DCIT CIR 13(3), MUMBAI V. SURENDRA BAJAJ, MUMBAI

ITA 6234/MUM/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 55807 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 17-08-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 02-12-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: V V SHASTRI
• Keywords: Business income; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH: MUMBAI BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO.6234/MUM/2009 (ASSESSMENT YEAR: 2006-07) ACIT, CIRCLE 13(3), ROOM NO.430, 4TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, NEW MARINE LINES, MUMBAI -400 020 ....... APPELLANT VS SHRI SURENDRA BAJAJ, 4/43, KAPADIA CHAMBERS, 51-D, RANTANSEY MARG, MUMBAI -400 009 ..... RESPONDENT PAN: AAEPB 3670 R APPELLANT BY: SHRI V.V. SHASTRI RESPONDENT BY: SHRI REEPAL TRALSHWALA DATE OF HEARING: 17.08.2011 DATE OF PRONOUNCEMENT: 28.10.2011 O R D E R PER R.S. PADVEKAR, JM IN THIS APPEAL THE REVENUE HAS CHALLENGED THE IMPUG NED ORDER OF THE LD. CIT (A) -24, MUMBAI DATED 30.09.2009 FOR TH E A.Y. 2006-07. THE REVENUE HAS TAKEN THE FOLLOWING EFFECTIVE GROUN DS:- 1. (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LD. CIT (A) HAS ERRED IN DELET ING OF ` 22,20,495/- MADE BY THE AO TREATING THE ASSESSEE AS TRADER IN SHARES. (II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, ERRED IN NOT APPRECIATING THE FACTORS L IKE ITA 6234/MUM/2009 SHRI SURENDRA BAJAJ 2 VOLUME, FREQUENCY, PERIOD OF HOLDING AS CRITERION T O DETERMINE THE NATURE OF TRANSACTIONS. 2. THE APPELLANT PRAYS THAT THE ORDER OF CIT (A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 2. THE FACTS RELEVANT TO THE ISSUE ARE AS UNDER. T HE ASSESSEE IS A PARTNER IN THE FIRMS NAMELY M/S. CHANDA EXPORTS, M/ S. METAL & ALLIED PRODUCTS AND M/S. CHANDA INTERNATIONAL. THE RETURN FILED BY THE ASSESSEE FOR THE A.Y. 2006-07 WAS SELECTED FOR SCRU TINY AND ASSESSMENT WAS COMPLETED U/S.143(3) OF THE ACT. TH E ASSESSEE HAS DECLARED SHORT-TERM-CAPITAL-GAIN AT ` 22,20,495/- ON THE SALE OF THE SHARES. AS PER THE DETAILS FILED BY THE A.O. IN TH E RELEVANT PREVIOUS YEAR, THE ASSESSEE HAD CARRIED OUT 320 TRANSACTIONS OF THE PURCHASE AND SALE OF THE SHARES ON WHICH THE ASSESSEE HAS DE CLARED THE SAID SHORT-TERM-CAPITAL-GAIN. THE A.O. PROCEEDED TO EXA MINE THE CLAIM OF THE ASSESSEE TO DECIDE WHETHER HE IS AN INVESTOR O R TRADER IN THE SHARES AND WHETHER THE SHARE TRANSACTIONS ARE TAXAB LE AS CAPITAL- GAIN OR AS A BUSINESS INCOME. IN THE OPINION OF THE A.O. THE NUMBER OF SHARES TRADED, NUMBER OF TRANSACTIONS AND ALSO V OLUME OF TRANSACTION IS TO BE TAKEN INTO CONSIDERATION FOR D ETERMINING THE NATURE OF THE TRANSACTION WHETHER IT IS A TRADING O R INVESTMENT. THE A.O. ALSO NOTED THAT THE INTENTION AT THE TIME OF P URCHASE IS VERY CRUCIAL, RELEVANT AND OFTEN CONCLUSIVE FACTOR TO DE CIDE WHETHER THE TRANSACTION WAS IN THE NATURE OF ADVENTURE IN THE T RADE OR NOT. AS PER THE DETAILS FILED BY THE ASSESSEE, THE A.O. CLASSIF IED THE TRANSACTIONS ON THE BASIS OF PERIOD OF HOLDING AS WELL AS PERCEN TAGE OF TRANSACTION IN VOLUME OF PERCENTAGE OF TRANSACTION IN NUMBER. THE SAME IS GIVEN ON PAGE NO.3 BY WAY OF A CHART AND FOR THE SAKE OF BENEFIT TO DECIDE THE ISSUE THE SAME IS REPRODUCED HEREUNDER:- ITA 6234/MUM/2009 SHRI SURENDRA BAJAJ 3 SR. NO. PERIOD OF HOLDING IN MONTHS) NO.OF TRANSACT- IONS VOLUME OF TRANSACTION ( ` `` ` ) PERCENTAGE OF TRANSACT- ION IN VOLUME PERCENTAGE OF TRANSACTIONS IN NUMBER 0 DAYS 82 56,80,820 22% 26% 1-10 DAYS 57 40,05,845 16% 18% 1 1 89 84,54,207 33% 28% 2 2 20 14,03,649 6% 6% 3 3 4 83,898 1% 1% 4 4 14 14,96,686 6% 4% 5 5 9 3,88,231 2% 3% 6 6 7 5,77,211 2% 2% 7 7-12 38 30,48,168 12% 12% PERCENTAGE OF TRANSACTIONS IN TERMS OF VALUE AND NUMBER CARRIED OUT DURING THE PERIOD OF 6 MONTHS: 80% 88% TOTAL 320 2,51,38,715 100% 100% 3. AFTER EXAMINING THE PERIOD OF HOLDING OF THE TRA NSACTION AS WELL AS COMPARATIVE PERCENTAGE OF THE TRANSACTION IN VOL UMES THE A.O. CAME TO THE CONCLUSION THAT THE ASSESSEE IS A TRADE R IN SHARES AND NOT AN INVESTOR AND HENCE WHATEVER PROFIT IS EARNED I.E . A BUSINESS INCOME OF THE ASSESSEE AND CANNOT BE TREATED AS A CAPITAL GAINS. THE A.O. SOUGHT THE EXPLANATION OF THE ASSESSEE AND THE ASSE SSEE RESISTED THE ACTION OF THE A.O. JUSTIFYING HIS CLAIM THAT THE PR OFITS / GAINS ON THE PURCHASE AND SALE OF THE SHARES IS ONLY THE SHORT-T ERM-CAPITAL-GAIN AFTER ELABORATE DISCUSSION ON THE ISSUE, THE A.O. C ONCLUDED THAT THE ASSESSEE WAS INVOLVED IN THE TRADING OF SHARES DURI NG THE RELEVANT FINANCIAL YEAR AND HE WAS NOT AN INVESTOR IN THE SH ARES AND HENCE THE ENTIRE PROFIT / GAIN ON THE SALE OF THE SHARES IS T O BE TREATED AS A BUSINESS INCOME. THE REASONS GIVEN BY THE A.O. HAV E COME TO THE CONCLUSION THAT THE GAINS / PROFITS ON THE SALE OF THE SHARES IS ONLY THE BUSINESS INCOME ARE AS UNDER:- 6.12 WHILE DEFINING THE TERM BUSINESS, THE SUPRE ME COURT IN 101 ITR 234 OBSERVED THE EXPRESSION BUSINESS, AS OBSERVED BY SHAH J. SPEAKING FOR THE COURT IN THE CASE OF STATE OF GUJARAT VS. RAIPUR MFG. CO. (1967) 19 STC 1 (SC), THOUGH EXTENS IVELY USED IN TAKING STATUS, IS A WORD OF INDEFINITE IMPORT. IN TAXING STATUTES, IT ITA 6234/MUM/2009 SHRI SURENDRA BAJAJ 4 IS USED IN THE SENSE OF AN OCCUPATION, OR PROFESSIO N WHICH OCCUPIES THE TIME, ATTENTION AND LABOUR OF A PERSON , NORMALLY WITH THE OBJECT OF MAKING PROFIT. TO REGARD AN ACTIVITY AS BUSINESS THERE MUST BE A COURSE OF DEALINGS, EITHER ACTUALLY CONTINUED OR CONTEMPLATED TO BE CONTINUED WITH A PROFIT MOTIVE, AND NOT FOR SPORT OR PLEASURE. WHETHER A PERSON CARRIES ON BUS INESS IN A PARTICULAR COMMODITY MUST DEPEND UPON THE VOLUME, F REQUENCY, CONTINUITY AND REGULARITY OF TRANSACTIONS OF PURCHA SE AND SALE IN A CLASS OF GOODS AND THE TRANSACTIONS MUST ORDINARI LY BE ENTERED INTO WITH A PROFIT MOTIVE. BY THE USE OF THE EXPRE SSION PROFIT MOTIVE IT IS NOT INTENDED THAT PROFIT MUST IN FACT BE EARNED. NOR DOES THE EXPRESSION COVER A MERE DESIRE TO MAKE SOM E MONETARY GAIN OUT OF TRANSACTION OR EVEN A SERIES OF TRANSAC TIONS. IT PREDICATES A MOTIVE WHICH PERVADES THE WHOLE SERIES OF TRANSACTIONS EFFECT BY THE PERSON IN THE COURSE OF HIS ACTIVITY. 6.13 KEEPING IN MIND THE ABOVE PRINCIPLES, IT MAY B E MENTIONED THAT AN INVESTOR IS A PERSON WHO INVESTS HIS SAVING S / SURPLUS MONEY FOR EARNING RETURN ON ITS INVESTMENT EITHER B Y WAY OF DIVIDEND OR APPRECIATION IN VALUE OVER A PERIOD OF TIME. THE PURPOSE OF INVESTMENT IS MAINLY WITH THE EXPECTATIO N THAT INVESTMENT MAY APPRECIATE IN LONG RUN AND NOT IMMED IATELY AND IN SUCH A TRANSACTION, THE ASSESSEE ALWAYS TAKES LO NG TERM VIEW IN THAT RESPECT. THE CONDUCT AND INTEREST OF THE A SSESSEE CLEARLY SHOWS THAT THE ASSESSEE MAKES INVESTMENT WITH AN IN TENTION TO HOLD THEM AS ITS INVESTMENT AND NOT WITH THE INTENT ION TO HOLD THEM AS STOCK IN TRADE AND TO DO BUSINESS IN THEM. 6.14 MOST INVESTORS ARE RISK-AVERSE AND ATTEMPTS TO MAXIMIZE THEIR WEALTH. AS A PRINCIPAL, INVESTORS MAXIMIZE W EALTH BY MAXIMIZING RETURN AND MINIMIZING RISK. INVESTMENT MAY BE DEFINED AS THE PURCHASE BY AN INDIVIDUAL OR AN INST ITUTIONAL OF AN ASSET THAT PRODUCES A RETURN PROPORTIONAL TO RISK O VER SOME FUTURE ITA 6234/MUM/2009 SHRI SURENDRA BAJAJ 5 PERIOD. ANOTHER PRINCIPLE GUIDING INVESTMENT IS TH E REDUCTION OF RISK OF LOSS OF CAPITAL OR INCOME. INVESTORS FACE KNOWN AND UNKNOWN FEATURES AND TRY TO DIVERSIFY THE INVESTMEN T. AS A GENERAL RULE, GROWTH OF CAPITAL WAS A DESIRABLE OBJ ECT OF PORTFOLIO MANAGEMENT. 6.15 AS REGARDS TO ASSESSEES ARGUMENT THAT THE SHA RE WERE SHOWN AS INVESTMENT AND NOT AS STOCK-IN TRADE IN TH E BOOKS, IT HAS BEEN REPEATEDLY HELD BY THE SUPREME COURT THAT IT IS THE NATURE OF THE TRANSACTION THAT IS MORE RELEVANT RAT HER THAN THE NAME OR THE MANNER OF ENTRIES IN THE BOOKS OF ACCOU NTS THAT HAD BEEN PREPARED. A CLASSIFICATION OF PARTICULAR SCRI P IN THE BOOKS OF ACCOUNTS CAN ONLY BE INDICATIVE BUT NOT CONCLUSIVE TO PROVE THE NATURE. EVEN THOUGH THE ASSESSEE MAY BE CLASSIFYIN G THE SHARES AN INVESTMENTS, THE FACT REMAINS THAT THERE HAS BEE N FREQUENT DEALINGS IN SHARES IN THE EARLIER YEAR AND EVEN DUR ING THE CURRENT YEAR AND SUBSEQUENT YEAR, THERE HAS BEEN NOT LET UP IN THE FREQUENCY OR THE TURNOVER OF THE ASSESSEE AND HE CO NTINUES TO CHURN THE SCRIPS ON A REGULAR BASIS. 6.16 IN FACT, ALTHOUGH THE ASSESSEE HAD ALLEGED THA T HE WAS AN INVESTOR, HIS CLAIM IS BELIED BECAUSE OF THE MOTIVE FOR PURCHASE OF SECURITIES WAS TO EARN ITS PROFITS BY SELLING SHARE S AND SECURITIES AT THE QUICKEST POSSIBLE TIME; THE PERIOD OF HOLDIN G WAS 0 TO 1 MONTH OR 0 TO 2 MONTHS FOR SEVERAL TRANSACTIONS AS SHOWN IN THE ABOVE TABLE. AS CAN BE NOTED THE FREQUENCY OF TRAN SACTIONS WAS VERY HIGH. THE INFRASTRUCTURE EMPLOYED AND CO-RELA TION WITH OTHER ACTIVITIES OF HE ASSESSEE AS WELL AS THE SOURCE OF ACQUISITION OF THE SHARES PROVED THAT THE APPELLANT WAS INDULGING IN B USINESS OF PURCHASE AND SALE OF SHARES. 6.17 A TRADER IN SHARES IS A PERSON WHO IS ACTIVELY INVOLVED IN THE STOCK MARKET AND WHO FREQUENTLY PURCHASES AND S ELLS SHARES ITA 6234/MUM/2009 SHRI SURENDRA BAJAJ 6 TO MAKE A GAIN OUT OF THE MOVEMENT IN PRICES OVER A PERIOD OF TIME WHICH MAY BE AS LOW AS A FEW SECONDS OR MAY LAST FO R MONTHS ALTOGETHER. AS CAN BE SEEN FROM THE ABOVE TABLE, T HE ASSESSEE HAS DISPLAYED ALL INGREDIENTS OF SHARE TRADING WHIC H CONCLUSIVELY PROVE THAT THE PURCHASE AND SALE OF SECURITIES WERE NOT AN OCCASIONAL INDIVIDUAL ACTIVITY BUT THE ASSESSEE WAS ENGAGED IN SOME REAL SUBSTANTIAL AND SYSTEMATIC BUSINESS ACTIV ITY WITH THE SAID PURPOSE OF EARNING INCOME AND THAT THE TRANSAC TIONS IN SHARE WERE MADE WITH THE SPECIFIC TARGET OF MAKING PROFIT. 6.18 IT IS OBSERVED IN THE PRESENT CASE THAT THE SH ARES WERE PURCHASED WITH THE INTENTION OF RESALE AT A PROFIT. IT IS NOTED THAT THE PROFIT WAS DERIVED FROM PURCHASE AND SALE OF SH ARES WITHIN SHORT PERIOD OF ONE TO SIX MONTHS. AS A MATTER OF FACT, THE MAJOR PROFIT WAS DERIVED THROUGH SHARE TRANSACTIONS WHERE THE PURCHASE AND SALE HAD TAKEN PLACE WITHIN A PERIOD O F THREE MONTHS. IT IS FURTHER OBSERVED THAT SCALE OF SHARE TRADING TRANSACTION WAS SUBSTANTIAL. IT IS FURTHER OBSERVE D THAT THE SHARES WERE TRANSACTED CONTINUOUSLY AND REGULARLY D URING THE PREVIOUS YEAR RELEVANT TO THE CURRENT ASSESSMENT YE AR. LOOKING TO THE NATURE, NUMBER OF VOLUME OF SHARE TRANSACTIO NS, THE ASSESSEE HAS DEVOTED SUBSTANTIAL TIME IN THE SHARE PURCHASE AND SALES ACTIVITY AND HE HAS EARNED SUBSTANTIAL PROFIT FROM THE SAID ACTIVITY. 6.19 HONBLE SUPREME COURT IN THE CASE OF SOLD TRUS TEE LOK SHIKHSHANA TRUST VS. CIT REPORTED IN 101 ITR 234 ( SC) HAS HELD THAT WHETHER A PERSON CARRIED ON A BUSINESS, DEPEND S UPON THE VOLUME, FREQUENCY, CONTINUITY, AND REGULARITY OF TR ANSACTIONS AND THAT TRANSACTIONS MUST BE ENTERED INTO WITH PROFIT MOTIVE. THE FACTS OF THIS CASE OF THE ASSESSEE ARE JUST LIKE TH E HONBLE SUPREME COURTS JUDGMENTS REFERRED IN THIS ORDER. ITA 6234/MUM/2009 SHRI SURENDRA BAJAJ 7 6.20 REGARDING PERIOD OF HOLDING, IT MAY BE NOTED F ROM THE ABOVE TABLE THAT THE ASSESSEE HAS COMPLETED PURCHAS E AND SALE TRANSACTION ON THE VERY SAME DAY IN 82 CASES, IN 57 TRANSACTIONS THE TRANSACTIONS HAVE BEEN COMPLETED IN THE TIME GA P OF 1 TO 10 DAYS AND WITHIN A PERIOD OF ONE MONTH THE ASSESSEE HAS TRANSACTED INTO 228 SCRIPS. IN ALL 88% OF SHARE T RANSACTIONS WERE COMPLETED WITHIN 0 TO 6 MONTHS. THEREFORE, IT IS B EYOND DOUBT THAT THE ASSESSEE DID NOT HAVE ANY INTENTION TO HOL D THE SECURITIES. THE INTENTION WAS FOCUSED TO EARN MORE PROFIT BY INDULGING IN FREQUENT PURCHASE AND SALE OF SHARES W HICH CERTAINLY IN THE NATURE OF TRADE. REGARDING FREQUENCY OF TRA NSACTIONS, IT IS FURTHER NOTED THAT THE ASSESSEE HAD INDULGED IN SHA RE TRANSACTIONS IN ALMOST ALL SETTLEMENT PERIODS AND O N ALMOST ALL DAYS WHEN THE STOCK EXCHANGE WAS FUNCTIONING. 6.21 THE FACTS AS ILLUSTRATED ABOVE CLEARLY PROVE T HAT THE ASSESSEE WAS ENGAGED IN BUSINESS ACTIVITY AS FAR AS SHARES PURCHASE AND SALES ARE CONCERNED. THE ASSESSEE WAS INVOLVED IN TRADING OF SHARES DURING THE RELEVANT F.Y. AND THAT HE WAS NOT AN INVESTOR IN SHARES, BUT A TRADER IN SHARES. IT IS NOTED THAT THE ASSESSEE HAS BEEN SYSTEMATICALLY CARRYING ON BUSINE SS OF PURCHASE AND SALE OF SHARES AND HENCE INCOME EARNED IN THAT ACTIVITY IS TO BE ASSESSEE AS BUSINESS INCOME INS TATED OF CAPITAL GAINS. EVEN PAST RECORDS SHOWS THAT ASSESSEE IS E NGAGED IN SALE AND PURCHASE OF SHARES IN HUGE QUANTITIES AND ALMOST 90% OF THE ASSESSEES INVESTMENT IS CHANGING HAND WITHI N THE SAME YEAR OR NEXT. IF THERE IS A CONTINUOUS PURCHASE AN D SALE TRANSACTIONS OF SHARES, IT IS NOT REQUIRED TO SAY T HAT THE ASSESSEE IS INDULGED IN THE TRADE OF SHARES. 6.22 THE CIRCUMSTANCES THAT WERE RESPONSIBLE FOR RE ALIZATION OF SHARES WITHIN SHORT PERIOD IS ALSO REQUIRED TO BE C ONSIDERED. ON PERUSAL OF THE RECORDS IT APPEARS THAT THE ASSESSEE WAS NOT ITA 6234/MUM/2009 SHRI SURENDRA BAJAJ 8 COMPELLED OR FORCED BY ANY OF THE CIRCUMSTANCES TO SELL THE SHARE ACQUIRED BY HIM AND THE SALE OF SHARES WERE AFFECTE D VOLUNTARILY WITH A VIEW TO MAKE ANY PROFIT UNDER THE PROFIT MAK ING SCHEME. UNLESS THERE IS A SUDDEN EMERGENCY OR REQUIREMENT O F READY MONEY, IF THE SHARE ARE SOLD, THE SAME INDICATES TH AT THE PURCHASE OF SHARES WAS WITH A MOTIVE OF EARNING QUI CK PROFIT AND HENCE THE SAME IS IN THE NATURE OF TRADE AND PROFIT WAS THE INTENTION OF THE ASSESSEE FOR THE ACQUISITION OF TH E SHARES. 4. THE ASSESSEE CHALLENGED THE ASSESSMENT ORDER BEF ORE THE LD. CIT (A) AND SUCCEEDED ON HIS PLEA THAT THE GAIN OR PROFIT ON THE SALE OF THE SHARES PARTAKES THE CHARACTER OF THE CAPITAL G AIN ONLY. THE REASONS GIVEN BY THE LD. CIT (A) FOR ACCEPTING THE CLAIM OF THE ASSESSEE ARE AS UNDER:- 2.3 I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE LD. COUNSEL AND I AM OF THE OPINION THAT THE ASSESSEE D ESERVES TO SUCCEED ON THE ISSUE OF BEING AN INVESTOR AND NOT A TRADER IN SHARES BECAUSE OF THE FOLLOWING REASONS:- I) THE CASE LAWS OF MUMBAI ITAT IN JANAK S. RANGWALA V S. ACIT (2007) 11 SOT 627 (MUM), J.M. SHARE & STOCK BROKERS LTD. VS JCIT, ACIT VS. MOTILAL OSWAL ITA NO.3861/M/01 DT. 28/02/2006, CIT VS N.S.S. INVESTME NTS (P) LTD. (2005) 277 ITR 149 (MAD), ACIT VS. KETHAN KUMAR A. SHAH (2000) 242 ITR 83 (KER), GOPAL PUROHIT VS J CIT (2009) 20 DTR 99 (MUM), ORDER DT. 10/02/2009 CLEARL Y SHOW THAT THE ISSUE IS TO BE DECIDED BY EXAMINING T HE FACT OF HOLDING BEING ON CAPITAL ACCOUNT AND NO AS A STO CK IN TRADE AND FURTHER MERE FREQUENCY AND IT BEING AN OR GANIZED ACTIVITY CANNOT BE HELD AGAINST THE ASSESSEE WHEN I T IS SEEN THAT THE SAME PATTERN HAS BEEN GOING ON FOR PA ST 20 YEARS. ITA 6234/MUM/2009 SHRI SURENDRA BAJAJ 9 II) IN THE PREVIOUS ASSESSMENT YEARS 1998-99 AND 2005-0 6 THE ASSESSEES CASE HAS BEEN DONE IN SCRUTINY AND T HE FACT THAT THE INVESTMENT REFLECTED IN THE BALANCE SHEET HAVE BEEN ACCEPTED FOR MORE THAN SEVERAL YEARS ON CAPITA L ACCOUNT CLEARLY SHOWS THAT THE APPELLANT IS AN INVE STOR IN SHARES AND HENCE TO BE TAXED AS SHORT TERM CAPITAL GAINS. MOREOVER, THERE HAS BEEN NO SIGNIFICANT CHANGE IN MATERIAL CIRCUMSTANCES TO JUSTIFY THE CONTRARY INFE RENCE WHEN THE ASSESSEE HAS ALL ALONG SHOWN THE INVESTMEN TS ALWAYS ON CAPITAL ACCOUNT IN THE BALANCE SHEET AND IT HAS BEEN ACCEPTED AS SUCH. III) MERE FREQUENCY OF TRANSACTIONS BY ITSELF AND THE VO LUME OF TREATING THE TRANSACTION AS A BUSINESS (TRADER) AND NOT AS AN INVESTOR (CAPITAL ACCOUNT) WHEN IT CAN BE SHOWN THAT THE ASSESSEE INTENDS TO HOLD THEM AS AN INVESTMENT AND THE PAST RECORDS SHOWS THAT THE ASSESSEE IS ENGAGED ONL Y IN ALE AND PURCHASE OF SHARES AND DELIVERY HAS BEEN TA KEN. IV) THE AO IS THEREFORE NOT CORRECT IN CONCLUDING THAT THE ASSESSEE IS A TRADER IN SHARES AND TO BE ASSESSED A S BUSINESS INCOME. THE RATIO OF THE CASE OF M/S J.M. SHARE & STOCK BROKERS LTD. VS. JCIT ITA NO.2801/MUM/2000 A.Y. 1995-96, ITA NO.2802/MUM/2000 A.Y. 1996-97, ITA NO.5488/MUM/2001 A.Y. 1997-98 HONBLE ITAT MUMBAI BENCH J, MENTIONED HEREINABOVE IN THE ORDER AND ALSO CITED AND RELIED UPON BY THE ASSESSE E IS SQUARELY APPLICABLE TO THE GIVEN FACTS OF THE CA SE AND ACCORDINGLY I DECIDE THE ISSUE IN FAVOUR OF THE ITA 6234/MUM/2009 SHRI SURENDRA BAJAJ 10 ASSESSEE AND THE DISALLOWANCE MADE BY AO, TREATING THE ASSESSEE AS A TRADER IN SHARES IN DELETED AND T HE INCOME IS TO BE ASSESSED AS SHORT TERM CAPITAL GAIN S AS DECLARED BY THE ASSESSEE IN THE RETURN OF INCOME FILED. 5. NOW, THE REVENUE IS IN APPEAL BEFORE US. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTI ES AND PERUSED THE RECORDS AS WELL AS DIFFERENT PRECEDENTS RELIED UPON BY LD. D.R. AS WELL AS THE LD. COUNSEL. THERE IS NO QUARREL ON TH E PROPOSITION THAT THE RATIO OF ANY DECISION DEPENDS ON THE FACTS OF T HAT PARTICULAR CASE. FIRST OF ALL, WE HAVE TO EXAMINE THE FACTS AND THEN TO APPLY THE RATIO DECI DENDI OF ANY DECISION RELIED ON BY THE LITIGANTS. WE HA VE ALSO PERUSED THE PAPER BOOK FILED BY THE ASSESSEE, MORE PARTICULARLY, PAGE NO.8 TO 22 WHERE THE DETAILS OF THE SHARE TRANSACTI ONS ARE GIVEN, SHOWING THE NAME OF THE SCRIPT, DATE OF PURCHASE, D ATE OF SALE, GAIN OR LOSS. THE ASSESSEE HAS ALSO FILED THE CHART GIVING DETAILS IN RESPECT OF THE SHARE TRANSACTIONS. ON THE PERUSAL OF THE CHAR T, PAGE NO.23 OF THE COMPILATION, WE FIND THAT THERE IS A DIFFERENCE IN THE TOTAL NUMBER OF TRANSACTIONS SHOWING THE PERIOD-WISE HOLDING. AS P ER THE CHART, ZERO DAY TRANSACTIONS ARE 50 AS AGAINST 82 SHOWN BY THE A.O. THE HOLDING PERIOD IN RESPECT OF THE TRANSACTIONS IN RESPECT OF 1 TO 10 DAYS ARE 76 BUT A.O. HAS SHOWN 57. LIKEWISE, THE TOTAL TRANSAC TION ARE SHOWN AT 263 BUT AS PER THE A.O. THE TOTAL NUMBER OF TRANSAC TION ARE 320. BUT THE FACT REMAINS THAT 19% TRANSACTIONS ARE INTRA-DA YS TRANSACTIONS AND IN THE CASE OF 24% TRANSACTIONS, PERIOD OF HOLD ING OF SHARES IS 1 TO 10 DAYS. SAME WAY, HOLDING PERIOD IN THE CASE OF 4 8 TRANSACTIONS HAS CLAIMED BY THE ASSESSEE IS LESS THAN ONE MONTH AND THE PERCENTAGE WORKED OUT TO 18.75%, BUT THE FACT REMAINS THAT APP ROXIMATELY 70% TRANSACTIONS ARE OF THE VERY SHORT SPAN AND FROM AB OVE STATED FACT IT CANNOT BE SAID THAT INTENTION OF THE ASSESSEE WAS T O MAKE THE INVESTMENT. EVEN ON THE PERUSAL OF THE DETAILS GIV EN BY THE ASSESSEE, ITA 6234/MUM/2009 SHRI SURENDRA BAJAJ 11 WE FIND THAT MANY OF THE SCRIPTS ARE PURCHASED AND SOLD ON THE SAME DAY AND THAT IS ALSO NOT IN DISPUTE. WE FURTHER FI ND THAT VOLUME OF THE SHORT HOLDING TRANSACTIONS IN THE SCRIPT I.E. FROM 1 TO 7 DAYS ARE ALSO CONSIDERABLE. THE A.O. HAS GIVEN THE DETAILS REASO NING FOR REJECTING THE CLAIM OF THE ASSESSEE THAT THE SHARE TRANSACTIO NS OF THE ASSESSEE WHEREIN IN THE NATURE OF THE INVESTMENT. THE LD. C IT (A) HAS NOT EVEN COUNTERED THE REASONS GIVEN BY THE A.O. BUT MECHANI CALLY ACCEPTED THE SUBMISSIONS OF THE ASSESSEE. IN OUR OPINION, A S PER THE MATERIAL BEFORE US, IT CANNOT BE SAID THAT THE ASSESSEE INDU LGED INTO THE TRANSACTIONS OF THE SHARES AS AN INVESTOR BUT AS RIGHTLY HELD BY THE A.O. THE TRANSACTIONS ARE IN THE NATURE OF THE TRAD ING. WE, THEREFORE, REVERSE THE ORDER OF THE LD. CIT (A) ON THIS ISSUE AND RESTORE THE ORDER OF THE A.O. 7. IN THE RESULT, REVENUES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 2 8TH OCTOBER 2011. SD/- SD/- ( PRAMOD KUMAR ) ACCOUNTANT MEMBER ( R.S. PADVEKAR ) JUDICIAL MEMBER MUMBAI, DATE : 28TH OCTOBER, 2011 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A)-24, MUMBAI. 4) THE CIT-10, MUMBAI. 5) THE D.R. H BENCH, MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR I.T.A.T., MUMBAI *CHAVAN ITA 6234/MUM/2009 SHRI SURENDRA BAJAJ 12 SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT DICTATED ON 12.10.2011 SR.PS 2 DRAFT PLACED BEFORE AUTHOR 13.10.2011 SR.PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER