Shri Amitkumar Hasmukhbhai Shah, Baroda V. The ACIT.,Circle-2(1), Baroda

ITA 2102/AHD/2008

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6884 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 10 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-04-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 04-04-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 30-05-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R K DHANISTA
• Keywords: Business income; Depreciation; Income from undisclosed sources; Salary income; Opportunity of being heard; Rule of consistency; Earning of tax free income; Corroborative evidences; Revised return
• Section: 153A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH AHMEDABAD (BEFORE S/SHRI G. D. AGARWAL, VP AND BHAVNESH SAINI , JM) ITA NO.2102/AHD/2008 A. Y.: 2004-05 SHRI AMITKUMAR HASHMUKHBHAI SHAH, PROP. SAGAR INDUSTRIES, 401, CENTRE POINT, R. C. DUTT ROAD, ALKAPURO, BARODA VS THE A. C. I. T., CIRCLE 2(1), BARODA PA NO. AGIPS 3476 L (APPELLANT) (RESPONDENT) APPELLANT BY SHRI DHIREN SHAH, AR RESPONDENT BY SHRI R.K. DHANISTA, DR O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST ORDER OF THE LEARNED CIT(A)-II, BA RODA DATED 03 RD MARCH, 2008 FOR ASSESSMENT YEAR 2004-05. 2. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOT H THE PARTIES, PERUSED THE FINDINGS OF THE AUTHORITIES BELOW AND C ONSIDERED THE MATERIAL AVAILABLE ON RECORD. 3. ON GROUND NO.1 OF THE APPEAL, THE ASSESSEE CHALL ENGED THE ORDER OF THE LEARNED CIT(A) IN CONFIRMING THE FINDI NGS OF THE AO TREATING THE CAPITAL GAIN (CG) SHOWN BY THE ASSESSE E ON SALE OF SHARES AS BUSINESS INCOME. ITA NO.2102/AHD/2008 SHRI AMITKUMAR HASMUKHBHAI SHAH VS ACIT, CIRCLE-2(1 ), BARODA 2 4. THE AO HAS DISCUSSED THE ISSUE IN DETAIL AT PARA 3 OF THE ASSESSMENT ORDER. THE ASSESSEE HAS DECLARED INCOME FROM CAPITAL GAINS OF RS.2,42,897/-. THE AO OBSERVED FROM THE TR ANSACTIONS THAT THE ASSESSEE IS REGULARLY DOING PURCHASE AND SALE O F SHARES, ON LARGE SCALE. IN THE LIGHT OF BOARDS INSTRUCTION NO.1827 THE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO WHY THE INCOME SHOWN AS C APITAL GAIN SHOULD NOT BE TREATED AS BUSINESS INCOME AS THE ASS ESSEE IS ENGAGED IN LARGE NUMBER OF TRANSACTION AND VOLUME I NVOLVED IN SHARES. THE ASSESSEE DID NOT FURNISH ANY EXPLANATIO N DURING THE ASSESSMENT PROCEEDINGS. THE AO STATED THAT IT IS A REGULAR ACTIVITY OF THE ASSESSEE AS LARGE NUMBER OF SALE AND PURCHASE T RANSACTIONS CARRIED OUT BY THE ASSESSEE. DURING THE YEAR SALE C ONSIDERATION OR SECURITIES IS SHOWN AT RS.99,19,909/- WHICH IS A HU GE AMOUNT. THE AO HAS ALSO RELIED ON BOARDS INSTRUCTION NO.1827. THE AO HELD THE SALE PROCEEDS IN RESPECT OF ALL THE SHARE TRANSACTI ONS RECEIVED BY THE ASSESSEE IN THE YEAR UNDER CONSIDERATION AS BUSINES S INCOME AND NOT AS CAPITAL GAIN. THE AO TREATED THE INCOME SHOW N AS CAPITAL GAIN AS PROFIT ON SALE OF SHARES AT RS.3,92,657/-. 5. IT WAS CONTENDED BEFORE THE LEARNED CIT(A) THAT DURING THE ASSESSMENT PROCEEDINGS ALL THE DETAILS ABOUT ALL SH ARE TRANSACTIONS ARE ATTACHED WITH THE RETURN OF INCOME. THE AO ADDE D THE AMOUNT HYPOTHETICALLY TREATING THE CAPITAL GAIN AS BUSINES S INCOME. THE ASSESSEE HAS ALSO DECLARED SHORT TERM CAPITAL LOSS AT RS.1,27,333/-. THE ASSESSEE ALSO CONTENDED THAT IF THE INTENTION O F THE AO WAS TO TREAT INCOME AS BUSINESS INCOME, HE SHOULD ALSO HAV E ASKED FOR STT PAID TO GIVE CREDIT OF THE SAME U/S 88E OF THE IT A CT AND THAT IT WAS AN ITA NO.2102/AHD/2008 SHRI AMITKUMAR HASMUKHBHAI SHAH VS ACIT, CIRCLE-2(1 ), BARODA 3 ACTIVITY OF OCCASIONAL NATURE WITH THE INTENT TO MA KE PROPER INVESTMENT IN GOOD COMPANIES TO EARN MAXIMUM DIVIDENDS AND NOT FOR RESALE AND TRANSACTIONS ARE NOT ENTERED CONTINUOUSLY AND R EGULARLY. ALSO THE PURCHASES ARE FROM OWN FUNDS. EVEN THE INVESTMENT U NSOLD AS ON 31-03-2004 WILL ALSO SHOW THAT THE ASSESSEE IS INVE STOR ONLY. 6. THE LEARNED CIT(A) DISMISSED THE APPEAL OF THE A SSESSEE TREATING IT TO BE BUSINESS INCOME. HIS FINDINGS IN PARA 2.3 IN THE IMPUGNED ORDER ARE REPRODUCED AS UNDER: 2.3 I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT AND FACTS OF THE CASE. ASSESSING OFFICER HAS TREATED THE CAPITAL GAIN SHOWN BY THE APPELLANT AS BUSINESS PROFIT WHILE CONSIDERING NUMBER OF TRANSACTIONS UNDERTAKEN BY THE APPELLANT IN SHARES. ASSESSING OFFICER DISCUSSED THE ISSUE IN DETAIL IN PARA -3 OF THE ASSESSMENT ORDER AND AS PER THAT APPELLANT HAD UNDERTAKEN 373 TRANSACTIONS DURING TH E YEAR INVOLVING MORE THAN RS.99 LACS. ASSESSING OFFICER ALSO REFERRED CIRCULAR NO.1827 AS PER WHICH THE RELEVANT FACTORS ARE WHETHER PURCHASE AND SALE WAS INCIDENTAL TO BUSINESS OR IT WAS AN OCCASIONAL ACTIVITY. THE INTENTION WHILE MAKING PURCHASE OF SHARES WHETHER PURCHASES ARE MADE FROM OUT OF BORROWINGS OR OWN FUNDS AND THE TREATMENT GIVEN IN THE BALANCE-SHEET. ASSESSING OFFICER FOUND THAT ASSESSEE HAS DONE LARGE AMOUNT OF BUYING AND SELLING SHARES AND 8 TIMES DOING INTRADAY TRADING F OR WHICH THE MOTIVE CAN ONLY BE PROFIT MAKING RATHER THAN EARNING DIVIDEND OR INTEREST. FREQUENCY AND VOLUME OF TRADE UNDERTAKEN BY THE APPELLANT WAS FOUND TO BE FITTING IN THE DEFINITION OF SECTION 2 (13) BY THE ASSESSING OFFICER AND THEREFORE HE TREATED THE CAPITAL GAIN DISCLOSED BY THE APPELLANT AS BUSINESS PROFIT. APPELLANT HAS NOT SUBMITTED COPY OF BALANCE - SHEET DISCLOSING THE SHARES AS INVESTMENT. SUCH ITA NO.2102/AHD/2008 SHRI AMITKUMAR HASMUKHBHAI SHAH VS ACIT, CIRCLE-2(1 ), BARODA 4 DETAILS WERE NOT SUBMITTED EVEN DURING THE APPEAL PROCEEDINGS. APART FROM JUST MENTIONING THAT INTENTION OF PURCHASE AND SALE WAS NOT EARNING PROF IT BUT DIVIDEND, APPELLANT DID NOT SUBMIT ANY EVIDENCE OR PROOF TO ESTABLISH THAT SHARE TRANSACTIONS UNDERTAKEN BY HIM ARE IN FACT INVESTMENT AND NOT SHARE TRADING. IN THE ABSENCE OF ANY EXPLANATION WI TH SUPPORTING EVIDENCES, THE FINDINGS REACHED BY THE ASSESSING OFFICER HAS TO BE CONFIRMED AND ACCORDINGLY THE TRANSACTIONS TREATED BY THE ASSESSING OFFICER AS BUSINESS AS AGAINST CAPITAL GA IN IS CONFIRMED. APPELLANT DISCLOSED SHORT TERM CAPITAL GAIN OF RS.2,44,662/- AND LONG TERM CAPITAL GAIN OF RS.20,7 62/- . APART FROM TREATING THE CAPITAL GAIN AS BUSINESS INCOME, ASSESSING OFFICER ALSO DISALLOWED THE CLAIM OF SHORT TERM CAPITAL LOSS OF RS.1,27,233/- U/S 94( 7) OF THE I. T. ACT IN THE ABSENCE OF DETAILS OF DIVIDEND INCOME. WHEN TRANSACTION OF PURCHASE AND SALE WITHIN THREE MONTHS RESULTS IN LOSS, ONUS IS ON THE APPELLANT TO PROVE THAT THERE IS NO EXEMPT DIVIDEND AGAINST SUCH LOSS. THE DIVIDEND DETAILS SUBMITTED B Y THE APPELLANT SHOWS THAT APPELLANT RECEIVED RS.10,705/- DIVIDEND ON VARIOUS SHARES. THE LOSS FR OM SHORT TERM SHARE TRANSACTION IS NOT FROM THE COMPANIES FROM WHOM DIVIDEND WAS RECEIVED. THEREFORE, SUCH LOSS DISALLOWED BY THE ASSESSING OFFICER U/S. 94(7) IS NOT CORRECT. SINCE THERE IS N O EXEMPT INCOME AGAINST WHICH LOSS IN SHARE TRANSACTION IS CLAIMED, THE DISALLOWANCE OF RS.1,27,233/- MADE BY THE ASSESSING OFFICER IS NOT CORRECT. I THEREFORE DELETE THE ADDITION OF RS.1,27 ,233/- OUT OF TOTAL ADDITION OF RS.3,92,657/- MADE BY THE ASSESSING OFFICER AS BUSINESS INCOME. 7. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND S UBMITTED THAT THE MAIN BUSINESS OF THE ASSESSEE WAS BUSINESS OF C HEMICALS AND ITA NO.2102/AHD/2008 SHRI AMITKUMAR HASMUKHBHAI SHAH VS ACIT, CIRCLE-2(1 ), BARODA 5 THE ASSESSEE ALSO DERIVED INCOME FROM TRANSPORTATIO N BUSINESS AND THE SHARE TRANSACTION AS SHOWN ONLY BY WAY OF INVES TMENT AND ALL THE TRANSACTIONS WERE CARRIED OUT THROUGH DEMAT ACCOUNT AND THE SAME WAS ALSO CARRIED OUT WITH OWN FUNDS ON WHICH NO INT EREST HAS BEEN PAID. HE HAS SUBMITTED THAT SINCE THE MAIN BUSINESS OF THE ASSESSEE WAS NOT TO DEAL IN SHARES AND ONLY INVESTMENT HAS B EEN SHOWN, THEREFORE, THE CAPITAL GAIN SHOULD BE SHOWN AS SHOR T TERM CAPITAL GAIN AS RETURNED BY THE ASSESSEE. HE HAS SUBMITTED THAT THE ASSESSEE HAS FILED REPLY BEFORE THE AO DATED 30-08-2006 (PB- 4) ALONG WITH THE CHART OF DETAILS OF SHARES HELD IN SHORT TERM CAPIT AL GAINS AND FURTHER REPLY IS FILED ON 22-12-2006 (PB-12). THEREFORE, TH E AO WAS NOT JUSTIFIED IN NOTING THAT NO DETAILS HAVE BEEN FURNI SHED BY THE ASSESSEE. HE HAS RELIED UPON THE ORDERS OF ITAT MUM BAI BENCH IN THE CASES OF SHRI VINOD K. NEVATIA VS ACIT IN ITA NO.6556/MUM/2009 DATED 03-12-2010 AND DCIT VS M/S. SMK SHARES & STOCK BROKING PVT. LTD. IN ITA NO.799/MUM/ 2009 DATED 24- 11-2010 IN SUPPORT OF THE CONTENTION. 8. ON THE OTHER HAND, THE LEARNED DR RELIED UPON TH E ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE ASSESSEE H AS NOT FILED THE REQUIRED DETAILS EITHER BEFORE THE AO OR BEFORE THE LEARNED CIT(A) AND EVEN NO BALANCE SHEET IS FILED. NO EVIDENCE WAS SUB MITTED TO SHOW THAT SHARE TRANSACTIONS UNDERTAKEN BY THE ASSESSEE ARE IN FACT INVESTMENT AND NOT SHARE TRADING. THE LEARNED DR SU BMITTED THAT FOR DEALING IN SHARES THERE IS NO NEED TO GO FOR REGULA R BUSINESS. THE ASSESSEE CONDUCTED HUGE TRANSACTIONS ALMOST EVERY D AY AND IN THE ITA NO.2102/AHD/2008 SHRI AMITKUMAR HASMUKHBHAI SHAH VS ACIT, CIRCLE-2(1 ), BARODA 6 ABSENCE OF THE DETAILS THE AUTHORITIES BELOW WERE J USTIFIED IN REJECTING THE CLAIM OF THE ASSESSEE. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND MAT ERIAL AVAILABLE ON RECORD. ITAT AHMEDABAD IN THE CASE OF DCIT VS SHRI RAVINDRA M. AGRAWAL AND OTHERS IN ITA NO.1725/AHD/2 008 AND OTHERS VIDE ORDER DATED 28-01-2011 DECIDED THE IDENTICAL I SSUE BY CONSIDERING VARIOUS RELEVANT FACTS FOR DECIDING WHE THER TRANSACTION IN QUESTION IS CAPITAL GAIN OR BUSINESS INCOME. THE TR IBUNAL HAS TAKEN INTO CONSIDERATION SEVERAL DECISIONS ON THE MATTER IN ISSUE. THE FINDINGS OF THE TRIBUNAL IN PARA 9 TO 14 ARE REPROD UCED AS UNDER: 9. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF B OTH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US . IT WAS ADMITTED BY BOTH THE PARTIES THAT THE FACTS IN THE CASES OF ALL THE ASSESSEES IN ALL THE YEARS ARE MOR E OR LESS SIMILAR THEREFORE, THE FACTS IN ANY YEAR CAN B E CONSIDERED WHICH WOULD BE APPLICABLE IN OTHER YEARS ALSO. THEREFORE, THE ASSESSEE WAS DIRECTED TO FURNISH COP Y OF ORIGINAL COMPUTATION AS WELL AS REVISED COMPUTATION OF ONE YEAR IN THE CASE OF SHRI RAVINDRA M. AGARWAL. H E HAS FURNISHED THE COPY OF RETURN FOR ASSESSMENT YEAR 20 01- 2002, THEREFORE, WE SHALL DEAL HEREINBELOW THE FACT S FOR ASSESSMENT YEAR 2001-2002. 10. THE ONLY DISPUTE IN THIS APPEAL BY THE REVENUE IS WHETHER THE PROFIT FROM SALE OF SHARES IS TO BE ASS ESSED AS BUSINESS INCOME OR AS INCOME FROM CAPITAL GAIN. TO DETERMINE THIS, THE MOST IMPORTANT TEST IS WHETHER THE INITIAL ACQUISITION OF THE SHARES WAS WITH THE INTE NTION OF DEALING IN THE SHARES OR IT WAS MADE AS AN INVESTME NT. 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 ITA NO.2102/AHD/2008 SHRI AMITKUMAR HASMUKHBHAI SHAH VS ACIT, CIRCLE-2(1 ), BARODA 7 ASSESSEE. THE APPELLATE AUTHORITIES HAVE LAID DOWN CERTAIN GUIDELINES ON THE BASIS OF WHICH THE INTENT ION OF THE ASSESSEE CAN BE INFERRED. IN THE CASE OF SARNAT H INFRASTRUCTURE PVT. LTD. (SUPRA), THE LUCKNOW BENCH OF THE ITAT HAS LAID VARIOUS PRINCIPLES WHICH MAY BE APPLI ED TO DETERMINE WHETHER THE TRANSACTION OF PURCHASE AND S ALE OF SHARE IS IN THE NATURE OF TRADE OR INVESTMENT. T HE 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 TRADE OR ARE MERELY F OR INVESTMENT PURPOSES: (1) WHAT IS THE INTENTION OF THE ASSESSEE AT THE TI ME OF PURCHASE OF THE SHARES. THIS CAN BE FOUND OUT FROM THE TREATMENT IT GIVES TO SUCH PURCHASE IN ITS BOOKS OF ACCOUNTWHETHER IT IS TREATED AS STOCK-IN- TRADE OR INVESTMENT; WHETHER SHOWN IN OPENING/CLOSING STOCK OR SHOWN SEPARATELY AS INVESTMENT OR NON-TRADING ASSET. (2) WHETHER ASSESSEE HAS BORROWED MONEY TO PURCHASE AND PAID INTEREST THEREON. NORMALLY, MONEY IS BORROWED TO PURCHASE GOODS FOR THE PURPOSES OF TRADE AND NOT FOR INVESTING IN AN ASSET FOR RETAINING. (3) WHAT IS THE FREQUENCY OF SUCH PURCHASES AND DISPOSAL IN THAT PARTICULAR ITEM? IF PURCHASES AND SALES ARE FREQUENT, 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 SALES AND THE HOLDINGS MAY SHOW WHETHER THE ASSESSEE IS TRADING OR INVESTING (HIGH TRANSACTIONS AND LOW HOLDINGS INDICATE TRADE WHEREAS LOW TRANSACTIONS AND HIGH HOLDINGS INDICATE INVESTMENT). ITA NO.2102/AHD/2008 SHRI AMITKUMAR HASMUKHBHAI SHAH VS ACIT, CIRCLE-2(1 ), BARODA 8 (4) WHETHER PURCHASE AND SALE ARE FOR REALIZING PROFIT OR PURCHASES ARE MADE FOR RETENTION AND APPRECIATION IN ITS VALUE? FORMER WILL INDICATE INTENTION OF TRADE AND LATTER, AN INVESTMENT. IN TH E CASE OF SHARES WHETHER INTENTION WAS TO ENJOY DIVIDEND AND NOT MERELY EARN PROFIT ON SALE AND PURCHASE OF SHARES. A COMMERCIAL MOTIVE IS AN ESSENTIAL INGREDIENT OF TRADE. (5) HOW THE VALUE OF THE ITEMS HAS BEEN TAKEN IN TH E BALANCE SHEET? IF THE ITEMS IN QUESTION ARE VALUED AT COST, IT WOULD INDICATE THAT THEY ARE INVESTMENTS O R WHERE THEY ARE VALUED AT COST OR MARKET VALUE OR NE T REALIZABLE VALUE (WHICHEVER IS LESS), IT WILL INDIC ATE THAT ITEMS IN QUESTION ARE TREATED AS STOCK-IN-TRAD E. (6) HOW THE COMPANY (ASSESSEE) IS AUTHORIZED IN MEMORANDUM OF ASSOCIATION/ARTICLES OF ASSOCIATION? WHETHER FOR TRADE OR FOR INVESTMENT? IF AUTHORIZED ONLY FOR TRADE, THEN WHETHER THERE ARE SEPARATE RESOLUTIONS OF THE BOARD OF DIRECTORS TO CARRY OUT INVESTMENTS IN THAT COMMODITY? AND VICE VERSA. (7) IT IS FOR THE ASSESSEE TO ADDUCE EVIDENCE TO SHOW THAT HIS HOLDING IS FOR INVESTMENT OR FOR TRAD ING AND WHAT DISTINCTION HE HAS KEPT TO THE RECORDS OR OTHERWISE, BETWEEN TWO TYPES OF HOLDINGS: IF THE ASSESSEE IS ABLE TO DISCHARGE THE PRIMARY ONUS AND COULD PRIMA FACIE SHOW THAT PARTICULAR ITEM IS HELD AS INVESTMENT (OR SAY, STOCK-IN-TRADE) THEN ONUS WOULD SHIFT TO REVENUE TO PROVE THAT APPARENT IS NO T REAL. (8) THE MERE FACT OF CREDIT OF SALE PROCEEDS OF SHARES (OR FOR THAT MATTER ANY OTHER ITEM IN QUESTI ON) IN A PARTICULAR ACCOUNT OR MUCH FREQUENCY OF SALE AND PURCHASE WILL ALONE NOT BE SUFFICIENT TO SAY T HAT ASSESSEE WAS HOLDING THE SHARES (OR THE ITEMS IN QUESTION) FOR INVESTMENT. ITA NO.2102/AHD/2008 SHRI AMITKUMAR HASMUKHBHAI SHAH VS ACIT, CIRCLE-2(1 ), BARODA 9 (9) ONE HAS TO FIND OUT WHAT ARE THE LEGAL REQUISIT ES FOR DEALING AS A TRADER IN THE ITEMS IN QUESTION AN D WHETHER THE ASSESSEE IS COMPLYING WITH THEM. WHETHER IT IS THE ARGUMENT OF THE ASSESSEE THAT IT IS VIOLATING THOSE LEGAL REQUIREMENTS, IF IT IS CLAIME D THAT IT IS DEALING AS A TRADER IN THAT ITEM? WHETHE R IT HAD SUCH AN INTENTION (TO CARRY ON ILLEGAL BUSINESS IN THAT ITEM) SINCE BEGINNING OR WHEN PURCHASES WERE MADE? (10) IT IS PERMISSIBLE AS PER CBDTS CIRCULAR NO. 4 OF 2007 OF 15-6-2007 THAT AN ASSESSEE CAN HAVE BOTH PORTFOLIOS, ONE 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 PORTFOLIOS. (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 HAD DEALT IN SHARES BOTH AS STOCK-IN-TRADE AS WE LL AS INVESTMENT. IT SOLD SHARES FROM THE INVESTMENT PORTFOLIO AND CLAIMED THAT THE PROFIT ARISING THERE FROM WAS CAPITAL GAIN. THE ASSESSING OFFICER HELD THAT MAIN BUSINESS OF THE ASSESSEE WAS PURCHASE AND SALE IN SHARES. IT WAS NEITHER A SHARE DEALER NOR A SHARE BROKER. THE DETAILS 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, THE ASSESSEE DID NOT HAVE SUFFICIENT FUNDS TO MAKE SUCH INVESTMENTS AND THE ASSESSEE WAS CLAIMING TO HAVE MADE INVESTMENT OUT OF BORROWED CAPITAL. HE, THEREFORE, HELD THAT T HE ITA NO.2102/AHD/2008 SHRI AMITKUMAR HASMUKHBHAI SHAH VS ACIT, CIRCLE-2(1 ), BARODA 10 PROFIT IN QUESTION 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. IT HAD KEPT SEPARATE ACCOUNTS IN RESPEC T OF TWO PORTFOLIOS. NO MATERIAL WAS BROUGHT ON RECOR D TO SHOW THAT DEMARCATION LINE BETWEEN BUSINESS AND INVESTMENT WAS HAZY OR THAT THE ASSESSEE HAD NOT MAINTAINED AN INVESTMENT PORTFOLIO AND IT WAS DEALING IN SHARES ONLY LIKE A TRADER. THUS, ON APPRECIATION OF CUMULATIVE EFFECT OF SEVERAL FACTOR S PRESENT IT WAS TO BE HELD THAT THE SURPLUS WAS CHARGEABLE TO CAPITAL GAINS ONLY AND THE ASSESSEE WAS NOT TO HE TREATED AS TRADER IN RESPECT OF SALE AND PURCHASE OF SHARES IN THE INVESTMENT PORTFOLIO. THE ITAT, MUMBAI BENCH IN THE CASE OF JANAK S. RANGWALA (SUPRA) HELD AS UNDER: THE MERE VOLUME OF TRANSACTION TRANSACTED BY THE ASSESSEE 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 TAKEN INTO CONSIDERATION AND THE MAGNITUDE OF THE TRANSACTION DOES NOR AFTER THE NATURE OF TRANSACTION. THOUGH TH E PRINCIPLE OF RES JUDICATA DOES NOT APPLY TO THE INCOME-TAX PROCEEDINGS AS EACH 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 THERE 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 B E SEERS TO DETERMINE THE NATURE OF TRANSACTION ITA NO.2102/AHD/2008 SHRI AMITKUMAR HASMUKHBHAI SHAH VS ACIT, CIRCLE-2(1 ), BARODA 11 CONDUCTED BY THE ASSESSEE. THOUGH THE INVESTMENT 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 SHORT TERM BASI S. 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 GAINS. THERE WAS NO BASIS FOR TREATING THE ASSESSEE AS A TRADER IN SHARES, WHEN HIS INTENTION WAS TO HOLD SHARES ITS T HE INDIAN COMPANIES AS AN INVESTMENT AND NOT AS STOCK-IN-TRADE. THE MERE MAGNITUDE OF THE TRANSACTION DOES NOT CHANGE THE NATURE OF TRANSACTION, 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. (SU PRA) AND HELD AS UNDER: FURTHER, ON THE BASIS OF MERITS ALSO, IN VIEW OF T HE RATIO OF THE DECISION OF SARNATH INFRASTRUCTURE P. LTD.S CASE (SUPRA), IT WAS HELD THAT THE DELIVERY BASED TRANSACTION SHOULD BE TREATED AS OF THE NATUR E OF INVESTMENT TRANSACTIONS AND PROFIT THEREFROM SHOULD BE TREATED AS SHORT TERM CAPITAL GAIN OR LON G 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 TH AT IN THE PRECEDING YEAR, SIMILAR CLAIM WAS ACCEPTED BY T HE REVENUE. THE RELEVANT FINDINGS OF THE ITAT ARE AS U NDER: THUS, THE NATURE OF ACTIVITIES, MODUS OPERANDI OF THE ASSESSEE, MANNER OF KEEPING RECORDS AND ITA NO.2102/AHD/2008 SHRI AMITKUMAR HASMUKHBHAI SHAH VS ACIT, CIRCLE-2(1 ), BARODA 12 PRESENTATION OF SHARES AS INVESTMENT AT THE YEAR END WERE SAME IN ALL THE YEARS, AND, HENCE, APPARENTLY, THERE APPEARED NO REASON AS TO WHY THE CLAIMS MADE BY THE ASSESSEE SHOULD NOT BE ACCEPTED. HOWEVER, THE REVENUE AUTHORITIES HAD TAKEN A DIFFERENT VIEW IN THE YEAR UNDER CONSIDERATION BY HOLDING THAT PRINCIPLE OF RES JUDICATA WAS NOT APPLICABLE TO THE ASSESSMENT PROCEEDINGS. THERE COULD NOT BE ANY DISPUTE ON THIS ASPECT, BUT THERE IS ALSO ANOTHER JUDICIAL THOUGHT THAT THERE SHOULD BE UNIFORMITY IN TREATMENT AND CONSISTENCY UNDER THE SAME FACTS AND CIRCUMSTANCES AND IT WAS AS ALREADY FOUND THAT FACTS AND CIRCUMSTANCES WERE IDENTICAL EVEN THOUGH A DIFFERENT STAND HAD BEEN TAKEN BY THE REVENUE AUTHORITIES.: 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 R AISED AGAINST THE RULE OF CONSISTENCY APPLIED BY THE ITAT . THE HONBLE HIGH COURT VIDE ORDER DATED 6-1-2010, 228 C TR 582 (BOM) UPHELD THE ORDER OF THE ITAT AND HELD AS UNDER: 3. IN SO FAR AS QUESTION (B) IS CONCERNED, THE TRIBUNAL HAS OBSERVED IN PARE 8. OF ITS JUDGMENT TH AT THE ASSESSEE HAS FOLLOWED A CONSISTENT PRACTICE IN REGARD TO THE NATURE OF THE ACTIVITIES, THE MANNER OF KEEPING RECORDS AND THE PRESENTATION OF SHARES AS INVESTMENT AT THE END OF THE YEAR, IN ALL THE YEAR THE REVENUE SUBMITTED THAT A DIFFERENT VIEW SHOULD BE TAKEN FOR THE YEAR UNDER CONSIDERATION, SINCE THE PRINCIPLE OF RES JUDICATA IS NOT APPLICABLE TO ASSESSMENT PROCEEDINGS. THE TRIBUNAL CORRECTLY ACCEPTED THE POSITION 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 ITA NO.2102/AHD/2008 SHRI AMITKUMAR HASMUKHBHAI SHAH VS ACIT, CIRCLE-2(1 ), BARODA 13 CONSISTENCY WHEN THE FACTS AND CIRCUMSTANCES ARE IDENTICAL, PARTICULARLY IN THE CASE OF THE ASSESSEE . THIS APPROACH OF THE TRIBUNAL CANNOT BE FAULTED. THE REVENUE DID NOT FURNISH ANY JUSTIFICATION FOR ADOPTING A DIVERGENT APPROACH FOR THE ASSESSMENT YEAR IN QUESTION. QUESTION (B), THEREFORE, 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 FACT. 12. SIMILAR VIEW IS TAKEN BY THE OTHER BENCHES OF T HE ITAT IN VARIOUS DECISIONS RELIED UPON BY THE LEARNED COU NSEL. HOWEVER, FOR THE SAKE OF BREVITY, THE SAME ARE NOT DISCUSSED HERE IN DETAIL. 13. THE LEARNED DR HAD CONTENDED THAT THE ABOVE DECISIONS OF THE ITAT WOULD NOT BE APPLICABLE TO TH E CASE UNDER APPEAL BEFORE US, BECAUSE, IN THESE CASES THE TRANSACTIONS OF THE PURCHASE AND SALE OF SHARES WER E DISCLOSED TO THE DEPARTMENT, WHILE IN THE CASE OF T HE ASSESSEE, THESE WERE UNDISCLOSED TRANSACTIONS DETEC TED BY THE REVENUE ONLY AS A RESULT OF SEARCH. TO VERIF Y FACTUAL CORRECTNESS OF THE CONTENTION OF THE REVENU E, THE ASSESSEE WAS ASKED TO FURNISH THE COPY OF ORIGINAL COMPUTATION AS WELL AS REVISED COMPUTATION IN THE C ASE OF RAVINDRA AGRAWAL FOR ANY ONE ASSESSMENT YEAR. THE ASSESSEE FURNISHED THE DETAIL FOR A.Y.2000-2001 FRO M WHICH WE FIND THAT THE ORIGINAL RETURN WAS FURNISHE D BY THE ASSESSEE ON 7-11-2001 WHEREAS THE SEARCH HAS TAKEN PLACE AT THE ASSESSEES PREMISES ON 29-10-2004. IN THIS ORIGINAL RETURN LONG TERM CAPITAL GAIN OF RS.10,02, 774/- WAS DISCLOSED. IN RESPONSE TO THE NOTICE UNDER SECT ION 153A, THE ASSESSEE FURNISHED RETURN DISCLOSING CAPI TAL GAIN OF RS.7,31,096/- WHICH WAS FILED ON 30-11-206. THIS RETURN WAS AGAIN REVISED ON 24-4-2007 IN WHICH THE CAPITAL GAIN OF RS.7,33,450/- WAS DISCLOSED. THE FA CT REMAINS THAT THE CAPITAL GAIN WAS DISCLOSED BY THE ASSESSEE IN THE ORIGINAL RETURN AS WELL. OF COURSE THERE IS ITA NO.2102/AHD/2008 SHRI AMITKUMAR HASMUKHBHAI SHAH VS ACIT, CIRCLE-2(1 ), BARODA 14 SOME VARIATION IN THE AMOUNT OF CAPITAL GAIN DISCLO SED. IN THE ORDER UNDER SECTION 153A ALSO THERE IS NO FINDI NG 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 FROM UNDISCLOSED SOURCES, BU T ASSESSED AS BUSINESS INCOME. THEREFORE, THE CONTENT ION OF THE LEARNED DR THAT THE TRANSACTION OF PURCHASE AND SALE OF SHARES WAS NOT DISCLOSED TO THE DEPARTMENT IS FACTUALLY NOT CORRECT. MOREOVER, WHETHER THE TRANSA CTION OF PURCHASE AND SALE OF SHARES WAS DISCLOSED BEFORE TH E DATE OF SEARCH OR NOT WOULD NOT BE RELEVANT FOR DETERMINING WHETHER THE TRANSACTION WAS IN THE NATU RE OF TRADING TRANSACTION OR IN THE NATURE OF INVESTMENT. THEREFORE, WHETHER THE TRANSACTION OF PURCHASE AND SALE OF SHARES WAS A TRADING TRANSACTION OR INVESTMENT W ILL 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 DIRECTOR IN SAURAHSTRA CHEMICALS LTD., PORBANDAR AT THE RELEVANT TIME. HE WAS NOT IN THE BUSINESS OF PURCHASE AND SALE OF SHARES. IN THE ORI GINAL RETURN OF INCOME FURNISHED PRIOR TO THE SEARCH, THE PROFIT FROM SALE OF SHARES WAS OFFERED TO TAX AS CAPITAL G AIN AND THE SAME WAS ACCEPTED BY THE REVENUE UNDER SECTION 143(1). NO MONEY WAS BORROWED BY THE ASSESSEE FOR T HE ACQUISITION OF THE SHARES. ALL SHARES WERE ACQUIRED BY UTILISING OWN FUND. NEITHER ANY OFFICE NOR ANY STAF F WAS KEPT AND MAINTAINED FOR THE PURPOSE OF SALE OF PURCHASE/SHARES. HOWEVER, THERE WERE FREQUENT TRANSACTIONS OF PURCHASE AND SALE OF SHARES. THERE IS DISPUTE WITH REGARD TO TOTAL NUMBER OF SHARE TRANSA CTIONS OF PURCHASE AND SALE OF SHARES BY VARIOUS ASSESSES. AS PER THE REVENUE THE TOTAL NUMBER OF TRANSACTION BY ALL THE ASSESSEES DURING THE VARIOUS ASSESSMENT YEARS UNDER APPEAL WAS TOTALING TO 36,000 (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 ITA NO.2102/AHD/2008 SHRI AMITKUMAR HASMUKHBHAI SHAH VS ACIT, CIRCLE-2(1 ), BARODA 15 VARIOUS ASSESSEES IN SEVERAL YEARS. WHETHER THE TRANSACTIONS WERE 4,611 OR 36,000, THE FACTS REMAIN THAT THERE WERE FREQUENT TRANSACTIONS OF PURCHASE AND SA LE OF SHARES. HOWEVER, EXCEPT THE PARAMETER OF FREQUENCY IN PURCHASE/SALE OF SHARES ALL OTHER PARAMETERS INDICA TE THAT THE TRANSACTIONS WERE IN THE NATURE OF INVESTMENT A ND NOT THE TRADE TRANSACTIONS. EVEN FOR FREQUENCY, IT WAS EXPLAINED 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 IN STEAD OF INVESTING IN ONE SCRIPT. FOR EXAMPLE, IF THE ASS ESSEE HAD TO INVEST RS.10 LAKHS INSTEAD OF INVESTMENT IN ONE SCRIPT, HE USED TO INVESTMENT IN TEN DIFFERENT SCRI PTS. HE MADE A STATEMENT THAT THE ASSESSEE NEVER PURCHASED AND SOLD THE SAME SCRIPTS FREQUENTLY. HE ALSO STATE D THAT SHARES WERE KEPT FOR LONG PERIOD AND THERE IS NO FR EQUENT PURCHASE/SALE OF SAME SCRIPTS. THIS CONTENTION OF T HE LEARNED COUNSEL APPEARS REASONABLE AND HAS NOT BEEN FACTUALLY CONTROVERTED BY THE REVENUE. THERE IS A S AYING THAT NEVER PUT ALL YOUR EGGS IN ONE BASKET AND IF THE ASSESSEE AS A PRUDENT PERSON MADE INVESTMENT IN NUMBER OF SCRIPTS INSTEAD OF ONE SCRIPTS, IT CANNOT BE SAID THAT HE WAS CARRYING ON THE BUSINESS OF PURCHASE AN D SALE OF SHARES. THERE WERE SUBSTANTIAL INCOME FROM THE DIVIDEND. IN THE CASE OF SHRI RAVINDRA M. AGARWAL F OR A.Y.2001-2002, AS PER THE REVISED RETURN, THE DIVID END INCOME WAS AS HIGH AS RS.19,33,425/-. IT IS A SETTL ED LAW THAT, TO DETERMINE WHETHER THE ASSESSEE IS A TRADER OR INVESTOR IN SHARES, NO SINGLE TEST IS CONCLUSIVE BU T CUMULATIVE EFFECT OF ALL THE FACTS ARE TO BE SEEN. IN THE CASE OF THE ASSESSEE, ONE FACT I.E. FREQUENT PURCHA SE/SALE OF SHARES CAN BE SAID TO BE AGAINST THE ASSESSEE BU T ALL OTHER FACTS WHICH CAN BE SUMMARISED AS UNDER ARE IN FAVOUR OF THE ASSESSEE: I) SHRI RAVINDRA AGRAWAL IS A QUALIFIED PROFESSIONA L BEING CHARTERED ACCOUNTANT, COMPANY SECRETARY AND COST ACCOUNTANT; ITA NO.2102/AHD/2008 SHRI AMITKUMAR HASMUKHBHAI SHAH VS ACIT, CIRCLE-2(1 ), BARODA 16 II) SHRI AGRAWAL WAS FULL TIME DIRECTOR OF A PUBLIC LIMITED COMPANYAT THE RELEVANT TIME, POSTED AT PORBANDER; III) SHARES WERE ACQUIRED WITH OWN MONEY AND THERE WAS NO BORROWING BY SHRI RAVINDRA AGRAWAL OR ANY OTHER FAMILY MEMBER; IV) NO OFFICE OR ANY STAFF WAS MAINTAINED FOR LOOKI NG AFTER PURCHASE AND SALE OF SHARES; V) THERE WAS SUBSTANTIAL DIVIDEND INCOME; VI) HIS SOURCE OF INCOME WAS INCOME FROM SALARY, CA PITAL GAIN, DIVIDEND AND INTEREST AND HE WAS NOT HAVING A NY BUSINESS INCOME; VII) IN THE ORIGINAL RETURN OF INCOME FURNISHED FRO M TIME TO TIME, INCOME FROM SALE OF SHARES WAS DISCLOSED UNDE R 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 INVESTOR IN SHARES, APPEARS TO BE CORRECT. APART FR OM THE ABOVE, ON THE PRINCIPLE OF CONSISTENCY ALSO ORDER O F THE CIT(A) ON THIS POINT DESERVES TO BE UPHELD BECAUSE IN THE ORIGINAL RETURNS INCOME FROM SALE OF SHARES WAS DIS CLOSED UNDER THE HEAD CAPITAL GAIN AND THE SAME WAS ACCE PTED 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 CONSIST ENCY UNDER THE SAME FACTS AND CIRCUMSTANCES. THIS DECISI ON IS UPHELD BY THE HONBLE MUMBAI HIGH COURT IN CIT VS. GOPTAL PUROHIT, 228 CTR 582 (BOM). THESE DECISIONS WOULD BE SQUARELY APPLICABLE TO THE CASES OF THE ASSESSEE UNDER APPEAL BECAUSE IN THESE CASES NOT ON LY IN EARLIER YEAR BUT IN THE YEARS UNDER APPEAL ALSO IN ORIGINAL PROCEEDINGS TRANSACTION OF PURCHASE AND SA LE OF ITA NO.2102/AHD/2008 SHRI AMITKUMAR HASMUKHBHAI SHAH VS ACIT, CIRCLE-2(1 ), BARODA 17 SHARES SHOWN AS CAPITAL GAIN WAS ACCEPTED BY THE REVENUE. MERELY BECAUSE, THERE WAS SEARCH AT THE ASSESSEES PREMISES, THE NATURE OF TRANSACTION WOUL D NOT CHANGE. IN VIEW OF THE ABOVE, AFTER CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND VARI OUS JUDICIAL PRONOUNCEMENT REFERRED ABOVE, WE FIND NO JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE CI T(A) ON THIS POINT. THE SAME IS UPHELD AND THE REVENUES APPEALS ARE DISMISSED. 14. IN THE RESULT, ALL THE APPEALS OF THE REVENUE A RE DISMISSED. 9.1 THE AO NOTED SPECIFICALLY IN THE ASSESSMENT ORD ER THAT THE ASSESSEE DID NOT PRODUCE THE REQUIRED DETAILS AND N O EXPLANATION WAS FILED IN RESPONSE TO THE SHOW CAUSE NOTICE. THE LEARNED CIT(A) ALSO NOTED THAT THE ASSESSEE HAS NOT FURNISHED THE BALANCE SHEET TO SHOW WHETHER SHARES WERE HELD AS INVESTMENT OR OTHE RWISE AND NO FURTHER EVIDENCE IN SUPPORT OF THE SAME HAS BEEN FI LED. THE LEARNED COUNSEL FOR THE ASSESSEE HOWEVER, FROM THE REPLY FI LED BEFORE THE AO SHOWN THAT THE DETAILS OF TRANSACTIONS CARRIED OUT BY THE ASSESSEE WERE FILED BEFORE THE AO BUT NO SPECIFIC REPLY WAS FILED IN RESPONSE TO THE SHOW CAUSE NOTICE OF THE AO DATED 22-12-2006. T HE REPLY OF THE ASSESSEE (PB-12) DATED 22-12-2006 CANNOT BE FILED I N RESPONSE TO THE SHOW CAUSE ORDER SHEET ENTRY DATED 22-12-2006 A S IS NOTED BY THE AO IN THE ASSESSMENT ORDER. HOWEVER, SOME OF TH E DETAILS WERE FILED ON WHICH THE AO CONSIDERED THE MATTER IN ISSU E. THESE FACTS WOULD SHOW THAT SOME DETAILS WERE FILED BEFORE THE AO BY THE ASSESSEE BUT THE SAME WERE NOT TO THE SATISFACTION OF THE AO. HOWEVER, THE FREQUENCY AND OTHER CONSIDERATION AS N OTED BY THE AUTHORITIES BELOW WOULD NOT BE SUFFICIENT TO HOLD T HAT THE ASSESSEE ITA NO.2102/AHD/2008 SHRI AMITKUMAR HASMUKHBHAI SHAH VS ACIT, CIRCLE-2(1 ), BARODA 18 CARRIED OUT BUSINESS TRANSACTIONS IN THE SHARES. TH E LEARNED COUNSEL FOR THE ASSESSEE ALSO STATED THAT FOR DEALING IN SH ARES NO BALANCE SHEET HAS BEEN PREPARED BUT THE ASSESSEE SHALL HAVE TO PRODUCE SOME EVIDENCE ON RECORD TO SHOW THAT THE SHARES WER E HELD AS INVESTMENT ON WHICH OWN CAPITAL WAS USED AND ON WHI CH NO BORROWED FUNDS HAVE BEEN USED. IT WOULD, THEREFORE, REQUIRE THAT THE ASSESSEE SHOULD FILE SPECIFIC EXPLANATION BEFORE THE AO IN V IEW OF THE GUIDELINES PROVIDED IN THE DECISION IN THE CASE OF SHRI RABINDRA M. AGRAWAL (SUPRA). CONSIDERING THE FACTS OF THE CASE IN THE LIGHT OF THE ABOVE DECISIONS, WE ARE OF THE VIEW THAT THE MATTER REQUIRES RECONSIDERATION AT THE LEVEL OF THE AO BECAUSE GIVI NG ONE MORE OPPORTUNITY TO THE ASSESSEE TO FILE DETAILS TO THE SATISFACTION OF THE AO IS REQUIRED IN THE MATTER. WE ACCORDINGLY, SET ASID E THE ORDERS OF THE AUTHORITIES BELOW AND RESTORE THIS ISSUE TO THE FIL E OF THE AO WITH DIRECTION TO RE-DECIDE THE ISSUE IN THE LIGHT OF TH E GUIDELINES ISSUED IN THE CASE OF SHRI RAVINDRA M. AGRAWAL(SUPRA). THE AS SESSEE IS DIRECTED TO FURNISH COMPLETE DETAILS AND EXPLANATIO N BEFORE THE AO WITH ALL EVIDENCES. THE AO SHALL GIVE REASONABLE SU FFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. IN THE RESULT, GROUND NO.1 OF THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATIS TICAL PURPOSES. 10. ON GROUND NO.2 OF THE APPEAL, THE ASSESSEE CHAL LENGED THE ORDER OF THE LEARNED CIT(A) IN CONFIRMING THE DISAL LOWANCE OF DEPRECIATION OF TWO TANKERS. THE AO ON VERIFICATION OF THE VEHICLE WISE PROFIT & LOSS ACCOUNT FOUND THAT THE ASSESSEE HAS N OT SHOWN ANY INCOME AGAINST TRUCK NO. GJ-6 W-9300 AND GJ-6 W-970 0 AND DECLARED LOSS IN THE ACCOUNTS OF THESE TRUCKS BY CL AIMING DEPRECIATION ITA NO.2102/AHD/2008 SHRI AMITKUMAR HASMUKHBHAI SHAH VS ACIT, CIRCLE-2(1 ), BARODA 19 AND EXPENSES OF RS.3,69,833/-. THE AO STATED THAT T HESE TRUCKS WERE NOT PUT TO USE AND CLAIM OF EXPENSES INCLUDING DEPR ECIATION ARE NOT ALLOWABLE. IT WAS SUBMITTED BEFORE THE LEARNED CIT( A) THAT THERE IS NO REGULAR CONTRACT FOR TRANSPORTATION OF REQUIRED MAT ERIAL BUT EXPENSES WERE INCURRED AND IT WAS VERIFIED FROM THE RTO BOOK THAT TANKERS WERE PUT TO NON USE. THE LEARNED CIT(A) NOTED THAT SINCE THE TRUCKS WERE NOT USED FOR THE PURPOSE OF BUSINESS, THEREFOR E, CONDITION FOR CLAIMING DEPRECIATION IS NOT SATISFIED AND ACCORDIN GLY, THIS GROUND OF APPEAL OF THE ASSESSEE WAS DISMISSED. 11. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND S UBMITTED THAT THESE TRUCKS WERE MEANT FOR TRANSPORTING CAUSTIC SO DA AND DUE TO NO CONTRACT RECEIVED FOR TRANSPORTATION OF CAUSTIC SOD A, THESE TRUCKS WERE NOT PUT TO USE. THE LEARNED COUNSEL FOR THE ASSESSE E REFERRED TO PB- 16, THE DETAILS OF THE TRUCKS NOT USED. HOWEVER, HE HAS SUBMITTED THAT SINCE BOTH THE TRUCKS WERE PART OF THE BLOCK OF ASS ETS AND WERE READY TO USE, THEREFORE, DEPRECIATION SHOULD HAVE BEEN AL LOWED IN FAVOUR OF THE ASSESSEE. HE HAS RELIED UPON THE DECISION CIT V S SOUTHERN PETROCHEMICAL INDUSTRIES CORPORATION LTD. 301 ITR 2 55 IN WHICH IT WAS HELD THAT SAND-BY MACHINERY IS ENTITLED FOR DEPRECIATION BECAUSE SAME WAS KEPT READY FOR THE USER. HE HAS ALSO RELIED UPON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS VISWANATH BHASKAR SATHE 5 ITR 621 IN WHICH I T WAS HELD THAT DEPRECIATION IS ALLOWABLE AS THE WORD USED CONNO TES PASSIVE AS WELL AS ACTIVE USER FOR THE PURPOSE OF DEPRECIAT ION. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE MATTER MAY BE ITA NO.2102/AHD/2008 SHRI AMITKUMAR HASMUKHBHAI SHAH VS ACIT, CIRCLE-2(1 ), BARODA 20 REMANDED TO THE FILE OF THE AO FOR VERIFICATION OF THE CLAIM OF THE ASSESSEE. 12. ON THE OTHER HAND, THE LEARNED DR RELIED UPON T HE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE ASSESSEE D ID NOT FURNISHED ANY REPLY BEFORE THE AO WITH REGARD TO THE CLAIM MA DE NOW BEFORE THE TRIBUNAL, THEREFORE, THE MATTER MAY BE REMANDED TO THE FILE OF THE AO FOR VERIFICATION. 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND MA TERIAL AVAILABLE ON RECORD. IT IS SETTLED LAW THAT WHEN TH E ASSET IS KEPT READY FOR USE OF THE BUSINESS, IT WOULD BE ENTITLED FOR D EPRECIATION. SIMILARLY, AFTER BRINGING THE CONCEPT OF BLOCK OF ASSET IN THE IT ACT, MERELY BECAUSE ONE ASSET IS NOT USED, WOULD NOT DISENTITLE D THE ASSESSEE FROM CLAIMING DEPRECIATION IF THE SAME FORM PART OF THE BLOCK OF ASSET AND IS USED FOR THE PURPOSE OF BUSINESS. HOWEVER, T HE ASSESSEE DID NOT FURNISH ANY REPLY BEFORE THE AO AND NO REPLY OR DETAILS HAVE BEEN GIVEN TO SHOW HOW THE TRUCKS WERE KEPT READY FOR TH E PURPOSE OF USER OF THE BUSINESS OF THE ASSESSEE. IT WAS ALSO NOT CL ARIFIED WHETHER THE SAME TRUCKS FORMED PART OF BLOCK OF ASSET OF THE AS SESSEE. CONSIDERING THE DETAILS NOW FILED IN THE PAPER BOOK , WE ARE OF THE VIEW THAT THE MATTER REQUIRES RECONSIDERATION AT TH E LEVEL OF THE AO BECAUSE THE ASSESSEE NEVER CLAIMED BEFORE THE AUTHO RITIES BELOW THAT THESE TANKERS WERE MEANT ONLY FOR CARRYING CAU STIC SODA AND IN THE ABSENCE OF ANY SPECIFIC CUSTOMER FOR TRANSPORTA TION OF CAUSTIC SODA, SAME WERE NOT USED FOR THE PURPOSE OF BUSINES S. SINCE THE EXPLANATION OF THE ASSESSEE NOW MADE IS COMING FOR THE FIRST TIME, ITA NO.2102/AHD/2008 SHRI AMITKUMAR HASMUKHBHAI SHAH VS ACIT, CIRCLE-2(1 ), BARODA 21 THEREFORE, THE MATTER REQUIRES RECONSIDERATION ON A T THE LEVEL OF THE AO. WE ACCORDINGLY, SET ASIDE THE ORDERS OF THE AUT HORITIES BELOW AND RESTORE THIS ISSUE TO THE FILE OF THE AO FOR DIRECT ION TO RE-DECIDE THIS ISSUE IN THE LIGHT OF THE SUBMISSIONS OF THE ASSESS EE NOW MADE. THE ASSESSEE IS DIRECTED TO FILE COMPLETE DETAILS AND E XPLANATION BEFORE THE AO. THE AO SHALL RE-DECIDE THIS ISSUE BY GIVING REASONABLE SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. IN THE RESULT, GROUND NO.2 OF THE APPEAL OF THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSES. 14. ON GROUND NO.3, THE ASSESSEE CHALLENGED THE DIS ALLOWANCE OF RS.40,000/- ON ACCOUNT OF PERSONAL USER OUT OF PETR OL AND DEPRECIATION. THE AO NOTED THAT PERSONA L USER OF THE EXPENSES BY THE ASSESSEE CANNOT BE RULED OUT AND AC CORDINGLY RS.40,000/- WAS DISALLOWED. THE LEARNED CIT(A) CONS IDERING THE DISALLOWANCE TO BE ONE FIFTH OF THE TOTAL CLAIM OF THE EXPENDITURE DISMISSED THE APPEAL OF THE ASSESSEE. THE LEARNED C OUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ADDITION IS EXCESSIVE I N NATURE. ON THE OTHER HAND, THE LEARNED DR RELIED UPON THE ORDERS O F THE AUTHORITIES BELOW. 15. ON CONSIDERATION OF THE ABOVE FACTS, WE ARE OF THE VIEW THAT THE ADDITION IS RIGHTLY MADE ON THE MATTER IN ISSUE BEC AUSE PERSONAL USER OF THE EXPENSES BY THE ASSESSEE CANNOT BE RULED OUT . HOWEVER, THE ADDITION IS IN EXCESSIVE IN NATURE AND THE SAME IS MODIFIED TO RS.25,000/- IN ALL AS AGAINST DISALLOWANCE OF RS.4 0,000/-. IN THE RESULT, GROUND NO.3 OF THE APPEAL OF THE ASSESSEE I S PARTLY ALLOWED. ITA NO.2102/AHD/2008 SHRI AMITKUMAR HASMUKHBHAI SHAH VS ACIT, CIRCLE-2(1 ), BARODA 22 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 08-04-2011 SD/- SD/- (G. D. AGARWAL) VICE PRESIDENT (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 08-04-2011 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DY. REGISTRAR, ITAT, AHMEDABAD