ACIT 25(3), MUMBAI V. ANITA ASHOK AGARWAL, MUMBAI

ITA 7787/MUM/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3451 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-06-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 06-06-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 11-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: BEHARILAL
• Keywords: Business income; Speculation loss; Speculative transactions

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A, MUMBAI . . , ! ' #'' '$ , % ! & BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER . : 7787 / / 2010 A.Y. : 2007-08 ITA NO. : 7787/MUM/2010 (ASSESSMENT YEAR : 2007-08) ACIT 25(3), C-11, R. NO. 308, PRATYAKSH KAR BHAVAN, BANDRA-KURLA COMPLEX, BANDRA (EAST), MUMBAI -400 051 VS M/S. ANITA ASHOK AGARWAL, 1401-1B, WHISPERING PALMS, LOKHANDWALA COMPLEX, KANDIVALI (EAST), MUMBAI -400 101 PAN: AAGPA 0139 A (ASSESSEE) (RESPONDENT) (ASSESSEE) (RESPONDENT) ASSESSEE BY : SHRI MANOJ KUMAR RESPONDENT BY : SHRI BEHARILAL /DATE OF HEARING : 06-06-2013 / DATE OF PRONOUNCEMENT : 19-06-2013 * O R D E R #'' '$ , : PER VIVEK VARMA, JM: THE APPEAL ARISES FROM THE ORDER OF THE CIT(A) 35, MUMB AI, DATED 16.08.2010 WHEREIN, THE DEPARTMENT HAS RAISED THE FOLLOWING GROUND: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE AO TO ACCEPT THE CLAI M OF SHORT TERM CAPITAL GAIN OF RS. 20,40,025/- AND LONG TERM CAPITAL GAIN OF RS. 3,54,066/- ON PROFIT ARRIVING FROM PURCHASE & SALE OF SHARES INST EAD OF BUSINESS INCOME TREATED BY THE AO WITHOUT APPRECIATING THE F ACT THAT THE ASSESSEE IS DEALING IN LARGE VOLUME OF SHARES, MOST OF THE SHARES ARE BOUGHT AND SOLD WITHIN SHORT PERIOD, WHILE SOME ARE NOT SOLD DUE TO MARKET CONDITIONS AND THEIR HOLDING WITH ASSESSEE R EMAINS BEYOND FEW DAYS, IT WILL NOT CHANGE THE NATURE OF TRANSACTIONS AND THE ASSESSEE IS VERY WELL ENGAGED IN THE BUSINESS OF SHARE TRADING, WHICH DENOTE THAT THE MOTIVE OF THE ASSESSEE IS TO CARRY ON BUSINESS IN SHARES TO BOOK PROFIT RATHER THAN INVESTMENT IN SHARES. . . . 7787 /'' / 2010 ITA NO. 7787 /'' / 2010 M/S. ANITA ASHOK AGARWAL 2 2. THE FACTS, ARE THAT THE ASSESSEE IS DERIVING INCOME FR OM CAPITAL GAINS AND INCOME FROM OTHER SOURCES. THE ASSESSEE IS AN INDIVIDUAL, WHO DECLARED PROFIT, EARNED IN SHARE TRANSACTIONS AT RS. 20,40,025/- AND RS. 3,54,067/- UNDER THE HEAD SHORT TERM CAPITAL GAIN AND LONG TERM CAPITAL GAIN RESPECTIVELY AND CERTAIN INCOME, AT RS. 2 3,997/-, AS SPECULATION. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO SOUGHT JUSTIFICATION FOR THE CLAIM OF THE ASSESSEE WITH REGARD TO LO NG TERM CAPITAL GAINS (LTGC) AND SHORT TERM CAPITAL GAIN (STGC) IN THE TRANSACTIONS ENTERED INTO BY THE ASSESSEE, IN THE SHARE S CLAIMED TO BE HELD BY THE ASSESSEE UNDER INVESTMENTS. THE AO, SOUGH T DETAILS OF TRANSACTIONS AND OTHER DETAILS, WITH RESPECT TO THE ACTIV ITY CARRIED ON BY THE ASSESSEE. HAVING REGARD TO THE FREQUENCY OF TRAN SACTIONS, QUANTITY OF SHARES PURCHASED AND SOLD AND THE NUMBER O F TRANSACTIONS, THE AO WAS OF THE OPINION THAT IT WAS AN O RGANIZED ACTIVITY OF PURCHASE AND SALE OF SHARES WITH PROFIT MOTIVE A ND, THEREFORE, REQUIRED THE ASSESSEE TO FURNISH THE REASONS AS TO WHY THE SAME COULD NOT BE TREATED AS BUSINESS INCOME. THE ASSE SSEE, VIDE LETTER DATED 24.12.2009 SUBMITTED THAT THE ASSESSEE IS/W AS AN INVESTOR IN SHARES. IT WAS SUBMITTED THAT THE SHARES WE RE SHOWN AS INVESTMENT IN THE BALANCE SHEET FILED ALONG WITH THE RETUR N OF INCOME. THE ASSESSEE FURTHER CONTENDED THAT NO BORROWED FUNDS WERE UTILISED, EXCEPT FOR SOME SMALL LOANS TAKEN FROM FAMILY MEMBERS AND FRIENDS, ON WHICH NO INTEREST WAS PAID, AND NO INTEREST EXPENDITUR E WAS CLAIMED. THE ASSESSEE ALSO RELIED ON VARIOUS DECISIONS, AS CI TED IN THE ASSESSMENT ORDER. THE ASSESSEE CONTENDED THAT THE VO LUME OF FREQUENCY OF TRANSACTIONS WOULD NOT DECIDE THE NATURE OF ASSET AND FOR THIS PURPOSE RELIED ON THE DECISIONS WOULD NOT DECIDE THE NATURE OF ASSET AND FOR THIS PURPOSE RELIED ON THE DECISION OF HONB LE MUMBAI TRIBUNAL IN THE CASE OF JANAK S RANGWALLA (11 SOT 627). THE AO, DID NOT ACCEPT THE ABOVE REPLY AND ASSESSED BOTH, THE S HORT TERM CAPITAL GAIN/LONG TERM CAPITAL GAIN UNDER THE HEAD BUSINESS ON TH E FOLLOWING GROUNDS: . . . 7787 /'' / 2010 ITA NO. 7787 /'' / 2010 M/S. ANITA ASHOK AGARWAL 3 MERE ENTRIES IN THE BOOKS OF ACCOUNT SHOWING SHARES AS INVESTMENT IS NOT DETERMINATIVE FACTOR TO DECIDE THE REAL NATURE OF TRANSACTION. FOR THIS PROPOSITION THE AO RE LIED ON VARIOUS JUDGMENTS INCLUDING THE DECISIONS OF THE SUP REME COURT, A) TUTICORIN ALKALI CHEMICALS CASE 227 ITR 172 B) CHOWRINGHEE SALES BUREAUS CASE 87 ITR 584 C) PUNJAB DISTILLING INDUSTRIES LTDS CASE 35 ITR 523 D) G. VENKATASWAMI NAIDU & COS CASE 35 ITR 594 E) BAZAPUR SUGAR FACTORS CASE 172 ITR 330 (I) ASSESSEE IS UNDOUBTEDLY DEALING IN LARGE NUMBER OF SHARES IS THE SOLE BUSINESS OF THE ASSESSEE. MOST OF THE SHARES ARE BOUGHT AND SOLD WITHIN SHORT PERIOD. WHILE SOME ARE NOT SOLD DUE TO MARKET CONDITIONS AND THEIR HOLDING WITH THE ASSESSEE REMAINS BEYOND FEW DAYS, IT WILL NOT CHANGE THE NATURE OF TRANSACTIONS. THE ASSESSEE IS VERY WELL ENGAGED IN THE BUSINESS OF SHARE TRADING AND RUNS A FULL FLEDGED OFFICE FOR THIS PURPOSE. (II) THE AO RELIED ON THE CIRCULAR NO. 4/2007 DATED 15.06.2007 ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES (III) FOR TREATING THE PROFIT ON SALE OF INVESTMENT IN SHARES AS BUSINESS INCOME, THE AO RELIED UPON FOLLOWING JUDGMENTS: A) LAXMINARAYAN RAM GOPAL VS. GOVT. OF HYDERABAD 25 ITR 449 (SC) B) DAMODAR SHENOY (AP) VS. CIT 26 ITR 650 (BOM) C) WERLE & C. VS. COLQHOUN (1988) TC 402; D) CIT VS MOTILAL HIRABHAI SPG. & WVG. CO. LTD. 117 ITR 173 (GUJ); E) RAJA BAHADUR VISHESHWARA SINGH VS. CIT 4 TAXMAN 58 (DEL.); F) BHARAT DEVELOPMENT (P) LTD. VS. CIT 4 TAXMAN 58 (DEL.); G) PUNJAB CO-OPERATIVE BANK LTD. VS. CIT 81 ITR 635 (PC) AND H) SARDAR INDRA SINGH & SONS LTD. VS. CIT 24 ITR 514 (SC) (IV) THE AO HAS FURTHER NOTED THAT THE FACT THAT THE ASSESSEE HAS HELD SHARES FOR A SHORT PERIOD AND THEN SOLD THEM OFF INDICATES THAT THE ONLY INTENT OF THE ASSESSEE IS TO BOOK PROFIT ON SALE OF SHARES. THE FACT THAT THE ASSESSEE HAS SOLD LARGE NUMBER OF SHARES WITHIN A SHORT PERIOD OF PURCHASE PROVES THAT THERE WAS NO INTENTION OF . . . 7787 /'' / 2010 ITA NO. 7787 /'' / 2010 M/S. ANITA ASHOK AGARWAL 4 THE ASSESSEE TO HOLD THE SHARES AS INVESTMENT AND EARN DIVIDEND ON THE SAME. THE ASSESSEE HAS REPEATEDLY BOUGHT AND SOLD SHARES AFTER HOLDING THEM FOR SHORT DURATION WITH ONLY ONE INTENT I.E. PROFIT MAKING. RELIANCE WAS PLACED BY THE AO. ON THE DECISION OF THE ITAT AHMADABAD BENCH IN DCIT VS. DEEPA SHAH 99 ITD 219. (V) THE AO FURTHER HELD THAT MOST OF THE SHARES ARE BOUGHT AND SOLD IN FEW DAYS WHILE SOME OTHER SHARES WERE HELD BEYOND FEW DAYS. IN VIEW OF THE ABOVE REASONS, THE AO ASSESSED SHORT TERM CAPITAL GAIN AND LONG TERM CAPITAL GAINS UNDER THE HEAD BUSINESS, WHICH IS CONTESTED IN THIS APPEAL. 3. THE AO, THEREFORE, DISALLOWED THE CAPITAL GAINS, SHOWN AS LTGC AND STGC, AND ASSESSED THE ENTIRE INCOME FROM BUSINESS. 4. THE ASSESSEE, THEN APPROACHED THE CIT(A), BEFORE WHOM THE ASSESSEE REITERATED THE ARGUMENTS MADE BEFORE THE AO AND CONTENDED THAT THE ASSESSEE WAS ONLY AN INVESTOR IN SHARES AND THE INVESTMENT IN SHARES WAS ADMITTED UNDER THE HEAD INVESTMENT IN THE B ALANCE SHEET FILED BY THE ASSESSEE. HE SUBMITTED THAT AS PER BALANCE S HEET AS ON 31.3.2006 THE INVESTMENT WAS ADMITTED AT RS. 88,28,688/- W HEREAS AS ON 313.2007 THE INVESTMENT IN SHARES STOOD AT RS. 71,59,9 78/- AND WHEN COMPARED TO THE SAME THE TOTAL PURCHASE AND SALE VALUE OF SHARES WAS RS. 98,14,865/- AND RS. 1,18,54,891/-. HE CONTEN DED THAT FROM THE ABOVE, IT CANNOT BE SAID THAT THE SALE RATIO WAS HIGHER THEN THE INVESTMENT AND THE ASSESSEE DID NOT AVAIL ANY BORRO WED FUNDS, ON WHICH ANY INTEREST WOULD HAVE BEEN PAID. THE FEW LOANS APP EARING IN THE BALANCE SHEET WERE TAKEN FROM FRIENDS AND RELATIVES, O N WHICH, NO INTEREST WAS PAID. IT WAS SUBMITTED THAT THE ASSESSEE D ID SOME SPECULATIVE TRANSACTIONS IN SHARES, WHICH WERE VERY NOMINA L, BUT THAT BY ITSELF, WOULD NOT DEBAR THE ASSESSEE FROM CLAIMING THE PROFIT ON SALE OF SHARES UNDER THE HEAD CAPITAL GAINS. HE ADMITTED THAT THE ASSESSEE SHOWED SPECULATIVE PROFIT OF RS. 37,331/- IN THE PRECEDING Y EAR, I.E. ASSESSMENT YEAR 2006-07 WHEREAS FOR THE CURRENT YEAR , THERE WAS A . . . 7787 /'' / 2010 ITA NO. 7787 /'' / 2010 M/S. ANITA ASHOK AGARWAL 5 SPECULATION LOSS, WHICH WAS CLAIMED AT RS. 35,660/-. HE FURTHE R CONTENDED THAT THE AO WAS WRONG TO HOLD THAT THE ASS ESSEE HELD MOST OF THE SHARES ONLY FOR VERY FEW DAYS. ON THE OTHER HAN D, THE ASSESSEE EARNED MAJOR PORTION OF SHORT TERM CAPITAL GAIN (RS. 16,95 ,025 OUT OF RS. 20,40,025/-) FROM THE SHARES HELD FOR FAIRLY LONG PERIOD AS SHOWN BELOW: PURCHASES SALES SECURITY NAME DATE QTY AMT. DATE QTY AMT. *HOLDING PERIOD GAIN LOSS GTC INDUSTRIES LTD. 9.12.05 10561 1178072 10.5.06 5000 1499211 152 -- 19.10.06 4000 802811 314 -- 01.11.06 1561 310775 327 -- 10561 1178072 10561 2612797 1434725 MYSORE CEMENTS LTD. 8.3.06 25000 917980 12.7.06 25000 1173328 126 25534 8 BARTRONICS INDIA LTD. 16.1.06 2121 271845 17.11.06 601 64634 305 09.1.07 1520 197365 358 2121 271845 2121 261999 -9846 FLEX INDUSTRIES LTD. 05.1.06 200 20717 05.12.06 200 21743 334 1027 JINDAL VIJAYANA GAR STEEL 12.8.05 200 58374 17.4.06 200 72145 248 13771 1695025 5. FROM THE ABOVE, THE ASSESSEE SUBMITTED BEFORE THE C IT(A), THAT MORE THAN 75% OF SHORT TERM CAPITAL GAIN WAS EARNED B Y HOLDING SHARES FOR MORE THAN 5 TO 6 MONTHS AND, THEREFORE, THE AO ERRED IN HOLDING THAT THE ASSESSEE HELD THE SHARES ONLY FOR FEW D AYS. HE FURTHER CONTENDED THAT ALL THE SHARES TRANSACTED WERE DELIVERY BASED, AS IS EVIDENT BY THE DEMAT ACCOUNT AND THAT THE ASSESSEE P AID STT AT A HIGHER RATE APPLICABLE TO THE INVESTOR WHICH SHOWS THAT T HE ASSESSEE WAS ONLY AN INVESTOR. REGARDING LONG TERM CAPITAL GAIN, HE SUBMITTED THAT THE SHARES WERE HELD FOR MORE THAN 1 YEAR AND TH E TOTAL SALE VALUE OF SHARES IS ONLY RS. 14,52,962/- IN RESPECT OF 8 TRANSAC TIONS ON WHICH LONG TERM CAPITAL GAIN OF RS. 3,54,067/- WAS ADMITTED. HE FURT HER . . . 7787 /'' / 2010 ITA NO. 7787 /'' / 2010 M/S. ANITA ASHOK AGARWAL 6 CONTENDED THAT THE ASSESSEE HELD TWO SHARES FOR A PER IOD OF 504 DAYS AND IT IS NOT A CASE WHERE THE ASSESSEE SOLD ALL THE SHA RES IMMEDIATELY AFTER A PERIOD OF 1 YEAR. HE RELIED ON THE DECISION OF HON BLE MUMBAI TRIBUNAL IN THE CASE OF GOPAL PUROHIT VS JCIT (29 SOT 117) IN WHICH IT WAS HELD AS UNDER: WHERE WE COMPARE THE FACTS OF THE CASE, WE FIND TH AT THE FACTS OF BOTH ARE ALMOST IDENTICAL. IN THE PRESENT CASE, THE ASSESSEE IS ALSO MAINTAINING SEPARATE RECORDS FOR BOTH TYPES OF TRANSACTIONS. FURTHER, IN THE PRESENT CASE, IT IS IMPORTANT TO NO TICE THAT THE ASSESSEE HAS ENTERED INTO TWO DIFFERENT TYPES OF TR ANSACTIONS, WHERE BOTH ACTIVITIES ARE ENTIRELY DIFFERENT IN NAT URE I.E. ONE ACTIVITY IS OF INVESTMENT IN NATURE ON THE BASIS OF DELIVERY AND SECOND ACTIVITY IS PURELY OF JOBBING (WITHOUT DELIV ERY) WHICH PUTS ASSESSEES CASE ON A MORE STRONG FOOTING. HENCE, IN OUR VIEW, THE RATIO OF THIS DECISION IS SQUARELY APPLIES TO T HE FATS OF THE PRESENT CASE. ACCORDINGLY, WE HOLD THAT THE DELIVER Y BASED TRANSACTION SHOULD BE TREATED AS OF THE NATURE OF I NVESTMENT TRANSACTIONS AND PROFIT THERE FROM SHOULD BE TREATE D AS SHORT TERM CAPITAL GAIN OR LONG TERM CAPITAL DEPENDING UP ON THE PERIOD OF HOLDING. TO CONCLUDE, WE HOLD THAT, IN THE FACTS AND CIRCUMS TANCES OF THE PRESENT CASE, THE ASSESSEES CLAIM OF SHORT TERM CA PITAL GAIN AND LONG TERM CAPITAL ON SHARE TRANSACTIONS WHERE THE D ELIVERY HAS BEEN TAKEN OR GIVEN AND SECURITIES TRANSACTION TAX HAS BEEN PAID IS LIABLE TO ACCEPTED. ACCORDINGLY, WE REVERSE THE ORDERS OF REVENUE AUTHORITIES. 6. FURTHER THE REPRESENTATIVE RELIED ON THE DECISION OF H ONBLE TRIBUNAL IN THE CASE OF JANAK S. RANGWALLA VS ACIT (11 SOT 627) WHEREIN IT IS HELD THAT THE FREQUENCY AND MAGNITUDE OF TRA NSACTION CANNOT BE THE CRITERIA FOR DETERMINING THE HEAD OF INCOME. HE FURTHER SUBMITTED THAT RECENTLY THE HONBLE MUMBAI HIGH COURT H AS CONFIRMED THE DECISION OF THE HONBLE ITAT IN THE CASE OF SHRI GOPAL PUROHIT. 7. THE CIT(A), TAKING INTO CONSIDERATION THE SUBMISSIONS, HELD, I HAVE CONSIDERED THE SUBMISSIONS OF THE REPRESENT ATIVE AND THE STAND TAKEN BY THE AO. ADMITTEDLY, THE ASSESSEE DISCLOSED THE SHARES AS INVESTMENT IN THE BALANCE SHEET FOR AY 2006-07 AND 2007-08. IT IS SEEN FROM THE BALANCE SHEET THAT THE INVESTMENT IN SHARE S AS ON 31.3.2006 WAS RS. 88,28,688/- WHEREAS THE INVESTMENT IN SHARE S AS ON 31.3.2007 WAS RS. 71,59,978/-. THE TOTAL SALE VALUE OF SHARES ON WHICH SHORT TERM CAPITAL GAIN WAS ADMITTED BY THE ASSESSE E DURING THIS YEAR IS RS. 1,18,54,891/- AND WHEN SAME IS COMPARED TO T HE INVESTMENT IN SHARES AS ON 31.3.2006 AND 31.3.2007, IT CANNOT BE SAID THAT THE ASSESSEE WAS ENGAGED IN FREQUENT TRANSACTIONS. THE RATIO OF TURNOVER TO INVESTMENT WAS MORE THAN ONE BUT LESS THAN TWO, IT IS TRUE THAT THE ASSESSEE UNDERTOOK SPECULATIVE TRANSACTIONS DURING THIS YEAR AND EARLIER YEAR BUT THAT IS NO BAR FOR THE ASSESSEE TO HOLD SHARES AS . . . 7787 /'' / 2010 ITA NO. 7787 /'' / 2010 M/S. ANITA ASHOK AGARWAL 7 INVESTMENT AS PER THE DECISION OF THE HONBLE HYDER ABAD TRIBUNAL IN THE CASE OF SHA-LA INVESTMENT AND FINANCIAL CONSULTANTS PVT. LTD. VS. DY. CIT (2 SOT 371). FURTHER ALL THE SHARES WERE TRANSF ERRED IN THE NAME OF THE ASSESSEE AS EVIDENT FROM THE DEMAT ACCOUNT AND THE ASSESSEE PAID STT AT A HIGHER RATE APPLICABLE TO THE INVESTOR. FU RTHER, THE ASSESSEE DID NOT CLAIM ANY PAYMENT OF INTEREST ON BORROWED FUNDS WHICH WERE UTILIZED FOR INVESTMENT IN SHARES. A PERUSAL OF WOR KING OF SHORT TERM CAPITAL GAINS SHOWS THAT THE ASSESSEE EARNED SHORT TERM CAPITAL GAINS BY HOLDING SHARES AS BELOW: NO. OF DAYS NO. OF SCRIPS NO. OF BUYING TRANSACTIONS NO. OF SALE # TRANS- ACTIONS CAPITAL GAIN/LOSS % OF TOTAL GAINS/LOSS 331-360 3 1 3` 39044 1.91% 301-300 4 4 6 504555 24.73% 271-300 1 0 1 -7055 -0.35% 241-270 3 2 3 1893 0.09% 211-240 0 0 0 0 0.00% 181-210 1 1 1 -17661 -0.87% 151-180 9 9 8 960986 47.11% 121-150 3 3 3 241559 11.84% 91-120 2 4 4 -5829 -0.29% 61-90 2 1 3 35821 1.76% 31-60 4 4 4 2107 0.10% 0-30 46 29 32 284616 13.95% TOTAL 2949925 100.00% FROM THE ABOVE, IT COULD BE SEEN THAT MAJOR PORTION OF SHORT TERM CAPITAL GAINS WAS EARNED BY HOLDING THE SHARES FOR MORE THA N FIVE MONTHS AND IN FACT THE SHORT TERM CAPITAL GAINS EARNED ON SALE OF SHARES BY HOLDING THEM FOR LESS THAN FIVE MONTHS IS NOT SUBSTANTIAL. FURTHER AS SEEN FROM THE CAPITAL ACCOUNT AND BALANCE SHEET, THE ASSESSEE HAS NOT CLAIMED ANY INTEREST PAID ON BORROWINGS AS THE SAME WERE FR OM RELATIVES AND FRIENDS. CONSIDERING THE ABOVE FACTS, IT CANNOT BE SAID THAT THE ASSESSEE WAS REGULARLY TRADING IN SHARES. FURTHER IT IS SEEN THAT THE ASSESSEE ADMITTED LONG TERM CAPITAL GAIN OF RS. 3,54,067/- O N SALE OF 8 SCRIPS FOR RS. 14,52,962/- AFTER HOLDING THEM FOR MORE THAN ON E YEAR. THE PROFIT ARISING ON SALE OF SUCH SHARES CANNOT BE ASSESSED U NDER THE HEAD BUSINESS AND THE CLAIM OF THE ASSESSEE THAT IT IS A SSESSABLE UNDER THE HEAD LONG TERM CAPITAL GAINS HAS TO BE ACCEPTED. FURTHER, THE HONBLE TRIBUNAL IN THE CASE OF GOPAL PUROHIT VS. JCIT (29 SOT 117) HELD AS UNDER: WHEN WE COMPARE THE FACTS OF THE CASE WITH THAT CA SE, WE FIND THAT THE FACTS OF BOTH ARE ALMOST IDENTICAL. IN THE PRESENT CASE, THE ASSESSEE IS ALSO MAINTAINING SEPARATE RECORDS FOR BOTH TYPES OF TRANSACTIONS FURTHER, IN THE PRESENT CASE, IT IS IMPORTANT TO NO TICE THAT THE ASSESSEE HAS ENTERED INTO TWO DIFFERENT TYPES OF TRANSACTION S, WHERE BOTH ACTIVITIES ARE ENTIRELY DIFFERENT IN NATURE I.E. ON E ACTIVITY IS OF INVESTMENT IN NATURE ON THE BASIS OF DELIVERY AND SECOND ACTIV ITY IS PURELY OF JOBBING (WITHOUT DELIVERY) WHICH PUTS ASSESSEES CA SE ON A MORE STRONG FOOTING. HENCE, IN OUR VIEW, THE RATIO OF THIS DECI SION IS SQUARELY APPLIES TO THE FACTS OF THE PRESENT CASE. ACCORDINGLY, WE H OLD THAT THE DELIVERY BASED TRANSACTION SHOULD BE TREATED AS OF THE NATUR E OF INVESTMENT TRANSACTIONS AND PROFIT THEREFROM SHOULD BE TREATED AS SHORT TERM CAPITAL GAIN OR LONG TERM CAPITAL GAIN DEPENDING UP ON THE PERIOD OF HOLDING. TO CONCLUDE, WE HOLD THAT, IN THE FACTS AND CIRCUMS TANCES OF THE PRESENT CASE, THE ASSESSEES CLAIM OF SHORT TERM CAPITAL GA IN AND LONG TERM . . . 7787 /'' / 2010 ITA NO. 7787 /'' / 2010 M/S. ANITA ASHOK AGARWAL 8 CAPITAL ON SHARE TRANSACTIONS WHERE THE DELIVERY HA S BEEN TAKEN OR GIVEN AND SECURITIES TRANSACTION TAX HAS BEEN PAID IS LIABLE TO ACCEPTED. ACCORDINGLY, WE REVERSE THE ORDERS OF REVENUE AUTHO RITIES. FURTHER, THE HONBLE TRIBUNAL IN THE CASE OF JANAK S. RANGWALLA VS. ACIT (11 SOT 627) HELD THAT THE FREQUENCY AND MAGNI TUDE OF TRANSACTION CANNOT BE THE CRITERIA FOR DETERMINING THE HEAD OF INCOME. IT WAS HELD AS UNDER: THE MERE VOLUME OF TRANSACTION TRANSACTED BY THE A SSESSEE WOULD NOT ALTER THE NATURE OF TRANSACTION. IT IS AN ESTABLISH ED PRINCIPLE THAT INCOME IS TO BE COMPUTED WITH REGARD TO THE TRANSACTION. T HE TRANSACTION IN WHOLE HAS TO BE TAKEN INTO AND THE MAGNITUDE OF TH E TRANSACTION DOES NOT ALTER THE NATURE OF TRANSACTION. THOUGH THE PRI NCIPLE OF RES JUDICATA DOES NOT APPLY TO THE INCOME-TAX PROCEEDINGS AS EAC H YEAR IS AN INDEPENDENT YEAR OF THE ASSESSMENT BUT IN ORDER TO MAINTAIN CONSISTENCY, IT IS JUDICIALLY ACCEPTED PRINCIPLE TH AT SAME VIEW SHOULD BE ADOPTED FOR THE SUBSEQUENT YEARS, UNLESS THERE IS A MATERIAL CHANGE IN THE FACTS. THEIR LORDSHIPS OF HONBLE SUPREME COURT IN THE RADHASOAMI SATSANG VS CIT [1992] 193 ITR 321 HAVE CATEGORICALL Y HELD AS UNDER: STRICTLY SPEAKING, RES JUDICATA DOES NOT APPLY T O INCOME-TAX PROCEEDINGS. THOUGH, EACH ASSESSMENT YEAR BEING A U NIT, WHAT WAS DECIDED IN ONE YEAR MIGHT NOT APPLY IN THE FOLLOWIN G YEAR, WHERE A FUNDAMENTAL ASPECT PERMEATING THROUGH DIFFERENT ASS ESSMENT YEARS HAS BEEN FOUND AS A FACT. ONE WAY OR THE OTHER AND PART IES HAVE ALLOWED THAT POSITION TO BE SUSTAINED BY NO CHALLENGING THE ORDER, IT WOULD NOT BE AT ALL APPROPRIATE TO ALLOW THE POSITION TO BE C HANGED IN A SUBSEQUENT YEAR. THE SAME VIEW HAS BEEN TAKEN BY THE HONBLE DELHI C OURT IN CIT VS. NEO POLY PACK (P) LTD. [2000] 245 ITR 492. FURTHER THE HONBLE MUMBAI TRIBUNAL IN THE CASE OF GOPAL PUROHIT (29 SOTR 117) HELD THAT THE DELIVERY BASED TRANSACTIONS ARE TO BE ASSESSED UNDER CAPITAL GAINS AND THIS DECISION HAS BEEN CONF IRMED BY THE HONBLE MUMBAI HIGH COURT BY JUDGMENT DATED 06.01.2 010. IN THE LIGHT OF THE ABOVE JURISDICTIONAL DECISIONS AND FOR THE OTHER FACTUAL FINDINGS GIVEN ABOVE, I DIRECT THE AO TO ACCEPT THE CLAIM OF THE ASSESSEE BY ACCEPTING SHORT TERM CAPITAL GAIN AND LONG TERM CAPITAL GAIN ADMITTED BY THE ASSESSEE. THE CIT(A), THUS, ALLOWED THE CLAIM OF THE ASSESSEE AND REV ERSED THE DECISION OF THE AO. 8. AGAINST THIS DECISION, THE DEPARTMENT IS IN APPEAL. 9. BEFORE US, THE DR STRENUOUSLY ARGUED AND DEFENDED TH E CASE OF THE AO, WHEREAS THE AR DEFENDED THE CASE OF THE CIT(A), BESIDES REFERRING TO THE DETAILED CHARTS SHOWING THE VOLUME OF BUS INESS AND FREQUENCY OF TRANSACTIONS AND HOLDING PERIOD OF SHARES HELD FOR PERIOD LESS THAN ONE YEAR. . . . 7787 /'' / 2010 ITA NO. 7787 /'' / 2010 M/S. ANITA ASHOK AGARWAL 9 10. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES A ND HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD AND CASE LAWS CITED B EFORE US. FROM THE DETAIL AS PRODUCED AT APB 14, WE FIND THAT 73.75% OF INVES TMENTS TRANSACTED WERE HELD FOR MORE THAN 6 MONTHS, DESPITE THE FACT THAT NUMBERS OF TRANSACTIONS WERE 61 IN 46 SCRIPS, WHICH RESULTED IN ONLY 13.95% SHARES HELD AS INVESTMENTS. BASED ON THESE FACTS, WHEN WE APPLY TH E DECISIONS OF GOPAL PUROHIT, WHICH NOW HAS FOUND APPROVAL EVEN BY THE H ONBLE SUPREME COURT, THE HONBLE BOMBAY HIGH COURT HAD INSISTED UPON INTENTION AT THE TIME OF PURCHASE AND CONSISTENCY IN THE NATURE OF HOLDINGS. ON BOTH THES E GROUNDS, THE ISSUE IS SQUARELY COVERED BY THE DECISION. COMI NG TO THE CHARTS, AS REPRODUCED HERE ABOVE AND THE DETAILS IN THE BALANC E SHEET, WITH REGARD TO THE HOLDING PATTERN OF SHARES, HELD UNDER INVESTMEN TS AND TRADING, IT IS EVIDENTLY CLEAR THAT THE ASSESSEE WAS MAINTAINING S EPARATE DISTINCT PORTFOLIOS. THIS FACT, NOT HAVING BEEN DENIED BY THE AO, IS BAS ICALLY THE SPINE OF THE SUBMISSIONS OF THE ASSESSEE, BEFORE THE REVENUE AUT HORITIES. HENCE THE FACTS, AS NOTED ABOVE, GETS SQUARELY COVERED BY THE DECISI ON OF GOPAL PUROHIT (SUPRA) , WHICH, NOW HAS THE APPROVAL OF THE HONBLE APEX C OURT, AS WELL. 11. RESPECTFULLY FOLLOWING THE DECISIONS OF THE HON BLE BOMBAY HIGH COURT IN THE CASE OF GOPAL PUROHIT (SUPRA) , AS DONE BY THE CIT(A), WE DO NOT FIND ANY REASON TO DISTURB THE ORDER OF THE CIT(A), WHIC H WE SUSTAIN. 12. IN THE RESULT, THE APPEAL FILED BY THE DEPARTME NT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH JUNE, 2013. SD/- SD/- ( .. ) ( #'' '$ ) ! ! (P.M. JAGTAP) (VIVEK VARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 19 TH JUNE, 2013 . . . 7787 /'' / 2010 ITA NO. 7787 /'' / 2010 M/S. ANITA ASHOK AGARWAL 10 / COPY TO:- 1) / THE ASSESSEE. 2) / THE RESPONDENT. 3) % ( ) - 35 MUMBAI / THE CIT (A)-35, MUMBAI. 4) % 25, MUMBAI / THE CIT35, MUMBAI, 5) '() * + , * , ' , / THE D.R. A BENCH, MUMBAI. 6) )- . COPY TO GUARD FILE. /01 / BY ORDER / / TRUE COPY / / [ 2 / 3 4 * , ' , DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI *673 . . * CHAVAN, SR. PS