PRAKASH D DEVJANI, MUMBAI V. ACIT 19(1), MUMBAI

ITA 6852/MUM/2011

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9317 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 5 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 05-03-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 10-10-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PREMANAND J
• Keywords: Capital asset; Business income; Rule of consistency; Speculative transactions
• Section: 143(3); 6

Judgement Text

, L LL LH HH H INCOME TAX APPELLATE TRIBUNAL,MUMBAI - C BENCH. , ! , BEFORE S/SH.VIJAY PAL RAO, JUDICIAL MEM BER & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO.6852/MUM/2011, ' ' ' ' # # # # / ASSESSMENT YEAR-2006-07 PRAKASH D. DEVJANI, 201, ROSE APARTMENT, PLOT NO.203, 10TH ROAD, KHAR (WEST),MUMBAI-52 PAN:AACPD9900E VS ACIT 9(1), MUMBAI. ( $% / APPELLANT) ( &'$% / RESPONDENT) '() '() '() '() * * * * / ASSESSEE BY : SHRI PRAKASH PANDIT + * / REVENUE BY : SHRI PREMANAND J. ' ' ' ' + ++ + ), ), ), ), / DATE OF HEARING : 05.03.2015 -.# + ), / DATE OF PRONOUNCEMENT : 11-03-2015 ' ' ' '1961 1961 1961 1961 + + + + 254 254 254 254( (( (1 11 1) )) ) )7) )7) )7) )7) 8 8 8 8 ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,AM ! ! ! ! ' ' ' ' : CHALLENGING THE ORDER DT. 20-7-2011 OF CIT (A)-30,M UMBAI THE ASSESSEE HAD FILED FOLLOWING GROUNDS OF APPEAL:- 1 IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT APPEALS ERRED IN CONFIRMING THE INCOME OF RS. 30,86,760/- UNDER THE HEAD 'BUSINESS INCOME' AS AGAINST INCOME UNDER THE HEAD INCOME FROM 'SHORT TERM CAPITAL GAIN ' AS CLAIMED BY THE APPELLANT. 2 REASONS GIVEN BY LEARNED CIT (APPEALS) FOR CONFI RMING THE INCOME OF RS.30,86,760/- UNDER THE HEAD 'BUSINESS INCOME' AS AGAINST INCOME UNDER THE HEAD 'INCOME FROM SHORT TERM CAPITAL GAIN' AS CLAIMED BY THE APPELLANT., ARE WRONG INSUFFICIEN T AND CONTRARY TO THE FACTS AND EVIDENCE ON RECORD. 3 WITHOUT PREJUDICE TO ABOVE GROUND, LEARNED CIT (A ) HAVING HELD THAT THE INCOME OF RS.30,80,760/- FALLS UNDER THE HEAD BUSINESS INCOME THEN HE OUGHT TO HAVE VALUED THE CLOSING STOCK OF THE APPELLANT AT MARKET PRICE OR COST PRICE, WHI CHEVER IS LESS. ASSESSEE,AN INDIVIDUAL,FILED HIS RETURN OF INCOME O N 31-10-2006 DECLARING TOTAL INCOME AT RS. 31.26 LAKHS.THE ASSESSING OFFICER(AO)COMPLETED THE ASSESSMENT U/S 143(3) OF THE ACT ON 29-12- 2008,DETERMINING THE INCOME OF THE ASSESSEE AT RS.3 1,26,210/-. 2. EFFECTIVE GROUNDS OF APPEAL IS ABOVE CONFIRMING THE INCOME ARISING OUT OF SHARE TRANSACTION U/S BUSINESS INCOME AS AGAINST THE INCOME U/H SHORT TER M CAPITAL GAIN (STCG), AS CLAIMED BY THE ASSESSEE.DURING THE ASSESSMENT PROCEEDINGS, THE AO FOUND THAT ASSESSEE HAD SHOWN STCG OF RS. 30.86 LACS, THAT HAD TAKEN OVER DRAFT OF RS. 27 LAC S FROM HDFC BANK, WHERE THE CLOSING BALANCE OF OVER DRAFT WAS AT RS. 24.63 LACS, THAT IN ADDITI ON TO THE ABOVE HE HAD TAKEN LOAN FROM PRIVATE PARTIES.VIDE HIS NOTICE ISUUED U/S.142(1) OF THE AC T,DATED 13-6-2008, THE AO DIRECTED THE ASSESSEE TO FURNISH THE DETAILS OF PURCHASE AND SALES OF SHA RES/UNITS BOTH FOR INVESTMENTS AND STOCK-IN-TRADE SEPARATELY.AS PER THE AO THE ASSESSEE DID NOT FURNI SH THE DETAIL, AS DESIRED IN PERFORMA SUPPLIED BY HIM.THE AO OBSERVED THAT FROM THE DETAILS GIVEN BY THE ASSESSEE IT WAS NOT CLEAR AS TO WHETHER THE ASSESSEE HAD DELIVERY OF THE SHARES AND THE PER IOD OF HOLDING OF THE SHARE.,THAT IN THE ABSENCE OF COMPLETE DETAILS AND FAILURE ON THE PART OF THE ASSESSEE TO GIVE DETAILS OF SHARES IT WAS NOT POSSIBLE TO DECIDE THE REAL NATURE OF THE SHARE TRA NSACTIONS.THEREFORE, THE STCG CLAIMED BY THE ASSESSEE WAS TREATED AS BUSINESS INCOME AND ACCORDI NGLY BROUGHT TO TAX.THE AO FURTHER HELD THAT 2 ITA NO. 6852/M/2011 PRAKASH D. DEVJANI THERE WAS SYSTEMATIC,REGULAR AND PERIODIC ACTIVITY WITH NUMEROUS AND CONTINUOUS TRANSACTION, THAT THE ACTIVITY WAS AN INDICATION THAT THE TRANSACTION S UNDERTAKEN BY THE ASSESSEE WERE IN THE NATURE BUSINESS, THAT THERE WERE REPETITIVE PURCHASE AND S ALE OF THE SAME SCRIPS DURING THE YEAR UNDER APPEAL.CONSIDERING THE ABOVE FACTS,HE ASKED THE ASS ESSEE TO SHOW CAUSE AS TO WHY THE STCG SHOULD NOT BE TREATED AS BUSINESS INCOME. AFTER CO NSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE THE AO PREPARED A CHART OF THE SHARES PURCHASED AND SOLD DURING THE YEAR AS WELL AS THE NUMBER OF DAYS FOR WHICH THE SHARES WERE HELD BY THE ASSESSEE .AFTER ANALYSING THE CHART HE HELD THAT MANY TRANSACTIONS WERE LESS THAN 30 DAYS.RELYING UPON TH E ORDER OF DEEPABEN AMIT BHAISHAH,(100 TTJ 1065), CBDT CIRCULAR,HE HELD THAT THERE WAS A SYSTE MATIC REGULAR AND PERIOD ACTIVITY IN THE STOCK MARKET WITH HIGH FREQUENCY, VOLUME AND QUANTUM, WHE RE THE ACTIVITY WERE UNDERTAKEN BY THE ASSESSEE WITH THE ULTIMATE MOTIVE OF MAXIMISATION O F PROFIT. FINALLY HE ASSESSED THE STCG AS INCOME FROM BUSINESS. 3. AGGRIEVED BY THE ORDER OF AO THE ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA).BEFORE HIM IT WAS SUBMITTED THAT THE ASSESSEE TRADED IN SHARES AND ALSO MADE INVESTMENT, THAT HE MAINTAINED TWO DIFFERENT SET OF BOOKS, THAT FOR PROFIT AND LOSS IN INVESTMENT STCG WAS OFFERED FOR TAXATION UNDER THE HEAD CAPITA L GAINS, THAT WERE PROFITS/LOSS ARISING FROM SHARE TRADING WAS OFFERED AS BUSINESS INCOME, THAT HE WAS FOLLOWING THE SAME METHOD OF ACCOUNTING FOR EARLIER YEARS ALSO, THAT THE AO HAD CONSIDERED STCG AS BUSINESS INCOME WITHOUT GIVING REASONABLE REASON/MATERIAL ON RECORD TO JUST IFY DEVIATION FROM CONSISTENCY.THE ASSESSEE REFERRED TO THE JUDGMENT OF GOPAL PUROHIT (222 CTR 582) DELIVERED BY THE HONBLE BOMBAY HIGH COURT.ALTERNATIVELY IT WAS ARGUED THAT IF THE AO WA NTED TO TREAT THE STCG AS BUSINESS INCOME, THE SHARE INVESTMENT AS ON 31-3-2006 SHOULD BE VALUED A T COST OR MARKET PRICE WHICHEVER IS LOW, THAT THE AO DID NOT CONSIDER THE CONTENTION OF THE ASSES SEE IN THIS REGARD.AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE ASSESSMENT ORDE R THE FAA HELD THAT ALL THE TRANSACTIONS OF THE ASSESSEE WAS NOT DELIVERY BASED, THAT THE ASSESSEE WAS INDULGED IN SPECULATIVE TRANSACTIONS, THAT HE HAD SHOWN RS. 45,635/- FOR INTRA TRADING WHICH WERE NOT DELIVERY BASED, THAT THE ASSESSEE HAD TAKEN LOAN IN FORM OF OVERDRAFT FROM THE BANK WHICH HAD BEEN UTILISED FOR THE PURCHASE OF SHARES,, THAT THE ASSESSEE DID NOT HAVE ENOUGH FUNDS OF HIS OWN TO INVEST IN SHARES, THAT THE FACT OF BORROWING OF MONEY WAS STRONG INDICATOR THAT HE WAS NOT AN INVESTOR, THAT THE ASSESSEE HAD INDULGED IN REPETITIVE BUYING AND SELLING OF SHARES WHICH WAS A SIGN OF TRADING ACTIVITY, THAT CHART DRAWN BY THE AO CLEARLY INDICATED THAT THE HOLDING PERIOD OF SHARES OF THE ASSESSEE WAS QUITE LESS, THAT THE MOTIVE OF THE ASSESSEE WAS TO MAXIMISE PRO FIT AND NOT TO INVEST IN SHARES FOR LONG TERM INVESTMENTS.ACCORDINGLY,HE HELD THAT STCG,AMOUNTING TO RS.30.86 LACS,WAS BUSINESS INCOME OF THE ASSESSEE.FINALLY,UPHOLDING THE ORDER OF THE AO, HE DISMISSED THE APPEAL OF THE ASSESSEE. 4. BEFORE US,AUTHORISED REPRESENTATIVE(AR)CONTENDED TH AT THE HOLDING FOR A PERIOD FOR LESS THAN 30 DAYS IN CASE OF THE ASSESSEE WAS LESS THAN 25% O F THE AMOUNT IN DISPUTE, THAT 80% OF THE GAIN FROM THE INVESTMENT WAS OUT OF THE SALE OF SHARES T HAT WERE HELD FOR MORE THAN 150 DAYS. HE REFERRED TO PAGE 3 & 4 OF THE PAPER BOOK AND STATED THAT INTENTION OF THE ASSESSEE WAS TO TREAT IT AS INVESTMENT, THAT IN THE EARLIER AND SUBSEQUENT ASSE SSMENT YEARS INCOME ARISING OF SUCH TRANSACTIONS WAS ACCEPTED UNDER THE HEAD CAPITAL GA INS, THAT FOLLOWING THE RULE OF CONSISTENCY THE STCG SHOULD NOT HAVE BEEN TREATED AS BUSINESS INCOM E. HE RELIED UPON THE CASES OF PARESH SHAH [2ITR(TRIB.)311],GIGNESH INDULAL PATEL 139 ITD 294, HITESH S.JOSHI(46 SOT336), NEERAJ A. SURTI (347ITR149),GOPAL PUROHIT 336 ITR 387 AND NISHAD B. VACHHARAJANI (INCOME TAX APPEAL 1042 OF 2011),ASHOK KUMAR(43 CCH 188 AND E-CAP (64 SOIT 192 ). DEPARTMENTAL REPRESENTATIVE (DR) ARGUED THAT THE FA CTS OF THE METHOD UNDER CONSIDERATION WAS CLEARLY DISTINGUISHABLE FROM THE FACTS OF GOPAL PUR OHIT (SUPRA),THAT THE ORDER FOR THE EARLIER YEARS PASSED U/S 143(1) OF THE ACT, THAT THE ASSESSEE WAS ENGAGED IN BUSINESS OF SHARES, THAT THE TURNOVER OF TEXTILE BUSINESS WAS 31 LACS ONLY WHEREAS FOR TH E YEAR UNDER APPEAL THE ASSESSEE HAD TURNOVER OF RS.2.81 CRORES OF THE SHARE ACTIVITY,THAT THE ASSES SEE HAD HUGE BORROWED FUNDS FOR MAKING INVESTMENTS, THAT MOST OF THE SHARE WAS SOLD WITHIN A PERIOD OF ONE MONTH. 3 ITA NO. 6852/M/2011 PRAKASH D. DEVJANI 5. WE HAVE HEARD RIVAL SUBMISSION AND PERUSED THE MATE RIAL PLACED BEFORE US.WE ARE OF THE FIRM OPINION THAT THERE IS NO CLEAR CUT CRITERIA OR DEMA RCATION THAT COULD SEGREGATE THE TRANSACTIO - NS RELATED WITH THE SHARES UNDER THE HEAD BUSINESS TRANSACTION/CAPITAL GAIN TRANSCTION.EVEN AFTER SERIES OF CASES DECIDED BY THE TRIBUNAL AND THE HON BLE HIGH COURT NO ONE CAN SAY WITH CERTAINTY THAT AN ASSESSEE UNDERTAKING SHARE TRANSA CTIONS COULD BE ASSESSED AS INVESTOR OR TRADER.COURTS ARE OF THE VIEW THAT INTENTION OF THE ASSESSEE HAS TO LOOKED IN TO. INTENTION AT BEST CAN BE DECIDED FROM THE SURROUNDING CIRCUMSTAN CES. BROADLY,AN INVESTOR PURCHASE A SHARE WITH A VIEW TO EARNING INCOME IN THE FORM OF DIVIDEND AND FOR APPRECIATION IN VALUE OVER A LONG PERIOD OF TIME AND IS NOT MOTIVATED TO SELL SHARES ON EACH AND EVERY RISE IN THE VALUE OF SHARES WHICH ARE,IN FACT,THE ATTRIBUTES OF A TRADER.TO PURCHASE SHARES AND THEN WAIT FOR APPRECIATION IN THEIR VALUE IN THE LONG TERM IS THE CLASSIC EXAMPLE OF AN INVESTOR.THERE MAY BE CRITERIA AND PARAMETERS,BUT INDIVIDUAL PARAMETERS W OULD NOT BE DECISIVE AND IT IS ONLY THE CUMULATIVE EFFECT OF ALL THOSE CRITERIA WOULD BE I MPORTANT TO DECIDE WHETHER THE ASSESSEE WAS AN INVESTOR OR A TRADER.BESIDES,WE ARE OF THE O PINION THAT ENTRIES IN THE BOOKS OF ACCOUNTS ARE NOT DETERMINATIVE OF THE TRUE NATURE OF THE TRA NSACTIONS, THAT ONLY BECAUSE THE SHARES HAVE BEEN DISCLOSED IN THE BALANCE SHEET AS AN INVESTMEN T WOULD NOT DETERMINE OR PROVE THAT THE SHARES WERE PURCHASED AS A CAPITAL ASSET,THAT TO DE TERMINE THE NATURE OF THE TRANSACTIONS OR WHETHER THE ASSESSEE HAS ACTED AS A TRADER OR INVES TOR WHAT HAS TO BE EXAMINED IS AS TO HOW HE HAS DEALT OVERALL WITH HIS ASSETS AFTER THE PURCHAS E.IN SHORT, TOTALITY OF FACTS AND PARAMETERS,AS LAID DOWN BY THE HON'BLE COURTS AS WELL AS CBDT,HAV E TO BE TAKEN INTO CONSIDERATION IN DECIDING THE QUESTION.IN THE MATTER OF SONIA UPPAL THE HONB LE P & H HIGH COURT HAS(367ITR70)HELD AS UNDER: THERE IS A NO STRAITJACKET FORMULA FOR CONCLUDING WHETHER A TRANSACTION WOULD FALL WITHIN THE DOMAIN OF PROFITS DERIVED FROM AN ADVENTURE IN THE NATURE OF TRADE OR OUTSIDE ITS AMBIT. THE FACTS AND CIRCUMSTANCES OF EACH CASE WOULD BE DETERMINATI VE OF THE CHARACTER OF THE RECEIPT. THE PRIMARY CONSIDERATION IN SUCH CASES RELATES TO EXAM INING THE NATURE OF THE TRANSACTION. WHERE A PERSON INVESTS MONEY IN AN ASSET WITH INTENTION TO HOLD IT, ENJOYS ITS USUFRUCT FOR SOME TIME AND THEN SELLS IT AT AN ENHANCED PRICE, IT WOULD BE A C ASE OF CAPITAL ACCRETION OUTSIDE THE SCOPE OF PROFITS RESULTING FROM AN ADVENTURE IN THE NATURE O F TRADE. ON THE OTHER HAND, WHERE INCOME ACCRUES ON REALISATION OF INVESTMENTS CONSISTING OF PURCHASE AND RESALE, INCOME ACCRUING COULD BE TREATED AS FROM AN ADVENTURE IN THE NATURE OF TRADE . THE CARDINAL QUESTION WHICH WOULD REQUIRE TO BE ANSWERED WOULD BE WHETHER THE PURCHASER WAS A TR ADER AND HAD PURCHASED THE COMMODITY WITH THE CLEAR UNDERSTANDING THAT IT WAS HIS USUAL TRADE OR BUSINESS OR INCIDENTAL TO IT. WE FIND THAT THE FAA HAS GIVEN CATEGORICAL FINDING OF FACTS ABOUT THE INTENTION OF THE ASSESSEE AFTER CONSIDERING THE FACTORS LIKE PERIOD OF HOLDING,VOLU ME AND FREQUENCY OF SHARES,INTEREST PAID BY HIM ON THE LOAN TAKEN FOR MAKING INVESTMENT IN SHARES.WE F IND THAT THE ASSESSEE HAD NOT FURNISHED ANY DETAILS OF DIVIDEND EARNED DURING THE YEAR BEFORE T HE AO OR THE FAA.SO,WE HAD NO OCCASION TO LOOK IN TO THAT ASPECT.WE WANT TO MAKE IT CLEAR THAT IT IS NOT THE SOLE CRITERIA FOR DECIDING THE TRADER/IN VESTOR CONTROVERSY,BUT IT IS ALSO ONE OF THE DECIDING FACT ORS.GENERALLY,THE INVESTORS EARNS HANDSOME DIVIDEND AS THEY HOLD THE SHARES FOR A LONG PERIOD FOR APPRE CIATION.A FINDING OF FACT RECORDED BY BOTH THE AUTHORITIES ABOUT INVESTMENT OF BORROWED FUND FOR P URCHASING SHARES DURING THE YEAR UNDER CONSIDERATION,WAS ADMITTED BY THE AR BEFORE US.THE ASSESSEE IS NOT IN A POSITION TO BIFURCATE THE AMOUNT OF INTEREST PAID BY HIM FOR MAKING INVESTMEN T IN SHARES.THE OVERDRAFT ACCOUNT HAS BEEN USED BY THE ASSESSEE FOR CARRYING OUT HIS TEXTILE BUSINE SS AND THE SHARE TRANSACTIONS.THUS,IT IS A UNDISPUT ED FACT THAT THE ASSESSEE HAD TAKEN LOANS TO MAKE INVE STMENT IN SHARES. WE ARE OF THE OPINION THAT TAKING OR NOT TAKING OF LOANS IS NOT THE SOLE DETER MINING FACTOR FOR COMING TO THE CONCLUSION WHETHER THE ASSESSEE IS A TRADER OR AN INVESTOR IN SHARES,BUT IT IS AN IMPORTANT PARAMETER,THAT NORMALLY,AN INVESTOR WOULD NOT USE BORROWED FUNDS F OR MAKING INVESTMENTS,THAT USING BORROWED FUNDS WAS GENERALLY THE ATTRIBUTE OF A TRA DER.IT IS ALSO A FACT THAT THE AO HAD DIRECTED THE ASSESSEE TO FURNISH THE DETAILS OF PURCHASE AND SALES OF SHARES/UNITS BOTH FOR INVESTMENTS AND STOCK-IN-TRADE SEPARATELY,BUT HE DID FILE THE REQUI RED DETAILS.IF THE ASSESSEE WAS HAVING TWO SEPARATE PORTFOLIOS,HE SHOULD HAVE PROVED THE FACT BEFORE THE AO OR THE FAA.WE DO NOT KNOW AS 4 ITA NO. 6852/M/2011 PRAKASH D. DEVJANI WHAT PREVENTED HIM FROM FURNISHING THE DETAILS.THE ONLY LOGICAL CONCLUSION OF NON FILING OF ABOVE DETAILS IS THAT HE WAS MAINTAINING ONLY ONE PORTFOL IO I.E. STOCK IN TRADE AND DETAILS ABOUT SO CALLED INVESTMENT WAS MISSING. CONSIDERING THE FREQUENCY OF SALE OF SHARES AND OTH ER FACTS MENTIONED ABOVE,WE ARE OF THE OPINION THAT THE PURCHASE AND SALE OF SHARES WAS NOT AN OCC ASIONAL INDEPENDENT ACTIVITY OF THE ASSESSEE, BUT HE WAS ENGAGED IN REAL, SUBSTANTIAL AND SYSTEMATIC BUSINESS ACTIVITY.WE FIND THAT IN THE EARLIER YEARS THE ASSESSMENT WERE COMPLETED U/S.143(1) OF T HE ACT AND THUS THE AO HAD NO CHANCE TO EXAMINE THE CLAIM MADE BY ASSESSEE ABOUT THE SHARE TRANSACTIONS ENTERED IN TO,IF ANY.TILL A CLAIM OF AN ASSESSEE IS NOT TESTED ON THE TOUCHSTONE OF SCRU TINY ASSESSMENT,IT CANNOT BE HELD THAT THE AO HAD FORMED ANY OPINION AGAINST OR IN FAVOUR OF THE ASSE SSEE. RETURNS FILED BY THE ASSESSEES ARE PROCESSED AT COMPUTER PROCESSING CENTERS AND COMPUTERS DO NOT DECIDE THE NATURE OF TRANSACTION UNDERTAKEN BY THEM.SO,TO ARGUE THAT IN EARLIER OR SUBSEQUENT YEAR S A CLAIM WAS ADMITTED BY THE AO,IN OUR OPINION,IS NOT FACTUALLY CORRECT STATEMENT,UNTIL AND UNLESS TH E ORDERS ARE NOT PASSED U/S.143(3)OF THE ACT.WE HAVE ALSO CONSIDERED THE ARGUMENT ADVANCED BY THE D R ABOUT THE TURNOVER OF THE TEXTILE BUSINESS CARRIED OUT BY THE = AND HAVE COMPARED IT WITH THE VOLUME OF THE SHARES TRANSACTED FOR THE YEAR UNDER APPEAL. NOW,WE WOULD LIKE TO DISCUSS THE CASES RELIED UPON BY THE ASSESSEE.IN THE CASE OF PARESH D SHAH THE ASSESSEE WAS ENGAGED IN TRADING OF SHARES AS WE LL AS INVESTMENT IN SHARES.CONSIDERING THE FACTS OF THE CASE THAT THE ASSESSEE HAD SOLD THE IN VESTMENTS DURING THE YEAR,TRIBUNAL HAD HELD THAT THE INCOME ARISING OF SUCH TRANSACTIONS SHOULD BE T REATED AS INCOME UNDER THE HEAD CAPITAL GAINS. IN THE CASE UNDER CONSIDERATION THE ASSESSEE HAS MA DE INVESTMENT BY BORROWING FUNDS HE HAD NOT SOLD INVESTMENTS.BESIDES,IF THE OTHER PARAMETERS ME NTIONED IN THE BOARDS LETTER 4/2007 OF 15.06. 2007 ARE CONSIDERED IT BECOMES CLEAR THAT THE ASSES SEE WAS NOT A TRADER FOR THE DISPUTED TRANSACTIO -NS.IN THE CASE OF JIGNESH INDULAL PATEL.IN THE MAT TER OF JIGNESH INDULAL PATEL(SUPRA) IT WAS HELD BY THE TRIBUNAL THAT THE REVENUE COULD NOT DEMONSTRATE THAT THERE WERE LARGE NUMBER OF TRANSACTIONS WHICH HAD FREQUENCY,VOLUME,CONTINUITY AND REGULARIT Y.IN THE CASE OF BEFORE US ALL THE FACTORS I.E. FREQUENCY,VOLUME,CONTINUITY AND REGULARITY EXIT.THE TRIBUNAL,IN THE CASE OF HITESH SATISHCHANDRA DOSHI(SUPRA),HAS OBSERVED THAT THERE WAS NO INDICAT ION OF HOLDING PERIOD OF 30 DAYS FINDS PLACE EITHER IN STATUTE OR IN CIRCULAR/INSTRUCTIONS AS WE LL AS JUDICIAL PRONOUNCEMENT ON ISSUE,THAT THE ASSESSEE WAS REGULARLY EARNING DIVIDEND INCOME.WE F IND THAT THE AR HAD EMPHASISED THE POINT OF HOLDING OF SHARES FOR MORE THAN 30 DAYS FOR SUPPORT ING THE CASE OF THE ASSESSEE AND THE ASSESSEE HAS NOT PROVED THAT HE HAD SUBSTANTIAL INCOME FROM DIVIDEND.THE HONBLE GUJARAT HIGH COURT IN THE CASE OF NIRAJ A SURTI(SUPRA)WAS DEALING WITH EN TIRELY DIFFERENT QUESTION.IT HAS HELD AS UNDER: THE QUESTION AS TO WHETHER A TRANSACTION IS AN ADV ENTURE IN THE NATURE OF TRADE MUST BE DECIDED ON A CONSIDERATION OF ALL THE RELEVANT FACTS AND CI RCUMSTANCES WHICH ARE PROVED IN A PARTICULAR CASE. THE ANSWER TO THE QUESTION DOES NOT DEPEND UP ON THE APPLICATION OF ANY ABSTRACT RULE, PRINCIPLE OR FORMULA BUT MUST DEPEND UPON THE TOTAL IMPRESSION AND EFFECT OF ALL THE RELEVANT FACTS AND CIRCUMSTANCES ESTABLISHED IN THE PARTICULAR CAS E. IN THE CASE BEFORE US,THE REVENUE AUTHORITIES HAVE NOT DECIDED THE ISSUE AS TO WHETHER THE TRANSACTION WAS AN ADVENTURE IN NATURE OF TRADE OR NOT.IN THAT MATTER CITED BY THE AR,THE ASSESSEE WAS A CA BY PROFESSION AND THE FAA AND THE TRIBUNAL HAD HELD THAT THE TRANSACTION COULD NOT BE TREATED AS ADVENTURE IN NATURE OF BUSINESS.IT WAS A LSO FOUND THAT MOST OF THE SHARES WERE SOLD AFTER A PERIOD OF ONE OR TWO YEARS.CLEARLY THE FACTS OF T HE CASE ARE DIFFERENT.AS STATED EARLIER THE MAIN SOURCE OF INCOME FOR THE YEAR UNDER APPEAL IS FROM SHARE TRANSACTIONS AS COMPARED TO THE REGULAR BUSINESS CLAIMED TO HAVE BEEN CARRIED OUT BY HIM.IN THE CASE OF GOPAL PUROHIT, THE HONBLE BOMBAY HIGH COURT HAS LAID DOWN GENERAL PRINCIPLE A BOUT SHARE TRANSACTIONS AND HAS HELD THAT RULE OF CONSISTENCY SHOULD BE FOLLOWED.FOLLOWING IS THE JUDGMENT OF THE HONBLE COURT: IT WAS OPEN TO THE ASSESSEE TO MAINTAIN TWO SEPARA TE PORTFOLIOS, ONE RELATING TO INVESTMENT AND ANOTHER RELATING TO BUSINESS OF DEALING IN SHARES, THAT A FINDING OF FACT HAD BEEN ARRIVED AT BY THE TRIBUNAL AS REGARDS THE TWO DISTINCT TYPES OF TRANS ACTIONS, NAMELY, THOSE BY WAY OF INVESTMENT AND THOSE FOR THE PURPOSES OF BUSINESS, AND THIS WARRAN TED NO INTERFERENCE. (II) THAT THERE SHOULD BE UNIFORMITY IN TREATMENT A ND CONSISTENCY WHEN FACTS AND CIRCUMSTANCES FOR DIFFERENT YEARS WERE IDENTICAL PARTICULARLY IN THE CASE OF THE SAME ASSESSEE. 5 ITA NO. 6852/M/2011 PRAKASH D. DEVJANI (III) THAT ENTRIES IN THE BOOKS OF ACCOUNT ALONE AR E NOT CONCLUSIVE IN DETERMINING THE NATURE OF INCOME. IN THAT MATTER THE TRIBUNAL HAD GIVEN A FINDING OF FACT THAT THE ASSESSEE WAS MAINTAINING TWO SEPARATE ACCOUNTS AND THE HONBLE COURT HAD ENDORSE D THE VIEW OF THE TRIBUNAL.WE FIND THAT THE AO AND THE FAA HAVE,AFTER CONSIDERING THE VARIOUS F ACTORS,HELD THAT THE ASSESSEE WAS A TRADER OF SHARES AND NOT INVESTOR.BEFORE US,THE ASSESSEE WAS NOT ABLE TO PROVE THAT FINDING OF FACT GIVEN BY THE BOTH THE AUTHORITIES WAS PERVERSE.SECONDLY,THE HONBLE COURT HAS HELD THAT THE ENTRIES IN THE BOOKS OF ACCOUNTS ALONE WERE NOT CONCLUSIVE.THUS,TH E OBSERVATION GOES AGAINST THE ASSESSEE,BECAUSE HE HAS ARGUED THAT THE ENTRIES IN THE BOOKS OF ACCOUNTS HAD TO BE CONSIDERED FOR DECIDING THE ISSUE.IN THE CASE OF NAISHADH V VACHHA RAJANI(SUPRA),THE TRIBUNAL FOUND THAT THE ASSESSEE IN NUMBER OF CASES HAD HELD SHARES FOR MOR E THAN 10 YEARS AND IN THE EARLIER YEAR SHARE TRANSACTIONS WERE ASSESSED UNDER THE HEAD CAPITAL G AINS.THE HONBLE BOMBAY HIGH COURT HAD UPHELD THE ORDER OF THE TRIBUNAL CONSIDERING THE AB OVE FACTS.WE DO NOT FIND ANY SIMILARITY OF FACTS OF THE PRESENT CASE WITH THE CASE RELIED UPON BY TH E ASSESSEE.IN THE CASE OF ASHOK KUMAR(SUPRA)THE DELHI TRIBUNAL FOUND THAT IN THE SUBSEQUENT AY.,WHI LE COMPLETING THE ASSESSMENT U/S.143(3)OF THE ACT,THE AO HAD ACCEPTED THE PROFITS ARISING OF SALE OF SHARES UNDER THE HEAD CAPITAL GAINS.SECONDLY,THE FAA HAD DECIDED THE ISSUE IN FA VOUR OF THE ASSESSEE IN THAT MATTER.IN THE CASE OF E-CAP PARTNERS(SUPRA),THE TRIBUNAL HAS HELD AS U NDER: THE QUESTION AS TO WHETHER THE ASSESSEE HAS EARNED CAPITAL GAIN OR BUSINESS / PROFITS ON THE SHARES SOLD BY HIM DEPEND ON THE FACTS AND CIRCUMST ANCES OF EACH CASE. SUCH DECISION IS TO BE ARRIVED AT BY TAKING INTO ACCOUNT THE INTENTION OF THE ASSESSEE WHILE PURCHASING THE SHARES, AS TO WHETHER THE SAME WAS ACQUIRED FOR HOLDING AS INVEST MENT OR FOR DOING BUSINESS THEREIN. THE TREATMENT GIVEN BY THE ASSESSEE IN ITS BOOKS OF ACC OUNT. IS ALSO ONE OF THE DECISIVE FACTORS TO FIND OUT WHETHER THE SHARES WERE HELD AS INVESTMENT OR S TOCK-IN-TRADE. IF THE SHARES ARE BOUGHT WI.TH THE INTENTION OF EARNING CAPITAL GAINS THEREON AND ALSO DIVIDEND INCOME BY KEEPING THE SAME AS INVESTMENT, THE GAIN ARISING THEREFROM IS REQUIRED TO BE TREATED AS CAPITAL GAINS. ON THE OTHER HAND, IF THE SHARES ARE PURCHASED WITH THE INTENTIO N TO EARN PROFIT THEREON AND THE SAME IS TREATED AS STOCK-IN-TRADE IN THE BOOKS OF ACCOUNT, THE PROF IT ARISING OUT OF SALE OF SUCH SHARES ARE LIABLE TO BE TREATED AS BUSINESS INCOME. VOLUME AND FREQUENCY OF TRANSACTION IS ALSO ONE OF THE GUIDING FACTORS TO FIND OUT WHETHER THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PURCHASE AND SALE OF SHARES OR MAKING INVESTMENT TO HAVE CAPITAL GAIN THEREON. IT WAS FOUND BY THE TRIBUNAL THAT THE ASSESSEE HAS INVESTED IN SHARES OF COMPANIES SINCE LAST 5-6 YEARS WHICH WAS CLEAR FROM THE STATEMENT OF SHAREHO LDING OF THE ASSESSEE.IN OUR OPINION THE FACTS OF THE CASE UNDER APPEAL ARE DISTINGUISHABLE FROM T HE FACTS OF THE CASE E-CAP PARTNER.IN SHORT,CASES RELIED BY THE ASSESSEE ARE OF NO HELP TO HIM AS THE Y WERE DECIDED ON DIFFERENT SET OF FACTS. IF THE CARDINAL QUESTION,AS SUGGESTED BY THE HONBLE P & H HIGH COURT IN THE MATTER OF SONIA UPPAL(SUPRA),IS TO BE ANSWERED AFTER CONSIDERING TH E PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE UNDER APPEAL,THEN IT BECOMES CLEAR THAT THE ASSESSE E WAS A TRADER AND HE HAD PURCHASED THE COMMODITY WITH THE CLEAR UNDERSTANDING THAT IT WAS HIS USUAL TRADE OR BUSINESS.IN OTHER WORDS IT WAS NOT INCIDENTAL TO HIS TRADE.IN THESE CIRCUMSTAN CES,WE HOLD THAT THE ORDER OF THE FAA DOES NOT SUFFER FROM ANY LEGAL OR FACTUAL INFIRMITY.THEREFOR E,CONFIRMING HIS ORDER,WE DECIDE EFFECTIVE GROUND OF APPEAL AGAINST THE ASSESSEE. AS A RESULT,APPEAL FI LED BY THE ASSESSEE STANDS DISMISSED. ( 9 '() + : + ) ;<. ORDER PRONOUNCED IN THE OPEN COURT ON 11TH, MARCH,2015 . 8 + -.# > ?' 11 EKPZ , 201 5 . + 7 @ SD/- SD/- ( / VIJAY PAL RAO) ( ! ! ! ! / RAJENDRA) / JUDICIAL MEMBER /ACCOUNTANT MEMBER , / MUMBAI, ?' /DATE: 11.03 . 2015. SK 6 ITA NO. 6852/M/2011 PRAKASH D. DEVJANI 8 8 8 8 + ++ + &) &) &) &) A #) A #) A #) A #) / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / $% 2. RESPONDENT / &'$% 3. THE CONCERNED CIT(A)/ B C , 4. THE CONCERNED CIT / B C 5. DR C BENCH, ITAT, MUMBAI / D7 &)' L LL LH HH H , . . . 6. GUARD FILE/ 7 E ') ') ') ') &) &)&) &) //TRUE COPY// 8' / BY ORDER, F / ; DY./ASST. REGISTRAR , /ITAT, MUMBAI