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TMI Blog2017 (2) TMI 1183X X X X Extracts X X X X X X X X Extracts X X X X ..... Circular No.4 of 2007 dated 15/06/2007 issued by the CBDT clearly lays down that it is possible for a taxpayer to have two types of portfolios simultaneously, i.e. an investment and trading portfolio. We simultaneously note that substantial majority of the transactions giving rise to the capital gains are mere resale of shares acquired in the initial public offer for allotment of shares by companies. Thus, shares were acquired in the primary market and sold in the secondary market after obtaining delivery thereof. The transactions involving purchase and sales are limited in number and does not indicate any continuous and systematic course of activity or conduct with set purpose. We observe that the manner in which the books of accounts are kept is an important piece of evidence for determination of the factual issue in hand. The shares held at the end of the year towards investment has also not been shown to be valued at cost or market price whichever is lower. We also notice that the investments giving rise to the capital gains are not driven primarily by the borrowed funds which were claimed to be not obtained on commercial basis. In these facts, the action of the AO acceptin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y required to verify the nature of transactions in shares which resulted into Short Term Capital Gains taxable u/s.111A of the I.T. Act. I find that the Assessing Officer has accepted the taxability of gain of ₹ 25,23,011/- u/s.111A of the I.T.Act without properly analyzing these transactions. A closure scrutiny of the transactions resulting into gain of ₹ 25,32,011/- shows that gain of about ₹ 21-22 lakh was made by the assessee in only three scrips, namely Jindal Cotex (Rs.3.72 lakh). Kiridyes (Rs.10.64 lakh) and VITL Info (Rs.7.43 lakh). In almost all the three instances assessee purchased shares work ₹ 25-30 lakh and sold within 20-40 days. The VITL Info shares were purchased in May and sold in June, Jindal Cotex shares were purchased in September and sold in October, Kiridyes were purchased in November and sold in December. A very short duration of possession of shares worth ₹ 25-30 lakhs with such regularity of sale and purchase during the year with a singular motive to make handsome profit clearly shows the intention of appellant as adventure in the nature of trade rather than investment in these shares. Except for shares of 3 and 4 companies, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. The Ld.AR for the assessee Mr.G.C. Domadia heavily relied upon the written submissions filed before the CIT and contended that the STCG offered by the assessee has been accepted by the AO under s.143(3) after collecting requisite details and after application of mind thereon. The Ld.AR submitted that the assessee has separately maintained the records towards its investment portfolio vis- -vis trading portfolio. The assessee has also maintained separate records for transactions entered in derivative segment. It was asserted that shares have been purchased on delivery basis and surplus arising thereon as per the separate records have been offered for taxation as Long Term Capital Gains (LTCGs) or the STCGs, as the case may be. It was submitted that the dividend has been earned on the investments which was duly reflected in the books of accounts and the return of income. The assessee is consistently following the aforesaid practice. It was vehemently emphasized that out of total 33 scrips giving rise to the capital gains, capital gains arising in as many as 26 scrips are by way of acquisition in initial public offerings (IPOs) by the companies, sale whereof has resulted in some ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO has collected the requisite details during assessment proceedings which included details of purchase and sales of shares which resulted in capital gains during the relevant period. We simultaneously note that the AO has made conspicuous averments towards declaration of STCGs at ₹ 25,32,011/- and also specifically noted concessional rate of tax applicable thereon. We further observe that the AO has noted that necessary details and evidences thereof have been furnished by the assessee. In the circumstances, it is difficult to accept the allegation that the action of the AO was without requisite enquiry and application of mind on facts. Possibly, the CIT is not happy with the quality of the outcome on the enquiry. However, this by itself would not give occasion to the CIT to pass order under s.263 of the Act. On facts, we note from the order of the CIT itself that the assessee has maintained separate records whereby intention to hold certain shares as capital assets as compared to other class of trading assets of similar nature can be deciphered. This act of the assessee by itself is a strong indicator of the declaration of the underlying intention of the assessee. We als ..... X X X X Extracts X X X X X X X X Extracts X X X X
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