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TMI Blog2019 (12) TMI 760X X X X Extracts X X X X X X X X Extracts X X X X ..... es in a systematic manner. The assessee did not hold any shares for a longer period that means, the assessee s intention is not at all earn dividend income, but, only he wanted to make profit. In the written submissions, the ld. counsel for the assessee relied on various case law as well as CBDT Circular No. 6 of 2016, dated 29/02/2016. In our view, the same are not relevant to the facts of the case of the assessee. Therefore, the revenue authorities treated the assessee as a trader and not an investor is proper and accordingly, we uphold the order of the CIT(A) and dismiss the ground raised by the assessee in this regard. Disallowance of expenses under the head conveyance travelling and vehicle maintenance - AO made the disallowance on the ground that some of the vouchers are self made and not supported by bills and disallowance was to the extent of 30% of the amounts under the said heads of expenses - HELD THAT:- AO made the disallowances @ 30% of the expenditure on the ground that the some of the vouchers submitted by the assessee are self-made vouchers. The CIT(A) restricted the disallowance to 15%. Therefore, we find no infirmity in the order of CIT(A) and therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scrutiny guidelines contained in the action plan cannot go beyond the scrutiny guidelines. Hence the basis of scrutiny is quite contrary to law. 3. That the assessment order passed by the Asst. Commissioner of Income Tax without serving the scrutiny notice to the Petitioner within the period prescribed and serving the assessment order dt.15-12-2010 on 10-1-2011 is an order anti dated passed in the month of January, 2011 by putting the date as 15-12-2010 under the Income Tax Act, as such the same is ex-facie barred by limitation. 4. That the petitioner who is carrying on the business in manufacturing of iron and steel products and trade in the above said commodity only. Investments in equity shares and income earned from equity investment cannot. be subjected to higher rate of income tax as business income, Special charging provision section 111A overrides general charging provision. 5. Disallowance of expenses with the observation that vouchers are self made without finding fault in it or discrepancy in it, disallowance is quite contrary to law and liable to be set aside. That the Petitioner craves leave of the Hon'ble Tribunal to permit the Petitioner to add, alter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The AO observed that in most of the cases, though the mode of trade was delivery trading, the period of holding of stock is for short period. Further, in most of the trades, the assessee did not even hold on to atleast some part of huge purchases even though the mode of trade was delivery and instead of rentered into the same scrips in a short span of time. In view of the above observations, the AO held the assessee as a trader and not an investor in respect of transactions. Relying on the Circular No. 4/2007, dated 15/06/2007 issued by the CBDT, the AO held that gains on transactions held by the assessee cannot be treated as short term capital gains to be taxed at the special rate of 10%, as prescribed u/s 111A and accordingly, taxed the said profits of ₹ 48,75,642/- @ 30% as profits of business. 12. When the assessee preferred an appeal before the CIT(A), the CIT(A) confirmed the addition made by the AO by observing as under: 9.4 Perused the observations of the A.O and submissions of the appellant. As could be seen from the facts of the case that the appellant is into the regular business of manufacturing and trading in various steel products. However, during the y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the same indicate the intention of the appellant that the investments were made for deriving the profit in trading of the shares. Further, the appellant did not contest the details of purchases and sale of shares as enumerated in assessment order which has indicated the frequency of transactions. Further, the submissions of the appellant wherein it was clearly indicated that he did not hold the shares for longer period for fear of losses on account of fluctuations in the market, also indicate the real intention of the assessee in this regard. 9.5 In light of the above facts of the case, it is relevant to refer to the order of ITAT, Hyderabad on the similar lines and issues in the case of Mr. S.Ravindranath Tagore, Hyderabad in ITA No.1161 of 2009 dated 31.01.2013, wherein the decision of Hon'ble ITAT refer to the decision of jurisdictional High Court in the case of P.V.S.Raju Vs. Add!. CIT (340 ITR 75) wherein the Hon'ble High Court has further laid down the tests and guidelines, to determine whether the gains from sale of shares, constitute income from capital gains or income from business, which run as under: a) The frequency of buying and 'selling of shares ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies. The Assessing Officer in the assessment order has mentioned specific instances where the assessee has sold shares either on the same day or within a very short period of 7 to 15 days. It is also a fact on record that the volume of turnover was because of the frequency and regularity of transactions and not due to huge investment. Even the CIT(A) in para 8.4 of his order has accepted the fact that there were not only numerous transactions but volume of transactions were also more. The CIT(A) also admits the fact that certain shares were purchased and sold on the same day by the assessee. It is also revealed from the order of the CIT(A) that certain shares purchased on 2-11-2004 and 9-112004 were sold within a short span on 19-11-2004. These facts clearly show that the intention of the assessee in investing in shares is for the purpose of earning profit and not to earn dividend. It is also a fact on record that the dividend earned by the assessee during the relevant financial year is meager considering the quantum of turnover. If the intention of the assessee would have been to hold the shares as investment for the purpose of earning dividend, then the assessee would not have in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rived by the assessee from sale of shares has to be treated as profit from business. 9.7 Thus, based on the facts of the case which are similar to the facts of the case of the decision of the Hon'ble !TAT, Hyderabad and also respectfully following the ratio of the decision of Jurisdictional High Court (supra), I am of the considered opinion that in the instant case, shares were purchased and sold at high frequency resulting in higher volumes and by holding them for shorter period, more specifically restricted to few days, resulted in earning of the profits on sale of the shares as trading profits than the gains on sale of the short term capital asset. Under the circumstances, I am of the considered opinion that the AO is justified in holding the said profits as gains of the business than the capita lgains from the sale of short term capital asset. Accordingly, the addition of ₹ 48,75,642/- is upheld and directed to be assessed @ 30% as against 10% claimed by the appellant as per the provisions of Sec. 111A. In the result, this ground of appeal is treated as dismissed. 13. This appeal was heard on 28/11/2019 and when this appeal was taken up for dictation, we find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same within 2 days for profit. All the shares in the above table except one scrip pertaining to EASUN Reyrol, which is purchased on 25/07/2007 and sold on the same day, the assessee purchased on 24/07/2007 and sold on 206/07/2007 i.e. within two days. Therefore, it is very much evident that the intention of the assessee is only to make the profit by buying and selling the shares in a systematic manner. The assessee did not hold any shares for a longer period that means, the assessee s intention is not at all earn dividend income, but, only he wanted to make profit. In the written submissions, the ld. counsel for the assessee relied on various case law as well as CBDT Circular No. 6 of 2016, dated 29/02/2016. In our view, the same are not relevant to the facts of the case of the assessee. Therefore, the revenue authorities treated the assessee as a trader and not an investor is proper and accordingly, we uphold the order of the CIT(A) and dismiss the ground raised by the assessee in this regard. 16. As regards ground No. 5 relating to disallowance of expenses under the head conveyance travelling and vehicle maintenance, the AO made the disallowance on the ground that some of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowing the 15% of the expenditure claimed by the assessees on similar circumstances and was in turn based on the ratio of the decision of Hon'ble A.P.High Court in the case of CIT Vs. Transport Corporation of India (256 ITR 701). Hence, by considering the facts of the case as well as the ratio of the judicial decision In this regard, on the subject matter, the A.O is directed to restrict the disallowances of expenses under the heads of 'conveyance travelling' and vehicle maintenance' to 15% of the total expenses under respective heads, as against 30% adopted in the assessment order. The appellant gets part relief in this regard, against the disallowances under both the heads of expenses. Accordingly, these grounds of appeal are treated as partly allowed. 18. We have considered the rival submissions and perused the material on record as well as gone through the orders of revenue authorities. The AO made the disallowances @ 30% of the expenditure on the ground that the some of the vouchers submitted by the assessee are self-made vouchers. The CIT(A) restricted the disallowance to 15%. Therefore, we find no infirmity in the order of CIT(A) and therefore, t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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