Sh. Gopal Krishna wattal, Agra V. A.C.I.T.-1, Agra

ITA 233/AGR/2013

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 0733 (ITAT-AGRA)
• Duration Of Justice: 5 year(s) 10 month(s) 19 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 16-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 17-06-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 27-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SUBHASH CHAND AGARWAL
• Keywords: Capital asset; Business income; Question of law; Date of conversion; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH: AGRA BEFORE SHRI A. D. JAIN, JUDICIAL MEMBER, AND DR. MITHA LAL MEENA, ACCOUNTANT MEMBER I.T.A NO. 233/AGRA/2013 (ASSESSMENT YEAR - 2009 - 10) SHRI GOPAL KRISHNA WATTAL D - 13, LAWYERS COLONY, AGRA. PAN NO.AAFPW0988G (ASSESSEE) V S .. ACIT - 1, AGRA. (R EVENUE ) A SSESSEE BY SHRI SUBHASH CHAND AGARWAL, ADV. REVENUE BY SHRI WASEEM ARSHAD, SR. DR. ORDER PER, A. D. JAIN, JUDICIAL MEMBER: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A), DATED 26.02.2013 FOR THE ASSESSMENT YEAR 2009 - 10 , C HALLENGING THE ACTION OF THE LD. CIT(A) IN CONFIRMING THE AOS ACTION IN TREATING LOSS IN SHARE TRADING BUSINESS TO BE A CAPITAL LOSS AND NOT A TRADING LOSS. DATE OF HEARING 17 . 10 .2016 DATE OF PRONOUNCEMENT 21 .10. 201 6 I.T.A NO. 233/AGRA/2013 2 2. THE FACTS ARE THAT VIDE ASSESSMENT ORDER DATED 22.12.2011, THE AO DETERMINED THE ASSESSEES ASSESSED INCOME AT RS.1,95,18,870/ - , AS AGAINST THE RETURNED INCOME OF RS.1,42,55,520/ - . THE AO OBSERVED THAT THE ASSESSEE WAS EARLIER HOLDING SHARES IN HIS INVESTMENT ACCOUNT AND ONLY DURING THE PERIOD UNDER CONSIDERATION, IT HA D BEEN CLAIMED THAT HE DECIDED TO DO TRADING IN SHARE S . THE ASSESSE E RELIED ON CBDT CIRCULAR NO. 4/2007 DATED 15.6.2007, PLEADING THAT LOOKING TO THE VOLUME OF TRANSACTION S AND SEPARATE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE FOR HIS BUSINESS OF TRADING OF SHARES, SUCH TRANSACTIONS SHOULD BE CONSIDERED AS TRADING AND THAT THE SHARES EARLIER HELD BY HIM AS INVESTMENT, IN THE FORM OF CAPITAL ASSET , WAS CONVERTED INTO STOCK - IN - TRADE IN THE BEGINNING OF THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. THE AO, HOWEVER, DID NOT AGREE WITH THE CONTENTIO N OF THE ASSESSEE. HE OBSERVED THAT NO ENTRY HAD BEEN PASSED BY THE ASSESSEE IN THE BOOKS OF ACCOUNT FOR CONVERSION OF THE CAPITAL ASSET INTO STOCK - IN - TRADE AND THAT ALSO, NO CAPITAL GAIN OR LOSS WAS DECLARED BY HIM ON CONVERSION OF THE CAPITAL ASSET INTO STOCK - IN - TRADE. THE ASSESSEE PLEADED THAT SUCH MISTAKE HAD OCCURRED DUE TO OVERSIGHT. THIS ARGUMENT DID NOT FIND F AVOUR WI TH THE AO, AS NOT VERY CONVINCING . THE AO ALSO OBSERVED THAT THE ASSESSEE HAD NOT BEEN REGULARLY ENGAGED IN PURCHASE AND SALE OF SHARE S AND I.T.A NO. 233/AGRA/2013 3 THE AVERAGE HOLDING OF SHARES BY HIM WAS ABOUT 165 DAYS AND IN THREE MONTHS, I.E. , FROM JULY, TO SEPTEMBER, 2008, HE DID NOT BUY OR SELL A SINGLE SHARE AND IN THE MONTH OF OCTOBER 2008, HE PURCHASED 2855 SHARES, BUT DID NOT SELL ANY SHARES. THE AO ALSO OBSERVED THAT THE SHARES BEING SOLD BY THE ASSESSEE WERE NOT ACQUIRED BY HIM WITHIN A SHORT PERIOD , BUT THEY WE RE SOLD AFTER KEEPING THEM FOR A SUBSTANTIAL PERIOD OF TIME. THE AO THUS CONCLUDED THAT THE TRANSACTION OF SHARES SHOWN BY THE ASSESSEE WAS NOT IN THE NATURE OF TRADING OF SHARES, BUT, ACTUALLY, IT WAS IN THE NATURE OF INVESTMENT AND THEREFORE, THE LOSS OF RS.52,16,380/ - CLAIMED BY THE ASSESSEE ON ACCOUNT OF SUCH TRADING OF SHARES WAS HELD BY THE ASSESSEE TO BE A CAPITAL LOSS AND NOT A LOSS FROM BUSINESS AND PROFESSION. THIS AMOUNT WAS ADDED BY THE AO TO THE INCOME OF THE ASSESSEE ON THE BASIS THAT THE CAP ITAL LOSS CANNOT BE SET OFF FROM THE BUSINESS INCOME. 3. BY VIRTUE OF THE IMPUGNED ORDER, THE LD. CIT(A) AFFIRMED THE ASSESSMENT ORDER. 4. AGGRIEVED, THE ASSESSEE IS IN FURTHER APPEAL. 5. WE HAVE HEARD THE BOTH THE PARTIES AND HAVE PERUSED THE RELEVANT MATERIAL ON RECORD. THE ASSESSEE HAS MAINTAINED THE STAND TAKEN BEFORE THE LD. CIT(A), WHEREAS THE LD. DR HAS PLACED STRONG RELIANCE ON THE IMPUGNED ORDER. I.T.A NO. 233/AGRA/2013 4 6. IN THE IMPUGNED ORDER, WHILE CONFIRMING THE ASSESSMENT ORDER, THE LD. CIT(A) HAS OBSERVED AS FOL LOWS: 7.3 I HAVE CONSIDERED ALL THE FACTS AS DISCUSSED BY THE AO IN THE ASSESSMENT ORDER AS WELL AS EXPLAINED TO ME BY THE LD. AR AND THE ASSESSEE (APPELLANT) PERSONALLY WITH REGARD TO SHARE TRANSACTION UNDER CONSIDERATION IN THIS APPEAL, WHICH HAVE BEEN CLAIMED BY THE ASSESSEE (APPELLANT) AS TRADING TRANSACTION BUT HELD BY THE AO AS BEING INVESTMENT IN SHARES. IT IS UNDISPUTED FACT THAT HISTORICALLY, THE ASSESSEE (APPELLANT) WAS HOLDING SHARES TILL 31.03.2008 AS HIS INVESTMENT AND THESE SHARES WERE BEING SHOWN BY HIM AS CAPITAL ASSET. DURING THE YEAR UNDER CONSIDERATION, IT IS BEING CLAIMED BY THE ASSESSEE (APPELLANT) THAT HE DECIDED TO DO SHARE TRADING BUSINESS ALONG WITH HIS MAIN BUSINESS OF CARPET MANUFACTURING. I HAVE ALSO FOUND THAT SINCE BEGINNING, THE ASSESSEE (APPELLANT) IS IN THE BUSINESS OF CARPET MANUFACTURING AND HE HAS NO KNOWLEDGE OF SHARE TRADING BUSINESS. THEREFORE, TILL 31.03.2008, WHATEVER SHARES WERE PURCHASED BY HIM, IT WAS HELD BY HIM AS CAPITAL ASSET AND HE WAS ALSO EARNING DIVIDEND O N THE SHARES HELD BY HIM AS CAPITAL ASSET. NO CLEAR REASON COULD BE GIVEN BY THE ASSESSEE (APPELLANT) FOR ENTERING INTO SHARE TRADING BUSINESS, EXCEPT SAYING THAT ALONG WITH CARPET MANUFACTURING BUSINESS, HE ALSO WANTED TO DO SHARE TRADING BUSINESS. IT HAS ALSO BEEN I.T.A NO. 233/AGRA/2013 5 NOTICED THAT THE SHARE MARKET WAS NOT IN VERY GOOD CONDITION DURING THE YEAR UNDER CONSIDERATION WHEN THE ASSESSEE (APPELLANT), AS CLAIMED BY HIM, HAS DECIDED TO ENTER INTO SHARE TRADING BUSINESS BECAUSE DURING THE PERIOD UNDER CONSIDERATION, TH E SHARE MARKET HAS FALLEN DOWN FROM 20286 POINT IN DECEMBER, 2007 TO 9708 POINT IN MARCH, 2009, AS PER THE CHART GIVEN BY THE AO ON PAGE NO. 4 OF THE ASSESSMENT ORDER. IT IS QUITE UNUSUAL FOR A PERSON WHO DOES NOT HAVE ANY KNOWLEDGE OF THE SHARE MARKET, TO ENTER INTO SHARE TRADING BUSINESS AT THE TIME WHEN SHARE MARKET WAS NOT DOING VERY WELL. THEREFORE, I FIND THAT THE ASSESSEE (APPELLANT) HAS FAILED TO EXPLAIN HIS INTENTION OF DOING SHARE TRADING BUSINESS DURING THE YEAR CONSIDERATION WITH THE CIRCUMSTANTIAL EVIDENCE AVAILABLE AND HIS SUCH FAILURE ALSO GETS CORROBORATED BY THE FACT THAT NO ENTRY HAS BEEN MADE IN HIS BOOKS OF ACCOUNT, CONVERTING THE SHARES HELD AS CAPITAL ASSET INTO STOCK IN TRADE AS ON 01.04.2008 IN THE B EGINNING OF THE PREVIOUS YEAR UNDER CONSIDERATION, WHEN AS PER HIS CLAIM, HE DECIDED TO DO SHARE TRADING BUSINESS. FOR JUSTIFYING HIS CLAIM FOR DOING THE SHARE TRADING BUSINESS, THE ASSESSEE (APPELLANT) HAS ONLY RELIED UPON THE VOLUME OF HIS SHARE TRANSACT ION DURING THE YEAR UNDER CONSIDERATION AND MAINTENANCE OF SEPARATE BOOKS OF ACCOUNT AND MAKING OF SEPARATE PROFIT & LOSS ACCOUNT FOR HIS SO CALLED SHARE TRADING BUSINESS AND TO PROVE HIS POINT OF VIEW, HE HAS I.T.A NO. 233/AGRA/2013 6 PLACED RELIANCE ON CIRCULAR NO. 4/2007 DATED 1 5.06.2007 OF CBDT. HOWEVER, AFTER GOING THROUGH THIS CIRCULAR, I FIND THAT THE VOLUME OF THE SHARE TRANSACTION AND THE MAINTENANCE OF SEPARATE BOOKS OF ACCOUNT ONLY, ARE NOT SUFFICIENT TO SHOW THE NATURE OF SHARE TRANSACTION, WHETHER IT IS TRADING OR INVE STMENT AND FOR THIS PURPOSE, WHAT IS MORE IMPORTANT IS THE MOTIVE OF THE ASSESSEE (APPELLANT), WHETHER IT IS FOR EARNING OF PROFIT OR DERIVING INCOME BY WAY OF DIVIDEND BY KEEPING THE SHARES FOR A SUBSTANTIAL PERIOD OF TIME. THE ISSUE WHETHER THE VOLUME OF TRANSACTION WOULD DETERMINE TE SHARE TRANSACTION SHOWN BY THE ASSESSEE (APPELLANT) BEING TRADING OR NOT, HAS COME BEFORE THE HONBLE BOMBAY HIGH COURT IN CASE OF CIT VS. GOPAL PUROHIT (2010) 228 CTR (BOM) 582. IN THIS CASE LAW, THE HONBLE BOMBAY HIGH COU RT HAS HELD THAT THE DELIVERY BASED TRANSACTION ARE TO BE TREATED AS INVESTMENT TRANSACTION AND THE PROFIT RECEIVED THERE FROM IS TO BE TREATED AS SHORT TERM CAPITAL GAIN OR LONG TERM CAPITAL GAIN, DEPENDING ON THE PERIOD OF HOLDING OF SHARES. IT IS ALSO H ELD THAT FOR SUCH TRANSACTIONS, THE TRIBUNAL HAS CORRECTLY HELD THAT THOUGH THE PRINCIPLES OF RE S - JUDICATA IS NOT ATTRACTED, SINCE EACH ASSESSMENT IS SEPARATE IN ITSELF, THERE OUGHT TO BE UNIFORMITY IN TREATMENT AND CONSISTENCY WHEN THE FACTS AND CIRCUMSTA NCES ARE IDENTICAL. IN THIS CASE, THE ASSESSEE WAS ENGAGED IN TWO DIFFERENT TYPES OF TRANSACTIONS. THE FIRST SET OF TRANSACTION I.T.A NO. 233/AGRA/2013 7 INVOLVED IS INVESTMENT IN SHARES, THE SECOND SET OF TRANSACTION INVOLVED IS DEALING IN SHARES FOR THE PURPOSE OF BUSINESS. IN TH IS CASE, ON SALE OF 759003 SHARE FOR RS.5,22,00,870/ - , PROFIT HAS BEEN SHOWN AS INCOME FROM SHORT TERM CAPITAL GAIN AND ON SALE OF 388797 SHARE FOR RS.6,65,02340/ - , PROFIT HAS BEEN SHOWN AS LONG TERM CAPITAL GAIN. ON SUCH HIGH VOLUME OF SHARE TRANSACTIONS, THE PRINCIPLES LAID DOWN IN THIS CASE BY THE HONBLE BOMBAY HIGH COURT IS THAT FOR DELIVERY BASED SHARE TRANSACTION, PROFIT EARNED WOULD BE TAXED UNDER THE HEAD CAPITAL GAIN AND FOR THE NON DELIVERY BASED TRANSACTIONS, THE SAME WOULD BE CONSIDERED AS BUSI NESS INCOME. 7. AS EVIDENT FROM THE AFORE QUOTED RELEVANT PORTION OF THE IMPUGNED ORDER, THE MAIN OBJECTION OF THE LD. CIT(A) IS THAT THE REAL INTENTION OF THE ASSESSEE WAS TO SHOW THE LOSSES OF HIS SHARE TRANSACTIONS AS SHARE TRADING LOSSES AND THAT THI S INTENTION WAS CLEAR FROM THE FACT THAT HE DID NOT MAKE NECESSARY ENTR IES IN HIS BOOKS OF ACCOUNT SHOWING THE CONVERSION OF THE SHARES HELD EARLIER BY HIM AS CAPITAL ASSETS, INTO STOCK - IN - TRADE . THIS OBSERVATION OF THE LD. CIT(A), HOWEVER, IS FOUND TO BE INCONSISTENT WITH THE RE CO RD. AT PAGE 25 OF THE ASSESSEES PAPER BOOK, THE ASSESSEE HAS PLACED A COPY OF HIS BALANCE SHEET AS ON 31.3.2009. FOR READY REFERENCE THE SAME IS BEING REPRODUCED HEREU NDER: BALANCE SHEET AS AT 31 ST MARCH 2009 I.T.A NO. 233/AGRA/2013 8 LIABILITIES AMOUNTS ASSETS AMOUNTS CAPITAL CURRENT ASSETS STOCK OF SHARES 2,436,926.26 OP. BALANCE 12,926,683.70 LESS: LOSS ON CONVERSION CASH & BANK BALANCES INTO STOCK IN TRADE (1,503 , 737.00) ICICI BANK 8482 3,769,640.19 LESS LOSS DURING THE YEAR (5,216,380.25) 6,206,566.45 ___________ 6,206,566.45 6,206,566.45 FURTHER, AT APB 26 - 27, THE ASSESSEE HAS FILED A CONVERSION CHART, GIVING A STOCK SUMMARY OF COMPA NY SHARES, FOR THE PERIOD FROM 1.4.2008 TO 31.3.2009 AS FOLLOWS: PARTICULARS STOCKS VALUE AT: FIFO OPENING BALANCE INWARDS OUTWARDS CLOSING BALANCE QUANTITY RATE VALUE QUANTITY RATE VALUE QUANTITY RATE VALUE QUANT ITY RATE VALUE ACC 660.000 NOS 787.87 5,19,995.48 660.000 NOS 787.87 5,19,995.4 8 AMBUJA CEMENT 4220.000 NOS 127.95 5,39,950.72 4220.000 NOS 127.95 5,39,950.7 2 AUROBINDO PHARMA 400.000 NOS 311.79 1,24,714.25 400.000 NOS 311.79 1,24,714.2 5 BAJAJ AUTO 142.000 NOS 2,187.25 3,10,589.79 142.000 NOS 2,187.2 5 3,10,589.7 9 BANK OF BARODA SHARES 92.000 NOS 92.000 NOS I.T.A NO. 233/AGRA/2013 9 BIRLA CORP 3600.000 NOS 227.51 8,19,030.98 3600.000 NOS 227.51 8,19,030.9 8 BONGOIGAON REFINERY 200.000 NOS 54.68 10,936.00 200.000 NOS 54.68 10,936.00 BSES EQ CHENNAI PETRO 1.000 NOS 204.67 204.67 1.000 NOS 204.67 204.67 FDC LTD. 7600.000 NOS 32.24 244996.22 7600.000 NOS 32.24 244996.22 ..LEX CABLES 2350.000 NOS 73.58 1,72904.99 2350.000 NOS 73.58 1,72904.9 9 FORTIS HEALTHCARE 3900.000 NOS 82.48 321682.63 3900.000 NOS 82.48 321682.63 GAIL 1.000 NOS 213.85 213.85 1.000 NOS 81.00 81.00 GRASIM HDFC BANK HINDALCO SHARES 2609.000 NOS 164.52 429230.99 2609.000 NOS 164.52 429230.99 HPCL .. HUGHES TATA TELE SERVICES 12600.000 NOS 35.04 4,41,469.02 12600.000 NOS 35.04 4,41,469.0 2 ICICI BANK 517.000 NOS 1,039.64 537493.59 517.000 NOS 1,021.4 5 5 28089 . 9 9 INDIAN HOTELS 2900.000 NOS 133.28 386516.61 2900.000 NOS 133.28 386516.61 .TECH 607.000 NOS 1,944.48 1180300.84 607.000 NOS 1,944.4 8 1180300.8 4 ..CORP IPCL 1.000 NOS 191.56 191.56 1.000 NOS 191.56 191.56 JAIPRAKASH ASSOCIATES 2420.000 NOS 323.70 783347.50 2420.000 NOS 323.70 783347.50 KIRLOSKAR CUMMINS I.T.A NO. 233/AGRA/2013 10 MARUTI SUZUKI 490.000 NOS 826.61 405040.38 490.000 NOS 826.61 405040.38 NAT ALUMINIUM 75.000 NOS 223.40 16754.78 75.000 NOS 223.40 16754.78 .LIGNITE . NTPC LTD. 1700.000 NOS 203.01 345120.16 1700.000 NOS 203.01 345120.16 ONGC EQ 121.000 NOS 818.89 99085.75 121.000 NOS 818.89 99085.75 ORIENTAL BANK OF COMMERCE 1200.000 NOS 229.55 275458.32 1200.000 NOS 229.55 275458.32 ..SHARES 450.000 NOS 485.39 218425.86 450.000 NOS 485.39 218425.86 RANBAXY LABS 50.000 NOS 388.46 19422.79 50.000 NOS 388.46 19422.79 RCF 1001.000 NOS 50.53 50,584.98 1001.000 NOS 50.53 50,584.98 RELIANCE ENERGY SERVICES RELIANCE PETRO RELIANCE POWER 15.000 NOS 430.00 6,450.00 15.000 NOS 430.00 6,450.00 RIL 40.000 NOS 366.37 14654.95 40.000 NOS 366.37 14654.95 SAIL SATYAM COMPUTERS 25.000 NOS 456.56 11,413.98 25.000 NOS 456.56 11,413.98 SHREE CEMENTS 440.000 NOS 1298.33 571265.13 440.000 NOS 1298.3 3 571265.13 SONATA SOFTWARE 1000.000 NOS 55.94 55943.90 1000.000 NOS 55.94 55943.90 STEEL AUTHORITY 10.000 NOS 74.09 740.92 10.000 NOS 74.09 740.92 I.T.A NO. 233/AGRA/2013 11 TAMIL NADU NEWS PRINT 1200.000 NOS 90.56 108666.71 1200.000 NOS 90.56 108666.71 TATA CONSULTANCY 130.000 NOS 1468.86 190951.19 130.000 NOS 1468.8 6 190951.19 TATA MOTORS 1470.000 NOS 684.53 1006264.18 1470.000 NOS 684.53 1006264.1 8 TISCO 1370.000 NOS 714.36 978666.39 1370.000 NOS 714.36 978666.39 VIJAYA BANK 1300.000 NOS 65.67 479391.81 1300.000 NOS 65.67 479391.81 WIPRO TECH 120.000 NOS 547.24 65668.43 120.000 NOS 547.24 65668.43 WOKHARDT PHARMA 40.000 NOS 409.84 16393.68 40.000 NOS 409.84 16393.68 G. TOTAL 63,067.000 NOS 1,1760133. 98 63067.000 NOS 11750597. 53 8. UNDISPUTEDLY, BOTH THE ABOVE DOCUMENTS WERE PLACED BY THE ASSESSEE BEFORE THE LD. CIT(A). IN PARA 7.1, AT PAGES 8 OF THE ORDER UNDER APPEAL, THE LD. CIT(A) HAS OBSERVED THAT HE HAD PUT THE ASSESSEE TO QUERY REGARDING THE ASSESSEE NOT HAVING MADE NECESSARY ENTRIES IN THE BOOKS OF ACCOUNT FOR CONVERTING SHARES HELD AS INVESTMENT, IN THE FORM OF CAPITAL ASSET, I NTO STOCK - IN - TRADE. THE ASSESSEE FILED WRITTEN SUBMISSION S DATED 22.2.2013 (APB 6 2 - 63) BEFORE THE LD. CIT(A). THE S E WRITTEN SUBMISSIONS HAVE BEEN REPRODUCED BY THE LD. CIT(A) AT PAGES 9 - 10 OF THE IMPUGNED ORDER. IN PARAS 1 AND 2 OF THE SAID WRITTEN SUBMISS ION S , THE ASSESSEE I.T.A NO. 233/AGRA/2013 12 HAS CONTENDED THAT HE WAS FILING THE BALANCE SHEET AS ON 31.3.2009 AND CONVERSION CHART/CALCULATION OF LOSS AT THE TIME OF CONVERSION OF SHARES INTO STOCK - IN - TRADE ON 1.4.2008. THEREAFTER, WITHOUT REFUTING THE SAID DOCUMENT S , IN FACT , W ITHOUT EVEN REFERRING TO THEM, THE LD. CIT(A) HAS CONCLUDED THAT NO ENTRY HAD BEEN MADE BY THE ASSESSEE IN HIS BOOKS OF ACCOUNT, CONVERTING SHARES HELD AS CAPITAL ASSET, INTO STOCK - IN - TRADE AS ON 1.4.2008, IN THE BEGINNING OF THE PREVIOUS YEAR UNDER CONSID ERATION. 9. FROM THE ABOVE, IT IS EVIDENT THAT THE OBSERVATION OF THE LD. CIT(A) IS INCORRECT. 10. THE ASSESSEE DID MAKE NECESSARY ENTRIES IN HIS BOOKS OF ACCOUNT SHOWING THE CONVERSION OF THE SHARES HELD AS CAPITAL ASSET INTO STOCK - IN - TRADE AS ON 1.4.2008. 11. NOW, THIS LEAVES US WITH THE QUESTION THAT IN THE FACE THE CONVERSION SHOWN BY THE ASSESSEE IN HIS BOOKS OF A CCOUNT, HAS THE LOSS IN THE SHARE TRADING BUSINESS OF THE ASSESSEE BEEN RIGHTLY TREAT ED AS A CAPITAL LOSS AND NOT AS A TRADING LOSS, AS CLAIMED BY THE ASSESSEE, JUST BECAUSE THE RETURN OF INCOME FILED DID NOT CONTAINED A RECITAL IN THIS REGARD. OBVIOUSLY, IT IS THE INTENTION OF THE ASSESSEE WHICH IS MATERIAL IN SUCH MATTERS AND SUCH INTENTION, IN THE PRESENT CASE, IS SQUARELY I.T.A NO. 233/AGRA/2013 13 GATHERED FROM THE AUDITED BOOKS OF ACCOUNT RELIED ON BY THE ASSESSEE , BEFORE THE AUTHORITIES BELOW, AS BEFORE US. THE LD. DR HAS RAIS ED OBJECTION THAT THE PREPARATION OF THE AUDITED BOOKS OF ACCOUNT IS AN EARLIER FACT, WHEREAS THE RELEVANT DATE OF CONVERSION WAS 1.4.2008 AND THA T THE ASSESSEES INTENTION HAS RIGHTLY HEL D BY BOTH THE AUTHORITIES BELOW AS NOT BEING THAT OF CONVERSION OF T HE SHARES FROM THAT OF INVESTMENT, INTO STOCK - IN - TRADE. HAD IT BEEN OTHERWISE, IT WOULD, OBVIOUSLY, HAVE BEEN REFLECTED IN THE RETURN OF INCOME, WHICH IS NOT SO. FOR THE PRECEDING DISCUSSION, WE DO NOT FIND OURSELVES TO BE IN AGREEMENT WITH THE OBJECTION R AISED BY THE LD. DR IN SUPPORT OF THE IMPUGNED ORDER. 12. THEN, THE LD. CIT(A) HAS PLACED RELIANCE ON CIT VS. GOPAL PUROHIT , 228 CTR 582 (BOM). THE LD. CIT(A) HAS OBSERVED THAT IN THIS DECISION, IT HAS BEEN HELD THAT THE DELIVERY BASED TRANSACTIONS ARE TO BE TREATED AS INVESTMENT TRANSACTIONS AND THE PROFIT RECEIVED THERE FROM IS TO BE TREATED AS SHORT TERM CAPITAL GAIN OR LONG TERM CAPITAL GAIN, DEPENDING ON THE PERIOD OF HOLDING OF THE SHARES. TO THIS, THE LD. COUNSEL FOR THE ASSESSEE HAS PLACED RELIAN CE ON SHRI DEVJI NENSHI PALANI, MUM BAI VS. ITO, ORDER DATED 12.09.2012, PASSED BY T HE MUMBAI BENCH OF THE TRIBUNAL , ( COPY A CLP B PAGES 1 TO 8), IN ITA NO.7881/MUM/2010 AND ACIT VS. SHRI ANIL KUMAR JAIN, SECUNDERABAD, ORDER DATED 28.09.2012 (CLPB 9 - 20) RE NDERED BY I.T.A NO. 233/AGRA/2013 14 THE HYDERABAD BENCH OF THE TRIBUNAL IN ITA NO.163/HYD/2011. IT HAS BEEN CONTENDED ON BEHALF OF THE ASSESSEE THAT AS HELD IN THE S E DECISIONS, IN GOPAL PUROHIT (SUPRA) , IT HAS NOWHERE BEEN HELD THAT ALL DELIVERY BASED TRANSACTIONS ARE ALWAYS INVESTMENT TRANSACTIONS. 13. THE CONTENTION OF THE ASSESSEE IN THIS REGARD IS FOUND TO BE CORRECT. GOPAL PUROHIT (SUPRA) STANDS CONSIDERED IN SHRI DEVJI NENSHI PALANI (SUPRA) AND IN PARA 7, THERE OF , THE MUMBAI BENCH OF THE TRIBUNAL HAS HELD THAT IN GOPAL PUROHIT , THERE IS NO UNIVERSAL FINDING THAT ALL DELIVERY BASED TRANSACTIONS HAVE TO BE TREATED AS INVESTMENT. IT WOULD BE APPROPRIATE TO HEREIN REPRODUCE THE RELEVANT FINDINGS OF THE T RIBUNAL: 7. THE LD. AR FOR THE ASSESSEE HAS RELIED ON THE DECISION OF THE TRIBUNAL IN THE CASE OF GOPAL PUROHIT (29 SOT 171) TO ARGUE THAT INCOME FROM ALL DELIVERY BASED TRANSACTIONS HAS TO BE ASSESSED AS INCOME AS HELD BY THE TRIBUNAL IN THE SAID CASE. W E HAVE CAREFULLY PERUSED THE ORDER OF THE TRIBUNAL IN THE CASE OF GOPAL PUROHIT (SUPRA), BUT WE FIND THAT THERE IS NO UNIVERSAL FINDING IN THAT CASE THAT ALL DELIVERY BASED TRANSACTIONS HAVE TO BE TREATED AS INVESTMENT. IT IS PERTINENT TO NOTE THAT THE TRI BUNAL IN CASE OF GOPAL PUROHIT (SUPRA), HAD DECIDED THE CASE FOLLOWING THE DECISION OF TRIBUNAL IN CASE OF SARNATH INFRASTRUCTURE PVT. LTD VS. ACIT (2009) 120 TTJ 216 HOLDING THAT FACTS IN THE CASE OF SARNATH INFRASTRUCTURE PVT. LTD (SUPRA), WERE IDENTICAL . HOWEVER, IT IS NOTED THAT IN SARNATH INFRASTRUCTURE PVT. LTD (SUPRA), THE SHARES SOLD OUT OF INVESTMENT ACCOUNT HAD BEEN HELD I.T.A NO. 233/AGRA/2013 15 THAT 2 - 3 YEARS AND REVENUE COULD NOT SHOW ANY SHARES SOLD WHICH HAD BEEN PURCHASED DURING THE YEAR OR IN THE IMMEDIATELY PRECEDI NG YEAR. THEREFORE, ONLY IN RESPECT OF SUCH CASES, THE DECISION IN CASE OF GOPAL PUROHIT (SUPRA), COULD BE APPLIED. THE HONBLE HIGH COURT OF BOMBAY HAD UPHELD THE DECISION OF THE TRIBUNAL IN THE CASE OF GOPAL PUROHIT (SUPRA), ON THE GROUND THAT THERE WAS NO SUBSTANTIAL QUESTION OF LAW INVOLVED. EVEN BEFORE HONBLE HIGH COURT THERE WAS NO QUESTION RAISED THAT ALL DELIVERY BASED TRANSACTIONS HAVE ALWAYS TO BE TREATED AS INVESTMENT ACTIVITY. THUS THE DECISION OF THE TRIBUNAL AS WELL AS THE HONBLE HIGH COURT IN CASE OF GOPAL PUROHIT (SUPRA), CANNOT BE CONSIDERED AS A PRECEDENT FOR THE PROPOSITION THAT ALL DELIVERY BASED SHARES HAVE TO BE TREATED AS INVESTMENT ACTIVITY. THE ASSESSEE CAN ALSO BE A TRADER IN CASE OF DELIVERY BASED PURCHASES AND SALES, WHICH IS A NORMAL FEATURE OF ANY TRADING ACTIVITY. THEREFORE, IN OUR VIEW RELIANCE PLACED BY THE LD. AR ON THE DECISION IN THE CASE OF GOPAL PUROHIT IS MISPLACED. EACH CASE HAS TO BE DECIDED BASED ON ITS OWN FACTS. CONSIDERING THE FACTS OF THIS CASE, WE HOLD THAT THE SHARE TRANSACTIONS FROM WHICH THE ASSESSEE HAS SHOWN SHORT TERM CAPITAL GAIN WERE OF THE NATURE OF TRADING ACTIVITY OF THE ASSESSEE AND ACCORDINGLY WE SET ASIDE THE ORDER OF THE CIT(A) TREATING THE SHORT TERM CAPITAL GAIN AS BUSINESS INCOME. 14. SO FAR AS REGARDS THE ASSESSEES CASE, AS PER THE RECORD AND AS A LSO OBSERVED BY BOTH THE AUTHORITIES BELOW, THE HOLDING PERIOD OF THE SHARES IS ABOUT 16 5 DAYS. TOO, THE MAGNITUDE IS LO W, COMPARED TO THE VALUE. 15. IN S HRI ANIL KUMAR JAIN (SUPRA), WHILE CONSIDERING GOPAL PUROHIT (SUPRA), THE HYDERABAD BENCH OF THE TRIBUNAL OBSERVED AS FOLLOWS: I.T.A NO. 233/AGRA/2013 16 11. WHILE DECIDING WHETHER THE SALE OF SHARES IS INCOME FROM BUSINESS OR INCOME FROM CAPITAL GAIN, ONE HAS TO GO BY THE FOLLOWING CRITERIA , AS HELD BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF P.V.S.RAJU & ANR. V/S. ADDL. COMMISSIONER OF INCOME - TAX (340 ITR 75) - AP. - (A) THE FREQUENCY OF BUYING AND SELLING OF SHARES BY THE APPELLANTS WERE HIGH; (B) THE PERIOD OF HOLDING WAS LESS; (C) THE QUANTUM OF TURNOVER WAS ON ACCOUNT OF FREQUENCY OF TRANSACTIONS, AND NOT BECAUSE OF HUGE INVESTMENT; (D) THE INTENTION OF THE ASSESSEE TO MAKE QUICK PROFITS ON A HUGE TURNOVER; (E) NO. OF SCRIPS SHARES HELD FOR FEWER DAYS; (F) WHETHER ENGAGED IN DEALING IN THE SAME SCRIPS FREQUENTLY; (G) INTENTION OF THE ASSESSEE IN BUYING SHARES IS NOT TO DERIVCE INCOME BY WAY OF DIVIDEND ON SUCH SHARES, BUT TO EARN PROFITS ON THE SALE OF THE SHARES; (H) WHETHER THE ASSESSEES HAD INDULGED IN MULTIPLE TRANSACTIONS OF LAR GE QUANTITIES WITH HIGH PERIODICITY. THESE PERIODIC TRANSACTIONS SELECTING THE TIME OF ENTRY AND EXIT IN EACH SCRIP, CALLED FOR REGULAR DIRECTION AND MANAGEMENT WHICH WOULD INDICATE THAT IT WAS IN THE NATURE OF TRADE; (I) REPEATED TRANSACTIONS, COUPLED WIT H THE SUBSEQUENT CONDUCT OF THE ASSESSEE TO RE - ENTER THE SAME SCRIP OR SOME OTHER SCRIP, IN ORDER TO TAKE ADVANTAGE OF MARKET FLUCTUATIONS LENT THE FLAVOUR OF TRADE TO SUCH TRANSACTIONS; I.T.A NO. 233/AGRA/2013 17 (J) THE ASSESSEES WERE PURCHASING AND SELLING THE SAME SCRIPS REPEAT EDLY, AND WERE SWITCHING FROM ONE SCRIP TO ANOTHER; (K) MERE CLASSIFICATION OF THESE SHARE TRANSACTIONS AS INVESTMENT IN THE ASSESSEES BOOKS OF ACCOUNTS WAS NOT CONCLUSIVE; (L) THE INTENTION OF THE ASSESSEES AT THE TIME OF PURCHASE WAS ONLY TO SELL THE SHARES IMMEDIATELY AFTER PURCHASE; (M) FREQUENCY OF PURCHASE AND SALE OF SHARES SHOWED THAT THE ASSESSEE NEVER INTENDED TO KEEP THESE SHARES AS INVESTMENT; AND (O) IT IS ONLY FOR THE PURPOSE OF CALMING BENEFIT OF LOWER RATE OF TAX, UNDER SECTION 111A OF THE ACT, THAT THEY HAD CLAIMED CERTAIN SHARES TO BE INVESTMENT, THOUGH THESE TRANSACTIONS WERE ONLY IN THE NATURE OF TRADE. 12. IN THE LIGHT OF THE ABOVE PARAMETERS AND THE DECISION OF THE JURISDICTIONAL HIGH COURT, ON PERUSAL OF THE STATEMENTS INCORPORATED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER WE FIND THAT THE ASSESSEES HAVE MADE SEVERAL TRANSACTIONS OF PURCHASE OF SHARES DURING THE RELEVANT YEAR UNDER CONSIDERATION, AND IF THERE HIGH VOLUME, FREQUENCY AND REGULARITY OF THE ACTIVITY CARRIED ON BY THE ASSESSEES IN A SYSTEMATIC MANNER, IT WOULD PARTAKE THE CHARACTER OF BUSINESS ACTIVITIES CARRIED ON BY THE ASSESSEE IN SHARES, AND IT CANNOT BE SAID THAT THE ASSESSEES HAVE MERELY MADE INVESTMENTS I N SHARES. IN OUR OPINION THE FINDINGS OF THE CIT(A) CANNOT BE SUSTAINED IN THE EYES OF LAW, AS HE HAS NOT CONSIDERED RELEVANT FACTS TO DECIDE THE ISSUE. ACCORDINGLY, WE REVERSE THE ORDER OF THE CIT(A) AND RESTORE THE O RDER OF THE ASSESSING OFFICER. 16. IN THE CASE OF THE ASSESSEE BEFORE US, LIKE IN SHRI ANIL KUMAR JAIN (SUPRA), THE FREQUENCY OF TRADING IN SHARES WAS HIGH, THE PERIOD OF HOLDING WAS LESS, THE I.T.A NO. 233/AGRA/2013 18 QUANTUM OF TURNOVER WAS ON ACCOUNT OF FREQUENCY OF TRANSACTIONS AND NOT DUE TO HUGE INVESTMENT, TH E INTENTION OF THE ASSESSEE WAS TO MAKE PROFIT AND WAS NOT TO DERIVE INCOME BY WAY OF DIVIDEND, THERE WERE MULTIPLE TRANSACTIONS WITH HIGH PERIODICITY, THERE WERE REPEATED TRANSACTIONS, BUT MERE CLASSIFICATION OF THE SHARE TRANSACTIONS AS INVESTMENT IN THE EARLIER YEAR IS NOT CONCLUSIVE. THUS, THE ACTIVITY OF THE ASSESSEE IN THE YEAR UNDER CONSIDERATION WAS IN THE NATURE OF A BUSINESS ACTIVITY AND NOT THAT OF INVESTMENT. 17. IN FACT, CBDT CIRCULAR NO. 4/2007, DATED 15.6.2007 (APB 1 - 2 ) STATES, INTER ALIA, AS FOLLOWS: (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 WOULD BE TREATED AS ITS BUSINESS INCOME, TH ESE ARE THE PRINCIPLES WITH REGARD TO THE QUESTION AT HAND, WHICH HAVE BEEN RECOGNIZED BY THE CBDT ITSELF. THE ACTIVITY OF THE ASSESSEE FALLS SQUARELY WITHIN THESE PRINCIPLES. 18. FURTHER, VIDE CBDT CIRCULAR NO. 6/2016, DATED 29/ 2/20 16 ( COPY PLACED ON REC ORD ) , THE CBDT HAS, INTER ALIA, OBSERVED THAT WHERE THE ASSESSEE ITSELF, I.T.A NO. 233/AGRA/2013 19 IRRESPECTIVE OF THE PERIOD OF HOLDIN G THE LISTED SHARES AND SECURITIES , OPTS TO TREAT THEM AS STOCK - IN - TRADE, THE INCOME ARISING FROM TRANSFER OF SUCH SHARES/SECURITIES CANNOT BE TREA TED AS ITS BUSINESS INCOME. 19. ON THE BASIS OF ALL THE ABOVE, THE ORDER UNDER APPEAL IS FOUND TO BE ERRONEOUS. THE SAME IS REVERSED . THE GRIEVANCE OF THE ASSESSEE IS ACCEPTED. THE AO IS DIRECTED TO TREAT THE LOSS IN SHARE TRADING BUSINESS OF THE ASSESSEE TO BE A TRADING LOSS AND NOT A CAPITAL LOSS. 20. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. O RDER PRONOUNCED IN THE OPEN COURT ON 21 /10/ 201 6 . SD/ - SD/ - ( DR. MITHA LAL MEENA) (A. D. JAIN) ACCOU N TANT MEMBER JU DICIAL MEMBER * AKV * COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI I.T.A NO. 233/AGRA/2013 20 DATE 1. DRAFT DICTATED (DNS) 17 .10 .201 6 PS 2. DRAFT PLACED BEFORE AUTHOR 19 .10. 201 6 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 21.10.2016 PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK 21.10.2016 PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.