ACIT CIR 15(1), MUMBAI V. HARDIK BHARAT PATEL, MUMBAI

ITA 8804/MUM/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88463 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 2 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-03-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 03-03-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 28-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SACHIDANAND DUBE
• Assessee Lawyers: V G GINDE
• Keywords: Business income; Salary income; Question of law; Speculation loss
• Section: 143(3)

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES H, MUMBAI , .. , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI B.R.BASKARAN, ACCOUNTANT MEMBER ITA NO.8804/MUM/2011 ASSESSMENT YEAR: 2008-09 JOINT COMMISSIONER OF INCOME-TAX (OSD), CIRCLE-15(1), ROOM NO.104, MATRU MANDIR, 1 ST FLOOR, TARDEO RD. MUMBAI-400007 / VS. SHRI HARDIK BHARAT PATEL, 3-3A, 1 ST FLOOR, CHURCHGATE HOUSE, VEER NARIMAN ROAD, FORT, MUMBAI-400023 ( / REVENUE) ( /ASSESSEE) P.A. NO. A HIPP1407H / REVENUE BY : SHRI SACHIDANAND DUBE / ASSESSEE BY) SHRI V.G. GINDE ! ' # $ / DATE OF HEARING : 03/03/2015 DATE OF ORDER : # $ / 03/03/2015 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) : THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DATE D 05/10/2011 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI. THE FIRST GROUND PERTAINS TO DIRECTION TO THE ASSESSING OFFICER TO ASSESSEE THE INCOME FROM SHARES AS CAPITAL GAINS AS AGAINST BUSINESS INCOME OPINED BY THE ASSESSING OFFICER. SHRI HARDIK BHARAT PATEL 2 2. AT THE TIME OF HEARING, THE LD. DR, SHRI SACHIDA NAND DUBE, ADVANCED HIS ARGUMENTS WHICH IS IDENTICAL TO THE GROUND RAISED BY SUPPORTING THE ASSESSMENT ORDER. ON THE O THER HAND, THE LD. COUNSEL FOR THE ASSESSEE, SHRI V.G. GINDE, CONTENDED THAT THE IMPUGNED ISSUE IS COVERED BY THE DECISION OF THE TRIBUNAL DATED 01 ST MAY, 2013, IN THE CASE OF ASSESSEE ITSELF, FOR AY 2007-08 AND 2008-09 (ITA NO.2274 AND 8013/MUM/20 11). THIS FACTUAL MATRIX WAS NOT CONTROVERTED BY THE LD. DR. 2.1 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL AVAILABLE ON RECORD. IN VIEW OF THE ABOVE, WE ARE REPRODUCING HEREUNDER THE RELEVANT PORTION FROM THE ORDER OF THE TRIBUNAL DATED 01 ST MAY 2013 (SUPRA) FOR READY REFERENCE:- 3. THE ASSESSEE IN BOTH THE APPEALS IS OBJECTING I N CONFIRMING THE ACTION OF THE AO AS TO INCOME EARNED ON TRANSACTION IN SHARES OF RS.1,11,89,670/- SUBJECT TO STT IS TAXABLE UNDER THE HEAD INCOME FR OM BUSINESS OR PROFESSION INSTEAD OF CAPITAL GAIN, DECLARED BY THE ASSESSEE FOR ASSESSMENT YEAR 2007-08 AND AN AMOUNT OF RS.77,52,9 24/- FOR ASSESSMENT YEAR 2008-09. 4. DURING THE ASSESSMENT PROCEEDINGS, THE AO NOTICE D THAT THE ASSESSEE IS A DIRECTOR OF MIS. FINQUEST SECURITIES PVT. LTD. FROM WHERE HE HAS RECEIVED THE COMMISSION. HOWEVER, THIS COMPANY IN WHICH ASSE SSEE IS A DIRECTOR DEALS IN SHARE AND F & 0 TRANSACTIONS. IT WAS OBSER VED BY THE AO IN PARA 3 OF THE ASSESSMENT ORDER THAT ALL THE PURCHASES AND SALES OF SHARES/ F & 0 HAVE BEEN SHOWN BY THE ASSESSEE EITHER WITH THIS CO MPANY WHERE HE IS A DIRECTOR OR WITH THE SISTER CONCERN. FOR THAT PURPO SE. APPELLANT HAS UTILIZED OVERDRAFT FACILITIE THAT TOO AFTER PLEDGING SHARES STOCK TO THE BANK. ACCORDING TO THE AO, THE REPLY OF THE APPELLANT DAT ED 03.12.2009 JUSTIFYING THE CLAIM OF SHORT TERM CAPITAL GAIN IS NOT ACCEPTA BLE BECAUSE OF THE FACTS OF THE CASE. IN SUPPORT, HE HAS GIVEN DETAILS OF TRANS ACTIONS IN ANNEXURE 'A', 'B' & 'C' ENCLOSED WITH THE ASSESSMENT ORDER. ACCORDING TO HIM. IN F. Y. 2003- SHRI HARDIK BHARAT PATEL 3 04, THERE WAS NO SUCH INVESTMENT IN SHARE NOR WAS A NY DIVIDEND BUT IN F.Y. 2004-05, THERE WAS PURCHASE OF SHARES OF RS. 4,87,6 5,519/- AND THE DIVIDEND WAS SHOWN OF RS. 1900/- ONLY. IN SUBSEQUENT YEAR I. E. F.Y. 2005-06, THERE WAS PURCHASE/INVESTMENT IN SHARES OF RS. 6,12,03,70 2/- AND DIVIDEND WAS ONLY OF RS. 5,34,913/- AND IN F. Y. 2006-07 RELEVAN T TO THIS ASSESSMENT YEAR, THERE IS TRANSACTION OR RS. 3,41,23,815/- AND DIVID END IS OR RS. 8,76,009/-. FURTHER. AO HAS MENTIONED THAT EVEN IN A. Y. 2005-0 6, THERE WAS A FREQUENT PURCHASE AND SALES SHOWN AS TO HOW ASSESSEE DOES TR ADING IN SHARES. AS CAN BE SEEN THAT ON 07.3.2005 SHARES OF BALMER LAWRIE W AS PURCHASED AND IMMEDIATELY SAME WAS SOLD BETWEEN 14.3,2005 TO 16.3 .2005. SIMILAR IS THE FACT IN RESPECT OF SHARE OF HINDUSTAN COMPOSITE, KA LPATARU POWER, TARA STEEL AND TIDE 'WATER. FURTHER. IT WAS OBSERVED BY THE AO IN A, Y. 2006-07, THAT THERE WAS FULL FREQUENCY OF PURCHASE AND SALE OF SHARES WHICH CANNOT BE PRESUMED TO BE INVESTMENT. FURTHER IN THIS YEAR, IT WAS OBSERVED BY THE AO THAT NEAR ABOUT 505 TRANSACTIONS HAVE BEEN DONE BY THE ASSESSEE. IT WAS ALSO NOTICED THAT SHARES OF ABB LTD. WERE PURCHASED ON 07.04.2006 AND SOLD OUT ON 12.4.2006, 08.5.2006 AND 05.01.2007. SI MILAR IS THE FACT IN RESPECT OF PURCHASE AND SHARE OF AMBAL SARA E. THE SHARES OF THIS COMPANY WERE PURCHASED ON 02.01.2007 AND SOLD OUT ON 05.01. 2007 AND 12.01.2007. THE AO ALSO NOTICED THAT SHARES OF BANK OF INDIA WE RE PURCHASED ON 02.5.2006 AND SOLD OUT ON 02.5.2006, 03.5.2006 AND 08.5.2006. THUS, ACCORDING TO THE AO, IN ALL PRECEDING YEARS SIMILAR INVOLVEMENT OF THE ASSESSEE IS THERE FOR DOING DAY-TO-DAY TRANSACTIONS . IT IS FURTHER NOTED BY HIM THAT THE SAME DATE TRANSACTIONS HAVE BEEN INCLU DED AS SPECULATION INCOME. THE AO HAS MENTIONED THAT NO SEPARATE ACCOU NT HAS BEEN KEPT FOR THIS SPECULATION AND CAPITAL GAIN BUT HAS MERELY BE EN SHOWN AS AN INVESTMENT IN BALANCE SHEET, WHICH DOES NOT ALTER T HE TRUE CHARACTER AND NATURE OF THE TRANSACTION. THE DIVIDEND INCOME IS E ARNED BY CHANCE AND NOT BECAUSE OF THERE IS AN INVESTMENT WITH MOTIVE OF EA RNING DIVIDEND. FURTHER, LD. AO HAS MENTIONED IN PARA 3.5 THE SERIES OF INVO LVEMENT AND EARNING OF PROFIT FROM PURCHASE AND SALE OF SHARES. ACCORDING TO THE AO, ALL THESE FACTS CLEARLY ESTABLISH THE PROFIT EARNING MOTIVE BY DAY- TO-DAY TRANSACTION OF THE SHRI HARDIK BHARAT PATEL 4 SHARES. THEREFORE, ACCORDING TO HIM, AS PER DEFINITION OF PROFIT U/S. 2(13) OF THE INCOME-TAX ACT, APPELLANT'S ACTIVITY COMES UNDE R THE MEANING AND DEFINITION OF 'BUSINESS AND PROFESSION'. ACCORDINGL Y, THE AO TREATED THE SHORT TERM CAPITAL GAIN AS BUSINESS PROFIT INSTEAD OF CAPITAL GAIN SHOWN BY THE ASSESSEE. 5. ASSESSEE PREFERRED APPEALS BEFORE THE CIT(A), BE FORE WHOM DETAILED SUBMISSIONS WERE FILED. IT WAS SUBMITTED THAT FOR I MMEDIATELY PRECEDING YEAR I.E. FOR ASSESSMENT YEAR 2006-07, THE AO HAS A CCEPTED THE SHORT TERM CAPITAL GAIN ON SIMILAR TRANSACTIONS WHILE COMPLETI NG ASSESSMENT UNDER SECTION 143(3). IT WAS FURTHER SUBMITTED THAT THE A SSESSEE HAS SHOWN ALL THE PURCHASES UNDER THE INVESTMENT PORTFOLIO AND IN SUP PORT OF THESE, COPY OF BALANCE SHEET SHOWING INVESTMENT IN SHARES WERE ALS O FILED AND IT WAS ALSO SHOWN THAT THEY HAVE VALUED AT COST. IT WAS FURTHER SUBMITTED THAT THE AO HAS ACCEPTED THE LONG TERM CAPITAL GAIN BUT HAS NOT ACCEPTED THE SHORT TERM CAPITAL GAIN AS HE TREATED THE TRANSACTION AS ADVEN TURE OF NATURE IN TRADE. RELIANCE WAS PLACED ON THE BOARD CIRCULAR AND THE D ECISION OF THE TRIBUNAL IN THE CASE OF GOPAL PUROHIT VS. JCIT, REPORTED ION (2009) 29 SOT 117 (BOM), WHICH HAS BEEN CONFIRMED BY THE HONBLE BOMB AY HIGH COURT REPORTED IN 270 CTR 582. RELIANCE WAS ALSO PLACED O N VARIOUS CASE LAWS I.E. IN THE CASE OF JANAK S RANGWALA VS. ACIT, 11 S OT 627 (MUM), ACIT VS. KHETAN KUMAR A SHAH, 242 ITR 83 (KER) AND IN TH E CASE OF SURESH KUMAR SEKSARIA VS. ACIT, REPORTED IN 1 ITR (TRIB) 7 83 (MUM). 6. THE CONTENTION RAISED BEFORE THE LOWER AUTHORIT IES HAVE BEEN INCORPORATED IN THE ORDER OF THE LEARNED CIT(A) IN PARA 3.1 AT PAGES 5 TO 11. THEREAFTER LEARNED CIT(A) DISCUSSING THE ISSUE IN DETAIL AND TAKING INTO CONSIDERATION VARIOUS CASE LAWS, WHICH ARE MENTIONE D IN HIS ORDER, FOUND THAT THE ASSESSEE IS INDULGED IN FREQUENT TRANSACTI ON OF PURCHASES AND SALES, THEREFORE, THEY ARE NOTHING BUT BUSINESS TRANSACTIO N. LEARNED CIT(A) HAS ALSO OBSERVED THAT ONUS LAYS UPON THE ASSESSEE TO P ROVE THAT ALL THE TRANSACTIONS ARE DONE ON ACCOUNT OF INVESTMENT AND THEY ARE NOT FREQUENT TRANSACTIONS. IN VIEW OF THE LEARNED CIT(A), THE AS SESSEE FAILED TO ESTABLISH SHRI HARDIK BHARAT PATEL 5 THAT THE TRANSACTIONS ARE ON ACCOUNT OF INVESTMENT ONLY BECAUSE OF THE REASON THAT THERE WERE 690 TRANSACTIONS AND WERE FR EQUENT TRANSACTIONS, THEREFORE, HE WAS IN AGREEMENT WITH THE FINDING OF THE AO. ACCORDINGLY, HE CONFIRMED THE ORDER OF THE AO FOR BOTH OF THE YEARS . 7. NOW, THE ASSESSEE IS IN APPEALS FOR BOTH OF THE YEARS HERE BEFORE THE TRIBUNAL. 8. LEARNED COUNSEL OF THE ASSESSEE REITERATED ITS C ONTENTIONS RAISED BEFORE THE LEARNED CIT(A), HERE BEFORE THE TRIBUNAL. A FAC T SHEET WAS ALSO FILED. COPY OF THE DECISION OF THE HONBLE BOMBAY HIGH COU RT IN THE CASE OF SHRI ASHVINKUMAR K. KAPADIA, PASSED IN ITA NO.5510 OF 20 10, WAS ALSO FILED, WHERE SIMILAR ISSUE WAS DECIDED IN FAVOUR OF THE AS SESSEE. AGAIN RELIANCE WAS PLACED ON THE DECISION OF THE HONBLE HIGH COUR T IN THE CASE OF GOPAL PUROHIT (SUPRA). RELIANCE WAS ALSO PLACED ON VARIOU S OTHER CASE LAWS MENTIONED IN THE WRITTEN NOTE PLACED ON RECORD. 9. ON THE OTHER HAND, LEARNED DR HAS PLACED RELIAN CE ON THE ORDER OF LEARNED CIT(A). 10. AFTER CONSIDERING THE ORDER OF AO, CIT(A) AND O THER MATERIAL ON RECORD, WE FOUND THAT THE ASSESSEE DESERVES TO SUCCEED ON T HE ISSUE INVOLVED FOR BOTH OF THE YEARS. WE NOTED THAT THE DEPARTMENT ITS ELF HAS ACCEPTED THE SHORT TERM CAPITAL GAIN SHOWN BY THE ASSESSEE WHILE PASSI NG ASSESSMENT UNDER SECTION 143(3) FOR ASSESSMENT YEAR 2006- 07 AND FOR ASSESSMENT YEAR 2009- 10, COPY OF WHICH IS PLACED AT PAGES 35 & 45 RESPEC TIVELY. BOTH THESE ASSESSMENTS WERE COMPLETED UNDER SECTION 143(3) AND SIMILAR TRANSACTIONS WERE MADE AND THEY WERE ACCEPTED. DIFFERENT YARDSTI CK ADOPTED FOR THESE TWO YEARS UNDER CONSIDERATION, WHICH IN OUR VIEW, W AS NOT JUSTIFIED. THE ASSESSEE IS A SALARIED PERSON AND SHOWN ALL THE PUR CHASES OF SHARES UNDER THE HEAD INVESTMENT PORTFOLIO, THEREFORE, THEY HAVE TO BE TREATED UNDER THE HEAD INVESTMENT PORTFOLIO AND CAPITAL GAIN WHETHER SHORT TERM OR LONG TERM CAPITAL GAIN HAS TO BE ASSESSED. 11. THE HONBLE HIGH COURT HAS DECIDED THIS ISSUE IN THE CASE OF GOPAL PUROHIT (SUPRA), BY WHICH THE DETAILED ORDER PASSED BY THE TRIBUNAL HAVE SHRI HARDIK BHARAT PATEL 6 BEEN CONFIRMED. THEREAFTER IN THE CASE OF ASHVINKUM AR K. KAPADIA, SIMILAR ISSUE WAS DECIDED BY THE TRIBUNAL AND THIS ORDER OF THE TRIBUNAL HAS ALSO BEEN AFFIRMED BY THE HONBLE JURISDICTIONAL HIGH CO URT IN ITA NO.5510/2010, VIDE ORDER DATED 28-9-2011. WHILE DEC IDING THE ISSUE IN FAVOUR OF THE ASSESSEE, THE HONBLE HIGH COURT FOLL OWED THE DECISION IN THE CASE OF GOPAL PUROHIT (SUPRA). 12. RECENTLY THE NAGPUR BENCH OF THE TRIBUNAL IN TH E CASE OF SHRI SANJAY ISHWARLAL RANKA IN ITA NO.161/NAG/2012, VIDE ORDER DATED 8-2-2013, HAS DECIDED THE SIMILAR ISSUE. THE FINDINGS OF THE TRIB UNAL HAVE BEEN RECORDED IN PARA 6TO9 AT PAGES 2 TO 7, WHICH ARE AS UNDER :- 6. AFTER CONSIDERING THE SUBMISSIONS AND TAKING INT O CONSIDERATION THE ORDERS OF THE LOWER AUTHORITIES, AND THE ORDER OF T HE TRIBUNAL DECIDED IN ITA NO.216/NAG/2009, IN THE CASE OF SANJAY ISHWARLAL RA NKA FOR THE ASSESSMENT YEAR 2006-07, VIDE ORDER DATED 16-10-2012, WE FIND THAT THE APPEALS OF THE DEPARTMENT ARE LIABLE TO BE DISMISSED. 7. THESE TWO ASSESSEES DERIVED INCOME FROM SALARY, BUSINESS, CAPITAL GAIN AND OTHER SOURCES. IN THE RETURN, THE ASSESSEE HAS SHOWN LONG TERM CAPITAL GAIN AND SHORT TERM CAPITAL GAIN ON SALE OF SHARES AND MUTUAL FUNDS. DURING THE ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE RE ARE CERTAIN FREQUENT PURCHASE AND SALES AND, THEREFORE, HE VIEWED THAT T HE PROFIT ON ACCOUNT OF PURCHASE AND SALE OF SHARES, MUTUAL FUNDS ETC. ARE LIABLE TO BE TAXED UNDER THE HEAD BUSINESS INCOME. ACCORDINGLY, THE PROFIT W AS ASSESSED UNDER THE HEAD BUSINESS INCOME. 8. THESE ASSESSEES PREFERRED APPEAL BEFORE THE CIT( A), BEFORE WHOM DETAIL SUBMISSIONS WERE FILED. RELIANCE WAS PLACED ON THE DECISION OF THE ORDER OF THE CIT(A) FOR ASSESSMENT YEAR 2006-07, WHERE ON TH E IDENTICAL FACTS, APPEAL OF THE ASSESSEE WAS ALLOWED AND THE AO WAS D IRECTED TO TREAT THE TRANSACTION AS INVESTMENTS AND LONG TERM CAPITAL GA IN AND SHORT TERM CAPITAL GAIN AS THE CASE MAY BE, BE COMPUTED. AFTER CONSIDERING THE SUBMISSION, LEARNED CIT(A) FOUND THAT THERE IS NO D ISPUTE THAT BOTH THE ASSESSEES ARE INVESTOR AND DEALERS IN SHARES. INCOM E FROM DERIVATIVE SHRI HARDIK BHARAT PATEL 7 TRANSACTIONS IS SHOWN UNDER THE HEAD OF BUSINESS IN COME. SIMILARLY, INCOME FROM DAY TRADING IS ALSO OFFERED UNDER THE HEAD OF BUSINESS INCOME. SIMILARLY, ON ACCOUNT OF INVESTMENT IN SHARES, THE LONG TERM CAPITAL GAIN OR THE SHORT TERM CAPITAL GAIN HAS BEEN OFFERED FOR TA XATION, AS THE CASE MAY BE. THE CIT(A) NOTED THAT ONLY RS.1.43 LAKHS OR ODD WAS TAKEN ON LOAN FOR THE PURPOSE OF MAKING INVESTMENTS IN SHARES WHICH C OMPRISES 0.37% OF TOTAL INVESTMENTS. TOTAL INVESTMENTS IN THE SHARES AND MU TUAL FUNDS WERE TO THE TUNE OF RS.3.83 CRORES. THE CONTENTION OF THE ASSES SEES THAT A PORTFOLIO INVESTMENT IS CLASSIFIED SEPARATELY IN THE BALANCE SHEET AND ON THIS ACCOUNT, THE ASSESSEES HAD EARNED DIVIDEND INCOME OF RS.66,5 2,110/-. ACCORDINGLY, CIT(A) HELD THAT THE AO WAS NOT CORRECT IN HOLDING THAT THE ENTIRE TRANSACTION AS BUSINESS TRANSACTION. THE CIT(A) HAS ALSO OBSERVED THAT MERE FACT THAT THE ASSESSEE HAS INVESTED A CONSIDER ATION AMOUNT IN THE SHARE MARKET AND CONSEQUENTLY THE VOLUME OF TRANSACTIONS IS HEAVY, CANNOT LEAD TO THE CONCLUSION THAT THE ASSESSEE IS A TRADER IN SHA RES. THE ASSESSEE HAD ALSO EARNED DIVIDEND INCOME ON SHARES. IT IS AN INCONTRO VERTIBLE FACT THAT THE BORROWINGS ARE A MARGINAL 0.37% OF THE TOTAL INVEST MENT. REGARDING FINDING OF THE AO THAT THE PERIOD OF HOLDING IN CERTAIN SCR IPS BEING LESS THAN A MONTH, IT WAS FOUND BY THE LEARNED CIT(A) THAT IT I S NECESSARY TO APPRECIATE THAT A PRUDENT INVESTOR WOULD KEEP A WATCH ON MARKE T TRENDS AND IS ENTITLED TO LIQUIDATE HIS INVESTMENT AND EARN PROFITS WHICH ARE TO BROUGHT TO TAX AS SHORT TERM CAPITAL GAIN. AFTER PLACING RELIANCE ON THE ORDER OF HIS PREDECESSOR FOR THE ASSESSMENT YEAR 2006-07, DECIDE D IN APPEAL OF THE CIT(A) NO.CIT(A)-I/559/08- 09, DATED 07-07-2009, WH EREBY A SIMILAR CLAIM WAS ALLOWED IN FAVOUR OF THE ASSESSEE, ALLOWED THE ISSUE IN FAVOUR OF BOTH THESE ASSESSEES, AS THE FACTS ARE SIMILAR IN BOTH O F THE CASES. 9. WE FURTHER NOTED THAT AGAINST THE ORDER OF CIT(A ) FOR ASSESSMENT YEAR 2006-07, THE DEPARTMENT PREFERRED APPEAL BEFORE THE TRIBUNAL AND THE TRIBUNAL DISCUSSING THE ISSUE IN DETAIL AND PLACING RELIANCE ON VARIOUS DECISIONS OF THE TRIBUNAL I.E. IN THE CASE OF DINES HBHAI C. PATEL (HUF),PASSED IN ITA616/NAG/2008, VIDE ORDER DATED 5 -6-2009; GOPAL PUROHIT, 20 DTR (MUM)(TRIB) 99; THE DECISION IN THE CASE OF CIT VS. SHRI HARDIK BHARAT PATEL 8 V.A.TRIVEDI, 172 ITR 95 (MUM) AND THE DECISION OF T HE HON BLE HIGH COURT IN THE CASE OF CIT VS. GOPAL PUROHIT, 228 CTR 582, ALLOWED THE ISSUE IN FAVOUR OF ASSESSEE. THE FINDINGS OF THE TRIBUNAL FO R THE ASSESSMENT YEAR 2006-07 HAVE BEEN RECORDED IN PARA 12 TO 16, WHICH ARE AS UNDER:- 12. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISS IONS AND, PERUSED THE MATERIAL ON RECORD ALONG WITH THE ORDER OF THE TAX AUTHORITIES BELOW. WE HAVE ALSO GONE THROUGH THE CASE LAW AS HAS BEEN CIT ED BEFORE US. WE FIND THAT IN THE CASE OF CIT (CENTRAL), CALCUTTA VS ASSO CIATED INDUSTRIAL DEVELOPMENT COMPANY (P) LTD. (82-ITR-586), THE HON BLE SUPREME COURT HAS HELD AS UNDER: WHETHER A PARTICULAR HO/DING OF SHARES IS BY WAY O F IN VESTMENT OR FORMS PART OF THE STOCK-IN-TRADE IS A MATTER WHICH IS WIT HIN THE KNOWLEDGE OF THE ASSESSEE WHO HOLDS THE SHARES AND HE SHOULD, IN NOR MAL CIRCUMSTANCES, BE IN A POSITION TO PRODUCE EVIDENCE FROM HIS RECORDS AS TO WHETHER HE HAS. MAINTAINED ANY DISTINCT/ON BETWEEN THOSE SHARES WHI CH ARE HIS STOCK-IN- TRADE AND THOSE WHICH ARE HELD BY WAY OF INVESTMENT . 12.1 IN THE CASE OF CIT, BOMBAY VS H HOLCK LARSEN ( 160-ITR- 67), THE ORDER TO DETERMINE WHETHER ONE WAS A DEALER IN SHAR ES OR AN INVESTOR, THE QUESTION WAS NOT WHETHER THE TRANSACTION OF BUYING AND SELLING THE SHARES LACKS THE ELEMENT OF TRADING, BUT WHETHER THE LATER STAGES OF THE WHOLE OPERATION SHOW THAT THE FIRST STEP THE PURCHASE O F THE SHARES WAS NO KEN AS, OR IN THE COURSE OF A TRADING TRANSACTION. THE TOTALITY OF ALL THE FACTS WILL HAVE TO BE BORNE IN MIND AND THE CORRECT LEGAL PRINCIPLES APPLIED TO THESE. IF ALL THE RELEVANT FACTORS HAVE BEEN TAKEN INTO CONSIDERATION AND THERE HAS BEEN NO MISAPPLICATION OF THE PRINCIPLES OF LAW, THEN THE CONCLUSION ARRIVED AT BY THE TRIBUNAL CANNOT BE INT ERFERED WITH BECAUSE THE INFERENCE QUESTION OF LAW, IF SUCH AN INFERENCE WAS A POSSIBLE ONE, SUBJECT, HOWEVER, THAT ALL THE RELEVANT FACTORS HAVE BEEN DU LY WEIGHED AND THE CONSIDERED BY THE TRIBUNAL, THE INFERENCE REACHED B Y THE TRIBUNAL SHOULD NOT BE INTERFERED WITH. SHRI HARDIK BHARAT PATEL 9 13. IN VIEW OF THE AFORESAID DECISIONS, WE ARE OF T HE VIEW THAT WHETHER THE PROFIT FROM THE SHARES IS A CAPITAL GAIN OR BUSINES S INCOME - WHETHER THE SHARES ARE HELD BY THE ASSESSEE AS I NVESTMENTS OR - WHETHER THE SHARES ARE PURCHASED WITH AN INTENTI ON TO KEEP THEM - WHETHER THE SHARES PURCHASED WITH AN INTENTION TO SELL; -WHETHER THE SHARES WERE PURCHASED WITH AN INTENTIO N TO EARN THE PROFIT IN THE SHORT TERM; - WHETHER THE SHARES ARE HELD TO MA XIMIZE THE RETURN; - WHETHER THE SHARES HAVE BEEN PURCHASED FROM THE PRIMARY MARKET; - WHETHER THE SHARES HAVE BEEN PURCHASED FROM THE SECONDARY MARKET; - WHETHER THE SHARES HAVE BEEN PURCHASED BY SUBSCRI PTION TO PUBLIC -WHETHER THE SHARES HAVE BEEN HELD FOR FAIRLY LONG PERIOD, AND - WHETHER THE SHARES ONCE SOLD HAVE NEVER BEEN REPU RCHASED 14. WE NOTED THAT IN THE CASE OF CIT VS V A TRIVEDI 172 ITR 95 (BORN) HON BLE JURISDICTION HIGH COURT HAS CLEARLY LAID DOWN U NDER PARA 12 OF THE ORDER THAT THE ONUS OF ESTABLISHING THAT A PURCHASE IS MADE WITH THE INTENTION TO TRADE IS ON THE REVENUE. 15. WE NOTED THAT THE MAIN CONTENTION OF THE REVENU E IN TREATING THE GAIN TO BE THE INCOME FROM BUSINESS IS THE NUMBER OF TRANSA CTIONS AND THE PERIOD OF THE HOLDING BY THE ASSESSEE. THE PERIOD OF THE HOLD ING AND NUMBER OF TRANSACTIONS CANNOT BE THE ONLY BASIS TO DETERMINE WHETHER THE ASSESSEE HAS CARRIED OUT THE BUSINESS IN SHARES TRANSACTIONS. IT MAY BE ONE OF THE RELEVANT CONSIDERATION BUT CANNOT BE THE MAIN CONSIDERATION FOR DECIDING WHETHER THE ASSESSEE IN THIS CASE IS ENGAGED IN A BUSINESS OR NOT. WE HAVE TO LOOK INTO ALL THE SURROUNDING CIRCUMSTANCES. THIS IS A F ACT ON RECORD THAT THE ASSESSEE IN THIS CASE IS ENGAGED IN THE EMPLOYMENT AND HAS DERIVED THE SALARY INCOME. OUT OF THE SURPLUS FUND, HE INVESTED INTO THE SHARES AND THE UNITS AND THOSE SHARES AND UNITS HAS DULY BEEN SHOW N BY THE ASSESSEE AS INVESTMENT IN HIS BALANCE SHEET IN THE EARLIER YEAR AS WELL AS DURING THE YEAR. IN THE EARLIER YEAR ALSO, THE ASSESSEE DERIVE D THE INCOME ON THE SALE OF SHRI HARDIK BHARAT PATEL 10 THE SHARES, WHICH HAS BEEN RETURNED BY THE ASSESSEE AS CAPITAL GAIN AND REVENUE HAS DULY ACCEPTED THE SAME. THE ASSESSEE WA S NOT HOLDING THE SHARES OF THE UNITS AS A STOCK IN TRADE. THIS FACT IS ALSO NOT DENIED BY THE REVENUE. THE PERIOD OF HOLDING ITSELF HAS BEEN TREA TED BY THE LEGISLATURE TO BE A RELEVANT CONSIDERATION FOR DETERMINING WHETHER THE CAPITAL GAIN DERIVED IS A LONG TERM CAPITAL GAIN OR A SHORT TERM CAPITAL GAIN. THERE IS NO PROVISION UNDER THE INCOME-TAX ACT WHICH HAS PROVID ED THAT IN CASE THE ASSESSEE IS HOLDING THE SHARES FOR A LESSER PERIOD THAN THE ONE PRESCRIBED, IT WILL BE REGARDED TO BE THE BUSINESS INCOME. DIVIDIN G THE CAPITAL GAIN INTO TWO PARTS I.E. THE SHORT TERM GAIN OR THE LONG TERM GAIN ITSELF PROVE THAT THE PERIOD OF THE HOLDING CANNOT BE THE CRITERIA FOR DE TERMINING WHETHER THE PROFIT DERIVED BY THE ASSESSEE IS A LONG TERM CAPIT AL GAIN OR SHORT TERM CAPITAL GAIN. 16. THE CIT(A), WE NOTED IN THIS CASE WHILE ALLOWIN G THE APPEAL OF THE ASSESSEE HAS RELIED ON THE DECISION OF THE ITAT NAG PUR BENCH IN THE CASE OF DINESHBHAI C. PATEL (HUF) IN 1TA NO.616/2008, WHICH CONFIRMED THE DECISION OF THE C1T(A), THE COPY OF THE DECISION WA S FILED BEFORE US. THE APPEAL AGAINST THE DECISION OF THE NAGPUR BENCH IN THE CASE OF DINESHBHAI C. PATIL (SUPRA) HAS BEEN DISMISSED BY THE HIGH COU RT VIDE ORDER DATED 28 10 2010 HOLDING THAT NO SUBSTANTIAL POSITION ARISE AND THE TRIBUNAL, ON THE BASIS OF THE MATERIAL ON RECORD, HOLD THAT THE SHAR ES WERE PURCHASED BY THE ASSESSEE AS INVESTMENT AND THE GAIN ARISING ON SALE OF THOSE SHARES WERE ALLOWABLE TO BE TAXED AS CAPITAL GAIN. IT IS NOT DE NIED THAT IN THIS CASE ALSO, THE ASSESSEE WAS HOLDING THE SHARES AS INVESTMENT. HOLDING OF THE SHARES AS INVESTMENT ITSELF PROVE THE INTENTION OF THE ASSESS EE AS REGARDS TO THE NATURE OF THE TRANSACTION. HAD THE SHARES BEEN THE BUSINES S ASSETS, IT WOULD HAVE SHOWN BY THE ASSESSEE AS A STOCK IN TRADE. APPARENT IS REAL, IF THE REVENUE FEELS THAT THE INTENTION OF THE ASSESSEE WAS NOT TO HOLD THE SHARES AS INVESTMENT. THE ONUS IN OUR OPINION IS ON THE REVEN UE TO PROVE THAT APPARENT IS NOT REAL. NO EVIDENCE WAS BEING PLACED OR BROUGHT TO OUR KNOWLEDGE BY THE LD. D.R. WHICH MAY PROVE THAT THE INTENTION OF THE ASSESSEE WAS NOT TO HOLD THE SHARES AS INVESTMENT. IT IS ALSO A FACT THAT THE SHRI HARDIK BHARAT PATEL 11 ASSESSEE DERIVED THE DIVIDEND INCOME AND HAS ALSO M ADE THE INVESTMENT IN THE SHARES NOT OUT OF THE BORROWED FUNDS, BUT OUT O F ITS OWN SURPLUS FUNDS. THE CIT(A) WHILE ALLOWING THE APPEAL OF THE ASSESSE E HAS EXTENSIVELY DEALT WITH THE VARIOUS FACTORS AS WELL AS VARIOUS CASE LA WS TO ARRIVE AT A FINDING THAT THE SHARES WERE HELD BY THE ASSESSEE AS A CAPI TAL INVESTMENT AND NOT AS STOCK IN TRADE. HE HAS ALSO RELIED ON THE DECISION OF THIS TRIBUNAL IN THE CASE OF CIT VS. DINESHBHAI C. PATEL (SUPRA). IT IS NOT DENIED THAT THE FACTS INVOLVED IN THIS CA SE IN THE CASE OF DINESHBHAI C. PATEL (SUPRA) ARE SIMILAR TO THE FACTS IN THE CA SE OF THE ASSESSEE. SIMILARLY, THE FACTS INVOLVED IN THE CASE OF GOPAL PUROHIT VS. JC1T 20 DTR 99 (MUMBAI) WERE ALSO THE SAME AS IN THE CASE OF TH E ASSESSEE. IN ALL THOSE CASES, THE TRIBUNAL TOOK THE VIEW THAT PERIOD OF HO LDING CANNOT BE THE BASIS TO DETERMINE WHETHER THE SHARE TRANSACTION ENTERED INTO BY THE ASSESSEE IS A BUSINESS INCOME OR CAPITAL GAIN. IN THIS CASE ALSO, WE NOTED THAT THE ASSESSING OFFICER HAS BUILT UP HIS CASE MAINLY ON T HE BASIS O PERIOD OF HOLDING AND ON THAT BASIS, HE TOOK THE VIEW THAT TH E SHARES HELD FOR A SHORT PERIOD OR FOR A NUMBER OF DAYS WOULD NOT BE CAPITAL GAIN. IN OUR OPINION, NO INTERFERENCE IS CALLED FOR IN THE ORDER OF THE CIT( A). THE CIT(A) HAS RIGHTLY TAKEN THE VIEW THAT THE DECISION OF THIS TRIBUNAL I N ITA NO.616/2008 IN THE CASE OF ACIT VS. DINESHBHAI C. PATEL (HUF) IS CLEAR LY APPLICABLE IN THE CASE OF THE ASSESSEE. THE DECISION OF THE COORDINAT E BENCH WHICH HAS BEEN APPROVED BY THE HON BLE JURISDICTIONAL HIGH COURT IS BINDING ON US. WE CANNOT TAKE A DIFFERENT VIEW. WE NOTED THAT THE NAG PUR BENCH OF THIS TRIBUNAL IN THE CASE OF DINESHBHAI C. PATEL I (SUP RA) HAS FOLLOWED THE DECISION OF GOPAL PUROHIT VS. JCIT (SUPRA), THAT D ECISION HAS ,ALSO BEEN APPROVED BY THE HON BLE JURISDICTIONAL HIGH COURT AND SLP AGAINST THAT DECISION HAS BEEN DISMISSED BY THE SUPREME COURT WE ACCORDINGLY, CONFIRM THE ORDER OF THE CIT(A) AND DISMISS BOTH THE APPEAL S. 13. SIMILAR FACTS ARE INVOLVED IN THE PRESENT CASE. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL AND THE HON BLE HIGH COURT MENTIONED ABOVE, WE HOLD THAT THE LEARNED CIT(A) WA S NOT JUSTIFIED IN SHRI HARDIK BHARAT PATEL 12 CONFIRMING THE ORDER OF AO, WHO TOOK THE TRANSACTIO N AS BUSINESS TRANSACTION INSTEAD OF TREATING THE SAME AS SHORT T ERM CAPITAL GAIN. LEARNED CIT(A) HAS CONFIRMED THE ORDER OF AO BY OBSERVING T HAT THE TRANSACTIONS ARE FREQUENT TRANSACTIONS, HOWEVER, WE ARE OF THE V IEW THAT THE HOLDING PERIOD CANNOT BE TAKEN INTO CONSIDERATION BECAUSE U NDER THE ACT ITSELF, IT HAS BEEN PROVIDED THAT WHERE THE HOLDING PERIOD OF SHARES ARE MORE THAN ONE YEAR THEN THE LONG TERM CAPITAL GAIN WILL BE AP PLICABLE AND WHERE THE HOLDING PERIOD IS LESS THAN ONE YEAR, THEN THE SHOR T TERM CAPITAL GAIN WILL BE APPLICABLE, SUBJECT TO THE TRANSACTION ARE SHOWN UN DER THE HEAD INVESTMENT PORTFOLIO. THEREFORE, WHETHER THE TRANSACTION ARE F REQUENT OR HOLDING PERIOD IS LESS, THEY ARE SHOWN UNDER THE HEAD INVESTMENT P ORTFOLIO, THEREFORE, THE TRANSACTION WHICH HAVE BEEN SHOWN UNDER THE HEAD IN VESTMENT PORTFOLIO AND, HENCE, THE SHORT TERM CAPITAL GAIN OR LONG TER M CAPITAL GAIN AS THE CASE MAY BE, WILL BE APPLICABLE. IN VIEW OF THESE FACTS AND CIRCUMSTANCES, WE ALLOW THE GROUNDS OF THE ASSESSEE FOR BOTH OF THE Y EARS AND DIRECT THE AO TO ASSESS THE PROFIT UNDER THE HEAD SHORT TERM CAPITAL GAIN INSTEAD OF UNDER THE HEAD BUSINESS PROFIT. 2.3. WE FIND THAT THE TRIBUNAL ON IDENTICAL FACT, T HAT TO IN THE CASE OF ASSESSEE ITSELF, FOR ASSESSMENT YEARS 2007- 08 AND 2008-09 DELIBERATED UPON THE ISSUE AND AFTER CONSID ERING VARIOUS DECISIONS INCLUDING FROM HONBLE JURISDICTI ONAL HIGH COURT REACHED TO A PARTICULAR CONCLUSION AND DIRECT ED THE ASSESSING OFFICER TO ASSESS THE PROFIT OF THE ASSES SEE UNDER THE HEAD SHORT TERM CAPITAL GAINS INSTEAD OF BUSINES S PROFIT. SINCE, NO CONTRARY FACTS/JUDICIAL PRONOUNCEMENTS WE RE BROUGHT TO OUR NOTICE, MORE SPECIFICALLY, BY THE REVENUE, W E FIND NO INFIRMITY IN THE CONCLUSION DRAWN BY THE LD. COMMIS SIONER OF INCOME TAX (APPEALS). THIS GROUND OF THE REVENUE, IS THEREFORE, DISMISSED. SHRI HARDIK BHARAT PATEL 13 2.4. THE NEXT GROUND RAISED PERTAINS TO DIRECTING T HE ASSESSING OFFICER TO TREAT THE NOTIONAL LOSS INCURRED IN F & O TRANSACTIONS AS NORMAL BUSINESS LOSS. AT THE OUTSET, THE LD. CO UNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE FACTUAL FINDING RECORDED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS). HOWE VER, THE LD. DR, DEFENDED THE CONCLUSION ARRIVED AT IN THE ASSES SMENT ORDER BY ASSERTING THAT THE DIRECTION OF THE LD. FIRST AP PELLATE AUTHORITY IS CONTRARY TO FACTS. 2.5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND P ERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ASSESSING OFFICER MADE DISALLOWANCE OF LOSS ON DERIVATIVE TRA NSACTION OF RS.74,20,007/- HOLDING THE SAME AS SPECULATION LOSS BY OBSERVING THAT THE ASSESSEE DID NOT PRODUCE ANY DOC UMENTS WITH RESPECT TO ACTUAL PAYMENTS/RECEIPTS RELATING T O THE TRANSACTIONS AND FURTHER THERE IS NO EVIDENCE TO SH OW THAT F & O MARGINS WERE SETTLED BY ACTUAL CASH PAYMENTS. TH US, HE TREATED SUCH LOSS AS SPECULATION LOSS WHICH CANNOT BE SET OFF AGAINST THE BUSINESS INCOME. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) DEALT WITH THE ISSUE ELABORATELY AND AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE FOUND T HAT THE ASSESSEE REGULARLY CARRIED OUT DERIVATIVE TRANSACTI ONS OF F & O THROUGH RECOGNIZED STOCK EXCHANGE. THE POSITION HA VE BEEN PUT TO RAISED BY THE HONBLE JURISDICTIONAL HIGH CO URT IN THE CASE OF BHARAT RUIA (HUF) BY HOLDING THAT AFTER THE AMENDMENT THE DERIVATIVE TRANSACTION IN SHARES WILL NOT COME WITHIN THE AMBIT OF SPECULATIVE TRANSACTION U/S 43(5)(D) OF TH E ACT. THERE IS FURTHER UNCONTROVERTED FINDING IN THE IMPUGNED O RDER THAT THESE TRANSACTIONS WERE CARRIED OUT THROUGH RECOGNI ZED STOCK EXCHANGE. IN VIEW OF THIS UNCONTROVERTED FINDING, WE AGREE WITH SHRI HARDIK BHARAT PATEL 14 THE CONCLUSION DRAWN IN THE IMPUGNED ORDER THAT SUC H TRANSACTION WILL BE TREATED AS NORMAL BUSINESS PROF IT/LOSS AND CANNOT BE TREATED AS NOTIONAL LOSS. THE STAND OF T HE LD. COMMISSIONER OF INCOME TAX (APPEALS) IS AFFIRMED. T HIS GROUND OF THE REVENUE IS ALSO DISMISSED. FINALLY, THE APPEAL OF THE REVENUE IS DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVE FROM BOTH SIDES AT T HE CONCLUSION OF THE HEARING ON 03/03/2015. SD/ - (B.R. BASKARAN) SD/ - (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER ! ' MUMBAI; & DATED : 03/03/201 5 F{X~{T? P.S/. .. %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. '( )* / THE APPELLANT 2. +,)* / THE RESPONDENT. 3. ! - ( '( ) / THE CIT, MUMBAI. 4. ! - / CIT(A)- , MUMBAI 5. / 0 + 1 , '($ '1 2 , ! ' / DR, ITAT, MUMBAI 6. 0 3 4 ' / GUARD FILE. / BY ORDER, , /( + //TRUE COPY// / (DY./ASSTT. REGISTRAR) , ! ' / ITAT, MUMBAI