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TMI Blog2013 (1) TMI 868X X X X Extracts X X X X X X X X Extracts X X X X ..... ified and unwarranted as the entire expenses have been wholly and exclusively incurred for the purpose of Petitioner s business activities . 2. The assessee in the present case is an individual. A return of income was filed at ₹ 26,67,570/- and carry forward short term loss of ₹ 1,17,70,414/-, was claimed in respect of sale and purchase of shares. The assessee was required to file details in respect of share transactions and it was noticed that there were certain non-delivery transaction which were to be treated as speculative transaction. However, during the course of assessment proceedings the assessee vide letter dated 17/10/2011 claimed that the activity of the assessee regarding sale and purchase of shares should be considered to be in the nature of business activity. It was pleaded that loss arising out of sale and purchase of shares should be allowed as loss arising out of business of sale and purchase of shares. A loss of ₹ 5,40,98,454/- was computed by the assessee in respect of sale and purchase of shares which has also been described at page-3 of the assessment order in the following table: III Income from Business/Professio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er: Rs. Rs. a) Income from House Property: (as per return of income) (87,000) b) Salary Income: (as per return of income) 23,87,900 c) Income from Business/Profession: (as per return of income) (46,45,323) Add: Disallowance as discussed in para 5 above 28,47,311 (17,98,011) d) Speculation business (as discussed in para 4 above) 2,14,55,056 E Capital Gains: Short Term Loss (as discussed in paras 4 above) c/f (3,53,47,944) F Income from other sources: (as per return of income) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... own under the head investment; the claim made by the assessee during the course of assessment proceedings is an after thought claim; the assessee cannot be allowed to change the stand just to take advantage of some provisions of the Act; the assessee is not a trader of shares and purchase and sale of shares by him is only a part time activity because the assessee is getting regular salary income from the company; mere frequency of transactions cannot be an exclusive proof of trading activity. Therefore, he held that AO was right in treating such income under the head capital gain and in this manner Ld. CIT(A) has confirmed the action of the AO. Ld. CIT(A) has also confirmed the disallowance made by the AO in respect of interest. 5. The assessee is aggrieved with such order of Ld. CIT(A) and hence, raised the aforementioned grounds of appeal. 6. After narrating the facts, it was submitted by Ld. AR that details of sales and purchases were filed alongwith original return. He in this regard invited our attention towards page 1 to 9 of the paper book on which copy of original computation has been filed. From page 3 to 7 the details regarding sale and purchases of shares an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 2.70 crores. The AO held that the nature of activity, frequency and magnitude suggest that the profit declared by the assessee on account of transactions in purchase and sale of share was business income. Ld. CIT(A) held that sale of shares where period of holding was less than one month should be treated as business income. In case where holding was more than one month then the same should be treated as capital gain. On these facts it was held by the Tribunal that legal principles laid down by the Courts on account of treatment of an income as business income or capital gain can be summarized as follows: (a) It is possible for an assessee to be both an investor as well as dealer in shares. (b) Whether a transaction of sale and purchase of shares is a trading or investment transaction is a mixed question of law and fact. (c)Whether a particular holding is by way of investment or of stock-intrade is a matter within the knowledge of the assessee and ii is for the assessee to produce evidence from the records as to whether he maintained any distinction between shares held as investments and those held as stock-In-trade. (d) The treatment in the boo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capital gain. The AO noted that transactions in relation to scrips were amounting to more than 450 in numbers during the year. The average period of holding ranged from a few days to few months. The AO noted that the volume of purchase and sale of shares, frequency with which it was done, the organized /orchestral manner in which transactions were carried out and the fact that all these transactions had been conducted with a meager capital of ₹ 1.00 lac and mainly with the help of borrowed funds indicated that activity of purchase and sale of shares was with the intention to make instant profit and he considered the same as income from business. The stand of AO was confirmed by Ld.CIT(A) and the order of Ld. CIT(A) was upheld by the Tribunal. (4) Shri Narottam Somani (HUF) vs. ACIT, 47 SOT 37. In this case it was noted by the Tribunal that the frequency of the transaction was very high and shares were held for a very short time as they were sold immediately after short period of purchase, therefore, it clearly indicate that assessee s intention was to trade in shares and it was held that the activity of sale and purchase entered into by the assessee was in the natur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... return filed by him for making additional claim other than by filing a revised return. 11. We have carefully considered the rival submissions in the light of material placed before us. It is already mentioned that the details of sale and purchases of shares has been submitted by the assesse alongwith original computation of income, copy of which has been filed at pages 3 to 7 of the paper book. We have gone through the said details and to bring clarity on facts few instances are required to be mentioned. First scrip mentioned in the detail is ABN Offshore Company, in which assessee has purchased the shares of the said company at six occasions i.e. 3/11/2008, 4/11/2008, 1/1/2009, 15/1/2009, 23/1/2009 and 22/8/2008. The shares purchased on 3/11/2008 were for a consideration of ₹ 40,11,968/-. These were sold on the same date i.e. for a sum of ₹ 44,19,316/- giving rise to income at ₹ 4,07,354/-. Similarly shares purchased on 4/11/2008 for a sum of ₹ 42,65,162/- were sold on the same date for a consideration of ₹ 49,66,280/- giving rise to profit of ₹ 7,01,118/-. The share purchased on 1/1/2009 amounting to ₹ 33,86,491/- were also sold on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 188579 Yes 16/02/09 1000779 2030779 16/02/09 2158253 2158253 127474 Yes 17/02/09 1806529 1915653 17/02/09 2049470 2049470 133817 Yes 02/03/09 2500933 3788733 02/03/09 4098930 4098930 310197 Yes 06/03/09 5500853 2362280 06/03/09 2212646 2212646 -149634 Yes 12/03/09 2008143 3141029 12/03/09 3049730 3049730 - 91299 Yes Similar is the case with Ranbaxy Scrip, the details are as under: Acq. Dt. Rate Acq.cost Sale Date Sales Consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... take of his rights nor can the existence or absence of entries in the books of accounts be decisive or conclusive in the matter. Therefore, simply for the reason that assessee had claimed the said income as giving rise to capital gain, which claim was later on revised during the course of assessment proceedings, it cannot be held that the activity of sale and purchase of shares entered into by the assessee has given rise to capital gain. It is required to ascertain that whether activity of sale and purchase of shares carried out by the assessee is in the nature of business or capital gain . It has already been mentioned that the manner in which the assessee has carried out this activity clearly indicate that the intention of the assessee was to carry out such activity as trade and the motive of the assessee was to earn profit. The activity of sale and purchase of share was regular activity. The assessee has dealt with in the scrip of one company on various dates. They have been purchased and sold on the same date for which huge purchase price is paid and huge income is earned on the same date. The criteria on which it has to be determined that whether or not assessee is e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le Income-tax Appellate Tribunal, in law, was right in holding that a claim of deduction not made in the original return and not supported by a revised return, is admissible ? (C) Whether, on the facts and in the circumstances of the case, the hon ble Tribunal, in law, was right in not appreciating the fact that the Assessing Officer has no power to entertain a claim made by an assessee after filing a original return otherwise than by filing a revised return? Their Lordship in that case referred to the decision of Hon ble Delhi High Court in the case of CIT vs. Jai Parabolic 306 ITR 42(Del), wherein it has been held that Hon ble Supreme Court in the case of Goetze (India) Ltd. vs. CIT(supra) had dismissed the appeal making it clear that the decision was limited to the power of assessing authority to entertain a claim of deduction otherwise than by way of revised return and did not impinge on the powers of the Tribunal. In the said case their Lordship of Hon ble Jurisdictional High Court found that there were two important things. Firstly, the assessee was entitled to the deduction claimed. Secondly, the assessee made the claim not only before the AO but also independentl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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