ACIT CIR 21(1), MUMBAI V. CHANDRAKANT K. PARIKH, MUMBAI

ITA 3133/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 2102 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-05-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 03-05-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 13-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: L K AGARWAL
• Assessee Lawyers: B V JHAVERI; PRITI SHUKLA
• Keywords: Capital asset; Business income; Rule of consistency; Source of fund; Capital Gains

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH C, MUMBAI BEFORE SHRI D.K. AGARWAL, JM AND SHRI T.R. SOOD, A M I.T.A.NO. 3133/MUM/2009 ASSESSMENT YEAR : 2006-07 THE ASST. COMMISSIONER OF INCOME- TAX, CIRCLE 21(1), 6 TH FLOOR, ROOM NO.601,PRATYAKSHAKAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA(E), MUMBAI 400 051. VS. SHRI CHANDRAKANT K. PARIKH, 405, UNIQUE APARTMENT, IRLA, S.V. ROAD, VILE PARLE WEST. MUMBAI 400 056. PAN: AABPP 1869 P (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI L.K. AGARWAL RESPONDENT BY : SHRI B.V. JHAVERI & MS. PRITI SHUK LA O R D E R PER T.R. SOOD, AM: IN THIS APPEAL THE REVENUE HAS RAISED THE FOLLOWIN G GROUNDS: I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) ERRED IN DIRECTING THE A.O. TO TREAT THE SURPLUS OF RS.6,42,940/- ON SALE OF SHARES HELD FOR LESS THAN 60 DAYS AS BUSINESS INCOME AND TO TREAT THE SURPLUS SHORT TERM CAPITAL GAIN OF RS. 1,02,68,205/- AND LONG TERM CAPITAL GAIN OF RS. 45,40,160/- ON SALE OF SHARES HELD FOR MORE THAN 60 DAYS AS CAPITA L GAINS. II) THE LD. CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT THE ASSESSEE IS INTO AN ORGANIZED AND SYSTEMATIC ACTIVITY WHICH RENDERS IT TO BE ADVENTURE IN THE NATURE OF TRADE AND NOT INVESTMENT . 2. AFTER HEARING BOTH THE PARTIES, WE FIND THAT DUR ING THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICED THAT INCO ME AND EXPENDITURE ACCOUNT FILED ALONG WITH THE RETURN OF INCOME HAD SHOWN THE FOLLO WING AMOUNTS: SHARE OF PROFIT RS. 9,61,406/- SALARY RECEIVED FROM M/S. ARCK ENTERPRISES RS. 1,80,000/- SHORT TERM CAPITAL GAINS RS.1,09,11,145/- LONG TERM CAPITAL GAIN RS. 45,40,160/- BANK INTEREST RS. 4,408/- DIVIDEND RS. 5,55,943/- BOND INTEREST RS. 2,23,750/- TOTAL RS.1,73,76,812/- 3. FROM THE ABOVE, THE ASSESSING OFFICER WAS OF THE VIEW THAT ASSESSEE WAS MAINLY TRADING IN SHARES. HOWEVER, IN THE RETURNED INCOME THE SAME HAS BEEN BIFURCATED AS INCOME FROM SHORT-TERM AND LONG TERM CAPITAL GAINS. ASSESSING OFFICER WENT ON TO MAKE DETAILED ENQUIRY AND ALSO ASKED TH E ASSESSEE WHY THE TRANSACTIONS ITA NO.3133/M/09 SHRI CHANDRAKANT K. PARIKH 2 SHOULD NOT BE TREATED AS BUSINESS TRANSACTIONS. IN RESPONSE TO THIS LETTER, IT WAS MAINLY SUBMITTED THAT ASSESSEE WAS MAINLY ENGAGED I N BUSINESS AS A PARTNER IN A FIRM M/S. ARCK ENTERPRISES, WHICH WAS MAINLY ENGAGE D IN THE BUSINESS OF IMPORT AND EXPORT OF DIAMANDS AND HE WAS MERELY MAKING INVESTM ENT IN SHARES. IT WAS POINTED OUT THAT ASSESSEE HAD RECEIVED A DIVIDEND OF RS. 5, 55,943/-. ASSESSEE HAS MADE HUGE INVESTMENT IN SHARES IN THIS YEAR AND EARLIER YEARS. IT WAS ALSO POINTED OUT THAT SOME OF THE ASSESSEES MONEY WAS INVESTED IN THE G OVERNMENT BONDS, WHICH WAS GIVING LOW RETURN OF 6 TO 7% THAT IS WHY MAJOR INV ESTMENT WAS MADE IN SHARES. IT WAS FURTHER POINTED OUT THAT ASSESSEE HAD NOT BORR OWED ANY MONEY NOR HAD ANY ORGANIZED SET UP IN THIS INVESTMENT BUSINESS. FURT HER IT WAS EXPLAINED THAT ASSESSEE WAS GETTING A SALALRY OF RS. 1,80,000/- FROM ARCK E NTERPRISES AND SHARE OF PROFIT OF RS. 9,61,406/-. ASSESSEE WAS RECEIVING INTEREST FRO M BONDS AT RS.2,23,750/- AND DIVIDEND OF RS. 5,55,943/- AND THUS ASSESSEE HAD SU FFICIENT SOURCES OF INCOME FOR HIS PERSONAL EXPENSES AND OTHER NEEDS AND THAT IS WHY S URPLUS FUNDS WERE BEING INVESTED. IT WAS ALSO POINTED THAT NO TRANSACTION WAS CONDUCTED WITHOUT TAKING DELIVERY AND ALL TRANSACTIONS WERE IN RESPECT OF LI STED SECURITIES THROUGH A BROKER AND EVEN SECURITY TRANSACTION TAX WAS PAID. 4. ASSESSING OFFICER AFTER EXAMINING THE SUBMISSION S AND GOING THROUGH VARIOUS CASE LAWS ALSO REFERRED TO THE BOARD CIRCUL AR NO. 4/2007 AND WAS OF THE VIEW THAT IN VIEW OF THE LARGE TRANSACTION CONDUCTE D BY THE ASSESSEE, THE TRANSACTION OF SALE AND PURCHASE OF SHARES WAS TO BE TREATED A S BUSINESS INCOME. 5. ON APPEAL BEFORE THE LEARNED CIT(A) SIMILAR SUBM ISSIONS WERE REITERATED AND FURTHER RELIANCE WAS PLACED ON THE DECISION OF THE TRIBUNAL IN THE CASE OF SHRI JANAK S. RAMGWALA VS. ACIT (11 SOT 627) AND THE D ECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT V. TRISHUL INVESTMENT S LTD.,(305 ITR 434). THE LEARNED CIT(A) AFTER EXAMINING THE ISSUE DECIDED TH E SAME VIDE PARA 4.3, WHICH READS AS UNDER: I HAVE PERUSED THE ASSESSMENT ORDER AND HAVE CAREFU LLY CONSIDERED THE FINDINGS AND THE CONCLUSION OF THE AO. I HAVE A LSO CAREFULLY CONSIDERED THE SUBMISSIONS OF THE APPELLANT. I HAVE CONSIDERED THE FACTS OF THE CASE. I AM OF THE CONSIDERED OPINION T HAT BOTH THE AO AND THE APPELLANT HAVE TAKEN EXTREME VIEWS. WHILE THE A O HAS TREATED THE APPELLANT AS A TRADER AND HAS TREATED ALL THE TRANS ACTIONS OF THE APPELLANT AS BUSINESS INCOME, THE APPELLANT HAS CLA IMED TO BE AN INVESTOR AND HAS TREATED ALL HIS TRANSACTIONS AS IN VESTMENT TRANSACTION AND THEREBY OFFERED GAIN ON SALE OF SHA RES AS CAPITAL GAINS. IN MY CONSIDERED OPINION, NEITHER VIEW SEEMS TO BE A CORRECT VIEW. I ALSO FIND THAT THE AO HAS TAKEN A LIMITED V IEW OF THE MATTER BY RESTRICTING HIMSELF TO THE FACTS OF THE YEAR UNDER CONSIDERATION WHEREAS AT TIMES IT IS NECESSARY TO CONSIDER THE FA CTS OF THE PAST AND ITA NO.3133/M/09 SHRI CHANDRAKANT K. PARIKH 3 SUBSEQUENT YEARS ALSO TO ASCERTAIN THE TRUE NATURE OF ACTIVITIES OF THE APPELLANT. 4.3.1.1. I HAVE CAREFULLY STUDIED THE TRANSACTIONS UNDERTAK EN BY THE APPELLANT AND REQUESTED HIM TO GIVE A BREAKUP OF PR OFIT ON THESE TRANSACTIONS ON THE BASIS OF PERIOD OF HOLDING FOR LESS THAN 60 DAYS AND LESS THAN 30 DAYS. THESE ARE PROFIT OF RS.6,42, 940 AND LOSS OF RS.2,79,406/- RESPECTIVELY. THOUGH THERE CAN BE NO SCIENTIFIC CRITERIA IN THIS REGARD, BUT I CONSIDER 60 DAYS AS A PROPER PERIOD WITHIN WHICH IF THE PURCHASED SHARE ARE SOLD, THE ACCRETION SHOU LD BE TREATED AS BUSINESS PROFIT. PROFIT ON SALES OF SHARES HELD FOR LESS THAN 60 DAY S RS.6,42,940 PROFIT ON SALES OF SHARES HELD FOR MORE THAN 60 DAYS (STCG RS.1,02,68,205 + LTCG RS.45,40,160) RS.1,48,08,365 4.3.2. FROM THE ANALYSIS OF THE DATA IT IS CLEAR THAT THIS IS A CASE OF AN INVESTOR CUM TRADER. THE APPELLANT IS AN INVESTO R WHO ALSO AT TIMES TRIES HIS HAND AT TRADING IN SHARES AND ENDS UP SEL LING THE SHARES WITHIN SHORT SPAN OF 60 DAYS OR LESS. IT IS WELL KN OWN FACT THAT THE PERSON WHO IS A FULL TIME INVESTOR WOULD BE IN A PO SITION TO UNDERSTAND AND TAKE ADVANTAGE OF SHORT TERM OPPORTU NITIES THAT ARE PRESENT IN THE MARKET. THE FACT THAT A PERSON CAN B E BOTH AN INVESTOR AS WELL AS A TRADER IS ALSO RECOGNIZED BY THE CBDT AND THE CBDT HAS STATED THAT A TAX PAYER CAN HAVE PORTFOLIOS, AN INV ESTMENT PORTFOLIO AS WELL AS TRADING PORTFOLIO. VARIOUS FACTORS WHICH MA KES THE APPELLANT AN INVESTOR ARE THAT THE APPELLANT HAD MADE INVESTM ENTS IN LISTED SHARES, THE SHARES WERE SHOWN IN BALANCE SHEET AS I NVESTMENTS AND VALUED AT COST, THE APPELLANT DID NOT HAVE ANY OFFI CE AND / OR ADMINISTRATIVE SET UP, THERE ARE NO FIXED ASSETS, T HE SOURCE OF ACQUISITION OF SHARES WAS OUT OF OWN FUNDS AND FAMI LY FUNDS, THE RATIO OF INVESTMENTS TO SALE AND PURCHASES IS VERY HIGH AND THE FACT THAT THERE WAS NOT A SINGLE INSTANCE WHERE THE APPE LLANT HAD SQUARED OFF THE TRANSACTION ON THE SAME DAY WITHOUT TAKING DELIVERY OF SHARES. 4.3.3. WHILE THE FACTORS LISTED ABOVE MAKES IT CLEAR THAT THE APPELLANT IS MAINLY AN INVESTOR, THE FACTORS LIKE L ACK OF DIVIDEND INCOME, TURNOVER OF SHARES IS LESS THAN 60 DAYS, ET C., POINTS TO THE FACT THAT THE APPELLANT IS ALSO A TRADER. I THEREFO RE HOLD THAT THE APPELLANT IS BOTH AN INVESTOR AS WELL AS TRADER. MY PREDECESSOR HAS ALSO TREATED APPELLANT AS A TOTAL INVESTOR IN SHARE S AND ALLOWED THE CAPITAL GAIN IN FULL VIDE HIS ORDER NO.CIT(A)XXI/ D CIT- 21(2)/IT.200/06-07 DATED 22.05.2007 IN THE APPELLAN TS CASE FOR A.Y. 2004-05. AFTER DUE CONSIDERATION OF THE JUDGMENTS C ITED BY THE AO AND THE APPELLANT, THE BOARDS CIRCULAR AND MY LD. PREDECESSORS ORDER, I DIRECT THE AO TO TREAT THE SURPLUS OF RS.6 ,42,940/- ON SALE OF SHARES HELD FOR LESS THAN 60 DAYS AS BUSINESS INCOM E AND TO TREAT THE SURPLUS SHORT TERM CAPITAL GAIN OF RS.1,02,68,205/- AND LONG TERM CAPITAL GAINS OF RS.45,40,160/- ON SALE OF SHARES H ELD FOR MORE THAN 60 DAYS AS CAPITAL GAINS. ITA NO.3133/M/09 SHRI CHANDRAKANT K. PARIKH 4 6. BEFORE US THE LEARNED DEPARTMENTAL REPRESENTATIV E REFERRED TO THE ASSESSMENT ORDER AND POINTED OUT THAT ASSESSEE HAD INDULGED IN LARGE NUMBER OF SHARE TRANSACTIONS. THIS CLEARLY SHOWS THAT INTENTI ON OF THE ASSESSEE WAS TO DO BUSINESS IN SHARES. HE ARGUED THAT THE LEARNED CIT (A) HAS MADE A CUT OFF OF 60 DAYS BUT THERE IS NO BASIS FOR THE SAME IN THE SENS E THAT THE ACT PRESCRIBES EITHER FOR LONG TERM CAPITAL GAINS OR SHORT CAPITAL GAINS OR F OR BUSINESS TRANSACTION ON THE BASIS OF HOLDING PERIOD OF ONE YEAR. HE ALSO STRONGLY RE LIED ON THE DECISION OF THE AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF DCIT V. SMT. DEEPABEN ABHILASH SHAH (99 ITD 219). 7. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE A SSESSEE MAINLY SUBMITTED THAT THE ASSESSEE HAS BEEN INVESTING IN SHARES FRO M THE ASSESSMENT YEAR 1994-95 AND IN THIS REGARD HE REFERRED TO PAGE 12 OF THE P APER BOOK TO POINT OUT THAT IN ALL THESE YEARS SUBSTANTIAL AMOUNT OF MONEY WAS INVESTE D AND INCOME GENERATED WAS ALWAYS REFLECTED SHORT TERM AND LONG TERM CAPITAL G AINS AS PER THE DURATION OF THE PERIOD FOR WHICH THE SHARES WERE HELD. THEREFORE IN KEEPING THE PRINCIPLE OF CONSISTENCY ITSELF, THE ASSESSING OFFICER SHOULD HA VE ASSESSED THE SAME AS INCOME FROM SHORT TERM AND LONG TERM CAPITAL GAINS AND IN THIS CONNECTION HE RELIED ON THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF SHRI JANAK S. RANGWALA V. ACIT (11 SOT 627) WHEREIN AFTER REFERRING TO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF RADHASOAMI SATSANG V. CIT (193 ITR 321), THE PRINCIPLE OF CONSISTENCY WAS APPLIED TO THE SHARE TRANSACTION. 8. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER POI NTED OUT THAT ASSESSEE HAS ALWAYS REFLECTED THE INVESTMENT IN THE BALANCE SHEE T UNDER THE HEAD INVESTMENT AND EVEN THE SHARES WERE VALUED ALWAYS ON COST AND NOT ON COST OR MARKET VALUE WHICHEVER IS LOWER AS REQUIRED IF THE TRANSACTION HAS TO BE TREATED AS BUSINESS TRANSACTION. HE POINTED OUT THAT ASSESSEE WAS MAINL Y ENGAGED IN THE BUSINESS OF IMPORT AND EXPORT OF DIAMONDS AFTER CUTTING AND POL ISHING THE SAME THROUGH A PARTNERSHIP AND WAS HAVING SUBSTANTIAL INCOME FROM THAT FIRM AND WAS HAVING LOT OF SURPLUS MONEY AND SOME OF WHICH WAS INVESTED IN THE GOVERNMENT BONDS AND REST IN THE SHARE MARKET. THE ASSESSEE IS NOT MAINTAINI NG ANY OFFICE OR STAFF OR ANY OTHER ORGANIZED SET UP FOR HANDLING HIS INVESTMENT IN SHA RES. THE ASSESSEE HAS FURTHER NOT BORROWED ANY SINGLE PAISA FOR INVESTMENT AND HAS AL SO NOT CLAIMED ANY EXPENSES ON ACCOUNT OF INVESTMENT BUSINESS. THE ASSESSEE ALWAY S DEALT WITH IN THE SHARES ON DELIVERY BASIS AND HAS NOT INDULGED EVEN IN A SINGL E TRANSACTION WITHOUT DELIVERY. THE ASSESSEE DEALS IN THE LISTED SECURITIES WHICH AS PER THE ACT IF HELD FOR MORE THAN ITA NO.3133/M/09 SHRI CHANDRAKANT K. PARIKH 5 12 MONTHS THEN REQUIRED TO BE TREATED AS LONG TERM ASSET UNDER THE INCOME-TAX ACT AND IF THE HOLDING PERIOD WAS LESS THAN 12 MONTHS T HEN THE SAME WAS SHORT TERM CAPITAL ASSET. HE VEHEMENTLY ARGUED THAT 2004 TO 2 007 WAS A BOOMING PERIOD OF THE MARKET AND SHARE PRICES WERE CONTINUOUSLY RISING A T A FAST PACE AND THAT IS WHY WHATEVER WAS INVESTED WAS SOLD IN SMALL LOTS TO BO OK THE PROFITS. THIS HAS LEAD TO INCREASE IN THE VOLUME OF TRANSACTIONS. HE HAS REF ERRED TO THE DECISION OF THE MUMBAI TRIBUNAL IN THE CASE OF GOPAL PUROHIT V. JCI T (20 DTR 99), COPY OF THE DECISION HAS BEEN FILED ON RECORD, WHEREIN ON THE B ASIS OF PAST PRACTICE THE TRANSACTION OF SHARE INVESTMENT WERE HELD TO BE UND ER THE HEAD INVESTMENT. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER POINTED TH AT THIS DECISION OF THE TRIBUNAL HAS BEEN CONFIRMED BY THE HONBLE BOMBAY HIGH COURT IN INCOME-TAX APPEAL NO. 1121/2009 DATED 6.1.2010, COPY OF WHICH HAS BEEN PL ACED AT PAGE 1 OF THE COMPILATION OF THE DECISIONS. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFUL LY. WE FIND THAT ASSESSEE IS INVESTING IN SHARES FROM LAST SO MANY YEARS WHICH B ECOMES CLEAR FROM ITS INVESTMENT FOR EARLIER YEARS, DETAILS OF WHICH HAS BEEN GIVEN AT PAGE 12 OF THE PAPER BOOK AND WHICH READS AS UNDER: ASSESSMENT YEAR CAPITAL G AIN SHARES INVESTM ENT SHORT TERM LONG TERM AT COST 1994-1995 - - 1,91,000 1995-1996 - 22,500 23,71,662 1976-1997 (24,946) (1,83,321) 27,27,002 1977-1978 (7,350) (2,16,096) 30,47,300 1978-1979 10,979 - 44,78,701 1999-2000 9,33,244 (6,20,387) 87,79,452 2000-2001 36,02,577 1,51,568 1,33,74,639 2001-2002 (1,36,560) (1,52,572) 1,37,80,899 2002-2003 3,60,250 (3,42,338) 1,54,76,948 2003-2004 12,61,231 26,98,946 1,66,96,142 2004-2005 29,24,009 74,85,958 1,59,19,149 2005-2006 62,53,043 45,66,552 2,33,38,453 2006-2007 1,09,11,145 45,40,160 3,63,13,427 2007-2008 29,34,188 1,02,06,074 3,32,84,920 2008-2009 79,13,250 48,32,796 3,48,99,135 2009-2010 (8,86,319) (44,80,284) 3,32,83,945 THE ABOVE CLEARLY SHOWS THAT SUBSTANTIAL INVESTME NT WAS MADE IN SHARES AND WHATEVER PROFIT IS GENERATED HAS BEEN RETURNED UNDER THE HEAD SHORT TERM OR LONG-TERM CAPITAL GAINS AND THE SAME HAS BEEN ACC EPTED BY THE DEPARTMENT IN THE EARLIER YEARS. IF THE GOVERNMENT HAS PROVIDED FOR T AXABILITY OF SHARE TRANSACTION ITA NO.3133/M/09 SHRI CHANDRAKANT K. PARIKH 6 UNDER SHORT-TERM AND LONG-TERM CAPITAL GAINS THEN M ERELY BECAUSE AN ASSESSEE HAS LARGE NUMBER OF TRANSACTION, THE SAME CANNOT BE DEN IED TO HIM. FIRSTLY THE PRINCIPLE OF CONSISTENCY HAS TO BE FOLLOWED. WE FIND THAT THE MUMBAI TRIBUNAL IN THE CASE OF GOPAL PUROHIT V. JCIT (SUPRA) HAS OBSERVED AS UNDER : THUS, THE NATURE OF ACTIVITIES, MODUS OPERANDI OF THE ASSESSEE, MANNER OF KEEPING RECORDS AND PRESENTATION OF SHARES AS INVESTMENT AT THE YEAR END IS SAME IN ALL T HE YEARS, HENCE; APPARENTLY, THERE APPEARS NO REASON AS TO W HY THE CLAIMS MADE BY THE ASSESSEE SHOULD NOT BE ACCEPT ED. HOWEVER, THE REVENUE AUTHORITIES HAVE TAKEN A DIFFERE NT VIEW IN THE YEAR UNDER CONSIDERATION BY HOLDING THAT PRINCIPLE OF RES JUDICATA IS NOT APPLICABLE TO THE AS SESSMENT PROCEEDINGS. THERE CANNOT BE, IN OUR VIEW, ANY DISPUT E ON THIS ASPECT BUT THERE IS ALSO ANOTHER JUDICIAL THOUGHT , THAT THERE SHOULD BE UNIFORMITY IN TREATMENT AND CONSISTEN CY UNDER THE SAME FACTS AND CIRCUMSTANCES AND WE HAVE ALREADY FOUND THAT FACTS AND CIRCUMSTANCES ARE IDENT ICAL, EVEN THOUGH A DIFFERENT STAND HAS BEEN TAKEN BY THE REVENUE AUTHORITIES. THIS ACTION OF THE REVENUE AUTH ORITIES HAS LED US TO ASK OURSELVES THAT IN THIS YEAR WHY IT H AS BEEN DONE SO. IN THE PROCESS TO FIND THE ANSWER, WE NOTED THAT THERE WAS A CHANGE IN THE SCHEME OF TAXATION RELATI NG TO SHORT-TERM CAPITAL GAINS AND LONG TERM CAPITAL GAINS. THROUGH THE FINANCE ACT, 2004 THE LEGISLATURE IMPOSED SECURITIES TRANSACTION TAX ON THE SALE AND PURCHASE OF SHARES AND OTHER DERIVATIVE TRANSACTIONS, AND, SIMULTANEOUSLY , THE LEGISLATURE EXEMPTED LONG TERM CAPITAL GAIN UNDER SECT ION 10(38) OF THE ACT FROM THE LEVY OF TAX AND ON SHORT-T ERM CAPITAL GAIN, A CONCESSIONAL RATE OF TAX I.E 10 PER CENT HAS BEEN LEVIED SUBJECT TO THE CONDITIONS THAT TRANSACTI ONS RESULTING INTO THIS TYPE OF GAIN MUST HAVE SUFFERED SECURITIES TRANSACTION TAX. THIS IS THE FIRST YEAR OF SUCH CHAN GE AND, HAVING REGARD TO THE QUANTUM OF GAINS, THIS SCHEME OF TAXATION ONLY, IN OUR VIEW, HAS PROMPTED THE REVENUE AUTHORITIES TO TAKE A DIFFERENT VIEW ON THE SAME TYP E OF TRANSACTIONS ENTERED INTO BY THE ASSESSEE IN EARLIE R YEARS. AT THIS STAGE, WE CONSIDER IT FIT TO STATE THAT THERE I S NO DISPUTE BEFORE US THAT ASSESSEE HAS CLAIMED EXEMPTION UNDER SECTION 10(38) AND/OR HAS PAID TAX UNDER SECTION 111 A AT CONCESSIONAL RATE ON THE TRANSACTIONS, WHERE SECURIT IES TRANSACTION TAX HAS NOT BEEN. IT IS ALSO NOTED THAT THE ASSESSEE HAS PAID TAX ON SHORT-TERM CAPITAL GAINS AT NORMAL RATES ON SHARE TRANSACTIONS EXECUTED IN THE PERIOD PRIOR TO IMPOSITION OF SECURITIES TRANSACTIONS TAX. IN OUR VIEW , THE LEGISLATURE CHANGE OF THIS NATURE, WHEREBY NO CHANGE HAS BEEN MADE IN RESPECT OF NATURE AND MODUS OPERANDI O F SUCH SHARE TRANSACTIONS, RESULTING INTO ANY ADVANTAGE CA NNOT BE TAKEN AWAY BY THE REVENUE AUTHORITIES IN THIS MANNER AND IN THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT, PRIN CIPLE OF ITA NO.3133/M/09 SHRI CHANDRAKANT K. PARIKH 7 CONSISTENCY, THROUGH IT IS AN EXCEPTION TO THE PRIN CIPLE OF RES JUDICATA MUST BE APPLIED HERE. IT IS FURTHER SO BECA USE THE PAYMENT OF SECURITIES TRANSACTION TAX IS MANDATORY I .E. WHETHER AN ASSESSEE EARNS THE PROFIT OR NOT OR SUFF ERS A LOSS AND BY IMPOSITION OF SUCH TAX, THE LEGISLATURE HAS NOT GIVEN ANY BENEFIT TO A CLASS OF TRANSACTIONS AS A WHOLE TH OUGH IT MAY RESULT INTO AN APPARENT BENEFIT TO INDIVIDUAL(S) ENTERING INTO THOSE TRANSACTIONS. THUS, IN OUR VIEW, IN THE F ACTS AND CIRCUMSTANCES OF THE CASE, ON THE BASIS OF PRINCIPLE OF CONSISTENCY ALONE, THE ACTION OF THE REVENUE AUTHORITI ES IS LIABLE TO BE QUASHED. WE ORDER ACCORDINGLY AND DIRECT T HE ASSESSING OFFICER TO ACCEPT THE CLAIMS OF ASSESSEE I N REGARD TO SHORT TERM CAPITAL GAIN AND LONG TERM CAPITAL GAIN.' THIS FINDING OF THE TRIBUNAL HAS ALREADY BEEN CONFI RMED BY THE HONBLE BOMBAY HIGH COURT IN CIT V. GOPAL PUROHIT (SUPRA). IN THAT CASE THE HIGH COURT OBSERVED THAT THERE OUGHT TO BE UNIFORMITY IN TREATMENT AND CONSI STENCY WHEN THE FACTS AND CIRCUMSTANCES ARE IDENTICAL PARTICULARLY IN THE CAS E OF THE ASSESSEE. 10. IN ANY CASE, IN THE CASE BEFORE US, ADMITTEDLY THE ASSESSEE HAS NEVER BORROWED ANY SINGLE PAISA TO MAKE INVESTMENT. ASSE SSEE IS A RICH BUSINESSMAN AND HAS ALSO INVESTED A SUM OF MORE THAN 1.24 CRORES IN GOVERNMENT BONDS AND ASSESSEE WAS STILL LEFT WITH A LOT OF MONEY WHICH H AS BEEN INVESTED IN SHARE MARKET. ASSESSEE IS NOT MAINTAINING ANY OFFICE OR EMPLOYING ANY EMPLOYEE OR CONSULTANT OR ANY ORGANIZED SET UP AND CONSEQUENTLY HAS NOT CLAIM ED ANY EXPENSES WHICH SHOWS THAT THERE WAS NO INTENTION TO CARRY ON THE BUSINE SS OF TRADING IN SHARES. FURTHER, ASSESSEE IS GAINFULLY EMPLOYED AS PARTNER IN A FIRM KNOWN AS M/S. ARCK ENTERPRISES WHICH IS DOING THE BUSINESS OF IMPORT AND EXPORT OF CUT AND POLISHED DIAMONDS AND ASSESSEE IS RECEIVING SALARY OF RS. 1,80,000/- AS W ELL AS SHARE OF PROFIT OF RS.9,61,406/- DURING THE YEAR. THIS SHOWS THE MAIN BUSINESS OF THE ASSESSEE IS IMPORT AND EXPORT OF DIAMONDS. WE ALSO FIND FORCE I N THE SUBMISSION THAT 2004-07 HAPPENED TO BE A BOOMING PERIOD AND THE MARKET WAS CONTINUOUSLY IN UPSWING AND IF THE ASSESSEE BOUGHT SHARES IN LARGE VOLUME AND S OLD THE SAME IN SMALLER TRANSACTIONS IN DIFFERENT LOTS BECAUSE OF WHICH THE NUMBER OF TRANSACTION HAS INCREASED THEN NO FAULT CAN BE FOUND WITH THAT AND SUCH LARGE VOLUME OF TRANSACTION BECAUSE ALL THESE PHENOMENA WILL NOT CO NVERT THE INVESTMENT INTO TRADING OF SHARES. WE FURTHER FIND THAT THE LEARNED CIT(A) HAS TREATED THE SHARES SOLD WITHIN 60 DAYS TO BE TREATED AS BUSINESS PROFI TS AND ASSESSEE SHOULD BE AGGRIEVED BY THAT FINDING AGAINST WHICH ASSESSEE HA S NOT FILED ANY APPEAL AND IT WAS STATED THAT SMALL AMOUNT WAS INVOLVED AND APPEAL WA S NOT FILED. THIS DECISION WILL REMOVE LARGE NUMBER OF TRANSACTIONS FROM THE ASSESS EES TOTAL TRANSACTIONS. IN ITA NO.3133/M/09 SHRI CHANDRAKANT K. PARIKH 8 THESE CIRCUMSTANCES, WE FIND NOTHING WRONG WITH THE ORDER OF THE LEARNED CIT(A) AND CONFIRM THE SAME. 11. IN THE RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 14 TH DAY OF MAY 2010. SD/- SD/- (D.K. AGARWAL) (T. R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI DATED THE 14 TH MAY, 2010. KN COPY TO: 1. THE ASSESSEE 2. THE REVENUE 3. THE CIT, CITY XXI, MUMBAI 4. THE CIT(A)-XX, MUMBAI 5. THE DR C BENCH, MUMBAI BY ORDER /TRUE COPY/ ASST. REGISTRAR, ITAT, MUMBAI ITA NO.3133/M/09 SHRI CHANDRAKANT K. PARIKH 9