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TMI Blog2012 (10) TMI 402X X X X Extracts X X X X X X X X Extracts X X X X ..... gain of Rs. 8,66,41,282 under the head of business income." 2. Facts relevant for adjudication of the issue involved are that the assessee is an individual and is deriving income under the heads "Income From Business", "Income From Short Term Capital Gains", "Income From Long Term Capital Gains" and "Income From Other Sources". In the computation of income filed along with the return of income, the assessee had shown following main sources of income:- Computation of Total Income III. INCOME FROM BUSINESS i. Net Profit from M/s. Bhairujee Stock Fund Rs. 4,53,55,197 ii. Net Profit from Speculation Rs. 3,636 Rs. 4,53,58,833 IV INCOME FROM CAPITAL GAINS a. Long term capital gain of shares Rs. 28,64,97,522 Less: Exempted Rs. 28,64,97,522 Nil b. Short term capital gain on shares Rs. 8,66,41,282 c. Short term capital gain on mutual fund units Rs. 2,43,064 Rs. 8,68,84,346 V. INCOME FROM OTHER SOURCES a. Dividend Rs. 11,45,932 b. Dividend MF Unit Rs. 17,33,474 c. P.P.F. Interest Rs. 29,318 Total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gains. The second set of books of account is in the name of "Bhairujee Stock Fund" which is a proprietorship firm of the assessee, wherein the stock transactions in shares and securities have been treated as business income. This practice has been followed consistently since the year 1998. Thus, the assessee's intention was to invest in shares in his personal account and has kept separate proprietary concern for doing the business; (ii) in the past, the same treatment of two separate accounts have been accepted by the Department and in assessment years 2003-04, 2004-05 and 2006-07, similar nature of transactions has been accepted in scrutiny proceedings under section 143(3) of the Act; (iii) the assessee has used his own surplus funds for investment in shares in his personal account and has not borrowed any funds for this purpose; (iv) capital gains on sale of shares kept as an investment has been accepted in the earlier years and, therefore, the same is to be accepted in this year also, as there is no change in facts and circumstances of the case; and (v) the assessee's case is fully covered by the judgment of Hon'ble Jurisdictional High Court in CIT v/s Gopal Purohit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from short term capital gain and long term capital gain under the head "Income From Business". 8. During the course of first appellate proceedings, the assessee mainly reiterated the submissions made before the Assessing Officer. Further, the assessee has drawn a comparison with the facts and issues as was there in assessment year 2006-07, which was assessed under section 143(3) of the Act and after comparing the same with the present assessment year, he submitted that the parameters in the current assessment year are far better, which is evident from the fact that the long term gain as a percentage of total gain is 76.7% as against 8.6%. The margin of appreciation is much higher at 29.3% and the capital turnover is 2.5 times as against 4.75 times. Further, long term capital gain has arisen out of two scrips and the period of holding is between two to three years falling in three assessment years and not 15 to 16 months as pointed out by the Assessing Officer. As regards short term capital gain, dealing in 108 scrips was not high looking to the fact that transactions were not more as against the Assessing Officer's observation that there were 900 transactions. The net margin fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er as well as the learned Commissioner (Appeals) has deduced. He also gave detailed clarification and pointwise rebuttal of each and every finding of the Assessing Officer as well as the learned Commissioner (Appeals) with reference to various documents as was filed before us in the form of paper book and the details as was required by us to be furnished. 11. Per contra, the learned Departmental Representative submitted that maintaining two separate accounts do not make any difference and so also the findings given in the earlier years. One has to go for the substance of the transactions by the assessee during the year under question. He drew our attention to various reasons given by the Assessing Officer and the learned Commissioner (Appeals)'s observations with regard to various repetitive transactions which has been incorporated in Page-7 of the appellate order. Lastly, he submitted that no case law will apply in such kind of a case as the same has to be seen on facts of each and every case. Hence, this is a case where one has to see how the assessee has dealt with so many scrips and has entered into so many transactions within a short period which goes to show that assessee's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rough out the assessee had held the portfolio of shares and mutual funds as investments and the second set of books of account pertains to his proprietorship concern i.e., "Bhairujee Stock Funds", wherein he carries out trading transactions in future and options (F&O) in shares; secondly, the assessee has maintained not only separate books of account but has also maintained separate demat account and separate bank account as per the details furnished by the learned Counsel at the time of hearing; thirdly, the transaction of shares shown under the head "Investment", has been treated to be capital gains in the earlier assessment years, right from assessment year 2003-04 to 2007-08. These transactions have also been accepted under scrutiny proceedings under section 143(3) of the Act by the Department which have attained finality on this score; lastly, the assessee has used his own funds and no borrowed funds have been utilised for investment. 15. From the above, it can be inferred that all through out the assessee's intention was to maintain two separate portfolios - one for the investment purpose and the second for the trading purpose and has segregated his transactions. The assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers trading in the Stock Exchange into many smaller transactions but that does not mean the assessee has carried out several transactions. Such transactions give unrealistic figures of number of transactions to which the Assessing Officer as well as the learned Commissioner (Appeals) has relied upon. Thus, the findings of the learned Commissioner (Appeals) as well as the Assessing Officer that the short term capital gain is to be assessed under the head "Income From Business" solely on account of frequency of transactions cannot be sustained. The assessee has given several instances to prove this point for e.g., in the case of Jindal shares, sale of 97,560 shares have been treated as 27 transactions. Likewise, the shares of Binanind, one transaction has been split into nine transactions. Likewise, there are various other instances which have been pointed out by the assessee before us. 18. The assessee's case also gets covered by the judgment of Hon'ble Jurisdictional High Court in Gopal Purohit (supra), wherein it has been held that if the assessee has maintained two separate books of account, separate portfolios i.e., one in relation to investment in shares and other relating to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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