The DCIT, Circle-3, Surat V. Shri Sugamchand Chimanlal Shah, Surat

ITA 3040/AHD/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6335 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2007-2008
• Appeal Filed On: 08-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K PATEL
• Assessee Lawyers: RASESH SHAH
• Keywords: Business income; Question of law

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'D' BEFORE SHRI BHAVNESH SAINI,JM & SHRI A N PAHUJA,AM ITA NO.3040/AHD/2010 (ASSESSMENT YEAR:-2007-08) DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-3, ROOM NO. 213,2 ND FLOOR ,AAYAKAR BHAVAN,MAJURA GATE,SURAT V/S SHRI SUGAMCHAND CHIMANLAL SHAH, 204, VIJAY CHAMBERS, BHAGATALO, SURAT PAN: AKQPS 3606 J [APPELLANT] [RESPONDENT] REVENUE BY :- SHRI A K PATEL, DR ASSESSEE BY:- SHRI RASESH SHAH, AR O R D E R A N PAHUJA: THIS APPEAL BY THE REVENUE AGAINST AN ORDER DATED 25-08-2010 OF THE LD. CIT(APPEALS)-II, SURAT FOR T HE ASSESSMENT YEAR 2007-08, RAISES THE FOLLOWING GROUNDS:- [1] ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A) HAS ERRED IN DIRECTING THE AO TO TREAT THE PROFIT/GAINS EARNED ON THE TRANSACTION OF PURCHASE AND SALE OF SHARES AND SECURITIES OF RS .1,68,01,686/- AS LONG TERM CAPITAL GAIN AS AGAINST TREATED BY THE AO UND ER THE HEAD BUSINESS INCOME. [2] ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DIRECTING THE AO THAT PROFIT ON SALE OF SH ARES HELD ABOVE ONE MONTH TO BE TREATED AS SHORT TERM CAPITAL GAIN. [3] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LEARNED CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE AO. [4] IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE CIT(A) MAY BE SET-ASIDE AND THAT OF AO MAY BE RESTORED TO THE ABOVE EXTENT. 2. ADVERTING TO GROUND NOS. 1 & 2 IN THE APPEAL, FACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT RETURN DECLARING IN COME OF RS.30,05,170/- FILED BY THE ASSESSEE, ENGAGED IN TH E BUSINESS OF SHARES & MANUFACTURING OF GREY CLOTH ON JOB WORK BA SIS, WAS SELECTED FOR SCRUTINY WITH THE SERVICE OF A NOTICE U/S 143(2) OF THE 2 ITA NO.3040/AHD/2010 INCOME-TAX ACT, 1961 [HEREINAFTER REFERRED TO AS TH E ACT].THE ASSESSING OFFICER[AO IN SHORT] NOTICED DURING THE C OURSE OF ASSESSMENT PROCEEDINGS THAT THE ASSESSEE REFLECTED SHORT TERM CAPITAL GAIN-RS.39,66,123/- AND LONG TERM CAPITAL GAIN- RS.1,68,01,686/- ON SALE OF SHARES. SINCE THE ASSES SEE WAS TRADING IN THE SHARES AT A LARGE SCALE WITH A MOTIVE TO EA RN PROFIT ONLY, THE AO SHOWCAUSED THE ASSESSEE AS TO WHY SHORT TERM CAP ITAL GAIN - RS.39,66,123/- SHOULD NOT BE BROUGHT TO TAX AS BUSI NESS INCOME AND WHY LONG TERM CAPITAL CAPITAL GAIN ON SALE OF SHAR ES- RS.1,68,01,686/- BE NOT BROUGHT TO TAX, CONSIDERING THE INVESTMENT SHOWN AS ON 31-03-2004/01-04-2004 AS STOCK-IN-TRADE . IN RESPONSE, THE ASSESSEE REPLIED THAT A SIMILAR ADDITION TREATI NG THE LONG TERM CAPITAL GAIN AS BUSINESS INCOME MADE IN A.Y. 2005-06 & 2006 -07 WAS DELETED BY THE CIT (A) .AS REGARDS SHORT TERM CAPITAL GAIN INCOME OF RS.39,66,123/- ON SALE OF SHARES AND OF RS.4,962 ON MUTUAL FUNDS, THE ASSESSE E POINTED OUT THAT HE WAS INVESTOR IN SHARES & NOT A TRADER, BASIC INTENTION BEHIND THE PURCHASE OF SHARES BEING TO MAKE INVESTMENT. SINCE HE HAD EARNED DIVID END INCOME OF RS.16,39,280 FOR THE YEAR UNDER CONSIDERATION AND S HARES WERE PURCHASED OUT OF HIS OWN FUNDS WHILE THE BOOKS OF ACCOUNTS REFLECTED SHARES & SECURITIES UNDER THE HEAD OF 'INVESTMENTS' & NOT AS 'STOCK IN TRADE' & T HE SAME HAD BEEN ACCEPTED BY DEPARTMENT IN THE PRECEDING ASSESSMENT YEARS, THE ASSESSEE PLEADED THAT TRANSACTIONS IN SHARES AND SECURITIES BERECOGNIZED AS INCOME FROM CAPITAL GAINS ONLY. INTER ALIA, THE ASSESSEE REFERRED DECISIONS I N KARAM CHAND THAPAR AND BROTHERS (P) LTD VS. CIT (1971) 83 ITR 899(SC) ;AR JUN KAPUR V. DCIT- 70 ITD 161(DELHI) ; JANAK RANGVALLA V. ACIT, 11 SOT 627(BO MBAY). HOWEVER, THE AO DID NOT ACCEPT THE SUBMISSIONS OF THE ASSESSEE IN V IEW OF THE FOLLOWING REASONS GIVEN IN PARA 4.4 OF THE ASSESSMENT ORDER : (I) ONE OF THE MOST IMPORTANT FACTOR TO DECIDE WHE THER A PARTICULAR TRANSACTION IS OF NATURE OF 'SHORT TERM CAPITAL GAI N' OR 'INCOME FROM BUSINESS' IS MOTIVE BEHIND SUCH INVESTMENT. THIS THEORY HAS FOUND PLACE IN VARIOUS DECISIONS OF COURTS. EVEN THE AR O F THE ASSESSEE HAS MENTIONED THE SAME IN HIS SUBMISSION FIRST PARAGRAP H AT SUPRA. DURING THE YEAR UNDER CONSIDERATION ASSESSEE HAS EARNED DIVIDE ND OF RS.15,65,224.04 WHEREAS THE PROFIT ON THE SALE OF S HARE IS OF 3 ITA NO.3040/AHD/2010 RS.2,07,67,809/- IF RATIO OF DIVIDEND TO PROFIT IS TO BE CONSIDERED IT IS 1:13, I.E. FOR PROFIT OF 13 RUPEES ASSESSEE HAS EARNED ON LY 1 RUPEE OF DIVIDEND. LOOKING THE FACTS AND FIGURES OF THE CASE IT IS CLE AR THAT THE MOTIVE OF THE ASSESSEE BEHIND THE TRANSACTIONS IS TO EARN PROFIT ONLY. (II) THE SECOND THING WHICH CAN HELP IN AN ATTEMPT TO DETERMINE THE NATURE OF TRANSACTION IS FREQUENCY OF TRANSACTIONS. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS ENTERED INTO 9558 SA LE AND PURCHASE TRANSACTIONS IN 392 SCRIPTS. IT IS A VERY BASIC IDE A, IF ONE HAS FUNDAMENTAL MOTIVE TO INVEST HE WILL INVEST IN SOME SCRIP AND T HE NUMBER OF TRANSACTION WOULD ALSO BE LIMITED. CONVERSELY, IF MOTIVE IS TO EARN PROFIT, ONE WILL BUY AND SELL ACCORDING TO OPPORTUNITY AND FREQUENCY OF TRANSACTION WOULD BE MORE. THE ASSESSEE HAS ENTERED INTO 9558 TRANSACTIONS IN 392 SCRIPS, ON AN AVERAGE ASSESSEE HAS, DURING THE YEAR, PURCHA SED AND SOLD EACH SCRIPT MORE THAN 24.38 TIMES. MOREOVER, THE ASSESSE E HAS TRANSACTED ON AN AVERAGE AT LEAST TWO SCRIPTS IN A WORKING DAY AN D CARRIED ON 26 TRANSACTION PER DAY, WHICH ARE APART FROM THE PURCH ASE TRANSACTION DONE DURING THE YEAR. IT IS ALSO PERTINENT TO MENTION HE RE THAT ASSESSEE HAS EARNED PROFIT FROM 1833 TRANSACTIONS; ACCORDINGLY N ATURE OF TRANSACTIONS CANNOT BE CONSIDERED AS INVESTMENT ACTIVITIES ON TH E PARAMETERS OF FREQUENCY OF TRANSACTIONS. (III) THE ASSESSEE IN HIS SUBMISSION AT PARA (D)IX SUPRA HAS MENTIONED ABOVE DISCUSSED PARAMETERS AND ALSO REFERRED CIRCUL AR NO. 4/2007 DATED 15.06.2007 ISSUED BY THE CBDT AND REFERRED DECISION IN 288-ITR-641. CBDT CIRCULAR NO. 4/2007 SEEKS TO ADDRESS THE CRUCI AL ISSUE OF CHARACTERIZATION AND TAXATION OF INCOME EARNED THRO UGH HOLDING OF SHARES WITH EMPHASIS ON TAXATION OF FIIS WITH RESPECT TO S UCH EARNINGS. THE CIRCULAR HAS TOTAL 12 PARAS AND INSTRUCTIONS CONTAI NED IN IT ARE SUPPLEMENT TO EARLIER INSTRUCTIONS NO. 1827 DATED 31.08.1989 ( F. NO. 149/287/2005- TPL). THE SAID CIRCULAR EMPHASIZES ON PRINCIPLES LA ID DOWN BY THE SUPREME COURT IN FOLLOWING TWO CASES: ASSOCIATED INDUSTRIAL DEVELOPMENT COMPANY PVT. LTD. (82 ITR 586), THE SUPREME COURT OBSERVED THAT: 'WHETHER A PARTICULAR HOLDING OF SHARES IS BY WAY OF 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 IT SHOULD, IN NORMAL CIRCUMSTANCES, BE IN A POSITION TO PRODUCE E VIDENCE FROM ITS RECORDS AS TO WHETHER IT HAS MAINTAINED ANY DISTINC TION BETWEEN THOSE SHARES WHICH ARE ITS STOCK-IN-TRADE AND THOSE WHICH ARE HELD BY WAY OF INVESTMENT' IN THE CASE OF COMMISSIONER OF INCOME-TAX, BOMBAY V /S. H. HOLCK LARSEN (160 ITR 67), THE SUPREME COURT OBSERVED: 4 ITA NO.3040/AHD/2010 'THE HIGH COURT IN OUR OPINION, MADE A MISTAKE IN O BSERVING WHETHER TRANSACTIONS OF SALE AND PURCHASE OF SHARES WERE TRADING TRANSACTIONS OR WHETHER THESE WERE IN THE NATURE OF INVESTMENT WAS A QUESTION OF LAW. THIS WAS A MIXED QUESTION OF LAW AND FACT.' THE CASE LAW 288-ITR-641 REFERRED BY THE ASSESSEE A LSO FINDS PLACE IN THE SAID CIRCULAR. IN THIS CASE AUTHORITY FOR ADVANCE R ULINGS (AAR) (288 ITR 641) REFERRING TO THE DECISIONS OF SUPREME COURT IN SEVERAL CASES HAS CULLED OUT THE FOLLOWING PRINCIPLES: (I) WHERE A COMPANY PURCHASES AND SELLS SHARES, IT MUST BE SHOWN THAT THEY WERE HELD AS STOCK-IN-TRADE AND THA T EXISTENCE OF THE POWER TO PURCHASE AND SELL SHARES IN THE MEMORA NDUM OF ASSOCIATION IS NOT DECISIVE OF THE NATURE OF TRANSA CTION; (II) THE SUBSTANTIAL NATURE OF TRANSACTIONS, THE MA NNER OF MAINTAINING BOOKS OF ACCOUNTS, THE MAGNITUDE OF PUR CHASES AND SALES AND THE RATIO BETWEEN PURCHASES AND SALES AND THE HOLDING WOULD FURNISH A GOOD GUIDE TO DETERMINE THE NATURE OF TRANSACTIONS; (III) ORDINARILY THE PURCHASE AND SALE OF SHARES WI TH THE MOTIVE OF EARNING A PROFIT, WOULD RESULT IN THE TRANSACTION B EING IN THE NATURE OF TRADE/ADVENTURE IN THE NATURE OF TRADE; BUT WHER E THE OBJECT OF THE INVESTMENT IN SHARES OF A COMPANY IS TO DERIVE INCO ME BY WAY OF DIVIDEND ETC. THEN THE PROFITS ACCRUING BY CHANGE I N SUCH INVESTMENT (BY SALE OF SHARES) WILL YIELD CAPITAL GAIN AND NOT REVENUE RECEIPT. (IV) IN THE CIRCULAR, THE CBDT HAS ALSO EMPHASIZED IN PARA 10 AND 11 ON FOLLOWING POINTS: (A) MAINTENANCE OF TWO PORTFOLIOS BY A TAX PAYER (B) PRINCIPLES TO BE TAKEN IN TOTALITY TO DETERMINE WHETHER IN A GIVEN CASE THE SHARES HELD BY THE ASSESSEE ARE INVE STMENT OR STOCK-IN-TRADE. IN THE INSTANT THE ASSESSEE HAS MAINTAINED ONLY ONE PORTFOLIO JUST TO MITIGATE TAX LIABILITY DESPITE HAVING VOLUME AND MO TIVE OF BUSINESS SCALE. (V) CONSIDERING THE GUIDELINES ON THE BASIS OF ABOV E MENTIONED CIRCULARS AND DECISIONS, IT CAN BE SAID OTHER FACTO R TO BE CONSIDERED WHILE DECIDING THE NATURE OF TRANSACTIONS ARE MAGNITUDE OF SALE AND PURCHASE. THE ASSESSEE'S TURNOVER IN THE SAID BUSINESS IS RUN NING IN CRORES OF RUPEES. OTHER THINGS INCLUDED IN GUIDING FACTORS AR E SUBSTANTIAL NATURE OF TRANSACTIONS AND MANNER OF MAINTAINING BOOKS OF ACC OUNTS. SUBSTANTIAL NATURE/MAGNITUDE OF THE TRANSACTIONS HAS BEEN DISCU SSED IN PARA (II), THE ASSESSEE IN HIS BOOKS HAS SHOWN PROFIT FROM THE SAL E OF SHARES AND AT THE TIME OF FILING RETURN OF INCOME CLAIMED SHORT TERM AND LONG TERM CAPITAL GAIN. 5 ITA NO.3040/AHD/2010 (VI) THE LENGTH OF PERIOD OF OWNERSHIP OR HOLDING PERIOD OF SHARES IS ALSO A DECIDING FACTOR TO ESTABLISH NATURE OF TRANS ACTION. IT IS NOTICE FROM THE RECORDS THAT THE ASSESSEE HOLDS MAJORITY OF SCR IPS (70%-80%) FOR LESS THAN 45 DAYS I.E. THE ASSESSEE TRANSACTED AS A PRUD ENT BUSINESSMAN BY REALIZING THE PROFIT AS AND WHEN IT ARISES. THE ASS ESSEE HAS MADE PURCHASES OF SHARES WITH AN INTENTION TO EARN PROFI T, IF INTENTION WERE OF INVESTMENT; THE ASSESSEE WOULD HAVE HELD THE SCRIPT S FOR A LONGER PERIOD. (VII) THE INFRASTRUCTURE EMPLOYED FOR THE SHARE TR ANSACTIONS IS ALSO A DECIDING FACTOR TO ESTABLISH NATURE OF TRANSACTION. THE ASSESSEE HAS HIS ACCOUNTS WITH THE FOLLOWING STOCK BROKERS. (I) SOUTH GUJARAT SHARES &, SHARE BROKERS LTD. (II) KOTAK SECURITIES . (III) VENTURA INVESTMENT (VIII) DURING THE YEAR UNDER CONSIDERATION THE ASSE SSEE HAS OBTAINED LOANS FROM BANKS AND OTHER INSTITUTIONS/PARTIES AGA INST HYPOTHECATION OF SHARES AND SECURITIES HDFC BANK - RS. 5,30,565/- STAN-CHART BANK -- RS. 5,28,777/- ABN-AMRO - RS. 7,70,359/- OTHER UNSECURED LOANS OF RS.48,58,920 [SHARE]+RS.4, 27,651 [BUSINESS] 2.1 ACCORDINGLY, WHILE DISTINGUISHING THE DECISI ONS RELIED UPON BY THE ASSESSE IN 83 ITR 899 AND 11 SOT 627, THE AO TREATED THE SUM OF RS.2,07,67,809/- SHOWN BY THE ASSESSEE IN HIS STATEMENT OF TOTAL INC OME UNDER THE HEAD 'SHORT TERM CAPITAL GAIN' AND 'LONG TERM CAPITAL GAIN,' AS 'BUSINESS INCOME' 3. ON APPEAL, THE LEARNED CIT(A) WHILE FOLLOWING TH E ORDER DATED 29.1.2010 OF THE ITAT IN THE ASSESSEES OWN CASE FO R THE AYS 2005- 06 & 2006-07 DECIDED THE ISSUE IN THE FOLLOWING TERMS:- 3. ON MERITS, THE APPELLANTS SUBMISSION IS THAT THE ISSUE INVOLVED IN THE YEAR UNDER CONSIDERATION IS IDENTICAL TO THE IS SUES INVOLVED IN THE ASST. YEARS 2005-06 & 2006-07 AND THEREFORE SQUARELY COVE RED BY THE ABOVE ORDER OF THE HONBLE ITAT IN HIS CASE. 4. I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF TH E APPELLANT. IN SO FAR AS THE SALE OF SHARES FROM WHICH CAPITAL GAINS HAS BEEN SHOWN, THE HON'BLE ITAT HAS CONFIRMED THE ORDER OF THE CIT(A) IN HOLDING THAT THE PROFIT FROM THE SALE OF SHARES IS ASSESSABLE AS LON G TERM CAPITAL GAIN. IN 6 ITA NO.3040/AHD/2010 REGARD TO THE PROFIT FROM SALE OF SHARES DECLARED U NDER THE HEAD 'SHORT TERM CAPITAL GAIN', IT IS IMPORTANT TO REPRODUCE THE OPE RATIVE PART OF THE ITAT'S ORDER. '15. IN RESPECT OF PROFIT OF RS.55,40,679/~ BEING ' SHORT TERM CAPITAL GAIN' AS CLAIMED BY THE ASSESSEE AND HELD AS PROFIT S ASSESSED UNDER THAT BUSINESS BY TWO AUTHORITIES, WE FIND THAT IN M ANY CASES THERE IS DELIVERY OF SHARES AND SHARE WERE REGISTERED IN THE NAME OF THE ASSESSEE. THE HOLDING PERIOD OF THE SHARES IS FROM '0' DAYS TO '366'DAYS. IN SOME CASES,, THE FREQUENCY OF TRANSAC TIONS ARE APPARENTLY SUBSTANTIAL AS ON ONE DAY THE ASSESSEE H AS PURCHASES SEVERAL SCRIPTS AND SOLD SEVERAL OF THEM ON THE SAM E DAY. 16. THE QUESTION IS WHETHER THEREFORE, MERELY FROM FREQUENCY OF THE TRANSACTIONS CARRIED ON BY THE ASSESSEE, HE IS TREATED AS DEALER IN SHARES OR STILL HE IS HELD AS INVESTOR. AS FOUND IN THE CASE OF SARNATH INFRASTRUCTURE (P) LTD. VS ASSTT.CIT(SUPRA) ALSO, A SSESSEE ADDUCED EVIDENCE TO SHOW THAT HIS HOLDINGS ARE FOR INVESTME NT AS RECORDED IN THE BOOKS OF ACCOUNT. THE HOLDINGS ARE VALUED AT COST, AND SUCH ACCOUNTING HAS BEEN ACCEPTED BY THE REVENUE IN EARL IER YEARS. THERE IS NO MATERIAL TO SHOW THAT ASSESSEE HAS DECL ARED HIMSELF AS A TRADER IN SHARES AND LEGAL REQUIREMENTS THEREFORE H AVE BEEN COMPLIED WITH. IT IS ALSO A FACT THAT HE HAS NOT BO RROWED ANY MONEY FOR INVESTING IN SHARES. MERELY BECAUSE, ASSESSEE H AD SOME BORROWED FUNDS IT WOULD NOT BY ITSELF SHOW THAT THE Y WERE DEPLOYED IN INVESTMENT. NOTWITHSTANDING, EVEN BORROWING ARE REQUIRED TO SETTLE PAYMENTS OBLIGATIONS IN RESPECT OF INVESTMEN TS, LIKE ONE TAKES LOAN FOR PURCHASING A HOUSE. IN ANY CASE, HIGH FREQ UENCY TRANSACTIONS AND LOW PERIOD HOLDINGS INDICATE TRADE , WHEREAS LOW FREQUENCY TRANSACTIONS AND HIGH PERIOD HOLDINGS IND ICATE INVESTMENT, 17. IN THIS CASE, THE ASSESSEE HAS DISCHARGED THE O NUS OF SHOWING THAT IT IS MAKING INVESTMENT BUT REVENUE IS ABLE TO SHOW THAT THERE ARE HIGH FREQUENCIES AND LOW HOLDINGS IN MANY TRANS ACTIONS OF SHARES INDICATING THAT ASSESSEE HAS SOME INTENTION OF PURCHASING AND SELLING SHARES AS A TRADER. THE CASE OF THE ASS ESSEE IS SUPPORTED BY THE FACT THAT IT HAS ENTERED THE PURCHASES IN TH E BOOKS AS INVESTMENT, SHARES ARE VALUED AT COST AND REVENUE I S HOLDING SUCH ACCOUNTING TREATMENT AS INVESTMENT IN THE PAST. THU S, THERE CANNOT BE A FIXED CRITERIA TO DECIDE AS IN THE PRESENT CAS E WHETHER ASSESSEE HAS TRADED IN SHARES EVEN THOUGH ASSESSEE HELD THEM AS INVESTMENT. 18. THOUGH IT HAS BEEN HELD IN THE CASE OF SARNATH INFRASTRUCTURE (P) LTD.(SUPRA) THAT DELIVERY OF SHARES IS AN IMPOR TANT CRITERIA FOR HO/DING THAT ASSESSEE IS INVESTING IN THEM BUT AFTE R DEMATIZATION WHERE SHARES ARE DELIVERED IN THE DEMAT ACCOUNT THE NEXT DAY, IT CANNOT BE HELD THAT IN ALL SUCH CASES, IT WOULD BE INVESTMENT AND 7 ITA NO.3040/AHD/2010 NOT TRADING. IF THAT IS SO HELD, THEN ALL THOSE TRA DERS IN SHARES IN WHOSE DEMAT ACCOUNTS SHARES ARE DELIVERED CAN BE SA ID TO HAVE EARNED CAPITAL GAINS AND NOT PROFITS. THEREFORE, ON LY ONE CRITERIA, I.E. DELIVERY OF SHARES ALONE WILL NOT BE SUFFICIENT TO DECIDE THE ISSUE. EVEN OTHERWISE IN SARNATH INFRASTRUCTURE (P) LTD.(S UPRA) ITSELF IT HAS BEEN HELD THAT CUMULATIVE EFFECT OF SEVERAL FACTORS WILL DECIDE THE ISSUE. 19. CONSIDERING THE TOTALITY AND PECULIARITY OF THE FACTS OF THIS CASE, WE FIND THAT ASSESSEE IS NEITHER FULLY ACTING AS A TRADER NOR AS FULLY INVESTOR. DEMARCATION IS QUITE HAZY; THOUGH I N THE BOOKS HE IS SHOWING ALL THE PURCHASES AS INVESTMENT BUT FREQUEN CY OF TRANSACTION IN SEVERAL CASES IS SO LARGE AND HOLDIN G IN MANY CASES IS SO SMALL FROM 0 TO A WEEK OR SO THAT ASSESSEE IS DE FACTO SELLING AND PURCHASING SHARES AS TRADER. HE IS ALSO HOLDING SHARES FOR LONG PERIOD INDICATING THAT THEY ARE HELD AS INVESTMENT. THEREFORE, A CRITERIA HAS TO BE FIXED FOR DETERMINING AS TO WHEN HE IS ACTING AS TRADER AND WHEN AS INVESTOR. ACCORDINGLY, WE DECIDE FOLLOWING CRITERIA TO HOLD WHEN GAINS ARE TO BE TAXED AS PROF IT TO BE EARNED UNDER THE BUSINESS OR TO BE TAXED AS SHORT TERM CAP ITAL GAIN, WE HOLD THAT IF SHARES ARE NOT HELD EVEN SAY FOR A MON TH, THEN THE INTENTION IS CLEARLY TO REAP PROFIT BY ACTING AS A TRADER AND HE DID NOT INTEND TO HOLD THEM IN INVESTMENT PORT-FOLIO. W E BELIEVE THAT IF A PERSON INTENDS TO HOLD HIS PURCHASES OF SHARES AS I NVESTMENT, HE WOULD WATCH THE FLUCTUATION OF RATES IN THE MARKET FOR WHICH A MINIMUM TIME IS NECESSARY, WHICH WE ESTIMATE AT ONE MONTH. WHERE SHARES ARE HELD FOR MORE THAN A MONTH, THEY S HOULD BE TREATED AS INVESTMENT AND ON THEIR SALE SHORT TERM CAPITAL GAIN SHOULD BE CHARGED. WHEN SHARES ARE HELD FOR LESS TH AN A MONTH, GAIN ON THEM SHOULD BE TREATED AS PROFIT FROM BUSIN ESS. 20. THE ASSESSEE WILL GIVE THE WORKING AND COMPUTIN G 'SHORT-TERM CAPITAL GAINS' ON THE ABOVE BASIS. THE REST OF THE PROFIT WILL BE TREATED AS ASSESSABLE UNDER THE HEAD 'BUSINESS.' , 5. IN VIEW OF THE ABOVE DECISION OF THE HON'BLE ITA T, AHMEDABAD IN THE APPELLANT'S OWN CASE, I HOLD THAT THE ASSESSING OFF ICER HAS WRONGLY TREATED THE PROFIT FROM SALE OF SHARES OF RS.1,68,01,686/- UNDER THE 'BUSINESS' HEAD AND ACCORDINGLY DIRECT HIM TO ASSESS THE PROFI T FROM THE SALE OF ABOVE SHARES UNDER THE HEAD 'CAPITAL GAINS'. SIMILARLY, T HE PROFIT TO THE EXTENT OF RS.39,66,123/-FROM SALE OF SHARES SHOWN AS SHORT TE RM CAPITAL GAIN, ASSESSED UNDER THE 'BUSINESS' HEAD IS DECIDED IN TE RMS OF THE DECISION GIVEN BY THE HON'BLE ITAT IN THE APPELLANT'S CASE I N THE A.YRS 2005-06 & 2006-07. IF THE SHARES SHOWN UNDER THE HEAD SHORT T ERM CAPITAL GAINS HAVE BEEN HELD FOR LESS THAN A MONTH, THEN THE INTENTION OF THE APPELLANT IS CLEARLY TO REAP PROFIT BY ACTING AS A TRADER, AS HE DID NOT INTEND TO HOLD THEM IN INVESTMENT PORT-FOLIO AND IF SHARES ARE HEL D FOR A MONTH OR MORE, THEN THEY SHOULD BE TREATED AS INVESTMENT AND PROFI T FROM SALE OF THESE SHARES IS TO BE TAXED AS SHORT TERM CAPITAL GAIN. I N OTHER WORDS, GAIN FROM 8 ITA NO.3040/AHD/2010 SHARES HELD FOR LESS THAN A MONTH IS TO BE TREATED AS A PROFIT FROM BUSINESS. I, THEREFORE, UPHOLD THE ORDER OF THE ASS ESSING OFFICER REGARDING TAXABILITY OF SHORT TERM CAPITAL GAINS UNDER THE BU SINESS HEAD TO THE EXTENT OF PROFIT RECEIVED FROM SALE OF SHARES WHICH ARE HE LD FOR LESS THAN A MONTH. THE ASSESSING OFFICER SHALL CARRY OUT NECESSARY COM PUTATION IN THIS REGARD. THE APPELLANT SHALL, ACCORDINGLY, GIVE A WO RKING OF COMPUTATION OF SHORT TERM CAPITAL GAINS ON THE ABOVE BASIS BEFORE THE ASSESSING OFFICER SO AS TO GIVE EFFECT TO THIS ORDER. THE FIRST GROUN D OF APPEAL IS, THEREFORE, PARTLY ALLOWED. THE REMAINING TWO GROUNDS OF APPEAL ALSO STAND DISPOSED OF IN TERMS OF THE DECISION GIVEN IN THE FIRST GROU ND OF APPEAL. 4. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST T HE AFORESAID FINDINGS OF THE LEARNED CIT(A). AT THE OUTSET, BOTH THE PARTIES AGREED THAT THE ISSUE IS SQUARELY COVERED BY THE DECISIO N REPORTED IN 37DTR(AHD.)(TRIB)345 IN THE ASSESSEES OWN CASE. 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE AS ALSO THE AFORESAID DECISION OF THE ITAT . WE FIND THAT IN THE AFORESAID DECISION DATED 29.1.2010 IN ITA NOS.3 554/AHD/2008, 4024/AHD/2008, 2219/AHD/2009 AND 1932/AHD/2009,FOR THE AYS 2005-06 & 2006-07,NOW REPORTED IN 37DTR(AHD.)(TRIB) 345, IN THE ASSESSEES OWN CASE, THE TRIBUNAL FOUND THAT THE AS SESSEE HAD SHOWN THE TRANSACTIONS IN SHARES AS INVESTMENT AND NOT AS STOCK-IN-TRADE CONSISTENTLY FOR SEVERAL YEARS IN THE PAST AND THE DEPARTMENT DI D NOT CHALLENGE THE BOOKKEEPING OR ACCOUNTING OF SHARES AS INVESTMENT. THE ENTIRE PORTFOLIO HAD BEEN VALUED AT COST AS AT THE END OF THE ACCOUNTING YEAR. ACCORDINGLY, THE TRIBUNAL CONCLUDED THAT IF IN THE PAST, THE DEPARTM ENT HAD ACCEPTED THE SALE OF SHARES OF HOLDING OF MORE THAN A YEAR AS INVESTMENT AND PROFITS THEREON HAS BEEN ASSESSED UNDER THE HEAD CAPITAL GAINS, THEN THERE WAS NO REASON TO HOLD DIFFERENTLY THIS YEAR.AS REGARDS SHORT-TERM CAPITA L GAINS, THE ITAT OBSERVED THAT THE ASSESSEE DISCHARGED THE ONUS OF SHOWING THAT H E WAS MAKING INVESTMENT, BUT THE REVENUE WAS ABLE TO SHOW THAT THERE WERE HI GH FREQUENCIES AND LOW HOLDINGS IN MANY TRANSACTIONS OF SHARES, INDICATING THAT THE ASSESSEE HAD SOME INTENTION OF PURCHASING AND SELLING SHARES AS A TRA DER. CONSIDERING THE TOTALITY AND PECULIARITY OF THE FACTS OF THE CASE, IT WAS HE LD THAT THE ASSESSEE WAS NEITHER FULLY ACTING AS A TRADER NOR AS AN INVESTOR. THEREF ORE, A CRITERION WAS FIXED FOR 9 ITA NO.3040/AHD/2010 DETERMINING AS TO WHEN HE IS ACTING AS TRADER AND W HEN AS INVESTOR. ACCORDINGLY, THE TRIBUNAL DIRECTED THAT WHERE SHARES WERE HELD F OR MORE THAN A MONTH, THESE SHOULD BE TREATED AS INVESTMENT AND ON THEIR SALE S HORT-TERM CAPITAL GAINS SHOULD BE CHARGED. WHEN SHARES WERE HELD FOR LESS THAN A M ONTH, GAIN ON THEM SHOULD BE TREATED AS PROFIT FROM BUSINESS, THE ITAT CONCLU DED. INDISPUTABLY, FACTS AND CIRCUMSTANCES IN THE YEAR UNDER CONSIDERATION ARE S IMILAR TO THE FACTS AND CIRCUMSTANCES OBTAINING IN THE PRECEDING YEARS. SIN CE THE LD. CIT(A) MERELY FOLLOWED THE DECISION DATED 29-01-2010 OF THE ITAT IN THE ASSESSEES OWN CASE FOR THE AYS 2005-06 AND 2006-07 IN ITA NOS.355 4/AHD/2008, 4024/AHD/2008, 2219/AHD/2009 AND 1932/AHD/2009, IN THE ABSENCE OF ANY MATERIAL SO AS TO ENABLE US TO TAKE A DIFFER ENT VIEW IN THE MATTER, WE ARE NOT INCLINED TO INTERFERE WITH THE F INDINGS OF THE LD. CIT(A). CONSEQUENTLY, FOLLOWING THE VIEW TAKEN BY A CO-ORDINATE BENCH IN THEIR AFORESAID DECISION, WE HAVE NO ALTER NATIVE BUT TO REJECT GROUND NOS. 1 & 2 IN THE APPEAL. 6. GROUND NOS.3 AND 4 IN THE APPEAL, BEING MERE P RAYER NOR ANY SUBMISSIONS HAVING BEEN MADE ON THESE GROUNDS, DO N OT REQUIRE ANY SEPARATE ADJUDICATION AND ARE, THEREFORE, DISMISSED . 7. IN THE RESULT, APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE COURT TODAY ON 24 -06-2011 SD/- SD/- (BHAVNESH SAINI) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATED : 24 -06-2011 COPY OF THE ORDER FORWARDED TO: 1. SHRI SUGAMCHAND CHIMANLAL SHAH, 204, VIJAY CHAMB ERS, BHAGATALO, SURAT 2. THE DY. COMMISSIONER OF INCOME-TAX, CIRCLE-3, SU RAT 3. CIT CONCERNED 4. CIT(A)-II, SURAT 10 ITA NO.3040/AHD/2010 5. DR, ITAT, AHMEDABAD BENCH-D, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD