CHHITUBHAI N. PATEL, MUMBAI V. ACIT 25(3), MUMBAI

ITA 5238/MUM/2009

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 3572 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 01-12-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 14-09-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GOLI SRINIVAS RAO
• Keywords: Business income; Depreciation; Rule of consistency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, C, MUMBAI BEFORE SHRI R.S.SYAL, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO. 5238/MUM/2009 (ASSESSMENT YEARS: 2006-07) SHRI CHHITUBHAI N PATEL, VEENA VIHAR CO-OP HSG. SOCIETY, B-1302,SECTOR-8, CHARKOP KANDIVALI (W), MUMBAI-400067. PAN: AAYPP4083A . APPELLANT VS ACIT 25(3), PRATYAKSHAKAR BHAVANB BANDRA KURLA COMPLEX, MUMBAI-400051 RESPONDENT APPELLANT BY : SHRI DEEPAK TRALSHAWALA RESPONDENT BY : SHRI GOLI SRINIVA S RAO. O R D E R PER VIJAY PAL RAO,JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER DATED 2.07.2009 OF CIT(A)-XXV, MUMBAI FOR TH E ASSESSMENT YEAR 2006-07. 2. THE ASSESSEE RAISED THE FOLLOWING GROUNDS IN THI S APPEAL: ON THE FACTS AND CIRCUMSTANCES OF THE CASE , AND I N LAW, THE LD. COMMISSIONER OF INCOME TAX (A) XXV, MUMBAI ERRED IN UPHOLDING THE ASSESSMENT ORDER DEEMING THE INCOME OF THE ASSESSEE FROM SALE OF SHARES AS INCOME FROM BUSINESS, INSTEAD OF INCOME FROM SHORT TERM /LONG TERM CAPITAL GAINS AS DECLAR ED BY THE ASSESSEE ITA NO. 5238/MUM/2009 (ASSESSMENT YEARS: 2006-07) 2 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS AN INDIVIDUAL AND DECLARED INCOME IN THE RETURN OF INC OME FROM SHORT TERM CAPITAL GAIN AT RS.60,84,494/- AND LONG TERM CAPITAL GAIN OF RS.59,979/-. HE HAS ALSO OFFERED DIVIDEN D INCOME OF RS.5,23,396/- AND INTEREST ON GOVERNMENT BOND OF RS.2,34,000/- AND CLAIMED EXEMPTION. THE AO VERIFI ED THE DETAILS OF THE TRANSACTIONS ON SALE AND PURCHASE AN D NOTICED THAT THE ASSESSEE HIMSELF TREATED THE SHARE DEALI NG AS BUSINESS IN THE ASSESSMENT YEAR 2004-05 AND OFFERED GAIN ON THE SALE OF SHARES AS TRADING PROFIT. THE AO ASKED THE ASSESSEE AS TO WHY THE GAIN FROM SALE OF SHARES SH OULD NOT BE TAXED AS BUSINESS INCOME IN STEAD OF SHORT TERM OR LONG TERM CAPITAL GAIN. 4. IN RESPONSE, THE ASSESSEE EXPLAINED THAT THE ASS ESSEE IS A SENIOR CITIZEN AND IS ALONE IN THE FAMILY AND HIS HEALTH DOES NOT PERMIT HIM TO DO THE BUSINESS. HE DOES TR ANSACTIONS OF SHARES THROUGH SHARE BROKER, JAWAI SECURITIES LI MITED. HE LEFT INVESTMENT AND DISINVESTMENT OF SHARES IN THE HANDS OF THE BROKER AS HE IS NOT IN A POSITION TO DECIDE THE W ORTH OF THE INVESTMENTS. THE ASSESSEE FILED THE DETAILS REGARDI NG THE PURCHASE AND SALE OF SHARES FOR THE LAST 2-3 YEARS AND IT HAS BEEN SHOWN IN THE BOOKS OF ACCOUNT AS INVESTMENTS. THE AO DID NOT ACCEPT THE VERSION OF THE ASSESSEE. THE A O WAS OF THE VIEW THAT THE VOLUME AND PERIODICITY OF TRANSAC TION DOES ITA NO. 5238/MUM/2009 (ASSESSMENT YEARS: 2006-07) 3 NOT ALTER THE NATURE OF THE TRANSACTION. THE ASSES SEE ACCOUNTED FOR THE INVESTMENT GAINING BY CHANGE OF H IS OWN METHOD SHOWING IN THE ASSESSMENT YEAR 2004-05. THU S, THE AO HELD THAT MERELY INTRODUCING IN THE BOOKS THE SHARES AS INVESTMENT IS NOT DETERMINING FACTOR TO DECIDE THE REAL NATURE OF TRANSACTIONS. THE AO HAS TREATED THE PROFIT ON SALE OF SHARES AS BUSINESS INCOME. 5. ON APPEAL, THE CIT(A) HAS CONFIRMED THE ORDER OF THE AO IN TREATING THE INCOME AS INCOME FROM BUSINESS AND PROFESSION MAINLY ON THE REASON THAT THE ASSESSEE HAS SUDDENL Y CHANGED THE METHOD OF ACCOUNTING AND COMPUTATION OF INCOME WITHOUT FOLLOWING THE RULES OF CONSISTENCY. SINCE THERE W AS NO CHANGE IN THE CIRCUMSTANCES OF THE CASE FOR THE ASS ESSMENT YEAR 2004-05 AND 2005-06/2006-07, THE CIT(A) WAS OF THE VIEW THAT ONLY REASON OF CHANGE BY THE ASSESSEE A PPEARS TO BE THAT THE GOVERNMENT ANNOUNCED NO TAX ON LONG TER M CAPITAL GAIN AND 10% TAX ON SHORT TERM CAPITAL GAIN ON SA LE OF SHARES FROM 1.10.2004 WHILE IN EARLIER YEARS THERE WAS NOT TAX PARITY. 6. BEFORE US, THE LEARNED AR OF THE ASSESSEE HAS SU BMITTED THAT THE ASSESSEE WAS STAYING IN FIJI UP TO 196 8 WHEN HE CAME BACK TO INDIA. THE ASSESSEE IS A 79 YEARS OLD SENIOR CITIZEN. IN THE YEAR 2000, THE ASSESSEE SOLD HIS FLAT AND THEN MADE INVESTMENT IN RESERVE BANK OF INDIAS BONDS. FORM THE ASSESSMENT YEAR 2002-03, ITA NO. 5238/MUM/2009 (ASSESSMENT YEARS: 2006-07) 4 HE STARTED INVESTMENTS IN SHARES. HE HAS SUBMITTED THAT THOUGH THE ASSESSEE HIMSELF DECLARED INCOME FROM SH ARES DEALING UNDER THE HEAD BUSINESS AND PROFESSION IN THE ASSESSMENT YEAR 2004-05 BUT BEFORE THE SAID ASSESSM ENT YEAR, THE ASSESSEE WAS TREATING THE PURCHASE OF SHA RES AS INVESTMENT IN BOOKS OF ACCOUNT AND EVEN AFTER THE ASSESSMENT YEAR 2004-05, THE ASSESSEE HAS TREATED THE TRANSACTION OF SHARES AS INVESTMENT IN HIS BOOKS OF ACCOUNTS. HE HAS FURTHER CONTENDED THAT DURING THE PERIOD R ELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSES SEE PURCHASED ONLY 23 SCRIPTS OF SHARES OUT OF WHICH 20 SCRIPTS WERE SOLD AND TWO OTHER SCRIPTS PURCHASED BY THE AS SESSEE IN THE EARLIER YEARS WERE ALSO SOLD DURING THE YEAR. HE HAS REFERRED THE COPIES OF CAPITAL ACCOUNT FOR THE YEAR ENDING 31.3.2003 TO 31.3.2006 AND SUBMITTED THAT THE ASSES SEE HAS SHOWN THE SHARES AS INVESTMENT IN THE BALANCE SHEET AS ON 31.3.2003 FOR THE ASSESSMENT YEAR 2004-05. THE ASS ESSEE HAS SHOWN THE CAPITAL GAIN ON MUTUAL FUNDS WHICH W AS SET OFF AGAINST THE CARRIED FORWARD LOSSES FOR THE ASSESSME NT YEAR 2001-02 THEREFORE NO CAPITAL GAIN WAS OFFERED BY TH E ASSESSEE, HOWEVER, THE PROFIT ON SALE OF SHARES WA S OFFERED AS INCOME FROM BUSINESS AND PROFESSION DUE TO THE I NCREASE OF VOLUME OF TRANSACTIONS. THE LEARNED AR FURTHER SUB MITTED THAT EXCEPT THE ASSESSMENT YEAR 2004-05, THE ASSESSEE H AS BEEN CONSISTENTLY TREATING THE PURCHASE OF SHARES AS INV ESTMENT AND ITA NO. 5238/MUM/2009 (ASSESSMENT YEARS: 2006-07) 5 THEREFORE IF THE PRINCIPLE OF CONSISTENCY IS APPLIE D, THE TRANSACTION SHOULD BE TREATED AS INVESTMENT. HE HAS FILED THE CHART SHOWING VARIOUS DETAILS OF SALES AND PURCHAS ES AND SUBMITTED THAT DURING THE PERIOD RELEVANT TO THE A SSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE HAS DONE 38 TRANSACTIONS OF PURCHASES AND 41 TRANSACTIONS OF SA LES AND THUS, THE TOTAL NUMBER OF TRANSACTIONS DURING THE Y EAR WAS 79. AS FAR AS THE NUMBER SCRIPTS IS CONCERNED THE LEAR NED AR HAS SUBMITTED THAT ONLY THE ASSESSEE HAS PURCHASED THE SHARES OF 22 SCRIPTS DURING THE YEAR. THE LEARNED AR OF THE ASSESSEE HAS SUBMITTED THAT WHERE THE HOLDING PERIOD OF SHAR ES IS LESS THAN ONE MONTH, THE ASSESSEE HAS SOLD THESE SHARES NOT FOR EARNING THE PROFIT BUT TO AVOID THE LOSS TO THE ASS ESSEE BEING THE PRUDENT PERSON. HE HAS FURTHER SUBMITTED THAT T HE ASSESSEE IS NOT INDULGED IN ANY SPECULATION TRANSAC TIONS, THE AMOUNT OF DIVIDEND EARNED BY THE ASSESSEE IS SUBSTA NTIAL BEING RS. .5,23,396/- WHICH GIVES A DIVIDEND YIEL D AT THE RATE OF 3.49%. THE NUMBER OF SHARES PURCHASED BY THE AS SESSEE DURING THE YEAR ARE RS.2,31,134/- AND THE NUMBER O F SHARES SOLD ARE RS.169534. THEREFORE, THE SALE DURING T HE YEAR IS ONLY 72.72% OF THE PURCHASES. HE HAS RELIED UPON THE DECISION OF THIS TRIBUNAL IN THE CASE OF VINOD M S HAH V/S ADDL.CIT REPORTED IN 38 SOT 503(MUM) AND THE DECISI ON OF THIS TRIBUNAL IN THE CASE OF DY. COMMISSIONER OF I NCOME TAX 4(2) V/S M/S. SMK SHARES & STOCK BROKING PVT. LTD. IN ITA ITA NO. 5238/MUM/2009 (ASSESSMENT YEARS: 2006-07) 6 NO.799/MUM./2009 (ASSESSMENT YEAR : 200506) ORDER DATED 24.11.2010. 7. ON THE OTHER HAND, THE LEARNED DR HA SUBMITTED T HAT THE ASSESSEE HAS HIMSELF ADMITTED THE INCOME FROM PURCH ASE AND SALE OF THE SHARES AS BUSINESS INCOME FOR THE ASSES SMENT YEAR 2004-05. HE HAS REFERRED THE ORDER OF THE AO AS WEL L AS THE LEARNED CIT(A) AND SUBMITTED THAT WHEN THE ASSESSE E HIMSELF HAD ADMITTED THE PROFIT ON SALE OF SHARES AS TRADIN G ADDITIVES AND THERE IS NO CHANGE IN THE CIRCUMSTANCES THEN A BRUPT CHANGE IN METHOD OF ACCOUNTING IS NOT PERMISSIBLE. THE ASSESSEE HAS INTENDED TO AVOID THE TAX LIABILITY IN VIEW OF CHANGE IN LAW NO TAX ON LONG TERM CAPITAL GAIN ON SALE OF INVESTMENT IN SHARES AND ONLY 10% ON SHORT TERM CA PITAL GAIN FROM THE INVESTMENTS IN SHARES. HE HAS FURTHER SUB MITTED THAT PRIOR TO THE ASSESSMENT YEAR 2003-04 THE ASSESSEE WAS ONLY INVESTING IN MUTUAL FUNDS AND FROM THE ASSESSMENT Y EAR 2004- 05, THE ASSESSEE STARTED IN DEALING IN SHARES AND O FFERED THE INCOME AS INCOME FROM THE BUSINESS BY ESTIMATING TH E TRANSACTION OF SHARES AND TRADING ACTIVITIES. THE LEARNED DR FURTHER POINTED OUT THAT THE ASSESSEE HAS SHOWN THE INTEREST ON BANK OD AT RS.8,53,366/- WHICH CLEARY SHOWS THA T THE ASSESSEE WAS USING THE BORROWED FUNDS FOR THE PURP OSE OF PURCHASE AND SALE OF SHARES. THE LEARNED DR HAS FU RTHER POINTED THAT THE ASSESSEE HAS MAINTAINED FULL OFFI CE CUM ITA NO. 5238/MUM/2009 (ASSESSMENT YEARS: 2006-07) 7 RESIDENCE ON RENT BASIS FOR THE PURPOSE OF CARRYING OUT BUSINESS OF SHARE TRADING AND HAS DEBITED VARIOUS EXPENSES SUCH AS TELEPHONE EXPENSES, PROFESSIONAL FEES, BAN K CHARGES, DEPRECIATION, RENT, CONVEYANCE, ELECTRICITY AND DEM AT CHARGES IN HIS CAPITAL ACCOUNT. HE HAS RELIED UPON THE OR DERS OF THE LOWER AUTHORITIES. 30.8.2010 8. IN REBUTTAL, THE LEARNED AR HAS SUBMITTED THAT THERE IS NO BASIS OF FACTS RECORDED BY THE AUTHORITIES BELOW THAT THE ASSESSEE HAS BEEN MAINTAINING FULL OFFICE CUM RESI DENCE FOR THE PURPOSE OF SHARE TRADING. HE HAS POINTED OUT T HAT THAT NO STOCK AND NO OFFICE EXPENSES ARE DEBITED IN THE BOO KS OF ACCOUNT BY THE ASSESSEE, THEREFORE, OBSERVATIONS MA DE BYS THE LOWER AUTHORITIES IS WITHOUT ANY BASIS. 9. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND REL EVANT RECORD. THE ASSESSEE HAS FILED THE CHART GIVING D ETAILS OF SHARE PURCHASED AND SOLD AND ALSO SHORT TERM CAPITA L AND LONG TERMS CAPITAL GAIN. THE CHART IS REPRODUCED BELOW : SHRI CHHITURBHAI N PATEL STATEMENT SHOWING DETAILS OF SALES AND PURCHASE OF SHARES FOR THE YEAR ENDING 31.03/2006 SHORT TERM CAPITAL GAIN NAME OF SCRIP NO. OF SHARES HOLDING PERIOD(IN DAYS) PURCHASE AMOUNT SALES AMOUNT CAPITAL GAIN DIVIDEND NO.OF TRANSACTION DURING THE YEAR PURCHASE + SALES 31 INFOTECH LTD 8,400 156 1,105,895.00 1,509,780.00 403,885.00 2 + 2 ACC LTD 1200 4 575296.00 560490.00 (14,806.00) 1 + 1 BONGAINGAON REFINERY 6100 76 573717.00 433700.00 (140017.00) 36600 2 + 2 GUJARAT 6400 102 505506.00 528889.00 23383.00 1 + 2 ITA NO. 5238/MUM/2009 (ASSESSMENT YEARS: 2006-07) 8 AMBUJA CEMENT ICICI LTD 6600 2 TO 5 MONTHS 2801624.00 3467165.00 665541.00 56100 1 + 6 INDIA GLYCOL 500 20 80,292.00 76320.00 (3972.00) 1 + 1 IPCL 1000 73 284792.00 269759.00 (15033.00) 2 + 2 TATA SPONGE-LPI TATA 2000 38 320544.00 338998.00 18454.00 1 + 1 JINDAL VIYAYNAGAR STEEL 3300 7 733249.00 833278.00 100029.00 1 + 1 MONNET ISPTA 1500 7 307864.00 296832.00 (11,032.00) 1 + 2 MUKUND 900 15 77327.00 70476.00 (6851.00) 2 + 1 MOSER BAER 3250 3 762249.00 716383.00 (45866.00) 1 + 1 MYSORE CEMENT LTD 30000 34 1175200.00 1014898.00 (160302) 1 + 1 RAINBAXY LABORATORIES 1000 91 509983.00 364172.00 (145811.00) 2500 1 + 2 SAIL 31500 10 MONTHS (LT) 1562127.97 1670514.18 108386.21 1 + 1 SBI 800 2 626471.00 610861.00 (15610.00) 1 + 1 TATA CHEMICALS 1000 4 197998.00 191133.00 (68.6500) 1 + 1 THIRUMALAI CHEMICALS 500 20 68155.00 67140.00 (1015.00) 1 + 2 TISCO 28950 5 TO 10 MONTHS 5729896.62 10352322.00 4622426.38 426175 2 + 8 RELIANCE INDUSTRIES NEW 1100 44 504994.00 770622.00 265628.00 11+ 1 RELIANCE NATURAL RESORUCES 31500 10 652203.00 1096145.00 443942.00 2 + 1 TOTAL 6084494.59 37+ 40 SHRI CHHITURBHAI N PATEL STATEMENT SHOWING DETAILS OF SALES AND PURCHASE OF SHARES FOR THE YEAR ENDING 31.03/2006 LONG TERM CAPITAL GAIN NAME OF SCRIP NO. OF SHARES HOLDING PERIOD(IN DAYS) PURCHASE AMOUNT SALES AMOUNT CAPITAL GAIN DIVIDEND NO.OF TRANSACTION DURING THE YEAR PURCHASE + SALES NTPC 1648 14 134152.70 194132.00 59979.30 2021.00 1 + 1 TOTAL 59979.30 1 + 1 FROM THE ABOVE DETAILS, THE UNDISPUTED FACTS EMERG ED OUT THAT THERE WERE TOTAL 79 TRANSACTIONS OF PURCHASE AND SA LES OF SHARES IN 23 SCRIPTS. THUS, IN AN AVERAGE, THE AS SESSEE HAS MADE ABOUT 3 TRANSACTIONS OF PURCHASE AND 3 TRANS ACTIONS ITA NO. 5238/MUM/2009 (ASSESSMENT YEARS: 2006-07) 9 OF SALES IN A MONTH DURING THE YEAR UNDER CONSIDER ATION. THERE IS NO STRAIGHT JACKET FORMULA TO DECIDE THE NATURE OF TRANSACTION TO BE TREATED AS INVESTMENT OR TRADING. THE BOARD HAS ISSUED GUIDELINES VIDE INSTRUCTION NO.1827 DATE D 31.08.1989 TO DETERMINE WHETHER THE TRANSACTIONS TO BE TREATED AS TRADING OR INVESTMENTS WHICH ARE REPRODU CE BELOW FOR THE SAKE OF CONVENIENCE : I. WHETHER THE PURCHASE AND SALE OF SECURITIES WAS ALLIED TO HIS USUAL TRADE OR BUSINESS WAS INCIDENTAL TO IT OR WAS AN OCCASIONAL INDEPENDENT ACTIVITY; II. WHETHER THE PURCHASE IS MADE SOLELY WITH THE IN TENTION TO RESALE AT A PROFIT OR FOR LONG TERM APPRECIATION AN D / OR FOR EARNING DIVIDENDS AND INTEREST; III. WHETHER SCALE OF ACTIVITY IS SUBSTANTIAL; IV. WHETHER TRANSACTIONS WERE ENTERED INTO CONTINUO USLY AND REGULARLY DURING THE ASSESSMENT YEAR; V. WHETHER PURCHASES ARE MADE OUT OF OWN FUNDS OR BORROWINGS; VI. TYPICAL HOLDING PERIOD FOR SECURITIES BROUGHT A ND SOLD; VII. RATIO OF SALES TO PURCHASES AND HOLDING; VIII. THE TIME DEVOTED TO THE ACTIVITY AND THE EXTE NT TO WHICH IT IS THE MEANS OF LIVELIHOOD; IX. THE CHARACTERIZATION OF SECURITIES IN THE BOOKS OF ACCOUNT AND IN BALANCE SHEET AS STOCK IN TRADE OR INVESTMEN TS; X. WHETHER THE SECURITIES PURCHASED OR SOLD ARE LIS TED OR UNLISTED; XI. WHETHER INVESTMENT IS IN SISTER / RELATED CONCE RNS OR INDEPENDENT COMPANIES; XII. WHETHER TRANSACTION IS BY PROMOTERS OF THE COM PANY; XIII. TOTAL NUMBER OF STOCKS DEALT IN; AND ITA NO. 5238/MUM/2009 (ASSESSMENT YEARS: 2006-07) 10 XIV. WHETHER MONEY HAS BEEN PAID OR RECEIVED OR WHE THER THESE ARE ONLY BOOK ENTRIES. 10. THUS, IT IS CLEAR THAT THERE IS NO SINGLE CR ITERION FOR DETERMINING THE NATURE OF TRANSACTION AND EACH CAS E HAS TO BE DECIDED ON ITS PECULIAR FACTS AND CIRCUMSTANCE OF T HE CASE. THE INTENT OF THE ASSESSEE AT THE TIME OF THE PURC HASE AND SALE OF THE SHARES IS AN IMPORTANT FACTOR IN DETE RMINING THE NATURE OF TRANSACTION. FROM THE DETAILS AS REPRODUC ED ABOVE, IT IS CLEAR THAT THE NUMBER OF TRANSACTIONS AND THE FR EQUENCY OF THE TRANSACTIONS ARE NOT TO THAT EXTENT TO ARRIVE AT THE CONCLUSION THAT THE SALE AND PURCHASE WAS FOR EARNI NG THE INCOME ON TRADING IN THE SHARES. IT IS TO BE NOTED THAT ALL TRANSACTIONS, THE HOLDING PERIOD OF THOSE ARE LES S THAN 30 DAYS ARE ABOUT 10 IN NUMBER AND EXCEPT TWO ALL OTH ER RESULTANT LOSS. THEREFORE, IT APPEARS THAT THE SHOR T PERIOD OF HOLDINGS OF THESE SHARES WAS WITH A VIEW TO SAVE F URTHER LOSS ON THE PARTICULAR SCRIPTS AND NOT WITH A VIEW TO E ARN PROFIT IN THE SHORTEST POSSIBLE PERIOD. THUS, BY ANALYZING T HE DETAILS OF THE TRANSACTIONS, WE HAVE NO DOUBT THAT THE INTENT OF THE ASSESSEE WAS NOT FOR EARNING PROFIT BY TRADING IN S HARES BUT FOR EARNING THE PROFIT DUE TO APPRECIATION IN THE VALU E OF THE SHARES AND EARNING THE DIVIDEND. THE ASSESSEE HAS NOT BOOKED ANY EXPENDITURE AGAINST THE INCOME SHOWN AS CAPITAL GAIN FROM THE PURCHASE AND SALE OF THE SHARES. ALL THE EXPENDITURE HAS BEEN TRANSFERRED TO THE CAPITAL ACC OUNT OF THE ITA NO. 5238/MUM/2009 (ASSESSMENT YEARS: 2006-07) 11 ASSESSEE AND NOT CHARGED AGAINST THE INCOME. THE A SSESSEE HAS ALSO EARNED THE DIVIDEND INCOME OF RS.5,23,396 /-. THEREFORE, IN TOTALITY OF THE CIRCUMSTANCES, THE IN TENT OF THE ASSESSEE IS CLEAR THAT THE SALE AND PURCHASE OF THE SHARES BY THE ASSESSEE WERE IN THE NATURE OF INVESTMENT. AS FAR AS RULES OF CONSISTENCY IS CONCERNED, WE NOTE THAT FOR THE A SSESSMENT YEARS 2003-04, THE ASSESSEE HAS SHOWN THE INVESTMEN T IN SHARES IN THE BALANCE SHEET AT PAGE 4 OF THE PAPE R BOOK AS UNDER : SHARES ORIENT PAPER LTD (400) 8,000.00 COLOUR CHIPS LTD (400) 16,000.00 JINDAL IRON AND STEEL (3000) 2,14,900.0 JINDAL STEEL AND POWER (250) 86,212.00 JINDAL STRIPS (1000) 1,43,850.00 CENTURY TEXTILES (1000) 67,850.00 TISCO (1000) 1,39,750.00 11. THEREFORE, EVEN PRIOR TO THE ASSESSMENT YEAR 2 004-05, THE ASESEEE WAS SHOWING THE PURCHASE OF SHARES AS INVESTMENT IN THE BOOKS OF ACCOUNT AND CONSEQUENTLY IF RULE OF CONSISTENCY HAS TO BE APPLIED. THE SAME SHOULD H AVE BEEN APPLIED IN THE ASSESSMENT YEAR 2004-05, WHERE THE A SSESSEE HAS CHANGED THE METHOD OF ACCOUNTING IN COMPARISON TO THE EARLIER YEAR AS WELL AS IN THE SUBSEQUENT YEAR. SI NCE THERE ARE DECISIONS ON BOTH SIDES ON THIS POINT, THEREFOR E, EACH CASE HAS TO BE DECIDED ON ITS OWN FACTS. HAVING REGARD TO THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE , WE ARE OF CONSIDERED VIEW THAT THE TRANSACTIONS OF SALE AND P URCHASE BY THE ASSESSEE WAS IN THE NATURE OF INVESTMENT IN SHA RES AND ITA NO. 5238/MUM/2009 (ASSESSMENT YEARS: 2006-07) 12 NOT TRADING IN SHARES. THEREFORE, WE SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES QUA THIS ISSUE. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. PRONOUNCED IN THE OPEN COURT ON 20.12.2010 SD SD (R.S.SYAL) (VIJ AY PAL RAO) ACCOUNTANT MEMBER JUDICIAL MEMB ER MUMBAI, ON THIS 20 TH DAY OF DEC, 2010 SRL:131210 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI