VINAY GIRDHARI MOTWANI, MUMBAI V. JT CIT RG 12(2), MUMBAI

ITA 5063/MUM/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3538 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-06-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Assessment Year: 2008-2009
• Appeal Filed On: 08-08-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business income; Advance ruling; Question of law

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH G, MUMBAI BEFORE SHRI RAJENDRA SINGH, ACCOUNTANT MEMBER AND DR. S.T.M. PAVALAN , JUDICIAL MEMBER ITA NO.5063/MUM/2012 ASSESSMENT YEAR : 2008-09 SHRI VINAY GIRDHARI MOTWANI 3, ELEGANT APARTMENTS SOBANI ROAD, COLABA MUMBAI-400 005. PAN :AADPM 3598 G VS. JT. COMMISSIONER OF INCOME TAX, RANGE 12(2) MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI NARESH KUMAR RESPONDENT BY : SHRI PAVAN VED DATE OF HEARING : 20.5.2013 DATE OF PRONOUNCEMENT : 12.06.2013 O R D E R PER RAJENDRA SINGH, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 10.5.2012 OF CIT(A) FOR THE ASSESSMENT YEAR 2008-09 . THE DISPUTES RAISED BY THE ASSESSEE IN THIS APPEAL RELATE TO NATURE OF INC OME EARNED BY THE ASSESSEE FROM SHARE TRANSACTIONS AND ASSESSMENT OF HOUSE PRO PERTY INCOME. 2. AT THE TIME OF HEARING OF THE APPEAL, THE LD. AR FOR THE ASSESSEE DID NOT PRESS GROUND NO.2 RELATING TO THE ASSESSMENT OF INCOME FROM THE PROPERTY AT BELLISIMA. THIS GROUND IS DISMISSED AS NOT PRESS ED. 3. THE SECOND DISPUTE IS REGARDING NATURE OF INCOME EARNED BY THE ASSESSEE FROM SALE AND PURCHASE OF SHARES. THE FACT S IN BRIEF ARE THAT THE ITA NO.5063/M/12 A Y .08-09 2 ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS NOTED THAT THE ASSESSEE AS A PROPRIETOR OF M/S. V.M. INVESTMENTS, WAS ENGAG ED IN THE BUSINESS OF SHARE TRADING. THE ASSESSEE WAS ALSO DIRECTOR OF M/ S. PRIME BROKING COMPANY LTD. FROM WHICH HE HAD RECEIVED SALARY. THE ASSESSE E HAD ALSO DERIVED INCOME FROM HOUSE PROPERTY AND INTEREST INCOME. THE AO FURTHER NOTED THAT THE ASSESSEE HAD ENTERED INTO CERTAIN TRANSACTIONS IN SHARES FROM WHICH INCOME HAD BEEN DECLARED AS SHORT TERM CAPITAL GAIN AND LONG TERM CAPITAL GAIN. THE ASSESSEE HAD PURCHASED SHARES WORTH RS.35 ,44,80,540/- AND SOLD THEM FOR RS.37,08,67,635/- AND DECLARED GAIN OF RS. 1,50,92,723/- AS SHORT TERM CAPITAL GAIN. THE ASSESSEE HAD ALSO PURCHASED CERTAIN OTHER SHARES FOR RS.93.00 LACS AND SOLD THEM FOR RS.2,45,72,964/- AN D GAIN FROM THESE TRANSACTIONS AMOUNTING TO RS.1,52,14,989/- WAS DECL ARED AS LONG TERM CAPITAL GAIN. THE AO OBSERVED THAT THE ASSESSEE WAS DEALING IN LARGE VOLUME OF SHARES WITH VERY HIGH FREQUENCY AND MOST OF THE SHA RES WERE BOUGHT AND SOLD IN FEW DAYS. THE AO THEREFORE ASKED THE ASSESSEE TO EXPLAIN AS TO WHY SHORT TERM CAPITAL GAIN AND LONG TERM CAPITAL GAIN DECLAR ED BY ASSESSEE FROM SHARE TRANSACTIONS SHOULD NOT BE TREATED AS BUSINESS INCO ME. THE ASSESSEE SUBMITTED THAT THE SHARES UNDER REFERENCE HAD BEEN PURCHASED WITH A MOTIVE TO EARN DIVIDEND INCOME AND APPRECIATION IN VALUE. THESE SHARES WERE ALSO ENTERED INTO BOOKS OF ACCOUNT AS INVESTMENT. THE SH ARES HAD BEEN PURCHASED FROM OWN FUNDS AND NOT BORROWED FUNDS. THE ASSESSEE HAD NOT MAINTAINED ANY OFFICE FOR CARRYING ON TRADING ACTIVITIES. THE ASSESSEE ALSO REFERRED TO CIRCULAR NO.4 OF 2007 DATED 15.6.2007 OF THE CBDT I N WHICH IT WAS CLEARLY MENTIONED THAT THE ASSESSEE COULD BE BOTH AN INVEST OR AND TRADER FOR WHICH IT COULD MAINTAIN SEPARATE ACCOUNT. THE ASSESSEE FURTH ER POINTED OUT THAT IN THE ITA NO.5063/M/12 A Y .08-09 3 PRECEDING ASSESSMENT YEARS I.E. 2006-07 AND 2007-08 THE INCOME FROM SHARE TRANSACTIONS HAD BEEN ACCEPTED BY DEPARTMENT AS CAP ITAL GAIN IN ASSESSMENTS MADE UNDER SECTION 143(3). IT WAS ALSO SUBMITTED TH AT THOUGH PRINCIPLE OF RESJUDICATA WAS NOT APPLICABLE IN CASE OF INCOME TAX PROCEEDING S, THERE HAS TO BE UNIFORMITY IN TREATMENT AND CONSISTENCY WHEN THE FACTS AND CIRCUMSTANCES ARE IDENTICAL. REFERENCE IN THIS REGARD WAS MADE TO THE JUDGMENT OF HON'BLE HIGH COURT OF BOMBAY IN CASE OF CIT VS. GOPAL PUROHIT (336 ITR 287) . 3.1 THE ASSESSING OFFICER WAS HOWEVER NOT SATISFIED WITH THE EXPLANATION GIVEN. IT WAS OBSERVED BY HIM THAT ENTRY WAS NOT CO NCLUSIVE REGARDING NATURE OF TRANSACTIONS. THE ASSESSEE WAS FREQUENTLY BUYING AND SELLING SHARES WITH HOLDING PERIOD VARYING FROM 8-10 DAYS TO A FEW MONT HS. IN MAJORITY OF THE SCRIPS, THE VOLUME OF TRANSACTION WAS ALSO HIGH AND TRANSACTIONS HAD BEEN UNDERTAKEN THROUGH FIVE BROKERS. THE ASSESSEE HIMSE LF WAS ENGAGED IN SHARE TRANSACTION BUSINESS IN PROPRIETARY CONCERN AND ALS O DIRECTOR OF BROKING FIRM M/S. PRIME BROKING CO. INDIA LTD. THE DIVIDEND INC OME EARNED BY THE ASSESSEE WAS ONLY RS.4,62,029/- ON SALE OF SHARES W ORTH RS.40.00 CRORES WHICH WAS ONLY MEAGRE AND THEREFORE INTENTION OF TH E ASSESSEE WAS NOT TO EARN DIVIDEND INCOME BUT TO EARN PROFIT FROM SALE A ND PURCHASE OF SHARES. HE REFERRED TO THE JUDGMENT OF AUTHORITY FOR ADVANCE RULINGS (AAR) REPORTED IN (288 ITR 641) IN WHICH THE AUTHORITY AFTER REFERRING TO SEVERAL JUDGMENTS OF HON'BLE SUPREME COURT OBSERVED THAT THE PURCHASE AN D SALE OF SHARES WITH MOTIVE OF EARNING PROFIT WOULD RESULT IN THE TRANSA CTION BEING IN THE NATURE OF TRADE/ADVENTURE IN THE NATURE OF TRADE BUT IN CASES WHERE OBJECT OF INVESTMENT IN SHARES WAS TO DERIVE INCOME BY WAY OF DIVIDEND ETC. THEN THE PROFIT WOULD BE CAPITAL GAIN AND NOT REVENUE RECEIP T. AS REGARDS THE ITA NO.5063/M/12 A Y .08-09 4 ASSESSMENT IN EARLIER YEARS, THE ASSESSING OFFICER OBSERVED THAT PRINCIPLE OF RESJUDICATA WAS NOT APPLICABLE IN INCOME TAX PROCEEDINGS. CONS IDERING THE FACTS AND CIRCUMSTANCES MENTIONED EARLIER, THE ASSE SSING OFFICER HELD THAT THE ASSESSEE WAS DEALING IN SHARES WITH MOTIVE TO EARN PROFIT IN SHORT SPAN AS A TRADER. HE, THEREFORE, TREATED BOTH SHORT TERM CAPI TAL GAIN AND LONG TERM CAPITAL GAIN AGGREGATING TO RS.3,03,07,712/- AS INC OME FROM BUSINESS. 3.2 THE ASSESSEE DISPUTED THE DECISION OF ASSESSING OFFICER AND REITERATED THE SUBMISSIONS MADE EARLIER THAT THE SHARES HAD BE EN PURCHASED AS INVESTMENT WHICH HAD ALSO BEEN ENTERED AS INVESTMEN T IN THE BOOKS OF ACCOUNT. THE INTENTION OF THE ASSESSEE WAS TO MAKE INVESTMENT AND NOT TRADE IN SHARES. THE ASSESSEE HAD ALSO SOLD SOME OF THE S HARES AFTER HOLDING FOR MORE THAN A YEAR. THE SHARES HAD ALSO BEEN SOLD AFT ER HOLDING FOR SHORT PERIOD CONSIDERING THE MARKET CONDITIONS AND FUTURE PERCEPTION OF THE INVESTOR. SIMILAR TRANSACTIONS IN THE EARLIER YEARS HAD BEEN ACCEPTED AS INVESTMENT BY ASSESSING OFFICER AFTER SCRUTINY UNDE R SECTION 143(3). THEREFORE, FOR CONSISTENCY AND UNIFORMITY IN TREATM ENT, CLAIM OF THE ASSESSEE HAD TO BE ACCEPTED. 3.3 CIT(A) HOWEVER DID NOT ACCEPT THE CONTENTIONS R AISED. HE REFERRED TO THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE O F CIT VS. ASSOCIATED INDUSTRIAL DEVELOPMENT CO. (P.) LTD. (82 ITR 586) AND THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS. HOLCK LARSEN (160 ITR 67) IN WHICH IT HAS BEEN HELD THAT CUMULATIVE EFFECT OF VA RIOUS FACTORS SUCH AS INTENTION AT THE TIME OF PURCHASES, NATURE OF FUNDS USED, FREQUENCY AND VOLUME ARE REQUIRED TO BE CONSIDERED FOR ARRIVING A T A FAIR CONCLUSION AND THAT ITA NO.5063/M/12 A Y .08-09 5 NO SINGLE FACTOR WAS DECISIVE IN SUCH MATTERS. IT WAS ALSO OBSERVED BY HIM THAT IT WAS NOT NECESSARY TO HAVE A SERIES OF TRANS ACTIONS OF PURCHASE AND SALE IN ORDER TO CONSTITUTE TRADE. A SINGLE TRANSACTION COULD ALSO CONSTITUTE ADVENTURE IN THE NATURE OF TRADE. RELIANCE FOR THE SAID PROPOSITION WAS PLACED ON THE JUDGMENT OF HON'BLE SUPREME COURT IN CASE OF CIT VS. SUTLEJ COTTON MILLS SUPPLY AGENCY LTD. (100 ITR 706) . HE ALSO REFERRED TO THE DECISION OF BOMBAY BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. NAGESH IN ITA NO.5410/M/2008 DATED 24.09.2009 FOR ASSESSMENT YEAR 2005-06 IN WH ICH IT WAS HELD THAT IN CASE OF AN INVESTMENT, A PERSON US UALLY WATCHES THE MARKET FOR A LONGER PERIOD OF TIME BEFORE SELLING SHARES A ND PRIMARY CONDITION IN SUCH CASES IS TO EARN DIVIDEND AND APPRECIATION IN VALUE OF SHARES. IN THE PRESENT CASE, CIT(A) OBSERVED THAT THE ASSESSEE HAD FREQUEN TLY PURCHASED AND SOLD SHARES AND THERE WERE ALSO REPEATED PURCHASES AFTER SALE IN THE SAME SCRIPS SUCH AS IN CASE OF ABAN LLOYD . IN THIS CASE THERE WERE 62 TRANSACTIONS WITH REPETITIVE BUYING AND SELLING. THE SCRIPS HAD BEEN SOLD AFTER HOLDING IT FOR ONE DAY AND FEW DAYS. THE GAIN FROM REPEATED PURCHASES AND SALES IN THESE SCRIPS WAS RS.1.52 CRORES OUT OF TOTAL DECLARED SHORT TERM CAPITAL GAIN OF RS.1.50 CRORES. THE REPEATED TRANSACTION IN THE SAME SCRIP S CLEARLY SHOWED THE INTENTION OF THE ASSESSEE TO TRADE IN SHARES TO EAR N PROFIT. THE ASSESSEE WAS ALSO ACTUALLY INVOLVED IN THE SHARE BUSINESS AS PRO PRIETOR OF M/S. M.K. INVESTMENTS AND ALSO DIRECTOR OF M/S. PRIME BROKING COMPANY (INDIA) LTD. THE ASSESSEE HAD ACQUIRED LARGE NUMBER OF SHARES WH ICH WERE SOLD IN SHORT PERIOD. THE ASSESSEE HAD ACCESS TO INFRASTRUCTURE AVAILABLE OF THE PROPRIETARY CONCERN. ITA NO.5063/M/12 A Y .08-09 6 3.4 AS REGARDS CLAIMS ACCEPTED IN EARLIER YEAR, THE CIT(A) OBSERVED THAT MISTAKE COMMITTED IN EARLIER YEAR CANNOT ALLOWED TO BE PERPETUATED AS HELD BY HONBLE SUPREME COURT IN CASE OF DISTRIBUTOR (BARODA) P. LTD. V. UNION OF INDIA (155 ITR 120) . AS REGARDS LONG TERM CAPITAL GAIN, CIT(A) OBSERV ED THAT THE ASSESSEE WAS DEALING IN SHARE MARKET AND MERELY BECAUSE A FEW SHARES HAPPENED TO BE HELD FOR A LONGER PERIOD DID NOT IMP LY THAT THE SHARES REPRESENTED INVESTMENTS. CIT(A) DISTINGUISHED THE D ECISION OF THE TRIBUNAL IN CASE OF SHRI MAHENDRA C SHAH VS. ACIT IN ITA NO.6289/MUM/20 08 DATED 18 TH MAY 2011 ON THE GROUND THAT IN THAT CASE THE NUMBER OF COMP ANIES WHOSE SHARES WERE HELD REMAINED MORE OR LESS CONSTANT, WH EREAS IN CASE OF THE ASSESSEE THE MIX OF SCRIPS HAD ALSO BEEN CHANGING F ROM YEAR TO YEAR. THE DECISION OF PUNE BENCH OF TRIBUNAL IN CASE OF ARA TRADING & INVESTMENTS VS. DCIT IN ITA NO.499/PN/2008 WAS ALSO DISTINGUISHED ON THAT GROUND . IN THAT CASE, THE ASSESSEE HAD MADE INVESTMENT THROUGH PORT FOLIO MANAGER FOR APPRECIATION IN VALUE AND THAT ASSESSEE WAS NOT ENG AGED IN TRADE. CIT(A) ACCORDINGLY CONFIRMED THE ORDER OF ASSESSING OFFICE R TREATING THE SHORT TERM CAPITAL GAIN AND LONG TERM CAPITAL GAIN AS BUSINESS INCOME. AGGRIEVED BY THE DECISION OF CIT(A), ASSESSEE IS IN APPEAL BEFORE TH E TRIBUNAL. 4. BEFORE US, THE LD. AR REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES THAT THE ASSESSEE WAS BOTH TRADER AND INVESTOR FOR WHICH SEPARATE ACCOUNTS HAD BEEN MAINTAINED. HE REFERRED TO CIRCULAR 4 OF 2007 OF CBDT AS PER WHICH IT WAS PERMISSIBLE TO BE BOTH TRA DER AND INVESTOR. IT WAS ALSO SUBMITTED THAT FOR DECIDING THE TRUE NATURE OF TRANSACTION, INTENTION AT THE TIME OF PURCHASE WAS IMPORTANT. THE SHARES HAD BEEN ENTERED IN BOOKS OF ACCOUNT AS INVESTMENT WHICH SHOWED THE INTENTION OF THE ASSESSEE AT THE TIME ITA NO.5063/M/12 A Y .08-09 7 OF PURCHASE. IT WAS ALSO SUBMITTED THAT IN EARLIER ASSESSMENT YEARS I.E. IN ASSESSMENT YEAR 2006-07 AND ASSESSMENT YEAR 2007-08 AS WELL IN SUBSEQUENT ASSESSMENT YEAR I.E., 2010-11 THE TRANSACTIONS HAD BEEN ACCEPTED AS INVESTMENT IN THE ASSESSMENTS MADE UNDER SECTION 1 43(3). SO TO MAINTAIN CONSISTENCY AND UNIFORMITY OF TREATMENT, THE CLAIM OF THE ASSESSEE HAD TO BE ACCEPTED. RELIANCE WAS PLACED ON THE DECISION OF T HE TRIBUNAL IN THE CASE OF GOPAL PUROHIT (29 SOT 117), WHICH HAD BEEN UPHELD BY THE HONBLE BOMBAY HIGH COURT AS REPORTED IN (336 ITR 287). IT WAS FU RTHER SUBMITTED THAT DECISION TAKEN BY THE AUTHORITIES IN EARLIER YEARS HAVE TO BE FOLLOWED AND CAN BE DEVIATED ONLY IN CERTAIN CIRCUMSTANCES AS HELD B Y THE HONBLE BOMBAY HIGH COURT IN THE CASE OF H.A. SHAH AND CO. VS CIT/EXCESS PROFITS TAX (30 IT R 618). IT WAS FURTHER SUBMITTED THAT IN THE FOLLOWING CA SE, UNDER SIMILAR CIRCUMSTANCES, CLAIM OF THE ASSESSEE OF INVESTMENT HAS BEEN ACCEPTED BY THE TRIBUNAL. RELIANCE WAS PLACED ON THE FOLLOWING DEC ISIONS: I) 50 SOT 167 (MUM) IN THE CASE OF DEV ASHOK KARVAT VS . DCIT II) 139 ITD 294 (MUM) JIGNESH INDULAL PATEL V. ITO III) 130 TTJ 86 (MUM) (UO) B. K. KENIA VS. ADDL. CIT 4.1 THE LD. AR FURTHER SUBMITTED THAT THE GAIN HAD ALSO ARISEN IN RESPECT OF CERTAIN SHARES WHICH HAD BEEN PURCHASED IN EARLIER YEAR AND SINCE THESE HAD BEEN ACCEPTED AS INVESTMENT IN EARLIER YEARS, THE C APITAL GAIN, IN SUCH CASES HAVE TO BE ACCEPTED. IT WAS ALSO SUBMITTED THAT TH E ISSUE COULD BE DEBATABLE BUT IN SUCH CASES WHERE TWO VIEWS ARE POSSIBLE, THE ONE FAVOURABLE TO THE ASSESSEE SHOULD BE ADOPTED. AS REGARDS LONG TERM C APITAL GAINS, IT WAS SUBMITTED THE SHARES SOLD AFTER ONE YEAR HAVE TO BE CONSIDERED AS HELD FOR LONG TERM INVESTMENT AND, THEREFORE, LONG TERM CAPI TAL GAIN HAVE TO BE ITA NO.5063/M/12 A Y .08-09 8 ACCEPTED. RELIANCE WAS PLACED ON THE DECISION OF D ELHI BENCH OF THE TRIBUNAL IN THE CASE OF ARJUN KAPUR VS. DCIT (70 TTJ 161) . 5. THE LD. CIT- DR APPEARING FOR THE REVENUE, ON TH E OTHER HAND, STRONGLY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. IT WAS ARGUED THAT EACH CASE HAS TO BE DECIDED ON THE BASIS OF OWN FACTS AND NO TWO CASES WERE IDENTICAL. IT WAS SUBMITTED THAT THE JUDGMENTS RELIED UPON BY THE LD. AR WERE DISTINGUISHABLE ON FACTS. IN THIS CASE THE ASSESSE E HAD FREQUENTLY PURCHASED AND SOLD SHARES AFTER SHORT HOLDING AND ALSO THERE WERE REPETITIVE TRANSACTIONS IN THE SAME SCRIPS. DIVIDEND EARNED WAS ONLY NOMIN AL AND INCIDENTAL. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE , THE PROFIT EARNED ON SALE AND PURCHASE OF SHARES HAS BEEN RIGHTLY ASSESSED AS BUSINESS INCOME BY AUTHORITIES BELOW. AS REGARDS CLAIM OF THE ASSESSE E THAT SIMILAR TRANSACTION WAS ACCEPTED AS INVESTMENT IN THE EARLIER YEAR, THE LD. CIT- DR PLACED RELIANCE ON THE JUDGMENT OF HONBLE SUPREME COURT I N THE CASE OF NEW JEHANGIR VAKIL MILLS CO. LTD. VS. CIT 49 ITR 137 , IN WHICH IT WAS HELD THAT THE FACT THAT IN THE EARLIER ASSESSMENT YEAR THE ASSESS EE WAS TREATED AS AN INVESTOR WOULD NOT ESTOP THE ASSESSING AUTHORITIES FROM CONSIDERING FOR THE PURPOSE OF COMPUTATION OF PROFITS IN THE SUBSEQUENT YEAR AS TO WHEN THE TRADING ACTIVITY OF THE ASSESSEE BEGAN. IN THAT CA SE THE AUTHORITIES FOUND THAT THE TRADING ACTIVITY BEGAN IN THE EARLIER YEAR. TH US, FOR THE PURPOSE OF GIVING FINDING OF FACTS IN THE SUBSEQUENT YEAR, THE AUTHOR ITIES WERE ENTITLED TO LOOK INTO RECORDS OF EARLIER YEAR AND ARRIVE AT DIFFEREN T FINDING WITHOUT DISTURBING FINDING GIVEN IN EARLIER YEAR. THEREFORE, IT WAS ARGUED THAT CLAIM OF THE ASSESSEE THAT GAIN IN RESPECT OF SHARES PURCHASED I N EARLIER YEARS SHOULD BE ACCEPTED AS CAPITAL GAINS HAD NO MERIT. ITA NO.5063/M/12 A Y .08-09 9 5.1 THE LD. DR ALSO SUBMITTED THAT THE INTENTION OF THE ASSESSEE HAS TO BE GATHERED FROM HIS SUBSEQUENT CONDUCT IN DEALING WIT H THE SHARES. IN THIS CASE, CONDUCT OF THE ASSESSEE WAS QUIET CLEAR THAT THE ASSESSEE HAD PROFIT MOTIVE IN ENTERING INTO SHARE TRANSACTION AND, THER EFORE GAIN HAS TO BE ASSESSED AS BUSINESS INCOME. 6. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE R IVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING NATURE OF INCOM E FROM SHARE TRANSACTIONS ENTERED INTO BY THE ASSESSEE. THE ISSUE WHETHER THE SHARE TRANSACTIONS IN A PARTICULAR CASE SHOULD BE TREATED AS INVESTMENT ACT IVITY OR TRADING ACTIVITY HAS BEEN A HIGHLY DEBATABLE ISSUE. THERE ARE DECISIONS OF THE TRIBUNAL ON BOTH THE SIDES. EACH CASE WILL DEPEND ON ITS OWN FACTS AND C IRCUMSTANCES. THERE ARE VARIOUS FACTORS SUCH AS FREQUENCY, VOLUME, ENTRY IN THE BOOKS OF ACCOUNTS, NATURE OF FUNDS USED, HOLDING PERIOD ETC. WHICH ARE RELEVANT IN DECIDING THE TRUE NATURE OF TRANSACTIONS AND NO SINGLE FACTOR IS CONCLUSIVE. THE MOST IMPORTANT FACTOR IS THE INTENTION OF THE ASSESSEE A T THE TIME OF PURCHASE WHICH HAS TO BE GATHERED FROM THE ACTUAL CONDUCT OF THE A SSESSEE WHILE DEALING WITH THE SHARES SUBSEQUENTLY AND NOT ONLY ON THE BASIS O F ENTRY IN THE BOOKS OF ACCOUNT OR THE OBJECTS IN THE MEMORANDUM OF ASSOCIA TION. THIS VIEW IS SUPPORTED BY THE JUDGMENT OF THE HON'BLE SUPREME CO URT IN THE CASE OF CIT VS. MADANGOPAL RADHEYLAL (73 ITR 642). THE ACTUAL CONDUCT HAS TO BE EVALUATED BY ANALYZING THE HOLDING PERIOD ETC. AN INVESTOR MAKES PURCHASES WITH LONG TERM GOAL OF EARNING INCOME FROM THE INVE STMENT AND HE IS NOT TEMPTED TO SELL THE SHARES ON EVERY RISE AND FALL I N THE MARKET WHICH ARE THE ATTRIBUTES OF A TRADER. SINCE INCOME FROM INVESTMEN T IN SHARES WHICH IS IN THE ITA NO.5063/M/12 A Y .08-09 10 FORM OF DIVIDEND IS RECEIVED ANNUALLY, NORMALLY AN INVESTOR IS EXPECTED TO HOLD THE SHARES FOR MORE THAN A YEAR. HOWEVER THERE MAY BE SITUATIONS WHEN THE INVESTOR MAY ALSO SELL THE SHARES AFTER SHORT HOLDI NG IN ORDER TO RESHUFFLE PORTFOLIO WHEN PRICES ARE FALLING OR TO ENCASH INVE STMENT IN CASE OF SOME PERSONAL EXIGENCIES. EACH CASE IS REQUIRED TO BE EX AMINED CAREFULLY TO ASCERTAIN THE TRUE NATURE OF TRANSACTIONS. 7. IN THIS CASE THE DETAILS OF SHARE TRANSACTIONS H ELD PERIOD-WISE HAVE BEEN GIVEN BY THE ASSESSEE AT PAGE 69 TO 73 OF THE PAPER BOOK BOTH IN RESPECT TO LONG TERM CAPITAL GAIN AND SHORT TERM CA PITAL GAIN. AS REGARDS SHORT TERM CAPITAL GAIN, THE ASSESSEE HAD DONE TRANSACTIO NS IN PURCHASE AND SALES IN SIX DIFFERENT SCRIPS. THE TOTAL PURCHASES ARE S UBSTANTIALLY HIGH WORTH RS.35,44,80,540/- ON WHICH GAIN OF RS.1,50,92,723/- HAS BEEN SHOWN. THE HOLDING PERIOD OF SHARES IN THIS CASE VARIES FROM L ESS THAN A WEEK TO A LITTLE OVER THREE MONTHS. OUT OF TOTAL GAIN OF RS.1.50 CRO RES THE ASSESSEE HAS EARNED GAIN OF ABOUT RS.1.52 CRORES IN TRANSACTIONS IN RELATION TO ONE SCRIP I.E. ABAN LLOYD. IN SOME OTHER SCRIPS THERE WERE LOSS WH ICH REDUCED THE OVERALL GAIN. AN INTERESTING FEATURE IS THAT THE ASSESSEE H AD ENTERED INTO REGULAR AND REPEATED TRANSACTIONS IN THIS SCRIP. FOR INSTANCE T HE ASSESSEE MADE PURCHASES OF SHARES IN THIS SCRIP REGULARLY ON SEVERAL DATES IN THE MONTH OF APRIL AND SHARES WERE SOLD ON REGULAR BASIS ON SEVERAL DATES MOSTLY IN THE MONTH OF MAY. THE ASSESSEE AGAIN STARED PURCHASING SHARES IN THE SAME SCRIP IN THE MONTH OF JUNE, 2007 ON SEVERAL DATES AND SHARES WER E SOLD IN THE MONTH OF JULY AND AUGUST, 2007. THEREAFTER, THE ASSESSEE AGA IN MADE PURCHASES IN THE SAME SCRIP IN JULY AND NOVEMBER AND SHARES WERE SOL D IN DECEMBER. ITA NO.5063/M/12 A Y .08-09 11 7.1 THUS THE ASSESSEE HAD BEEN REGULARLY BUYING AND SELLING SHARES IN THIS SCRIP WHICH ARE THE ATTRIBUTES OF A TRADER. AN INVE STOR BUYS SHARES FOR EARNING DIVIDEND AND FOR APPRECIATION OVER A LONG PERIOD OF TIME WHICH IS NOT SO IN THE PRESENT CASE. FURTHER, REPEATED BUYING OF THE SAME SHARES AFTER SELLING THE EARLIER HOLDING CLEARLY INDICATES THE INTENTION OF THE ASSESSEE TO MAKE QUICK PROFIT. IN RESPECT OF OTHER SHARES ALSO THE HOLDING PERIOD IS LOW VARYING FROM 8 DAYS TO LITTLE OVER THREE MONTHS. THOUGH THE ASSESS EE HAD NOT PURCHASED SHARES IN LARGE NUMBER OF SCRIPS BUT THERE ARE LARG E AND REPETITIVE PURCHASES IN THE SAME SCRIPS CLEARLY SHOWING THE TRADING ACTI VITY. IT IS A SETTLED LEGAL POSITION AS HELD BY THE HON'BLE SUPREME COURT IN CA SE OF CIT VS. SUTLEJ COTTON MILLS SUPPLY AGENCY LTD. (SUPRA), THAT EVEN A SINGLE TRANSACTION COULD ALSO CONSTITUTE ADVENTURE IN THE NATURE OF TRADE AND THE REFORE IT IS NOT NECESSARY THAT THERE SHOULD BE LARGE AND REGULAR TRANSACTIONS FOR TREATING SAME AS TRADING TRANSACTIONS. WE ALSO NOTE THAT DIVIDEND IN COME EARNED BY THE ASSESSEE IS ONLY MEAGER AMOUNTING TO RS.4,62,029/- ON SALE OF SHARES WORTH RS.40.00 CRORES WHICH GIVES RETURN OF AROUND 0.1 % ON INVESTMENT COMPARED TO HIGH PROFIT EARNED FROM SALE AND PURCHASE OF SHA RES WHICH ALSO SHOWS THAT DIVIDEND WAS ONLY INCIDENTAL INCOME AS EVEN IN CASE OF TRADING SHARES THE ASSESSEE WILL BE ENTITLED FOR DIVIDEND IN RESPECT O F SHARES WHICH WERE HELD ON RECORD DATE. CLEARLY ASSESSEE IN THIS CASE HAD PURC HASED AND SOLD SHARES WITH PROFIT MOTIVE AND NOT FOR INVESTMENT AS IS CLEAR FR OM THE SUBSEQUENT CONDUCT OF THE ASSESSEE IN DEALING WITH SHARES. THE TRANSAC TIONS RESULTING INTO SHORT TERM CAPITAL GAIN HAVE THEREFORE TO BE TAKEN AS BUS INESS ACTIVITY AND THE SHORT TERM CAPITAL AS BUSINESS INCOME. ITA NO.5063/M/12 A Y .08-09 12 8. IT HAS BEEN ARGUED ON BEHALF OF THE ASSESSEE THA T SIMILAR TRANSACTIONS IN THE EARLIER YEARS I.E. 2006-07 AND 2007-08 AS WE LL AS IN SUBSEQUENT YEAR I.E. 2010-11 HAVE BEEN ACCEPTED BY ASSESSING OFFICE R AS INVESTMENT ACTIVITY. THEREFORE, TO MAINTAIN CONSISTENCY AND FOR UNIFORMI TY OF TREATMENT, THE TRANSACTION SHOULD BE ACCEPTED AS INVESTMENT ACTIVI TY IN THIS YEAR ALSO. HOWEVER CONSIDERING THE FACTS OF THE CASE WE ARE UN ABLE TO ACCEPT THE ARGUMENTS ADVANCED BY THE ASSESSEE. ON CAREFUL PER USAL OF THE ASSESSMENT ORDERS FOR EARLIER ASSESSMENT YEARS AND SUBSEQUENT YEAR ON WHICH RELIANCE HAS BEEN PLACED BY THE ASSESSEE, WE FIND THAT THE N ATURE OF TRANSACTIONS I.E. WHETHER BUSINESS ACTIVITY OR INVESTMENT ACTIVITY HA S NOT BEEN EXAMINED IN THESE ORDERS. THERE IS NO REFERENCE TO THIS ASPECT IN THE ASSESSMENT ORDERS NOR ANY DETAILS OF SHARE TRANSACTIONS HAVE BEEN GIV EN THEREIN. THE ASSESSING OFFICER IN THESE ORDERS HAS ONLY MADE DISALLOWANCE OF SOME EXPENSES AND ADDITION TO HOUSE PROPERTY INCOME. THEREFORE THERE WAS NO CONSCIOUS DECISION OF THE ASSESSING OFFICER TO ACCEPT SHARE TRANSACTIO N AS INVESTMENT ACTIVITY. THE PLEA OF CONSISTENCY CAN BE ACCEPTED IF THE REVE NUE HAS TAKEN A PARTICULAR VIEW IN A PARTICULAR MATTER WHICH IT IS REQUIRED TO FOLLOW IN THE SUBSEQUENT YEAR FOR THE SAKE OF CONSISTENCY. BUT WHEN THERE IS NO VIEW TAKEN ON ANY ISSUE, THE DOCTRINE OF CONSISTENCY WOULD NOT HOLD G OOD IN OUR OPINION. MOREOVER FACTS OF THOSE YEARS HAVE NOT BEEN BROUGHT ON RECORD BY THE ASSESSING OFFICERS IN THE RESPECTIVE ORDERS, THEREF ORE IT CANNOT BE SAID THAT FACTS RELATING TO THE ISSUE WERE IDENTICAL. THE PRI NCIPLE OF RESJUDICATA IS ADMITTEDLY NOT APPLICABLE TO INCOME TAX PROCEEDINGS AND REVENUE AUTHORITIES ARE THEREFORE NOT BOUND BY THE DECISION TAKEN IN TH E EARLIER YEAR. THIS YEAR ITA NO.5063/M/12 A Y .08-09 13 THE ASSESSING OFFICER HAS MADE DETAILED EXAMINATION OF SHARE TRANSACTIONS WHICH CLEARLY SHOWS THAT THE ASSESSEE HAD ENTERED I NTO TRANSACTIONS TO MAKE QUICK PROFIT AND THEREFORE ON THE BASIS OF MATERIAL PLACED IN THIS YEAR THE AUTHORITIES COULD DEVIATE FROM THE DECISION IN THE EARLIER YEAR IN WHICH THE ISSUE HAD NOT BEEN EXAMINED AT ALL. 9. THE LD. AR HAS ALSO ARGUED THAT GAIN ARISING FRO M SHARES SOLD WHICH HAD BEEN PURCHASED IN THE EARLIER YEAR IN WHICH IT HAD BEEN CONSIDERED AS INVESTMENT SHOULD BE ACCEPTED AS CAPITAL GAIN. THIS ARGUMENT IN OUR VIEW CAN ALSO NOT BE ACCEPTED BECAUSE THE TRUE NATURE OF THE ACTIVITY CAN BE ONLY GATHERED FROM THE ACTUAL CONDUCT OF THE ASSESSEE IN DEALING WITH THE SHARES SUBSEQUENTLY. THEREFORE WHETHER THE PURCHASES MADE IN EARLIER YEAR WERE WITH THE INTENTION TO MAKE INVESTMENT OR FOR EARNIN G PROFIT CAN BE GATHERED ONLY FROM THE ACTIVITY OF SALE IN THE CURRENT YEAR. THE ACTIVITY AS HELD EARLIER CLEARLY SHOWS THE INTENTION OF THE ASSESSEE TO EARN PROFIT FROM PURCHASE AND SALE OF SHARES AND NOT TO MAKE INVESTMENT FOR EARNI NG DIVIDEND AND APPRECIATION IN THE VALUE OF SHARES. THE SAME VIEW HAS BEEN TAKEN BY THE HON'BLE SUPREME COURT IN THE CASE OF NEW JEHANGIR VAKIL MILS CO. LTD. VS. CIT (SUPRA), ON WHICH RELIANCE HAS BEEN PLACED BY THE L D. DR. IN THAT CASE THE HON'BLE SUPREME COURT HELD THAT THE FACT THAT IN TH E EARLIER YEAR THE ASSESSEE WAS TREATED AS AN INVESTOR WOULD NOT ESTOP THE ASSE SSING AUTHORITY FROM CONSIDERING AS TO WHEN THE TRADING ACTIVITY OF THE ASSESSEE IN SHARES BEGAN FOR THE PURPOSE OF COMPUTATION OF PROFIT IN THE SUB SEQUENT YEAR. THUS IN THAT CASE, PROFIT IN RESPECT OF SHARE PURCHASED IN EARLI ER YEAR WAS ALSO ACCEPTED AS BUSINESS PROFIT. ITA NO.5063/M/12 A Y .08-09 14 10. THE LD. AR FOR THE ASSESSEE HAS RELIED ON THE DECISION OF THE TRIBUNAL IN THE CASE OF GOPAL PUROHIT (29 SOT 171) TO ARGUE THAT INCOME FROM ALL DELIVERY BASED TRANSACTIONS HAS TO BE ASSESSED AS I NCOME AS HELD BY THE TRIBUNAL IN THE SAID CASE. WE HAVE CAREFULLY PERUS ED THE ORDER OF THE TRIBUNAL IN THE CASE OF GOPAL PUROHIT (SUPRA), BUT WE FIND T HAT THERE IS NO UNIVERSAL FINDING IN THAT CASE THAT ALL DELIVERY BASED TRANSA CTIONS HAVE TO BE TREATED AS INVESTMENT. IT IS PERTINENT TO NOTE THAT THE TRIBU NAL IN CASE OF GOPAL PUROHIT (SUPRA), HAD DECIDED THE CASE FOLLOWING THE DECISIO N OF TRIBUNAL IN CASE OF SARNATH INFRASTRUCTURE PVT. LTD VS. ACIT (2009) (120 TTJ 216) HOLDING THAT FACTS IN THE CASE OF SARNATH INFRASTRUCTURE PVT. LT D (SUPRA), WERE IDENTICAL. HOWEVER, IT IS NOTED THAT IN CASE OF SARNATH INFRAS TRUCTURE PVT. LTD (SUPRA), THE SHARES SOLD OUT OF INVESTMENT ACCOUNT HAD BEEN HELD FOR 2-3 YEARS AND REVENUE COULD NOT SHOW ANY SHARES SOLD WHICH HAD BE EN PURCHASED DURING THE YEAR OR IN THE IMMEDIATELY PRECEDING YEAR. THER EFORE, ONLY IN RESPECT OF CASES WHERE FACTS ARE IDENTICAL TO THOSE IN CASE OF SARNATH INFRASTRUCTURE PVT. LTD. (SUPRA), THE DECISION IN CASE OF GOPAL PUROHIT (SUPRA), COULD BE APPLIED. THE HONBLE HIGH COURT OF BOMBAY HAD UPHELD THE DEC ISION OF THE TRIBUNAL IN THE CASE OF GOPAL PUROHIT (SUPRA), ON THE GROUND TH AT THERE WAS NO SUBSTANTIAL QUESTION OF LAW INVOLVED. EVEN BEFORE HONBLE HIGH COURT, THERE WAS NO QUESTION RAISED THAT ALL DELIVERY BASED TRAN SACTIONS HAVE ALWAYS TO BE TREATED AS INVESTMENT ACTIVITY. THUS THE DECISION OF THE TRIBUNAL AS WELL AS THAT OF THE HONBLE HIGH COURT IN CASE OF GOPAL PUR OHIT (SUPRA), CANNOT BE CONSIDERED AS A PRECEDENT FOR THE PROPOSITION THAT ALL DELIVERY BASED SHARES HAVE TO BE TREATED AS INVESTMENT ACTIVITY. THE ASS ESSEE CAN ALSO BE A TRADER ITA NO.5063/M/12 A Y .08-09 15 IN CASE OF DELIVERY BASED PURCHASES AND SALES, WHIC H IS A NORMAL FEATURE OF ANY TRADING ACTIVITY. THEREFORE, IN OUR VIEW RELIA NCE PLACED BY THE LD. AR ON THE DECISION IN THE CASE OF GOPAL PUROHIT IS MISPLA CED. EACH CASE HAS TO BE DECIDED BASED ON ITS OWN FACTS. AS REGARDS CONSISTE NCY, WE HAVE ALREADY HELD THAT IT WILL NOT BE OF ANY HELP TO THE ASSESSEE IN THIS CASE. 11. THE ASSESSEE HAS ALSO PLACED RELIANCE ON CERTAI N DECISIONS OF THE TRIBUNAL AS MENTIONED IN PARA-4 EARLIER. THESE DECI SIONS OF THE TRIBUNAL IN OUR VIEW DO NOT HELP THE CASE OF THE ASSESSEE. IN CASE OF DEV ASHOK KARVAT VS. DCIT (SUPRA), THE TRIBUNAL NOTED THAT THE CAPITAL GAIN I N RESPECT OF SHARES SOLD WITHIN A MONTH WAS NEGLIGIBLE AND THEREFORE ON THE FACTS OF THAT CASE THE TRIBUNAL ACCEPTED THE SHORT TERM CAPITAL GAIN DECLA RED BY THE ASSESSEE. THERE WERE NO REGULAR AND REPETITIVE TRANSACTIONS IN THE SAME SCRIPS AS IN THE PRESENT CASE. THEREFORE, THE CASE IS DISTINGUISHABL E. IN CASE OF JIGNESH INDULAL PATEL VS. ITO (SUPRA), THE TRIBUNAL NOTED THAT HOLDING PERIOD DET AILS WERE NOT AVAILABLE AND REVENUE HAD FAILED TO DEMONSTRATE THA T THERE WERE LARGE NUMBER OF TRANSACTIONS WITH FREQUENCY, VOLUME, CONT INUITY AND REGULARITY. IT WAS IN THESE CIRCUMSTANCES THAT THE CLAIM OF INVEST MENT BY THE ASSESSEE WAS ACCEPTED. IN THE PRESENT CASE THERE IS SUFFICIENT M ATERIAL AS MENTIONED EARLIER TO SHOW THAT THE ASSESSEE HAD UNDERTAKEN THE TRANSA CTIONS WITH PROFIT MOTIVE WITH REGULAR AND REPETITIVE TRANSACTIONS IN THE SAM E SCRIP. IN CASE OF B.K. KENIA VS. ACIT (SUPRA), THE TRIBUNAL HELD THAT MERELY ON THE BASI S OF VOLUME OF TRANSACTION THE SHARE TRANSACTION ACTIVITY COULD NOT BE CONSIDERED AS BUSINESS. IN THE PRESENT CASE THE TRANSACTIONS HAVE BEEN TREATED AS BUSINESS NOT ONLY ON THE BASIS OF VOLUME BUT CONSIDERING THE FREQUENCY OF TRANSACTIONS ITA NO.5063/M/12 A Y .08-09 16 HOLDING PERIOD AS WELL AS REPETITIVE TRANSACTIONS I N THE SAME SCRIP ON REGULAR BASIS. THE DECISIONS OF THE TRIBUNAL CITED BY THE L D. AR ARE THEREFORE REJECTED AS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. 12. IN VIEW OF THE FOREGOING DISCUSSION AND FOR THE REASONS GIVEN EARLIER WE HOLD THAT SHORT TERM CAPITAL GAIN DECLARED BY TH E ASSESSEE IN RESPECT OF SHARE TRANSACTION HAS TO BE ASSESSED AS BUSINESS IN COME. THE ASSESSEE HAS HOWEVER POINTED OUT THAT THE HOLDING PERIOD IN RESP ECT OF TRANSACTIONS IN SHARES OF LOGIX MICRO HAS BEEN WRONGLY TAKEN AS LES S THAN ONE YEAR. IT WAS SUBMITTED THAT THESE SHARES HAD BEEN PURCHASED IN T HE EARLIER YEAR ON 7.10.2005 AND AGAIN ON 14.10.2005 AND WERE SOLD ON 23.8.2007 AND 26.8.2007. THESE SHARES WERE THUS HELD FOR ABOUT TW O YEARS AND THEREFORE, INCOME IN RESPECT OF THESE SHARES HAS TO BE ASSESSE D AS LONG TERM CAPITAL GAIN. IN OUR VIEW IF THE SHARES HAVE BEEN HELD FOR MORE THAN A YEAR, IT WILL CLEARLY INDICATE INVESTMENT ACTIVITY AND THEREFORE, IN SUCH CASES GAIN DECLARED BY THE ASSESSEE HAS TO BE ACCEPTED AS LONG TERM CAP ITAL GAIN. THE SAME VIEW HAS BEEN TAKEN BY THE MUMBAI BENCH OF THE TRIBUNAL IN CASE OF JIGNESH INDULAL PATEL VS. ITO (139 ITD 294) . WE, THEREFORE HOLD THAT GAIN EARNED BY THE ASSESSEE FROM SALE OF SHARES WHICH HAVE BEEN HE LD BY THE ASSESSEE FOR MORE THAN A YEAR HAS TO BE ACCEPTED AS LONG TERM CA PITAL GAIN. HOWEVER, CLAIM OF THE ASSESSEE ON HOLDING SHARES FOR MORE TH AN ONE YEAR IN CASE OF LOGICX MICRO REQUIRES VERIFICATION. WE, THEREFORE R ESTORE THIS ASPECT TO THE FILE OF AO FOR VERIFICATION AND NECESSARY ACTION IN THE LIGHT OF OUR DECISION MENTIONED ABOVE. THE LONG TERM CAPITAL GAIN DECLARE D BY THE ASSESSEE IN RESPECT OF SHARES SOLD AFTER HOLDING FOR MORE THAN A YEAR HAS TO BE ACCEPTED ITA NO.5063/M/12 A Y .08-09 17 AS LONG TERM CAPITAL GAIN AS HELD EARLIER. THE ORDE R OF CIT(A) IS SET ASIDE ON THIS POINT AND CLAIM OF THE ASSESSEE IS ALLOWED. 13. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12.6.2013. SD/- SD/- (DR. S.T.M. PAVALAN) JUDICIAL MEMBER (RAJENDRA SINGH) ACCOUNTANT MEMBER MUMBAI, DATED: 12.6. 2013. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.