The DCIT, Circle-2, Surat V. Shri Ramakant R. Kasat, Surat

ITA 1400/AHD/2011

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1461 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 05-05-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 16-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RASESH SHAH
• Assessee Lawyers: SHAURYA SHUKLA
• Keywords: Unexplained cash credit; Business income
• Section: 143(3); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH (BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER & SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER) ITA. NO: 1707 & 2190/AHD/2010 (ASSESSMENT YEAR: 2006-07) SHRI RAMNIWAS RAMJIVAN KASAT 1013, SHREE LAXMI MARKET, RING ROAD, SURAT PAN NO. AEBPK0877L ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-2, SURAT V/S V/S ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-2, SURAT SHRI RAMNIWAS RAMJIVAN KASAT 1013, SHREE LAXMI MARKET, RING ROAD, SURAT PAN NO. AEBPK0877L (APPELLANT) (RESPONDENT) ITA. NO: 3098 & 3141/AHD/2010 (ASSESSMENT YEAR: 2007-08) SHRI RAMNIWAS RAMJIVAN KASAT 1013, SHREE LAXMI MARKET, RING ROAD, SURAT PAN NO. AEBPK0877L DY. COMMISSIONER OF INCOME-TAX, CIRCLE-2, SURAT V/S V/S DY. COMMISSIONER OF INCOME-TAX, CIRCLE-2, SURAT SHRI RAMNIWAS RAMJIVAN KASAT 1013, SHREE LAXMI MARKET, RING ROAD, SURAT PAN NO. AEBPK0877L (APPELLANT) (RESPONDENT) ITA. NO: 3099 & 3142/AHD/2010 (ASSESSMENT YEAR: 2007-08) ITA NOS. 1707, 2190/AHD/201 0 & ORS. AY. 2006-07, 2 007-08 & 2008-09 2 SHRI RAMNIWAS RAMJIVAN KASAT HUF 1013, SHREE LAXMI MARKET, RING ROAD, SURAT PAN NO. AEBPK0877L DY. COMMISSIONER OF INCOME-TAX, CIRCLE-2, SURAT V/S V/S DY. COMMISSIONER OF INCOME-TAX, CIRCLE-2, SURAT SHRI RAMNIWAS RAMJIVAN KASAT HUF 1013, SHREE LAXMI MARKET, RING ROAD, SURAT PAN NO. AEBPK0877L (APPELLANT) (RESPONDENT) ITA. NO: 1971 & 2108/AHD/2011 (ASSESSMENT YEAR: 2008-09) SHRI RAMNIWAS RAMJIVAN KASAT 1013, SHREE LAXMI MARKET, RING ROAD, SURAT PAN NO. AEBPK0877L DY. COMMISSIONER OF INCOME-TAX, CIRCLE-2, SURAT V/S V/S DY. COMMISSIONER OF INCOME-TAX, CIRCLE-2, SURAT SHRI RAMNIWAS RAMJIVAN KASAT 1013, SHREE LAXMI MARKET, RING ROAD, SURAT PAN NO. AEBPK0877L (APPELLANT) (RESPONDENT) ITA. NO: 1457 & 1400/AHD/2011 (ASSESSMENT YEAR: 2006-07) SHRI RAMAKANT RAMNIWAS KASAT, PROP. OF M/S. VENKATESH SILK AGENCY, 505-508, SHREE LAXMI MARKET NR. SHREEJI MARKET, RING ROAD, SURAT PAN NO. ABVPK6554F V/S DY. COMMISSIONER OF INCOME-TAX, CIRCLE-2, SURAT SHRI RAMAKANT RAMNIWAS KASAT, PROP. OF M/S. ITA NOS. 1707, 2190/AHD/201 0 & ORS. AY. 2006-07, 2 007-08 & 2008-09 3 DY. COMMISSIONER OF INCOME-TAX, CIRCLE-2, SURAT V/S VENKATESH SILK AGENCY, 505-508, SHREE LAXMI MARKET NR. SHREEJI MARKET, RING ROAD, SURAT PAN NO. ABVPK6554F (APPELLANT) (RESPONDENT) ITA. NO: 3100 & 3220/AHD/2010 (ASSESSMENT YEAR: 2007-08) SHRI RAMAKANT RAMNIWAS KASAT, PROP. OF M/S. VENKATESH SILK AGENCY, 505-508, SHREE LAXMI MARKET NR. SHREEJI MARKET, RING ROAD, SURAT PAN NO. ABVPK6554F DY. COMMISSIONER OF INCOME-TAX, CIRCLE-2, SURAT V/S V/S DY. COMMISSIONER OF INCOME-TAX, CIRCLE-2, SURAT SHRI RAMAKANT RAMNIWAS KASAT, PROP. OF M/S. VENKATESH SILK AGENCY, 505-508, SHREE LAXMI MARKET NR. SHREEJI MARKET, RING ROAD, SURAT PAN NO. ABVPK6554F (APPELLANT) (RESPONDENT) ITA. NO: 1970 & 2247/AHD/2011 (ASSESSMENT YEAR: 2008-09) SHRI RAMAKANT RAMNIWAS KASAT, PROP. OF M/S. VENKATESH SILK AGENCY, 505-508, SHREE LAXMI MARKET NR. SHREEJI MARKET, RING ROAD, SURAT PAN NO. ABVPK6554F DY. COMMISSIONER OF INCOME-TAX, CIRCLE-2, SURAT V/S V/S DY. COMMISSIONER OF INCOME-TAX, CIRCLE-2, SURAT SHRI RAMAKANT RAMNIWAS KASAT, PROP. OF M/S. VENKATESH SILK AGENCY, 505-508, SHREE LAXMI MARKET NR. SHREEJI MARKET, RING ROAD, SURAT PAN NO. ABVPK6554F (APPELLANT) (RESPONDENT) ITA NOS. 1707, 2190/AHD/201 0 & ORS. AY. 2006-07, 2 007-08 & 2008-09 4 ITA. NO: 1708 & 2108/AHD/2010 (ASSESSMENT YEAR: 2006-07) SMT. SURAJKANWARI KASAT 3007 SHREEJI MARKET, RING ROAD, SURAT PAN NO. ABMPK5913H ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-2, SURAT V/S V/S ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-2, SURAT SMT. SURAJKANWARI KASAT 3007 SHREEJI MARKET, RING ROAD, SURAT PAN NO. ABMPK5913H ITA. NO: 3101 & 3143/AHD/2010 (ASSESSMENT YEAR: 2007-08) SMT. SURAJKANWARI KASAT 3007 SHREEJI MARKET, RING ROAD, SURAT PAN NO. ABMPK5913H DY. COMMISSIONER OF INCOME-TAX, CIRCLE-2, SURAT V/S V/S DY. COMMISSIONER OF INCOME-TAX, CIRCLE-2, SURAT SMT. SURAJKANWARI KASAT 3007 SHREEJI MARKET, RING ROAD, SURAT PAN NO. ABMPK5913H ITA. NO: 1972 & 2107/AHD/2011 (ASSESSMENT YEAR: 2008-09) SMT. SURAJKANWARI KASAT 3007 SHREEJI MARKET, RING ROAD, SURAT PAN NO. ABMPK5913H DY. COMMISSIONER OF INCOME-TAX, CIRCLE-2, SURAT V/S V/S DY. COMMISSIONER OF INCOME-TAX, CIRCLE-2, SURAT SMT. SURAJKANWARI KASAT 3007 SHREEJI MARKET, RING ROAD, SURAT PAN NO. ABMPK5913H ITA. NO: 1713/AHD/2013 (ASSESSMENT YEAR: 2006-07) ITA NOS. 1707, 2190/AHD/201 0 & ORS. AY. 2006-07, 2 007-08 & 2008-09 5 DY. COMMISSIONER OF INCOME-TAX, CIRCLE-2, SURAT V/S SMT. SURAJKANWARI KASAT 3007 SHREEJI MARKET, RING ROAD, SURAT PAN NO. ABMPK5913H APPELLANT BY : SHRI RASESH SHAH, A.R. RESPONDENT BY : SHRI SHAURYA SHUKLA, SR. D.R . ( )/ ORDER DATE OF HEARING : 05 -05-201 6 DATE OF PRONOUNCEMENT : 31 -05-2016 PER BENCH: 1. ALL THESE CAPTIONED APPEALS ARE BY THE RESPECTIVE A SSESSEES AND THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A)-II, SUR AT FOR RELEVANT ASSESSMENT YEARS AS MENTIONED IN THE CAPTIONED APPE ALS. 2. ALL THESE APPEALS WERE HEARD TOGETHER AND ARE DISPO SED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE AND BREVIT Y. 3. AT THE VERY OUTSET, THE LD. COUNSEL FOR THE ASSESSE E FURNISHED A DETAILED CHART EXPLAINING COMMON ISSUES INVOLVED IN ALL THESE APPEALS. THE LD. D.R. FAIRLY ACCEPTED THE CONTENTION OF THE LD. COUNSEL THAT THE ISSUES INVOLVED IN ALL THESE APPEALS ARE IDENTICAL AS EXPLAINED HERE UNDER:- (I) TREATMENT OF GROSS SALES PROCEEDS OF SHARES AS INCOME FROM OTHER SOURCES AS UNEXPLAINED CASH CREDIT U/S. 68 OF THE A CT FOR WHICH THE ASSESSEES ARE IN APPEAL. (II) TREATMENT OF SHORT TERM CAPITAL GAIN AS BUSINE SS INCOME FOR WHICH THE ASSESSEES ARE IN APPEAL. ITA NOS. 1707, 2190/AHD/201 0 & ORS. AY. 2006-07, 2 007-08 & 2008-09 6 (III) TREATMENT OF LONG TERM CAPITAL GAIN AS BUSINE SS INCOME, WHEREVER THE LD. CIT(A) HAS DECIDED AGAINST THE REVENUE, THE REVENUE IS IN APPEAL AND WHEREVER THE LD. CIT(A) HAS DECIDED AGAINST THE ASS ESSEE, THE ASSESSEE IS IN APPEAL. 4. ON SUCH STATEMENTS/ACCEPTANCE BY THE RIVAL PARTIES, WE PROCEED TO DECIDE THESE APPEALS BY CONSIDERING THE FACTS GIVEN IN THE CASE OF RAMNIVAS KASAT IN ITA NO. 2190/AHD/2010 FOR A.Y. 20 06-07. IT WOULD BE PERTINENT TO MENTION HERE THAT ALTHOUGH THE ISSU ES ARE IDENTICAL, THE QUANTUM MAY DIFFER. 5. FACTS OF THE CASE IN ITA NO. 1707/AHD2010 ARE THAT. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSE E WAS ASKED TO FURNISH COPIES OF THE CONTRACT NOTES OF PURCHASE AN D SALE, ACCOUNT OF SCRIP-WISE TRANSACTIONS ENTERED INTO WITH RESPECT T O SHORT TERM CAPITAL GAIN AND LONG TERM CAPITAL GAIN. 6. ASSESSEE FURNISHED THE REQUISITE DETAILS. ON PERUSI NG THE DETAILS, THE A.O FOUND THAT THE PURCHASES HAVE BEEN MADE IN THE MONTH OF APRIL, 2004 AND THE SALES HAVE BEEN MADE IN THE MONTH OF M AY, JUNE & JULY OF 2005. ON FURTHER PROBE, THE A.O NOTICED THAT SHA RES OF TWENTY FIRST CENTURY. , AMLUCKY INVEST AND MP INVESTCON WERE PUR CHASED PARTLY IN CASH AND PARTLY BY CHEQUE PAYMENT AND THE BALANCE, IF ANY, WAS MET OUT AGAINST SPECULATION PROFIT. THE A.O MADE DETAIL ED ENQUIRY FROM THE STOCK EXCHANGE AND CAME TO KNOW THAT THE BROKER HAD NOT MADE ANY TRANSACTION IN THE AFOREMENTIONED SCRIPS UNDER THE CLIENT CODE OF THE ASSESSEE. WHEN THE ASSESSEE WAS CONFRONTED WITH THI S, IT WAS BROUGHT TO THE NOTICE OF THE A.O THAT THE SHARES WERE PURCH ASED OF MARKET AND NOT THROUGH ANY STOCK EXCHANGE. ITA NOS. 1707, 2190/AHD/201 0 & ORS. AY. 2006-07, 2 007-08 & 2008-09 7 7. THE A.O DOUBTED THE GENUINENESS OF THE PURCHASES HO LDING THAT IT IS NOT PERMISSIBLE TO PURCHASE SHARES OFF MARKET. 8. IN SO FAR AS SHARE OF PRRANETA INDUSTRIES ARE CONCE RNED, A.O MADE ENQUIRIES FROM THE STOCK EXCHANGE AND GOT A REPLY T HAT NO CLIENT WITH THE NAME OF RAM NIVAS KASAT IS REGISTERED WITH THE TRADING MEMBER VIJAY BHAGWANDAS & CO. AND THE SAID MEMBER HAS NOT ENTERED ANY TRANSACTION IN THE SCRIP OF PRRANETA INDUSTRIES. TH E A.O WAS OF THE FIRM BELIEF THAT THE BROKER HAS ISSUED BOGUS BILLS IN TH E NAME OF THE ASSESSEE TO FACILITATE ADJUSTMENT OF PURCHASE PRICE . 9. THE A.O WAS CONVINCED THAT THE ASSESSEE HAS SHOWN PURCHASES OF SHARES WHICH ARE SUPPORTED BY BOGUS BILLS AND TH E SHARES ARE NOTHING BUT PENNY STOCK. SINCE THE PURCHASES WERE F OUND TO BE BOGUS, THE A.O TREATED THE SALE CONSIDERATION AS UNEXPLAIN ED CASH CREDIT AND MADE THE ADDITION U/S. 68 OF THE ACT. 10. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) B UT WITHOUT ANY SUCCESS. BEFORE US, THE LD. COUNSEL FOR THE ASS ESSEE VEHEMENTLY STATED THAT THE PURCHASES WERE MADE IN APRIL, 2004 AND HAVE BEEN ACCEPTED IN THE RELEVANT ASSESSMENT YEAR A.Y. 2005- 06, THEREFORE, THE A.O HAS NO REASON TO DISBELIEVE THE PURCHASES MADE IN FINANCIAL YEAR 2004-05. IT IS THE SAY OF THE LD. COUNSEL THAT THE SHARES WHICH WERE PURCHASED IN APRIL, 2004 WERE SOLD IN MAY, JUNE & J ULY, 2005. THEREFORE, THE SALE CONSIDERATION CANNOT BE TREATED AS UNEXPLAINED CASH CREDIT U/S. 68 OF THE ACT BECAUSE THE ASSESSEE HAS DISCHARGED THE ONUS SUCCESSFULLY. ITA NOS. 1707, 2190/AHD/201 0 & ORS. AY. 2006-07, 2 007-08 & 2008-09 8 11. PER CONTRA, THE LD. D.R. STRONGLY SUPPORTED THE FIN DINGS OF THE A.O. IT IS THE SAY OF THE LD. D.R. THAT ON SPECIFIC ENQUIRIES, THE A.O FOUND THE PURCHASES TO BE BOGUS SUPPORTED BY BOGUS BILLS OF THE BROKERS, THEREFORE, THE A.O HAS RIGHTLY TREATED THE PURCHASES AS NOT GENUINE AND SINCE THE PURCHASES WERE NOT GENUINE TH E SALE CONSIDERATION REMAINS UNEXPLAINED. 12. WE HAVE HEARD THE RIVAL CONTENTIONS AND HAVE CAREFU LLY PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND WITH THE AS SISTANCE OF THE LD. COUNSEL WE HAVE GONE THROUGH THE RELATED DOCUMENTAR Y EVIDENCES PLACED ON RECORD IN THE FORM OF PAPER BOOK. THE UN DISPUTED FACT WHICH EMANATES FROM THE ASSESSMENT ORDER IS THAT THE PURC HASES WERE MADE IN THE MONTH OF APRIL, 2004 I.E. FINANCIAL YEAR 200 4-05 RELEVANT TO ASSESSMENT YEAR 2005-06. 13. A PERUSAL OF THE RECORD SHOWS THAT ASSESSMENT OF A. Y. 2005-06 WAS MADE U/S. 143(3) R.W.S. 147 OF THE ACT VIDE ORD ER DATED 08.10.2012 AND THE REASONS FOR THE REOPENING OF THE ASSESSMENT SHOWS THAT THE ASSESSMENT WAS REOPENED TO VERIFY TH E DEPOSITS MADE IN THE BANK ACCOUNT WHICH WERE USED FOR THE INVESTM ENT IN SHARES. AFTER THOROUGH SCRUTINY THE INVESTMENT IN SHARES WA S ACCEPTED. 14. IT IS PERTINENT TO NOTE THAT THE IMPUGNED ORDER OF THE FIRST APPELLATE AUTHORITY IS DATED 25.03.2010 AND THE REA SSESSMENT ORDER IS DATED 08.10.2012 WHICH MEANS THAT WHEN THE OFFICER MADE THE REASSESSMENT ORDER, THE ORDER OF THE FIRST APPELLAT E AUTHORITY WAS ON RECORD BEFORE HIM. ITA NOS. 1707, 2190/AHD/201 0 & ORS. AY. 2006-07, 2 007-08 & 2008-09 9 15. IN SPITE OF THE ADVERSE FINDINGS GIVEN BY THE FIRST APPELLATE AUTHORITY, THE A.O ACCEPTED THE INVESTMENT IN SHARE S. THE REVENUE CANNOT BLOW HOT AND COLD IN THE SAME BREATH SINCE I N THE SCRUTINY REASSESSMENT THE PURCHASES HAVE BEEN ACCEPTED. WE D O NOT FIND ANY REASON/LOGIC IN NOT ACCEPTING THE SUBSEQUENT SALES OF THE SHARES AND SINCE THE CREDIT IN THE BOOKS PERTAINED TO THE SALE CONSIDERATION RECEIVED, IN OUR CONSIDERED OPINION, THE SAME CANNO T BE TREATED AS UNEXPLAINED CASH CREDIT. THEREFORE, WE DO NOT FIND ANY MERIT IN THE IMPUGNED ADDITIONS MADE U/S. 68 BY TREATING THE SAL E PROCEEDS AS UNEXPLAINED CASH CREDIT. THE ADDITIONS ON THIS ACCO UNT ARE DIRECTED TO BE DELETED. 16. THE SECOND DISPUTE IS IN RELATION TO THE TREATMENT OF SHORT TERM CAPITAL GAIN AS BUSINESS INCOME. WHILE SCRUTINIZING THE RETURN OF INCOME, THE A.O NOTICED THAT THE ASSESSEES HAVE SHO WN NET SHORT TERM CAPITAL GAINS AND ALSO LONG TERMS CAPITAL GAINS. C ONSIDERING THE NATURE OF TRANSACTIONS, QUANTUM, VOLUME AND MOTIVE INVOLVE D, THE ASSESSEE WAS ASKED TO EXPLAIN WHY THE STCG, LTCG SHOULD NOT BE TREATED AS BUSINESS INCOME. ASSESSEE FILED A DETAILED REPLY OB JECTING TO THE CONCLUSION DRAWN BY THE A.O AND STATING THAT THE SH ARES AND SECURITIES ARE SHOWN AS INVESTMENT SINCE PAST MANY YEARS AND M ERELY BECAUSE A FEW TRANSACTIONS WERE CARRIED OUT WITHIN A SHORT TI ME, THE GAIN CANNOT BE TREATED AS BUSINESS INCOME. IT WAS ALSO EXPLAINE D THAT MAJORITY OF THE CAPITAL GAIN IS ON ACCOUNT OF SALE OF SHARES WH ERE THE HOLDING PERIOD IS MORE THAN ONE YEAR. 17. THE EXPLANATIONS OF THE ASSESSEE WERE RUBBISHED BY THE A.O. DISMISSING THE CLAIM OF THE ASSESSEE; THE A.O BASED ITS FINDING ON THE FACT THAT THE ASSESSEE HAS ALSO SHOWN PROFIT IN DER IVATIVE TRANSACTIONS. ITA NOS. 1707, 2190/AHD/201 0 & ORS. AY. 2006-07, 2 007-08 & 2008-09 10 THE A.O ACCORDINGLY TREATED THE PROFIT ON SALE OF S HARES AS BUSINESS INCOME. 18. ASSESSEE STRONGLY AGITATED THE MATTER BEFORE THE LD . CIT(A). AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS, TH E LD. CIT(A) ACCEPTED THE LONG TERM CAPITAL GAINS AS SUCH BUT CO NFIRMED THE TREATMENT OF SHORT TERM CAPITAL GAINS AS BUSINESS I NCOME OF THE ASSESSEE. 19. WE HAVE HEARD THE RIVAL CONTENTIONS AND HAVE CAREFU LLY PERUSED THE ORDERS OF THE AUTHORITIES BELOW. THE DISPUTE IS REGARDING THE NATURE OF INCOME ON SALE AND PURCHASE OF SHARES BY THE ASS ESSEE. THE ISSUE, WHETHER THE INCOME FROM SALE AND PURCHASE OF SHARES IN A PARTICULAR CASE SHOULD BE TREATED AS CAPITAL GAIN OR AS BUSINE SS INCOME HAS BEEN A DEBATABLE ISSUE AND THERE ARE CONFLICTING DECISIO NS OF THE TRIBUNAL ON THIS ISSUE. EACH CASE IS, THEREFORE, TO BE BASED ON ITS OWN FACTUAL SITUATION. A PERUSAL OF THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE SHOW THAT THE ASSESSEE HAS SEPARATELY SHOWN DERIVATIVE P ROFIT, LONG TERM CAPITAL GAINS/SHORT TERM CAPITAL GAINS ON SHARES. I N THE BALANCE SHEET, THE ASSESSEE HAS SHOWN SHARES UNDER THE HEAD 'INVES TMENT'. THESE INVESTMENT SHARES HAVE BEEN VALUED AT COST. THE HON 'BLE SUPREME COURT IN THE CASE OF CIT ASSOCIATED INDUSTRIAL DEVE LOPMENT CO PVT. LTD. 82 ITR 586, WHICH DECISION HAS ALSO BEEN CONSI DERED BY THE CBDT IN ITS CIRCULAR NO. 4/2007 DT. 15.6.2007, HAS OBSER VED THAT: 'WHETHER A PARTICULAR HOLDING OF SHARES IS BY WAY O F INVESTMENT OR FORMS PART OF THE STOCK-IN-TRADE IS A MATTER WHICH IS WITHIN T HE KNOWLEDGE OF THE ASSESSEE WHO HOLDS THE SHARES AND IT SHOULD, IN NOR MAL CIRCUMSTANCES, BE IN A POSITION TO PRODUCE EVIDENCE FROM ITS RECORDS AS TO WHETHER IT HAS MAINTAINED ANY DISTINCTION BETWEEN THOSE SHARES WHI CH ARE ITS STOCK-IN-TRADE AND THOSE WHICH ARE HELD BY WAY OF INVESTMENT' ITA NOS. 1707, 2190/AHD/201 0 & ORS. AY. 2006-07, 2 007-08 & 2008-09 11 20. THE CBDT IN ITS CIRCULAR NO. 6/2016 DATED 29.02.201 6, INTERALIA OBSERVED AS UNDER:- 3. DISPUTES, HOWEVER, CONTINUE TO EXIST ON THE APPL ICATION OF THESE PRINCIPLES TO THE FACTS OF AN INDIVIDUAL CASE SINCE THE TAXPAY ERS FIND IT DIFFICULT TO PROVE THE INTENTION IN ACQUIRING SUCH SHARES/SECURITIES. IN THIS BACKGROUND, WHILE RECOGNIZING THAT NO UNIVERSAL PRINCIPAL IN ABSOLUTE TERMS CAN BE LAID DOWN TO DECIDE THE CHARACTER OF INCOME FROM SALE OF SHARES AND SECURITIES (I.E. WHETHER THE SAME IS IN THE NATURE OF CAPITAL GAIN O R BUSINESS INCOME), CBDT REALIZING THAT MAJOR PART OF SHARES/SECURITIES TRAN SACTIONS TAKES PLACE IN RESPECT OF THE LISTED ONES AND WITH A VIEW TO REDUC E LITIGATION AND UNCERTAINTY IN THE MATTER, IN PARTIAL MODIFICATION TO THE AFORE SAID CIRCULARS, FURTHER INSTRUCTS THAT THE ASSESSING OFFICERS IN HOLDING WH ETHER THE SURPLUS GENERATED FROM SALE OF LISTED SHARES OR OTHER SECURITIES WOUL D BE TREATED AS CAPITAL GAIN OR BUSINESS INCOME, SHALL TAKE INTO ACCOUNT THE FOL LOWING- A) WHERE THE ASSESSEE ITSELF, IRRESPECTIVE OF THE PERIOD OF HOLDING THE LISTED SHARES AND SECURITIES, OPTS TO TREAT THEM AS STOCK -IN-TRADE, THE INCOME ARISING FROM TRANSFER OF SUCH SHARES/SECURITIES WOU LD BE TREATED AS ITS BUSINESS INCOME, B) IN RESPECT OF LISTED SHARES AND SECURITIES HELD FOR A PERIOD OF MORE THAN 12 MONTHS IMMEDIATELY PRECEDING THE DATE OF ITS TRANSF ER, IF THE ASSESSEE DESIRES TO TREAT THE INCOME ARISING FROM THE TRANSF ER THEREOF AS CAPITAL GAIN, THE SAME SHALL NOT BE PUT TO DISPUTE BY THE ASSESSI NG OFFICER. HOWEVER, THIS STAND, ONCE TAKEN BY THE ASSESSEE IN A PARTICULAR A SSESSMENT YEAR, SHALL REMAIN APPLICABLE IN SUBSEQUENT ASSESSMENT YEARS AL SO AND THE TAXPAYERS SHALL NOT BE ALLOWED TO ADOPT A DIFFERENT/CONTRARY STAND IN THIS REGARD IN SUBSEQUENT YEARS; C) IN ALL OTHER CASES, THE NATURE OF TRANSACTION (L E, WHETHER THE SAME IS IN THE NATURE OF CAPITAL GAIN OR BUSINESS INCOME) SHALL CO NTINUE TO BE DECIDED KEEPING IN VIEW THE AFORESAID CIRCULARS ISSUED BY T HE CBDT. 21. THE ALLEGATION OF THE A.O IS THAT THE ASSESSEE HAS INDULGED INTO HIGH FREQUENCY TRANSACTION. THIS IN ITSELF COULD NO T MEAN THAT TRADING ITA NOS. 1707, 2190/AHD/201 0 & ORS. AY. 2006-07, 2 007-08 & 2008-09 12 ACTIVITIES HAVE BEEN CARRIED OUT. A PRUDENT INVESTO R ALWAYS KEEP A WATCH ON THE VOLATILITY OF THE MARKET AND MAKES SOU ND INVESTMENT DECISION IN ACCORDANCE WITH SUCH MARKET FLUCTUATION AND HAS THE LIBERTY TO LIQUIDATE ITS INVESTMENTS IN SHARES AS AND WHEN NECESSARY. THE LAW ITSELF HAS RECOGNIZED THIS FACT BY TREATING THE SAM E AS SHORT TERM CAPITAL GAINS FOR SHARES HELD LESS THAN 12 MONTHS A ND LONG TERM CAPITAL GAINS WHERE THE SHARES ARE HELD FOR MORE THAN 12 MO NTHS. HAD THIS BEEN NOT THE CASE, ALL THE GAINS ON SHARES WOULD HA VE BEEN CONSIDERED AS BUSINESS INCOME ONLY. THE FACT THAT THE LAW RECO GNIZES SUCH VOLATILITY AND HAS SPECIFICALLY PROVIDED A SEPARATE HOLDING PERIOD IN RESPECT OF SUCH SHARES MAKES IT VERY CLEAR THOSE GA INS ON SUCH SHARES HAVING A HOLDING PERIOD OF LESS THAN 12 MONTHS AND HELD AS INVESTMENT WOULD BE CONSIDERED AS SHORT TERMS CAPITAL GAINS ON LY. THUS THE ASSESSEES CLAIM CANNOT BE NEGATED ON THE BASIS OF FREQUENCY OF TRANSACTION. 22. CONSIDERING THE ENTIRE FACTS IN TOTALITY, WE FIND T HAT THE ASSESSEE HAS SHOWN SHARES AS INVESTMENT RIGHT FROM THE YEAR OF PURCHASE AND THAT WAS SHOWN AS SUCH IN THE BALANCE SHEET OF THE ASSESSEE WHICH WAS FILED BEFORE THE A.O. 23. IN OUR HUMBLE OPINION, THE SHARES HAVE TO BE TREATE D AS INVESTMENTS AND, THEREFORE ANY PROFIT EARNED ON THE SALE THEREOF IS TO BE TREATED AS CAPITAL GAINS. 24. IN SO FAR AS THE FINDINGS OF THE LD. CIT(A) CONFIRM ING STCG AS BUSINESS INCOME IS CONCERNED, WE SET ASIDE THE SAME AND DIRECT THE A.O TO TREAT AS STCG. IN SO FAR AS THE LONG TERMS CAPITAL GAINS ARE CONCERNED, THE LD. CIT(A) HAS DECIDED THIS ISSUE IN FAVOUR OF THE ITA NOS. 1707, 2190/AHD/201 0 & ORS. AY. 2006-07, 2 007-08 & 2008-09 13 ASSESSEE AND AGAINST THE REVENUE, FOR OUR DETAILED DISCUSSION HEREINABOVE, WE CONFIRM THE FINDINGS OF THE LD. CIT (A). 25. TO SUM UP:- (I) SALE PROCEEDS FROM SALE OF SHARES HAVE TO BE TR EATED AS PART OF SALE CONSIDERATION AND CANNOT BE ADDED AS UNEXPLAINED CA SH CREDIT U/S. 68 OF THE ACT. (II) CAPITAL GAINS BE IT SHORT TERMS OR LONG TERM SHALL BE ASSESSED AS SUCH AND NOT AS BUSINESS INCOME. 26. APPEALS OF THE ASSESSEE IN THE AFOREMENTIONED ISSUE S ARE ALLOWED AND APPEAL OF THE REVENUE IS ACCORDINGLY DI SMISSED. 27. THE ONLY ISSUE REMAINS TO BE DECIDED IS IN ITA NO. 3098/AHD/2010 IN CASE OF RAMNIVAS RAMJIVAN KASAT (H UF) FOR A.Y. 2007-08. 28. THE GRIEVANCE OF THE ASSESSEE RELATES TO THE DISALL OWANCE OF INTEREST EXPENSES OF RS. 38,461/-. 29. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEE DINGS AND ON VERIFICATION OF THE PROFIT AND LOSS ACCOUNT, THE A.O NOTICED THAT THE ASSESSEE HAS CLAIMED INTEREST EXPENSES OF RS. 92,74 9/- ON UNSECURED LOANS PAID @ 15%. THE A.O FURTHER NOTICED THAT THE ASSESSEE HAD ALSO ADVANCED LOANS TO ONE OF HIS FAMILY MEMBER SMT. SUR AJKANWARI KASAT ON WHICH INTEREST HAS BEEN CHARGED @ 9%. 30. ASSESSEE WAS ASKED TO JUSTIFY THE CLAIM OF INTEREST PAID QUA THE INTEREST RECEIVED. ON RECEIVING NO PLAUSIBLE REPLY, THE A.O PROCEEDED ITA NOS. 1707, 2190/AHD/201 0 & ORS. AY. 2006-07, 2 007-08 & 2008-09 14 BY MAKING PROPORTIONATE DISALLOWANCE OF INTEREST AM OUNTING TO RS. 38,461/-. 31. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) B UT WITHOUT ANY SUCCESS. 32. BEFORE US, THE LD. COUNSEL COULD NOT ADDUCE ANY EVI DENCE TO SHOW THAT THERE IS NO NEXUS BETWEEN THE BORROWINGS AND THE LENDING OF MONEY. SINCE NO EVIDENCE HAS BEEN BROUGHT ON REC ORD, NEITHER BEFORE THE LOWER AUTHORITIES NOR BEFORE US. DISALLO WANCE OF INTEREST EXPENSES OF RS. 38,461/- IS CONFIRMED. 33. IN THE RESULT, APPEALS OF THE ASSESSEE ARE ALLOWED EXCEPT IN THE CASE OF RAMNIVAS KASAT (HUF) FOR A.Y. 2007-08, WHER E THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED AND THE APPEALS FIL ED BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 31- 05 - 2016. SD/- SD/- (R.P. TOLANI) (N. K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD