BUNKIM FINANCE & INVESTMENTS P. LTD, MUMBAI V. ITO 10(3)(1), MUMBAI

ITA 6166/MUM/2013

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 1145 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 1 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-12-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 23-02-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 21-10-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AJAY KUMAR LD
• Assessee Lawyers: RAJIV KHANDELWALLD
• Keywords: Capital asset; Business income; Rule of consistency; Earning of tax free income; Additional evidence; Question of law; Cost of acquisition; Futures and options; Rule 8D; Set aside; Capital Gains
• Section: 143(3); 234B; 14A; 195; 43; 73; 72; 13; 131; 263

Judgement Text

1 ITA NO.6166, 6491/MUM/2013 M/S. BUNKIM FINANCE & INVESTMENTS PVT.LTD. ASSESSMENT YEAR-2006-07 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI , , BEFORE SHRI SAKTIJIT DEY, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.6166/MUM/2013 ( / ASSESSMENT YEAR: 2006-07) BUNKIM FINANCE & INVESTMENTS PVT.LTD. BLOCK NO.15, 2 ND FLOOR DURGA SMRUTI BUILDING, GV SCHEME ROAD NO.2, MULUND (E), MUMBAI-400 081. / VS. INCOME TAX OFFICER 10(3)(1) MUMBAI. ./ ./PAN/GIR NO. AAACB-2974-K ( '# /APPELLANT ) : ( $%'# / RESPONDENT ) & ./ I.T.A. NO.6491/MUM/2013 ( / ASSESSMENT YEAR: 2006-07) INCOME TAX OFFICER 10(3)(1) MUMBAI. / VS. BUNKIM FINANCE & INVESTMENT S PVT.LTD. BLOCK NO.15, 2 ND FLOOR DURGA SMRUTI BUILDING, GV SCHEME ROAD NO.2, MULUND (E), MUMBAI-400 081. ./ ./PAN/GIR NO. AAACB-2974-K ( '# /APPELLANT ) : ( $%'# / RESPONDENT ) APPELLANT BY : SHRI RAJIV KHANDELWAL-LD. AR R ES PONDENT BY : SHRI AJAY KUMAR-LD. CIT-DR / DATE OF HEARING : 26/09/2019 / DATE OF PRONOUNCEMENT : 17/12/2019 2 ITA NO.6166, 6491/MUM/2013 M/S. BUNKIM FINANCE & INVESTMENTS PVT.LTD. ASSESSMENT YEAR-2006-07 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER): - 1.1 AFORESAID CROSS APPEALS FOR ASSESSMENT YEAR [AY ] 2006-07 CONTEST THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEAL S)-22, MUMBAI [CIT(A)], APPEAL NO. CIT(A)-22/ITO-10(3)-1/IT-78/2012-13 D ATED 01/08/2013. THE GROUNDS RAISED BY ASSESSEE READ AS UNDER: - 1. THE COMMISSIONER OF INCOME-TAX (APPEALS) - 22, M UMBAI (HEREINAFTER REFERRED TO AS THE CIT(A)) ERRED IN UPHOLDING THE ACTION OF THE IN COME-TAX OFFICER - 10(3)(1), MUMBAI (HEREINAFTER REFERRED TO AS THE ASSESSING OF FICER) IN DISALLOWING A SUM OF RS.1,53,828 UNDER SECTION 14A OF THE ACT. THE APPELLANTS CONTEND THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) OUGHT NOT TO HAVE UPHELD THE IMPUGN ED DISALLOWANCE OF RS 1,53,828 AS THERE IS NO EXPENDITURE INCURRED IN RELATION TO EARNING THE INCOME NOT FORMING PART OF THE TOTAL INCOME AND AS SUCH, NO DISALLOWANCE CA N BE MADE UNDER SECTION 14 A. 2. THE CIT(A) ERRED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN TREATING SHORT- TERM CAPITAL GAINS OF RS 53,27,430 AS A BUSINESS IN COME. THE APPELLANTS CONTEND THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) OUGHT NOT TO HAVE UPHELD THE ACTION OF THE ASSESSING OFFICER IN CONSIDERING THE CAPITAL GAINS ARISING ON SALE OF SH ORT-TERM CAPITAL ASSETS AS BUSINESS INCOME. 3. THE ASSESSING OFFICER ERRED IN CHARGING INTEREST UNDER SECTIONS 234B AND 234C OF THE ACT. THE APPELLANTS CONTEND THAT THE ASSESSING OFFICER O UGHT NOT TO HAVE CHARGED INTEREST UNDER SECTIONS 234B INASMUCH AS THE APPELL ANTS, IN TERMS OF SECTION 208, WERE NOT LIABLE TO PAY ADVANCE TAX. THE GROUNDS RAISED BY REVENUE READ AS UNDER: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN RESTRICTING THE DISALLOWANCE OF EXPENDITUR E MADE U/S.14A TO RS.1,53,828/- AGAINST RS.7,93,802/- DISALLOWED BY T HE ASSESSING OFFICER. 2.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO ASSESS THE PR OFIT & GAINS ON SALE OF SHARES UNDER THE HEAD CAPITAL GAINS (RS.16,56,89,573/- AS LTCG & RS.53,27,430/- AS STCG) AS AGAINST THE BUSINESS INCOME ASSESSED BY TH E ASSESSING OFFICER. 3 ITA NO.6166, 6491/MUM/2013 M/S. BUNKIM FINANCE & INVESTMENTS PVT.LTD. ASSESSMENT YEAR-2006-07 2.2 WITHOUT PREJUDICE, ON THE FACTS AND IN THE C IRCUMSTANCES OF THE CASE AND IN LAW, THE PROFIT & GAINS ON SALE OF SHARES ARE REQUIRED T O BE ASSESSED AS SPECULATION INCOME AS PER THE EXPLANATION OF SEC. 73 OF THE I. T. ACT.' 3. THE APPELLANT PRAYS THAT THE ORDER OF CIT( A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 1.2 THIS IS SECOND ROUND OF APPEAL BEFORE US SINCE INITIALLY THE APPEAL OF THE ASSESSEE WAS DISMISSED BY LEARNED FIRST APPELLA TE AUTHORITY VIDE ORDER DATED 21/07/2010. HOWEVER, UPON FURTHER APPEAL, THE TRIBUNAL SET-ASIDE THE IMPUGNED ORDER AND RESTORED THE MATTER BACK TO THE FILE OF LD. CIT(A) FOR RE- ADJUDICATION VIDE ITA NO. 6936/MUM/2010 ORDER DATED 27/01/2012. PURSUANT TO THE AFORESAID DIRECTIONS, THE LD. CIT(A ) HAS RE-ADJUDICATED THE ISSUES VIDE IMPUGNED ORDER DATED 01/08/2013 WHICH H AS GIVEN RISE TO PRESENT CROSS-APPEALS BEFORE US. 1.3 WE HAVE CAREFULLY HEARD THE RIVAL SUBMISSIONS, PERUSED RELEVANT MATERIAL ON RECORD INCLUDING DOCUMENTS PLACED IN TH E PAPER BOOK AND DELIBERATED ON JUDICIAL PRONOUNCEMENTS AS CITED BEF ORE US. OUR ADJUDICATION TO VARIOUS ISSUES OF CROSS-APPEALS IS AS GIVEN IN S UCCEEDING PARAGRAPHS. 2. FACTS ON RECORD WOULD REVEAL THAT THE ASSESSEE B EING RESIDENT CORPORATE ASSESSEE STATED TO BE ENGAGED IN TRADING AND INVESTMENT OF SHARES AND SECURITIES WAS ASSESSED FOR YEAR UNDER C ONSIDERATION U/S.143(3) OF THE ACT ON 31/12/2008 AT RS.1713.64 LACS AFTER C ERTAIN ADDITIONS / ADJUSTMENTS AS AGAINST NIL RETURN E-FILED BY THE ASSESSEE ON 30/11/2006. IN THE QUANTUM ASSESSMENT ORDER, THE ASSESSEE HAS SUFF ERED TWO ADJUSTMENTS VIZ. (I) DISALLOWANCE U/S 14A; AND (II) DENIAL OF E XEMPTION U/S 10(38) SINCE 4 ITA NO.6166, 6491/MUM/2013 M/S. BUNKIM FINANCE & INVESTMENTS PVT.LTD. ASSESSMENT YEAR-2006-07 LONG-TERM CAPITAL GAINS AS WELL AS SHORT-TERM CAPIT AL GAINS WERE TREATED AS BUSINESS INCOME. 3.1 DISALLOWANCE U/S 14A DURING ASSESSMENT PROCEEDINGS, UPON PERUSAL OF PROF IT & LOSS ACCOUNT, IT TRANSPIRED THAT THE ASSESSEE REFLECTED EXEMPT CAPIT AL GAIN OF RS.1656.89 LACS U/S 10(38) AND EXEMPT DIVIDEND INCOME U/S 10(3 4) FOR RS.15.38 LACS WHICH LED LD.AO TO COMPUTE DISALLOWANCE U/S 14A. TH E ASSESSEE WAS ASKED TO FILE THE RELEVANT DETAILS AND SHOW-CAUSED AS TO WHY INTEREST AS WELL AS OTHER EXPENDITURE SHOULD NOT BE DISALLOWED U/S 1 4A. IN DEFENSE, THE ASSESSEE SUBMITTED THAT IT HAD ALREADY IGNORED CLAI M OF EXPENDITURE OF RS.4.46 LACS AS AGAINST RS.3.79 LACS WORKED OUT AS PER RULE 8D AND THEREFORE, FURTHER DISALLOWANCE WOULD NOT BE WARRAN TED. HOWEVER, NOT SATISFIED, LD. AO WORKED OUT AGGREGATE DISALLOWANCE OF RS.8.72 LACS IN TERMS OF RULE 8D, WHICH COMPRISED-OFF OF INTEREST D ISALLOWANCE U/R 8D(2)(II) FOR RS.4.92 LACS AND EXPENSE DISALLOWANCE U/R 8D(2) (III) FOR RS.3.79 LACS. SINCE TOTAL EXPENDITURE DEBITED TO PROFIT & LOSS AC COUNT WAS RS.7.93 LACS, THE AFORESAID DISALLOWANCE WAS RESTRICTED TO RS.7.9 3 LACS. 3.2 THE LEARNED FIRST APPELLATE AUTHORITY, WHILE CO NFIRMING THE STAND OF LD. AO IN INVOKING THE PROVISIONS OF SECTION 14A, DIREC TED LD. AO TO RESTRICT THE DISALLOWANCE TO 10% OF EXEMPT INCOME AND DELETED TH E BALANCE DISALLOWANCE OF RS.6.39 LACS. THE SAME HAS GIVEN RI SE TO ONE OF THE GROUNDS OF CROSS-APPEALS. 3.3 UPON DUE CONSIDERATION, WE FIND THAT AS PER SET TLED LEGAL POSITION, THE PROVISIONS OF RULE 8D WERE NOT APPLICABLE TO THE YE AR UNDER CONSIDERATION. 5 ITA NO.6166, 6491/MUM/2013 M/S. BUNKIM FINANCE & INVESTMENTS PVT.LTD. ASSESSMENT YEAR-2006-07 THEREFORE, THE DISALLOWANCE WAS TO BE COMPUTED ON S OME REASONABLE ESTIMATED BASIS KEEPING IN VIEW THE ASSESSEES FINA NCIALS. THE ESTIMATION OF 10% AS MADE BY LEARNED FIRST APPELLATE AUTHORITY COULD NOT BE SAID TO BE UNFAIR OR UNREASONABLE, IN ANY MANNER. FROM PERUSAL OF FINANCIAL STATEMENTS, IT IS OBSERVED THAT THE ASSESSEE HAS DE BITED ADMINISTRATION AND OTHER CHARGES FOR RS.7.93 LACS WHICH WOULD INCLUDE ROUTINE EXPENDITURE VIZ. SALARY, TELEPHONE, CONVEYANCE, DIRECTORS REMUNERAT ION, DEMAT CHARGES, SERVICE TAX ETC. MOST OF THE EXPENDITURE WOULD BE S TATUTORY IN NATURE AND WOULD BE NECESSARY TO MAINTAIN CORPORATE PERSONALIT Y OF THE ASSESSEE. THEREFORE, THE ESTIMATION AS MADE BY LD. CIT(A), IN OUR CONSIDERED OPINION, WAS QUITE FAIR AND THE SAME WOULD NOT REQUIRE ANY I NTERFERENCE ON OUR PART. RESULTANTLY, THE GROUNDS RAISED IN ASSESSEES APPEA L AS WELL AS IN REVENUES APPEAL, ON THIS ISSUE, STANDS DISMISSED. 4.1 LONG TERM CAPITAL GAINS IN ITS COMPUTATION OF INCOME, THE ASSESSEE CLAIMED LONG-TERM CAPITAL GAINS OF RS.1656.89 TO BE EXEMPT U/S 10(38). DURING ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS DIRECTED TO FILE THE DETAILS OF SALE AND PURCHASE OF SHARES GIVING RISE TO AFORESAID GAINS. HOWEVER, THE ASSESSEE COULD NOT FILE COMPLETE DETAILS INCLUDING DETAILS O F PURCHASE / ACQUISITION OF SHARES. THE PERUSAL OF DEMAT ACCOUNT STATEMENT OBTAINED BY LD. AO FROM AXIS BANK LTD., AGAINST SUMMONS U/S 131, REVEALED T HAT AS ON 31/03/2004, THE ASSESSEE HAD CLOSING BALANCE OF 36593 SHARES OF RUCHI SOYA AND 10552 SHARES OF RUCHI INFRASTRUCTURE. LOOKING AT TH E FREQUENCY OF TRANSACTION FROM DEMAT ACCOUNT, LD. AO FORMED AN OPINION THAT THE 6 ITA NO.6166, 6491/MUM/2013 M/S. BUNKIM FINANCE & INVESTMENTS PVT.LTD. ASSESSMENT YEAR-2006-07 ASSESSEE WAS ACTUALLY INVOLVED IN TRADING OF SHARES RATHER THAN AS AN INVESTOR WHICH WAS FURTHER STRENGTHENED BY THE FACT THAT NO OTHER BUSINESS ACTIVITY WAS CARRIED OUT BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. AN OPINION WAS ALSO FORMED THAT THE TRANSACTIONS WERE CARRIED OUT WITH A PROFIT MOTIVE AND THEREFORE, THE RESULTANT GAINS / LOSSES WERE TO BE ASSESSED AS BUSINESS INCOME AND NOT AS CAPITAL GAINS. THE RELEVANT OBSERVATIONS OF LD. AO WERE AS FOLLOWS: - 5.8.2 LOOKING TO THE VOLUME FREQUENCY, CONTINUITY AND REGULARITY PURCHASE AND SALES IN SHARES, IT CAN BE INFERRED THAT THESE TRANSACTIONS ENTERED INTO BY THE ASSESSEE WITH A PROFIT MOTIVE. THIS ACT OF SHOWS THAT THE TRANSAC TIONS WERE ENTERED INTO WITH THE INTENTION TO DO BUSINESS. IT CANNOT BE SAID THAT TH ESE TRANSACTIONS WERE ENTERED INTO ONLY FOR THE PURPOSE OF INVESTMENT AND THERE WAS NO MOTI VE TO EARN PROFIT. THOUGH, THE WORD BUSINESS HAS NOT BEEN DEFINED IN THE TAXING STATUTE , YET IT POSTULATES THE EXISTENCE OF CERTAIN ELEMENTS IN THE ACTIVITY OF THE ASSESSEE WH ICH WOULD INVEST IT WITH THE CHARACTER OF THE BUSINESS. ACCORDING TO WELL-ESTABLISHED INTE RPRETATION OF WORD BUSINESS AS FOUND IN TAXING STATUTES IT IS THE SENSE OF AN OCCUPATION OR PROFESSION WHICH OCCUPIES THE TIME, ATTENTION AND LABOUR OF A PERSON NORMALLY WIT H THE OBJECT OF MAKING PROFIT. TO RECORD AN ACTIVITY AS BUSINESS THERE MUST BE OF COU RSE DEALINGS EITHER ACTUALLY CONTINUED OR CONTEMPLATED TO BE CONTINUED WITH A PROFIT MOTIV E. WHETHER OR NOT A PERSON CARRIES ON BUSINESS IN A PARTICULAR COMMODITY MUST DEPEND UPON THE VOLUME, FREQUENCY, CONTINUITY AND REGULARITY OF TRANSACTIONS OF PURCHASE AND SALE IN A CLASS OF GOODS AND TRANSACTION MUST ORDINARILY BE ENTERED INTO WITH A PROFIT MOTIV E. SUCH MOTIVE MUST PERVADE THE WHOLE SERIES OF TRANSACTIONS EFFECTED BY THE PERSON IN THE COURSE OF HIS ACTIVITY. HENCE, IN VIEW OF THE ABOVE DISCUSSION THE INCOME IS CHARG ED UNDER THE HEAD 'BUSINESS INCOME' AND NOT AS CAPITAL GAIN. 4.2 THE STAND OF LD. AO, UPON CONFIRMATION BY LEARN ED FIRST APPELLATE AUTHORITY , IN THE FIRST ROUND, WAS ASSAILED BY ASS ESSEE BEFORE TRIBUNAL VIDE ITA NO.6936/MUM/2010 ORDER DATED 27/01/2012 WHEREIN THE MATTER WAS RESTORED BACK WITH FOLLOWING DIRECTIONS: - 15. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF AUTH ORITIES BELOW AND SUBMISSIONS OF LD. REPRESENTATIVES OF PARTIES. WE OBSERVE THAT AO VID E SUMMONS U/S. 131 OF THE ACT DT. 12.12.2008 ASKED CERTAIN DOCUMENTS FROM ASSESSEE, D ETAILS OF WHICH ARE GIVEN IN PARA 5.1 OF ASSESSMENT ORDER. WE OBSERVE THAT ASSESSEE FURNISHED CERTAIN DETAILS IN RESPECT OF SHARES ON WHICH ASSESSEE DISCLOSED LONG TERM CAP ITAL GAIN AND CLAIMED EXEMPTION 7 ITA NO.6166, 6491/MUM/2013 M/S. BUNKIM FINANCE & INVESTMENTS PVT.LTD. ASSESSMENT YEAR-2006-07 U/S. 10(38) OF I.T. ACT. IT IS A FACTS THAT ASSESS EE COULD NOT FURNISH CERTAIN DETAILS BEFORE AO, DETAILS OF WHICH ARE STATED BY AO AT PARA 5.4 O F ASSESSMENT ORDER AND HAVE ALSO BEEN MENTIONED HEREIN ABOVE AT PARA-9. WE OBSERVE THAT ASSESSEE VIDE ITS LETTER DT. 22.2.2005, COPY PLACED AT PAGES 233-234 AND ADDRESS ED TO LD. CIT(A) FILED DETAILS OF PURCHASE OF SHARES, DEMAT ACCOUNTS AND ALSO EXPLAIN ED THAT SAID SHARES WERE HELD EARLIER BY ASSESSEE IN PHYSICAL FORM. ASSESSEE ALSO EXPLAINED IN SAID LETTER AS TO WHY ASSESSEE COULD NOT FURNISH DETAILS BEFORE AO AND ST ATED THAT ON ACCOUNT OF FREQUENT CHANGES IN STAFF, DETAILS COULD NOT BE RETRIEVED FR OM OLD RECORDS. THE ASSESSEE ALSO STATED IN THE SAID LETTER THAT ALL THE DETAILS LIKE DATE OF PURCHASE, COST OF ACQUISITION ETC. REGARDING PURCHASE OF SHARES ON WHICH ASSESSEE CLAI MED LONG TERM AND SHORT-TERM CAPITAL GAIN WERE FILED BEFORE AO. 16. WE OBSERVE THAT ASSESSEE REQUESTED BEFORE LD. CIT(A) TO ADMIT ADDITIONAL EVIDENCES IN TERMS OF RULE 46A OF I.T. RULES. HOWE VER, WE OBSERVE THAT LD. CIT(A) VIDE PARA 5.1 AND 5.2 HAS STATED THAT ASSESSEE WAS NOT P REVENTED BY ANY CAUSE TO PRODUCE SAID DOCUMENTS BEFORE AO AND THEREFORE DID NOT ADMI T SAID DOCUMENTS. DURING THE COURSE OF HEARING, LD. DR HAS NOT DISPUTED THE FACT THAT SAID DOCUMENTS GO TO THE ROOT OF THE ISSUE INVOLVED. WE ALSO OBSERVE FROM PAGES 195 TO 198 OF PAPER BOOK R.W. PAGES 199-200 THAT ASSESSEE CLAIMED CAPITAL GAIN IN ASSESSMENT YEAR 2005-06 AND THE DEPARTMENT ACCEPTED THE CAPITAL GAIN DISCLOSED BY A SSESSEE. SIMILARLY, FOR ASSESSMENT YEAR 2008-09, COPY PLACED AT PAGES 356 -377 R.W. PA GES 358 OF PAPER BOOK, ASSESSEE DISCLOSED CAPITAL GAIN AND SAME WAS ALLOWED BY THE DEPARTMENT. THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF SMT. PRABH AVATI S. SHAH V. CIT (SUPRA) HAS HELD THAT THE APPELLATE AUTHORITY SHOULD NOT REFUSE TO M AKE ENQUIRY IN THE CASE WHERE FACTS AND CIRCUMSTANCES SO DEMAND. WE OBSERVE THAT DOCUM ENTS PROPOSED TO BE FILED BY ASSESSEE ARE RELEVANT AND NECESSARY TO BE CONSIDERE D TO DECIDE THE ISSUE AS TO WHETHER SHARES WERE HELD BY ASSESSEE AS INVESTMENT OR STOCK-IN-TRADE. IT IS RELEVANT TO STATE THAT HONBLE APEX COURT HAS HELD IN THE CASE OF CIT VS PRABHU DAYAL 82 ITR 804 THAT QUESTION AS TO WHETHER RECEIPT IS A CAPITAL RE CEIPT OF INCOME, HAS TO BE JUDGED FROM THE FACTS OF EACH CASE AND QUESTION OF LAW CAN BE DRAWN SUCH FACTS. THE HONBLE APEX COURT IN THE CASE OF CIT VS. H. HOLCK LARSEN 160 IT R 67 ALSO HELD THAT WHETHER TRANSACTION OF SALE AND PURCHASE OF SHARE IS A TRAD ING TRANSACTION OR IN THE NATURE OF INVESTMENT, IS A MIXED QUESTION OF LAW AND FACTS. THEREFORE, TO DECIDE THE QUESTION AS TO WHETHER ASSESSEE HAS TO BE TREATED AS INVESTOR I N SHARE OR A TRADER OR SHARES IS TO BE CONSIDERED, CONSIDERING TOTALITIES OF ALL FACTS. I N VIEW THEREOF, IT IS NECESSARY THAT LD. CIT(A) SHOULD HAVE CONSIDERED THE EVIDENCES PROPOSE D TO BE FILED BY ASSESSEE TO DECIDE THE ISSUE FAIRLY AND JUDICIOUSLY. 17. IN VIEW THEREOF, WE, IN THE INTEREST OF JUSTICE , SET ASIDE THE ORDER OF LD. CIT(A) AND RESTORE THE ISSUE TO HIS FILE WITH A DIRECTION THAT HE SHOULD DECIDE IT AFRESH AFTER MAKING PROPER ENQUIRY AND CONSIDERING SUCH EVIDENCES AS MA Y BE FILED BY ASSESSEE BEFORE HIM. NEEDLESS TO STATE THAT LD. CIT(A) WILL GIVE D UE OPPORTUNITY OF HEARING TO THE PARTIES IN ACCORDANCE WITH LAW. HENCE GROUND NO. 2 OF APPE AL IS ALLOWED FOR STATISTICAL PURPOSES BY RESTORING THE ISSUE TO LD. CIT(A) FOR H IS FRESH ADJUDICATION. 18. IN GROUND NO. 3 OF APPEAL, LD. AR SUBMITTED THA T AO WITHOUT GIVING ANY REASON HAS CONSIDERED SHORT TERM CAPITAL GAIN DISCLOSED BY ASS ESSEE AS BUSINESS INCOME. 8 ITA NO.6166, 6491/MUM/2013 M/S. BUNKIM FINANCE & INVESTMENTS PVT.LTD. ASSESSMENT YEAR-2006-07 19. LD. AR REFERRED TO PAGE 165 OF PAPER BOOK AND S UBMITTED THAT ASSESSEE TOOK AN ADDITIONAL GROUND BEFORE LD. CIT(A) VIDE LETTER DT. 24.11.2009 THAT AO TREATED SHORT TERM CAPITAL GAIN OF RS. 53,27,430/- AS BUSINESS IN COME WITHOUT GIVING ANY REASON. THE LD. CIT(A) HAS NOT ADJUDICATED THE SAID GROUND WHILE DECIDING THE APPEAL OF ASSESSEE. HE SUBMITTED THAT ISSUE MAY BE RESTORED TO LD. CIT(A) TO DECIDE THE ABOVE GROUND BY A REASONED ORDER. THE LD. DEPARTMENTAL RE PRESENTATIVE HAS NOT DISPUTED ABOVE SUBMISSION OF LD. AR. 20. WE HAVE CONSIDERED SUBMISSIONS OF LD. REPRESENT ATIVES OF PARTIES AND HAVE CAREFULLY PERUSED ORDER OF AUTHORITIES BELOW AS WEL L AS PAGE 165 TO 166 OF PAPER BOOK. WE OBSERVE THAT AO HAS NOT GIVEN ANY REASON WHILE C ONSIDERING SHORT TERM CAPITAL GAIN, DISCLOSED BY ASSESSEE AS BUSINESS INCOME. WE ALSO OBSERVE THAT ASSESSEE TOOK AN ADDITIONAL GROUND VIDE LETTER DT. 24.11.2009 BEF ORE LD. CIT(A), COPY PLACED AT PAGES 165 TO 166 OF PAPER BOOK. WE AGREE WITH LD.CIT(A) THAT WHILE DISPOSING OF APPEAL OF ASSESSEE HAS NOT OBJECTED THIS GROUND THOUGH AT PAG E-3 OF HIS ORDER, HE HAS STATED THAT ASSESSEE SUBMITTED BEFORE HIM THAT AO HAS TREATED SHORT TERM CAPITAL GAIN OF RS. 53,27,430/- AS BUSINESS INCOME WITHOUT GIVING ANY R EASON IN THE ASSESSMENT ORDER. SINCE LD. CIT(A) HAS NOT ADJUDICATED THE ABOVE GROU ND, WE, RESTORE THIS GROUND TO LD. CIT(A) WITH A DIRECTION TO DECIDE THE SAME BY A SPE AKING ORDER AFTER GIVING DUE OPPORTUNITY OF HEARING TO THE PARTIES AND ALSO CONS IDERING SUCH EVIDENCES AS MAY BE FILED BEFORE HIM IN ACCORDANCE WITH LAW. HENCE, GRO UND NO. 3 OF THE APPEAL TAKEN BY ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES IT IS EVIDENT FROM THE AFORESAID DIRECTIONS THAT TH E MATTER OF ASSESSMENT OF LONG-TERM CAPITAL GAINS AS WELL AS SHORT-TERM CAPIT AL GAINS WAS SET- ASIDE FOR FRESH ADJUDICATION IN THE LIGHT OF ADDITI ONAL EVIDENCES SUBMITTED BY THE ASSESSEE. 4.3 PURSUANT TO AFORESAID DIRECTIONS, LD. CIT(A) RE -EXAMINED THE CLAIM IN THE LIGHT OF ADDITIONAL EVIDENCES FURNISHED BY THE ASSESSEE WHICH WERE ALREADY FILED BEFORE LD.AO DURING REMAND PROCEEDING S IN THE FIRST ROUND OF APPEAL. WITH RESPECT TO LONG-TERM CAPITAL GAINS, TH E ASSESSEE SUBMITTED THAT THE SHARES OF TWO ENTITIES UNDER CONSIDERATION WERE HELD SINCE FINANCIAL YEAR (FY) 2002-03 & 2003-04 WITH AN INTENTION TO EA RN DIVIDEND INCOME. THERE WAS NO REGULAR SALE OR PURCHASE OF SHARES OF THESE ENTITIES AND THE 9 ITA NO.6166, 6491/MUM/2013 M/S. BUNKIM FINANCE & INVESTMENTS PVT.LTD. ASSESSMENT YEAR-2006-07 INVESTMENT WERE LONG TERM INVESTMENT WHICH WAS EVID ENT FORM THE FACT THAT THE ASSESSEE NEVER MADE PROVISION FOR DIMINUTION IN THE VALUE OF SHARES IN THE BOOKS OF ACCOUNTS. FURTHER, THE SHARES WERE REF LECTED AS LONG-TERM NON- TRADE INVESTMENTS IN THE BALANCE SHEET. IN SUPPORT OF THE SAID SUBMISSIONS, THE ASSESSEE FILED FINANCIAL STATEMENT FOR VARIOUS YEARS ALONG WITH COPIES OF RELEVANT PURCHASE BILLS, DELIVERY CHALLANS, LEDGER ACCOUNT COPIES, BANK STATEMENTS EVIDENCING PAYMENTS, CONFIRMATION FROM S HARE TRANSFER AGENTS AND DEMAT STATEMENTS. REGARDING, SHORT-TERM CAPITAL GAINS OF RS.53.27 LACS, THE ASSESSEE SUBMITTED THAT THE INCOME HAS BE EN TREATED AS BUSINESS INCOME BY LD. AO WITHOUT GIVING ANY REASON S. 4.4 THE LEARNED FIRST APPELLATE AUTHORITY, AFTER CO NSIDERING THE VARIOUS REMAND REPORTS WHEREIN THE GENUINENESS OF THE ABOVE TRANSACTIONS WAS DOUBTED BY LD. AO, CAME TO A CONCLUSION THAT JUST B ECAUSE THE SHARES WERE PURCHASED OFF-MARKET, THE PURCHASES TRANSACTIONS CO ULD NOT BE DOUBTED. 4.5 PROCEEDING FURTHER, LD. CIT(A) CONCURRED WITH A SSESSEES SUBMISSIONS WITH RESPECT TO TREATMENT OF LONG-TERM CAPITAL GAIN S IN THE LIGHT OF EVIDENCES FURNISHED BY THE ASSESSEE. THE FACTUAL FI NDINGS AND CONCLUSIONS DRAWN BY LD. CIT(A), WERE AS FOLLOWS: - 10.11 I HAVE CAREFULLY CONSIDERED THE IMPUGNED ASS ESSMENT ORDER, THE SUBMISSIONS MADE ALONG WITH THE PAPER BOOK AND THE MATERIALS AV AILABLE ON RECORD. EACH CASE HAS ITS UNIQUE AND PECULIAR SET OF FACTS. NUMEROUS DECI SIONS OF ITAT AND HIGH COURT ARE AVAILABLE ON THIS ISSUE. ALL THESE DECISIONS CANNOT BE APPLIED AS A STRAIT JACKET FITTING TO THE FACTS OF THE APPELLANT'S CASE. THE ASSESSING OF FICER WHILE ANALYZING VARIOUS INGREDIENTS LAID DOWN BY THE JUDICIARY AND CBDT, IN A GENERAL AND ROUTINE MANNER BUT NOT WITH REFERENCE TO THE ACTUAL FACTS IN THE APPEL LANT'S CASE. THE VARIOUS TESTS LAID DOWN WILL HAVE TO BE ANALYZED WITH REFERENCE TO THE SCRI PS ACTUALLY PURCHASED AND SOLD BY THE ASSESSEE. 10 ITA NO.6166, 6491/MUM/2013 M/S. BUNKIM FINANCE & INVESTMENTS PVT.LTD. ASSESSMENT YEAR-2006-07 10.12 THE ACID TEST TO JUDGE THE INTENTION IS AS TO WHETHER ONE INDULGES IN FREQUENT BUY AND SELL ONLY TO MAKE QUICK MONEY. IF THIS INGREDIE NT IS PRESENT THEN IT CAN BE CLEARLY CONCLUDED THAT ONE IS IN THE HABIT OF TRADING IN SH ARES. THE MOST IMPORTANT CRITERIA IS TO ASCERTAIN THE INTENTION AT THE TIME OF PURCHASE BUT SUCH INTENTION HAS TO BE GATHERED FROM THE SUBSEQUENT CONDUCT OF THE ASSESSES IN DEAL ING WITH THE SHARES. THE INVESTOR IS CONSISTENTLY NOT MOTIVATED TO SELL THE SHARES ON EA CH AND EVERY RISE IN THE VALUE OF SHARES. IN FACT, THE ATTRIBUTE OF THE TRADER IS THA T THERE SHOULD BE FREQUENT BUYING AND SELLING. THE INVESTOR IS NOT BARRED FROM SELLING TH E SHARES AFTER SHORT HOLDING PERIOD IN ORDER TO RESHUFFLE PORTFOLIO WHEN A PARTICULAR SHAR E IS NOT DOING WELL. MERELY BECAUSE THE ASSESSEE LIQUIDATES ITS INVESTMENT AFTER A SHORT PE RIOD OF HOLDING, IT SHOULD NOT LEAD TO A CONCLUSION THAT THE INTENTION WAS TO TRADE. LARGE V OLUME OF PURCHASE AND SALE OF SHARES DOES NOT PER-SE MEANS BUSINESS ACTIVITY. THE VOLUME AND FREQUENCY CANNOT BE SOLE CRITERIA TO ARRIVE AT THE CONCLUSION THAT THE ASSES SEE IS INTO TRADING. A PRUDENT INVESTOR ALWAYS KEEPS A WATCH ON THE MARKET TRENDS. THUS, TH E INTENTION CAN BE PROVED ONLY BY WAY OF CONDUCT OF THE APPELLANT AFTER THE PURCHASE. THE CONDUCT OF THE APPELLANT IN THE PRESENT CASE SHOWS THAT THE INTENTION WAS TO HOLD T HE SHARES FOR LONG BEFORE DISPOSING OFF THE SAME WHICH IS, DISCUSSED IN THE COMING PARA S. 10.13 THE MAIN DISPUTE IN THIS CASE RELATED TO TREA TMENT INVOLVING 2 SCRIPS VIZ. M/S.RUCHI SOYA AND M/S.RUCHI INFRA. PAGE 39 AND 40 OF THE PAPER BOOK SHOWS THE DETAIL OF PURCHASE AND SALE OF THESE 2 SCRIPS RUCHI SOYA AND RUCHI INFRA DURING THIS ASSESSMENT YEAR. TABLE CONTAINING THE DETAILS FILED BY THE APPELLANT IS ENCLOSED TO THIS ORDER (ENCLOSURE 'A'). A CAREFUL ANALYSIS OF THE TA BLE REVEALS THE FOLLOWING FACTS: DETAILS OF SALE OF RUCHI SOYA SHARES:- MONTH NO OF TRANSACTION NO DAYS TOTAL SHARES SOLD APRIL 10 6 77,899 MAY 16 11 3,40,931 SEPTEMBER 1 1 10,000 TOTAL : 27 18 4,28,830 DETAILS OF SALE OF RUCHI INFRA SHARES :- MONTH NO OF TRANSACTION NO DAYS TOTAL SHARES SOLD APRIL 6 6 1,410 MAY 15 14 5,25,000 JUNE 19 8 13,45,000 11 ITA NO.6166, 6491/MUM/2013 M/S. BUNKIM FINANCE & INVESTMENTS PVT.LTD. ASSESSMENT YEAR-2006-07 JULY 1 1 20,000 AUGUST 24 12 17,48,406 SEPTEMBER 7 3 1,93,000 TOTAL : 72 44 38,32,816 NOTE : MULTIPLE TRANSACTIONS ON THE SAME DAY IS TRE ATED AS ONE TRANSACTION ONLY. 10.14 AS FAR AS THE SHARES OF RUCHI SOYA IS CONCERN ED THE APPELLANT HAD VISITED THE STOCK EXCHANGE ONLY 18 DAYS DURING THE WHOLE YEAR A ND THERE WERE ONLY 27 SALE TRANSACTIONS. WITH REGARD TO RUCHI INFRA THERE WAS 44 DAYS OF VISIT WITH TOTAL OF 72 TRANSACTIONS. THE PERUSAL FURTHER REVEALS THAT SOME TIMES THE APPELLANT HAD INDULGED IN SALE OF BOTH THE SCRIPS ON THE SAME DAY. IF THIS IS CONSIDERED THEN THE APPELLANT HAD VISITED THE STOCK EXCHANGE HARDLY 30 TO 35 DAYS IN THE WHOLE YEAR AND THE TOTAL NUMBER OF TRANSACTIONS WERE LESS THAN 100 PUT TOGETHER FOR BOTH THE SCRIPS. THIS BEHAVIOUR CLEARLY SHOWS THOUGH THE VOLUME IS HIGH BUT THE FRE QUENCY IS LESS WHICH IS NOT AN ATTRIBUTE OF THE TRADER. HENCE AT NO STRETCH OF IMA GINATION IT CAN BE SAID THAT THE APPELLANT IS A TRADER. 10.15 THE APPELLANT HAD IDENTIFIED, THE SOURCE OF P URCHASE OF THESE SHARES AS OUT OF THE STOCK HELD BY IT. THE SAME IS REPRODUCED AS UNDER ( ACTUAL DETAILS ARE AVAILABLE IN ENCLOSURE- A) RUCHI SOYA DATE QUANTITY 15.09.2003 18,830 19.09.2003 1,50,000 23.09.2003 1,50,000 25.09.2003 1,00,000 06.07.2004 500 01.09.2004 2,000 7,500 4,28,830 RUCHI INFRA DATE QUANTITY 09.01.2004 1,410 09.01.2004 23,602 26.03.2004 3,33,500 26.03.2004 32,13,918 02.04.2004 2,60,386 38,32,816 12 ITA NO.6166, 6491/MUM/2013 M/S. BUNKIM FINANCE & INVESTMENTS PVT.LTD. ASSESSMENT YEAR-2006-07 THE ABOVE CLEARLY SHOWS THAT THE SHARES PURCHASED D URING THIS ASSESSMENT YEAR ARE NOT PART THE SHARES SOLD AND THE INVESTMENT MADE DURING THE EARLIER YEAR AND HELD AS STOCK IN THE INVESTMENT PORTFOLIO ONLY WERE SOLD BY THE A PPELLANT DURING THIS YEAR. AS MENTIONED ABOVE THE PHYSICAL SHARES PURCHASED WERE DEMATERIAIIZED AND THE APPELLANT MAINTAINS IT'S D-MAT ACCOUNT WITH AXIS BANK. WHEN T HE DEALINGS ARE THROUGH D-MAT A/C THE NATURAL COROLLARY IS THAT THE SHARES PURCHASED FIRST ARE SOLD FIRST AND EFFECTIVELY THE FIFO METHOD COMES IN TO PLAY/HENCE THE METHOD ADOPT ED BY THE APPELLANT IS FOUND ACCEPTABLE IT IS WORTH TO MENTION HERE THE CIRCULAR NO.786 DTD.24.06.1998 ISSUED BY THE CBDT IN THIS REGARD. I FIND THE METHOD FOLLOWED BY THE APPELLANT IS IN CONSONANCE WITH THE BOARD CIRCULAR. 10.16 SIMILAR DETAILS WITH REGARD TO PURCHASE AND SALE OF THESE TWO SCRIPS DURING AY 2005-06 ARE AVAILABLE IN PAGE 38 OF THE PAPER BOOK. A CHART PREPARED INDICATING THE DATE WISE TRANSACTION WAS ALSO FURNISHED WHICH IS A VAILABLE IN PAGE 353 OF THE PAPER BOOK. THE SCRUTINY REVEALS THE FOLLOWING: RUCHI SOYA SALES MONTH WISE DURING FY 2004-05: JULY 100 SEPTEMBER 35,235 OCTOBER 171 DECEMBER 10,656 JANUARY 6,630 FEBRUARY 2,400 MARCH 63,700 1,18,882 THE APPELLANT HAD IDENTIFIED THE DATE OF PURCHASE O F THE SCRIP ALSO. THE DETAILS ARE AS UNDER: DATE QUANTITY 08/05/2002 3623 13/05/2002 688 31/03/2003 79,246 23/09/2003 35,235 1,18,882 10.17 THE ANALYSIS OF THE DETAILS FOR BOTH AY 2005 -06 AND 2006-07 SHOWS THAT THE SCRIPS PURCHASED DURING THE YEAR WAS NOT SOLD BY TH E APPELLANT. IT WAS THE STOCK HELD AS INVESTMENT IN THE EARLIER YEAR HELD FOR MORE THAN A YEAR ONLY WAS DISPOSED OF DURING RELEVANT YEAR. THE CLAIM OF INVESTMENT MADE IN THES E SHARES IN THE EARLIER YEARS WERE NEVER DISPUTED BY THE AO. ALL THE ABOVE SHARES SOLD ARE PART OF OPENING BALANCE IN THE INVESTMENT PORTFOLIO IN THE RESPECTIVE YEARS. 10.18 THE SCHEDULE ATTACHED TO THE BALANCE SHEET UN DER THE HEAD INVESTMENT WAS FILED BY THE APPELLANT. THE DETAILS OF HOLDING OF THESE 2 SCRIPS IN THE LAST 5 YEARS PRODUCED BY THE APPELLANT IS AVAILABLE IN PAGE 373 OF THE PAPER BOOK AND FOR THE SAKE OF CONVENIENCE THE SAME IS REPRODUCED HERE UNDER:- RUCHI SOYA 13 ITA NO.6166, 6491/MUM/2013 M/S. BUNKIM FINANCE & INVESTMENTS PVT.LTD. ASSESSMENT YEAR-2006-07 RUCHI INFRA 10.19 THE SHARES WHICH WERE FIGURING IN THE OPENING BALANCE AND SOLD SUBSEQUENTLY CAN NEVER BE CONSIDERED AS TRADING. THE CLAIM OF TH E APPELLANT THAT IT IS ONLY AN INVESTOR IS FOUND TO BE ACCEPTABLE IN LIGHT OF THE DECISION OF THE JURISDICTIONAL ITAT IN THE CASE OF M/S. KAMLESH REAL ESTATE PRIVATE LIMITED IN ITA NO. 1451/M/2010 DATED 20/04/2011 FOR A.Y. 2006-07. THE FINDING OF THE HON'BLE ITAT IS IN PARA 4.4 WHICH IS REPRODUCED HERE UNDER :- '4.4 WE HAVE CONSIDERED THE VARIOUS ASPECTS OF THE ISSUE CAREFULLY. WHETHER THE PARTICULAR SHARE TRANSACTIONS CONSTITUTE INVESTMENT ACTIVITY OR TRADING ACTIVITY WILL DEPEND UPON FACTS AND CIRCUMSTANCES OF EACH CASE. THE FACT ORS SUCH AS ENTRY IN THE BOOKS OF ACCOUNT AS INVESTMENT, TRANSACTIONS BEING FUNDED FR OM OWN FUNDS AND NOT BORROWED FUNDS ETC, ARE SOME OF THE RELEVANT FACTORS IN DECI DING THE TRUE NATURE OF TRANSACTIONS BUT NONE OF THESE FACTORS IS CONCLUSIVE. THE INTENTION AT THE TIME OF PURCHASES IS THE MOST IMPORTANT FACTOR BUT SUCH INTENTION HAS .TO BE GATH ERED FROM SUBSEQUENT CONDUCT OF THE ASSESSEE IN DEALING WITH THESE SHARES, AND NOT FROM THE ENTRY IN THE BOOKS OF ACCOUNTS. AN INVESTOR PURCHASES A SHARE WITH A VIEW TO EARNIN G INCOME IN THE FORM OF DIVIDEND AND FOR APPRECIATION IN VALUE OVER A LONG PERIOD OF TIM E AND IS NOT MOTIVATED TO SELL SHARES ON EACH AND EVERY RISE IN THE VALUE OF SHARES WHICH ARE IN FAD THE ATTRIBUTES OF A TRADER. IN THE PRESENT CASE THE ASSESSEE HAS BEEN FREQUENTL Y PURCHASING AND SELLING SHARES AND THE SALES IN ALL CASES HAVE BEEN MADE AFTER HOL DING THE SHARES FOR LESS THAN 3 MONTHS AND THE OVERALL PROFIT EARNED HAS ALSO BEEN SMALL CLEARLY SUGGESTING THAT THE ASSESSEE HAD BEEN SELLING THE SHARES MOTIVATED BY P ROFIT. EVEN AN INVESTOR SOMETIMES MAY SELL SHARES AFTER HOLDING FOR A SHORT PERIOD IN ORDER TO RESHUFFLE THE PORTFOLIO WHEN A PARTICULAR SHARE IS NOT DOING WELL OR IN CASE OF EX CEPTIONAL APPRECIATION. SUCH SELLING AFTER SHORT HOLDING HAS TO BE EXPLAINED. IN THIS CA SE THE ASSESSEE HAS NOT EXPLAINED WHY IT HAS BEEN SELLING THE SHARES AFTER HOLDING FOR A SHORT TERM. THE ASSESSEE HAS GIVEN GENERAL REASONS SUCH AS GOVERNMENT POLICY, MANAGEMENT, MARKET OUTLOOK ETC. WHICH IS QUITE VAGUE AND DOES NOT EXPLAIN SA TISFACTORILY THE REASON FOR FREQUENTLY MA RCH 2000 MARCH 2001 MARCH 2002 MARCH 2003 MARCH 2004 MARCH 2005 QUANTITY 81,300 14,38,020 14,32,551 39,636 5,37,712 4,51,190 AMOUNT 2,06,76,858 11,33,19,105 11,36,31,239 12,46, 760 2,19,11,251 2,14,15,358 PAGE NO. PAPER BOOK 343 345 347 348 349 350 MARCH 2000 MARCH 2001 MARCH 2002 MARC H 2003 MARCH 2004 MARCH 2005 QUANTITY 14,38,120 89,900 77,050 2,39,350 4,06,352 7,78,709 AMOUNT 11,33,26,724 2,20,77,169 1,87,62,283 3,95,09,478 2,67,90,779 4,1 6,88,350 PAGE NO. PAPER BOOK 343 345 347 348 349 350 14 ITA NO.6166, 6491/MUM/2013 M/S. BUNKIM FINANCE & INVESTMENTS PVT.LTD. ASSESSMENT YEAR-2006-07 SELLING THE SHARES AFTER HOLDING FOR A SHORT PERIOD . IT HAS BEEN ARGUED THAT IN EARLIER YEARS SIMILAR TRANSACTIONS HAVE BEEN ACCEPTED AS IN VESTMENT ACTIVITY BUT IT HAS NOT BEEN SHOWN HOW THE TRANSACTIONS IN EARLIER YEARS WERE EX ACTLY IDENTICAL AND WHETHER THE SAME10 HAD BEEN ACCEPTED AFTER EXAMINATION. THE ASS ESSEE HAS ALSO CITED SOME TRIBUNAL DECISIONS WHICH IN OUR VIEW ARE DISTINGUIS HABLE AS EACH CASE HAS ITS OWN PECULIAR FEATURES. IN OUR VIEW, ON THE FACTS OF THE CASE, THE INCOME ARISING FROM SAFE AND PURCHASE OF SHARES WITHIN THE THREE MONTHS PERIOD H AS TO BE TREATED AS BUSINESS INCOME. HOWEVER WE MAKE IT CLEAR THAT IN CASE ANY P ART OF THE GAIN IS IN RESPECT OF SALE OF SHARES APPEARING IN THE OPENING BALANCE WHICH HA S BEEN TREATED AS INVESTMENT IN THE EARLIER YEAR, IT HAS TO BE TREATED AS CAPITAL GAIN AND EXCLUDED FROM THE BUSINESS PROFIT. SUBJECT TO ABOVE WE CONFIRM THE ORDER OF CIT(A). THUS THE ITAT CAME TO A CONCLUSION THAT SHARES HELD FOR LESS THAN 3 MONTHS CANNOT BE CONSIDERED AS INVESTMENT AND AT THE SAME TIME SHARE S WHICH WERE PART OF OPENING BALANCE NEEDS TO BE TREATED AS CAPITAL GAIN AND EXC LUDED FROM BUSINESS PROFITS. 10.20 THE RATIO LAID BY THE ITAT IF APPLIED TO THE FACTS IN APPELLANT'S CASE THEN THERE CANNOT BE A DOUBT THAT THE APPELLANT IS ONLY AN INV ESTOR AND NOT A TRADER. AS MENTIONED ABOVE, THOUGH THESE TWO SCRIPS HAD RESULTED IN PROF IT BUT THE HABIT OF THE ASSESSEE SHOWS THAT SHARES BOUGHT IN THE EARLIER ONLY WAS SO LD. JUST BECAUSE THESE SCRIPS HAD RESULTED IN A PROFIT THE APPELLANT HAD NOT REPEATED LY BOUGHT AND SOLD IN QUICK SUCCESSION, WITHOUT HOLDING IT FOR TOO LONG A PERIO D. THUS THE ELEMENT OF FREQUENT PURCHASE AND SALE IS MISSING WHICH IS THE KEY INGRE DIENT IN THE CASE OF A TRADER AND FURTHER THE ELEMENT OF INTENTION OF MAKING QUICK PR OFIT IS NOT THERE IN THE APPELLANTS CASE. THIS BEHAVIOR OF THE APPELLANT CLEARLY PROVES THAT IT IS AN INVESTOR AND NOT A TRADER. LARGE VOLUME OF PURCHASE AND SALE OF SHARES DOES NOT PER- SE MEANS IS A BUSINESS ACTIVITY. THE VOLUME AND FREQUENCY CANNOT BE SOLE CRITERIA TO ARRIVE AT THE CONCLUSION THAT THE APPELLANT IS INTO TRADING. THE OVERALL CONDUCT OF T HE APPELLANT SHOWS THAT THE INTENTION AT THE TIME OF PURCHASE WAS TO HOLD IT FOR LONG AS INV ESTMENT AND AS DISCUSSED ABOVE THE SUBSEQUENT BEHAVIOR ALSO DID NOT SHOW ANY ATTRIBUTE OF A TRADER. 10.21 THE APPELLANT HAD SUBMITTED THE ASSESSMENT O RDERS FOR 2005-06 AND 2008-09 AS A PART OF THE PAPER BOOK TO SHOW THAT CONSISTENTLY THE CLAIM OF LONG TERM CAPITAL GAIN ON SALE OF SHARES HAD BEEN ACCEPTED BY THE DEPARTME NT AFTER A THOROUGH SCRUTINY U/S143(3).COPIES OF THE ORDER IS AVAILABLE IN PAGES 195 TO 198 AND 356 TO 357 OF THE PAPER BOOK. I HAVE PERUSED THE COPY OF THE ORDER FO R AY 2005-06, THE AO HAD ACCEPTED THE CLAIM OF LTCG WHICH HE HAD DISCUSSED IN PARA 3 OF THE ORDER. THE VERY SAME AO HAD PASSED THE ORDER FOR THE CURRENT YEAR. WHEN THE SAME ASSESSING OFFICER HAD ACCEPTED THESE SHARES AS INVESTMENT IN EARLIER YEAR S, HE CANNOT SUDDENLY CHANGE THE TREATMENT AND CONSIDER THE PROFIT ARISING OUT OF TH E TRANSACTION AS BUSINESS ACTIVITY DURING THIS YEAR. THUS THE APPELLANT HAD CONSISTENT LY DECLARED THE GAIN ARISING OUT OF SALE OF SHARE AS LONG AND SHORT TERM CAPITAL GAIN W HICH WAS ACCEPTED BY THE ASSESSING OFFICER U/S 143(3). THOUGH THE RULE RES-JUDICATA IS NOT APPLICABLE TO I.T. PROCEEDINGS BUT IN THE ABSENCE OF CHANGE IN FACTS, THE PRINCIPLE OF CONSISTENCY CANNOT BE IGNORED BY THE AO. THE APPELLANT HAD DISCLOSED THE SHARES AS INVES TMENT IN THE BALANCE SHEET AND NOT AS STOCK-IN-TRADE. THIS FACT HAS ALSO BEEN RECOGNIZ ED BY THE AO. IF THE RULE OF CONSISTENCY IS CONSIDERED ALONG WITH THE OTHER FA CTS DISCUSSED IN THE PRECEDING 15 ITA NO.6166, 6491/MUM/2013 M/S. BUNKIM FINANCE & INVESTMENTS PVT.LTD. ASSESSMENT YEAR-2006-07 PARAGRAPHS, I AM PERSUADE TO HOLD THAT THE SURPLUS ON THE SALE OF SHARES WAS RIGHTLY DECLARED BY THE APPELLANT AS LONG TERM CAPITAL GAIN S. ; 10.22 IN THE NOTE BELOW PARA 8.12, I HAVE MENTIONE D THAT MULTIPLE TRANSACTION ON A SINGLE DAY IS TREATED AS ONE TRANSACTION. SIMPLY TH ERE WERE MULTIPLE SALE TRANSACTIONS ON THE SAME DAY, IT CANNOT BE CONSTRUED THAT THE APPEL LANT IS FREQUENTLY INDULGING IN PURCHASE AND SALE AND HENCE, IT IS A TRADER. FOR TH IS PROPOSITION I PLACE MY RELIANCE ON THE JURISDICTIONAL ITAT IN THE CASE OF MR.NEHAL V. SHAH ITA. NO. 2733/MUM/2009 DT 15/12/2010. THE RELEVANT PORTION OF THE FINDING DIFFERENT PARAS ARE REPRODUCED HERE UNDER :- 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CAR EFULLY PERUSED THE RECORD AND FIND FORCE IN THE SUBMISSIONS OF THE LEARNED COUNSEL FOR THE ASSESSEE. /(SEEMS THAT NUMBER OF TRANSACTIONS HAVE NOT BEEN CALCULATED PROPERLY B Y THE ASSESSING OFFICER BECAUSE IT MAY HAPPEN SOME TIME THAT A SINGLE TRANSACTION WOUL D BE SPLIT BY THE COMPUTERS TRADING OF THE STOCK EXCHANGES INTO MANY SMALLER TRANSACTIO NS, BUT, THAT DOES NOT MEAN THAT ASSESSEE HAS CARRIED SO MANY TRANSACTIONS. LET US S AY, IF SOME 'ONE PLACES AN ORDER FOR PURCHASE OF 1000 SHARES OF 'X' COMPANY AND THE SAME IS EXECUTED BY THE ELECTRONIC TRADING SYSTEM OF STOCK EXCHANGE INTO 100 SMALLER T RANSACTIONS, IT DOES NOT MEAN THAT THIS PERSON HAS ENTERED INTO 100 TRANSACTIONS. A SSESSEE HAS CARRIED OUT ONLY 31 PURCHASE TRANSACTIONS AND 25 SALE TRANSACTIONS WHIC H CANNOT BE SAID TO BE A GREAT VOLUME OF TRANSACTIONS. FURTHER, ASSESSEE WAS HOL DING SHARES WORTH RS. 11.56 CRORES AT THE END OF THE YEAR AND MARKET VALUE OF THE SAME WAS ABOUT RS.17.69 CRORES. IF ASSESSEE WAS A TRADER, HE WOULD HAVE DEFINITELY REA LISED THIS HUGE PROFIT OF ALMOST RS. 6 CRORES IMMEDIATELY AND NOT CARRIED OUT THE STOCK TO THE NEXT YEAR. AS FAR AS THE TWO TRANSACTIONS NARRATED BY THE ASSESSING OFFICER IN W HICH NO DELIVERY WAS TAKEN AND TRANSACT/ON WAS SETTLED IN THE SAME DAY WE AGREE WI TH THE SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT PERHAPS THESE PARTICU LARS WERE WRONGLY CARRIED OUT ON BEHALF OF THE ASSESSEE BY THE BROKER THAT'S WHY ASS ESSEE GOT THEM SETTLED ON (HE SAME DAY AND HAS NOT CONTESTED THESE TWO TRANSACTIONS. A SSESSEE HAS ALSO NOT BORROWED ANY MONEY AND HE ALREADY OCCUPIED FULL TIME BUSINESS FOR GARMENTS THROUGH THE FIRM M/S. ZEN CLOTHING. HE FURTHER FINDS THAT IN IDENTICAL CI RCUMSTANCES, IN THE CASE OF SISTER, THE TRIBUNAL HAD HELD AS UNDER: 11. 'WE HAVE CAREFULLY CONSIDERED THE FACTS AND THE RIVAL CONTENTIONS. IT SEEMS TO US THAT ON THE FACTS OF THE CASE IT IS DIFFICULT TO HO LD THAT THE ASSESSEE WAS CARRYING ON A BUSINESS IN SHARES, WITH THE SHARES AS HER STOCK-IN -TRADE. AS ALREADY NOTED, THE ASSESSEE'S BACKGROUND DOES NOT INDICATE THAT SHE WA S FAMILIAR WITH THE SHARE BUSINESS. SHE WAS A WORKING PARTNER IN A PARTNERSHIP FIRM WHI CH WAS ENGAGED IN THE GARMENT BUSINESS AND WAS A DIRECTOR IN A COMPANY WHICH WAS ALSO ENGAGED IN A SIMILAR BUSINESS. IT WOULD APPEAR THEREFORE THAT SHE HARDLY HAD ANY KNOWLEDGE ABOUT THE NUANCES OF SHARE TRADING. SHE ALSO DID NOT BORROW A NY MONIES FOR THE PURPOSE OF ACQUIRING THE SHARES AND THIS FACT IS NOT DISPUTED ON BEHALF OF THE REVENUE. THE SHARES HAVE BEEN ACQUIRED OUT OF THE SURPLUS FUNDS LEFT WI TH THE ASSESSEE. SHE HAS DISCLOSED THE SHARES IN THE BALANCE SHEET AS SHARES ONLY AND NOT AS STOCK-I N-TRADE. THIS FACT HAS ALSO BEEN RECOGNIZED BY THE DEPARTMENTAL AUTHORITIE S. IN PARAGRAPH 15 OF HIS ORDER THE 16 ITA NO.6166, 6491/MUM/2013 M/S. BUNKIM FINANCE & INVESTMENTS PVT.LTD. ASSESSMENT YEAR-2006-07 CIT(A) HAS OBSERVED THAT THE ASSESSEE HAS CONSIDERE D ALL THE PURCHASE OF SHARES ONLY AS INVESTMENTS AND THAT THEY WERE CLASSIFIED AS SUC H IN THE BALANCE SHEET. HE HAS ALSO GONE ON TO OBSERVE THAT THE ASSESSEE HAD TWO PORTFO LIOS, A TRADE PORTFOLIO AND AN INVESTMENT PORTFOLIO. FROM THE BALANCE SHEET AS ON 31.03.2005 IT IS DIFFICULT TO FIND ANY SHARES HELD IN THE TRADE PORTFOLIO AND TO THIS EXTE NT THE CIT(A) APPEARS TO BE WRONG - I.E., IN SAYING THAT THE ASSESSEE HAD TWO PORTFOLIOS. ACC ORDING TO THE BALANCE SHEET .AS ON 31.03.2005 THE SHARES COSTING RS.12,59,85,603/- WER E SHOWN AS SHARES AND THE BALANCE SHEET ALSO CONTAINED THE LIST OF THE SHARES OF THE 26 COMPANIES HELD BY THE ASSESSEE. THE BALANCE SHEET ALSO DISCLOSED RS.3,79, 80,707/- AS 'OTHER INVESTMENTS' WHICH CONSISTED MAINLY OF BONDS AND MUTUAL FUNDS. T HERE WERE NO SHARES WHICH WERE SHOWN IN THE BALANCE SHEET OR THE PROFIT AND LOSS A CCOUNT AS STOCK-IN-TRADE. SURPLUS RECEIVED ON THE SHARES SOLD DURING THE YEAR WERE SH OWN AS EITHER SHORT TERM CAPITAL GAINS OR AS LONG TERM CAPITAL GAINS. SO FAR AS THE LONG TERM CAPITAL GAIN IS CONCERNED, WE HAVE ALREADY SEEN THAT THE AO DID NOT DISPUTE THE N ATURE OF THE GAINS AND MADE NO ATTEMPT TO TREAT THEM AS BUSINESS PROFITS. IT IS ON LY WITH REGARD TO THE SHORT TERM CAPITAL GAINS THAT HE HAS TAKEN A VIEW THAT THEY REPRESENT BUSINESS PROFITS APPARENTLY BECAUSE OF THE PERIOD OF HOLDING. IF THE AVERAGE INVESTMEN T MADE BY THE ASSESSEE IN ONE SCRIP IS TAKEN, IT COMES TO AROUND RS.45.00 LAKHS AS POINTED OUT BY THE ASSESSEE, WHICH APPEARS TO BE TOO HIGH FOR AN INDIVIDUAL TO HOLD AS STOCK-IN-TRADE. THE PORTFOLIO OF THE SHARES SHOWS THAT MANY OF THE SCRIPS ARE OF BLUE CH IP COMPANIES, THEIR SHARES IN WHICH ARE NORMALLY CONSIDERED TO BE SAFE AND SOUND INVEST MENTS. THE LIST IS ATTACHED TO THE BALANCE SHEET AS ON 31.03.2005 AND IT INCLUDES THE SHARES OF MADRAS CEMENTS LTD., COLGATE LTD., LUMAX INDUSTRIES, BHARAT ELECTRONICS, RELIANCE INDUSTRIES, FINOLEX, MAHINDRA & MAHINDRA, APPOLO TYRE, TCS LTD., NTPC, T ISCO, POLARIS, ETC. THE DETAILS OF THE SHORT TERM CAPITAL GAINS A/SO ATTACHED TO THE B ALANCE SHEET SHOWS SALE OF SHARES OF SEVERAL BLUE CHIP COMPANIES BESIDES 'THE AFORESAID COMPANIES. THE ASSESSEE HAS NOT INDULGED IN ANY DEALINGS, IN FUTURES AND OPTIONS AN D THE INSTANCES OF SHARE TRANSACTIONS INVOLVING NO DELIVERY ARE ONLY TWO AND THE LOSS THE REIN WAS ONLY RS.474/-. THE AO APPEARS TO HAVE BEEN INFLUENCED MORE BY THE FREQUEN CY OF THE TRANSACTIONS AND HE HAS CITED THE BROKERS' CONTRACT NOTES WHICH SHOW A NUMB ER OF ORDERS PLACED FOR PURCHASE OF THE SHARES ON THE SAME DAY AT DIFFERENT RATES. WE H AVE ALREADY REFERRED TO THE ARGUMENT OF THE LEARNED REPRESENTATIVE FOR THE ASSESSEE AS T O HOW THE CONTRACT NOTES ARE ISSUED BY THE SHARE BROKER. HE HAS ALSO REFERRED TO PAGES 74 TO 79 OF THE PAPER BOOK WHICH CONTAINS THE CONTRACT NOTES ISSUED BY FALCON BROKER AGE PVT. LTD. ON 1ST FEBRUARY 2005. THOUGH THERE ARE SEVERAL ORDERS FOR PURCHASE OF THE SHARES OF MAN INDUSTRIES LTD. ON THE SAME DAY, THE ASSESSEE APPEARS TO HAVE INTENDED TO ACQUIRE 25000 SHADES IN THIS COMPANY AND THE CONTRACT NOTE MERELY EXHIBITED THE DIFFERENT TIMES ON THE SAME DAY AT WHICH THE BROKER ACQUIRED THE SHARES IN THE STOCK E XCHANGE AT DIFFERENT RATES. ULTIMATELY THE BROKER HAD ACQUIRED 25000 SHARES OF THE COMPANY ON BEHALF OF THE ASSESSEE FOR A TOTAL PRICE OF RS. 26,80,890/- . THU S IT IS ACTUALLY A SINGLE TRANSACTION FOR ACQUIRING 25000 SHARES IN A COMPANY AND NOT SEVERAL TRANSACTIONS OF ACQUIRING THE SAME COMPANY'S SHARES ON A SINGLE DAY AS ASSUMED BY THE AO. THE ASSESSEE HAS A/SO EXPLAINED IN SIMILAR FASHION THE DETAILS OF THE SHO RT TERM CAPITAL GAINS FURNISHED IN PAGES 17 TO 19 OF THE PAPER BOOK, WHICH HAS BEEN EXPLA INED ALONG WITH THE DETAILS 17 ITA NO.6166, 6491/MUM/2013 M/S. BUNKIM FINANCE & INVESTMENTS PVT.LTD. ASSESSMENT YEAR-2006-07 CONTAINED AT PAGE 30 OF THE PAPER BOOK. THESE DETAI LS SHOW THAT THE ASSESSEE SOLD 30 SCRIPS DURING THE YEAR, WHICH GAVE RISE TO THE SHOR T TERM CAPITA! GAINS OF RS,2,25,47,9927-. THE SALES ON THE SAME DAY BUT IN DIFFERENT LOTS OF THE SHARES OF THE SAME COMPANY CANNOT BE TREATED, IN OUR OPINION, AS SEPARATE TRANSACTIONS OF SALE IN ORDER TO JUDGE THE FREQUENCY OF THE SALES WE HAVE A LREADY REFERRED TO THE ARGUMENT OF THE LEARNED REPRESENTATIVE FOR THE ASSESSEE THAT WH EN THE SHARES OF AUTOMO COR WERE PURCHASED ON 25.11.2004 IN THREE LOTS, THEY HAVE T O BE TREATED AS A SINGLE PURCHASE TRANSACTION AND SIMILARLY WHEN THE SHARES OF THE SA ID COMPANY WERE SOLD ON 29.11.2004 IN THREE SEPARATE LOTS, THEY HAVE TO BE TAKEN AS A SINGLE SALE. IT SEEMS TO US THAT THIS IS A REASONABLE WAY OF ASCERTAINING THE FREQUENCY OF THE TRANSACTIONS. THIS IS THE WAY IN WHICH THE STATEMENT AT PAGE 30 OF THE PAPER BOOK HA S BEEN PREPARED FROM WHICH IT IS SEEN THAT THE TRANSACTIONS OF PURCHASES, COUNTED MO NTH-WISE, CAME TO 49 IN NUMBER DURING THE YEAR AND TRANSACTIONS OF SALES RECKONED IN A SIMILAR MANNER CAME TO 43 IN NUMBER DURING THE YEAR. 12. IT SEEMS TO US FROM THE FACTS NOTED ABOVE THAT IT IS DIFFICULT TO UPHOLD THE CONCLUSION OF THE DEPARTMENTAL AUTHORITIES THAT THE ASSESSEE H ELD THE SHARES AS HER STOCK-IN- TRADE. IN THE ASSESSMENT YEAR 2004-05 THE ASSESS EE SOLD 30 SCRIPS AND EARNED CAPITAL GAINS OF RS.1.05 CRORES, WHICH WAS ACCEPTED BY THE AO AS SHORT TERM CAPITAL GAINS UNDER SECTION 143(3) OF THE ACT. SIMILARLY IN THE ASSESSMENT YEAR 2007-08 ALSO THE CAPITAL GAINS OF RS. 0.08 CRORES ON SALE OF 24 SCRI PS WAS TREATED AS SNORT TERM CAPITAL GAINS BY THE AO IN THE ASSESSMENT COMPLETED UNDER S ECTION 143(3) OF THE ACT. THE CONDUCT OF THE AO ATTRACTS THE RULE OF CONSISTENCY AND THIS PRINCIPLE CONSIDERED ALONG WITH THE OTHER FACTS FOUND IN THE PRECEDING PARAGRA PH, PERSUADE US TO HOLD THAT THE SURPLUS ON THE SALE OF SHARES WAS RIGHTLY DECLARED BY THE ASSESSEE AS SHORT TERM CAPITAL GAINS. IN ADDITION TO THE SAME WE FIND THAT THE ATT EMPT OF THE CIT TO ASSESS THE LONG TERM CAPITAL GAINS FOR THE SAME YEAR AS BUSINESS PR OFITS UNDER SECTION 263 OF THE ACT, ON THE FOOTING THAT THE ASSESSEE IS A REGULAR TRADER I N SHARES AND SECURITIES WAS ULTIMATELY DROPPED BY ORDER DATED 19.03.201 0. IN THE NOTICE ISSUED ON 26.11.2009, THE CIT EXPRESSED THE VIEW THAT IF THE ASSESSEE IS TO BE TREATED AS A REGULAR TRADER IN SHARES AND SECURITIES, THE HOLDING PERIOD OF THE SH ARES DOES NOT ALTER THE CHARACTER OF THE INCOME. IN OUR OPINION, THE APPROACH OF THE CIT , WITH RESPECT, REFLECTS THE CORRECT APPROACH TO BE ADOPTED IN SUCH CASES AND IT IS OF F UNDAMENTAL IMPORTANCE TO FIRST ASCERTAIN WHETHER THE ASSESSEE IS A DEALER IN SHARE S OR INVESTOR IN SHARES. THE CHARACTER OR THE HEAD OF INCOME UNDER WHICH THE SUR PLUS IS TO BE ASSESSED FOR PURPOSES OF THE INCOME TAX ACT GETS DETERMINED BY THE ANSWER TO THIS FUNDAMENTAL QUESTION. AS WE HAVE ALREADY NOTED THERE ARE NO STRONG MATERIALS TO HOLD THAT THE ASSESSEE TRADED IN SHARES, WHEREAS THERE IS SUFFICIENT MATERIAL TO HOL D THAT SHE INVESTED IN SHARES AS INVESTOR AND NEVER INTENDED TO CARRY ON A BUSINESS IN SHARES. 13. FOR THE ABOVE REASONS WE ACCEPT THE CONTENTIONS OF THE ASSESSEE AND HOLD ON THE FACTS OF THE PRESENT CASE THAT THE SHORT TERM CAPIT AL GAINS OF RS.2,25,47,992/- ON THE SALE OF SHARES AND MUTUAL FUND UNITS SHOULD BE ASSE SSED AS SHORT TERM CAPITAL GAINS AS DECLARED BY THE ASSESSEE. THE APPEAL OF THE ASSESSE E IS ALLOWED WITH NO ORDER AS TO COSTS'. 18 ITA NO.6166, 6491/MUM/2013 M/S. BUNKIM FINANCE & INVESTMENTS PVT.LTD. ASSESSMENT YEAR-2006-07 10.23 I HAVE ALSO ANALYSED THE SOURCES FOR PURCHASE OF THESE 2 SCRIPS. IT IS ALSO WORTH TO MENTION HERE THE LETTER FILED BY THE APPELLANT B EFORE THE CIT(A)-10, MUMBAI DATED 08.06.2009 WHEREIN IT WAS CLARIFIED THAT THE APPELL ANT COMPANY DID NOT UTILISE ANY INTEREST BEARING BORROWED FUNDS FOR THE PURPOSE OF INVESTMENT IN THESE SHARES AND HENCE, IT WAS PRAYED THAT THE INCOME EARNED SHOULD BE TREATED AS LONG TERM CAPITAL GAIN/SHORT TERM CAPITAL GAIN AND NOT INCOME FROM BU SINESS. IT IS THE CONTENTION OF THE APPELLANT THAT THE ORIGINAL ADVANCES GIVEN TO M/S.A NAND MANGAL INVESTMENTS PVT. LTD. AND M/S.JIL INVESTMENT WERE RETURNED AND THESE WERE THE SOURCES FOR THE ACQUISITION OF THESE 2 SCRIPS. COPY OF THE LEDGER EXTRACT OF THE A BOVE 2 CONCERNS ARE AVAILABLE IN PAGES 363 AND 364 OF THE PAPER-BOOK. AS MENTIONED A LREADY, PAYMENT TO PRIYAM SECURITIES TOWARDS ACQUISITION OF THE SCRIPS OF RUC HI SOYA WAS MADE THROUGH STATE BANK OF INDORE AND UTI BANK ACCOUNT MAINTAINED BY T HE APPELLANT. PAGE 52, 53, 78 AND 79 OF THE PAPER-BOOK CLEARLY SHOWS THAT, AFTER THE RECEIPT OF THE ADVANCE FROM THE ABOVE TWO CONCERNS, THE APPELLANT, IN TURN, HAD MADE THE PAYMENT TO PRIYAM SECURITIES. THIS SHOWS THAT THE INTEREST BEARING BORROWED FUNDS WERE NEVER UTILISED BY THE APPELLANT IN PURCHASE OF THE ABOVE TWO SCRIPS. IN THE ABSENCE OF BORROWALS THE GAIN ON THE PURCHASE AND SALE OF SHARES CANNOT BE TREATED AS INCOME FROM BUSINESS. 10.24 THUS, THE OVERALL PICTURE IN THE APPELL ANT'S CASE REVEALS THAT: (I) FREQUENCY OF THE TRANSACTION IS VERY LESS THOUG H THE VOLUME IS HIGH. (II) NO REPETITIVE TRANSACTION WITH SHORT PERIOD O F HOLDING. (III) ABSENCE OF INTENTION TO MAKE QUICK PROFIT. (IV) THE HOLDING PERIOD WAS MORE THAN A YEAR. (V) CONSISTENTLY THE AO HAD ACCEPTED THE LTCG IN T HE EARLIER YEARS U/S 143(3). (VI) AO HAD NEVER DISPUTED THE STOCKS SHOWN AS INVESTMENT IN THE BALANCE SHEET. (VII) THE SCRIPS ARE IN DEMAT FORM AND APPELLAN T RIGHTLY FOLLOWS FIFO METHOD, (VIII) SHARES IN OPENING BALANCE WERE ONLY SOLD DURING THE YEAR. (IX) INTEREST BEARING BORROWED FUNDS WERE NOT UT ILISED BY THE APPELLANT TOWARDS THE INVESTMENT IN SHARES. THUS THERE ARE NO STRONG MATERIALS TO HOLD THAT THE APPELLANT IS IN TO TRADING OF SHARES, WHEREAS THERE ARE OVERWHELMING MATERIALS TO HOLD TH AT IT HAD INVESTED IN SHARES AS INVESTOR AND NEVER INTENDED TO CARRY ON A BUSINESS IN SHARES. IN VIEW OF THE ABOVE DISCUSSION, I AM OF THE FIRM VIEW THAT THE GAIN ARI SING OUT OF THESE 2 SCRIPS CONSTITUTE LONG TERM CAPITAL GAIN, AND NOT BUSINESS INCOME AS HELD BY THE AC. THIS GROUND OF APPEAL IS ALLOWED. 4.6 HOWEVER, THE ASSESSEES PLEA THAT SHORT-TERM CA PITAL GAINS WERE WRONGLY TREATED AS BUSINESS INCOME COULD NOT FIND F AVOR WITH LD. CIT(A). 19 ITA NO.6166, 6491/MUM/2013 M/S. BUNKIM FINANCE & INVESTMENTS PVT.LTD. ASSESSMENT YEAR-2006-07 THE FACTUAL FINDINGS OF LD. CIT(A), WITH RESPECT TO TREATMENT OF SHORT-TERM CAPITAL GAINS AS BUSINESS INCOME WERE AS FOLLOWS: - 12. ADDITIONAL GROUNDS RAISED : THE APPELLANT HAD FILED ADDITIONAL GROUNDS VIDE LET TER DATED 24.11.2009 BEFORE THE CIT(A). HOWEVER, HE FAILED TO ADJUDICATE THE ABOVE GROUNDS CONNECTED TO TREATING THE SHORT TERM CAPITAL GAIN ON SALE OF SHARES AS BUSINE SS INCOME. THE APPELLANT HAS RAISED THIS ISSUE IN GROUND NO.3 OF THE APPEAL FILE D BEFORE THE HON'BLE ITAT. THE FINDING OF THE HON'BLE ITAT IS IN PARA 20 OF ITS ORDER. SIN CE THE CIT(A) DID NOT ADJUDICATE THE ADDITIONAL GROUND TAKEN, THIS ISSUE WAS RESTORED TO THE CIT(A) WITH THE DIRECTION TO DECIDE THE ISSUE OF CLAIM OF SHORT TERM CAPITAL GAI N, AFTER GIVING DUE OPPORTUNITY OF HEARING AND TO CONSIDER SUCH EVIDENCES AS MAY BE FI LED. 12.1 THE ADDITIONAL GROUND FILED IS AVAILABLE IN PAGE 165 AND 166 OF THE PAPER-BOOK. THE ADDITIONAL GROUNDS RAISED ARE AS UNDER :- 1) THAT THE LEARNED INCOME-TAX OFFICER OUGHT TO HAV E CONSIDERED THE SHORT TERM CAPITAL GAINS CLAIMED BY THE ASSESSEE. 2) THAT THE LEARNED INCOME-TAX OFFICER HAS TREATED SHORT TERM CAPITAL GAINS OF RS.53,27,430/- AS A BUSINESS INCOME WITHOUT GIVING ANY REASON WHICH IS QUITE ILLEGAL, ARBITRARY, UNWARRANTED UNJUSTIFIED, AND BAD IN LAW. 3) THAT THE APPELLANT FURTHER CRAVES TO LEAVE TO A DD AND/OR TO AMEND AFORESAID GROUND OF APPEALS AS AND WHEN NECESSARY. 12.2 NO NEW EVIDENCES WERE FILED BEFORE ME EXCEPT THE DETAILS ALREADY FURNISHED BEFORE THE AO DURING THE COURSE OF REMAND PROCEEDIN G. THE AO DID NOT GIVE ANY REASON IN THE ASSESSMENT ORDER AS TO WHY THE SHORT TERM CA PITAL GAIN DISCLOSED BY THE APPELLANT IS TREATED AS BUSINESS INCOME. THE SUBMIS SION OF THE APPELLANT IS AS UNDER :- '9. SHORT-TERM CAPITAL GAIN OF RS.53,27,430/- THE ID. A.O. HAS TREATED SHORT-TERM CAPITAL GAIN AS BUSINESS INCOME WITHOUT GIVING ANY REASON IN THE BODY OF ASSESSMENT ORDER. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSES COMPANY HAS FILED COMPLETE DETAILS OF SHORT-TERM CAPITAL GAIN STATEMENT ALONGWITH THE COPY OF SALE INVOICES.' 12.3 I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE APPELLANT AND THE MATERIAL AVAILABLE IN THE PAPER-BOOK. THE DETAILS CONNECTED TO THE SHORT TERM CAPITAL GAIN/ LOSS EARNED DURING THE YEAR IS AVAILABLE IN PAGES 45 AND 46 OF THE PAPER-BOOK, WHICH WAS PART OF THE PAPER-BOOK CONTAINING 141 PAGES FILED B EFORE THE AO DURING THE REMAND PROCEEDING. THE PERUSAL SHOWS THAT THE APPELLANT HA D DEALT WITH 30 SCRIPS DURING THE YEAR ON WHICH, THE NET SHORT TERM CAPITAL GAIN OF R S.53,27,437/- WAS ADMITTED. DURING THE COURSE OF HEARING, THE AR OF THE APPELLANT WAS DIRECTED TO FILE THE NUMBER OF DAYS OF HOLDING OF THE ABOVE SCRIPS BEFORE IT WAS SOLD, BY ADDING A COLUMN TO THE DETAILS ALREADY FILED IN PAGE 45 AND 46 OF THE PAPER-BOOK WHICH WAS FILED ON 11.07.2013. THE PERUSAL CLEARLY SHOWS THAT THE PERIOD OF HOLDING RANGES FRO M 1 TO 9 DAYS IN RESPECT OF THE FOLLOWING SCRIPS :- 20 ITA NO.6166, 6491/MUM/2013 M/S. BUNKIM FINANCE & INVESTMENTS PVT.LTD. ASSESSMENT YEAR-2006-07 SR. NO. NAME OF THE SCRIP PERIOD OF HOLDING 1. BAYER CROP 1 DAY 2. DCM LTD. 9 DAYS 3. HPCL 3 DAYS 4. IPCL 4 DAYS 5. KANISHK STEEL 6 DAYS 6. POLARIS 1 DAY 7. PUNJAB CHEMICALS 6 DAYS 8. SUN PHARMA 8 DAYS 9. SATAVANA 4 DAYS 10. FEW TRANSACTIONS CONNECTED TO RAMCO SYSTEM 2 TO 3 DAYS WITH REGARD TO THE FOLLOWING SCRIPS, THE PERIOD OF HOLDING WAS BETWEEN 10 TO 45 DAYS :- SR. NO. NAME OF THE SCRIP PERIOD OF HOLDING 1. BANK OF RAJASTHAN 13 TO 18 DAYS 2. IDBI LTD. 10 DAYS 3. KANISHK STEEL 13 DAYS 4. BAYER CROP 10 DAYS 5. PORTION OF SHARES OF MORARJEE TEXTILE 10 DAYS 21 ITA NO.6166, 6491/MUM/2013 M/S. BUNKIM FINANCE & INVESTMENTS PVT.LTD. ASSESSMENT YEAR-2006-07 12.4 ANOTHER FEATURE NOTICED WAS ALL THESE SCRIPS MENTIONED ABOVE HAVE BEEN BOUGHT AND SOLD ONLY ONCE BY THE APPELLANT. SINCE THE HOLD ING PERIOD WAS LESS THAN 45 DAYS, THE CLAIM OF THE APPELLANT THAT GAIN ARISING OUT OF THESE SCRIPS ARE SHORT TERM GAIN CANNOT BE ACCEPTED. FURTHER, I FIND WITH REGARD TO THE SCR IPS OF ABC INDIA LTD. (128 TO 133 DAYS), M.P.GIYCHEM (122 TO 194 DAYS), RAMCO SYS. (7 6 TO 80 DAYS), RUCHI SOYA (45 TO 185 DAYS) AND RUCHI STRIPS (137 TO 159 DAYS), THOUG H THE AVERAGE HOLDING PERIOD WAS MORE, BUT THE APPELLANT HAD REPEATEDLY CARRIED OUT MULTIPLE TRANSACTIONS WITH SHORT SELLING WHICH IS DEFINITELY THE ATTRIBUTE OF THE TR ADER AND NOT THAT OF THE INVESTOR. IN VIEW OF THIS, THE ENTIRE, CLAIM OF SHORT-TERM CAPITAL GAIN IS TREATED AS 'BUSINESS INCOME' OF THE APPELLANT AND ACCORDINGLY, GROUND TAKEN BY THE APPELLANT, IS DISMISSED. 13. IN THE RESULT, APPEAL IS PARTLY ALLOWED. THE AFORESAID ADJUDICATION FORM SUBJECT MATTER OF C ROSS APPEAL BEFORE US. 5. WE HAVE CAREFULLY CONSIDERED THE FACTUAL FINDING S OF LEARNED FIRST APPELLATE AUTHORITY, AS EXTRACTED ABOVE. SO FAR AS THE TREATMENT OF LONG-TERM CAPITAL GAINS IS CONCERNED, THE UNDISPUTED POSITION THAT EMERGES IS THE FACT THAT THE STATED INVESTMENTS WERE HELD BY ASSESSEE S INCE PAST MANY YEARS. THE INVESTMENTS WERE LONG TERM INVESTMENTS AND REFL ECTED AS SUCH IN THE FINANCIAL STATEMENTS WHICH IS FURTHER EVIDENT FROM THE FACT THAT THE ASSESSEE 6. MPHASIS BFL SOFT 12 DAYS 7. NATIONAL STEEL 19 DAYS 6. RAIN COMMOD 14 DAYS 9. MCDOWEII 42 TO 45 DAYS 10. SURYA PHARMA 10 TO 14 DAYS 11. UCAL FUEL SYSTEMS 11 DAYS 12, ZENITH COMPUTERS 45 DAYS 13. ZICOM SEC URITY SYS 20 TO 22 DAYS 22 ITA NO.6166, 6491/MUM/2013 M/S. BUNKIM FINANCE & INVESTMENTS PVT.LTD. ASSESSMENT YEAR-2006-07 NEVER MADE PROVISION FOR DIMINUTION IN VALUE THEREO F ON THE BALANCE SHEET DATE. IN FACT, SIMILAR GAINS WERE ACCEPTED BY DEPAR TMENT AS LONG-TERM CAPITAL GAINS IN AYS 2005-06 & 2008-09 IN SCRUTINY ASSESSMENTS U/S 143(3). THEREFORE, RULE OF CONSISTENCY FAVORED ASSE SSEES STAND. IT IS ALSO THE FACTUAL FINDINGS OF LD. CIT(A) THAT THE STATED INVESTMENTS WERE NOT OUT OF BORROWED FUNDS, WHICH FACT REMAIN UNDISPUTED BEFORE US ALSO. FURTHER, THE FACTUAL FINDINGS OF LD. CIT(A) AT PARA 10.24 LEAD U S TO INEVITABLE CONCLUSION THAT THE STATED GAINS WERE RIGHTLY HELD TO BE ASSES SABLE AS LONG-TERM CAPITAL GAINS RATHER THAN AS BUSINESS INCOME. THERE FORE, WE CONCUR WITH THE STAND OF LEARNED FIRST APPELLATE AUTHORITY, IN THIS RESPECT. RESULTANTLY, THE GROUNDS RAISED BY REVENUE STAND DISMISSED. THE REVE NUES APPEAL STANDS DISMISSED. 6. SO FAR AS THE TREATMENT OF SHORT-TERM CAPITAL GA INS AS BUSINESS INCOME IS CONCERNED, WE FIND THAT LD. CIT(A) HAS CLINCHED THIS ISSUE ALSO IN THE RIGHT PERSPECTIVE. THE AVERAGE HOLDING PERIOD OF MOST OF THE SCRIPS WAS FOUND TO BE BELOW 45 DAYS. THE ASSESSEE CARRIED OUT MULTIPLE TRANSACTIONS WITH SHORT SELLING WHICH WOULD BE THE ATTRIBUTES OF A TRADER A ND NOT OF AN INVESTOR. THE LD. AR, IN THE COURSE OF HEARING, HAS RELIED UPON T HE DECISION OF HONBLE BOMBAY HIGH COURT RENDERED IN JAYA CHHEDA V/S ACIT (89 TAXMANN.COM 152) TO SUBMIT THAT THE FORMULA OF HOLDING PERIOD AS ADO PTED BY LD. FIRST APPELLATE AUTHORITY WOULD NOT BE CONCL USIVE. HOWEVER, WE FIND THAT LEARNED FIRST APPELLATE AUTHORITY, IN THE PRES ENT CASE, HAS ELABORATELY EXAMINED THE NATURE OF THE STATED TRANSACTIONS AND ON THE BASIS OF ASSESSEES CONDUCT, FORMED AN OPINION THAT THE ASSE SSEE ACTED AS TRADER 23 ITA NO.6166, 6491/MUM/2013 M/S. BUNKIM FINANCE & INVESTMENTS PVT.LTD. ASSESSMENT YEAR-2006-07 AND NOT AS AN INVESTOR. WE ALSO FIND THAT LD. AR IS UNABLE TO CONTROVERT THE FACTUAL FINDINGS OF LD. CIT(A). THEREFORE, WE SEE N O REASON TO INTERFERE WITH THE IMPUGNED ORDER, IN THIS REGARD. HENCE, CONCURRI NG WITH THE SAME, WE DISMISS THE GROUND RAISED BY THE ASSESSEE. GROUND N O. 3 OF ASSESSEES APPEAL IS RELATED WITH INTEREST U/S 234, WHICH WOUL D NOT REQUIRE OUR INDULGENCE. 7. IN THE RESULT, BOTH THE APPEALS STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH DECEMBER, 2019. SD/- SD/- (SAKTIJIT DEY) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 17/12/2019 SR.PS:-JAISY VARGHESE 8# 9# / COPY OF THE ORDER FORWARDED TO : 1. '# / THE APPELLANT 2. $%'# / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. 0 1$ 2 , 2 , / DR, ITAT, MUMBAI 6. 1 456 / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.