ACIT (OSD) 2, MUMBAI V. SAILESH LILADHAR BHATIA, MUMBAI

ITA 4096/MUM/2009

• Counselvise Citation: 409619914 RSA 2009
• Duration Of Justice: 2 year(s) 1 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 14-06-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 02-07-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARTHA SARATHI NAIK
• Assessee Lawyers: K GOPAL JITENDRA SINGH
• Keywords: Capital asset; Business income; Rule of consistency; Question of law; Speculation loss
• Section: 143(3); 260A; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E, MUMBAI BEFORE SHRI N.V.VASUDEVAN(J.M) & SHRI B.RAMAKOTAIA H (A.M) ITA NO.4096/MUM/09(A.Y.2005-06) THE ACIT 2(1), AAYKAR BHAVAN, R. NO.575, 5 TH FLOOR, AAYKAR BHAVAN, MK ROAD, MUMBAI 20. (APPELLANT) VS. SHRI SAILESH LILADHAR BHATIA C/O. BHATIA SHIPPING CORP (P) LTD., SHIPPING HOUSE, 24/26, KUMPTHA STREET, BALLARD ESTATE, MUMBAI 01. PAN :AABPB3277F (RESPONDENT) APPELLANT BY : SHRI PARTHASARATHI NAIK RESPONDENT BY : S/SHRI K.GOPAL/JITENDRA SING H DATE OF HEARING : 16/08/2011 DATE OF PRONOUNCEMENT : ORDER PER N.V.VASUDEVAN, J.M, THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORDE R OF THE CIT(A)-II, THANE DATED 29/4/2009 RELATING TO ASSESSMENT YEAR 2 005-06. THE GROUNDS OF APPEAL OF THE REVENUE READ AS FOLLOWS: 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE REA DS AS FOLLOWS: ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN ALLOWING RELIEF TO THE ASSESSEE TO THE EXTENT IMPUGNED IN THE GROUNDS ENUMERATED BELOW: 1. THE LEARNED CIT(A) ERRED IN DIRECTING THE AO TO TREAT THE INCOME FROM SALE OF INVESTMENT IN THE YEAR UNDER CONSIDERA TION AS CAPITAL GAINS AND ALSO ALLOW THE ASSESSEE TO SET OFF BROUG HT FORWARD UNABSORBED SHORT TERM CAPITAL LOSS WITHOUT APPREC IATING THE FACT THAT THE ASSESSEE WAS IN REGULAR TRADING ACTIVITY OF SHA RES DURING THE ACCOUNTING YEAR RELEVANT TO THE ASSESSMENT YEAR UND ER CONSIDERATION. ITA NO.4096/MUM/09(A.Y.2005-06) 2 2. THE LEARNED CIT(A) ERRED IN RELYING ON THE DECIS ION OF HONBLE ITAT IN THE CASE OF SHRI JANAK S. RANGWALA VS. ACIT 12(2 ) AND SHRI GOPAL PUROHIT VS. JCIT 25(3) AND OTHERS WHICH HAVE NOT BE EN ACCEPTED BY THE DEPARTMENT AND APPEALS U/S. 260A HAVE BEEN FILED. 3. THE ASSESSEE IS AN INDIVIDUAL. HE FILED RETURN O F INCOME FOR A.Y. 2005- 06 DECLARING TOTAL INCOME OF RS.29,53,077/-. AMONG OTHER HEADS OF INCOME, THE ASSESSEE DECLARED INCOME UNDER THE HEAD SALARI ES BEING SALARY RECEIVED FROM BHATIA SHIPPING & AGENCIES PVT. LTD. AND M/S.BHATIA AGENCIES PVT. LTD. UNDER THE HEAD INCOME FROM BUSINESS, TH E ASSESSEE DECLARED LOSS OF RS.1,28,729/-. THIS LOSS AROSE OUT OF THE ACTIV ITY OF THE ASSESSEE OF DEALING IN SHARES IN FUTURES & OPTIONS TRADING IN W HICH THERE IS NO ACTUAL DELIVERY. THIS LOSS WAS SHOWN BY THE ASSESSEE IN T HE RETURN OF INCOME AS A SPECULATION LOSS. THE ASSESSEE ALSO DECLARED INC OME UNDER THE HEAD SHORT TERM CAPITAL GAINS (STCG) AND INCOME UNDER THE HEAD LONG TERM CAPITAL GAIN (LTCG). 4. THE A.O WAS OF THE VIEW THAT THE ASSESSEE WAS CA RRYING ON THE BUSINESS OF SHARE TRADING AND THE LTCG AND STCG DEC LARED BY THE ASSESSEE ARE TO BE CONSIDERED AS BUSINESS INCOME. IN COMING TO THE ABOVE CONCLUSION THE AO WAS OF THE VIEW THAT THE ASSESSEES CASE WAS SIMILAR TO THE CASE OF NEERAJ BIRLA, 66 ITD 148, WHEREIN THE DIVIDEND INCO ME WAS VERY SMALL AND IT WAS AN INDICATION THAT ASSESSEE WAS INDULGING IN AN ADVENTURE IN THE NATURE OF TRADE. THE ASSESSEE HOWEVER SUBMITTED T HAT THE LTCG & STCG AROSE OUT OF TRANSACTIONS OF SHARES WHICH WAS HELD AS AN INVESTMENT AND THAT THE ASSESSEE CANNOT BE SAID TO HAVE CARRIED ON ANY BUSINESS OF TRADING IN SHARES. IN THIS REGARD THE ASSESSEE MAINTAINED THAT IT WAS CARRYING ON TRADING IN SHARES IN FUTURES AND OPTIONS AND IN RES PECT OF GAIN OR LOSS IN SUCH TRADING THE ASSESSEE HAS BEEN DECLARING THE SA ME AS INCOME FROM BUSINESS. THE AO HOWEVER, HELD THAT THE MAIN ACTIV ITY OF THE ASSESSEE WAS TRADING IN SHARES AND THE SAME RESULTED IN STCG AND SPECULATION/BUSINESS PROFIT. THE AO ALSO HELD THAT THE VOLUME OF PURCHA SES WERE VERY HIGH AND ITA NO.4096/MUM/09(A.Y.2005-06) 3 THAT THE ACTIVITY OF DEALING IN SHARES CONTINUED RE GULARLY THROUGH OUT THE YEAR. ACCORDING TO THE AO PROFIT MOTIVE WAS THE SO LE INTENTION OF THE ASSESSEE AND, THEREFORE, THE ACCOUNTING TREATMENT N AMELY TREATING SHARES AS INVESTMENT WAS ONLY FOR THE PURPOSE OF INCOME TAX P ROCEEDINGS SO THAT THE CLASSIFICATION OF THE GAIN AS LTCG AND STCG ATTRACT S LESSER RATE OF TAX. FOR THE REASONS GIVEN ABOVE THE AO TREATED THE LTCG & S TCG DECLARED BY THE ASSESSEE AS INCOME FROM BUSINESS. 5. BEFORE CIT(A) THE ASSESSEE SUBMITTED THAT HE WA S AN INVESTOR IN SHARES FOR MORE THAN 45 YEARS. AS FAR AS THE LTCG IS CONCERNED THE ASSESSEE POINTED OUT THAT THE SAME AROSE OUT OF THE TRANSACTIONS IN 2 SCRIPS. THE DETAILS OF WHICH WERE AS FOLLOWS: NAME OF THE SCRIP DATE OF PURCHASE DATE OF SALE CA PITAL GAINS (AMOUNT) MARUTI UDYOG LTD. JULY 2003(ABOUT) 16/08/2004(ABOU T) 2044020.6 ALOK INDUSTRIES FEB 01(ABOUT) MARCH 05(ABOUT) 15 29668 THE ASSESSEE POINTED OUT THAT THE AFORESAID GAIN CA NNOT BE CONSIDERED AS INCOME FROM BUSINESS BY ANY STRETCH OF IMAGINATION. 6. AS FAR AS THE STCG DECLARED BY THE ASSESSEE IS C ONCERNED, THE ASSESSEE POINTED OUT THAT THE SHARES WERE HELD AS I NVESTMENT AND, THEREFORE, ANY GAIN ARISING OUT OF SALE OF INVESTMENT HAS TO B E CONSIDERED AS CAPITAL GAIN. THE ASSESSEE ALSO POINTED OUT THAT IT HAD MA INTAINED DISTINCTION IN THE BOOKS OF ACCOUNT REGARDING SHARES WHICH WERE HELD A S INVESTMENT AND SHARE IN RESPECT OF WHICH THE ASSESSEE INDULGED IN TRADIN G. THE ASSESSEE ALSO BROUGHT TO THE NOTICE OF THE CIT(A) CBDT CIRCULAR NO.4 OF 2007 DATED 15//6/2007, WHEREIN IT HAS BEEN MENTIONED THAT SHAR ES HELD AS INVESTMENT AND GAIN ON SALE OF SUCH SHARES WILL GIVE RISE TO ONLY CAPITAL GAINS. THE ASSESSEE ALSO SUBMITTED THAT IN ASSESSMENT YEAR 200 5-06, THE TAXING PROVISIONS WITH REGARD TO CAPITAL GAINS UNDER WENT CHANGE. SECTION 88E WAS ITA NO.4096/MUM/09(A.Y.2005-06) 4 INTRODUCED WHEREBY SECURITIES TRACTION TAX WAS LEVI ED ON SALE OF SHARES AND CAPITAL GAIN ON SALE OF SHARES IF IT IS STCG HAD AT TRACTED TAX AT 10% AND IF IT WAS AN LTCG IT WAS EXEMPT FROM TAX. THE ASSESSEE P OINTED OUT THAT THE ASSESSEE HAD NOT DONE ANY ACT TO DELIBERATELY AVOID TAX LIABILITY AS ALLEGED BY THE AO. THE ASSESSEE ALSO DISTINGUISHED THE DECISI ON IN THE CASE OF NEERAJ BIRLA(SUPRA) RELIED UPON BY THE AO. THE ASSESSEE R ELIED ON DECISION OF THE ITAT, MUMBAI IN THE CASE OF SHRI JANAK S. RANGWALA VS. ACIT , ITA NO.1163/M/04, WHEREIN IT WAS HELD THAT LARGE MAGNIT UDE OF TRANSACTIONS WILL NOT CHANGE THE NATURE OF INVESTMENT AS ONE INTO STO CK IN TRADE. FURTHER RELIANCE WAS PLACED ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GOPAL PUROHIT VS. JCIT, ITA NO.4854/M/08, W HEREIN THE TRIBUNAL HAD TAKEN A VIEW THAT THE DEPARTMENT HAS TO BE CON SISTENT IN ITS STAND REGARDING TAXING GAIN ON SALE OF SHARES IN VARIOUS ASSESSMENT YEARS. 7. THE CIT(A) CONSIDERED THE ABOVE SUBMISSIONS AND FOUND THAT OUT OF THE TOTAL INCOME DECLARED UNDER THE HEAD CAPITAL GAINS 58.84% OF THE CAPITAL GAINS WERE LTCG, WHICH AROSE FROM TWO SCRIPS WHICH HAD BEEN HELD BY THE ASSESSEE FOR MORE THAN 12 MONTHS. THE CIT(A) WAS O F THE VIEW THAT THIS CAPITAL GAIN CANNOT BE CONSIDERED AS BUSINESS INCOM E. THE CIT(A) FOUND THAT THE COMPOSITION OF STCG WAS INVESTMENT IN MUTU AL FUNDS, IPO AND OWN PORTFOLIO. OWN PORTFOLIO WAS 41.0% AND THE REST W AS CAPITAL GAINS ON INVESTMENT IN MUTUAL FUNDS AND SHARES ALLOTTED IN I PO. THIS ACCORDING TO THE CIT(A) INDICATED THAT THE ASSESSEE WAS PREDOMIN ANTLY AN INVESTOR. THE CIT(A) ALSO FOUND THAT THE ASSESSEE WAS DOING TRANS ACTIONS IN FUTURES AND OPTIONS MARKET AND THE SAME WAS TREATED AS BUSINESS INCOME BY THE ASSESSEE. THE CIT(A) WAS OF THE VIEW THAT THERE WA S OF PROHIBITION IN LAW FOR AN ASSESSEE TO HOLD SHARES AS INVESTMENT AND ALSO T O HOLD SHARES AS STOCK IN TRADE OF BUSINESS, PROVIDED A CLEAR DISTINCTION IS MAINTAINED IN THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE. THE CIT(A) AL SO FOUND THAT THE POLICY OF THE GOVERNMENT IN THE MATTER OF INVESTMENT IN CA PITAL MARKET WAS TO PROVIDE INCENTIVES TO INVESTMENT IN CAPITAL MARKET AND THIS WAS A REASON FOR ITA NO.4096/MUM/09(A.Y.2005-06) 5 AMENDMENT OF LAW. HE WAS OF THE VIEW THAT VOLUME O F TRANSACTION DONE BY THE ASSESSEE WAS NOT HIGH SO AS TO CONCLUDE THAT TH E ASSESSEE WAS CARRYING ON THE BUSINESS OF DEALING IN SHARES. FOR ALL ABOV E REASONS THE CIT(A) HELD THAT THE INCOME DECLARED UNDER THE HEAD LTCG AND ST CG BY THE ASSESSEE HAS TO BE ACCEPTED AS SUCH AND THE AOS ACTION IN T REATING THE SAME AS BUSINESS INCOME WAS HELD TO BE NOT CORRECT. 8. AGGRIEVED BY THE ORDER OF THE CIT(A) THE REVENU E HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 9. WE HAVE HEARD THE SUBMISSIONS OF THE LD. D.R, WH O MAINLY REITERATED THE STAND OF THE AO. THE LD. COUNSEL FOR THE ASSES SEE REITERATED THE SUBMISSIONS AS WERE MADE BEFORE THE CIT(A). HE ALS O BROUGHT TO OUR NOTICE THE HISTORY OF THE ASSESSMENT IN THE CASE OF THE AS SESSEE FROM A.Y 2002-03. THE SAME IN THE FORM OF A CHART IS ANNEXED AS ANNEX URE A TO THIS ORDER. IN PARTICULAR IT WAS BROUGHT TO OUR NOTICE THAT IN A.Y 2007-08 AND 2008-09 THE ASSESSEE HAD CARRIED OUT TRANSACTIONS IN THE SAME MANNER AS WAS DONE IN THE PRESENT ASSESSMENT YEAR. THE AO IN AN ORDER PA SSED UNDER SECTION 143(3) OF THE ACT DATED 18/12/2009 FOR A.Y 2007-0 8 AND DATED 24/12/2010 FOR A.Y 2008-09 ACCEPTED SIMILAR CLAIM OF THE ASSESSEE ON SALE OF SHARES HELD AS INVESTMENTS AS GIVING RAISE TO CA PITAL GAINS. OUR ATTENTION WAS DRAWN TO THE DECISION OF THE ITAT MUMBAI BENCH IN THE CASE OF SHANTILAL M. JAIN VS. ACIT, ITA NO.2690/M/10 ORDER DATED 27/4 /11, WHEREIN THE TRIBUNAL TOOK NOTE OF THE STAND TAKEN BY THE REVENU E IN SUBSEQUENT ASSESSMENT YEARS IN THE CASE OF THAT ASSESEE WHEREB Y THE STCG DECLARED BY THE ASSESSEE WAS ACCEPTED AND HELD THAT THE REVENUE CANNOT TAKE AN INCONSISTENT STAND IN DIFFERENT ASSESSMENT YEARS IN RESPECT OF AN IDENTICAL ITEM OF INCOME. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE ISSUE TO BE DECIDED IS AS TO WHETHER THE GAIN ON TRANSACTION OF PURCHASE A ND SALE OF SHARES ITA NO.4096/MUM/09(A.Y.2005-06) 6 UNDERTAKEN BY THE ASSESSEE DURING THE PREVIOUS YEAR IS TO BE ASSESSED UNDER THE HEAD INCOME FROM BUSINESS, AS CLAIMED BY THE REVENUE OR INCOME UNDER THE HEAD CAPITAL GAIN, AS CONTENDED BY THE ASSESS EE. THE ANSWER TO THE ABOVE ISSUE WOULD DEPEND ON WHETHER THE ASSESSEE WH EN HE PURCHASED THE SHARES INTENDED TO TREAT THEM AS INVESTMENTS I.E. A CAPITAL ASSET OR A TRADING ASSET I.E. AS STOCK IN TRADE OF BUSINESS OF TRADING IN SHARES. BEFORE WE DEAL WITH THE FACTS OF THE CASE OF THE ASSESSEE, WE WILL BRIEFLY NARRATE THE PRINCIPLES APPLICABLE IN DECIDING THE ABOVE ISSUE A S LAID DOWN IN SEVERAL JUDICIAL PRONOUNCEMENTS :- (A) WHETHER A TRANSACTION OF SALE AND PURCHASE OF SHARE S WERE TRADING TRANSACTIONS OR WHETHER THEY WERE IN THE NATURE OF INVESTMENTS IS MIXED QUESTION OF LAW AND FACT. CIT VS. HOLCK LARSE N, 60 ITR 67 (SC). (B) IT IS POSSIBLE FOR AN ASSESSEE TO BE BOTH AN INVEST OR AS WELL AS A DEALER IN SHARES. WHETHER A PARTICULAR HOLDING IS BY WAY O F INVESTMENT OR FORMED PART OF STOCK IN TRADE IS A MATTER WHICH IS WITHIN THE KNOWLEDGE OF THE ASSESSEE AND IT IS FOR THE ASSESSEE TO PRODU CE EVIDENCE FROM HIS RECORDS AS TO WHETHER HE MAINTAINED ANY DISTINCTION BETWEEN SHARES WHICH WERE HOLD BY HIM AS INVESTMENTS AND THOSE HOL D AS STOCK IN TRADE. (CIT VS. ASSOCIATED INDUSTRIAL DEVELOPMENT C O. LTD., 82 ITR 586 (SC). (C) TREATMENT IN THE BOOKS BY AN ASSESSEE WILL NOT BE C ONCLUSIVE. IF THE VOLUME, FREQUENCY AND REGULARITY WITH WHICH TRANSAC TIONS ARE CARRIED OUT INDICATE SYSTEMATIC AND ORGANIZED ACTIVITY WITH PROFIT MOTIVE, THEN IT WOULD BE A CASE OF BUSINESS PROFITS AND NOT CAPI TAL GAIN. CIT VS. MOTILAL HIRABHAI SPG. AND WVG. CO. LTD., 113 ITR 17 3 (GUJ); RAJA BAHADUR VISWSHWARA SINGH VS. CIT, 41 ITR 685 (SC). (D) PURCHASE WITHOUT AN INTENTION TO RESELL WHERE THEY ARE SOLD UNDER CHANGED CIRCUMSTANCES WOULD BE CAPITAL GAINS. CIT V S. PKN, 60 ITR 65 (SC). PURCHASE WITH AN INTENTION TO RESELL WOULD RE NDER THE GAIN PROFIT ON SALE BUSINESS PROFIT DEPENDING ON THE CIRCUMSTAN CES OF THE CASE LIKE NATURE AND QUANTITY OF ARTICLE PURCHASED, NATU RE OF THE OPERATION INVOLVED. SAROJ KUMAR MAZUMDAR VS. CIT, 37 ITR 242 (SC). (E) NO SINGLE FACT HAS ANY DECISIVE SIGNIFICANCE AND TH E QUESTION MUST DEPEND UPON THE COLLECTIVE EFFECT OF ALL THE RELEVA NT MATERIALS BROUGHT ON RECORD. JANKI RAM BAHADUR RAM VS. CIT, 57 ITR 21 (SC). 11. KEEPING IN MIND, THE ABOVE BROAD PRINCIPLES, W E SHALL NOW EXAMINE THE CASE OF THE ASSESSEE. IN THE CASE OF THE ASSESSEE, THERE IS NO DISPUTE THAT THE ITA NO.4096/MUM/09(A.Y.2005-06) 7 SHARES WHICH WERE SOLD BY THE ASSESSEE AND WHICH GA VE RAISE TO CAPITAL GAIN WERE HELD BY THE ASSESSEE AS INVESTMENTS AND NOT AS STOCK IN TRADE. THE AO HAS NOT BROUGHT ON RECORD FACTS OR CIRCUMSTANCES WH ICH WOULD SHOW THAT THE INTENTION OF THE ASSESSEE WAS ONLY TO ENGAGE IN THE BUSINESS OF BUYING AND SELLING SHARES. IN THIS REGARD, HE HAS NOT BROUGHT ON RECORD THE VOLUME AND FREQUENCY OF TRANSACTIONS CARRIED OUT BY THE ASSESS EE. THE COMPOSITION OF STCG WAS INVESTMENT IN MUTUAL FUNDS, IPO AND OWN PO RTFOLIO. OWN PORTFOLIO WAS 41.0% AND THE REST WAS CAPITAL GAINS ON INVESTMENT IN MUTUAL FUNDS AND SHARES ALLOTTED IN IPO. THIS INDICATES T HAT THE ASSESSEE WAS PREDOMINANTLY AN INVESTOR. THE ASSESSEE WAS DOING TRANSACTIONS IN FUTURES AND OPTIONS MARKET AND THE SAME WAS TREATED AS BUSI NESS INCOME BY THE ASSESSEE. THERE WAS OF PROHIBITION IN LAW FOR AN A SSESSEE TO HOLD SHARES AS INVESTMENT AND ALSO TO HOLD SHARES AS STOCK IN TRAD E OF BUSINESS, PROVIDED A CLEAR DISTINCTION IS MAINTAINED IN THE BOOKS OF ACC OUNTS MAINTAINED BY THE ASSESSEE. IN THE CASE OF JANAK KANGWALLA VS. ACIT 2007 (11) SOT 627 (MUM), IT WAS HELD THAT MERE FACT THAT VOLUME OF TR ANSACTIONS CARRIED OUT BY AN ASSESSEE WAS LARGE CANNOT BE A GROUND TO CONCLUD E THAT AN ASSESSEE WAS A TRADER IN SHARES AND NOT AN INVESTOR. WE ARE OF THE VIEW THAT THE INTENTION OF THE ASSESSEE WAS TO HOLD SHARES AS INVESTMENTS A ND THE CIRCUMSTANCES DO NOT JUSTIFY GIVING A DIFFERENT TREATMENT. WE THERE FORE HOLD THAT THE CAPITAL GAIN AS DECLARED BY THE ASSESSEE SHOULD BE ACCEPTED . THE PARTIES HAVE PLACED RELIANCE ON SEVERAL JUDICIAL PRONOUNCEMENTS BEFORE US. WE HAVE REFRAINED FROM MAKING ANY REFERENCE TO THOSE DECISI ONS AS THE SAME ARE BASED ON FACTS PREVAILING IN EACH CASE. THE FUNDAM ENTAL PRINCIPLE AS ELABORATED BY US IN THE EARLIER PART OF THIS ORDER AS LAID IN JUDICIAL PRONOUNCEMENTS HAVE BEEN APPLIED TO THE FACTS OF TH E CASE. 12. APART FROM THE ABOVE CONCLUSION, WE ALSO FIND T HAT THE BREAK-UP OF INCOME OF THE ASSESSEE FOR ASSESSMENT YEAR 2002-03 TO 2009-10 WAS AS PER THE CHART ANNEXED AS ANNEXURE A TO THIS ORDER. IT IS CLEAR FROM THE ABOVE CHART THAT THE FACTS THAT PREVAILED IN THIS CASE O F THE ASSESSEE WAS IDENTICAL ITA NO.4096/MUM/09(A.Y.2005-06) 8 IN ALL THE ASSESSMENT YEARS. THE ASSESSEE WAS EARN ING INCOME UNDER THE HEAD CAPITAL GAIN AND WAS ALSO SHOWING INCOME FROM BUSINESS OF TRADING IN SHARES. THE ASSESSMENT FROM 2002-03 TO 2004-05 AND 2006-07 AND 2009- 10 WERE UNDER SECTION 143(1) OF THE ACT, WHERE NO SCRUTINY HAD TAKEN PLACE. IT IS ONLY IN A.Y 2005-06, THE AO HAS TREATED THE I NCOME DECLARED UNDER THE HEAD CAPITAL GAINS AS INCOME FROM BUSINESS. HOWEVE R, IN A.Y. 2007-08 AND 2008-09, WHEN THE ASSESSMENT WERE DONE AFTER SCRUTI NY BY THE AO U/S.143(3) OF THE ACT, THE AO HAS ACCEPTED THE CLAI M OF THE ASSESSEE REGARDING THE INCOME UNDER THE HEAD CAPITAL GAIN ON SALE OF SHARES. THE FACTS AS IT PREVAILED IN THOSE ASSESSMENT YEARS ARE IDENT ICAL TO THE FACTS AS IT PREVAILS IN THE PRESENT ASSESSMENT YEAR. COPIES OF THOSE ASSESSMENT ORDERS PASSED U/S.143(3) OF THE ACT, DATED 18.12.2009 AND 24.12.W010 FOR AY 07- 08 AND 09-10 HAVE BEEN FILED BEFORE US. IT IS THUS CLEAR THAT THE REVENUE HAS BEEN TAKING INCONSISTENT STAND. IN CIT VS. GOPAL P UROHIT 228 CTR 582 (BOM), THE QUESTION OF LAW RAISED WAS REGARDING WHE THER STCG DECLARED BY THE ASSESSEE WAS TO BE ASSESSED AS BUSINESS INCOME OR NOT. QUESTION (B) CONSIDERED BY THE HONBLE BOMBAY HIGH COURT WAS AS FOLLOWS: (B) WHETHER, ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE HONBLE ITAT WAS JUSTIFIED INHOLDING THAT PRINC IPLE OF CONSISTENCY MUST BE APPLIEDHERE AS AUTHORITIES DID NOT TREAT TH E ASSESSEE AS A SHARE TRADER IN PRECEDING YEAR, IN SPITE OF EXISTEN CE OF SIMILAR TRANSACTION, WHICH CANNOT IN ANY WAY OPERATE AS RES JUDICATA TO PRECLUDE THE AUTHORITIES FROM HOLDING SUCH TRANSACT IONS AS BUSINESS ACTIVITIES IN CURRENT YEAR? THE HONBLE BOMBAY HIGH COURT HELD AS FOLLOWS: 3. IN SO FAR AS QUESTION (B) IS CONCERNED, THE TRI BUNAL HAS OBSERVED IN PARAGRAPH 8.1 OF ITS JUDGMENT THAT THE ASSESSEE HAS FOLLOWED A CONSISTENT PRACTICE IN REGARD TO THE NATURE OF THE ACTIVITIES, THE MANNER OF KEEPING RECORDS AND THE PRESENTATION OF SHARES A S INVESTMENT AT THE END OF THE YEAR, IN ALL THE YEARS. THE REVENUE SUBM ITTED THAT A DIFFERENT VIEW SHOULD BE TAKEN FOR THE YEAR UNDER CONSIDERATI ON, SINCE THE PRINCIPLE OF RES JUDICATA IS NOT APPLICABLE TO ASSESSMENT PROCEEDINGS. THE TRIBUNAL CORRECTLY ACCEPTED THE POSITION, THAT THE PRINCIPLE OF RES JUDICATA IS NOT ATTRACTED SINCE EACH ASSESSMENT YEAR IS SEPA RATE IN ITSELF. THE TRIBUNAL HELD THAT THERE OUGHT TO BE UN IFORMITY IN TREATMENT ITA NO.4096/MUM/09(A.Y.2005-06) 9 AND CONSISTENCY WHEN THE FACTS AND CIRCUMSTANCES AR E IDENTICAL, PARTICULARLY IN THE CASE OF THE ASSESSEE. THIS APPR OACH OF THE TRIBUNAL CANNOT BE FAULTED. THE REVENUE DID NOT FURNISH ANY JUSTIFICATION FOR ADOPTING A DIVERGENT APPROACH FOR THE ASSESSMENT YE AR IN QUESTION. QUESTION (B), THEREFORE, DOES NOT ALSO RAISE ANY SU BSTANTIAL QUESTION. 13. EVEN APPLYING THE PRINCIPLE OF CONSISTENCY, TH E PLEA OF THE ASSESSEE DESERVES TO BE ACCEPTED. WE THEREFORE FIND NO INFI RMITY IN THE ORDER OF THE CIT(A) AND CONSEQUENTLY CONFIRM HIS ORDER AND DISMI SS THE APPEAL BY THE REVENUE. 14. IN THE RESULT, THE APPEAL BY THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 26T H DAY OF AUG., 2011. SD/- SD/- (B.RAMAKOTAIAH ) (N.V.VASUDEVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED. 26TH AUG.2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3 . THE CIT CITY CONCERNED 4. THE CIT(A)- CONCERNED 5. THE D.RE BENCH. (TRUE COPY) BY ORDER ASST. REGISTRAR, I TAT, MUMBAI BENCHES MUMBAI. VM.