MANAZ RETAIL P.LTD, MUMBAI V. DCIT RG 8(2), MUMBAI

ITA 7636/MUM/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 8031 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2006-2007
• Appeal Filed On: 30-12-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Keywords: Unexplained cash credit; Capital asset; Business income; Share purchase agreement; Opportunity of being heard; Earning of tax free income; Additional evidence; Assessment record
• Section: 143(3); 142(1); 14A; 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B MUMBAI BEFORE SHRI JOGINDER SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 7636/MUM/2016 ASSESSMENT YEAR: 2006 - 07 MANZ RETAIL P. LTD. KNOWLEDGE HOUSE, SHYAM NAGAR, OFF. JOGESHWARI VIKHROLI LINK ROAD, JOGESHWARI (E), MUMBAI - 400060. VS. DY. CIT, RANGE - 8(2) AAYAKARBHAVAN, M.K. ROAD, MUMBAI - 400020 PAN NO. AAACM1978J APPELLANT RESPONDENT ITA NO. 1013/MUM/2017 ASSESSMENT YEAR: 2006 - 07 DCIT - 10(2)(2), R. NO. 209, 2 ND FLOOR, AAYAKARBHAVAN, M.K. ROAD, MUMBAI - 400020 VS. MANZ RETAIL P. LTD. KNOWLEDGE HOUSE, SHYAM NAGAR, OFF. JOGESHWARI VIKHROLI LINK ROAD, JOGESHWARI (E), MUMBAI - 400060. PAN NO. AAACM1978J APPELLANT RESPONDENT ASSESSEE BY : MR. VIPUL JOSHI , AR REVENUE BY : MR. NEIL PHILIP , DR DATE OF HEARING : 10 /0 9 /2018 DATE OF PRONOUNCEMENT: 25/09/2018 MANZ RETAIL P. LTD. ITA NOS. 7636/MUM/2016 & 1013/MUM/2017 2 ORDER PER N.K. PRADHAN, AM THE CAPTIONED CROSS APPEALS - ONE BY THE ASSESSEE AND THE OTHER BY THE REVENUE ARE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 16 , MUMBAI AND ARISE OUT OF THE ASSESSMENT COMPLETED U/S 143(3) OF THE INCOME TAX ACT 1961 (THE ACT). AS COMMON ISSUES ARE INVOLVED, WE ARE PROCEEDING TO DISPOSE THEM OFF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. ITA NO. 7636/MUM/2016 ASSESSMENT YEAR: 2006 - 07 2. THE GROUNDS OF APPEALS FILED BY THE ASSESSEE READ AS UNDER: 1.1 THE LD. CIT(A ERRED IN CONFIRMING THE ACTION OF THE DEPUTY COMMISSIONER OF INCOME TAX, RANGE - 8(2), MUMBAI [THE AO], IN MAKING ADDITION OF RS.1,43,50,000/ - U/S 68 OF THE INCOME TAX ACT, 1961 ON ACCOUNT OF SHARE APPLICATION MONEY RECEIVED BY THE APPELLANT. 1.2 IT IS SUBMITTED THAT, IN THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW, NO SUCH ADDITION WAS CALLED FOR. 2.1 THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF THE AO IN MAKING DISALLOWANCE U/S 14A OF THE ACT, TO THE EXTENT OF RS.18,37,50 0/ - TOWARDS ALLEGED EXPENDITURE INCURRED FOR EARNING DIVIDEND INCOME. 2.2 IT IS SUBMITTED THAT IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE CASE OF THE APPELLANT WAS NOT COVERED U/S 14A OF THE ACT AND IN ANY CASE, NO DISALLOWANCE WAS CAL LED FOR UNDER THIS SECTION. 2.3 WITHOUT PREJUDICE TO THE ABOVE, IT IS SUBMITTED THAT ASSUMING BUT NOT ADMITTING THAT SOME DISALLOWANCE WAS REQUIRED TO BE MADE U/S 14A OF THE MANZ RETAIL P. LTD. ITA NOS. 7636/MUM/2016 & 1013/MUM/2017 3 ACT, THE CALCULATION OF DISALLOWANCE IS NOT IN ACCORDANCE WITH THE LAW, I S ARBITR ARY AND IS EXCESSIVE. 3. WE BEGIN WITH THE 1 ST GROUND OF APPEAL. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE HAD RECEIVED SHARE APPLICATION MONEY FROM 18 PARTIES AMOUNTING TO RS.3,33,54,170/ - . OUT OF THESE 18 PARTIES, 16 PARTIES BELONG ED TO BIYANI FAMILY I.E. PROMO TERS OF FUTURE GROUP AND THE FOLLOWING TWO PARTIES WERE FROM OUTSIDE FROM WHOM THE ASSESSEE HAD TAKEN SHARE APPLICATION MONEY AMOUNTING TO RS.1,43,50,000/ - . THE DETAILS OF THE TWO PARTIES ARE AS UNDER: (I) ANISHA ESTATE PVT. LTD. CALCUTTA RS.43,50,000/ - (II) QUICK PAY SUPPLIERS PVT. LTD. RS.1,00,00,000/ - TOTAL RS.1,43,50,000/ - THE AO NOTED THAT IN RESPONSE TO A QUERY RAISED BY HIM, THE ASSESSEE SUBMITTED DETAILS ALONG WITH DOCUMENTARY EVIDENCE IN RESPECT OF SHARE APPLICATION MONEY REC EIVED FROM BIYANI FAMILY. HOWEVER, THE ASSESSEE FAILED TO FILE ANY DOCUMENTARY EVIDENCE AND CONFIRMATION IN RESPECT OF THE ABOVE TWO PARTIES. THE AO WAS OF THE OPINION THAT THE ASSESSEE FAILED TO PROVE THE IDENTITY OF THE PERSONS, THEIR CREDITWORTHINESS AND THE GENUINENESS OF THE TRANSACTION. THEREFORE, HE MADE AN ADDITION OF RS.1,43,50,000/ - AS UNEXPLAINED CASH CREDITS U/S 68 OF THE ACT. 4. AGGRIEVED BY THE ORDER OF THE AO , THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). DURING THE COURSE OF APPELLATE PROCEEDINGS, THE MANZ RETAIL P. LTD. ITA NOS. 7636/MUM/2016 & 1013/MUM/2017 4 ASSESSEE FILED BEFORE THE LD. CIT(A), THE CONFIRMATIONS AND OTHER DETAILS IN RESPECT OF M/S ANISHA ESTATE P. LTD. AND M/S QUICK PAY SUPPLIERS P. LTD. WHICH WERE CALLED BY THE AO, BUT WHICH HE COULD NOT FILE BEFORE HIM. THE REASON GIVEN BY THE ASSESSEE WAS THAT THE ABOVE TWO PARTIES WERE RESIDENTS OF KOLKATA AND AT THE TIME OF ASSESSMENT, THE ASSESSEE COULD NOT CONTRACT THEM DUE TO SHORTAGE OF TIME. KEEPING IN MIND THE EXPLANATI ON OF THE ASSESSEE, THE LD. CIT(A) ADMITTED THE ADDITIONAL EVIDENCE AND FORWARDED IT TO THE AO TO MAKE AN INQUIRY AND SEND A REMAND REPORT. THE AO CONDUCTED THE INQUIRY AND FORWARDED A REMAND REPORT TO THE LD. CIT(A) VIDE LETTER DATED 30.09.2016. AFTER REC EIPT OF THE REMAND REPORT, THE LD. CIT(A) FORWARDED A COPY OF IT TO THE ASSESSEE. IN RESPONSE TO IT, THE ASSESSEE FILED A REJOINDER BEFORE HIM. HAVING GONE THROUGH IT , THE LD. CIT(A) OBSERVED THAT THE ASSESSEE HAD FAILED TO PRODUCE THE SHARE APPLICANTS. TH E ASSESSEE ALSO FAILED TO FILE THE LATEST KNOWN ADDRESS AT WHICH THE DEPARTMENT CAN ISSUE SUMMONS U/S 131 TO THE SHARE APPLICANTS. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE LD. CIT(A) ASKED THE ASSESSEE TO PRODUCE THE SAID PARTIES BEFORE HIM FOR EXAM INATION. BUT THE ASSESSEE COULD NOT PRODUCE THE SHARE APPLICANTS BEFORE HIM NOR COULD PROVIDE COGENT MATERIAL TO PROVE THE IDENTITY, CREDITWORTHINESS OF THE CREDITORS AND THE GENUINENESS OF THE TRANSACTION. AS THE ASSESSEE FAILED TO DISCHARGE ITS ONUS, THE LD. CIT(A) CONFIRMED THE ADDITION OF RS.1,43,50,000/ - MADE BY THE AO. 5. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SUBMITS THAT BOTH QUICK PAY SUPPLIERS P. LTD. AND ANISHA ESATE AND FINANCE P. LTD. WERE REGISTERED NBFC COMPANY DURING THE RELEVANT PERIOD. AND PURSUANT TO THE SCHEME OF ARRANGEMENT SANCTIONED BY CALCUTTA HIGH COURT, MANZ RETAIL P. LTD. ITA NOS. 7636/MUM/2016 & 1013/MUM/2017 5 INVESTMENT DIVISION OF ANISHA ESATE AND FINANCE P. LTD. WAS TRANSFERRED TO QUICK PAY SUPPLIERS P. LTD. ON 01.04.2005. ULTIMATELY, SHARES WERE ALLOTTED TO THESE TWO COMPANIES ON 01.02.2007. THE LD. COUNSEL SUBMITS THAT THE AO HA S ACCEPTED THE FACT OF AMALGAMATION OF ANISHA ESATE AND FINANCE P. LTD. WITH QUICK PAY SUPPLIERS P. LTD. THE SAME WAS EVEN EVIDENT AT THE STAGE OF ASSESSMENT ALSO BEING FINANCIAL STATEMENTS OF THE TWO NBFCS PRODUCED BEFORE THE AO. IT IS STATED THAT RBI MAINTAINS STRICT CONTROL ON BUSINESS OF THESE NBFCS. THUS THIS FACT PROVES THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION ENTERED INTO WITH THESE REGISTERED NBFCS. THE LD. COUNSEL FURTHER SUBMITS THAT ONLY AN AMOUNT OF RS.43,50,000/ - RELATES TO SHARE APPLICATION MONEY FOR THE IMPUGNED ASSESSMENT YEAR AND THE BALANCE RS.1,00,00,000/ - RELATES TO EARLIER YEARS. THE LD. COUNSEL FILES A PAPER BOOK (P/B) CONTAINING (I) A COPY OF COMPUTATION OF INCOME, (II) A COPY OF STATEMENT OF ACCOUNTS, (III) ALL CORRESPONDENCES BEFORE AO, ALONGWITH RELEVANT ANNEXURES DURING ORIGINAL SCRUTINY ASSESSMENT: (A) NOTICE U/S 142(1) DATED 25.08.2008 (B) NOTICE U/S 142(1) DATED 08.12.2008 (C) REPLY DATED 19.08.2008 (D) LETTER IN RESPONSE TO NOTICE DATED 25.08.2008 (E) REPLY DATED 12.12.2008 (F) REPLY DATED 19.12.2008, (IV) ALL CORRESPONDENCES BEFORE AO ALONGWITH RELEVANT ANNEXURES DURING REMAND PROCEEDINGS: (A) LETTER DATED 16.12.2014 (B) A COPY OF FORM 2 FILED WITH ROC WITH RESPECT TO ALLOTMENT OF SHARES (C) A COPY OF FINANCIAL STATEMENTS OF BOTH ANISHA ESTATE AND FINANCE PVT. LTD. AND QUICKPAY SUPPLIERS PRIVATE LIMITED (D) A COPY OF A C KNOWLEDGMENT OF RETURN OF INCOME OF BOTH MANZ RETAIL P. LTD. ITA NOS. 7636/MUM/2016 & 1013/MUM/2017 6 ANISH A AND QUICK PAY (E) A COPY OF CONFIRMATION OF INVESTMENTS ON BEHA LF OF BOTH THE PARTIES FROM QUIC KPAY (F) A COPY OF COMPANY MASTER DATA AS DOWNLOADED FROM WEBSITE OF MCA OF ANISHA AND QUICKPAY, (V) ALL CORRESPONDENCES BEFORE CIT (A), ALONG WI T H RELEVANT AN NEXURES: ( A) A COPY THE INDEX OF THE PAPER BOOK FILED ON 20.01.2010 (B) A COPY OF MEMORANDUM AND ARTICLES OF ASSOCIATION, (C) DETAILS OF SHORT TERM CAPITAL GAIN DURING ASSESSMENT YEAR 06 - 07 , (D) A COPY OF PAYMENT FOR SHARES CONSIDERATION IN PUBLIC AUCTIO N BY TAX RECOVERY OFFICER (E) APPLICATION FOR ADMISSION OF ADDITIONAL EVIDENCE UNDER RULE 46A , (F) A COPY OF WRITTEN SUBMISSION FILED ON 08.02.2012, (VI) (A) CORRESPONDENCE DURING REMAND PROCEEDINGS(B) A COPY OF ENQUIRY REPORT (C) A COPY OF REMAND REPORT DATED 30.09.2016, (VII) ALL CORRESPONDENCES BEFORE CIT (A) IN RESPONSE TO REMAND REPORT, ALONG WITH RELEVANT ANNEXURES: ( A) A COPY OF SUBMISSION FILED ON 18.10.2016 (B) A COPY OF SUBMISSION DATED 29 . 11.2016 (C) A COPY OF MINUTES OF THE BOARD MEETING OF A PPELLANT COMPANY FOR ALLOTMENT OF SHARES (D) A COPY OF SHARE CERTIFICATE ISSUED TO ANISHA AND QUICK PAY, (VIII) PAN OF VINAYAK LOGISTICS PVT. LTD. AND (IX) EXTRACTS / LEDGER FROM THE BOOKS OF ACCOUNTS OF THE ASSESSEE (A) LEDGER OF QUICKPAY & ANISHA FROM 01 .04.2003 TO 31.03.2007 (B) FINANCIAL STATEMENTS FOR THE YEAR ENDING 31.03.2004. (C) BREAKUP OF SHARE APPLICATION MONEY RECEIVED DURING AY 2006 - 07. IT IS SUBMITTED BY THE LD. COUNSEL THAT THE ABOVE DOCUMENTS/REPLIES WERE FILED BY THE ASSESSEE BEFORE THE AO AND LD. CIT(A) DURING VARIOUS PROCEEDINGS MANZ RETAIL P. LTD. ITA NOS. 7636/MUM/2016 & 1013/MUM/2017 7 THE LD. COUNSEL RELIES ON THE DECISION IN CIT V. ORISSA CORPORATION P LTD. [1986] 159 ITR 78 (SC), CIT V. STELLER INVESTMENT LTD [2001] 251 ITR 263 (SC), CIT V. ST EL LER INVESTMENT LTD . [1991] 192 ITR 287 (DEL - HC), CIT V. LOVELY EXPORTS (P) LTD [2008] 216 CTR 195 (SC), CIT V. LOVELY EXPORTS (P) LTD. [2008] 299 ITR 268 (DEL - HC), CIT V. CREATIVE WORLD TELEFILMS LTD. [2011] 333 ITR 100 (BOM - HC) , CIT V. GREEN INFRA LTD [2017] 392 ITR 680 (BOM - HC), CIT V. GAGANDEEP I NFRASTRUCTURE PVT. LTD. [2017] 394 ITR 680 (BOM - HC), PCIT V. PARADISE INLAND SHIPPING (P) LTD. [2017] 400 ITR 439 (BOM - HC), PCIT V. APEAK INFO TECH NAGPUR & ORS [2017] 397 148 (BOM - HC), CIT V. ORCHID INDUSTRIES PVT. LTD. [2017] 397 ITR 136 (BOM - HC), CIT V. HARESH D. MEHTA [2017] 251 TAXMAN 346 (BOM - HC), PCIT V. VEEDHATA TOWER PVT. LTD. [2018] 403 ITR 415 (BOM - HC) . 6. ON THE OTHER HAND, THE LD. DR SUBMITS THAT AS THE ASSESSEE FAILED TO PRODUCE THE PARTIES FOR EXAMINATION BEFORE THE AO AND FURTHER FAILED TO G IVEN THE LATEST KNOWN ADDRESS AT WHICH THE DEPARTMENT COULD ISSUE SUMMONS U/S 131 TO THE APPLICANTS, THE LD. CIT(A) HAS RIGHTLY CONFIRMED THE ADDITION OF RS.1,43,50,000/ - MADE BY THE AO. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATER IALS ON RECORD. A PERUSAL OF THE BALANCE SHEET OF THE ASSESSEE AS AT 31.03.2006 CLEARLY SHOWS THAT THE SHARE APPLICATION MONEY WAS RS.29,724,170/ - AS AT 31.03.2005 AND RS.33,354,170/ - AS AT 31.03.2006 . THUS THERE IS A N INCREASE IN SHARE APPLICATION MONEY A MOUNTING TO RS.36,30,000/ - . THE DETAILS OF SHARE APPLICATION MONEY FOR THE AY 2006 - 07 ARE AS UNDER: MANZ RETAIL P. LTD. ITA NOS. 7636/MUM/2016 & 1013/MUM/2017 8 NAME OF THE PARTIES AS ON 31.03.2005 AS ON 31.03.2006 MONEY RECEIVED/ (REPAID) DURING AY 2006 - 07 AAHAN BIYANI 8,60,000 8,60,000 - ANIL BIYANI - HUF 75,000 75,00O - ANIL BIYANI 3,14,900 3,14,900 ANISHA ESTATE & FINANCE PVT. LTD. - 43,50,000 43,50,000 ARYAN BIYANI 3,40,000 3,40,000 - ASHNI KISHORE BIYANI 7,20,000 - (7,20,000) GODAVARIDEVIBIYANI 50,000 50,000 - GOPIKISHANBIYANI 19,64,900 19,64, 900 GOPIKISHANBIYAM - HUF 1,61,750 1,61,750 - ISHABIYANI 4,20,000 4,20,000 - KESHAVBIYANI 6,60,000 6,60,000 - LAXMINARAYANBIYANI 1,34,000 1,34,000 - NIKUNJBIYANI 4,80,000 4,80, 000 NISHTABIYANI 1,40,000 1,40,000 - QUICK PAY SUPPLIERS PVT. LTD. 1,00,00,000 1,00,00,000 - RAKESH BIYANI 35,11,500 35,11,500 - RAKESH BIYANI - HUF 75,000 75,000 - SUNIL BIYANI 90,02,120 90,02,120 - SUNIL BIYANI - HUF 2,15,000 2,15,000 - TOTAL 2,97,24,170 3,33,54,170 36,30,000 7.1 A PERUSAL OF THE ABOVE TABLE CLEARLY INDICATES THAT THE SHARE APPLICATION MONEY IN THE CASE OF ANISHA ESTATE & FINANCE PVT. LTD. MANZ RETAIL P. LTD. ITA NOS. 7636/MUM/2016 & 1013/MUM/2017 9 AMOUNTING TO RS.43,50,000/ - IS THE ONLY FRESH ONE DURING THE AY 2006 - 07. THE ADDITION OF BALANCE AMOUNT OF RS.1,00,00,000/ - MADE BY THE AO RELATES TO EARLIER YEARS. THE ISSUE OF TAXABILITY CAN BE AGITATED ONLY FOR RS.43,50,000/ - DURING THE IMPUGNED ASSESSMENT YEAR. THE ADDITION OF BALANCE AMOUNT OF RS.1,00,00,000/ - MAD E BY THE AO U/S 68 IS, THEREFORE, DELETED . NOW WE DISCUSS THE ISSUE OF TAXABILITY OF RS.43,50,000/ - . IT IS WELL SETTLED THAT IN ORDER TO DISCHARGE THE ONUS U/S 68, THE ASSESSEE MUST PROVE THE FOLLOWING: (I) THE IDENTITY OF THE CREDITOR, (II) THE CAPACITY OF THE CREDITOR TO ADVANCE MONEY; AND (III) THE GENUINENESS OF TRANSACTION. WE ARE OF THE CONSIDERED VIEW THAT AFTER THE ASSESSEE HAS ADDUCED EVIDENCE TO ESTABLISH PRIMA FACIE THE AFORESAID, THE ONUS SHIFTS TO THE DEPARTMENT. IN THE IN STANT CASE, WE FIND THAT THE ASSESSEE HAS ADDUCED EVIDENCE TO ESTABLISH PRIMA FACIE THE AFORESAID AND THE ONUS HAS SHIFTED TO THE DEPARTMENT. HOWEVER, THE DEPARTMENT HAS ARRIVED AT A FINDING WITHOUT PROPER ENQUIRY AND THE CONCLUSION IS BASED O N PRESUMPTION S. THEREFORE, THE ADDITION OF RS.43,50,000/ - MADE BY THE AO IS DELETED. THUS THE 1 ST GROUND OF APPEAL IS ALLOWED. 8. THEN WE COME TO THE 2 ND GROUND OF APPEAL. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO OBSERVED THAT THE ASSESSEE HAD EARNED DIVIDEND INCOME OF RS.18,37,500/ - . IN RESPONSE TO A QUERY RAISED BY THE AO, THE ASSESSEE SUBMITTED BEFORE HIM THAT THE ABOVE DIVIDEND WAS MANZ RETAIL P. LTD. ITA NOS. 7636/MUM/2016 & 1013/MUM/2017 10 RECEIVED ONLY ON SHARES OF PANTALOON RETAIL (INDIA) LTD. THE ASSESSEE ALSO SUBMITTED BEFORE THE AO THAT NO EXPENDITURE HAD BEEN CLAIMED DIRECTLY OR INDIRECTLY IN EARNING THE DIVIDEND INCOME AND THEREFORE, NO EXPENDITURE WOULD BE DISALLOWED. FURTHER, THE ASSESSEE SU BMITTED BEFORE THE AO THAT INVESTMENT IN PANTALOON RETAIL (INDIA) LTD. HAD BEEN MADE OUT OF RESERVES AND SURPLUS AND NO INTEREST BEARING FUND WAS INVOLVED. HOWEVER, THE AO WAS NOT CONVINCED WITH THE ABOVE EXPLANATION OF THE ASSESSEE FOR THE REASON THAT T HE ASSESSEE HAD RESERVES AND SURPLUS ONLY TO THE EXTENT OF RS.4.78 CRORES AND NON - INTEREST BEARING FUNDS WHICH AT THE MOST CONSIDERED BY THE ASSESSEE COULD BE UNSECURED LOAN AMOUNTING TO RS.19.50 CRORES AS AGAINST SHARES OF PANTALOON RETAIL (INDIA) LTD. OF RS.58.29 CRORES. FURTHER, THE ASSESSEE HAD TAKEN SECURED LOAN AS HIGH AS RS.64.96 CRORES AND THE ACQUISITION OF SHARES HA D BEEN DONE THROUGH SECURED LOANS ONLY. THEREFORE, THE AO MADE A DISALLOWANCE OF RS.25,92,128/ - U/S 14A R.W. RULE 8D. 9. AGGRIEVED BY THE ORDER OF THE AO THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). WE FIND THE LD. CIT(A), AFTER CONSIDERING THE CONTENTIONS OF THE ASSESSEE HELD THAT THE DISALLOWANCE U/S 14A R.W. RULE 8D SHOULD NOT EXCEED THE AMOUNT OF EXEMPT INCOME EARNED AND RELY ING ON THE ORDER OF THE TRIBUNAL IN THE CASE OF DAGA GLOBAL CHEMICALS PVT. LTD. (ITA NO. 5592/MUM/2012 DATED 01.01.2015), RESTRICTED THE DISALLOWANCE TO THE EXTENT OF THE EXEMPT INCOME OF RS.18,37,500/ - . 10. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SUBM ITS THAT IN ORDER TO MAKE A DISALLOWANCE U/S 14A R.W. RULE 8D, THE PRE - CONDITIONS LIKE MANZ RETAIL P. LTD. ITA NOS. 7636/MUM/2016 & 1013/MUM/2017 11 SATISFACTION OF THE AO, EXAMINATION OF THE BOOKS OF THE ASSESSEE, ESTABLISHMENT OF PROXIMATE CONNECTION OF EXPENDITURE WITH EXEMPT INCOME ETC. HAVE TO BE FIRST MET. ONLY THEN, RULE 8D CAN BE INVOKED. FURTHER IT IS STATED THAT THE AO HAS TO ESTABLISH THAT SOME EXPENDITURE HAS ACTUALLY BEEN INCURRED BY THE ASSESSEE OR THE CLAIM OF THE ASSESSEE IS INCORRECT AND IN ABSENCE OF SUCH FINDING, NO DISALLOWANCE CAN BE MADE U/S 14A R.W. RULE 8D. ALSO IT IS SUBMITTED THAT DISALLOWANCE U/S 14A CANNOT EXCEED THE AMOUNT OF EXEMPT INCOME. FINALLY, IT IS STATED THAT ONCE AN EXPENDITURE IS ALLOWED/DISALLOWED UNDER NORMAL PROVISIONS, DOUBLE ADDITION CANNOT BE MADE U/S 14A OF THE ACT. 11. ON THE OTHER HAND, THE LD. DR SUPPORTS THE ORDER PASSED BY THE AO. 12. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. WE FIND THAT RULE 8D IS APPLICABLE ONLY FROM THE AY 2008 - 09. IN THE CASE OF M/S GODREJ AGROVET LTD. V. ACIT (ITA NO. 1629/MUM/2009) FOR AY 2005 - 06 THE ITAT G BENCH MUMBAI VIDE ITS ORDER DATED 17.09.2010 HAS OBSERVED THE FOLLOWING : AS HELD BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ BOYCE MFG. CO. LTD. (ITA NO. 626 OF 2010 DTD. 12.08.2010), R ULE 8D OF THE INCOME TAX RULES 1962 IS APPLICABLE ONLY PROSPECTIVELY I.E. FROM A.Y. 2008 - 09. AS FURTHER HELD BY THE HONBLE BOMBAY HIGH COURT IN THE SAID CASE, THE QUANTUM OF DISALLOWANCE U/S 14A FOR THE YEARS EARLIER TO A.Y. 2008 - 09 HAS TO BE WORKED OUT B Y ADOPTING SOME REASONABLE METHOD. IN THIS CONTEXT, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT IN THE EARLIER YEARS, A SIMILAR DISALLOWANCE MADE BY THE A.O. HAS BEEN SUSTAINED BY THE LD. CIT(A) TO THE EXTENT OF 2% OF THE TOTAL EXEMPT INCOME EARNED BY THE ASSESSEE AND THE SAME BEING MANZ RETAIL P. LTD. ITA NOS. 7636/MUM/2016 & 1013/MUM/2017 12 REASONABLE, THE ASSESSEE HAS ACCEPTED IT. WE, THEREFORE, DIRECT THE A.O. TO VERIFY THIS ASPECT FROM THE ASSESSMENT RECORDS OF THE EARLIER YEARS AND ACCORDINGLY RESTRICT THE DISALLOWANCE OUT OF COMMON ADMINISTRATIVE EXPEN SES TO 2% OF THE TOTAL EXEMPT INCOME. THE ABOVE ORDER OF THE TRIBUNAL HAS BEEN AFFIRMED BY THE HONBLE BOMBAY HIGH COURT. 12.1 IN THE INSTANT CASE, WE ARE CONCERNED WITH THE AY 2006 - 07. FACTS BEING IDENTICAL, WE FOLLOW THE ABOVE ORDER OF THE CO - ORDINAT E BENCH AND DIRECT THE AO TO RESTRICT THE DISALLOWANCE OUT OF COMMON ADMINISTRATIVE EXPENSES TO 2% OF THE TOTAL EXEMPT INCOME. THUS THE 2 ND GROUND OF APPEAL IS PARTLY ALLOWED. ITA NO. 1013/MUM/2017 ASSESSMENT YEAR: 2006 - 07 13. THE GROUNDS OF APPEAL FILED BY THE REVENUE READ AS UNDER: 1. WHETHER ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN HOLDING THE INCOME FROM S A LE OF SHARES OF RS.1,32,93,168/ - AS 'INCOME FROM SHORT TERM CAPITAL GAIN' AS AGAINST 'INCOME FROM BUSINESS' HELD BY THE ASSESSING OFFICER, WITHOUT APPRECIATING THE RELEVANT FACTS; BEING, THE SOURCE OF PURCHASE OF SHARES WERE FROM BORROWED FUNDS AND THERE HAS BEEN NO OTHER INCOME EARNED BY THE AS SESSEE COMPANY DURING THE Y EAR. 2. WHETHER ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN HOLDING THE INCOME FROM SALE OF SHARES AT RS.1,32,93,168/ - AS 'INCOME FROM SHORT TERM CAPITA L GAIN' AS AGAINST 'INCOME FROM BUSINESS' HELD BY THE ASSE SSING OFFICER, WITHOUT APPRECIATING THE CIRCUMSTANTIAL FACTS THAT THE SHARES WERE PURCHASED AND SOLD WITHIN A SPAN OF MANZ RETAIL P. LTD. ITA NOS. 7636/MUM/2016 & 1013/MUM/2017 13 THREE WEEKS, INVOLVING SPURTS OF 19 TRANSACTIONS AND INTENTION WA S NOT TO HOLD IT AS INVESTMENT. 3. WHETHER ON THE FACTS AND IN CIRCUMSTA NCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN HOLDING THE INCOME FROM SA L E OF SH A RES AT RS.1,32,93,168/ - AS 'INCOME FROM SHORT TERM CAPITAL GA IN' AS AGAINST 'INCOME FROM BUSINESS' HELD BY THE ASSESSING OFFICER, BY MERELY FOLLOWING THE C ASE LAWS, RATHER THAN APPRECIATING THE INTENTION EMANATING FROM THE QUANTUM, FREQUENCY AND PERIOD O F HOLDINGS, RESULTING IN THE GAIN. 4. WHETHER ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN RESTRICTING THE DISALLO WANCE MODE U/S. 14A OF THE INCOME TAX ACT, 1961, TO THE EXTENT OF EXEMPT INCOME WITHOUT APPRECIATING THE FACT THAT NO SUCH PROVISION EXIST IN THE INCOME TAX ACT, 1961, FOR THE SAME, AND IGNORING THE METHOD PRESCRIBED FOR COMPUTATION OF SUCH DISALLOWANCE UN DER THE INCOME TAX ACT, 1961/ INCOME TAX RULES, 1962. 14. WE DISCUSS BELOW THE 1 ST , 2 ND AND 3 RD GROUND OF APPEAL TOGETHER AS THEY ADDRESS A COMMON ISSUE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE HAD DECLARED SHORT TERM CAPITAL GAINS (STCG) OF RS.1,32,93,168/ - DURING THE YEAR. THE AO TREATED THE ABOVE SUM OF RS.1, 32,93,168/ - AS BUSINESS INCOME FOR THE FOLLOWING REASONS : (I) THE ASSESSEE HAD SHARE CAPITAL OF RS.1,00,000/ - AND RESERVE AND SURPLUS OF RS.4,78,58,879/ - . AS AGAINST THE OWN FUNDS OF RS.479.59 LAKHS, THE ASSESSEE HAD MADE INVESTMENT IN SHARES WHICH IS R S.6697 LAKHS. ALSO, THE ASSESSEE HAD ACQUIRED AS MANY AS 17,42,814 SHARES OF PANTALOON RETAIL (INDIA) LTD. FOR A COST OF RS.58.29 CRORES. THUS FROM THE QUANTUM OF INVESTMENT AND ITS COMPARISON TO OWN FUNDS, IT IS CLEAR THAT MANZ RETAIL P. LTD. ITA NOS. 7636/MUM/2016 & 1013/MUM/2017 14 THE ASSESSEE IS ENGAGED IN THE B USINESS OF TRADING IN SHARES AND NOT IN INVESTMENT. (II) AS PER THE BALANCE SHEET, THE ASSESSEE COMPANY HAS TAKEN LOAN FROM BANKS AND FINANCIAL INSTITUTIONS TO THE EXTENT OF RS.64.97 CRORES. AS PER THE LOAN SANCTION LETTERS FROM FINANCIAL INSTITUTION, IT IS OBSERVE D THAT ALL THE LOANS HAVE BEEN TAKEN WHERE THE PURPOSE HAS BEEN SPECIFIED AS TO MEET THE GROUP FUND REQUIREMENT AND IN MAJORITY OF THE CASES, SHARE OF PANTALOON RETAIL (INDIA) LTD. HAS BEEN PLEDGED AS A SECURITY AT A MARGIN OF 60%. ALSO THE SAME IS AGAINST THE PERSONAL GUARANTEE OF SHRI KISHORE BHIYANI AND SHRI VIJAY BHIYANI, WHO ARE THE MAIN PROMOTERS OF FUTURE GROUP. (III) A S PER THE P&L ACCOUNT, THE INCOME RECEIVED BY THE ASSESSEE COMPRISES OF PROFIT ON SALE OF SHARES OF RS.132.93 LAKHS, DIVIDEND INCOME OF RS.18.30 LAKHS AND INTEREST INCOME OF RS.0.42 LAKHS. THEREFORE, WHATEVER, INCOME IS EARNED ON PURCHASE AND SALE OF SHARES NEE DS TO BE TAXED UNDER THE HEAD I NCOME FROM BUSINESS ONLY . (IV) THE VALUE OF INVESTMENT IN SHARES IS RS.66.97 CRORES AGAINST TOTAL FUNDS AVAILABLE OF RS.92.67 CRORES. HENCE THE RATIO OF SHARES TO TOTAL FUNDS AVAILABLE COMES TO 72.26%. IT INDICATES THAT THE MAIN BUSINESS OF THE ASSESSEE IS PURCHASE AND SALE OF SHARES. (V) THE ASSESSEE HAS EFFECTED SALES OF RS.20.36 CRORES WORTH OF SHARES, WHEREAS IT HAD PURCHASED TOTAL SHARES WORTH RS.80.99 CRORES. UNDER NO CIRCUMSTANCES, AN INVESTOR CAN BUY SUCH A HUGE AMOUNT OF SHARES, THAT TOO AGAINST LOAN. MANZ RETAIL P. LTD. ITA NOS. 7636/MUM/2016 & 1013/MUM/2017 15 (VI) FURTHER THE TOTAL HOLDING PERIOD OF THE SHARES IN WHICH PROFIT EARNED AND OFFERED AS STCG VARIES FROM 7 DAYS TO MAXIMUM OF 30 DAYS, THUS ON THIS ASPECT AS WELL, THE ASSESSEE CANNOT BE CONSIDERED AN INVESTOR. IN VIEW OF THE ABOVE REASONS, THE AO TREATED THE STCG OF RS.1,32 ,93,168/ - AS BUSINESS INCOME. 15. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). WE FIND THAT THE LD. CIT(A ) HAS CONCLUDED THAT THE DELIVERY BASED TRANSACTIONS IN THE ASSESSEES CASE, SHOULD BE TREATED AS THOSE IN TH E NATURE OF INVESTMENT TRANSACTIONS AND THE PROFIT RECEIVED THERE FROM SHOULD BE TREATED AS SHORT - TERM OR, AS THE CASE MAY BE, LONG TERM CAPITAL GAIN, DEPENDING UPON THE PERIOD OF HOLDING. MERELY BECAUSE, THE ASSESSEE LIQUIDATES ITS INVESTMENT WITHIN A SHO RT SPAN OF TIME, WHICH HA S GIVEN BETTER OVERALL EARNING TO THE ASSESSEE, WOULD NOT LEAD TO THE CONCLUSION THAT THE ASSESSEE HAD NO INTENTION TO KEEP ON THE FUNDS AS INVESTOR IN EQUITY SHARES, BUT WAS ACTUALLY IN TENDED TO TRADE IN SHARES. IT IS FURTHER OBSE RVED BY THE LD. CIT(A) THAT THERE IS NO DISPUTE ON THE FACT THAT THE ASSESSEE HAS TREATED EQUITY SHARES OF INDIAN COMPANIES AS INVESTMENT I.E. CAPITAL ASSET ALL ALONG AND ACCORDINGLY VALUED THE INVESTMENT AT COST; HAD THE ASSESSEE VALUED THE SHARES AT COST OR MARKET PRICE, WHICHEVER IS LOWER, THE GAIN ARISING OUT OF SALE OF SHARES COULD EASILY BE TREATED AS BUSINESS INCOME. THE ASSESSEE HAS NOT VALUED THE SHARES AS STOCK BUT VALUED THE SAME AS INVESTMENT. IN VIEW OF THE ABOVE FACTS, THE LD. CIT(A) HELD THAT THE INTENTIONS OF THE ASSESSEE TO MANZ RETAIL P. LTD. ITA NOS. 7636/MUM/2016 & 1013/MUM/2017 16 PURCHASE SHARES WERE FOR THE PURPOSE OF MAKING INVESTMENTS AND NOT FOR THE PURPOSE OF TRADING IN SHARES AND THUS ALLOWED THE APPEAL. 16. BEFORE US, THE LD. DR SUPPORTS ON THE ORDER OF THE AO AND MAKES A SPECIFIC REFERENCE TO PARA 5 OF THE SAID ORDER . ON THE OTHER HAND THE LD. COUNSEL OF THE ASSESSEE, REFERRING TO CASE - LAWS, SUBMITS THAT EVEN IF SHARES ARE PURCHASED UTILIZING BORROWED FUNDS, THEY STILL ARE CAPITAL ASSETS AND GAIN ARISING THER E FROM IS ASSESSABLE AS CAPITA L GAINS AND NOT BUSINESS INCOME AND MERELY BECAUSE OF SHORT HOLDING PERIOD, INCOME FROM SALE OF SHARES HELD AS INVESTMENT CANNOT BE TREATED AS BUSINESS INCOM E INSTEAD OF CAPITAL GAINS. THEREFORE , THE LD. COUNSEL SUPPORTS THE O RDER OF THE LD. CIT(A). 17. BEFORE WE PROCEED TO CONSIDER THE RELEVANT FACT, IT WOULD BE APPROPRIATE TO EXAMINE THE LEGAL PRINCIPLES WHICH GOVERN THE ISSUE. THE HONBLE SUPREME COURT, AFTER REFERRING TO VARIOUS OTHER AUTHORITIES HAS SUMMARIZED THE PRINCIPL ES IN CIT V. SUTL E J COTTON MILLS SUPPLIES LTD. (1975) 100 ITR 706, THUS: IN THE ABSENCE OF ANY EVIDENCE OF TRADING ACTIVITY IN CASES OF PURCHASE AND RESALE OF SHARES, IT HAS BEEN HELD THAT PROFIT ARISING FROM THE RESALE IS AN ACCRETION TO THE CAPITAL. IF A TRANSACTION IS IN THE ASSESSEE'S ORDINARY LINE OF BUSINESS THERE CAN BE NO DIFFICULTY IN HOLDING THAT IT IS IN THE NATURE OF TRADE. BUT THE DIFFICULTY ARISES WHERE THE TRANSACTION IS OUTSIDE THE ASSESSEE'S LINE OF BUSINESS AND THEN, IT MUST DEPEND UPON THE FACTS AND CIRCUMSTANCES OF EACH CASE WHETHER THE TRANSACTION IS IN THE NATURE OF TRADE. IT IS NOT NECESSARY TO CONSTITUTE TRADE THAT THERE SHOULD BE A SERIES OF TRANSACTIONS, BOTH OF PURCHASE AND OF SALE. A SINGLE TRANSACTION OF PURCHASE AND SALE OUTSI DE THE ASSESSEE'S LINE OF BUSINESS MAY CONSTITUTE AN ADVENTURE IN THE NATURE TRADE. NEITHER REPETITION NOR CONTINUITY OF SIMILAR TRANSACTIONS IS NECESSARY TO CONSTITUTE A TRANSACTION AN ADVENTURE IN THE NATURE OF TRADE. IF MANZ RETAIL P. LTD. ITA NOS. 7636/MUM/2016 & 1013/MUM/2017 17 THERE IS REPETITION AND CONTINUIT Y, THE ASSESSEE WOULD BE CARRYING ON A BUSINESS AND THE QUESTION WHETHER THE ACTIVITY IS AN ADVENTURE IN THE NATURE OF TRADE CAN HARDLY ARISE. A TRANSACTION MAY BE REGARDED AS ISOLATED ALTHOUGH A SIMILAR TRANSACTION MAY HAVE TAKEN PLACE A FAIRLY LONG TIME BEFORE [SEE COMMISSIONERS OF INLAND REVENUE V. REINHOLD (1953) 34 TC 389]. THE PRINCIPLES UNDERLYING THE DISTINCTION BETWEEN A CAPITAL SALE AND AN ADVENTURE IN THE NATURE OF TRADE WERE EXAMINED BY THIS COURT IN G. VENKATASWAMI NAIDU & CO. V. COMMISSIONER O F INCOME - TAX [ (1959) 35 ITR 594 (SC) ], WHERE THIS COURT SAID THAT THE CHARACTER OF A TRANSACTION CANNOT BE DETERMINED SOLELY ON THE APPLICATION OF ANY ABSTRACT RULE, PRINCIPLE OR TEST BUT MUST DEPEND UPON ALL THE FACTS AND CIRCUMSTANCES OF THE CASE. ULTIMATELY, IT IS A MATTER OF FIRST IMPRESSION WITH THE COURT WHETHER A PARTICULAR TRANSACTION IS IN THE NATURE OF TRADE OR NOT. IT HAS BEEN SAID THAT A SINGLE PLUNGE MAY BE ENOUGH PROVIDED IT IS SH OWN TO THE SATISFACTION OF THE COURT THAT THE PLUNGE IS MADE IN THE WATERS OF THE TRADE; BUT MERE PURCHASE/SALE OF SHARES - IF THAT IS ALL THAT IS INVOLVED IN THE PLUNGE - MAY FALL SHORT OF ANYTHING IN THE NATURE OF TRADE. WHETHER IT IS IN THE NATURE OF TRADE WILL DEPEND ON THE FACTS AND CIRCUMSTANCES. WHERE THE PURCHASE OF ANY ARTICLE OR OF ANY CAPITAL INVESTMENT, FOR INSTANCE, SHARES, IS MADE WITHOUT THE INTENTION TO RESELL AT A PROFIT, A RESALE UNDER CHANGED CIRCUMSTANCES WOULD ONLY BE A REALISATION OF CAPIT AL AND WOULD NOT STAMP THE TRANSACTION WITH A BUSINESS CHARACTER (SEE COMMISSIONER OF INCOME - TAX V. P.K.N. CO. LTD. (1966) 60 ITR 65 (SC) . WHERE A PURCHASE IS MADE WITH THE INTENTION OF RESALE , IT DEPENDS UPON THE CONDUCT OF THE ASSESSEE AND THE CIRCUMSTANCES OF THE CASE WHETHER THE VENTURE IS ON CAPITAL ACCOUNT OR IN THE NATURE OF TRADE. A TRANSACTION IS NOT NECESSARILY IN THE NATURE OF TRADE BECAUSE THE PURCHASE WAS MADE WITH THE INTENTION OF RESALE (SEE JENKINSON V. FREEDLAND [(1961) 39 TC 636 (CA)], RADHA DEBI JALAN V. CIT [1951] 20 ITR 176 (CAL) , INDIA NUT CO. LTD. V. CIT [1960] 39 ITR 234 (KER), MRS. SOONIRAM PODDAR V. CIT [1939] 7 ITR 470 (RANG)(FB) , AJAX PRODUCTS LTD. V. CIT [1961] 43 ITR 297 (MAD) , GUSTAD DINSHAW IRANI V. CIT [1957] 31 ITR 92 (BOM) AND MRS. D.M. ALEXANDER V. CIT [1952] 22 ITR 379 (MAD) . A CAPITAL INVESTMENT AND RESALE DO NOT LOSE THEIR C APITAL NATURE MERELY BECAUSE THE RESALE WAS FORESEEN AND CONTEMPLATED WHEN THE INVESTMENT WAS MADE AND THE POSSIBILITY OF ENHANCED VALUES MOTIVATED THE INVESTMENT (SEE [ LEEMING V. JONES (1930) 15 TC 333 (HL)] AND ALSO THE DECISIONS OF THIS COURT IN SAROJ K UMAR MAZUMDAR V. CIT [1959] 37 ITR 242 (SC) AND JANKI RAM BAHADUR RAM V. CIT [1965] 57 ITR 21 (SC) . MANZ RETAIL P. LTD. ITA NOS. 7636/MUM/2016 & 1013/MUM/2017 18 IN COMMISSIONER OF INLAND RE VENUE V. FRASER [(1942) 24 TC 498, 502] LORD NORMAND SAID: THE INDIVIDUAL WHO ENTERS INTO A PURCHASE OF AN ARTICLE OR COMMODITY MAY HAVE IN VIEW THE RESALE OF IT AT A PROFIT, AND YET IT MAY BE THAT THAT IS NOT THE ONLY PURPOSE FOR WHICH HE PURCHASED THE A RTICLE OR THE COMMODITY, NOR THE ONLY PURPOSE TO WHICH HE MIGHT TURN IT IF FAVOURABLE OPPORTUNITY FOR SALE DOES NOT OCCURR. . . .. . AN AMATEUR MAY PURCHASE A PICTURE WITH A VIEW TO ITS RESALE AT A PROFIT AND YET HE MAY RECOGNISE AT THE TIME OR AFTERWARDS THAT THE POSSESSION OF THE PICTURE WILL GIVE HIM AESTHETIC ENJOYMENT IF HE IS UNABLE ULTIMATELY, OR AT HIS CHOSEN TIME, TO REALIS E IT AT A PROFIT . . . . . . . AN ACCRETION TO CAPITAL DOES NOT BECOME INCOME MERELY BECAUSE THE ORIGINAL CAPITAL WAS INVESTED IN THE HOPE AND EXPECTATION THAT IT WOULD RISE IN VALUE; IF IT DOES SO RISE, ITS REALISATION DOES NOT MAKE IT INCOME. LORD DUNEDIN SAID IN LEEMING V. JONES AT P AGE 360: THE FACT THAT A MAN DOES NOT MEAN TO HOLD AN INVESTMENT MAY BE AN ITEM OF EVIDENCE TENDING TO SHOW WHETHER HE IS CARRYING ON A TRADE OR CONCERN IN THE NATURE OF TRADE IN RESPECT OF HIS INVESTMENTS BUT PER SE IT L EADS TO NO CONCLUSION WHATEVER. T HIS COURT LAID DOWN IN G. VENKATASWAMI NAIDU & CO. V. CIT [1959] 35 ITR 594 (SC) THAT THE DOMINANT OR EVEN SOLE INTENTION TO RESELL IS A RELEVANT FACTOR AND RAISES A STRONG PRESUMPTION, BUT BY ITSELF IS NOT CONCLUSIVE PROOF, OF AN ADVENTURE IN THE NATURE OF TRADE. THE INTENTION TO RESELL WOULD, IN CONJUNCTION WITH THE CONDUCT OF THE ASSESSEE AND OTHER CIRCUMSTANCES, POINT TO THE BUSINES S CHARACTER OF THE TRANSACTION. 17.1 WE ARE OF THE CONSIDE RED VIEW THAT T HE SUBSTANTIAL NATURE OF TRANSACTIONS, THE MANNER OF MAINTAINING BOOKS OF ACCOUNT, THE MAGNITUDE OF PURCHASES AND SALES AND THE RATIO BETWEEN PURCHASES AND SALES AND THE HOLDING WOULD FURNISH A GOOD GUIDE TO DETERMINE THE NATURE OF TRANSACTI ONS. ALSO ORDINARILY THE PURCHASE AND SALE OF SHARES WITH THE MOTIVE OF EARNING A PROFIT, WOULD RESULT IN THE TRANSACTION BEING IN THE NATURE OF TRADE/ADVENTURE IN THE NATURE OF TRADE; BUT WHERE THE OBJECT OF THE INVESTMENT IN SHARES OF A COMPANY IS TO DER IVE INCOME BY MANZ RETAIL P. LTD. ITA NOS. 7636/MUM/2016 & 1013/MUM/2017 19 WAY OF DIVIDEND ETC. THEN THE PROFITS ACCRUING BY CHANGE IN SUCH INVESTMENT (BY SALE OF SHARES) WILL YIELD CAPITAL GAIN AND NOT REVENUE RECEIPT. 17.2 IN VIEW OF THE ABOVE POSITION OF LAW , WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THE MATTER TO THE FILE OF THE AO TO MAKE A DE NOVO ORDER AFTER GIVING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE DIRECT THE ASSESSEE TO FILE THE RELEVANT DOCUMENTS/EVIDENCE BEFORE THE AO. THUS THE 1 ST , 2 ND AND 3 RD GROUND OF APPEAL ARE ALLOWED FOR STATISTICAL PURPOSES. AS THE ABOVE MATTER HAS BEEN RESTORED TO THE FILE OF THE AO, WE ARE NOT ADVERTING TO THE CASE - LAWS REFERRED BY THE LD. COUNSEL. 18. FINALLY WE TURN TO THE 4 TH GROUND OF APPEAL. THE ISSUE HAS BEEN ADJUDICATED BY US AT PARA 12 HEREINBEFORE. ACCORDINGLY, THE 4 TH GROUND OF APPEAL IS DISMISSED. 19. IN THE RESULT, THE APPEAL S FILED BY THE ASSESSEE AND THE REVENUE ARE PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 25/09/2018. SD/ - SD/ - ( JOGINDER SINGH ) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 25/09/2018 MANZ RETAIL P. LTD. ITA NOS. 7636/MUM/2016 & 1013/MUM/2017 20 RAHUL SHARMA, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// ( SR. PRIVATE SECRETARY ) ITAT, MUMBAI