ACIT 19(1), MUMBAI V. DAYALDAS KIHEMCHAND, JETHWADI, MUMBAI

ITA 8511/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9114 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2008-2009
• Appeal Filed On: 15-12-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A B KOLI
• Keywords: Gift; Business income; Opportunity of being heard; Rule of consistency; Source of fund
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D, MUMBAI BEFORE SHRI D.K. AGARWAL, JUDICIAL MEMBER & SHRI P.M.JAGTAP, ACCOUNTANT MEMBER. I.T.A. NO.8511/MUM/2011 ASSESSMENT YEAR : 2008-09. ASSTT. COMMISSIONER OF INCOME-TAX, SHR I DAYALDAS KHEMCHAND JETHWANI, 19(1), MUMBAI. VS. 501, MORU MILAP, 15 TH ROAD, KHAR (W), MUMBAI- 400052 PAN AAAPJ 6087C APPELLANT. RESPONDENT . C.O . NO.246/MUM/2012 (ARISING OUT OF I TA NO.8511/MUM/2011) ASSES SMENT YEAR : 2008-09. SHRI DAYALDAS KHEMCHAND JETHWANI, ASST T. COMMISSIONER OF INCOME-TAX, MUMBAI. VS. 19(1), MUMBAI. CROSS OBJECTOR RESPONDENT. DEPARTMENT BY : SHRI A.B. KOLI. ASSES SEE BY : SHRI VIMAL PUNMIYA. DATE OF HEARING : 03-12-2012 DATE OF PRONOUNCEMENT : 14-12-2012. O R D E R PER P.M. JAGTAP, A.M. : THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF LEARNED CIT(APPEALS)-30, MUMBAI DATED 13-10-2011 AND THE SA ME IS BEING DISPOSED OF ALONG WITH THE CROSS OBJECTION FILED BY THE ASSESSE E BEING C.O. NO. 246/MUM/2012. 2 ITA NO.8511/MUM/2011 C.O.NO. 246/MUM/2012 2. IN THIS APPEAL, THE REVENUE HAS CHALLENGED THE A CTION OF THE LEARNED CIT(APPEALS) IN DIRECTING THE AO TO ACCEPT THE CLAI M OF THE ASSESSEE THAT PROFIT ARISING FROM SHARE TRANSACTIONS AMOUNTING TO RS.34, 84,473/ CONSTITUTED SHORT TERM CAPITAL GAIN AND NOT THE BUSINESS INCOME. 3. THE ASSESSEE IN THE PRESENT CASE IS AN INDIVIDUA L WHO FILED HIS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ON 21-01-20 09 DECLARING TOTAL INCOME OF RS.35,31,980/- WHICH COMPRISED OF INCOME FROM HOUSE PROPERTY, CAPITAL GAINS AND OTHER SOURCES. IN THE SAID RETURN, PROFIT FROM SALE OF SHARES AMOUNTING TO RS.34,84,473/- WAS CLAIMED BY THE ASSESSEE AS SHORT TERM CAPITAL GAIN. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE SAID CLAIM WA S EXAMINED BY THE AO AND ON SUCH EXAMINATION, HE HELD THE SAME TO BE BUSINESS I NCOME OF THE ASSESSEE FOR THE FOLLOWING REASONS : 1. THE MOTIVE FOR THE ORIGINAL PURCHASE AS PERCEIV ED AT THE TIME OF SALE SINCE, THE ASSESSEE HAS SOLD MOST OF THE SHARES WIT HIN A SHORT PERIOD, THE MOTIVE IS CLEARLY TO EARN QUICK PROFIT, AS THERE IS NO QUESTION OF EARNING DIVIDEND ETC. FOR HOLDING THE SHARES FOR SUCH A SHO RT PERIOD. 2. THE LENGTH OF PERIOD OF HOLDING OF THE SHARES THE TRANSACTIONS IN THE SHORT TERM CAPITAL GAIN STATEMENT WERE SORTED ON TH E BASIS OF HOLDING PERIOD. IT CAN BE SEEN FROM THE SAME THAT OUT OF 675 TRANSA CTIONS OF SALE OF SHARES, 10 90 TRANSACTIONS HOLDING PERIOD IS LESS THAN A MONT H. THE ASSESSEE HAS NOT BEEN ABLE TO REPLY TO THE CONTENTION THAT IN LARGE PROPORTION OF THESE TRANSACTIONS, THE HOLDING PERIOD IS LESS. BASED ON THE SAME AND ALSO BY THE BASED ON THE FACTS THAT THIS HAS BEEN THE MOST IMPO RTANT FACTOR TAKEN IN CONSIDERATION BY THE HONBLE COURTS (JUDGMENTS AT S .NO. 2, 6, 10, 12, 15, 17, 18,20, 25 & 27), THE TRANSACTIONS ARE CLEARLY TRADI NG TRANSACTIONS. 3. THE FREQUENCY OF SALE OF SHARES IT IS SEEN FRO M THE TRANSACTIONS OF SHARES THAT TRANSACTIONS OF PURCHASED SALE ARE REGU LAR. THEY HAVE BEEN MADE THROUGH OUT THE YEAR ALMOST ON EVERYDAY BASIS. THE ASSESSEE HAS PURCHASED THEN SOLD AND THEN AGAIN PURCHASED AND THEN AGAIN S OLD THE SHARES IN THE SAME SCRIP REGULARITY AND CONTINUITY OF TRANSACTION S MAKE IT CLEAR THAT 3 ITA NO.8511/MUM/2011 C.O.NO. 246/MUM/2012 TRANSACTIONS ARE IN THE NATURE OF TRADING. THIS FAC TOR HAS BEEN CONSIDERED IN THE JUDGMENTS AT S. NO.2, 11,16, 17, 25 & 26. 4. THE CIRCUMSTANCES RESPONSIBLE FOR THE SALE OF SH ARES IF THE SALE OF SHARES HAD BEEN MADE BECAUSE OF THE NEED FOR FUNDS, THE SAME CAN BE REGARDED AS INVESTMENT IN THE ASSESSEES CASE, THER E IS NO SUCH CIRCUMSTANCE. THE ASSESSEE IS ENGAGED IN PURCHASED SALE OF SHARES ON REGULAR BASIS. 5. THE PRESENCE OF A CLEARLY DISCERNIBLE MOTIVE FOR PURCHASE OF SHARES IF THE ASSESSEE COULD PROVE THAT THE PURCHASE WAS N ECESSITATED NOT MERELY BY MOTIVES OF PROFITS BUT WAS UNDERTAKEN ON ACCOUNT OF OTHER MOTIVES SUCH AS FOR ACQUIRING CONTROLLING INTEREST ETC. THE TRANSAC TION CAN BE REGARDED AS INVESTMENT. THERE IS NO SUCH FACTOR IN ASSESSEES C ASE. 6. THE RELATION OF THE SHARE TRANSACTIONS TO THE NO RMAL BUSINESS OF THE ASSESSEE THE ASSESSEE HAS LONG TERM CAPITAL GAINS IN SHARES OF RS.25,40,135/- AND HAS ALREADY OFFERED AS LONG TERM CAPITAL GAINS AND HAS BEEN CLAIMED AS EXEMPTED. THERE IS NO BUSINESS INCO ME EXCEPT INCOME FROM HOUSE PROPERTY AND INCOME FROM OTHER SOURCES. IT IS EVIDENT THAT THE ASSESSEE IS BORROWING MONEY TO TRADE IN SHARES. HENCE, EVEN THIS FACTOR POINTS TOWARDS TRADING IN SHARES IN ASSESSEES CASE. 7. THE SOURCE OF FUNDS OUT OF WHICH THE SHARES WERE ACQUIRED IT IS SEEN THAT AS ON 31.03.2008, THE ASSESSEE HAS CLAIMED INT EREST OF RS.3,13,000/- IN HIS INCOME AND EXPENDITURE ACCOUNT. SINCE THE INVES TMENT IS ALSO FROM BORROWED FUNDS THIS FACTOR ALSO POINTS TOWARDS TRAD ING. HONBLE COURTS HAVE CONSIDERED THIS AS AN IMPORTANT FACTOR IN JUDGMENTS AT S.NO.4, 6, 8, 14, 18, 23 & 25 AND HAVE HELD THAT PURCHASE FROM BORROWED F UNDS POINTS TOWARDS TRADING. 8. IN THE CASE OF COMPANY, EXISTENCE OF AN OBJECTS CLAUSE PERMITTING IT TO TRADE IN SHARES THIS FACTOR IS NOT APPLICABLE IN ASSESSEES CASE. 9. THE MANNER OF ACQUISITION OF SHARES IF THE SHA RES WERE NOT PURCHASED, BUT WERE INHERITED OR RECEIVED AS GIFT O R PURCHASED FROM PRIMARY MARKET FOR LONG TERM HOLDING, THE PRESUMPTION WOULD GENERALLY BE THAT OF INVESTMENT. IN ASSESSEES CASE, THE SHARES HAVE BEE N PURCHASED FROM SECONDARY MARKET. HENCE, EVEN THIS FACTOR PAINTS TO WARDS TRADING IN SHARES IN ASSESSEES CASE. 4 ITA NO.8511/MUM/2011 C.O.NO. 246/MUM/2012 10. MARKETABILITY OF THE SHARES THE SHARES PURCHA SED AND SOLD BY THE ASSESSEE ARE LIQUID SHARES AND TRADED ON BSE/NSE. T HEY ARE EASILY MARKETABLE AND LIQUID. THIS ALSO LEADS TO PRESUMPTI ON OF TRADING. 11. MAGNITUDE OF PURCHASE SALE OF SHARES THIS FAC TOR HAS BEEN CONSIDERED IN JUDGMENTS AT S.NO. 2, 14, 15, 18, 26 & 27. IT IS SEEN THAT THE ASSESSEE HAS PURCHASED/SOLD SHARES IN LARGE AMOUNTS . IN RESPECT OF INVESTMENTS, THE ASSESSEE HAS CLOSING STOCK OF RS.3 ,11,25,914/-. IN THE CAPITAL GAIN STATEMENT, THE ASSESSEE HAS SOLD SHARE S OF RS.3,33,25,631/- AND PURCHASED SHARES OF RS.3,41,02,381/-. HENCE, MAGNIT UDE OF TRANSACTIONS IS VERY LARGE EVEN WITH REFERENCE TO ASSESSEES AVERAG E STOCK OF SHARES. HENCE, THIS FACTOR ALSO POINTS TOWARDS TRADING IN SHARES. 12. DIVIDEND INCOME IN RELATION 10 HOLDING THIS F ACTOR HAS BEEN CONSIDERED IN JUDGMENTS AT S.NO. 4, 8, 15 & 23. THE ASSESSEE HAS STATED THAT HE HAS RECEIVED DIVIDEND OF RS.2, 10,471/-. THE DIV IDEND EARNED IS QUITE LOW IN COMPARISON TO INTEREST RATE BEING PAID BY THE AS SESSEE. HENCE, THIS FACTOR POINTS TOWARDS TRADING IN RESPECT OF SHARES WHICH H AVE BEEN HELD FOR A PERIOD OF LESS THAN A YEAR. 4. THE ACTION OF THE AO IN TREATING THE PROFIT FROM SALE OF SHARES AS SHORT TERM CAPITAL GAIN WAS CHALLENGED BY THE ASSESSEE IN AN A PPEAL FILED BEFORE THE LEARNED CIT(APPEALS) AND THE FOLLOWING SUBMISSIONS WERE MAD E ON BEHALF OF THE ASSESSEE BEFORE THE LEARNED CIT(APPEALS) IN SUPPORT OF HIS C LAIM THAT THE PROFIT IN QUESTION FROM SALE OF SHARES WAS RIGHTLY SHOWN AS SHORT TERM CAPITAL GAIN : A) THE ASSESSEE IS AN INVESTOR IN SHARES AND INVES TMENT IS ALWAYS THE INTENTION AT TIME OF PURCHASE OF SHARES. THE VOLUME AND FREQUENCY OF TRANSACTIONS IN SHARES IS LOW CONSIDERING THE OVERA LL INVESTMENTS IN SHARES. KINDLY CONSIDER THE FACT OF INVESTMENT IN S HARES OF RS.3,11,25,914/- AND OVERALL SALE PROCEEDS OF SHARE S OF RS.3,33,25,631/- AND PURCHASE OF SHARES OF RS.3,41, 02,381/- DURING THE YEAR INCLUSIVE OF SALE PROCEEDS OF LONG TERM CA PITAL GAINS. THE TOTAL TURNOVER OF TRADER WOULD BE SEVERAL TIMES OF THE INVESTMENT AND THAT OF INVESTOR LIKE US IS JUST ONE IN A YEAR. B) THERE IS A LONG TERM CAPITAL GAINS OF RS.25,40,1 35/- AND SHORT TERM CAPITAL GAINS OF RS.34,84,473/- I.E. TOTAL CAPITAL GAINS OF RS.60,24,608/- ON THE SALE PROCEEDS OF RS.3,33,25,6 31/-. 5 ITA NO.8511/MUM/2011 C.O.NO. 246/MUM/2012 C) THE ASSESSEE HAD SUBMITTED THE COMPLETE CHART BE FORE THE LEARNED ASSISTANT COMMISSIONER OF INCOME TAX GIVING DATE WI SE PURCHASE AND SALE OF SHARES IN LONG TERM AND SHORT TERM CAPITAL GAINS AND ALSO THE DEMAT ACCOUNT WHEREIN ALL THE TRANSACTIONS ARE ROUT ED THROUGH DELIVERY OF SHARES. D) THE ASSESSEE HAD INVESTMENT IN SHARES OF RS.3,11 ,25,914/- AND HAD DIVERSIFIED THE INVESTMENT BY INVESTING IN VARIOUS SCRIPTS. THERE ARE ONLY 121 SCRIPTS IN SHORT TERM CAPITAL GAINS OF RS. 34,84,473/- BUT THESE 121 SCRIPTS IN SHORT TERM CAPITAL GAINS ALSO INCLUD ES (A) SCRIPTS WHICH HAVE BEEN PURCHASED AND SOLD JUST ONCE AND ALSO INC LUDES (B) SCRIPTS WHICH HAVE BEEN PURCHASED AND SOLD BUT NOT PURCHASE D AFTER SOLD. THE REPETITIVE TRANSACTIONS I.E. A SCRIP HAS BEEN PURCH ASED, THEN SOLD, THEN AGAIN PURCHASED AND THEN AGAIN SOLD IN ALL THE 121 SCRIPTS IS DENIED. THERE IS NO ANY DEVIATION FROM THE PATTERN OF PURCH ASE AND SALE OF SHARES FROM EARLIER ASSESSMENT YEARS. E) NO LOAN ON INTEREST BORROWED FOR THE PURPOSE OF INVESTMENT IN SHARES. THE MONEY BORROWED IS FAMILY LOAN OUTSTANDING SINCE PREVIOUS YEAR AND NOT BORROWED DURING THE YEAR. THE INTEREST BEAR ING FUNDS ARE UTILIZED FOR LOAN GIVEN TO PARTIES ON INTEREST. THE RE IS A DIRECT NEXUS OF UTILIZATION OF FUNDS. F) THE COMPLETE CHART OF PURCHASE AND SALE OF SHARE S IN LONG TERM AND SHORT TERM CAPITAL GAINS ENCLOSED. G) DIVIDEND INCOME HAS NO COMPARISON WITH RATE OF I NTEREST PAID, SINCE NO MONEY IS BORROWED ON INTEREST FOR THE PURPOSE OF INVESTMENT IN SHARES. THE OVERALL RETURN ON INVESTMENT IS MORE TH AN 22% P.A. CONSIDERING THE LONG TERM CAPITAL GAINS OF RS.25,40 ,135/- AND SHORT TERM CAPITAL GAINS OF RS.34,84,473/- I.E. TOTAL CAP ITAL GAINS OF RS.60,24,608/- AND DIVIDEND OF RS.2,10,471/- ON AN AVERAGE INVESTMENT IN SHARES OF RS.2,77,25,235/-. H) THE FACTS OF CASE ARE IDENTICAL TO THE FACTS OF THE CASE OF EARLIER YEARS WHEREIN THE SHORT TERM CAPITAL GAINS IS ASSESSED AS SHORT TERM CAPITAL GAINS AND NOT AS BUSINESS INCOME. KINDLY DIRECT SHORT TERM CAPITAL GAINS OF RS.34,84, 473/- BE TREATED AS CAPITAL GAINS AND NOT AS BUSINESS INCOME. 6 ITA NO.8511/MUM/2011 C.O.NO. 246/MUM/2012 5. THE LEARNED CIT(APPEALS) FOUND MERIT IN THE SUBM ISSION OF THE ASSESSEE AND DIRECTED THE AO TO TREAT THE PROFIT FROM SALE OF SH ARES AS SHORT TERM CAPITAL GAIN AND NOT AS BUSINESS INCOME FOR THE FOLLOWING REASONS GI VEN IN PARAGRAPH NO. 2.3 OF HIS IMPUGNED ORDER : I HAVE CAREFULLY GONE THROUGH THE ASSESSMENT ORDE R, THE SUBMISSIONS OF THE APPELLANT AND THE FACTS OF THE CASE. THE MAI N GROUND ON WHICH THE AO HAS TREATED THE STCG AS BUSINESS INCOME IS THAT THE MAGNITUDE OF SHARES IS VERY LARGE AND THE NUMBER OF SCRIPS IS ALSO LARGE. FURTHER THE APPELLANT HAS TAKEN LOANS AND HAS PAID INTEREST. AS REGARDS TO TH E LOANS THE AR OF THE APPELLANT HAS STATED THAT THERE ARE NO FRESH LOANS TAKEN AND ALL THE LOANS ARE COMING FROM THE PREVIOUS YEARS. FURTHER, NO LOANS H AVE BEEN UTILIZED FOR THE PURCHASE OF SHARES. THE LOANS HAVE BEEN GIVEN ON IN TEREST AND INTEREST HAS ALSO BEEN RECEIVED ON SUCH LOANS. THE APPELLANT HAS ALSO POINTED OUT THAT IN THE PAST I.E. IN A.YEARS 2004-05, 2005-06, 2006-07 & 2007-08 THE INCOME SHOWN AS CAPITAL GAINS BY THE APPELLANT WAS TAXED A S SUCH AND APPELLANT WAS TREATED AS AN INVESTOR IN SHARES. FOR ALL THE AFORE SAID ASSESSMENT YEARS THE ASSESSMENTS WERE COMPLETED IN SCRUTINY ASSESSMENT U /S 143(3) OF THE I.T. ACT, 1961. IT IS IN THE ASSESSMENT YEAR UNDER CONSI DERATION THAT THE AO HAS DEVIATED FROM THE PAST STAND OF THE DEPARTMENT AND HAS TREATED THE APPELLANTS INCOME AS STCG AS BUSINESS INCOME FOR T HE FIRST TIME. IT IS ONLY BECAUSE OF THESE FACTS THE APPELLANT HAD STATED HIS CASE IS SQUARELY COVERED BY THE DECISION IN THE CASE OF CIT VS. GOPAL PUROHI T (2010) (199 TAXMAN 140) (288 CTR 582)(BOM) WHEREIN IT WAS LAID DOWN TH AT THOUGH THE PRINCIPLE OF RES-JUDICATA IS NOT APPLICABLE TO THE INCOME TAX PROCEEDINGS BUT THE PRINCIPLE OF CONSISTENCY SHOULD BE FOLLOWED. I AGREE WITH THE AFORESAID SUBMISSION OF THE APPELLANT AND I FIND THAT THE CAS E OF THE APPELLANT IS SQUARELY COVERED BY THE DECISION IN THE CASE OF CIT VS. GOPAL PUROHIT (2010) MENTIONED (SUPRA). IN THE PAST THE DEPARTMEN T HAS HELD THAT THE APPELLANT IS AN INVESTOR IN SHARES AND HAS ACCEPTED THE INCOME DECLARED BY HIS AS CAPITAL GAINS. THE AO HAS NOT ASSIGNED ANY R EASONS TO MAKE A DEPARTURE FROM THE EARLIER STAND OF THE DEPARTMENT. THE PRINCIPLE OF CONSISTENCY REQUIRES THAT THE VIEW TAKEN IN ONE YEA R SHOULD BE FOLLOWED IN SUBSEQUENT YEARS, UNLESS THE FACTS OR THE LEGAL POS ITION JUSTIFY DEPARTURE THEREFROM. RECENTLY THE MUMBAI HIGH COURT IN THE CA SE OF CIT VS. DARITUS PANDOLE (2011) 330 ITR 485 (BOM.) HAS HELD THAT INC OME FROM SALE OF SHARES TREATED AS BUSINESS INCOME IN EARLIER YEAR B Y WAY OF ASSESSMENT U/S. 143(3) CANNOT BE TAKEN AS CAPITAL GAIN IN SUBSEQUEN T YEAR. THE ESSENCE OF 7 ITA NO.8511/MUM/2011 C.O.NO. 246/MUM/2012 JUDGEMENT IS THAT THE PRINCIPLE OF CONSISTENCY SHOU LD BE FOLLOWED AND THE PARTIES SHOULD NOT BE ALLOWED TO REGISTER DEPARTURE FROM THE EXISTING POSITION TIME AND AGAIN. THIS PRINCIPLE OF CONSISTENCY HAS A LSO BEEN FOLLOWED IN A VERY RECENT JUDGEMENT OF THE MUMBAI ITAT IN THE CAS E OF ACIT VS. SHRI SATPAL SINGH SETHI IN ITA NO.3650/MUM/2010 A.Y. 200 6-07. IN VIEW OF THE ABOVE DISCUSSION THE AO IS DIRECTED TO TREAT TH E STCG DECLARED BY THE APPELLANT AT RS.34,84,473/- AS SUCH AND NOT AS BUSI NESS INCOME. THIS GROUND OF APPEAL IS ALLOWED. 6. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. A PERUSAL OF THE IMPUGNED ORDER OF THE LEARNED CIT(APPEALS) ON THE ISSUE UNDER CONSIDERATION SHOWS THAT HE HAS ACCEPTED THE CLAIM OF THE ASSESSEE ON ACCOUNT OF PROFIT FROM SALE OF SHARES A S SHORT TERM CAPITAL GAINS MAINLY ON THE BASIS OF RULE OF CONSISTENCY RELYING ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF GOPAL PUROHIT 188 TAXMAN 140 WHICH HAS SINCE BEEN AFFIRMED BY THE HONBLE SUPREME COURT. HE, HOWEVER, APPEARS TO HAVE NOT COMPARED THE FACTS INVOLVED IN THE EARLIER YEARS VI Z-A-VIZ THE FACTS INVOLVED IN THE YEAR UNDER CONSIDERATION WHICH ARE SPECIFICALLY HIG HLIGHTED BY THE AO IN THE ASSESSMENT ORDER TO ASCERTAIN THAT THE RELEVANT FAC TUAL POSITION INVOLVED IN ALL THESE YEARS IS THE SAME. EVEN IN THE ASSESSMENT ORDER, TH ERE IS NOTHING TO SHOW THAT THE FACTS INVOLVED IN THE YEAR UNDER CONSIDERATION ARE SIMILAR TO THAT OF THE EARLIER YEARS WHEN THE CLAIM OF THE ASSESSEE OF PROFIT FROM SALE OF SHARES BEING SHORT TERM CAPITAL GAINS WAS ACCEPTED BY THE AO. MOREOVER, THE LEARNED COUNSEL FOR THE ASSESSEE HAS PLACED ON RECORD BEFORE US CERTAIN FACTS AND FIGURE S RELATING TO THE ISSUE UNDER CONSIDERATION WHICH SHOW THAT THEY ARE NOT TALLYING WITH CERTAIN FACTS AND FIGURES GIVEN BY THE AO IN THE ASSESSMENT ORDER. FOR INSTAN CE, THE TOTAL TRANSACTIONS OF SALE OF SHARES GIVING RISE TO SHORT TERM CAPITAL GAINS I S TAKEN BY THE AO AT 675 WHEREAS AS PER THE SUBMISSION OF THE ASSESSEE, SUCH TRANSAC TIONS ARE ONLY 417. SIMILARLY, THE NUMBER OF TRANSACTIONS WHEREIN HOLDING PERIOD WAS L ESS THAN A MONTH IS GIVEN BY THE AO IN THE ASSESSMENT ORDER AT 90 WHEREAS AS PER THE SUBMISSION OF THE 8 ITA NO.8511/MUM/2011 C.O.NO. 246/MUM/2012 ASSESSEE, SUCH TRANSACTIONS ARE ONLY 77. THE IMPUGN ED ORDER OF THE LEARNED CIT(APPEALS) DOES NOT THROW ANY LIGHT ON THESE FACT UAL CONTRADICTIONS WHICH, IN OUR OPINION, ARE RELEVANT TO DECIDE THE ISSUE. IN O UR OPINION, IT IS NECESSARY TO ASCERTAIN THE EXACT FACTUAL POSITION FIRST AND THEN TO APPLY THE LAW ON APPRECIATION OF SUCH FACTUAL POSITION. WE, THEREFORE, SET ASIDE THE IMPUGNED ORDER OF THE LEARNED CIT(APPEALS) ON THIS ISSUE AND RESTORE THE MATTER T O THE FILE OF THE AO FOR DECIDING THE SAME AFRESH AFTER ASCERTAINING THE EXACT FACTUA L POSITION FROM THE RELEVANT RECORD AND APPLYING THE RELEVANT LAW INCLUDING THE LAW LAID DOWN IN THE CASE OF GOPAL PUROHIT (SUPRA). NEEDLESS TO OBSERVE THAT THE AO SHALL AFFORD SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 7. THE APPEAL FILED BY THE REVENUE IS TREATED AS AL LOWED FOR STATISTICAL PURPOSES. 8. IN HIS CROSS OBJECTION, THE ASSESSEE HAS TAKEN T HE FOLLOWING GROUNDS : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) ERRED IN CONFIRMING THE ACTION OF TH E ASSESSING OFFICER IN DISALLOWANCE OF INTEREST UNDER SECTION 1 4A HAVING NO NEXUS OF UTILIZATION OF FUNDS IN TAX EXEMPT INVESTMENTS. 2. WITHOUT PREJUDICE TO GROUND NO. 1 AND ON THE FAC TS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED C IT(A) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN D ISALLOWANCE OF 100% OF INTEREST PAID I.E. RS.3,13,000.00 UNDER SEC TION 14A HAVING DIRECT NEXUS OF UTILIZATION OF FUNDS IN TAXABLE INV ESTMENT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) ERRED IN CONFIRMING THE ACTION OF TH E ASSESSING OFFICER IN DISALLOWANCE OF COST OF IMPROVEMENT OF R S.2,63,183/- OUT OF LONG TERM CAPITAL GAINS ON SALE OF PROPERTY TOWA RDS MUNICIPAL CHARGES, SOCIETY CHARGES AND INTEREST CAPITALIZED T O FLAT ACCOUNT UTILIZED FOR PURCHASE OF FLAT. 9. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. THE LEARNED COUNSEL FOR THE ASS ESSEE HAS SUBMITTED THAT BOTH THE ISSUES RAISED IN THE CROSS OBJECTION OF THE ASSESSE E ARE REQUIRED TO BE SENT BACK TO 9 ITA NO.8511/MUM/2011 C.O.NO. 246/MUM/2012 THE AO FOR VERIFICATION OF THE RELEVANT FACTS. AS R EGARDS THE ISSUE RELATING TO DISALLOWANCE OF INTEREST U/S 14A RAISED IN GROUND N O. 1 AND 2, HE HAS SUBMITTED THAT THE ENTIRE LOAN WAS AVAILED BY THE ASSESSEE IN THE EARLIER YEARS AND SINCE THE SAME WAS NOT UTILIZED FOR MAKING INVESTMENT IN THE SHARES WHICH FETCHED THE INTEREST INCOME, NO DISALLOWANCE U/S 14A IN RESPECT OF INTEREST PAID THEREON IS WARRANTED. HE HAS CONTENDED THAT NEITHER THE AO NOR THE LEARNED CIT(APPEALS), HOWEVER, HAS GIVEN ANY FINDING ON VERIFICATION OF T HIS ASPECT. HE HAS CONTENDED THAT SIMILARLY THE ISSUE RAISED IN GROUND NO.3 RELA TING TO CAPITALIZATION OF INTEREST TO FLAT ACCOUNT ETC. IS REQUIRED TO BE CONSIDERED AFRE SH IN THE LIGHT OF RECENT JUDICIAL PRONOUNCEMENTS WHICH WERE NOT AVAILABLE EITHER BEFO RE THE AO OR BEFORE THE LEARNED CIT(APPEALS). KEEPING IN VIEW THESE SUBMISS IONS MADE BY THE LEARNED COUNSEL FOR THE ASSESSEE WITH WHICH EVEN THE LEARNE D DR HAS AGREED, WE SET ASIDE THE IMPUGNED ORDER OF THE LEARNED CIT(APPEALS) AND RESTORE THESE ISSUES TO THE FILE OF THE AO FOR DECIDING THE SAME AFRESH AFTER VERIFY ING THE RELEVANT FACTS FROM THE RECORD AND AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD. 10. IN THE RESULT, THE APPEAL OF THE REVENUE AS WEL L AS CROSS OBJECTION OF THE ASSESSEE ARE TREATED AS ALLOWED FOR STATISTICAL PU RPOSES. ORDER PRONOUNCED ON THIS 14 TH DAY OF DEC., 2012. SD/- SD/- (D.K.AGARWAL) (P.M. JAGTAP) JUDICIAL MEMBER ACCO UNTANT MEMBER MUMBAI, DATED: 14 TH DEC., 2012. 10 ITA NO.8511/MUM/2011 C.O.NO. 246/MUM/2012 COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, D-BENCH. (TRUE COPY) BY ORD ER ASSTT. REGI STRAR, ITAT, MUMBAI BENCHES, MUMBAI. WAKODE