PARAS JAIKUMAR JAIN, MUMBAI V. ITO 13(2)(3), MUMBAI

ITA 4024/MUM/2009

• Counselvise Citation: 402419914 RSA 2009
• Duration Of Justice: 2 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-07-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 26-04-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 26-06-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SU RENDRA KUMAR
• Keywords: Unexplained cash credit; Business income; Income from undisclosed sources; Additional evidence; Futures and options; Capital Gains
• Section: 143(3); 250

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C MUMBAI BEFORE SHRI J. SUDHAKAR REDDY(AM) AND SMT. ASHA VIJAYARAGHAVAN (JM) ITA NO.4024/MUM/2009 ASSESSMENT YEAR-2005-06 SHRI PARAS JAIKUMAR JAIN, 306, POPATLAL CHAMBERS, MASJID BUNDER MUMBAI-400 009 PAN-ACWPJ 0952G VS. THE ITO 13(2)(3), AAYAKAR BHAVAN, MUMBAI-400 020 (APPELLANT) (RESPONDENT) ITA NO.4102/MUM/2009 ASSESSMENT YEAR-2005-06 THE ITO 13(2)(3), AAYAKAR BHAVAN, MUMBAI-400 020 VS. SHRI PARAS JAIKUMAR JAIN, 306, POPATLAL CHAMBERS, MASJID BUNDER MUMBAI-400 009 PAN-ACWPJ 0952G (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI BHUPENDRA SHAH REVENUE BY: SHRI SURENDRA KUMAR O R D E R PER ASHA VIJAYARAGHAVAN (JM) THIS SET OF CROSS APPEALS CONSISTING OF ONE APPEAL FILED BY THE ASSESSEE AND THE OTHER APPEAL FILED BY THE REVENUE IS DIRECT ED AGAINST THE ORDER DATED 17.4.2009 PASSED BY THE LD. CIT(A)-XIII FOR THE ASS ESSMENT YEAR 2005-06 IN THE MATTER OF ASSESSMENT U/S. 143(3) OF THE INCOME TAX ACT, 1961. AS THESE APPEALS WERE HEARD TOGETHER AND INVOLVED CONNECTED ISSUES, BOTH OF THESE APPEARS ARE BEING DISPOSED OF BY WAY OF THIS CONSOL IDATED ORDER. PARAS J. JAIN 2 ITA NO. 4024/M/2009 -ASST. YEAR: 2005-06 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A N INDIVIDUAL AND WAS DOING SOME PROFESSIONAL AND CONSULTANCY BUSINESS AND ALSO SALE AND PURCHASE OF SHARES. IN THE RETURN OF INCOME, THE APPELLANT REF LECTED SHORT TERM CAPITAL GAIN OF RS. 17,36,836/-. THE ASSESSING OFFICER ASKED T HE APPELLANT TO FURNISH THE DETAILS ALONGWITH STATEMENT SHOWING THE SALE AND P URCHASE OF SHARES DURING THE YEAR AND TO PRODUCE DE MAT STATEMENT AS WELL AS BAN K STATEMENT IN ORDER TO ASCERTAIN AND QUANTIFY THE AMOUNT OF CAPITAL GAINS AS WELL AS BUSINESS INCOME. THE APPELLANT WAS MOSTLY DEALING IN FUTURES AND OPT IONS TRADING. THE AO HIMSELF REPLIED THE STATEMENT SHOWING THE NAME OF SCRIPS, DATE OF PURCHASE, QUANTITY, RATE, AMOUNT AND SIMILAR DETAILS IN RESPECT OF SALE OF CORRESPONDING SCRIPS. THE AO MENTIONED THAT THE ASSESSEE HAS PURCHASED AND SO LD SHARES IN HUGE QTY. WITH VARIOUS HOLDING PERIODS RANGING WITHIN 2 TO 3 DAYS TO 10 DAYS. THE ASSESSEE HAD NEVER INVESTED IN ANY OF THE STOCKS FOR MORE TH AN A MONTH AND MOST OF THE STOCKS PURCHASED AND SOLD WERE IN FUTURE AND OPTION S TRADING WHERE THE ASSESSEE DID NOT TAKE ANY DELIVERY OF THE SHARES. NO DEMAT STATEMENT, BROKERS LEDGER ACCOUNT WAS PRODUCED BY THE ASSESSEE. THE ASSESSEE DID NOT PRODUCE SHARE TRANSACTION TAX CERTIFICATE ISSUED BY THE BROKER IN SUPPORT OF CLAIM. THE AO LOOKING INTO THE SUBSTANTIAL NATURE OF TRANSACTIONS , MAGNITUDE OF PURCHASES AND SALES AND MOTIVE OF THE ASSESSEE TO MAKE QUICK TURN OVER CONCLUDED THAT ASSESSEES ACTIVITY WAS BUSINESS AND THEREFORE THE PROFIT SHOWN ON SHARE TRANSACTION WAS TO BE TREATED AS BUSINESS INCOME. THE AO RELIED ON THE FOLLOWING CASE LAWS: 1) 41 ITR 685(SC) RAJA BAHADUR VISHESHWAR SINGH 2) 68 ITR 486 (SC) DALHOUSIE INVESTMENT TRUST CO. LTD. 3) 100 ITR 706 (SC) SUTLEJ COTTON MILLS 4) 250 ITR 194 XYZ/ABC EQUITY FUND PARAS J. JAIN 3 5) 48 ITR (SC) A.V. THOMAS & CO. 6) 60 ITR 65 (SC) P.K.N & CO. LTD. 7) 82 ITR 582 (SC) ASSOCIATED INDUSTRIAL DEVELOPMENT 8) 160 ITR 67(SC) HOLICK LARSEN 3. BEFORE THE LD. CIT(A), THE AR OF THE ASSESSEE SU BMITTED THAT THE AO HAD TAKEN INTO ACCOUNT ONLY FEW TRANSACTIONS BASED ON T EST CHECK BASIS AND THE ASSESSEE FILED STATEMENT OF SHARE TRANSACTIONS GIVI NG DETAILS OF SCRIPS, DATE OF PURCHASE AND SALE, QUANTITY AND AMOUNT. THE LD. CI T(A) CONFIRMED THE ORDER OF THE AO THAT SHARE TRANSACTIONS ACTIVITY WAS A BUSIN ESS ACTIVITY. 4. WITH REGARD TO SECOND ISSUE BEFORE THE LD. CIT(A ), IT WAS SUBMITTED THAT THE AO ERRED IN CONCLUDING THAT PROFIT SHOWN AS SHO RT TERM WAS NOTHING BUT NET OF SHORT TERM CAPITAL LOSS AND PROFIT FROM FUTURES AND OPTIONS TRADING. HE FURTHER ERRED IN CALCULATING SHORT TERM LOSS AT RS. 21,954/- BY SELECTING ONLY FEW BILLS TRANSACTIONS AND CONCLUDING THAT ASSESSEE HAD MADE THE PROFIT OF RS. 17,58,790/- (17,36,836/- + 21,954/-) ON FUTURES AND OPTIONS TRADING WITHOUT ANY JUSTIFICATION INSTEAD OF RS. 17,36,836/- RIGHTLY SH OWN BY THE APPELLANT AS SHORT TERM CAPITAL GAIN ARISING FROM SALE AND PURCHASE OF SHARES WHICH WAS EVIDENT BY BROKERS BOUGHT NOTE AND SOLD NOTE PRODUCED AND FIL ED BEFORE THE AO. 5. THE LD. CIT(A) HELD AS FOLLOWS: THE FACTS LEADING TO THIS ADDITION HAVE PARTLY BEEN EXPLAINED IN EARLIER PARAS. THE APPELLANT DURING THE YEAR INDULGED IN S HARE TRANSACTIONS, THE A.O. NOTICED THAT MOST OF THE BILLS SUBMITTED I N THE OFFICE PERTAIN TO FUTURES AND OPTIONS TRADING, SINCE THE APPELLANT DID NOT PRODUCE ANY LEDGER STATEMENT OF THE BROKERS NOR ANY BOOKS OF AC COUNTS FOR VERIFICATION OF THE TRANSACTIONS, THE A.O. CONCLUDE D THAT PROFIT SHOWN AS SHORT TERM CAPITAL GAIN WAS NOTHING BUT THE NET OF SHORT TERM CAPITAL LOSS AND THE PROFIT FROM FUTURES AND OPTION S TRADING. PARAS J. JAIN 4 DURING APPELLATE PROCEEDINGS, THE APPELLANT FILE D STATEMENT SHOWING THE PROFIT/ LOSS ON VARIOUS SECURITIES. TH E APPELLANT ALSO ARGUED THAT THE A.OS CONCLUSION WAS INCORRECT AS THE SAME WAS BASED ON FEW TRANSACTIONS PROBABLY BASED ON TEST CHECK BASIS. THE APPELLANT REQUESTED THAT THE STATEMENT SUBMITTED BY HIM DURIN G APPELLATE PROCEEDINGS SHOULD BE CONSIDERED TO ARRIVE AT THE C ONCLUSION WHETHER PROFIT WAS ON ACCOUNT OF SHORT TERM CAPITAL GAIN OR ON ACCOUNT OF FUTURES AND OPTIONS. THE APPELLANTS SUBMISSIONS AND DETAILS WERE FO RWARDED TO THE A.O. FOR REMAND REPORT AS THE SAME WERE CONSIDE RED ADDITIONAL EVIDENCE WHICH WERE NOT FILED DURING ASSESSMENT PRO CEEDINGS. THE APPELLANT ARGUED THAT THE A.O. DID NOT ASK FOR THE FULL DETAILS AND THEREFORE, THERE WAS NO OCCASION TO FILE THE SAME B EFORE THE A.O. IN VIEW OF APPELLANTS ARGUMENT, THE ADDITIONAL EVIDENCE WE RE ADMITTED AND SENT TO THE A.O. FOR HIS REMAND REPORT. DURING REMAND REPORT PROCEEDINGS, THE APPELLA NT SUBMITTED TO THE A.O. THAT SHORT TERM CAPITAL GAIN WAS EARNED AS UNDER: I. ON SALE OF SHARES AS PER BROKERS NOTE RS 6,7 9,767 II. SHORT TERM SHARE PROFIT RECEIVED IN CASH RS.10,5 7,069 IN RESPECT OF ALLEGED SHORT TERM CAPITAL GAIN OF RS 679,767/- ON SALE OF SHARES AS PER BROKERS NOTE, THE A.O. ACCEP TED THAT ON ACCOUNT OF THE AMOUNT OF RS.33,490/- WERE INTRA DAY TRANSAC TIONS WHICH CLARIFY FALLS UNDER THE PURVIEW OF BUSINESS INCOME. IN RESP ECT OF BALANCE OF RS 646,277/- THE A.O. REPORTED THAT THE SAME WERE ON A CCOUNT OF SALE PURCHASE OF SHARES AMOUNTING TO BUSINESS TRANSACTIO NS. THUS, THE A.O. IN REMAND REPORT ACCEPTED THAT THE INCOME/AMOU NT OF RS 679,767/- WAS NOT ON ACCOUNT OF FUTURES AND OPTIONS TRANSACTIONS IN THE GARB OF SHORT TERM CAPITAL PROFIT RECEIVED IN C ASH. THE A.O. CONCLUDED SO ON THE BASIS OF APPELLANTS REPLY DATE D 31.1.2009 WHICH IS AS UNDER:- AS REGARDS THE SHARE OF PROFIT OF RS 10,57,069/- E ARNED IN CASH WHICH STATE THAT SAME HAS BEEN EARNED FROM THE UNQU OTED SHARE DEALING FOR WHICH HAS BEEN TAKEN PLACE PRIVATELY AN D NOT THROUGH THE BROKERS AND HENCE TO PREPARE AND TO SUBMIT TO Y OUR HONOUR THE SCRIP-WISE STATEMENT OF SHORT TERM CAPITAL GAIN FOR THE ABOVE TRANSACTIONS WAS NOT PRACTICABLE. (D) A COPY OF REMAND REPORT WAS HANDED OVER TO THE A PPELLANT. IN RESPONSE, THE APPELLANT IN WRITTEN SUBMISSION STATE D THAT THE SHORT PARAS J. JAIN 5 TERM CAPITAL GAIN INCLUDED PROFIT ON FUTURE AND OP TIONS TRANSACTIONS AT RS. 33,490/- ONLY. THE APPELLANT ALSO SUBMITTED TH AT SHORT TERM CAPITAL GAIN INCLUDED RS 6,79,767/- AND RS. 10,57,0 69/-TOTALING TO RS.17,36,836/- WHICH WAS CORRECTLY DECLARED IN THE RETURN OF INCOME. THE APPELLANT FURTHER ARGUED THAT THIS PROFIT WAS R EPRESENTING THE SHORT TERM CAPITAL GAIN AND SHOULD BE ASSESSED AS SUCH. I HAVE CONSIDERED THE FACTS OF THE CASE. THIS GROU ND OF APPEAL HAS TWO LIMBS, FIRSTLY ALLEGED SHORT TERM CAPITAL GAIN OF RS 6,79,767/- AND SECONDLY SHORT TERM SHARE PROFIT RECEIVED IN CASH O F RS 10,57,069/- THESE TOO ARE DEALT WITH HERE UNDER SEPARATELY. IN RESPECT OF PROFIT OF RS 6,79,767/- ON SALE PURCH ASE OF SHARES, IN ABSENCE OF ANY DETAILS THE A.O. TREATED THE SAME AS PROFIT DERIVED FROM FUTURE AND OPTIONS ASSESSABLE AS BUSINESS INCOME. H OWEVER, IN THE REMAND REPORT, THE AO HAS ACCEPTED THAT THIS PROFIT WAS ON ACCOUNT OF SHARE TRANSACTIONS ON SALE OF SHARES AS PER BROKER S NOTE. THE A.O. INDIRECTLY ADMITTED THAT THIS WAS NOT ON ACCOUNT OF TRANSACTIONS IN FUTURE AND OPTIONS. HOWEVER, THE AO ALSO, IN REMAND REPORT REPORTED THAT THIS PROFIT WAS ALSO ON ACCOUNT OF TRADING ACTIVITIES IN SHARES AND THEREFORE ASSESSABLE AS BUSINESS PROFITS. IN THE 1 ST GROUND OF APPEAL, I HAVE CONCLUDED THAT APPELLANTS ACTIVITY IN SHARE TRANSA CTIONS WAS TRADING ACTIVITIES AND HENCE IT WAS A BUSINESS ACTIVITY LEA DING TO GENERATION OF BUSINESS INCOME. I AM IN AGREEMENT WITH THE A.O. TH AT THIS PROFIT OF RS. 6,79,767/- WAS ASSESSABLE AS BUSINESS INCOME. IN RESPECT OF SHORT TERM SHARE PROFITS RECEIVED IN CASH OF RS 10,57,069/- THE APPELLANT HAS ARGUED BEFORE A.O. AND ALSO DURIN G APPELLATE PROCEEDINGS THAT PROFIT OF RS 10,57,069/- WAS EARNE D IN CASH ON ACCOUNT OF UNQUOTED SHARE DEALINGS WHICH TOOK PLACE PRIVATE LY AND NOT THROUGH THE BROKERS. THE APPELLANT EXPRESSED HIS INABILITY TO GIVE SCRIP WISE STATEMENT OF THESE SHARE DEALING TRANSACTIONS LEADING TO PROF IT IN CASH OF RS 10,57,069/- THE A.O. IN HIS REMAND REPORT HAS REPORTED THAT THI S CASH PROFIT WAS ON ACCOUNT OF FUTURE AND OPTIONS TRANSACTIONS WHICH WE RE CLAIMED BY APPELLANT AS SHORT TERM CAPITAL PROFIT RECEIVED IN CASH. IN HIS REMAND REPORT, THE AO HAS INDIRECTLY ACCEPTED THAT DURING THE YEAR UNDER CONSIDERATION THE APPELLANT EARNED PROFIT IN CASH O F RS 10,57,069/- THE A.O. HAS NOT RAISED ANY DOUBTS AS TO WHETHER THIS C ASH PROFIT WAS INTRODUCTION OF APPELLANTS OWN UNACCOUNTED INCOME OR OTHERWISE. THOUGH THE APPELLANT CLAIMED THIS CASH PROFIT AS SH ORT TERM CAPITAL GAIN EARNED IN CASH BUT THE A.O. IN REMAND REPORT HAS RE PORTED THE SAME AS PARAS J. JAIN 6 PROFIT DERIVED FROM FUTURE AND OPTIONS TRANSACTIONS . THE EXACT WORDS OF THE AO ARE REPRODUCED AS UNDER:- FROM THE ABOVE, IT IS CLEAR THAT THE ASSESSEE IS T RYING TO HIDE THE PROFIT DERIVED FROM THE FUTURE AND OPTIONS TRANSACT IONS IN THE GARB OF SHORT TERM CAPITAL PROFIT RECEIVED IN CASH OF R S 10,57,069/- THUS, THE AO DIRECTLY OR INDIRECTLY ACCEPTED T HAT THE APPELLANT EARNED PROFIT IN CASH OF RS 10,57,069/- THE APPELLANT CLAI MED THE SAME AS SHORT TERM CAPITAL GAIN, WHEREAS THE AO REPORTED THE SAME IN T HE REMAND REPORT AS CASH PROFIT ON FUTURE AND OPTIONS (THIS ISSUE OF PROFIT GENERATED IN CASH IS IMPORTANT IN VIEW OF THE FACT THAT THE AO HAS MADE SEPARATE ADDI TION ON ACCOUNT OF THIS ISSUE AS UNACCOUNTED CASH DEPOSITED IN BANK ACCOUNT). W HILE DEALING IN GROUND NO.1, I HAVE ALREADY CONCLUDED THAT APPELLANTS SHARE TRA NSACTION ACTIVITY WAS BUSINESS ACTIVITY LEADING TO GENERATION OF BUSINESS INCOME. IN RESPECT OF CASH PROFIT EARNED AT RS 10,57,069/- THE APPELLANT HAS NOT BEEN ABLE TO PROVE WITH DOCUMENTARY EVIDENCE THAT THE SAME WAS SHORT TERM C APITAL GAIN. APPELLANT CLAIMED THAT THIS PROFIT WAS EARNED ON UNQUOTED SHA RES DEALING WHICH TOOK PLACE PRIVATELY AND NOT THROUGH THE BROKERS. IT IS NOT B ELIEVABLE THAT THE APPELLANT MAY NOT BE HAVING DOCUMENTARY EVIDENCE OF EVEN A SINGLE TRANSACTIONS LEADING TO CASH PROFIT. THUS, LOOKING INTO THE FACTS AND CIRCUMSTANCE S OF THE CASE, WHETHER IT IS EARNED ON SHARE TRANSACTION OR FUTURE AND OPTIONS, THE SAME WAS APPELLANTS BUSINESS INCOME AND WAS ASSESSABLE AS SUCH. THE A. OS ACTION OF ASSESSING THE ENTIRE CAPITAL GAINS AS BUSINESS INCOME IS HEREBY C ONFIRMED. THIS GROUND OF APPEAL FAILS. 6. AGGRIEVED BY THE ORDER OF THE LD. CIT(A) THE ASS ESSEE IS IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUND: THE LD. ITO ERRED IN TREATING & LD. CIT(A), MUMBAI ERRED IN CONFIRMING THE SHORT TERM CAPITAL GAIN RS. 17,36,83 6/- RIGHTLY DECLARED AND SUPPORTED BY THE DOCUMENTARY EVIDENCE PROOF AS BUSINESS INCOME WITHOUT ANY BASIS AND JUSTIFICATION AND CONTRARY TO THE EVIDENCE PRODUCED BEFORE THEM AND HENCE REQUIRED TO BE TREATED AS SHO RT TERM CAPITAL GAIN ONLY INSTEAD OF BUSINESS INCOME. PARAS J. JAIN 7 7. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON TH E ORDER OF THE LD. CIT(A). THE LD. COUNSEL FOR THE ASSESSEE REITERATE D THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES. 8. WE HEARD BOTH THE PARTIES. THE CBDT HAS ISSUED CIRCULAR NO.4/2007 DATED 15-06-2007 AFTER CONSIDERING VARIOUS JUDGEMEN TS ON THE IDENTICAL ISSUE AND CONCLUDED THAT THREE ASPECTS ARE IMPORTAN T TO BE DETERMINED WHETHER ANY TRANSACTION IS TRADING OR INVESTMENT : (I) MAGNITUDE OF PURCHASE & SALE (II) PERIOD OF HOLDING AND (III) MOTIVE BEHI ND IT. IT IS HELD THAT WHETHER A TRANSACTION OF SALE AND PURCHASE OF SHARES WERE T RADING TRANSACTIONS OR THEY WERE IN THE NATURE OF INVESTMENT IS A MIXED QU ESTION OF LAW AND FACTS AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. H. HOLCK LARSEN 160 ITR 67. IT IS FURTHER HELD IN THE CASE OF CIT V S. ASSOCIATED INDUSTRIAL DEVELOPMENT CO. LTD. 82 ITR 586 THAT IT IS POSSIBLE THAT THE ASSESSEE TO BE BOTH AN INVESTOR AS WELL AS DEALER IN SHARES. WHETH ER A PARTICULAR HOLDING IS BY WAY OF INVESTMENT OR FORM PART OF STOCK-IN-TRADE IS A MATTER WITHIN THE KNOWLEDGE OF THE ASSESSEE AND IT IS FOR THE ASSESSE E TO PRODUCE EVIDENCE FROM THE RECORDS AS TO WHETHER HE MAINTAINED ANY DI STINCTION BETWEEN SHARES WHICH ARE HELD AS INVESTMENT AND THOSE HELD AS STOC K-IN-TRADE. IT IS ALSO HELD IN THE CASE OF MOTILAL HIRABHAI SPT. & WVG. CO.LTD. 113 ITR 173 (GUJ) AND RAJA BAHADUR VISHESHWARA SING 41 ITR 685 (SC) THAT TREATMENT IN THE BOOKS BY AN ASSESSEE WILL NOT BE CONCLUSIVE AND IF THE VO LUME, FREQUENCY AND REGULARITY AT WHICH TRANSACTIONS ARE CARRIED OUT IN DICATE SYSTEMATIC AND ORGANIZED ACTIVITY WITH PROFIT MOTIVE THEN IT BECOM ES BUSINESS PROFIT AND NOT CAPITAL GAIN. IN THE CASE OF CIT VS. PKN CO. LTD. 6 0 ITR 65 IT WAS HELD THAT PURCHASE WITH AN INTENTION TO RESALE WILL ALSO, UND ER THE CHANGED CIRCUMSTANCES, WOULD BE CAPITAL GAINS. IT IS ALSO H ELD IN THE CASE OF SAROJ KUMAR MAZUMDAR VS. CIT 37 ITR 242 BY THE HONBLE SUP REME COURT THAT PURCHASE WITH AN INTENTION TO RESALE IN ORDER TO GA IN PROFIT WILL BE BUSINESS PROFIT DEPENDING ON THE CIRCUMSTANCES OF THE CASE L IKE NATURE , QUANTITY OF PURCHASE AND NATURE OPERATION INVOLVED. IT WAS ALSO HELD IN THE CASE OF JANKI RAM BAHADURRAM VS. CIT 57 ITR 21 (SC) THAT NO SINGL E FACT HAS ANY DECISIVE PARAS J. JAIN 8 SIGNIFICANCE AND THE QUESTION MUST BE ANSWERED DEPE NDING ON THE COLLECTIVE EFFECT OF ALL RELEVANT MATERIAL BROUGHT ON RECORD. 9. KEEPING IN VIEW THE ABOVE PRINCIPLES, IF WE EXA MINE THE CASE OF THE ASSESSEE AS BROUGHT OUT IN THE ORDER OF THE AO, WHI CH IS AS UNDER, WE ARE INCLINED TO AGREE WITH THE VIEW TAKEN BY THE AO : THE ESSENTIAL CONDITIONS FOR DETERMINING WHETHER T HE INVESTMENTS WERE TRADING ASSETS OR NOT IS TO LOOK A T THE SUBSTANTIAL NATURE OF TRANSACTIONS, THE MAGNITUDE O F PURCHASE AND SALES AND THE MOTIVE OF THE ASSESSEE AS TO WHET HER INVESTMENT WAS FOR THE PURPOSE OF DERIVING DIVIDEND INCOME OR A TRADE/ADVENTURE INTENDING TO EARN PROFIT. THE INVE STMENT OF THE ASSESSEE WAS SUBSTANTIAL IN SHARES AND THERE WAS QU ICK TURNOVER AS IS REVEALED BY THE CHART. THIS INDICATES THAT T HE FOREMOST INTEREST OF THE ASSESSEE WAS TO TRADE IN THE SHARES SO THAT TRADING PROFIT ARISES AND RECEIVING OF DIVIDEND INC OME WAS ONLY INCIDENTAL. IT IS SEEN THAT DURING THE YEAR THE ASSESSEE HAS DO NE TRANSACTIONS INCLUDING SHORT TERM & LONG TERM TRANS ACTIONS IN MORE THAN 50 SCRIPTS AND ALSO THE VOLUME OF TRANSAC TIONS IS QUITE HIGH. APART FROM THIS, LOOKING AT THE FREQUE NCY OF PURCHASE AND SALE OF SHARES IT IS ABUNDANTLY CLEAR THAT THIS IS A TRADING ACTIVITY CARRIED ON BY THE ASSESSEE. 10. THEREFORE WE DISMISS THE APPEAL FILED BY THE AS SESSEE. ITA NO. 4102/MUM/2009- REVENUES APPEAL 11. THE GROUNDS RAISED BY THE REVENUE READ AS FOLLO WS 1) THE LD. CIT(A) ON THE FACTS AND IN THE CIRCUMST ANCES OF THE CASE ERRED IN LAW IN DIRECTING THE AO TO DELETE THE ADDITION OF RS. 11,25,000/- MADE ON ACCOUNT OF CASH DEPOSITS . 2) THE LD. CIT(A) ON THE FACTS AND IN THE CIRCUMSTA NCES OF THE CASE ERRED IN NOT APPRECIATING THE FACT THAT IN THE REMAND REPORT DT. 9.2.2009, THE SHORT TERM CAPITAL GAIN RE CEIVED IN CASH WAS REPORTED AS AFTERTHOUGHT BY THE ASSESSEE N OT SUPPORTED BY PROPER DOCUMENTARY EVIDENCE. PARAS J. JAIN 9 3) THE LD. CIT(A) ON THE FACTS AND IN THE CIRCUMSTA NCES OF THE CASE ERRED IN LAW THAT THERE WAS NO CASH SURPLUS TO REDEPOSIT IN THE BANK AND THE NEXUS BETWEEN THE DEPOSITORS AN D THE ALLEGED CASH RECEIPT OF ALLEGED S.T.C.G IS NOT PROV ED. 12. THE FACTS OF THE CASE WERE THAT DURING ASSESSME NT PROCEEDINGS, THE AO NOTICED FROM PERUSAL OF BANK ACCOUNT THAT THERE WERE ONLY 8 ENTRIES OF DEPOSITS IN THE ENTIRE FY WHEREIN THE APPELLANT HAD DEPOSITED CASH OF RS.11,25,000/- OUT OF TOTAL DEPOSITS OF RS.15,13,00 0/- AND WITHDRAWN RS.1,90,000/- IN THE FORM OF CASH AND ISSUED THE RE MAINING TOTAL AMOUNT OT THE BROKERS BY CHEQUES. DURING ASSESSMENT PROCEE DINGS, THE AO ASKED THE APPELLANT TO EXPLAIN THE SOURCE OF CASH D EPOSIT IN THE BANK ACCOUNT. ON THIS ISSUE, THE CASE WAS FIXED FOR HEAR ING ON 29.12.2007. SINCE THE APPELLANT DID NOT FILE ANY EXPLANATION, T HE AO TREATED THE DEPOSITS OF RS.11,25,000/- AS UNEXPLAINED CASH CRED ITS U/S.68 OF THE ACT BY PASSING ASSESSMENT ORDER ON 31.12.2007. 13. DURING APPELLATE PROCEEDINGS, THE APPELLANT ARG UED THAT HE EARNED PROFIT ON SALE AND PURCHASE OF SHARES IN CASH AMOUN TING TO RS.10,57,069/-. THE CASH GENERATED HAD BEEN UTILIZE D IN DEPOSITING THE CASH IN BANK ACCOUNT ON VARIOUS DATES. THE APPELLAN T FURNISHED THE DATE-WISE DETAILS OF CASH DEPOSITS AND WITHDRAWALS. THE APPELLANT SUBMITTED THAT THERE WAS A VALID SOURCE OF CASH DEP OSITS IN THE BANK ACCOUNT ON VARIOUS DATES TOTALING TO RS.11,25,000/- OUT OF CASH EARNED ON SALE PURCHASE OF SHARES. THE APPELLANT REQUESTED THAT THE ADDITION MADE BY AO SHOULD BE DELETED. 14. SINCE THE APPELLANTS DETAILS AND SUBMISSIONS C ONSTITUTED ADDITIONAL EVIDENCE THE SAME WERE FORWARDED TO THE AO FOR HIS REMAND REPORT. DURING REMAND REPORT, THE APPELLANT SUBMITT ED BEFORE AO THAT CASH OF RS.2,30,000/- WAS RE-DEPOSITED IN THE BANK ON FOUR OCCASIONS OUT OF CASH WITHDRAWALS FROM THE BANK. IN RESPECT O F BALANCE PARAS J. JAIN 10 RS.8,95,000/-, THE APPELLANT CLAIMED THE SAME AS DE POSITS OUT OF SHORT TERM CAPITAL PROFIT RECEIVED IN CASH OF RS.10,57,06 9/-. THE A.O. IN HIS REMAND REPORT REPORTED THAT THE APPELLANTS CLAIM O F PROFIT RECEIVED IN CASH WAS AN AFTER THOUGHT AND NOT SUPPORTED BY PROP ER DOCUMENTARY EVIDENCE AND HENCE THE GENERATION OF CASH ON THIS A CCOUNT WAS NOT GENUINE. THE AO ALSO REPORTED THAT AFTER MEETING EX PENSES THE CASH WITHDRAWALS CLAIMED TO BE RE-DEPOSITED WERE NOT SUF FICIENT FOR AGAIN DEPOSITING IN THE BANK. THE AO REPORTED THAT ADDITI ON MADE IN ASSESSMENT ORDER WAS PROPER. 15. THE LD. CIT(A) HELD AS FOLLOWS: I HAVE CONSIDERED THE FACTS OF THE CASE. THE APPEL LANT HAS VEHEMENTLY ARGUED THAT HE ALSO ENTERED IN SHARE DEA LING WHICH TOOK PLACE PRIVATELY AND NOT THROUGH THE BROKERS AND THE PROFIT WAS EARNED IN CASH. THIS CASH EARNED WAS CLAIMED BY APP ELLANT AS SHORT TERM CAPITAL GAIN. SINCE THE APPELLANT CLAIMED THAT THE PROFIT WAS EARNED IN CASH, THEREFORE, HE WAS HAVING CASH AVAIL ABLE FOR DEPOSITING THE SAME IN THE BANK ACCOUNT. IN MY CONS IDERED VIEW, THIS CASH PROFIT OF RS.11,25,000/- HAS BEEN SUBJECT ED TO TAX TWICE, ONCE AT THE TIME OF TREATING THE SAME AS BUSINESS I NCOME AS AGAINST APPELLANTS CLAIM OF SHORT TERM CAPITAL GAIN. THE A O IN HIS REMAND REPORT HAS SUBMITTED THAT THE APPELLANT EARNED CASH PROFIT WHICH WAS ON ACCOUNT OF FUTURE AND OPTION TRANSACTIONS WH ICH APPELLANT TRIED TO HIDE IN THE GARB OF SHORT TERM CAPITAL PRO FIT. IF AOS THIS ARGUMENT IS ACCEPTED, THEN IT HAS ALSO TO BE ACCEPT ED THAT APPELLANT WAS HAVING CASH PROFIT AND CONSEQUENTLY THE APPELLA NT WAS HAVING VALID SOURCE OF DEPOSIT OF CASH IN THE BANK ACCOUNT . IF THE APPELLANTS CLAIM OF GENERATION OF CASH PROFIT OF RS.10,57,069/ - IS TREATED AS NON ACCEPTABLE, THEN THE ADDITION U/S. 68 ON ACCOUNT OF CASH DEPOSITS HAS TO BE TREATED AS JUSTIFIED, BUT CONSEQUENTLY TH E APPELLANTS CLAIM OF SHORT TERM CAPITAL GAIN IN CASH HAS TO BE REJECT ED. THUS, THE SAME CASH AMOUNT CANNOT BE TAXED TWICE, ONCE UNDER BUSI NESS INCOME ON ACCOUNT OF CASH PROFIT ON SHARE TRANSACTIONS AND AG AIN WHILE DEPOSITING THE SAME IN THE BANK ACCOUNT. IN MY CONS IDERED VIEW, IN THE REMAND REPORT, THE AO HAS ACCEPTED THAT THE CAS H PROFIT ON SALE OF SHARE TRANSACTIONS WAS ON ACCOUNT OF FUTURE AND OPTION TRANSACTIONS. BY ACCEPTING SO APPELLANTS CLAIM HAS TO BE ACCEPTED THAT HE WAS HAVING CASH IN HAND FOR DEPOSITING THE SAME IN THE BANK ACCOUNT. IN CASE THE CASH DEPOSIT IN BANK ACCO UNT IS DELINKED PARAS J. JAIN 11 WITH THE APPELLANTS CLAIM OF CASH PROFIT ON SHARE TRANSACTIONS, THEN CONSEQUENTLY APPELLANTS PROFIT ON SHARE TRANSACTIO NS HAS TO BE REDUCED TO THAT EXTENT. IN MY CONSIDERED VIEW, SINC E THE APPELLANTS CASH PROFIT ON SALE TRANSACTIONS HAVE BEEN ACCEPTED BY AO, THEREFORE, APPELLANT WAS HAVING CASH IN HAND WHICH WAS A VALID AND ACCOUNTED SOURCE OF DEPOSIT IN THE BANK ACCOUNT . THEREFORE, LOOKING INTO THE FACTS AND CIRCUMSTANCES, THE AO WA S NOT JUSTIFIED IN TREATING THE CASH DEPOSIT IN BANK AS APPELLANTS UN EXPLAINED CASH CREDIT U/S.68 OF THE ACT. THE ADDITION MADE BY AO I S HEREBY DELETED. 16. IN OUR OPINION AN AMOUNT OF RS. 10,57,069/- HAS BEEN GENERATED AS CASH ON THE SALE AND PURCHASE OF SHARES HENCE WE FIND TH AT THERE IS A SOURCE FOR CASH DEPOSITS IN THE BANK ACCOUNT ON VARIOUS DATES TOTAL ING TO RS. 11,25,000/-. THE ASSESSEE HAD SUBSTANTIATED THE DATE-WISE DETAILS O F THE CASH DEPOSITS AND WITHDRAWALS. THE REASONING OF THE CIT(A) IS CORRECT VIZ., THAT IF THE ASSESSEES CLAIM OF GENERATION OF CASH PROFIT OF RS. 10,57,069 /- IS TREATED AS NON ACCEPTABLE THEN THE ADDITION U/S. 68 MADE BY THE AO ON ACCOUNT OF CASH DEPOSITS HAS TO BE TREATED AS JUSTIFIED AND CONSEQUENTLY THE ASSESSEE S CLAIM OF SHORT TERM CAPITAL GAIN IN CASH HAS TO BE REJECTED. THUS, THE SAME CA SH AMOUNT CANNOT BE TAXED TWICE ONCE UNDER BUSINESS INCOME ON ACCOUNT OF CASH PROFIT ON SHARE TRANSACTIONS AND AGAIN WHILE DEPOSITING THE SAME IN THE BANK ACCOUNT. SINCE THE ASSESSEES CASH PROFITS ON SALE TRANSACTION HAS BEE N ACCEPTED BY AO, THE ASSESSEE COULD HAVE CASH IN HAND WHICH ACCOUNTED FO R THE SOURCE OF DEPOSITS IN THE BANK ACCOUNT. HENCE THE AO WAS NOT CORRECT IN TREATING THE CASH DEPOSIT IN BANK AS ASSESSEES UNEXPLAINED CASH CREDIT U/S. 68 OF THE I.T. ACT. THEREFORE, WE CONFIRM THE ORDER OF THE LD. CIT(A) AND DISMISS THE GROUNDS RAISED BY THE DEPARTMENT. 17. THE ASSESSEE HAS SUBMITTED THAT HE HAD ENTERED INTO SHARE DEALING WHICH TOOK PLACE PRIVATELY AND NOT THROUGH BROKER AND PRO FIT WAS EARNED IN CASH. THE DEPARTMENT HAS NOT PRODUCE ANY EVIDENCE TO CONTRADI CT THE STATEMENT OF THE ASSESSEE. HENCE THE OBJECTION BY THE DEPARTMENT TH AT IN THE REMAND REPORT DT. PARAS J. JAIN 12 9.2.2009, THE SHORT TERM CAPITAL GAIN RECEIVED IN C ASH WAS REPORTED AS AFTER THOUGHT BY THE ASSESSEE IS BASELESS. THEREFORE, WE CONFIRM THE ORDER OF THE LD. CIT(A) AND DISMISS THE GROUNDS RAISED BY THE DEPART MENT. 18. IN THE RESULT, BOTH ASSESSEES APPEAL AND DEPAR TMENTAL APPEAL ARE DISMISSED. ORDER PRONOUNCED ON THIS 15 TH DAY OF JULY, 2011 SD/- SD/- (J. SUDHAKAR REDDY) (ASHA VIJA YARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEM BER MUMBAI, DATED 15 TH JULY, 2011 RJ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR C BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, I.T.A.T, MUMBAI PARAS J. JAIN 13 DATE INITIALS 1. DRAFT DICTATED ON: 6.7. 2011 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 11.07.2011 SR. PS/PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER: JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER: JM/AM 5. APPROVED DRAFT COMES TO THE SR. PS/PS: SR. PS/PS 6. ORDER PRONOUNCED ON: SR. PS/PS 7. FILE SENT TO THE BENCH CLERK: 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK: SR. PS/PS 9. DATE ON WHICH FILE GOES TO AR 10. DATE OF DISPATCH OF ORDER: