Smt. Swatiben Anilbhai Shah, Ahmedabad V. DCIT, Central Circle-1(2), Ahmedabad

ITA 1513/AHD/2019

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 6887 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 3 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2007-2008
• Appeal Filed On: 04-10-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P SHARMA; L P JAIN SR D R ITA
• Keywords: Capital asset; Business income; Income from undisclosed sources; Set aside; Capital Gains
• Section: 143(3); 153A; 13

Judgement Text

, C IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD ( CONVENED THROUGH VIRTUAL COURT ) BEFORE SHRI RAJPAL YADAV, VICE PRESIDENT AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ./ I.T.A. NOS. 1513 & 1514/AHD/2019 ( ASSESSMENT YEARS : 2007-08 & 2008-09) SWATIBEN ANILBHAI SHAH C/O KETAN H. SHAH, ADVOCATE 512, TIMES SQUARE-I, OPP. RAM BAUG BUNGALOW, THALTEJ SHILAJ ROAD, THALTEJ, AHMEDABAD / VS. DCIT CENTRAL CIRCLE - 1(2), AHMEDABAD ./ ./ PAN/GIR NO. : ALHPS1798K ( APPELLANT ) .. ( / RESPONDENT ) & ./ I.T.A. NO. 1515/AHD/2019 ( ASSESSMENT YEAR : 2007-08) ATUL HIRALAL SHAH 8, AMRASHIRISH BUNGALOWS, OPP. SHRI CHIMANBHAI PATEL INSTITUTE, NR. PRAHLADNAGAR GARDEN, PRAHLADNAGAR, AHMEDABAD / VS. DCIT CENTRAL CIRCLE - 1(2), AHMEDABAD ./ ./ PAN/GIR NO. : ALJPS4966M ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI KETAN H. SHAH WITH SHRI AMAN K. SHAH, A.RS. / RESPONDENT BY : SHRI O. P. SHARMA, CIT.DR & SHRI L. P. JAIN, SR. D.R. ITA NOS. 1513 TO 1515/AHD/19 [SWATIBEN A. SHAH & ANR.] - 2 - DATE OF HEARING 18/01/2021 !'# / DATE OF PRONOUNCEMENT 29/01/2021 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEALS DIRECTED AT THE INSTANCE OF D IFFERENT ASSESSEES & REVENUE ARISE FROM THE RESPECTIVE ORDER S OF THE COMMISSIONER OF INCOME TAX (APPEALS) (CIT(A)) AGA INST DIFFERENT ASSESSMENT YEARS AS TABULATED BELOW: ITA NOS. NAME OF ASSESSEE AY CIT(A)S ORDER DATED AOS ORDER DATED AOS ORDER UNDER SECTION 1513/AHD/19 SMT. SWATIBEN A. SHAH 2007-08 08.08.19 29.12.17 143(3) R.W.S. 254 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) 1514/AHD/19 -DO- 2008-09 -DO- -DO- -DO- 1515/AHD/17 ATUL HIRALAL SHAH 2007-08 -DO- -DO- -DO- 2. WE SHALL TAKE UP THE CAPTIONED APPEALS FOR ADJUD ICATION AS FOLLOWS: ITA NO. 1513/AHD/2019 AY 2007-08 3. THE GROUNDS OF APPEAL RAISED BY THE CAPTIONED AS SESSEE READ HEREUNDER: 1 THE LD. CIT (A) HAS ERRED IN FACTS AND CIRCUMSTA NCES AND IN LAW IN CONFIRMING THE ASSESSMENT ORDER U/S. 143(3) R.W. S. 254. 2 THE LD. CIT (APPEALS)-11, AHMEDABAD HAS ERRED IN CONFIRMING THE TREATMENT MADE BY THE LD. A.O. IN DE NOVO ASSES SMENT FOR THE GAIN ON SALE OF SHARES AS BUSINESS INCOME INSTEAD O F CAPITAL GAIN. THE SAME IS PRAYED FOR TREATMENT AS CAPITAL G AIN. ITA NOS. 1513 TO 1515/AHD/19 [SWATIBEN A. SHAH & ANR.] - 3 - 4. THE ASSESSEE HAS ALSO RAISED ADDITIONAL GROUND W HICH READS AS UNDER: LD. LOWER AUTHORITY HAS ERRED ON FACTS AS WELL A S LAW IN NOT APPRECIATING THE FACTS THAT, IN ABSENCE OF ANY INCR IMINATING DOCUMENT FOUND DURING THE COURSE OF SEARCH ON 07-02-2008, TH E WHOLE PROCEEDING UNDER 153A IS BAD IN LAW, ILLEGAL AND LIABLE TO BE QUASHED. 5. THE PRAYER FOR ADMISSION OF ADDITIONAL GROUNDS N OTED ABOVE WHICH ARE NOT SET FORTH IN MEMORANDUM OF APPEAL ARE BEING ADMITTED FOR ADJUDICATION IN TERMS OF RULE 11 OF INCOME TAX (APPELLATE TRIBUNAL) RULES, 1963 OWING TO THE FACT THAT OBJECT IONS RAISED IN THE ADDITIONAL GROUND ARE LEGAL IN NATURE AND CHALLENGE S THE JURISDICTION OF THE AO FOR MAKING ADDITIONS/DISALLOWANCES AND FO R SUCH OBJECTIONS THE RELEVANT FACTS ARE STATED TO BE EMAN ATING FROM EXISTING RECORDS IN THE LIGHT OF DECISION OF THE HO NBLE SUPREME COURT IN THE CASE OF NATIONAL THERMAL POWER CO. LTD. V. CIT [1998] 229 ITR 383 (SC) . 6. TURNING TO THE FACTS, A RETURN OF INCOME WAS FIL ED BY THE ASSESSEE ON 07.11.2007 DECLARING A TOTAL INCOME OF RS.1,41,20,990/-. AFTER FILING OF RETURN, A SEARCH & SEIZURE ACTION W AS CONDUCTED UNDER S.132 OF THE ACT IN GROUP CASES OF ATUL SHAH ON 07.02.2008 INCLUDING ASSESSEE. A NOTICE UNDER S.153A OF THE A CT WAS ISSUED TO THE ASSESSEE ON 01.08.2008. IN RESPONSE TO THE AFO RESAID NOTICE, THE ASSESSEE FILED ANOTHER RETURN OF INCOME UNDER S.153 A OF THE ACT DECLARING TOTAL INCOME AT RS.1,58,02,820/- WHICH WA S REVISED TO RS.1,54,88,670/- THEREAFTER. AS PER THE RETURNS FI LED UNDER S.153A OF THE ACT, THE ASSESSEE INTER ALIA DECLARED INCOME UNDER THE HEAD CAPITAL GAINS AS SHORT TERM CAPITAL GAINS OF RS.1 ,40,01,808/-. AN ORDER UNDER S.153A R.W.S. 143(3) OF THE ACT WAS PAS SED ON 05.05.2009 DETERMINING TOTAL INCOME OF RS.1,56,36,0 30/- AS AGAINST INCOME RETURNED AT RS.1,54,08,670/- WHEREIN SHORT T ERM CAPITAL GAINS OF RS.1,40,01,808/- WAS TREATED AS BUSINESS INCOME BY THE ITA NOS. 1513 TO 1515/AHD/19 [SWATIBEN A. SHAH & ANR.] - 4 - AO AS AGAINST THE CLAIM OF THE ASSESSEE TO BE ASSES SED AS SHORT TERM CAPITAL GAIN. THE CONTROVERSY TOWARDS REALIGNMENT OF HEAD FROM CAPITAL GAINS TO INCOME FROM BUSINESS/PROFESSION TRAVELLED UP TO THE ITAT, AHMEDABAD. THE ITAT VIDE ITA NO. 57/AHD/2010 ORDER DATED 19.05.2016 SET ASIDE THE ISSUE REGARDING THE NATURE AND CHARACTER OF GAINS ARISING TO THE ASSESSEE AMOUNTIN G TO RS.1,40,01,808/- FOR RE-EXAMINATION. THE AO, IN TH IS SECOND ROUND OF PROCEEDING, ONCE AGAIN CALLED FOR THE DETAILS OF BORROWED FUNDS AND DETAILS OF TRANSACTIONS OF PURCHASE AND SALES O F SHARES OF PYRAMID SIAMIRA THEATER LTD. (PSTL) WHEREFROM THE C APITAL GAIN WAS MAINLY DERIVED. THE AO AFTER CALLING FOR DETAI LS, PASSED A VERY CRYPTIC ORDER YET AGAIN AND ESSENTIALLY CONCLUDED T HAT IN THE ABSENCE OF UTILIZATION OF OWN FUNDS FOR PURCHASE OF SHARES AND IN THE ABSENCE OF SEPARATE DE-MAT ACCOUNT MAINTAINED FOR PURCHASE AND SALE OF SHARES IN INVESTMENT ACCOUNT VIS--VIS TRADING ACCOUNT, THE GAINS ARISING ON SALE OF SHARES ARE REQUIRED TO BE TREATE D AS BUSINESS INCOME AND THUS ONCE AGAIN REINSTATED THE POSITION TAKEN BY AO IN THE FIRST ROUND OF ASSESSMENT PROCEEDINGS. 7. AGGRIEVED BY THE CHANGE IN THE CHARACTER OF INCO ME AND REALIGNMENT OF INCOME REPORTED UNDER THE HEAD FROM CAPITAL GAINS TO BUSINESS INCOME, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). THE CIT(A), HOWEVER, CONFIRMED THE ACTION OF THE AO AND HELD THAT GAINS ARISING ON SALE OF SHARES ARE LIABL E TO BE TREATED AS BUSINESS INCOME. 8. FURTHER AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE TRIBUNAL. 9. WHEN THE MATTER WAS CALLED FOR HEARING, THE LEAR NED AR FOR THE ASSESSEE SUBMITTED AT THE OUTSET THAT THE ASSES SEE MAINTAINS TWO ITA NOS. 1513 TO 1515/AHD/19 [SWATIBEN A. SHAH & ANR.] - 5 - PORTFOLIOS; (I) INVESTMENT PORTFOLIO WHERE THE SH ARES ACQUIRED WITH THE LONG TERM PERSPECTIVE ARE SHOWN AS CAPITAL INVE STMENT (II) TRADING PORTFOLIO WHERE THE ASSESSEE PURCHASES SHAR ES WITH SHORT TERM PERSPECTIVE AND IS SOLELY DRIVEN BY PROFIT MOT IVE. THE GAINS/LOSS ARISING ON SALE OF SHARES HELD IN INVEST MENT PORTFOLIO ARE REPORTED UNDER THE HEAD CAPITAL GAINS WHEREAS PRO FIT AND LOSS ARISING ON SALE OF SHARES LISTED IN TRADING PORTFOL IO ARE REPORTED AS BUSINESS INCOME/LOSS OF THE ASSESSEE ON A CONSIST ENT BASIS. THE LEARNED AR FOR THE ASSESSEE SUBMITTED THAT THERE AR E LONG LINE OF JUDICIAL PRECEDENTS WHICH APPROVES THE DUAL MANNER OF TREATMENT OF INCOME AS SHOWN BY THE ASSESSEE UNDER THE RESPECTIV E HEADS. PROMINENT CASE LAWS ON THIS SCORE INCLUDES CIT VS. GOPAL PUROHIT 228 CTR 582 (BOM.) . IT WAS POINTED OUT THAT CBDT CIRCULAR HAS ALSO ADOPTED THE GUIDELINES EVOLVED BY JUDICIAL PRE CEDENTS AS CAN BE SEEN IN CBDT CIRCULAR NO. 4 OF 2007 DATED 15.06.200 7. IT WAS NEXT POINTED OUT THAT UTILIZATION OF BORROWED FUNDS ON S TANDALONE BASIS CANNOT BE DETERMINATIVE OF THE NATURE OF INCOME RES ULTING FROM SALE OF SHARES ACQUIRED FROM PARTICIPATION OF BORROWED F UNDS AS HELD IN PLETHORA OF JUDICIAL DECISIONS. A REFERENCE IN THI S REGARD WAS MADE TO THE DECISION OF THE HONBLE GUJARAT HIGH COURT I N THE CASE OF CIT VS. NEERAJ AMIDHAR SUR [2011] 238 CTR 294 (GUJ). 9.1 ADVERTING TO THE FACTS BRIEFLY, THE LEARNED COU NSEL SUBMITTED THAT IT IS A MATTER OF RECORD THAT PROFIT/GAINS OF RS.1,40,01,808/- IN QUESTION ARISES FROM PURCHASE AND SALE OF SHARES OF PSTL. THE ASSESSEE HAS PURCHASED 215802 SHARES OF PSTL AND SO LD 167000 SHARES GIVING RISE TO THE IMPUGNED GAINS AND REMAIN ING 48702 SHARES HAVE REMAINED IN INVESTMENT STOCK. THE TOTA L NUMBER OF TRANSACTIONS OF PURCHASE IS ONLY FIVE AND SALE IS B ARELY SEVEN. IT WAS THUS CONTENDED THAT FREQUENCY AND REPETITION IN THE IMPUGNED SCRIP IS PRIMA FACIE ABSENT JUSTIFYING THE INTENTION OF ASSESSEE TO ITA NOS. 1513 TO 1515/AHD/19 [SWATIBEN A. SHAH & ANR.] - 6 - PURCHASE THE SHARES AS CAPITAL ASSET. IT WAS STRON GLY CONTENDED THAT THE AO HAS SOUGHT TO REALIGN THE HEAD OF INCOME AND SHIFT THE INCOME DECLARED UNDER THE HEAD CAPITAL GAINS TO BUSINESS INCOME ONLY TO DENY THE ASSESSEE OF CONCESSIONAL TAX TREAT MENT OF 10% AVAILABLE TO THE ASSESSEE UNDER S.111A OF THE ACT A ND HAS SOUGHT TO APPLY THE REGULAR RATE OF TAX APPLICABLE TO BUSINES S INCOME. IT WAS INSISTED THAT THE ASSESSEE HAS MAINTAINED SEPARATE LEDGER ACCOUNT FOR ITS CAPITAL INVESTMENT TRANSACTIONS VIS-A-VIS TRADING TRANSACTIONS AND THEREFORE DECLARED INTENTION OF THE ASSESSEE OF CAP ITAL INVESTMENT CATEGORY OUGHT NOT TO HAVE BEEN DISPLACED SIMPLY TO SEEK HIGHER RATE OF TAX, MORE SO, IN THE ABSENCE OF ANY REPETITION, FREQUENCY OR REGULARITY ETC. 9.2 THE LEARNED AR THEREAFTER ADVERTED TO THE ADDIT IONAL GROUNDS OF LEGAL NATURE RAISED UNDER RULE 11 OF THE INCOME TAX (APPELLATE TRIBUNAL) RULES, 1963 AND CONTENDED THAT THE RETURN FILED UNDER S.153A OF THE ACT OWES IT GENESIS TO SEARCH ACTION CONDUCTED IN THE GROUP CASES OF ASSESSEE ON 07.02.2008 AND PURSUANT THERETO A FRESH RETURN WAS CALLED FOR BY THE AO UNDER S.153A OF THE ACT. IN THE ASSESSMENT MADE ON RETURN FILED UNDER S.153A OF THE ACT, IT WAS INCUMBENT UPON THE AO TO REFER TO SOME INCRIMINATIN G DOCUMENT FOUND IN THE COURSE OF SEARCH TO DISTURB THE POSITI ON TAKEN BY THE ASSESSEE, MORE SO, ON CLASSIFICATION OF ASSET. IT WAS THUS CLAIMED THAT IN THE ABSENCE OF ANY SUCH REFERENCE, WHOLE PR OCEEDINGS UNDER S.153A OF THE ACT ITSELF IS VITIATED AND RENDERED B AD IN LAW AND HENCE LIABLE TO BE QUASHED. IT WAS ASSERTED THAT A CTION SUCH AS MERE RE-ALIGNMENT OF INCOME FROM HEAD TO ANOTHER HAS NO IMPACT ON ULTIMATE TAXABLE INCOME AND THUS CANNOT BE DONE IN SPECIAL PROCEEDINGS UNDERTAKEN UNDER S.153A OF THE ACT OWIN G TO SEARCH WHICH CARRIES WITH IT AN AVOWED OBJECTIVE OF ASSESS MENT OF UNACCOUNTED INCOME WHICH IS NOT PRESENT. ITA NOS. 1513 TO 1515/AHD/19 [SWATIBEN A. SHAH & ANR.] - 7 - 10. THE ASSESSEE FILED YET ANOTHER ADDITIONAL GROUN D UNDER RULE 11 OF THE ITAT RULE VIDE APPLICATION DATED 08.07.20 20 WHICH READS AS UNDER: LD. LOWER AUTHORITY HAS ERRED ON FACTS AS WELL AS LAW IN NOT APPRECIATING THE FACTS THAT, IN ABSENCE OF THE APPR OVAL U/S 153D, THE WHOLE PROCEEDINGS IS ITSELF BAD IN LAW AND VOID AS HELD IN RANCHI BENCH ITAT AS WELL AS GUJARAT HIGH COURT DECISION IN THE CASE OF SUNRISE FINLEASE REPORTED IN 89 TAXMANN.COM 1 AND THEREFORE , THIS ASSESSMENT FRAMED IS BAD IN LAW AND VOID AND LIABLE TO BE QUAS HED. 11. THE ADDITIONAL GROUNDS WERE ADMITTED FOR ADJUDI CATION AT THE TIME OF HEARING HAVING REGARD TO THE ASSERTIONS MAD E BY THE ASSESSEE THAT THE ADDITIONAL GROUNDS ARE LEGAL IN NATURE AND SEEKS TO CHALLENGE THE JURISDICTIONAL ASPECT OF THE PROCEEDI NGS. 11.1 ADVERTING TO THE ADDITIONAL GROUND, THE LEARNE D COUNSEL FOR THE ASSESSEE REFERRED TO THE ASSESSMENT ORDER PASSED UN DER S.143(3) R.W.S. 254 OF THE ACT DATED 20.12.2017 SOUGHT TO BE IMPUGNED IN THE PRESENT CASE AND SUBMITTED THAT THE AO HAS MADE NO REFERENCE TO THE APPROVAL TAKEN FROM THE SUPERIOR AUTHORITY UNDER S. 153D OF THE ACT, IF ANY, AND THUS IN THE ABSENCE OF STATUTORY APPROV AL OF THE DESIGNATED AUTHORITY IN SEARCH CASES, THE WHOLE ASS ESSMENT PASSED IN THE SECOND ROUND OF PROCEEDINGS IS BAD IN LAW. THE LEARNED AR FOR THE ASSESSEE REFERRED TO THE DECISION OF THE CO-ORD INATE BENCH OF THE TRIBUNAL IN THE CASE OF ANUP KUMAR CHATTERJEE VS. ACIT IT(SS)A NOS. 70-74/RAN/2019 ORDER DATED 19.12.2019 TO SUPPORT ITS AFORESAID CONTENTION. 11.2 JOINING THE CONTENTION RAISED TOWARDS ADDITION AL GROUND(SUPRA) WITH REFERENCE TO SECTION 153D OF THE ACT, THE LEAR NED DR POINTED OUT THAT IN THE FIRST ROUND OF THE SUBSTANTIVE ASSE SSMENT PROCEEDINGS UNDER S.143(3) R.W.S. 153A OF THE ACT, THE APPROVAL OF DESIGNATED AUTHORITY UNDER S. 153D OF THE ACT WAS DULY TAKEN. HOWEVER, IN THE ITA NOS. 1513 TO 1515/AHD/19 [SWATIBEN A. SHAH & ANR.] - 8 - ABSENCE OF ANY REFERENCE MADE IN ASSESSMENT ORDER, IT IS NOT KNOWN WHETHER THE APPROVAL IN THE SECOND ROUND OF PROCEED INGS COMING INTO MOTION ON ACCOUNT OF THE ORDER OF THE ITAT HAS BEEN TAKEN OR NOT. NOTWITHSTANDING, IT WAS CONTENDED BY THE LEA RNED DR FOR REVENUE THAT THE ABSENCE OF APPROVAL UNDER S.153D O F THE ACT WOULD NOT VITIATE THE ASSESSMENT ORDER IN SECOND ROUND UN DER REFERENCE HAVING REGARD TO THE FACT THAT THE ASSESSMENT ORDER UNDER S.143(3) R.W.S. 254 OF THE ACT IS AT THE INSTANCE OF ITAT WH ICH IS A SUPERIOR AUTHORITY AND THE AO AS WELL AS THE DESIGNATED AUTH ORITY WERE DUTIFULLY GOVERNED BY ITS COMMAND IN A BINDING MANN ER. 12. AS NOTED IN PRECEDING PARAGRAPHS, THE ASSESSEE HAS CHALLENGED THE ACTION OF THE AO ON MERITS AND ALSO RAISED ADDI TIONAL GROUNDS OF LEGAL NATURE QUESTIONING THE VALIDITY OF THE ACTION OF THE AO IN LAW. 13. WE SHALL FIRST ADDRESS OURSELVES ON MERITS OF T HE ISSUE INVOLVED. 13.1 THE SOLITARY ISSUE FOR ADJUDICATION ON MERITS IS WHETHER GAINS ARISING ON SALE OF CERTAIN QUANTITY OF SHARES OF A COMPANY, NAMELY, PYRAMID SIAMIRA THEATRE LTD. (PSTL) BY THE ASSESSEE IN THE RELEVANT ASSESSMENT ORDER IS REQUIRED TO BE TAXED UNDER THE HEAD CAPITAL GAINS AS OFFERED BY THE ASSESSEE OR IS TO BE TREAT ED AS BUSINESS INCOME OF THE ASSESSEE. THE ISSUE INVOLVED IS ESS ENTIALLY FACTUAL IN NATURE. AS REGARDS THE JUSTIFICATION ON THE CLAIM OF SHORT TERM CAPITAL GAIN (STCG), IT IS THE CASE OF THE ASSESSEE THAT THE GAINS IN QUESTION HAVE ARISEN ON SALE OF ONLY ONE SHARE I.E. PSTL. THE ASSESSEE HAS PURCHASED 215802 SHARES AND SOLD 16700 0 SHARES DURING THE YEAR. THE TOTAL NUMBER OF TRANSACTIONS OF PURCHASE IS BARELY 5 AND THAT OF CORRESPONDING SALE IS ONLY 7. THE PRINCIPAL ARGUMENT ON BEHALF OF THE REVENUE IN THE FIRST ROUN D OF PROCEEDINGS ITA NOS. 1513 TO 1515/AHD/19 [SWATIBEN A. SHAH & ANR.] - 9 - IS THAT TRANSACTIONS HAVE BEEN ENTERED WITHIN A SHO RT PERIOD OF LESS THAN ONE MONTH AND THE ASSESSEE DOES NOT HAVE SUFFI CIENT OWN FUNDS AT ITS DISPOSAL AND HAS EMPLOYED BORROWED FUNDS FRO M OUTSIDERS ON WHICH INTEREST HAS BEEN PAID. IT WAS FURTHER OBSER VED BY THE AO THAT THE ASSESSEE HAS ALSO DEALT IN OTHER SHARES WH ICH ARE REPORTED AS SHARE TRADING BUSINESS BY THE ASSESSEE. IN THIS BA CKGROUND, THE BENEFIT OF CONCESSIONAL RATE OF TAX ON STCG WAS DEN IED TO THE ASSESSEE. 13.2 WHEN THE MATTER TRAVELLED TO THE ITAT, IN THE ABSENCE OF PROPER FACTS AVAILABLE BEFORE THE ITAT, THE MATTER WAS SET ASIDE AND REMANDED BACK TO THE FILE OF AO FOR RE-DETERMINATIO N OF THE ISSUE AFRESH AFTER ASCERTAINING THE DEPLOYMENT OF BORROWE D FUNDS AND THE MANNER OF MAINTENANCE OF DEMAT ACCOUNT ETC. THE CO -ORDINATE BENCH INTER ALIA OBSERVED THAT THE ORDER OF THE AO IS CRYPTIC WITHOU T ANY PROPER VERIFICATION OF BOOKS OF ACCOUNTS. THE AO MERELY DEEMED THE BORROWED FUNDS TO HAVE BEEN UTILIZED FOR INVESTMENT PURPOSES. IN PARA 11 OF THE ORDER OF THE CO-ORDINA TE BENCH, IT WAS OBSERVED THAT IT WAS UPON THE ASSESSEE TO DEMONSTRA TE THAT HIS INTENTION FOR EARNING INVESTMENT INCOME AND SHARE T RADING INCOME ARE WELL DIFFERENTIATED AND CERTAINLY THE CASE OF T HE ASSESSEE GETS MORE STRONG IF HE IS ABLE TO PROVE THAT NO BORROWED FUNDS HAVE BEEN TAKEN SPECIFICALLY FOR BUYING THE SHARES WHEN HE IN TENDS TO SHOW AS INVESTMENT INCOME. THUS, ALL THE FACTS AND CIRCUMS TANCES OF THE CASE ARE REQUIRED TO BE WEIGHED CUMULATIVELY FOR PR OPER DETERMINATION OF NATURE OF INCOME ARISING FROM SALE OF SHARE. 13.3 THE LAW HAS CONSIDERABLY EVOLVED ON THE POINT AND CONTINUING. THE COURTS HAVE LAID DOWN SEVERAL TESTS FOR ASCERTA INING THE NATURE OF TRANSACTION. THE CBDT ITSELF HAS ALSO LAID DOWN PARAMETERS BY WAY OF CIRCULAR NO. 4 DATED 15.06.2007. IN THE INS TANT CASE, WE NOTE ITA NOS. 1513 TO 1515/AHD/19 [SWATIBEN A. SHAH & ANR.] - 10 - FEW PECULIAR FACTS FROM THE FINANCIAL STATEMENTS PL ACED IN THE PAPER BOOK. THE ASSESSEE HAS CLAIMED PROFITS ARISING ON SALE OF A SOLITARY SHARE (PSTL). THE FREQUENCY OF PURCHASE AND SALE I NSTANCES ARE QUITE FEW AS NOTED ABOVE. THE SALE OF THE SHARES O F PART QUANTITY HAS HAPPENED WITHIN A PERIOD OF ONE MONTH AND THUS CLAIMED AS STCG. A PART UTILIZATION OF BORROWED CAPITAL, IF AN Y, IN THIS PECULIAR BACKGROUND WOULD NOT NECESSARILY OVERWHELM THE LOW FREQUENCY HAVING REGARD TO THE DECISION OF HONBLE GUJARAT HI GH COURT IN THE CASE OF NEERAJ AMIDHAR SUR (SUPRA) . THE CUMULATIVE EFFECT OF ALL FACTORS NEED TO BE WEIGHED AND A MERE INVOLVEMENT O F BORROWED FUNDS IN SOME INSTANCES WOULD NOT PER SE DENUDE THE TRANSACTIONS OF ITS CHARACTER OF CAPITAL ASSETS. THE ISSUE IS ESSEN TIALLY FACTUAL AND DEPENDS OF PECULIAR FACTS OF EACH CASE. IN THE ABSE NCE OF ANY STRAIGHT JACKET FORMULA AVAILABLE DESPITE PLETHORA OF JUDGMENTS, THE LACK OF REGULARITY AND ISOLATED INSTANCES OF CAPITA L TRANSACTIONS WOULD VINDICATE THE STAND OF ASSESSEE THAT INCOME/L OSS FROM SEVEN TRANSACTIONS HAVE BEEN RIGHTLY REGARDED AS CAPITAL GAINS. AS STATED, THE ASSESSEE HAS TAKEN DELIVERY OF SHARES BEFORE SA LE. WHILE MAINTENANCE OF CAPITAL AND TRADING TRANSACTIONS AS A SEPARATE CATEGORY IN BOOKS CAN BE INSISTED UPON IN PRACTICE TO ASCERTAIN THE UNDERLYING INTENTIONS, THE MAINTENANCE OF SEPARATE D-MAT ACCOUNT SEPARATELY IS NOT NECESSARILY IN CONFORMITY WITH US AGE OF SHARE TRADE AND THUS CANNOT BE INSISTED UPON. 13.4 WE THUS FIND MERIT IN THE PLEA OF ASSESSEE. C ONSEQUENT CLAIM OF ASSESSEE DESERVES TO BE ALLOWED ON MERITS. 13.5 AS THE GRIEVANCE OF THE ASSESSEE HAS BEEN ANSW ERED IN FAVOUR OF THE ASSESSEE ON MERITS, WE ARE NOT INCLINED TO A DDRESS OURSELVES ON ADDITIONAL GROUNDS RAISED BY THE ASSESSEE AT BEL ATED STAGE. ITA NOS. 1513 TO 1515/AHD/19 [SWATIBEN A. SHAH & ANR.] - 11 - 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ITA NO. 1514/AHD/2019 AY 2008-09 15. THE GROUNDS OF APPEAL RAISED BY CAPTIONED ASSES SEE READ HEREUNDER: 1 THE LD. CIT (A) HAS ERRED IN FACTS AND CIRCUMSTA NCES AND IN LAW IN CONFIRMING THE ASSESSMENT ORDER U/S. 143(3) R.W. S. 254. 2 THE LD. CIT (APPEALS)-11, AHMEDABAD HAS ERRED IN CONFIRMING THE TREATMENT MADE BY THE LD. A.O. IN DE NOVO ASSES SMENT FOR THE GAIN ON SALE OF SHARES AS BUSINESS INCOME INSTEAD O F CAPITAL GAIN. THE SAME IS PRAYED FOR TREATMENT AS CAPITAL G AIN. 15.1 THE ASSESSEE HAS ALSO RAISED ADDITIONAL GROUND WHICH READS AS UNDER: LD. LOWER AUTHORITY HAS ERRED ON FACTS AS WELL A S LAW IN NOT APPRECIATING THE FACTS THAT, IN ABSENCE OF ANY INCR IMINATING DOCUMENT FOUND DURING THE COURSE OF SEARCH ON 07-02-2008, TH E WHOLE PROCEEDING UNDER 153A IS BAD IN LAW, ILLEGAL AND LIABLE TO BE QUASHED. 15.2 THE ASSESSEE FILED YET ANOTHER ADDITIONAL GROU ND UNDER RULE 11 OF THE ITAT RULE VIDE APPLICATION DATED 08.07.20 20 WHICH READS AS UNDER: LD. LOWER AUTHORITY HAS ERRED ON FACTS AS WELL AS LAW IN NOT APPRECIATING THE FACTS THAT, IN ABSENCE OF THE APPR OVAL U/S 153D, THE WHOLE PROCEEDINGS IS ITSELF BAD IN LAW AND VOID AS HELD IN RANCHI BENCH ITAT AS WELL AS GUJARAT HIGH COURT DECISION IN THE CASE OF SUNRISE FINLEASE REPORTED IN 89 TAXMANN.COM 1 AND THEREFORE , THIS ASSESSMENT FRAMED IS BAD IN LAW AND VOID AND LIABLE TO BE QUAS HED. 16. IN THE INSTANT CASE, THE ISSUE INVOLVED IS IDEN TICAL TO THE ISSUE INVOLVED IN ITA NO. 1513/AHD/2019 CONCERNING AY 200 7-08 (SUPRA). THE FACTS IN BRIEF ARE NOTED AS FOLLOWS. IN THE RETURN FILED BY THE ASSESSEE IN PURSUANCE OF NOTICE UNDER S.153A OF THE ACT, THE ASSESSEE HAS DECLARED SHORT TERM CAPITAL GAINS OF R S.27,62,912/- CHARGEABLE AT CONCESSIONAL RATE OF 10% UNDER S.111A OF THE ACT. ITA NOS. 1513 TO 1515/AHD/19 [SWATIBEN A. SHAH & ANR.] - 12 - THE AFORESAID GAINS HAVE BEEN EARNED ON PURCHASE AN D SALES OF SHARES OF PYRAMID SIMARA THEATER LTD. (PSTL). THE ASSESSEE HAD PURCHASED 215802 SHARES OUT OF WHICH 167000 SHARES WERE SOLD IN AY 2007-08 AND REMAINING 48802 SHARES HAVE BEEN SOL D IN FY CONCERNING AY 2008-09 IN QUESTION. THE TOTAL NUMBE R OF TRANSACTIONS OF SALE DURING THE YEAR IS STATED TO B E SIX ONLY. IN PARITY OF THE REASONS RECORDED FOR AY 2007-08 (SUPR A), WE FIND FORCE IN THE PLEA OF THE ASSESSEE FOR ALLOWABILITY OF GAIN ON SALES OF SHARES UNDER THE HEAD SHORT TERM CAPITAL GAINS AS CLAIMED. WE ACCORDINGLY REVERSE THE ACTION OF THE LOWER AUTHORI TIES IN THIS REGARD. 17. WE THUS FIND MERIT IN THE PLEA OF ASSESSEE. CO NSEQUENT CLAIM OF ASSESSEE DESERVES TO BE ALLOWED ON MERITS. 18. AS THE GRIEVANCE OF THE ASSESSEE HAS BEEN ANSWE RED IN FAVOUR OF THE ASSESSEE ON MERITS, WE ARE NOT INCLINED TO A DDRESS OURSELVES ON ADDITIONAL GROUNDS RAISED BY THE ASSESSEE AT BEL ATED STAGE. 19. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ITA NO. 1515/AHD/2019 AY 2007-08 (IN CASE OF SHRI A TUL HIRALAL SHAH) 20. THE GROUNDS OF APPEAL RAISED BY CAPTIONED ASSES SEE READ HEREUNDER: 1 THE LD. CIT (A) HAS ERRED IN FACTS AND CIRCUMSTA NCES AND IN LAW IN CONFIRMING THE ASSESSMENT ORDER U/S. 143(3) R.W.S. 254. 2 THE LD. CIT (APPEALS)-11, AHMEDABAD HAS ERRED IN CONFIRMING THE TREATMENT MADE BY THE LD. A.O. IN DE NOVO ASSES SMENT FOR THE GAIN ON SALE OF SHARES AS BUSINESS INCOME INSTE AD OF ITA NOS. 1513 TO 1515/AHD/19 [SWATIBEN A. SHAH & ANR.] - 13 - CAPITAL GAIN. THE SAME IS PRAYED FOR TREATMENT AS C APITAL GAIN. 21. THE ASSESSEE FILED ADDITIONAL GROUND UNDER RULE 11 OF THE ITAT RULE VIDE APPLICATION DATED 08.07.2020 WHICH R EADS AS UNDER: LD. LOWER AUTHORITY HAS ERRED ON FACTS AS WELL AS LAW IN NOT APPRECIATING THE FACTS THAT, IN ABSENCE OF THE APPR OVAL U/S 153D, THE WHOLE PROCEEDINGS IS ITSELF BAD IN LAW AND VOID AS HELD IN RANCHI BENCH ITAT AS WELL AS GUJARAT HIGH COURT DECISION I N THE CASE OF SUNRISE FINLEASE REPORTED IN 89 TAXMANN.COM 1 AND T HEREFORE, THIS ASSESSMENT FRAMED IS BAD IN LAW AND VOID AND LIABLE TO BE QUASHED. 22. IN THE INSTANT CASE, THE ISSUE INVOLVED IS IDEN TICAL TO THE ISSUE INVOLVED IN ITA NO. 1513/AHD/2019 CONCERNING AY 200 7-08 (SUPRA). THE FACTS IN BRIEF ARE NOTED AS FOLLOWS. IN THE RETURN FILED BY THE ASSESSEE IN PURSUANCE OF NOTICE UNDER S.153A OF THE ACT, THE ASSESSEE HAS DECLARED SHORT TERM CAPITAL GAINS OF R S.78,93,389/- CHARGEABLE AT CONCESSIONAL RATE OF 10% UNDER S.111A OF THE ACT. THE AFORESAID GAINS HAVE BEEN EARNED ON PURCHASE AN D SALES OF SHARES OF SGLPP. THE ASSESSEE HAD PURCHASED 4,09,3 55 SHARES ON A SINGLE DAY I.E. ON 10.04.2016 AND ANOTHER 1435 SHAR ES ON 04.05.2006. THE ASSESSEE HAS SOLD ALL THE SHARES O N VARIOUS DATED ON 14 OCCASIONS AND EARNED GAINS IN QUESTION. THE TOTAL NUMBER OF TRANSACTIONS OF PURCHASE IS THUS ONLY 2 AND OF SALE IS ONLY 14. IN PARITY OF THE REASONS RECORDED FOR AY 2007-08 (SUPR A), WE FIND FORCE IN THE PLEA OF THE ASSESSEE FOR ALLOWABILITY OF GAIN ON SALES OF SHARES UNDER THE HEAD SHORT TERM CAPITAL GAINS AS CLAIMED. WE ACCORDINGLY REVERSE THE ACTION OF THE LOWER AUTHORI TIES IN THIS REGARD. 23. WE THUS FIND MERIT IN THE PLEA OF ASSESSEE. CO NSEQUENT CLAIM OF ASSESSEE DESERVES TO BE ALLOWED ON MERITS. ITA NOS. 1513 TO 1515/AHD/19 [SWATIBEN A. SHAH & ANR.] - 14 - 24. AS THE GRIEVANCE OF THE ASSESSEE HAS BEEN ANSWE RED IN FAVOUR OF THE ASSESSEE ON MERITS, WE ARE NOT INCLINED TO A DDRESS OURSELVES ON ADDITIONAL GROUND RAISED BY THE ASSESSEE AT BELA TED STAGE. 25. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. 26. IN THE COMBINED RESULT, ALL THREE APPEALS OF AS SESSEES ARE ALLOWED. SD/- SD/- (RAJPAL YADAV) (PRADIP KUMA R KEDIA) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD: DATED 29/01/2021 TRUE COPY S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ , / CONCERNED CIT 4. ,- / CIT (A) /. 012 33*+4 *+#4 56) / DR, ITAT, AHMEDABAD 7. 289 / GUARD FILE. BY ORDER / 4 /5 *+#4 56) THIS ORDER PRONOUNCED ON 29/01/2021