ACIT 143(3), MUMBAI v. HASMUKH C. SHAH, MUMBAI

ITA 2321/MUM/2010 | 2006-2007
Pronouncement Date: 29-07-2011 | Result: Allowed

Appeal Details

RSA Number 232119914 RSA 2010
Assessee PAN AAOPS7601M
Bench Mumbai
Appeal Number ITA 2321/MUM/2010
Duration Of Justice 1 year(s) 4 month(s) 5 day(s)
Appellant ACIT 143(3), MUMBAI
Respondent HASMUKH C. SHAH, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 29-07-2011
Appeal Filed By Department
Order Result Allowed
Bench Allotted H
Tribunal Order Date 29-07-2011
Date Of Final Hearing 12-07-2011
Next Hearing Date 12-07-2011
Assessment Year 2006-2007
Appeal Filed On 24-03-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H MUMBAI BEFORE SHRI P.M.JAGTAP ACCOUNTANT MEMBER & SHRI R.S. PADVEKAR JUDICIAL MEMBER. I.T.A. NO. 2321/MUM/2010. ASSESSMENT YEAR : 2006-07 ASSTT. COMMISSIONER OF INCOME-TAX HASMUKH C. SHAH 14(3) MUMBAI. VS. 22 SHREEJI BHAVAN 2 ND FLOOR 51 MANGALDAS ROAD MUMBAI 400 002. PAN AAOPS7601M. APPELLANT. RESPONDENT. APPELLANT BY : SHRI M.R. KUBAL. RESPONDE NT : SHRI HITEN VASANT. O R D E R. PER P.M. JAGTAP A.M. : THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST TH E ORDER OF LEARNED CIT(APPEALS)-25 MUMBAI DATED 05-01-2010 WHEREBY HE ACCEPTED THE TREATMENT GIVEN BY THE ASSESSEE TO THE PROFIT ON SALE OF SHAR ES AS CAPITAL GAIN AS AGAINST THE TREATMENT GIVEN BY THE AO TO THE SAID PROFIT AS BUS INESS INCOME. 2. THE ASSESSEE IN THE PRESENT CASE IS AN INDIVIDUA L WHO IS ENGAGED IN THE BUSINESS OF DEALING IN DISPOSABLE SURGICAL ITEMS UN DER THE NAME AND STYLE OF HIS PROPRIETARY CONCERN M/S CHIMANLAL SHAH & CO. THE RE TURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY HIM ON 31-10-2006 DECLARING A TOTAL INCOME OF RS.91 91 494/-. IN THE SAID RETURN THE PROFIT ON S ALE OF SHARES AMOUNTING TO RS.94 12 744/- WAS DECLARED BY THE ASSESSEE AS SHOR T TERM CAPITAL GAIN. DURING THE 2 ITA NO.2321/MUM/2010 ASSESSMENT YEAR : 2006-07. COURSE OF ASSESSMENT PROCEEDINGS THE AO REQUIRED T HE ASSESSEE TO EXPLAIN AS TO WHY THE SAID PROFIT ON SALE OF SHARES SHOULD NOT BE TREATED AS BUSINESS INCOME RATHER THAN CAPITAL GAIN. IN REPLY THE FOLLOWING S UBMISSION WAS MADE BY THE ASSESSEE IN WRITING : I AM DOING BUSINESS OF SURGICAL ITEMS SINCE LAST 40 YEARS & PAYING TAX SINCE LAST 40 YEARS. IN 1980-82 I HAVE STARTED INV ESTMENT IN SHARES SECURITIES BONDS MUTUAL FUNDS AS A INVESTORS BOTH AS SHORT TERM & LONG TERM. AS A INVESTORS I AM APPLYING IN PRIMARY MARKET IN PUBLIC ISSUES OF SHARES BONDS MUTUAL FUNDS & ALSO PURCHASING SHARES FROM S ECONDARY MARKET AS A INVESTORS RIGHT FROM THE BEGINNING. THE SAID INVESTMENT IS MADE WITH A VIEW OF SHORT TE RM & LONG TERM & NOT AS A TRADER. RIGHT FROM THE BEGINNING I HAVE SHOWN IN COME FROM SUCH INVESTMENT AS CAPITAL GAIN I.E. SHORT TERM OR LONG TERM & PAID TAXES THEREON TIME TO TIME. GENERALLY VOLUME OF TRANSACTIONS WILL BE MORE WHEN TEJI IS THERE & VOLUME OF TRANSACTION WILL BE LESS WHEN MANDI IS THERE. TH IS TIME TEJI IS STARTED FROM STARTING OF THE YEAR 2003 & GRADUALLY VOLUME HAVE B EEN INCREASED. THE INCOME TAX ACT DOES NOT SAY THAT WHAT IS TO BE TRE ATED AS CAPITAL GAIN & BUSINESS INCOME IN RESPECT OF SHARES TRANSACTIONS EVEN WHEN THE VOLUME OF TRANSACTION ARE HIGH OR LOW. HOWEVER I HAVE CATEGORICALLY DIFFERENTIATED THE SH ORT TERM CAPITAL GAIN THE LONG TERM CAPITAL GAIN THE SPECULATIVE TRANSACTION S & THE DERIVATIVES TRANSACTIONS & ALSO BUSINESS INCOME IN MY RETURN OF INCOME FOR A.Y. 2006- 07 FILED WITH YOUR GOODSELF. FURTHER I WANT TO CLARIFY THAT THE ASSESSEES HAS G OT RIGHT TO CHOOSE THE INCOME TO BE TREATED AS SHORT TERM CAPITAL GAIN OR BUSINESS INCOME. IN THE ABSENCE OF ANY CLARIFICATION FROM THE FINANCE MINIS TRY OF CENTRAL GOVERNMENT I HAVE TREATED MY INVESTMENT INCOME AS SHORT TERM CAPITALGAIN & NOT AS BUSINESS INCOME. FURTHER IN THE BALANCE SHEET I HAVE SHOWN SHARES A S INVESTMENT & NOT AS OPENING SOCK & CLOSING STOCK OF SHARES. 3 ITA NO.2321/MUM/2010 ASSESSMENT YEAR : 2006-07. IN THE PREVIOUS YEARS ALSO I HAVE SHOWN SUCH INCOME OF SHORT TERM CAPITAL GAINS AS SHORT TERM CAPITAL GAIN & NOT AS BUSINESS INCOME WHICH HAS BEEN ACCEPTED BY THE DEPARTMENT. FURTHER THAT VOLUME OF TRANSACTION SHOULD NOT BE B ASIS OF CONSIDERING SUCH INCOME AS BUSINESS INCOME. ACCORDINGLY THE SAME MA TTER DECIDED BY THE ITAT MUMBAI JUST BEFORE A YEAR. SO FROM THE ABOVE FACTS I MOST HUMBLY REQUEST YOUR GOODSELF THAT KINDLY TREAT MY OFFER OF SHORT TERM CAPITAL GAIN AS SHORT TERM CAPITAL GAIN ONLY & NOT AS BUSINESS INCOME. 3. THE ABOVE SUBMISSION MADE BY THE ASSESSEE WAS NO T FOUND ACCEPTABLE BY THE AO FOR THE FOLLOWING REASONS : (A) ON GOING THROUGH THE DETAILS FILED WITH THE RE TURN OF INCOME AND SUBMISSION MADE IT IS FOUND THAT THE ASSESSEE HAS MANY A TIME HELD THE SHARES FOR A FEW DAYS BEFORE SELLING THEM. INVESTORS WOULD NOT GENERALLY SELL OR PURCHASE WITH IN A SHORT PERIOD. THE PERIOD OF HOLDING OF SHARES CLEARLY SHOWS THAT THE INTENTION WAS NOT LONG TERM INVESTMENT BUT SHORT TERM TRADING PRO FIT. THESE TRANSACTIONS WERE MADE SOLELY WITH THE INTENTION OF RESALE AT A PROFIT RATHER THAN GENERATE INCOME FROM LONG TERM APPRECIA TION AND / OR FOR EARNING DIVIDEND. THE ACTIVITY HAS BECOME MORE A ME ANS TO EARN PROFIT RATHER THAN AN ACTIVITY OF INVESTMENT OF THE ASSESS EE. (B) UNDER THE INCOME TAX ACT INCOME IS ASSESSED ON ANNUAL BASIS AND THE ACTIVITIES OF THE ASSESSEE IN A PARTICULAR PREVIOUS YEAR NEED TO BE CONSIDERED FOR ASSESSING HIS INCOME FOR THAT PARTIC ULAR YEAR. THE FACTS OF THE CASE FOR THE PREVIOUS YEAR RELEVANT TO THE P RESENT ASSESSMENT YEAR CLEARLY SHOW THAT THE ASSESSEE HAS DEALT IN SH ARES WITH A PROFIT MOTIVE RATHER THAN GETTING INCOME IN THE FORM OF D IVIDEND. (C) THE ASSESSEE HAS PURCHASED & SOLD SHARES WITH A MOTIVE OF REALIZING PROFIT AND NOT TO DERIVE INCOME BY WAY OF DIVIDEND. THE NOMENCLATURE USED BY THE ASSESSEE IN THIS REGARD IS OF NO RELEV ANCE WERE THE FACTS OF THE CASE POINT OTHERWISE. 4 ITA NO.2321/MUM/2010 ASSESSMENT YEAR : 2006-07. (D) THE ASSESSEE STATES THAT HE HAS GOT RIGHT TO CH OOSE THE INCOME TO BE TREATED AS SHORT TERM CAPITAL GAIN OR BUSINESS INCO ME IN THE ABSENCE OF ANY CLARIFICATION. THE ASSESSEES CONTENTION CANNOT BE ACCEPTED AS THE HEADS OF INCOME DO NOT DEPEND ON THE CHOICE OF THE ASSESSEE BUT DEPEND UPON THE FACTS OF THE CASE. 4. FOR THE REASONS GIVEN ABOVE AND RELYING ON THE D ECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. H.H. LARSEN RE PORTED IN 160 ITR 67 THE AO HELD THAT THE TRANSACTIONS IN SHARES WERE ENTERED I NTO BY THE ASSESSEE ESSENTIALLY AS A TRADING ACTIVITY AND THE PROFIT FROM THE SAID TRA NSACTIONS WAS CHARGEABLE TO TAX UNDER THE HEAD PROFIT AND GAINS OF BUSINESS OR PRO FESSION. THE CLAIM OF THE ASSESSEE OF THE SAID PROFIT BEING SHORT TERM CAPITA L GAIN CHARGEABLE TO TAX AT LOWER RATE THEREFORE WAS NOT ACCEPTED BY THE AO AND THE SAME WAS BROUGHT TO TAX BY HIM IN THE HANDS OF THE ASSESSEE UNDER THE HEAD PR OFITS AND GAINS OF BUSINESS OR PROFESSION IN THE ASSESSMENT COMPLETED U/S 143(3) VIDE AN ORDER DATED 23-12- 2008. 5. AGAINST THE ORDER PASSED BY THE AO U/S 143(3) A N APPEAL WAS PREFERRED BY THE ASSESSEE BEFORE THE LEARNED CIT(APPEALS) AND TH E SUBMISSION MADE BEFORE THE AO WAS REITERATED ON BEHALF OF THE ASSESSEE BEFORE THE LEARNED CIT(APPEALS). FURTHER RELIANCE WAS ALSO PLACED ON BEHALF OF TH E ASSESSEE ON THE DECISION OF TRIBUNAL IN THE CASE OF GOPAL PUROHIT VS. JCIT REPO RTED IN (2009) 20 DTR (MUMBAI) 99. THE LEARNED CIT(APPEALS) FOUND MERIT I N THE SUBMISSION MADE ON BEHALF OF THE ASSESSEE BEFORE HIM ON THIS ISSUE AND ACCEPTING THE SAME HE ALLOWED THE CLAIM OF THE ASSESSEE THAT PROFIT FROM SALE OF SHARES WAS CHARGEABLE TO TAX UNDER THE HEAD SHORT TERM CAPITAL GAIN MAINLY FOR THE F OLLOWING REASONS GIVEN IN PARA NO.6.2 OF HIS IMPUGNED ORDER : 5 ITA NO.2321/MUM/2010 ASSESSMENT YEAR : 2006-07. I FIND CONSIDERABLE FORCE IN THE ABOVE CONTENTION S OF THE APPELLANT PARTICULARLY IN VIEW OF THE FACT THAT APPELLANT HAS BEEN AN INVESTOR IN SHARES AND SECURITIES AND HAS BEEN SHOWING THE INCOME THER EFROM AS SHORT TERM CAPITAL GAINS OR LONG TERM CAPITAL GAINS ON THE BAS IS OF THE PERIOD OF HOLDING AND ALSO DECLARING DIVIDEND INCOME AS WELL. IT IS A LSO A FACT THAT UPTO AY 2005-06 THE APPELLANTS CONTENTION AND CONSISTENT DECLARING OF INVESTMENT AND SHORT TERM AND LONG TERM CAPITAL GAINS HAD BEE N ACCEPTED BY THE DEPARTMENT. EVEN DURING THE SUBSEQUENT ASSESSMENT YEAR I.E. 2007-08 ALSO THE SAME HAS BEEN ACCEPTED BY THE AO U/S. 143(3) OF THE I.T. ACT 1961. I ALSO FIND THAT THE PERIOD OF HOLDING OF SHARES BY T HE APPELLANT WAS RANGING FROM 2 DAYS TO 329 DAYS AS CLAIMED BY THE APPELLANT . FURTHER I ALSO FIND THAT THE SHARES TRANSACTED DURING THE YEAR WERE OF DELIV ERY BASED TRANSACTIONS IN SHARES WERE TREATED AS INVESTMENTS AND NOT AS STOCK S. WITH THESE FACTS I DO NOT FIND ANY REASON WHATSOEVER WITH THE AO TO CHANG E THE CHARACTER OF TRANSACTION IN SHARES AND SECURITIES WITHOUT BRINGI NG OUT ANY NEW AND SUBSTANTIAL FACTS. IT HAS BEEN HELD BY THE HONBLE ITAT MUMBAI IN VARIOUS DECISIONS THAT ONCE HAVING ACCEPTED THAT THE TRANSA CTIONS ARE PART OF INVESTMENT ACTIVITY IN THE EARLIER YEARS REVENUE I S NOT ENTITLED TO TAKE A DIFFERENT VIEW IN THE SUBSEQUENT YEAR WHEN THE NATU RE OF TRANSACTION IS SAME. I ALSO FIND SUBSTANTIAL FORCE IN THE ARGUMENT OF TH E APPELLANT THAT THE MERE FREQUENCY AND MAGNITUDE OF INVESTMENT ALSO CANNOT B E A DECISIVE FACTOR ABOUT THE NATURE OF TRANSACTION. MOREOVER JUST BEC AUSE SOME INVESTMENTS ARE MADE FOR A SHORT TERM PERIOD THE SAME WILL NOT LOO SE ITS BASIC CHARACTER OF INVESTMENT. FURTHER AS PER THE I.T. ACT ONE YEAR I S CONSIDERED AS LONG PERIOD FOR EQUITY INVESTMENTS. IN THE CASE OF ASSETS OTHER THAN SHARES IF HELD FOR A PERIOD OF LESS THAN 36 MONTHS THE SAME IS CONSIDER ED AS SHORT TERM ASSET BUT IN THE CASE OF SHARES THIS LIMIT IS SUBSTANTIALLY LOWER I.E. ONLY ONE YEAR. THUS INVESTMENTS IN SHARES MADE BY AN ASSESSEE IF IT IS TRANSFERRED OR SOLD EVEN WITHIN 2 DAYS TO 11 DAYS THE TRANSFER OF SHARES WI LL NOT CHANGE THE CHARACTER OF INVESTMENT. FURTHER HONBLE ITAT MUMBAI IN THE CASE OF GOPAL PUROHIT ALSO HELD THAT DELIVERY BASED TRANSACTIONS SHOULD B E TREATED AS BEING IN THE NATURE OF INVESTMENT TRANSACTIONS THAT GIVE RISE T O CAPITAL GAINS. SIMILARLY IT WAS ALSO HELD THAT SINCE THE ASSESSEE HAD FOLLOWED A CONSISTENT PRACTICE OF KEEPING RECORDS AND PRESENTING SHARES AS INVESTMENT AT THE END OF THE YEAR IN ALL THE YEARS THERE WAS NO JUSTIFICATION FOR A DIF FERENT VIEW BEING TAKEN BY THE A.O. EVEN WHILE ENTRIES ON BOOKS OF ACCOUNT AL ONE ARE NOT CONCLUSIVE IN DETERMINING THE NATURE OF INCOME BUT IT HAS CERTAIN LY A BEARING. IN THE CASE OF THE APPELLANT ALSO THERE WAS A DELIVERY BASED TRANS ACTIONS IN RESPECT OF SHARES THEREFORE THE PROFIT THEREFROM SHOULD BE T REATED AS CAPITAL GAIN AS 6 ITA NO.2321/MUM/2010 ASSESSMENT YEAR : 2006-07. AGAINST THE TREATMENT GIVEN BY THE AO AS BUSINESS I NCOME. SIMILARLY THE APPELLANT HAS ALSO BEEN FOLLOWING A CONSISTENT PRAC TICE OF KEEPING RECORDS AND PRESENTING SHARES AS INVESTMENT AT THE END OF T HE YEAR IN ALL THE YEARS WHICH WERE ALSO ACCEPTED BY THE AO. THEREFORE I FI ND THAT THE AO WAS NOT JUSTIFIED IN CHANGING THE HEADS OF INCOME IN THE CA SE OF APPELLANT. ACCORDINGLY THE AO IS DIRECTED TO TREAT THE AMOUNT OF RS.94 06 347/- AS SHORT TERM CAPITAL GAIN AND NOT AS BUSINESS INCOME. THIS GROUND IS THEREFORE DECIDED IN FAVOUR OF THE APPELLANT. AGGRIEVED BY THE ORDER OF THE LEARNED CIT(APPEALS) THE REVENUE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALS O PERUSED THE RELEVANT MATERIAL ON RECORD. THE ISSUE AS TO WHETHER THE PRO FIT ON SALE OF SHARES CONSTITUTES BUSINESS INCOME OF THE ASSESSEE OR CAPITAL GAINS DE PENDS ON WHETHER THE SAID SHARES WERE PURCHASED AND HELD BY THE ASSESSEE AS INVESTME NT OR STOCK IN TRADE. IN ORDER TO ASCERTAIN AS TO WHETHER THE SHARES WERE PURCHASED B Y THE ASSESSEE AS INVESTMENT OR STOCK-IN-TRADE THE MOST RELEVANT ASPECT THAT IS TO BE SEEN IS THE INTENTION OF THE ASSESSEE TO PURCHASE AND HOLD THE SHARES AND SUCH INTENTION HAS TO BE GATHERED FROM THE FACTS OF THE CASE INCLUDING THE CONDUCT OF THE ASSESSEE. IN THE CASE OF SARNATH INFRASTRUCTURE (P).LTD. VS. ACIT REPORTED I N 120 TTJ (LUCKNOW) 216 THE COORDINATE BENCH OF THIS TRIBUNAL AFTER TAKING INTO CONSIDERATION THE VARIOUS JUDICIAL PRONOUNCEMENTS ON THIS ISSUE AS WELL AS TH E RELEVANT CIRCULAR ISSUED BY THE BOARD HAS LAID DOWN THE FOLLOWING PRINCIPLES/CRITE RIAS WHICH CAN BE APPLIED TO THE FACTS OF THE CASE TO FIND OUT WHETHER THE TRANSACTI ONS IN SHARES ARE IN THE NATURE OF TRADE OR ARE MERELY FOR THE INVESTMENT PURPOSES : 7 ITA NO.2321/MUM/2010 ASSESSMENT YEAR : 2006-07. (1) WHAT IS THE INTENTION OF THE ASSESSEE AT THE T IME OF PURCHASE OF THE SHARES (OR ANY OTHER ITEM). THIS CAN BE FOUND OUT F ROM THE TREATMENT IT GIVES TO SUCH PURCHASE IN ITS BOOKS OF ACCOUNT. WHETHER I T IS TREATED AS STOCK-IN- TRADE OR INVESTMENT? WHETHER SHOWN IN OPENING/CLOSI NG STOCK OR SHOWN SEPARATELY AS INVESTMENT OR NON-TRADING ASSET? (2) WHETHER ASSESSEE HAS BORROWED MONEY TO PURCHASE AND PAID INTEREST THEREO N. NORMALLY MONEY IS BORROWED TO PURCHASE GOODS FOR THE PURPOSE OF TRADE AND NOT FOR INVESTING IN AN ASSET FOR RETAINING. (3) WHAT IS THE FREQUENCY O F SUCH PURCHASES AND DISPOSAL IN THAT PARTICULAR ITEM? IF PURCHASE AND S ALE ARE FREQUENT OR THERE ARE SUBSTANTIAL TRANSACTIONS IN THAT ITEM IT WOULD INDICATE TRADE. HABITUAL DEALING IN THAT PARTICULAR ITEM IS INDICATIVE OF IN TENTION OF TRADE. SIMILARLY RATIO BETWEEN THE PURCHASES AND SALES AND THE HOLDI NGS MAY SHOW WHETHER THE ASSESSEE IS TRADING OR INVESTING (HIGH TRANSACT IONS AND LOW HOLDINGS INDICATE TRADE WHEREAS LOW TRANSACTIONS AND HIGH HO LDINGS INDICATE INVESTMENT): (4) WHETHER PURCHASE AND SALE IS FOR R EALIZING PROFIT OR PURCHASES ARE MADE FOR RETENTION AND APPRECIATION I N ITS VALUE. FORMER WILL INDICATE INTENTION OF TRADE AND LATTER AN INVESTME NT. IN THE CASE OF SHARES WHETHER INTENTION WAS TO ENJOY DIVIDEND AND NOT MER ELY EARN PROFIT ON SALE AND PURCHASE OF SHARES. A COMMERCIAL MOTIVE IS AN E SSENTIAL INGREDIENT OF TRADE. (5) HOW THE VALUE OF THE ITEMS HAS BEEN TAKE N IN THE BALANCE SHEET? IF THE ITEMS IN QUESTION ARE VALUED AT COST IT WOULD INDICATE THAT THEY ARE INVESTMENTS OR WHERE THEY ARE VALUED AT COST OR MAR KET VALUE OR NET REALIZABLE VALUE (WHICHEVER IS LESS) IT WILL INDIC ATE THAT ITEMS IN QUESTION ARE TREATED AS STOCK-IN-TRADE. (6) HOW THE COMPANY (ASS ESSEE) IS AUTHORIZED IN MEMORANDUM OF ASSOCIATION/ARTICLE OF ASSOCIATION? W HETHER FOR TRADE OR FOR INVESTMENT? IF AUTHORIZED ONLY FOR TRADE THEN WHET HER THERE ARE SEPARATE RESOLUTIONS OF THE BOARD OF DIRECTORS TO CARRY OUT INVESTMENTS IN THAT COMMODITY? AND VICE VERSA. (7) IT IS FOR THE ASSESS EE TO ADDUCE EVIDENCE TO SHOW THAT HIS HOLDING IS FOR INVESTMENT OR FOR TRA DING AND WHAT DISTINCTION HE HAS KEPT IN THE RECORDS OR OTHERWISE BETWEEN TW O TYPES OF HOLDINGS. IF THE ASSESSEE IS ABLE TO DISCHARGE THE PRIMARY ONUS AND COULD PRIMA FACIE SHOW THAT PARTICULAR ITEM IS HELD AS INVESTMENT FOR SAY STOCK-IN-TRADE) THEN ONUS WOULD SHIFT TO REVENUE TO PROVE THAT APPARENT IS NO T REAL. (8) THE MERE FACT OF CREDIT OF SALE PROCEEDS OF SHARES (OR FOR THAT M ATTER ANY OTHER ITEM IN QUESTION) IN A PARTICULAR ACCOUNT OR NOT SO MUCH FR EQUENCY OF SALE AND PURCHASE WILL ALONE WILL NOT BE SUFFICIENT TO SAY T HAT ASSESSEE WAS HOLDING THE SHARES FOR THE ITEMS IN QUESTION) FOR INVESTMENT. ( 9) ONE HAS TO FIND OUT WHAT ARE THE LEGAL REQUISITES FOR DEALING AS A TRADER IN THE ITEMS IN QUESTION AND WHETHER THE ASSESSEE IS COMPLYING WITH THEM. WHETHE R IT IS THE ARGUMENT OF 8 ITA NO.2321/MUM/2010 ASSESSMENT YEAR : 2006-07. THE ASSESSEE THAT IT IS VIOLATING THOSE LEGAL REQUI REMENTS IF IT IS CLAIMED THAT IT IS DEALING AS A TRADER IN THAT ITEM? WHETHER IT HAD SUCH AN INTENTION (TO CARRY ON ILLEGAL BUSINESS IN THAT ITEM SINCE BEGIN NING OR WHEN PURCHASES WERE MADE? (10) IT IS PERMISSIBLE AS PER CBDTS CIR CULAR NO. 4 OF 2007 OF 15 TH JUNE 2007 THAT AN ASSESSEE CAN HAVE BOTH PORTFOLI OS ONE FOR TRADING AND OTHER FOR INVESTMENT PROVIDED IT MAINTAINING SEPARA TE ACCOUNT FOR EACH TYPE THERE ARE DISTINCTIVE FEATURES FOR BOTH AND THERE I S NO INTERMINGLING OF HOLDINGS IN THE TWO PORTFOLIOS. (11) NOT ONE OR TWO FACTORS OUT OF ABOVE ALONE WILL BE SUFFICIENT TO COME TO A DEFINITE CONC LUSION BUT THE CUMULATIVE EFFECT OF SEVERAL FACTORS HAS TO BE SEEN. 7. A PERUSAL OF THE ORDERS PASSED BY THE LOWER AUTH ORITIES IN THE PRESENT CASE SHOWS THAT NEITHER THE AO NOR THE LEARNED CIT(APPEA LS) HAS DONE THE EXERCISE TO FIND OUT THE EXACT NATURE OF SHARE TRANSACTIONS CAR RIED ON BY THE ASSESSEE IN A PROPER MANNER BY APPLYING THE RELEVANT CRITERIAS/PRINCIPLE S TO THE FACTS OF THE CASE. WE THEREFORE DEEM IT FIT AND PROPER AND IN THE INTERE ST OF JUSTICE TO SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW ON THIS ISSUE AND RESTORE THE MATTER TO THE FILE OF THE AO WITH A DIRECTION TO DECIDE THE SAME AFRESH AFTER AP PLYING THE PRINCIPLES/CRITERIAS LAID DOWN BY THE LUCKNOW BENCH OF THE TRIBUNAL IN THE CA SE OF SARNATH INFRASTRUCTURE (SUPRA) TO THE FACTS OF THE CASE. NEEDLESS TO OBSER VE THAT THE AO SHALL AFFORD PROPER AND SUFFICIENT OPPORTUNITY TO THE ASSESSEE OF BEING HEARD. 8. IN THE RESULT THE APPEAL OF THE REVENUE IS TREA TED AS ALLOWED FOR STATISTICAL PURPOSES. . ORDER PRONOUNCED ON THIS 29 TH DAY OF JULY 2011. SD/- SD/- (R.S. PADVEKAR) (P.M. JAGTAP) JUDICIAL MEMBER A CCOUNTANT MEMBER MUMBAI DATED: 29 TH JULY 2011. 9 ITA NO.2321/MUM/2010 ASSESSMENT YEAR : 2006-07. COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR H-BENCH. (TRUE COPY ) BY ORD ER ASSTT. R EGISTRAR ITAT MUMBAI BEN CHES MUMBA I. WAKODE