S.K. KANKAL HUF, MUMBAI V. ITO 25(3)(4), MUMBAI

ITA 4606/MUM/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1592 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-12-2016
• Appeal Filed By: Assessee
• Bench Allotted: E
• Next Hearing Date: 08-04-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 12-06-2013
• Court: TRIBUNAL
• Department Lawyers: B S BIST
• Assessee Lawyers: DEEPAK PADAUCH
• Keywords: Capital asset; Business income; Rule of consistency; Benefit of exemption
• Section: 143(3)

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E, MUMBAI BEFORE SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI ASHWANI TANEJA (ACCOUNTANT MEMBER) I.T.A. NO.4606/MUM/2013 (ASSESSMENT YEAR: 2010-11) S.K. KANKAL, HUF A-2, SUBHASH LANE, SUNDER NIKETAN MATHURADAS ROAD, KANDIVALI (W) MUMBAI-67 VS INCOME TAX OFFICER 25(3)(4) MUMBAI PAN : AABAT4497N (APPELLANT) (RESPONDENT) APPELLANT BY SHRI DEEPAK PADAUCH RESPONDENT BY SHRI B.S. BIST DATE OF HEARING : 01-12-2016 DATE OF ORDER : 15 -12-2016 O R D E R PER ASHWANI TANEJA, AM: THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-35, MUMBAI [IN SHORT, CIT(A) DATED 25-04-2013 PASSED AGAINST ASSESSMENT ORDER OF THE A O U/S 143(3) OF THE ACT DATED 07-03-2013 FOR AY. 2010-11, ON THE FOLLOW ING GROUNDS:- THE GROUND OR GROUNDS OF APPEAL ARE WITHOUT PREJUD ICE TO ONE ANOTHER. 2 I.T.A. NO.4606/MUM/2013 1.A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE ID. CIT(A) ERRED IN CONFIRMING THE PROCESS OF A CTION OF THE AO IN ASSESSING THE SHORT TERM CAPITAL GAINS OF ` 41,35,767/ - AND LONG TERM CAPITAL GAINS OF ` 10,52,379/- BOTH ON SALE OF SHARES AS BUSINESS INCOME AND THEREBY ERRED IN CONFIRMING THE PROCESS OF ACTION OF THE AO IN BRINGING TO TAX THE SAME AT NORMAL RATE OF INCOME TAX INSTEAD OF SPECIAL RATE PRESCRIBED U/S.1 11A/ 112 OR EXEMPT U/S. 10(38) AND ALSO ERRED IN CONFIRMING THE PROCESS OF ACTION OF THE AO IN NOT ALLOWING SET OFF OF BROUGHT FORWARD SHORT TERM CAPITAL LOSSES OF THE A.Y.2009-10 TO THE EXTEN T OF SHORT TERM CAPITAL GAINS OF ` 41,35,767/-. B) THE ID. CIT(A) FAILED TO APPRECIATE THAT THE PRO FIT ON SALE OF SHARES HELD AS INVESTMENT OUGHT TO HAVE BEEN ASSESS ED AS LONG TERM CAPITAL GAINS OF ` 10,52,379/- BEING EXEMPT U/S.10(38) AND SHORT TERM CAPITAL GAINS OF ` 41,35,767/- BEING TAXED AT SPECIAL RATE PRESCRIBED U/S 111A/ 112 OR ELIGIBLE FOR SET O FF AGAINST BROUGHT FORWARD SHORT TERM CAPITAL LOSSES OF THE A. Y.2009-10. C) IN REACHING TO THE CONCLUSION AND MAKING SUCH CH ANGES IN HEADS OF INCOME, THE ID. CIT(A) OMITTED TO CONSIDER RELEVANT FACTORS, CONSIDERATIONS, PRINCIPLES AND EVIDENCES W HILE HE WAS OVERWHELMED, INFLUENCED AND PREJUDICED BY IRRELEVAN T CONSIDERATIONS AND FACTORS. EVEN, IN THE CONCLUDING PART OF THE ORDER, THE ID. CIT(A) GIVEN HIS FINDINGS ON THE FAC TS WHICH ARE NOT RELEVANT TO THE FACTS OF THE APPELLANT. 2. THE ID. CIT(A) ERRED IN NOT DISPOSING THE GROUND NO.3 RAISED DISPUTING THE LEVY OF INTEREST U/S.234B AND 234C OF THE INCOME TAX ACT, 1961. THE APPELLANT DENIES HIS LIABILITY F OR SUCH INTEREST. 3. THE ID. CIT(A) ERRED IN NOT DISPOSING THE GROUND NO. 4 RAISED DISPUTING THE INITIATION OF THE PENALTY PROCEEDINGS U/S.271(1)(C). THE APPELLANT DENIES HIS LIABILITY FOR SUCH PENALTY . 2. THE ONLY EFFECTIVE GROUND RAISED DURING THE COURSE OF HEARING BEFORE US WAS THAT THE LOWER AUTHORITIES ERRED IN T REATING THE SHORT TERM CAPITAL GAIN OF RS. 41,35,767/- AND LONG TERM GAIN OF RS 10,52,379 ARISING 3 I.T.A. NO.4606/MUM/2013 OUT OF SALE OF SHARES AS BUSINESS INCOME AND ALSO E RRED CONSEQUENTLY IN TAXING THE SAME AT NORMAL RATE OF INCOME-TAX, INSTE AD OF SPECIAL RATES PRESCRIBED U/S 111A / 112 OF THE ACT AND ALSO DENIE D BENEFIT OF EXEMPTION U/S 10(38) AS WAS APPLICABLE ON THE LONG TERM CAPIT AL GAIN AND ALSO ERRED IN NOT GRANTING BENEFIT OF SET OFF OF ALL BROUGHT F ORWARD SHORT TERM CAPITAL LOSSES OF ASSESSMENT YEAR 2009-10. 3. THE BRIEF BACKGROUND AS CULLED OUT FROM THE ORDERS OF THE LOWER AUTHORITIES IS THAT THE ASSESSEE IS AN HUF, FILED R ETURN OF INCOME SHOWING INCOME INCLUDING INCOME FROM SHORT TERM AND LONG TE RM CAPITAL GAIN ON SALE OF SHARES, SPECULATION PROFIT ON SALE OF SHARE S, INCOME FROM HOUSE PROPERTY AND INTEREST FROM BANK. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO ASKED THE ASSESSEE TO SUBMIT DE TAILS WITH RESPECT TO SHARE TRADING ACTIVITIES. ASSESSEE FILED THE DETAI LS, ON THE BASIS OF WHICH THE AO CONCLUDED THAT SHARE TRADING ACTIVITIES CARR IED OUT BY THE ASSESSEE WERE DONE FREQUENTLY AND SHARES WERE HELD FOR A VER Y SHORT PERIOD. THUS, LOOKING INTO THE REGULARITY AND FREQUENCY OF THE TR ANSACTIONS, THE AO ISSUED SHOW-CAUSE NOTICE TO THE ASSESSEE REQUIRING THE ASSESSEE TO EXPLAIN WHY THE GAIN ARISING FROM SHARE TRADING TRANSACTION S, SHOULD NOT BE TREATED AS BUSINESS INCOME. 4. IN RESPONSE, THE ASSESSEE SUBMITTED DETAILED REPLIE S TO JUSTIFY THAT THE SHARES WERE HELD AS INVESTMENT FOR THE PURPOSE OF MAXIMISING WEALTH, AND THEREFORE, THE RESULTANT GAIN SHOULD BE TREATED AS CAPITAL GAIN UNDER THE INCOME-TAX ACT. THE REPLY FILED BY THE ASSESSE E, VIDE LETTER DATED 12- 02-2013 READS AS FOLLOWS: 'THE ASSESSEE SUNDERDAS KANKAS HUF IS ENGAGED IN BU SINESS OF DEALING IN SHARE AS WELL AS INVESTMENT IN SHARES. D URING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS SHOWN SHORT T ERM CAPITAL GAIN AT RS.41,35, 767/-. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE WA S DEALING IN SECURITIES, STOCKS AND OTHER MARKETABLE INSTRUMENTS . THE ASSESSEE HAS OFFERED SPECULATION BUSINESS PROFIT OF RS.71,251/- AND PROFIT ON SALE OF INVESTMENT OF RS.41,35, 767/- AS SHORT TERM CAPITAL GAIN AND SET 'OFF IT AGAINST SHORT TERM CAP ITAL LOSS FOR A.Y.2009-10 WHICH IN TOTAL WAS RS.43,32,497/- AND B ALANCE 4 I.T.A. NO.4606/MUM/2013 UNADJUSTED SHORT TERM CAPITAL LOSS IS CARRIED FORWA RD TO SUBSEQUENT ASST. YEAR. IN THIS CONNECTION WE SUBMIT AS UNDER: 1. THE ASSESSEE HAS BEEN INVESTING IN SHARE SINCE M ANY YEARS, SHOWING THE SAID SHARES AS INVESTMENT IN THE BALANC E SHEET AS SUBMITTED DURING THE PROCEEDINGS. THE GAIN FROM THE SALE OF SAID INVESTMENTS HAS BEEN OFFERED TO TAX AS CAPITAL GAIN S AND THE' PROFIT FROM SHARE TRADING HAS BEEN OFFERED TO TAX A S BUSINESS INCOME YEAR AFTER YEAR. 2. AS PER ACCOUNTING POLICY OF ASSESSEE HE SHOWS TH E SHARES HELD AS INVESTMENT IN BALANCE SHEET UNDER THE HEAD INVES TMENT, THE SAME IS VALUED AT COST. 3. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSE E WAS DEALING IN SECURITIES, STOCKS AND OTHER MARKETABLE INSTRUME NTS. THE ASSESSEE HAS OFFERED SPECULATION BUSINESS PROFIT OF RS.71,251/- AND PROFIT ON SALE OF INVESTMENT OF RS.41,33, 767/- AS SHORT TERM ITAL GAINS. 4. THE ASSESSEE FURTHER SUBMITS THAT IT HAS MADE IN VESTMENT IN SHARES OUT OF, ITS OWN FUNDS AND INVESTMENT IN SECU RITIES WAS MADE WITH INTENTION OF CAPITAL APPRECIATION. NO BOR ROWED FUNDS WERE UTILIZED FOR PURCHASE OF SHARES FOR INVESTMENT S. 5. THE ASSESSEE FURTHER SUBMITS THAT THE MERE VOLUM E OF TRANSACTIONS IS NOT THE SOLE DETERMINATIVE FACTOR T O DETERMINE THE NATURE OF TRANSACTIONS. IT IS AN ESTABLISHED PR INCIPLE THAT INCOME IS TO BE COMPUTED WITH REGARD TO THE NATURE OF THE TRANSACTIONS. THE TRANSACTION IN WHOLE HAS TO BE TA KEN INTO CONSIDERATION AND THE MAGNITUDE OF THE TRANSACTION DOES NOT ALTER THE NATURE OF TRANSACTION. 6. THE ASSESSEE FURTHER SUBMITS THAT IT, HOLDS THE SHARES AS AN 'INVESTMENT' AS WELL AS 'STOCK IN TRADE'. IT IS THE INTENTION OF ASSESSEE WHICH HAS TO BE SEEN TO DETERMINE THE NATU RE OF TRANSACTION. THERE IS NO BASIS FOR TREATING THE INV ESTMENT ACTIVITY OF THE ASSESSEE AS TRADING IN SHARES, WHEN ITS INTE NTION WAS TO HOLD SHARES IN THE COMPANIES AS AN INVESTMENT AND N OT AS STOCK- IN-TRADE. MAGNITUDE OF TRANSACTION IS NOT THE SOLE FACTOR TO DETERMINE THE NATURE OF TRANSACTION. WE ALSO DRAW A TTENTION TO 5 I.T.A. NO.4606/MUM/2013 CBDT CIRCULAR NO.4/2007 DATED 15.6.2007 WHEREIN IT IS STATED THAT ' ..... THE ASSESSING OFFICER ARE FURTHER ADVISED T HAT NO SINGLE PRINCIPLE WOULD BE DECISIVE AND THE TOTAL EFFECT OF AL THE PRINCIPLES SHOULD BE CONSIDERED TO DETERMINE WHETHE R, IN A GIVEN CASE, THE SHARE ARE HELD BY THE ASSESSEE AS INVESTM ENT OR STOCK IN TRADE' 7. FURTHER THE ASSESSEE HAS BEEN CONSISTENTLY INVES TMENT IN SHARES FOR THE PAST SEVERAL YEARS AND THE ASSESSEE HAS BEEN OFFERING FOR INCOME TAX ANY' GAINS MADE BY IT ON SA LE OF SHARES UNDER THE HEAD 'CAPITAL GAINS' (I. E. LONG-TERM OR SHORT-TERM) DEPENDING ON THE PERIOD OF HOLDING. 8. WE FURTHER SUBMIT THAT THE INTENT OF ANY INVESTM ENT IN EQUITIES IS TO MAXIMIZE RETURNS. FOR THESE ONE NEED S TO MONITOR, OR AN ONGOING BASIS, WHETHER THE RETURNS ARE FAIR I RRESPECTIVE OF THE PERIOD FOR WHICH THE EQUITY IS HELD. THEREFORE, JUST BECAUSE A LARGE GAIN IS EARNED IN A SHORT PERIOD OF TIME BY A N INVESTOR, OR THESE ARE LARGE NUMBER OF TRANSACTIONS, WOULD NOT C HANGE' THE NATURE OF THE INCOME. THE PERIOD OF HOLDING OR VOLU ME OF TRANSACTIONS CAN;'EVER DETERMINE THE NATURE OF INCO ME' 5. THE AO DID NOT ACCEPT THE SUBMISSIONS OF THE ASSESS EE MAINLY FOR THE REASON THAT MANNER OF RECORDING TRANSACTIONS IN THE BOOKS OF ACCOUNT IS NOT CONCLUSIVE PROOF TO DECIDE THE HEAD OF INCOM E. IT WAS OBSERVED BY THE AO THAT SHOWING THE SHARES AS INVESTMENT WAS NOT DETERMINATIVE FACTOR TO DECIDE REAL NATURE OF TRANSACTIONS. IN O THER WORDS, IF A RECEIPT WAS A TRADING RECEIPT, THE FACT THAT IT WAS NOT SHO WN AS SUCH IN THE ACCOUNTS OF THE ASSESSEE DOES NOT PREVENT THE AO FR OM TREATING IT AS TRADING RECEIPT. THE AO WAS ALSO INFLUENCED BY THE FACT THAT ASSESSEE WAS DEALING IN LARGE VOLUME OF SHARES AND ALSO THE FACT THAT MANY SHARES WERE BOUGHT AND SOLD. THEREFORE, THE AO WAS OF THE VIEW THAT THE NATURE OF ACTIVITY CARRIED OUT BY THE ASSESSEE WAS SHARE TRAD ING. HE ALSO PLACED RELIANCE UPON THE CBDT CIRCULAR NO.4/2007 DATED 15- 06-2007 TO ARRIVE AT THE CONCLUSION THAT THE SHARE TRADING ACTIVITY OF T HE ASSESSEE WAS IN THE NATURE OF BUSINESS AND, THEREFORE, THE RESULTANT GA IN SHOULD BE TREATED AS INCOME FROM BUSINESS. ACCORDINGLY, HE ASSESSED THE INCOME OF THE ASSESSEE AS BUSINESS INCOME AND DENIED THE CONSEQUE NTIAL BENEFITS AS 6 I.T.A. NO.4606/MUM/2013 HAVE BEEN MENTIONED IN THE GROUNDS RAISED BY THE AS SESSEE. DURING THE COURSE OF APPEAL BEFORE CIT(A) DETAILED SUBMISSIONS WERE MADE BY THE LD. COUNSEL ON BEHALF OF THE ASSESSEE, BUT LD.CIT(A) WA S NOT IMPRESSED WITH THE ARGUMENTS OF THE ASSESSEE; THEREFORE, HE ENDORS ED THE VIEW TAKEN BY THE AO AND UPHELD THE ADDITION MADE BY THE AO. 6. DURING THE COURSE OF HEARING BEFORE US, THE LD. COU NSEL MADE DETAILED SUBMISSIONS IN SUPPORT OF HIS CLAIM. IT W AS INTER-ALIA ARGUED BY HIM THAT ASSESSEE HAS BEEN CONSISTENTLY SHOWING IDE NTICAL INCOME EARNED FROM SALE OF SHARES UNDER THE HEAD CAPITAL GAINS. THE SAME HAS BEEN ACCEPTED BY THE REVENUE CONSISTENTLY IN ALL THE YEA RS RIGHT FROM AY 1999- 2000 UPTO 2009-10. IN AY 2006-07, THE ASSESSMENT O RDER WAS PASSED U/S 143(3) DT 07-08-2008 WHEREIN THE RETURNED INCOME WA S ASSESSED, UNDER THE HEAD CAPITAL GAINS ONLY. EVEN IN SUBSEQUENT ASSESSMENT YEARS FROM A.YS. 2011-12 TO 2015-16, THE INCOME WAS RETUNED UN DER THE HEAD CAPITAL GAINS AND ASSESSED AS SUCH BY THE AO. TH ERE WAS NO BASIS FOR THE AO IN THIS YEAR TO TAKE A DIVERGENT VIEW. THE SHAR ES HAVE ALWAYS BEEN SHOWN AS PART OF INVESTMENT AND ACCEPTED AS SUCH. LD. COUNSEL RELIED UPON THE FOLLOWING JUDGEMENTS IN SUPPORT OF HIS CLA IM: 1) GOPAL PUROHIT V. JCIT [2009] 29 SOT 117 (MUM) 2) CIT V.GOPAL PUROHIT [2011] 336 ITR 287 (BOM) 3) ACIT V. CHETAN K. MEHTA - (ITA NO.6529/MURN/2011 ) 4) ACIT V. SHRI RONNIE HOSI MEHTA (ITA NO. 640/M/20 12) 5) M/S. MINDSET TECHNOLOGIES PVT.LTD. (ITA NO.7071/ M/2013) 6) SHRI DHAIRESH K. SANGVI V. DCIT (ITA NO. 2933/M/ 2013) 7) DCIT V. M/S. E-CAP PARTNERS (ITA NO.4785/M/2009) 8) SHRI RAJESH S. SANGHVI V. ACIT (ITA NO, 1609/M/2 011) 9) CIT V. AMIT JAIN ITA NO.517/2012 (DELHI HIGH COU RT) 7. PER CONTRA, THE LD. DR RELIED UPON THE ORDERS OF TH E LOWER AUTHORITIES AND REITERATED THE OBSERVATIONS MADE BY THE AO AND THE CIT(A) IN THEIR ORDERS. 8. WE HAVE GONE THROUGH THE FACTS OF THE CASE. IT HAS BEEN NOTED BY US THAT THE ASSESSEE IS A PARTNER IN CERTAIN PARTNE RSHIP FIRMS AND IS ALSO ENGAGED IN MAKING INVESTMENT IN SHARES. THE INCOME SHOWN BY THE 7 I.T.A. NO.4606/MUM/2013 ASSESSEE IN ITS RETURN IS INCOME FROM HOUSE PROPER TY, INCOME FROM CAPITAL GAINS, INCOME FROM SPECULATION AND INCOME FROM OTHER SOURCES. NO INCOME HAS BEEN SHOWN FROM ANY REGULAR BUSINESS ACTIVITY. IT HAS BEEN CLAIMED BY THE ASSESSEE THAT ASSESSEE IS NOT ENGAGE D IN ANY BUSINESS ACTIVITY IN AN ORGANISED AND SYSTEMATIC MANNER. TH E ASSESSEE HAS BEEN MAKING INVESTMENTS IN SHARES SINCE SO MANY YEARS WH ICH HAVE BEEN ACCEPTED, AS SUCH. OUR ATTENTION HAS BEEN DRAWN UP ON THE INCOME-TAX RETURNS FILED FROM ASSESSMENT YEARS 1999-2000 ONWAR DS. IT IS NOTED BY US THAT ASSESSEE HAS BEEN SHOWING THE AMOUNT OF INVEST MENTS IN SHARES UNDER THE HEAD INVESTMENTS IN ITS BALANCE SHEETS RIGHT FROM BALANCE SHEET DATED 31-03-1999. DURING ALL THE YEARS, THE INVESTMENT HAS BEEN SHOWN IN THE BALANCE SHEET UNDER THE HEAD INVESTME NT. AT NO POINT OF TIME, THE INVESTMENT MADE IN SHARES HAS EVER BEEN S HOWN AS PART OF STOCK-IN-TRADE. GAIN ARISING ON SALE OF SHARES HAS ALWAYS BEEN SHOWN UNDER THE HEAD INCOME FROM CAPITAL GAINS. THE SA ME HAS BEEN ACCEPTED UNDER THE HEAD INCOME FROM CAPITAL GAINS BY THE A O IN ALL THE YEARS, I.E. AY. 1999-2000. IT IS FURTHER NOTED THAT IN A.Y. 20 06-07, ASSESSMENT ORDER WAS PASSED U/S 143(3) DATED 07-08-2008, WHEREIN INC OME RETURNED UNDER THE HEAD CAPITAL GAIN HAS BEEN ACCEPTED, AS SUCH. OUR ATTENTION WAS ALSO DRAWN ON THE FACT THAT THE PURCHASE AND SALE OF SHA RES IN A.Y. 2006-07 WAS ALSO DONE IN IDENTICAL MANNER. IT IS ALSO SHOWN TO US THAT EVEN IN SUBSEQUENT YEARS, I.E. AYS. 2011-12 TO 2015-16, INC OME FROM SALE OF SHARES HAS BEEN RETURNED AND ACCEPTED UNDER THE HEA D CAPITAL GAINS. UNDER THESE CIRCUMSTANCES, WE DO NOT FIND ANY REASO N WITH THE AO OR LD. CIT(A) TO DEVIATE FROM THE CONSISTENT STAND WHICH H AD BEEN TAKEN AND ACCEPTED IN ALL EARLIER AND SUBSEQUENT YEARS. THUS , IN VIEW OF JUDGMENTS OF HON'BLE SUPREME COURT IN THE CASE OF RADHASOAME SATS ANG VS CIT 293 8 I.T.A. NO.4606/MUM/2013 ITR 321 (SC) AND CIT VS EXCEL INDUSTRIES LTD 358 IT R 295 , UPHOLDING THE PRINCIPLE OF CONSISTENCY, THE CLAIM OF THE ASSESSEE DESERVES TO BE UPHELD. 9. IN ADDITION TO THE ABOVE, IT IS NOTED BY US THAT TH E ASSESSEE HAD USED ITS OWN FUNDS IN MAKING INVESTMENT IN THE SHARES. THE SHARES HAVE ALWAYS BEEN SHOWN AS PART OF INVESTMENT IN ITS BALANCE-SHE ET CONSISTENTLY. IT HAS ALSO BEEN NOTED THAT CBDT BY WAY OF ITS CIRCULAR NO .4/7 DATED 15-06-2007 CLARIFIED THAT AN ASSESSEE CAN HAVE TWO PORTFOLIOS, I.E. ONE FOR INVESTMENT PURPOSES AND THE OTHER FOR BUSINESS PURPOSES. THE AMOUNT HELD IN THE INVESTMENT PORTFOLIO SHOULD BE TREATED AS INCOME UN DER THE HEAD CAPITAL GAINS. RELEVANT PART OF THE CIRCULAR IS REPRODUCE D BELOW: '10. CBDT ALSO WISHES TO EMPHASISE THAT IT IS POSSI BLE FOR A TAX PAYER TO HAVE TWO PORTFOLIOS, I.E., AN INVESTMENT P ORTFOLIO COMPRISING OF SECURITIES WHICH ARE TO BE TREATED AS CAPITAL ASSETS AND A TRADING PORTFOLIO COMPRISING OF STOCK-IN-TRAD E WHICH ARE TO BE TREATED AS TRADING AS-SETS. WHERE AN ASSESSEE HA S TWO PORTFOLIOS, THE ASSESSEE MAY HAVE INCOME UNDER BOTH HEADS I.E. CAPITAL GAINS AS WELL AS BUSINESS INCOME. 11. ASSESSING OFFICERS ARE ADVISED THAT THE ABOVE P RINCIPLES SHOULD GUIDE THEM IN DETERMINING WHETHER, IN A GIVE N CASE, THE SHARES ARE HELD BY THE ASSESSEE AS INVESTMENT (AND THEREFORE GIVING RISE TO CAPITAL GAINS) OR AS STOCK-IN-TRADE (AND THEREFORE GIVING RISE TO BUSINESS PROFITS). THE ASSESSING OFF ICERS ARE FURTHER ADVISED 'THAT NO SINGLE PRINCIPLE WOULD BE DECISIVE AND THE TOTAL EFFECT OF ALL THE PRINCIPLES SHOULD BE CONSIDERED T O DETERMINE WHETHER, IN A GIVEN CASE, THE SHARES ARE HELD BY TH E ASSESSEE AS INVESTMENT OR STOCK-IN-TRADE.' 10. OUR ATTENTION WAS ALSO DRAWN ON CBDT CIRCULAR NO.6 OF 2016 DATED 29-02-2016 WHEREIN THE BOARD GAVE FURTHER GUIDELINE S WITH REGARD TO THE TREATMENT OF PROFIT AS ARISING ON SALE / PURCHASE O F SHARES. IT WAS INTER-ALIA OBSERVED IN THE CIRCULAR THAT THE AO SHALL TAKE INT O ACCOUNT THE FOLLOWING GUIDELINES IN DECIDING WHETHER THE SURPLUS GENERATE D FROM SALE OF LISTED 9 I.T.A. NO.4606/MUM/2013 SHARES OR OTHER SECURITIES WOULD BE TREATED AS CAPI TAL GAINS OR BUSINESS INCOME :- A) WHERE THE ASSESSEE ITSELF, IRRESPECTIVE OF THE PERIOD OF HOLDING THE LISTED SHARES AND SECURITIES, OPTS TO T REAT THEM AS STOCK-IN-TRADE, THE INCOME ARISING FROM TRANSFER OR SUCH SHARES/SECURITIES WOULD BE TREATED AS ITS BUSINESS INCOME, B) IN RESPECT OF LISTED SHARES AND SECURITIES HELD FOR A PERIOD OF MORE THAN 12 MONTHS IMMEDIATELY PRECEDING, THE DATE OF ITS TRANSFER, IF THE ASSESSEE DESIRES TO TREAT THE INCO ME ARISING FROM THE TRANSFER THEREOF AS CAPITAL GAIN, THE SAME SHAL L NOT BE PUT TO DISPUTE BY THE ASSESSING OFFICER. HOWEVER, THIS STAND, ONCE TAKEN BY THE ASSESSEE IN A PARTICULAR ASSESSMENT YE AR, SHALL REMAIN APPLICABLE IN SUBSEQUENT ASSESSMENT YEARS AL SO AND THE TAXPAYERS SHALL NOT BE ALLOWED TO ADOPT A DIFFERENT/CONTRARY STAND IN THIS REGARD IN SUBSEQUE NT YEARS; C) IN ALL OTHER CASES, THE NATURE OF TRANSACTION (I .E. WHETHER THE SAME IS IN THE NATURE OF CAPITAL GAIN OR BUSINESS I NCOME) SHALL CONTINUE TO BE DECIDED KEEPING IN VIEW THE AFORESAI D CIRCULARS ISSUED BY THE CBDT. 11. IT WAS FURTHER OBSERVED IN THE CIRCULAR IS AS UNDER :- 5. IT IS REITERATED THAT THE ABOVE PRINCIPLES HAVE BEEN FORMULATED WITH THE SOLE OBJECTIVE OF REDUCING LITI GATION AND MAINTAINING CONSISTENCY IN APPROACH ON THE ISSUE OF TREATMENT OF INCOME DERIVED FROM TRANSFER OF SHARES AND SECURITI ES ALL THE RELEVANT PROVISIONS OF THE ACT SHALL CONTINUE TO AP PLY ON THE TRANSACTIONS INVOLVING TRANSFER OR SHARES AND SECUR ITIES. 12. THUS, FROM THE PERUSAL OF THE ABOVE SAID CIRCULARS , I.E. CIRCULAR NO.4/2007 AND CIRCULAR NO.6/2016, INTER-ALIA , FOLLOWING POINTS CAN BE NOTED:- (I) AN ASSESSEE CAN HAVE TWO PORTFOLIOS, I.E. INVESTMEN T AND BUSINESS; (II) THE ASSESSEE HAS CHOICE OF DECIDING WHETHER THE SHA RES ARE PURCHASED IN INVESTMENT PORTFOLIO OR BUSINESS PORTFOLIO. ONCE A PARTICULAR DECISION IS TAKEN BY THE ASSESSEE, THEN HE IS OBLIGED TO FOLLOW THE SAME IN ALL 10 I.T.A. NO.4606/MUM/2013 SUBSEQUENT YEARS; IT WOULD IN TURN MEAN THAT AO SH ALL ALSO BE BOUND TO FOLLOW CONSISTENT APPROACH; (III) CBDT ALSO WANTS TO REDUCE LITIGATION AND MAINTAIN CONSISTENCY BY THE REVENUE AS WELL AS BY THE ASSESS EE IN APPROACH FOLLOWED ON THE ISSUE OF TREATMENT OF INCO ME DERIVED FROM SALE OF SHARES. 12. THUS, TURNING BACK TO THE FACTS OF OUR CASE, IT IS AN UNDISPUTED FACT THAT IN AY 1999-2000 THE ASSESSEE INCLUDED ITS SHAR ES AS PART OF INVESTMENT AND SINCE THEN THE ASSESSEE HAS BEEN C ONSISTENT IN APPROACH BY SHOWING THE SAME UNDER THE HEAD INVESTMENT AND CLAIMING THE INCOME FROM SALE OF SHARES AS ASSESSABLE UNDER THE HEAD INCOME FROM CAPITAL GAINS. BUT THE AO BREACHED THE CONSISTENC Y APPROACH IN THE YEAR BEFORE US DESPITE THE FACT THAT IN ALL EARLIER AND SUBSEQUENT YEARS THE STAND OF THE ASSESSEE HAS BEEN ACCEPTED. THIS APPR OACH IS NOT PERMISSIBLE UNDER THE LAW. ON THE OTHER HAND, THE ASSESSEE HAS OFFERED THE IMPUGNED INCOME AS ASSESSABLE UNDER THE HEAD CAPITAL GAINS IN ACCORDANCE WITH LAW AND FACTS AND IN LINE WITH ITS CONSISTENT APPROACH. THUS, AFTER TAKING INTO ACCOUNT ALL THE FACTS AND CIRCUMSTANCES OF THE CASE , AND ESPECIALLY IN VIEW OF THE CIRCULARS OF THE BOARD, WE DO NOT FIND LEGAL ITY IN THE ACTIONS OF THE LOWER AUTHORITIES IN ASSESSING THE IMPUGNED INCOME UNDER THE HEAD BUSINESS. THUS, THE IMPUGNED INCOME ARISING FROM SALE OF SHARES IS DIRECTED TO BE ASSESSED UNDER THE HEAD CAPITAL GAI NS, I.E. SHORT TERM CAPITAL GAIN OR LONG TERM CAPITAL GAIN, AS THE CASE MAY BE. THE AO IS ALSO DIRECTED TO PROVIDE ALL CONSEQUENTIAL BENEFITS AS H AVE BEEN MENTIONED IN GROUNDS OF APPEAL, AFTER VERIFYING REQUISITE FACTS, VIZ. GRANTING OF EXEMPTION U/S 10(38) WHEREVER APPLICABLE, CHARGING OF TAX ON SPECIAL RATE PRESCRIBED U/S 111A/112 AND SETTING OFF OF BROUGHT FORWARD SHORT TERM 11 I.T.A. NO.4606/MUM/2013 CAPITAL LOSSES OF AY 2009-10, IN ACCORDANCE WITH LA W AND FACTS OF THIS CASE. THUS, WITH THESE DIRECTIONS, GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. 13. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER WAS PRONOUNCED IN THE OPEN COURT AT THE CONCL USION OF THE HEARING. SD/- SD/- (MAHAVIR SINGH) (ASHWANI TANEJA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT : 15 TH DECEMBER, 2016 PK/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE , E-BENCH (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, MUMBAI BENCHES