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TMI Blog2016 (2) TMI 161X X X X Extracts X X X X X X X X Extracts X X X X ..... vable as on 31-03-2010 stood at ₹ 6.74 crores and has substantial income from the said firm which stood at ₹ 32,88,053/- for the assessment year 2010-11 which again indicates that it must be occupying substantial time of the assessee as the assessee has also contended that he is working partner of the said firm M/s Dia Export Corporation . We have also observed that the assessee has not borrowed any funds for buying and holding the shares which also indicates that the assessee is an investor. In our considered view keeping in view facts and circumstances of the case , the CIT(A) has rightly classified and distinguished whereby the shares transacted repeatedly within short period of time within few days was held to be business income of ₹ 8,03,879.90 as per chart above in preceding para’s while the rest of income/gain from sale of shares is classified as STCG or LTCG and we do not find any infirmity in the well reasoned orders of the CIT(A) which we uphold. - Decided against revenue - I.T.A. No. 3347/Mum/2014 - - - Dated:- 1-1-2016 - SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER For The Appellant : Shri Morya Pratap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned L.T.C.G. and S.T.C.G. and incurred L.T.C.G. loss and S.T.C.G. loss of ₹ 151824, 3239632, 12794968 and ₹ 1174753/- respectively . The aforesaid details for the A.Y.2010-11 prove that the assessee is an investor in shares. 4. The assessee has invested his surplus funds for a long time and the position is accepted year after year as will be seen from the scrutiny assessment order made u/s. 143(3) of the Act for A.Ys. 2007-08, 2008-09 and 2009-10. Briefly the details are as under:- Sr. No. A.Y. L.T.C.G. S.T.C.G. Investment 1 2006-07 8751163 16098368 73754858 2 2007-08 23531677 5153600 86414090 3 2008-09 27296345 -(1380608) 110128712 4 2009-10 -(798021) -(29473795) 76229707 5. For the year ended 31st March 2010 relevant to A.Y. 2010- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sell the shares. Hence , the assessee cannot terms himself as an investor. Thus , the AO observed that the assessee has derived the income from trading in shares and offered the same under the head STCG. The AO observed that the number of transactions and the quantum is quite huge i.e. the sale and purchase of shares stood at ₹ 9,22,58,412 and ₹ 10,50,53,364/- respectively with a total dealing in shares of several companies in various transactions. The AO observed that the assessee has indulged in trading activity in shares on regular basis with period of holding of these shares to as minimum as 2 days. 4. The AO observed that the assessee has entered into the repeated nature of transactions of the same scripts which gives a clear indication that is not a case of investment but is of trading of shares and hence, income of ₹ 99,24,367/- shown by the assessee was treated as business income under the head Income from Business or Profession . 5. Aggrieved the assessee filed the first appeal before the CIT(A) and submitted as under:- 1. The Assessee is an individual and is carrying on the business of trading in diamonds in the firm's name and style of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is with period of holding of these shares as minimum as two days. 4. However the Assessing Officer held that while completing the assessment for A. Y. 2009-10 u/s.143(3) of the Act, the shares held as on 31.3.2009 were treated as investment and therefore, the sale of the said shares in the previous year relevant to the A. Y. 2010-11 is to be treated as Short Term Capital Gains/Loss. Accordingly the Assessing Officer computed the Short Term Capital Gains on sale of such shares at ₹ 32,80,883/- and Short Term Capital Loss on sale of such shares at ₹ 4,10,280/-. Therefore, the Assessing Officer treated the balance Short Term Capital Gains of ₹ 99,24,367/- as business income and taxed accordingly. Against the aforesaid order of the Assessing Officer, the assessee is in appeal before your honour. 5. In this respect at the outset, your honour's attention is invited to page 23 of the Paper Book, wherein the assessee has given details of Short Term Capital Gain/Loss and Long Term Capital Gain/Loss, income from share trading and investment in shares in the A. Ys. 2001-02 to 2010-11. On perusal of the aforesaid chart, your honour will find that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f shares were carried out without taking delivery, the profit or loss arising from the said transactions is treated as business income from share trading and it is offered for taxation accordingly. This fact is also apparent from the aforesaid chart which is enclosed at page 23 of the Paper Book. Eighthly . the Assessee has valued his shares always at cost as the shares are held by the Assessee as his investment and not stock in trade. Ninthly, the Assessee has always acted as an investor who would shuffle his portfolio by booking the expected appreciation which is apparent from the fact that on an average within a period of less than a year the Assessee has been able to get 10% appreciation. Tenthly , on perusal of the details of the Short Term Capital Gains on pages 10 to 14 of the Paper Book, your honour will find that on an average the period of holding of each scrip is more than 30 days, which shows that the Assessee is an investor in shares. Eleventhly , on perusal of the chart on page 23 of the Paper Book, your honour will find that in all the years, except A. Y. 2001-02 the Assessee has sold shares which were held for more than 365 days and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olios, the assessee may have income under both heads viz. capital gains as well as business income. Sixteenthly , your honour's attention is invited to the decision of the Appellate Tribunal in the case of Janak Rangwalla vs. ACIT (11 SOT 627) wherein the Hon. Tribunal in paragraph 6 has held as under: 6. We have heard the rival submissions and perused the records. The facts of the present case are that the assessee had earned income from Short Term Capital Gains amounting to ₹ 1,47,15,196 on sale of shares in the year under consideration, which was claimed to be adjusted against Long Term Capital Loss. The assessee has also declared income from speculation gains/loss which are on account of sale and purchase of shares without delivery of the shares. During the year under consideration, the assessee had also claimed Long Term Capital Loss of ₹ 1,02,31,691 on sale of shares which were hold by the assessee as investment and duly reflected in his Balance Sheet as investment. Similar transaction of sale and purchase of shares are being carried out by the assessee in preceding years, details of which have been filed on record. In addition to the Capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imed himself both dealer as well as investor and has offered income for taxation accordingly, which has been claimed to have been accepted by the Revenue authorities in earlier years. The assessee has also submitted details of shares purchased and taken delivery from asst. yr. 2001-02 till asst. Yr. 2005-06 to show the period of holding as well as to substantiate the claim that in respect of delivery transactions, the assessee always showed the profit there from either as long term capital gain and short term capital gain depending upon the period of holding. The Hon'ble Tribunal in para 8.1 has observed as under: 8.1 Thus, the nature of activities, modus operandi of the assessee, manner of keeping records and presentation of shares as investment at the year end is same in all the years, hence; apparently, there appears no reason as to why the claims made by the assessee should not be accepted. However, the Revenue Authorities have taken a different view in the year under consideration by holding that principle of res judicata is not applicable to the assessment proceedings. There cannot be, in our view, any dispute on this, aspect but there is also another judicial thou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may result into an apparent benefit to individual(s) entering into those transactions. Thus, in our view, in the facts and circumstances of the case, on the basis of principle of consistency alone, the action of the Revenue Authorities is liable to be quashed. We order accordingly and direct the Assessing Officer to accept the claims of assessee in regard to short-term capital gain and long-term capital gain. The aforesaid decision of the Tribunal is affirmed by the Bombay High Court and accordingly the appeal of the Department u/s. 260A of the Act has been dismissed which is reported in 336 ITR 287. In the said judgment their Lordships held as under: The Tribunal has correctly applied the principle of law in accepting the position that it is open to an assessee to maintain two separate port folios, one relating to investment in shares and another relating to business activities involving dealing in shares. The Tribunal held that the delivery based transactions in the present case, should be treated as those in the nature of investment transactions and the profit received there from should be treated either as short-term or, as the case may be, long-term capital g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Radhasoami Satsang v. CIT [1992]193 ITR 321. While the principle of res judicata could not as an abstract principle apply to assessment proceedings since each year of assessment has to be considered separately, yet when a fundamental aspect was duly considered after a query was raised by the Assessing Officer and was answered by the assessee on the same facts, a change in view, was evidently not warranted for the assessment year in question. So construed, we do not find that the decision of the Tribunal will give rise to any substantial question of law. The view which we have taken is consistent with the principle laid down by the Division Bench of this Court in Karsondas Ranchhoddas v. CIT [1972] 83 ITR 256. The appeal is hence dismissed. Nineteenthly , your honour's attention is also invited to the latest decision of the Hon. Appellate Tribunal in the case of ACIT vs. Shri Nailesh P. Dalal in ITA No. 3337/Mum/2009 and C.O. NO.235/Mum/2009 dated 28-8-2013 wherein the Hon. Tribunal held as under: 10. We have considered the rival submissions and also perused the relevant material on record. The issue as to whether the profits on sale of shares constitutes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... commercial motive is an essential ingredient of trade. (5) How the value of the items has been taken in the balance sheet? If the items in question are valued at cost, it would indicate that they are investments or where they are valued at cost or market value or net realizable value (whichever is less), it will indicate that items in question are treated as stock-in-trade. (6) How the company (assessee) is authorized in memorandum of association/article of association? Whether for trade or for investment? If authorized only for trade, then whether there are separate resolutions of the board of directors to carry out investments in that commodity? And vice versa. (7) It is for the assessee to adduce evidence to show that his holding is for investment or for trading and what distinction he has kept in the records or otherwise, between two types of holdings. If the assessee is able to discharge the primary onus and could prima facie show that particular item is held as investment for say, stock-in-trade), then onus would shift to Revenue to prove that apparent is not real. (8) The mere fact of credit of sale proceeds of shares (or for that matter any other item in question) in a part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal gain which again goes to show that the shares were held by the assessee for a considerably long period before the sale showing low frequency. The investment portfolio of the assessee was comprising of mutual funds, shares of unlisted companies etc. and this pattern of investment further shows that the assessee was investor in shares and securities and not a trader. All the investments made by the assessee in shares and securities were consistently valued at cost which further shows that the shares were treated by the assessee as investment and not stock-in-trade. The assessee was a working director in Miss Dalal Broacha Stock Broking Pvt. Ltd. earning a remuneration of ₹ 52 lacs and although the said company was engaged in the business of trading in shares, the fact that he was in full employment of that company shows that he was not left with sufficient time to carry on the business of trading on shares on his personal account. In our opinion, if all these relevant facts of the assessee's case are taken into consideration in totality, it becomes abundantly clear that the transactions in shares were made by the assessee as in investor and not as a trader and the profi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hile on the other hand, the ld. counsel of assessee relied upon the orders of the CIT(A) and submitted that in earlier six years from assessment year 2004-05 to 2009-10 the case was scrutinized u/s. 143(3) of the Act , whereby, the Revenue has accepted the assessee as an investor. He also relied upon the orders in the case of ACIT v. Sanjay M. Jhaveri, ITAT, Mumbai A Bench ITA No. 4039/Mum/2011(Mum. Trib.) and also relied upon the orders of ITO v. Janardhan Prahaladrao Gupta in ITA No. 1030/PN/2011(Pune-Trib) to contend that the assessee is an investor. 8.We have considered the rival submissions and perused the material on record and case laws relied upon. We have observed that the assessee is a regular investor and the assessee has shown the income of Short Term Capital Gain/Loss and Long Term Capital Gain /Loss from the sale of shares which is being shown consistently since preceding several year s and the same was accepted in the preceding years by the Revenue. The Revenue has during the last six years i.e. assessment years 2004-05 to 2009-10 processed the case of the assessee under scrutiny u/s 143(3) of the Act and accepted the assessee as an investor and brought to tax g ..... X X X X Extracts X X X X X X X X Extracts X X X X
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