DCIT v. Bharat Kunverji Kenia ITAT ‘B’ Bench, Mumbai Before D. Manmohan (VP) and Pramod Kumar (AM) ITA No. 929/Mum./2010 A.Y.: 2006-07. Decided on: 2-2-2011 Counsel for revenue/assessee: Hari Govind Singh/Pradip N. Kapasi

Facts:
During the year the assessee had shown short-term capital gain of Rs.40.31 lac from purchase and sale of shares. The AO noticed that the volume of purchase and sale was worth Rs.2.5 crore and the number of transactions aggregated to 276 in number. Based on the same he concluded that: the data indicated that the assessee intended to deal in shares as a trader and not as an investor. When the assessee contended that in the earlier years, under the similar circumstances, the income was taxed as capital gains and not as a business income, the AO observed that the doctrine of res judicata could be applicable to the decisions of Civil Courts and it cannot be invoked while deciding income-tax matter.

On appeal, the CIT(A) had the benefit of the order of the ITAT in the assessee’s own case for the A.Y. 2005-06 (ITA No. 6544/Mum./2008 dated 15-5-2009) wherein on identical facts, the Tribunal decided the issue in favour of the assessee. Applying the principle of consistency, the CIT(A) allowed the appeal of the assessee.

Before the Tribunal the Revenue relied on the order of the AO and further submitted that the volume, frequency and regularity of the transaction was one of the essential tests to consider the nature of transactions. Further, relying on the following two decisions, it was contended that where facts were distinguishable or fresh facts were brought on record, principles of res judicata did not come into play and the authority was free to take a different view on the matter. The decisions relied upon were as under:

•  Sadhana Nabera v. ACIT, (ITA No. 2586/M/2009, dated 26-3-2010; and

•  Rakesh J. Sanghvi v. DCIT, (ITA Nos. 4607/ M/2008 and 5710/M/2009, dated 31-8-2009).

Held:
According to the Tribunal, no single criteria laid down by the Courts or in the Board Circular (No. 4 of 2007, dated 15-6-2007) was decisive and they had to be considered cumulatively to bring out the real intention of the assessee before entering into such transactions. Referring to a chart prepared by the assessee, which was showing compliance with various conditions of the Board Circular, the Tribunal noted that he had complied with all the requirements mentioned in the Circular. In addition the Tribunal noted as under:

•  The shares held were all along treated as an investment;

•  The assessee had not borrowed funds for the purpose of making investments;

•  Shares once sold were not purchased again;

•  Average holding period of the shares sold by the assessee was of 181 days.

In view of the above and the Tribunal’s decision in the assessee’s own case for the earlier year, the Tribunal dismissed the appeal filed by the Revenue. According to the Tribunal, the case laws relied upon by the Revenue were distinguishable on the facts.