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TMI Blog2015 (3) TMI 705X X X X Extracts X X X X X X X X Extracts X X X X ..... MI 261 - ITAT MUMBAI ) further supports the case of he assessee. Likewise, the decision from Hon'ble Madras High Court in CIT vs N.S.S. Investment Pvt Ltd. (2005 (4) TMI 45 - MADRAS High Court ), CIT vs. Associated Industrial Development Company, (1971 (9) TMI 3 - SUPREME Court) supports the case of the assessee. Accordingly, we uphold the order of CIT(A) and dismiss the appeal of the revenue. - Decided in favour of assesee. - ITA No.1284/Hyd/2010 - - - Dated:- 4-3-2015 - Shri P.M. Jagtap And Smt.Asha Vijayaraghavan JJ. For the Appellant : Shri Rajan Mitra, DR For the Respondent : V. Ratnakar, Advocate) ORDER Per Smt. Asha Vijayaraghavan, J.M. This appeal filed by the Revenue is directed against the order of the CIT (A)-VI Hyderabad, dated 30.07.2012 passed for A.Y 2007-08. 2. Briefly stated, the assessee filed his return of income for the A.Y 2007- 08 on 27.07.2007 admitting total income of ₹ 84,02,637 consisting of income from salaries amounting to ₹ 13,38,600, income from dividend of ₹ 4,43,857, income from house property amounting to ₹ 3,88,668 and income from sale of shares under the short term capital gains amounti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Long term capital gain on sale of shares 8,73,513 c. Short term capital gain on sale of shares 61,66,584 Total 74,48,030 The assessing officer has assessed the capital gain (both long term and short term) on sale of shares entirely as business income and assessed to tax as business profit ₹ 70,45,550/- (there appears to be an error and the correct amount is ₹ 70,40,097/- viz ₹ 8,73,513/-+Rs.61,66,584/-). In the assessment order the Assessing Officer has made some incorrect statements. Hence it has become necessary to place before the learned commissioner the errors in the assessment order in relation to the factual position. The Assessing Officer, at page 4 last para, observed as under: The second contention raised by assessee that he had never re-entered into any of the script which he had sold once. He also further submitted that he had never acquired the shares on different dates and he had never sold the same on different dates, the entire shares of particular script have bought in one go and sold at a st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14 13.02.2007 01.04.2006 318 In the same table-1 some shares are shown as purchased on various dates. These shares have been sold subsequently. Given below are the details of the sale of shares which were bought on the dates shown in table-1 Name of No. of Date of Date when No. of the script shares purchase these are days held purchased sold before sale Name of the Script No. of shares purchased Date of purchased Date when these shares are sold No. of days held before sale HINDAL 1000 02.08.2006 01.02.2007 183 ALECHE 793 27.12.2006 17.01.2007 21 ALECHE 3980 29.12.2006 17.01.2007 19 AKRINIR 86 13.02.2007 07.02.2007 7 The Assessing Officer merely tried to tally ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Name of the Script No. of shares purchased 12.07.2006 Date of sale of these shares No. of days held before sale PUNTRA 600 01.04.2006 102 INNCOM 1000 25.04.2006 78 OPTCIR 1674 25.04.2006 78 PETLlNG 200 18.04.'2006 85 POWTRA 100 18.04.2006 85 PUNTRA 600 01.04.2006 102 TOTAL 4174 Name of the Script No. of shares purchased 28.07.2006 Date of sale of these shares No. of days held before sale ANOBAN 5000 15.01.2007 18 ASHLEY ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t No. of shares purchased 15.01.2007 Date of sale of these shares No. of days held before sale ALEGHE 2969 22.11.2006 42 ANDBAN 5000 28.12.2006 18 ASHLEY 16000 28.12.2006 18 IFCI 10000 29.12.2006 19 SAGGEM 99 28.12.2006 18 SATGOM 1450 05.12.2006 40 TANSOL 33 25.04.2006 265 TCS 99 4.10.2006 86 TOTAL 40038 It is clear from the above that the appellant had not been involved in day trading as claimed by the Assessing Officer. A statement was filed before the Assessing Officer, showing number of days for whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C 100 13.2.2007 46 7.1.2008 328 GAUAMB 2000 1.3.2007 30 17.5.2007 77 EVIACC 220 31.3.2007 1 9.4.2007 10 HINLEV 1000 15.1.2007 75 7.5.2007 112 ICIBAN 800 28.02.2007 31 30.05.2007 91 IOECEL 245 31.03.2007 1 09.04.2007 10 INOFIL 144 31.03.2007 1 09.04.2007 10 KREBIO 4000 18.01.2007 72 28.05.2007 130 MUOLlF 271 31.03.2007 1 09.04.2007 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing important aspects which have a vital bearing for the purpose of consideration of the surplus on the sale of shares as long term and short term capital gain. The appellant has received a sum of ₹ 4, 43, 857/- as dividend in respect of various shares and mutual funds held by him during the year. This was declared in the tax return and a statement showing details was also furnished. The said statement showing list of dividend is again enclosed. The appellant s intention to hold shares was also to earn dividends. As at the end of the year, the appellant is holding shares and mutual funds of value ₹ 2,88,62,302l-. The reasons for selling the shares within the same year is only because of the taxation rate for the shares held for a short term period is concessional rate at 10%. The appellant has also derived long term capital gain from the sale of shares held by him for periods in excess of one year. Particulars of this long term capital gain on sale of shares has also been furnished to the Assessing Officer. The appellant had been allotted shares of Pennar Profiles Limited on 31.07.2005. These shares were sold during 28.11.2006 to 21.12.2006. A statement s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oans were borrowed for the purpose of acquiring the shares. There was no payment of interest by the appellant. All the shares were purchased out of own funds available with the appellant for investment. The appellant is not a trader of shares. He is employed as CEO / MO of a private sector company. He is an engineer by profession and qualification. The appellant is not an agriculturist and sugar cane grower as mentioned in para 3 of page 3 of the assessment order. . The appellant has not acquired Pennar Industries shares from ICICI bank. The appellant did not make any such submission. Shares of Pennar Industries were with the appellant since long time. The appellant is also a Director of Pennar Industries Limited for last 10 years. All the shares sold falling under long term capital gain are relating to only one company viz. Pennar Profiles Limited which the appellant was the Managing Director for a period of 12 long years . All these shares sold were allotted on subscription by the company on 31.07.2005. These shares were held for a period of more than 16 months before they were sold on 28th November, 2006. All the above factors cumulatively prove that the inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S.C 160 ITR 67 Shares whether held as investment or stock in trade is within the knowledge of the assessee. 1 CIT v. Associated Industrial Development Co. (P) Ltd S.C 82 ITR 586 6. The assessee also submitted additional grounds of appeal which are as follows: The appellant contends that the description in the cause title of the assessment order at Col.9, under the head nature of business shown as share trading and other income is not correct. There is no business carried by the appellant. The said column should be kept blank. In the alternative, in the said column the appellant should be described as salaried employee , 7. The CIT(A) held as follows: The assessee s contention that column should be kept blank is not accepted as all columns should be filled in. Further the assessee s contention that it should be described as salaries employee. As seen from the return of income filed by the assessee, his salary income was ₹ 13,38,600, income from house property was ₹ 3,88,668, income from short term capital gains (which w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ITAT Mumbai High Court in the case of Gopal Purohit. 6.1 It is observed that in the earlier years the AO has the claim of the appellant uninterrupted on identical facts which are prevalent during the year under consideration and allowed the same transactions as capital gains. Consistency is a degree of firmness and harmony of conduct with profession. There has to be an aim or a design or purpose or goal to execute a specified course of action with a proper form and pattern. Therefore, I agree that the above case law fits into the facts and circumstances of the case. 6.2 The AO has mainly based the assessment order on the fact that the appellant indulged in frequent voluminous sale and purchases of shares and concluded that it is not an investment but an intentional activity in the form of business adventure. An intention is an anticipated outcome that is guided through a process and a purpose to obtain the end result. In the case of the appellant such intention is not clearly brought out by the AO to give it a character of adventure or business activity . 9. The ld Counsel reiterated the submissions made before the CIT (A). The ld DR relied on the decision of Smt. Sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... brining on record contrary material, the AO cannot change the intention and manner of investment being made by the assessee. Had the assessee valued the shares at cost or market price whichever is lower, the gain arising out of sale of shares could easily be treated as business income. Assessee had not valued the shares as stock but valued the same as investment. Thus, what was a capital asset will remain a capital asset unless a person holding the asset himself changes the nature by a specific action like conversion of capital asset into stock in trade. In view of the decision of Hon'ble Supreme Court in the case of Ram Kumar Agarw Brothers, 205 ITR 251, the AO was not justified in treating the capital gain earned from sale of these shares, as business profits, which were entered by the assessee as investment in books of account. There is also no dispute to the well settled legal proposition that res judicata do not strictly apply to the income tax proceedings, but at the very same time, it is well settled that principle of consistency under the same facts and circumstances is the fundamental of judicial principle, which cannot be brushed aside without proper reasoning. In t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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