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TMI Blog2012 (11) TMI 224X X X X Extracts X X X X X X X X Extracts X X X X ..... d as business income has no substance and are without any cogent reason and thereby deleting addition of Rs. 1,38,015/- and Rs. 1,07,44,493/- made by the AO on account of Short Term capital gain and Long Term capital gain respectively." 3. Brief facts are: The assessee is engaged in the activities of sale and purchase of shares by two ways i.e. (i) Investment account; and (ii) Trading accounts. Both these accounts are maintained by the assessee since earlier years and have been accepted by the department. In the return of income, assessee disclosed profits from both the counts separately i.e. business income from Trading port folio; and capital gains from investment port folio. 3.1. Assessing Officer proposed to show cause as to why the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee by way of short term capital gains and long term capital gains as business income. 3.6. Aggrieved, assessee preferred first appeal where he reiterated all these facts and further pleaded that even the contract notes of brokers and corresponding bank statements demonstrated that these activities were separately carried out and the sale and purchases of investment in shares was separately entered in separate bank accounts. Reliance was placed on CBDT Circular no. 4 of 2007 dated 15-6-2007 reported in 291 ITR (Stat.) 35, where apart from various other directions, it has been clarified that - "CBDT also wishes to emphasize it is possible for a tax payer to have two portfolios i.e. an investment portfolio comprising of securities wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en 160 ITR 67 (SC), holding: "The High Court, in our opinion, made a mistake in observing whether transactions of sale and purchase of shares were trading transactions or whether these were in the nature of investment was a question of law. This was a mixed question of law and fact." 3.9. CIT(A) thus relying on various judicial pronouncements, as mentioned in his order, accepted assessee's explanation and deleted the addition in question, inter alia, observing as under: "6.5. The Assessing Officer took the adverse view based on the observation that the appellant had carried out huge transactions of Rs. 52 crore and short term capital gain and long term capital gain were camouflaged to evade tax. However, I found that the appellant was h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng 100 shares each of Reliance Industries, Reliance Capital venture, Reliance Natural Resources whereas had sold 150, 300 and 150 shares of these companies. The appellant asserted that the Reliance group of industries had split and demerged and the appellant resultantly received larger number of shares. The appellant furnished documentary evidence before me. In view of the judicial pronouncements and board's circular and the evidences furnished by the appellant I am inclined to hold that the action of the AO in holding the short term capital gain and long term capital gain be treated as business income has no substance and are without any cogent reason. The additions made are based on conjectures and surmises. The additions so made are dele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect the Assessing Officer to allow carry forward the same." 4. Ld. DR relied on the order of Assessing Officer and contends that the frequency of share transactions revealed that the assessee was carrying out business of trading in shares and in order to reduce tax liability, camouflaged the transactions of sale of shares as investment and trading portfolio. The combined activity in the shares being a trading activity Assessing Officer has rightly treated them as business income. 5. Learned counsel for the assessee reiterated the arguments and contends that the Board Circular as mentioned above, being a benevolent circular, clearly deals with the issue allowing maintenance of two portfolios. The assessee was maintaining distinct tr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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