SURESH ASRANI, MUMBAI V. ADDL CIT RG 19(1), MUMBAI

ITA 129/MUM/2011

• Counselvise Citation: 12919914 RSA 2011
• Duration Of Justice: 4 year(s) 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-08-2015
• Appeal Filed By: Assessee
• Bench Allotted: E
• Next Hearing Date: 11-11-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 06-01-2011
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Keywords: Business income; Depreciation; Rule of consistency; Cost of acquisition
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL E , BENCH MUMBAI . . , , BEFORE SHRI R.C.SHARMA , A M & SHRI SANJAY GARG , J M ./ ITA NO . 129 / MUM/20 1 1 ( / ASSESSMENT YEAR : 200 6 - 0 7 ) MR. SURESH ASRANI , 302, GOLDEN BUNGLOW, JUHU ROAD, SANTACRUZ (W), MUMBAI - 400054 VS. ADCIT, RG.19(1), MUMBAI - 400703 ./ ./ PAN/GIR NO. : A A BPA 3241 N ( / APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY : SHRI DHARMESH SHAH /REVENUE BY : SHRI NEIL PHILIP / DATE OF HEARING : 07 /0 7 / 2015 / DATE OF PRONOUNCEMENT 07/08 /2015 / O R D E R PER R.C.SHARMA (A.M) : TH IS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) , MUMBAI , FOR THE ASSESSMENT YEAR 200 6 - 0 7 IN THE MATTER OF ORDER PASSED U/S.143(3) OF THE I.T.ACT , WHEREIN FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE ASSESSEE : - 1) THE LEARNED COMMISSIONER OF INCOME TAX HAS ERRED IN VIEW OF THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE IN TREATING THE INCOME FROM SALE OF SHARES OF RS. 1 07,24,457 / - AS INCOME FROM BUSINESS INSTEAD OF FROM SHORT TERM CAPITAL GAINS ARISING FROM THE INVESTMENTS OF THE FULL TIME EXPORTER BUSINESSMAN. 2) IN ANY CASE AND WITHOUT PREJUDICE THE TREATMENT OF THE ENTIRE AMOUNT MENTIONED ABOVE AS BUSINESS INCOME IS FAR TOO EXCESSIVE AND NOT WARRANTED ITA NO. 129 / 1 1 2 3) THE LEARNED COMMISSIONER OF INCOME TAX HAS FU RTHER ERRED IN UPHOLDING THE DISALLOWANCE OF 20% OF THE TELEPHONE EXPENSES AMOUNTING TO RS.33,256/ - . THE SAME ARE BASED ON CONJECTURES AND SURMISES, AND THE SAME MAY BE ORDERED TO BE DELETED. IN ANY CASE AND WITHOUT PREJUDICE THE SAID DISALLOWANCE IS FAR T OO EXCESSIVE. 4) THE LEARNED COMMISSIONER OF INCOME TAX HAS FURTHER ERRED IN UPHOLDING THE DISALLOWANCE OF 20% OF THE FUEL AND CAR MAINTENANCE EXPENSES AMOUNTING TO RS.25,610 / - . THE SAME ARE BASED ON CONJECTURES AND SURMISES, AND THE SAME MAY BE ORDERED TO BE DELETED. IN ANY CASE AND WITHOUT PREJUDICE THE SAID DISALLOWANCE IS FAR TOO EXCESSIVE .. 5) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN UPHOLDING DISALLOWANCE OF 20% OF THE DEPRECIATION PARTICULARLY IN VIEW OF THE FACTS AND CIRC UMSTANCES, THAT THE SAME IS CLAIMED ON THE ASSET THAT FORMS PART OF THE BLOCK OF ASSETS AND HE SAME IS THEREFORE NOT CALLED FOR. 6) YOUR APPELLANTS CRAVE LEAVE TO ADD, ALTER OR AMEND OR WITHDRAW THE ABOVE GROUND OF APPEAL AND TO SUBMIT SUCH STATEMENTS, DOCUMENTS AND PAPERS AS MAY BE CONSIDERED NECESSARY EITHER AT OR BEFORE HEARING OF THE APPEAL. 2 . RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF EXPORT AND IMPORT OF MARBLES, GRANITE ETC. THE ASSESSEE WAS ALSO INVESTING IN SHARES AND WAS CONSISTENTLY OFFER ING LONG TERM AND SHORT TERM CAPITAL GAINS IN EARLIER YEARS WHICH HAVE BEEN ACCEPTED BY THE DEPARTMENT IN SCRUTINY ASSESSMENT ORDER FRAMED U/S.143(3) OF THE ACT. HOWEVER, DURING THE YEAR UNDER CONSIDERATION, THE AO DID NOT ACCEPT ASSESSEES CONTENTION REGARDING INVESTOR WITH REGARD TO SHORT TERM CAPITAL GAINS AND HELD THAT ASSESSEE WAS TRADER IN SHARES. ACCORDINGLY, SHORT TERM CAPITAL GAINS OFFERED BY THE ASSESSEE WAS NOT ACCEPTED, H OWEVER, THE AO HAS ACCEPTED THE LONG TERM CAPITAL GAINS OFFERED BY THE ASSESSEE. ITA NO. 129 / 1 1 3 3. BY THE IMPUGNED ORDER, THE CIT(A) CONFIRMED THE ACTION OF THE AO WITH REGARD TO TREATMENT OF SHORT TERM CAPITAL GAINS AGAINST WHICH THE ASSESSEE IS IN FURTHER APPEAL BEFOR E US. 4. IT WAS ARGUED BY LD. AR THAT THE ASSESSEE IS CARRYING OUT HIS OWN BUSINESS OF IMPORT AND EXPORT OF MARBLE AND GRANITE ETC. OUR ATTENTION WAS INVITED TO TRADING, PROFIT AND LOSS ACCOUNT AND BALANCE SHEET OF EARLIER YEARS, WHEREIN THE ASSESSEE WAS CONTINUOUSLY CARRYING ON THE BUSINESS OF IMPORTER AND EXPORTER . HE WAS ALSO CONSISTENTLY INVESTING IN SHARES AS INVESTOR, CAPITAL GAINS AROSE THEREON WAS OFFERED AS CAPITAL GAINS DEPENDING ON THE PERIOD OF HOLDING AND THE SAME WAS ACCEPTED BY THE DEPARTMEN T. AS PER LD. AR ONLY DURING THE YEAR UNDER CONSIDERATION THE AO HAS CHANGED THE TREATMENT OF INCOME WHICH IS CONTRARY TO THE ACCEPTED LEGAL POSITION IN VIEW OF THE DECISION OF THE HON BLE BOMBAY HIGH COURT IN THE CASE OF GOPAL PUROHIT, 336 ITR 287. OUR AT TENTION WAS ALSO INVITED TO THE FREQUENCY AND VOLUME OF THE TRANSACTION TO INDICATE THAT IT WAS NOT SUFFICIENT FOR THE AO TO MERELY RELY ON THE SAME AND CHANGE THE CONCLUSION ALREADY DRAWN IN THE EARLIER YEAR. OUR ATTENTION WAS ALSO INVITED TO THE METHOD O F VOLUME OF SHARES HELD AS INVESTMENT, WHICH WERE ALWAYS VALUED AT COST AND NOT AT COST AT MARKET PRICE, WHICHEVER IS LESS . ATTENTION WAS ALSO INVITED TO THE DIVIDEND INCOME REGULARLY EARNED BY THE ASSESSEE ON ITS INVESTMENT AND OFFERED FOR TAX AS INCOME FROM OTHER SOURCES AND ALSO ACCEPTED BY THE DEPARTMENT. AS PER LD. AR NO BORROWED FUNDS WAS USED FOR THE INVESTMENT SO MADE. ATTENTION WAS ALSO INVITED TO THE FACT THAT PROFIT AROSE ON DELIVERY BASED TRANSACTION IN RESPECT OF SHARES ITA NO. 129 / 1 1 4 HELD AS INVESTMENT AN D IN RESPECT OF NON - DELIVERY BASED TRANSACTION PROFIT WAS OFFERED AS A SPECULATIVE TRANSACTION. AS PER LD. AR THE CBDT HAS ALSO CLARIFIED THAT THE ASSESSEE HAS BEEN PERMITTED TO HOLD TWO PORTFOLIOS. RELIANCE WAS PLACED BY LD. AR ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS : - I) IN THE CASE OF BHARAT KUVERJI KENIA VS. ADD.CIT, 130 TTJ 86 (MUM) , THE MUMBAI BENCH OF THE TRIBUNAL OBSERVED THAT, THERE IS NO JUSTIFICATION FOR TREATING THE ACTIVITY OF PURCHASE AND SALE OF SHARES AS 'BUSINESS' MERELY ON THE REASON O F THE' VOLUME OF TRANSACTIONS. AS PER WELL SETTLED PRINCIPLES OF LAW, THE FREQUENCY OF TRANSACTIONS CANNOT BE PER SE DECISIVE . II) IN THE CASE OF MR. NEHAL V. SHAH VS, ACIT (ITA. NO.2733/MUM/2009) , THE MUMBAI BENCH OF THE TRIBUNAL HELD 'THAT A SINGLE TRA NSACTION WOULD BE SPLIT BY THE COMPUTERS TRADING OF THE STOCK EXCHANGES INTO MANY SMALLER TRANSACTIONS, BUT, THAT DOES NOT MEAN THAT ASSESSEE HAS CARRIED SO MANY TRANSACTIONS. IN THE CASE OF HITESH SATISHCHANDRA DOSHI VS. J'CL'I' (ITA NO. 64971MUM/2009), THE TRIBUNAL HELD THAT THE FREQUENCY OF PURCHASE AND SALE OF SHARES, TRANSACTIONS THROUGH THE ELECTRONIC SYSTEM OF STOCK EXCHANGE SPLIT A SINGLE ORDER INTO NUMEROUS TRANSACTIONS. THIS GIVES AN UNREALISTIC FIGURE OF THE NUMBER OF TRANSACTIONS. III) IN CAS E OF DCIT VS. SMK SHARES & STOCK BROKING (ITA NO. 799/MUM/2009) THE HON'BLE MUMBAI TRIBUNAL HELD THAT 'THE FACT THAT THE AO ACCEPTED THE APPELLANT'S CLAIM IN EARLIER YEARS THAT IT ITA NO. 129 / 1 1 5 WAS AN INVESTOR IS MATERIAL BECAUSE THOUGH THE PRINCIPLES OF RES JUDICATA DO NOT STRICTLY APPLY TO INCOME TAX PROCEEDINGS IT IS WELL SETTLED LAW THAT THE PRINCIPLES OF CONSISTENCY SHOULD NOT BE IGNORED. UNIFORMITY IN TREATMENT AND CONSISTENCY UNDER THE SAME FACTS AND CIRCUMSTANCES IS ONE OF THE FUNDAMENTALS OF THE JUDICIAL PRINCIP LES WHICH CANNOT BE BRUSHED ASIDE WITHOUT PROPER REASON. IV) THE HONBLE BOMBAY HIGH COURT IN CIT VS. GOPAL PUROHIT (228 CTR 582) HAS UPHELD THE OBSERVATIONS OF THE MUMBAI TRIBUNAL THAT AN ASSESSEE CAN HAVE TWO PORTFOLIOS I.E. ONE TRADING AND THE OTHER AN INVESTMENT. IT WAS HELD THAT, 'IT IS IMPORTANT TO NOTICE THAT THE ASSESSEE HAS ENTERED INTO TWO DIFFERENT TYPES OF TRANSACTIONS WHERE BOTH ACTIVITIES ARE ENTIRELY DIFFERENT IN NATURE JOBBING (WITHOUT DELIVERY), WHICH PUTS ASSESSEE'S CASE ON A MORE STRONG FOOTING. HENCE, THE DELIVERY BASED TRANSACTION SHOULD BE TREATED AS OF THE NATURE OF INVESTMENT TRANSACTIONS AND PROFIT THEREFROM SHOULD BE TREATED AS SHORT - TERM CAPITAL GAIN OR LONG - TERM CAPITAL GAIN DEPENDING UPON THE PERIOD OF HOLDING'. 5. LD. AR FURTHE R PLACED RELIANCE ON THE FOLLOWING DECISIONS : - I) CIT VS. GOPAL PUROHIT, 336 ITR 287; II) DR. PRIYANKA DOCTOR VS. ACIT, ITA NO.1454/MUM/2012, DATED 22 - 4 - 2014; III) DR. RAHUL DOCTOR VS. ACIT, ITA NO.827/MUM/2012, DATED 5 - 12 - 2014; IV) DARSHAK DADBHAWALA VS. ACIT, ITA NO.3522/MUM/2012, DATED 5 - 12 - 2014 VI) ACIT VS. MRS. KINNARY SANGHAVI, 56 TAXMANN.COM 288; VII) HITESH SATISHCHANDRA DOSHI VS. JCIT, 140 TTJ 32; AND VIII) JANAK S. RANGWALLA VS. ACIT, 11 SOT 627. ITA NO. 129 / 1 1 6 6 . ON THE OTHER HAND, LD. DR RELIED ON THE ORDER OF LOWER AUTHORITIES AND CONTENDED THAT IN VIEW OF FREQUENCY AND VOLUME OF TRANSACTION, THE AO WAS JUSTIFIED IN TREATING THE SHORT TE RM CAPITAL G A I N AS BUSINESS INCOME. 7 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AU THORITIES BELOW. WE HAD ALSO DELIBERATED ON THE JUDICIAL PRONOUNCEMENTS CITED AT BAR BY LD. AR AND LD. DR IN THE CONTEXT OF FACTUAL MATRIX OF THE CASE. FROM THE RECORD WE FOUND THAT ASSESSEE IS A PROPRIETOR CARRYING OUT BUSINESS IN THE NAME AND STYLE OF M/ S STONE AGE INTERNATIONAL AND M/S JAI MAHARASHTRA BATTERY SERVICES. THE MAIN BUSINESS OF THE ASSESSEE WAS IMPORT AND EXPORT OF MARBLE AND GRANITE. THE AUDITED BALANCE AN D PROFIT AND LOSS ACCOUNT PLACE D ON RECORD CLEARLY INDICATE THE MAIN BUSINESS OF THE AS SESSEE. THE ASSESSEE WAS ALSO INVESTING IN SHARES AND HAS ALWAYS OFFERED GAIN FROM INVESTMENT UNDER THE HEAD CAPITAL GAIN AND THE SAME HAVE ALSO BEEN ACCEPTED BY THE DEPARTMENT IN ALL THE YEARS IN PAST UNDER THE SCRUTINY ASSESSMENT FRAMED U/S. 143(3) OF THE ACT. WE HAD VERIFIED THE DETAILS OF INCOME UNDER THE HEAD CAPITAL GAIN ARISING OUT OF SHARE TRANSACTION FROM ASSESSMENT YEAR 200 3 - 0 4 TO 2008 - 09 AS PLACED ON RECORD. PERUSAL OF ASSESSMENT FRAMED FOR ASSESSMENT YEAR 2003 - 04 & 2004 - 05 CLEARLY INDICATE THAT T HE AO HAS ACCEPTED ASSESSEE AS INVESTOR, THEREBY CAPITAL GAIN OFFERED WAS ACCEPTED AS LONG TERM OR SHORT TERM DEPENDING ON PERIOD OF HOLDING. D URING THE YEAR UNDER CONSIDERATION, THE LONG TERM CAPITAL GAIN OFFERED BY THE ASSESSEE AND CLAIMED AS EXEMPT WAS ACCEPTED BY THE AO , HOWEVER, HE ITA NO. 129 / 1 1 7 DID NOT ACCEPT ASSESSEES CLAIM OF SHORT TERM CAPITAL GAIN AND TREATED THE SAME AS BUSINESS INCOME. THUS, ONLY IN THIS ISOLATE YEAR, THE AO HAS CHANGED THE TREATMENT OF INCOME WHICH IS CONTRARY TO THE ACCEPTED LEGAL POSITION BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF GOPAL PUROHIT (SUPRA), SLP AGAINST THE SAME PREFERRED BY THE DEPARTMENT HAS BEEN DISMISSED BY THE HON BLE SUPREME COURT. 8 . FROM THE RECORD, WE FOUND THAT EVEN IN THE PAST THE INCOME SHOWN AS LONG TERM CAPIT AL GAIN HAS ALSO BEEN ALLOWED EXEMPT U/S.10(38) OF THE IT ACT AND SHORT TERM CAPITAL GAINS ALSO ACCEPTED BY DEPARTMENT . IN ADDITION TO THE SHORT TERM AND LONG TERM CAPITAL GAINS, ASSESSEE WAS ALSO EARNING DIVIDEND INCOME ON THE SALE OF SHARES HELD AS INVES TMENT. THERE IS NO DISPUTE TO THE WELL SETTLED PROPOSITION THAT FOR DECIDING AS TO WHETHER ASSESSEE IS AN INVESTOR IN SHARE OR TRADER IN SHARE, SO MANY FACTORS ARE RELEVANT WHICH COMPRISES OF VOLUME AND FREQUENCY OF TRANSACTION, INTENTION OF ASSESSEE WHILE ACQUIRING THE SHARES WHICH RESULTS INTO EARNING THE DIVIDEND INCOME, USE OF OWNED/BORROWED FUNDS FOR ACQUIRING SHARES , PERIOD OF HOLDING OF SHARES ETC. ONE OF THE IMPORTANT FACTOR FOR DECIDING THE TRUE INTENTION OF THE ASSESSEE IS TO FIND OUT WHETHER THE ASSESSEE HAD INTENTION TO EARN DIVIDEND BY HOLDING THE SHARES AS INVESTOR OR TO EARN PROFIT BY TRADING IN THE SAME. IT IS ALSO TRUE THAT VOLUME AND FREQUENCY OF TRANSACTIONS IS AN IMPORTANT INDICATOR OF THE INTENTION OF THE ASSESSEE, WHETHER TO DEAL IN THE SHARES AS BUSINESSMAN OR TO HOLD THE SHARES AS AN INVESTOR, BUT CERTAINLY NOT THE SOLE CRITERIA. THE INTENTION OF THE ASSESSEE WHILE PURCHASING THE SHARE, IS THE IMPORTANT AND GUIDING FACTOR AS TO ITA NO. 129 / 1 1 8 WHETHER THE SAME WAS PURCHASED WITH AN INTENTION OF INVEST MENT OR FOR TRADING. THE FACTS OF THE CASE AS DISCUSSED ABOVE, CLEARLY REVEAL THAT THE ASSESSEE WAS INVESTING IN SHARES AS INVESTOR. AS DISCUSSED ABOVE, IF DURING THE MID OF THE RELEVANT FINANCIAL YEAR, CERTAIN TAX BENEFITS HAVE BEEN GIVEN IN RESPECT OF C APITAL GAINS, THAT CANNOT, IN ANY WAY, LEAD TO AN ASSUMPTION OR PRESUMPTION THAT THE INTENTION OF THE ASSESSEE AT THE TIME OF PURCHASE OF SHARES WAS THAT OF A TRADER AND NOT OF AN INVESTOR. THE TREATMENT OF THE INVESTMENT IN THE ACCOUNT BOOKS OF THE ASSES SEE IS ALSO A RELEVANT GUIDING FACTOR. AFTER ACCEPTING ASSESSEE CLAIM FOR LONG TERM AND SHORT TERM CAPITAL GAINS IN ALL THE ASSESSMENT YEARS, T HE AO HAS ALSO NOT POINTED OUT AS TO IN WHAT MANNER THE ACTIVITY OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATIO N HAD BEEN CHANGED FROM INVESTOR TO THAT OF A TRADER ESPECIALLY WHEN IN RESPECT OF VERY SAME SHARES WHICH WERE HELD FOR MORE THAN 12 MONTHS , THE AO HAS ACCEPTED THE PROFIT ARISING THEREFROM AS LONG TERM CAPITAL GAINS. THUS, ONLY DURING THIS YEAR UNDER CONS IDERATION THAT THE ASSESSEE HAS BEEN TREATED AS A TRADER BECAUSE OF CERTAIN TAX BENEFITS GRANTED TO AN INVESTOR IN SECURITIES BY WAY OF AMENDMENT IN THE RELEVANT PROVISIONS OF THE INCOME TAX ACT BROUGHT BY FINANCE ACT, 2004. B Y INSERTION OF PROVISIONS OF S ECTION 111A AND SECTION 10(38), THE LEVY OF TAX HAS BEEN REDUCED TO 10% ON SHORT TERM CAPITAL GAINS AND LONG TERM CAPITAL GAINS HAVE BEEN MADE EXEMPT. UNDER THE OLD PROVISIONS OF THE ACT, PROFITS OR GAINS ARISING TO AN INVESTOR FROM THE TRANSFER OF SECURIT IES WERE CHARGED DEPENDING ON THE PERIOD OF HOLDING OF THE SAID SECURITIES. SHORT TERM CAPITAL GAINS WERE TAXED AT APPLICABLE RATES (NORMAL RATES) AND ITA NO. 129 / 1 1 9 LONG TERM CAPITAL GAINS WERE TAXED AT THE RATE OF 20% AFTER ADJUSTING FOR INFLATION BY INDEXING THE COST OF ACQUISITION. FOR LISTED SECURITIES, THE TAX PAYER HAD AN OPTION TO PAY TAX ON LONG TERM CAPITAL GAINS AT THE RATE OF 10% BUT WITHOUT INDEXATION. IN CASE OF TRADER IN SECURITIES, HOWEVER, THE CAPITAL GAINS WERE TAXED AS ANY OTHER NORMAL BUSINESS INCOM E. THUS, TAX LIABILITY ON THE INCOME FOR SALE AND PURCHASE OF SHARES AS REGARDS TO SHORT TERM CAPITAL GAINS AND BUSINESS INCOME WAS AT PAR. THE ISSUE OF TREATMENT OF INCOME FROM SHARE TRANSACTION AS SHORT TERM CAPITAL GAINS OR BUSINESS INCOME HAS IN FACT ARISEN AFTER THE AMENDMENT BROUGHT WITH FINANCE ACT, 2004 W.E.F. 01.10.2004. IT IS AN ADMITTED FACT ON THE RECORD THAT PRIOR TO THE AMENDMENT WHEN THE TAX O N SHORT TERM CAPITAL GAINS, AS DISCUSSED ABOVE, WAS AT PAR WITH THAT OF BUSINESS INCOME, THE DEPAR TMENT HAS BEEN CONSISTENTLY ACCEPTING THE TREATMENT OF INCOME BY THE ASSESSEE AS CAPITAL GAINS. MERELY BECAUSE THE RATE OF TAX HAS BEEN REDUCED IN RESPECT OF SHORT TERM CAPITAL GAINS AND LONG TERM CAPITAL GAINS HAVE BEEN EXEMPT DURING THE YEAR BY WAY OF A N AMENDMENT TO THE PROVISIONS AS DISCUSSED ABOVE, THAT ITSELF, CANNOT BE A GROUND FOR THE AO TO DEPART FROM ITS CONSISTENT STAND OF TREATING THE ASSESSEE AS AN INVESTOR AND THEREBY TO CHARGE THE INCOME EARNED BY THE ASSESSEE FROM SHARE TRANSACTIONS AS BUSI NESS INCOME. 9 . FROM THE RECORD WE FOUND THAT AT THE TIME OF PURCHASE AND SALES EVEN DURING THE PERIOD PRIOR 1 - 10 - 2004, THE ASSESSEE WAS NOT GUIDED OR INFLUENCED BY LOWER TAX RATE IN CASE OF SHORT TERM CAPITAL GAINS AS THE RATE FOR BUSINESS INCOME AND S HORT TERM CAPITAL GAINS WAS AT PAR. THE ITA NO. 129 / 1 1 10 ASSESSEE, HOWEVER, WAS TREATING HIMSELF AS AN INVESTOR AND KEEPING THE DELIVERY BASED SHARES AS INVESTMENTS IN HIS ACCOUNT IRRESPECTIVE OF THE PROBABLE TAX IMPLICATION AS THERE WERE NO SUCH TAX IMPLICATIONS AS DISCU SSED ABOVE. THUS, THE INTENTION OF THE ASSESSEE, WHILE PURCHASING THE SHARE, IS THE IMPORTANT AND GUIDING FACTOR AS TO WHETHER THE SAME WAS PURCHASED WITH AN INTENTION OF INVESTMENT OR FOR TRADING. THE FACTS OF THE CASE AS DISCUSSED ABOVE, CLEARLY REVEAL THAT THE ASSESSEE HAD TREATED THE DELIVERY BASED SHARE TRANSACTIONS AS INVESTMENTS IN HIS BOOKS OF ACCOUNT. A FTER THE AMENDMENT BY THE FINANCE ACT,2004, CERTAIN TAX BENEFIT HAVE BEEN GIVEN IN RESPECT OF CAPITAL GAINS, THAT CANNOT, IN ANY WAY, LEAD TO AN ASSUMPTION OR PRESUMPTION THAT THE INTENTION OF THE ASSESSEE AT THE TIME OF PURCHASE OF SHARES WAS THAT OF A TRADER AND NOT OF AN INVESTOR. EVEN THE PRINCIPLE OF RES JUDICATA IS NOT APPLICABLE IN INCOME TAX PROCEEDINGS BUT THE PRINCIPLE OF CONSISTENCY REQ UIRES THAT THE VIEW TAKEN IN ONE YEAR SHOULD BE FOLLOWED IN SUBSEQUENT YEARS UNLESS THE FACTS OR THE LEGAL POSITION JUSTIFY DEPARTURE THERE FROM; RELIANCE CAN BE PLACED IN THIS RESPECT ON THE AUTHORITIES OF THE HONBLE BOMBAY HIGH COURT IN CIT VS. DARIUS PANDOLE [(2011 330 ITR 485 (BOM.)] AND IN CIT VS. GOPAL PUROHIT [(2011) 336 ITR 287 (BOM.). 10. THE FREQUENCY AND REPETITION OF THE PURCHASE AND SALE TRANSACTIONS PLAY IMPORTANT ROLE, BUT THE SAME IS NOT CONCLUSIVE AND OTHER FACTORS LIKE MAIN BUSINE SS/PROFESSION OF ASSESSEE, INTENTION WHILE PURCHASING SHARES, HOLDING THE SAME AS INVESTMENT , EARNING OF DIVIDEND INCOME THEREON ETC. ITA NO. 129 / 1 1 11 ARE REQUIRED TO BE SEEN FOR REACHING TO THE CONCLUSION REGARDING ASSESSEE BEING INVESTOR OR TRADER IN SHARES. 11. FROM TH E RECORD WE FOUND THAT ASSESSEE HAS DISCLOSED SHARES AS INVESTMENT IN THE BALANCE SHEET, THERE IS NO CLAIM OF ANY EXPENSES WHILE COMPUTING CAPITAL GAINS WHICH DEMONSTRATES THE INTENTION OF THE ASSESSEE TO TREAT THE SHARES AND SECURITIES AS INVESTMENT AND N OT AS STOCK - IN - TRADE. NO BORROWED INTEREST BEARING FUNDS WAS INVESTED IN SHARES EXCEPT FOR MAKING INVESTMENT IN ONE SECURITY ON LONG TERM BASIS. THE SAID FACT WAS ALSO EXPLAINED TO THE AO AND THE AO HAS NOT DISPUTED THE SAME WHILE ACCEPTING ASSESSEES CLAI M OF LONG TERM CAPITAL G A I NS . CBDT IN ITS INSTRUCTION NO 1827 DATED 31.08.1989 HAS LAID DOWN CERTAIN CRITERIA TO DETERMINE WHETHER AN ACTIVITY OF PURCHASE & SALE OF SHARES/SECURITIES IS IN THE NATURE OF TRADING ACTIVITY OR INVESTMENT ACTIVITY. ONE OF THE C RITERIA LAID DOWN IS THE TREATMENT GIVEN BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT AS A TRADING ASSET OR INVESTMENT; TREATMENT GIVEN IN THE BOOKS IS INDICATIVE OF ASSESSEE'S INTENTION WHETHER TO HOLD THE SHARES WITH A VIEW TO EARN DIVIDEND & LONG TERM APPREC IATION OR WITH A VIEW TO CARRYING ON AS BUSINESS. EVEN VARIOUS COURTS AND TRIBUNALS HAVE APPROVED THAT TREATMENT GIVEN BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT AS A VITAL FACTOR TO DECIDE WHETHER THE ASSESSEE IS A TRADER OR AN INVESTOR. WE ALSO FOUND THAT T HE ASSESSEE HAS REGULARLY TREATED SHARES AS INVESTMENT IN THE EARLIER YEAR AND HAS OFFERED GAIN ON SALE OF SHARES UNDER THE HEAD CAPITAL GAIN. 12. IN THE CASE OF GOPAL PUROHIT (SUPRA), T HE HON'BLE HIGH COURT ALSO ACCEPTED TRIBUNAL'S OBSERVATIONS THAT TH E PRINCIPLE OF RES JUDICATA IS NOT ITA NO. 129 / 1 1 12 ATTRACTED SINCE EACH YEAR IS SEPARATE IN ITSELF. HOWEVER, THERE OUGHT TO BE UNIFORMITY IN TREATMENT AND CONSISTENCY WHEN THE FACTS AND CIRCUMSTANCES ARE IDENTICAL, PARTICULARLY IN THE CASE OF THE ASSESSEE. SPECIAL LEAVE P ETITION FILED BY THE DEPARTMENT AGAINST THIS ORDER OF HONBLE BOMBAY HIGH COURT HAS BEEN DISMISSED BY THE SUPREME COURT VIDE ORDER DATED 15TH NOVEMBER, 2010. 13 . IN VIEW OF THE ABOVE DISCUSSION, WE DO NOT FIND ANY MERIT IN THE ACTION OF THE AO FOR NOT ACCE PTING ASSESSEES CLAIM FOR SHORT TERM CAPITAL GAINS WHILE ACCEPTING THE LONG TERM CAPITAL GAINS ON THE SIMILAR INVESTMENT MADE IN EARLIER YEARS. 14 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 07/08 / 201 5 . SD/ - SD/ - ( ) ( SANJAY GARG ) ( . . ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 07/08 /201 5 . . /PKM , . / PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. //TRUE COPY//