Shri Ashok Porwal HUF, Indore V. The JCIT, Rang- 3, Indore

ITA 35/IND/2013

• Counselvise Citation: 3522714 RSA 2013
• Duration Of Justice: 1 year(s) 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-06-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 18-01-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Keywords: Capital asset; Business income; Principle of natural justice; Rule of consistency; Transactions in derivatives; Cost of acquisition
• Section: 143(3); 131; 68

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER ITA NO.35/IND/2013 A.Y. 2005-06 SHRI ASHOK PORWAL HUF INDORE PAN AAFHA 8554 A :: APPELLANT VS JOINT COMMISSIONER OF INCOME TAX RANGE -3, INDORE :: RESPON DENT APPELLANT BY SHRI ANIL KAMAL GARG, CA RESPONDENT BY SHRI R.A.VERMA, SR. DR . DATE OF HEARING 01.05.2014 DATE OF PRONOUNCEMENT 1 3 . 0 6 .201 4 O R D E R PER JOGINDER SINGH , JUDICIAL MEMBER THE ASSESSEE IS AGGRIEVED BY THE IMPUGNED ORDER DATED 26.11.2012. THOUGH THE ASSESSEE HAS RAISED AS MANY AS 2 FIVE GROUNDS OF APPEAL, WHICH ARE ARGUMENTATIVE IN NATURE BUT THE FIRST EFFECTIVE GROUND RAISED BY THE ASSESSEE PERTAINS TO UPHOLDING THE SHORT TERM CAPITAL GAIN FROM SALE OF SHARE AMOUNTING TO RS. 35,58,788/- AS BUSINESS INC OME OF THE ASSESSEE. 2. DURING HEARING, WE HAVE HEARD SHRI ANIL KAMAL GAR, LEARNED COUNSEL FOR THE ASSESSEE AND SHRI R.A. VERMA, L D. SR. DR. THE CRUX OF ARGUMENT ADVANCED ON BEHALF OF THE ASSESSEE IS THAT THE ASSESSEE HUF DECLARED INCOME OF RS . 35,90,299/- IN ITS RETURN ALONG WITH COPY OF CAPITAL ACCOUNT SHOWING INCOME FROM SHORT TERM CAPITAL GAINS AMOUNTING TO RS. 35,58,788/- FROM SALE OF INVESTMENT IN SHARES OF LISTED COMPANIES THROUGH RECOGNIZED STOCK EXCHANGES AN D PAID SECURITY TRANSACTION TAX. IT WAS ARGUED THAT THE ASSESSEE MADE FULLEST COMPLIANCE TO THE QUERIES RAISED B Y THE ASSESSING OFFICER AND FILED WRITTEN SUBMISSIONS ALONG WITH DOCUMENTARY EVIDENCES FOR WHICH OUR ATTENTION WAS 3 INVITED TO PAGE 50 TO 56 OF THE PAPER BOOK. IT WAS ASSE RTED THAT THE ASSESSING OFFICER WRONGLY RECLASSIFIED THE S HORT TERM CAPITAL GAIN AS BUSINESS INCOME. IT WAS POINTED O UT THAT STATEMENT U/S 131 OF THE ACT WAS RECORDED FROM PRINCIPAL OFFICER OF THE BROKING COMPANY THROUGH WHOM THE SHARE TRANSACTIONS WERE CARRIED OUT FOR WHICH OUR ATTENT ION WAS INVITED TO PAGES 16 TO 17 AND 18 TO 23 OF THE PAPER BOOK. IT WAS SUBMITTED THAT THE LD. CIT(A) IGNORED TH E WRITTEN SUBMISSION FILED BY THE ASSESSEE. ON THE OTH ER HAND, THE LD. SR. DR, SHRI R. A. VERMA, DEFENDED THE ADDITION, SO MADE, BY THE ASSESSING OFFICER AND CONFIR MED BY THE LD. CIT(A) BY SUBMITTING THAT THE GAIN ARISING FROM SALE OF SHARE IS BUSINESS INCOME OF THE ASSESSEE. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL AVAILABLE ON RECORD. THE FACTS IN BRIEF ARE T HAT THE ASSESSEE HUF DECLARED INCOME U/S 139(4) OF THE AC T, DECLARING INCOME AT RS. 35,90,299/- ON 29.12.2005, AS IS 4 EVIDENT FROM PAPER BOOK PAGE NO. 44 & 45. THE ASSESSEE ALSO FURNISHED COPY OF ACCOUNT AND STATEMENT OF AFFAIRS WITH RETURN AS IS EVIDENT FROM PAGE 45 AND 46 OF THE P APER BOOK. IN ITS RETURN OF INCOME, THE ASSESSEE SHOWED I NCOME OF RS. 35,58,788/- AS SHORT TERM CAPITAL GAIN FROM SALE OF INVESTMENT IN SHARES, THROUGH RECOGNIZED STOCK EXCHAN GES OF LISTED LIMITED COMPANIES AND ALSO PAID SECURITY TRANSACTION TAX. NOTICES WERE ISSUED TO THE ASSESSEE T O WHICH THE ASSESSEE RESPONDED AND MADE WRITTEN SUBMISSIONS AS IS EVIDENT FROM PAGE 50 TO 56 OF THE P APER BOOK. FINALLY, THE LD. ASSESSING OFFICER IN ASSESSMEN T ORDER PASSED U/S 143(3) OF THE ACT DETERMINING THE SAME INC OME OF RS. 35,90,299/- AND CLAIMED SHORT TERM CAPITAL GAIN AMOUNTING TO RS. 35,58,788/- WAS TREATED AS BUSINESS INCOME OF THE ASSESSEE. ON APPEAL, THE LD. CIT(A) NOT ONLY AFFIRMED THE ACTION OF THE ASSESSING OFFICER BUT ALSO MADE 5 ENHANCEMENT TO THE TUNE OF RS. 74,50,000/- INVOKING THE PROVISIONS OF SECTION 68 OF THE ACT. 3.1 UNDER THE AFOREMENTIONED FACTS, NOW QUESTION ARISES WHETHER THE GAIN SO AROSE FROM INVESTMENT IN SH ARE IS SHORT TERM CAPITAL GAIN/LONG TERM CAPITAL GAIN OR IS T HE BUSINESS INCOME OF THE ASSESSEE? WE NOTE THAT IN ITS WRITTEN SUBMISSION DATED 28.9.2007 (PAGE 52 TO 56 OF PAPER BOOK) PREFERRED BEFORE THE LD. ASSESSING OFFI CER HAS TRIED TO EXPLAIN AS TO WHY THE IMPUGNED TRANSACTION IN SHARE SHOULD BE REGARDED TO BE CARRIED OUT CLAIMING THAT THE STATUS OF THE ASSESSEE IS OF HUF HAVING NO PHYSICAL EXISTENCE AND THE ASSESSEE PURCHASED THE SHARE WITH SO LE PURPOSE OF INVESTMENT. ADMITTEDLY, THE ASSESSEE BOUG HT CERTAIN SHARES THROUGH INITIAL PUBLIC OFFER (IPOS) TOO AS IS EVIDENT FROM PAGE 47 OF THE PAPER BOOK SHOWING SHORT TERM CAPITAL GAIN. SUCH INVESTMENT IS IN TWO SCRIPTS OF TCS LIMITED AND NTPC LIMITED. THE ASSESSEE CARRIED OUT 6 TRANSACTIONS IN 15 SCRIPTS WHICH ARE DELIVERY BASED. IN SOME OF THE CASES, THE DELIVERY CAME THROUGH D-MAT ACCOUNT OF THE ASSESSEE AND SOME OF THE CASES THE DELIV ERY WERE TAKEN BY THE BROKER ON BEHALF OF THE ASSESSEE. TH E CLAIM OF THE ASSESSEE IS THAT BEING A PRUDENT INVESTOR AND TO AVOID COST ATTRIBUTABLE TO D-MAT TRANSACTION, THE ASSESSEE CHOSE NOT GET THE DELIVERY OF SHARES TRANSFER RED IN HIS D-MAT ACCOUNT AND ALLOWED THE BROKER TO RETAIN THE DELIVERY IN HIS COOL ACCOUNT, SO AS TO SAVE THE COST OF D-MAT ACCOUNT AND WAS ALSO ABLE TO PROVIDE THE MARGIN TO ITS BROKER TO MAKE FURTHER PURCHASES. ALL THE TRANSACTIONS OF PURCHASES/SALES WERE CARRIED OUT THROUGH ACTUAL PAYMENT AND NOT THROUGH SETTLEMENT. THIS CLAIM OF THE ASSESSEE CAN BE VERIFIED FROM THE BOOKS OF THE BROKER M/S. INDIR A SECURITIES AVAILABLE AT PAGE 85 OF THE PAPER BOOK. THE ASSESSEE MADE THE PURCHASES/SALE, MOSTLY THROUGH THIS BROKER I.E. M/S. INDIRA SECURITIES AND REPAYMENTS WER E 7 MADE THROUGH ACCOUNT PAYEE CHEQUES FOR PURCHASES AND ALSO RECEIVED THE AMOUNT THROUGH CHEQUES ON SALE OF SHARES. THIS FACT IS ALSO CONFIRMED BY THE STATEMENT OF THE MANAGER OF THE BROKING FIRM RECORDED ON 1.3.2012 BY T HE LD. ASSESSING OFFICER, AS IS EVIDENT WHILE REPLYING TO QUESTION NO. 5 (PAPER BOOK PAGE 20), WHEREIN IT WAS TENDERED THAT THE BROKING FIRM MADE PAYMENTS/RECEIVE D PAYMENTS AGAINST SALES/PURCHASES OF SHARES ON BEHALF OF THE ASSESSEE. WE ALSO NOTE THAT THE ASSESSEE DID NOT CAR RY OUT SPECULATIVE TRANSACTION SUCH AS TRANSACTION OF FUTUR E AND OPTION DERIVATIVES AS IS EVIDENT FROM COPY OF STATE MENT OF SHORT TERM CAPITAL GAIN AVAILABLE AT PAGE 47 OF THE PAPE R BOOK. ANOTHER FACT BROUGHT TO OUR NOTICE BY THE ASSES SEE IS THAT THE ASSESSEE DID NOT BORROW ANY FUND FROM ANY OUTSIDER RATHER THE FUNDS WERE TAKEN FROM THE FAMILY CONCERN, VIZ., M/S. ASHWIN STOCKS & INVESTMENT LIMI TED, PROMOTED BY FAMILY MEMBERS THAT TOO INTEREST FREE. IT IS 8 NOTEWORTHY THAT RATHER THE ASSESSEE RECEIVED INTEREST AMOUNTING TO RS. 33,011/- FROM THIS COMPANY AND OFFER ED FOR TAXATION IN ITS RETURN AS IS EVIDENT FROM PAGE 45. THIS FACT IS ALSO VERIFIED FROM THE COPY OF ACCOUNT OF THE ASSESSEE IN THE BOOKS OF ASIPL (PAGE 57 OF THE PAPER BOOK). IT IS ALSO NOTED THAT THE ASSESSEE CARRIED OUT ITS ACTIVITY ONLY F OR 23 DAYS OUT OF 250 TRADING DAYS, WHICH SHOWS THAT THE ASSESSEE DID NOT ACT AS BUSINESSMAN. IT IS ALSO NOTEWORT HY THAT IN ITS STATEMENT OF ACCOUNT, NO ESTABLISHMENT EXPENSES HAVE BEEN CLAIMED IN RESPECT OF TRANSACTIONS OF SHARES. THE CASE OF THE ASSESSEE IS FURTHER FORTIFIED FROM PAGE 47 OF THE PAPER BOOK THAT THE ASSESSEE CARRIED OUT TRANSACTIONS IN SHARE AFTER PAYMENT OF SECURITY TRANSACTI ON TEST THROUGH RECOGNIZED STOCK EXCHANGES AND REGISTERE D BROKERS SEBI. THE ASSESSEE HELD THESE SHARES FOR FEW DAYS TO FEW WEEKS. IT IS ALSO NOTEWORTHY THAT IN SUBSEQUENT ASST YEAR, THE INCOME FROM SHARE TRANSACTION WAS CONSIDERED AS 9 INCOME FROM SHORT TERM CAPITAL GAIN AS EVIDENT FROM PAGE 87 OF THE PAPER BOOK ( ASSESSMENT YEAR 2006-07 ), WHER EIN THE DEPARTMENT ACCEPTED THE INCOME AS SHORT TERM CAPITAL GAIN ONLY FROM SALE OF SHARE. IN VIEW OF THESE FACTS, W E ARE OF THE VIEW THAT THE LD. ASSESSING OFFICER WRONGLY T REATED THE INCOME AS BUSINESS INCOME. OUR VIEW IS FORTIFIED BY THE DECISION OF THE INDORE BENCH OF TRIBUNAL IN THE CASE OF ACIT VS. OM PRAKASH SURI, (2010) 16 ITJ 185, WHEREIN ALSO THERE WAS ACTUALLY DELIVERY BASED SHARES AFTER PAYMENT OF STT AND THE SHARES WERE HELD BY THE ASSESSEE FOR FEW DAYS/ FEW WEEKS. INDORE BENCH OF THE TRIBUNAL HELD THAT SINCE T HE SHARES WERE KEPT BY THE ASSESSEE FOR A PERIOD LESSER T HAN ONE YEAR, THUS, IT HAS TO BE REGARDED AS SHORT TERM CAP ITAL GAIN. THIS ORDER WAS UPHELD BY HON'BLE JURISDICTIONAL HIGH COURT REPORTED IN (2012) 19 ITJ 326 (MP). IN ANOTHER CASE OF DURGESH PRASAD MALOO, ITA NO.424/IND/2012, ORDER DATED 14.11.2013 (WHEREIN BOTH OF US ARE SIGNATORY TO THE 10 ORDER), THE INDORE TRIBUNAL MADE A DETAILED DISCUSSION AND CONSIDERED VARIOUS JUDICIAL PRONOUNCEMENTS, DISMISSED THE APPEAL OF THE REVENUE. THE RELEVANT PORTION OF THE AFOR ESAID ORDER IS REPRODUCED HEREUNDER FOR READY REFERENCE: THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DATED 24-04-2012 OF THE LD. FIRST APPELLATE AUTHORITY, IN DORE ON THE GROUND THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE INCOME OF RS. 58,25,577/- FROM TRADING OF SHARE S TO BE FIXED @ 10% FROM SUCH ACTIVITY. 2. THE CRUX OF ARGUMENT ADVANCED ON BEHALF OF THE R EVENUE IS THAT IT WAS TO BE TAXED @ 30% AS INFORMATION WAS RECEIVED FROM NSE AND BSE INFERRING THE NATURE OF TRANSACTIO NS WERE BUSINESS ACTIVITY. IT WAS CONTENDED THAT THE LD. CI T(A) IGNORED THE FACTS BROUGHT OUT ON RECORD B THE ASSESSING OFFICER . PLEA WAS ALSO RAISED THAT THE ASSESSEE WAS A TRADER AD NOT AN INVESTOR. IT WAS SUBMITTED THAT BORROWED FUNDS WERE USED FOR PUR CHASE OF SHARES. ON THE RULE OF CONSISTENCY, IT WAS PLEADED THAT EACH YEAR IS AN INDEPENDENT, THEREFORE, RES JUDICATA IS NOT AP PLICABLE IN INCOME TAX PROCEEDINGS. A STRONG PLEA WAS RAISED T HAT ASSESSEE DID TRADING AND MAGNITUDE OF TRANSACTION IS VERY HI GH. RELIANCE WAS PLACED ON THE DECISION IN THE CASE OF ACIT VS S HRI NAVNEET KUMAR (ITA NO.346/IND/2013). FURTHER RELIANCE WAS P LACED UPON CIRCULAR NO. 4 OF 2007, ISSUED BY CENTRAL BOARD OF DIRECT TAXES (CBDT) TO THE EFFECT THAT NO SINGLE PRINCIPLE IS DE CISIVE. THE LD. SR. D.R. PLACED RELIANCE UPON THE FOLLOWING DECISIONS. (A) RAJABAHADUR VISHESHWARA SINGH & OTHERS VS LD. CIT (1961), 41 ITR 685 (SC). (B) FIDILITY NORT STAR & ORS (2007) 207 CTR (AAR) 297. 11 (C) CIT VS HOLCKLARSEN (160 ITR 67 (SC) (D) DCIT VS SMT. DEEPABEN, AMITBHAI SHAHA, 99 ITD 219 (AHD.) (E) CIT VS ASSOCIATED INDUSTRIAL DEVELOPMENT CO. L TD. 82 ITR 586 (SC) 2.1 ON THE OTHER HAND, LEARNED COUNSEL FOR THE ASSE SSEE CONTENDED THAT THE ASSESSEE IS 89 YEARS OLD PERSON AND FOR EARLIER YEARS MOST OF THE ASSESSMENT WERE FRAMED U /S 143(3) OF THE ACT, ACCEPTING THE CLAIM OF THE ASSESSEE. ON T HE ISSUE OF CONTENTION OF THE SR. DR THAT THERE WERE LARGE FR EQUENCY IN TRADING / BUSINESS ACTIVITY, OUR ATTENTION WAS INVI TED TO PAGE 50 OF THE PAPER BOOK EXPLAINING THAT THERE ARE ONLY 25 8 TRANSACTIONS (PAGE 54 OF THE PAPER BOOK). ON THE PLEA OF MULTIPL E TRANSACTIONS, IT WAS EXPLAINED THAT DUE TO E FILING OF RETURN, THESE TRANSACTIONS WERE AUTOMATICALLY SPLITTED UP. RELIANCE WAS PLACED UPON THE DECISION OF THE TRIBUNAL IN ACIT VS OM PRAKASH SURI (2010) 16 ITJ 185 (INDORE) WHICH WAS AFFIRMED BY THE HON'BLE JURISDICTIONAL HIGH COURT REPORTED IN (2012) 19 ITJ 326 (M.P.). IT WAS PLEADED THAT THE ASSESSEE IS AN INVESTOR FOR W HICH RELIANCE WAS PLACED ON THE FOLLOWING DECISIONS:- (I) MAHENDA C SHAH, MUMBAI VS ADDL. CIT, RANGE 13( 1), MUMBAI. (II) SHANTILAL M JAIN VS ACIT, 12 (3), MUMBAI (III) RAMESH BABU RAO VS ACIT 17 (3), MUMBAI (IV) ITO 19(2)(1), MUMBAI VS RADHA BIRJU PATEL (V) ACIT 21(3) MUMBAI VS NISHAD V. VACHHARAJANI (VI) DCIT 4(2), MUMBAI VS SMK SHARES & STOCK BROKI NG PVT LTD. (VII) VINOD K. NEVATIA VS ACIT, MUMBAI (IX) ITO VS ROHIT ANAND (X) CIT VS PNB FINANCE & INDUSTRIES LTD. (XI) SUGANCHAND C SHAH VS ACIT (XII) MANAGEMENT STRUCTURE & SYSTEM PVT. LTD VS IT O 6(3)(2). (XIII) MR. NEHAL V. SHAH VS ACIT 21 (1), MUMBAI (XIV) ACIT CENTRAL CIRCLE 2(3), AHEMDABAD VS BANKI M JAYAANTILAL SHAH 12 THE LD. COUNSEL ALSO PLACED RELIANCE UPON THE DECIS ION IN THE CASE OF NAGINDAS P SETH(HUF) ACIT (ITA NO.961/MUM/2010) TO THE EFFECT THAT DESPITE LARGE NUMBER OF TRANSACTIONS IN SHARES, THE PROFIT MAYA BE ASSESSABLE AS CAPITAL GAINS. FURTHE R RELIANCE WAS PLACED ON THE DECISION IN JANAK S RANAWALA VS ACIT, 11 SOT 627, ITO VS RADHA BIRJU PATEL (ITA NO.5382/MUM/2009). TH E IMPUGNED ORDER WAS DEFENDED. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON RECORD. BEFORE COMING TO ANY CONCLUSION, WE ARE REPRODUCING HEREUNDER THE RELEVA NT PORTION OF THE CONCLUSION DRAWN IN THE IMPUGNED ORDER FOR READ REFERENCE. 4.2.2 THE ISSUE IS CONSIDERED. UNDER THE OLD PROVISIONS OF THE INCOME-TAX ACT, PROFITS OR GAINS ARISING TO AN INVESTOR FROM THE TRANSFER OF SECURIT IES WERE CHARGED TO TAX EITHER AS LONG TERM CAPITAL GAI NS OR SHORT TERM CAPITAL GAINS DEPENDING ON THE PERIOD OF HOLDING OF THE SAID SECURITIES. SHORT TERM CAPITAL GAINS ARISING FROM TRANSFER OF SECURITIES WEE TAXED AT TH E APPLICABLE RATES (NORMAL RATE) AND LONG TERM CAPIT AL GAINS WERE TAXED @ 20%, AFTER ADJUSTING THE INFLATIO N BY INDEXING THE COST OF ACQUISITION. FOR LISTED SE CURITIES, THE TAXPAYER HAD AN OPTION TO PA TAX ON LON G TERM CAPITAL GAINS @ 10% BUT WITHOUT INDEXATION. FOR FOREIGN INSTITUTIONAL INVESTORS (FIIS), THE LONG TE RM CAPITAL GAINS AND SHORT TERM CAPITAL GAINS WERE TA XED AT THE RATE OF 10%(WITHOUT INDEXATION)AND 30% RESPECTIVELY. IN CASES OF A TRADER IN SECURITIES, H OWEVER, THE GAINS WERE TAXED AS ANY OTHER NORMAL BUSINESS INCOME. HOWEVER, THE ISSUE OF TREATMENT OF INCOME FROM SHARE TRANSACTION AS CAPITAL GAINS OR BUSINES S INCOME HAS N FACT ARISEN AFTER THE AMENDMENT BROUGH T WITH FINANCE ACT, 2004 BY INSERTION OF PROVISIONS O F SECTION 111A AN 10(38) AS REGARDS TO LEVY OF TRANSACTION TAX AND EXEMPTION/ CONCESSION ON CAPIT AL GAINS ARISING FROM SECURITIES ENTERED IN A RECOGNIZ ED 13 STOCK EXCHANGE. WITH A VIEW TO SIMPLIFY THE TAX REG IME ON SECURITIES TRANSACTIONS, A TAX AT THE RATE OF 0. 015 PER CENT (SEE: CHANGE IN RATES ON SECURITIES TRANSACTIO NS, BY FINANCE ACTS, AT APPROPRIATE HEAD) IS LEVIED ON THE VALUE OF ALL THE TRANSACTIONS OF PURCHASE OF SECURI TIES THAT TAKE PLACE IN A RECOGNIZED STOCK EXCHANGE IN I NDIA. THIS TAX IS COLLECTED BY THE STOCK EXCHANGE FROM TH E PURCHASER OF SUCH SECURITIES AND PAID TO THE EXCHEQ UER. THE PROVISIONS RELATING TO THE SECURITIES TRANSACTI ON TAX ARE CONTAINED IN CHAPTER VII OF THE FINANCE (NO.2) BILL, 2004, AND CAME INTO EFFECT FROM 01-10-2004. FURTHER CLAUSE (38) HAS BEEN INSERTED IN SECTION 10 OF THE INCOME-TAX ACT, SO AS TO PROVIDE EXEMPTION FROM LO NG TERM CAPITAL GAIN ARISING OUT OF SECURITIES SOLD ON THE STOCK EXCHANGE. A NEW SECTION 111A HAS ALSO BEN INSERTED AND SECTION 115AD IS AMENDED, SO AS TO PROVIDE THAT SHORT TERM CAPITAL GAINS ARISING FROM SALE OF SUCH SECURITIES TO AN INVESTOR INCLUDING FIIS SH ALL BE CHARGED AT THE RATE OF TEN PER CENT. THESE AMENDMEN TS APPLY TO ASSESSMENT YEAR 2005-06 AND SUBSEQUENT YEARS. THROUGH FINANCE ACT 2008, SECTIONS 111A AND 115AD HAVE FURTHER BEEN AMENDED WHEREBY THE RATE OF TAX ON SHORT TERM CAPITAL GAIN HAS BEEN RAISED TO FIFTEEN PER CENT. THUS W.E.F. 01-10-2004, ON THE SHARE TRANSACTIONS SUBJECTED TO STT, CONCESSIONAL T AX RATE OF 10% (WHICH HAS BEEN INCREASED TO 15% FROM ASSESSMENT YEAR 2009-10) ARE APPLICABLE IN RESPECT OF STCG WHEREAS THE TAX IS CHARGEABLE IN RESPECT OF S TCG. IT IS ALSO NOTED THAT THE CBDT VIE ITS CIRCULAR NO. 4/2007 DATED 15-06-2007 HAS ALSO RECOGNIZED POSSIBILITY OF TWO PORTFOLIOS, I.E. ONE INVESTMENT PORTFOLIO COMPRIS ING OF SECURITIES WHICH ARE TO BE TREATED AS CAPITAL ASSET S AND THE OTHER TRADING PORTFOLIO COMPRISING OF STOCK I N TRADE WHICH ARE TO BE TREATED AS TRADING ASSETS. IN THE CASE OF PRESENT ASSESSEE, THE INCOME ARISING FROM F &O TRANSACTIONS AND DAILY TRADING IN SHARES (WITHOUT PHYSICAL DELIVERY) HAS BEEN REFLECTED CONSISTENTLY FOR 14 THE LAST SEVERAL YEARS AS SPECULATIVE BUSINESS WHER EAS THE INCOME ON DELIVERY BASED TRANSACTIONS OF SALE A ND PURCHASE OF SHARES HAVE BEEN SHOWN AS CAPITAL GAIN S STCG OR LTCG DEPENDING UPON THE PERIOD OF HOLDING. THE BALANCE SHEET REFLECTS THE HOLDINGS OF SHARES A S INVESTMENT(ONLY ONE PORTFOLIO). THEREFORE, IN MY CONSIDERED VIEW INCOME ARISING ON PURCHASE AND SALE OF SHARES ARE TO BE TREATED AS INCOME FROM CAPITAL GA IN WHICH WOULD FURTHER BE CLASSIFIED AS STCG OR LTCG. IT IS NOTED THAT ALTHOUGH ASSESSING OFFICER TREATED THE S TCG SHOWN BY THE ASSESSEE AS BUSINESS INCOME AND SUBJECTED THE SAME AT NORMAL TAX RATE, BUT THE CLAI M OF THE LTCG (ON SALE OF SHARES) WERE ACCEPTED AS SUCH AS EXEMPTED INCOME U/S 10(38). WHEREAS THE NATURE AND SOURCE OF INCOME WAS SAME I.E. INVESTMENT N SHARES AND THE INCOME THEREON WAS CLASSIFIED BY THE ASSES SEE AS STCG OR LTCG DEPENDING ON THE PERIOD OF HOLDING, , THE ASSESSING OFFICER APPLIED DIFFERENTIAL TREATMEN TS WHICH IS EVEN AGAINST THE RULE OF CONSISTENCY. HAVI NG CONSIDERED THE FACTS AND FOLLOWING THE RULE OF CONSISTENCY, I AM OF THE VIEW THAT THE INCOME SHOWN AS STCG DESERVES TO BE TAXED AT CONCESSIONAL RATE ITSE LF IN ACCORDANCE WITH PROVISIONS OF SECTION 111A AND NOT AS BUSINESS INCOME CHARGEABLE TO TAX AT NORMAL RATE AS DONE BY THE ASSESSING OFFICER. IN THE RESULT, THE ASSESSEES GROUND STANDS ALLOWED. IF THE CONCLUSION DRAW IN THE IMPUGNED ORDER, OBSER VATION MADE FROM THE ASSESSMENT ORDER, ASSERTIONS MADE BY THE L D. RESPECTIVE COUNSEL AND THE MATERIALS AVAILABLE ON RECORD ARE K EPT IN JUXTAPOSITION AND ANALYSE, WE FIND THAT THE ASSESSE E HAD BEEN CONSISTENTLY TRADING IN SHARES FOR THE LAST ABOUT 2 5 YEARS AND THE INCOME ARISING FROM F&O TRANSACTIONS AND DAILY TRAD ING IN SHARES HAD BEEN REFLECTED CONSISTENTLY AS SPECULATIVE BUSI NESS (WITHOUT PHYSICAL DELIVERY) AND IN THE CASE OF DELIVER BASED TRANSACTION OF SALE AND PURCHASES OF SHARES HAD BEEN SOWN AS CAPI TAL GAINS I.E. 15 LTCG AD STCG, DEPENDING UPON THE PERIOD OF HOLDING. IF THE BALANCE SHEET OF THE ASSESSEE IS ANALYSED, IT REFL ECTS HOLIDNG OF SHARES AS INVESTMENT (ONE PORTFOLIO). I IS FURTHER NOTED THAT THE DEPARTMENT CONSISTENTLY HAD BEEN ACCEPTING THE CLAI M OF THE ASSESSEE FROM LONG TERM CAPITAL GAIN, THEREFORE, NO U TURN IS EXPECTED FOR SHORT TERM CAPITAL GAIN. DURING HEAR D, THE LD. SR. DR CONTENDED THAT BORROWED FUNDS WERE USED FOR PURC HASE OF SHARES WHICH WAS STRONGLY OBJECTED TO BY THE LEARNED COUNSEL FOR THE ASSESSEE BY SUBMITTING THAT NO INTEREST WAS PAI D ON THE BORROWED FUNDS. THIS ASSERTIONS OF THE ASSESSEE WA S NOT CONTROVERTED BY THE REVENUE WITH THE HELP OF AN POS ITIVE MATERIALS. IT IS ALSO UNDISPUTED FACTS THAT IN EARL IER YEARS, THE DEPARTMENT, IDENTICALLY, ACCEPTED THE CLAIM OF THE ASSESSEE THAT TOO WHILE FRAMING THE ASSESSMENT U/S 143() OF THE ACT. THE LD. SR.DR ALSO POINTED OUT THAT THE ASSESSEE MADE TOTA L TRANSACTIONS TO THE EXTENT OF MORE THAN 2500 WHICH WAS ALSO CONT ROVERTED BY THE ASSESSEE BY INVITING OUR ATTENTION TO PAGES 50 TO 54 OF THE PAPER BOOK. WE HAVE PERUSED THE PAPER BOOK AND FOUN D THAT THERE ARE 258 TRANSACTIONS ONLY AND SOME OF THEM AR E FROM THE SAME COMPANY/ CONCERN AND DUE TO E FILING THESE HAV E BEEN AUTOMATICALLY SPLIT UP. IT IS ALSO WORTH NOTING THA T PRIOR TO AMENDMENT, THE DEPARTMENT NEVER OBJECTED TO THE CLAI M OF THE ASSESSEE AND FOR THE IMPUGNED ASSESSMENT YEAR OBJEC TED DUE TO RATE OF TAX. IN VIEW OF THE FACTS, THE CONTENTION O F THE ASSESSING OFFICER THAT THERE WERE LARGE FREQUENCIES IS NOT SU BSTANTIATED. THE ASSESSEE WAS CLAIMED TO BE 89 YEARS OLD, HAD B EEN SHOWING CONSISTENTLY INCOME FROM TRADING IN SHARES, LONG AN D SHORT TERM CAPITAL GAINS ON THE SALE OF SHARES AND ALSO INCOME FROM OTHER SOURCES. WE HAVE ALSO PERUSED THE ASSESSMENT ORDER FROM THE ASSESSMENT YEAR 2001-02, 2005-06 TO 2007-08 WHICH H AVE BEEN FRAMED U/S 143(3) OF THE ACT. THE DETAILS OF SOME OF THE ASSESSMENT YEARS ALONGWITH BREAD UP OF LONG TERM AN D SHORT 16 TERM CAPITAL GAINS FOR THE IMPUGNED ASSESSMENT YE ARS ARE SUMMARISED AS UNDER:- S.N. A.Y. INCOME FROM CAPITAL GAINS COMPILATION PAGE NO. SECTION UNDER WHICH ASSESSMENT DIVIDEND INCOME 01 2007-08 SHORT TERM CAPITAL GAIN RS. 29,13,943/-, LONG TERM CAPITAL GAIN RS. 3,65,918/- 71 TO 78 143(3) RS. 3,72,422/- PAGE NO. 80 & RS. 7,49,028/- PAGE NO. 81 02 2006-07 SHORT TERM CAPITAL GAIN RS. 16,47,346/- 85 TO 94 143(3) RS. 9,77,010/- PAGE NO. 98 03 2005-06 SHORT TERM CAPITAL GAIN RS. 45,521/- AND RS. 19,838/- LONG TERM CAPITAL GAIN RS. 9,33,825/- 103 TO 111 143(3) RS. 3,84,561/- PAGE NO.134 04. 2004-05 LONG TERM CAPITAL GAIN RS. 4,67,930/- SHORT TERM CAPITAL GAIN RS. 2,05,339/- 139 TO 144 143(3) FIGURE NOT AVAILABLE 05 2003-04 LONG TERM CAPITAL GAIN RS. 36,730/- 145 TO 148 143(1) RS. 1,25,740/- PAGE O. 150 06 2002-03 LONG TERM CAPITAL GAIN RS. 5,57,424/- 157 TO 160 143(1) RS. 1,37,112/- PAGE NO.161 07 2001-02 LONG TERM CAPITAL GAIN RS. 3,15,661/- 167 TO 170 143(3), THERE IS ALSO OF HON'BLE ITAT WHICH IS ON PAGE NO. 196 TO 201 IN THE SAID ORDER ALSO, THE REFERENCE IN INVESTMENT IN SHARES IS GIVEN WHICH IS ON PARA 11 BACK OF PAGER 196 RS. 2,04,233/- PAGE NO.185 02. THAT THE BREAK UP OF LONG TERM CAPITAL GAIN A ND SHORT TERM CAPITAL GAIN FOR THE ASSESSMENT YEAR 2008-09 IS AS UNDER:- 17 (I) SHORT TERM CAPITAL GAIN (A) SELF INVESTMENT RS. 17,21,234/- (B) THROUGH PMSMIV INVESTMENT SERVICES LTD. RS. 41,04,340/- TOTAL:- RS.58,25,574/- (II) LONG TERM CAPITAL GAIN (A) SELF INVESTMENT RS.37,28,589/- (B) THROUGH PMS RS. 2,43,840/- TOTAL:- RS.39,72,429/- 3.1 WE FURTHER NOTED THAT THE CONTROVERSY AROSE FOR THE FIRST TIME FOR THE IMPUGNED ASSESSMENT YEAR WHEREIN THE ASSESSING OFFICER TREATED THE CLAIM OF SHORT TERM CAPITAL GA IN AS BUSINESS INCOME AND SIMULTANEOUSLY ACCEPTED THE LONG TERM CAPITAL GAIN OF RS. 39,79,429/- AS EXEMPT U/S 10(38) OF THE ACT. WHILE COMING TO A PARTICULAR CONCLUSION, THE LD. CIT(A) B ROADLY EXAMINED THE HISTORY OF THE ASSESSEE WITH THE HELP OF ORDER PASSED IN EARLIER ASSESSMENT YEARS, PLACED RELIANC E UPON THE DECISION IN THE CASE OF GOPAL PUROHIT, 228 CTR 52 8 (BOM.) AND THE SLP FILED BY THE DEPARTMENT AGAINST THIS DECISI ON WAS ALSO DISMISSED BY HON'BLE APEX COURT VIDE ORDER DATED 15 -11-2010. OTHER JUDICIAL DECISIONS HAVE ALSO BEEN CITED BY THE LD. CIT(A). IT IS ALSO NOTED THAT THE LD. CIT(A) HAS FOLLOWED THE DEC ISION FOR ASSESSMENT YEAR 2002-03 IN THE CASE OF THE ASSESSE E ITSELF WHICH HAS BEEN ACCEPTED BY THE DEPARTMENT. THEREFORE, IN THE ABSENCE OF ANY CONTRARY MATERIALS, THE DEPARTMENT IS NOT EX PECTED TO TAKE A CONTRARY STAND. IN ITS SPEECH BY THE HON'BLE FINANCE MINISTER REGARDING DIRECT TAX CASES (UNION BUDGET 2 004-05), SPECIFICALLY CLAUSE 111 (PAGE 69 OF THE PAPER BOOK) , THE INTENTION 18 OF THE GOVT. FOR INTRODUCING THE SECURITY TRANSACTI ON TAX AND EXEMPTING THE LONG TERM CAPITAL GAIN EARNED FROM SA LE OF SHARES AND LEAVING 10% TAX ON SHORT TERM CAPITAL GAIN, EA RNED FROM SALE OF SHARES, ALSO SUPPORTS THE CASE OF THE ASSE SSEE . THE IDEA BEHIND INTRODUCTION OF SECURITY TRANSACTION TAX IS TO END THE LITIGATION ON THE ISSUE WHETHER PROFIT EARNED FROM THIS DELIVERY BASE SALE OF SHARES IS A CAPITAL GAIN OR A BUSINES S PROFIT. EVEN THE HON'BLE APEX COURT IN THE CASE OF K.P. VERGHESE VS TO, 131 ITR 597 (SC) OBSERVED AS UNDER:- THE TASK OF INTERPRETATION OF A STATUTORY ENACTME NT IS NOT MECHANICAL TASK. IT IS MORE THAN A MERE READIN G OF MATHEMATICAL FORMULAE BECAUSE FEW WORD POSSESSES THE PRECISION OF MATHEMATICAL SYMBOLS. IT IS AN ATT EMPT TO DISCOVER THE INTENT OF THE LEGISLATURE FROM THE LANGUAGE USED B IT AND IT MUST ALWAYS BE REMEMBERED THAT LANGUAGE IS AT BEST AN IMPERFECT INSTRUMENT FO R THE EXPRESSION OF HUMAN THOUGHT AND, AS POINTED OUT BY LORD DENNING, IT WOULD BE IDLE TO EXPECT EVERY STATUTORY PROVISIONS TO BE DRAFTED WITH DIVINE PRESCIENCE AND PERFECT CLARITY. WE CAN DO BETTER T HAN REPEAT THE FAMOUS WORDS OF JUDGE LEARNED HAND WHEN HE SAID. THE ABOVE OBSERVATIONS OF HON'BLE JUDGES OF THE APE X COURT WAS REITERATED BY HON'BLE APEX COURT IN THE CASE OF KER ALA STATE INDUSTRIAL CORPORATION, 259 ITR 51 (SC) HOLDING AS UNDER:- THAT THE FINANCE MINISTERS SPEECH CAN BE RELIED UPON TO THROW LIGHT ON THE OBJECT AND PURPOSE OF THE PARTICULAR PROVISIONS INTRODUCTION BY THE FINANCE B ILL HAS BEEN RECOGNIZED BY THIS COURT IN K.P. VERGHESE VS ITO 1981), 131 ITR 597 (SC), AT 609. AGAIN IN THE C ASE OF R & B FALCON (A) PVT. LTD VS CIT (2008) 301 ITR 309 (SC), IT WAS HELD THAT (PAGE 323):- 19 RULES OF EXECUTIVE CONSTRUCTION IN A SITUATION OF THIS NATURE MAY ALSO BE APPLIED. WHERE A REPRESENTATION IS MADE BY THE MAKERS OF LEGISLATION AT THE TIME OF INTRODUCTION OF BILL OR CONSTRUCTION THEREUPON IS P UT BY THE EXECUTIVE UPON ITS COMING INTO FORCE, THE CARRI ES GREAT WEIGHT. THE HON'BLE DELHI HIGH COURT IN ARJ SECURITY PRINTE RS, 264 ITR 276 AND NEO POLLYPACK PVT LTD. 245 ITR 492 (DEL.) HELD THAT EVEN WHEN THE DOCTRINE OF RES JUDICATA DOES NOT APPLY TO INCOME TAX PROCEEDINGS, WHERE A ISSUE HAS BEEN DECIDED CONSIST ENTLY IN EARLIER ASSESSMENT YEARS IN PARTICULAR MANNER, THE SAME VIEW SHOULD PREVAIL IN SUBSEQUENT YEARS UNLESS THERE IS A MATERIAL CHANGE IN FACTS, MEANING THEREBY, THERE MUST BE MAT ERIAL CHANGE IN THE FACTS. AS MENTIONED EARLIER, THE LD. CIT(A), IDENTICALLY FOR ASSESSMENT YEAR 2002-03 ALLOWED TH E CLAIM OF THE ASSESSEE AND THE SAME HAS BEEN ACCEPTED BY THE DEPA RTMENT. 3.2 THE INDORE BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS OM PRAKASH SURI (SUPRA) HELD AS UNDER:- 3. WE HAVE CONSIDERED THE SUBMISSIONS PUT FORTH BY THE LEARNED SENIOR DR AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. BRIEF FACTS ARE THAT IN THE PA ST THE ASSESSEE WAS ENGAGED IN ROAD BUILDING CONTRACTOR AN D WAS DERIVING INCOME FROM CONTRACT RECEIPTS AS WELL AS FROM SALE OF GITTI AND DURING THE IMPUGNED YEAR, VENTURED INTO INVESTMENT IN SHARE MARKET. THE INCO ME ARISING FROM F&O TRANSACTIONS AND DAILY TRADING IN SHARES (WITHOUT PHYSICAL DELIVERY) REFLECTED AS SPECULATIVE BUSINESS WHEREAS THE INCOME ON DELIVERY BASED TRANSACTIONS OF SALE AND PURCHASE OF SHARES, INCOME WAS SHOWN FROM CAPITAL GAINS. THE LEARNED A O CONSIDERED THE INCOME WHICH WAS BASED ON PURCHASE AND SALE OF SHARES AS BUSINESS INCOME ON THE GROUND S AS NARRATED IN THE ASSESSMENT ORDER AS WELL ASAT PAGES 3 AND 4 OF THE APPELLATE ORDER. BROADLY, THE LEARNED AO 20 WAS OF THE VIEW THAT THE INTENTION OF THE ASSESSEE SINCE BEGINNING WAS SALE OF SHARES AS TRADING ACTIVITIES, AS EVIDENT FROM AUDITED PROFIT AND LOSS ACCOUNT BY NOT SHOWING THE SAME AS SHORT TERM CAPITAL GAIN AND ALS O IN FORM 3CD THE ASSESSEE HAS MENTIONED THE NATURE OF BUSINESS AS TRADING/DEALING IN SHARES/SECURITIES AN D MUTUAL FUNDS. THE FREQUENCY OF TRANSACTIONS WAS AL SO CONSIDERED, CONSEQUENTLY HE TREATED THE AMOUNT OF RS.49,81,915/- AS BUSINESS INCOME FROM SHARE TRADIN G. HOWEVER, BEFORE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) THE BASIS OF ADDITIONS WAS EXPLAINED AS EVIDENT FROM PARA 3.1.1 ONWARDS. THE CRUX OF CLAIM OF THE ASSESSEE IS THAT IN THE AUDITED ACCOUNTS, THE S ALE OF SHARES AMOUNTING TO RS. 9.43 CRORES IN WHICH DELIVE RY HAD BEEN TAKEN, STT WAS PAID AND THE SHARES WERE SO LD AFTER HOLDING FOR A FEW DAYS/FEW WEEKS. THE MUTUAL FUNDS OF RS. 2.91 LACS WERE SOLD AND WERE TREATED A S INCOME FROM SHORT TERM CAPITAL GAINS. BEFORE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) THE ASSESSEE ALSO FILED A DETAILED NOTE ON THE PURCHASE PROCESS FOR DELIVERY BASE SHARES, DETAILS OF DIVIDE ND RECEIVED ON THE BASIS OF RELEVANT STATEMENTS BY PLA CING RELIANCE ON THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF JM SHARES & STOCK BROKERS V . JCIT DATED JANUARY, 2009. BRIEFLY, THE CLAIM OF THE ASSE SSEE BEFORE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) WAS THAT THE DELIVERY BASED TRANSACTIONS WERE MADE WITH AN INVESTMENT MOTIVE AND AS SUCH THE INCOME THEREFROM WAS IN THE NATURE OF SHORT TERM CAPITAL GAINS WHEREAS THE INCOME AROSE FROM F&O TRANSACTIONS AND DAILY TRADING IN SHARES WERE WITH THE BUSINESS MOTIVE WHICH WERE SHOWED AS BUSINESS INCOM E ONLY WHICH WAS MAINLY THROUGH STOCK BROKER, ARIHANT CAPITAL MARKETS LIMITED, REGISTERED WITH NSC, NSE A ND BSE. IT IS ALSO SEEN THAT IN THE IMPUGNED ORDER TH E BOARD CIRCULAR NO. 4/2007 DATED 15.6.2007 WHEREIN I T WAS EMPHASIZED THAT IT IS POSSIBLE FOR A TAX PAYER TO 21 HAVE TWO PORT FOLIOS I.E. AN INVESTMENT PORT FOLIO COMPRISING OF SECURITIES WHICH ARE TO BE TREATED AS CAPITAL ASSET AND TRADING PORT FOLIO COMPRISING STO CK IN TRADE WHICH ARE TO BE TREATED AS TRADING ASSET, WAS CONSIDERED. THE BOARD FURTHER CLARIFIES THAT NO SIN GLE PRINCIPLE WOULD BE DECISIVE AND THE TOTAL PROPOSITI ON NEEDS TO BE CONSIDERED. THE ASSESSEE HAS MAINTAINED ONLY ONE PORT FOLIO AND CLAIMED THAT TO BE AN INVES TMENT FOLIO. UNDISPUTEDLY, THE PERIOD OF HOLDING IS LES S THAN ONE YEAR, CONSEQUENTLY, THERE IS NO INFIRMITY IN HO LDING THAT THESE TRANSACTIONS WOULD BE TREATED AS SHORT T ERM CAPITAL GAIN ON WHICH THE APPLICABLE TAX IS @ 10% O NLY. IN VIEW OF THIS UNCONTROVERTED FACT, THERE IS NO ME RIT IN THE APPEAL OF THE REVENUE AND THE SAME IS DISMISSED . ORDER PRONOUNCED IN OPEN COURT ON 4 TH AUGUST, 2010. THE AFORESAID DECISION WAS AFFIRMED BY THE HON'BLE JURISDICTIONAL HIGH COURT REPORTED IN (2012) 19 ITJ 326 M.P). THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF SHANTILAL M JA IN VS ACIT VIDE ORDER DATED 27-04-2011 (ITA NO. 269/MUM/2010) HELD THAT DESPITE LARGE VOLUME OF SHARES TRANSACTIONS, THE AS SESSING OFFICER CANNOT IGNORE THE RULE OF CONSISTENCY TO TR EAT THE GAINS ON SALE OF SHARES AS STCG. IN THAT CASE, THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF TRADING OF INVESTMENT IN SHARES AND SECURITIES OFFERED RS. 1.54 CRORES AS SHORT TERM CAPITAL GAIN AND RS. 2.91 CRORES FROM LONG TERM CAPITAL GAIN. THE LONG TERM C APITAL GAIN WAS ACCEPTED WHEREAS SHORT TERM CAPITAL GAIN WAS H ELD TO BE BUSINESS PROFIT. SINCE IN EARLIER ASSESSMENT YEARS THE CLAIM OF THE ASSESSEE WAS CONSISTENTLY ACCEPTED AS SHORT TERM C APITAL GAIN, IT WAS HELD THAT THE RULE OF CONSISTENCY AS PROPOUNDED BY HON'BLE BOMBAY HIGH COURT IN THE CASE OF GOPAL PUROHIT (SUP RA), IT IS FAIRLY APPLICABLE AND THE INCOME HAS TO BE TREATED AS SHORT TERM CAPITAL GAIN. IDENTICALLY IN THE CASE OF NAGINDAS P SETH (ITA NO.961/MUM/2010) IT WAS HELD THAT DESPITE LARGE NUM BER OF TRANSACTIONS IN SHARES, THE PROFIT CAN BE ASSESSED AS CAPITAL 22 GAINS UNDER THE FACTS OF THE CASE. THE CASE OF THE ASSESSEE IS FURTHER FORTIFIED BY THESE DECISIONS MORE SPECIFICA LLY WHEN THE ASSESSEE WAS HOLD THE SHARES IN HIS BOOKS AS INVE STOR, WAS NOT HAVING OFFICE OR ADMINISTRATIVE SET UP, NO INTEREST WAS PAID ON THE FUNDS AND THERE WAS NOT A SINGLE INSTANCE WHERE THE ASSESSEE SQUARED UP THE TRANSACTIONS ON THE SAME WI THOUT TAKING THE DELIVERY OF SHARES. THE DECISION IN THE CASE OF JANAK S RANAWALA, 11 SOT 627 (MUM.) FURTHER SUPPORTS THE CA SE OF THE ASSESSEE. LIKEWISE, THE DECISION FROM HON'BLE MADRA S HIGH COURT IN CIT VS N.S.S. INVESTMENT PVT LTD. 227 ITR 149 (M AD), CIT VS ASSOCIATED INDUSTRIAL DEVELOPMENT COMPANY, 82 ITR 5 26 (SC) SUPPORTS THE CASE OF THE ASSESSEE. IN THE PRESENT APPEAL, WE NOTE THAT THE ASSESSEE MADE INVESTMENT IN SHARES W ITH INTENTION TO EARN DIVIDEND INCOME ON APPRECIATION OF PRICE OF SHARES. THEREFORE, IT CANNOT BE SAID THAT THE ASSESSEE WAS DOING BUSINESS. MORE SPECIFICALLY WHEN, THE ASSESSEE EIT HER UTILISED HIS OWN FUNDS/ FAMILY FUNDS OR DID NOT PAY ANY INTEREST AND DEPICTED THE TRANSACTIONS IN SHARES UNDER INVESTMENT PORTFOL IO. DURING HEARING, IT WAS ALSO EXPLAINED BY THE LEARNED COUNS EL FOR THE ASSESSEE THAT ACCOUNTS WERE MAINTAINED BY THE ASSE SSEE IN TWO SEPARATE CAPACITIES I.E. TRADER AND INVESTOR AND NE VER TREATED THE SAME AS HOLDINGS OF SHARES AS STOCK IN TRADE WHICH CLARIFIES THE INTENTION OF THE ASSESSEE. THIS ASSERTION WAS NOT CONTROVERTED BY THE REVENUE. SO FROM THIS ANGLE, THE STAND OF THE L D. CIT(A) DESERVES TO BE AFFIRMED. 3.3 THE LD. SR. DR PLACED RELIANCE UPON THE DECISI ON OF THIS TRIBUNAL IN ACIT VS SHRI NAVEET KUMAR (ITA NO.346/I ND/2013) ORDER DATED 30-08-2013. WE HAVE PERUSED THIS ORDER AND FOUND THAT IT HAS BEEN CLARIFIED THAT IF THE SHARES ARE SHOWN AS INVESTMENT AND NOT AS STOCK IN TRADE, PROFIT ARRIVI NG FROM SUCH SHARES WILL BE CAPITAL GAINS AND NOT BUSINESS PROF IT. THE MATTER WAS RESTORED TO THE ASSESSING OFFICER TO EXAMINE TH E FACTS AND 23 THEN DECIDE ACCORDINGLY. THEREFORE, THIS JUDICIAL P RONOUNCEMENT MAY NOT HELP THE REVENUE. THE OTHER CASES RELIED UP ON BY THE REVENUE HAVE ALSO BEEN PERUSED AND ARE OF THE VIEW THAT THE FACTS ARE NOT IDENTICAL, THEREFORE, THESE MAY NO HELP THE REVENUE. THE BOARD CIRCULAR NO. 4.2007 DATED 15-06- 207 ALSO EMPHASIZES THAT IT IS POSSIBLE FOR A TAX PAYER TO H AVE TWO PORTFOLIOS NAMELY, AN INVESTMENT PORTFOLIO, COMPRIS ING OF SECURITIES, WHICH ARE TO BE TREATED AS CAPITAL ASSE TS AND TRADING PORTFOLIO COMPRISING OF STOCK IN TRADE WHICH ARE T O BE TREATED AS TRADE ASSETS. NO SINGLE PRINCIPLE WOULD BE DECISIVE AND THE FACT HAS TO BE CONSIDERED IN ENTIRETY. THIS PROPOSITION HAS BEEN CONFIRMED BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF SHRI OM PRAKASH SURI (SURPA). THE TOTALITY OF FACTS PLAINLY INDICATE THAT THE LD. FIRST APPELLATE AUTHORITY RIGHTLY DIRE CTED THE ASSESSING OFFICER TO TREAT THE SHORT TERM CAPITAL GAIN AS EA RNED FROM INVESTMENT IN SHARES. INSTRUCTION NO.1827 DATED31 ST AUGUST, 1989 WAS SUPPLEMENTED BY CBDT CIRCULAR NO. F.NO.149/287/2005-TPL [REPORTED IN 210 CTR 29 (ST.) ], ADVISING THE ASSESSING OFFICERS THAT THE PRINCIPLES CONTAINE D IN THE CIRCULAR SHOULD GUIDE THEM IN DETERMINING WHETHER, IN GIVEN CASES, THE SHARES ARE HELD BY THE ASSESSEE AS INVESTMENT (AND THEREFORE, GIVING RISE TO CAPITAL GAINS) OR STOCK-IN-TRADE (AN D THEREFORE, GIVING RISE TO BUSINESS PROFIT) BY FURTHER OPINING THAT NO SINGLE PRINCIPLE WOULD BE DECISIVE AND TOTAL EFFECT OF ALL THE PRINCIPLES SHOULD BE CONSIDERED. IF THE NUMBER OF TRANSACTIONS ARE ANALYSED, WE NOTE THAT, IN A COMPUTER BASED TRADING SYSTEM/ E- FILING, THE FIGURES, BEING SPLIT UP, GIVE MISLEADIN G HIGH FIGURES, REFLECTING THE INDIVIDUAL COMPONENT OF THE TRANSACT ION BUT REALLY, IF THESE FIGURES ARE SYNCHRONISED THEN CLEAR PICTUR E OOZES OUT. SINCE THE GAIN HAS BEEN EARNED FROM THE DELIVERY BA SED TRANSACTIONS, THEREFORE, RESPECTFULLY FOLLOWING THE DECISION FROM HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF SH RI OM PRAKASH 24 SURI (SUPRA), WE FIND NO INFIRMITY IN THE CONCLUSIO N DRAWN BY THE LD. CIT(A). IT IS AFFIRMED. FINALLY, THE APPEAL OF THE REVENUE IS HAVING NO MER IT, CONSEQUENTLY DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT ON 1 4 TH NOV. 2013. IN ANOTHER CASE OF ACIT VS. MOHAN R.KHANDELWAL, (2012) 2 0 ITJ 482 AND ACIT VS. SANJAY SONI, (2012) 20 ITJ 454, WHEREIN THE INDORE BENCH OF THE TRIBUNAL HELD THAT SI NCE THE DELIVERY BASED TRANSACTION WERE CARRIED OUT, THE IN COME HAS TO BE REGARDED AS SHORT TERM CAPITAL GAIN. IN THE CASE OF SUNIL KUMAR GANERIWAL VS. DCIT, (2012) 134 ITD 179 (MUM), INCOME ARISING FROM PURCHASE AND SALE OF SHARE WAS HELD TO BE ASSESSABLE AS CAPITAL GAIN AND NOT BUSINESS INCOME. IDENTICAL RATIO WAS LAID DOWN IN SHANTILAL M.JAIN VS. ACIT, 144 TTJ (MUM) 718. THE HON'BLE MUMBAI HIGH COURT IN THE CASE OF GOPAL PUROHIT,336 ITR 287 (MUM), HELD THAT THE DELIVERY BASED TRANSACTION ARE TO BE REGARD ED AS INVESTMENT TRANSACTION AND PROFIT THEREFROM IS TO BE 25 REGARDED AS SHORT TERM OR LONG TERM CAPITAL GAIN DEPENDI NG UPON THE PERIOD OF HOLDING. IN THE CASE HITESH SATISH CHANDRA DOSHI VS. JCIT (2011) 140 TTJ (MUM) 32, THE MUMBAI BENCH OF THE TRIBUNAL HELD THAT EVEN FOR THE PURPOSE OF DECIDING WHETHER ANY TRANSACTION OF SHARES A RE TO BE REGARDED AS INVESTMENT TRANSACTION OR BUSINESS TRANSACTION. IT IS NOT NECESSARY THAT ASSESSEE SHOULD HO LD THE SHARE ATLEAST FOR 30 DAYS. SIMILAR VIEW WAS TAKEN IN DEV ASHOK KARWAT VS. DCIT, (2012) 50 SOT 167 (MUM) AND MAHENDRA C. SHAH VS. ADDL. CIT, 140 TTJ (MUM) 16. IN VIEW OF THE CLEAR FACTS AND THE JUDICIAL PRONOUNCEMENTS , DISCUSSED HEREINABOVE, WE ARE OF THE CONSIDERED OPINI ON THAT THE ASSESSEE CORRECTLY SHOWED THE INCOME AS SHORT TERM CAPITAL GAIN FROM INVESTMENT MADE IN SHARES OF THE LISTED COMPANIES THROUGH RECOGNIZED EXCHANGES AFTER PAYMENT OF SECURITY TRANSACTION TAX. AS DISCUSSED EARL IER, IN SUBSEQUENT A.Y. 2006-07, THE DEPARTMENT, IDENTICALL Y, 26 ACCEPTED THE INCOME SHOWN BY THE ASSESSEE FROM SALE OF SHARES AS INCOME FROM SHORT TERM CAPITAL GAIN. THEREFORE , THE STAND OF THE LD. CIT(A) IS REVERSED. THIS GROUND OF THE ASSESSEE IS ALLOWED. 4. THE ASSESSEE HAS ALSO CHALLENGED THE ENHANCEMENT OF RS.74,50,000/- U/S 68 OF THE ACT AND INVOCATION OF TH E PROVISIONS OF SECTION 251(1) R.W.S. 251(2) R.W.S. 2 50(4) OF THE ACT. THE LEARNED COUNSEL FOR THE ASSESSEE INVITED OUR ATTENTION TO VARIOUS PAGES OF ASSESSMENT ORDER, IMPUGN ED ORDER AND THE PAPER BOOK BY CONTENDING THAT AT PAGE NO. 1 OF THE ORDER OF THE LD. CIT(A), FINDING OF THE ASSE SSING OFFICER HAS BEEN MENTIONED. IT WAS SUBMITTED THAT THE ASSESSEE DULY FURNISHED CONFIRMATION FROM ASIPL, COPY OF ACKNOWLEDGMENT OF FILING OF RETURN FOR A.Y. 2005-06 SHOWING INCOME OF RS.26,98,216/- ALONG WITH COPY OF BANK ACCOUNT. IT WAS ALSO CONTENDED THAT LD. CIT(A) DID NOT PROVIDE ADEQUATE OPPORTUNITY TO THE ASSESSEE TO EXPLAIN THE 27 AFFAIRS, THUS, THE ENHANCEMENT IS PATENTLY WRONG. THE ASSESSEE WAS ASKED TO EXPLAIN THE SOURCE OF RS.74.50 LAC S MADE BY THE ASSESSEE TO INDIRA SECURITIES. IT WAS CONTE NDED THAT VIDE LETTER DATED 19.3.2012, THE SOURCE WAS DULY EXPLAINED FOR WHICH OUR ATTENTION WAS INVITED TO PAGES 28 & 29 OF THE PAPER BOOK. IT WAS EXPLAINED THAT THE ASSESSEE BORROWED THE FUNDS ONLY FROM ASIPL AND NOT FROM INDI RA SECURITIES, THUS UNDER NO CIRCUMSTANCES, THE ASSESSEE WAS UNDER OBLIGATION TO ESTABLISH THE CREDITWORTHINESS OF M/S. INDIRA SECURITIES. WITH RESPECT TO ESTABLISHING THE I DENTITY OF THE CREDITOR, GENUINENESS OF THE TRANSACTION OF LO AN AND CREDITWORTHINESS OF THE CREDITOR, OUR ATTENTION WAS I NVITED TO THE COPY OF I.T. RETURN OF ASIPL (PAGES 58 TO 61 OF THE PAPER BOOK), COPY OF DEMAND NOTICE (PAGE 84), COPY OF CONFIRMATION (PAGE 87), COPY OF BANK STATEMENT (PAGES 77 TO 80), COPY OF AUDITED BALANCE SHEET ETC. (PAGES 62 TO 76) AND COPY OF SAVING BANK ACCOUNT (PAGES 81 TO 83 OF THE 28 PAPER BOOK). OUR ATTENTION WAS ALSO INVITED TO PAGE 85 OF THE PAPER BOOK. IN REPLY, THE LD. SR. DR CONTENDED T HAT ALL THESE DOCUMENTS NEED EXAMINATION AT THE LEVEL OF THE L D. ASSESSING OFFICER. WE NOTE THAT THE LD. ASSESSING O FFICER AS WELL AS THE LD. CIT(A) WHILE ADJUDICATING THE ISSUE OF CLASSIFICATION OF INCOME FROM SALE OF SHARES HAVE HEAVILY PLACED RELIANCE ON THE FACT THAT THE ASSESSEE MADE BORROWINGS FROM GROUP COMPANIES. THE STAND OF THE ASSESSEE IS THAT THE PERSONS/DIRECTORS MANAGING THE COMPANIES ARE THE FAMILY MEMBERS AND NOT THE OUTSIDERS, THEREFORE, THEIR IDENTITY IS NOT IN DOUBT. IT WAS ALS O CONTENDED THAT THE ASSESSEE IS IN THE POSITION TO EXP LAIN THE NATURE & SOURCE OF THE AMOUNT INVOLVED. THEREFORE , KEEPING IN VIEW THE MATERIAL AVAILABLE ON RECORD, THE F ACTS & CIRCUMSTANCES NARRATED BEFORE US, PRINCIPLE OF NATURAL JUSTICE THAT NO PERSON SHOULD BE CONDEMNED UNHEARD AND ALSO TO SAFEGUARD THE INTEREST OF THE REVENUE, WE REMAN D 29 THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER WIT H A DIRECTION TO EXAMINE THE AUTHENTICITY/GENUINENESS OF THE DOCUMENTS AND ALSO THE CONCERNED PERSONS. THE ASSESSI NG OFFICER IS FREE TO EXAMINE THE CONCERNED PERSONS IN ACCORDANCE WITH LAW FOR WHICH DUE OPPORTUNITY OF BEIN G HEARD BE PROVIDED TO THE ASSESSEE. THUS, THIS GROUND OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES ONLY. FINALLY, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 13.6.2014. (R.C.SHARMA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 13.6.2014 COPY TO: APPELLANT, RESPONDENT, CIT, CIT(A), DR, GU ARD FILE !VYS!