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TMI Blog2011 (5) TMI 618X X X X Extracts X X X X X X X X Extracts X X X X ..... offered short term capital gains of Rs. 1,17,82,521 in the return of income. The Assessing Officer noticed that assessee has involved himself fully in trading of F&O and also stock market and related activities and analysed the purchases and sales of shares during the year and came to a conclusion that assessee was involved in large number of purchases of more than Rs. 40 crores in stock market, have repeated transactions in same company's shares and the average holding period is very less. In his order, the Assessing Officer has analysed and came to a conclusion that the holding period of 26 scrips running across 84 transactions was less than 30 days having purchase value of Rs. 22.5 crores. There were transactions with the period of holding of 1 day even. He also analysed the frequency of transactions, source of investment, portfolio maintained by the assessee and other related aspects and came to a conclusion that assessee is indulging in share trading activity as a business venture and therefore, the capital gains disclosed as short term capital gains is nothing but business income or alternatively surplus from the adventure/enterprise in the nature of trade or business. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m is a mutual fund investment and not share transactions on which only a profits of Rs. 3,076 was earned on a total transaction of Rs. 2.56 crores. It was submitted that these are not trading transactions but investment transactions for the purpose of earning dividend. He also submitted that treating artificially repetitive transactions of more than four times alone as business transactions is not correct ignoring the fact that there are number of shares which are held for more than 300 days which are also treated as business transactions whereas the assessee has invariably maintained investment portfolio and trading portfolio separately and consistently over a period of time and the CIT(A) erred in ignoring the factual position and treating part of the income as business income on an artificial bifurcation. It was his submission that assessee maintained consistently separate transactions of investment and trading. In the investment transactions assessee has not claimed any benefit of increase or decrease in the closing stock valuation and maintained separate books of account for these transactions. It was further submitted that the Assessing Officer in assessment year 2004-05 has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,62,94,593 (-)39,31,327 33,15,710 - 05-06 50,18,238 95,32,403 - 33,06,013 06-07 1,17,82,521 29,46,135 - 5,38,26,933 7. It is also on record that frequency and volume of shares purchased and sold are found to be substantially higher in the relevant year in comparison to the earlier assessment year. Therefore the CIT(A) was of the opinion that the facts available on the case, eventhough are identical to the facts raised in the case of Gopal Purohit v. Jt. CIT [2009] 29 SOT 117 (Mum.) (which was subsequently confirmed by the Hon'ble High Court), he differed from the consistency principle holding that assessee has entered into transactions repeatedly and frequently, i.e., assessee has purchased a particular share, sold it and again purchased and sold thereby indicating that the transaction is of trading in nature. The CIT(A) also analysed various case laws/Board circulars and ultimately came to a conclusion that on the facts of the case, since assessee is having mixed/consolidated bank accounts through which both nature of transactions are carried out and also as assessee failed to prove that borrowed funds are exclusively used in his F&O business, he came to the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investment is to correlate with reference to the F&O dealings. If assessee is indulging in same shares both in physical delivery as well as in F&O on the same day this may indicate that the nature of transaction is that of business as an adventure. Investment in a particular scrip both in physical delivery and in speculation transaction of F&O cannot be considered different when undertaken at the same time and same nature of transaction on the same day. Therefore one way of analysing the intention of the assessee of trading or investment in a particular scrip is to correlate with the F&O transactions. As noticed earlier the profit in F&O transactions is 5 times the gains earned in share transactions. Therefore in the interest of justice, since complete details are not placed on record to analyse whether the assessee's share transactions are in the nature of business transaction or investment transaction, we are of the opinion that the matter can be restored back to the file of the Assessing Officer to examine the facts and analyse the intention. 10. The frequency of transactions, volume of transactions, holding period of shares are only indicative in nature to analyse whether ..... X X X X Extracts X X X X X X X X Extracts X X X X
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