ACIT 16 (1), MUMBAI V. DOLLY K VAJIFDAR, MUMBAI

ITA 3867/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1679 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-03-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 19-12-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 11-05-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: O P MEENA
• Assessee Lawyers: KETAN L VAJANI
• Keywords: Business income
• Section: 143(3)

Judgement Text

PAGE 1 OF 12 IN THE INCOME TAX APPELLATE TRIBUNAL 'D' BENCH, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI SANJAY ARORA, ACCOUNTANT MEMBER ITA NO.3867/MUM/2011 (ASSESSMENT YEAR: 2006-07) ASST. CIT 16(1), MATRU MANDIR, TARDEO, MUMBAI - 400007 VS. DOLLY K. VAJIFDAR, 42, VALLENTINA, NEWROJ GAMADIA ROAD, PEDDAR D, MUMBAI 400006 [PAN: AACPV 9120 C] (APPELLANT) (RESPONDENT) DEPARTMENT BY: SHRI O.P. MEENA, DR ASSESSEE BY: SHRI KETAN L. VAJANI DATE OF HEARING: 19/12/2012 DATE OF PRONOUNCEMENT: 08 /03/2013 O R D E R PER SANJAY ARORA, A.M. THIS APPEAL HAS BEEN FILED BY THE DEPARTMENT AGAIN ST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-27 MUMBAI (CI T(A) FOR SHORT) DATED 05.01.2011 FOR TREATING THE INCOME OF RS.25,40,974/ - AS INCOME EARNED FROM INVESTMENT IN STCG FOR THE ASSESSMENT YEAR 2006-07, REVERSING THE ORDER BY THE ASSESSING OFFICER (AO) DATED 10/12/2008 U/S. 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) TREATING THE SAID INCOME AS BUSINESS INCOME. 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE FILED HER RETURN OF INCOME FOR THE ASSESSMENT YEAR 2006-07 DISCLOSING AN INCOME OF RS. 58,85,390/- BY WAY OF SHORT TERM CAPITAL GAINS (STCG). THE GAINS WERE EARNED IN TRAN SACTIONS MADE THROUGH RELIANCE PORTFOLIO MANAGEMENT SERVICES (PMS) (RS.33,16,415/- ) AND THROUGH DIRECT TRANSACTIONS VIA ICICI ONLINE (RS.25,40,974/-). TH E AO ALLOWED THE INCOME EARNED THROUGH PMS (RS.33,16,415/-) AS STCG. HOWEVER, HE T REATED THE INCOME EARNED BY THE ASSESSEE THROUGH ONLINE TRADING IN SHARES (RS.2 5,40,974/-) AS BUSINESS INCOME, AND ITA NO.3867 OF 2011 (A.Y. 2006-07) ASST. CIT VS. DOLLY K VAJIFDAR, MUMBAI PAGE 2 OF 12 FRAMED THE ASSESSMENT ACCORDINGLY. THE REASONING GI VEN BY THE AO IS THAT FOR ASSESSMENT YEAR 2005-06, ON ACCOUNT OF VARIOUS FACT ORS, VIZ. THE VOLUME AND NUMBER OF TRANSACTIONS; THE PERIOD OF HOLDING, ETC., THE T RANSACTIONS ENTERED THROUGH ICICI ONLINE WERE HELD TO BE IN THE NATURE OF TRADING, AN D THERE WAS NO CHANGE IN THE FACTS OF THE CASE FOR THE CURRENT YEAR. THE LD. CIT(A), REVE RSING THE ORDER OF AO, AGREED WITH THE SUBMISSIONS OF THE AUTHORIZED REPRESENTATIVE (A R), THE COUNSEL FOR THE ASSESSEE, TO THE EFFECT THAT ASSESSEE HAD BEEN CONSISTENTLY I NVESTING IN SHARES, BONDS, MUTUAL FUNDS, ETC., AND HAS EARNED LONG TERM CAPITAL GAINS (LTCG) ON SALE THEREOF DURING THE FINANCIAL YEARS RELEVANT TO THE ASSESSMENT YEAR S 2005-06 AND 2006-07, WHICH HAVE BEEN ACCEPTED BY AO. THE AO HAD ALSO ACCEPTED THE S TCG EARNED BY ASSESSEE ON ACCOUNT OF PMS TRANSACTIONS. IT WAS FURTHER OBSERVE D BY THE LD. CIT(A) THAT THERE ARE ONLY 78 SCRIPS HELD THROUGH ICICI ONLINE, OUT OF WH ICH IN 70 SCRIPS THERE WAS ONLY A SINGLE TRANSACTION DURING THE YEAR AND, THUS, THERE IS NO CHURNING OF OR VOLUMINOUS BUSINESS, AS OBSERVED BY THE AO. EVEN OUT OF THE CA PITAL GAINS EARNED THROUGH ICICI ONLINE, AN AMOUNT OF RS.20,17,007/- HAD BEEN EARNED ON SHARES HELD FOR MORE THAN 200 DAYS. THE LD. CIT(A) WAS FURTHER IMPRESSED BY T HE FACT THAT THE ASSESSEE HAD BEEN CONSISTENTLY DECLARING THE AMOUNT OF INVESTMENT IN SHARES IN HER BALANCE-SHEET FOR ALL THE ASSESSMENT YEARS AS AN INVESTMENT. THERE WAS NO UTILIZATION OF BORROWED FUNDS FOR THE PURPOSE OF INVESTMENT IN SHARES. THE ASSESSEE H AD ALSO EARNED DIVIDEND OF RS.3,19,163/- ON SHARES. EVEN EARLIER, THE FIRST AP PELLATE AUTHORITY HAD EXAMINED THE ISSUE FOR THE ASSESSMENT YEAR 2005-06 AND VIDE HIS ORDER NO. CIT(A)/27/ACIT 16(1)266/07-08 DATED FEBRUARY 22, 2010, ALLOWED THE APPEAL OF ASSESSEE IN HER FAVOUR. AS SUCH, FOLLOWING THE ORDER OF THE FIRST APPELLATE AUTHORITY PASSED FOR THE ASSESSMENT YEAR 2005-06, THE PRESENT APPEAL OF ASSESSEE WAS AL LOWED BY THE LD. CIT(A), AND THE INCOME EARNED THROUGH TRANSACTIONS CONDUCTED VIA IC ICI ONLINE DIRECTED TO BE TREATED AS STCG AND NOT AS BUSINESS PROFIT. NOT SATISFIED W ITH THE ORDER OF THE LD. CIT(A), THE REVENUE IS IN APPEAL. 3. BEFORE US, THE LD. DR SUBMITTED THAT THE ASSE SSEE IS ENGAGED IN VOLUMINOUS TRANSACTIONS AND, AS SUCH, THE AO HAS RIGHTLY TREAT ED THE INCOME EARNED FROM TRANSACTIONS MADE THROUGH ICICI ONLINE AS BUSINESS INCOME. ON THE OTHER HAND, THE ITA NO.3867 OF 2011 (A.Y. 2006-07) ASST. CIT VS. DOLLY K VAJIFDAR, MUMBAI PAGE 3 OF 12 LD. AR WOULD SUBMIT THAT THE ASSESSEE IS AN INVESTO R IN SHARES AND NOT A TRADER OR DEALER IN SHARES. IN THE EARLIER YEARS ALSO, SIMILA R TRANSACTIONS HAVE BEEN ACCEPTED AS ON ACCOUNT OF INVESTMENT. IT WAS FURTHER SUBMITTED THAT THE PERIOD OF HOLDING AND THE VOLUME OF TRANSACTIONS IS NOT THE SOLE CRITERIA TO DECIDE THE NATURE OF THE TRANSACTIONS. MERELY BECAUSE THE TRANSACTIONS ARE LARGE IN NUMBER DOES NOT ALTER THE NATURE OF THE TRANSACTIONS. 4. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH T HE LEARNED REPRESENTATIVES, PERUSED THE MATERIAL ON RECORD AS WELL AS THE CASE LAW CITED. 4.1 A PERUSAL OF THE PAPER-BOOK REVEALS THAT ASSE SSEE IS SINCE LONG REGULARLY MAKING VOLUMINOUS TRANSACTIONS IN SHARES. SHE HAS BOTH INV ESTOR PORTFOLIO AS WELL AS TRADER PORTFOLIO. HOWEVER, SHE HAS SHOWN THE ENTIRE TRANSA CTIONS AS INVESTMENTS. SHE HAS NOT ONLY EARNED PROFITS BY TRANSACTING IN SHARES THROUG H THE PMS ROUTE, BUT ALSO BY MAKING TRANSACTIONS DIRECTLY THROUGH ICICI ONLINE. IN OUR VIEW, THERE IS NO FIXED CRITERION THAT THE INCOME EARNED FROM SHARES THROUG H PMS IS TO BE TREATED AS INVESTMENT INCOME, WHILE THAT EARNED BY MAKING DIRE CT ONLINE TRANSACTIONS IS TO BE TREATED AS BUSINESS INCOME. WE HAVE TO SEE THE OVER ALL FACTS AND CIRCUMSTANCES, AS TO WHETHER IN PURCHASING AND SELLING THE SHARES, HER I NTENTION WAS TO MAKE PROFITS THROUGH MARKET MANAGEMENT, OR WAS TO ESSENTIALLY SE CURE APPRECIATION IN THE VALUE OF HER HOLDING. THE LARGE NUMBER OF TRANSACTIONS MADE BY ASSESSEE SHOW THAT SHE IS IN FULL-TIME BUSINESS OF TRANSACTING IN SHARES. THOUGH THE DISPUTE BEFORE US RELATES TO THE TRANSACTIONS MADE BY ASSESSEE DIRECTLY THROUGH THE ICICI ONLINE, WE OBSERVE THAT NOT ONLY A LARGE NUMBER OF TRANSACTIONS HAVE BEEN MADE DIRECTLY THROUGH THE ICICI ONLINE, BUT THE ASSESSEE HAS ALSO MADE VOLUMINOUS T RANSACTIONS THROUGH PMS. THESE TRANSACTIONS OF PURCHASE AND SALE HAVE BEEN MADE CO NTINUOUSLY AND REGULARLY THROUGHOUT THE YEAR WITHOUT ANY INTERVAL, SHOWING T HAT ASSESSEE WAS KEEPING A CONSTANT VIGIL ON THE UPS AND DOWNS OF THE MARKET, AND PURCHASING AND/OR SELLING THE SHARES ACCORDINGLY. THIS TYPE OF CONDUCT, IT MAY BE APPRECIATED, CANNOT BE SAID TO BE THAT OF AN INVESTOR; RATHER, HAS THE CHARACTERISTIC S OF A BUSINESS. THE WORD BUSINESS IS A WORD OF LARGE AND INDEFINITE IMPORT; IT IS SOM ETHING WHICH OCCUPIES THE ATTENTION AND LABOUR OF A PERSON FOR THE PURPOSE OF PROFIT; I T IS AN ACTIVITY CARRIED ON ITA NO.3867 OF 2011 (A.Y. 2006-07) ASST. CIT VS. DOLLY K VAJIFDAR, MUMBAI PAGE 4 OF 12 CONTINUOUSLY IN AN ORGANIZED MANNER WITH A SET PURP OSE AND WITH A VIEW TO EARN PROFIT. WE FIND THESE ATTRIBUTES TO BE PRESENT IN T HE INSTANT CASE. 4.2 THE ARGUMENT OF THE AR THAT THE NUMBER OF TR ANSACTIONS PER SCRIP IS VERY LESS, THOUGH ON FACE APPEARS TO HAVE SOME FORCE, HOWEVER, FAILS WHEN WE GO THROUGH THE RECORD OF THE TRANSACTIONS. IT IS OBSERVED THAT EVE N THOUGH THE NUMBER OF TRANSACTIONS PER SCRIP IS SOMEWHAT LESS, BUT THE ASSESSEE HAS MA DE TRANSACTIONS IN SO MANY SCRIPS, AND HAS BEEN REGULARLY INVOLVED HERSELF IN PURCHASE AND SALE SHARES, WHICH SHOWS THAT SHE IS ENGAGED IN BUSINESS AND NOT IN INVESTMENT. I T IS NOT THE NUMBER OF TRANSACTIONS PER SCRIP ALONE THAT IS RELEVANT. THE NUMBER AND VO LUME OF SCRIPS; THE NUMBER OF TRANSACTIONS; AND THE INTENTION OF ASSESSEE AS DEMO NSTRATED BY THE CONDUCT, THAT ARE ALSO THE RELEVANT FACTORS. FROM THE PERUSAL OF THE DOCUMENTS PLACED ON RECORD, IT IS CLEARLY REVEALED THAT THE CONDUCT OF ASSESSEE IS NO T THAT OF AN INVESTOR; RATHER, IT SHOWS THAT SHE IS ENGAGED IN BUSINESS OF PURCHASING AND S ELLING SHARES. 4.3 THE NEXT ARGUMENT OF THE LD. AR IS TO THE E FFECT THAT FOR THE EARLIER YEARS , SUCH TYPE OF TRANSACTIONS WERE TREATED AS INCOME EARNED BY WAY OF CAPITAL GAINS AND, AS SUCH, FOR THIS YEAR ALSO SUCH INCOME IS REQUIRED TO BE TREATED AS CAPITAL GAINS. WE CANNOT AGREE WITH THIS SUBMISSION. UNDER THE INCOME TAX LAW, EACH YEAR IS A SEPARATE UNIT OF ASSESSMENT, AND THE FACTS OF EACH YEAR HAVE TO BE SEEN IN THEIR OWN PERSPECTIVE. THE PRINCIPLE OF RES JUDICATA IS NOT APPLICABLE TO THE PROCEEDINGS UNDER THE ACT . A PERSON MAY INITIALLY START AS AN INVESTOR IN SHARES , BUT OVER THE YEARS WHEN HE STARTS GAINING IN CONFIDENCE AND EXPERIENCE, EARNING INCOM E, HE MAY GO ON INCREASING HIS OR HER INVESTMENT AND INVOLVEMENT IN THOSE TRANSACTION S, SO THAT THE SAME IN TIME MAY ACQUIRE THE CHARACTERISTICS OF A BUSINESS OR VOCATI ON. THAT IS, A PERSON COULD BE AN INVESTOR FOR SOME YEARS AND A BUSINESSMAN FOR OTHER S, ACCORDING TO THE NATURE OF THE TRANSACTIONS; THE NUMBER OF TRANSACTIONS; THE INTEN TION IN MAKING THE TRANSACTIONS AND CONDUCT OF THE PERSON FOR THE RELEVANT YEAR. THE AR GUMENT OF THE COUNSEL THAT THE ASSESSEE IS CONSISTENTLY INVESTING IN SHARES AND IN EARLIER YEARS SHE WAS TREATED TO HAVE EARNED INCOME ON CAPITAL ACCOUNT, IN OUR VIEW, HAS TO BE SEEN IN LIGHT OF THE OBTAINING FACTS FOR THE YEAR, AND HAS NO LEGAL FORCE BY ITSEL F. WE CAN SAFELY OBSERVE THAT FOR THE RELEVANT ASSESSMENT YEAR, THE ASSESSEE HAS GAINED T HE CHARACTERISTICS OF A BUSINESS ITA NO.3867 OF 2011 (A.Y. 2006-07) ASST. CIT VS. DOLLY K VAJIFDAR, MUMBAI PAGE 5 OF 12 PERSON THROUGH CONTINUOUSLY, REGULARLY AND CONSISTE NTLY MAKING TRANSACTIONS IN SHARES, WHICH, RECKONED ON THE WHOLE, ARE VOLUMINOUS. THOUG H ASSESSEE MAY NOT HAVE INVESTED ANY BORROWED CAPITAL, BUT WE OBSERVE THAT THAT AGAIN IS ONLY INDICATIVE AND NOT A FIXED CRITERION. IT IS THE ASSESSMENT, ON AN OVERALL APPRECIATION OF FACTS, THAT IS MATERIAL, SO THAT NO SINGLE CRITERIA CAN BE FOLLOWE D IN THIS RESPECT. 4.4 THE NEXT SUBMISSION OF THE LD. AR IS TO THE EFF ECT THAT ALMOST 70% OF THE INCOME HAS BEEN EARNED BY SELLING SHARES WITH A HOL DING PERIOD OF MORE THAN 200 DAYS. WE OBSERVE THAT IT IS NOT A CRITERION AS TO W HAT INCOME HAS BEEN EARNED FROM THE SHARES WITH HOLDING PERIOD OF 200 DAYS OR MORE, OR HAVING HOLDING PERIOD OF LESS THAN 30 DAYS OR EVEN LESSER, WHICH ALL DEPENDS ON THE AS SESSMENT OF THE ANTICIPATED PRICE MOVEMENT IN THE INDIVIDUAL SCRIP VIS-A-VIS THE ACTU AL MOVEMENT THEREIN AS WELL IN THE MARKET. WE OBSERVE THAT A NUMBER OF PURCHASE AND SA LE TRANSACTIONS WITH A HOLDING PERIOD OF LESS THAN 200 DAYS, OR EVEN LESS THAN 30 DAYS, WERE MADE BY ASSESSEE DURING THE RELEVANT YEAR. IT IS IMMATERIAL AS TO WHAT INCO ME HAS BEEN EARNED BY ASSESSEE AND FROM WHAT TRANSACTIONS. THE MATERIAL FACT IS THAT A SSESSEE HAS MADE SO MANY TRANSACTIONS OUT OF WHICH CERTAIN TRANSACTIONS ENDE D IN MORE THAN 200 DAYS AND CERTAIN TRANSACTIONS ENDED IN A VERY SHORT PERIOD. THE NUMB ER OF TRANSACTIONS; THE WHOLE TIME ENGAGEMENT OF ASSESSEE IN MAKING TRANSACTIONS ACCOR DING TO THE UPS AND DOWN OF THE MARKET TO REDUCE THE LOSS AND MAKE PROFIT ARE THE R ELEVANT FACTORS WHICH SHOWS THAT ASSESSEE HAS BEEN ENGAGED IN BUSINESS/VOCATION AND NOT AS AN INVESTOR, SO FAR THE ASSESSMENT YEAR IN QUESTION IS CONCERNED. IN THE CA SE OF ROHIT KOTHARI (IN ITA NO. 5422/MUM/2011 DATED 19.12.2012), THE TRIBUNAL, EVEN WHILE OBSERVING THAT CERTAIN TRADES, CLAIMED TO BE ON CAPITAL ACCOUNT, WERE SQUA RED OFF BY SALE WITHIN A SHORT PERIOD OF TIME, WAS YET OF THE VIEW THAT A WHOLESOME VIEW, BASED ON THE ENTIRETY OF THE TRANSACTIONS AND THE OVERALL CONDUCT OF THE ASSESSE E, IS TO BE TAKEN, SO THAT THE SAME, BEING BACKED BY DELIVERY, WERE ALSO CONSIDERED AS S O, I.E., LEADING TO STCG, AND NOT BUSINESS INCOME, AS CLAIMED BY THE REVENUE. OUR OB SERVATIONS IN THIS CASE ARE, THUS, CONSISTENT WITH THE VIEW EXPRESSED BY THE TRIBUNAL IN THE SAID CASE. 4.5 A PERUSAL OF THE ORDER DATED FEBRUARY 22, 2010 BY THE LD.CIT(A) FOR THE ASSESSMENT YEAR 2005-06 SHOWS THAT ASSESSEE FOR THA T YEAR HAD TAKEN A PLEA THAT STOCK ITA NO.3867 OF 2011 (A.Y. 2006-07) ASST. CIT VS. DOLLY K VAJIFDAR, MUMBAI PAGE 6 OF 12 MARKET IN THE COUNTRY HAD EXPERIENCED SUBSTANTIAL B OOM DURING THE FINANCIAL YEAR 2004-05, ESPECIALLY AFTER 01.10.2004, AND THE BULL- RUN IN THE STOCK MARKET HAD ALSO CONTRIBUTED TO A VERY HIGH TURNOVER ON THE MARKET A FTER 01.10.2004. HE ALSO RELIED ON A CHART SHOWING THE BSE INDEX OF EACH MONTH DURING FI NANCIAL YEAR 2004-05. IT WAS FURTHER PLEADED THAT DUE TO THE BOOM IN THE STOCK M ARKET, THE INVESTORS HAD BECAME POSITIVE TO A GREAT EXTENT AND, ACCORDINGLY, INCREA SED THEIR EXPOSURE AND, FURTHER, HIGHER RETURNS WERE ACHIEVED IN SHORTER PERIOD OF T IME, AND HENCE THE PERIOD OF HOLDING ALSO REDUCED SUBSTANTIALLY. THE SAME MAY WE LL BE TRUE. HOWEVER, WHERE THE ASSESSEE INCREASES HER ACTIVITIES CONSIDERABLY IN R ESPONSE TO THE UPS AND DOWN IN THE MARKET FOR THE SUBSEQUENT YEAR, THEN IT ESSENTIALLY ACQUIRES THE CHARACTER OF A BUSINESS AND NOT OF INVESTMENT. THOUGH THIS ARGUMENT WAS ACC EPTED WHILE DECIDING THE APPEAL FOR THE ASSESSMENT YEAR 2005-06, BUT THE SAME PLEAD ING FOR THE SUBSEQUENT YEAR WILL SHOW THAT THE ASSESSEE HAS TURNED FROM AN INVESTOR TO A BUSINESSMAN. THE BOOM IN THE MARKET, AND THE CONSEQUENT HIGH RETURNS, MAY PERHAP S HAVE BEEN THE MOTIVATING OR THE ENABLING FACTORS FOR THE INCREASED EXPOSURE OR ENGA GEMENT IN THE STOCK MARKET, BUT BY ITSELF WOULD NOT DECIDE ON OR BE DETERMINATIVE OF T HE CHARACTER OF THE TRANSACTIONS. 4.6 THE ARGUMENT OF THE LEARNED AR THAT THE FREQUEN CY OF THE TRANSACTIONS OF INVESTMENTS IN SHARES OF DIFFERENT COMPANIES CANNOT BE A CRITERION TO UNDERSTAND THE NATURE OF THE TRANSACTIONS IS ALSO NOT TENABLE. THE LD. AR HAS GIVEN AN EXAMPLE THAT A PERSON MAY INVEST HIS MONEY IN FIXED DEPOSITS OF VA RIOUS BANKS, SO THAT HE DOES NOT LOOSE HIS CAPITAL IN CASE OF INSOLVENCY OF ANY PART ICULAR BANK AND, SIMILARLY, WHEN AN INVESTOR INVESTS IN VARIOUS DIFFERENT COMPANIES, HE DOES NOT BECOME A TRADER NOR IT IS THE FREQUENCY OF THE TRANSACTIONS BUT THE TRANSACTI ONS PER SCRIP THAT IS TO BE SEEN. THE SAID SUBMISSION IS OF NO MOMENT IN THE FACTS OF THE CASE. IN CASE OF INVESTMENT IN FIXED DEPOSITS, THE MONEY IS INVESTED FOR A FIXED P ERIOD. THE INVESTOR IS NOT CONCERNED WITH THE UPS AND DOWNS IN THE MARKET; THERE IS NO C ONSTANT ENGAGEMENT; RATHER, NO ENGAGEMENT AT ALL, AND THE INVESTOR IS ENTITLED TO A FIXED RATE OF INTEREST OVER THE TERM OF THE INVESTMENT. ON THE OTHER HAND, IN CASE OF I NVESTMENT IN SHARES OF DIFFERENT COMPANIES, THE INVESTOR KEEPS A CONSTANT VIGIL ON THE MARKET SO AS TO EARN MAXIMUM PROFIT BY MAKING SALES AND PURCHASE AS PER THE TREN D OF THE MARKET AS WELL AS THE UPS ITA NO.3867 OF 2011 (A.Y. 2006-07) ASST. CIT VS. DOLLY K VAJIFDAR, MUMBAI PAGE 7 OF 12 AND DOWN IN THE MARKET VALUE OF THE DIFFERENT SCRIP S IN WHICH HE HAS INVESTED THE MONEY. AND WHICH, THUS, ACQUIRES THE ATTRIBUTES OF A BUSINESS, AND CANNOT BE COMPARED WITH THE INVESTMENT OF MONEY IN FIXED DEPO SITS. 4.7 THE LD. AR HAS RELIED UPON AN AUTHORITY OF THE HON'BLE SUPREME COURT IN THE CASE OF G. VENKATASWAMI NAIDU VS. CIT (1959) 35 ITR 594 (SC) TO STRESS THE POINT THAT THE HON'BLE APEX COURT IN THE SAID CASE HAS HE LD THAT IF THE COMMODITY PURCHASED IS GENERALLY THE SUBJECT MATTER OF TRADE AND IS PURCHA SED IN LARGE QUANTITIES, IT WOULD TEND TO ELIMINATE THE POSSIBILITY OF INVESTMENT FOR PERS ONAL USE, POSSESSION OR ENJOYMENT. HE HAS FURTHER SUBMITTED THAT THE LARGE QUANTITY MA Y BE RELEVANT ONLY IF THE SAME IS THE SUBJECT MATTER OF TRADE AND NOT OTHERWISE, AND MERE LY LARGE QUANTITY DOES NOT MAKE AN INVESTMENT COMPANY A TRADING COMPANY. EVEN ASSESSEE HAS NOT MADE ANY SUBSEQUENT EFFORT TO IMPROVE THE QUALITY OF THE COMMODITY PURC HASED AND THEREBY MAKING IT MORE READILY RE-SALEABLE. WE OBSERVE THAT IN THE ABOVE STATED AUTHORITY, THE FACTS UNDER EXAMINATION RELATED TO THE PURCHASE AND SALE OF CERTAIN PLOTS O F LAND BY THE ASSESSEE. THE AO HAD TREATED THE PROFIT EARNED FROM PURCHASING AND SELLI NG THE PLOTS AS BUSINESS INCOME, AS THE SELLING OF PLOTS OF LAND WAS NOT FOR AGRICULTUR AL PURPOSE OR OF AN INVESTMENT. THE HON'BLE HIGH COURT HELD THAT AS THE APPELLANT PURCH ASED 4 PLOTS DURING TWO YEARS WITH THE SOLE INTENTION TO SELL THEM AT A PROFIT, AND TH IS INTENTION RAISES A STRONG PRESUMPTION IN FAVOUR OF THE VIEW THAT IT WAS A BUSINESS INCOME , EVEN THOUGH THE TRANSACTION WAS A SOLITARY TRANSACTION AND THE ASSESSEE WAS NOT INVOL VED IN THE BUSINESS OF REAL ESTATE. EVEN IN SUCH CIRCUMSTANCES, TAKING INTO CONSIDERATI ON THE INTENTION OF THE ASSESSEE TO EARN PROFITS, THE INCOME FROM THE SAID SOLITARY TRA NSACTION WAS TREATED AS BUSINESS INCOME. THE LEARNED AR HAS PICKED UP A FEW SENTENCE S FROM THE JUDGMENT OF THE HON'BLE APEX COURT TO STRESS HIS POINT. HOWEVER, WE OBSERVE THAT THE ASSESSEES CASE IS NOT A CASE OF A SOLITARY TRANSACTION; RATHER, THE S OLE MOTIVE OF THE ASSESSEE IN MAKING REGULAR TRANSACTIONS OF PURCHASE AND SALE OF SHARES IS TO EARN PROFIT BY SELLING THEM AT A HIGHER RATE. WHAT THE ASSESSEE IN THE CASE AT HAND IS DOING, IN OUR VIEW, IS A BUSINESS OF SALE AND PURCHASE OF SHARES AS COMMODITY, TAKING CONSCIOUS DECISIONS ALL THE TIME TO EITHER BUY, HOLD OR SELL A SCRIP BY KEEPING A CO NSTANT VIGIL ON THE MARKET AS ALSO THE ITA NO.3867 OF 2011 (A.Y. 2006-07) ASST. CIT VS. DOLLY K VAJIFDAR, MUMBAI PAGE 8 OF 12 DEVELOPMENTS IN THE ECONOMY AS WELL AS IN RELATION TO THE SHARES HELD OR TO BE HELD. THE LAW LAID DOWN BY THE HON'BLE APEX COURT IN G. VENKATASWAMI NAIDUS (SUPRA) CASE RELIED UPON BY ASSESSEE GOES AGAINST ASSESSEE RATHE R THAN HELP HER. THE HON'BLE SUPREME COURT IN THE SAID AUTHORITY IN CLEAR WORDS HAS HELD THAT IN EACH CASE IT IS THE TOTAL EFFECT OF ALL THE RELEVANT FACTORS AND CIRCUM STANCES THAT DETERMINE THE CHARACTERISTICS OF THE TRANSACTIONS. NO SINGLE OR D IRECT RULE CAN BE MECHANICALLY APPLIED; RATHER, IT IS THE FACTS AND CIRCUMSTANCES OF EACH CASE WHICH DETERMINE THE CHARACTER OF THE TRANSACTION. AS OBSERVED BY THE AP EX COURT, FOR AN INVESTMENT IN A PURCHASE, THE ELEMENT OF PRIDE OF POSSESSION COMES INTO PICTURE. IN THE CASE IN HAND, NO SUCH ELEMENT IS INVOLVED. 4.8 THE LD. AR HAS FURTHER RELIED ON AN AUTHORI TY STYLED CIT V. ASSOCIATED INDUSTRIAL DEVELOPMENT CO. (P.) LTD ., 82 ITR 586 (SC) TO STRESS THE POINT THAT, AS HEL D THEREIN, WHETHER A PARTICULAR HOLDING IS BY WAY OF INVESTMEN T OR AS STOCK-IN-TRADE IS A MATTER WHICH IS WITHIN THE KNOWLEDGE OF ASSESSEE WHO HOLDS THE SHARES. IN NORMAL CIRCUMSTANCES HE WOULD BE IN A POSITION TO PRODUCE EVIDENCE FROM HIS RECORD AS TO WHETHER HE IS MAINTAINING ANY DISTINCTION BETWEEN S HARES WHICH ARE HIS STOCK-IN-TRADE AND THOSE WHICH ARE HELD AS AN INVESTMENT. THE LD. AR WAS VEHEMENT IN STRESSING THAT THE ASSESSEE HAD SHOWN THE PURCHASE OF SHARES AS HE R INVESTMENT IN HER ACCOUNTS. THIS AUTHORITY CITED BY THE LD. AR IS, AGAIN, OF NO HELP TO THE ASSESSEE; RATHER, GOES IN FAVOUR OF THE REVENUE. THE FACTS IN THE SAID AUTHOR ITY WERE THAT THE ASSESSEE-COMPANY WAS INVOLVED IN THE SALE AND PURCHASE OF SHARES. TH E ASSESSEE-COMPANY HAD NEVER BEEN TREATED AS A DEALER IN SHARES IN ANY OF THE PA ST ASSESSMENTS, AND ITS HOLDING IN VARIOUS COMPANIES WERE TREATED AS INVESTMENTS, AND NOT AS STOCK-IN-TRADE OF ITS SHARE TRADING BUSINESS. DURING THE RELEVANT YEAR ASSESSEE CLAIMED THE NET PROFIT OF RS.1,26,027/- ON THE SALE OF SHARES AS CAPITAL GAIN . EVEN SOME NECESSITY FOR THE SALE OF SHARES WAS ALSO SHOWN. HOWEVER, THE INCOME TAX OFFI CER HELD THE PROFIT AS TAXABLE AS BUSINESS INCOME. THE LD. CIT(A) CONFIRMED THE ORDER OF AO. THE LD. JUDICIAL MEMBER AND LD. ACCOUNTANT MEMBER OF THE TRIBUNAL DIFFERED IN THEIR VIEWS. THE LD. JUDICIAL MEMBER HELD THAT ASSESSEE WAS TRADING IN SHARES, WH EREAS THE LD. ACCOUNTANT MEMBER TOOK A CONTRARY VIEW, AND HELD THAT THE DEPARTMENT HAD FAILED TO BRING ON RECORD ANY ITA NO.3867 OF 2011 (A.Y. 2006-07) ASST. CIT VS. DOLLY K VAJIFDAR, MUMBAI PAGE 9 OF 12 EVIDENCE TO SHOW THAT THE PURCHASE OF SHARES WAS MA DE WITH AN INTENTION OF SELLING THEM AT PROFIT. THE CASE WAS REFERRED TO THE PRESID ENT OF THE TRIBUNAL. THE PRESIDENT OF THE TRIBUNAL, AS A THIRD MEMBER, AGREED WITH THE LD . JUDICIAL MEMBER THAT ASSESSEE WAS A DEALER IN SHARES, WHICH WERE CONFINED TO THE SHARES OF THE MANAGED COMPANIES. THOUGH THE HON'BLE JURISDICTIONAL HIGH COURT UPHELD MAJORITY VIEW OF THE TRIBUNAL, I.E., THAT THE ASSESSEE WAS A DEALER IN SHARES, HOW EVER, IT GAVE NEW FINDING ON FACT/S, AND HELD THAT THE PROFIT OF RS.1,26,027/- DID NOT A RISE TO THE ASSESSEE IN THE COURSE OF ITS BUSINESS AS A DEALER IN SHARES. IT WAS THUS ORD ERED TO BE TREATED AS CAPITAL AND NOT A REVENUE RECEIPT. THE HON'BLE SUPREME COURT WHILE DE ALING WITH THE MATTER OBSERVED THAT IT WAS NEVER THE CASE OF THE ASSESSEE AT ANY S TAGE THAT ALTHOUGH HE IS A DEALER IN SHARES, BUT THOSE SHARES WHICH WERE THE SUBJECT MAT TER OF SALE WERE HELD BY WAY OF INVESTMENT. IT HAD MENTIONED THROUGHOUT THAT ALL TH E SHARES WERE HELD BY IT AS AN INVESTOR, AND THAT IT COULD NOT BE REGARDED AS A DE ALER BECAUSE THE SHARES DID NOT FORM ITS STOCK-IN-TRADE. IT WAS OBSERVED THAT UPTO A CERTAIN POINT OF TIME T HE ASSESSEE HAD BEEN ASSESSED AS AN INVESTOR BUT THE MULTIPLICITY O F THE TRANSACTIONS CROSSED SUCCESSIVELY OVER THE YEARS SHOWED THAT ASSESSEE HA D CEASED TO BE AN INVESTOR AND HAD BECOME A DEALER . THE ASSESSEE SHOULD HAVE CONTENDED THAT EVEN ON T HE ASSUMPTION THAT IT BECAME A DEALER AND WAS NO LONGE R AN INVESTOR IN SHARES, THE PARTICULAR HOLDING, ON SALES OF WHICH PROFIT IN QUE STION HAD ARISEN, HAD ALWAYS BEEN TREATED BY IT AS AN INVESTMENT. THE HON'BLE APEX CO URT OBSERVED THAT THOUGH INITIALLY THE ONUS IS ON THE REVENUE TO PROVE THAT A PARTICUL AR ITEM OF RECEIPT IS TAXABLE, BUT THE ONUS SHIFTS TO THE ASSESSEE AS IT IN NORMAL CIRCUMS TANCES SHOULD BE IN A POSITION TO PRODUCE EVIDENCE FROM ITS RECORD AS TO WHETHER IT H AS MAINTAINED ANY DISTINCTION BETWEEN THE SHARES WHICH ARE ITS STOCK-IN-TRADE AND THOSE WHICH ARE HELD BY WAY OF INVESTMENT. THE HON'BLE COURT OBSERVED THAT ASSESSE E IN THAT CASE MADE NO ATTEMPT TO MAKE OUT A CASE THAT THE SHARES WHICH HAD BEEN SOLD WERE A PART OF ITS CAPITAL INVESTMENT, AND THAT THOSE SHARES HAD BEEN TREATED IN ITS BOOKS ANY DIFFERENTLY FROM THE OTHER SHARES HELD BY IT. IT IS IN THIS CONTEXT THE ABOVE SAID OBSERVATIONS WERE MADE BY THE HON'BLE COURT. IN THE CASE ON HAND, THE ASSE SSEE HAS ALSO NOT TREATED THE SHARES ANY DIFFERENTLY IN HER BOOKS; RATHER, SHE HAS ALSO TREATED ALL THE PURCHASE AND SALE TRANSACTIONS AS HER INVESTMENT AND, AS SUCH, AS PER THE SAID AUTHORITY, IT CAN BE SAFELY ITA NO.3867 OF 2011 (A.Y. 2006-07) ASST. CIT VS. DOLLY K VAJIFDAR, MUMBAI PAGE 10 OF 12 HELD THAT ALTHOUGH UPTO A CERTAIN POINT OF TIME THE ASSESSEE WAS ASSESSED AS AN INVESTOR BUT THE MULTIPLICITY OF THE TRANSACTIONS OCCURRING OVER THE YEARS JUSTIFY THE STAND OF THE DEPARTMENT THAT ASSESSEE HAS SINCE CEASED TO BE AN INVESTOR AND, RATHER, HAS BECOME AN ACTIVE DEALER IN SHARES. 4.8 THE NEXT AUTHORITY RELIED UPON BY THE LEARNED AR IS CIT VS. KARAM CHAND THAPAR AND BROTHERS PRIVATE LIMITED 82 ITR 899 (SC). THE SAID AUTHORITY IS AGAIN OF NO HELP TO THE ASSESSEE. AS PER THE FACTS OF THE SA ID AUTHORITY, THE ASSESSEE WAS SHOWING THE HOLDING OF SHARES IN ITS ACCOUNTS AS AN INVESTMENT. THOSE SHARES WERE RETAINED FOR 14 YEARS. THE ASSESSEE HAD SHOWN THOSE SHARES AS INVESTMENT IN ITS BOOKS AS WELL AS IN THE BALANCE-SHEET. HOWEVER, WHEN THE SHARES WERE SOLD AT A LOSS, THE ASSESSEE CLAIMED IT TO BE A TRADING LOSS. THE TRIBU NAL IN THE CIRCUMSTANCES OF THE CASE HELD THAT ASSESSEE WAS SHOWING THE SHARES AS AN INV ESTMENT IN ITS BOOKS AS WELL AS IN BALANCE-SHEET, AND THOUGH THE SAME BY ITSELF IS NOT CONCLUSIVE, YET CONSIDERED IT TO BE A RELEVANT CIRCUMSTANCE, AND HELD IT TO BE A CAPITA L LOSS. TO STRESS HIS POINT, THE LD. AR POINTED OUT THAT ASSESSEE IN THE CASE ON HAND HAS A LSO SHOWN THE PURCHASE OF SHARES AS AN INVESTMENT IN HER ACCOUNTS AND, AS SUCH, THE INC OME FROM THE SALE OF THOSE SHARES SHOULD BE TREATED AS CAPITAL GAINS. WE MAY OBSERVE THAT ADMISSIONS AS PER LAW ARE RELEVANT AGAINST THE PERSON WHO MAKES IT, AND NOT A GAINST THE OTHER PERSON. IF THE ASSESSEE IS SHOWING HER TRANSACTIONS IN HER ACCOUNT S AS CAPITAL INVESTMENT, AND LATER ON CLAIMS IT TO BE A BUSINESS INCOME, THEN SUCH ADMIS SIONS CAN BE A RELEVANT FACTOR AGAINST THE ASSESSEE. HOWEVER, IF ASSESSEE IS SHOWI NG THE INVESTMENT IN HER BOOKS AS CAPITAL INVESTMENT, BUT THE REVENUE HAS CHALLENGED IT AS A BUSINESS TRANSACTION/S, THEN SUCH TYPE OF ADMISSIONS CANNOT OPERATE AGAINST TH E DEPARTMENT. SO THIS AUTHORITY IS AGAIN OF NO HELP TO ASSESSEE. 4.9 ANOTHER AUTHORITY RELIED UPON BY THE LD. AR STYLED AS GOPAL PUROHIT VS. JT. CIT , 29 SOT 117 (MUM), TO STRESS THE POINT THAT DELIVERY BASED TRANSACTIONS SHOULD BE TREATED AS IN THE NATURE OF INVESTMENT TRANSACTIONS , AND NOT AS INCOME FROM BUSINESS OR PROFESSION. AS THE HON'BLE APEX COURT HAS OBSERVED IN THE ABOVE MENTIONED AUTHORITY/S THAT THERE CANNOT BE A FIXED CRITERIA O R RULE TO JUDGE THAT THE INCOME EARNED ITA NO.3867 OF 2011 (A.Y. 2006-07) ASST. CIT VS. DOLLY K VAJIFDAR, MUMBAI PAGE 11 OF 12 CAN BE CHARACTERIZED AS CAPITAL GAIN OR BUSINESS IN COME, BUT THE OVERALL FACTS AND CIRCUMSTANCES OF THE CASE; THE NUMBER OF TRANSACTIO NS; THE CONDUCT AND INTENTION OF ASSESSEE, ETC., ARE THE RELEVANT CONSIDERATIONS. HE NCE THE AUTHORITY OF THE MUMBAI BENCH OF THE TRIBUNAL, AND ALSO ANOTHER STYLED AS SARANATH INFRASTRUCTURE P. LTD. VS. ASSTT. CIT , 120 TTJ 216 (LUCK.), WITH DUE RESPECT, ARE GOOD A S PER THE FACTS AND CIRCUMSTANCES OF THOSE CASES, BUT DUE TO THE PECULI AR FACTS OF THIS CASE, CANNOT BE APPLIED IN THIS CASE. 5. IN VIEW OF THE ABOVE OBSERVATIONS, THE APPEAL OF THE DEPARTMENT IS HEREBY ALLOWED, AND THE AO IS DIRECTED TO TREAT THE IMPUGN ED INCOME IN QUESTION AS EARNED THROUGH TRANSACTIONS MADE DIRECTLY THROUGH ICICI ON LINE AS BUSINESS INCOME AND ASSESS THE ASSESSEE ACCORDINGLY. 6. IN THE RESULT, THE APPEAL BY THE REVENUE IS ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON MARCH, 2013 SD/- SD/- ( D. MANMOHAN) (SANJAY ARORA) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI, DATED 8 TH MARCH, 2013 VNODAN/SPS COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, D BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI