DIPALI N. SHAH, MUMBAI V. ACIT 16(1), MUMBAI

ITA 1769/MUM/2012

• Counselvise Citation: 176919914 RSA 2012
• Duration Of Justice: 3 year(s) 6 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 25-02-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 14-03-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: CHANDRA VIJAY
• Keywords: Business income; Question of law
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI D BENCH, MUMBAI BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER. ITA. NO. 1769/MUM/2012 (ASSESSMENT YEAR:2008-09) SMT. DIPALI N. SHAH C-5, 2 ND FLOOR, TRIVENI WALKESHWAR ROAD, MUMBAI 400 006 APPELLANT VS. ACIT 16(1), MUMBAI RESPONDENT & ITA. NO. 1685/MUM/2012 (ASSESSMENT YEAR:2008-09) ACIT 16(1), MUMBAI APPELLANT VS. SMT. DIPALI N. SHAH C-5, 2 ND FLOOR, TRIVENI WALKESHWAR ROAD, MUMBAI 400 006 RESPONDENT PAN: AIWPS3418E ITA NOS.1769 & 1685/MUM/12 A.Y. 2008-09 (SMT. DIPALI N. SHAH VS. ACIT) PAGE 2 / BY ASSESSEE : SHRI SATISH R. MODY, A.R. / BY REVENUE : SHRI CHANDRA VIJAY, D.R. /DATE OF HEARING : 24.09.2015 /DATE OF PRONOUNCEMENT : 09.10.2015 ORDER PER SHAILENDRA KUMAR YADAV, J.M: THESE CROSS APPEALS HAVE BEEN FILED AGAINST THE ORD ER OF COMMISSIONER OF INCOME-TAX (APPEALS)-27, MUMBAI, DA TED 22.12.2011 FOR A.Y. 2008-09. SO, THEY ARE BEING DI SPOSED OF BY WAY OF COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. IN ITA NO.1769/MUM/2012, ASSESSEE HAS FILED APPE AL ON FOLLOWING GROUNDS: 1) THE CIT(APPEALS) HAS ERRED IN LAW AND ON FACTS IN TREATING SHORT TERM CAPITAL GAIN AS INCOME FROM BUSINESS AND PROFESSION AMOUNTING TO RS.28,98,906/- . 2) THE CIT(APPEALS) HAS ERRED IN LAW AND ON FACTS I N DISALLOWING INTEREST PERTAINING TO LOAN TAKEN FOR T HE PURPOSE OF WORKING CAPITAL U/S.14A. 3) WITHOUT PREJUDICE TO THAT THE INCOME FROM SALE O F SHARES SHOULD BE TREATED AS SHORT TERM CAPITAL GAINS AND NOT AS BUSINESS INCOME, THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT ALLOWING EXPENSES RELATED TO SHORT TERM CAPITAL GAINS, TREATED AS BUSINESS INCOME, INCURRED BY THE ASSESSEE. ITA NOS.1769 & 1685/MUM/12 A.Y. 2008-09 (SMT. DIPALI N. SHAH VS. ACIT) PAGE 3 3. IN ITA NO.1685/MUM/2012, REVENUE HAS FILED APPEA L ON FOLLOWING GROUND: 1. ON THE FACTS AND CIRCUMSTANCES AND IN LAW, THE LD. CIT(A) ERRED IN TREATING THE TRANSACTION OF PURCHAS E AND SALE OF SHARES TO THE TUNE OF RS.1,69,67,011/- AS SHORT TERM CAPITAL GAIN INSTEAD OF BUSINESS INCOME. 4. ASSESSEE IS AN INDIVIDUAL AND SUB-BROKER IN SHAR ES HAVING INCOME FROM BROKERAGE, SHORT TERM AND LONG TERM CAP ITAL GAINS ON SALE OF SHARES AND INCOME FROM OTHER SOURCES. A SSESSING OFFICER IN ASSESSMENT ORDER TREATED THE SHORT TERM CAPITAL GAINS OF RS.1,69,67,011/- AS ASSESSEES BUSINESS INCOME AND FURTHER DISALLOWED AMOUNT OF RS.6,17,810/- U/S.14A R.W. RUL E 8D. 5. MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AU THORITY, WHEREIN CIT(A) FOUND THAT WHILE TREATING SHORT TERM CAPITAL GAIN EARNED BY ASSESSEE AS HER BUSINESS INCOME, ASS ESSING OFFICER OBSERVED AS UNDER: 3.1 THE APPELLANT HAS SHOWN BUSINESS INCOME CONSIST ING BROKERAGE INCOME AND SPECULATION INCOME. THIS CONFI RMS THAT SHE DEALS IN SHARES AND FULLY AWARE OF THE FUN CTIONING OF THE CAPITAL MARKET. 3.2 THE TOTAL NUMBER OF TRANSACTIONS RESULTING STCG ARE 3216, AS PER DETAILS FILED BY THE APPELLANT. TAKING 250 TRADING DAYS OF THE STOCK EXCHANGE, THE AVERAGE TRA NSACTIONS PER DAY ARE 12.86. THE VARIOUS PERIODS OF HOLDING O F SHARES, RANGING FROM 10 DAYS TO MORE THAN 300 DAYS IS GIVEN AS BELOW. S. NO. NUMBER OF TRANSACTIONS HOLDING PERIOD IN DAYS % OF TOTAL NUMBER OF TRANSACTIONS 1 299 10 OR LESS THAN 10 DAYS 9% ITA NOS.1769 & 1685/MUM/12 A.Y. 2008-09 (SMT. DIPALI N. SHAH VS. ACIT) PAGE 4 2 472 IN BETWEEN 11 TO 30 DAYS 15% 3 597 IN BETWEEN 30 TO 60 DAYS 19% 4 564 IN BETWEEN 61 TO 99 DAYS 18% 5 796 IN BETWEEN 100 TO 200 DAYS 25% 6 360 IN BETWEEN 201 TO 300 DAYS 11% 7 128 IN BETWEEN 301 TO 365 DAYS 04% 8 3216 FROM THE ABOVE IT IS CLEAR THAT THE FREQUENCY OF TR ADING IS TOO HIGH. THE PERIOD OF HOLDING OF SHARE IS ALSO SMALL. SHE IS OTHERWISE ENGAGED IN THE BROKERAGE AND SPECULATION BUSINESS. THE QUANTUM OF DIVIDEND EARNED IS JUST RS.3,68,023/-. THE APPELLANT CANNOT BE HELD AS INVE STOR. THE ENTRIES MADE IN BOOKS OF ACCOUNTS CANNOT BE THE CON CLUSIVE EVIDENCE OF HER BEING INVESTOR, NORMALLY THE PERSON WATCHES MARKET FOR A LONGER PERIOD TO EARN DIVIDEND AND APP RECIATION IN THE VALUE OF SHARES. IT IS ONLY IN THE CASE OF T RADER THAT HE EARNS STCG. WHEN SHE CLAIMS TO BE AN INVESTOR BASIC ALLY, THAT FACT IS NOT SUPPORTED BY THE EVIDENCE. SHE HAS SHOWN INCOME/LOSS FROM FUTURE AND OPTIONS, AS WELL AS INC OME FROM SHARE TRANSACTIONS AS STCG /LTCG AND DIVIDEND INCOM E. SHE HAS SUFFERED SUBSTANTIAL LOSSES IN STCG AS WELL AS LTCG. IF SHE WOULD HAVE BEEN A PURE INVESTOR SHE WOULD HA VE WAITED FOR THE RISE IN THE SHARE PRICE OF THAT PARTICULAR SHARES AND WOULD HAVE NEVER SUFFERED A LOSS, AS MAJORITY OF S HARES IN WHICH SHE HAS SUFFERED LOSS ARE DIVIDED GIVING COMP ANIES AND THIS ESTABLISH THE MOTIVE OF THE ASSESSEE THAT HER INTENTION WAS NOT THE APPRECIATION IN VALUE OF SHARES OR TO E ARN DIVIDEND BUT TO SWITCH OVER TO OTHER SHARES WHICH W ERE ON THE RISE AND TO EARN PROFIT FROM THEIR SALE. 3.3 SOME OF THE SHARES IN WHICH SHE EARNED DIVIDEND , SUFFERED LOSSES BUT STILL SOLD THEM ARE ALONG WITH THEIR HOLDING PERIOD IN BRACKET NAMELY, GLAXO (134 DAYS); GUJARAT NRE COKE (38 TO 71 DAYS); GULF OIL (0 TO 5 DAYS); HIND DOOR OLIVER (83 TO 172 DAYS)' IFCI (14 TO 19 DAYS); INDIAN BANK (24 TO 46 DAYS); INDUSFILA (18 TO 45 DAYS); JB CHEMICAL (22 D AYS); JP ASSOCIATES (0 DAYS); KALYANI STEEL (34 TO 282 DAYS) ; LKP MER (33 TO 47 DAYS) ; MAGNUM (8 TO 17 DAYS); MAIKAA FIB RE (73 TDO 120 DAYS); MUKTA ARTS (125 DAYS); MYSOOR CEMENT (51 TO 82 DAYS); NETCO ( 1 TO 14 DAYS); OCLIND (53 TO 87 DAYS ); PARAMOUNT COMMUNICATION (147 TO 306 DAYS); PATEL ITA NOS.1769 & 1685/MUM/12 A.Y. 2008-09 (SMT. DIPALI N. SHAH VS. ACIT) PAGE 5 ROADWAYS (24 TO 34 DAYS); RADICO KHAITAN (34 TO 37 DAYS); RAP MEDIA (50 TO 126 DAYS) RELIANCE INDUSTRY INFRAS TRUCTURE (14 TO 157 DAYS). THIS FACT CONFIRM THAT THE ASSESS EE IS NOT A BASICALLY INVESTOR ONLY. SHE IS A TRADER ALSO. 3.4 THE ASSESSEE'S SUBMISSION THAT SHE HAS EARNED 9 2% OF STCG FROM HOLDING OF ONLY SHARES OF 10 COMPANIES IS ALSO DOES NOT HELP HER IN CHANGING THE NATURE OF INCOME. THE PRICES OF SHARES DEPENDS UPON THE SENSEX OR VICE-VE RSA. ONE HAS TO LOOK AT THESE GAINS OR LOSSES OR TURNOVE R KEEPING IN VIEW THE SENSEX. EVEN A PERSON DEALING IN SHARE OF ONE COMPANY CAN EARN BUSINESS INCOME, BECAUSE IT DEPEND S UPON THE FREQUENCY OF THE TRANSACTIONS AND QUANTUM OF TRANSACTION. IN THE CASE OF THE ASSESSEE, THE FREQU ENCY OF TRANSACTION AS WELL AS QUANTUM ARE TOO HIGH. 3.5 YES, IT IS A WELL SETTLED PRINCIPLE THAT BUYING AND SELLING OF SHARES IS THE NATURE OF TRADE OR INVESTMENT IS A MI XED QUESTION OF LAW AND FACTS. IN THE CASE OF THE ASSES SEE, THE BOOKS OF ACCOUNTS DO NOT GIVE ANY INDICATION AS TO WHETHER IT IS AN INVESTMENT. THE FREQUENCY OF TRADING IS TOO H IGH. THE VOLUME OF TRADING IS ALSO TOO HIGH. THE ASSESSEE IS ALSO ENGAGED IN THE SPECULATION BUSINESS OF SHARES AND S HOWING IT AS A BUSINESS INCOME. SHE HAS UTILIZED BORROWED FUN DS AND ALSO CLAIMED DEDUCTION TOWARDS INTEREST PAYMENT ON IT. SHE HAS EARNED DIVIDEND AS WELL AS SUFFERED L TCL AND S TCL. 3.6 ASSESSEE WAS ASKED TO WHAT IS THE QUANTUM OF DISALLOWANCE UNDER SECTION 14A OF THE I.T.ACT, READ WITH RULE 8D OF THE I.T.RULES. VIDE A WRITTEN REPLY DATED 27. 10.2010, A FIGURE OF DISALLOWANCE OF RS.LL,55,552/- WAS FURNIS HED. THIS IS INCORRECT. THE CORRECT WORKING IS A UNDER. UNDER RULE 8D OF THE I.T.RULE THE AVERAGE VALUE OF INVESTMENT, INCOME FROM WHICH DOES NOT FORM OF THE TOTAL INCOME IS RS.5,1 0,45,221/- [ (RS.6,82,51,776/- + RS.3,38,38,666/-) / 2 THE AVERAGE VALUE OF THE TOTAL ASSETS AS SHOWN IN T HE BALANCE ITA NOS.1769 & 1685/MUM/12 A.Y. 2008-09 (SMT. DIPALI N. SHAH VS. ACIT) PAGE 6 SHEET IS RS.6,22,27,868/-. THE TOTAL AMOUNT OF INTE REST AS CLAIMED AS EXPENDITURE IS RS.4,42,175/-. THE AMOUNT UNDER RULE8D(1) NIL THE AMOUNT UNDER RULE8D(2)(I) NIL THE AMOUNT UNDER RULE 8D(2)(II) 51045221/62227868 X 442175 =RS.3,63,584/- THE AMOUNT UNDER RULE 8D(2)(III) 0.5 X 51045221 = RS.2,55,226/- THUS THE TOTAL DISALLOWANCE IS WORKED OUT AT RS.6,1 7,810/-. THIS IS DISALLOWED AND ADDED TO THE INCOME OF THE A SSESSEE.' DURING APPELLATE PROCEEDING, VARIOUS CONTENTIONS WE RE RAISED ON BEHALF OF BOTH PARTIES AND HAVING CONSIDE RED THE SAME, CIT(A) GRANTED PART RELIEF TO ASSESSEE. 6. BOTH PARTIES ARE BEFORE US AGAINST RESPECTIVE GR IEVANCES AS NARRATED IN THEIR GROUNDS OF APPEAL. LEARNED DEPAR TMENTAL REPRESENTATIVE SUPPORTED THE ORDER OF ASSESSING OFF ICER WHILE LEARNED AUTHORIZED REPRESENTATIVE SUPPORTED THE ORD ER OF CIT(A) AS FAR AS RELIEF GRANTED AND OPPOSED THE ORD ER OF CIT(A) VIS--VIS SUSTAINING OF THE ORDER OF ASSESSING OFFI CER AS DISCUSSED IN GROUNDS OF APPEAL. 7. AFTER GOING THROUGH RIVAL SUBMISSIONS AND MATERI AL ON RECORD, WE FIND THAT ASSESSEE IS A BROKER IN SECURI TIES AND WELL VERSED IN STOCK MARKET OPERATION. THE ASSESSEE CAN CARRY OUT DUAL ROLES OF BUSINESS PERSON AS WELL AS AN INVESTO R AND THEREFORE WHAT NEEDS TO BE SEEN IS THE MANNER WHICH INVESTMENT ACTIVITIES ARE CARRIED OUT. THE MERE FA CT THAT SHE IS ITA NOS.1769 & 1685/MUM/12 A.Y. 2008-09 (SMT. DIPALI N. SHAH VS. ACIT) PAGE 7 A BROKER IN SECURITIES CANNOT BE HELD AGAINST HER. IN CASE, ASSESSEE IS HOLDING SOME SHARES AS STOCK AND OTHERS AS INVESTMENT CONSISTENTLY, THEN SALE OF SHARES HELD A S INVESTMENT WOULD CONSTRUE CAPITAL GAIN AND OTHER HELD AS STOCK WILL BE TREATED AS BUSINESS PROFIT. THERE IS NO BAR ON A S TOCK BROKER HOLDING SHARES AS AN INVESTMENT. THE MAGNITUDE OF TRANSACTION DOES NOT CHANGE THE NATURE OF TRANSACTI ON. THE CONSISTENT PRACTICE OF ASSESSEE HAS TO BE LOOKED IN TO THESE FACTS AND CIRCUMSTANCES. THE PRUDENT PERSON CAN DO BOTH I NVESTOR AS WELL AS TRADER IN THE SHARES. IT IS FOUND THAT ASSESSEE HAS BEEN AN INVESTOR IN SHARE ALL ALONG. IN THE YEAR UN DER CONSIDERATION, ASSESSING OFFICER HAS ARRIVED AT CON CLUSION OF HIGH VOLUME AND FREQUENCY OF TRANSACTIONS BY RELYIN G ON NUMBER OF TRANSACTIONS AT 3216. THE VOLUME AND NUM BER OF TRANSACTIONS DEPEND UPON CAPITAL INVESTMENT AND THA T PARTICULAR ORDER IS SPLIT INTO NUMBER OF TRANSACTIO NS FOR WANT OF REQUIRED BUYERS/SELLERS OF SCRIPS ORDERED. ONCE OR DER IS EXECUTED BY BROKER, IT RESULTS IN A NUMBER OF TRANS ACTIONS. AS PER GUIDELINE OF SEBI CONTRACT NOTE IS TO BE ISSUED SEPARATELY FOR EACH TRANSACTION, WHEREAS IN REALITY IT CONSIST S OF SINGLE ORDER AS FAR AS ASSESSEE IS CONCERNED. ASSESSEE BEF ORE CIT(A) DEMONSTRATED THIS POSITION IN HER SUBMISSIONS AND A RRIVED AT 987 TRANSACTIONS AS AGAINST 3216 ADOPTED BY ASSESSI NG OFFICER. HAVING REGARD TO CAPITAL INVESTED BY ASSESSEE, THE NUMBER OF TRANSACTIONS REPORTED AT 987 COULD NOT BE REGARDED AS EXCESSIVE. THIS WAS NOT EXCLUSIVE YEAR IN WHICH SUC H LARGE NUMBER OF TRANSACTIONS WERE REPORTED. HENCE CIT(A) RIGHTLY DID ITA NOS.1769 & 1685/MUM/12 A.Y. 2008-09 (SMT. DIPALI N. SHAH VS. ACIT) PAGE 8 NOT AGREE WITH THE OBSERVATION OF ASSESSING OFFICER ON THIS ISSUE. THE VOLUME AND NUMBER WILL DEPEND UPON THE Q UANTUM OF INVESTMENTS MADE. IN CASE, FUNDS INVESTED ARE H UGE, OBVIOUSLY THE NUMBER OF TRANSACTIONS AND VOLUME WIL L BECOME HIGH. IN CASE LARGE NUMBER OF TRANSACTIONS WERE CON FINED WITHIN THE SAME YEAR THIS DEFINITELY WILL GIVE INDI CATION THAT ASSESSEE IS TRADING IN SHARES BUT IN CASE THE NUMBE R OF TRANSACTIONS ARE LARGE BUT SALES MADE DURING YEAR A RE IN RESPECT OF PURCHASES MADE LONG AGO THEN IT COULD NO T BE SAID THAT ASSESSEE IS TRADING IN SHARES MERELY BECAUSE V OLUME ARE HEAVY AND NUMBER OF TRANSACTIONS ARE LARGE. SHARES SOLD IN THE YEAR UNDER CONSIDERATION HAVE BEEN ACQUIRED IN EARL IER YEARS IN WHICH THESE HAVE ALREADY BEEN ACCEPTED AS INVESTMEN T. THEREFORE, THE NATURE OF INVESTMENT CANNOT BE CHANG ED IN THE YEAR. THIS REASONED FINDING OF CIT(A) NEEDS NO INT ERFERENCE FROM OUR SIDE . 7.1 FURTHER, ASSESSEE HAS TRANSACTED NOT MORE THAN 15 DAYS IN ANY OF THE MONTHS DURING THE YEAR AND FOR THE EN TIRE YEAR SHE HAD TRANSACTED ON 164 DAYS OUT OF 250 WORKING D AYS OF STOCK EXCHANGE. ON AVERAGE SHE HAD CARRIED OUT 6 TR ANSACTIONS PER DAY WHICH CANNOT BE CONSIDERED AS HIGH VOLUME W HEN VIEWED IN THE BACKGROUND OF THE DAILY TRANSACTIONS CARRIED OUT IN BSE/NSE. THESE TRANSACTIONS WERE NOT ENTERED INT O FREQUENTLY, CONTINUOUSLY AND REGULARLY BY ASSESSEE. CONSISTENT DEALING IN PARTICULAR ITEM IS INDICATIVE OF INTENTI ON OF TRADE. CONSIDERING THE FACT THAT ASSESSEE HAS RE-ENTERED I N ONLY 17 ITA NOS.1769 & 1685/MUM/12 A.Y. 2008-09 (SMT. DIPALI N. SHAH VS. ACIT) PAGE 9 SCRIPS OUT OF 273 SCRIPS DEALT DURING THE YEAR AND PROFIT EARNED THERE FROM IS RS.28,98,906/-, WHICH CONSTITUTES ONL Y 17% OF SHORT TERM CAPITAL GAIN. IN THIS BACKGROUND, CIT(A ) RIGHTLY HELD THAT THE ENTIRE SHORT TERM CAPITAL GAIN CANNOT BE H ELD TO BE BUSINESS INCOME BASED ON THIS ISOLATED FACT, AND HO WEVER THE AFORESAID AMOUNT OF RS.28,98,906/- COULD ALONE BE C ONSIDERED AS BUSINESS INCOME HELD BY CIT(A). THIS REASONED F INDING OF CIT(A) NEEDS NO INTERFERENCE FROM OUR SIDE. WE UPH OLD THE SAME. 7.2 FURTHER, CIT(A) OBSERVED FROM TABLE NO.2 FILED BEFORE HIM THAT ASSESSEE HAS EARNED 88% OF TOTAL SHORT TERM CA PITAL GAINS WITH A HOLDING PERIOD MORE THAN 3 MONTHS. IN OTHER WORDS, ONLY 12% OF THE OVERALL CAPITAL GAIN FOR ASS ESSEE HAS ACCRUED FROM STOCKS WHERE THE WEIGHTED AVERAGE HOLD ING DURATION FOR SCRIPTS WAS UP TO 3 MONTHS. FURTHER 72 % OF SHORT TERM CAPITAL GAIN WAS EARNED ON STOCKS WITH A HOLDI NG PERIOD OF MORE THAN 6 MONTHS. IN RESPECT OF SALE OF SHARES WI THIN 3 MONTHS OF HOLDING IT WAS EXPLAINED TO BE TRIGGERED BY AN UNPRECEDENTED VOLATILITY IN THE MARKET BETWEEN NOVE MBER, 2007 TO JANUARY, 2008, THAT ASSESSEE HAD SOLD SHARE S WITHIN A SHORT PERIOD OF HOLDING AT LOSS IN FEAR OF FURTHER LARGE FALL IN MARKET. IN FACT THIS POSITION IS REINFORCED BY THE FACT THAT WITH 236 TRANSACTIONS IN LESS THAN A MONTH AND 339 TRANS ACTIONS DURING 1 MONTH TO 3 MONTHS CARRIED OUT BY ASSESSEE RESULTED IN A MEAGER PROFIT OF 12% OF TOTAL SHORT TERM CAPIT AL GAIN. IN ITA NOS.1769 & 1685/MUM/12 A.Y. 2008-09 (SMT. DIPALI N. SHAH VS. ACIT) PAGE 10 THIS BACK GROUND, CIT(A) DID NOT ACCEPT THE STAND O F ASSESSING OFFICER THAT ASSESSEE SOLD DIVIDEND YIELDING STOCKS AT A LOSS. 7.3 CIT(A) NOTED FROM TABLE NO.8 FILED BEFORE HIM T HAT ASSESSEE HAS EARNED A SHORT TERM CAPITAL GAIN OF 72.15 LAKHS AND LONG TERM CAPITAL GAIN OF 3.3 CRORES IN 19 COMM ON SCRIPS TRANSACTED IN RESPECTIVE CATEGORIES. ASSESSING OFFI CER HAS ACCEPTED LONG TERM CAPITAL GAIN ON SALE OF THESE SC RIPS AS RETURNED BY ASSESSEE WHEREAS TREATED SHORT TERM CAP ITAL GAIN IN SAME SCRIPS AS BUSINESS INCOME. ASSESSING OFFICE R HAS CONTRADICTED HIMSELF WITHOUT ANY REASON, AND THEREF ORE, GAINS ARISING FROM SHARES PURCHASED IN EARLIER YEARS AND TREATED AS INVESTMENTS COULD NOT BE SUDDENLY CONSIDERED AS BUS INESS INCOME. 7.4 ASSESSEE WAS NOT TRANSACTING FREQUENTLY FOR SMA LLER GAINS AS WAS REFLECTED FROM TOTAL CAPITAL GAIN ON COST OF INVESTMENT SOLD BEING 47% DURING THE YEAR AS CAN BE OBSERVED F ROM TABLE NO.5. FILED BEFORE CIT(A). IN FACT, SHORT TERM CAP ITAL GAIN AS PERCENTAGE OF COST OF INVESTMENTS SOLD DURING THE Y EAR STOOD AT 16.5% WHICH DEFINITELY ON HIGHER SIDE WHEN COMPARED TO A TRADER'S ACTIVITY. 7.5 AVERAGE CAPITAL APPRECIATION WAS A HUGE FOR THE TOP FOUR SCRIPS (JAI CORP, JINDAL STEELS & POWER, ACCENTIA A ND BAG FILMS), WHICH TOGETHER ACCOUNTED FOR 49% OF THE TOT AL CAPITAL GAINS. IN THIS BACKGROUND, CIT(A) RIGHTLY OBSERVED THAT THE ITA NOS.1769 & 1685/MUM/12 A.Y. 2008-09 (SMT. DIPALI N. SHAH VS. ACIT) PAGE 11 INTENTION WAS CLEARLY NOT TO FREQUENTLY TRADE OR CH URN FOR SMALLER RETURNS THAT ARE NORMALLY TRAITS OF TRADERS IN BUSINESS. 7.6 FURTHER, CIT(A) OBSERVED THAT ASSESSEE HAD SIGN IFICANT UNBOOKED AND UNREALIZED CAPITAL GAIN OF RS1.35 CROR ES IN SCRIPS HELD AS CLOSING INVESTMENTS AS ON 31.3.2008. A TRADER WOULD HAVE DEFINITELY REALIZED THE HUGE PROFIT IMME DIATELY AND NOT CARRIED OUT PROFITS TO THE NEXT YEAR. FROM TAB LE NO.1 FILED BEFORE HIM CIT(A) OBSERVED THAT ASSESSEE HAD UNREAL IZED CAPITAL GAIN FOR ALL THE YEARS VIZ., A.YS. 2004-05 TO 2008-09. THE PRESENCE OF SUCH HUGE UNREALIZED CAPITAL GAINS HAVING LONGER HOLDING PERIOD CLEARLY INDICATES INTENTION O F ASSESSEE OF TRYING TO SEEK LONG TERM CAPITAL GAIN, RIGHTLY OBSE RVED BY CIT(A). 7.7 THE STAND OF ASSESSEE AS AN INVESTOR HAS BEEN A CCEPTED BY THE ASSESSING OFFICER IN EARLIER YEAR UNDER SECT ION 143(3). THE ASSESSMENT FOR A.Y. 2007-08 WAS COMPLETED U/S. 143(3). AND CAPITAL GAINS ON SALE OF SHARES AND SECURITIES WERE ACCEPTED AND TAXED AS SHORT TERM AT RS.85,23,821/- AND LONG TERM CAPITAL GAIN ASSESSED AT RS. 39,17,054/-. BESI DES, SHARES WERE ACCEPTED AS INVESTMENTS IN THE BALANCE SHEET. THE FACTS OF THE CASE WERE SIMILAR IN A.YS. 2007-2008 & 2008- 2009 EXCEPT THE TRANSACTIONS RELATING TO REPETITIVE TRAN SACTIONS DISCUSSED ABOVE AND NO FRESH MATERIAL HAS BEEN BROU GHT ON RECORD BY ASSESSING OFFICER IN THIS YEAR UNDER CONS IDERATION. THE ASSESSEES CLAIM REGARDING LONG TERM CAPITAL GA INS HAS NOT BEEN DISTURBED BY ASSESSING OFFICER FOR THE YEAR UN DER ITA NOS.1769 & 1685/MUM/12 A.Y. 2008-09 (SMT. DIPALI N. SHAH VS. ACIT) PAGE 12 CONSIDERATION AND THUS, ASSESSING OFFICER HIMSELF H AS ACCEPTED THAT ASSESSEE WAS INVESTOR IN SHARES ALSO. IN SUCH CIRCUMSTANCES, CIT(A) RIGHTLY OBSERVED THAT THERE W AS NO REASON FOR THE ASSESSING OFFICER TO TREAT INVESTMEN T IN SHARES BY ASSESSEE AS TRADING IN SHARES FOR A.Y.2008-09. T HE UNIFORMITY IN TREATMENT AND CONSISTENCY UNDER THE S AME FACTS AND CIRCUMSTANCES IS ONE OF THE FUNDAMENTAL JUDICIA L PRINCIPLES WHICH CANNOT BE BRUSHED ASIDE IN ANY MAN NER. IN VIEW OF THIS, CIT(A) RIGHTLY DIRECTED THE ASSESSING OFFICER TO CONSIDER THE AMOUNT OF RS.28,98,906/- AS BUSINESS I NCOME AND REST OF SHORT TERM CAPITAL GAIN WAS DIRECTED T O BE ASSESSED AS SHORT TERM CAPITAL GAIN. THIS REASONED FACTUAL FINDING OF CIT(A) NEEDS NO INTERFERENCE FROM OUR SIDE. WE UPH OLD THE SAME. 8. WITH REGARD TO DISALLOWANCE U/S.14A R.W. RULE 8D RAISED IN REVENUES APPEAL, STAND OF ASSESSEE HAS BEEN THA T INTEREST BEARING BORROWED FUNDS WERE UTILIZED FOR THE WORKIN G CAPITAL REQUIREMENT OF REGULAR BUSINESS. CIT(A) OBSERVED TH AT LONG TERM CAPITAL GAINS, DIVIDENDS, INTEREST ON PPF ETC. , WHICH WERE EXEMPTED INCOMES, WERE REPORTED IN THE RETURN FILED AND THE BALANCE SHEET WAS A CONSOLIDATED ONE FOR BUSINESS A ND ALSO SHARE INVESTMENTS. ACCORDINGLY, CIT(A) HELD THAT A SSESSEES CASE WAS SQUARELY HIT BY THE PROVISIONS OF SEC.14A. 8.1 BEFORE US, LEARNED AUTHORIZED REPRESENTATIVE SU BMITTED THAT CIT(A) WAS NOT JUSTIFIED IN DISALLOWING INTERE ST PERTAINING TO LOAN TAKEN FOR THE PURPOSE OF WORKING CAPITAL U/ S.14A. ITA NOS.1769 & 1685/MUM/12 A.Y. 2008-09 (SMT. DIPALI N. SHAH VS. ACIT) PAGE 13 ASSESSEE IS FAIRLY CONCEDED BEFORE US REGARDING DIS ALLOWANCE OF 0.5% ADMINISTRATIVE EXPENSES, WE HOLD ACCORDINGLY. FURTHER, LEARNED AUTHORIZED REPRESENTATIVE DREW OUR ATTENTIO N TO PAGE 11 AND SUBMITTED THAT ASSESSEE HAD SUFFICIENT OWN F UNDS AND REQUESTED THAT DISALLOWANCE IN QUESTION IS NOT JUST IFIED. THIS FACT NEEDS VERIFICATION IN ITS FACTS AND CIRCUMSTAN CES. SO, MATTER IS RESTORED TO ASSESSING OFFICER WITH DIRECT ION TO DECIDE THIS ISSUE AS PER FACTS ON RECORD AND AS PER LAW AF TER PROVIDING DUE OPPORTUNITY OF HEARING TO ASSESSEE. 9. AS A RESULT, ITA NO.1769/MUM/2012 FILED BY ASSES SEE IS PARTLY ALLOWED AND ITA NO.1685/MUM/2012 FILED BY RE VENUE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS THE 09 TH DAY OF OCTOBER, 2015. SD/- SD/- (ASHWANI TANEJA) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBE R MUMBAI: DATED 09/10/2015 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- 1. / REVENUE 2. / ASSESSEE 3. ! / CONCERNED CIT 4. !- $%&' / CIT (A) 5. )*+& ,--, $%&' $, / / DR, ITAT, MUMBAI 6. +12 34' / GUARD FILE. BY ORDER / 5 , 6%/8 % &, $%&' $, / 9