DCIT CIR 13(3), MUMBAI V. ANILKUMAR R. BANSAL, MUMBAI

ITA 930/MUM/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62339 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-05-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 22-02-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 05-02-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P K B MENON
• Assessee Lawyers: M MANI
• Keywords: Capital asset; Business income; Rule of consistency; Question of law; Speculative transactions
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'G' BENCH, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ITA NO. 930/MUM/2010 (ASSESSMENT YEAR: 2006-07) A C I T - 13(3) SHRI ANILKUMAR R. BANSAL ROOM NO. 430, 4TH FLOOR 515, GIRIRAJ, SANT TUKARAM ROAD AAYAKAR BHAVAN, M.K. ROAD VS. MUMBAI 400009 MUMBAI 400020 PAN - AABPB 7358 M APPELLANT RESPONDENT APPELLANT BY: SHRI P.K.B. MENON RESPONDENT BY: SHRI M. MANI DATE OF HEARING: 12.04.2012 DATE OF PRONOUNCEMENT: .04.2012 O R D E R PER D. MANMOHAN, V.P . THIS IS AN APPEAL FILED AT THE INSTANCE OF THE REVE NUE AND IT PERTAINS TO A.Y. 2006-07. 2. THE GROUNDS URGED BEFORE US ARE TAKEN UP IN SEQU ENCE WITH REFERENCE TO THE FACTS NECESSARY FOR DISPOSAL OF EACH ISSUE. 3. VIDE GROUND NO. 1 THE REVENUE CONTENDS THAT THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION OF ` 23,57,672/- MADE BY THE A.O. AS BUSINESS INCOME AS AGAINST STCG SHOWN BY THE ASSESSEE. ASSES SEE IS A PROPRIETOR OF M/S. HANUMAN INVESTMENT & CONSULTANCY DEALING IN IN VESTMENTS AND CONSULTANCY. ASSESSEES TOTAL INCOME COMPRISES OF I NCOME FROM BUSINESS, CAPITAL GAINS AND INCOME FROM OTHER SOURCES. IN RES PECT OF THE PREVIOUS YEAR RELEVANT TO A.Y. 2006-07 ASSESSEE DECLARED A TOTAL INCOME OF ` 25,86,200/- WHICH COMPRISES OF A SUM OF ` 23,57,672/- DECLARED UNDER THE HEAD SHORT TERM CAPITAL GAINS. THE CASE HAVING BEEN TAKEN UP FOR SCRUTINY, THE AO CALLED FOR THE DETAILS WITH REGARD TO THE TRANSACTI ONS WHICH HAD GIVEN RISE TO ITA NO. 930/MUM/2010 2 THE SHORT TERM CAPITAL GAINS. AO NOTICED THAT DURIN G THE RELEVANT PREVIOUS YEAR ASSESSEE CARRIED OUT 775 TRANSACTIONS OF PURCH ASE AND SALE OF SHARES. 4. THE CASE OF THE ASSESSEE WAS THAT HE WAS AN INVE STOR IN SHARES AND HAS NEVER SHOWN THE SHARES AS STOCK-IN-TRADE. HE HA S TAKEN DELIVERY OF ALL SHARES AND HELD THEM AS INVESTMENT. SHARES WERE SOL D AS PER THE MARKET CONDITIONS AND SALES COMPLETED WITHIN ONE YEAR OF I TS PURCHASE WERE DECLARED AS SHORT TERM CAPITAL GAINS AND THE BALANC E AS LONG TERM CAPITAL GAINS. THE INTENTION OF THE ASSESSEE TO HOLD THE SH ARES AS INVESTMENT HAS TO BE TAKEN INTO CONSIDERATION WHICH CAN BE VERIFIED F ROM THE BALANCE SHEET AND THE QUANTUM OF TRANSACTIONS SHOULD NOT BE A FAC TOR FOR CONSIDERATION. 5. THE AO HAVING CALLED FOR THE DETAILS, HE HAS ANA LYSED THE SHARE TRANSACTIONS AS UNDER: - S.NO. PERIOD OF HOLDING (IN MONTHS) NO. OF TRANSACTIONS VOLUME OF TRANSACTION (RS.) PERCENTAGE OF TRANSACTION IN VOLUME PERCENTAGE OF TRANSACTIONS IN NUMBER 1 0 (SAME DAY) 508 4,75,31,717 74% 66% 2 0-1 MONTH 117 79,86,780 12% 15% 3 1-2 MONTHS 36 29,69,151 5% 5% 4 2-3 MONTHS 28 19,64,034 3% 4% 5 3-4 MONTHS 18 17,35,275 3% 2% 6 4-5 MONTHS 15 7,76,292 1% 2% 7 5-6 MONTHS 19 4,51,842 1% 2% 8 7-12 MONTHS 34 5,88,635 1% 4% PERCENTAGE OF TRANSACTIONS IN TERMS OF VALUE AND NUMBER CARRIED OUT DURING THE PERIOD OF 6 MONTHS 99% 96% TOTAL 775 6,40,03,726 100% 100% SINCE THIS DATA INDICATES FREQUENCY OF PURCHASE AND SALE OF SHARES, THE AO CONCLUDED THAT THE ASSESSEE IS NOT AN INVESTOR BUT ACTED AS A TRADER, I.E. TO EARN PROFIT ON SALE OF SHARES. 6. HE FURTHER OBSERVED THAT AFTER INTRODUCTION OF SECURITY TRANSACTION TAX W.E.F. 01.10.2004 AN ASSESSEE HAS TO MAINTAIN TWO SEPARATE PORTFOLIOS ITA NO. 930/MUM/2010 3 COMPRISING OF SECURITIES WHICH ARE TO BE TREATED AS CAPITAL ASSETS AND A TRADING PORTFOLIO COMPRISING OF STOCK-IN-TRADE. IN THE INSTANT CASE THE ASSESSEE HAS DECLARED THE SHARES ONLY AS INVESTMENT . HE THEN EMBARKED UPON ANALYSING THE EXPRESSION BUSINESS, AS DEFINE D IN SECTION 2(13) OF THE INCOME TAX ACT, TO HIGHLIGHT THAT THE EXPRESSION B USINESS IS A WORD OF LARGE AND INDEFINITE IMPORT WHICH INDICATES ANY TRADE, CO MMERCE OR MANUFACTURE OR ANY ADVENTURE IN THE NATURE OF TRADE. THUS ANY C ONTINUED ACTIVITY WITH AN INTENTION TO MAKE PROFIT, DEPENDING ON THE VOLUME, FREQUENCY, ETC. SHOULD ORDINARILY BE TREATED AS AN ACTIVITY ENTERED INTO W ITH PROFIT MOTIVE AND CONSEQUENTLY THE INCOME THEREFROM IS TAXABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. IN THE INSTANT CA SE THE CONDUCT OF THE ASSESSEE CLEARLY SHOWS THAT THE INVESTMENT WAS FOR EARNING PROFIT BY SELLING SHARES AT THE QUICKEST POSSIBLE TIME. THE PERIOD OF HOLDING WAS 0-1 MONTH OR 0-2 MONTHS. 66% OF THE TRANSACTIONS ARE REFERABLE T O THE PURCHASES MADE ON A PARTICULAR DATE AND SOLD ON THE SAME DATE. THE IN FRASTRUCTURE EMPLOYED AND CO-RELATION WITH OTHER ACTIVITIES OF THE ASSESS EE PROVES THAT HE HAD INDULGED IN THE BUSINESS OF PURCHASE AND SALE OF SH ARES. THE SCALE OF TRANSACTIONS WAS SUBSTANTIAL AND THE SHARES WERE TR ANSACTED CONTINUOUSLY AND REGULARLY DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. IN TERMS OF VOLUME OF TRANSACT ION 91% OF THE PROFIT WAS DERIVED FROM PURCHASE AND SALE OF SHARES WITHIN A S HORT SPAN OF TWO MONTHS AND THUS THE A.O. HELD THAT THE INTENTION WAS TO EA RN MORE PROFIT BY INDULGING IN FREQUENT PURCHASE AND SALE OF SHARES. IN PARA 6.21 HE OBSERVED THAT EVEN PAST RECORDS INDICATE THAT THE ASSESSEE W AS ENGAGED IN SALE AND PURCHASE OF SHARES IN HUGE QUANTITIES AND ALMOST 90 % OF ASSESSEES INVESTMENT IS CHANGING HANDS WITHIN THE SAME YEAR O R NEXT. 7. AS REGARDS APPLICABILITY OF RES JUDICATA, THE AO OBSERVED THAT THE DOCTRINE OF RES JUDICATA APPLIES TO THE DECISIONS O F CIVIL COURTS AND IT HAS NO APPLICATION TO THE DECISIONS OF INCOME TAX AUTHORIT IES SO AS TO PRECLUDE THE DETERMINATION OF A QUESTION IN A SUBSEQUENT ASSESSM ENT YEAR (NEW JEHAGIR VAKIL MILLS CO. LTD. VS. CIT (1963) 49 ITR 137 (SC) . HE ALSO NOTED THAT THE FACTS OF EACH YEAR ARE TO BE LOOKED INTO BEFORE CON SIDERING AS TO WHETHER THE ITA NO. 930/MUM/2010 4 INTENTION WAS TO INVEST IN SHARES OR TO HOLD THEM A S STOCK-IN-TRADE. THUS HE CONCLUDED THAT THE ASSESSEE WAS A TRADER IN SHARES. 8. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE T HE CIT(A) 24, MUMBAI WHEREIN IT WAS CONTENDED THAT THE AO HAS ARB ITRARILY TREATED THE PROFIT ON SALE OF SHARES AS BUSINESS INCOME INSTEAD OF TREATING IT AS SHORT TERM CAPITAL GAINS. THE COUNSEL APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED BEFORE THE LEARNED CIT(A) THAT THE ASSESS EE WAS PRIMARILY A BROKER HAVING A PROPRIETARY BUSINESS IN THE NAME OF M/S. H ANUMAN INVESTMENTS & CONSULTANCY AND HENCE HE HAD NO TIME TO CONDUCT AN ORGANISED BUSINESS ACTIVITY. UNIFORM TREATMENT WAS GIVEN BY THE ASSESS EE TO HIS INVESTMENT IN SHARES IN ALL THE YEARS AND THERE WAS NO CHANGE IN THE ACTIVITY/MODUS OPEARNDI OR INTENTION AND HE HAS ALWAYS REFLECTED H IS HOLDINGS AS INVESTMENTS IN THE BALANCE SHEET. IT WAS FURTHER SU BMITTED THAT IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR THE INCOME WA S DECLARED UNDER THE HEAD CAPITAL GAINS AND THE SAME WAS ACCEPTED BY THE DEPARTMENT. THIS IS THE FIRST YEAR WHERE THE AO PROPOSES TO CHANGE THE TREATMENT FROM SHORT TERM CAPITAL GAINS TO BUSINESS INCOME. THIS IS IMPE RMISSIBLE IN LAW IN THE LIGHT OF THE DECISION OF THE APEX COURT IN THE CASE OF RADHASAOMI SATSANG 193 IT 321 (SC). 9. LEARNED CIT(A) OBSERVED THAT THE ASSESSEE CARRIE D OUT 775 TRANSACTIONS OF PURCHASE AND SALE OF SHARES OUT OF WHICH, SAME DAY TRANSACTIONS WORK OUT TO 508. IN THIS REGARD HE OBSERVED THAT SUCH SHARES WOULD N OT HAVE BEEN TRANSFERRED TO THE NAME OF THE ASSESSEE BEFORE SALE AND HENCE THEY DES ERVE TO BE CONSIDERED AS SPECULATIVE TRANSACTIONS AND, INCOME THEREFROM HAS TO BE TREATED AS INCOME FROM SPECULATION. IT MAY BE NOTICED THAT THE ASSESSEE HA S NOT PREFERRED ANY APPEAL AGAINST THE ABOVE MENTIONED OBSERVATIONS. LEARNED C IT(A) FURTHER NOTICED THAT THE OPENING CAPITAL AVAILABLE TO THE ASSESSEE WAS ` 25,71,136/- WHICH IS LESS THAN THE INVESTMENT IN SHARES AND THUS THE ASSESSEE WOULD H AVE USED BORROWED FUNDS FOR SUCH INVESTMENTS. HE THEREAFTER OBSERVED THAT THE A SSESSEE HAD INFUSED FURTHER FUNDS IN AUGUST 2005, BY VIRTUE OF WHICH OWN FUNDS WERE SUFFICIENT TO MEET THE INVESTMENTS IN SHARES FOR THE SUBSEQUENT PERIOD. UN DER THE CIRCUMSTANCES, HE CONCLUDED, TILL SUCH FURTHER INVESTMENT WAS MADE BY THE ASSESSEE, SHARES WOULD ITA NO. 930/MUM/2010 5 HAVE BEEN PURCHASED WITH BORROWED FUNDS; CONSEQUENT LY INCOME FROM SUCH TRANSACTIONS SHOULD BE TREATED AS BUSINESS INCOME. IN PARAGRAPH 3 OF HIS ORDER LEARNED CIT(A) HAS PROJECTED THESE FINDINGS BY WAY OF A CHART WHICH SHOWS THAT 74% OF THE TRANSACTIONS (IN VOLUME) AND 66% TRANSAC TIONS (IN NUMBER) GIVE RISE TO SPECULATION INCOME AND 17% & 20% RESPECTIVELY GIVE RISE TO BUSINESS INCOME. ON THIS FINDING ALSO THE ASSESSEE DID NOT PREFER ANY A PPEAL BEFORE THE TRIBUNAL. IN OTHERWORDS, THE ASSESSEE ACCEPTED THE FINDINGS OF L EARNED CIT(A). HOWEVER, WITH REGARD TO THE BALANCE TRANSACTIONS I.E. 9% IN TERMS OF VOLUME AND 14% IN TERMS OF NUMBER, CIT(A) TREATED THEM AS INVESTMENTS AND IN T HIS REGARD HE OBSERVED THAT MERELY BECAUSE VOLUME OF TRANSACTIONS IS SOMEWHAT L ARGE IT IS NOT DECISIVE TO COME TO A CONCLUSION THAT THE ASSESSEE IS A TRADER IN SH ARES. 10. AGGRIEVED BY THE FINDING OF LEARNED CIT(A) THAT 9% OF THE TRANSACTIONS (IN VOLUME) GIVES RISE TO SHORT TERM CAPITAL GAINS, THE REVENUE IS IN APPEAL BEFORE US. 11. LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED T HAT EVEN THE ASSESSEE HAD ADMITTED THAT HE IS ENGAGED IN SPECULATIVE TRANSACT IONS AND BUSINESS TRANSACTIONS, DESPITE RECORDING IN THE BOOKS THAT THEY ARE IN THE NATURE OF INVESTMENT. THE INTENTION OF THE ASSESSEE HAS TO BE GIVEN DUE WEIGH TAGE RATHER THAN GOING BY NOMENCLATURE GIVEN IN THE BOOKS OF ACCOUNT. THE ASS ESSEE HAVING NOT PREFERRED AN APPEAL AGAINST THE FINDINGS OF LEARNED CIT(A), IT P ROVES THAT THOUGH THE ASSESSEE HAS REFLECTED SHARE PURCHASES AS INVESTMENT IN ITS BOOKS, THE INTENTION WAS TO CARRY ON BUSINESS/SPECULATION IN PURCHASE AND SALE OF SHA RES. IN FACT 91% OF THE TOTAL VOLUME OF TRANSACTIONS WAS IN THE NATURE OF SPECULA TION/BUSINESS, AS ADMITTED BY THE ASSESSEE, AND HENCE, MERELY BECAUSE THE ASSESSI NG OFFICER HAS ACCEPTED THE RETURN OF THE ASSESSEE IN THE EARLIER YEAR OR IN TH E SUBSEQUENT YEAR, IT WOULD NOT ACT AS RES-JUDICATA. 12. ON THE OTHER HAND LEARNED COUNSEL FOR THE ASSES SEE SUBMITTED THAT EVEN FOR THE SUBSEQUENT YEAR THE DEPARTMENT HAS ACCEPTED HIS TRANSACTIONS AS INVESTMENT. IN RESPECT OF A.Y. 2009-10, THE ASSESSEE DECLARED T HE INCOME FROM SALE OF SHARES AS SHORT TERM/LONG TERM CAPITAL GAINS AND THE SAME WAS ACCEPTED BY THE ASSESSING OFFICER IN AN ORDER PASSED U/S. 143(3) OF THE ACT ( A.Y. 2009-10). THIS IS THE ONLY YEAR WHEREIN THE TRANSACTIONS WERE TREATED AS BUSI NESS TRANSACTIONS. LEARNED COUNSEL FOR THE ASSESSEE RELIED UPON THE DECISION O F ITAT H BENCH, MUMBAI IN THE CASE OF HITESH SATISHCHANDRA DOSHI (46 SOT 336) IN SUPPORT OF HIS CONTENTION THAT RULE OF CONSISTENCY HAS TO BE FOLLOWED AND, IN THE LIGHT OF THE DECISION OF HON'BLE ITA NO. 930/MUM/2010 6 BOMBAY HIGH COURT IN THE CASE OF GOPAL PUROHIT (20 DTR 99), INCOME ON SALE OF SHARES HELD BY THE ASSESSEE FOR MORE THAN 2 MONTHS SHOULD BE TREATED AS SHORT TERM CAPITAL GAINS. IN THE CASE OF HITESH SATISHCHA NDRA DOSHI VS. JCIT, THE BENCH OBSERVED THAT RESHUFFLING OF PORTFOLIOS IN A SHORT PERIOD MAY NOT NECESSARILY BE AN ACTIVITY OF TRADING WHEN THE INTENTION IS TO REDUCE RISK OF LOSS OF CAPITAL. UNDER THE CIRCUMSTANCES IT HELD THAT UNIFORMITY IN TREATMENT HAS TO BE MAINTAINED WHEN THE FACTS AND CIRCUMSTANCES ARE IDENTICAL. 13. IT MAY BE NOTICED THAT THE ASSESSEE HAS FILED A PAPER BOOK CONSISTING OF LIST OF TRANSACTIONS I.E. NAME OF THE COMPANY, QUANTITY, DATE OF PURCHASE, DATE OF SALE AND PROFIT/LOSS ON THE SAID TRANSACTIONS ETC. 14. WE HAVE CAREFULLY PERUSED THE TRANSACTIONS. THE Y INDICATE THAT MOST OF THE SHARES WERE PURCHASED AND SOLD ON THE SAME DATE AND SHARES OF THE SAME COMPANY WAS AGAIN PURCHASED AT REGULAR INTERVALS. FOR EXAMP LE, SHARES OF JINDAL PHOT WERE PURCHASED ON 6.4.2005 AND SOLD ON THE SAME DATE BUT ON THE NEXT DAY I.E. 7.4.2005 ASSESSEE PURCHASED ANOTHER 750 SHARES OF THE SAME C OMPANY AND AGAIN SOLD THEM ON THE SAME DATE. ONCE AGAIN SHARES OF JINDAL PHOT WERE PURCHASED ON 16.6.2006 AND SOLD THEM ON THE SAME DATE AND THERE WERE MANY MORE TRANSACTIONS OF THE SAME COMPANY OR DIFFERENT COMPANIES ON THE SAME LIN ES, WHICH CLEARLY REFLECT THE INTENTION OF THE ASSESSEE. 15. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ON AND PERUSED THE RECORD. IN OUR OPINION THE PLEA OF THE REVENUE DESERVES ACC EPTANCE. LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE DECISION OF THE ITAT MUMBAI BENCH IN THE CASE OF SMT. HARSHA N. MEHTA (43 SOT 332) IN SUPPORT OF HIS CONTENTION THAT WHETHER TRANSACTIONS OF SALE AND PURCHASE OF SHARES IS TRA DING OR INVESTMENT, IS A MIXED QUESTION OF FACT AND LAW AND IT HAS TO BE DECIDED O N CERTAIN LEGAL PRINCIPLES (LISTED BELOW) ENUNCIATED BY VARIOUS COURTS INCLUDING HON'B LE BOMBAY HIGH COURT IN THE CASE GOPAL PUROHIT (SUPRA). (A) IT IS POSSIBLE FOR AN ASSESSEE TO BE BOTH AN INVEST OR AS WELL AS DEALER IN SHARES. (B) WHETHER A TRANSACTION OF SALE AND PURCHASE OF SHARE S IS A TRADING OR INVESTMENT TRANSACTION IS A MIXED QUESTION OF LAW A ND FACT. (C) WHETHER A PARTICULAR HOLDING IS BY WAY OF INVESTMEN T OR OF STOCK-IN- TRADE IS A MATTER WITHIN THE KNOWLEDGE OF THE ASSES SEE AND IT IS FOR ITA NO. 930/MUM/2010 7 THE ASSESSEE TO PRODUCE EVIDENCE FROM THE RECORDS A S TO WHETHER HE MAINTAINED ANY DISTINCTION BETWEEN SHARES HELD AS I NVESTMENTS AND THOSE HELD AS STOCK-IN-TRADE. (D) THE TREATMENT IN THE BOOKS OF AN ASSESSEE IS NOT CO NCLUSIVE AND IF THE VOLUME, FREQUENCY AND REGULARITY AT WHICH TRANSACTI ONS ARE CARRIED OUT INDICATE SYSTEMATIC AND ORGANIZED ACTIVITY WITH PROFIT MOTIVE, THEN IT BECOMES BUSINESS PROFIT AND NOT CAPITAL GAI N. (E) PURCHASE WITH INTENTION TO RESELL CAN CONSTITUTE CA PITAL GAIN OR BUSINESS PROFIT DEPENDING ON CIRCUMSTANCES LIKE QUA NTITY OF PURCHASE AND NATURE OF ACTIVITY. (F) NO SINGLE FACT HAS ANY DECISIVE SIGNIFICANCE AND TH E QUESTION MUST BE ANSWERED DEPENDING UPON SELECTIVE EFFECT OF ALL REL EVANT MATERIALS BROUGHT ON RECORD. 16. ITAT E BENCH, MUMBAI IN THE CASE OF SHRI SUME GH MODI (ITA NO.5599/MUM/2010 DATED 12.10.2011) REITERATED THIS PRINCIPLE; IN ADDITION THERETO, THE BENCH HAD AN OCCASION TO CONSIDER THE SCOPE AND AMBIT OF PRINCIPLE OF RES-JUDICATA IN INCOME TAX PROCEEDINGS. THE BENCH O BSERVED THAT THE PRINCIPLES OF RES-JUDICATA DO NOT APPLY TO INCOME TAX PROCEEDINGS , SINCE EACH ASSESSMENT YEAR IS SEPARATE AND DISTINCT. 17. IN THIS BACKDROP, LET US ANALYSE THE FACTS IN T HE INSTANT CASE. THERE IS NOTHING ON RECORD TO SUGGEST THAT IN THE IMMEDIATEL Y PROCEEDING YEAR THE ASSESSING OFFICER HAD AN OCCASION TO CONSIDER THE ISSUE IN GR EAT DETAIL. IN OTHERWORDS, IT IS NOT THE CASE OF THE ASSESSEE THAT THE ASSESSING OFFICER WAS AWARE OF THE FACT THAT THERE WERE REPEATED TRANSACTIONS OF THE SAME SCRIPS; IT I S NOT STATED THAT BORROWED FUNDS WERE UTILISED FOR PURCHASE OF SHARES AND DESPITE SU CH FACTUAL MATRIX THE ASSESSING OFFICER HAS ACCEPTED THE PURCHASE AS INVESTMENT A ND NOT AS STOCK-IN-TRADE. IT APPEARS THAT FOR THE IMMEDIATELY PRECEDING ASSESSME NT YEAR RETURN OF INCOME WAS PROCESSED U/S. 143(1) OF THE ACT AND HENCE THE ASSE SSING OFFICER APPEARS TO HAVE NOT APPLIED HIS MIND. IN RESPECT OF THE A.Y. 2007-0 8, LEARNED CIT(A) VIDE ORDER DATED 28.10.2010 ACCEPTED THE PLEA OF THE ASSESSEE BY FOLLOWING HIS OWN ORDER FOR A.Y. 2006-07 WHICH IS IN APPEAL BEFORE US AND, IT I S MYSTERIOUS AS TO WHY THE REVENUE HAS NOT PREFERRED ANY APPEAL FOR THE NEXT A SSESSMENT YEAR. IN RESPECT OF A.Y. 2009-10, THOUGH AN ORDER WAS PASSED U/S. 143(3 ) OF THE ACT, THE ASSESSING OFFICER HAS NOT INDICATED AS TO WHETHER THERE WERE REPETITIVE TRANSACTIONS OF SAME SCRIPS/SIMILAR SCRIPS. AT ANY RATE, IF PRINCIPLE OF RES-JUDICATA HAS TO BE APPLIED, THE SAME PRINCIPLE SHOULD EQUALLY APPLY TO THE ASSESSEE SINCE THE ASSESSEE HAS ADMITTED THAT PART OF THE TRANSACTIONS ARE SPECULAT IVE/BUSINESS IN NATURE AND NO ITA NO. 930/MUM/2010 8 APPEAL WAS PREFERRED BEFORE THE APPELLATE TRIBUNAL BY THE ASSESSEE. IN FACT, LEARNED CIT(A) HAS GIVEN CATEGORICAL FINDING THAT 74% OF TH E TRANSACTIONS ARE SPECULATIVE IN NATURE AND 17% TRANSACTIONS GIVE RISE TO BUSINESS I NCOME AND THUS OUT OF THE TOTAL VOLUME OF TRANSACTIONS, 91% ARE IN THE NATURE OF BU SINESS TRANSACTIONS. WHEN THIS FINDING WAS ACCEPTED BY THE ASSESSEE, JUST BECAUSE FEW SHARES WERE HELD FOR MORE THAN TWO MONTHS THE SAME TRANSACTION WOULD NOT BECO ME INVESTMENT IN NATURE. IN OTHERWORDS, IF THE ASSESSEE IS HELD TO BE CARRYING ON BUSINESS IN SHARES, THE MODE OF RECORDING TRANSACTIONS IN THE BOOKS OR ITS HOLD ING PERIOD ARE NOT DETERMINATIVE FACTORS TO UNDERSTAND THE NATURE OF TRANSACTIONS. W E THEREFORE ACCEPT THE PLEA OF THE REVENUE BY HOLDING THAT THE INCOME EARNED ON SA LE OF SHARES SHOULD BE TAXED UNDER THE HEAD PROFITS AND GAINS OF BUSINESS/PROFE SSION. IN THE RESULT, ORDER OF CIT(A) ON THIS ISSUE IS SET ASIDE AND WE UPHOLD THE ORDER OF THE AO. 18. VIDE GROUND NO. 2 THE REVENUE SUBMITS THAT LEAR NED CIT(A) ERRED IN DELETING THE ADDITION OF ` 3,11,167/- REFERABLE TO COMMISSION. 19. FACTS IN SHORT ARE THAT THE ASSESSEE CREDITED A TOTAL AMOUNT OF ` 4,10,700/- ON ACCOUNT OF BROKERAGE. DURING THE COURSE OF ASSES SMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO FURNISH DETAILS OF BROKERAGE RECEIVED. DETAILS FURNISHED BY THE ASSESSEE INDICATE THAT HE HAS RECEIVED A SUM OF ` 7,21,867/- TOWARDS BROKERAGE THOUGH THE ASSESSEE HAS CREDITED AN AMOUNT OF ` 4,10,700/- TO THE PROFIT AND LOSS ACCOUNT. IN THIS REGARD THE ASSESSEE SUBMITTED THAT THE DIFFERENTIAL AMOUNT WAS RETAINED BY M/S. PAS SECURITIES PVT. LTD. THE ASSE SSING OFFICER EXAMINED THE COPY OF AGREEMENT DATED 8.7.1999 BETWEEN PAS SECURITIES PVT. LTD. AND THE ASSESSEE TO CONCLUDE THAT THERE IS NO SUCH LIABILITY/REQUIREMEN T AND, HENCE THE ENTIRE AMOUNT RECEIVED BY THE ASSESSEE WAS TREATED AS INCOME OF THE ASSESSEE. 20. LEARNED CIT(A) OBSERVED THAT THE COMMISSION IS DEDUCTED DIRECTLY BY THE MAIN BROKER PAS SECURITIES PVT. LTD. AND THE BALANC E WAS PAID TO THE ASSESSEE AFTER DEDUCTING TAX (TDS) AND THIS IS SUPPORTED BY A CERT IFICATE ISSUED IN FORM NO. 16A. HAVING REGARD TO THIS SUBMISSION, LEARNED CIT(A) SE T ASIDE THE ADDITION OF ` 3,11,167/-. 21. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 22. LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED T HAT THE ASSESSEE IS NOT LIABLE TO PAY COMMISSION/BROKERAGE AND HENCE THE EN TIRE INCOME IS ASSESSABLE TO TAX IN THE HANDS OF THE ASSESSEE. IT WAS FURTHER C ONTENDED THAT MERELY BECAUSE TAX ITA NO. 930/MUM/2010 9 WAS DEDUCTED AT SOURCE IT CANNOT BE SAID THAT THERE IS A LIABILITY UPON THE ASSESSEE TO MAKE SUCH PAYMENT. IT IS A CASE OF MERE APPLICAT ION OF INCOME WHICH HAS TO BE ASSESSED TO TAX IN THE HANDS OF THE ASSESSEE AND DE DUCTION IS PERMISSIBLE ONLY IF UPON PROVING THAT THE ASSESSEE IS LIABLE TO PAY TO PAS SYSTEMS. 23. ON THE OTHER HAND LEARNED COUNSEL FOR THE ASSES SEE SUBMITTED THAT THE COMMISSION PAYMENT IS BASED UPON THE AGREEMENT AND HENCE LIABILITY IS PROVED. HOWEVER, NO MATERIAL WHATSOEVER WAS PLACED BEFORE U S TO PROVE THAT THE LIABILITY WAS FASTENED UPON THE ASSESSEE. PERUSAL OF THE ORDE R OF LEARNED CIT(A) SHOWS THAT HE MERELY RELIED UPON THE TDS CERTIFICATE, WITHOUT CONTRADICTING THE FINDINGS OF AO WITH REGARD TO CONTENTS IN THE AGREEMENT. IN THE IN TERESTS OF SUBSTANTIAL JUSTICE, WE RESTORE THE ISSUE TO THE FILE OF THE ASSESSING OFFI CER FOR FRESH ADJUDICATION. NEEDLESS TO OBSERVE THAT THE ASSESSEE HAS TO PROVE THAT LIAB ILITY HAS ACCRUED IN RESPECT OF IMPUGNED SUM AND IT WAS NOT AN APPLICATION OF INCOM E. GROUND NO. 2 IS DISPOSED OF ACCORDINGLY. 24. IN THE RESULT APPEAL FILED BY THE REVENUE IS TR EATED AS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 ND MAY, 2012. SD/- SD/- (N.K. BILLAIYA) (D. MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT MUMBAI, DATED: 2 ND MAY 2012 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 24, MUMBAI 4. THE CIT 13, MUMBAI CITY 5. THE DR, G BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI PS