The ACIT, Circle 2(1), Indore V. Dr. Shri Rajeev Chaudhary, Indore

ITA 293/IND/2012

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 6133 (ITAT-INDORE)
• Duration Of Justice: 6 year(s) 7 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2019
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 29-11-2018
• Assessment Year: 2008-2009
• Appeal Filed On: 15-05-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAJEEB JAIN
• Keywords: Business income; Rule of consistency; Transactions in derivatives; Earning of tax free income; Question of law; Rule 8D; Set aside; Capital Gains
• Section: 143(3); 14A; 251; 143(2); 147

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE HON'BLE I KUL BHARAT, JUDICIAL MEMBER AND HON'BLE MANISH BORAD, ACCOUNTANT MEMBER ITA NO 293/IND/2012 ASSESSMENT YEAR 2008-09 PAN : ABKPC5729K ASSISTANT COMMISSIONER OF V/S DR.RAJEEV CHOUDHARY INCOME TAX, 1, SHIV VILAS PALACE CIRCLE-2(1), INDORE INDORE (REVENUE) (RESPONDENT) C.O. NO.65/IND/2012 ASSESSMENT YEAR 2008-09 DR. RAJEEV CHOUDHARY V/S ASSISTANT COMMISSIONER O F 1, SHIV VILAS PALACE, INCOME TAX, CIRCLE-2(1), INDORE INDORE (APPELLANT) (RESPONDENT) REVENUE BY SHRI R AJEEB JAIN , SR.DR ASSESSEE BY SHRI ARUN PADLIYA, CA DATE OF HEARING 29 .1 1 . 2018 DATE OF PRONOUNCEMENT 10 . 01.2019 O R D E R PER MANISH BORAD. THE ABOVE APPEAL FILED AT THE INSTANCE OF REVENUE A ND CROSS OBJECTION FILED BY THE ASSESSEE PERTAINING TO ASSES SMENT YEAR 2008- 09 ARE DIRECTED AGAINST THE ORDERS OF LD. COMMISSIO NER OF INCOME TAX RAJEEV CHOUDHARY ITA NOS.293/IND/2012& C.O.NO.65/IND/2012 2 (APPEALS)-I (IN SHORT LD.CIT(A)], INDORE DATED 0 5.03.2012 WHICH ARE ARISING OUT OF THE ORDER U/S 147/143(3) DATED 21.12 .2010 FRAMED BY ACIT-2(1), INDORE. 2. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER; I ITA NO.293/IND/2012, ASSESSMENT YEAR 2008-09 ON THE FACTS AND IN LAW AND IN THE CIRCUMSTANCES O F THE CASE THE LD.CIT(A) ERRED IN :- 1. THE LD. CIT (A) HAS ERRED IN TREATING THE INCOME OF RS. 118,57,282/- EARNED FROM SALE AND PURCHASE OF SHARE AS STCG INS TEAD OF BUSINESS INCOME WITHOUT CONSIDERING THE MAGNITUDE, INTENTION , FREQUENCY OF TRANSACTIONS WHICH REFLECTS MODUS OPERANDI OF ASSES SEE OF SHARE BUSINESS AS AN ADVENTURE IN THE NATURE OF TRADE. 2. THE LD CIT (A) HAS ERRED IN NOT APPRECIATION THE FACT THAT ASSESSEE HAS PURCHASED SHARES OF A VERY LARGE AMOUNT OF RS. 12,0 2,54,365/- AND SOLD THE SHARES FOR RS. 14,20,85,990/- . THESE FIGURES THEMSELVES SPEAK WHICH IS THE PRIME ACTIVITY AND THAT IS THE DOMINANT INTE NTION OF THE ASSESSEE. THE MAGNITUDE OF SHARE TRANSACTION IS ON SO HIGHER SIDE THAT IT CANNOT BE SAID THAT MAIN ACTIVITY OF THE ASSESSEE WAS OF DOCTOR'S PROFESSION. 3. APPRECIATING THE ASSESSEE'S VERSION THAT HE IS A LEADING EYE SURGEON HAVING NO TIME FOR CARRYING OUT SHARE BUSINESS AND SHARE BUSINESS IS NOT OF HIS LINE, IT MAY BE MENTIONED THAT IT IS NOT NECESS ARY THAT A PERSON SHOULD ENGAGE PHYSICALLY FOR CARRYING OUT SUCH BUSINESS TH AT TO WHEN THE ASSESSEE IS HAVING TIME FOR DOING SPECULATIVE BUSINESS. 3. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER ;- C.O. NO.65/IND/2012 (ASSESSMENT YEAR 2008-09) 01. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT- (A) APPRECIATING THE SUBMISSIONS MADE BEFORE HIM WA S FULLY JUSTIFIED IN TREATING THE ADDITION OF RS. 1,18,57,282/- EARNED F ROM SALE AND PURCHASE OF SHARES TRANSACTIONS AS SHORT TERM CAPITAL GAIN INST EAD OF ADVENTURE IN THE NATURE OF TRADE AS BUSINESS INCOME WITH CONSIDERING THE MAGNITUDE, RAJEEV CHOUDHARY ITA NOS.293/IND/2012& C.O.NO.65/IND/2012 3 DOMINANT INTENSION AND NATURE OF SHARES TRANSACTION S AS AN INVESTMENT. A) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT- (A) APPRECIATING THE SUBMISSIONS MADE BEFORE HIM WA S FULLY JUSTIFIED IN TREATING THE INVESTMENT IN SHARES AND DEBENTURES OF RS. 4,02,19,282/- FROM HIS OWN FUNDS LIKE OTHER INVESTMENT IN PPF AND FIXE D DEPOSITS, IT WOULD MAKE NO DIFFERENCE EVEN IF THE TRANSACTION IS A SIN GLE, MULTIPLE OR ISOLATED. B) IN THE ASSESSEE'S CASE THE TRANSACTIONS ARE OUT SIDE THE LINE OF PROFESSION OF MEDICAL. THE CHARACTER OF THE TRANSACTION CANNOT SOLELY BE DETERMINED UPON THE APPLICATION OF ANY ABSTRACT RULE, PRINCIPL E OR TEST BUT MUST DEPEND UPON FACTS AND CIRCUMSTANCES OF THE CASE. C) IT IS FURTHER SUBMITTED THAT THE INVESTMENT IN S HARES/DEBENTURES WITH A VIEW TO REALIZE BETTER PRICE, WITHOUT ANYTHING MORE , IS CONSISTENT WITH THE REALIZATION OF CAPITAL INVESTMENT AND SURPLUS RECEI VED BY THE ASSESSEE WILL NOT BE TRADING OR BUSINESS PROFIT. 02. THAT THE LEARNED CIT(A) HAS CONFIRMED THE DISAL LOWANCE MADE BY THE LEARNED AO OF RS. 2,15,542/- BY INVOKING THE PROVIS ION OF SECTION 14A TO BE READ WITH RULE 8D OF IT RULES, 1962 WITHOUT POINTIN G OUT HIS DIS-SATISFACTION FOR CLAIM OF EXPENDITURE INCURRED BY THE ASSESSEE F OR EARNING DIVIDEND INCOME OF RS.4,37,354/-. LOOKING TO THE FACTS AND C IRCUMSTANCES OF THE CASE, THE APPELLANT PROVIDED FULL DETAILS OF EXPENSES AT RS. 5,27,267/- OUT OF WHICH IS ALREADY DISALLOWED OF RS. 66,700/- FOR LON G TERM CAPITAL GAIN WHICH DOES NOT FORM PART OF TOTAL INCOME. FURTHER DISALLO WANCE OF RS. 2,15,542/- OUT OF DIVIDEND INCOME OF RS. 4,37,354/- FOR WHICH ASSESSEE HAS NOT INCURRED ANY EXPENDITURE DIRECT OR INDIRECT IN RELA TION TO DIVIDEND INCOME WHICH IS NOT FORM PART OF TOTAL INCOME. IT IS THEREFORE PRAYED THAT THE APPEAL SO FILED BY THE DEPARTMENT MAY KINDLY BE DISMISSED AS THERE IS NO MERIT IN THE APPEAL SO FILED. 4. BRIEF FACTS AS CULLED OUT FROM THE RECORDS ARE T HAT THE ASSESSEE IS AN INDIVIDUAL AND PRACTICING AS A DOCTOR UNDER SOLE PROPRIETORSHIP CONCERN M/S. CHAUDHARY EYE & RETINA RESEARCH CENTRE . E-RETURN OF INCOME FILED ON 29.05.2008 DECLARING TOTAL INCOME O F RS.3,14,17,278/-. CASE WAS SELECTED FOR SCRUTINY AN D NECESSARY NOTICE U/S 143(2) OF THE ACT WAS DULY SERVED UPON T HE ASSESSEE. RAJEEV CHOUDHARY ITA NOS.293/IND/2012& C.O.NO.65/IND/2012 4 DURING THE COURSE OF ASSESSMENT PROCEEDINGS LD. ASS ESSING OFFICER IN SHORT LD.AO) OBSERVE THAT THE ASSESSEE APART F ROM EARNING PROFESSIONAL INCOME BY RUNNING M/S. CHAUDHARY EYE & RETINA RESEARCH CENTRE HAS ALSO EARNED SUBSTANTIAL INCOME FROM PURCHASE AND SALE OF EQUITY SHARES WHICH INCLUDED LONG TERM CAPITAL GAIN AT RS.35,22,054/- AND SHORT TERM CAPITAL GAIN AT RS.1, 18,57,282/-. LD. ASSESSING OFFICER WAS SATISFIED WITH THE CLAIM OF LONG TERM CAPITAL GAIN OF RS.35,22,054/-. THE LD. ASSESSING OFFICER E XAMINED IN DETAIL ABOUT THE PROFIT FROM PURCHASE AND SALE OF EQUITY S HARES AT RS.1,18,57,282/- BY CALLING NECESSARY DETAILS OF TH E EQUITY SHARES PURCHASED AND SOLD AND FINANCIAL LEDGER FOR THE TR ANSACTIONS CARRIED OUT DURING THE YEAR. AFTER GOING THROUGH SUBMISSION S MADE BY THE ASSESSEE AS WELL AS FACTS AVAILABLE ON RECORD LD. A O CAME TO A CONCLUSION THAT THE ALLEGED PROFIT OF RS.1,18,57,28 2/- IS A PROFIT FROM RUNNING OF SHARE BUSINESS WHICH IS IN AN ADVENTURE IN THE NATURE OF BUSINESS AND THE ASSESSEE HAS WRONGLY CLAIMED THE B ENEFIT OF LOWER TAX RATE BY SHOWING IT HAS SHORT TERM CAPITAL GAIN. LD. ASSESSING OFFICER ALSO MADE DISALLOWANCE U/S 14A OF THE ACT A T RS.2,15,542/-. ACCORDINGLY, THE INCOME OF THE ASSESSEE WAS ASSESSE D AND COMPUTED IN THE FOLLOWING MANNER: STCG SHOWN IN RETURN TO BE TREATED AS BUSINESS INCO ME 1,18,57,282/- ADD: EXPENSES NOT ALLOWABLE PERTAINING TO LTCG CLAIMED EXEMPTED AS PER NOTE ABOVE 66,7 00/- 1,19,23,982/- WITH THE ABOVE REMARKS THE TOTAL INCOME IS COMPUTED AS UNDER: RAJEEV CHOUDHARY ITA NOS.293/IND/2012& C.O.NO.65/IND/2012 5 A) PROFIT AND GAINS OF BUSINESS OR PROFESSION 1,78,51,212 B) PROFIT AND GAIN OF SPECULATION BUSINESS 72,551 C) INCOME FROM SHORT TERM CAPITAL GAIN TREATED AS BUSINESS INCOME AS DISCUSSED ABOVE 1 ,19,23,982 D) INCOME FROM OTHER SOURCES A) DIVIDEND INCOME NOT EXEMPTED AS DISCUSSED ABOVE 2,15,542 B) INCOME FROM INTERESTS 18,19,034 C) WINNING FROM LOTTERIES ETC. 500 D) MINORS, TOTAL INCOME CLUBBED 9,386 20,44,46 2 GROSS TOTAL INCOME 3,18,92,207 LESS: A) DEDUCTIONS U/S 80-C 1,00,000 B) DEDUCTIONS U/S 80-G 20,500 (-) 1,20,500 TOTAL INCOME 3,17,71,707/- ROUNDED OFF 3,17,71,700/- INCOME ASSESSEE UNDER SECTION 143(3) OF IT, ACT, 19 61 AT RS.3,17,71,700/- 5. AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFORE TH E LD. CIT(A) AND PARTLY SUCCEEDED AS LD. CIT(A) CONFIRMED THE DISALL OWANCE U/S 14A OF THE ACT AT RS.2,15,542/- AND ALLOWED THE ASSESSEES CLAIM OF PROFIT FROM PURCHASE AND SALE OF EQUITY SHARES HELD FOR LE SS THEN ONE YEAR AT RS.1,18,57,282/- AS SHORT TERM CAPITAL GAIN. 6. AGGRIEVED REVENUE IS NOW IN APPEAL BEFORE THE TR IBUNAL AGAINST THE FINDING OF LD. CIT(A) WHEREAS THE ASSESSEE HAS RAIS ED CROSS OBJECTION RAISING TWO ISSUES; FIRSTLY SUPPORTING THE FINDING OF LD. CIT(A) RELATING TO CLAIM OF SHORT TERM CAPITAL GAIN FROM PURCHASE & SALE OF EQUITY SHARES AND ALSO RAISED GROUND AGAINST THE DISALLOWA NCE CONFIRMED BY RAJEEV CHOUDHARY ITA NOS.293/IND/2012& C.O.NO.65/IND/2012 6 THE LD. CIT(A) U/S 14A OF THE ACT AT RS.2,15,542/-. 7. WE WILL FIST TAKE THE REVENUES APPEAL WHEREIN S OLE ISSUE RAISED IS AGAINST THE FINDING OF LD. CIT(A) TREATING THE INCO ME OF RS.1,18,57,282/- AS PROFIT FROM PURCHASE & SALE OF SHARES AS SHORT TERM CAPITAL GAIN INSTEAD OF BUSINESS INCOME WITHOU T CONSIDERING THE MAGNITUDE, INTENTION, FREQUENCY ON TRANSACTIONS WHI CH REFLECTS MODUS OPERANDI OF THE ASSESSEE OF SHARE BUSINESS AS ADVENTURE IN THE NATURE OF TRADE. 8. LD. DEPARTMENTAL REPRESENTATIVE (DR) VEHEMENTLY ARGUED SUPPORTING FOLLOWING FINDINGS OF LD. ASSESSING OFFI CER: THE SUBMISSION OF THE ASSESSEE HAS BEEN DULY CONSI DERED IN REFERENCE TO THE - CIRCULAR OF THE CBDT NO. 4/2007, BUT NOT ACCE PTED BECAUSE OF THE FOLLOWING REASONS:- (I) THE ASSESSEE IS DERIVING INCOME FROM THE F & 0 AS WELL AS SPECULATION SHARE TRADING WHICH ARE PURELY BUSINESS INCOME. THE PERSON WHO IS IN THE TRADING NEVER CAN BE AN INVESTOR BECAUSE BY THE PAT TERN ITSELF IT IS DIFFICULT TO DISTINGUISH THE SHORT TERM CAPITAL GAIN AND BUSI NESS TRADING IN SHARES. (II) THE FREQUENCY OF THE TRANSACTIONS ARE ALSO A GAINST THE ASSESSEE. THE SALE VALUE OF THE SHARES ARE IN CRORES, THE NUMBER OF SCRIPS ARE HUGE AND BY NO STRETCH OF IMAGINATION IT CAN BE SAID AS 'INVEST MENT'. THEREFORE IN TOTALITY OF THE FACTS AND THE CIRCUMST ANCES THE STCG SHOWN OF RS. 1,18,57,2821- IS TREATED AS BUSINESS INCOME FRO M SHARE TRADING. I AM ALSO SATISFIED THAT THE ASSESSEE HAS SUBMITTED INAC CURATE PARTICULARS WHICH ATTRACT PENALTY U/S271 (1)( C). ACCORDINGLY PENALTY U/S 271 (1 )(C ) IS INITIATED. THE ABOVE ISSUE IS ALSO DEALT BY THE HON'BLE ITAT, MUMBAI IN TWO RECENT CASES AND HELD AS UNDER :- (A) SADHANA NABERA VS. ACIT (ITAT MUMBAI) DATED 251 0512010 RAJEEV CHOUDHARY ITA NOS.293/IND/2012& C.O.NO.65/IND/2012 7 TESTS LAID DOWN TO DETERMINE WHETHER INCOME FROM SH ARES IS 'BUSINESS' INCOME OR 'CAPITAL GAINS' THE ASSESSEE, A DIRECTOR AND SHAREHOLDER IN A COMPANY ENGAGED IN SHARE TRADING, RETURNED INCOME OF RS.78,89,499 EARNED BY HER ON TRANSFER OF SHARES AS A 'SHORT-TERM CAPITAL GAIN'. THE A 0 TOOK THE VIEW THAT AS THERE WERE VOLUMINOUS TRANSACTIONS, THE ASSESSEE WAS ENGA GED IN SHARE TRADING AND THE INCOME WAS ASSESSABLE AS 'BUSINESS INCOME'. THIS WAS UPHELD BY THE CIT (A). ON APPEAL, HELD DISMISSING THE APPEAL: (I) THE LEGAL PRINCIPLES ARE WELL SETTLED VIZ. THAT: (A) WHETHER A TRANSACTION OF SALE AND PURCHASE OF SHARES IS A TRADING OR INVESTMENT TRANSACTION IS A MIXED QUESTION OF LAW AND FACTS, (B) IT IS POSSIBLE FOR AN ASSESSEE TO BE BOTH AN IN VESTOR AS WELL AS DEALER IN SHARES, (C) WHETHER A PARTICULAR HOLDING IS BY W AY OF INVESTMENT OR OF STOCK-IN-TRADE IS A MATTER WITHIN THE KNOWLEDGE OF THE ASSESSEE AND IT IS FOR THE ASSESSEE TO PRODUCE EVIDENCE FROM THE RECOR DS AS TO WHETHER HE MAINTAINED ANY DISTINCTION BETWEEN SHARES HELD AS I NVESTMENT AND THOSE HELD AS STOCK-IN-TRADE, (D) THE TREATMENT IN THE BOOKS BY AN ASSESSEE IS NO T CONCLUSIVE AND IF THE VOLUME, FREQUENCY AND REGULARITY AT WHICH TRANSACTI ONS ARC CARRIED OUT INDICATE SYSTEMATIC AND ORGANIZED ACTIVITY WITH PRO FIT MOTIVE THEN IT BECOMES BUSINESS PROFIT NOT CAPITAL GAIN, (E) PURCHASE WITH INTENTION TO RESALE CAN CONSTITUT E CAPITAL GAINS OR BUSINESS PROFIT DEPENDING ON CIRCUMSTANCES LIKE QUA NTITY OF PURCHASE AND NATURE OF ACTIVITY, (F) NO SINGLE FACT HAS ANY DECISIVE SIGNIFICANCE AN D THE QUESTION MUST BE ANSWERED DEPENDING ON THE COLLECTIVE EFFECT OF ALL RELEVANT MATERIAL BROUGHT ON RECORD. (II) THESE PRINCIPLES HAVE TO BE APPLIED TO THE FOL LOWING FACTS: (A) THE ASSESSEE ENTERED INTO TRANSACTION OF PURCH ASES AND SALE OF SHARES OF ABOUT 32 COMPANIES TOTALLING RS. 1,87,83, 440 WHICH WERE SOLD FOR RS.2,69, 71,368. THOUGH MOST TRANSACTIONS WERE EFFE CTED BY ACTUAL DELIVERY, THE HOLDING PERIOD WAS LESS THAN 6 MONTHS. MOST OF THE GAIN WAS EARNED IN SHARES HELD FOR A PERIOD FOR SHORT PERIODS; (B) IN THE EARLIER YEARS THE ASSESSEE HAS NIL OR SMALL LONG TERM RAJEEV CHOUDHARY ITA NOS.293/IND/2012& C.O.NO.65/IND/2012 8 CAPITAL GAIN WHICH INDICATES THAT HOLDING INVESTMENTS FOR A LONGER PERIOD IS NOT THE MAIN INTENTION EXCEPT FEW SCRIPS WHICH ARE CARRIED OVER WITHOUT ANY TRANSACTIONS YEAR AFTER YEAR. ACCORDING LY TO THE EXTENT OF INVESTMENT ACTIVITY IN SHARES ONE CAN SEE THAT THE ASSESSEE HAS INVESTED IN SOME 5 TO 6 COMPANIES SCRIPS WHICH HAVE BEEN CARRIED OVER FROM YEAR TO YEAR IN WHICH THERE ARE NO FREQUENT OR LARGE NUMBER OF TRANSACTIONS AND THESE INVESTMENTS IN SHARES CAN BE CONSIDERED AS AS SESSEE'S PROPER 'INVESTMENTS'; (C) PURCHASE AND SALE OF SHARES IN SHORT PERIOD INDICATES THAT THE ASSESSEE PURCHASED THE SHARES WITH A MOTIVE TO EARN PROFIT IN SHORT PERIOD; (D) THE ASSESSEE BORROWED FUNDS TO PURCHASE SHARES; (E) THE DIVIDEND RECEIVED WAS MEAGER; (III) THESE FACTS INDICATE THAT THE INTENTION OF THE ASSESSEE WAS TO GAIN PROFITS BY DEALING IN SHORT TERM PERIOD ONLY. CONSEQUENTLY, THE INCOME FROM SALE OF SHARES WAS ASSESSABLE AS 'INCOME FROM BUSINESS' AND NOT 'SHORT-TERM CAPITAL GAINS'; (8) JAYSHREE PRADIP SHAH VS ACIT C-25(2) I. T.A NO. 360BIMUML07 (ASSESSMENT YEAR: 2004-05) D ATED 24TH FEB. 2010 KEEPING IN MIND, THE ABOVE BROAD PRINCIPLES, WE SHA LL NOW EXAMINE THE CASE OF THE ASSESSEE. THE ASSESSEE DURING THE PREVIOUS Y EAR HAD ENTERED INTO TRANSACTIONS OF PURCHASE OF SHARES OF ABOUT 200 COMPANIES TOTALING TO RS. 1,01,51,786/- AND ALL THOSE SHARES WERE SOLD FOR A VALUE OF RS. 1, 10,45,798/-. THE ABOVE TRANSACTIONS WERE EFFECTED B Y ACTUAL DELIVERY OF SHARES AT THE LIME OF PURCHASE AND SALE. BESIDES SUCH TRANSACTIONS, THE ASSESSEE HAD ALSO ENTERED INTO TRANSACTIONS OF PURCHASE AND SALE OF SHARES WHERE THERE WAS NO ACTUAL DELIVERY. THE NET PROFIT AFTER EXPENSES, ON SUCH TRANSACTIONS WAS RS. 36.503/-. BOTH THE AFORESAID T RANSACTIONS WERE IN RESPECT OF TRANSACTION OF PURCHASE AND SALE OF SHAR ES WHERE THE HOLDING PERIOD WAS LESS THAN 12 MONTHS. THE PROFIT ON TRANSACTION AND SALE OF SHARES WHERE THERE WAS NO DELIVERY WAS OFFERED TO L AX BY THE ASSESSEE AS SPECULATIVE INCOME UNDER THE HEAD BUSINESS INCOME. THE INCOME FROM OTHER TRANSACTIONS WHERE THERE WAS ACTUAL DELIVERY WAS CL AIMED BY THE ASSESSEE TO BE STCG. SUCH TRANSACTIONS WERE ABOUT 800 NUMBER DURING THE PREVIOUS YEAR. THE MAXIMUM HOLDING PERIOD WAS FROM 1 DAY TO MAXIMUM 6 MONTH. THE CONDUCT OF THE ASSESSEE IN SHOWING INCOME FROM DELIVERY BASED RAJEEV CHOUDHARY ITA NOS.293/IND/2012& C.O.NO.65/IND/2012 9 TRANSACTIONS AS STCG AND NON DELIVERY BASED TRANSAC TION AS BUSINESS INCOME ONLY SHOWS THAT BUT FOR ACTUAL DELIVERY EVEN INCOME FROM INCOME FROM THOSE TRANSACTION WOULD HAVE BEEN CONSIDERED A S SPECULATIVE INCOME AND BUSINESS INCOME. IN OTHER WORDS THE NATURE OF S PECULATIVE TRANSACTIONS HAVE BEEN CONSIDERED BY THE ASSESSEE HERSELF 10 CONSTITUTE BUSINESS. THE INCOME FROM DELIVERY BASED TRANSACTIONS ARC SOUGHT TO BE PROJECTED AS STCG ONLY BECAUSE: THERE WAS ACTUAL DELIVERY AND BECAUSE THEY WERE SHOWN AS INVESTMENTS IN THE BOOKS OF ACCOUNTS OF THE ASSESSE E. WE ARC OF THE VIEW THAT THE ABOVE TWO ASPECTS WILL NOT MAKE ANY DIFFER ENCE TO THE NATURE OF TRANSACTION WHERE DELIVERY IS EFFECTED CONSIDERING THE OTHER FACTS PREVAILING THE CASE OF THE ASSESSEC VIZ., (A) THE VOLUME AND FREQUENCY OF THE' TRANSACTIONS WHICH WERE ABOUT 800 IN NUMBER WHERE THE HOLDING PERIOD WAS BETWEEN MINI MUM OF 1 DAY TO MAXIMUM O( 6 MONTHS. (B) SHARES OF MORE THAN 200 COMPANIES HAD BEEN BO UGHT AND SOLD BY THE ASSESSEE DURING THE PREVIOUS YEAR. (C) THE VOLUME OF PURCHASE AND SALE (DELIVERY BASED ) OF THE ASSESSEE DURING THE PREVIOUS YEAR WAS RS. 1,01,51,786/ AND RS. 1,10 ,45,798/- RESPECTIVELY. THE VALUE OF INVESTMENT AS ON 31.3.2004 WAS ONLY RS . 11,14,054/-. (D) THE PURCHASE AND SALE OF SHARES WAS THE ONLY ACTIVITY OF THE-ASSESSEE. (E) THE PERIOD OF HOLDING BEING VERY SHORT IT IS RE ASONABLE TO PRESUME THAT THE PURCHASE WAS MADE WITH AN INTENTION TO RESELL. (F) THE SCALE OF ACTIVITY IS SUBSTANTIAL. (G) THE TRANSACTIONS WERE CONTINUOUS AND REGULAR BE SIDES BEING SYSTEMATIC. (H) BORROWED FUNDS HAD BEEN USED FOR PURCHASE OF SH ARES LEARNED COUNSEL FOR THE ASSESSEE'S CONTENTION THAT BORROWED FUNDS W ERE USED TO BUY IMMOVABLE PROPERTY REMAINS UNSUBSTANTIATED AND THE FINDINGS O F THE ASSESSING OFFICER TO THE CONTRARY SHOULD THEREFORE PREVAIL. (I) SUBSTANTIAL TIME DEVOTED BY THE ASSESSEE TO THE ACTIVITY OF PURCHASE AND SALE. IN FACT, THE ONLY SOURCE OF INCOME IN THE PROFIT AND LOSS ACCOUNT IS FROM PURCHASE AND SALE OF SHARES. (J) ALL THE SHARES SOLD AND PURCHASED ARC OF LISTED COM PANIES. (K) COMPOSITION OF THE DIVIDEND INCOME IS MEAGER, W HICH GOES TO SHOW THAT RAJEEV CHOUDHARY ITA NOS.293/IND/2012& C.O.NO.65/IND/2012 10 THE ASSESSEE NEVER LOCKED FOR RETURNS FROM INVESTME NTS. IN THE LIGHT OF THE ABOVE CIRCUMSTANCES PREVAILING IN THE CASE OF THE ASSESSEE WE ARE OF THE VIEW THAT THE CONCLUSION OF THE REVENUE AUTHORITIES THAT THE INCOME FROM SALE OF SHARES DECLARED BY THE ASSESSEE AS STCG IS INCOME FROM BUSINESS IS CORRECT AND CALLS FOR NO IN TERFERENCE. 9. PER CONTRA LD. COUNSEL FOR THE ASSESSEE HAS MADE FOLLOWING WRITTEN SUBMISSIONS: 02. REGARDING SHORT TERM/LONG TERM CAPITAL GAIN. ASSESSEE MADE INVESTMENT IN SHARES AND TREATED THE SAME AS CAPITAL GAINS BOTH LONG TERM AND SHORT TERM CAPITAL GAINS WAS EAR NED. INCOME FROM NON DELIVERY TRANSACTIONS WAS OFFERED AS BUSINESS INCOM E. AO TREATED SHORT TERM CAPITAL GAIN AS BUSINESS INCOME HOLDING THAT A LL THOUGH ASSESSEE DEALT IN LIMITED NUMBER OF SHARES, BUT THE VOLUME OF TRAN SACTIONS WAS HIGH. NO FUNDS WERE BORROWED FOR MAKING INVESTMENT IN SHARES AND DIVIDEND EARNED ON THE SAME. THESE FACT NOT BEEN DISPUTED BY THE AO . IT WOULD MAKE NO DIFFERENCE EVEN IF THE TRANSACTION IS A SINGLE, MUL TIPLE OR ISOLATED. THE CHARACTER OF THE TRANSACTION CANNOT BE SOLELY B E DETERMINED UPON THE APPLICATION OF ANY ABSTRACT RULE, PRINCIPLE OR TEST BUT MUST DEPEND UPON FACTS AND CIRCUMSTANCES OF THE CASE. HE DOES NOT DEAL IN THE PURCHASE AND SALE OF SHARES DAILY OR REGULARLY LIKE TRADERS. HE HAS NOT ABSORBED HIMSELF IN THE BUSINESS OF SHARES. HE PURCHASE AND SALE SHARES IT AND WHEN ADVISED BY THE EXPERTS AND BROKERS. THE RATIOS OF THIS CASE ARE SIMILARLY WITH THE CASE OF ASSISTANT COMMISSIONER OF INCOME TAX VS. SHRI SANJAY SONI (2012) 20 IT] 45 4. HELD BY THE ITA T INDORE BENCH, INDORE IS IN FAVOUR OF THE ASSESSEE. THE PHOTOCOPY OF THE SAME HAS ALREADY BEEN FILED. THE ITAT INDORE BENCH, INDORE APPLYING THE JUDGMENT OF CIT VS. SHRI OMPRAKASH SURI (2012) 19 I T] 326 (MP) .. HELD THAT ASSESSEE INVESTED TO EARN DIVIDEND - NO FUNDS WERE BORROWED FOR MAKING INVESTMENT - INCOME IS TREATED AS SHORT TERM CAPITA L GAINS. SIMILARLY, ASSESSEE'S HAVE TWO PORT FOLIOS, ONE FOR INVESTMENT AND OTHER FOR SHARE TRADING. SINCE PERIOD OF HOLDING OF INVESTMEN T IN SHARES IS LESS THAN ONE YEAR, CAPITAL GAIN IS TO BE TREATED AS SHORT TE RM. AS ALREADY STATED IN OUR EARLIER SUBMISSION THE CON SISTENCY IS OBSERVED BY THE DEPARTMENT IN THE CASE OF ASSESSEE RIGHT FROM A .Y. 2001-02 HAS TO BE FOLLOWED. IN ALL THESE PREVIOUS YEARS LOSSES/INCOME FROM PURCHASE AND SALE RAJEEV CHOUDHARY ITA NOS.293/IND/2012& C.O.NO.65/IND/2012 11 OF SHARES HAS BEEN TREATED BY THE DEPARTMENT AS CAP ITAL LOSS/GAIN. HE. HAS. HANDSOME MONEY. HE TRIES HIS LUCK BY MAKING INVESTM ENT IN SHARES IN GOOD QUANTITY. HE HAS ADOPTED THE MODE OF INVESTMENT IN SHARES BECAUSE MONEY INVESTED THEREIN IS READILY REALIZABLE, WITHOUT ANY EFFORTS. THE ASSESSEE'S SHARES ACTIVITY TREATED AS INVESTMEN T IN EARLIER YEARS CANNOT BE TREATED AS BUSINESS IN SUBSEQUENT YEAR IF FACTS ARE THE SAME. RELIANCE IS PLACED ON THE DECISION OF HIGH COURT OF BOMBAY IN T HE CASE OF COMMISSIONER OF INCOME TAX VS. GOPAL PUROHIT INCOME TAX APPEAL N O. 1121 0/2009 DATED 06.01.2010. IT IS THEREFORE SUBMITTED THAT THE ORDER OF THE CIT (A) BE UPHELD AND APPEAL OF THE DEPARTMENT BE DISMISSED AND CROSS OBJECTION OF THE ASSESSEE BE ALLOWED. HE FURTHER SUBMITTED THAT ON PERUSAL OF BALANCE SHEET FILED BY RESPONDENT FRO M A. Y. 2002-03 TO A.Y. 2011-12, YOU WILL APPRECIATE THE FACTS THAT THE ASS ESSEE IS ALWAYS MAKING INVESTMENTS AS UNDER: I) SHARES. AND DEBENTURES. II) PUBLIC PROVIDENT FUND. III) FIXED DEPOSITS. FINANCIAL YEAR SHARES./ DEBENTURE PPF FIXED DEPOSIT 2001-02 75,94,928 2,21,860 16,68,920 2002-03 81 22637 322757 18,09,668 2003-04 74,75,564 4,19,888 -- 2004-05 1,91,63,008 5,27,212 1,63,92,724 2005-06 3,42,86,111 6,43,589 41,25,229 2006-07 4,66,25,677 7,66,009 -- 2007-08 4,02,19,282 8,97,290 2,58,81,088 2008-09 3,18,64,816 10,37,064 7,05,07,582 2009-10 3,27,45,371 11,90,869 7,54,71,050 2010-11 9,98,77,183 13,55,639 3,06,37,308 2011-12 9,91,15,979 15,65,801 3,03,19,554 STATEMENT OF DIVIDEND, PPF INTEREST, FUR INTEREST A ND LONG TERM & SHORT TERM GAIN & LONG TERM SHORT TERM GAIN RAJEEV CHOUDHARY ITA NOS.293/IND/2012& C.O.NO.65/IND/2012 12 F.Y DIVIDEND INCOME PPF INTEREST F.D. INTEREST LONG TERM GAIN SHORT TERM GAIN 2001-02 13,289 21,860 67,322 -- 31,40,245 2002-03 1,76,589 40,897 1,40,746 -- (-)49,13,018 2003-04 3,69,254 27,131 8,150 -- 63,18,449 2004-05 2,42,162 37,324 3,92,724 15,97,049 1,02,38,693 2005-06 1,23,550 46,377 2,38,676 97,48,386 32,29,256 2006-07 3,29,368 52,420 99,339 13,67,339 32,79,855 2007-08 4,37,354 77281 17,90,494 35,22,054 1,18,57,282 2008-09 6,33,223 71,274 5612 179 (-)25,31,605 8,89,162 2009-10 14,05,361 84,805 65,84,736 (-)21,92,310 33,03,469 2010-11 6,61,670 95,270 59,08,981 85,35,041 2,83,525 2011-12 4,59,287 1,11,162 28,68,793 (-)5,03,234 7,98,900 STATEMENT REGARDING PROFESSIONAL INCOME SHORT TERM GAIN AND INVESTMENT IN SHARES DURING THE YEARS RELEVANT TO A.Y. 2003-04 TO A.Y. 2008-09. S.NO. A.Y PROFESSIONAL INCOME(RS.) INCOME FROM SHARES (STCG)(RS.). INVESTMENT IN SHARES (RS.) 1 2203-04 61,04,167 (-)49,13,018 78,34,600 2 2004-05 65,73,595 63,18,449 69,84,657 3 2005-06 63,90,950 82,88,624 1,65,21,224 4 2006-07 85,00,933 32,29,256 3,57,14,124 5 2007-08 87,85,201 32,79,854 4,66,25,676 6 2008-09 1,78,51,212 1,18,57,282 4,02,19,282 THE NATURE OF TRANSACTION OF SALE AND PURCHASE OF S HARES HAS REMAINED THE SAME YEAR AFTER AND THE ASSESSEE HAS CONSISTENTLY S HOWN THEM AS INVESTMENT. AFTER CONSIDERING THE ABOVE STATEMENT C IT(A) 'IT WAS CONSIDERED AS HIS INVESTMENT', HELD THAT PURCHASES OF SHARES W ERE MADE BY HIS OWN SAVINGS. SO THAT, INCOME FROM PURCHASE AND SALE OF SHARES BY THE ASSESSEE DESERVES TO BE TREATED AS SHORT TERM CAPITAL GAIN O NLY. IT IS MENTIONED IN CIT(A) ORDER DATED 30. 05.2011 ON PAGE NO. 12 TO 13 . 01. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) APPRECIATING THE SUBMISSIONS MADE BEFORE HIM WAS FU LLY JUSTIFIED IN TREATING THE ADDITION OF RS. 1,18,57,282/- EARNED FROM SALE AND PURCHASE OF SHARES TRANSACTIONS AS SHORT TERM CAPITAL GAIN INSTEAD OF ADVENTURE IN THE NATURE OF TRADE AS BUSINESS INCOME WITH CONSIDERING THE MAGNI TUDE, DOMINANT INTENSION AND NATURE OF SHARE TRANSACTIONS AS AN IN VESTMENT. IT IS SUBMITTED THAT THE POINT HAS BEEN DISCUSSED BY LEARNED CIT(A) IN PARA 2.2, 2.3, 2.4, 2.5 & 2.6 .. THE ASSESSEE IS RELIES ON THE SAME. RAJEEV CHOUDHARY ITA NOS.293/IND/2012& C.O.NO.65/IND/2012 13 AS ALREADY STATED ABOVE THE CONSISTENCY IS OBSERVED BY THE DEPARTMENT IN THE CASE OF ASSESSEE RIGHT FROM A.Y. 2001-02 TO 200 7-08 EXCEPT IN THE A. Y. 2004-05 REOPENED THE CASE U/S, 147 OF IT ACT. IN AL L THESE PREVIOUS YEARS LOSSES/INCOME FROM PURCHASE AND SALE OF SHARES HAS BEEN TREATED BY THE DEPARTMENT AS CAPITAL LOSS/GAIN. THE SAID ISSUE HAS ALREADY BEEN DECIDED BY THE LEARNED CIT(A) IN THE ASSESSEE'S APPEAL NO. IT-283/2009-10/40 DATED 30.05.2011 IN FAVOUR OF THE ASSESSEE. THE DEPARTMEN T HAS BEEN FILED THE APPEAL AGAINST THE CIT(A) ORDER FOR THE A.Y. 2004-0 5 BEFORE ITAT INDORE BENCH, INDORE WHICH IS PENDING FOR ORDER. MOREOVER FOLLOWING POINTS NEEDS ATTENTION:- 1. THE ASSESSEE IS RENOWNED EYE SURGEON AND ALL THE TIME HE IS BUSY IN HIS PROFESSION. HE DOES NOT HAVE ANY BUSINESS AT ALL. H E HAS EARNED MONEY IN PROFESSION WHICH HE INVEST BY WAY OF FIXED DEPOSITS IN THE BANKS AND ALSO PURCHASED AND SALE OF SHARES OF VARIOUS INDIAN COMP ANIES. II. HE DOES NOT HAVE ANY SHOP/OFFICE FOR TRADING IN SHARES. HE DOES NOT DEAL IN THE PURCHASE AND SALE OF SHARES REGULARLY. IT WOULD MAKE NO DIFFERENCE EVEN IF THE TRANSACTION IS A SINGLE, MULTIPLE OR ISOLATE D. III. HE HAS NOT ABSORBED HIMSELF IN THE BUSINESS OF SHARES. HE PURCHASE AND SALE SHARES IT AND WHEN ADVISED BY THE EXPERTS AND/ OR BROKERS, SO THAT HE MAY INVEST HIS OWN MONEY PROFITABLY. FOR THIS PURPO SE HE DOES NOT BORROW MONEY FROM OTHER PERSONS. IV, HE HAS HANDSOME MONEY. HE TRIES HIS LUCK BY MAK ING INVESTMENT IN SHARES IN GOOD QUANTITY. THE CIT(A) HAS ALREADY GIV EN THE DETAILS OF HIS INVESTMENTS FROM A.Y. 2003-04 TO 2008-09 ON PAGE NO . 11 OF THE ORDER. V. HE HAS ADOPTED THE MODE OF INVESTMENTS IN SHARES BECAUSE MONEY INVESTED THEREIN IS READILY REALIZABLE, WITHOUT ANY EFFORTS. VI. THE CHARACTER OF THE TRANSACTION CANNOT SOLELY BE DETERMINED UPON THE APPLICATION OF ANY ABSTRACT RULE, PRINCIPLE OR TEST BUT MUST DEPEND UPON FACTS AND CIRCUMSTANCES OF THE CASE. VII. IT IS FURTHER SUBMITTED THAT THE INVESTMENT IN SHARES/DEBENTURES WITH A VIEW TO REALIZE BETTER PRICE, WITHOUT ANYTHING MORE , IS CONSISTENT WITH THE REALIZATION OF CAPITAL INVESTMENT AND SURPLUS RECEI VED BY THE ASSESSEE WILL NOT BE TRADING OR BUSINESS PROFIT. RELIANCE IS PLACED ON ITO VS. ROHIT ANAND (2009) 34 SOT 42 (DELHI) AND CIT VS. H.R. STOCK HOLDINGS LTD. (2010) 33 DTR (DEL.) 1 17. RAJEEV CHOUDHARY ITA NOS.293/IND/2012& C.O.NO.65/IND/2012 14 02. THE MAIN OBJECTION OF THE LEARNED AO IS THAT 'A SSESSEE HAS PURCHASED SHARES OF VERY LARGE AMOUNT OF RS 12,02,54,365/- A ND SOLD THE SHARES FOR RS, 14,20,85,990/-. THESE FIGURES THEMSELVES SPEAK TRANSACTION IS ON SO HIRE SIDE SO THAT IT CANNOT BE SAID MAIN ACTIVITY O F THE ASSESSEE WAS OF DOCTOR'S PROFESSION.' I. THE MOST OF THE SHARE TRANSACTIONS ROUTED THROUG H DEMATE ACCOUNT WITH STATE BANK OF INDORE. THE COPY OF DEMATE ACCOUNT RE GARDING INVESTMENT IN SHARES HAVE ALREADY BEEN FILED BEFORE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS, II. THE ASSESSEE HAS TREATED THE ENTIRE INVESTMENT IN THE SHARES AS AN INVESTMENT ONLY AND NOT AS STOCK-IN-TRADE. ANOTHER IMPORTANT ASPECT TO BE CONSIDERED HERE IS THAT THE ASSESSEE IS NOT A SHARE BROKER NOT IS HE HAVING A REGISTRATION WITH ANY STOCK EXCHANGE. THE ASSESSEE INVESTED HIS OWN MONEY IN SHARES/DEBENTURES. THE APPELLANT HAS NOT BORROWE D ANY MONEY FOR INVESTING IN SHARES AND USED HIS OWN SURPLUS FUNDS AND THESE FACT NOT BEEN DISPUTED BY THE AO . IN THIS CONNECTION THE FOLLOWING PAPERS/DOCUMENTS A RE AS UNDER :- A. SUMMARY OF SHORT TERM GAIN ON SHARE TRANSACTIONS COMPANY WISE IS ON PAGE . 10 TO 23 OF PAPER BOOK. B. LEDGER COPY OF INVESTMENT IN SHARES AND SALE OF SHARES DURING THE YEAR UNDER CONSIDERATION IS ON PAGE 2.4 TO 48 OF PAPER B OOK. C. BALANCE SHEET AND PROFIT & LOSS ACCOUNT FOR THE YEAR ENDING 31 ST MARCH, 2008 IS ON PAGE 49. TO 51 OF PAPER BOOK. THE LEARNED CIT(A) IS JUSTIFIED HOLDING THAT THE IN COME DERIVED BY THE ASSESSEE FROM THE SHARE TRANSACTIONS IS A SHORT TER M CAPITAL GAIN. THE RATIOS OF THIS CASE ARE SIMILARLY WITH THE APPE LLANT'S CASE HELD BY JURISDICTIONAL HON'BLE HIGH COURT IN THE CASE OF CI T VS. SHREE OM PRAKASH SUR; (2012) 191TJ 326 (M.P.). HELD - 'THAT ASSESSEE INVESTED TO EARN DIVIDEND - N O FUNDS WERE BORROWED FOR MAKING INVESTMENT - INCOME IS TREATED AS SHORT TERM CAPITAL GAIN''. THE ITAT INDORE BENCH, INDORE APPLYING THE JUDGMENT OF CIT VS .OM PRAKASH SURI; (2012) 19 ITJ 326 (M.P) IS IN FAVOUR OF ASSES SEE IN THE FOLLOWING CASES:- (1) COMMISSIONER OF INCOME TAX VS. SANJAY SONI (20. 12) 20. IT J 454. RAJEEV CHOUDHARY ITA NOS.293/IND/2012& C.O.NO.65/IND/2012 15 (II SHRI MANISH KARWA VS. ACIT - 5(1), INDORE I.T.A . NO. 3O.711ND12,QO.9 ORDER DATED 20.12.2013 (III) SHRI SUSHILKARWA VS. ACIT - 5(1}, INDORE. I.T .A. NO. 3O.811ND/2QO.9 ORDER DATED 20.12.20.3 (IV) SMT. SUDHA KARWA VS. ACIT - 5(1), INDORE I.T.A . NO. 3O.9/1ND/2O.O.9 ORDER DATED 20.12.2013 (V) SHRI VISHNU KARWA VS. ACIT - 5(1), INDORE I.T.A . NO. 31O./LND/200.9 ORDER DATED 20.12.2013 (VI) SHRI SUBHASHCHAND KARWA (HUF) VS. ACIT - 5(1), INDORE I.T.A. NO. 311/1ND/2O.O.9 ORDER DATED 20.12.2013 (VII) SHRI SUSHIL J. KARWA (HUF) VS. ACIT - 5(1), I NDORE I. T .. A. NO .. 312/1ND/2.O.O.9 ORDER DATED 20.12.2013 (VIII) SHRI MUKESH KARWA VS. ACIT - 5(1), INDORE I. T.A. NO. 313/1NDJ2O.09 ORDER DATED 20.12.201 I 3 (IX) SHRI ANQOP KARWA VS .. ACIT - 5(1), INDORE I.T .A. NO. 314/1ND/2O.09 ORDER DATED 20.12.20.13 (X) SHRI ASHISH KARWA VS. ACIT .. 5(1), INDORE I.T. A. NO. 315/1ND/2.O.O.9 ORDER DATED 20.12.20.13 (XI) SMT. ANI KARWA VS. ACIT - 5(1), INDORE I.T.A. NO .. 3461LND/2O.O.9 ORDER DATED 20.12.20.13 (XLL) SMT. SUVARNA KARWA VS. ACIT - 5(1), INDORE I. T.A. NO. 347/1NDJ2O.09 ORDER DATED 20.12.20.13 (XIII) SMT. MATHURA DEVI KALWA VS. ACIT - 5(1), IND ORE I. T.A. NO. 348/1ND/2O.O.9 ORDER DATED 20.12.2013 HON'BLE ITAT MUMBAI BENCHES 'E', MUMBAI IN THE CASE OF ACIT - 19 (3), MUMBAI VS. SHRI SACHIN R. TENDULKAR, ITA NO. 3217/M UM/2014 FOR THE A.Y. 2010-11 AND ITA NO. 1411!MUM/2015 FOR THE A.Y. 2011 -12 DATED 25.01.2017 IN FAVOUR OF THE ASSESSEE. IN THE RESULT , APPEAL IS FILED BY THE REVENUE ARE DISMISSED REGARDING INCOME FROM CAPITAL GAINS. THE COPY OF THE SAME IS ON PAGE 52 TO 80 OF PAPER BOOK. IT IS THEREFORE SUBMITTED THAT THE ORDER OF THE CIT (A) BE UPHELD AND APPEAL OF RAJEEV CHOUDHARY ITA NOS.293/IND/2012& C.O.NO.65/IND/2012 16 THE DEPARTMENT BE DISMISSED AND CROSS OBJECTION OF THE ASSESSEE BE ALLOWED. 10. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED TH E RECORD PLACED BEFORE US AND HAVE CAREFULLY GONE THROUGH THE JUDGM ENTS REFERRED AND RELIED BY THE LD. COUNSEL FOR THE ASSESSEE. ISS UE BEFORE US RAISED BY THE REVENUE IS THAT WHETHER THE INCOME OF RS.1,1 8,57,282/- FROM SALE/PURCHASE OF SHARES EARNED BY THE ASSESSEE DURI NG THE YEAR IS TO BE TAXED AS SHORT TERM CAPITAL GAIN OR AS A BUSINES S INCOME. 11. SUBMISSIONS MADE BY THE LD. COUNSEL FOR THE ASS ESSEE MAINLY INDICATES THAT THE ASSESSEE IS A RENOWNED EYE SURGE ON AND ALL THE TIME HE IS VERY BUSY IN HIS PROFESSION. HE INVESTS HIS PROFESSIONAL INCOME IN FIXED DEPOSITS AND EQUITY SHARES. HE HAS NOT BORROWED ANY MONEY FOR INVESTING IN THE EQUITY SHARES. HE IS CON SISTENTLY SHOWING THE PROFITS/LOSS FROM PURCHASE/SALE OF EQUITY SHARE S UNDER THE HEAD CAPITAL GAIN SINCE LAST MANY YEARS. INVESTMENT IN T HE SHARE HAS BEEN DISCLOSED AS INVESTMENT AND NOT AS STOCK IN TRADE. THE RELIANCE HAS BEEN PLACED ON PLETHORA OF JUDGMENT IN SUPPORT OF I TS CLAIM THAT THE IMPUGNED INCOME OF RS.1,18,57,282/- HAS BEEN RIGHTL Y SHOWN AS SHORT TERM CAPITAL GAIN. 12. IT IS AN ESTABLISHED FACT THAT THE ISSUE RELATI NG TO TAXABILITY OF GAIN/LOSS FROM PURCHASE/SALE OF EQUITY SHARES IS PU RELY A MATTER OF FACT AND THE TREATMENT OF SUCH GAIN/LOSS CAN BE DEC IDED ONLY ON THE BASIS OF THE FACTS OF THE PARTICULAR ASSESSEE. THOU GH THE LD. COUNSEL FOR THE ASSESSEE HAS RELIED ON MANY JUDGMENTS BUT I N OUR HUMBLE VIEW THE DECISION CANNOT BE APPLIED SQURELY ON THE FACTS OF THE RAJEEV CHOUDHARY ITA NOS.293/IND/2012& C.O.NO.65/IND/2012 17 ASSESSEE. THOUGH THE FACTS BEFORE THE HON'BLE HIGH COURT OF BOMBAY IN THE CASE OF ITO VS. GOPAL PUROHIT ARE SIMILAR TO A CONSIDERABLE EXTENT BUT THE VIEW CANNOT BE APPLIED ON THE FACTS OF THE ASSESSEE BECAUSE IT DOES NOT FULFILL THE RULE OF CONSISTENCY . IN THE CASE OF ASSESSEE IN THE PRECEDING YEAR THERE WAS MEAGER INC OME FROM PURCHASE AND SALE OF EQUITY SHARES WHICH CONSIDERAB LY INCREASED FROM YEAR TO YEAR WITH THE FACT THAT THE ASSESSEE A LSO START SHARE TRADING BUSINESS AS WELL AS TRADING OF FUTURE & OPT IONS (F&O). FOR THIS VERY REASON THE RULE OF CONSISTENCY CANNOT BE APPLIED. EVEN OTHERWISE THE CASE OF ASSESSEE WAS NEVER SUBJECT TO SCRUTINY FOR EXAMINING THIS ISSUE OF PURCHASE AND SALE OF SHARES AND IT WAS ONLY FOR A.Y. 2004-05 THAT THE CASE WAS REOPENED AND THE ASSESSING OFFICER THEREIN HAS DECIDED THAT THE GAIN FROM PURC HASE AND SALE OF SHARES HELD FOR LESS THEN ONE YEAR IS TO BE TAXED A S BUSINESS INCOME. THEREFORE, WE ARE INCLINED TO ADJUDICATE THE ISSUE RAISED BEFORE US BY THE REVENUE PURELY ON THE BASIS OF THE FOLLOWING FA CTS OF THE INSTANT APPEAL EMERGING FROM PERUSAL OF THE RECORDS:- A. PAPER BOOK PAGE 117 REVEALS THAT THE ASSESSEE SO LD SECURITIES WORTH RS. 12,41,10,593/- AND CLAIMED DEDUCTION FOR PURCHASE VALUING AT RS.11,17,26,044/- AND COST OF TRANSFER A T RS.5,27,267/-. B. IN THE AUDITED PROFIT AND LOSS ACCOUNT APPEARING AT PAGE 50 OF THE PAPER BOOK DATED 23.05.2018, EQUITY SHARES HELD AS ON 1 ST APRIL, 2007 HAVE BEEN SHOWN UNDER THE HEAD OPENING STOCK A LONG WITH PURCHASE OF RS.12,02,54,265/-, SALES AT RS.14,20,85 990/- AND RAJEEV CHOUDHARY ITA NOS.293/IND/2012& C.O.NO.65/IND/2012 18 CLOSING STOCK AT RS.3,99,59,591/-. C. ON THE INCOME SIDE OF THE PROFIT AND LOSS ACCOUN T ALONG WITH OPENING STOCK, PURCHASES SALES AND CLOSING STOCK OF EQUITY SHARES, INCOME FROM DIVIDEND, ASSESSEE HAS ALSO SHOWN PROFI T FROM SHARE TRADING BYWAY OF PROFIT AND LOSS FROM FUTURE & OPTI ON (F & O) TRANSACTIONS, PROFIT AND LOSS ACCOUNT JMMSFS LTD. F & O, SHOWN UNDER THE HEAD SHARE TRADING, PROFIT/LOSS. IT SHOWS THAT THE ASSESSEE IS SUO MOTO ACCEPTING THAT REGULAR BUSINESS TRANSACTIONS OF SH ARE TRADING ARE CARRIED OUT BY HIM. D. THE PROFIT AND LOSS ACCOUNT HAS BEEN AUDITED BY CHARTERED ACCOUNTANT FIRM IN ORDER TO CERTIFY THE TRANSACTION S SHOWN UNDER THE HEAD OPENING STOCK, PURCHASE DIRECT EXPENSES, INDIR ECT INCOME, SHARE TRADING PROFIT, F & O PROFIT AND CLOSING STOC K. E. MOVING ON TO THE FREQUENCY OF TRANSACTIONS CARRI ED OUT DURING THE YEAR LEDGER ACCOUNT OF INVESTMENT IN SHARES PURCHAS ES PLACED AT PAGES 24 TO 39 OF THE PAPER BOOK DATED 23.05.2018 S HOWS THAT APPROX. 288 TRANSACTIONS TOOK PLACE FOR THE PURCHAS E OF EQUITY SHARES WHICH HAVE BEEN CARRIED OUT THROUGHOUT YEAR. SIMILARLY, AROUND 162 TRANSACTIONS FOR SALES HAVE BEEN ENTERED WITH VARIOUS SHARE BROKERS INCLUDING ARIHANT CAPITAL MARKET LTD. , J.M. FINANCE P. LTD. ETC. UNDISPUTEDLY THE ASSESSEE HAD ENTERED INT O MULTIPLE TRANSACTIONS FOR VARIOUS LISTED COMPANIES HOWEVER I N THE CASE OF BOC INDIA LTD. AROUND 70 TRANSACTIONS OF SALES TOOK PL ACE DURING THE YEAR AND THE ASSESSEE PURCHASED 1,07,640 EQUITY SHARE VALUING AT RAJEEV CHOUDHARY ITA NOS.293/IND/2012& C.O.NO.65/IND/2012 19 RS.1,58,73,054/- AND SOLD THE EQUITY SHARES OF THE SAME QUANTITY. IN THE CASE OF ESCORTS LTD. 253934 EQUITY SHARES WERE PURCHASED AND SOLD DURING THE YEAR ON 52 OCCASIONS. IN CASE OF FO RTIS HEALTH CARE LTD. 1,88,690 EQUITY SHARES WERE PURCHASED AND SOLD SCATTERED OVER ON 31 TRANSACTIONS. 13. THE ABOVE GIVEN FACTS HAVE NOWHERE DURING THE C OURSE OF PROCEEDING BEFORE THE LOWER AUTHORITIES AS WELL AS BEFORE US HAVE BEEN DISPUTED BY LD. COUNSEL FOR THE ASSESSEE. THE PICTURE WHICH CAN BE FRAMED IN THE LIGHT OF THE ABOVE FACTS SHOWS THA T THOUGH THE ASSESSEE HAS NOT BORROWED THE MONEY FOR INVESTING I NTO THE BUSINESS BUT APART FROM THAT ALL OTHER BASIC FEATURE OF CARR YING ON REGULAR BUSINESS HAVE BEEN PERFORMED BY THE ASSESSEE. IT HA S NOWHERE BEEN PLEADED THAT THE ASSESSEE HAS KEPT DESIGNATED EMPLO YEE/PORTFOLIO MANAGER TO TAKE CARE OF INVESTMENTS. THEREFORE, ALL THESE HUGE NUMBER OF TRANSACTIONS OF REGULAR PURCHASE/SALE OF EQUITY SHARES OF VARIOUS LISTED COMPANIES SHARE TRADING TRANSACTION S HAVE BEEN CARRIED OUT BY THE ASSESSEE HIMSELF. THE ASSESSEE H AS ALSO EARNED INCOME FROM FUTURE AND OPTION TRANSACTIONS OF EQUIT Y SHARES WHICH ITSELF INFER THAT THE ASSESSEE IS INTO BUSINESS OF SHARE TRADING. 14. SUCH ISSUES OF TAXABILITY OF GAIN FROM EQUITY S HARES WHETHER BEING SHORT TERM CAPITAL GAIN OR BUSINESS INCOME AR ISES FOR THE DIFFERENCE IN TAX RATES APPLICABLE TO BOTH OF SUCH INCOMES. SHORT TERM CAPITAL GAIN IS TAXABLE @ OF 10% IF GAIN IS GENERAT ED FROM SALE OF LISTED SECURITIES. IN THE INSTANT CASE ALSO THE ISS UE BEING THE SAME RAJEEV CHOUDHARY ITA NOS.293/IND/2012& C.O.NO.65/IND/2012 20 WHERE FOCUS BEFORE US IS TO EXAMINE THAT WHETHE R THE GAIN FROM PURCHASE/SALE TRANSACTIONS CARRIED OUT BY THE ASSES SEE ROUND THE YEAR OF LISTED EQUITY SHARE IS TO BE TAXED UNDER TH E HEAD OF SHORT TERM CAPITAL GAIN @ 10% OR AS BUSINESS INCOME. IT HAS BE EN PLEADED BEFORE US THAT ASSESSEE IS SHOWING THE EQUITY SHARES UNDER THE HEAD INVESTMENTS AND IS ALSO ELIGIBLE TO MAINTAIN MULTIP LE PORTFOLIOS ONE IN THE INVESTMENT IN EQUITY SHARE AND OTHER FOR THE PU RPOSE OF BUSINESS. 15. IT IS OBSERVED THAT THE ASSESSEE IS MAINTAINING THE DETAILS/RECORDS OF PURCHASE/SALE OF EQUITY SHARES A S IF IT IS RUNNING A BUSINESS. IT IS CONSISTENTLY MAINTAINING THE BOOKS OF ACCOUNT SHOWING THE DETAILS OF EQUITY SHARES UNDER THE HEAD OPENING STOCK, CLOSING STOCK, PURCHASES & SALES AND GROSS PROFIT W HICH IS A REGULARS REAL FEATURE OF SHOWING THE BUSINESS TRANSACTIONS. NORMALLY THERE IS NO REQUIREMENT TO GET AUDITED THE GAIN/LOSS FROM P URCHASE AND SALE OF EQUITY SHARES CLAIMED UNDER THE HEAD SHORT TERM CAPITAL GAIN BY AN AUDITOR BUT THE ASSESSEE HAS DISCLOSED ALL THE T RANSACTIONS RELATING TO EQUITY SHARES UNDER THE HEAD PROFIT AND LOSS ACCOUNT AND GOT IT CERTIFIED BY THE AUDITOR. 16. FREQUENCY OF TRANSACTIONS ALSO PLAYS VITAL ROL E IN EXAMINING TAXABILITY OF SUCH TRANSACTIONS. THOUGH IT IS PLEAD ED THAT THE ASSESSEE IS A VERY BUSY DOCTOR ENGAGED IN THE PROFE SSIONAL WORK BUT WHAT TRANSPIRES FROM THE RECORDS IS THAT THE ASSESS EE IS DEVOTING HIS TIME AND KNOWLEDGE FOR REGULAR PURCHASE AND SALE OF EQUITY SHARES ROUND THE YEAR. EVEN OTHERWISE THERE IS NO ESTOPPEL BY LAW ON THE RAJEEV CHOUDHARY ITA NOS.293/IND/2012& C.O.NO.65/IND/2012 21 ASSESSEE TO CARRY MORE THAN ONE BUSINESS OR PROFESS ION. THERE ARE INNUMERABLE INSTANCES WHERE A PARTICULAR INDIVIDUAL CARRIES ON MULTIPLE BUSINESSES FROM MULTIPLE LOCATIONS THEN WH Y CANNOT THE ASSESSEE. 17. THERE SEEMS TO BE A CONSISTENT TOUCH OF ASSESSE E WITH THE EQUITY MARKET AS FREQUENT TRANSACTIONS OF PURCHASE AND SAL E OF THE SAME SCRIPT ARE DONE DURING THE YEAR WHICH NORMALLY IS N OT A PRACTICE OF AN INVESTOR BECAUSE THE INVESTOR USUALLY INVESTS AND THEN WAIT FOR CONSIDERABLE TIME AND THE REASON FOR SUCH WAITING I S THAT THE INVESTOR WHO IS NORMALLY ENGAGED IN OTHER BUSINESS OR PROFESSION MAKE SUCH INVESTMENTS TO FETCH SOME INCOME WITHOUT INVESTING MUCH TIME ON TRADING SUCH INVESTMENTS ON REGULAR BA SIS. FOR THIS REASON THE INVESTORS INVESTS THE MONEY IN FIXED DEP OSITS PUBLIC PROVIDENT FUNDS AS WELL AS EQUITY SHARES AND OTHER INVESTMENTS OPTIONS. 18. BUT THE SITUATION IN THE CASE OF ASSESSEE SEEMS TO BE DIFFERENT BECAUSE ASSESSEE IS KEEPING CONTINUOUS WATCH ON THE SHARE MARKET. HE SELECTS VARIOUS SCRIPTS FOR REGULAR PURCHASE AND SALE AND HE IS ALSO ENGAGED IN THE FUTURE AND OPTION MARKET. HUNDR EDS OF TRANSACTIONS HAVE BEEN ENTERED WITH THE SAME BROKER S FOR PURCHASE/SALE. NO SEPARATE DEMAT ACCOUNT HAVE BEEN KEPT BY THE ASSESSEE RELATING TO THE ALLEGED INVESTMENT IN EQUI TY SHARES AND PROFIT AND SALE FROM SHARE TRADING AND FUTURE AND O PTION. IN THESE GIVEN FACTS IT IS HARD TO BELIEVE THAT SUCH GAIN FR OM SUCH MAGNITUDE RAJEEV CHOUDHARY ITA NOS.293/IND/2012& C.O.NO.65/IND/2012 22 OF TRANSACTIONS CAN BE TAXED UNDER THE HEAD OF SHOR T TERM CAPITAL GAIN. 19. LD. AO WAS FAIR ENOUGH TO GIVE THE BENEFIT OF E XEMPTION FOR THE LONG TERM CAPITAL GAIN BUT AS REGARDS THE ALLEGED I NCOME OF RS.1,18,57,282/-, WE FIND MERIT IN THE FINDING OF L D. AO AND ARE INCLINED TO HOLD THAT THE ALLEGED INCOME OF RS.1,18 ,57,282/- IS PURELY INCOME FROM BUSINESS FROM PURCHASE/SALE OF SHARES A ND THEREFORE, IS TO BE TAXED AS A BUSINESS INCOME. WE, THEREFORE, AL LOW THE GROUNDS RAISED BY THE REVENUE AND DISMISS THE GROUND NO.1 R AISED IN THE CROSS OBJECTION FILED BY THE ASSESSEE. 20. NOW WE TAKE CROSS OBJECTION FILED BY THE ASSESS EE. WE HAVE ALREADY DECIDED GROUND NO.1 OF THIS CROSS OBJECTION ALONG WITH REVENUES APPEAL. WE ARE LEFT WITH GROUND NO.2 IN T HE CROSS OBJECTION THROUGH WHICH THE ASSESSEE HAS CHALLENGED THE FINDI NG OF LD. CIT(A) CONFIRMING THE DISALLOWANCE U/S 14A OF THE ACT AT R S.2,15,542/-. 21. BRIEF FACTS RELATING TO THIS GROUND ARE THAT TH E LD. ASSESSING OFFICER WHILE EXAMINING THE RECORDS DURING THE COUR SE OF ASSESSMENT PROCEEDINGS OBSERVED THAT ASSESSEE HAS EARNED DIVID END INCOME OF RS.4,37,354/-, HE APPLIED PROVISIONS OF SECTION 14A OF THE ACT R.W.R.T. RULE 8D OF THE I.T. RULES 1962 AND ON THE BASIS OF THE METHOD PROVIDED THEREIN COMPUTED AN AMOUNT OF RS.2 15,542/ - BEING SPENT FOR EARNING EXEMPTED INCOME. 22. AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFORE T HE LD. CIT(A) BUT RAJEEV CHOUDHARY ITA NOS.293/IND/2012& C.O.NO.65/IND/2012 23 FAILED TO SUCCEED. 23. NOW THE ASSESSEE IS IN APPEAL THROUGH THIS CROS S OBJECTION RAISING GROUND NO.2. 24. LD. COUNSEL FOR THE ASSESSEE ARGUED REFERRING T O FOLLOWING WRITTEN SUBMISSIONS: 03. DISALLOWANCE MADE BY THE LEARNED AO OF RS. 2,15 ,542/- BY INVOKING THE PROVISION OF SECTION 14A TO BE READ WITH RULE 8D OF IT RULES, 1962. THAT THE LEARNED CITCA) HAS CONFIRMED THE DISALLOWA NCE MADE BY THE LEARNED AO OF RS, 2,15,.542/- BY INVOKING THE PROVI SION OF SECTION 14A TO BE READ WITH RULE ~ 8D OF IT RULES, 1962 WITHOUT POINT ING OUT HIS DISSATISFACTION FOR CLAIM OF EXPENDITURE INCURRED BY THE ASSESSEE F OR EARNING DIVIDEND INCOME OF RS. 4,37,354/-. I. THE APPELLANT PROVIDED FULL DETAILS OF EXPENSES AT RS. 5,27,267/- OUT OF WHICH IS ALREADY DISALLOWED EXPENSES OF RS. 66,7 00/- FOR LONG TERM CAPITAL GAIN WHICH DOES NOT FORM PART OF TOTAL INCO ME. FURTHER DISALLOWANCE OF RS, 2,15,542/- OUT OF DIVIDEND INCO ME OF RS. 4,37,354/- FOR WHICH ASSESSEE HAS NOT INCURRED ANY EXPENDITURE DIRECT OR INDIRECT IN RELATION TO DIVIDEND INCOME W HICH IS NOT FORM PART OF TOTAL INCOME UNDER THE ACT FOR SUCH PREVIOUS YEA R. THE APPELLANT HAS MAINTAINED THE SEPARATE BOOKS OF ACCOUNTS REGAR DING INVESTMENT MADE IN SHARES, MUTUAL FUNDS. THE APPELLANT HAS CLA IMED THE FOLLOWING EXPENSES FOR INVESTMENTS IN SHARES: BANK/DE-MET CHARGES 37,451 CESS ON ST 4,224 BROKERAGE 2,66,205 SERVICE TAX ON BROKERAGE 1,71,442 TRANSACTION CHARGES 46,159 STAMP CHARGES 815 TURNOVER CHARGES 970 TOTAL 5,27,267 II. THE SAID EXPENSES RS. 5,27,267/- CLAIMED AGAINS T SHORT-TERM CAPITAL GAIN ON SALE OF SHARES. DURING THE YEAR UNDER APPEAL SHO RT TERM SALE PROCEEDS OF SHARES RS. 12,41,10,593/- AND LONG TERM SALE PROCEE DS OF SHARES RS, 1,79,75,397/-. THUS THE TOTAL SALE PROCEEDS OF RS. 14,20,85,990/-. THE RAJEEV CHOUDHARY ITA NOS.293/IND/2012& C.O.NO.65/IND/2012 24 SHORT TERM SALE PROCEEDS 87.35% AND LONG TERM SALE PROCEEDS 12.65/0. THE SHORT TERM EXPENSES RS, 4,60,567 (527267 X 87.35110 0) AND LONG TERM EXPENSES RS. 66,700 (527267 X 12.65/100) OUT OF THE SAID EXPENSES RS. 5,27,267. THE EXPENSES INCURRED RS. 66,700 FOR LONG TERM CAPITAL GAIN WHICH IS ALREADY DISALLOWED IN THE ASSESSMENT ORDER PERTAINING TO LTCG CLAIMED AS EXEMPTED INCOME. III. SECTION 14A - EXPENDITURE INCURRED IN RELATION TO INCOME NOT INCLUDIBLE IN TOTAL INCOME, NO DEDUCTION SHALL BE ALLOWED IN RESP ECT OF EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHIC H DOES NOT FORM PART. OF THE TOTAL INCOME UNDER THIS ACT. IV. THE CLAIM MADE BY THE APPELLANT THAT NO EXPENDI TURE HAS BEEN INCURRED IN RELATION TO INCOME, WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT FOR SUCH PREVIOUS YEAR. DISALLOWANCE U/S. 14A O F THE ACT REQUIRES FINDING OF INCURRING OF EXPENDITURE. WHERE IT FOUND THAT FO R EARNING EXEMPTED INCOME NO EXPENDITURE HAS BEEN INCURRED, DISALLOWANCE U/S 14A OF THE ACT CANNOT BE MADE. IN THE PRESENT . APPEAL LEARNED AO WITHOUT POINTING OUT HIS DIS- SATISFACTIONS FOR CLAIM OF EXPENDITURE INCURRED BY THE ASSESSEE FOR EARNING DIVIDEND INCOME OF RS. 437354/- THAT THE LEARNED AO DISALLOWED A SUM OF RS, 2,15,542 BY INVOKING THE PROVISION OF SECTION 1 4A TO BE R.W RULE 8D OF IT RULES, 1962 BY TAKING AVERAGE OF INVESTMENT SHOWN I N THIS YEAR AND EARLIER YEAR MULTIPLIED BY 0.5% I.E. RS. 2,15,542. V. THAT THE ASSESSING OFFICER SHOULD HAVE DETERMINE AS TO WHETHER THE ASSESSEE HAS INCURRED ANY EXPENDITURE (DIRECT OR IN DIRECT) IN RELATION TO DIVIDEND INCOME WHICH DOES NOT FORM PART OF THE TOT AL INCOME AS CONTEMPLATED UNDER SECTION 14A. AO NOT ADOPT REASON ABLE BASIS FOR EFFECTING THE APPORTIONMENT. LOOKING TO THE FACTS AND CIRCUMS TANCES OF THE CASE, THE APPELLANT PROVIDED THE FULL DETAILS OF EXPENSES AT RS. 5,27,267 OUT OF WHICH IS ALREADY DISALLOWED OF RS. 66,700 FOR LONG TERM C APITAL GAIN WHICH DOES NOT FORM PART OF TOTAL INCOME. FURTHER DISALLOWANCE OF RS. 2,15,542 OUT OF DIVIDEND INCOME OF RS, 4,37,354 FOR WHICH ASSESSEE HAS NOT INCURRED ANY EXPENDITURE DIRECT OR INDIRECT IN RELATION TO DIVID END INCOME WHICH IS NOT FORM PART OF TOTAL INCOME. VI THE LEARNED CIT(A) CONFIRMED THE DISALLOWANCE MA DE BY THE AO OF RS. 2,15,5421/- IS NOT CORRECT AS PER U/S 14A OF THE A CT, WHICH IS NOT AS PER THE FACTS OF THE CASE. REGARDING SIMILAR ISSUE IN THE CASE OF SHRI SACHIN R. TENDALKAR DISALLOWANCE MADE BY THE AO U/S, 14A R.W. RULE - 8D FOR RS. 76,55,841/- WHICH HAS BEEN DELETED BY LEARNED CIT(A) AS NO EXPE NSES WERE CLAIMED IN THE PROFIT & LOSS ACCOUNT ATTRIBUTABLE TO THE EARNI NG OF EXEMPT INCOME. RAJEEV CHOUDHARY ITA NOS.293/IND/2012& C.O.NO.65/IND/2012 25 THEREFORE, NO DISALLOWANCE WAS POSSIBLE UNDER THE L AW. HELD - THAT THE AMOUNT OF GAIN ARISING FROM SALE/PU RCHASE OF SHARES WAS ASSESSED AS INCOME FROM CAPITAL GAINS. THE COPY OF THE SAME IS ON PAGE 52TO M OF PAPER BOO K. DISALLOWANCE U/S. 14A OF THE ACT IS NOT WARRANTED. IT IS THEREFORE SUBMITTED THAT IN THE APPELLANT CAS E THE ORDER OF THE CIT(A) REGARDING SHORT TERM CAPITAL GAIN BE UPHELD AND DIS ALLOWANCE OF RS, 2,15,542/- OUT OF DIVIDEND INCOME OF RS, 4,37,354/- FOR WHICH ASSESSEE HAS NOT INCURRED ANY EXPENDITURE DIRECT OR INDIRECT IN RELATION TO DIVIDEND INCOME THE SAME MAY KINDLY BE ALLOW. APPEAL OF THE DEPARTM ENT BE DISMISSED AND CROSS OBJECTION OF THE ASSESSEE BE ALLOWED. 25. PER CONTRA LD. DR SUPPORTED THE ORDER OF THE BO TH LOWER AUTHORITIES. 26. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED TH E RECORD PLACED BEFORE US. THE ISSUE RAISED BY THE ASSESSEE IN THIS CROSS OBJECTION RELATES TO DISALLOWANCE U/S 14A OF THE ACT AT RS.2, 15,542/-. AS DISCERNABLE FROM THE RECORDS, THE ASSESSEE HAS EARN ED LONG TERM CAPITAL GAIN, DIVIDEND INCOME AND ALSO BUSINESS INC OME FROM TRADING IN SHARES AND FUTURES AND OPTION. THE ASSESSEE HAS ALSO SHOWN SHORT TERM CAPITAL GAIN FROM PURCHASE AND SALE OF LISTED EQUITY SHARE WHICH HAVE BEEN HELD BY US TO BE BUSINESS INCOME WHILE D ECIDING THE ISSUE RAISED BY THE REVENUE FOR THE INSTANT YEAR UNDER AP PEAL. 27. AS FAR AS DISALLOWANCE U/S 14A OF THE ACT IS CO NCERNED, WE FIND THAT ASSESSEE HAS SUO MOTO DISALLOWED A SUM OF RS.66,700/- WHICH IS PROPORTIONATELY CALCULATED TO HAVE BEEN INCURRED FO R EARNING EXEMPTED INCOME. IN THE FINDING GIVEN BY THE ASSESS ING OFFICER IN THE ASSESSMENT ORDER THERE IS NO WHISPER ABOUT HIS SATI SFACTION AS TO RAJEEV CHOUDHARY ITA NOS.293/IND/2012& C.O.NO.65/IND/2012 26 WHETHER ANY INTEREST BEARING FUNDS HAVE NEXUS TO TH E INVESTMENT IN LISTED SECURITIES OR ANY OTHER EXPENDITURE CLAIMED AS DEDUCTION HAS BEEN INCURRED WHICH HAS ITS NEXUS TO THE EARNING OF EXEMPTED INCOME. 28. IN THE ABSENCE OF SUCH SATISFACTION ON THE PART OF THE ASSESSING OFFICER AS WELL AS THE FACT THAT THE ASSESSEE HAS N OT CLAIMED ANY EXPENDITURE IN THE PROFIT AND LOSS ACCOUNT TO EARN THE EXEMPTED INCOME WE FIND THAT THE JUDGMENT OF COORDINATE MUMB AI BENCH IN THE CASE OF ACIT VS. SACHIN R. TENDULKAR DATED 25.0 1.2017 IS SQUARELY APPLICABLE ON THE ASSESSEE WHEREIN IT WAS HELD THAT AS NO EXPENSES WERE CLAIMED IN THE PROFIT AND LOSS ACCOUN T ATTRIBUTABLE TO THE EARNING OF EXEMPT INCOME, THEREFORE NO DISALLOW ANCE IS CALLED FOR U/S 14A OF THE ACT R.W. RULE-8D. 29. THEREFORE, IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE AND IN VIEW OF THE DECISION OF THE COORDINATE BENCH MUM BAI REFERRED ABOVE WE ARE OF THE CONSIDERED OPINION THAT NO DISA LLOWANCE WAS CALLED FOR U/S 14A OF THE ACT AT RS. 2,15,542/- BY THE ASSESSING OFFICER. WE THEREFORE, SET ASIDE THE FINDING OF THE LD. CIT(A) AND DELETE THE DISALLOWANCE OF RS.2,15,542/- MADE BY THE ASSES SING OFFICER BYWAY INVOKING PROVISION OF SECTION 14A OF THE ACT. THUS, GROUND NO.2 OF THE CROSS OBJECTION FILED BY THE ASSESSEE I S ALLOWED. RAJEEV CHOUDHARY ITA NOS.293/IND/2012& C.O.NO.65/IND/2012 27 30. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALL OWED AND CROSS OBJECTION OF THE ASSESSEE IS PARTLY ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 10 .01. 2019. SD/- ( KUL BHARAT) SD/- (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER / DATED : 10 TH JANUARY, 2019 PATEL/PS COPY TO: THE APPELLANT/RESPONDENT/CIT CONCERNED/CIT (A) CONCERNED/ DR, ITAT, INDORE/GUARD FILE. BY ORDER, ASSTT.REGISTRAR, I.T.A.T., INDORE