DCIT - 5(1), MUMBAI V. M/s. BLUE SHELL INVESTMENT P. LTD., MUMBAI

ITA 4468/MUM/2008

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4142 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-07-2013
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 08-07-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 30-06-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P K SHUKLA
• Assessee Lawyers: S V JOSHI
• Keywords: Capital asset; Business income; Cost of acquisition; Fair market value
• Section: 45(2); 2(14)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI .. , !'# $ $ $ $ ! %, & !'# !' BEFORE SHRI P.M. JAGTAP, AM AND SHRI SANJAY GARG, J M !./ I.T.A. NO. 4468 /MUM/2008 ( &) % $*% &) % $*% &) % $*% &) % $*% / / / / ASSESSMENT YEAR : 2004-05) DY. COMMISSIONER OF INCOME TAX 5(1), ROOM NO. 568/525, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. ) ) ) ) / VS. M/S BLUE SHELL INVESTMENT PVT. LTD., KEJRIWAL HOUSE, 7 N. GAMADIA ROAD, MUMBAI 400 026. #+ !./ PAN : AAACB 0481 D ( +, / // / APPELLANT ) .. ( -.+, / RESPONDENT ) +, / 0 ! / APPELLANT BY : SHRI P.K. SHUKLA -.+, / 0 ! / RESPONDENT BY : SHRI S.V. JOSHI !)$ / / // / DATE OF HEARING : 08-07-2013 12* / / DATE OF PRONOUNCEMENT : 12-7-2013 '3 / O R D E R PER P.M. JAGTAP, A.M . : THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A) -V, MUMBAI DATED 21-4-2008. 2. GROUND NO. 1 RAISED BY THE REVENUE IN THIS APPE AL READS AS UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND AS PER LAW, THE LD. CIT(A) HAS ERRED IN NOT APPRECIATING THE FACT T HAT ONCE INVESTMENTS ARE CONVERTED INTO STOCK IN TRADE, IT LOOSES THE CH ARACTER OF CAPITAL ASSET ITA 4468/MUM/2008 2 AS PROVIDED U/S 2(14) OF THE I,.T. ACT AS WELL AS S ECTION 45(2) OF THE I.T. ACT AND ALSO ERRED IN WRONGLY RELYING ON THE DECISI ON OF BOMBAY HIGH COURT IN THE CASE OF CIT VS. JANAHVI INVESTMENT P. LTD. 215 CTR (72) WHILE DIRECTING THE A.O. TO RECOMPUTED THE CAPITAL GAINS BY PROVIDING INDEXATION WITH RESPECT TO THE ORIGINAL DATE OF ACQ UISITION. 3. THE MATERIAL FACTS OF THE CASE RELEVANT TO THE I SSUE RAISED IN GROUND NO. 1 ARE THAT THE ASSESSEE IS A COMPANY WHICH IS ENGAG ED IN THE BUSINESS OF INVESTMENT AND TRADING IN SHARES. THE RETURN OF IN COME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 31-10-2004 DECLARI NG TOTAL INCOME OF RS. 6,26,93,360/-. IN THE SAID RETURN, THE LONG TERM C APITAL GAIN ARISING FROM SALE OF SHARES OF M/S YERROWADA INVESTMENTS LTD. WAS DEC LARED BY THE ASSESSEE AND WHILE COMPUTING THE SAID GAIN, DEDUCTION OF RS. 5,38,88,789/- WAS CLAIMED BY THE ASSESSEE ON ACCOUNT OF INDEXED COST OF ACQUISITION TAKING INTO ACCOUNT THE RESPECTIVE DATES OF PURCHASE OF SHARES AS THE ACQUISITION DATES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE A.O. THAT THE SHARES OF M/S YERROWADA INVESTMENTS LTD. PURCHA SED EARLIER AND HELD AS INVESTMENT TILL 26-2-1996 WERE CONVERTED BY THE ASS ESSEE INTO STOCK-IN-TRADE AS ON 1-3-1996. HOWEVER, LATER ON 30-11-98, THE AS SESSEE COMPANY AGAIN RECONVERTED THESE SHARES FROM STOCK-IN-TRADE INTO C APITAL ASSET AS INVESTMENT. ACCORDING TO THE A.O., THE ASSESSEE THEREFORE WAS E LIGIBLE TO CLAIM INDEXATION IN RESPECT OF THE SAID SHARES FROM F/Y 1998-99 AND NOT FROM THE RESPECTIVE DATES OF PURCHASES AS CLAIMED BY THE ASSESSEE. HE, THEREFORE, RECOMPUTED THE INDEXED COST OF THE SHARES OF YERRAWADA INVESTMENT LTD SOLD BY THE ASSESSEE AT RS. 2,86,71,620/- AND RESTRICTED THE DEDUCTION C LAIMED BY THE ASSESSEE FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAIN INTO STO CK EXCHANGE. ON APPEAL, THE LD. CIT(A) REVERSED THE DECISION OF THE A.O. ON THIS ISSUE AND ACCEPTED THE CLAIM OF THE ASSESSEE FOR INDEXATION OF SHARES ON T HE BASIS OF RESPECTIVE DATES OF ACQUISITION RELYING ON THE DECISION OF HONBLE B OMBAY HIGH COURT IN THE CASE OF CIT VS. JANAHVI INVESTMENT P. LTD. 215 CTR (BOM.) 72. HE ALSO NOTED THAT A SIMILAR ISSUE WAS DECIDED BY HIM IN ASSESSEE S CASE FOR A.Y. 2005-06. ITA 4468/MUM/2008 3 4. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS REGARDS T HE RELIANCE OF LD. CIT(A) ON HIS OWN ORDER IN ASSESSEES CASE FOR A.Y. 2005-06 D ECIDING THE SIMILAR ISSUE IN FAVOUR OF THE ASSESSEE, THE LD. D.R. WAS DIRECTED B Y THE BENCH TO ASCERTAIN THE STATUS OF THIS MATTER IN A.Y. 2005-06. HE HAS FILE D A LETTER DTD. 1-7-2013 RECEIVED FROM THE CONCERNED A.O. STATING THAT NO SE COND APPEAL HAS BEEN FILED BEFORE THE TRIBUNAL AGAINST THE ORDER OF THE LD. CI T(A) IN ASSESSEES CASE FOR A.Y. 2005-06. AS REGARDS THE SIMILAR ISSUE INVOLVED IN THE PRESENT APPEAL, THE LD. D.R. HAS SUBMITTED THAT HE IS RELYING ON THE OR DER OF THE A.O. IN SUPPORT OF THE REVENUES CASE ON THIS ISSUE. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, HAS SUBMITTED THAT THIS ISSUE IS SQUARE LY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. JANAHVI INVESTMENT P. LTD. 215 CTR (BOM.) 72 RE LIED UPON BY THE LD. CIT(A) IN HIS IMPUGNED ORDER. IN THE SAID CASE, THE ASSESSEE HAD ACQUIRED CERTAIN SHARES OF A COMPANY IN THE YEAR 1977 AND HA D ALSO RECEIVED BONUS SHARES SUBSEQUENTLY. ALL THESE SHARES WERE HELD BY THE ASSESSEE AS STOCK-IN- TRADE TILL 6 TH NOV. 1987 WHEN THE SAME WERE CONVERTED INTO A CAPI TAL ASSET. SUBSEQUENTLY, THE SAID SHARES WERE SOLD BY THE ASSE SSEE AND WHILE WORKING OUT THE CAPITAL GAIN, THE ASSESSEE OPTED FOR THE FA IR MARKET VALUE OF THE SHARES AS ON THE STATUTORY DATE I.E. IST APRIL, 1981 AS TH E DATE OF ACQUISITION. THE A.O. HELD THAT SINCE THE ASSESSEE WAS HOLDING THE S HARES AS STOCK-IN-TRADE TILL 1987 AND AS THE SAID SHARES WERE NOT CAPITAL ASSET AS ON 01-04-1981, THE OPTION ADOPTED AS FAIR MARKET VALUE W.E.F. 1-4-1981 WAS NOT AVAILABLE TO THE ASSESSEE. THE TRIBUNAL, HOWEVER, HELD IN FAVOUR OF THE ASSESSEE BY PLACING RELIANCE ON THE DECISION OF HONBLE BOMBAY HIGH COU RT IN THE CASE OF KESHAVJI KARSONDAS VS. CIT, 207 ITR 737(BOM). WHEN THE MATTE R REACHED TO THE HONBLE BOMBAY HIGH COURT, IT WAS SOUGHT TO BE CONT ENDED ON BEHALF OF THE REVENUE THAT THE DECISION IN THE CASE OF KESHAVJI K ARSONDAS (SUPRA) WAS NOT APPLICABLE AFTER THE INTRODUCTION OF THE CONCEPT OF INDEXED COST OF ACQUISITION IN EXPLANATION III TO SECTION 48(9) BY THE FINANCE ACT, 1992 W.E.F. 1993. THE ITA 4468/MUM/2008 4 HONBLE BOMBAY HIGH COURT, HOWEVER, DID NOT FIND AN Y SUBSTANCE IN THIS CONTENTION OF THE REVENUE AND HELD THAT THE AMENDME NT OF 1993 DID NOT IN ANY WAY NULLIFY OR DILUTE THE RATIO AS LAID DOWN IN THE CASE OF KESHAVJI KARSONDAS (SUPRA). IT WAS HELD BY THE HONBLE BOMB AY HIGH COURT THAT THE COST OF ACQUISITION CAN ONLY BE THE COST ON THE DAT E OF THE ACTUAL ACQUISITION AND SINCE THERE WAS NO ACQUISITION OF THE SHARES ON 6 TH NOV. 1987 WHEN THE SAME WERE CONVERTED FROM STOCK-IN-TRADE TO A CAPITA L ASSET, THE SAID DATE CANNOT BE TAKEN AS DATE OF ACQUISITION. IN OUR OPI NION, THE RATIO OF THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF JANAHVI INVESTMENT PVT. LTD. (SUPRA) IS SQUARELY APPLICABLE TO THE ISS UE INVOLVED IN THE PRESENT CASE AND WE DO NOT FIND ANY INFIRMITY IN THE IMPUGN ED ORDER OF THE LD. CIT(A) DECIDING THE SAID ISSUE IN FAVOUR OF THE ASSESSEE B Y FOLLOWING THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE O F JANAHVI INVESTMENT PVT. LTD (SUPRA). THE SAME IS, THEREFORE, UPHELD ON THI S ISSUE AND GROUND NO. 1 OF REVENUES APPEAL IS THUS DISMISSED. 5. GROUND NO. 2 RAISED BY THE REVENUE IN THIS APPEA L READS AS UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND AS PER LAW, THE LD. CIT(A) HAS ERRED IN NOT APPRECIATING THE FACT D ISCUSSED IN DETAIL IN THE ASSESSMENT ORDER AS WELL AS RELIANCE PLACED ON THE DECISION IN THE CASES OF RAJPUTANA TEXTILES (AGENCIES) LTD. VS. CIT 1961 42 ITR 743 (SC) AND RAJA BAHADUR BISHWESHWAR SINGH VS. CIT 196 1 41 ITR 685 (SC) WHILE DIRECTING THE A.O. TO ASSESS THE PROFIT ON SALE OF SHARES AS CAPITAL GAIN INSTEAD OF BUSINESS. 6. IN ITS RETURN OF INCOME, THE ASSESSEE HAD SHOWN SHO RT TERM CAPITAL GAIN ON SALE OF SHARES TOTALING TO RS. 51,64,654/-. ON P ERUSAL OF THE RELEVANT DETAILS, THE A.O. FOUND THAT THE SHARES OF NFL, RCF , L&T, BEPCL WERE FREQUENTLY PURCHASED AND SOLD BY THE ASSESSEE. KEE PING IN VIEW OF THIS POSITION AS WELL AS OTHER FACTS AND CIRCUMSTANCES O F THE CASE, THE A.O. WAS OF THE VIEW THAT THE SHARES WERE PURCHASED BY THE ASSE SSEE WITH A VIEW TO EARN PROFITS. ACCORDING TO HIM, THERE WAS NO SAFETY OF THE CAPITAL INVESTED AND WHEN THERE WAS NO CERTAINTY OF REGULAR RETURN ALSO, IT WAS DIFFICULT TO SAY THAT ITA 4468/MUM/2008 5 SUCH A TRANSACTIONS IN SHARES COULD BE IN THE NATUR E OF INVESTMENTS. HE HELD THAT THIS ACTIVITY, ON THE OTHER HAND, WAS AN ADVEN TURE IN THE NATURE OF TRADE SINCE IT INVOLVED RISK AND UNCERTAINTY. ACCORDINGLY , RELYING ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF RAJABAHADUR VI SHWESHWARASINGH VS. CIT (1961) 41 ITR 685 (SC), HE HELD THAT THE INCOME DISCLOSED BY THE ASSESSEE FROM SHARE TRANSACTIONS WAS ITS BUSINESS INCOME AND NOT SHORT TERM CAPITAL GAIN. ON APPEAL, THE LD. CIT(A) ACCEPTED THE STAND OF THE ASSESSEE ON THIS ISSUE THAT THE SHARES WERE HELD BY IT AS INVESTMENT AND THE PROFIT FROM THE TRANSACTIONS IN SHARES WAS CHARGEABLE TO TAX AS SHO RT TERM CAPITAL GAIN. HE TOOK THIS VIEW FOLLOWING HIS APPELLATE ORDER IN ASS ESSEES OWN CASE FOR A.Y. 2005-06 WHEREIN IT WAS HELD AS UNDER:- 5.3. I HAVE GONE THROUGH THE ARGUMENTS AND SUBMISS IONS OF THE LD. A.R. OF THE APPELLANT AS WELL THE CONTENTS OF THE IMPUGNED ASSESSMENT ORDER. I HAVE ALSO GONE THROUGH THE COPIED OF BALANCE SHEETS FOR THE YEARS ENDED ON 31.03.2003 AND 31.03.2005 WHEREIN THE FIGURES FOR 3 1.03.2002, 31.03.2003, 31.03.2004 AND 31.03.2005 ARE AVAILABLE ALONG WITH TREATMENT OF THE IMPUGNED SHARES. SCHEDULE V IN THE BALANCE SHEETS M AKES IT CLEAR THAT THE IMPUGNED SHARES AND DEBENTURES ARE SHOWN AS LONG T ERM INVESTMENTS AT COST IN TANDEM WITH THE GUIDELINES OF THE INDIAN I NSTITUTE OF CHARTERED ACCOUNTANTS. THUS, IT IS NOT CORRECT TO SAY THAT TH E INTENTION OF APPELLANT IS UNCLEAR AS TO WHAT TREATMENT OF THESE IMPUGNED SHAR ES SHOULD BE GIVEN. ONCE THE INTENTION IS CLEAR ON THE UNDISPUTED DOCUMENTS, THE FACTS OF SHARES BEING HELD AS AN INVESTMENT BECOMES APPARENT. IN SUCH A C LEAR CUT CASE, I DO NOT FIND ANY NEED TO GO FOR ANY CASE LAW AS IT IS WELL SETTLED THAT THE NATURE OF AN ITEM AS TO WHETHER IT IS INVESTMENT OR IT IS STOCK- IN-TRADE, IS TO BE DERIVED ONLY FROM THE INTENTION OF THE ASSESSEE. HENCE, THE ACTI ON OF THE LD. A.O. IS FOUND CLEARLY UNWARRANTED ON THE FACTS AND CIRCUMSTANCES OF THE INSTANT CASE AS DISCUSSED ABOVE THAT CANNOT BE UPHELD. THE LD. A.O. IS DIRECTED TO RECOMPUTE THE CAPITAL GAINS ON THE IMPUGNED SALE OF SHARES HE LD BY THE APPELLANT AS LONG TERM INVESTMENT AND ASSESSEE IT UNDER THE HEAD CAP ITAL GAINS. THE APPEAL IS ALLOWED ON THESE GROUNDS. 7. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND A LSO PERUSED THE RELEVANT MATERIAL ON RECORD. THE ISSUE AS TO WHETHE R THE PROFIT ON SALE OF SHARES CONSTITUTES BUSINESS INCOME OF THE ASSESSEE OR CAPITAL GAINS DEPENDS ON WHETHER THE SAID SHARES WERE PURCHASED AND HELD BY THE ASSESSEE AS INVESTMENT OR STOCK IN TRADE. IN ORDER TO ASCERTAIN AS TO WHETHER THE SHARES ITA 4468/MUM/2008 6 WERE PURCHASED BY THE ASSESSEE AS INVESTMENT OR STO CK IN TRADE, THE MOST RELEVANT ASPECT THAT IS TO BE SEEN IS THE INTENTION OF THE ASSESSEE BEHIND PURCHASING AND HOLDING THE SHARES AND SUCH INTENTIO N HAS TO BE GATHERED FROM THE FACTS OF THE CASE INCLUDING THE CONDUCT OF THE ASSESSEE. THE TREATMENT GIVEN BY THE ASSESSEE TO THE SHARES IN IT S BOOKS OF ACCOUNT AND ACCEPTANCE OF THE SAME BY THE REVENUE IN OTHER YEAR S IS ONLY ONE OF SUCH ASPECTS WHICH IS ALSO TO BE TAKEN INTO CONSIDERATIO N FOR DECIDING THIS ISSUE. HOWEVER, THAT IS NOT THE ONLY CRITERIA WHICH CAN BE ADOPTED AS A CONCLUSIVE TEST AND IT HAS TO BE TAKEN INTO CONSIDERATION ALON G WITH OTHER CRITERIAS TO ASCERTAIN THE EXACT INTENTION OF THE ASSESSEE TO PU RCHASE AND HOLD THE SHARES. IN THE CASE OF SARNATH INFRASTRUCTURE (P).LTD. VS. ACIT REPORTED IN 120 TTJ (LUCKNOW) 216, THE COORDINATE BENCH OF THIS TRIBUNA L, AFTER TAKING INTO CONSIDERATION THE VARIOUS JUDICIAL PRONOUNCEMENTS O N THIS ISSUE AS WELL AS THE RELEVANT CIRCULAR ISSUED BY THE BOARD, HAS LAID DOWN THE FOLLOWING PRINCIPLES/CRITERIAS WHICH CAN BE APPLIED TO THE FA CTS OF THE CASE TO FIND OUT WHETHER THE TRANSACTIONS IN SHARES ARE IN THE NATUR E OF TRADE OR ARE MERELY FOR THE INVESTMENT PURPOSES : (1) WHAT IS THE INTENTION OF THE ASSESSEE AT THE TI ME OF PURCHASE OF THE SHARES (OR ANY OTHER ITEM). THIS CAN BE FOUND OUT F ROM THE TREATMENT IT GIVES TO SUCH PURCHASE IN ITS BOOKS OF ACCOUNT. WHE THER IT IS TREATED AS STOCK-IN- TRADE OR INVESTMENT? WHETHER SHOWN IN OPE NING/CLOSING STOCK OR SHOWN SEPARATELY AS INVESTMENT OR NON-TRADING AS SET? (2) WHETHER ASSESSEE HAS BORROWED MONEY TO PURCHASE AND PAID IN TEREST THEREON. NORMALLY, MONEY IS BORROWED TO PURCHASE GOODS FOR T HE PURPOSE OF TRADE AND NOT FOR INVESTING IN AN ASSET FOR RETAINI NG. (3) WHAT IS THE FREQUENCY OF SUCH PURCHASES AND DISPOSAL IN THAT PA RTICULAR ITEM? IF PURCHASE AND SALE ARE FREQUENT, OR THERE ARE SUBSTA NTIAL TRANSACTIONS IN THAT ITEM, IT WOULD INDICATE TRADE. HABITUAL DEALIN G IN THAT PARTICULAR ITEM IS INDICATIVE OF INTENTION OF TRADE. SIMILARLY , RATIO BETWEEN THE PURCHASES AND SALES AND THE HOLDINGS MAY SHOW WHETH ER THE ASSESSEE ITA 4468/MUM/2008 7 IS TRADING OR INVESTING (HIGH TRANSACTIONS AND LOW HOLDINGS INDICATE TRADE WHEREAS LOW TRANSACTIONS AND HIGH HOLDINGS IN DICATE INVESTMENT): (4) WHETHER PURCHASE AND SALE IS FOR REALIZING PROF IT OR PURCHASES ARE MADE FOR RETENTION AND APPRECIATION IN ITS VALUE. F ORMER WILL INDICATE INTENTION OF TRADE AND LATTER, AN INVESTMENT. IN TH E CASE OF SHARES WHETHER INTENTION WAS TO ENJOY DIVIDEND AND NOT MER ELY EARN PROFIT ON SALE AND PURCHASE OF SHARES. A COMMERCIAL MOTIVE IS AN ESSENTIAL INGREDIENT OF TRADE. (5) HOW THE VALUE OF THE ITEMS HAS BEEN TAKEN IN THE BALANCE SHEET? IF THE ITEMS IN QUESTION ARE VALUED AT COST, IT WOULD INDICATE THAT THEY ARE INVESTMENTS OR WHERE THEY AR E VALUED AT COST OR MARKET VALUE OR NET REALIZABLE VALUE (WHICHEVER IS LESS), IT WILL INDICATE THAT ITEMS IN QUESTION ARE TREATED AS STOCK-IN-TRAD E. (6) HOW THE COMPANY (ASSESSEE) IS AUTHORIZED IN MEMORANDUM OF ASSOCIATION/ARTICLE OF ASSOCIATION? WHETHER FOR TRA DE OR FOR INVESTMENT? IF AUTHORIZED ONLY FOR TRADE, THEN WHETHER THERE AR E SEPARATE RESOLUTIONS OF THE BOARD OF DIRECTORS TO CARRY OUT INVESTMENTS IN THAT COMMODITY? AND VICE VERSA. (7) IT IS FOR THE ASSESSEE TO ADDUC E EVIDENCE TO SHOW THAT HIS HOLDING IS FOR INVESTMENT OR FOR TRADING AND WH AT DISTINCTION HE HAS KEPT IN THE RECORDS OR OTHERWISE, BETWEEN TWO TYPES OF HOLDINGS. IF THE ASSESSEE IS ABLE TO DISCHARGE THE PRIMARY ONUS AND COULD PRIMA FACIE SHOW THAT PARTICULAR ITEM IS HELD AS INVESTMENT FOR SAY, STOCK-IN-TRADE), THEN ONUS WOULD SHIFT TO REVENUE TO PROVE THAT APPA RENT IS NOT REAL. (8) THE MERE FACT OF CREDIT OF SALE PROCEEDS OF SHARES (OR FOR THAT MATTER ANY OTHER ITEM IN QUESTION) IN A PARTICULAR ACCOUNT OR NOT SO MUCH FREQUENCY OF SALE AND PURCHASE WILL ALONE WILL NOT BE SUFFICIENT TO SAY THAT ASSESSEE WAS HOLDING THE SHARES FOR THE ITEMS IN QUESTION) FOR INVESTMENT. (9) ONE HAS TO FIND OUT WHAT ARE THE LE GAL REQUISITES FOR DEALING AS A TRADER IN THE ITEMS IN QUESTION AND WH ETHER THE ASSESSEE IS COMPLYING WITH THEM. WHETHER IT IS THE ARGUMENT OF THE ASSESSEE THAT IT IS VIOLATING THOSE LEGAL REQUIREMENTS, IF IT IS CLA IMED THAT IT IS DEALING AS A TRADER IN THAT ITEM? WHETHER IT HAD SUCH AN INTEN TION (TO CARRY ON ILLEGAL BUSINESS IN THAT ITEM SINCE BEGINNING OR WH EN PURCHASES WERE MADE? (10) IT IS PERMISSIBLE AS PER CBDT CIRCULAR N O. 4 OF 2007 OF 15TH ITA 4468/MUM/2008 8 JUNE, 2007 THAT AN ASSESSEE CAN HAVE BOTH PORTFOLIO S, ONE FOR TRADING AND OTHER FOR INVESTMENT PROVIDED IT MAINTAINING SE PARATE ACCOUNT FOR EACH TYPE, THERE ARE DISTINCTIVE FEATURES FOR BOTH AND THERE IS NO INTERMINGLING OF HOLDINGS IN THE TWO PORTFOLIOS. (1 1) NOT ONE OR TWO FACTORS OUT OF ABOVE ALONE WILL BE SUFFICIENT TO CO ME TO A DEFINITE CONCLUSION BUT THE CUMULATIVE EFFECT OF SEVERAL FAC TORS HAS TO BE SEEN. A PERUSAL OF THE ORDERS PASSED BY THE AUTHORITIES B ELOW IN THE PRESENT CASE SHOWS THAT NEITHER THE AO NOR THE LEARNED CIT(APPEA LS) HAS DONE THE EXERCISE TO FIND OUT THE EXACT NATURE OF SHARE TRANSACTIONS CARRIED ON BY THE ASSESSEE IN A PROPER MANNER BY APPLYING THE RELEVANT CRITERI AS/PRINCIPLES TO THE FACTS OF THE CASE. WE, THEREFORE, CONSIDER IT FAIR AND PROPE R AND IN THE INTEREST OF JUSTICE TO SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW ON THIS ISSUE AND RESTORE THE MATTER TO THE FILE OF THE AO WITH A DIR ECTION TO DECIDE THE SAME AFRESH AFTER APPLYING THE PRINCIPLES/CRITERIAS LAID DOWN BY THE LUCKNOW BENCH OF THE TRIBUNAL IN THE CASE OF SARNATH INFRASTRUCTU RE (SUPRA) TO THE FACTS OF THE CASE. NEEDLESS TO OBSERVE THAT THE AO SHALL AFFORD PROPER AND SUFFICIENT OPPORTUNITY TO THE ASSESSEE OF BEING HEARD. GROUND NO. 2 OF REVENUES APPEAL IS ACCORDINGLY TREATED AS ALLOWED FOR STATISTICAL P URPOSE. 8. IN THE RESULT, APPEAL OF THE REVENUE IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSE. 4 5 #$ / !6/ 789 : :3 #$ ; / <= ORDER PRONOUNCED IN THE OPEN COURT ON 12-7-2013. . '3 / 12* >')5 12-7-2013 2 / SD/- SD/- (SANJAY GARG) (P.M. JAGTAP ) & !'# JUDICIAL MEMBER !'# / ACCOUNTANT MEMBER MUMBAI ; >') DATED 12-7-2013 $.&).!./ RK , SR. PS ITA 4468/MUM/2008 9 '3 / -&:? @?* '3 / -&:? @?* '3 / -&:? @?* '3 / -&:? @?*/ COPY OF THE ORDER FORWARDED TO : 1. +, / THE APPELLANT 2. -.+, / THE RESPONDENT. 3. A () / THE CIT(A)- V, MUMBAI 4. A / CIT MC-V MUMBAI 5. ?$D -&&) , , / DR, ITAT, MUMBAI I BENCH 6. E% F / GUARD FILE. '3)! '3)! '3)! '3)! / BY ORDER, !.? -& //TRUE COPY// 7 7 7 7/ // /!< !< !< !< ( DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI