The ACIT, Circle-10, Ahmedabad V. Mrs. Priyaben Amalbhai Kothari, Ahmedabad

ITA 2930/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94519 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 10 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-10-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 02-09-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 25-11-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ALBINUS TIRKEY
• Keywords: Business income
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH AHMEDABAD BEFORE S/SHRI KUL BHARAT, JM, & MANISH BORAD, A M. ITA NO.2930/AHD/2011 ASST. YEAR: 2008-09 ASSTT. C.I.T., CIRCLE-10, AHMEDABAD VS MRS. PRIYABEN AMALBHAI KOTHARI, BIPIN NIWAS, PANCHWATI, ELLISBRIDGE, AHMEDABAD. (APPELLANT) (RESPONDENT) PA NO.AFUPK8958G APPELLANT BY SHRI ALBINUS TIRKEY, SR.DR RESPONDENT BY MS. URVASHI SHODHAN, AR DATE OF HEARING: 2/9/2015 DATE OF PRONOUNCEMENT: 15/10/2015 O R D E R PER MANISH BORAD, ACCOUNTANT MEMBER. THIS IS AN APPEAL BY REVENUE AGAINST THE ORDER OF CIT(A) XVI, AHMEDABAD, DATED 12..9.2011. ASSESSMENT ORDER FOR A SST. YEAR 2008-09 HAS BEEN FRAMED U/S 143(3) OF I.T. ACT, 19 61 (IN SHORT THE ACT) BY THE ASSTT. CIT, CIRCLE-10,AHMEDABAD, VIDE O RDER DATED 23//12/2010. THE FOLLOWING GROUNDS HAVE BEEN RAISED BY THE REVENUE- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING TO ASSESSEE THE PROFIT EARNED ON SALE OF SHARE AS LONG TERM CAPITAL GAINS INSTEAD OF BUSINESS INCOME. ITA NO.2930/AHD/2011 ASST. YEAR 2008-09 2 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE AO. 3. IT IS THEREFORE, PRAYED THAT THE ORDER OF THE LD . CIT(A) MAY BE SET ASIDE AND THAT OF THE ORDER OF AO BE RESTORED TO TH E ABOVE EXTENT. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSEE FILED RETURN OF INCOME FOR F.Y.2007-08 RELEVANT TO ASST. YEAR 2008-09 ON 29.09.2008 DECLARING TOTAL INCOME OF RS.11.43,940/ -. THE CASE WAS SELECTED FOR SCRUTINY AND ASSESSMENT WAS COMPLETED BY ISSUANCE OF NOTICE UNDER SECTION 143(2) OF THE ACT ON 23/12/201 0. IN THE RETURN OF INCOME FILED BY THE ASSESSEE EXEMPTION UNDER SECTIO N 10(38) OF THE ACT OF RS.28,81,963/- WAS CLAIMED ON ACCOUNT OF LON G TERM CAPITAL GAIN FROM SALE OF EQUITY SHARES OF FOUR COMPANIES W HICH WERE HELD FOR MORE THAN ONE YEAR. HOWEVER, THE ASSESSING OFFICER DID NOT ACCEPT THE CLAIM OF ASSESSEE AND TREATED THE SURPLUS FROM SALE OF ABOVE REFERRED EQUITY SHARES AS BUSINESS INCOME MAINLY FO R THE REASON THAT THE ASSESSEE WAS SHOWING THE INVESTMENT IN SHARES U NDER THE HEAD STOCK-IN-TRADE (CLOSING STOCK OF SHARES) AND NOT UNDER THE HEAD INVESTMENT CONSISTENTLY. 3. IN DISALLOWING THE CLAIM OF EXEMPTION U/S 10(38) OF THE ACT THE ASSESSING OFFICER RELIED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. ASSOCIATED INDUSTRIAL DEVELOPME NT COMPANY (P) LTD. (1971) 82 ITR 586 (SC) WHEREIN THE HONBLE COU RT HAS OBSERVED - ITA NO.2930/AHD/2011 ASST. YEAR 2008-09 3 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 HOLDS THE SHARES AND HE SHOULD IN NORMAL CIRCUMSTANCES, BE IN A POSITION TO PRODUCE E VIDENCE FROM HIS RECORDS AS TO WHETHER HE HAS MAINTAINED ANY DISTINC TION BETWEEN THOSE SHARES WHICH ARE HIS STOCK IN TRADE AND THOSE WHICH ARE HELD BY WAY OF INVESTMENT. IF THIS RATIO OF HONBLE APEX COURT IS MADE APPLICABLE TO THE FACTS OF THE CASE OF THE ASSESSEE , IT IS CLEAR THAT WHETHER A PARTICULAR TRANSACTION CAN BE TREATED AS TRADING OR INVESTMENT WILL BE BASED ON THE INTENTION OF THE AS SESSEE AND INTENTION CAN BE JUDGED ON THE BASIS OF THE RECORDS OF THE ASSESSE AND IT CLEARLY TRANSPIRES FROM THE PAST RECORDS OF THE ASSESSEE THAT THE SHARES HELD BY THE ASSESSEE FORMS PART OF THE S TOCK IN TRADE. TAKING RELIANCE ON ABOVE JUDICIAL PRONOUNCEMENT, TH E ASSESSING OFFICER WENT AHEAD IN MAKING THE ADDITION OF RS.28, 81,963/- IN THE HANDS OF ASSESSEE BY TREATING THE PROFIT FROM SALE OF EQUITY SHARES AS BUSINESS INCOME WHEREAS THE ASSESSEE HAS CLAIMED IT AS LONG TERM CAPITAL GAIN FROM SALE OF SHARES ELIGIBLE FOR EXEMP TION UNDER SECTION 10(38) OF THE ACT. 4. AGGRIEVED, ASSESSEE WENT IN APPEAL BEFORE THE CI T(A) WHO HAS ELABORATELY DISCUSSED THE ISSUES OF THE CASE AND FI NALLY DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. THE CIT(A) IN HIS APPELLATE ORDER HAS DIFFERENTIATED THE FACTS OF THE ASSESSE ES CASE WITH THE FACTS INVOLVED IN THE CASE OF CIT VS. ASSOCIATED IN DUSTRIAL DEVELOPMENT COMPANY (P) LTD.(SUPRA), WHICH WAS THE MAIN BASIS TAKEN BY THE ASSESSING OFFICER IN MAKING THE ADDITI ON IN THE HANDS OF ASSESSEE. IT WOULD BE RELEVANT TO REPRODUCE THE REL EVANT CONTENTS OF THE ORDER OF CIT(A) READS AS UNDER- ITA NO.2930/AHD/2011 ASST. YEAR 2008-09 4 2.12 THE AO HAS RELIED UPON THE DECISION OF THE HO NBLE SUPREME COURT IN THE CASE OF CIT VS. ASSOCIATED INDUSTRIAL DEVELOPMENT COMPANY (P) LTD. (1971) 82 ITR 586 (SC). THE FACTS OF THE CASE WERE THAT DURING THE AY 1957-58, THE ASSESSEE COMPANY, W HICH ACTED AS MANAGING AGENTS OF VARIOUS COMPANIES, SOLD CERTAIN SHARES OF THE MANAGED COMPANIES, AND CLAIMED THE NET PROFIT ARISI NG THEREFROM AS CAPITAL GAIN AND NOT INCOME IN ITS HANDS, STATING T HAT THE IMMEDIATE NECESSITY FOR THE SALE OF THOSE SHARES WAS THE REDU CTION OF AN OVERDRAFT WITH ITS BANK. THE ASSESSEE HAD NEVER BEE N TREATED AS A DEALER IN SHARES IN ANY OF THE PAST ASSESSMENTS AND ITS HOLDINGS IN THE VARIOUS COMPANIES WERE TREATED AS INVESTMENT AN D NOT AS STOCK IN TRADE OF THE ASSESSEES SHARE-DEALING BUSINESS. THE ITO HELD THAT THE PROFIT WAS TAXABLE AS THE ASSESSEE WAS ENTITLED , UNDER ITS MEMORANDUM OF ASSOCIATION TO DEAL IN SHARES. ON APP EAL, THE AAC UPHELD THE ITOS ORDERS. ON SECOND APPEAL, THE TRIB UNAL HELD THAT THE ASSESSEE WAS A DEALER IN SHARES WHICH WERE CONFINED TO THE SHARES OF THE MANAGED COMPANIES. ON REFERENCE THE HIGH COU RT OBSERVED THAT THE FACTS THAT PART OF THE SHARES WERE SUBSCRI BED FOR THE PURPOSE OF ACQUIRING THE MANAGING AGENCY OF A COMPANY AND T HAT SUBSEQUENTLY LARGE BLOCKS OF SHARES WERE PURCHASED AND HELD FOR LONG PERIOD WITHOUT SALE AND FURTHER THAT THE SHARE S WERE NOT IN SMALL BLOCKS BUT IN BIG BLOCKS TO REDUCE THE LIABILITY TO THE BANK IN ITS OVERDRAFT ACCOUNT THAT THOSE SHARES WERE HELD BY TH E ASSESSEE AS A PART OF ITS INVESTMENT, IT, THEREFORE, HELD THE SAI D PROFIT TO BE A CAPITAL AND NOT A REVENUE RECEIPTS. ON APPEAL BEFORE THE SU PREME COURT, IT WAS HELD THAT THE HIGH COURT WENT BEYOND THE MATTERS WHICH WERE THE SUBJECT MATTER OF CONTROVERSY BEFORE THE DEPARTMENTAL AUTHORITIES AND THE TRIBUNAL. IT WAS NEVER THE CASE OF THE ASSESSEE AT ANY STAGE THAT AL THOUGH IT WAS A DEALER IN SHARES THOSE SHARES WHICH WERE THE SUBJECT MATTE R OF SALE WERE HELD BY WAY OF INVESTMENT. IT HAD MAINTAINED THROUGHOUT THA T ALL THE SHARES WERE HELD BY IT AS AN INVESTOR AND THAT IT COULD NOT BE REGARDED AS A DEALER BECAUSE THE SHARES DID NOT FORM ITS STOCK IN TRADE. THAT CASE OF THE ASSESSEE WAS NEGATIVE BECAUSE OF THE EXTENSIVE DEAL INGS AND OTHER FACTS AND CIRCUMSTANCES WHICH WERE TAKEN INTO CONSIDERATI ON. THE FIGURE OF PURCHASES AND SALES AS ALSO THE PROFITS RELATING TO THE YEARS 1954 TO 1957 JUSTIFIED THE VIEW THAT ALTHOUGH UP TO A CERTAIN PO INT OF TIME IT HAD BEEN ASSESSED AS AN INVESTOR, THE MULTIPLICITY OF THE TR ANSACTIONS OCCURRING SUCCESSIVELY OVER THE YEARS SUPPORTED THE DEPARTMEN TAL STAND THAT THE ASSESSEE HAD CEASED TO BE AN INVESTOR AND HAD BECOM E A DEALER. WHETHER A PARTICULAR HOLDING OF SHARES IS BY WAY OF INVESTMENT OR FORMS ITA NO.2930/AHD/2011 ASST. YEAR 2008-09 5 PART OF THE STOCK IN TRADE IS A MATTER WHICH IS WIT HIN THE KNOWLEDGE OF THE ASSESSEE WHO HOLDS THE SHARES AND IT SHOULD IN NORM AL CIRCUMSTANCES, BE IN A POSITION TO PRODUCE EVIDENCE FROM ITS RECORDS AS ITS STOCK IN TRADE AND THOSE WHICH ARE HELD BY WAY OF INVESTMENT. THE ASSE SSEE IN THE INSTANT CASE MADE NO ATTEMPT WHATSOEVER TO MAKE OUT A CASE THAT THE SHARES WHICH HAD BEEN SOLD WERE A PART OF ITS CAPITAL INVE STMENT. NOR DID IT PLACE ANY MATERIAL FROM WHICH IT COULD BE ESTABLISHED THA T THOSE SHARES HAD BEEN TREATED IN ITS BOOKS DIFFERENTLY FROM OTHER SH ARES HELD BY IT. THE MERE FACT THAT THE SALE PROCEEDS WERE PAID INTO THE OVER DRAFT ACCOUNT IN WHICH ADMITTEDLY PROCEEDS OF SALE OF ALL THE SHARES HELD BY THE ASSESSEE WERE BEING CREDITED AS AND WHEN THE SALES WERE MADE AND THAT THESE SHARES HAD NOT BEEN SOLD WITH ANY AMOUNT OF FREQUENCY COUL D NOT BE REGARDED AS SUFFICIENT TO ESTABLISH THAT THESE SHARES HAD BEEN HELD BY WAY OF INVESTMENT. EVEN OTHERWISE IT WAS FOR THE TRIBUNAL TO GIVE ITS DECISION ON FACTS AND SINCE NO DECISION WAS INVITED FROM THE TR IBUNAL AS TO WHETHER THE SHARES IN QUESTION HAD BEEN HELD BY WAY OF INVE STMENT IT WAS NOT OPEN TO THE HIGH COURT TO GIVE ITS FINDING ON THAT QUESTION WHICH WAS ESSENTIALLY ONE OF FACT AND WHICH IT WAS WITHIN THE JURISDICTION OF THE TRIBUNAL TO DETERMINE. HENCE THE TRIBUNAL WAS JUSTI FIED IN HOLDING THAT THE PROFIT AROSE TO THE ASSESSEE IN THE COURSE OF ITS B USINESS AS A DEALER IN SHARES AND AS SUCH WAS LIABLE TO BE ASSESSED AS A R EVENUE RECEIPT. 2.13 THE AFORESAID DECISION OF THE HONBLE SUPREME COURT CANNOT BE APPLIED IN THE CASE OF THE ASSESSEE. EVEN THIS DECI SION FAVOUR THE APPELLANT. THERE IS NO CASE OF THE EXTENSIVE DEALIN GS AND OTHER FACTS AND CIRCUMSTANCES WHICH WERE TAKEN INTO CONSIDERATI ON. THERE IS ABSENCE OF THE MULTIPLICITY OF THE TRANSACTIONS OCC URRING SUCCESSIVELY OVER THE YEAR. THE APPELLANT HAD ESTABLISHED THAT T HE SOLD SHARES WERE SHOWN AS INVESTMENT IN THE LEDGER ACCOUNT MAIN TAINED IN THE BOOKS OF ACCOUNT AS SHARES INVESTMENT ACCOUNT. TH E 400 SHARES OF SYNTEX INDUSTRIES LTD. VALUED AT RS.880/- WERE SHOW N IN SHARE DELIVERY ACCOUNT BY MISTAKE THOUGH THE HOLDING PER IOD IS MORE THAN 21 MONTHS THOUGH THE SAME WERE PURCHASED ONLY FOR I NVESTMENT. 2.14 CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND AFTER GOING THROUGH THE DECISIONS RELIED UPON BY THE AO A S WELL AS BY THE LD. COUNSEL, I AM OF THE OPINION THAT THE SOLD SHAR ES WERE HELD BY THE APPELLANT AS INVESTMENT AND NOT AS STOCK IN TRAD E AS WRONGLY CONCLUDED BY THE AO. THE PARTICULAR LEDGER ACCOUNT AS SHARES INVESTMENT A/C WAS CONVENIENTLY IGNORED BY THE AO. EVEN OTHERWISE ALSO, THE ENTRY IN THE BOOKS OF ACCOUNT ARE NOT CON CLUSIVE TO HOLD THE SALE OF SHARES AS BUSINESS INCOME. THERE IS ABSENCE OF MULTIPLICITY OF ITA NO.2930/AHD/2011 ASST. YEAR 2008-09 6 THE TRANSACTIONS OCCURRING SUCCESSIVELY OVER THE YE AR AND EXTENSIVE DEALINGS. THERE WAS ABSENCE OF FREQUENCY CONTINUITY AND REGULARITY OF TRANSACTIONS OF PURCHASE AND SALE OF SHARES AS THE MOST IMPORTANT TEST LAID DOWN BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. REVA SHANKAR KOTHARI 283 ITR 338 (GUJ) FOR THE ACTIVITY IN THE NATURE OF BUSINESS. IN VIEW THEREOF, THE PROFIT EAR NED ON SALE OF SHARES OF THE AFORESAID FOUR COMPANIES WAS ASSESSAB LE UNDER THE HEAD LONG TERM CAPITAL GAINS AND NOT AS BUSINESS INCOME. THE AO WAS THUS NOT JUSTIFIED IN HOLDING THE PROFIT ON SAL E OF SHARES AS BUSINESS INCOME. THE SAID FINDING OF THE AO IS NOT SUSTAINABLE AND REJECTED. HE IS DIRECTED TO ASSESSEE THE PROFIT ON SALE OF AFORESAID SHARES FOR RS.28,81,963/- AS LONG TERM CAPITAL GAI NS. THE ONLY GROUND OF APPEAL IS ALLOWED. 3.0 IN THE RESULT THE APPEAL IS ALLOWED. 5. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 6. THE LD. DR ALONG WITH RELYING ON THE ORDER OF AS SESSING OFFICER ALSO SUBMITTED THAT AS THE ASSESSEE HERSELF HAS BEE N SHOWING THE INVESTMENTS IN EQUITY SHARES UNDER THE HEAD CLOSIN G STOCK FORMING PART OF TRADING & PROFIT AND LOSS ACCOUNT AND AT TH E END OF THE YEAR IN THE BALANCE SHEET UNDER THE CURRENT ASSETS HEAD AS STOCK IN TRADE, THE PROFIT FROM SALE OF SHARES SHOULD BE TAXED AS B USINESS INCOME AND NOT LONG TERM CAPITAL GAIN. 7. ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE AL ONG WITH RELYING UPON THE SUBMISSIONS MADE BEFORE THE CIT(A) ALSO SUBMITTED THAT THE ASSESSEE IS NORMALLY DEALING IN SHARES AN D SECURITIES. BUT HAS KEPT SEPARATE RECORDS IN RESPECT OF LONG TERM I NVESTMENT AS WELL AS TRADING OF SHARES. THE LONG TERM CAPITAL GAIN AR OSE ONLY FROM FEW ITA NO.2930/AHD/2011 ASST. YEAR 2008-09 7 SCRIPS WHICH WERE HELD FOR A PERIOD OF MORE THAN 12 MONTHS. THE LD. AR ALSO SUBMITTED THAT ASSESSEE HAS BIFURCATED HIS CLOSING STOCK OF SHARES IN THREE SUB-GROUPS NAMELY SHARES INVESTM ENT A/C, SHARES DELIVERY A/C AND SHARES DERIVATIVES A/C AND THE TOTAL CLOSING STOCK AS ON 31.3.2008 IN THESE SUB-GROUPS WAS RS.39,41,814/- , 26,02,542.66 AND RS.19,439.81 RESPECTIVELY WHICH IN TOTAL COMES TO RS.65,63,823.89/- SHOWN IN THE AUDITED P & L A/C. THE LD. AR ALSO SUBMITTED THAT THE ASSESSEE HAS BEEN SHOWING PROFIT FROM TRADING OF SHARES AS WELL AS LONG TERM CAPITAL GAINS FROM SALE OF SHARES HELD FOR INVESTMENT IN HER RETURN OF INCOME REGULARLY IN PRE VIOUS YEARS ALSO. THE LD. AR REFERRED TO PAGE 30 OF THE PAPER BOOK FI LED ON 16.7.2012 THAT ASSESSEE HAS SHOWN LONG TERM CAPITAL LOSS OF R S.1,84,140/- DURING ASST. YEAR 2005-06 AND THERE WAS NO CAPITAL GAINS DURING ASST. YEAR 2006-07 AND ASST. YEAR 2007-08 AND ASSES SEE HAS SHOWN LONG TERM CAPITAL GAINS FROM SALE OF SHARES HELD FO R INVESTMENT AT RS.28,81,963/- DURING THE ASST. YEAR 2008-09 WHICH IS UNDER APPEAL. IN A NUT SHELL LD. AR TRIED TO CONVINCE THAT THE AS SESSEE WHO EVEN IF HAS SHOWN THE TOTAL INVESTMENT AND STOCK AS CLOSING STOCK OF SHARES BUSINESS SHOWN UNDER THE CURRENT ASSETS HEAD IN THE AUDITED BALANCE SHEET AND HAS NOT BIFURCATED THE STOCK IN THE BALAN CE SHEET BUT HAS BEEN REGULARLY MAINTAINING SUB-GROUPS OF HOLDING IN SHARES UNDER SHARES INVESTMENT A/C, SHARES DERIVATIVE A/C AND SH ARES STOCK A/C AND AT THE END OF THE YEAR THE SURPLUS/DEFICIT ON A CCOUNT OF SHARES HELD UNDER INVESTMENT ACCOUNT ARE SHOWN UNDER THE H EAD CAPITAL GAIN IN THE RETURN OF INCOME AND THE SURPLUS/DEFIC IT FROM THE TRANSACTIONS FROM PURCHASE/SALES OF SHARES UNDER SH ARES STOCK A/C AND SHARES DERIVATIVE ACCOUNT ARE BEING SHOWN AS BU SINESS INCOME. ITA NO.2930/AHD/2011 ASST. YEAR 2008-09 8 8. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE AND PERUSED THE MATER IAL ON RECORD. THE ISSUE BEFORE US IS TO EXAMINE AS TO WHETHER THE ASSESSING OFFICER IS CORRECT IN TREATING THE SURPLUS AMOUNT A RISING OUT OF SALE AND PURCHASE OF SHARES AT RS.28,81,963/- AS BUSINESS IN COME, WHEREAS ASSESSEE HAS CLAIMED IT AS LONG TERM CAPITAL GAIN. THE ASSESSING OFFICER HAS TREATED THE AFORESAID SURPLUS OUT OF PU RCHASE/SALE OF SHARES AS BUSINESS INCOME ON THE GROUND THAT THE SH ARES WERE SOLD AS STOCK-IN-TRADE AND WERE DULY FORMING PART OF THE AUDITED FINANCIAL STATEMENT. HOWEVER, THE LD. CIT(A) DID NOT ACCEPT T HE REASONING OF ASSESSING OFFICER ON THE GROUND THAT ASSESSEE HAS B EEN MAINTAINING DIFFERENT PORTFOLIOS, INVESTMENT, SHARES STOCK AND DERIVATIVES. THE IMPUGNED ADDITIONS PERTAIN TO INVESTMENT PORTFOLIO. CIT(A) ALSO MENTIONED IN HIS APPELLATE ORDER THAT THERE IS NO B AR IN LAW THAT THE PRESENT GAIN MAINTAINED TO DIFFERENT PORTFOLIOS. TH E CIT(A) HAS GIVEN HIS FINDING ON FACTS WHICH HAS NOT BEEN CONTROVERTE D BY THE REVENUE. 9. NOW IN ORDER TO EXAMINE THE CONTENTIONS OF LD. A R IN REGARD TO THE CLAIM OF ASSESSEE OF MAINTAINING THREE SEPARATE SUB-GROUPS OUT OF WHICH TWO SUB-GROUPS NAMELY SHARE STOCK A/C AND SHARES DERIVATIVES A/C, THERE IS NO DISPUTE AS THE SAME HA S BEEN TREATED AS A PART OF BUSINESS STOCK AND THE INCOME FROM TRANSACT IONS IN THESE SUB- GROUPS HAS BEEN SHOWN AS BUSINESS INCOME BY THE ASS ESSEE AND HAS BEEN DULY ACCEPTED AS BUSINESS INCOME BY THE AS SESSING OFFICER. THE ONLY SUB-GROUP WHICH NEEDS TO BE EXAMI NED IS THE SHARE INVESTMENT A/C FOR WHICH LD. AR HAS PLACED ON RECOR D THE SUB-GROUP ITA NO.2930/AHD/2011 ASST. YEAR 2008-09 9 SHARE INVESTMENT A/C AS ON 31.3.2006, 31.3.2007 AND 31.3.2008 AND ASSERTED UPON THAT THE SURPLUS AND DEFICIT FROM SAL E OF SHARES HELD IN THIS SUB-GROUP HAS BEEN CONSISTENTLY SHOWN AS CAPIT AL GAIN. BEFORE WE ANALYSE THIS ASPECT WE REPRODUCE BELOW THE DETAI LS OF LONG TERM CAPITAL GAIN SHOWN BY THE ASSESSEE IN THE RELEVANT FINANCIAL YEAR FOR THE YEAR UNDER APPEAL - NAME OF COMPANY DATE OF PURCHASE NO. OF SHARES NET CAPITAL GAIN (RS.) ADITYA BIRLA LTD. 1.4.2006 93 1,35,744 BARTRONICS INDIA LTD. 12.8.2005 19,000 23,89,630 BHARAT FORGE LTD. 27.7.2005 800 2,30,745 SINTEX INDUS.LTD. 11.11.2005 440 1,25,844 TOTAL 28,81,963 10. FROM THE MATERIAL PLACED ON RECORD IT IS NOTICE D THAT THE ASSESSEE HAS CLAIMED FOLLOWING EQUITY SHARES HELD U NDER SHARE INVESTMENT ACCOUNT AS ON 31.3.2006, 31.3.2007 & 31. 3.2008. FOR THE EASE OF COMPARISON QUANTITY OF EQUITY SHARES AS ON 31.3.2006, 31.3.2007 & 31.3.2008 HAVE BEEN PLACED TOGETHER IN ONE CHART AGAINST THE PARTICULAR COMPANY:- SHARE INVESTMENT A/C. PARTICULARS QUANTITY AS ON 31.3.2006 QUANTITY AS ON 31.3.2007 QUANTITY AS ON 31.3.2008 AIPL 5,045 NOS. 5,045 NOS. 5,045 NOS. ITA NO.2930/AHD/2011 ASST. YEAR 2008-09 10 AMAL CO POLY FIBRES 475 NOS. 475 NOS 475 NOS A.S.E. 130 NOS. 130 NOS 130 NOS ASEA LTD. DEB 24 NOS. 24 NOS 24 NOS BARTRONICS INDIA LTD 25,000 NOS. 22,000 NOS. 3,000 NOS. BFL SOFTWARE 200 NOS. 200 NOS. BHARAT FORGR LTD. 800 NOS. 800 NOS. BIRL 3M 200 NOS. 200 NOS BRITANIA IND LTD. 50 NOS. GUJARAT FOILS 100 NOS. 100 NOS INDOGULF FERT.CORP. 500 NOS. 500 NOS KERALA AUR 500 NOS. 500 NOS LG & DOCTOR ASS.P.LTD 3,563 NOS. 3,563 NOS. 3,563 NOS. NEYCL SHARE 1,000 NOS. 1,000 NOS PADMANI TECH 200 NOS. 200 NOS. PCCI 2,29,450 NOS. 2,29,450 NOS. 2,29,450 NOS. PFF 400 NOS. 400 NOS. 400 NOS. SAYAJI IND.LTD. 368 NOS. SSI 200 NOS. 200 NOS. TELCO 100 NOS. 100 NOS. VARUN TRAVELS 590 NOS. 590 NOS. 590 NOS. ADITYA BIRLA LTD. 93 NOS. 10 NOS. FLEXIBAGS PACKAGING P.LTD.(EQUITY) 1,20,000 NOS. 10.1 THE ABOVE CHART OF SHARE INVESTMENT A/C AS ON 31.3.2006, 31.3.2007 & 31.3.2008 WILL HELP TO NOTE THAT WHICH COMPANYS SHARE HAVE BEEN SOLD DURING THE PARTICULAR YEAR SO AS TO RECONCILE WITH THE CAPITAL GAIN FROM SALE OF SHARES SHOWN BY THE ASSES SEE IN ITS RETURN OF INCOME. FROM GOING THROUGH THE ABOVE SHARE INVESTME NT A/C FOLLOWING ISSUES ARE NOTICED:- 1) THE QUANTITY OF SHARES OF BARTRONICS INDIA LTD. AS ON 31.3.2006 WAS SHOWN AT 25,000 NOS. AND THE SAME REDUCED TO 22 ,000 NO. ON 31.3.2007 BUT THE DIFFERENCE OF 3,000 NOS. IS NO T APPEARING IN THE LONG TERM CAPITAL GAINS FOR AY 2007-08. 2) THE SHARES OF BRITANIA INDIA LTD. (50 NOS.) AND SHARES OF SAYAJI IND.LTD. (368 NOS.) WHICH WERE SHOWN UPTO 31.3.2006 ARE NOT ITA NO.2930/AHD/2011 ASST. YEAR 2008-09 11 APPEARING IN THE SHARE INVESTMENT A/C AS ON 31.3.20 07, THIS TRANSACTION IS ALSO NOT FORMING PART OF LONG TERM/S HORT TERM CAPITAL GAINS FOR AY 2007-08. 3) FOLLOWING EQUITY SHARES WHICH WERE APPEARING IN THE SHARES INVESTMENT A/C AS ON 31.3.2006 AS WELL AS ON 31.3.2 007 BUT ARE NOT APPEARING IN THE SHARES INVESTMENT A/C AS ON 31 .3.2008. BFL SOFTWARE (500) BIRLA 3M (200) GUJARAT FOILS (100) INDO GULF FERTILIZER CORPN. (500) KERALA AYUR (500) NEYCL SHARES (1000) PADMANI TECH (200) SSI (200) TELCO (100) THUS THIS RAISES QUESTION THAT IF ALL THESE SHARE S WERE SOLD DURING F.Y.2007-08 THEN WHY THE LONG TERM CAPITAL G AINS/LONG TERM CAPITAL LOSS HAS NOT BEEN SHOWN BY THE ASSESSE E IN HER CLAIM OF TOTAL LONG TERM CAPITAL GAINS AS FILED IN THE RETURN OF INCOME AND WHAT TREATMENT HAS THE ASSESSEE GIVEN TO THESE SHARES IN ITS BOOKS OF ACCOUNTS. 11. FROM ABOVE ANALYSIS, IT IS CLEAR THAT THERE HAS BEEN SOME DEVIATION TO THE CONTENTIONS PLACED BY LD. AR IN RE LATION TO CONSISTENT TREATMENT OF TRANSACTIONS OF PURCHASE/SALE OF SHARE S UNDER THE HEAD SHARES INVESTMENT ACCOUNT. THERE IS NO DISPUTE TH AT THE BOOKS OF ITA NO.2930/AHD/2011 ASST. YEAR 2008-09 12 ACCOUNT ARE AUDITED U/S 44AB OF THE ACT DULY CERTIF IED BY THE CHARTERED ACCOUNTANT AND SHOWING THE TOTAL STOCK OF EQUITY SHARES HELD BY ASSESSEE IN TRADING AND PROFIT AND LOSS ACC OUNT AND HAS BEEN TREATED AS CLOSING STOCK AND NO INFORMATION IS PLAC ED ON RECORD THAT WHETHER SUCH STOCK HAS BEEN CONVERTED INTO CAPITAL ACCOUNT OR VICE VERSA. IN THESE CIRCUMSTANCES IN ORDER TO VERIFY TH E SUBMISSIONS/CLAIM OF ASSESSEE OF CAPITAL GAINS FROM SHARES HELD IN SH ARES INVESTMENT A/C IN THE LIGHT OF OUR WORKING AS WELL AS QUESTION S RAISED, IT WILL BE JUST AND PROPER TO REMIT THIS ISSUE BACK TO THE FIL E OF ASSESSING OFFICER BEFORE WHOM THE ASSESSEE WILL PLACE ALL RECORDS. IF THE AO IS SATISFIED THAT ASSESSEE HAS CONSISTENTLY TREATED THE SHARES I NVESTMENT A/C AS HER INVESTMENT FOR LONG TERM PURPOSES AND HAS NOT S HIFTED THE STOCK IN INVESTMENT A/C TO SHARES TRADING STOCK A/C OR SH ARE DERIVATIVES A/C OR VICE VERSA THEN THE ASSESSING OFFICER WILL ACCEP T THE CLAIM OF ASSESSEE OF CLAIMING DEDUCTION U/S 10(38) OF THE AC T FOR LONG TERM CAPITAL GAINS FROM SALE OF EQUITY SHARES AND IF CON TRARY RESULTS ARE DISCOVERED BY THE ASSESSING OFFICER FROM THE RECORD S MADE AVAILABLE BY THE ASSESSEE THEN SUCH TOTAL INCOME FROM THE TRA NSACTION OF PURCHASE/SALE OF SHARES IN ALL THE THREE SUB-GROUPS A/C SHALL BE ITA NO.2930/AHD/2011 ASST. YEAR 2008-09 13 TREATED AS BUSINESS INCOME. THIS GROUND OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 12. OTHER GROUNDS ARE OF GENERAL NATURE, HENCE NEED NO ADJUDICATION. 13. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 15/10/2015 SD/- SD/- (KUL BHARAT) JUDICIAL MEMBER (MANISH BORAD) ACCOUNTANT MEMBER DATED 15/10/2015 MAHATA/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DY. REGISTRAR, ITAT, AHMEDABAD ITA NO.2930/AHD/2011 ASST. YEAR 2008-09 14 1. DATE OF DICTATION: 14/10/2015 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 14/10/2015 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 15/10/2015 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: