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TMI Blog2013 (9) TMI 448X X X X Extracts X X X X X X X X Extracts X X X X ..... in all recent AYs. The same is case with opening stocks of shares too. In fact, the opening and closing values are more or less equal. The number of scrips, transactions of purchase and sales also suggests the increasing trends for making quick business profits. Thus, the decision of the Tribunal in the case of Mukeshbhai Babulal Shah (2013 (9) TMI 151 - ITAT RAJKOT) which is relevant for the proposition that “where intention of the assessee behind purchase and sales of the shares was quickly to realize profits and not to earn dividend from them, the income would be assessable as business income”, helps the revenue. The intention of acquiring the shares as investment for capital appreciation is not translated and instead the symptoms of going for quick profits are evident. The stock: turnover ratio at 1:16 does against the claims of the assessee. Other data relating to opening stocks and closing stocks on one side and the assessee’s final exiting from the so called claim of STCG at the end of 2011-12 indicates the assessee’s conduct for quick profits and not for investment. Of course, the holding period particulars also confirm the AO’s conclusions. - Decided in favour of Reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 28,208/- Income from OS 1,70,071/- 1,13,213/- 1,50,993/- (e) The total number of scrips are 31, number of purchase transactions 70 and sale transactions 104. Number of days on which transactions took place are less than 150. Therefore, it cannot term as trading 3.1. On examining the submissions of the assessee, AO noticed that the assessee did not submit the balance sheets showing the nature of holding of shares and noted that the data pertaining to the current assessment year is distinguishable vis- -vis the particulars relevant for the assessment year 2006-07 and 2007-08. Details as given in the table in the subsequent paragraphs were relied. AO also noticed that the holding period of the short term shares was not longer than a period of 100 days in many transactions. AO reasoned that the assessee, who is already in the business of dealing in shares, derivatives, Futures Options and dealt with the common scrips qua the capital gains transactions, is only segregated certain shares/business profits as short term Capital Gains for the benefits of the tax rate. Further, he distinguished the decision relied upon by the assessee. Finally, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be accepted without any disturbance. He, however, confirmed the AO s finding to the extent of Rs. 21,50,410/- and denied the gains relatable to the reentered scrips. Thus, assessee s appeal was partly allowed on this issue. Relevant discussion is given in para 7, 8.1 to 8.7 of the impugned order. Aggrieved with the above, Revenue filed the present appeal before us. However, the assessee accepted the decision of the CIT(A) qua the CIT(A) s treatment of Rs.21,50,410/- as Profits and Gains from business or profession instead of Short term Capital Gains as originally claimed by the assessee in the returns. 5. During the proceeding before us, Ld DR relied heavily on the order of the AO. He mentioned that entire Short term capital gains (STCG) offered by the assessee amounting to Rs. 2,17,24,104/- should be treated as business income instead of merely a sum of Rs. 21,50,410/-. Ld DR relied heavily on the fact that the assessee conceded the AO s allegation regarding the original intention of the assessee as investor and the same is evident from the way assessee accepted for taxing the profits of Rs 21,15,410/- as business income instead of original claim of STCG. The parties hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee s explanation on the balance of gains. Meaning thereby, the entry in the books of accounts is no difference vis- -vis intention of the assessee. 7. Submitting further, Ld DR mentioned that the real investor with a goal of long term investment is not tempted to unload the shares being the temporary fall for the short term benefits and not tempted by the market conditions. He mentioned that the short term gain reported is in fact business transactions akin to the business of dealing in derivatives and F O. Attributing to the assessee s failure to furnish the original balance sheets for the AY 2007-2008 and 2008-2009 and also considering the lack of scrutiny assessment proceedings for the earlier assessment years, there is no fact of finding that the consistency related rules do not apply here. Further, Ld DR submitted that the holding period of the shares, being very short (94% of the transactions involved less than 100 days), is in favour of the Revenue. The quantify aspects of repurchase of shares as held by the Ld DR is in favour of the Revenue. No investor shall unload the shares again to purchase the same share but for the business intentions, the sale and purchase t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cter of a business activity and not investment activity. Thus, the Ld DR concluded by saying that the CIT (A) should have confirmed the decision of the AO in treating the capital gains as a business income of the assessee. 8. On the other hand, Ld Counsel for the assessee narrated the facts of the case and mentioned that the STCG earned by the assessee amounts to Rs.2,17,24,104/- which was considered by the AO as business income of the assessee and applied the provisions of section 14A read with Rule-8D and made disallowance of Rs.1,32,933/- as expenditure relatable to the exempt income. Ld Counsel argued vehemently stating that the decision of the CIT (A) is incorrect and not consistent that the Departmental stand taken in the assessee s own case for the earlier years. Ld Counsel mentioned that the assessee declared the said shares are investments in the books of accounts. He relied on the detailed arguments submitted before the CIT (A) which are reproduced in para 4 and 5 of the impugned order. 9. Bringing our attention to the table in para 4 of the impugned order, Ld Counsel mentioned that the STCG- related transactions involve 31 scrips. The scrips are common/similar to tho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 24,104/-. He reiterated the CIT (A) s reasoning and submitted that the order of the CIT (A) should be confirmed without any interference. In respect of the assessee s claim relating to the principles of consistency, Ld Counsel relied on the decision of Apex Court in the case of Gopal Purohit. Further, Ld Counsel relied on the order of the ITAT, Mumbai in the case of SMK Shares Stock Broking vide ITA No.799/M/2009 dated 26.11.2010 in his favour. He also relied on another decision of the ITAT Mumbai in the case of ACIT vs. Smt. Datta Mahendra Shah vide ITA 6094/M/2011 and CO No.155/M/2012 dated 27.2.2013 regarding motive and intentions. However, the Ld Counsel for the assessee could not establish a single decision out of the ones relied upon by him where the facts are exactly comparable with those of the present case. Tribunal Decision: 10. We have heard both the parties and perused the orders of the Revenue and the facts placed before us. The undisputed facts are that the is no clarity on preparation and furnishing of the complete balance sheets of various AYs to demonstrate the book entries of the shares as investments including that of the AY 2007-2008. Columns in the balanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue has been accepting the claims in the returns of the assessee, the impugned income should be taxed as STCG not as a business income. On the transactions involving reentry, assessee has nothing to state except relying on the detailed replies given by the assessee during the first appellate proceedings, which are enumerated in the table given in para 4 of the impugned order. Briefly, commonality of the scrips dealt as F O and the LTCG is not a determining factor. When the assessee is invested her own funds in listed scrips involving individual companies, they have treated as STCG only. As per the assessee, all the gains were actually earned in 8 years although it involved only 31 scrips. Further, it was asserted that the said transactions were entered in the books as investments and assessee is authorized by the CBDT Circular No.4/2007 to do both the activities namely investment as well as stock-in-trade. Otherwise, assessee reiterated the submissions made before the lower authorities for the proposition that the scheme of STCGs should be accepted. 12. We have considered the above divergent stands of the Ld Representatives of the parties in dispute. Core issue for adjudicati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under consideration when the facts are not strictly identical . 14. Facts of the Assessee s case: CIT(A) incorporated a table containing relevant data for many AYs 2004-05 to 2011-12 for purpose of comparison and distinguishing the figures for the present AY 2008-2009 from that of the other AYs. Data relate to the number of scrips, shares purchased and sold, opening and closing stocks, volumes/turnovers, no of transactions of sale and purchases, turnovers of purchase and sales and ratios etc. The said table is as under: VEENA KALRA 1. DETAILS OF SHARE HOLDINGS Sr. No. Particulars A.Y.2004-05 A.Y.2005-06 A.Y.2006-07 A.Y.2007-08 A.Y.2008-09 A.Y.2009-10 A.Y.2010-11 A.Y.2011-12 1. No of scrips held on 1st April 16 15 20 23 26 17 16 14 Value of Opening of Investments 435,750 435,750 868,020 1.817,575 1.829,470 1,795,971 1,745,747 1,767,517 2. No. of scrips Purchased during the year 1 13 8 25 29 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar under consideration is clearly distinguishable from that of the other years. Therefore, the judgment in the case of Gopal Purohit (supra) will not help the assessee in matters of principle of consistency . Therefore, the related arguments of Ld Counsel for the assessee are dismissed. As such it is a settle legal position that the principles of res judicata and the estoppels do not apply to the proceedings under the Act. 16. Regarding the intention of the assessee, normally entries originally made in the books of accounts soon after a purchase transaction is complete, becomes relevant factor or indicating factor for deciding the said intention. It is the case of the assessee that the relatable investments are made for short term gains purpose. Now the question is how to demonstrate the same if not with the help of the books of accounts and entries therein and of course, stand by the same without yielding to the temptation of making quick profits and ideally to earn the dividend income on one side and the capital appreciation on the other. In this case, the assessee failed to demonstrate the same with the help of the books. The conduct of the assessee demonstrates different. As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trait, we find that it is an admitted fact that the assessee entered into common scrips for conducting the business of F O on side and the investment in STCG on the other. In fact, there are common shares for the investment for STCG and LTCG too. Therefore, the allegation of quick profits and the issue of the business akinness, came up in the assessment proceedings. Assessee picked up the six common scrips for business of F O as well as the STCG. This is the area of dispute between the parties and there is no issue on change of classification of STCG as LTCG or vice versa before us. There is no clarity on what basis certain transactions involving the same scrip are treated as business and others as STCG and the assessee has no explanation in this regard except relying on the book entries, which we rejected already for detailed reasons given above. In the process, the assessee got an unfair advantage of lower tax rates applicable to the STCG. Such advantage is allowable unless the onus cast on the assessee is demonstrated. Assessee could not demonstrate the reasons for such treatment, which turned out to be prejudicial to the interest of the revenue. Considering the failure of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In any case, the issue of establishing the real capital appreciation of the shares is difficult for the assessee in the capital market of rapid fluctuations of relevant indices. 19. To sum, the facts about the entries in the books of accounts are inconclusive. By not contesting the conclusion of the CIT(A) with regard to so called STCG Rs 21,50,410/-, the assessee forfeited the claims relating to the credibility of the books entries at least with reference to the transactions involving the re-entered scips. With this, with regard to claims of investment in other scrips, the onus shifts to assessee and assessee failed to discharge the same. The intention of acquiring the shares as investment for capital appreciation is not translated and instead the symptoms of going for quick profits are evident. The stock: turnover ratio at 1:16 does against the claims of the assessee. Other data relating to opening stocks and closing stocks on one side and the assessee s final exiting from the so called claim of STCG at the end of 2011-12 indicates the assessee s conduct for quick profits and not for investment. Of course, the holding period particulars also confirm the AO s conclusions. Regar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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