BUSINESS OF PURCHASE AND S ALE OF SHARES. IN THE ORIGINAL RETURN OF INCOME FURNISHED PRIOR TO THE SEARCH, THE PROFIT FROM SALE OF SHARES WAS OFFERED TO TAX AS CA PITAL GAIN AND THE SAME WAS ACCEPTED BY THE REVENUE UNDER SECTION 143(1). NO MONEY WAS BORROWED BY THE ASSESSEE FOR THE ACQUISIT ION OF THE SHARES. ALL SHARES WERE ACQUIRED BY UTILISING OWN FUND. NEITHER ANY OFFICE NOR ANY STAFF WAS KEPT AND MAINTAINED FO R THE PURPOSE OF SALE OF PURCHASE/SHARES. HOWEVER, THERE WERE FR EQUENT TRANSACTIONS OF PURCHASE AND SALE OF SHARES. THERE IS DISPUTE WITH REGARD TO TOTAL NUMBER OF SHARE TRANSACTIONS OF PUR CHASE AND SALE OF SHARES BY VARIOUS ASSESSES. AS PER THE REVENUE THE TOTAL NUMBER OF TRANSACTION BY ALL THE ASSESSEES DURING T HE VARIOUS ASSESSMENT YEARS UNDER APPEAL WAS TOTALING TO 36,00 0 (APPROX.). AS PER THE ASSESSEE THE NUMBER OF TRANSACTIONS WERE 4611. THE REVENUE HAS NOT GIVEN ANY BASIS FOR THE FIGURE OF 3 6,000 MENTIONED IN THE ASSESSMENT ORDER WHILE THE ASSESSE E HAS GIVEN WORKING HOW THERE WERE 4,611 TRANSACTIONS BY VARIOU S ASSESSEES IN SEVERAL YEARS. WHETHER THE TRANSACTIONS WERE 4, 611 OR 36,000, THE FACTS REMAIN THAT THERE WERE FREQUENT TRANSACTI ONS OF PURCHASE AND SALE OF SHARES. HOWEVER, EXCEPT THE P ARAMETER OF FREQUENCY IN PURCHASE/SALE OF SHARES ALL OTHER PARA METERS INDICATE THAT THE TRANSACTIONS WERE IN THE NATURE OF INVESTM ENT AND NOT THE TRADE TRANSACTIONS. EVEN FOR FREQUENCY, IT WAS EXP LAINED BY THE LEARNED COUNSEL THAT THE ASSESSEE WAS MOSTLY MAKING THE INVESTMENT IN B-GROUP SCRIPTS AND TO AVOID RISK HE MADE INVESTMENT IN SEVERAL SCRIPTS INSTEAD OF INVESTING IN ONE SCRIPT. FOR EXAMPLE, IF THE ASSESSEE HAD TO INVEST RS.10 LA KHS INSTEAD OF INVESTMENT IN ONE SCRIPT, HE USED TO INVESTMENT IN TEN DIFFERENT SCRIPTS. HE MADE A STATEMENT THAT THE ASSESSEE NEV ER PURCHASED AND SOLD THE SAME SCRIPTS FREQUENTLY. HE ALSO STAT ED THAT SHARES WERE KEPT FOR LONG PERIOD AND THERE IS NO FREQUENT PURCHASE/SALE OF SAME SCRIPTS. THIS CONTENTION OF THE LEARNED COU NSEL APPEARS REASONABLE AND HAS NOT BEEN FACTUALLY CONTROVERTED BY THE REVENUE. THERE IS A SAYING THAT NEVER PUT ALL YOU R EGGS IN ONE BASKET AND IF THE ASSESSEE AS A PRUDENT PERSON MAD E INVESTMENT IN NUMBER OF SCRIPTS INSTEAD OF ONE SCRIPTS, IT CAN NOT BE SAID THAT HE WAS CARRYING ON THE BUSINESS OF PURCHASE AND SAL E OF SHARES. THERE WERE SUBSTANTIAL INCOME FROM THE DIVIDEND. I N THE CASE OF SHRI RAVINDRA M. AGARWAL FOR A.Y.2001-2002, AS PER THE REVISED RETURN, THE DIVIDEND INCOME WAS AS HIGH AS RS.19,33 ,425/-. IT IS A SETTLED LAW THAT, TO DETERMINE WHETHER THE ASSESS EE IS A TRADER OR INVESTOR IN SHARES, NO SINGLE TEST IS CONCLUSIVE BUT CUMULATIVE EFFECT OF ALL THE FACTS ARE TO BE SEEN. IN THE CAS E OF THE ASSESSEE, ONE FACT I.E. FREQUENT PURCHASE/SALE OF SHARES CAN BE SAID TO BE AGAINST THE ASSESSEE BUT ALL OTHER FACTS WHICH CAN BE SUMMARISED AS UNDER ARE IN FAVOUR OF THE ASSESSEE: ITA NO.1277/AHD/2011 10 I) SHRI RAVINDRA AGRAWAL IS A QUALIFIED PROFESSIONAL B EING CHARTERED ACCOUNTANT, COMPANY SECRETARY AND COST ACCOUNTANT; II) SHRI AGRAWAL WAS FULL TIME DIRECTOR OF A PUBLIC LIM ITED COMPANY AT THE RELEVANT TIME, POSTED AT PORBANDER; III) SHARES WERE ACQUIRED WITH OWN MONEY AND THERE WAS N O BORROWING BY SHRI RAVINDRA AGRAWAL OR ANY OTHER FAM ILY MEMBER; IV) NO OFFICE OR ANY STAFF WAS MAINTAINED FOR LOOKING A FTER PURCHASE AND SALE OF SHARES; V) THERE WAS SUBSTANTIAL DIVIDEND INCOME; VI) HIS SOURCE OF INCOME WAS INCOME FROM SALARY, CAPITA L GAIN, DIVIDEND AND INTEREST AND HE WAS NOT HAVING ANY BUS INESS INCOME; VII) IN THE ORIGINAL RETURN OF INCOME FURNISHED FROM TIM E TO TIME, INCOME FROM SALE OF SHARES WAS DISCLOSED UNDER THE HEAD CAPITAL GAIN AND WAS ACCEPTED BY REVENUE AS SUCH UNDER SECTION 143(1). WHEN TOTALITY OF ALL THE ABOVE FACTS ARE CONSIDERED , THE INFERENCE DRAWN BY THE CIT(A) THAT THE ASSESSEE IS AN INVESTO R IN SHARES, APPEARS TO BE CORRECT. APART FROM THE ABOVE, ON TH E PRINCIPLE OF CONSISTENCY ALSO ORDER OF THE CIT(A) ON THIS POINT DESERVES TO BE UPHELD BECAUSE IN THE ORIGINAL RETURNS INCOME FROM SALE OF SHARES WAS DISCLOSED UNDER THE HEAD CAPITAL GAIN AND THE SAME WAS ACCEPTED BY THE REVENUE. ITAT, MUMBAI BENCH IN THE CASE OF GOPTAL PURROHIT (SUPRA) HELD THAT THOUGH IN INCOME TAX PROCEEDINGS THE RULE OF RES JUDICATA DOES NOT APPLY BUT THERE SHOULD BE UNIFORMITY IN TREATMENT AND CONSISTENCY U NDER THE SAME FACTS AND CIRCUMSTANCES. THIS DECISION IS UPH ELD BY THE HONBLE MUMBAI HIGH COURT IN CIT VS. GOPTAL PUROHIT , 228 CTR 582 (BOM). THESE DECISIONS WOULD BE SQUARELY APPLI CABLE TO THE CASES OF THE ASSESSEE UNDER APPEAL BECAUSE IN THESE CASES NOT ONLY IN EARLIER YEAR BUT IN THE YEARS UNDER APPEAL ALSO IN ORIGINAL PROCEEDINGS TRANSACTION OF PURCHASE AND SALE OF SHA RES SHOWN AS CAPITAL GAIN WAS ACCEPTED BY THE REVENUE. MERELY B ECAUSE, THERE WAS SEARCH AT THE ASSESSEES PREMISES, THE NATURE O F TRANSACTION WOULD NOT CHANGE. IN VIEW OF THE ABOVE, AFTER CON SIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND VARIOUS JUDICIAL PRONOUNCEMENT REFERRED ABOVE, WE FIND NO J USTIFICATION TO INTERFERE WITH THE ORDER OF THE CIT(A) ON THIS POIN T. THE SAME IS UPHELD AND THE REVENUES APPEALS ARE DISMISSED. ITA NO.1277/AHD/2011 11 IN THE ABSENCE OF ANY DISTINGUISHING FEATURES BEING POINTED OUT BY THE DR, AND THE FACTS BEING IDENTICAL, RESPECTFULLY FOL LOWING THE PRECEDENT, WE DISMISS GROUNDS OF APPEAL OF THE REVENUE. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE COURT ON FRIDAY THE 30 TH JANUARY, 2015 AT AHMEDABAD. SD/- SD/- ( SHAILENDRA KUMAR YADAV ) JUDICIAL MEMBER ( N.S. SAINI) ACCOUNTANT MEMBER AHMEDABAD; DATED 30/01/2015