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TMI Blog2021 (4) TMI 679X X X X Extracts X X X X X X X X Extracts X X X X ..... No.5178/Del/2012 in favour of the Revenue. However, vide order dated 29.05.2020 in Misc. Application filed by the Revenue being MA No.621/Del/2018, this Tribunal had recalled the earlier order vide order dated 23.08.2018 to be heard afresh and to hear denovo. Hence, the finding given in the earlier order may not have any binding precedent. 3. The facts in brief are that the assessee is engaged in the business of providing financial consultancy and all allied and auxiliary services. However, as per MOA, the business has been stated to be of buying, selling and dealing in securities of various kinds. The assessee has declared income from business and profession to the tune of Rs. 1,41,84,797/-; and income from short term capital gain (STCG) of Rs. 35,14,66,127/-. The ld. Assessing Officer required the assessee to show cause as to why the STCG shown in share transaction should not be treated as business income. In response to which assessee filed very detailed reply which has been incorporated in the assessment order from pages 2 to 9 of the assessment order. In sums and substance, assessee's contention was that, during the year under consideration assessee has made investment in s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness. No separate bank account is maintained for diffracting the alleged investment made and for business activity. The assessee was utilizing the sales proceeds of the alleged investments for the purpose of business. Similarly, the assessee was utilizing the funds of business for alleged purchase of investment/ shares. Merely, an assumption by the assessee that a particular purchase is investment is not sufficient. If it is allowed then every person shall opt for income trading of shares as capital gain income, only because tax on capital gain is either levied lesser rate or Nil rate. (b) The turnover of these shares was to the tune of Rs. 69,06,09,30,892/-. This in itself shows that it was trading activity. 6. Finally, the Assessing Officer treated the income from sale of investment in share as business income after observing and holding as under: "In Asstt. Year 2007-08, the assessee itself treated its income as income from business and profession and considering this fact in mind the Assessing Officer accepted the plea of the assessee and the assessment was completed at the same figures without making any further addition as the department was taking the similar view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat appellant did not either purchased or sold any shares in the month of June 2007, July 2007 and October 2007. It is also seen that in several months the appellant has transacted' only in single scrip. It is also observed that in the month of April appellant acquired shares of one company and did not sold anything. In the month of May appellant acquired shares of one company and sold shares of two companies. In the month of June and July there was no purchase or sale. In the month of August appellant acquired shares of one company only and did not sale anything. In the month of September and October, appellant did not make any investment in shares and sold only shares of one company in the month of September. In the month of November appellant acquired shares of one company but did not sell anything. In the month of December appellant acquired shares of two companies and also sold shares of two companies. In the month of January appellant acquired shares of one company and sold shares of one company. In the month of February appellant acquired shares of three companies and also sold shares of three companies. In the month of March shares of two companies were purchased and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This observation of the ASSESSING OFFICER is factually incorrect. As stated above the appellant is engaged in the business of Financial Consultancy and advisors and from that business it has shown income of Rs. 141,84,797/- during the year. During the course of appellate proceedings, the appellant submitted that all transactions have been delivery based and were settled by way of payment, the appellant has also submitted that it has maintained separate records for investment and trading of shares without delivery. The holding of the shares on which short term capital has been claimed ranges from few days to few months. It is claimed by the appellant that investment was made in the shares with the intentions to hold the same for long term appreciation and for earning dividends. However, the investments was offloaded because of appreciation and maximizing the wealth. It is also contended by the appellant that period of holding of shares and non receipt of dividend income is not a decisive factor for treatment of particulars transaction as investment or trading transaction. It is further contended by the appellant that except in few cases the holding period ranges more than one mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal was decided by the Tribunal through an ex-parte judgment, vide order dated 23.01.2017 wherein the Revenue's appeal was allowed. Thereafter, it was recalled being an ex parte order and was fixed to be heard on merits. Thereafter, the Tribunal again vide order dated 23.08.2018 had passed a detailed order on merits, wherein the Tribunal has decided the issue against the assessee holding that assessee has purchased and sold scrips multiple times, on various dates and looking to the magnitude of purchase of shares which is very large, therefore, the gain is to be taxed as 'Business income'. However, the said order has again been recalled by the Tribunal to be heard fresh. She further submitted that in earlier years, the assessee itself had shown the transaction of shares as business income and only in this year the assessee has claimed transaction of short term capital gain. She also referred to the relevant observation and finding of the Assessing Officer given at pages 9 to 12 and also order made reference to the earlier order of the Tribunal dated 23.08.2018 specifically paragraphs 5 and 8, and therefore, she submitted that the said finding of the Tribunal cannot be reversed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eated the short-term capital gain amounting to Rs. 35,14,66,127/- earned on entire sale and purchase of shares as business income has noted that "In Asstt. Year 2007-08, the assessee itself treated its income as income from business and profession". He pointed out that which has also been noted by learned Assessing Officer that assessee has moved petition u/s 264 in light of the guidelines issued by Central Board of Direct Taxes in circular no. 4/2007 dated 15.06.2007 that profit from sale of shares of GHCL be taxed under the head 'capital gain' and not under the head 'business income'. He further added that in the preceding years i.e. assessment year 2007-08 assessee company earned profit from sale of shares of only in one company, namely GHCL and has no shares at the end of preceding assessment years on the contrary in the year under consideration assessee company has closing investment namely shares of M/s Prakash Industries Ltd., out of shares acquired during the year under consideration and, profit from sale shares of such shares has been offered by the assessee and accepted by the revenue under the head 'capital gain in all the subsequent assessment years. Thus, he submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 982 60,98,09,848 4,08,982 63,53,57,960 Prakash Industries Ltd. - - 12,50,000* 23,75,00,000 - - 13. Thus, in all, there are only 10 scrips in which investment had been made during the year and out of which disinvestment was made in 9 scrips. One of the controversies is that there are large number frequencies of purchase and sale of shares. However, the monthly frequency of transactions for the entire financial year shows that there not much frequency as alleged by Assessing Officer. This is quite evident from the following: Month Purchase Sale April Acquired share of 1 co Nil May Acquired share of 1 co Disposed off 2 cos. share June Nil Nil July Nil Nil August Acquired share of 1 co Nil September Nil Disposed off 1 co's share October Nil Nil November Acquired share of 1 co Nil December Acquired share of 2 co's Disposed off 2 co's share January Acquired share of 1 co Disposed off 1 co's share February Acquired share of 3 co's Disposed off 3 co's share March Acquired share of 2 co's Disposed off 2 co's share 14. Further, from the perusal of the details of capital gains, it is seen that, out of total capital gain of approximately Rs. 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Gopal Purohit, 336 ITR 287 (Bom) has upheld the proposition that it is open for the assessee to maintain two separate portfolio one relating to investment in share and another relating to business activities involving dealing in shares. Here, in this case also, the assessee has maintained separate portfolio and the shares in question have been treated as investment. In the financial statement, it has been valued as cost of the profit has been disclosed a sole of investment. The principle laid down by the Hon'ble Bombay High Court in the case of Gopal Purohit (supra) is squarely applicable on the facts of the present case also. 17. Even otherwise also, if the assessee has sold the shares in the relevant year and has made substantial gain even if the shares were held for shorter duration, that does not lead ipso facto inference that the shares were bought with the intention for doing trade and he is not an investor. The assessee in order to have maximum gain can buy and sell shares for a shorter duration in order to augment its gain and it is not necessarily the investment in shares should be for longer duration and if shares are transacted on a short term basis then it cannot be re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eterminative factor whether the assessee is trading in shares or is an investor. Some investors do take risk. The Assessing Officer has recorded that during the financial year 2006-07, the assessee had indulged in frequent and regular trade in securities. The Assessing Officer did not refer to and specifically dealt with the transactions in question though the chart and the figures noted above in this order were available and on record at the time of original assessment. He has not mentioned whether the assessee had indulged in frequent transactions in the previous period or subsequently. Merely because the assessee had sold the said shares in the relevant year and made substantial gains and could not show basically the objective for acquiring the shares was not as an investor but as a trade. The ratio of sales and purchase may be relevant in a particular case but when an assessee liquidates any investment, the said ratio will always be in favour of sales. [Emphasis supplied]." 18. Thus, when assessee itself has classified its shares into investment portfolio, and had sold the shares in the relevant year itself after making substantial gain, then it cannot be held that assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ROFIT 6-Nov-07 19,55,000 924.77 180,79,29,653 27-Dec-07 14,96,000 1,006.12 150,51,53,326 28-Dec-07 4,59,000 1,021.29 48,87,70,468 21-Jan-08 2,68,909 899.97 24,20,09,042 22-Jan-08 1,28,931 851.88 10,98,34,101 23-Jan-08 1,33,900 919.06 12,30,62,501 24-Jan-08 4,88,302 894.81 43,69,35,289 1-Feb-08 10,20,220 802.40 81,86,27,696 4-Feb-08 12,20,262 864.64 105,50,92,170 5-Feb-08 8,20,000 879.49 72,11,79,262 8-Feb-08 1,45,784 802.67 11,70,18,027 11-Feb-08 24,26,248 799.49 193,97,66,320 13-Feb-08 2,00,504 812.58 16,29,21,702 14-Feb-08 3,60,000 860.65 30, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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