SUMEGH MODI, MUMBAI V. DCIT 14(3), MUMBAI

ITA 5599/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 55502 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-10-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2006-2007
• Appeal Filed On: 09-07-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: G P TRIVEDI
• Keywords: Business income; Rule of consistency
• Section: 143(3)

Judgement Text

1 ITA 5599/ M/2010, SHRI SUMEGH MODI IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E BEFORE SHRI R.K. PANDA, A.M. AND SHRI V. DURGA RAO, J.M. ITA NO. 5599/MUM/2010 ASSESSMENT YEAR 2006-07 SHRI SUMEGH MODI, IST FLOOR, UJAMSHI BHAVAN, 127 VITHALBHAI PATEL ROAD, MUMBAI - 400 004. PAN AAAPM 6881D VS. DY. COMMISSIONER OF INCOME TAX 14(3), EARNESH HOUSE, NARIMAN POINT, MUMBAI 400021. APPELLANT RESPONDENT APPELLANT BY SHRI SATISH R. MODY RESPONDENT BY SHRI G.P. TRIVEDI DATE OF HEARING 29.9.2011 DATE OF PRONOUNCEMENT 12.10.2011 ORDER PER R.K. PANDA A.M. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER DT. 28.05.2010 OF THE CIT(A)- 25, MUMBAI RELATING TO A.Y. 2006-07. 2. THE ASSESSEE IN HIS GROUNDS OF APPEAL HAS CHALLE NGED THE ORDER OF THE LD. CIT(A) IN CONFIRMING THE A.O.S ACTION IN TREATING THE PROFIT FROM SALE OF SHARES AT ` 38,34,022/- AS BUSINESS INCOME AS AGAINST CAPITAL GAIN DECLARED BY THE ASSESSEE. 3. FACTS OF THE CASE IN BRIEF ARE THAT THE A.O. DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS NOTED THAT THE ASSESSEE HAS SHOWN INCOME FROM SPECULATIVE ACTIVITIES, LONG TERM AND SHORT TERM CA PITAL GAINS AND INTEREST 2 ITA 5599/ M/2010, SHRI SUMEGH MODI INCOME. FROM THE COMPUTATION OF TOTAL INCOME, HE N OTED THAT THE ASSESSEE HAS EARNED SHORT TERM CAPITAL GAIN OF ` 38,34,022/-, THE DETAILS OF WHICH ARE AS UNDER:- SHORT TERM CAPITAL GAINS-SUBJECT TO STT 34,46,127 ADD ADJUSTMENTS UNDER SECTION 94(7) 15,542 34,60,669 SHORT TERM CAPITAL GAINS NOT SUBJECT TO STT 3,73,353 38,34,022 3.1 FROM THE VARIOUS DETAILS FURNISHED BY THE ASSES SEE, HE NOTED THAT THE ASSESSEE HAS PURCHASED 231860 NOS OF SHARES OF VARI OUS COMPANIES FOR A CONSIDERATION OF ` 2,90,51,777/- AND SOLD FOR A CONSIDERATION OF ` 3,24,97,905/- ON WHICH HE HAS PAID SECURITIES TRANS ACTION TAX. THE SHORT TERM CAPITAL GAIN ON SAID SALE OF SHARES IS SHOWN AT ` 34,46,128/-. HE NOTED THAT THE ASSESSEE HAS PURCHASED 595552 NOS OF SHARES OF THE SCRIP RELIANCE FOR A CONSIDERATION OF ` 66 LACS AND 2287575 UNITS OF LIC MUTUAL FUND FOR A CONSIDERATION OF ` 2,50,00,000/- AND HAS SOLD THE SAME FOR A CONSIDER ATION OF ` 68,68,158/- AND ` 2,51,05,195/- RESPECTIVELY. THE SHORT TERM CAPITA L GAIN ON SAID SALE OF SHARES/UNITS IS SHOWN AT ` 3,73,353/- ON WHICH NO SECURITY TRANSACTION TAX IS PAID. CONSIDERING THE VOLUME AN D FREQUENCY OF TRANSACTIONS OF PURCHASE AND SALE OF SHARES/UNITS, THE A.O. WAS OF THE OPINION THAT THERE IS CLEARLY PROFIT MOTIVE IN SUCH TRANSACTION. THEREFOR E, THE A.O. ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE SHORT TERM CAPITA L GAIN OF ` 38,19,481/- SHOULD NOT BE TREATED AS BUSINESS INCOME AS AGAINST CAPITAL GAIN DECLARED BY HIM. 3.2 IT WAS EXPLAINED BY THE ASSESSEE THAT HE WAS AS SESSED TO TAX FOR THE PAST 20 YEARS AND IS MAKING INVESTMENT IN SHARES SINCE 1 988-89. IT WAS SUBMITTED THAT THE ASSESSEE IS NOT REGISTERED AS AN INTERMEDI ARY WITH SEBI AND HAS NOT CLAIMED SECURITY TRANSACTION TAX AS REBATE. THE IN VESTMENT IN SHARES HAS BEEN MADE OUT OF HIS OWN FUNDS AND NO BORROWINGS HA VE BEEN MADE OR UTILIZED FOR MAKING THIS INVESTMENT. THE SECURITIES ARE SHOW N AS INVESTMENTS IN THE 3 ITA 5599/ M/2010, SHRI SUMEGH MODI BOOKS OF ACCOUNT UNDER THE HEAD INVESTMENTS AND N OT AS STOCK IN TRADE IN THE BALANCE SHEET. THE A.O. HAS ALSO ACCEPTED THE SAME IN EARLIER YEARS. THE RETURN OF INCOME FOR THE A.Y. 1995-96 WAS SELECTED FOR SCR UTINY WHEREIN SUCH INCOME WAS ALSO ACCEPTED BY THE A.O. AS CAPITAL GAINS. THE SE INVESTMENTS WERE NOT CONVERTED INTO STOCK IN TRADE. THE ASSESSEE HAS MAD E INVESTMENT IN INDEPENDENT COMPANIES AND NOT IN SISTER CONCERNS OR RELATED COMPANIES. THE ASSESASEE HAS MADE ALL THE INVESTMENTS IN LISTED CO MPANIES ONLY. MOST OF THE SHARES OF VARIOUS COMPANIES HAVE BEEN SOLD AFTER HO LDING IT FOR QUITE SOME TIME. IT WAS SUBMITTED THAT THE ASSESSEE HAS NO OR GANIZED SET UP OR INFRASTRUCTURE FOR CARRYING OUT THE SALE OF SHARES/ INVESTMENT ACTIVITIES AND HE IS CARRYING OUT THE INVESTMENT ACTIVITIES ON HIS OW N. THE ASSESSEE AS A KARTA OF HUF IS ENGAGED IN WAREHOUSING ACTIVITY WHICH IS OFF ERED FOR TAXATION IN RETURN OF INCOME OF ASSESSEES HUF. IT WAS FURTHER SUBMITT ED THAT SIMILAR TRANSACTIONS OF SALE AND PURCHASE OF SHARES IN THE PRECEDING YEA RS HAVE BEEN HELD TO BE INCOME FROM CAPITAL GAIN BOTH LONG TERM AND SHOR T TERM. THE TRANSACTIONS IN THE YEAR UNDER CONSIDERATION ON ACCOUNT OF SALE AND PURCHASE OF SHARES IS SAME AS IN THE PRECEDING YEARS AND THEREFORE THE SA ME SHOULD BE ACCEPTED AS CAPITAL GAINS. THERE IS NO BASIS FOR TREATING THE ASSESSEE AS A TRADER IN SHARES WHEN HIS INTENTION WAS TO HOLD THE SHARES IN INDIAN COMPANIES AS INVESTMENT AND NOT AS STOCK-IN-TRADE. MERE MAGNITUDE OF THE T RANSACTION DOES NOT CHANGE THE NATURE OF TRANSACTION WHICH ARE BEING ASSESSED AS INCOME FROM CAPITAL GAINS IN THE PAST SEVERAL YEARS. THE ASSESSEE ALSO RELIED ON VARIOUS DECISIONS AND CBDT CIRCULAR NO. 4/2007 DATED 15.6.2007 TO THI S PROPOSITION. IT WAS ACCORDINGLY SUBMITTED THAT THE PROFIT FROM PURCHASE AND SALE OF SHARES HAS TO BE TREATED AS SHORT TERM AND LONG TERM CAPITAL G AINS AND NOT AS BUSINESS INCOME. 3.3 HOWEVER, THE A.O. WAS NOT CONVINCED WITH THE EX PLANATION GIVEN BY THE ASSESSEE. HE OBSERVED THAT DURING A.Y. 1995-96 THE SHORT TERM CAPITAL GAINS WERE TAXED AT THE FLAT RATE SIMILAR TO THAT OF ANY TRADING ACTIVITY. THE VOLUME OF TRANSACTIONS, FREQUENCY OF TRANSACTIONS AND DURATIO N OF SHARES HELD ETC. WERE 4 ITA 5599/ M/2010, SHRI SUMEGH MODI NOT WARRANTED AT ALL AS BOTH TRADING IN SHARES OR A NY OTHER COMMODITY AND EARNING OF SHORT TERM CAPITAL GAINS ON INVESTMENT I N SHARES WERE TREATED AT PAR AND TAXED IN SIMILAR BLOCK. HE NOTED THAT IN ASSESS EES CASE FOR A.Y. 2005-06, THE DEPARTMENT HAS TAXED THE SHORT TERM CAPITAL GAI N AS BUSINESS INCOME. ACCORDING TO THE A.O. EACH ASSESSMENT YEAR IS A SEP ARATE ASSESSMENT YEAR AND THE DEPARTMENT CAN TAKE ANY VIEW HAVING REGARD TO T HE VOLUME AND FREQUENCY OF TRANSACTIONS OF PURCHASE AND SALE OF SHARES, THE SHORT INTERVAL BETWEEN PURCHASE AND SALE OF SHARES AND THE PROFIT MOTIVE O F THE ASSESSEE IN EACH TRANSACTIONS. HE NOTED THAT THE ASSESSEE HAS EARNE D DIVIDEND OF ` 1,84,150/- ONLY WHICH SHOWS THAT THE INTENTION OF THE ASSESSEE TO EARN DIVIDEND IS NOT CLEAR FROM THE TRANSACTIONS. HAD IT BEEN THE INTEN TION OF THE ASSESSEE TO INVEST IN SHARES, HE WOULD HAVE HELD THE SHARES/MUTUAL FUN D UNITS FOR LONGER PERIODS TO EARN HEFTY DIVIDEND AND GET PROFIT ON SALE OF SH ARES. HOWEVER, THE ASSESSEE HAS HELD THE SHARES FOR SMALL DURATION AND THE INTE NTION OF THE ASSESSEE IS VERY CLEAR TO EARN PROFIT FROM SUCH TRANSACTIONS. REJECT ING THE VARIOUS EXPLANATIONS GIVEN BY THE ASSESSEE AND DISTINGUISHING THE VARIOU S DECISIONS CITED BEFORE HIM, THE A.O. TREATED THE PROFIT FROM SHORT TERM CA PITAL GAIN OF ` 38,19,481/- AS INCOME FROM PROFITS AND GAINS OF BUSINESS/PROFESSIO N. 3.4 BEFORE THE LD. CIT(A), THE ASSESSEE REITERATED THE SAME SUBMISSION AS MADE BEFORE THE A.O. IT WAS SUBMITTED THAT DURING A.Y. 2005-06, THE A.O. HAS TREATED THE PROFIT FROM SALE OF SHARES AS BUSINESS INCOME AS AGAINST SHORT TERM CAPITAL GAIN TREATED BY THE ASSESSEE AND ON APPEAL, THE CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE. ACCORDINGLY, IT WAS SUBMITTED THA T THE CLAIM OF THE ASSESSEE SHOULD BE ACCEPTED. 3.5 HOWEVER, THE LD. CIT(A) WAS ALSO NOT CONVINCED WITH THE EXPLANATION GIVEN BY THE ASSESSEE AND UPHELD THE ACTION OF THE A.O. WHILE DOING SO, HE NOTED THAT THE FINDING OF HIS PREDECESSOR FOR A.Y. 2005-06 ON THE FACTS OF THAT YEAR ARE OF NO APPLICATION TO THE FACTS BROUGHT OUT ON RECORD FOR THE IMPUGNED 5 ITA 5599/ M/2010, SHRI SUMEGH MODI A.Y. HE NOTED THAT AS AGAINST 25 TRANSACTIONS ENTE RED INTO BY THE ASSESSEE DURING A.Y. 2005-06, THE ASSESSEE ADMITTED TO HAVE ENTERED INTO 82 TRANSACTIONS WHICH IS MORE THAN 3 TIMES OF THE TRAN SACTIONS OF EARLIER YEAR. THIS CLEARLY INDICATES THE HIGH FREQUENCY OF SUCH T RANSACTIONS IN THE SHARES AND MUTUAL FUNDS DURING THE YEAR AND THIS CANNOT BE IGNORED. FURTHER, THE NUMBER OF TRANSACTIONS ARE ALSO VERY HIGH DURING TH E YEAR AS AGAINST EARLIER YEAR. HE NOTED THAT THE ASSESSEE DURING THE YEAR H AD PURCHASED AND SOLD NUMBER OF SHARES TWICE OR THRICE AND MORE OF SAME S CRIPS. HE NOTED THAT 5000 SCRIPS OF ABG HEAVY INDUSTRIES PURCHASED ON 25.4.20 05 WERE SOLD ON 27.4.2005. AGAIN THE SAME SCRIP (3000 IN NO.) WAS P URCHASED ON 10.05.2005 AND SOLD ON 02.06.2005. SIMILARLY, PURCHASE OF AVER A SCRIP (1000 NO.) MADE ON 01.03.2006 WAS SOLD ON 02.03.2006, WHICH WAS AGA IN PURCHASED ON 03.03 2006 (1000 IN NUMBER) SOLD ON 08.03.2006 AND AGAIN PURCHASED (310 NO,) ON 09.03.2006 WAS SOLD ON 10.03.2006 AND AGAIN PURCHAS ED ON 13.03.2006 (500 SHARES) WAS SOLD ON 28.03.2006 AND AGAIN PURCHASED ON 17.03.2006 (5000 SHARES) WAS SOLD ON 28.03.2006 AND SO ON. SIMILARLY , SAME SCRIPS PURCHASED AND SOLD NUMBER OF TIME ARE ALSO IN RESPECT OF ASSA M CO., BAJAJ AUTO FINANCE, FAIRFIELD ATLAS, GATEWAY DISTRIP, HIND. ORGANIC, ID EC, KARNATAK BANK, NESCO, PUNJAB CHEM. TAJ GVK HOTEL, TITAN IND. UB HOLDING A ND SO ON. THUS, THE PURCHASE AND SALE OF SUCH SCRIPS FREQUENTLY MADE DU RING THE YEAR IS NOT INDICATIVE OF AN INVESTOR BUT CERTAINLY AN INDICATI VE FACTOR OF A TRADER. FURTHER, IN THE EARLIER YEAR THE PERIOD OF HOLDING WAS ALSO FOUND TO BE GOOD THOUGH THE ASSESSEE IN THE SUBMISSIONS AND THE WORKING GIVEN, HAS CLAIMED THE AVERAGE PERIOD OF HOLDING TO BE 2.17 MONTHS I.E. 65.15 DAYS BUT ON CLOSE SCRUTINY OF THIS WORKING HE NOTED THAT THE LONGER OF HOLDING IS RELA TING TO THE SHARES PURCHASED DURING THE EARLIER YEARS, THE TRANSACTION OF WHICH IS FOUND TO BE ONLY 27 IN NUMBER. BUT FOR THE REMAINING TRANSACTIONS OF SHARE S BOTH THE PURCHASES AND SALES MADE WERE DURING THE YEAR ITSELF AND AVERAGE HOLDING IS ALMOST BELOW 30 DAYS. THUS, DURING THE YEAR UNDER APPEAL, THE ASSES SEE HAS CERTAINLY ENTERED INTO TRADING ACTIVITY IN SHARES MORE PARTICULARLY O F THE SHARES PURCHASED DURING THE YEAR WHICH CANNOT BE HELD TO BE AN INDICATIVE F ACTOR FOR INVESTMENT RATHER 6 ITA 5599/ M/2010, SHRI SUMEGH MODI CLEARLY ESTABLISHES THE ACTIVITY BEING IN THE NATUR E OF TRADING, AS THE ASSESSEE DURING THE YEAR WAS INVOLVED IN FREQUENT PURCHASES AND SALES OF THE SHARES AT SHORT INTERVALS. FURTHER, IN THE EARLIER YEAR, HIS PREDECESSOR HAS FOUND THAT SALE OF SHARES WERE MADE ONLY AFTER A DESIRED QUANTITY H AS BEEN BOUGHT WHICH REVEALED THAT ASSESSEE DID NOT PURCHASE AND SALE SA ME SCRIPS AGAIN AND AGAIN ENTICING A TRADING INTENTION. BUT DURING THE YEAR U NDER APPEAL AS MENTIONED ABOVE, THE ASSESSEE HAS PURCHASED AND SOLD THE SAME SCRIPS AGAIN AND AGAIN AND AT NUMBER OF TIMES WHICH IS CLEARLY AN INDICATI VE FACTOR OF A TRADER. FURTHER, IN THE EARLIER YEAR THE ASSESSEE HAS SHOWN DIVIDEND INCOME OF ` 1,18,024/- AGAINST THE STCG OF ` 3,99,756/-, WHICH BY THE THEN CIT(A) TO BE AN INDICATING FACTOR OF THE ASSESSEE KEEPING AN EYE ON CAPITAL APPRECIATION AND PROLONGING THE INVESTMENTS FOR LONGER PERIODS OF HO LDING TO GET IT RECORDED FOR THE PURPOSE OF DIVIDEND AND IS A CHARACTERISTIC OF GOOD INVESTOR THAN A TRADER WHO MERELY BOTHERS ABOUT MAKING QUICK PROFITS WITHI N SHORT SPAN OF TIME TOTALLY IGNORING THE DIVIDEND TO BE RECEIVED. BUT D URING THE YEAR UNDER APPEAL AGAINST THE STCG OF ` 38,34,022/-, THE DIVIDEND EARNED AND DECLARED IS A T ` 1,84,150/-, WHICH CLEARLY INDICATES THE INTENTION O F THE ASSESSEE FOR MAKING QUICK PROFITS WITHIN SHORT SPAN OF TIME, TOTALLY IG NORING THE DIVIDEND TO BE EARNED AND CAPITAL APPRECIATION. THEREFORE, THE FAC TS RELATING TO THE SHARE TRANSACTIONS DURING THE YEAR ARE DISTINCTLY AND DRA STICALLY DISTINGUISHABLE AS BROUGHT OUT ABOVE. HENCE THE LD. CIT(A) HELD THAT T HE FINDINGS OF HIS PREDECESSOR FOR AY 2005-06 ON THE FACTS OF THAT YEA R ARE HAVING NO APPLICATION TO THE FACTS BROUGHT OUT ON RECORD FOR THE YEAR UND ER APPEAL. 3.6 HE NOTED THAT THE VOLUME AND FREQUENCY OF TRANS ACTIONS IN PURCHASE AND SALE OF SHARES CLEARLY INDICATE THAT THE INTENTION OF THE ASSESSEE IS THAT OF A TRADER AND NOT AN INVESTOR. RELYING ON A COUPLE OF DECISIONS, HE HELD THAT THE PROFIT EARNED FROM THE TRANSACTIONS OF SHARES AND M UTUAL FUNDS HAS RIGHTLY BEEN TREATED AS BUSINESS INCOME BY THE A.O. AS AGAI NST SHORT TERM CAPITAL GAIN DECLARED BY THE ASSESSEE. HE ACCORDINGLY DISMISSED THE GROUND RAISED BY THE 7 ITA 5599/ M/2010, SHRI SUMEGH MODI ASSESSEE. AGGRIEVED WITH SUCH ORDER OF THE LD. CIT (A), THE ASSESSEE IS IN APPEAL BEFORE US. 4. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SAME SUBMISSIONS AS MADE BEFORE THE A.O. AND LD. CIT(A). REFERRING TO PAGE 1 OF THE PAPER BOOK HE SUBMITTED THAT THE ASSESSEE HAS SOLD SHARES TO THE EXTENT OF ` 12,576,550/- WHICH WERE HELD BY THE ASSESSEE AS ON 1.4.2005 AND THE COST OF THE SHARES WAS ` 95,34,433/-. THUS THE ASSESSEE HAS EARNED GAIN OF ` 30,42,117/- ON ACCOUNT OF SALE OF SHARES WHICH WERE PURCHASED DURING THE P RECEDING A.Y. AND SHOWN AS INVESTMENT IN THE BALANCE SHEET. HE SUBMITTED T HAT THE ASSESSEE DURING THE IMPUGNED A.Y. HAS PURCHASED SHARES WORTH ` 5,11,17,344/- WHICH WERE SOLD FOR ` 5,18,94,708/- AND MADE SHORT TERM CAPITAL GAIN OF ` 7,77,364/-. THE SHORT TERM CAPITAL GAIN OF ` 3,819,481/- CONSISTS OF PROFIT AND SALE OF SHARES HELD AT THE BEGINNING OF THE YEAR WHICH WERE SOLD D URING THE YEAR AND SHARES PURCHASED AND SOLD DURING THE YEAR. HE SUBMITTED TH AT THE A.O. IN THE PRECEDING A.Y. I.E. A.Y. 2005-06 HAS TREATED THE PR OFIT FROM PURCHASE AND SALE OF SHARES AS BUSINESS INCOME AND IN APPEAL, THE CIT (A) ALLOWED THE CLAIM OF THE ASSESSEE BY HOLDING THAT PROFIT FROM SALE OF SHARES AND MUTUAL FUNDS IS SHORT TERM CAPITAL GAIN AND THE DEPARTMENT HAD NOT GONE O N APPEAL AGAINST THE ORDER OF THE LD. CIT(A). HE SUBMITTED THAT DURING A.Y. 20 04-05, THE CLAIM OF THE ASSESSEE TREATING THE PROFIT ON SALE OF SHARES AS S HORT TERM CAPITAL GAIN HAS BEEN ACCEPTED BY THE DEPARTMENT U/S 143(1). HE SUB MITTED THAT DURING A.Y. 2007-08, THE REVENUE HAS ACCEPTED THE CLAIM OF SHOR T TERM CAPITAL GAIN ON ACCOUNT OF PURCHASE AND SALE OF SHARES AMOUNTING TO ` 30,08,655/-U/S 143(1) OF THE ACT. SIMILARLY IN THE A.Y. 2008-09, THE A.O . VIDE ORDER PASSED U/S 143(3) HAS ALLOWED THE CLAIM OF SHORT TERM CAPITAL GAIN. REFERRING TO THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS . GOPAL PUROHIT, HE SUBMITTED THAT IN VIEW OF RULE OF CONSISTENCY, THE CLAIM OF THE ASSESSEE SHOULD BE ALLOWED. HE SUBMITTED THAT THE A.O. WHILE REJEC TING THE CLAIM OF SHORT TERM CAPITAL GAIN HAS RELIED ON THE ORDER OF HIS PREDECE SSOR FOR A.Y. 2005-06 WHICH 8 ITA 5599/ M/2010, SHRI SUMEGH MODI HAS SINCE BEEN REVERSED BY THE LD. CIT(A) AND THE D EPARTMENT IS NOT IN APPEAL, THEREFORE, THE LD. CIT(A) SHOULD HAVE FOLLOWED THE ORDER OF HIS PREDECESSOR. HE SUBMITTED THAT THE ASSESSEE HAS NOT PAID ANY INTERE ST ON BORROWED CAPITAL UTILIZED FOR INVESTMENT PURPOSE AND THE SHARES HAVE BEEN VALUED AT COST PRICE IN THE BALANCE SHEET. THE ASSESSEE HAS NOT TAKEN B ENEFIT OF DIMINUTION IN THE VALUE OF SHARES. REFERRING TO A COUPLE OF DECISION S OF THE TRIBUNAL INCLUDING THE DECISION OF CO-ORDINATE BENCH OF THE TRIBUNAL IN TH E CASE OF SHANTILAL M JAIN VS. ACIT IN ITA NO. 2690/MUM/2010 FOR A.Y. 2006-07 ORDER DTD. 27.4.11, HE SUBMITTED THAT THE TRIBUNAL HAS FOLLOWED THE RULE O F CONSISTENCY AND ALLOWED THE CLAIM OF SHORT TERM CAPITAL GAINS MADE BY THE A SSESSEE ON ACCOUNT OF PURCHASE AND SALE OF SHARES. 4.1 IN HIS ALTERNATE ARGUMENT, HE SUBMITTED THAT SI NCE THE PROFIT ON SALE OF SHARES OF THE PRECEDING ASSESSMENT YEAR HAS BEEN AC CEPTED AS SHORT TERM CAPITAL GAIN AND THE INVESTMENT SHOWN IN THE BALANC E SHEET HAS BEEN ACCEPTED, THEREFORE, THE PROFIT ON SALE OF THOSE SHARES WHICH APPEARED IN THE BALANCE SHEET AS ON 31.3.2005 UNDER THE HEAD INVESTMENT C ANNOT BE TREATED AS BUSINESS INCOME. THE A.O. AT BEST COULD HAVE BROUG HT TO TAX THE AMOUNT OF ` 7,75,364/- ONLY AS BUSINESS INCOME. THE LD. COUNSE L FOR THE ASSESSEE REFERRING TO THE ORDER OF THE TRIBUNAL IN THE CASE OF HUSBAND OF THE ASSESSEE SHRI PRAFUL D. MODI SUBMITTED THAT THE TRIBUNAL UNDER IDENTICAL CIRCUMSTANCES HAS ACCEPTED THE CLAIM OF SHORT TERM CAPITAL GAIN MADE BY HER HUSBAND. HE ACCORDINGLY SUBMITTED THAT THE CLAIM OF THE ASSESSE E SHOULD BE ALLOWED. 5. THE LD. D.R., ON THE OTHER HAND, HEAVILY RELIED ON THE ORDER OF THE LD. CIT(A). HE SUBMITTED THAT THE VARIOUS CASE DECISIO NS RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE DO NOT APPLY TO THE FACTS OF THE PRESENT CASE. THE DECISION OF THE LD. CIT(A) IN ASSESSEES OWN CASE F OR THE IMMEDIATELY PRECEDING ASSESSMENT YEAR IS ALSO NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. DURING THE YEAR THE VOLUME, FREQUENCY AND THE PERIOD OF HO LDING OF THE SHARES GIVE A 9 ITA 5599/ M/2010, SHRI SUMEGH MODI CLEAR INDICATION ABOUT THE INTENTION OF THE ASSESSE E THAT HE IS A TRADER AND NOT AN INVESTOR. THIS IS FURTHER SUPPORTED BY THE REPE ATED NATURE OF TRANSACTIONS ON ACCOUNT OF SOME SCRIPS WHICH HAS ALREADY BEEN PO INTED BY THE LD. CIT(A) IN HIS ORDER. REFERRING TO THE DECISION OF THE TRIBUN AL IN THE CASE OF SMT. HARSHA N. MEHTA REPORTED IN 43 SOT 332 AND THE DECISION OF CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF IMMORTAL FINANCIAL SERVICES REPORTED IN 44 SOT 88, HE SUBMITTED THAT UNDER IDENTICAL FACTS AND CIRCUMSTAN CES, THE TRIBUNAL HAS HELD THE PROFIT FROM PURCHASE AND SALE OF SHARES AS BUSI NESS INCOME. AS REGARDS THE PROPOSITION OF RULE OF CONSISTENCY REFERRED TO BY THE LD. COUNSEL FOR THE ASSESSEE, THE LD. D.R. SUBMITTED THAT THE CONDUCT O F THE ASSESSEE DURING THE YEAR IS DIFFERENT FROM THAT OF THE PRECEDING AND SU BSEQUENT YEARS, THEREFORE, RULE OF CONSISTENCY CANNOT BE APPLIED TO THE FACTS OF THIS YEAR. FURTHER, THE CASE OF THE ASSESSEE HAS NOT BEEN SCRUTINIZED IN TH E SUBSEQUENT YEAR. 5.1 THE LD. COUNSEL FOR THE ASSESSEE, IN HIS REJOIN DER, REFERRING TO THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. DARIUS PANDOLE REPORTED IN (2011) 330 ITR 485 SUBMITTED THAT ONCE INCOME FROM SALE OF SHARES HAS BEEN TREATED AS BUSINESS INCOME IN AN EARLIER YEAR BY WA Y OF ASSESSMENT UNDER SECTION 143(3), IN THE NEXT YEAR IT CANNOT BE TAKEN AS CAPITAL GAIN. HE SUBMITTED THAT IF THE REVERSE POSITION IS TAKEN, TH EN IN THAT CASE, THE SHORT TERM CAPITAL GAIN HAVING BEEN ACCEPTED BY THE DEPARTMENT IN PRECEDING YEAR THE REVENUE CANNOT HELD THE SAME TO BE BUSINESS INCOME DURING THE IMPUGNED ASSESSMENT YEAR. REFERRING TO THE DECISION OF THE TRIBUNAL IN THE CASE OF ACIT VS. SHRI MANISH D. DESAI IN ITA NO. 3661/MUM/2010 O RDER DTD. 27 TH MAY, 2011 FOR A.Y. 2006-07, HE SUBMITTED THAT THE TRIBUN AL HAS FOLLOWED THE ABOVE CONVERSE PROPOSITION AND ACCEPTED THE CLAIM OF SHOR T TERM CAPITAL GAIN AS AGAINST BUSINESS INCOME DETERMINED BY THE A.O. 6. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDER OF THE A.O. AND LD. CIT(A) AND THE PLETHO RA OF DECISIONS CITED BY BOTH 10 ITA 5599/ M/2010, SHRI SUMEGH MODI THE SIDES. THERE IS NO DISPUTE TO THE FACT THAT IN THE A.Y. 2005-06, THE CLAIM OF SHORT TERM CAPITAL GAIN BY THE ASSESSEE ON ACCOUNT OF PROFIT ON PURCHASE AND SALE OF SHARES HAS BEEN TREATED AS BUSINESS INCOME BY THE A.O. THE LD. CIT(A) REVERSED THE ORDER OF THE A.O. AND ACCEPTED THE CLA IM OF SHORT TERM CAPITAL GAIN AS MADE BY THE ASSESSEE. THUS THE CLAIM OF SHORT TE RM CAPITAL GAIN ON ACCOUNT OF PURCHASE AND SALE OF SHARES WAS ACCEPTED BY THE REVENUE SINCE NO APPEAL HAS BEEN FILED BEFORE THE TRIBUNAL AGAINST THE ORDE R OF LD. CIT(A). THUS, THE INVESTMENTS SHOWN IN THE BALANCE SHEET HAVING BEEN ACCEPTED, THEREFORE, TO THE EXTENT THE PROFIT ON SALE OF SHARE APPEARING IN THE BALANCE SHEET AS ON 31.3.2005 I.E. AT THE BEGINNING OF THE IMPUGNED ASS ESSMENT YEAR HAS TO BE TREATED AS SHORT TERM CAPITAL GAIN. HOWEVER, SO FA R AS THE PROFIT OF ` 7,75,364/- ON ACCOUNT OF PURCHASE AND SALE OF SHARES IS CONCER NED, THE SAME IN OUR OPINION, CANNOT BE ACCEPTED AS SHORT TERM CAPITAL G AIN AND HAS TO BE TREATED AS PROFIT FROM BUSINESS. THIS IS BECAUSE THE VOLUME AN D FREQUENCY OF TRANSACTIONS DURING THE YEAR, THE PERIOD OF HOLDING OF THE SCRIP S AND , THE REPEATED NATURE OF TRANSACTIONS OF THE SAME SCRIPS GIVE A CLEAR INDICA TION THAT IT IS NOT A CASE OF INVESTMENT BUT IS OF TRADING. FOR EXAMPLE 5000 SHAR ES OF ABG HEAVY INDUSTRIES WERE PURCHASED ON 25.4.2005 AND SOLD ON 27.4.2005 A ND AGAIN 3000 SCRIPS OF THE SAME COMPANY WERE PURCHASED ON 10.5.2005 WHICH WERE SOLD ON 02.06.2005. SIMILARLY 1000 SCRIPS OF AVERA PURCHAS ED ON 1.3.2006 WERE SOLD ON 2.03.2006. THE ASSESSEE AGAIN PURCHASED THE SAME SCRIPS ON 3.3.2006 (1000 NOS) WHICH WERE SOLD ON 8.4.2006. THE ASSESSE E AGAIN PURCHASED 310 NOS. OF SHARES OF THE SAME COMPANY ON 9.3.2006 WHIC H WERE SOLD ON 10.3.2006. THE ASSESSEE AGAIN PURCHASED 500 SHARES OF THE SAME COMPANY ON 13.3.2006 AND ANOTHER 5000 SHARES ON 17.3.2006 WHIC H WERE SOLD ON 28.3.2006. SIMILARLY THE ASSESSEE HAS INDULGED IN T RANSACTIONS IN VARIOUS OTHER SCRIPS, THE DETAILS OF WHICH ARE ALREADY GIVEN BY T HE LD. CIT(A) IN HIS ORDER AND NOT CONTROVERTED BY THE LD. COUNSEL FOR THE ASSESSE E. THEREFORE, THE AMOUNT OF ` 7,77,364/- ON ACCOUNT OF PROFIT ON SALE OF SHARES W HICH WERE PURCHASED DURING THE YEAR HAS TO BE TREATED AS BUSINESS INCOME. THE VARIOUS DECISIONS RELIED ON 11 ITA 5599/ M/2010, SHRI SUMEGH MODI BY THE LD. COUNSEL FOR THE ASSESSEE ARE NOT APPLICA BLE TO THE FACTS OF THE PRESENT CASE. EACH CASE DEPENDS ON ITS OWN SET OF FACTS. A S REGARDS THE PROPOSITION OF RULE OF CONSISTENCY, THE SAME IS ALSO NOT APPLICABL E TO THE FACTS OF THE PRESENT CASE. FIRSTLY, THE PRINCIPLE OF RES JUDICATA DOES N OT APPLY TO INCOME-TAX PROCEEDINGS AND EACH ASSESSMENT YEAR IS SEPARATE AN D DISTINCT. SECONDLY, THE FACTS IN THE PRECEDING YEAR ARE DIFFERENT FROM THE FACTS OF THE IMPUGNED ASSESSMENT YEAR. IN THE PRECEDING YEAR, THE HOLDIN G PERIOD OF SHARES WAS FAIRLY LARGE WHEREAS DURING THE IMPUGNED ASSESSMENT YEAR, THE ASSESSEE IS CONTINUOUSLY BUYING AND SELLING THE SAME SCRIPS AND THE HOLDING PERIOD IN CERTAIN CASES IS AS LOW AS ONE DAY. THEREFORE, THE FACTS OF THE PRECEDING YEAR ARE NOT APPLICABLE. IN THIS VIEW OF THE MATTER, WE ARE OF THE CONSIDERED OPINION THAT THE PROFIT TO THE TUNE OF ` 30,40,117/- ON ACCOUNT OF SALE OF SHARES WHICH WER E PURCHASED IN THE PRECEDING ASSESSMENT YEAR AND WERE SHOWN AS INVESTMENT IN THE BALANCE SHEET AS ON 31.3.2005 HAS TO BE TREATED AS INCOME FROM SHORT TERM CAPITAL GAIN. THE PROFIT OF ` 7,77,364/- ON ACCOUNT OF SALE OF SHARES WHICH WERE PURCHASED DURING THE IMPUGNED ASSESSMENT YEAR, IN O UR OPINION, HAS TO BE TREATED AS BUSINESS INCOME. WE HOLD AND DIRECT ACC ORDINGLY. THE GROUNDS RAISED BY THE ASSESSEE ARE ACCORDINGLY PARTLY ALLOW ED. 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS P ARTLY ALLOWED. ORDER PRONOUNCED ON 12.10.2011. SD/- SD/- (V. DURGA RAO) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 12.10.2011. RK 12 ITA 5599/ M/2010, SHRI SUMEGH MODI COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 25, MUMBAI 4. THE CIT 14, MUMBAI 5. THE DR BENCH, E 6. MASTER FILE // TUE COPY// BY ORDER DY/ASSTT. REGISTRAR ITAT, MUMBAI