SHANTILAL M. JAIN, MUMBAI V. ACIT CIR 12(3), MUMBAI

ITA 2690/MUM/2010

• Counselvise Citation: 269019914 RSA 2010
• Duration Of Justice: 1 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2006-2007
• Appeal Filed On: 07-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SK MAHAPATRA PER R K
• Assessee Lawyers: SATENDRA PANDEY
• Keywords: Capital asset; Business income; Salary income; Share purchase agreement; Rule of consistency; Set aside
• Section: 143(3); 92B; 143(1)

Judgement Text

1 ITA NO.2690/MUM./2010 IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI MUMBAI MUMBAI MUMBAI E E E E BENCH BENCH BENCH BENCH MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI BEFORE BEFORE BEFORE BEFORE SHRI D MANMOHAN, VP & SHRI D MANMOHAN, VP & SHRI D MANMOHAN, VP & SHRI D MANMOHAN, VP & SHRI R K PANDA, AM SHRI R K PANDA, AM SHRI R K PANDA, AM SHRI R K PANDA, AM ITA NO. ITA NO. ITA NO. ITA NO. 2690/MUM/2010 2690/MUM/2010 2690/MUM/2010 2690/MUM/2010 (ASST YEAR (ASST YEAR (ASST YEAR (ASST YEAR 2006 2006 2006 2006- -- -07 0707 07) )) ) SHANTILAL M JAIN 92B MITTAL TOWER NARIMAN POINT MUMBAI 21 VS THE ASST COMMR OF INCOME TAX CIR 12(3), MUMBAI ( (( (APPELLANT APPELLANT APPELLANT APPELLANT) )) ) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) PAN NO. PAN NO. PAN NO. PAN NO.AABPJ3286E AABPJ3286E AABPJ3286E AABPJ3286E A SSESSEE BY SHRI K GOPAL & SATENDRA PANDEY REVENUE BY SHRI S K MAHAPATRA PER R K PANDA, AM PER R K PANDA, AM PER R K PANDA, AM PER R K PANDA, AM THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER DATED 17.2.2010 OF THE CIT(A)-23, MUMBAI RELATING TO ASSE SSMENT YEAR 2006-07. 2 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSE E IS MAINLY IN THE BUSINESS OF TRADING/INVESTMENT IN SHARES AND SECURITIES AND COMMISSION ON SALE OF VARIOUS PRODUCTS. THE ASSESSEE FILED HIS RETURN OF INCOME D ECLARING TOTAL INCOME OF RS. 1,75,53,777/-, WHICH WAS ON ACCOUNT OF SALARY, INCOME FROM HOUSE PROPERTY, BUSINESS INCOME, CAPITAL GAIN AND INCOME FROM OTHER SOURCES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OF FICER NOTED THAT THE ASSESSEE HAS DISCLOSED INCOME FROM SHORT TERM CAPIT AL GAINS (STCG) AT RS. 1,54,03,274/- AND LONG TERM CAPITAL GAINS(LTCG) AT RS. 2,91,37,201/- . THE ASSESSING OFFICER, FROM THE TAX AUDIT REPORT, NOTED THAT THE ASSESSEE IS DEALING IN SHARES BUSINESS IN THE FORM OF BUYING AND SELLIN G OF SHARES AND SECURITIES AND 2 ITA NO.2690/MUM./2010 DIFFERENT OTHER KIND OF SHARE DEALINGS. THEREFORE, HE WAS OF THE OPINION THAT THE PRIMARY BUSINESS OF THE ASSESSEE IS DEALING IN SHAR ES. THEREFORE, HE ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE INCOME SHOWN AS S TCG & LTCG SHOULD NOT BE TREATED AS BUSINESS INCOME BEING INCOME FROM SHARE TRADING ACTIVITIES AND NOT INCOME FROM CAPITAL GAINS. 2.1 THE ASSESSEE SUBMITTED THAT THE SAME CANNOT BE TREATED AS BUSINESS INCOME SINCE THE ASSESSEE IS DOING INVESTMENT IN SH ARES AND SECURITIES IN RECOGNIZED STOCK EXCHANGES. THE INVESTMENTS ARE AC QUIRED WITH THE INTENTION TO HOLD FOR A LONGER PERIOD AND NOT FOR TRADING. IT W AS SUBMITTED THAT MOST OF THE INVESTMENTS ARE VERY OLD. THE SCRIPS TRADED IN INT RADAY WITHOUT DELIVERY AND GAIN OR LOSS FROM DERIVATIVE TRANSACTIONS ARE TREATED AS BUSINESS INCOME. IT WAS SUBMITTED THAT THIS TYPE OF METHOD OF ACCOUNTING IS BEING CONSISTENTLY FOLLOWED AND ACCEPTED EVEN IN 143(3) ASSESSMENTS IN EARLIER YEARS. HOWEVER, THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE EXPLAN ATION GIVEN BY THE ASSESSEE. HE NOTED THAT THE ASSESSEE IS DEALING IN SHARE TRAD ING AND IN THE COURSE OF SHARE TRADING BUSINESS; THE ASSESSEE HAS DERIVED PROFIT I N DIFFERENT FORMS BY VIRTUE OF SHARES ONLY. THE INCOME FROM STCG IS NOTHING BUT AN OFF-SHOOT OF PRIME SHARE TRADING BUSINESS AND HENCE, THIS INCOME CANNOT BE D IFFERENTIATED FROM BUSINESS INCOME OF SHARE TRADING. THE ASSESSING OFFICER NOTE D THAT IN ORDER TO CONSTITUTE THE SHARE INCOME AS ADVENTURE IN THE NATURE OF TRA DE OR BUSINESS THE FOLLOWING IMPORTANT INGREDIENTS ARE NECESSARY: A) DAY-TO-DAY BUSINESS OF THE ASSESSEE AND WHETHER SUCH OTHER INCOME IS PART OF DAY-TO-DAY BUSINESS OR INCOME EARNED ON THE INDEPENDENT MANNER. B) CONTINUOUS, ORGANIZED AND PLANNED ACTIVITY C) COMMODITY IN WHICH ASSESSEE IS DEALING IN WITH 3 ITA NO.2690/MUM./2010 D) PROFIT EARNING MOTIVE E) PRIDE OF POSSESSION F) WHETHER ASSESSEE INTENDED TO EARN ACCRETION ON T HE CAPITAL INVESTMENT OR TO EARN PROFIT THEREON. G) SERIES OF TRANSACTIONS, REPETITIVENESS NATURE OF TRANSACTIONS, VOLUME OF TRANSACTIONS AND QUANTUM OF TRANSACTIONS. THEREFORE , DEMARCATION NOT POSSIBLE 2.2 REJECTING THE VARIOUS EXPLANATIONS GIVEN BY THE ASSESSEE AND RELYING ON A COUPLE OF DECISIONS, THE ASSESSING OFFICER TREATED THE ENTIRE INCOME FROM SHARE TRADING ACTIVITIES, AS INCOME FROM BUSINESSES. TH US, HE TREATED THE STCG OF RS. 1,54,03,274/- AS INCOME UNDER THE HEAD BUSINE SS INCOME. 3 BEFORE THE CIT(A), IT WAS SUBMITTED THAT THE ASSE SSEE IS DOING BUSINESS OF INVESTMENT IN SHARES AND SECURITIES IN RECOGNIZED S TOCK EXCHANGE SINCE 1980 WHEN THE SHARE CERTIFICATES IN PHYSICAL FORM WERE ISSUED BY THE COMPANIES. THE INVESTMENTS WERE MADE WITH THE INTENTION OF LONG TE RM HOLDING AND EARNING DIVIDEND. MOST OF THE INVESTMENTS WERE MADE IN EAR LIER YEARS AND SUBSTANTIAL DIVIDEND HAS BEEN EARNED. SUCH INCOME HAS CONSISTEN TLY BEEN SHOWN UNDER THE HEAD CAPITAL GAIN. IT WAS SUBMITTED THAT SCRIPS T RADED INTRADAY AND SETTLED COMPULSORILY WITHOUT DELIVERY LIKE DUE TO NON/BAD D ELIVERY OF SHARES OR AUCTION WAS CARRIED OUT BY THE EXCHANGE. THE INCOME FROM S UCH TRANSACTIONS IS TREATED UNDER THE HEAD SPECULATION BUSINESS. IT WAS SUBM ITTED THAT THE ASSESSEE HAS ACCOUNTED FOR IN THE BOOKS OF ACCOUNT THE SAID SHAR ES AND SECURITIES WHICH WERE HELD UNDER THE HEAD INVESTMENTS SINCE THEIR ACQUI SITION. THIS METHOD OF ACCOUNTING HAS BEEN CONSISTENTLY FOLLOWED AND ASSES SED AS SUCH U/S 143(3) IN THE EARLIER YEARS. THE INVESTMENTS WERE VALUED AT COST AND THE ASSESSEE HAS NOT TAKEN ANY BENEFIT OF DIMINUTION IN THE VALUE OF SHA RES AND SECURITIES BY WAY OF 4 ITA NO.2690/MUM./2010 VALUING THE STOCK AT COST OR MARKET VALUE, WHICHEVE R IS LOWER SINCE THE SHARES & SECURITIES HAD NOT BEEN HELD AS STOCK IN TRADE. THE SHARES ARE NOT PURCHASED FOR IMMEDIATE SALE AND WERE PURCHASED AND KEPT FOR REAS ONABLY LONG PERIOD TILL THE TIME THE OBJECTIVE IS ACHIEVED. THE DIVIDEND INCOME FROM SUCH INVESTMENTS WAS OFFERED FOR TAXATION IN THE RETURN OF INCOME FILED BY THE ASSESSEE. THERE HAS NOT BEEN ANY CHANGE IN THESE INVESTMENTS IN THE FORM OF PURCHASE AND SALES DURING THE PERIOD FROM INCEPTION TILL TODAY. IT WAS SUBMI TTED THAT THE CONDUCT AND INTENTION OF THE ASSESSEE CLEARLY SHOWS THAT ASSESS EE MAKES INVESTMENT WITH INTENTION TO HOLD THEM AS ITS INVESTMENT AND NOT WI TH THE INTENTION TO HOLD THEM AS STOCK IN TRADE TO DO BUSINESS IN THEM. THE CBDT CIRCULAR NO.4/2007 DATED 15 TH JUNE 2007 WAS BROUGHT TO THE NOTICE OF THE CIT(A). IT WAS SUBMITTED THAT THE ASSESSEE HAS ONLY ONE PORTFOLIO COMPRISING OF SECUR ITIES WHICH ARE TO BE TREATED AS CAPITAL ASSET. NEITHER THE ASSESSEE HAS ANY TRA DING ACTIVITY NOR HE HAS ANY TRADING PORTFOLIO COMPRISING OF STOCK IN TRADE. THE REFORE, IN VIEW OF THE CBDT CIRCULAR, THE PURCHASE AND SALE OF SHARES BY THE AS SESSEE CANNOT BE TREATED AS INCOME FROM BUSINESS. 3.1 AS REGARD THE ALLEGATION OF THE ASSESSING OFFIC ER THAT THE ASSESSEE HAS CARRIED OUT INVESTMENT IN A VERY WELL PLANNED, SYST EMATIC AND ORGANIZED MANNER AND REPEATED TRANSACTIONS, IT WAS SUBMITTED THAT TH E VOLUME OF TRANSACTIONS DOES NOT CHANGE THE NATURE OF TRANSACTION. RELYING ON A COUPLE OF DECISIONS, IT WAS SUBMITTED THAT A PERSON CAN BE BOTH AN INVESTOR AND A TRADER. THE INTENTION OF THE ASSESSEE AT THE TIME OF PURCHASE OF SHARES IS A PREDOMINANT FACTOR TO DECIDE THE NATURE OF TRANSACTION. THE DECISION OF THE JURI SDICTIONAL HIGH COURT IN THE CASE OF CIT VS GOPAL PUROHIT WAS ALSO CITED AND IT WAS S UBMITTED THAT THE DELIVERY BASED TRANSACTIONS IN THE PRESENT CASE SHOULD BE TR EATED AS THOSE IN THE NATURE 5 ITA NO.2690/MUM./2010 OF INVESTMENT TRANSACTIONS AND THE PROFIT RECEIVED THERE FROM SHOULD BE TREATED EITHER AS SHORT TERM OR LONG TERM CAPITAL GAIN DEPENDING UPON THE PERIOD OF HOLDING. 4 HOWEVER, THE CIT(A) WAS NOT CONVINCED WITH THE AR GUMENTS ADVANCED BEFORE HIM. HE REFERRED TO CBDT INSTRUCTION NO.18 27 DATED 31.8.1989 WHICH HAS LAID DOWN CERTAIN TESTS TO DISTINGUISH BETWEEN THE SHARES HELD AS STOCK-IN-TRADE AND SHARES HELD AS INVESTMENT. HE NOTED THAT THE C IRCUMSTANCES TO BE CONSIDERED BY THE ASSESSING OFFICER IN DETERMINING WHETHER A PERSON IS A TRADER IN STOCKS OR AN INVESTOR IN STOCK AS PER THE GUIDEL INES LAID DOWN BY THE CBDT ARE AS UNDER: I) WHETHER THE PURCHASE AND SALE OF SECURITIES WAS ALLIED TO HIS USUAL TRADE OR BUSINESS/WAS INCIDENTAL TO IT OR WAS AN OCCASION AL INDEPENDENT ACTIVITY. II) WHETHER THE PURCHASE IS MADE SOLELY WITH THE IN TENTION F RESALE AT A PROFIT OR FOR LONG TERM APPRECIATION AND/OR FOR EAR NING DIVIDENDS AND INTEREST. III) WHETHER SCALE OF ACTIVITY IS SUBSTANTIAL IV) WHETHER TRANSACTIONS WERE ENTERED INTO CONTINUO USLY AND REGULARLY DURING THE ASSESSMENT YEAR. V) WHETHER PURCHASES ARE MADE OUT OF OWN FUNDS OR B ORROWINGS VI) THE STATED OBJECTS IN THE MEMORANDUM AND ARTICL ES OF ASSOCIATION IN THE CASE OF A CORPORATE ASSESSEE VII) TYPICAL HOLDING PERIOD FOR SECURITIES BOUGHT A ND SOLD. VIII) RATIO OF SALES TO PURCHASES AND HOLDING IX) THE TIME DEVOTED TO THE ACTIVITY AND THE EXTENT TO WHICH IT IS THE MEANS OF LIVELIHOOD. X) THE CHARACTERIZATION OF SECURITIES IN THE BOOKS OF ACCOUNT AND IN BALANCE SHEET AS STOCK IN TRADE OR INVESTMENTS. 6 ITA NO.2690/MUM./2010 4.1 THE CIT(A) NOTED FROM THE VARIOUS DETAILS FURNI SHED BY THE ASSESSEE THAT THE ASSESSEE, IN THE INSTANT CASE HAS INDULGED IN P URCHASE/SALE OF SHARES ON A LARGE SCALE. PURCHASE OF SHARES OF RS. 1098 LACS A ND SALE OF SHARES OF RS. 1241 LACS DURING THE YEAR SHOW THAT THE ASSESSEE INDULGE D IN SHARE TRANSACTIONS ON A REGULAR BASIS AND ON A SUBSTANTIALLY HIGH SCALE. TH E ASSESSEE HAS TRADED IN AS MANY AS 85 SCRIPS IN 188 TRANSACTIONS AND IN AS MAN Y AS 1631852 SHARES DURING THE YEAR WITH FREQUENCY AND REGULARITY. ONLY IN 21 SCRIPS THERE HAVE BEEN SOME OPENING BALANCES. REST OF THE SCRIPS HAVE ALL BEE N PURCHASED AND SOLD DURING THE YEAR. THE HOLDING PERIOD IN SEVERAL SHARES HAS BEEN MERELY A FEW DAYS AND IN A FEW CASES THE PURCHASE AND SALE HAS BEEN ON TH E SAME DAY AND THERE IS EVEN ONE INSTANCE OF FORWARD SALES. HE FURTHER NOTE D THAT SIMPLY BECAUSE VALUE OF THE INVESTMENT IS SHOWN TO BE AT COST, THAT PER SE WOULD NOT CHANGE THE REAL NATURE OF THE ACTIVITY. FURTHER, THE PRINCIPLE OF RES JUDICATE IS NOT APPLICABLE TO INCOME TAX PROCEEDINGS. HE FURTHER NOTED THAT THER E IS FREQUENCY OF TRANSACTIONS; THEREFORE, THE CONTENTION OF THE ASSE SSEE THAT THE ASSESSEE IS AN INVESTOR CANNOT BE ACCEPTED. 4.2 AS REGARDS THE CONTENTION OF THE ASSESSEE THAT DELIVERY BASED TRANSACTION OUGHT TO BE TREATED AS INVESTMENT; HE NOTED THAT NO DETAILS REGARDING DELIVERY OF SHARES HAVE BEEN FILED BEFORE HIM. HOWEVER, EVEN AP ART FROM THIS, HAD DELIVERY BEEN THE ONLY CRITERIA IN DECIDING THAT ALL THE DEL IVERY BASED TRANSACTIONS ARE BY WAY OF INVESTMENT PURPOSE, THERE WOULD HAVE BEEN NO SITUATION WHEREIN DELIVERY BASED TRANSACTION CAN ALSO FORM PART OF BUSINESS AC TIVITY. IF IT IS TAKEN IN THIS WAY, IT WILL RESULT IN AN ABSURD SITUATION WHEREIN JUST BECAUSE DELIVERY IS TAKEN, IT HAS TO BE THAT THE DEALING IN SHARES MUST RESULT IN INVESTMENT ACTIVITY. THEREFORE, THE SURROUNDING FACTS AND CIRCUMSTANCES ARE ALSO CL EARLY AGAINST THE ASSESSEE. 7 ITA NO.2690/MUM./2010 HE NOTED THAT NOTHING HAS BEEN PLACED ON RECORD TO SHOW HOW COULD THE SCRIPS BE SAID TO HAVE BEEN HELD FOR INVESTMENT PURPOSE AL ONE, DESPITE THE FACT THAT VARIOUS FACTORS SUCH AS QUANTUM, PERIODICITY, FREQU ENCY AND MULTIPLICITY OF TRANSACTIONS AND OTHER SURROUNDING CIRCUMSTANCES PO INT OTHERWISE. RELYING ON A COUPLE OF DECISIONS INCLUDING THE GUIDELINES ISSUED BY THE CBDT, HE NOTED THAT THE ASSESSEE INDULGED IN PURCHASE/SALE OF SHARES ON REGULAR BASIS ON A SUBSTANTIALLY HIGH SCALE. THERE IS FREQUENCY AND RE GULARITY IN TRANSACTIONS AND SINCE THE ASSESSEE HAS NOT BEEN ABLE TO ESTABLISH T HAT THE TRANSACTIONS WERE CARRIED OUT BY DEPLOYING OWN FUNDS AND NOT OUT OF B ORROWED FUNDS; THEREFORE, MERELY TREATING THE ENTRIES IN THE BOOKS AS INVESTM ENT WOULD NOT BY ITSELF BE PROOF THAT THE SAME WERE FOR INVESTMENT. THE VOLUME , MAGNITUDE, FREQUENCIES, CONTINUITY, REGULARITY, THE RATIO BETWEEN PURCHASE AND SALE CLEARLY INDICATE TRADING ACTIVITY. THE PERIOD OF HOLDING IN SEVERAL INSTANCES HAS BEEN EXTREMELY SHORT. THE ASSESSEE HAS NOT MAINTAINED SEPARATE BAN K ACCOUNTS. IN VIEW OF THE ABOVE, HE UPHELD THE ACTION OF THE ASSESSING OFFICE R TREATING THE INCOME FROM STCG AS BUSINESS INCOME. 5 AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE ASSE SSEE IS IN APPEAL HERE BEFORE US WITH THE FOLLOWING GROUNDS: 1. I) ON THE FACTS AND IN THE CIRCUMSTANCES AND IN LAW, THE LD CIT(A) HAS ERRED AND WAS NOT JUSTIFIED IN CONFIRMING THE S HORT TERM CAPITAL GAIN AMOUNTING TO RS. 1,54,03,274/- WHICH WAS ASSES SED AS AN INCOME FROM BUSINESS INSTEAD OF INCOME UNDER THE HE AD CAPITAL GAINS; II) THE LD CIT(A) HAS TOTALLY IGNORED AND HAS NOT T AKEN INTO CONSIDERATION RELEVANT FACTS OF THE CASE AND ALSO T HE PAST ASSESSMENTS OF THE APPELLANT WHEREIN THE SAME INCOM E HAS BEEN CONSISTENTLY DECLARED AND ASSESSED UNDER THE HEAD I NCOME FROM CAPITAL GAINS. 8 ITA NO.2690/MUM./2010 III) THE LD CIT(A) HAS FAILED TO APPRECIATE THAT ON THE FACTS OF THE APPELLANTS CASE THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS GOPAL PUROHIT DECIDED ON 6 TH JAN 2010 IS SQUARELY APPLICABLE. THE APPELLANT THEREFORE, PRAYS THAT TREATMENT OF SH ORT TERM CAPITAL GAINS UNDER THE HEAD OF BUSINESS INCOME INSTEAD OF CAPITA L GAINS INCOME DESERVES TO BE DELETED. 2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE APPELLANT PRAYS YOUR HONOUR TO GRANT SUCH OTHER AND /OR CONSEQUENTIAL RELIEF AS YOUR HONOUR MAY DEEM FIT AND PROPER 6 THE LD COUNSEL FOR THE ASSESSEE REITERATED THE SA ME SUBMISSIONS AS MADE BEFORE THE ASSESSING OFFICER AND THE CIT(A). REFERR ING TO PAGE 1 OF THE PAPER BOOK, HE SUBMITTED THAT THE ASSESSEE HAS SHOWN STCG AT RS. 1,54,03,274/- AND LTCG AT RS. 2,91,37,201. THE ASSESSING OFFICER HAS ACCEPTED THE LTCG BUT HAS TREATED THE STCG AS BUSINESS INCOME. REFERRING TO PAGE 2 OF THE PAPER BOOK, HE SUBMITTED THAT THE ASSESSEE HAS RECEIVED DIVIDEND INCOME OF RS. 26,97,476/- WHICH HAS BEEN CLAIMED AS EXEMPT U/S 10(34). REFER RING TO PAGE 4 OF THE PAPER BOOK, HE SUBMITTED THAT OPENING CAPITAL OF THE ASSE SSEE IS RS.8,51,20,110/-. 6.1 REFERRING TO PAGES 9 & 10, THE LD COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO THE BALANCE SHEET AS ON 3 1 ST MAR 2006 OF THE PROPRIETARY CONCERN OF THE ASSESSEE DEEPKALA COLLEC TIONS SHOP WHERE THE ASSESSEES CAPITAL STANDS AT RS. 85,42,812/- ONLY. 6.2 REFERRING TO PAGES 22 TO 27 OF THE PAPER BOOK, HE DREW THE ATTENTION OF THE BENCH TO LTCG DERIVED BY THE ASSESSEE ON ACCOUN T OF DEALING IN VARIOUS SCRIPS. REFERRING TO PAGES 41 TO 67 OF THE PAPER B OOK, HE DREW THE ATTENTION OF THE BENCH TO THE ORDER PASSED BY THE ASSESSING OFFI CER U/S 143(1) WHERE THE 9 ITA NO.2690/MUM./2010 ASSESSING OFFICER HAS ACCEPTED THE STCG OF RS. 6,73 ,615/- FOR ASSESSMENT YEAR 2003-04. REFERRING TO PAGES 68 TO 89 OF THE PAP ER BOOK, HE SUBMITTED THAT SHORT TERM CAPITAL LOSS OF RS.55,38,840/- HAS BEEN ACCEPTED BY THE ASSESSING OFFICER IN THE ORDER PASSED U/S 143(3). REFERRING TO PAGES 90 TO 124, HE SUBMITTED THAT STCG OF RS. 84,58,656.- HAS BEEN ACC EPTED BY THE ASSESSING OFFICER IN THE ORDER PASSED U/S 143(1). REFERRING TO THE COPY OF THE ORDER FOR ASSESSMENT YEAR 2007-08 AND 2008-09, HE SUBMITTED T HAT THE ASSESSING OFFICER IN THE ORDER PASSED U/S 143(3) HAS ACCEPTED THE S TCG DECLARED BY THE ASSESSEE, WHICH IS RS. 69,38,985/- FOR ASSESSMENT Y EAR 2008-09 AND RS. 33,31,449/- FOR ASSESSMENT YEAR 2007-08. HE SUBMIT TED THAT THE ASSESSEE IS MAINTAINING SEPARATE BANK ACCOUNTS; ONE FOR INVESTM ENT PURPOSE AND OTHER ONE FOR BUSINESS PURPOSES. IT IS NOT KNOWN AS TO FROM WHERE THE ASSESSING OFFICER OBTAINED THE INFORMATION THAT THE ASSESSEE HAS OBTA INED BORROWED FUNDS. HE SUBMITTED THAT NO BORROWED FUNDS HAVE BEEN UTILISED FOR PURCHASE AND SALE OF SHARES AND THE ASSESSEE NEITHER PAID NOR RECEIVED A NY INTEREST FOR THE PURPOSE OF SHARE TRADING. 6.3 REFERRING TO PAGES 18 TO 20 OF THE PAPER BOOK, HE DREW THE ATTENTION OF THE BENCH TO PARA 13 OF THE REPLY TO THE ASSESSING OFFICER WHERE IT WAS SUBMITTED THAT THE ASSESSEE HAS GIVEN LOAN FROM HIS OWN CAPIT AL OR INTEREST FREE LOANS TAKEN FROM OTHERS ; THEREFORE NO INTEREST HAS BEEN CHARGE D ON LOANS GIVEN. 6.4 ON BEING QUESTIONED BY THE BENCH TO EXPLAIN PAR A 10 OF THE SAID REPLY WHEREIN IT WAS SUBMITTED THAT THE ASSESSEE HAS TAK EN SECURED LOAN FROM HDFC BANK AGAINST THE HYPOTHECATION OF SHARES AND SECURI TIES, LD COUNSEL FOR THE 10 ITA NO.2690/MUM./2010 ASSESSEE SUBMITTED THAT THE ASSESSEE HAS BORROWED F UNDS FROM THE BANK AGAINST PLEDGE OF SHARES, WHICH HAS BEEN UTILISED FOR THE PROPRIETARY SHIP BUSINESS OF DEEPKALA COLLECTIONS AND NO PART OF THE FUNDS HAS G ONE TO PURCHASE OR SALE OF SHARES. 6.5 REFERRING TO THE DECISION OF THE TRIBUNAL IN TH E CASE OF MR NEHAL V SHAH IN ITA NO.2733/MUM/2009 ORDER DATED 15.12.2010 FOR ASS ESSMENT YEAR 2005-06 AND THE ORDER OF THE TRIBUNAL IN THE CASE OF ACIT V S NAISHADH V VACHHARAJANI IN ITA NO.6429/MUM/209 ORDER DATED 25.2.2011 FOR ASSES SMENT YEAR 2006-07, HE SUBMITTED THAT UNDER IDENTICAL CIRCUMSTANCES, STCG ON ACCOUNT OF PURCHASE AND SALE OF SHARES HAS BEEN ACCEPTED BY THE TRIBUNAL. HE SUBMITTED THAT THE ASSESSEES CASE IS IN A MUCH STRONGER POSITION; THE REFORE, INCOME FROM STCG DECLARED BY THE ASSESSEE SHOULD BE ACCEPTED AND THE ORDER OF THE CIT(A) BE SET ASIDE. 6.6 THE LD DR, ON THE OTHER HAND SUPPORTED THE ORDE R OF THE CIT(A). 7 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE BY BOTH THE PARTIES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONS IDERED THE VARIOUS DECISIONS CITED BEFORE US. THERE IS NO DISPUTE TO THE FACT T HAT THE ASSESSEE, IN THE INSTANT CASE IS DEALING IN SHARES AND SECURITIES APART FROM DERIVING INCOME FROM SALARY, HOUSE PROPERTY BUSINESS INCOME AND INCOME FROM OTHE R SOURCES. THERE IS ALSO NO DISPUTE TO THE FACT THAT LTCG DECLARED BY THE ASSES SEE HAS BEEN ACCEPTED BY THE ASSESSING OFFICER AND THE DERIVATIVE INCOME DECLARE D BY THE ASSESSEE HAS BEEN ACCEPTED BY THE ASSESSING OFFICER AS BUSINESS INCO ME. THEREFORE, THE ONLY DISPUTE IN THE IMPUGNED APPEAL IS REGARDING THE TRE ATMENT OF STCG ON ACCOUNT 11 ITA NO.2690/MUM./2010 OF PURCHASE AND SALE OF SHARES, WHICH HAS BEEN HELD AS BUSINESS INCOME BY THE ASSESSING OFFICER AND UPHELD BY THE CIT(A). IT IS THE CASE OF THE REVENUE THAT DUE TO VOLUME, MAGNITUDE, FREQUENCY, CONTINUITY, RE GULARITY, THE RATIO BETWEEN PURCHASE AND SALE CLEARLY INDICATE THAT INCOME ON A CCOUNT OF PURCHASE AND SALE OF SHARES SHOULD BE TREATED AS INCOME FROM BUSINESS AND NOT AS INCOME FROM STCG. ACCORDING TO THE LD COUNSEL FOR THE ASSESSEE , SINCE THE INCOME OF STCG HAS BEEN ACCEPTED BY THE ASSESSING OFFICER FROM ASS ESSMENT YEARS 2003-04 TO 2008-09 I.E PRECEDING AND SUBSEQUENT YEARS; THEREFO RE, FOLLOWING THE RULE OF CONSISTENCY, THIS INCOME FROM STCG SHOULD BE ACCEPT ED DURING THE YEAR IN THE LIGHT OF THE DECISION OF THE JURISDICTIONAL HIGH CO URT IN THE CASE OF GOPAL PUROHIT (SUPRA). 8 IN THE INSTANT CASE, WE FIND THE ASSESSMENT ORDER WAS PASSED ON 31.12.2008 FOR THE ASSESSMENT YEAR 2006-07 WHEREIN THE ASSESSING OFFICER HAS TREATED THE STCG AS BUSINESS INCOME. AGAINST THIS, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A), WHO VIDE ORDER DATED 17.2.2010 U PHELD THE ACTION OF THE ASSESSING OFFICER. WE FIND, THE ASSESSING OFFICER IN THE ORDER PASSED U/S 143(3) ON 29.10.2009 FOR ASSESSMENT YEAR 2007-08 HAS ACCEP TED THE STCG DECLARED BY THE ASSESSEE. THE ABOVE ORDER OF THE ASSESSING OFFI CER WAS AFTER THE ORDER PASSED U/S 143(3) FOR THE ASSESSMENT YEAR 2006-07 A ND BEFORE THE ORDER PASSED BY THE CIT(A) UPHOLDING THE ACTION OF THE ASSESSIN G OFFICER. HOWEVER, WE FIND, THE ASSESSING OFFICER IN THE ORDER PASSED U/S 143(3 ) DATED 27.12.2010 FOR THE ASSESSMENT YEAR 2008-09 HAS ACCEPTED THE STCG OF R S. 69,39,985/- WHICH IS AFTER THE ORDER PASSED BY THE CIT(A) ON 17.2.2010. WHEN THE ABOVE ASPECT WAS CONFRONTED TO THE LD DR BY THE BENCH DURING THE COU RSE OF HEARING, THE LD DR COULD NOT SAY ANYTHING. THUS, FROM THE DETAILS FUR NISHED BY THE LD COUNSEL FOR THE 12 ITA NO.2690/MUM./2010 ASSESSEE, WE FIND FROM ASSESSMENT YEARS 2003-04 TO 2008-09, THE ASSESSING OFFICER HAS CONSISTENTLY ACCEPTED THE STCG SHOWN BY THE ASSESSEE EXCEPT FOR ASSESSMENT YEAR 2006-07 I.E. THE IMPUGNED ASSESSMEN T YEAR. UNDER THESE CIRCUMSTANCES, WE ARE OF THE CONSIDERED OPINION THA T RULE OF CONSISTENCY AS PROPOUNDED BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF GOPAL PUROHIT (SUPRA) WILL SQUARELY BE APPLICABLE TO THE FACTS OF THE PRE SENT CASE. 9. IN VIEW OF THE ABOVE DISCUSSION, WE ARE OF THE C ONSIDERED OPINION THAT THE INCOME DERIVED FROM THE SALE/PURCHASE OF SHARE IN T HE INSTANT CASE HAS RIGHTLY BEEN TREATED BY THE ASSESSEE AS STCG. THEREFORE, W E SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO ACCEPT T HE STCG AS DECLARED BY THE ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. THE GROU NDS RAISED BY THE ASSESSEE ARE ACCORDINGLY ALLOWED. 10 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THE 27 TH , DAY OF APRIL 2011. SD/- SD/- ( (( ( D MANMOHAN D MANMOHAN D MANMOHAN D MANMOHAN ) )) ) VICE PRESIDENT ( (( ( R K PANDA R K PANDA R K PANDA R K PANDA ) )) ) ACCOUNTANT MEMBER PLACE: MUMBAI : DATED:27 TH , APRIL 2011 RAJ* 13 ITA NO.2690/MUM./2010 COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI