RIKEEN P DALAL, MUMBAI V. DCIT 12(3), MUMBAI

ITA 2329/MUM/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71676 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-11-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 22-10-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 09-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Business income; Salary income; Rule of consistency; Transactions in derivatives
• Section: 143(3); 43(5)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI . . , . ! , ' # BEFORE SHRI I.P. BANSAL, JM AND RAJENDRA, AM ./ I.T.A. NO. 2329/MUM/2012 ( $ $ $ $ % % % % / ASSESSMENT YEAR : 2008-09 SHRI RIKEEN P. DALAL, 5D, KAKAD HOUSE, 5 TH FLOOR, A-WING, SIR VITHALDAS THAKAERSEY MARG, NEW MARINE LINES, MUMBAI 400020 $ $ $ $ / VS. THE DCIT 12(3) MUMBAI. & ' ./ ' ./ PAN/GIR NO. : AAEPD 4181F ( &( / APPELLANT ) .. ( )*&( / RESPONDENT ) &( + / APPELLANT BY: SHRI VIJAY MEHTA )*&( , + / RESPONDENT BY : AARSI PRASAD $ , -' / DATE OF HEARING : 22/10/2013 ./% , -' / DATE OF PRONOUNCEMENT : 08/11/2013 0 / O R D E R PER I.P.BANSAL,J.M: THIS APPEAL IS FILED BY THE ASSESSEE. IT IS DIRECT ED AGAINST THE ORDER PASSED BY CIT(A) DATED 15.02.2012 FOR ASSESSMENT YEAR 2008 -09. THE GROUND OF APPEAL READS AS UNDER :- ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE HONBLE CIT(A) ERRED IN CONFIRMING THE SHORT TERM CAPITAL G AIN OF RS.5,85,40,417/- ASSESSED BY THE LD. ASSESSING OFFI CER AS INCOME FROM NON-SPECULATIVE BUSINESS. THE APPELLANT PRAYS THAT SHORT TERM CAPITAL GAIN SHOULD NOT BE TREATED AS BUSINESS INCO ME. 2. THE ASSESSEE IS AN INDIVIDUAL AND IS ENGAGED IN THE ACTIVITY OF SALE AND PURCHASE OF SHARES AND IS ALSO EARNING INCOME FROM SALARY ALONGWITH INTEREST ETC. ./ I.T.A. NO. 2329/MUM/2012 ( $ $ $ $ % % % % / ASSESSMENT YEAR : 2008-09 2 HE ALSO EARNED INCOME FROM TRADING IN SHARES AS FU TURE AND OPTIONS (F&O) WHICH WAS RETURNED AS BUSINESS INCOME. HOWEVER, THE AO ASSESSED THE SAME AS INCOME FROM SPECULATIVE BUSINESS AND CIT(A) HAS HEL D THAT SUCH INCOME/LOSS WAS TO BE ASSESSED AS BUSINESS LOSS IN VIEW OF SECT ION 43(5) OF THE ACT. THE ASSESSEE HAS EARNED AN AMOUNT OF RS.5,85,40,417/- FROM SALE AND PURCHASE OF SHARES WHICH IS SHOWN AS SHORT TERM CAPITAL GAIN. THE AO REQUIRED THE ASSESSEE TO EXPLAIN AS TO WHY SUCH SHORT TERM CAPIT AL GAIN SHOULD NOT BE TREATED AS INCOME FROM BUSINESS. IN RESPONSE TO SUCH QUERY THE ASSESSEE CONTENDED THAT THE SHARES WERE SHOWN AS INVESTMENT IN THE BOOKS OF ACCOUNT AND SUCH INCOME WAS BEING OFFERED AS SHORT TERM CAPITAL GAIN IN THE EARLIER YEARS ALSO. EVIDENCE WAS SUBMITTED TO PROVE THAT DELIVERY OF SHARES WERE GIVEN AND TAKEN. IT WAS SUBMITTED THAT THE ASSESSEE DID NOT HAVE INFRASTRUC TURE EMPLOYED FOR THE PURPOSE OF INVESTMENT. THUS, IT WAS PLEADED THAT INCOME WAS RIGHTLY OFFERED AS CAPITAL GAIN. THE AO DID NOT ACCEPT SUCH SUBMISSION OF THE ASSESSEE ON THE GROUND THAT FROM CERTAIN TRANSACTION OF SHARES, INCOME HAD BEEN SHOWN AS INCOME FROM BUSINESS AND FROM REST OF THE TRANSACTIONS SUCH I NCOME IS SHOWN AS SHORT TERM CAPITAL GAIN AND THIS DIFFERENTIATION IS ONLY AS PE R CONVENIENCE OF THE ASSESSEE. 2.1 SO FAR AS IT RELATES TO CONTENTION OF THE ASSE SSEE THAT THESE SHARES HAVE BEEN SHOWN AS INVESTMENT IN THE BOOKS OF ACCOUNT, LD. AO HAS OBSERVED THAT ACCORDING TO ESTABLISHED PRINCIPLES OF LAW THE TR EATMENT GIVEN IN THE BOOKS OF ACCOUNT IS NOT DETERMINATIVE OF THE NATURE OF TRANS ACTIONS. 2.2 SO FAR AS IT RELATES TO THE CONTENTION OF THE A SSESSEE THAT IN EARLIER YEARS SIMILAR TRANSACTIONS HAVE BEEN ACCEPTED UNDER THE H EAD CAPITAL GAIN, LD. AO HAS OBSERVED THAT THE PRINCIPLE OF RES JUDICATA DOES NOT APPLY TO THE INCOME TAX PROCEEDINGS. HE ALSO REJECTED THE CONTENT OF THE AS SESSEE THAT ON THE BASIS OF CIR. NO.4/07 DATED 15.06.2007 THE CASE OF THE ASSESSEE SHOULD BE ACCEPTED. FURTHER, HE TREATED THE SAID AMOUNT AS BUSINESS INCOME ON TH E GROUND THAT THE ASSESSEE HIMSELF IS ENGAGED IN THE BUSINESS OF F&O WHICH IS ASSESSABLE UNDER THE HEAD BUSINESS, THEREFORE, THE INTENTION OF THE ASSESSE E IS TO SET OFF LOSS OF F&O AGAINST OTHER HEADS WHICH COULD HAVE BECOME INELIGI BLE IF THE LOSS IS SHOWN UNDER THE HEAD CAPITAL GAIN. ACCORDING TO AO, TH E ASSESSEE HAS CHOSEN THE ./ I.T.A. NO. 2329/MUM/2012 ( $ $ $ $ % % % % / ASSESSMENT YEAR : 2008-09 3 HEAD OF INCOME AS PER HIS CONVENIENCE. THE TRANSACT IONS ENTERED INTO SHARES REGARDING NON DELIVERY WHICH RESULTED INTO INCOME F ROM BUSINESS ITSELF IS INDICATIVE THAT THE ASSESSEE IS ENGAGED IN THE SALE AND PURCHASE OF SHARES AS BUSINESS ACTIVITY. THE AO ALSO OBSERVED THAT THE AS SESSEE HAS SQUARED UP SEVERAL TRANSACTIONS WITHIN A SHORT PERIOD OF ONE DAY TO 20 0 DAYS WHICH SHOWS THAT THESE TRANSACTIONS HAVE BEEN DONE TO EARN BUSINESS PROFIT AND QUICK GAIN. THE AO ALSO OBSERVED THAT THE ASSESSEE HAS ALSO BORROWED MONEY WITH OR WITHOUT INTEREST FROM DIFFERENT PARTIES, THEREFORE, THE ACTIVITY OF THE ASSESSEE WAS IN THE NATURE OF BUSINESS. HE OBSERVED THAT THERE ARE HUGE NUMBER O F TRANSACTIONS IN THIS MANNER. ON THESE FACTS LD. AO HAS ARRIVED AT A CO NCLUSION THAT THE ACTIVITY OF SALE AND PURCHASE OF SHARES ON WHICH INCOME HAS BEE N SHOWN AS SHORT TERM CAPITAL GAIN AND LONG TERM CAPITAL GAIN IS AN ACTIV ITY GIVING RISE TO BUSINESS INCOME. IN THIS MANNER THE AO HAS ASSESSED THE SA ID GAIN AS BUSINESS INCOME. 3. AGGRIEVED, ASSESSEE FILED AN APPEAL BEFORE LD. C IT(A) AND THIS ISSUE HAS BEEN DEALT BY LD.CIT(A) IN PARA 3 TO 3.5.13 I.E. F ROM PAGE NO.3 TO 24 OF HIS ORDER. IT WAS SUBMITTED THAT ASSESSEE IS AN INVESTOR. ALL THESE INVESTMENTS ARE DELIVERY BASED INVESTMENTS. ALL THE TRANSACTIONS ARE ROUTE D THROUGH DEMAT ACCOUNT. HOLDING PERIOD VARIES FROM ONE DAY TO 796 DAYS. SH ARES ARE SHOWN AS INVESTMENT IN THE BOOKS OF ACCOUNT. AS AT THE END OF THE YEA R THE INVESTMENT IN SHARES IS RS.4.93 CRORES WHICH IS SHOWN AS INVESTMENT. DIV IDEND RECEIVED DURING THE YEAR WAS RS.3.92 LACS. SHORT TERM CAPITAL GAIN EAR NED BY THE ASSESSEE FROM SALE OF SHARES IS AN AMOUNT OF RS.6,05,88,315/- AND AFTE R CLAIMING EXPENDITURE THE NET SHORT TERM CAPITAL GAIN IS SHOWN AT RS.5,85,40, 417/-. IT WAS SUBMITTED THAT AO COULD NOT RELY ON THE F&O TRANSACTIONS TO HOLD THAT ASSESSEE IS ENGAGED IN THE ACTIVITY OF BUSINESS REGARDING SHARES FOR WHIC H DELIVERY WAS TAKEN AND GIVEN. ACCORDING TO WELL ESTABLISHED LAW THE DISCRETION I S VESTED IN THE ASSESSEE TO DECIDE WHETHER HOLDING OF SHARES IS BY WAY OF INVES TMENT OR FORMS PART OF STOCK IN TRADE. IN THIS REGARD REFERENCE WAS MADE TO CIR CULAR NO.4/2007 DATED 15/6/2007. IN THE SAID CIRCULAR REFERENCE IS MADE TO THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. ASSOCIATED IN DUSTRIAL DEVELOPMENT ASSESSEE (P) LTD. (82 ITR 586), WHEREIN HONBLE APE X COURT HAS OBSERVED THAT PARTICULAR HOLDING OF SHARE, WHETHER IT IS BY WAY O F INVESTMENT OR FORMS PART OF ./ I.T.A. NO. 2329/MUM/2012 ( $ $ $ $ % % % % / ASSESSMENT YEAR : 2008-09 4 STOCK IN TRADE IS A MATTER WHICH IS WITHIN THE KNOW LEDGE OF THE ASSESSEE, WHO HOLD THE SHARES AND IT SHOULD IN NORMAL CIRCUMSTANC ES, BE IN A POSITION TO PRODUCE EVIDENCE FROM ITS RECORD AS TO WHETHER IT H AS MAINTAINED ANY DISTINCTION BETWEEN THOSE SHARES WHICH ARE STOCK IN TRADE AND T HOSE WHICH ARE HELD BY WAY OF INVESTMENT. THEREFORE, IT WAS PLEADED THAT MAIN TENANCE OF RECORD BY THE ASSESSEE IS AN IMPORTANT FACTOR. 3.1 SO FAR AS IT RELATES TO THE CONTENTION OF TH E AO THAT PRINCIPLE OF RES- JUDICATA IS NOT APPLICABLE IT WAS SUBMITTED THAT IN VESTMENT IN SHARES WAS CONSISTENTLY SHOWN BY THE ASSESSEE AS GIVING RISE T O INCOME FROM CAPITAL GAIN. FOR ASSESSMENT YEAR 2007-08 BY WAY OF AN ORDER PASS ED UNDER SECTION 143(3), THE AO HAS ACCEPTED SUCH INCOME AS GIVING RISE TO C APITAL GAIN. REFERENCE WAS MADE TO THE DECISION OF ITAT IN THE CASE OF GOPAL PUROHIT VS. JCIT, 29 SOT 117, WHICH WAS AFFIRMED BY HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. GOPAL PUROHIT, 336 ITR 287(BOM). SIMILARLY, IT WAS PLEAD ED THAT CONSISTENCY HAS TO BE MAINTAINED. FOLLOWING TABLE WAS GIVEN AS ANALYSIS SHOWING THE GAIN/LOSS WITH REFERENCE TO PERIOD OF HOLDING OF THE SHARES: S.NO. NO OF DAYS HOLDING GAIN/(LOSS) RS. 1. FROM 0 TO 10 DAYS (1,43,88,534) 2. FROM 10 TO 50 DAYS 2,54,33,660 3. FROM 51 TO 100 DAYS 1,26,50,007 4. FROM 101 TO 300 DAYS 3,68,93,183 TOTAL 6,05,88,315 FROM THE ABOVE CHART IT WAS SUBMITTED THAT LOSS HA S BEEN INCURRED BY THE ASSESSEE ON THE HOLDING WHICH ARE LESS THAN 10 DAYS AND GAIN WAS IN RESPECT OF HOLDING WHERE PERIOD OF HOLDING WAS MORE THAN 100 DAYS. 3.2 SO FAR AS IT RELATES TO ALLEGATION OF THE AO RE GARDING USER OF BORROWED FUNDS REFERENCE WAS MADE TO THE FOLLOWING TABLE SHOWING T HE SUMMARIZED BALANCE SHEET: ./ I.T.A. NO. 2329/MUM/2012 ( $ $ $ $ % % % % / ASSESSMENT YEAR : 2008-09 5 (RUPEES IN CRORES) LIABILITIES AMOUNT ASSETS AMOUNT CAPITAL A/C. OF RIKEEN DALAL 8.33 FIXED ASSETS 0.21 SECURED LOAN-CAR 0.16 INVESTMENT IN SHARES 4.9 4 UNSECURED LOANS 3.26 OTHER INVESTMENTS 0.20 CURRENT LIABILITIES 0.61 LOANS AND ADVANCES 5 .15 DEPOSITS 0.01 CASH & BANK 1.80 RECEIVABLES 0.04 TOTAL 12.36 TOTAL 12.36 3.3 REFERRING TO THE ABOVE CHART IT WAS SUBMITTED THAT INVESTMENT IN SHARES IS OF RS. 4.95 CRORES AND ASSESSEE HAS GIVEN LOAN AND ADVANCES OF RS.5.15 CRORES AND CASH AND BANK BALANCE OF RS.1.80 CORES. IT WAS SUBMITTED THAT SINCE THE AMOUNT OF LOANS AND ADVANCES GIVEN AND BALANCE IN B ANK IS MUCH MORE THAN THE AMOUNT BORROWED, THE AO WAS INCORRECT IN OBSERVING THAT THE ASSESSEE HAS USED BORROWED FUNDS FOR THE PURPOSE OF INVESTMENT IN SH ARES. IT WAS FURTHER SUBMITTED THAT NO NEXUS HAS BEEN ESTABLISHED BY T HE AO TO PROVE THAT AMOUNT BORROWED BY THE ASSESSEE WAS USED IN THE INVESTMEN T OF SHARES. 3.4 IT WAS FURTHER SUBMITTED THAT SOLE FACTOR OF HU GE NUMBER OF TRANSACTIONS WITHIN A SHORT PERIOD OF TIME AND FREQUENCY, THOUGH CAN BE RELEVANT FACTORS BUT THE NATURE OF TRANSACTIONS HAS TO BE DETERMINED AC CORDING TO THE FACTS OF THE CASE AND ACCORDING TO THE FACTS OF THE CASE ASSESS EE IS AN INVESTOR AND NOT TRADER. REFERENCE WAS MADE TO VARIOUS DECISIONS TO CONTEND THAT AO WAS WRONG IN TREATING THE GAIN OF THE ASSESSEE FROM SALE AND PURCHASE OF SHARES AS BUSINESS INCOME AGAINST THE CLAIM OF THE ASSESSEE THAT SUCH INCOME WAS ASSESSABLE UNDER THE HEAD CAPITAL GAIN. LD. CIT(A) AFTER CONSIDER ING ALL THESE SUBMISSIONS OF THE ASSESSEE HAS FINALLY COME TO THE CONCLUSION THAT AS SESSEES ONLY SOURCE OF INCOME EFFECTIVELY IS FROM DEALING IN SHARES, BOTH IN F& O SEGMENT OR OTHERWISE. THE ASSESSEE HAS CARRIED OUT BUSINESS IN THE F&O SEGMEN T ON A VERY LARGE SCALE AND DEALING IN SHARES OUTSIDE THE F&O SEGMENT CANNOT SA ID TO BE INSIGNIFICANT CONSIDERING FREQUENCY OF PURCHASE AND SALES AND VOL UME. IN MAJORITY SHARES ARE SOLD WITHIN JUST A FEW DAYS RANGING FROM ONE DAY TO THIRTY DAYS TO THEIR PURCHASES, MOSTLY AT A LOSS. IN FEW CASES, SHARES HAVE BEEN SOLD ON THE SAME DAY OF PURCHASE. THEREFORE, ASSESSEE CANNOT BE S AID TO HAVE ACTED AS AN ./ I.T.A. NO. 2329/MUM/2012 ( $ $ $ $ % % % % / ASSESSMENT YEAR : 2008-09 6 INVESTOR. LD. CIT(A) HAS OBSERVED THAT ACCORDING TO FINDINGS GIVEN BY AO ASSESSEE HAS BORROWED LOANS WHICH ARE UTILIZED TO M AKE PURCHASES OF THE SHARES AND SUCH FINDINGS OF THE AO HAS NOT BEEN DISPROVED BY THE ASSESSEE BY WAY OF ANY EVIDENCE. ALL THE SHARES ON WHICH CAPITAL GAIN IS CLAIMED WERE BOUGHT DURING THE PRESENT YEAR AND NOT IN THE EARLIER YEAR. TH EREFORE, THESE ARE NOT DISCLOSED AS INVESTMENT AS ON 31/3/2007. THE ASSESSEE DEVOTE D HIS ENTIRE TIME IN SALE AND PURCHASE OF SHARES, THEREFORE, THIS ACTIVITY C ANNOT BE SAID TO BE OCCASIONALLY INDEPENDENT ACTIVITY BUT THE ASSESSEE WAS ENGAGED I N REAL, SUBSTANTIAL AND SYSTEMATIC BUSINESS ACTIVITY. THE SHARES WERE PURC HASED WITH AN INTENTION TO RESALE THEM ON PROFIT. THEREFORE, LD. CIT(A) HAS ARRIVED AT A CONCLUSION THAT AO WAS RIGHT IN ASSESSING THE GAIN UNDER THE HEAD PR OFITS AND GAINS OF BUSINESS OR PROFESSION. IT IS IN THIS MANNER LD. CIT(A) HAS DECIDED THE ISSUE AGAINST THE ASSESSEE. 4. AFTER NARRATING THE FACTS IT WAS SUBMITTED BY LD . AR THAT LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE AO. THE MAIN PLANK OF ARGUMENTS OF LD. AR IS THAT IN VIEW OF DECISION OF HONBLE BOMBAY HIG H COURT IN THE CASE OF CIT VS. GOPAL PUROHIT (SUPRA) THE TRANSACTIONS ENTERED INTO BY THE ASSESSEE SHOULD HAVE BEEN HELD BY LD. CIT(A) TO BE ASSESSABLE UNDER THE HEAD CAPITAL GAIN. HE SUBMITTED THAT THE ASSESSEE HAS BEEN ASSESSED BY WA Y OF ORDERS PASSED UNDER SECTION 143(3) IN RESPECT OF ASSESSMENT YEAR 2007-0 8 TO ASSESSMENT YEARS 2010- 11. HE SUBMITTED THAT EXCEPT FOR THE YEAR UNDER C ONSIDERATION, IN ALL OTHER YEARS THE DEPARTMENT HAS ASSESSED THE ASSESSEE IN R ESPECT OF THESE TRANSACTIONS UNDER THE HEAD CAPITAL GAIN BY WAY OF ORDERS PASSED UNDER SECTION 143(3) OF THE ACT. HE SUBMITTED THAT THE FACTS OF THE PRESENT CA SE ARE NOT IN ANY MANNER DIFFERENT FROM THE FACTS OF THE OTHER YEARS FOR WH ICH THE ASSESSMENT HAVE BEEN MADE UNDER SECTION 143(3). HE SUBMITTED BEFORE US A CHART TO SHOW THAT THE FACTS REGARDING THE YEAR UNDER CONSIDERATION ARE NO T DIFFERENT FROM THE FACTS OF THE OTHER YEARS, COPY OF THE SAID CHART WAS ALSO GIVEN TO LD. DR. THE SAID CHART READ AS UNDER: ./ I.T.A. NO. 2329/MUM/2012 ( $ $ $ $ % % % % / ASSESSMENT YEAR : 2008-09 7 STATEMENT SHOWING DETAILS REGARDING CAPITAL GAINS TRANSACTIONS OF SCRUTINY ASSESSMENT YEARS: S. NO. A.Y NO OF SCRIPS NO OF TRANSACTIONS INVESTMENT (RS. IN LAKHS) CAPITAL (RS. IN LAKHS) AVERAGE PERIOD OF HOLDING(NO OF DAYS) INTEREST EXPENDITURE (RS. IN LAKHS) 1. 2007-08 58 93 332.00 335.00 53 2 .12 2. 2008-09 102 222 493.00 833.00 99 3. 35 3. 2009-10 14 21 297.40 685.68 91 10 .35 4. 2010-11 36 84 1296.92 627.48 118 11 .98 4.1 HE SUBMITTED THAT THOUGH NUMBER OF TRANSACTIONS IN THE YEAR UNDER CONSIDERATION MAY BE HIGHER BUT SOLELY THAT CANNOT BE CONSIDERED TO BE MATERIAL FACTOR TO HOLD OTHERWISE AS THE NATURE OF TRANSACT IONS REMAINS THE SAME IN ALL THESE YEARS. . HE SUBMITTED THAT IF THE FACTS ARE SAME THEN HIGHER VOLUME OF INVESTMENT AND SALE CANNOT ALTER THE NATURE OF TH E TRANSACTION DURING THE YEAR UNDER CONSIDERATION, MORE PARTICULARLY WHEN SIMILAR TRANSACTIONS HAVE BEEN ACCEPTED BY THE REVENUE IN OTHER YEARS AS GIVING RI SE TO THE INCOME ASSESSABLE UNDER THE HEAD CAPITAL GAIN. REFERENCE IN THIS REGARD WAS MADE TO THE DECISION OF THE TRIBUNAL IN THE CASE OF MRS. SEJAL DALAL VS. ACIT, ORDER DATED 20/2/2013 IN ITA NO.569/MUM/2012, COPY OF WHICH WAS GIVEN TO LD . DR ALSO AND REFERENCE WAS INVITED TO THE FOLLOWING OBSERVATIONS OF THE T RIBUNAL: 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS IN THE LIGHT OF MATERIAL PLACED BEFORE US. IT HAS BEEN DEMONSTRATED BY LD. AR THAT ASSESSEE HAS MAINLY DEALT IN ONLY 10 SCRIPS AS IN OTHER 20 SCRIPS THE I NVESTMENT BY THE ASSESSEE IS LESS THAN RS.25,000/-. THE MAIN INVESTMENT OF THE ASSE SSEE WAS IN THE SHARES OF POWER GRID CORPORATION WHICH WAS PURCHASED BY THE A SSESSEE ON 13/9/2007 AND IN THE MONTH OF NOVEMBER THEY WERE SOLD ON WHICH TH E ASSESSEE HAS EARNED PROFIT OF RS.1.18 CRORES. THE PERIOD OF HOLDING SUCH SCR IP IS 69,71 AND 74 DAYS(AVERAGE 71 DAYS). REALIZED AMOUNT OF SUCH SHARE WAS REINVE STED IN CORRAMANDAL FERTILIZERS SHARES. IT CAN BE SEEN THAT ASSESSEE H AS NOT DEALT IN THE SHARES OF POWER GRID CORPORATION ON DAY TO DAY BASIS OR ON TRADE B ASIS. THESE SHARES WERE HELD BY THE ASSESSEE FOR A PERIOD OF MORE THAN TWO MONT HS AND SUCH REALISED AMOUNT IS MAINLY INVESTED IN CORRAMANDAL FERTILIZERS SHARES. THE ASSESSEE IS NOT ROTATING THE FUNDS INTO THE SAME SCRIP TIME AND AGAIN. THE MAI N CASE OF LD. AR IS THAT FOR THE YEAR UNDER CONSIDERATION THE DEPARTMENT HAS CHANGED ITS STAND WITHOUT HAVING BROUGHT ON RECORD ANY MATERIAL CHANGE THE IN THE F ACTS OF THE CASE AS COMPARED TO EARLIER YEARS WHEN SIMILAR TRANSACTIONS WERE HELD T O BE ASSESSABLE UNDER THE HEAD CAPITAL GAIN. FOR SUCH CONTENTION RELIANCE HAS B EEN PLACED ON THE ASSESSMENT ORDERS FOR A.Y 2005-06 AND 2006-07. FOR A.Y 2005-0 6 SHORT TERM CAPITAL GAIN WAS EARNED BY THE ASSESSEE AT A SUM OF RS.11,55,603/-. THE ASSESSEE HAD DEALT WITH IN 12 SCRIPS AND PERIOD OF HOLDING RANGED BETWEEN 2 TO 329 DAYS. THOUGH THE AMOUNT INVESTED BY THE ASSESSEE IN THAT YEAR WAS N OT OF THE MAGNITUDE FOR WHICH THE INVESTMENT HAS BEEN MADE DURING THE YEAR UNDER CONSIDERATION BUT THAT FACTOR ./ I.T.A. NO. 2329/MUM/2012 ( $ $ $ $ % % % % / ASSESSMENT YEAR : 2008-09 8 ALONE CANNOT CHANGE THE CHARACTER OF TRANSACTION ENTERED INTO BY THE ASSESSEE DURING THE YEAR AS COMPARED TO EARLIER YEAR. SIMILARLY FOR A.Y 2006-07 THE ASSESSEE HAS DEALT IN 26 SCRIPS AND LONG TERM CAPI TAL GAIN IS EARNED AT RS.20,67,861/- AND SHORT TERM CAPITAL GAIN AT RS.7, 07,473/-. THERE ALSO THE PERIOD OF HOLDING RANGED BETWEEN 1 TO 147 DAYS. IN BOTH THE YEARS THE DEPARTMENT HAS ACCEPTED THE CLAIM OF THE ASSESSEE THAT ACTIVITY O F SALE AND PURCHASE ENTERED INTO BY THE ASSESSEE IS AN ACTIVITY GIVING RISE TO CAPIT AL GAIN. FOR SUBSEQUENT YEARS ALSO I.E. A.Y 2007-08 THE ASSESSEE HAS DECLARED SHORT T ERM CAPITAL GAIN OF RS.8,48,176/- DEALING IN 19 SCRIPS WHERE HOLDING PE RIOD IS BETWEEN 3 TO 363 DAYS. THE ASSESSEE HAD PURCHASED SHARES FOR AN AGGREGATE SUM OF RS.1,05,02,162/- AND SOLD THE SAME FOR RS.1,13,40,081/-. THUS ASSESSEE IS CONSISTENT IN INVESTING IN THE SHARES AND SUCH ACTIVITY OF THE ASSESSEE REMAINS TH E SAME FOR THE YEAR UNDER CONSIDERATION. THERE IS NO MATERIAL DIFFERENCE IN THE FACTS OF THE CASE EXCEPT THAT FOR THE YEAR UNDER CONSIDERATION THE VOLUME OF INVESTME NT AND SALE IS HIGH. IF IT IS SO, THE ARGUMENTS OF LD. AR REGARDING CONSISTENCY HAS T O BE ACCEPTED. AS PER DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. GOPAL PUROHIT, 336 ITR 287, WHEREIN IT HAS BEEN HELD THAT WHERE ASSESSEE HAS F OLLOWED CONSISTENT PRACTICE IN REGARD TO THE NATURE OF THE ACTIVITIES, THE MANNER OF KEEPING RECORDS AND PRESENTATION OF SHARES AS INVESTMENT AT THE END OF THE YEAR IN ALL THE YEARS, A DIFFERENT VIEW SHOULD NOT BE TAKEN FOR THE YEAR UND ER CONSIDERATION AS THERE OUGHT TO BE UNIFORMITY AND CONSISTENCY WHEN THE FACTS A ND CIRCUMSTANCES ARE IDENTICAL, PARTICULARLY IN THE CASE OF THE ASSESSEE AND TRIBUN AL WAS HELD TO BE RIGHT IN ALLOWING THE CLAIM OF THE ASSESSEE ON THE BASIS OF CONSISTENCY. IT WAS FOUND THAT REVENUE DID NOT SUBMIT ANY JUSTIFICATION FOR ADOPTI NG DIVERGENT APPROACH FOR THE ASSESSMENT YEAR IN QUESTION. THEREFORE, WE HOLD TH E ASSESSEES ACTIVITY IN SALE AND PURCHASE OF SHARES CANNOT NOT BE HELD TO BE AN ACT IVITY GIVING RISE TO THE INCOME ASSESSABLE UNDER THE HEAD INCOME FROM BUSINESS OR P ROFESSION. THE SOLE INSTANCE OF IPO FUNDING AVAILED BY THE ASSESSEE WITH A VIEW TO GET MORE ALLOTMENT CANNOT ALSO BE SAID TO HAVE CONVERTED THE ACTIVITY OF THE ASSESSEE OF SALE AND PURCHASE OF SHARES FROM INVESTMENT TO THE ACTIVITY OF BUSIN ESS. (EMPHASIS PROVIDED) 4.2 TO SUBSTANTIATE THE CONTENTION THAT IN EARLIER YEAR AND SUBSEQUENT YEARS DEPARTMENT HAS ACCEPTED THESE TRANSACTION GIVING R ISE TO CAPITAL GAIN REFERENCE WAS MADE TO THE FOLLOWING DOCUMENTS PLACED IN THE P APER BOOK: S.NO. PARTICULARS PAGES 1. COPY OF COMPUTATION OF INCOME FOR THE YEAR ENDIN G 31 ST MARCH 2006(A.Y.2006-07) 1-5 2. COPY OF ACKNOWLEDGEMENT OF RETURN FOR A.Y 2006-0 7 6-7 3. COPY OF COMPUTATION OF INCOME FOR THE YEAR ENDIN G 31/3/2007 (A.Y. 2007-08) 8-11 4. COPY OF ASSESSMENT ORDER FOR A.Y.2007-2008 DAT ED 16/122009 PASSED U/S. 143(3) OF THE ACT. 12-14 5. COPY OF COMPUTATION OF INCOME FOR THE YEAR ENDIN G 31/3/2008 (A.Y.2008-09) 15-19 6. COMPUTATION OF INCOME FOR THE YEAR ENDING 31/3/2 009 (A.Y. 2009-10) 20-22 7. COPY OF ASSESSMENT ORDER FOR THE A.Y. 2009-10 D ATED 15/12/2011 PASSED UNDER SECTION 143(3) OF THE ACT. 23-24 8. COPY OF COMPUTATION OF INCOME FOR THE YEAR ENDI NG 31/3/2010 (A.Y 2010-11) 25-27 9. COPY OF ASSESSMENT ORDER FOR THE A.Y 2010-2011 DATED 28/3/2013 PASSED U/S.143(3) OF THE ACT. 28-30 ./ I.T.A. NO. 2329/MUM/2012 ( $ $ $ $ % % % % / ASSESSMENT YEAR : 2008-09 9 4.3 FROM THE AFOREMENTIONED DOCUMENTS IT WAS SHOWN BY HIM THAT THE ACTIVITY OF THE ASSESSEE FOR ALL THESE YEARS REMAIN THE SAME . THE WAY OF SHOWING THE INCOME IS ALSO THE SAME AND IN THE ASSESSMENT ORDER THE AO HAS ACCEPTED THE CLAIM OF THE ASSESSEE THAT SUCH TRANSACTIONS HAVE GIVEN RISE TO INCOME WHICH IS ASSESSABLE UNDER THE HEAD CAPITAL GAIN. HE SUBM ITTED THAT FOR THE YEAR UNDER CONSIDERATION THE DEPARTMENT HAS DEVIATED FROM ITS STAND WITHOUT BRINGING ANY DIFFERENCE OF FACTS IN THE YEAR UNDER CONSIDERATION WHEN THEY ARE COMPARED WITH OTHER YEARS WHICH ARE DECIDED BY WAY OF SCRUTINY A SSESSMENT. HE SUBMITTED THAT IN ACCORDANCE WITH THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF DCIT VS. GOPAL PUROHIT (SUPRA) THE CLAIM WA S TO BE ACCEPTED ON THE GROUND OF UNIFORMITY AND CONSISTENCY. HE SUBMITTED THAT THE FACTS OF THE PRESENT CASE ARE SIMILAR TO THE FACTS OF MRS. SEJAL DALAL VS. ACIT(SUPRA) AND UNDER SIMILAR CIRCUMSTANCES IT WAS HELD THAT TO MAINTAIN CONSISTENCY, THE GAIN FROM THE TRANSACTIONS SHOULD BE ACCEPTED AS GIVING RISE TO CAPITAL GAIN. 4.4 LD. AR ALSO RELIED UPON THE FOLLOWING DECISIONS : (I) DECISION IN THE CASE OF ACIT VS. UPENDRA K. DOS HI ORDER DATED 14/8/2013 IN ITA NO.1499/MUM/2009 AND OTHERS, WHEREIN FINDING TH AT THE AO HAD ACCEPTED THESE TRANSACTIONS GIVING RISE TO LONG TERM CAPIT AL GAIN IN EARLIER YEARS, IT WAS HELD THAT ON THE BASIS OF CONSISTENCY THE CLAIM OF THE ASSESSEE SHOULD HAVE BEEN ACCEPTED. A COPY OF THIS ORDER WAS PLACED ON OUR R ECORD AND WAS ALSO GIVEN TO LD. DR. REFERENCE WAS INVITED TO THE FOLLOWING OBS ERVATIONS: AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERUSI NG THE RELEVANT MATERIAL ON RECORD, WE FIND IT AS UNDISPUTED FACT THAT THE ASSE SSEE CONSIDERED THESE SHARES AS INVESTMENT AND ACCORDINGLY DECLARED CAPITAL GAIN FROM THEIR TRANSFER AS LONG TERM/SHORT TERM CAPITAL GAIN DEPENDING UPON THE PER IOD OF HOLDING. THE TREATMENT OF LONG TERM CAPITAL GAIN HAS BEEN ACCEPTED BY THE ASS ESSING OFFICER. THE ONLY DISPUTE IS ABOUT THE TREATMENT OF PROFIT FROM SALE OF SHARE S ETC., OTHER THAN LONG TERM CAPITAL ASSETS, WHICH THE ASSESSING OFFICER TREATED IT AS BUSINESS INCOME. THE ASSESSEE GAVE SIMILAR TREATMENT TO THE SHARES BY KEEPING IT AS INVESTMENT ON THE LINES AS WAS DONE IN THE EARLIER YEARS. FOR THE IMMEDIATELY PRECEDING ASSESSMENT YEAR I.E. 2004-05, THE ASSESSEE SHOWED LONG TERM CAPITAL GAIN AND SHORT TERM CAPITAL GAIN FROM THE TRANSFER OF SHARES. THE AO ACCEPTED PROFIT FROM TRANSFER OF SHARES AS SHORT TERM/LONG TERM CAPITAL GAIN RESPECTIVELY IN THE ASS ESSMENT MADE U/S 143(3) OF THE ACT FOR SUCH EARLIER YEAR. A COPY OF THE ASSESSMENT ORDER FOR THE A.Y. 2004-05 PASSED U/S 143(3) IS AVAILABLE ON PAGE NOS. 69 TO 7 1 OF THE PAPER BOOK. SIMILAR IS THE POSITION FOR THE A.Y. 2003-04 IN WHICH THE ASSE SSEE AGAIN SHOWED PROFIT FROM THE TRANSFER OF SHARES AS LONG TERM CAPITAL GAIN AN D SHORT TERM CAPITAL GAIN WHICH WAS ASSESSED BY THE ASSESSING OFFICER AS SUCH IN AS SESSMENT MADE U/S 143(3) OF THE ACT. A COPY OF THE SUCH ASSESSMENT ORDER HAS AL SO BEEN PLACED ON PAGE NOS. 81 ./ I.T.A. NO. 2329/MUM/2012 ( $ $ $ $ % % % % / ASSESSMENT YEAR : 2008-09 10 TO 84 OF THE PAPER BOOK. THIS SHOWS THAT THE ASSESS EE HELD AND DECLARED THE SHARES AS INVESTMENT AND THIS STAND CAME TO BE ACCEPTED BY THE REVENUE. WE FAIL TO UNDERSTAND AS TO HOW A DIFFERENT TREATMENT CAN BE G IVEN IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION . THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. GOPAL PUROHIT (20 10) 336 ITR 287 (BOM) APPROVED THE VIEW TAKEN BY THE TRIBUNAL IN WHICH THE PRINCIP LE OF CONSISTENCY WAS FOLLOWED AND THE PROFIT FROM TRANSFER OF SHARES WAS ACCEPTED AS CAPITAL GAIN ON THE STRENGTH OF SIMILAR VIEW TAKEN AND ACCEPTED IN THE. EARLIER ORDERS. THE MUMBAI BENCH OF THE TRIBUNAL IN SRI HARDIK BHARAT PATEL VS. DCIT (ITA N O. 2274/MUM/2011) (TO WHICH ONE OF US, NAMELY, THE ID. J.M. IS PARTY) HAS HELD VIDE ITS RECENT ORDER DATED 01.05.2013 THAT THE PROFIT FROM TRANSFER OF SHARES SHOULD BE CONSIDERED AS CAPITAL GAIN WHEN SHORT TERM CAPITAL GAIN SHOWED BY THE ASS ESSEE IN EARLIER YEARS WAS ACCEPTED BY THE REVENUE. A COPY OF THE SAID ORDER I S AVAILABLE ON PAGES 121 ONWARDS OF THE PAPER BOOK AND RELEVANT DISCUSSION I S CONTAINED IN PARA 10 OF THE ORDER. IN VIEW OF THE FOREGOING DISCUSSION, WE ARE OF THE CONSIDERED OPINION THAT THE LD. CIT(A) HAS TAKEN AN UNIMPEACHABLE VIEW ON THIS ISSUE. THE IMPUGNED ORDER IS UPHELD AND THE RELEVANT GROUNDS TAKEN BY THE REVENU E IN THIS REGARD, ARE DISMISSED. (EMPHASIS PROVIDED) II. ACIT VS. SMT. VARSHA J. ASHAR, ORDER DATED 23/ 08/2013 IN ITA NO.953/MUM/2011, COPY WAS PLACED ON OUR RECORD AN D WAS ALSO GIVEN TO LD. DR. REFERENCE WAS INVITED TO THE FOLLOWING OBSERV ATIONS: 3. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD, IT IS OBSERVED THAT THE LEARNED CIT(A) HAS RECORDED A CATEGORICAL FINDING ON PAGE 12 OF THE IMPUGNED ORDER THAT IN THE EARLIER Y EARS SUCH PROFIT ON SHORT TERM CAPITAL ASSET WAS TREATED AS SHORT TERM CAPITAL GAI N. THE LEARNED AR HAS PLACED ON RECORD COPY OF THE ORDER PASSED BY THE ASSESSING OF FICER U/S 143(3) IN RESPECT OF THE IMMEDIATELY SUCCEEDING ASSESSMENT YEAR I.E. 2008-20 09 IN WHICH INCOME FROM SALE OF SHARES UNDER SIMILAR CIRCUMSTANCES DECLARED AS S HORT TERM CAPITAL GAIN HAS BEEN ACCEPTED AS SUCH. A COPY OF SUCH ASSESSMENT ORDER D ATED 31.12.2010 HAS BEEN PLACED ON RECORD. THE LEARNED AR DREW OUR ATTENTION TO THE FACT THAT THE NUMBER OF SHARES DEALT WITH IN THE INSTANT YEAR IS LESS THAN THOSE IN THE SUCCEEDING ASSESSMENT YEAR. WE FIND THAT THE HONBLE JURISDICT IONAL HIGH COURT IN THE CASE OF CIT V. GOPAL PUROHIT [(2011) 336 ITR 287 (BORN.)] H AS EMPHASIZED ON THE PRINCIPLE OF CONSISTENCY. IN THIS CASE THE HONBLE HIGH COURT, DEALING WITH S IMILAR ISSUE, HELD THAT : THERE OUGHT TO BE UNIFORMITY IN TREATMENT A ND CONSISTENCY WHEN THE FACTS AND CIRCUMSTANCES ARE IDENTICAL. AS INCOME FROM SALE O F SHARES HAS BEEN CONSISTENTLY ACCEPTED AS SHORT TERM CAPITAL GAIN IN PRECEDING AN D SUCCEEDING YEARS, WE SEE NO REASON FOR OBSERVING DEPARTURE FOR THE CURRENT YEAR . RESPECTFULLY FOLLOWING THE PRECEDENT, WE UPHOLD THE IMPUGNED ORDER. IN THE RESULT THE APPEAL IS DISMISSED.(EMPHASIS PRO VIDED) III. KUNVARJI NANJI KENIA VS. ADDL. CIT,(2010) 13 1 TTJ MUMBAI (UO) 87. REFERENCE WAS INVITED TO PARA 3 & 4 OF THE ORDER WH ICH READ AS UNDER: ./ I.T.A. NO. 2329/MUM/2012 ( $ $ $ $ % % % % / ASSESSMENT YEAR : 2008-09 11 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE RELEVANT MATERIAL ON RECORD. THE ASSESSEE'S BALANCE SHEET FOR THE YEAR U NDER CONSIDERATION HAS BEEN PLACED AT P. 44 OF THE PAPER BOOK, ON THE PERUSAL O F WHICH, IT CAN BE SEEN THAT THE SHARES AND OTHER SECURITIES HAVE BEEN SHOWN UNDER T HE HEAD 'INVESTMENT'. SIMILARLY FOR THE IMMEDIATELY PRECEDING YEAR I.E., ASST. YR. 2004-05, THE SHARES ETC. WERE SHOWN UNDER THE HEAD 'INVESTMENT'. IN ONE YEAR PRIOR TO THAT ALSO I.E., ASST. YR. 2003-04 THE SHARES WERE SHOWN UNDER THE HEAD 'INVES TMENT' IN THE BALANCE SHEET. IT CAN ALSO BE SEEN FROM THESE BALANCE SHEETS FOR T HREE YEARS THAT THERE ARE NO BORROWED FUNDS WHICH HAVE BEEN DEPLOYED BY THE ASSE SSEE FOR THE PURCHASE OF SHARES. EXCEPT FOR CAPITAL, THERE IS NO OTHER ITEM OF LOAN ON THE LIABILITY SIDE OF THE BALANCE SHEET. IT IS FURTHER OBSERVED THAT THE ASSE SSMENT FOR THE IMMEDIATELY PRECEDING YEAR WAS COMPLETED UNDER S. 143(3). COPY OF THE ASSESSMENT ORDER DT. 28TH DEC., 2006 FOR ASST. YR. 2004-05 HAS BEEN PLAC ED AT P. 47 ONWARDS OF THE PAPER BOOK. THERE IS A CATEGORICAL DISCUSSION ABOUT THE CAPITAL GAIN EARNED BY THE ASSESSEE FROM SALE OF SHARES HELD ON LONG-TERM AND SHORT-TERM BASIS. THE LONG-TERM CAPITAL GAIN ON SALE OF SHARES IN THE LAST YEAR WAS DECLARED AT RS. 9.27 CRORES AND SHORT-TERM CAPITAL GAIN ON SALE OF SHARES ETC. WAS OFFERED AT RS. 51.55 LAKHS. THE AO HAS THOROUGHLY DISCUSSED THE ISSUE OF CAPITAL GA IN AND THEREAFTER DETERMINED THE SHORT-TERM CAPITAL GAIN AT RS. 79.38 LAKHS BY N OT ALLOWING THE SET OFF OF LOSS TO THE EXTENT OF RS. 27.83 LAKHS. PAGE NO. 7 OF THE PA PER BOOK IS A CHART SHOWING COMPARISON OF VOLUMES OF THE INVESTMENTS IN SHARES ETC. FOR THE INSTANT YEAR VIS-A- VIS THE IMMEDIATELY PRECEDING YEAR. NUMBER OF SCRIP S PURCHASED AND SOLD IN THIS YEAR ARE AT 213 AND 173 RESPECTIVELY AS AGAINST 194 AND 177 RESPECTIVELY FOR THE ASST. YR. 2004-05. THE VALUE OF PURCHASE AND SALE O F SHARES IN TOTAL IS AT RS. 20.08 CRORES AND RS. 10.59 CRORES IN THIS YEAR AS AGAINST RS 8.23 CRORES AND RS. 5.84 CRORES IN THE IMMEDIATELY PRECEDING YEAR. IT SHOWS THAT THE PATTERN IN WHICH THE SHARES WERE PURCHASED AND SOLD IN THIS YEAR IS ALMO ST SIMILAR TO THAT OF THE PRECEDING YEAR. THE ASSESSMENT ORDER PASSED UNDER S . 143(3) IN RELATION TO ASST. YR. 2004-05 CLEARLY DEPICTS THAT THE AO HAS ACCEPTED TH E ASSESSEE'S VERSION ABOUT THE PROFIT ON SALE OF SHARES AS LIABLE TO BE TAXED AS S HORT-TERM CAPITAL GAIN AND LONG- TERM CAPITAL GAIN RESPECTIVELY. THE LEARNED COUNSEL HAS SUBMITTED THAT IN THE ASST . YRS. 2003-04 AND 2002-03 ALSO THE PROFIT ON SALE OF SHARES HELD FOR LESS THAN ONE YEAR WAS SHOWN AS SHORT-TERM CAPITAL GAIN WHICH WAS NOT DISTURBED BY THE REVENUE, THOUGH THE ASSESSMENTS WERE MADE UNDER S. 143(1). 4. THE MUMBAI BENCH OF THE TRIBUNAL IN GOPAL PUROHI T VS. JT. CIT IN ITA NO. 4854/MUM/2008 VIDE ITS ORDER DT. 10TH FEB., 2009 [R EPORTED AT (2009)122 TTJ (MUMBAI) 87: (2009) 20 DTR (MUMBAI)(TRIB) 99'ED.], A COPY OF WHICH HAS BEEN PROVIDED BY THE LEARNED AUTHORISED REPRESENTATIVE A ND IS ON RECORD, HAS HELD THAT WHERE THE NATURE OF ACTIVITIES, MODUS OPERANDI OF T HE ASSESSEE, MANNER OF KEEPING RECORDS AND PRESENTATION OF SHARES AS INVESTMENT AT THE YEAR END IS SAME IN ALL THE YEARS, THERE CANNOT BE ANY REASON AS TO WHY THE CLA IM MADE BY THE ASSESSEE FOR TREATING THE PROFIT ON SALE OF SHARES HELD FOR LOWE R PERIOD BE NOT TAKEN AS TAXABLE AS HEAD 'SHORT-TERM CAPITAL GAIN'. IT HAS FURTHER BEEN HELD IN THIS CASE THAT THERE SHOULD BE UNITY IN THE TREATMENT AND THE CONSISTENC Y UNDER THE SAME FACTS AND CIRCUMSTANCES. WE FIND THAT IN THAT CASE ALSO THE A SSESSMENT YEAR INVOLVED WAS 2005-06 AND THE TRIBUNAL SPECIFICALLY OBSERVED THAT THE CHARACTER OF INCOME SHALL NOT UNDERGO CHANGE DUE TO AMENDMENTS MADE THROUGH T HE FINANCE ACT, 2004, BY WHICH THE SECURITIES TRANSACTION TAX ON SALE OF PUR CHASE OF SHARES WAS INTRODUCED AND FURTHER LONG-TERM CAPITAL GAIN WAS MADE EXEMPT UNDER S. 10(38) AND SHORT-TERM CAPITAL GAIN WAS SOUGHT TO BE TAXED AT CONCESSIONAL RATE OF 10 PER CENT UNDER S. 111A. THE LEARNED COUNSEL FOR THE ASSESSEE CONTENDE D THAT THE FACTS AND CIRCUMSTANCES OF THE INSTANT CASE ARE MUTATIS MUTAN DIS SIMILAR TO THOSE OF THE ./ I.T.A. NO. 2329/MUM/2012 ( $ $ $ $ % % % % / ASSESSMENT YEAR : 2008-09 12 ASSESSEE BY WHICH THE TREATMENT TO PROFIT ON SALE O F SHARES HAS BEEN CHANGED IN THIS YEAR DUE TO THE CHANGES BROUGHT IN BY THE FINA NCE ACT, 2004. THE LEARNED AUTHORISED REPRESENTATIVE HAS ALSO RELIED ON ANOTHE R ORDER PASSED BY THE MUMBAI BENCH OF THE TRIBUNAL IN MRS. AMITA A. KAPADIA VS. ITO IN ITA NO. 7054/MUM/2007 FOR THE SAME PROPOSITION. ON THE PERUSAL OF THIS OR DER DT. 3RD FEB., 2009, A COPY OF WHICH HAS BEEN MADE AVAILABLE BY THE LEARNED AUTHOR ISED REPRESENTATIVE, WE FIND THAT THE FACTS AND CIRCUMSTANCES ARE SIMILAR AND EV EN THE ASSESSMENT YEAR IS ALSO THE SAME I.E. ASST. YR. 2005-06. IN THIS CASE ALSO THE DEPARTMENT SOUGHT TO CHANGE THE TREATMENT TO BE GIVEN TO THE PROFIT ON SALE OF SHARES FROM SHORT-TERM CAPITAL GAINS TO 'PROFITS AND GAINS OF BUSINESS OR PROFESSION', W HICH WAS NOT ALLOWED BY THE TRIBUNAL. ON THE SAME PATTERN SOME OTHER ORDERS HAV E ALSO BEEN PLACED ON RECORD WHICH HAVE THE SAME RATIO DECIDENDI. IN VIEW OF THI S OVERWHELMING POSITION SETTLED IN FAVOUR OF THE ASSESSEE AND THE LEARNED AUTHORISE D REPRESENTATIVE NOT BRINGING ON RECORD ANY CONTRARY VIEW, WE HOLD THAT SINCE IN IDE NTICAL CIRCUMSTANCES THE REVENUE AUTHORITIES HAVE ACCEPTED THE PROFIT ARISING FROM T HE SALE OF SHARES AS SHORT-TERM CAPITAL GAIN IN THE ASSESSMENT MADE UNDER S. 143(3) , THERE IS NO REASON AS TO WHY A DIFFERENT TREATMENT BE GIVEN IN THIS YEAR. IT IS TR UE THAT RES JUDICATA IS NOT APPLICABLE IN THE INCOME-TAX PROCEEDINGS, BUT AT THE SAME TIME WE CANNOT BRUSH ASIDE THE 'PRINCIPLE OF CONSISTENCY', WHICH REQUIRES THAT WHE N THE FACTS AND CIRCUMSTANCES CONTINUE TO REMAIN THE SAME, THEN THERE SHOULD NOT BE ANY VARIATION IN THE TREATMENT FROM THE EARLIER YEAR. WE THEREFORE, RESPECTFULLY FOLLOWING THE AFORESA ID ORDERS OF THE MUMBAI TRIBUNAL, SET ASIDE THE IMPUGNED ORDER A ND DIRECT THAT THE PROFIT ON SALE OF SHARES OFFERED BY THE ASSESSEE AS SHORT TERM CAP ITAL GAIN BE ACCEPTED AS SUCH..(EMPHASIS PROVIDED) 5. ON THE OTHER HAND, RELYING UPON THE ORDER PASSE D BY AO AND LD. CIT(A) IT WAS PLEADED BY LD. DR THAT THE GAIN ARISING OUT OF SALE AND PURCHASE OF SHARES HAS RIGHTLY BEEN ASSESSED UNDER THE HEAD PROFIT AN D GAINS OF BUSINESS OR PROFESSION 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS IN THE LIGHT OF MATERIAL PLACED BEFORE US. THE FIRST REASON DESCRIBED BY THE AO TO TAKE DIVERGENT VIEW DURING THE YEAR UNDER CONSIDERATION IS THAT THE ASSESSEE HAS ALREAD Y SHOWN CERTAIN INCOME FROM SHARE TRANSACTIONS AS INCOME FROM BUSINESS AND REST AS INCOME FROM SHORT TERM CAPITAL GAIN. ACCORDING TO AO SUCH DIFFERENTIATION IS ONLY AS PER CONVENIENCE OF THE ASSESSEE. THIS IS BECAUSE THE AO HAS FOUND THAT INCOME FROM F&O TRADING HAS BEEN TREATED BY THE ASSESSEE AS BUSINESS INCOME. DURING THE COURSE OF ARGUMENTS IT WAS SHOWN TO US THAT SIMILAR INCOME WAS EARNED BY THE ASSESSEE IN PRECEDING YEAR AS WELL AS SUBSEQUENT YEARS. THEREFORE, SUCH REASON DOES NOT LEAD TO DIFFERENCE IN FACT FOR THE YEAR UNDER CONSIDERATION. MOREOVER, AS PER DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF GOPAL PUROHIT (SUPRA) THE TRIBUNAL HA S BEEN HELD TO BE RIGHT IN ACCEPTING THE POSITION THAT IT IS OPEN TO AN ASSESSEE TO MAIN TAIN TWO SEPARATE PORTFOLIO, ONE RELATING TO INVESTMENT IN SHARES AND A NOTHER RELATING TO BUSINESS ACTIVITIES ./ I.T.A. NO. 2329/MUM/2012 ( $ $ $ $ % % % % / ASSESSMENT YEAR : 2008-09 13 INVOLVING DEALING IN SHARES. THEREFORE, ACCORDING TO WELL ESTABLISHED PRINCIPLE OF LAW THE ASSESSEE CAN MAINTAIN TWO SEPARATE PORTFOLI OS, ONE RELATING TO INVESTMENT IN SHARES AND ANOTHER RELATING TO BUSINESS ACTIVITI ES. 6.1 ANOTHER REASON STATED BY THE AO IS THAT ON THE BASIS OF ENTRIES IN THE BOOKS OF ACCOUNTS THE CLAIM OF THE ASSESSEE CANNOT BE ACC EPTED THAT SHARES SHOWN AS INVESTMENT SHOULD BE CONSIDERED TO HAVE GIVEN RISE TO INCOME ASSESSABLE UNDER THE HEAD CAPITAL GAIN. THIS IS TRUE THAT ENTRIES IN THE BOOKS OF ACCOUNTS ARE NOT RELEVANT TO DETERMINE THE CHARACTER OF THE TRANSACT IONS. HOWEVER, AT THE SAME TIME WITH REGARD TO SIMILAR ENTRIES THE DEPARTMENT IN THE EARLIER AS WELL AS SUBSEQUENT YEARS HAS ACCEPTED THE CLAIM OF THE ASS ESSEE THAT THE SHARES SHOWN AS INVESTMENT GIVE RISE TO AN INCOME WHICH IS ASSES SABLE UNDER THE HEAD CAPITAL GAIN. 6.2 ANOTHER REASON PROVIDED BY THE AO IS THAT PRINC IPLE OF RES-JUDICATA DOES NOT APPLY TO INCOME TAX PROCEEDINGS. IT IS TRUE TH AT PRINCIPLE OF RES-JUDICATA DOES NOT APPLY TO INCOME TAX PROCEEDINGS BUT AT THE SAME TIME IT IS ALSO WELL ESTABLISHED THAT THERE OUGHT TO BE UNIFORMITY IN TR EATMENT AND CONSISTENCY WHEN THE FACTS AND CIRCUMSTANCES ARE IDENTICAL PARTICULA RLY IN THE CASE OF ASSESSEE. THIS PRINCIPLE HAS BEEN ACCEPTED BY THE HONBLE JUR ISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. GOPAL PUROHIT (SUPRA) AS PER FOLLOW ING OBSERVATIONS. IN SO FAR AS QUESTION (B) IS CONCERNED, THE TRIBUN AL HAS OBSERVED IN PARAGRAPH 8.1 OF ITS JUDGMENT THAT THE ASSESSEE HAS FOLLOWED A CO NSISTENT PRACTICE IN REGARD TO THE NATURE OF THE ACTIVITIES, THE MANNER OF KEEPING REC ORDS AND THE PRESENTATION OF SHARES AS INVESTMENT AT THE END OF THE YEAR, IN ALL THE YEARS. THE REVENUE SUBMITTED THAT A DIFFERENT VIEW SHOULD BE TAKEN FOR THE YEAR UNDER CONSIDERATION, SINCE THE PRINCIPLE OF RES JUDICATA IS NOT APPLICAB LE TO ASSESSMENT PROCEEDINGS. THE TRIBUNAL CORRECTLY ACCEPTED THE POSITION, THAT THE PRINCIPLE OF RES JUDICATA IS NOT ATTRACTED SINCE EACH ASSESSMENT YEAR IS SEPARATE I N ITSELF. THE TRIBUNAL HELD THAT THERE OUGHT TO BE UNIFORMITY IN TREATMENT AND CONSI STENCY WHEN THE FACTS AND CIRCUMSTANCES ARE IDENTICAL, PARTICULARLY IN THE C ASE 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 YE AR IN QUESTION. QUESTION (B), THEREFORE, DOES NOT ALSO RAISE ANY SUBSTANTIAL QUES TION OF LAW. (EMPHASIS PROVIDED) 6.3 IN THE PRESENT CASE IT HAS BEEN SHOWN TO US THA T IN ASSESSMENT YEARS 2007-08, 2009-10 AND 2010-11 SIMILAR TRANSACTIONS H AVE BEEN ACCEPTED AS GIVING RISE TO INCOME ASSESSABLE UNDER THE HEAD CAP ITAL GAIN AND ONLY DURING THE ./ I.T.A. NO. 2329/MUM/2012 ( $ $ $ $ % % % % / ASSESSMENT YEAR : 2008-09 14 YEAR UNDER CONSIDERATION A DIFFERENT VIEW HAS BEEN TAKEN WHICH IS NOT LIABLE TO BE APPROVED IN VIEW OF AFOREMENTIONED DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. GOPAL PUROHIT (SUPRA). 6.4 ANOTHER OBJECTION RAISED BY THE AO IS THAT VOLU ME OF TRANSACTIONS, FREQUENCY AND INVESTMENT IN THE YEAR UNDER CONSIDER ATION ARE HIGH AND THERE ARE BORROWED FUNDS UTILIZED BY THE ASSESSEE. WE FOUND THAT THE FACTS OF THE CASE OF THE ASSESSEE FOR PRESENT YEAR ARE NO MORE DIFFERENT FROM THE FACTS IN THE CASE OF ASSESSEE FOR A.Y 2007-08, 2009-10 AND 2010-11 AS IT WILL BE CLEAR FROM THE CHART PRODUCED BY LD. AR WHICH IS ALSO REPRODUCED PARA 4 OF THIS ORDER. FROM THE ABOVE CHART IT CAN BE NOTED THAT THE AVERAGE PERI OD OF HOLDING DOES NOT VARY MUCH AS FOR THE YEAR UNDER CONSIDERATION IT IS 99 D AYS WHEN THEY ARE COMPARED TO A.YS 2009-10 AND 2010-11 WHICH IS 91 DAYS AND 11 8 DAYS RESPECTIVELY. THE INVESTMENT FOR THE YEAR UNDER CONSIDERATION IS RS. 493.00 LACS AS AGAINST INVESTMENT OF RS.332.00 LACS, RS.297.40 LACS AND RS .1296.92 LACS FOR ASSESSMENT YEARS 2007-08, 2009-10 AND 2010-11 RESPECTIVELY. SIMILARLY, INTEREST EXPENDITURE OF THE ASSESSEE FOR THE YEAR UNDER CONS IDERATION ARE RS.3.35 LACS AGAINST RS.2.12 LACS , RS.10.35 LACS AND RS.11.98 L ACS FOR THE ASSESSMENT YEARS 2007-08, 2009-10 AND 2010-11 RESPECTIVELY. THEREFO RE, IT CANNOT BE SAID THAT ASSESSEE HAS UTILIZED SUBSTANTIAL BORROWED FUNDS F OR MAKING INVESTMENTS IN SHARES. THE CAPITAL OF THE ASSESSEE IS ALSO A SUM OF RS.833.00 LACS FOR THE YEAR UNDER CONSIDERATION AS AGAINST RS.335.00 LACS, RS.6 85.68 LACS AND RS.627.48 LACS FOR ASSESSMENT YEARS 2007-08, 2009-10 AND 201 0-11 RESPECTIVELY. HOWEVER, THE NUMBER OF TRANSACTIONS AND NUMBER OF SCRIPS DEALT BY THE ASSESSEE IS ON HIGHER SIDE BUT THAT ALONE CANNOT BE SAID TO BE A FACTOR TO DEVIATE FROM THE VIEW TAKEN IN EARLIER AND SUBSEQUENT YEARS . FOR THIS PURPOSE REFERENCE CAN BE MADE TO THE DECISION OF ITAT IN THE CASE OF MRS. SEJAL DALAL VS. ACIT (SUPRA), THE RELEVANT PORTION OF THE OBSERVATIONS H AVE ALREADY BEEN REPRODUCED IN PARA 4.1 OF THIS ORDER. 6.5 WE HAVE ALSO GONE THROUGH THE ASSESSMENT ORDERS FOR ASSESSMENT YEARS 2007-08, 2009-10 AND 2010-11 AND THE RELEVANT PAPER S FILED IN THE PAPER BOOK TO SHOW THAT UNDER IDENTICAL FACTS THE AO IN EARLIER A S WELL AS SUBSEQUENT YEARS HAS ./ I.T.A. NO. 2329/MUM/2012 ( $ $ $ $ % % % % / ASSESSMENT YEAR : 2008-09 15 ACCEPTED THIS CLAIM OF THE ASSESSEE BY WAY OF ORDE R PASSED UNDER SECTION 143(3) OF THE ACT. THE DETAILS OF THESE ORDERS HAVE ALREA DY BEEN DESCRIBED IN PARA 4.2 OF THIS ORDER. 6.6 THE PRINCIPLE APPROVED BY HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. GOPAL PUROHIT (SUPRA) HAS BEEN APPLIED BY MUMBA I ITAT IN OTHER DECISIONS ALSO WHICH HAVE BEEN RELIED UPON BY LD. AR, WHEREIN FINDING THAT IN EARLIER YEAR/SUBSEQUENT YEAR SIMILAR CLAIM WAS ACCEPTED BY THE REVENUE, THE TRIBUNAL HAS GRANTED THE RELIEF. RELEVANT OBSERVATIONS OF THE TRIBUNAL FROM THOSE DECISIONS HAVE ALREADY BEEN REPRODUCED IN THE ABOV E PART OF THIS ORDER. 6.7 IN THIS VIEW OF THE SITUATION, WE HOLD THAT A MOUNT OF SHORT TERM CAPITAL GAIN SHOWN BY THE ASSESSEE AT RS.5,85,40,417/- CANN OT BE ASSESSED AS BUSINESS INCOME. THE SAME IS ASSESSABLE AS SHORT TERM CAPIT AL GAIN IN VIEW OF UNIFORMITY IN TREATMENT AND CONSISTENCY. WE DIRECT ACCORDINGL Y. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED IN THE MANNER AFORESAID. ORDER PRONOUNCED IN THE OPEN COURT ON 08/11/2013 . 0 , ./% ' 1 2$3 08/11/2013 / , 4 SD/- SD/- ! (RAJENDRA) . . (I.P.BANSAL) ' /ACCOUNTANT MEMBER /JUDICIAL MEMBER MUMBAI; 2$ DATED 08/11/2013 . $ . .VM , SR. PS ./ I.T.A. NO. 2329/MUM/2012 ( $ $ $ $ % % % % / ASSESSMENT YEAR : 2008-09 16 0 0 0 0 , ,, , )-56 )-56 )-56 )-56 7 6%- 7 6%- 7 6%- 7 6%- / COPY OF THE ORDER FORWARDED TO : 1. &( / THE APPELLANT 2. )*&( / THE RESPONDENT. 3. 8 ( ) / THE CIT(A)- 4. 8 / CIT 5. 694 )-$ , , / DR, ITAT, MUMBAI 6. 4: ; / GUARD FILE. 0$ 0$ 0$ 0$ / BY ORDER, *6- )- //TRUE COPY// < << < / = = = = (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI