Anil Kumar Bajaj, Delhi V. ACIT, New Delhi

ITA 3080/DEL/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7547 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 02-12-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 16-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: Y KAKKAR
• Assessee Lawyers: K SAMPATH SHRI RAJA KUMAR
• Keywords: Capital asset; Business income; Rule of consistency; Transactions in derivatives; Question of law; Cost of acquisition
• Section: 143(3); 2(14); 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH A , NEW DELHI) BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A. NO. 3080/DEL/2013 ASSESSMENT YEAR : 2008-09 ANIL KUMAR BAJAJ, VS. ACIT, CIRCLE 20(1), A-14/3, RANA PRATAP BAGH, NEW DELHI. DELHI-110 007 GIR / PAN:AAEPB2363B (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K SAMPATH, SHRI RAJA KUMAR, ADV. RESPONDENT BY : SHRI Y KAKKAR, DR ORDER PER T.S. KAPOOR, AM: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST OR DER OF LD. CIT(A) DATED 28.02.2013. THE SOLE GROUND OF APPEAL TAKEN BY THE ASSESSEE IS ACTION OF LD. CIT(A) BY WHICH HE HAD UPHELD THE SHORT TERM CAPITAL GAIN OF RS.8,88,153/- AS BUSINESS INCOME WITHOUT TAKING INT O ACCOUNT THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE BRIEF FACTS OF THE CASE AS NOTED IN THE ASSE SSMENT ORDER ARE THAT THE ASSESSEE DERIVES INCOME FROM PURCHASE AND SALE OF S HARES AND AS INSURANCE COMMISSION AGENT. THE CASE OF THE ASSESSEE W AS SE LECTED FOR SCRUTINY. DURING ASSESSMENT PROCEEDINGS, THE A.O. OBSERVED TH AT THE ASSESSEE HAS CLAIMED THE TOTAL LONG TERM CAPITAL GAIN TO THE TUN E OF RS.8,88,153/- AND SHORT 2 ITA NO.3080/DEL/2013 TERM CAPITAL GAIN TO THE TUNE OF RS.9,12,477/-. TH E A.O. FURTHER OBSERVED THAT THE ASSESSEE IN FACT WAS ENGAGED INTO TRANSACT IONS OF PURCHASE AND SALE OF SHARES WITH THE INTENTION TO EARN PROFIT BUT SOM E OF THE SHARES WERE SHOWN AS INVESTMENT AND ASSESSEE HAD CLAIMED SHORT TERM A ND LONG TERM CAPITAL GAIN ON THEM. THEREFORE, ASSESSEE WAS CONFRONTED A S TO WHY THE SHORT TERM AND LONG TERM CAPITAL GAINS BE NOT TREATED AS BUSIN ESS INCOME. IN RESPONSE TO THE QUERY, THE ASSESSEE FURNISHED FOLLOWING REPLY: HENCE, BY EVALUATING 'THE ABOVE DEFINITION THE INV ESTMENT IN SHARES MADE BY THE ASSESSEE IN HIS PERSONAL NAMES AND PAYMENT M ADE IN HIS PERSONAL CAPACITY AND SHOWN IN HIS PERSONAL BALANCE SHEET AS INVESTMENT IN SHARES SHALL FOR ALL PRACTICAL PURPOSES BE TREATED AS CAPI TAL ASSETS, HENCE. COVERED UNDER THE PROVISION 2(14) AND ANY PROFIT OR GAINS F ROM TRANSFER OF HIS CAPITAL ASSETS SHALL BE CHARGEABLE TO INCOME TAX UNDER THE HEAD OF CAPITAL GAIN UNDER THE PROVISION OF SECTION 45( I). CBDT IN THEIR LATE ST CIRCULAR NO. 4 DATED 15.6.2007 HAS CLEARLY DISTINGUISHED BETWEEN BUSINES S INCOME AND CAPITAL GAIN AND HAVE ALSO DIRECTED THE FOLLOWING RULING OF SUPREME COURT IN THE SAME. CIT (CENTRAL) CALCUTTA VS ASSOCIATED INDUSTRI AL DEVELOPMENT COMPANY PVT. LTD. (1971) 82 ITR 586 SC AND ALSO CON FIRMED DECISION IN CIT (BOMBAY) VS. H. HOLCK LARSEN (1986) 160 ITR 67 HON'BLE SUPREME COURT. 3. THE A.O. DID NOT ACCEPT THE ARGUMENT OF THE ASSE SSEE AND AFTER REPRODUCING THE CBDT CIRCULAR NO.4/2007 DATED 15.06 .2007 HELD THAT ASSESSEE WAS ENGAGED INTO TRANSACTION OF PURCHASE A ND SALE OF SHARES. HE BASED HIS OBSERVATION ON THE FACT THAT ASSESSEE THO UGH WAS HAVING TWO TRANSACTION CODES ID 880 AND ID 975 BUT THERE WERE INTER CODE TRANSACTIONS BETWEEN THE TWO CODES AND FURTHER THE ASSESSEE HAD PLEDGED A PART OF SHARES 3 ITA NO.3080/DEL/2013 TO OBTAIN MARGIN LIMITS. THE A.O. ALSO HELD THAT T HOUGH ASSESSEE WAS MAINTAINING SEPARATE ACCOUNTS FOR INVESTMENT AND TR ADING PURPOSE YET HE HAD TRANSFERRED MONEY FREQUENTLY FROM CURRENT ACCOUNT M AINTAINED FOR BUSINESS PURPOSES TO HIS OTHER ACCOUNT MAINTAINED FOR INVEST MENT PURPOSES. THEREFORE, RELYING UPON BOMBAY ITAT BENCH DECISION IN I.T.A. NO. 4094, THE A.O. HELD THAT ASSESSEE WAS INDULGING INTO TRAN SACTIONS OF SALE AND PURCHASE AND THEREFORE HE ASSESSED THE SHORT TERM A ND LONG TERM CAPITAL GAIN DECLARED BY ASSESSEE AS BUSINESS INCOME OF THE ASSE SSEE. AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE LD. CIT(A) AND MADE VA RIOUS SUBMISSIONS. THE DETAILED SUBMISSIONS OF THE ASSESSEE ARE CONTAINED FROM PARA 7 ONWARDS REPRODUCED BY LD. CIT(A) FROM PAGE 11-24 OF HIS ORD ER. LD. CIT(A) HOWEVER, DID NOT FULLY ACCEPT THE CONTENTIONS OF TH E ASSESSEE AND PARTLY UPHELD THE ORDER OF A.O. BY HOLDING AS UNDER: 8. DECISION 8.1 I HAVE CONSIDERED THE OBSERVATIONS OF THE' ASSE SSING OFFICER AND SUBMISSIONS OF THE APPELLANT. IT IS SEEN THAT THE A SSESSEE 'HAS CLAIMED, THAT THE INCOME FROM DEALING IN SHARES IS PURELY AN INVESTMENT ACTIVITY AND 'IS SEPARATE AND DISTINCT F ROM THE BUSINESS OF DERIVATIVES CARRIED ON BY THE ASSESSEE ON THE FOLLO WING BASIS :- (A) THAT THE BUSINESS OF DERIVATIVES IS CARRIED ON IN THE NAME OF THE FIRM M/S BAJAJ INSURANCE MANAGEMENT CONSULTANT, OF WHICH THE ASSESSEE IS THE PROPRIETOR, WHEREAS THE SHARE TRAN SACTIONS ARE CARRIED OUT IN THE NAME OF THE ASSESSEE HIMSELF IE. SH. ANIL KUMAR BAJAJ. (B) TWO SEPARATE SETS OF BOOKS OF ACCOUNT ARE MAIN TAINED FOR TRANSACTIONS OF DERIVATIVES AND TRANSACTIONS OF SHA RES. (C) TWO SEPARATE TRADE CODES ARE MAINTAINED, FOR TR ANSACTIONS OF DERIVATIVES AND TRANSACTIONS OF SHARES. (D) TWO SEPARATE DEMAT ACCOUNTS ARE' MAINTAINED FO R TRANSACTIONS OF DERIVATIVES AND TRANSACTIONS OF SHARES. (E) TWO SEPARATE BANK ACCOUNTS ARE MAINTAINED, ONE BEING SAVING BANK ACCOUNT IN THE NAME OF MR. ANIL KUMAR BAJAJ AN D SECOND BEING 4 ITA NO.3080/DEL/2013 CURRENT ACCOUNT IN THE NAME OF FIRM M/S BAJAJ INSUR ANCE MANAGEMENT. (F) ON THE PRINCIPLE OF CONSISTENCY, IN EARLIER YE ARS THE CLAIMED CAPITAL GAINS OF THE ASSESSEE BEING ACCEPTED AS SUC H. 8.2 ON THE OTHER HAND, IT IS SEEN THAT THE ASSESSI NG OFFICER HAS TREATED THE CLAIMED SHORT TERM AND LONG TERM CAPITA L GAINS ON TRANSACTIONS OF SHARES AS BUSINESS INCOME ON THE BA SIS OF THE FOLLOWING FACTORS :- (I) THE ASSESSEE WAS ENGAGED IN INTER CODE TRANSACT IONS IN ID NO. 880 AND 975. (II) FUNDS HAVE BEEN FREQUENTLY TRANSFERRED BETWEEN ' THE TWO BANK ACCOUNTS. (III) THE ASSESSEE HAS PLEDGED THE SHARES (WHICH A RE CLAIMED TO BE FOR PURELY INVESTMENT PURPOSE) TO M/S COMPOSITE SEC URITIES LIMITED AS MARGIN AGAINST CASH AND F&O SEGMENT, AND THUS THE S HARES WERE USED FOR BUSINESS PURPOSES. (IV) THE ASSESSEE HAD TAKEN LOANS FOR PURCHASE OF S HARES. (V) THE NUMBER OF TRANSACTIONS OF SHARES BEING SUB STANTIAL. (VI) - THE MOTIVE OF THE ASSESSEE BEING TO EARN BUS INESS PROFITS. (VII) THE ASSESSEE HAVING PURCHASED SHARES WITH THE SOLE INTENTION OF RE- SELLING THEM ON PROFIT, WHICH WAS EVIDENT FROM HIS CONDUCT AFTER PURCHASE, AND OTHER RELEVANT CIRCUMSTANCES. 8.3 ON THE BASIS OF THE ABOVE REASONS, THE ASSESSIN G OFFICER TREATED THE ENTIRE SHARE TRANSACTIONS OF THE ASSESSEE AS BE ING PART OF HIS BUSINESS AND TAXED THE ENTIRE LONG TERM AND SHORT T ERM CAPITAL GAINS AS BUSINESS PROFITS. 8.4 IT IS SEEN THAT THERE ARE SEVERAL FACTORS CITED BY THE APPELLANT AND SEVERAL DIFFERENT FACTORS HAVE BEEN HIGHLIGHTED BY THE ASSESSING OFFICER, IN THIS REGARD, THE DECISION OF THE HON'BL E ITAT, LUCKNOW IN THE CASE OF SAMATH INFRASTRUCTURE (P) LTD. VS. ACIT REPORTED IN 120 TT] PAGE 216 IS VERY RELEVANT. THE HON'BLE ITAT, LU CKNOW HAS CULLED OUT BROAD PRINCIPLES WHICH CAN .BE APPLIED ON THE F ACTS OF THE CASE TO FIND OUT WHETHER TRANSACTIONS OF AN ASSESSEE CLAIME D TO BE AN INVESTMENT IS REALLY AN INVESTMENT OR A BUSINESS TR ANSACTION. THE RELEVANT OBSERVATIONS OF THE HON'BLE ITA T, LUCKNOW , ARE AS UNDER :- 'THE FOLLOWING PRINCIPLES CAN BE APPLIED ON THE FAC TS OF A CASE TO FIND OUT WHETHER TRANSACTION (S) IN QUESTION ARE IN THE NATURE OF TRADE OR ARE MERELY FOR INVESTMENT PURPOSES :- 5 ITA NO.3080/DEL/2013 WHAT IS THE INTENTION OF THE ASSESSEE AT THE TIME O F PURCHASE OF THE SHARES (OR ANY OTHER ITEM). THIS CAN HE FOUND OUT F ROM THE TREATMENT IT GIVES TO SUCH PURCHASE IN ITS BOOKS OF ACCOUNT. WHE THER IT IS TREATED AS STOCK-IN-TRADE OR INVESTMENT. WHETHER SHOWN IN OPEN ING/CLOSING STOCK OR SHOWN SEPARATELY AS INVESTMENT OR NON-TRADING AS SET. WHETHER ASSESSEE HAS BORROWED MONEY TO PURCHASE AND PAID INTEREST THEREON. NORMALLY MONEY IS BORROWED TO PURCHASE GOO DS FOR THE PURPOSES OF TRADE AND NOT- FOR INVESTING IN AN ASSE T FOR RETAINING. WHAT IS THE FREQUENCY OF SUCH PURCHASES AND DISPOSA L IN THAT PARTICULAR ITEM? IF PURCHASE AND SALE IS FREQUENT, OR THERE ARE SUBSTANTIAL TRANSACTIONS IN THAT ITEM, IT WOULD IND ICATE TRADE. HABITUAL DEALING IN THAT PARTICULAR ITEM IS INDICATIVE OF I NTENTION OF TRADE. SIMILARLY RATIO BETWEEN THE PURCHASES AND SALES AND THE HOLDINGS MAY SHOW WHETHER THE ASSESSEE IS TRADING OR INVESTING. (HIGH TRANSACTIONS AND LOW HOLDINGS INDICATE TRADE WHEREAS LOW TRANSAC TIONS AND HIGH HOLDINGS INDICATE INVESTMENT). WHETHER PURCHASE AND SALE IS FOR REALIZING PROFIT O R PURCHASES ARE MADE FOR RETENTION AND APPRECIATION IN ITS VALUE. F ORMER WILL INDICATE AN INTENTION OF TRADE AND LATTER, AN INVESTMENT. IN THE CASE OF SHARES WHETHER INTENTION WAS TO ENJOY DIVIDEND AND NOT MER ELY EARN PROFIT ON SALE AND PURCHASE OF SHARES. A COMMERCIAL MOTIVE IS AN ESSENTIAL INGREDIENT OF TRADE. HOW THE VALUE OF THE ITEMS HAS BEEN TAKEN IN THE BA LANCE SHEET. IF THE ITEMS IN QUESTION ARE VALUED AT COST, IT WOULD INDI CATE THAT THEY ARE INVESTMENT OR WHERE THEY ARE VALUED AT COST OR MARK ET VALUE OR NET REALIZABLE VALUE (WHICHEVER IS LESS), IT WILL INDIC ATE THAT ITEMS IN QUESTION ARE TREATED AS STOCK-IN-TRADE. HOW THE COMPANY (ASSESSEE) IS AUTHORIZED IN MEMORAN DUM OF ASSOCIATION/ARTICLES OF ASSOCIATION. WHETHER FOR TR ADE OR FOR INVESTMENT. IF AUTHORIZED ONLY FOR TRADE, THEN WHET HER THERE ARE SEPARATE RESOLUTIONS OF THE BOARD OF DIRECTORS TO C ARRY OUT INVESTMENTS IN THAT COMMODITY AND VICE' VERSO. IT IS FOR THE ASSESSEE TO ADDUCE EVIDENCE TO SHOW T HAT HIS HOLDING IS FOR INVESTMENT OR FOR TRADING AND WHAT DISTINCTION HE H AS KEPT IN THE RECORDS OR OTHERWISE, BETWEEN TWO TYPES OF HOLDINGS . IF THE ASSESSEE IS ABLE TO DISCHARGE THE PRIMARY ONUS AND COULD PRIMA FACIE' SHOW THAT PARTICULAR ITEM IS HELD AS INVESTMENT (OR SAY, STOC K-IN-TRADE) THEN ONUS WOULD SHIFT TO REVENUE TO PROVE THAT APPARENT IS NO T REAL. 6 ITA NO.3080/DEL/2013 THE MERE FACT OF CREDIT/OF SALE PROCEEDS OF SHARES (OR FOR THAT MATTER ANY OTHER ITEM .IN QUESTION) IN A PARTICULAR ACCOUN T OR' NOT SO MUCH FREQUENCY; OF SALE AND PURCHASE WILL ALONE WILL NOT ' BE SUFFICIENT TO SAY THAT--ASSESSEE WAS HOLDING THE SHARES (OR THE ITEMS IN QUESTION) FOR INVESTMENT. ONE HAS TO FIND OUT WHAT ARE THE LEGAL REQUISITES F OR DEALING AS A TRADER IN THE ITEMS IN QUESTION AND .WHETHER THE AS SESSEE IS COMPLYING WITH THEM.' WHETHER IT IS THE ARGUMENT OF THE ASSES SEE THAT IT IS VIOLATING THOSE LEGAL REQUIREMENTS, IF IT IS CLAIME D THAT IT IS DEALING AS A TRADER IN THAT ITEM. WHETHER IT HAD SUCH AN INTEN TION (TO CARRYON ILLEGAL BUSINESS IN THAT ITEM) SINCE BEGINNING OR W HEN PURCHASES WERE MADE. 10)IT IS PERMISSIBLE AS PER CBOT'S CIRCULAR NO. 4/2 007 OF 15-6-2007 THAT AN ASSESSEE CAN HAVE BOTH PORTFOLIOS, ONE FOR TRADING AND OTHER FOR INVESTMENT PROVIDED IT IS MAINTAINING SEPARATE ACCOUNT FOR EACH 'TYPE, THERE ARE DISTINCTIVE FEATURES FOR BOTH AND THERE IS NO INTERMINGLING OF HOLDINGS IN THE TWO PORTFOLIOS. 11)NOT ONE OR TWO FACTORS OUT OF ABOVE ALONE WILL B E SUFFICIENT TO COME TO A DEFINITE CONCLUSION BUT THE CUMULATIVE EF FECT OF SEVERAL FACTORS HAS TO BE SEEN.' 8.5 APPLYING THE TESTS PROPOUNDED BY THE HON'BLE IT AT, LUCKNOW, IT IS SEEN THAT THOUGH THE TRANSACTIONS ON WHICH THE ASSE SSEE HAS DISCLOSED LONG TERM CAPITAL GAINS OF RS.8,88,! 53/- FALL IN T HE CATEGORY OF INVESTMENT, BUT THE TRANSACTIONS ON WHICH THE ASSES SEE HAS CLAIMED SHORT TERM CAPITAL GAINS OF RS.9, I 2,478/- ARE IN THE NATURE OF TRADE AND DEFINITELY FALL IN THE CATEGORY OF BUSINESS AND THEIR INCOME HAS TO BE TAXED AS BUSINESS INCOME. 8.6 IT IS SEEN THAT IN THE PRECEDING YEAR IE. A.Y. 2007-08 IN THE CASE OF THE ASSESSEE, THE ISSUE OF TAXATION OF PROFITS FROM TRANSACTIONS OF SHARES HAD ARISEN, AND THE -HON'BLE ITAT, DELHI IN THEIR DECISION DATED 20.06.2012 IN ITA NO. 83/DEL/2012 HELD THAT T HE ENTIRE .SHARE TRANSACTIONS WERE IN THE NATURE OF CAPITAL GAINS. T HE HON'BLE IT AT HAD ALSO TAKEN NOTE OF THE PRINCIPLES PROPOUNDED BY THE HON'BLE ITAT, LUCKNOW IN THE CASE OF SAMATH INFRASTRUCTURE PVT. L TD. THE HON'BLE ITAT, DELHI, AFTER DISCUSSING THE LEGAL POSITION RE GARDING' THE TAXATION OF SHARE PROFITS AS CAPITAL GAINS OR AS BUSINESS IN COME, EXAMINED THE FACTS OF THE PARTICULAR CASE BEFORE THEM I.E. THE C ASE OF THE ASSESSEE FOR A.Y. 2007-08. LOOKING AT THE FACTS AND CIRCUMST ANCES OF THE PARTICULAR CASE, THE HON'BLE ITAT NOTED THE, FINDIN GS OF THE LD. 7 ITA NO.3080/DEL/2013 CIT(A) WITH APPROVAL. THE LD. CIT(A) HAD OBSERVED T HAT THE APPELLANT WAS SHOWING PROFIT AND LOSS IN THE TRADIN G ACCOUNT AS. BUSINESS IN-COME AND THE SURPLUS ARISING ON ACCOUNT OF PURCHASE AND- SALE OF SHARES IN HIS OWN ACCOUNT WAS BEING SHOWN A S SHORT .TERM/LONG TERM CAPITAL GAINS/LOSS AND THAT THIS PR ACTICE WAS REGULARLY FOLLOWED BY THE APPELLANT FOR MANY YEARS AND ACCEPTED BY THE DEPARTMENT. IT WAS ALSO HELD BY THE LD. CIT(A) THAT THE SHARES WHICH ARE THE SUBJECT MATTER OF DISCUSSION HAD BEEN HELD BY THE APPELLANT FOR MORE THAN A YEAR. IT WAS ALSO HELD BY THE LD. CIT(A) THAT 'AS REGARDS, OBSERVATIONS OF THE A 0 THAT THER E HAS BEEN FREQUENT TRANSFER OF FUNDS FROM THE ASSESSEES CURRENT ACCOUN T TO HIS PERSONAL ACCOUNT, I FIND THAT NO MATERIAL SUBSTANTIATING THE AFORESAID FINDINGS HAS BEEN PLACED ON RECORD. N. THUS THE LD. CIT(A) H ELD THAT THE ENTIRE CAPITAL GAINS ON THE SHARE TRANSACTIONS WERE IN THE NATURE OF CAPITAL GAINS PARTICULARLY IN VIEW OF:- I) PRINCIPLE OF CONSISTENCY II) THE SHARES BEING HELD FOR MORE THAN A YEAR III) SPECIFIC FINDING BY THE CIT(A) THAT THERE WA S NO MATERIAL SUBSTANTIATING TRANSFER OF FUNDS BETWEEN THE TWO BA NK ACCOUNTS. 8.7 THE HON'BLE ITA T, DELHI IN THE ABOVEMENTIONED ORDER IN ITA NO. 83/DE1/2012 DATED 20.06.2012 IN THE CASE OF THE ASS ESSEE FOR A.Y. 2007-08 APPROVED THE ORDER OF THE LD. CIT(A) AND HE LD AS UNDER:- 'THOUGH THE PRINCIPLES OF RES JUDICATA DO APPLY TO THE INCOME-LAX PROCEEDINGS AS EACH YEAR IS AN INDEPENDENT YEAR OF THE ASSESSMENT BUT IN ORDER TO MAINTAIN CONSISTENCY, IT IS A JUDICIALL Y ACCEPTED PRINCIPLE THAT SAME VIEW SHOULD BE ADOPTED FOR THE SUBSEQUENT YEARS, UNLESS THERE IS A MATERIAL CHANGE IN THE FACTS. SIMILAR TR ANSACTIONS OF SALE AND PURCHASE IN SHARES IN THE PRECEDING YEARS HAVE BEEN HELD TO BE INCOME FROM CAPITAL GAINS BOTH ON LONG-TERM AND SHO RT-TERM BASIS. SINCE THE LD. DR APPEARING BEFORE US DID NOT CONTRO VERT THE AFORESAID FINDINGS OF THE LD. CIT(A) NOR BROUGHT TO OUR NOTIC E ANY MATERIAL OR CONTRARY DECISION IN ORDER TO ENABLE US TO TAKE A D IFFERENT VIEW IN THE MATTER, WE ARE NOT INCLINED TO INTERFERE WITH THE F INDINGS OF THE LD. CIT(A). THEREFORE, GROUND NO. J IN THE APPEAL OF TH E REVENUE IS DISMISSED. ' 8.8 THUS IT IS SEEN THAT THOUGH THE HON'BLE ITAT H AVE GIVEN THE BENEFIT OF CONSISTENCY TO THE ASSESSEE, BUT THEY HA VE GIVEN THE CLEAR 8 ITA NO.3080/DEL/2013 FINDING THAT THE PRINCIPLES OF THE RES JUDICATA DO NOT APPLY TO THE INCOME TAX PROCEEDINGS AS EACH YEAR IS AN INDEPENDE NT YEAR OF THE .ASSESSMENT. HOWEVER, THE HON'BLE ITAT ALSO HELD TH AT IN ORDER TO MAINTAIN CONSISTENCY; THE SAME VIEW SHOULD BE ADOPT ED FOR THE SUBSEQUENT YEAR, UNLESS THERE IS A MATERIAL CHANGE IN THE FACTS. 8.9 IT IS SEEN THAT THERE IS A MATERIAL CHANGE IN T HE FACTS IN THE YEAR UNDER CONSIDERATION AS COMPARED TO THE PRECEDING YE AR, AND AS HELD BY THE HON'BLE ITAT, THE PRINCIPLE OF CONSISTENCY W OULD NOT APPLY IN SUCH A SITUATION. 8.10 PERUSAL OF THE FACTS AND CIRCUMSTANCES OF THE CASE SHOW THAT THERE ARE THREE VERY MATERIAL CHANGES IN THE FACTS FOR THE YEAR UNDER CONSIDERATION I.E. A.Y. 2009, AS COMPARED TO THE PR ECEDING YEAR IE. A.Y. 2007-08. THESE ARE AS FOLLOWS:- A. INTERMINGLING BETWEEN THE TWO PORTFOLIOS: IN THE PRECEDING YEAR THERE WAS NO ISSUE OF ANY INT ERMINGLING OF HOLDINGS IN THE TWO PORTFOLIOS. HOWEVER, IN THE YEA R UNDER CONSIDERATION I.E. A.Y. 2008- 09 THERE IS CLEAR INTERMINGLING OF HOLDINGS IN THE TWO PORTFOLIOS. THIS ISSUE WAS MENTIONED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER ON PAGE 3, WHERE THE LD. ASSESSING OFFICER HAS NOT ONLY MENTIONED ABOUT THE INTERMINGLING BUT HAS ALSO GIVEN SPECIFIC INSTANCES OF SUCH AN INTERMINGLING IN THE FORM OF INTER CODE TRANSACT IONS IN THE TWO TRADING CODES MAINTAINED BY THE ASSESSEE. THE ASSES SING OFFICER HAS MENTIONED THE SPECIFIC INSTANCES OF SUCH INTERMINGL ING AS UNDER :- 'THE ASSESSEE IS ALSO DOING INTER CODE TRANSACTIONS IN 10 NO. 880 & 975 DETAILED BELOW:- DATE SETT TRAXN CHQ. BILL NO. PARTICULARS DE BIT CREDIT BALANCE NO. DOTE NO. REF. ________ 06.02.2008 ]V 87-0602 AMT TR. TO CODE-B80 5000 00 0.00 -14482 AMT. TR. TO CODE-880 27.02.2008 JV 2-2702 200000 0.00 0.00 AMT. TR. TO CADE-880 27.03.2008 JV 5-2703 600000 0.00 0.00 8.11 THOUGH THE APPELLANT HAS SUBMITTED LENGTHY AND DETAILED GROUNDS OF APPEAL AND ALSO DETAILED SUBMISSIONS, BU T NOWHERE IN THE GROUNDS OF APPEAL OR IN ANY OF THE SUBMISSIONS, THE ABOVE MENTIONED 9 ITA NO.3080/DEL/2013 FINDINGS OF THE ASSESSING OFFICER HAVE BEEN CHALLEN GED. WHAT TO SAY OF ANY REBUTTAL OF THE FINDINGS OF THE ASSESSING OFFIC ER, THERE IS NOT EVEN A WHISPER IN THE' DETAILED GROUNDS--OF APPEAL AND' THE VARIOUS SUBMISSIONS AGAINST THE ABOVE FINDINGS'. HENCE IT I S CONCLUDED THAT THE APPELLANT HAS NOTHING TO SAY REGARDING THE ABOVE FI NDINGS AND CONSEQUENTLY IT IS ESTABLISHED THAT THERE WAS INTER MINGLING BETWEEN THE TWO PORTFOLIOS MAINTAINED BY THE ASSESSEE. THIS IS ONE OF THE MAJOR FACTORS TO BE CONSIDERED FOR DETERMINING WHETHER TH E TRANSACTIONS ARE IN THE NATURE OF BUSINESS INCOME OR CAPITAL GAINS. FURTHER, THE INTERMINGLING BETWEEN THE TWO PORTFOLIOS IS A FACT WHICH PROVES THAT THERE IS MATERIAL CHANGE OF FACTS FROM THE EARLIER YEARS IN THE CASE OF THE ASSESSEE. 8.12 THE SECOND ISSUE WHICH SHOWS THE MATERIAL CHAN GE OF FACTS AS COMPARED TO THE PRECEDING YEAR IS AS UNDER :- B. FUNDS TRANSFER BETWEEN THE TWO BANK ACCOUNTS:- IN THE PRECEDING YEAR I.E. A.Y. 2007-08, THE LD. CI T(A) HAD GIVEN A CLEAR FINDING OF FACT THAT THERE WAS NO MATERIAL RE GARDING THE TRANSFER OF FUNDS. HOWEVER, IN THE YEAR UNDER CONSIDERATION, FROM A PE RUSAL OF THE DOCUMENTS FILED DURING APPEAL IT IS SEEN THAT THE F UNDS HAVE BEEN TRANSFERRED BETWEEN THE TWO PORTFOLIOS. FURTHER; TH E ACCOUNT OF SH. ANIL KUMAR BAJAJ (CLIENT 975) IN THE BOOKS OF M/S C OMPOSITE SECURITIES LTD. SHOWS THAT M/S COMPOSITE SECURITIES LTD. HAS BEEN USED AS A CONDUIT FOR TRANSFER OF FUNDS BETWEEN THE TWO BANK ACCOUNTS. HENCE AS DIAMETRICALLY OPPOSED TO THE FIN DING OF THE LD. CIT(A) FOR ASSESSMENT YEAR 2007-08, IT IS HOL,.1 TH AT THERE HAS BEEN TRANSFER OF FUNDS BETWEEN THE TWO BANK ACCOUNTS. TH IS IS AGAIN A FACT WHICH PROVES THAT THERE IS MATERIAL CHANGE OF FACTS FROM THE EARLIER YEARS IN THE CASE OF THE ASSESSEE. 8.13 THE THIRD ISSUE WHICH SHOWS THE MATERIAL CHANG E OF FACTS AS COMPARED TO THE PRECEDING YEAR IS AS UNDER ,:- C. HOLDING PERIOD OF SHARES :- FOR A.Y. 2007-08, THE LD. CIT(A) HAD HELD THAT THE ASSESSEE HAD HELD THE SHARES FOR A VERY LONG TIME WHICH WAS ABOUT AN YEAR FOR THE SHARES UNDER CONSIDERATION. HOWEVER, IN THE YEAR UN DER CONSIDERATION I.E. FOR A.Y. 2008- 09, PARTICULARLY FOR THE SHARE TRANSACTIONS ON WHICH SHORT TERM CAPITAL GAINS ARE DISCLOSED, IT IS SEEN- THAT IN SOME CASES THE HOLDING PERIOD OF SHARES IS EXTREMELY SHORT. PE RUSAL OF THE DETAILS SUBMITTED ALONG WITH THE SUBMISSIONS DATED 27.02.20 1 J SHOW THAT THE 10 ITA NO.3080/DEL/2013 DATE OF PURCHASE OF 'COMPULINK SYS' WHOSE SHARES WE RE SOLD FOR RS.10,498/- ON 03.08.2008 HAS NOT BEEN MENTIONED. T HE TRANSACTIONS OF 'COMPAUGE ARE VERY STRIKING' AS IT IS SEEN THAT THE SHARES OF 'COMPAUGE' WHICH' WERE PURCHASED ON 16.07.2007 FOR RS.65,575/- WERE SOLD ON 16.07.2007 ITSELF FOR RS.65,800/-, THU S THERE BEING ALMOST NO HOLDING PERIOD AT ALL. IT IS ALSO NOTEWORTHY, TH AT IN SUCH A CASE THE SHARE PERHAPS WOULD NOT EVEN HAVE BEEN PLACED IN TH E DEMAT ACCOUNT AS IT WAS SOLD ON THE SAME DAY. SUCH ACTIVITY IS D EFINITELY IN THE REALM OF BUSINESS, AND DEFINITELY IS NOT INVESTMENT. 8.14 IN VIEW OF THE ABOVE DISCUSSION, IT IS CLEAR T HAT THERE ARE MATERIAL CHANGES OF FACTS AS COMPARED TO THE PRECEDING YEARS OF THE ASSESSEE AND HENCE THE PRINCIPLE OF CONSISTENCY WOULD NOT AP PLY. KEEPING IN VIEW THE PRINCIPLES PROPOUNDED BY HON'BLE ITAT, LUC KNOW MENTIONED ABOVE AND ALSO IN VIEW OF THE ENTIRE LEGAL POSITION AND THE FACTS AND CIRCUMSTANCES OF THE TRANSACTIONS IN QUESTION, IT I S OBVIOUS THAT THE TRANSACTIONS ON WHICH SHORT TERM CAPITAL GAIN ARE S HOWN IN THE NATURE OF TRADING. THOUGH THE APPELLANT CLAIMED THA T THERE ARE SEPARATE BOOKS OF ACCOUNT AND THAT THERE IS SEPARAT E TRADING CODE, SEPARATE DEMAT ACCOUNT, AND SEPARATE BANK ACCOUNT E TC. AND THE TRANSACTIONS OF TRADING AND INVESTMENT ARE CARRIED OUT SEPARATELY IN THE NAME OF M/S BAJAJ INSURANCE MANAGEMENT CONSULTA NT, BUT ALL SUCH DEVICES CREATED BY THE ASSESSEE ARE MEANINGLES S IN THE FACE OF INTERMINGLING OF THE TWO PORTFOLIOS. IT IS HEREBY H ELD THAT THE TRANSACTIONS ON WHICH SHORT TERM CAPITAL GAINS AMOU NTING TO RS.9, 12,477/- HAVE BEEN CLAIMED ARE TO BE TAXED AS BUSIN ESS INCOME AND THE TRANSACTIONS ON WHICH LONG TERM CAPITAL GAINS A MOUNTING TO RS.8,88,153/- HAVE BEEN SHOWN ARE TO BE TAXED AS SU CH I.E. AS LONG TERM CAPITAL GAINS. ACCORDINGLY, AN AMOUNT OF RS.8, 88, 153/- OUT OF THE ADDITION OF RS.18,00,631/- MADE BY THE ASSESSIN G OFFICER IS DELETED AND THE ADDITION OF RS.9, 12,477/- AS BUSIN ESS INCOME IS HEREBY CONFIRMED. (CONFIRMED: RS.9,12,477/-) (DELET ED: RS.8,88,153/). 4. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 5. AT THE OUTSET, LD. A.R. SUBMITTED THAT THE ASSES SEE WAS MAINTAINING TWO SEPARATE ACCOUNTS; ONE FOR TRADING AND ANOTHER FOR INVESTMENT AND 11 ITA NO.3080/DEL/2013 SIMILARLY, HE WAS MAINTAINING TWO DIFFERENT DEMAT A CCOUNTS ONE OF WHICH WAS BEING USED FOR TRADING PURPOSES AND ANOTHER WAS BEING USED FOR INVESTMENT PURPOSES. IT WAS SUBMITTED THAT THERE W AS A CLEAR DEMARCATION BETWEEN INVESTMENT AND TRADING ACTIVITIES. IN THE EARLIER YEAR ALSO, THE ASSESSEE WAS ENGAGED INTO SIMILAR ACTIVITIES AND HO NBLE ITAT UNDER SIMILAR FACTS AND CIRCUMSTANCES HAD DECIDED THE ISSUE IN FA VOUR OF THE ASSESSEE. IN THIS RESPECT, OUR ATTENTION WAS INVITED TO PAPER BO OK PAGES 97-111 WHERE A COPY OF THE TRIBUNAL ORDER IN I.T.A. NO. 83 IN THE CASE OF ASSESSEE ITSELF WAS PLACED. INVITING OUR ATTENTION TO PARA 8.11 OF LD. CIT(A)S ORDER, LD. A.R. SUBMITTED THAT THE FINDINGS RECORDED BY LD. CIT(A) THAT ASSESSEE HAD NOTHING TO SAY IS INCORRECT AS DETAILED SUBMISSIONS WERE MADE BEFORE LD. CIT(A) WHICH HE HIMSELF HAD RECORDED IN HIS ORDER A T PARA 8. IT WAS SUBMITTED THAT LD. CIT(A) HAS IGNORED THE EXPLANATI ON OF THE ASSESSEE AND HAS DISTINGUISHED THE FACTS AND CIRCUMSTANCES OF TH E PRESENT APPEAL FROM THE EARLIER ORDER ON THE BASIS THAT IN THE PRESENT YEAR , THERE WAS INTERMINGLING IN TWO ACCOUNTS AND HOLDING PERIOD OF SHARES WERE TOO SHORT. IN THIS RESPECT, LD. A.R. SUBMITTED THAT THERE WAS NOTHING WRONG FOR AN ASSESSEE TO TRANSFER FUNDS FORM ONE BANK ACCOUNT TO ANOTHER BANK ACCOUNT TO SUPPORT HIS BUSINESS REQUIREMENTS AND SIMILARLY, REGARDING HOLDING PERIO D OF SHARES, IT WAS SUBMITTED THAT UNDER THE ACT, IT IS SPECIFICALLY PR OVIDED THAT IF SHARES ARE HELD FOR MORE THAN ONE YEAR, THE INCOME WILL BE TREATED AS LONG TERM CAPITAL GAIN AND IF SHARES ARE HELD FOR LESS THAN 1 YEAR, THE SA ME WILL BE TREATED AS SHORT TERM CAPITAL GAIN. 6. LD. D.R. ON THE OTHER HAND SUBMITTED THAT THE AS SESSEE WAS DEALING IN SALES AND PURCHASE OF SHARE TRANSACTION AND INVITED OUR ATTENTION TO PAPER BOOK PAGE 58 WHERE A COPY OF AUDIT REPORT WAS PLACE D. LD. D.R. ALSO 12 ITA NO.3080/DEL/2013 INVITED OUR ATTENTION TO THE FACT THAT IN THE AUDIT REPORT, IT WAS MENTIONED THAT THE ASSESSEE WAS ENGAGED IN SALES AND PURCHASE OF S HARES. REGARDING INTERMINGLING OF ACCOUNTS, THE LD. D.R. SUBMITTED T HAT THE ASSESSEE HAD TRANSFERRED FUNDS FROM CURRENT ACCOUNT TO HIS INDIV IDUAL ACCOUNT AND, THEREFORE, HE IN FACT HAD USED BUSINESS FUNDS FOR P URCHASE OF SHARES IN HIS INDIVIDUAL CAPACITY, WHICH TANTAMOUNT TO BUSINESS A CTIVITIES AS FUNDS RELATED TO BUSINESS WERE USED. MOREOVER, THE SHARES HELD F OR INVESTMENT WERE PLEDGED TO OBTAIN FUNDS FOR BUSINESS PURPOSES, THER EFORE, THE PURPOSE OF PURCHASE OF SUCH SHARES WAS TO AUGMENT BUSINESS ACT IVITIES. 7. LD. D.R. FURTHER SUBMITTED THAT LD. CIT(A) HAS C LEARLY DISTINGUISHED THE FACTS AND CIRCUMSTANCES OF THE PRESENT YEAR WIT H THE FACTS AND CIRCUMSTANCES OF EARLIER YEAR. HEAVILY RELYING UPO N THE CASE LAW OF MANOJ KUMAR SAMDARIA VS CIT IN I.T.A.NO. 97/2014 DECIDED BY HON'BLE DELHI HIGH COURT. LD. D.R. SUBMITTED THAT THE HONBLE CO URT AFTER TAKING INTO ACCOUNT CBDT CIRCULAR NO.4 OF 2007 AND VARIOUS DECI SIONS ON THIS SUBJECT, HAD SPECIFICALLY HELD THAT IF THE HOLDING PERIOD IS TOO LESS AND THERE ARE TOO MANY TRANSACTIONS, AND THERE IS NO DIVIDEND INCOME THEN THE ENTIRE INCOME NECESSARILY IS BUSINESS INCOME. LD. D.R. FURTHER A RGUED PRINCIPLE OF RES- JUDICATA DOES NOT APPLY TO INCOME TAX PROCEEDINGS. LD. A.R. IN HIS REJOINDER SUBMITTED THAT PAPER BOOK PAGE 58 REFERRED TO BY LD . D.R. IS FOR THE BUSINESS ACTIVITIES OF THE ASSESSEE AS INVESTMENT ACTIVITIES WERE UNDERTAKEN IN HIS INDIVIDUAL CAPACITY AND PERSONAL BUSINESS ACTIVITIE S DO NOT FIND MENTION IN THE AUDIT REPORT. AS REGARDS RELIANCE PLACED BY LD . D.R. IN HON'BLE DELHI HIGH COURT ORDER IN I.T.A. NO. 97 DATED 12.03.2014, LD. A.R. SUBMITTED THAT HONBLE COURT HAD DECIDED ON THE BASIS OF FACTS AND CIRCUMSTANCES OF THAT CASE ONLY AND NO LEGAL PRINCIPLES WERE LAID DOWN, T HEREFORE, IT WAS NOT 13 ITA NO.3080/DEL/2013 APPLICABLE. LOOKING UPON PRINCIPLE OF RES-JUDICATA , LD. A.R. SUBMITTED THAT THOUGH RES-JUDICATA DOES NOT APPLY TO INCOME TAX PR OCEEDINGS BUT PRINCIPLE OF CONSISTENCY IS A RELEVANT FACTOR WHICH HON'BLE S UPREME COURT HAS HELD IN VARIOUS CASE LAWS TO BE OF UTMOST IMPORTANCE. 8. WE HAVE HEARD RIVAL PARTIES AND HAVE GONE THROUG H THE MATERIAL PLACED ON RECORD. WE FIND THAT THE A.O. HAS HELD THE INCO ME OF THE ASSESSEE DECLARED AS CAPITAL GAIN TO BE HIS BUSINESS INCOME ON THE BASIS THAT THERE WAS INTERMINGLING OF FUNDS IN THE BANK ACCOUNTS MAINTAI NED FOR BUSINESS AND TRADING PURPOSES AND ON THE BASIS THAT ASSESSEE HAD PLEDGED CERTAIN SHARES TO PROVIDE MARGIN MONEY WHICH WAS USED TO CARRY OUT T RANSACTION IN FUTURES & OPTIONS SEGMENT. LD. CIT(A) ALSO HELD THAT THERE W ERE INTERCONNECTED TRANSACTIONS WHICH WERE USED FOR TRADING AND INVEST MENT PURPOSES. THOUGH DETAILED SUBMISSIONS WERE MADE BEFORE LD. CIT(A) AG AINST VARIOUS OBSERVATIONS OF A.O. AS CONTAINED AT PAGES 11-24 OF LD. CIT(A)S ORDER BUT LD. CIT(A) VIDE PARA 11.8 HAS HELD THAT ASSESSEE HA D NOT SUBMITTED ANYTHING AGAINST FINDINGS OF A.O. WHICH IS NOT A CORRECT FIN DING. FOR THE SAKE OF CONVENIENCE, THE SUBMISSIONS OF THE ASSESSEE BEFORE LD. CIT(A) AS CONTAINED IN PARA 7.1 ARE REPRODUCED BELOW: 7. SUBMISSIONS OF THE APPELLANT. 7.1 THE APPELLANT HAS STATED AS UNDER IN HIS SUBMIS SIONS DATED 02-01- 2012.:- 'THE ASSESSING OFFICER HAS GIVEN ABSURD REASON WHIL E TREATING THE LONG TERM CAPITAL GAIN AND SHORT TERM CAPITAL GAIN AS EARNED BY THE ASSESSEE AS BUSINESS PROFIT. THE ASSESSING OFFICER HAS FAILED TO ANALYZE THE FACTS OF THE CASE AS BROUGHT BEFORE HIM BY THE ASSESSEE. WE SUMMARIZE THE FACTS WHICH REQUIRES ATTENTION FRO M YOUR GOOD SELF AS UNDER; A) ASSESSEE IN HIS INDIVIDUAL CAPACITY ACTS AS AN I NVESTOR FOR LAST MORE THAN 25 YEARS 14 ITA NO.3080/DEL/2013 (I) WHEREIN ALL INVESTMENTS IN THE SHARES ARE HELD IN DEMAT ACCOUNT AS MAINTAINED BY HIM WITH THE DEPOSITORY FOR LAST NUMB ER OF YEARS (COPY OF DEMAT ACCOUNT AS MAINTAINED BY THE ASSESSEE IS E NCLOSED AT PAGE 36 TO 42) (II) ALL INVESTMENT OF SHARES ARE PROPERLY REFLECTE D IN {HE BOOKS OF ACCOUNTS AS MAINTAINED BY THE ASSESSEE IN HIS PERSO NNEL CAPACITY FOR LAST NUMBER OF YEARS (COPY OF BALANCE SHEET AS 31 ST MARCH 2004, 31 ST MAR, 2005, 31 ST MARCH 2006, 31 ST MARCH, 2007 AS WELL AS 31 ST MARCH 2008 IS ENCLOSED AT PAGE 43 TO 53) III) ALL TRANSACTIONS AS MADE (OR PURCHASE AND SALE OF SHARES BY THE ASSESSEE ARE MADE WITH A MEMBER BROKER OF NATIONAL STOCK EXCHANGE LIMITED M/S COMPOSITE SECURITIES LIMITED UNDER THE CLIENT CODE NO. 975 AFTER PAYMENT OF STT (COPY OF ACCOUNT AS MAINTA INED BY (HE MEMBER BROKER M/S COMPOSITE SECURITIES LTD. OF MR. ANIL KUMAR BAJA] IS ENCLOSED AT PAGE 54 TO 62) IV) RETURN OF INCOME FOR THE CURRENT ASSTT. YEAR 20 08-09 AS WELL PREVIOUS ASSESSMENT YEAR 2007-08 ARE ENCLOSED TO SH OW THAT THE TREATMENT OF INCOME UNDER THE HEAD LONG TERM/SHORT TERM CAPITAL GAIN AND BUSINESS INCOME ARE IDENTICAL IN BOTH THE YEARS (COPY OF RETURN AT PAGE 72 TO 77) V) THE ASSESSEE HAS NOT BORROWED ANY FUNDS FOR INVE STMENT PURPOSES AND HAS NOT PAID ANY INTEREST ON ANY BORRO WINGS DURING THE FINANCIAL YEAR 2007-08 RELEVANT TO THE ASSESSMENT Y EAR 2008-09. HENCE ALL INVESTMENTS HAVE BEEN MADE BY THE _ ASSES SEE OUT OF HIS PERSONNEL CAPACITY. AND NO INVESTMENTS IN SHARES HA VE BEEN MADE FROM THEIR PERSONNEL BORROWINGS AS WOULD BE CLEAR F ROM THE RETURN OF INCOME- VI) IN THE MODERN ERA OF STOCK EXCHANGE SY3Y-M,-NO SINGLE TRANSACTIONS CAN BE ENTERED INTO BY THE MEMBER 'STO CK EXCHANGE ON BEHALF OF THE CLIENTS FOR SALE/PURCHASE OF ANY SHAR ES UNLESS CLIENT CODE IS ENTERED IN THE COMPUTER SYSTEM WHICH IS NOT ALTERABLE. THE CLIENT CONTRACTS -ARE GENERATED BY THE COMPUTER SYS TEM GIVE THE DATE WITH TIME OF ALL THE TRANSACTIONS AS DONE BY ANY CL IENT IN THIS CASE THE BROKER HAS CERTIFIED THAT ALL THE TRANSACTIONS HAVE BEEN ENTERED INTO BY MR. ANIL KUMAR BAJAJ IN CLIENT CODE 975. FURTHER ALL TRANSACTIONS AS ENTERED INTO BY ANIL KUMAR BAJAJ ARE DELIVERY BA SED. THE DELIVERY ARE EFFECTED BY THE BROKER ONLY WHEN THE CLIENT HAS PAID FOR THE PURCHASE COST OF THE SHARES FULLY AND SALE CONSIDER ATION ARE CREDITED TO THE ACCOUNT OF THE CLIENT ONLY THE DELIVERY ARE EFFECTED BY THE CLIENTS 15 ITA NO.3080/DEL/2013 OUT OF HIS DEMAT ACCOUNT AS MAINTAINED BY HIM. HENC E, ALL TRANSACTIONS ARE RECONCILABLE FROM THE STATEMENT OF ACCOUNT AS GIVEN BY THE MEMBER BROKER TO THE CLIENT, DEMAT ACCOUNT, BANK ACCOUNT OF THE ASSESSEE AND THE BOOKS OF ACCOUNTS AS MAINTAINE D BY THE ASSESSEE. HENCE, INVESTMENTS ARE WELL RECONCILABLE WITH THE B OOKS OF ACCOUNTS AS MAINTAINED BY THE ASSESSEE IN TERMS OF CIRCULAR NO. 4/2007 AS ISSUED BY THE CBDT AND VARIOUS JUDICIAL PRONOUNCEME NTS, IT HAS BEEN MADE VERY CLEAR WHERE THE ALL PURCHASE OF SHARES AR E SHOWN AS INVESTMENTS IN THE BOOKS OF ACCOUNTS AND MOTIVE TO INVESTMENT WERE TO DERIVE INCOME BY WAY OF DIVIDEND, THEN THE PROFIT A CCRUING BY CHANGE IN SUCH INVESTMENT (BY SALE OF SHARES) WILL YIELD C APITAL GAIN AND THE REVENUE RECEIPT. VIII) ASSESSEE HAS EARNED DIVIDEND INCOME OF RS. 1, 26,479/- DURING THE ASSESSMENT YEAR FROM THE INVESTMENTS IN SHARES AS MADE BY HIM: SHARES ARE HELD IN DEMAT ACCOUNT, THE AVERAGE PERIO D OF HOLDING OF THE SHARES AS SOLD BY THE ASSESSEE DURING THE ASSES SMENT YEAR AND DETAILS OF SHARES AS HELD BY THE ASSESSEE ARE AS UN DER:- PARTICULARS SHARES SOLD NO. OF DAYS LONG TERM CAPITAL GAIN MRPL LTD. 50 756 (356) UNIVERSAL CABLES LTD. 118 > 4000 7159 STEEL CASTING LTD. 100 > 3200 21421 WALL STREET FINANCE 6147 404 (13799) VIKAS WSP LTD. 2153 > 1500 82626 FEDERAL BANK LTD. 2725 454 548167 COMPACT DISC LTD. 4775 > 4000 339481 INDIAN SUCROSE LTD. 4230 SEPL.2005 (96746) 8,88,153/- PARTICULARS SHARES HELD NO. OF DAYS CUBEX TUBING LTD. NUCENT ESTATE LTD. NEMTACH INDIA LTD. VIKAS WSP LTD. VATSA CORP. LTD. TELE DATA LTD. AJAY PAPER MILLS LTD. 20 138 500 347 40000 25 49 SINCE 1995 SINCE 1995 DEC. 1999 MARCH 2001 APRIL 1998 SINCE 2005 SINCE 2000 16 ITA NO.3080/DEL/2013 OSWAL AGRO MILLS LTD. MODI MIRRORS BLACK LTD. KEY LEASING LTD. CHOLA DBS FINANCE UTTAM SUGAR LTD. STC INDIA LTD. COMPULINKS LTD. TALA SPONGE LTD. ADITYA BIRLA CHEMICALS FERRO ALLOYS LTD. KIRLOSKAR FENS INDIAN CARD CLOTHING 180 500 200 44 25 9310 21110 1000 29000 1000 1000 5200 SINCE 2000 SINCE 2001 SINCE 2001 SINCE 2007 SINCE 2005 SINCE 2007 CURRENT YR CURRENT YR CURRENT YR CURRENT YR CURRENT YR CURRENT YR (IX) HENCE ASSESSEE HAS FULFILLED ALL THE CONDITI ONS AS REQUIRED UNDER CIRCULAR NO. 4/2007 AS DERAILED ABOVE. (X) THE ASSERTION BY ASSESSING OFFICER THAT ASSESSE E HAS PLEDGED 2800 SHARES OF FEDERAL BANK, 5000 SHARES OF J.K. CE MENTS AND 6000 SHARES OF STATE TRADING CORPORATION AND 1000 SHARE OF TATA SPONGE, HAS NO REPERCUSSION ON THE STATUS OF THE ASSESSEE. SINCE ASSESSEE IS PLEDGING THE INDIVIDUAL HOLDINGS TO M/S COMPOSITE S ECURITIES LTD. ON BEHALF OF M/S BAJAJ INSURANCE MANAGEMENT, A BUSINES S ENTITY ORGANIZATION IN WHICH HE IS ALSO A PROPRIETOR. HENC E, PLEDGING OF INDIVIDUAL SHARES DOES NOT RESULT IN THE BUSINESS A CTIVITIES AS CONTEMPLATED BY THE ASSESSING OFFICER. (XI) THE ASSERTION BY THE ASSESSING OFFICER THAT AS SESSEE HAS MADE FEW INTER CODE TRANSACTION IN ID NO. 880 & ID NO. 9 75, DOES NOT RESULT IN CONTEMPLATING THAT TO BE BUSINESS TRANSAC TION. IT IS ALL THE MORE CUSTOMARY IN THE STOCK EXCHANGE TRADE THAT SOM ETIMES DUE TO SUDDEN FALL IN THE SHARE MARKET PRICES & HEAVY MARG INS BEING IMPOSED BY THE STOCK EXCHANGES TO MITIGATE THE DEFA ULTS BY BROKERS. UNDER THAT CIRCUMSTANCE, BROKERS ARE ALLOWED UNDER THE NSE ACT & RULES TO DO SOME INTER SE TRANSACTIONS IN THE INDIV IDUAL BALANCE DUE TO SH. ANIL KUMAR BAJAJ HAS BEEN TRANSFERRED BY THE BR OKER TO THE ACCOUNT OF M/S BAJAJ INSURANCE MANAGEMENT WHICH IS NOTHING BUT AN INVESTMENT IN CAPITAL ACCOUNT BY THE INDIVIDUAL AS PROPRIETOR. IT IS NOT OUT OF PLACE TO MENTION THAT ASSESSEE ANIL KUMAR BA JA IS ALSO AS PROPRIETOR OF M/S BAJAJ INSURANCE MANAGEMENT. HENCE THIS STAND 17 ITA NO.3080/DEL/2013 ALONE TRANSACTION DOES NOT RESULT TO CONCLUDE THAT ALL TRANSACTION DURING THE YEAR ARE BUSINESS TRANSACTIONS. THE ASSESSEE IS THE PROPRIETOR OF THE FIRM M/S BAJA J INSURANCE MANAGEMENT, IN WHICH ALL THE BUSINESS RELATED ACTIV ITIES ARE CARRIED OUT BY HIM INCLUDING TRADING IN DERIVATIVES. SUMMAR Y OF SUCH ACTIVITIES ARE AS UNDER; (I) M/S BAJAJ INSURANCE MANAGEMENT ARE MAINTAINING A SE PARATE CLIENT CODE. NO. 880 WITH THE MEMBER NATIONAL STOCK EXCHAN GE M/S COMPOSITE SECURITIES LIMITED IN WHICH ALL TRANSACTI ONS ARE THE FUTURE & OPTION (F&O) SEGMENT WITH NO DELIVERY BASED TRANS ACTIONS. (COPY OF ACCOUNT IN THE BOOKS OF M/S COMPOSITE SECURITIES LTD. (MEMBER BROKER) OF THE FIRM M/S BAJAJ INSURANCE MANAGEMENT 65 TO 71) (II) M/S BAJAJ INSURANCE MANAGEMENT ARE MAINTAIN SE PARATE BOOKS OF ACCOUNTS FOR TRADING IN F & 0 SEGMENT AND GETTIN G THEIR ACCOUNTS AUDITED UNDER 44A B OF INCOME TAX ACT, 1961. (COP) OF SUCH AUDITED BALANCE SHEET AS AT 31 ST MARCH 2007 ENCLOSED I TO 15) (III) ALL INCOME/LOSS IN THE DERIVATIVE SEGMENTS AR E SHOWN UNDER THE HEAD 'INCOME FROM BUSINESS/PROFESSION' BY THE ASSES SEE ON THE SAME BASIS AS SHOWN IN THE EARLIER ASSESSMENT YEARS. (IV) NO DELIVERY OF SHARES ALLOWED UNDER F & 0 SEGM ENTS, HENCE, ASSESSEE DOES NOT HAVE ANY STOCK IN TRADE ON ACCOUN T F & 0 SEGMENTS AS AT 31 MARCH 2008 AS PER AUDITED BALANCE SHEET. (V) NO FUNDS HAVE BEEN DIVERTED BY THE ASSESSEE FRO M ACCOUNT OF BAJAJ INSURANCE MANAGEMENT TO/FROM THE BROKER. (VI) SINCE BROKER UNDER THE RULES & REGULATION OF S EB] NEEDS SOME MARGIN TO GIVE PERMISSION TO ANY CLIENT TO' OPERATE F & 0 SEGMENT, HENCE, ASSESSEE BEING PROP ALSO OF M/S BAJAJ INSURA NCE MANAGEMENT HAS GIVEN SHARES AS HELD BY HIM IN HIS INDIVIDUAL C APACITY TOWARDS MARGIN TO THE BROKER IT IS TO BE NOTED THAT THESE S HARES ONLY GOES TO THE PLEDGE ACCOUNT OF THE MEMBER BROKER. NO PART OF FINANCIAL TRANSACTIONS ARE INVOLVED IN THE SAME FURTHER, NO A MOUNT HAS BEEN SHOWN AS PART OF CAPITAL GAIN/LOSS BY THE ASSESSEE IN HIS RETURN OF INCOME. THE DISCUSSION, CONFUSION AND HYPE THEREOF HAS WRONGLY BEERY CREATED BY THE ASSESSING OFFICER JUST TO DRAW WRONG INFERENCES- THAT ASSESSEE HAS DIVERTED PERSONNEL HOLDING TO THE FIRMS BENEFIT: FURTHER, RECENTLY JUDGMENT IN CIT VS GOPAL PUROHIT 1129/2009 OF BOMBAY HIGH COURT (AS ENCLOSED AT PAGE 78 TO 82) IN THE SAME MANNER IN POINT NO. 2 OF THEIR JUDGMENT, IT WAS HEL D THAT 18 ITA NO.3080/DEL/2013 'THE TRIBUNAL HAS ENTERED A PURE FINDINGS OF FACT THAT ASSESSEE WAS' ENGAGED IN TWO DIFFERENT TYPES OF TRANSACTION. THE FIRST SET OF TRANSACTION INVOLVED INVESTMENT IN SHARES. THE SECO ND SET OF TRANSACTION INVOLVED DEALING IN SHARES FOR THE PURP OSES OF BUSINESS. THE TRIBUNAL HAS CORRECTLY APPLIED THE PRINCIPLES O F LAW IN ACCEPTING THE POSITION THAT IT IS OPEN TO AN ASSESSEE TO MAIN TAIN TWO SEPARATE PORT FOLIOS, ONE RELATING TO INVESTMENT IN SHARES A ND ANOTHER RELATING TO BUSINESS ACTIVITIES INVOLVING DEALING IN SHARES. THE TRIBUNAL HELD THAT THE DELIVERY BASED TRANSACTION IN PRESENT CASE , SHOULD BE TREATED AS THOSE IN THE NATURE OF INVESTMENT TRANSACTION AN D THE PROFIT RECEIVED THERE FROM SHOULD BE EITHER AS SHORT TERM OR, LONG TERM AS THE CASE MAY BE, DEPENDING UPON THE PERIOD OF HOLDING. A FINDING OF FACT HAS BEEN ARRIVED AT BY THE TRIBUNAL AS REGARDS THE EXISTENCE OF TWO DISTINCT TYPES OF TRANSACTIONS NAMELY, THOSE BY WAY OF INVESTMENT ON ONE HAND AND THOSE FOR THE PURPOSES OF BUSINESS ON THE OTHER HAND QUESTION (A) ABOVE DOES NOT RAISE ANY SUBSTANTIAL Q UESTION IN LAW. IN SO FAR AS QUESTION (B) IS CONCERNED, THE TRIBUNA L HAS OBSERVED IN PARAGRAPH 8.1 OF ITS JUDGMENT THAT THE ASSESSEE HAS FOLLOWED A CONSISTENT PRACTICE IN REGARD TO THE NATURE OF THE ACTIVITIES, THE MANNER OF KEEPING RECORDS AND THE PRESENTATION OF SHARES A S INVESTMENT AT THE END OF THE YEAR, IN ALL THE YEARS. THE REVENUE SUBM ITTED THAT A DIFFERENT VIEW SHOULD BE TAKEN FOR THE YEAR UNDER CONSIDERATI ON, SINCE THE PRINCIPLE OF RES JUDICATA IS NOT APPLICABLE TO ASSE SSMENT PROCEEDINGS, THE TRIBUNAL CORRECTLY ACCEPTED THE POSITION, THAT THE PRINCIPLE OF RES JUDICATA IS NOT ATTRACTED SINCE EACH ASSESSMENT YEA R IS SEPARATE IN ITSELF THE TRIBUNAL HELD THAT THERE OUGHT TO BE UNI FORMITY IN TREATMENT AND CONSISTENCY WHEN THE FACTS AND CIRCUMSTANCES AR E IDENTICAL, PARTICULARLY IN THE CASE OF THE ASSESSEE. THIS APPR OACH OF THE TRIBUNAL CANNOT BE FAULTED. THE REVENUE DID NOT FURNISH ANY JUSTIFICATION FOR ADOPTING A DIFFERENT APPROACH FOR THE ASSESSMENT YE AR IN QUESTION. QUESTION (B), THEREFORE, DOES NOT ALSO RAISE ANY SU BSTANTIAL QUESTION. IN SO FAR AS QUESTION /C) IS CONCERNED, AGAIN THERE CANNOT BE ANY DISPUTE ABOUT THE BASIC PROPOSITION THAT 'ENTRIES I N THE BOOKS OF ACCOUNT ALONE ARE NOT CONCLUSIVE IN DETERMINING THE NATURE, OF INCOME. THE TRIBUNAL HAS APPLIED THE CORRECT PRINCI PLE IN ARRIVING AT THE DECISION IN' THE FACTS OF THE PRESENT CASE. THE FINDING OF FACT DOES NOT CALL FOR INTERFERENCE IN AN APPEAL UNDER SECTIO N 260A. NO SUBSTANTIAL QUESTION OF LAW IS RAISED. THE APPEAL I S ACCORDINGLY DISMISSED. 19 ITA NO.3080/DEL/2013 AND ALSO JUDGMENT OF THE HON'BLE SUPREME COURT IN C IT VS. GOPAL . PUROHIT 228 CTR 582 (BOM) THE SUPREME COURT VIDE OR DER DT. 15.LL.2010 DISMISSED THE DEPARTMENT'S SPECIAL LEAVE PETITION AGAINST THE JUDGMENT OF THE BOMBAY HIGH COURT IN CL T VS. G OPAL PUROHIT 228 (BOM) WHERE IT WAS HELD THAT: (A) IT WAS OPEN TO AN ASSESSEE TO MAINTAIN TWO SEPA RATE PORTFOLIO, ONE RELATING TO INVESTMENT AND ANOTHER RELATING TO BUSI NESS OF DEALING -IN SHARES. (B) THAT A FINDING OF FACT HAD BEEN ARRIVED AT BY T HE TRIBUNAL AS REGARDS THE TWO DISTINCT TYPES OF TRANSACTIONS NAME LY, THOSE BY WAY OF INVESTMENT ARID THOSE FOR THE PURPOSES OF BUSINESS. (C) THAT THERE SHOULD BE UNIFORMITY IN TREATMENT AN D CONSISTENCY WHEN FACTS AND CIRCUMSTANCES ARE IDENTICAL PARTICULARLY IN THE CASE OF THE ASSESSEE AND (D) THAT ENTRIES IN BOOKS OF ACCOUNTS ALONE ARE NOT CONCLUSIVE IN DETERMINING THE NATURE OF INCOME THROUGH THEY HAVE A BEARING (COPY OF SUCH JUDGMENT AT PAGE 82). IT HAS CATEGORICALLY BEEN ACCEPTED IN VARIOUS JUDGM ENTS WHICH CLEARLY DEFINES THAT ASSESSEE IS WITHIN ITS RIGHT TO CLASSI FY HIS INVESTMENT IN SHARES AS LONG/SHORT TERM OR AS PART OF BUSINESS AC TIVITIES BEING STOCK IN TRADE AS REFLECTED FROM THE CONDUCT OF THE ASSESSEE BUSINESS AND INVESTMENT PORTFOLIOS, MANNER IN WHICH HE MAINT AINS HIS BOOKS OF ACCOUNTS, PERIOD. OF HOLDINGS OF THE INVESTMENT, PU RPOSE OF INVESTMENT, TREATMENT IN THE PREVIOUS ASSESSMENT YE ARS, WHETHER FUND ARE BORROWED OR SELF OWNED ETC. WE SUMMARIZE THE CONDUCT OF OUR ASSESSEE IN TERM OF - CIRCULAR NO. 4/2007 AND VARIOUS JUDICIAL PRONOUNCEMENTS AS UNDER :- A) THE ASSESSEE IS MAINTAINING SEPARATE -SET OF BOO KS OF ACCOUNTS ONE IS FOR INVESTMENT PORTFOLIO IN THE NAME OF ANIL KUMAR BAJAJ WHICH IS PART OF HIS LONG/SHORT TERM INVESTMENTS AND SECO ND SETS OF BOOKS OF ACCOUNTS IN THE NAME OF HIS PROPRIETORSHIP FIRM M); BAJAJ INSURANCE MANAGEMENT IN WHICH ONLY THE DERIVATIVES BEING F&O SEGMENT ARE TRADED BY HIM-WHICH IS NON DELIVERY BASE AND ALL TR ANSACTION ARE SQUARED UP AS PER GUIDELINES, RULES & REGULATIONS M ADE 'BY SEF3JWHEREIN DIFFERENCE IN SALE PURCHASE OF SHARES ARE TREATED AS BUSINESS PROFIT OR BUSINESS LOSS UNDER THE PROVISIO N OF INCOME TAX ACT. B) THE ASSESSEE IS MAINTAINING DEMAT ACCOUNT IN THE NAME OF ANIL KUMAR BAJAJ FOR ALL HIS INVESTMENT PORTFOLIO FOR-LA ST NUMBERS OF YEARS 20 ITA NO.3080/DEL/2013 IN WHICH ALL DELIVERY BASE TRANSACTIONS ARE TRANSFE RRED AND LONG TERM AND SHORT TERM GAIN ARE DERIVED OUT AS SUCH. IT IS CLARIFY THAT SINCE F&O SEGMENT IS DERIVATIVE SEGMENT HENCE, THERE IS N O DELIVERY TRANSACTION AND ALL INCOME OR LOSSES ON SALE PURCHA SE ARE PART OF BUSINESS INCOME/LOSS. C) THE ASSESSEE HAS NOT BORROWED ANY FUNDS FOR INVE STMENT IN SHARES EXCEPT FAMILY BORROWING, HOWEVER, NO INTERES T HAVE BEEN PAID BY THE ASSESSEE ON ANY BORROWING. D) TREATMENT OF SHORT TERM AND LONG TERM CAPITAL GA IN/LOSS OR ON SIMILAR BASIS AS FOLLOWED BY THE ASSESSEE IN THE PR EVIOUS YEARS AND SUCH TREATMENT HAS BEEN ACCEPTED BY THE DEPARTMENT IN SUCH EARLIER. E) THE ASSESSEE IS MAINTAIN SEPARATE CLIENT CODE AN D SEPARATE ACCOUNT FOR HIS DEALING IN CASH SEGMENT WHICH IS DELIVERY B ASE IN THE NAME OF ANIL KUMAR BAJA] WHICH CODE NO. 975 WITH M/S COMPOS ITE SECURITIES LTD. (MEMBER BROKER), THE ASSESSEE IS MAINTAINING H IS SEPARATE F&O SEGMENTTRADING ACCOUNT IN THE NAME OF M/S BAJA] INS URANCE MANAGEMENT WITH CODE NO. 880 WITH M/S COMPOSITE SEC URITIES LTD. (MEMBER BROKER). THERE ARE THE FOLLOWING JUDICIAL PRONOUNCEMENT IN F AVOUR OF THE ASSESSEE CITED AS UNDER MANAGEMENT STRUCTURE & SYST EM VS. ITO (ITAT) MUMBAI HITESH SATISH CHANDRA DOSHI VS. JCIT (ITAT) MUMBAI MAHENDRA C SHAH VS. ADDL. CIT (ITAT) MUMBAI . CIT VS. NAISHADH VS. VACHHAROJANI (BOMBAY HIGH COURT) 5. WE FURTHER STATE THAT ASSESSING OFFICER IN THE E ARLIER YEARS ASSTT. YEAR 2007-08 HAD MADE ADDITION ON SIMILAR GROUNDS W HICH HAS - ALREADY BEEN DELETED BY CIT(APPEALS)-VILL VIDE COPY OF HIS ORDER DT. 17.10.2011 ENCLOSED AT PAGE 95 TO 105. THE SAME ARE CIRCUMSTANCES OF THE CASE WERE IDENTICAL. 6. WE WOULD FURTHER LIKE TO STATE THAT ASSESSING OF FICER IN HIS ORDER U/S 143(3) FOR THE ASSTT. YEAR 2009-10 HAS ACCEPTED THE RETURN OF INCOME AS FILED, BY THE ASSESSEE IN WHICH LONG TERM CAPITA L GAIN INCOME AMOUNTING TO RS. 2,74,702/- WAS TREATED AS LONG TER M CAPITAL GAIN & TAX ACCORDINGLY. THE BUSINESS LOSS UNDER F& 0 SEGME NT AMOUNTING TO RS. 16,07,590/- WAS ACCEPTED AS BUSINESS LOSS AND- ALLOWED TO CARRIED FORWARD TO NEXT ASSESSMENT YEAR (PAGE 106- 1 08). UNDER THESE CIRCUMSTANCES, CONSISTENCY IN THE ASSES SMENT HAS BEEN MAINTAINED IN VIEW OF VARIOUS JUDICIAL PRONOUNCEMEN TS. PAPER BOOKS IS ENCLOSED. 21 ITA NO.3080/DEL/2013 POWER OF ATTORNEY IS ENCLOSED. YOU ARE REQUESTED TO GRANT RELIEF TO THE ASSESSEE N OT TO TREAT THE INCOME FROM CAPITAL GAIN AS PART OF BUSINESS INCOME AND DIRECT TO ASSESSING OFFICER TO TREAT A SUM OF RS. 8,88,153/- AS PART OF LONG TERM CAPITAL GAIN AND RS.9,12,477/- AS PART OF SHORT TER M CAPITAL GAIN AND TO BE TAXED ACCORDINGLY' UNDER THE INCOME TAX ACT, 1961. CONSEQUENTIAL RELIE F WITH REGARD 234B AND 234C AND PENALTY PROCEEDING INITIATING UND ER SECTION 271 (L)(C) BE DROPPED HENCEFORTH. ' THE APPELLANT HAS STATED AS UNDER IN THE SUBMISSION S DATED 01.10.2012:- 'THIS IS REFERENCE TO YOUR NOTICE DATED 21.09.2012 AND IN THE CONTINUATION OF OUR EARLIER REPLY DATED 02.01.2012 WHICH \VAS DULY HEARD AND CASE WAS DISCUSSED BY THE LEARNED CIT(A), HOWEVER, NO ORDER WAS PASSED. 9. FROM THE ABOVE SUBMISSIONS OF THE ASSESSEE BEFOR E LD. CIT(A), WE FIND THAT THE ASSESSEE HAS EXPLAINED ALL THE OBJECT IONS OF THE A.O. WHICH TO OUR MIND IS QUITE SATISFACSTORY. LD. CIT(A) HAS CO NVENIENTLY IGNORED THESE SUBMISSIONS AND HAS UPHELD THE ADDITION ON THE BASI S OF FOLLOWING : (1) INTERMINGLING OF TWO PORTFOLIOS (2) FUNDS TRANSFER BETWEEN BANK ACCOUNTS (3) HOLDING PERIOD OF SHARES. 10. AS REGARDS THE 1 ST ISSUE THE ASSESSEE HAS EXPLAINED THIS VIDE PARA 7.1(II) WHICH TO OUR MIND IS A SATISFACTORY EXPLANA TION ON WHICH LD. CIT(A) HAS NOT COMMENTED AND HAS SIMPLY IGNORED. SIMILARL Y, THE ASSESSEE HAD EXPLAINED REGARDING FUND TRANSFER BETWEEN THE TWO B ANK ACCOUNTS. WE DO NOT FIND ANYTHING WRONG IF AN ASSESSEE TRANSFERS HI S FUNDS FROM BUSINESS ACCOUNT TO HIS PERSONAL ACCOUNT AND FROM HIS PERSON AL ACCOUNTS TO HIS BUSINESS ACCOUNTS AS THE CASE MAY BE UNLESS ASSESSE E HAD BORROWED FUNDS BUT IN THE PRESENT CASE, IT IS NOT THAT THE ASSESSE E WAS USING BORROWED FUNDS. 22 ITA NO.3080/DEL/2013 AS REGARDS THE 3 RD ALLEGATION OF A.O. REGARDING HOLDING PERIOD OF SHA RES, WE FIND THAT THIS OBSERVATION IS ALSO BASELESS AS WHEN ASSESSEE HOLDS SOME SHARES FOR INVESTMENT PURPOSES AND DECLARES HIS INT ENTION OF INVESTMENT BY CLASSIFYING AS INVESTMENT THEN THE INCOME HAS TO BE ASSESSED AS CAPITAL GAIN EITHER AS LONG TERM CAPITAL GAIN OR SHORT TERM CAPI TAL GAIN DEPENDING UPON HOLDING PERIOD OF SHARES. LD. CIT(A) ON THE ONE H AND HAS ARRIVED AT THE DECISION AND HAS ALLOWED PART RELIEF BY TREATING A PART OF INCOME AS LONG TERM CAPITAL GAIN ON THE BASIS OF HOLDING PERIOD WHICH E XCEEDED ONE YEAR. THEREFORE THERE IS NO JUSTIFICATION IN NOT ALLOWING THE BALANCE PART OF SAME INVESTMENT AS SHORT TERM CAPITAL GAIN ON THE BASIS THAT HOLDING PERIOD WAS LESS THAN AN YEAR. THE LD. CIT(A) HAS DISTINGUISHE D THE FACTS OF PRESENT CASE WITH EARLIER YEARS ON IRRELEVANT CONSIDERATIONS AS NONE OF THE CIRCUMSTANCES AS EXPLAINED BY LD. CIT(A) CAN BE APPLIED TO HOLD T HE CAPITAL GAINS EARNED BY ASSESSEE AS BUSINESS INCOME. THE PLEDGING OF SH ARES HELD FOR INVESTMENT PURPOSES CANNOT ALTER THE NATURE OF INVESTMENT AS I N THAT CASE, EVEN LAND MORTGAGED BY A PERSON TO SECURE CREDIT FACILITIES F ROM A BANK WILL CHANGE THE NATURE OF LAND TO BUSINESS PURPOSES FROM INVESTMENT PURPOSES. SIMILARLY, USE OF FUNDS FROM BUSINESS ACCOUNTS FOR PERSONAL PU RPOSES OR VICE VERSA CANNOT ALTER THE NATURE OF INVESTMENT. 11. IN VIEW OF ABOVE, APPEAL FILED BY THE ASSESSEE IS ALLOWED. 12. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH DEC., 2014. SD./- SD./- (DIVA SINGH) (T.S. KAPO OR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 12 TH DEC., 2014 SP 23 ITA NO.3080/DEL/2013 COPY FORWARDED TO:- THE APPELLANT THE RESPONDENT THE CIT THE CIT (A)-, NEW DELHI. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). S.NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON SR. PS/PS 2 DRAFT PLACED BEFORE AUTHOR SR. PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/AM 5 APPROVED DRAFT COMES TO THE SR. PS/PS SR. PS/PS 6 KEPT FOR PRONOUNCEMENT SR. PS/PS 7 FILE SENT TO BENCH CLERK SR. PS/PS 8 DATE ON WHICH THE FILE GOES TO HEAD CLERK 9 DATE ON WHICH FILE GOES TO A.R. 10 DATE OF DISPATCH OF ORDER