Navbharat Seeds Pvt. Ltd., Ahmedabad V. The CIT.,A'bad-III, Ahmedabad

ITA 1824/AHD/2011

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3640 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 10 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 13-04-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 19-07-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R I PATEL
• Assessee Lawyers: M K PATEL
• Keywords: Business income
• Section: 143(3); 263

Judgement Text

, A IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER ./ ITA NO.1824/AHD/2011 / ASSTT. YEAR: 2006-2007 NAVBHARAT SEEDS PVT.LTD VASU KANAN BUILDING OPP: GUJARAT VIDHYAPITH ASHRAM ROAD AHMEDABAD. PAN : AAACN 5362 K VS THE CIT., AHMEDABAD - III AHMEDABAD. ! / (APPELLANT) '# ! / (RESPONDENT) ASSESSEE BY : SHRI M.K. PATEL, AR REVENUE BY : SHRI R.I. PATEL / DATE OF HEARING : 13/04/2016 / DATE OF PRONOUNCEMENT: 01/06/2016 $%/ O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE OR DER OF THE CIT- III, AHMEDABAD DATED 23.3.2011 PASSED IN THE ASSTT. YEAR 2006-07 UNDER SECTION 263 OF THE INCOME TAX ACT, 1961. 2. THOUGH THE ASSESSEE HAS TAKEN FIVE GROUNDS OF AP PEAL, BUT ITS GRIEVANCES REVOLVE AROUND A SINGLE ISSUE, WHEREBY, IT HAS CHALLENGED THE ORDER OF THE CIT PASSED UNDER SECTION 263 OF THE IN COME TAX ACT. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE-CO MPANY WAS ENGAGED IN PROCESSING AND MARKETING OF VARIOUS TYPE S OF HYBRID SEEDS FOR AGRICULTURE PURPOSE. IT HAS FILED ITS RETURN O F INCOME ON 23.12.2006 ITA NO.1824/AHD/2011 2 DECLARING TOTAL INCOME AT RS.1,47,12,010/-. THE AS SESSMENT ORDER WAS PASSED UNDER SECTION 143(3) OF THE ACT ON 16.12.200 8. THE LD.AO HAS DETERMINED THE TAXABLE INCOME OF THE ASSESSEE AT RS .1,50,87,010/-. 4. ON PERUSAL OF THE RECORD, THE LD.COMMISSIOENR HA BOURED A BELIEF THAT ACTION UNDER SECTION 263 OF THE INCOME TAX ACT DESERVES TO BE TAKEN AGAINST THE ASSESSEE. THE LD.COMMISISONER HA S OBSERVED THAT BESIDES DOING NORMAL BUSINESS, THE ASSESSEE WAS ALS O TRADING IN SHARES AND THE AO TREATED THE INCOME ARISING OUT OF SALE O F SHARES AS SHORT TERM CAPITAL GAIN. ACCORDING TO THE LD.COMMISSIONE R, IN VIEW OF EXPLANATION BELOW SECTION 73, PROFIT IN TRADING IN SHARES WAS REQUIRED TO BE TREATED AS SPECULATION BUSINESS, AND THE PROFIT FROM SUCH SPECULATION BUSINESS WAS REQUIRED TO BE ASSESSED AT NORMAL RATE S. THEREFORE, HE ISSUED SHOW CAUSE NOTICE UNDER SECTION 263 OF THE A CT. IN RESPONSE TO THE NOTICE ASSESSEE HAS CONTENDED THAT THE ASSESSEE HAS PURCHASED SHARES IN ORDER TO MAKE INVESTMENT. IN THE BALANCE SHEET THESE SHARES WERE SHOWN AS INVESTMENT AND NOT AS STOCK-IN-TRADE. THE SHARES WERE PURCHASED FROM OWN FUNDS AND NOT FROM BORROWED FUND S. NUMBER OF TRANSACTION ARE VERY SMALL. IN THE PAST AND SUBSEQ UENT YEARS, THE STATUS OF THE ASSESSEE AS INVESTOR WAS NEVER DISPUT ED BY THE AO. THE LD.CIT DID NOT ACCEPT CONTENTION OF THE ASSESSEE. HE OBSERVED THAT THOUGH THE ASSESSEE HAD A TURNOVER OF RS.9.87 CRORE S IN SEED BUSINESS, BUT IT HAS PURCHASED SHARES OF BANK OF BARODA, WHIC H SOLD WITHIN 10 DAYS. SIMILARLY, THE SHARES OF SUZLON AND JET AIR WERE SOLD IN BETWEEN TWO DAYS AND 15 DAYS. THUS, ACCORDING TO THE CIT, THE ASSESSEE WAS TRADING IN SHARES, AND THEREFORE, THE PROFIT FROM T RADING IN SHARES WAS REQUIRED TO BE TREATED AS FROM SPECULATION BUSINESS . 5. BEFORE US, THE LD.COUNSEL FOR THE ASSESSEE REITE RATED THE CONTENTIONS AS WERE RAISED BEFORE THE CIT. HE DREW OUR ATTENTION TOWARDS THE SUBMISSIONS OF THE ASSESSEE FILED BEFOR E THE LD.CIT, WHICH READS AS UNDER: ITA NO.1824/AHD/2011 3 1. THE ASSESSMENT ORDER PASSED BY THE JT COMMISSIONER OF INCOME TAX (AO), RANGE-5, AHMEDABAD ON 16.12.2008 I S NOT ERRONEOUS IN ANY MANNER NONETHELESS PREJUDICIAL TO THE REVENUE. 2. IT IS SUBMITTED THAT THE EXPLANATION TO SECTION 73 IS NOT APPLICABLE TO THE ASSESSEE AS THE ASSESSEE IS NOT E NGAGED IN THE BUSINESS OF PURCHASE AND SALE OF SHARES OF OTHE R COMPANIES. THE ASSESSEE HAS HELD THE SHARES AS AN INVESTMENT. THE ASSESSEE HAS SHOWN THE COST OF SHAR ES AS INVESTMENT IN THE BALANCE SHEET (COPY OF WHICH IS S UBMITTED HEREWITH). HAD THE ASSESSEE ENGAGED IN THE BUSINESS OF TRADING OF SHARES THE STOCK OF SHARES HELD BY IT WOULD HAVE BEEN SHOWN AS STOCK IN TRADE. AS SUCH THE ASSESSEE HAS CORRECT LY SHOWN THE INCOME AS SHORT TERM OR LONG TERM CAPITAL GAINS AS THE CASE MAY BE. THE EXPLANATION TO SECTION 73 IS APPLICABLE TO THOS E COMPANIES WHOSE ANY PART OF BUSINESS CONSISTS IN THE PURCHASE AND SALES OF SHARES OF OTHER COMPANIES. HERE OBVIOUSLY NO PAR T OF THE BUSINESS OF THE ASSESSEE CONSISTS OF PURCHASE AND S ALE OF SHARES OF OTHER COMPANIES. THE ASSESSEE ONLY MAKES INVESTMENT AND MAKING INVESTMENT IS ALSO NOT BUSINE SS OF THE COMPANY. IT IS THEREFORE SUBMITTED THAT THE ASSESSEE HAS RIG HTLY SHOWN THE INCOME FROM CAPITAL GAINS AND RIGHTLY TAX ED AT THE RATE APPLICABLE TO INCOME FROM SHORT TERM CAPITAL G AINS. 2. THE AO HAS PASSED THE ASSESSMENT ORDER AFT ER CONSIDERING THE CBDT CIRCULAR NOS 4/2007 DATED 15.0 6.2007 AS REFERRED TO IN YOUR AFORESAID NOTICE. THE SAID CIRC ULAR HAS REFERRED TO THE OBSERVATION OF THE HON'BLE SUPREME COURT IN CASE OF CIT (CENTRAL), CALCUTTA VS ASSOCIATED INDUS TRIAL DEVELOPMENT CO. (P) LTD 82 ITR 586 AS UNDER: '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 THE KNOWLEDGE OF THE ASSESSEE WHO H OLDS THE SHARES AND IT SHOULD, IN NORMAL CIRCUMSTANCE, 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 I NVESTMENT' 3. AS IS APPARENT FROM THE BALANCE SHEET, THE ASSESSEE COMPANY HAS SHOWN THE SHARES AS INVESTMENTS FROM YE AR TO YEAR. THE INVESTMENTS ARE MAINLY FINANCED FROM OWN SOURCES. ITA NO.1824/AHD/2011 4 NO BORROWING IS MADE FOR THESE PURPOSES. THE MAGNIT UDE OF TRANSACTIONS ARE ALSO FEW. IN THESE CIRCUMSTANCES I T CANNOT BE SAID THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF THE SHARE TRADING OR IT HAS EVER ANY INTENTION OF SHARE TRADING. IN VIEW OF THE ABOVE FACTS, IT IS RESPECTFULLY SUBM ITTED THAT THE ORDER PASSED BY THE JCIT IS NEITHER ERRONEOUS NOR P REJUDICIAL TO THE INTEREST OF REVENUE AND HENCE THE ACTION U/S 26 3 MAY KINDLY BE DROPPED. 6. HE FURTHER CONTENDED THAT EXPLANATION TO SECTION 73 IS APPLICABLE WHERE THERE IS A LOSS FROM SHARE TRADING. IN THE C ASE OF THE ASSESSEE THERE WERE ONLY PROFITS. IT HAS SHOWN IT AS LONG T ERM CAPITAL GAIN AND SHORT TERM CAPITAL GAIN. THE SHORT TERM CAPITAL GA IN SHOWN BY THE ASSESSEE IS OF RS.4,18,596/-, WHERE THE LONG TERM C APITAL GAIN IS OF RS.2,53,886/-. THE TOTAL SALE VALUE OF SHORT TERM CAPITAL GAIN IS OF RS.25,53,020/- AND LONG TERM CAPITAL IS OF 5,39,246 /-. THUS, THE TOTAL SALE VALUE OF THE INVESTMENT WAS OF ONLY RS.31 LAKH S, WHICH IS IN COMPARISON TO THE TURNOVER IN SEED BUSINESS OF RS.9 .87 CRORES IS MINISCULE. IN THIS WAY, HE SUBMITTED THAT THE LD.C IT FAILED TO BRING ANY MATERIAL TO INDICATE THE FACT THAT THE ASSESSEE WAS IN THE BUSINESS OF SHARE TRADING. 7. ON THE OTHER HAND, THE LD.DR RELIED UPON THE ORD ER OF THE CIT. 8. WE HAVE DULY CONSIDERED RIVAL CONTENTIONS AND GO NE THROUGH THE RECORD CAREFULLY. THE ISSUE, WHETHER GAIN FROM SAL E OF SHARES IS TO BE ASSESSED AS A BUSINESS INCOME OR SHORT TERM CAPITAL GAIN/LONG TERM CAPITAL GAIN, IS A HIGHLY DEBATABLE ISSUE. IT ALWA YS PUZZLED THE ADJUDICATOR EVEN AFTER AVAILABILITY OF LARGE NUMBER S OF AUTHORITATIVE PRONOUNCEMENTS BY THE HONBLE SUPREME COURT/HONBLE HIGH COURT. THE REASON FOR THE PUZZLE IS, ONE HAS TO GATHER THE INTENTION OF AN ASSESSEE WHILE HE ENTERED INTO THE TRANSACTION. TH E EXPRESSION INTENTION AS DEFINED IN MERIAM WEBSTER DICTIONARY MEANS, WHAT ONE INTENDS TO ACCOMPLISH OR ATTAIN, IT IMPLIES LITTLE MORE THAN WHAT ONE HAS ITA NO.1824/AHD/2011 5 IN MIND TO DO OR BRING OUT. IT SUGGESTS CLEAR FORM ULATION OR DELIBERATION. THUS, IT IS ALWAYS DIFFICULT TO ENTER INTO THE RECE SS OF THE MIND OF AN ASSESSEE TO FIND OUT THE OPERATIVE FORCES EXHIBITIN G THE INTENTION FOR ENTERING INTO THE TRANSACTION. THIS WOULD GIVE RIS E A DEBATE. NEVERTHELESS, WE HAVE TO LOOK INTO THE CURIOUS FEAT URES OF THIS CASE WHICH WILL GOAD US ON JUST CONCLUSION. 9. BEFORE WE EMBARK UPON AN INQUIRY ON THE FACTS OF PRESENT CASE SO AS TO FIND OUT, WHETHER ASSESSEE IS TO BE TERMED AS INVOLVING IN THE TRADING OF SHARES OR TO BE TREATED AS A SIMPLICITOR INVESTORS. WE WOULD LIKE TO REFER CERTAIN BROAD PRINCIPLE CULLED OUT BY ITAT LUCKNOW BENCH IN THE CASE OF SARNATH INFRASTRUCTURE PVT. LTD. REPORT ED IN 120 TTJ 216. THESE TESTS READ AS UNDER:- 13. AFTER CONSIDERING ABOVE RULINGS WE CULL OUT FO LLOWING PRINCIPLES, WHICH CAN BE APPLIED ON THE FACTS OF A CASE TO FIND OUT WHETHER TRANSACTION(S) IN QUESTION ARE IN THE NATURE OF TRA DE OR ARE MERELY FOR INVESTMENT PURPOSES: (1) WHAT IS THE INTENTION OF THE ASSESSEE AT THE TI ME OF PURCHASE OF THE SHARES (OR ANY OTHER ITEM). THIS CAN BE FOUND OUT FROM THE TREATMENT IT GIVES TO SUCH PURCHASE IN ITS BOOKS OF ACCOUNT. WHETHER IT IS TREATED STOCK-IN-TRADE OR INVESTMENT. WHETHE R SHOWN IN OPENING/CLOSING STOCK OR SHOWN SEPARATELY AS INVEST MENT OR NON- TRADING ASSET. (2) WHETHER ASSESSEE HAS BORROWED MONEY TO PURCHASE AND PAID INTEREST THEREON? NORMALLY, MONEY IS BORROWED TO P URCHASE GOODS FOR THE PURPOSE OF TRADE AND NOT FOR INVESTING IN AN AS SET FOR RETAINING. (3) WHAT IS THE FREQUENCY OF SUCH PURCHASE AND DISP OSAL IN THAT PARTICULAR ITEM? IF PURCHASE AND SALE ARE FREQUENT , OR THERE ARE SUBSTANTIAL TRANSACTION IN THAT ITEM, IF WOULD INDI CATE TRADE. HABITUAL DEALING IN THAT PARTICULAR ITEM IS INDICATIVE OF IN TENTION OF TRADE. SIMILARLY, RATIO BETWEEN THE PURCHASES AND SALES AN D THE HOLDINGS MAY SHOW WHETHER THE ASSESSEE IS TRADING OR INVESTI NG (HIGH TRANSACTIONS AND LOW HOLDINGS INDICATE TRADE WHEREA S LOW TRANSACTIONS AND HIGH HOLDINGS INDICATE INVESTMENT). ITA NO.1824/AHD/2011 6 (4) WHETHER PURCHASE AND SALE IS FOR REALIZING PROF IT OR PURCHASES ARE MADE FOR RETENTION AND APPRECIATION ITS VALUE? FORMER WILL INDICATE INTENTION OF TRADES AND LATTER, AN INVESTM ENT. IN THE CASE OF SHARES WHETHER INTENTION WAS TO ENJOY DIVIDEND AND NOT MERELY EARN PROFIT ON SALE AND PURCHASE OF SHARES. A COMMERCIA L MOTIVE IS AN ESSENTIAL INGREDIENT OF TRADE. (5) HOW THE VALUE OF THE ITEMS HAS BEEN TAKEN IN TH E BALANCE SHEET? IF THE ITEMS IN QUESTION ARE VALUED AT COST , IT WOULD INDICATE THAT THEY ARE INVESTMENTS OR WHERE THEY ARE VALUED AT COST OR MARKET VALUE OR NET REALIZABLE VALUE (WHICHEVER IS LESS), IT WILL INDICATE THAT ITEMS IN QUESTION ARE TREATED AS STOCK-IN-TRADE. (6) HOW THE COMPANY (ASSESSEE) IS AUTHORIZED IN MEM ORANDUM OF ASSOCIATION/ARTICLES OF ASSOCIATION? WHETHER FOR TR ADE OR FOR INVESTMENT? IF AUTHORIZED ONLY FOR TRADE, THEN WHE THER THERE ARE SEPARATE RESOLUTIONS OF THE BOARD OF DIRECTORS TO C ARRY OUT INVESTMENTS IN THAT COMMODITY? AND VICE VERSE. 7. IT IS FOR THE ASSESSEE TO ADDUCE EVIDENCE TO SHO W THAT HIS HOLDING IS FOR INVESTMENT OR FOR TRADING AND WHAT D ISTINCTION HE HAS KEPT IN THE RECORDS OR OTHERWISE, BETWEEN TWO TYPES OF HOLDINGS. IF THE ASSESSEE IS ABLE TO DISCHARGE THE PRIMARY ONUS AND COULD PRIMA FACIE SHOW THAT PARTICULAR ITEM IS HELD AS INVESTMENT (OR SAY, STOCK-IN-TRADE) THEN ONUS WOULD SHIFT TO REVENUE TO PROVE THAT APPA RENT IS NOT REAL. 8. THE MERE FACT OF CREDIT OF SALE PROCEEDS OF SHAR ES ( OR FOR THAT MATTER ANY OTHER ITEM IN QUESTION) IN A PARTICULAR ACCOUNT OR NOT SO MUCH FREQUENCY OF SALE AND PURCHASE WILL ALONE WILL NOT BE SUFFICIENT TO SAY THAT ASSESSEE WAS HOLDING THE SHARES (OR THE ITEMS IN QUESTION) FOR INVESTMENT. 9. ONE HAS TO FIND OUT WHAT ARE THE LEGAL REQUISITE S FOR DEALING AS A TRADER IN THE ITEMS IN QUESTION AND WHETHER THE A SSESSEE IS COMPLYING WITH THEM. WHETHER IT IS THE ARGUMENT OF THE ASSESSEE THAT IT IS VIOLATING THOSE LEGAL REQUIREMENTS, IF IT IS CLAIMED THAT IT IS DEALING AS A TRADER IN THAT ITEM? WHETHER IT HAD SUCH AN I NTENTION (TO CARRY ON ILLEGAL BUSINESS IN THAT ITEM) SINCE BEGINNING OR W HEN PURCHASES WERE MADE? 10. IT IS PERMISSIBLE AS PER CBDTS CIRCULAR NO. 4 OF 2007 OF 15 TH JUNE, 2007 THAT AN ASSESSEE CAN HAVE BOTH PORTFOLIO S, ONE FOR TRADING AND OTHER FOR INVESTMENT PROVIDED IT IS MAINTAINING SEPARATE ACCOUNT FOR EACH TYPE, THERE ARE DISTINCTIVE FEATURES FOR B OTH AND THERE IS NO INTERMINGLING OF HOLDINGS IN THE TWO PORTFOLIOS. ITA NO.1824/AHD/2011 7 11. NOT ONE OR TWO FACTORS OUT OF ABOVE ALONE WILL BE SUFFICIENT TO COME TO A DEFINITE CONCLUSION BUT THE CUMULATIVE EF FECT OF SEVERAL FACTORS HAS TO BE SEEN. 10 . THE HONBLE GUJARAT HIGH COURT HAD ALSO AN OCCASI ON TO CONSIDER THIS ISSUE IN THE CASE OF COMMISSIONER OF INCOME TAX VS. RIVA SHARKAR A KOTHARI REPORTED IN 283 ITR 338. HONBLE COURT HAS MADE RE FERENCE TO THE TEST LAID BY IT IN ITS EARLIER DECISION RENDERED IN THE CASE OF PARI MANGALDAS GIRDHARDAS VS. CIT REPORTED IN 1977 CTR 647. THESE TESTS READ AS UNDER: AFTER ANALYZING VARIOUS DECISIONS OF THE APEX COUR T, THIS COURT HAS FORMULATED CERTAIN TESTS TO DETERMINE AS TO WHETHER AN ASSESSEE CAN BE SAID TO BE CARRYING ON BUSINESS. (A) THE FIRST TEST IS WHETHER THE INITIAL ACQUISITION O F THE SUBJECT-MATTER OF TRANSACTION WAS WITH THE INTENTION OF DEALING IN THE ITEM, OR WITH A VIEW TO FINDING AN INVESTMENT. IF THE TRANSACTION, SINCE THE INCEPTION, APPEARS TO BE IMPRESSED WITH THE CHARACT ER OF A COMMERCIAL TRANSACTION ENTERED INTO WITH A VIEW TO EARN PROFIT, IT WOULD FURNISH A VALUABLE GUIDELINE. (B) THE SECOND TEST THAT IS OFTEN APPLIED IS AS TO WHY AND HOW AND FOR WHAT PURPOSE THE SALE WAS EFFECTED SUBSEQUENTLY. (C) THE THIRD TEST, WHICH IS FREQUENTLY APPLIED, IS AS TO HOW THE ASSESSEE DEALT WITH THE SUBJECT-MATTER OF TRANSACTION DURING THE TIME THE ASSET WAS THE ASSESSEE. HAS IT BEEN TREATED AS STOCK-IN- TRADE, OR HAS IT BEEN SHOWN IN THE BOOKS OF ACCOUNT AND BALANCE SHEE T AS AN INVESTMENT. THIS INQUIRY, THOUGH RELEVANT, IS NOT CONCLUSIVE. (D) THE FOURTH TEST IS AS TO HOW THE ASSESSEE HIMSELF HAS RETURNED THE INCOME FROM SUCH ACTIVITIES AND HOW THE DEPARTMENT HAS DEALT WITH THE SAME IN THE COURSE OF PRECEDING AND SUCCEEDING ASSESSMENTS. THIS FACTOR, THOUGH NOT CONCLUSIVE, CAN AFFORD GOOD AND COGENT ITA NO.1824/AHD/2011 8 EVIDENCE TO JUDGE THE NATURE OF THE TRANSACTION AND WOULD BE A RELEVANT CIRCUMSTANCE TO BE CONSIDERED IN THE ABSEN CE OF ANY SATISFACTORY EXPLANATION. (E) THE FIFTH TEST, NORMALLY APPLIED IN CASE OF PARTNER SHIP FIRMS AND COMPANIES, IS WHETHER THE DEED OF PARTNERSHIP OR TH E MEMORANDUM OF ASSOCIATION, AS THE CASE MAY BE, AUTHORIZES SUCH AN ACTIVITY. (F) THE LAST BUT NOT THE LEAST, RATHER THE MOST IMPORTA NT TEST, IS AS TO THE VOLUME, FREQUENCY, CONTINUITY AND REGULARITY OF TRA NSACTION OF PURCHASE AND SALE OF THE GOODS CONCERNED. IN A CAS E WHERE THERE IS REPETITION AND CONTINUITY, COUPLED WITH THE MAGNITU DE OF THE TRANSACTION, BEARING REASONABLE PROPOSITION TO THE STRENGTH OF HOLDING THEN AN INFERENCE CAN READILY BE DRAWN THAT THE ACTIVITY IS IN THE NATURE OF BUSINESS. 11. IN THE LIGHT OF THE ABOVE, LET US EXAMINE THE F ACTS OF THE PRESENT CASE. THE LD.CIT DID NOT DISPUTE WITH REGARD TO THE CONTE NTION OF THE ASSESSEE THAT IN THE BOOKS THE ASSESSEE HAS SHOWN SHARE TRANSACTION AS AN INVESTOR. HER STATUS AS INVESTOR WAS ACCEPTED BY THE DEPARTMENT IN PRECE DING YEAR AS WELL AS IN SUBSEQUENT YEAR. THE ASSESSEE HAS NOT USED ANY BOR ROWED FUNDS. IT HAS NOT INCURRED ANY EXPENDITURE FOR PORTFOLIO MANAGEMENT O R KEEPING A TRACK ON THE INVESTMENT. THE SHARES WERE NOT VALUED EITHER AT M ARKET VALUE OR AT COST, WHICHEVER IS LOWER ON THE CLOSE OF THE YEAR. WE HA VE ALSO PERUSED THE DETAILS OF LONG TERM CAPITAL GAINS AND SHORT TERM CAPITAL G AINS REPRODUCED BY THE LD.CIT. ONLY REASON ASSIGNED BY THE CIT IS THAT S OME OF THE SHARES WERE SOLD IMMEDIATELY AFTER THEIR ACQUISITION. BUT THE CIT N OWHERE POINTED OUT THAT WHETHER THE DELIVERIES OF THE SHARES WERE TAKEN BY THE ASSESSEE OR NOT. IN OUR OPINION, THE LD.CIT FAILED TO MAKE A CASE THAT THE ASSESSEE WAS TRADING IN SHARES AND NOT MADE INVESTMENT. THE REASON ASSIGNE D BY THE CIT IS BASED ONLY ONE CIRCUMSTANCE, WHICH WAS ALSO NOT BEING CON CLUSIVELY DEMONSTRATED. ITA NO.1824/AHD/2011 9 NO DOUBT, THREE SCRIP WERE SOLD BY THE ASSESSEE IN VERY SHORT SPAN OF TIME, BUT THE TOTAL INVESTMENT MADE BY THE ASSESSEE, WITH REG ARD TO THE SHORT TERM CAPITAL GAIN IS IN NINE SCRIP. SIMILARLY, UNDER LO NG TERM CAPITAL GAIN, IT HAS PURCHASED SHARES OF THREE COMPANIES ONLY. CONSIDER ING ALL THESE ASPECTS, IN THE LIGHT OF BROAD TEST LAID DOWN BY THE HONBLE GU JARAT HIGH COURT, WE ARE OF THE VIEW THAT THE LD.CIT COULD NOT BRING SUFFICIENT MATERIAL ON RECORD DEMONSTRATING THE FACT THAT THE ASSESSEE WAS ACTING AS TRADER AND NOT AN INVESTOR. THEREFORE, WE ALLOW THE APPEAL OF THE AS SESSEE, AND SET ASIDE THE ORDER PASSED UNDER SECTION 263 OF THE INCOME TAX AC T, 1961. CONSEQUENTLY, THE ASSESSMENT ORDER PASSED BY THE AO IS RESTORED. 12. IN RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE COURT ON 1 ST JUNE, 2016 AT AHMEDABAD. SD/- SD/- (ANIL CHATURVEDI) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER