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TMI Blog2015 (3) TMI 720X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 2.61 crores as short term capital gain as against a total assessed income of Rs. 2.63 crores. Besides short term capital gain, the assessee had also reported a sum of Rs. 47.14 lakhs as long term capital gains which was accepted. In the scrutiny assessment, the AO formed an opinion that the assessee's claim of Rs. 2.61 crores being short term capital gains was not admissible having regard to the nature of the transaction. The assessee had during the relevant assessment year traded in 329 scripts (as against the 1833 scripts held by him). Having regard to the frequency and volume of the transaction and the further circumstance that the assessee did not report any other form of income in his returns, the AO felt that short term capita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. 2007-08 LTCG & STCG Intimation u/s 143 of the Act. 2008-09 LTCG & STCG Assessment u/s 143 (3) of the Act, accepting the long term capital gains declared in the return. 11. It also emerges out from the record that assessee being investor has not been maintaining any office established or keeping any staff. He is also not registered with any authority or body such as stock exchange and SEBI etc. He is not maintaining regular books of account but submitted the details in respect of the investment before the Assessing Officer. He has not classified the shares held by him as stock-in-trade. The entire portfolio is valued at cost and not at cost or market price whichever is lower because that can only be applied if the shares were held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpressed with the character of a commercial transaction entered into with a view to earn profit, it would furnish a valuable guideline. (b) The second test that is often applied is as to why and how and for what purpose the sale was effected subsequently. (c) The third test, which is frequently applied, is as to how the assessee dealt with the subject matter of transaction during the time the asset was with the assessee. Has it been treated as stock-in-trade, or has it been shown in the books of account and balance sheet as an investment. This inquiry, though relevant, is not conclusive. (d) The fourth test is as to how the assessee himself has returned the income from such activities and how the Department has dealt with the same in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for all relevant past years up to 2005-06 and even subsequently - including periods when scrutiny assessments were made, the Revenue uniformly accepted the assessee's arguments that such income was on account of short term capital gain and had no occasion to doubt it, or treat the amounts as derived from business income. Emphasising the need for consistency, learned counsel for the assessee submitted that for the current assessment year i.e. AY 2006-07, for the Revenue to successfully state that the character of income is otherwise, some unique facts or evidence had to be placed on record - both of which were absent. 7. Learned counsel lastly submitted that the conclusions of the AO and the CIT (A) were largely based on the fact that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n an item, that can indicate trade. Habitual dealing in a particular item is indicative of intention of trade. Likewise, ratio between the purchases and sales and the holdings may show whether the assessee is trading or investing (high transactions and low holdings indicate trade whereas low transactions and high holdings indicate investment). Another related factor is the duration for which the shares are held. (4) Was the purchase and sale made for realizing profit, or for retention and appreciation in its value. The former indicates the purchases being part of trade; and the latter is indicative of the purchases being an investment. Furthermore, it would be relevant to ask whether the intention behind the purchase was to enjoy dividend, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... horities in the first and second instance is the value and frequency of the transactions. As underlined by us, that factor alone cannot be conclusive and would have to be weighed along with the totality of facts. An important detail which cannot be overlooked by the Court is that in all past periods and even subsequent periods, similar income reported by the assessee was accepted by the Revenue as short term capital gain. In fact for AY 2005-06, the scrutiny assessment under Section 143 (3) accepted the sum of Rs. 1.02 crores as short term capital gain. In the circumstances, it was all the more necessary for the Revenue to point to some unique feature or distinctive material to differentiate the assessee's activities for the subject ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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