Nitin Mishra, JODHPUR V. ITO, JODHPUR

ITA 238/JODH/2012

• Counselvise Citation: 23823314 RSA 2012
• Duration Of Justice: 1 year(s) 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 22-07-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 28-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G R KOKANIDR
• Keywords: Business income; Salary income; Non compliance
• Section: 143(3); 43(5); 263; 63

Judgement Text

IN THE INCOME TAX APPELALTE TRIBUNAL: JODHPUR BENCH : JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER. ITA NO. 238/JODH/2012 (A.Y. 2006-07) NITIN MISHRA VS ITO, WARD-3(4), C/O. MAHESHWARI & JAIN, JODHPUR. CHARTERED ACCOUNTANTS, E-47, SHASTRI NAGAR, JODHPUR. PAN NO. AJRPM6081D (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RAJENDRA JAIN. DEPARTMENT BY : SHRI G.R. KOKANI-(DR) DATE OF HEARING : 22/07/2013. DATE OF PRONOUNCEMENT : 28/08/2013. ORDER PER HARI OM MARATHA, J.M. : THIS APPEAL OF THE ASSESSEE FOR A.Y. 2006-07 IS DI RECTED AGAINST THE ORDER OF LD. CIT(A), JODHPUR, DATED 28/03/2012. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE AS INDIVIDUAL, FILED HIS RETURN OF INCOME (ROI) FOR A. Y. 2006-07 ON 26/06/2006 DECLARING TOTAL INCOME OF RS. 1,85,230/- AND A SHORT TERM 2 CAPITAL GAIN (STCG) OF RS. 16,49,319/-. THE ASSESSM ENT WAS COMPLETED ON 31/03/2008 U/S 143(3) OF THE ACT ON A TOTAL INCO ME OF RS. 2,20,230/- AND INCOME OF STCG AT RS. 16,49,319/-. 2.1 THIS ORDER DATED 31/03/2008 WAS REVISED BY CIT U/S 263 OF THE ACT. THE A.O. HAS FRAMED A SET ASIDE ASSESSMENT ORD ER U/S 263 / 143(3) OF THE ACT ON 22/12/2010. NOW THE STCG OF RS. 16,49 ,319/- HAS BEEN TREATED AS A BUSINESS INCOME OF THE ASSESSEE WHICH HAS ALSO BEEN CONFIRMED BY LD. CIT(A) VIDE THE IMPUGNED ORDER. 2.2 THE ONLY EFFECTIVE GROUND, WHICH HAS BEEN ARGUE D IS GROUND NO. 2 WHICH IS IN RELATION TO TREATING THE STCG DECLARED BY THE ASSESSEE AS HIS BUSINESS INCOME. WE HAVE HEARD RIVAL SUBMISSION S. BOTH PARTIES HAVE MAINTAINED THEIR EARLIER STAND. 2.3 THE WRITTEN SUBMISSION OF THE LD. A.R. IN THIS REGARD IS RELEVANT. AS PER THE WRITTEN SUBMISSIONS, THE LD. A.R. SUBMIT TED THE COPIES OF THE FOLLOWING DETAILS TO THE A.O: 1. CONTRACT NOTES FOR THE SHARE TRANSACTION SHOWING THE DELIVERY OF THE SHARES AND ALSO SHOWING THE DAY TRA DING TRANSACTION. THE ASSESSEE HAS DEALT WITH BOTH TYPES OF ACTIVITIES 3 I.E. INVESTMENT AS WELL AS TRADING TRANSACTIONS IN THE SHARES WHICH ARE DULY VERIFIABLE FROM THE ABOVE CONTRACT N OTES. 2. DP STATEMENT OF THE ASSESSEE. 3. DETAILED COPY OF INVESTMENT ACCOUNT OF SHARES F OR VERIFICATION THEREOF FROM THE COPIES OF CONTRACT NOTES SUBMITTED AS ABOVE. 4. COPY OF ACCOUNT WITH M/S VASANTI SHARE BROKERS LTD. AND THE STOCK HOLDING DETAILS OF THE SAID BROKER SHOWING TH E DEALINGS IN THE NAME OF THE ASSESSEE AND HOLDING THE SHARES IN HIS ACCOUNT AFTER PURCHASES THEREOF BUT BEFORE SALE. COPY OF AC COUNT WITH M/S G.R. PANDYA SHARE BROKERS LTD., IS ALSO ENCLOSE D HEREWITH ALONG WITH HIS CONTRACT NOTES. HOWEVER THE DP STATE MENT OF THE SAID BROKER IS STILL AWAITED.' IT WAS FURTHER SUBMITTED BY THE ASSESSEE TO THE AO AS UNDER:- 'YOUR HONOUR MAY PLEASE VERIFY THE ABOVE TRANSACTIO N AND ALSO PLEASE INVESTIGATE THE MATTER IN THE LIGHT OF THE DIRECTIONS GIVEN IN THE REVISION ORDER PASSED U/S 2 63 SO THAT THE TRUE PICTURE MAY BE ARRIVED AT FOR THE CLA IM OF 4 THE ASSESSEE. THE COPY OF THE REPLY MADE BY THE ASS ESSEE DURING THE REVISIONARY PROCEEDINGS IS ALSO ENCLOSED HEREWITH FOR YOUR HONOUR'S LEGAL APPRECIATION OF TH E CASE. YOUR HONOUR IS REQUESTED KINDLY TO ADJOURN THE CASE IF ANY SPECIFIC QUERY IS RAISED AFTER GOING THROUGH THE AB OVE DOCUMENTS AND OBLIGE.' THE LD. A.R. FURTHER SUBMITTED THAT THE AO HOWEVER DID NOT GIVE ANY OPPORTUNITY THEREAFTER AND FINALLY ASSESSED THE ASS ESSEE VIDE HIS ASST ORDER DT. 22.12.2010 STATING THAT THE ASSESSEE DID NOT COMPLY WITH THE EARLIER OPPORTUNITIES. THE ASSESSEE HAD ALREADY EXP LAINED TO THE CIT THE REASONS FOR ABOVE NON COMPLIANCES AND THE AO WA S THEREFORE NOT AT ALL JUSTIFIED IN PASSING THE ASST ORDER DT. 22.1 2.2010. THE ASSESSEE HAS ALREADY SUBMITTED ALL THE DETAILS BEFORE THE CI T-2, JODHPUR IN REVISION PROCEEDINGS AND ALSO SUBMITTED ALL THE POS SIBLE DETAILS BEFORE THE AO BUT IT APPEARS THAT THE AO ONLY SET OVER THE DOCUMENTS SO SUBMITTED AND MADE NO ENQUIRY AS DIRECTED BY THE CI T FOR THE REASONS BEST KNOWN TO HIM ONLY. (D) IN THE APPELLATE PROCEEDINGS BEFORE THE CIT IT WAS SUBMITTED AS UNDER :- 5 'FROM THE ABOVE SUBMISSIONS, THE ASSESSEE HAS COME OUT WITH CLEAN HANDS FOR MAKING THE INVESTIGATION BY TH E AO AFTER PUTTING BEFORE HIM THE MATERIAL WHICH THE ASS ESSEE COULD COLLECT BUT THE AO CHOSE NOT TO MAKE A SINGLE EFFORT TO MAKE ANY INVESTIGATION AND TOOK THE VIEW THAT TH E ASSESSEE HAD CARRIED OUT SPECULATIVE TRANSACTION OF SHARES WHICH COULD NOT BE TREATED AS SHORT TERM CAPITAL GA IN. THE DETAILED SUBMISSIONS WERE MADE BEFORE THE WORTHY CI T AS TO THE NATURE OF THE TRANSACTION DEALT WITH BY THE ASSESSEE AND THE AO WAS DIRECTED TO VERIFY THEM. IT WAS ALSO SUBMITTED THAT THE AFTER PURCHASE OF SHARES MADE, T HE SAME REMAINED IN THE DP OF THE BROKER AND AT THE EN D OF THE YEAR, WHATEVER BALANCE OF SHARES REMAINED, WERE TRANSFERRED TO THE ASSESSEE'S DP ACCOUNT, COPY OF W HICH WAS DULY SUBMITTED TO THE ASSESSING OFFICER. THE CONTRA CT NOTES AS RECEIVED BY THE ASSESSEE WERE ALL SUBMITTED TO T HE AO ALONG WITH THE COPIES OF THE ACCOUNTS OF THE BROKER S IN WHICH ALL THE TRANSACTIONS WERE MADE THROUGH ACCOUN T CHEQUES AND VERIFIABLE FROM THE BANK ACCOUNT OF THE ASSESSEE. THE FOLLOWING SUBMISSIONS MAY KINDLY BE CONSIDERED WHICH WOULD ESTABLISH THAT THE ASSESSEE HAD 6 DEALT WITH TWO TYPES OF TRANSACTION. ONE RELATED TO INVESTMENT ACTIVITIES AND OTHERS ON FUTURE AND OPTI ON BASIS I.E., INTRA DAY TRANSACTION. THE INVESTMENT ACTIVIT IES YIELDED SHORT TERM CAPITAL GAIN AND INTRA DAY TRANS ACTIONS YIELDED SPECULATIVE PROFIT TAXABLE AS BUSINESS INCO ME. DURING THE COURSE OF THE HEARING BEFORE THE AO IN T HE PROCEEDINGS OF THE ORIGINAL ASSESSMENT COMPLETE BOO KS OF ACCOUNTS MAINTAINED BY THE ASSESSEE FOR TRADING AND INVESTMENT ACTIVITIES WERE PRODUCED ALONG WITH THE COPY OF THE ACCOUNT OF INVESTMENT MADE IN SHARES WHICH WERE DULY VERIFIED BY THE AO FROM THE VARIOUS CONTRACT NOTES OF THE REGISTERED S HARE BROKER IN WHICH THE NATURE OF THE SHARE TRANSACTION IS CLEARL Y MENTIONED I.E. THE TRANSACTION IN WHICH THE DELIVERY HAS BEEN TAKEN AND THE TRANSACTION WHERE IN NO DELIVERY OF THE SHARES TAKE N BUT SETTLED ON THE SAME DATE. THESE BOOKS OF ACCOUNTS WERE ALSO SUBMITTED IN THE REVISION PROCEEDINGS BEFORE THE WORTHY CIT-2 , JODHPUR. HERE IT IS PERTINENT TO SUBMIT THAT THE DELIVERY OF SHARES WERE TAKEN FROM THE STOCK EXCHANGE BY THE AGENT IN THE A CCOUNT OF THE ASSESSEE I.E. THE SHARES WERE LYING CREDITED IN THE DP OF THE AGENT ITSELF AND DEALT WITH ACCORDINGLY. THE COPY O F THE SHARE 7 INVESTMENT ACCOUNT IN THE BOOKS OF THE ASSESSEE WIT H NARRATION IS ENCLOSED HEREWITH WHICH HAS ALREADY BEEN VERIFIED B Y THE AO DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS AND WHO AFTER APPLYING HIS MIND TO THE VARIOUS TRANSACTION, ACCEP TED THE SHORT TERM CAPITAL GAIN WHERE DELIVERY OF THE SHARES WAS TAKEN AND WHERE EVER DELIVERY OF SHARES HAS NOT BEEN TAKEN AN D SETTLED ON THE SAME DAY, THE ASSESSEE HAS SHOWN IT AS SPECULAT IVE BUSINESS INCOME/LOSS. RECENTLY THE MUMBAI HIGH COURT IN THE CASE OF CIT VS. GOPAL PUROHIT (2010) 34 DTR (BOM) 52 APPROVED T HE DECISION OF THE MUMBAI ITAT IN THE CASE OF GOPAL PUROHIT VS. JOINT COMMISSIONER OF INCOME TAX (2009) 122 TTJ (MUMBAI) 87 (COPIES OF BOTH DECISIONS ENCLOSED) IN WHICH IT HAS CATEGOR ICALLY BEEN HELD THAT THE SHARE TRANSACTIONS RESULTING INTO DEL IVERY WOULD BE COVERED BY EITHER THE SHORT TERM CAPITAL GAIN TAXAB LE AT THE RATE OF 10% AS PER SEC 111A AND IF IT IS LONG TERM CAPIT AL GAIN THEN IT WOULD BE EXEMPT U/S 10(38) AS THE CASE MAY BE IF TH E CONDITIONS OF THE RELEVANT SECTIONS ARE COMPLIED WITH. THE BEN EFIT OF REDUCED RATE OF TAX U/S SEC 111A HAS BEEN GIVEN ONL Y IN THOSE CASES OF THE SHARE TRANSACTIONS IN WHICH STT HAS BE EN PAID AND HAS BEEN DEALT WITH AT RECOGNIZED STOCK EXCHANGE. T HE AO HAS FAILED TO APPRECIATE THE LEGAL POSITION AND TREATED THE SHORT 8 TERM CAPITAL GAIN AS SPECULATIVE INCOME. THE ASSESS EE HAS ALREADY SHOWN IN HIS BOOKS OF ACCOUNTS, THE TWO TYP ES OF TRANSACTIONS SEPARATELY. THE DELIVERY BASED TRANSAC TIONS HAVE BEEN DULY SHOWN IN THE INVESTMENT ACCOUNT. THE FOLL OWING FURTHER FACTS ESTABLISH THAT THE ASSESSEE HAD DEALT WITH THE SHARES AS INVESTMENT WHEREVER DELIVERY HAS BEEN TAK EN AND SCRIPT-WISE DETAILS HAS ALSO BEEN KEPT: I. THE SHARE REMAINING ON THE CLOSED OF THE YEAR HA S BEEN VALUED AT COST IN THE BOOKS AND DULY SHOWN IN THE HEAD 'IN VESTMENT' IN THE BOOKS AND BALANCE SHEET AS IN THE PREVIOUS YEAR . THE AUDITORS HAVE EVEN GIVEN THE INVESTMENT ACCOUNT SEP ARATELY AS PART OF THE AUDITED STATEMENT. SINCE THE ASSESSEE D EALT IN BOTH THE TYPES OF SHARES I.E. AS INVESTMENT AND AS TRADI NG, THE AUDITORS HAVE MENTIONED THE SAME FACT IN THEIR AUDI T REPORT. NEVERTHELESS, THE AUDITORS REPORT IS NOT A BINDING DOCUMENT AND THE REAL CHARACTER OF THE TRANSACTIONS HAVE TO BE A DJUDGED BEFORE TAXING THE SAME IN A MANNER DIFFERENT FROM W HAT THE ASSESSEE HAS CLAIMED. THE PAYMENT OF THE SECURITY T RANSACTION TAX ON THE SHARE TRANSACTIONS HAVE BEEN BROUGHT INT O STATUTE TO PROVIDE CONCESSIONAL TAX TREATMENT WHERE THE ASSESS EE CLAIM SO. 9 II. THE SCRIPT WISE DETAILS ARE ALSO PRODUCED BEFOR E YOUR HONOUR. THE DELIVERY OF THE SHARES SO PURCHASED WERE TAKEN BY THE RECOGNIZED BROKER ON ASSESSEE'S BEHALF AND WERE SOL D ONLY IN THE PECULIAR CIRCUMSTANCES WHERE THERE WAS DOWN TREND O BSERVED IN THE MARKET OR GETTING THE GOOD CAPITAL GROWTH AND I T IS FURTHER SUBMITTED THAT THERE IS NO MUCH FREQUENCY IN EACH O F THE SCRIPT SO PURCHASED AND SOLD. IN MOST OF THE SCRIPTS, THE SHARES HAVE BEEN PURCHASED AND SOLD ONCE OR TWICE AND IN VERY F EW SCRIPTS, THE THREE TO FIVE TIMES TRANSACTION APPEARS. HENCE, THERE IS NO FREQUENCY OF THE TRANSACTION SO AS TO BRAND THEM AS 'TRADING OF SHARES' AS HAS BEEN ALLEGED BY AO IN HIS ASST. ORDE R DT. 22.12.2010. A NUMBER OF SHARES PURCHASED IN THE MID OF THE YEAR ARE EVEN LYING IN THE HAND AT THE END OF THE YEAR. THE SHARE IN HAND AT THE END OF THE YEAR HAD BEEN TRANSFERRED BY THE BROKER TO THE DMAT ACCOUNT OF THE ASSESSEE AS IS REFLECTED IN THE SAID ACCOUNT ENCLOSED HEREWITH. THE DELIVERED SHARE TRAN SACTION ARE MARKED AS 'D' IN THE COLUMN OF DELIVERY/CLEARING IN THE CONTRACT NOTES BEING PRODUCED BEFORE YOUR HONOUR AND FEW OF SUCH CONTRACT NOTES ALSO FORM PART OF THIS REPLY. IT IS ALSO A FACT THAT THE STT RATES ARE ALSO DIFFERENT FOR DELIVERY BASED TRANSACTIONS AND OTHER TRANSACTIONS WHERE NO DELIVERY EFFECTED A ND SETTLED 10 OTHERWISE. IN THE NUT AND SHELL, THE SCALE OF ACTIV ITY IN EACH SCRIPT OF SHARES WAS TOO LOW AND WAS NOT SO HIGH TO INFER ANY TRADING ACTIVITY THEREIN. THE AO HAS ALLEGED THAT S INCE MOST OF THE SHARES HAVE NOT BEEN HELD FOR MORE THAN A MONTH AND THEREFORE IT REFLECTS THE INTENTION OF THE ASSESSEE TO REAP THE SHORT TERM BENEFITS AS A TRADER. IN THE LIGHT OF TH E DECISION OF HON'BLE MUMBAI HIGH COURT APPROVING THE DECISION OF THE MUMBAI ITAT IN THE CASE OF GOPAL PUROHIT VS. JOINT COMMISSIONER OF INCOME TAX (2009) 122 TTJ (MUMBAI) 87, THE ABOVE OBSERVATION OF THE AO ARE NOT AT ALL TENABLE IN WHICH IT HAS BEEN HELD THAT EVEN IF THE SHARES ARE HELD FOR A DAY AND SOLD, IT WOULD GIVE RISE TO SHORT TERM CAPITAL GAIN . THE SAID DECISION HAS BEEN FOLLOWED BY THE HON'BLE ITAT, MUM BAI IN THE CASES OF ACIT VS. NAISHADH V. VACHHARAJANI AND DCIT VS. SMK SHARES & STOCK BROKING (EXTRACT OF DECISIONS ENCLOS ED). III. THE ASSESSEE HAS SHOWN DIVIDEND INCOME ON THE INVESTMENT MADE IN THE SHARES, WHICH SHOWS THE INTENSION OF TH E ASSESSEE TO TREAT THE SHARE TRANSACTION AS INVESTMENT. THE ALLE GATION OF THE AO THAT THE DIVIDEND INCOME WAS DECLARED FOR ONLY R S. 3860/- WOULD GIVE RISE TO THE INFERENCE THAT THE ASSESSEE WAS NOT A 11 GENUINE INVESTOR IS MEANINGLESS BECAUSE IN THE PRES ENT DAY SCENARIO, THERE ARE SO MANY REASONS INCLUDING FLUCT UATING MARKET, BETTER INFORMATIVE SYSTEM AND GLOBALIZATION , THE INVESTOR'S THOUGHT ABOUT THE SHARE STOCK ALSO IS QU ITE INFLUENCED AND THAT IS THE REASON THAT THE HOLDING PERIOD OF S HARE STOCK MAY OR MAY NOT BE FOR LONG TERM. IV. THE ASSESSEE HAS UTILIZED VERY NOMINAL BORROWED MONEY AS HIS OWN FUNDS WERE LYING LOCKED UP IN HIS COMPANY NAMEL Y M/S MISRA LIMES (P) LTD. JODHPUR AND OTHER LOANS BUT THE ASSE SSEE HAS NOT PAID ANY INTEREST ON SUCH LOAN AND QUESTION OF ITS CLAIM EVEN DOES NOT ARISE. THE ASSESSEE HAD HIS OWN SUFFICIENT CAPITAL TO MAKE INVESTMENT IN THE SHARES. THE COPY OF THE BANK ACCOUNT IS ENCLOSED HEREWITH ALONG WITH THE COPY THEREOF AS AP PEARING IN THE ASSESSEE'S BOOKS TO VERIFY THE ABOVE POSITION. VI. THE ASSESSEE IS A WHOLE TIME DIRECTOR IN M/S MI SRA LIMES (P) LTD. JODHPUR FOR WHICH HE HAS BEEN REGULARLY REMUNE RATED AND SALARY INCOME HAS ALREADY BEEN ASSESSED BY AO FOR T HE RELEVANT ASST YEAR. IT IS THEREFORE SUBMITTED THAT THE MAIN ACTIVITY OF THE ASSESSEE WAS TO PROVIDE HIS SERVICES FOR THE DAY-TO -DAY AFFAIRS OF 12 THE ABOVE COMPANY AND SHARE TRANSACTION WERE OCCASI ONALLY UNDERTAKEN AND NOT MUCH TIME WAS AFFORDED TO SUCH A CTIVITY. THE ALLEGATION OF THE AO THAT THE SHARE TRADING WAS THE MAIN ACTIVITY IS NOT CORRECT. THE ASSESSEE HAD ALREADY E NGAGED THE BROKERS THROUGH WHICH THE PURCHASES/SALES OF SHARES WERE MADE. THESE FACTS SHOW THAT THE ASSESSEE DEALT WITH INVES TMENT ACTIVITY AS FAR AS SHARE TRANSACTIONS ARE CONCERNED FOR WHICH DELIVERY HAS BEEN SHOWN. THE TRANSACTION OF SHARE W HERE NO DELIVERY THEREOF HAS BEEN TAKEN HAVE BEEN RIGHTLY S HOWN AS BUSINESS INCOME BY THE ASSESSEE. VI. THE ASSESSEE HAD DEALT WITH THE SHARES LISTED O N STOCK EXCHANGE ONLY HAVING NO CONTROL OR CONNECTION WITH THESE COMPANIES. VII. THERE IS NOTHING WRONG IF THE ASSESSEE ALONG W ITH THE INVESTMENT ACTIVITY IN SHARES, ALSO CARRIED ON BUSI NESS ACTIVITY BY WAY OF SHARE TRADING AND ACCOUNTED FOR THE TRANSACT IONS ACCORDINGLY. IN THE BOARD CIRCULAR NO. 4 DT 15.06.2 007 (2007) 29, IT HAS BEEN CLARIFIED THAT A PERSON MAY BE AN INVES TOR AND TRADERS OF THE SHARES BOTH. XI. IT IS SUBMITTED THAT THE HON'BLE SUPREME COURT IN THE CASE OF 13 KARAM CHAND THAPAR & BROS.(P) LIMITED VS. CIT (1971 ) 82 ITR 899 (SC) HELD THAT THE INTENTION OF THE ASSESSEE IS VER Y MUCH REFLECTED FROM THE MAINTENANCE OF THE ACCOUNTS AND PRESENTATION THEREOF BECAUSE IF THE ASSESSEE IS INT ENDING TO DEAL IN BOTH THE TYPES OF ACTIVITIES I.E. INVESTOR AS WE LL AS TRADER OF SHARES, THEN HE HAS TO MAINTAIN HIS ACCOUNT ACCORDI NGLY. IN THE ASSESSEE'S CASE, TWO DIFFERENT ACCOUNTS HAVE DULY B EEN MADE. XII. IT HAS BEEN ALLEGED BY THE AO THAT REGULARITY OF TRANSACTION WITH M/S VASANTI SHARE BROKERS LTD SHOWS THAT THE A SSESSEE WAS ENGAGED IN THE TRADING OF THE SHARES. IN THIS CONNE CTION, IT IS SUBMITTED THAT THE ASSESSEE HAS ALREADY EARMARKED T HE SHARE TRANSACTION WITH OR WITHOUT DELIVERY AND RETURNED T HE INCOME ACCORDINGLY AS HAS BEEN HELD BY THE HON'BLE MUMBAI HIGH COURT IN THE CASE OF GOPAL PUROHIT (SUPRA). XIII. AS REGARDS THE DEMAT ACCOUNT OF THE ASSESSEE, IT IS SUBMITTED THAT THE SAME WAS PRODUCED BEFORE THE AO AND COPY THEREOF IS ENCLOSED HEREWITH. IT HAS ALREADY BEEN S UBMITTED ABOVE THAT THE SHARE DELIVERY DURING THE RELEVANT A SST YEAR WAS TAKEN BY THE BROKERS AND KEPT IN THE ACCOUNT OF THE ASSESSEE MAINTAINED WITH THEM AND DEALT WITH FROM THE SAID A CCOUNT. 14 FINALLY ON THE CLOSE OF THE YEAR, THE BALANCE OF SH ARE STOCK IS TRANSFERRED INTO THE DEMAT ACCOUNT OF THE ASSESSEE WHICH IS EVIDENT FROM THE COPY OF THE ABOVE DEMAT ACCOUNT OF THE ASSESSEE. THE CONTRACT NOTES DULY REFLECT THE TRANS ACTIONS WHERE DELIVERY HAS BEEN EFFECTED. THE VALUATION OF THE SH ARES IN HAND AT THE CLOSE OF THE YEAR HAS BEEN MADE AT COST, WHI CH MEETS THE REQUIREMENT TO JUDGE WHETHER THE ASSESSEE ACTED AS INVESTOR OR A TRADER IN SHARES. XI. IT HAS ALREADY BEEN POINTED OUT THAT THE ASSESS EE DURING THE RELEVANT ASSTS YEAR ACTED BOTH AS INVESTOR AND TRAD ER OF SHARES AND THE AUDITORS HAVE THEREFORE MENTIONED THIS FACT IN THEIR REPORT. FURTHER THE AUDITOR'S OBSERVATIONS HAVE BEE N WRONGLY VIEWED BY THE AO AS THE AUDITOR HIMSELF HAS CERTIFI ED THE SHARE INVESTMENT ACCOUNT APPENDED WITH THE AUDITED STATEM ENTS OF ACCOUNT. THE INVESTMENT IN SHARES DULY APPEARS IN T HE AUDITED BALANCE SHEET AS AT 31.03.2006. XI. IT HAS ALREADY BEEN SUBMITTED THAT HOW AND IN W HAT MANNER THE DELIVERY OF THE SHARES HAVE BEEN TAKEN IN THE A SSESSEE'S CASE AND THEREFORE IN VIEW OF THE ABOVE SUBMISSIONS, THE ALLEGATION PUT FORTH BY THE AO THAT THE ENTIRE PROFIT IN THE S HARE ACCOUNT IS 15 SPECULATIVE PROFIT IN TERMS OF SEC 43(5) IS NOT SUP PORTIVE OF THE MATERIAL ON RECORD AND ON THIS ACCOUNT ALSO, THE OR DER DT. 22.12.2010 PASSED BY THE TREATING THE SHORT TERM CA PITAL GAIN AS SPECULATIVE PROFIT IS LIABLE TO BE CANCELLED. THE A O HAS COMPLETELY FAILED TO VERIFY THE TRANSACTIONS AS HAS BEEN DIRECTED BY THE WORTHY CIT IN THE REVISION PROCEEDINGS AND T HEREFORE THE HOLDING OF THE AO THAT THE PROFIT EARNED OUT OF SAL ES OF SHARES AMOUNTED TO SPECULATIVE PROFIT IS DEVOID OF ANY SUP PORTIVE MATERIAL ON RECORDS AND THE ORDER DT. 22.12.2010 IS NOT LIABLE TO BE SUSTAINED ON THIS ACCOUNT. THE CASES RELIED UPON BY THE AO ARE QUITE DISTINGUISHABLE ON THE FACTS OF THE ASSES SEE'S CASE.' (E) THE FOLLOWING DOCUMENTS ARE PLACED IN THE PAPER BOOK FOR YOUR HONOUR'S KIND PERUSAL. 1. COPY OF THE REVISION ORDER DT. 09.03.2010 PASSED U/S 263 OF THE IT ACT, 1961 FOR THE AY 2006-07 BY THE CIT-2, J ODHPUR PLACED AT PAGE NO. 15 TO 35 OF THE PAPER BOOK. 2. BALANCE SHEET, CAPITAL ACCOUNT AND PROFIT AN D LOSS ACCOUNT OF THE ASSESSEE FOR THE PERIOD 2005-06 ARE PLACED O N PAGE NO.36 TO 55 OF THE PAPER BOOK. 16 3. LEDGER OF 'INVESTMENT ACCOUNT' AS APPEARING IN THE ASSESSEE'S BOOKS OF ACCOUNTS FOR THE PERIOD 01.04.2005 TO 31.0 3.2006 PLACED ON PAGE NO.56 TO 66 OF THE PAPER BOOK. 4. COPY OF THE LETTER DT. 08.12.2010 GIVEN TO AO DURING ASST PROCEEDINGS TAKEN UP AFTER REVISIONARY ORDER IS PLA CED AT PAGE NO. 67 TO 68 OF THE PAPER BOOK. 5. COPIES OF FEW CONTRACT NOTES OF THE SHARE BROK ERS ARE ALSO PLACED ON PAGE NO. 69 TO 97 OF THE PAPER BOOK TO VE RIFY THE NATURE OF TRANSACTIONS. 6. SCRIPT WISE DETAILS OF THE TRANSACTION OF THE SHARES ARE PLACED AT PAGE NO. 98 TO 136 OF THE PAPER BOOK TO A SCERTAIN THE FREQUENCY OF THE TRANSACTION. 7. HOLD TRANSACTION LETTER AS ISSUED BY SHARE BROK ERS AND DP ACCOUNT OF THE ASSESSEE SHOWING TRANSFER OF SHARES AT THE CLOSE OF THE RELEVANT YEAR ARE PLACED AT PAGE NO. 137 TO 147 OF THE PAPER BOOK. 17 8. COPY OF THE DECISION OF THE HON'BLE BOMBAY HIG H COURT IN THE CASE OF CIT VS. GOPAL PUROHIT (2010) 34 DTK 52 (BOM ) IS PLACED AT PAGE NO. 148 TO 150 OF THE PAPER BOOK. (F) FROM THE ABOVE IT IS WELL EVIDENT THAT THE ASSE SSEE HAD RIGHTLY CLAIMED THE SHORT TERM CAPITAL GAINS OF RS. 1649319/- IN HIS RETURN FILED AND THE CIT WAS NOT AT ALL JUSTIFI ED IN CONFIRMING THE ACTION OF THE AO TO TREAT IT AS BUSINESS INCOME TAXABLE AT NORMAL INCOME TAX RATES INSTEAD OF SPECIAL RATE OF 10% AS PROVIDED IN SEC 11 1A OF THE IT ACT, 1961. THE FIND INGS OF THE CIT ON THE ISSUE ARE CONTAINED IN PARA 7 ON PAGE NO. 05 TO 10 OF HIS APPELLATE ORDER. IN VIEW OF THE ABOVE SUBMISSIONS, THE CIT WAS NOT A T ALL JUSTIFIED IN CONFIRMING THE ACTION OF THE AO IN TREATING THE SHORT TERM CAPITAL GAIN AS BUSINESS INCOME SUBJECT TO CHARGE O F TAX AT NORMAL INCOME TAX RATES AS AGAINST THE SPECIAL RATE OF 1 0% AS PROVIDED IN SEC. 111A OF THE IT ACT, 1961. IT IS TH EREFORE PRAYED THAT THE ORDER OF THE CIT IS LIABLE TO BE SET ASIDE ON THIS ISSUE AND OBLIGE. 18 2.4 IN FACT ON THE BASIS OF AUDIT REPORT GIVEN IN F ORM NO. 3 CD THAT ANY PROFIT EARNED FROM SPECULATIVE BUSINESS IS TO B E TAXED AT NORMAL RATES. THE ASSESSEE IS TRADING IN SHARE SCRIPTS AN D SPECULATION SHARE BUSINESS. HE ALSO CARRIES ON BUSINESS IN GUWAR DAL AND RECEIVES SALARY INCOME. ON THE BASIS OF THE NOTING MADE BY THE AUDI TOR, THE A.O. HAS MADE THIS ADDITION AND THERE IS NO DISPUTE REGARDIN G THIS FACT. HOWEVER, THE LD. COMMISSIONER WHILE SETTING ASIDE T HE ORIGINAL ASSESSMENT ORDER DATED 09/03/2010 PASSED U/S 263 RE QUIRED THE A.O. TO EXAMINE THE ISSUE AFRESH AND TO GIVE HIS CONCRET E FINDING AS TO THE TRUE NATURE OF THE PROFIT EARNED BY THE ASSESSEE ON SHARE TRANSACTION. BUT, THE A.O. HAS SIMPLY MADE THIS ADDITION WITHOUT MAKING ANY IN- DEPTH ENQUIRIES AS DIRECTED. BE THAT AS IT MAY, WE HAVE FOUND THAT THE ASSESSEE HAS BEEN MAINTAINING SEPARATE BOOKS OF ACC OUNTS FOR TRADING IN SHARES AND FOR INVESTING IN SHARES. THE ASSESSEE HAD PRODUCED COMPLETE BOOKS OF ACCOUNTS. THE A.O. HAS VERIFIED T HEM INCLUDING VARIOUS CONTRACT NOTES OF THE REGISTERED SHARE BROK ER IN WHICH THE NATURE OF THE SHARE TRANSACTION IS CLEARLY MENTIONE D. THE DELIVERY OF SUCH SHARES HAD BEEN TAKEN FROM THE STOCK EXCHANGE BY THE AGENT IN THE ACCOUNT OF THE ASSESSEE. THE ASSESSEE HAS DULY SHOWN ALL THE RELEVANT TRANSACTIONS IN THE INVESTMENT ACCOUNT AND THE ASSESSEE IS FOUND TO DEAL WITH SHARES AS INVESTMENT WHEREVER DE LIVERIES WERE 19 TAKEN AND SCRIPT-WISE DETAILS ARE KEPT. THE ASSESSE E HAS PAID STT ON SHARE TRANSACTION. THE ASSESSEE HAS ALSO SHOWN DIVI DEND INCOME ON THE INVESTMENT MADE IN THE SHARES, WHICH SHOWS INTENTIO NS OF THE ASSESSEE TO TREAT SHARE TRANSACTIONS AS INVESTMENT. THE ASSE SSEE HAS GOT HIS OWN SUFFICIENT CAPITAL TO INVESTMENT IN THE SHARES. ACC ORDINGLY, WE DO NOT FIND FORCE IN THE ALLEGATION THAT THE ENTIRE PROFIT IN THE SHARE ACCOUNT IS SPECULATIVE PROFIT IN TERMS OF SECTION 43(5). TH EREFORE, WE ACCEPT GROUND NO. (2). GROUND NO. (1) WAS NOT PRESSED SO I T IS DISMISSED. 3. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH AUGUST, 2013. SD/- SD/- [N.K. SAINI] [HARI OM MARATHA] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 28 TH AUGUST, 2013. VL COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) ASSISTANT REGISTRAR 5. THE DR