Shri Ashish Karwa (HUF), Indore V. The ACIT, Indore

ITA 315/IND/2009

• Counselvise Citation: 31522714 RSA 2009
• Duration Of Justice: 4 year(s) 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 03-05-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 17-06-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R A VERMA; MRIDULA BAJPAI
• Keywords: Capital asset; Business income; Salary income; Rule of consistency; Transactions in derivatives; Cost of acquisition; Deemed dividend
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, J.M. AND SHRI R.C.SHARM A, A.M. PAN NO. : ALGPK3905P I.T.A.NO.307/IND/2009 A.Y. : 2006-07 SHRI MANISH KARWA, ACIT, 9-B, JANKINAGAR ANNEXE, VS 5(1), INDORE. INDORE. APPELLANT RESPONDENT PAN NO. : ABCPK8869N I.T.A.NO.308/IND/2009 A.Y. : 2006-07 SHRI SUSHIL KARWA, ACIT, 9-B, JANKINAGAR ANNEXE, VS 5(1), INDORE. INDORE. APPELLANT RESPONDENT PAN NO. : ABPPK6381G I.T.A.NO.309/IND/2009 A.Y. : 2006-07 SMT.SUDHA KARWA, ACIT, 9-B, JANKINAGAR ANNEXE, VS 5(1), MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 2 2 INDORE. INDORE. APPELLANT RESPONDENT PAN NO. : ABCPK8868P I.T.A.NO.310/IND/2009 A.Y. : 2006-07 SHRI VISHNU KARWA, ACIT, 9-B, JANKINAGAR ANNEXE, VS 5(1), INDORE. INDORE. APPELLANT RESPONDENT PAN NO. : AAMHS1460C I.T.A.NO.311/IND/2009 A.Y. : 2006-07 SHRI SUBHASHCHAND KARWA (HUF), ACIT, 9-B, JANKINAGAR ANNEXE, VS 5(1), INDORE. INDORE. APPELLANT RESPONDENT PAN NO. : AABHK8503M I.T.A.NO.312/IND/2009 A.Y. : 2006-07 MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 3 3 SHRI SUSHIL J.KARWA (HUF), ACIT, 9-B, JANKINAGAR ANNEXE, VS 5(1), INDORE. INDORE. APPELLANT RESPONDENT PAN NO. : ALGPK4632H I.T.A.NO.313/IND/2009 A.Y. : 2006-07 SHRI MUKUND KARWA, ACIT, 9-B, JANKINAGAR ANNEXE, VS 5(1), INDORE. INDORE. APPELLANT RESPONDENT PAN NO. : ANBPK5655R I.T.A.NO.314/IND/2009 A.Y. : 2006-07 SHRI ANOOP KARWA, ACIT, 9-B, JANKINAGAR ANNEXE, VS 5(1), INDORE. INDORE. APPELLANT RESPONDENT PAN NO. : AAFHA7378Q I.T.A.NO.315/IND/2009 MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 4 4 A.Y. : 2006-07 SHRI ASHISH KARWA, ACIT, 9-B, JANKINAGAR ANNEXE, VS 5(1), INDORE. INDORE. APPELLANT RESPONDENT PAN NO. : ALNPK7401K I.T.A.NO.346/IND/2009 A.Y. : 2006-07 SMT. ARTI KARWA, ACIT, 9-B, JANKINAGAR ANNEXE, VS 5(1), INDORE. INDORE. APPELLANT RESPONDENT PAN NO. : ABPPK6380H I.T.A.NO.347/IND/2009 A.Y. : 2006-07 SMT. SUVARNA KARWA, ACIT, 9-B, JANKINAGAR ANNEXE, VS 5(1), INDORE. INDORE. APPELLANT RESPONDENT MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 5 5 PAN NO. : ABPPK6384D I.T.A.NO.348/IND/2009 A.Y. : 2006-07 SMT. MATHURA DEVI KARWA, ACIT, 9-B, JANKINAGAR ANNEXE, VS 5(1), INDORE. INDORE. APPELLANTS BY : SHRI PRAKASH JAIN, C. A. RESPONDENT BY : SMT.MRIDULA BAJPAI AND SHRI R.A.VERMA, SR. DR DATE OF HEARING : 09.10.2013 DATE OF PRONOUNCEMENT : 20.12.2013 O R D E R PER BENCH: THESE ARE THE APPEALS FILED BY THE DIFFERENT ASSESSEES CHALLENGING THE ORDER OF CIT(A) FOR THE MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 6 6 ASSESSMENT YEAR 2006-07, AGAINST THE ORDER PASSED B Y THE ASSESSING OFFICER U/S 143(3) OF THE INCOME-TAX AC T, 1961. 2. COMMON GROUNDS HAVE BEEN TAKEN IN ALL THE APPEALS. MAIN GRIEVANCE OF THE ASSESSEE PERTAINS TO ASSESSING THE PROFIT OFFERED ON SALE OF ASSETS BEIN G S.T.T. PAID ON LISTED SHARES UNDER THE HEAD INCOME FROM BUSINESS AS AGAINST INCOME FROM SHORT TERM CAPITAL GAINS U/S 111(1)(I) OF THE INCOME-TAX ACT, 19 61, ON WHICH TAX IS LEVIABLE AT FLAT RATE OF 10 %. 3. AS THE COMMON GROUNDS ARE INVOLVED IN ALL THE APPEALS, THESE WERE HEARD TOGETHER AND ARE NOW BEING DECIDED BY THIS CONSOLIDATED ORDER. 4. LD. AUTHORIZED REPRESENTATIVE, SHRI PRAKASH JAIN, FIRSTLY ARGUED THE CASE OF SHRI SUSHIL KARWA (I.T.A.NO.308/IND/09) AND SUBMITTED THAT THE ASSESS EE IS A MANAGING DIRECTOR OF M/S. KRISHIDHAN SEEDS MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 7 7 LIMITED. THE ASSESSEE WAS ALSO HAVING INCOME FROM SALE OF SHARES, WHICH WERE OFFERED FOR TAXATION UND ER THE HEAD CAPITAL GAINS. DURING THE COURSE OF ASSESSMENT, THE AO OBSERVED THAT THE ASSESSEE HAD PURCHASED SHARES OF RS. 16,05,41,706/- AND SOLD SHARES OF RS. 14,12,79,276/- AND EARNED PROFIT OF R S. 1,74,56,316/-. THE ASSESSEE DECLARED THIS PROFIT AS SHORT TERM CAPITAL GAIN WHEREAS THE AO HELD THAT T HE SAME IS TO BE ASSESSED UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION WHICH IS CHALLENGE D BY THE ASSESSEE. IT WAS OBSERVED BY THE ASSESSING OFFICER THAT IT WAS EVIDENT FROM THE COPIES OF BANK STATEMENT, SUBMITTED BY THE ASSESSEE, THAT THE ASSESSEE HAS NOT INVESTED HIS SAVING IN SHARES. HE HAS BORROWED FUNDS FROM M/S. KRISHIDHAN SEEDS LIMITED AND UTILIZED THESE FUNDS FOR HIS OWN BENEFIT. HE HAS CARRIED OUT TRANSACTIONS OF SHARES OF MORE THAN 16 MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 8 8 CRORE DURING THE YEAR UNDER CONSIDERATION. IT PROVES THAT HE IS ENGAGED IN THE BUSINESS OF TRADING OF SH ARES. AS PER ASSESSING OFFICER THE CASE LAWS RELIED UPON BY THE ASSESSEE ARE DISTINGUISHABLE ON FACTS, THE ASSES SEE HAS NOT INVESTED HIS SURPLUS FUNDS OR CAPITAL IN THE SHARES BUT HAS UTILIZED THE FUNDS BORROWED FROM PRIVATE LIMITED COMPANY IN WHICH HE IS HAVING SUBSTANTIAL INTEREST. THEREAFTER, THE AO DISCUSSED CBDT CIRCULAR NO.4/2007 DATED 15.6.2007, WHICH CLARIFIES THE ISSUE OF DISTINCTION BETWEEN SHARES HE LD AS STOCK IN TRADE AND SHARES HELD AS INVESTMENT. THREE GUIDING PRINCIPLES WERE GIVEN IN THIS CIRCULAR IN DETERMINING WHETHER IN A GIVEN CASE, THE SHARES ARE HELD BY THE ASSESSEE AS INVESTMENT OR AS STOCK IN T RADE I.E. :- 1. WE HAVE TO VERIFY AS TO HOW THE SHARES WERE VALUED/HELD IN THE BOOKS OF ACCOUNT I.E. MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 9 9 WHETHER THEY WERE VALUED AS STOCK IN TRADE AT THE END OF THE FINANCIAL YEAR FOR PURPOSE OF ARRIVING AT BUSINESS INCOME OR HELD AS INVESTMENTS IN CAPITAL ASSETS. 2. IN THE CASE OF ASSESSEE HE HAS SHOWN SHARES AS STOCK IN TRADE IN HIS BOOKS OF ACCOUNT. IT IS APPEARING AS CLOSING STOCK AT THE END OF THE YEAR IN THE BALANCE SHEET NOT AS INVESTMENT. IT PROVES THAT ASSESSEE HAS DONE BUSINESS OF SHARE TRADING DURING THE YEAR. 3. WHETHER THERE ARE SUBSTANTIAL TRANSACTIONS THEIR MAGNITUDE ETC. THE ASSESSING OFFICER STATED THAT THE ASSESSEE HAS DONE LARGE NUMBER OF TRANSACTIONS DURING THE YEAR, KEEPING IN VIEW VOLUME AND FREQUENCY OF THE TRANSACTIONS, THE ASSESSING OFFICER HELD THAT PROFIT EARNED BY THE ASSESSEE MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 10 10 IS BUSINESS INCOME AND NOT SHORT TERM CAPITAL GAIN. ASSESSING OFFICER ALSO OBSERVED THAT IN MOST OF THE TRANSACTIONS OF SHARES HOLDING IS LESS THAN A MONTH, SOME SHARES ARE TRANSACTED WITHIN A WEEK ALSO. THE ASSESSING OFFICER OBSERVED THAT THE MOTIVE OF THE ASSESSEE IS NOT TO EARN DIVIDEND, THEREFORE, HE HAS SOLD MOST OF SHARES AND SHOWN STOCK OF RS. 39,74,951/-. IN VIEW OF ABOVE DISCUSSION PROFIT DERIVED FROM SALES OF SHARES AMOUNTING TO RS. 1,74,56,316/- WAS TREATED AS BUSINESS PROFIT IN PLACE OF SHORT TERM CAPITAL GAIN AS SHOWN BY THE ASSESSEE AND PAID THE TAXES U/S 111A TO SPECIAL RATE. 5. BY THE IMPUGNED ORDER, THE LD. CIT(A) CONFIRMED THE ACTION OF THE AO FOR TREATING THE PRO FIT MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 11 11 EARNED ON SALE OF SHARES AS PROFIT FROM BUSINESS AN D PROFESSION AGAINST WHICH THE ASSESSEE IS IN FURTHER APPEAL BEFORE THIS TRIBUNAL. 6. IT WAS ARGUED BY THE LD. AUTHORIZED REPRESENTATIVE, SHRI PRAKASH JAIN THAT THE ASSESSEE IS NOT INVOLVED IN BUSINESS OF TRADING IN SHARES BUT W AS HAVING INCOME FROM SALARY AS A DIRECTOR OF A COMPAN Y. HE WAS FULLY EMPLOYED IN THE MANAGEMENT OF THE AFFAIRS OF THE COMPANY IN WHICH HE WAS MANAGING DIRECTOR. THE ASSESSEE HAS INVESTED MAJOR INCOME AN D PAST YEARS SAVINGS IN THE SHARES FOR THE PURPOSE OF EARNING DIVIDEND INCOME AND ALSO RIPENING THE BENEF ITS OF APPRECIATION IN PRICE OF SHARES, WHICH EVERY INV ESTOR ALWAYS DOES IN SHARES. THE LD. AUTHORIZED REPRESENTATIVE INVITED OUR ATTENTION TO THE STATEMEN T GIVING SCRIPT WISE DETAILS OF INVESTMENT MADE AND S OLD DURING THE YEAR, WHICH INDICATE THAT THE ASSESSEE H AD MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 12 12 NEVER INDULGED IN BULK TRADING IN SHARES NOR IN ANY SPECULATIVE ACTIVITIES IN SHARE LINE. HE SUBMITTED TH AT ALL THE SHARES IN WHICH INVESTMENT WAS MADE ARE OF HIGHLY REPUTED LISTED COMPANY HAVING HUGE VOLUME ON DAY TO DAY BASIS. IT WAS ALSO CONTENDED THAT NEITHE R IN THE PAST NOR IN THE SUBSEQUENT YEAR, THE ASSESSEE HA D UNDERTAKEN TRADING ACTIVITIES OR F & O ACTIVITIES I N JOBBING SHARES. OUR ATTENTION WAS ALSO INVITED TO TH E VITAL FACT THAT ALL THE SHARES WERE PURCHASED AND SO LD THROUGH DEMAT ACCOUNT AND IT WAS NOT A CASE WHERE THE SHARES WERE TRADED THROUGH BROKERS PULL ACCOUNT. AS PER LD. AUTHORIZED REPRESENTATIVE, THE ASSESSEE HA S UTILIZED HIS OWN FUNDS AND NOT BORROWED ANY FUNDS ON INTEREST FOR INVESTMENT IN SHARES. HE PLACED RELIAN CE ON VARIOUS TRIBUNALS DECISION AS PLACED ON RECORD WHERE IT WAS HELD THAT MERELY BY TAKING PROFIT FROM TIME TO TIME, AN INVESTOR DOES NOT LOOSE HIS CHARAC TER MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 13 13 AS AN INVESTOR AND DOES NOT BECOME A TRADER. THE ASSESSEE WAS HAVING CLEAR INTENTION TO ACT AS AN INVESTOR IN THE LINE OF SHARES AND STOCK WHICH IS EVIDENT FROM THE CONDUCT SINCE BEGINNING TO HOLD SHARES OF A FEW SELECTED COMPANY FOR THE PURPOSE OF EARNING DIVIDEND ON THE SHARE HOLDING. FURTHER SUBMISSION OF LD. AUTHORIZED REPRESENTATIVE WAS THAT HIS ASSESSEE DOES NOT CONDUCT LIKE A TRADER IN SHARE MARKET, WHO WATCHES FUNCTIONING OF MARKET VERY KEENLY AND CATCH HOLD OF EARLIEST OPPORTUNITY TO DISPOSE OF SHARES AT THE TIME WHEN THE PRICES OF TH E SHARES REACHED VERY NEAR TO PEAK. A TRADER WOULD REACT MUCH MORE SHARPLY AND ALSO PROMPTLY TO A DECLINING TREND IN THE MARKET. IT IS ONLY AN INVENT OR WHO GOES ON CHERISHING HOPE FOR A REVIVAL IN THE MARKET CONDITIONS. IT WAS FURTHER SUBMITTED THAT ASSESSEE HAVE CHOSEN A PARTICULAR LINE OF INVESTMENT IN MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 14 14 SHARES AND WAS NOT DOING ANY JOBBING OR F & O ACTIV ITY AS A REGULAR DEALER IN SHARES WHO IS DEALING IN F & O ACTIVITY AND JOBBING OF VARIOUS COMPANIES SHARES WOULD HAVE BEEN THE USUAL FEATURE. 7. HIS FURTHER SUBMISSION WAS THAT THE ASSESSEE HAD REGULARLY SHOWN ACQUISITION OF SHARES AS INVESTMENT AND NEVER TREATED THE HOLDING OF SHARE S AS STOCK IN TRADE. THE SAME IS ALSO A FAIRY GOOD IND ICATOR ABOUT THE ACTIVITIES AND ALSO THE INTENTION OF ASSES SEE. HE FURTHER SUBMITTED THAT AN INVESTOR MAY INVEST FOR NOT TOO A LONG TERM BUT WAIT FOR SOME APPRECIATION IN THE PRICE AND THEN OFFER THE SHARES TO MAKE PROFIT OUT OF IT. THE LAW LEXICON BY P. RAMNATHA AIYER (2 ND EDN.) SAYS THAT THE WORD INVESTMENT IS NOT A WORD OF AR T BUT A WORD OF CURRENT VERNACULAR. THE WORD INVEST AND INVESTMENT ARE TO BE TAKEN IN THE SENSE OF LA YING OUT OF MONEY WITH THE OBJECT TO EARN PROFIT. IN THE MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 15 15 INSTANT CASE ASSESSEE HAS NOT ENTERED INTO A FRANTI C ACTIVITY, BUT HOLD ON TO THE SHARES THUS IT IS AN INVESTMENT AND NOT A BUSINESS. 8. AS PER LD. AUTHORIZED REPRESENTATIVE THE SHARES WERE DISCLOSED IN THE BALANCE SHEET AS INVESTMENT AND NOT AS STOCK IN TRADE, THIS FACT ITS ELF PROVES THAT THE ASSESSEE IS AN INVESTOR AND NOT TRA DER IN SHARES. WITH REGARD TO THE OBSERVATION OF THE CI T(A) THAT THE ASSESSEE HAS ENTERED ON THE VERY SAME DAY TRANSACTION OF PURCHASING SHARES OF SAME COMPANY ON MANY OCCASIONS, THE CONTENTION OF THE LD. AUTHORIZE D REPRESENTATIVE WAS THAT WHENEVER THE ASSESSEE WANTS TO BUY SHARES, ONLY THE AVAILABLE LOTS CAN BE PURCHA SED AND, THEREFORE, TO FULFILL THE REQUIREMENTS OF THE ASSESSEE, THE BROKER HAS TO APPROACH THE ANOTHER SELLER TO MEET THE BUYING REQUIREMENT OF THE ASSESS EE. MERELY BECAUSE SHARES WERE PURCHASED ON SAME DAY OR MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 16 16 MORE THAN ONE OCCASION WILL NOT INDICATE THAT THE ASSESSEE HAS ENTERED IN TO SEPARATE TRANSACTION OF PURCHASES BUT ONLY BECAUSE THE BROKER OF THE ASSESSEE WAS ABLE TO LIFT A LESSER AMOUNT OF SHARES FROM ONE SELLER, THIS POSITION OCCURRED. SUCH POSITION SHOULD NOT BE ADVERSELY TAKEN FOR TREATING THAT THE ASSESSEE H AS ENTERED INTO HUGE TRANSACTION OF PURCHASE OF SHARES IN THE SAME COMPANY. 9. IT WAS FURTHER CONTENDED BY THE LD. AUTHORIZED REPRESENTATIVE THAT THE ASSESSEE WAS ENGAGED IN MAKING INVESTMENT IN SHARES SINCE LAST S O MANY YEARS. IT IS CLEARLY DEMONSTRATED BY THE HOLDI NG OF SHARES, WHICH IS INCREASING YEAR BY YEAR. THE DETAILED CHART OF SUCH HOLDING OF SHARES WAS ALSO PLACED ON RECORD TOWARDS WHICH OUR ATTENTION WAS ALS O INVITED. AS PER LD. AUTHORIZED REPRESENTATIVE, SHARES WERE SOLD BY THE ASSESSEE IN THIS YEAR ONLY TO EARN MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 17 17 MORE CAPITAL GAINS AND TO SAFEGUARD AGAINST ANY DECLINE IN THE PRICES. AS PER LD. AUTHORIZED REPRESENTATIVE, THE ASSESSEE HAS NOT CLAIMED STT IN THE BOOKS OF ACCOUNT, WHICH CLEARLY SHOWS THAT THE ASSESSEE WAS ELIGIBLE TO TREAT THE GAIN ON SALE OF SHARE AS CAPITAL GAINS RATHER THAN BUSINESS PROFITS. 10. ON THE OTHER HAND, THE LD. CIT DR VEHEMENTLY ARGUED THAT THE ASSESSEE WAS INVOLVED IN SHARE TRADING, WHICH CLEARLY INDICATED BY THE VOLUM E OF TRANSACTIONS UNDERTAKEN BY THE ASSESSEE WITH RESPECT TO PURCHASE AND SALE OF SHARES. ON SO MANY OCCASION ON A SINGLE DAY, THE ASSESSEE HAS MADE DIFFERENT PURCHASES OF SAME SHARES AND ALSO SOLD THE SAME AT A VERY SHORT INTERVAL. AS PER THE LD. CIT DR, THE VOLUM E AND FREQUENCY OF TRANSACTIONS ITSELF SPEAKS OF THE NATURE OF ACTIVITY THE ASSESSEE WAS CARRYING ON, WHI CH MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 18 18 CAN ONLY BE CLASSIFIED AND TAXED UNDER THE HEAD BUSINESS PROFITS RATHER THAN CAPITAL GAINS. 11. WE HAVE CONSIDERED THE RIVAL CONTENTIONS, CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND ALSO DELIBERATED UPON VARIOUS CASE LAWS CITED BY THE LD. AUTHORIZED REPRESENTATIVE AND LD. CI T DR AND IN THE CONTEXT OF FACTUAL MATRIX OF THE CASE. WE HAD ALSO DELIBERATED ON THE CASE LAWS REFERRED TO B Y LOWER AUTHORITIES IN THEIR RESPECTIVE ORDERS. THE QUESTION AS TO WHETHER THE ASSESSEE HAS EARNED CAPIT AL GAIN OR BUSINESS PROFITS ON THE SHARES SOLD BY HIM DEPEND ON THE FACTS AND CIRCUMSTANCES OF EACH CASE. SUCH DECISION IS TO BE ARRIVED AT BY TAKING INTO ACCOUNT THE INTENTION OF THE ASSESSEE WHILE PURCHAS ING THE SHARES, AS TO WHETHER THE SAME WAS ACQUIRED FOR HOLDING AS INVESTMENT OR FOR DOING BUSINESS THEREIN. THE TREATMENT GIVEN BY THE ASSESSEE IN ITS BOOKS OF MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 19 19 ACCOUNT IS ALSO ONE OF THE DECISIVE FACTORS TO FIND OUT WHETHER THE SHARES WERE HELD AS INVESTMENT OR STOCK IN TRADE. IF THE SHARES ARE BOUGHT WITH THE INTENTI ON OF EARNING CAPITAL GAINS THEREON AND ALSO DIVIDEND INCOME BY KEEPING THE SAME AS INVESTMENT, THE GAIN ARISING THERE FROM IS REQUIRED TO BE TREATED AS CAPI TAL GAINS. ON THE OTHER HAND, IF THE SHARES ARE PURCHASE D WITH THE INTENTION TO EARN PROFIT THEREON AND THE S AME IS TREATED AS STOCK IN TRADE IN THE BOOKS OF ACCOUN T, THE PROFIT ARISING OUT OF SALE OF SUCH SHARES ARE LI ABLE TO BE TREATED AS BUSINESS INCOME. VOLUME AND FREQUENCY OF TRANSACTION IS ALSO ONE OF THE GUIDING FACTORS TO FIND OUT WHETHER THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PURCHASE AND SALE OF SHARES OR MAKING INVESTMENT TO HAVE CAPITAL GAINS THEREON. IN THE INSTANT CASES BEFORE US, WE FOUND THAT THE ASSESSEE HAS INVESTED IN SHARES OF INDIAN COMPANIES SINCE LA ST MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 20 20 5 6 YEARS, WHICH IS CLEAR FROM THE STATEMENT OF SHAREHOLDING OF THE ASSESSEE. THUS, THE FACT OF THE ASSESSEE INVESTING IN SHARES FOR THE LAST SEVERAL Y EARS IS NOT IN DISPUTE. THERE IS ALSO NO DISPUTE TO THE FA CT THAT THE ASSESSEE HAS TREATED THE EQUITY SHARES OF INDIAN COMPANIES AS INVESTMENT I.E. CAPITAL ASSET A LL ALONG. THE ASSESSEE HAS ALSO VALUED THE SHARES AT CO ST THUS GIVEN A PARTICULAR TREATMENT TO THE SHARES HEL D AS INVESTMENT, THEREFORE, WITHOUT BRINING ON RECORD CONTRARY MATERIAL, THE AO CANNOT CHANGE THE INTENTI ON AND MANNER OF INVESTMENT BEING MADE BY THE ASSESSEE. HAD THE ASSESSEE VALUED THE SHARES AT COS T OR MARKET PRICE WHICHEVER IS LOWER, THE GAIN ARISIN G OUT OF SALE OF SHARES COULD EASILY BE TREATED AS BUSINESS INCOME. ASSESSEE HAD NOT VALUED THE SHARES AS STOCK BUT VALUED THE SAME AS INVESTMENT. THUS, WHAT WAS A CAPITAL ASSET WILL REMAIN A CAPITAL ASSE T MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 21 21 UNLESS A PERSON HOLDING THE ASSET HIMSELF CHANGES T HE NATURE BY A SPECIFIC ACTION LIKE CONVERSION OF CAPIT AL ASSET INTO STOCK IN TRADE. IN THE INSTANT CASES BEF ORE US, THE ASSESSEE HAS NOT TREATED THE INVESTMENT IN EQUITY SHARES OF INDIAN COMPANIES AS STOCK IN TRADE. IN VIEW OF THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF RAM KUMAR AGARWAL & BROTHERS, 205 ITR 251, THE AO AND THE LD. CIT(A) WAS NOT JUSTIFIED IN TREATING THE CAPITAL GAIN EARNED FROM SALE OF THESE SHARES, AS BUSINESS PROFITS, WHICH WERE ENTERED BY THE ASSESSEE AS INVESTMENT IN BOOKS OF ACCOUNT. THERE I S ALSO NO DISPUTE TO THE WELL SETTLED LEGAL PROPOSITIO N THAT RES JUDICATA DO NOT STRICTLY APPLY TO THE INCOM E TAX PROCEEDINGS, BUT AT THE VERY SAME TIME, IT IS WELL SETTLED THAT PRINCIPLE OF CONSISTENCY UNDER THE SAM E FACTS AND CIRCUMSTANCES IS THE FUNDAMENTAL OF JUDICIA L PRINCIPLE, WHICH CANNOT BE BRUSHED ASIDE WITHOUT MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 22 22 PROPER REASONING. IN THIS REGARD, RELIANCE CAN BE PLACED ON THE DECISION IN CASE OF S.M.K. SHARES AND STOCK BROKING PRIVATE LIMITED, I.T.A.NO. 799/MUM/09 ORDER DATED 24.11.2010. IN THIS PROPOSITION, THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF GOPAL PUROHIT, 228 CTR 582, IS VERY MUCH RELEVANT AND IMPORTANT. IN THE CASE OF SUSHIL KUMAR, WE FIND THAT THE LD. CIT(A) HAS UNNECESSARILY TRIED TO CREA TE CONFUSION BY TAKING ADVANTAGE OF BONA FIDE MISTAKE O F THE ACCOUNTANT OF THE ASSESSEE AND WITHOUT APPRECIATING CORRECT FACTS THAT IN THE BALANCE SHEE T, THE ACCOUNTANT THROUGH OVERSIGHT CLASSIFIED THE SHAR ES AS CLOSING STOCK AND LATER ON BY USING THE ERASER CHANGED THE HEADING AS INVESTMENT IN SHARES. IF THE ASSESSEE WAS HAVING SUCH AN INTENTION, THEN HE COUL D INSTEAD OF CORRECTING HIS MISTAKE BY USING ERASER AN D PEN, COULD HAVE TAKEN THE NEW PRINT OUT AND MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 23 23 SUBMITTED BEFORE THE CIT(A). ACTION OF THE ASSESSEE IN CORRECTING BY USING ERASER AND CHANGING THE HEADING BY PEN ITSELF SHOWS THAT THE INTENTION OF THE ASSES SEE WAS BONA FIDE ONE AND NOT MALA FIDE. HOWEVER, WHILE PUTTING THIS ALLEGATION, THE LD. CIT(A) HAS IGNORED T HE FACTUAL POSITION TO THE EFFECT THAT IN THE BALANCE SHEET OF SUBSEQUENT AND PRECEDING YEAR, THE ASSESSEE HAD SHOWN THE SHARES UNDER THE HEAD INVESTMENT. FURTHERMORE, IN THE PRECEDING YEARS ALSO, THE GAIN ARISING ON SHARES WAS OFFERED BY THE ASSESSEE UNDER THE HEAD SHORT TERM CAPITAL GAIN AND THE SAME WAS ACCEPTED BY THE DEPARTMENT. UNDISPUTEDLY, SINCE THE FINANCIAL YEAR 1995-96 THE ASSESSEE WAS MAKING INVESTMENT IN SHARES AND IN ALL THESE YEARS, THE ASSESSEE HAD CLASSIFIED THE SAME UNDER THE HEAD INVESTMENT IN SHARES AND NOT UNDER THE HEAD CLOSING STOCK. EVEN IF CONTENTION OF THE LD. CIT( A) IS MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 24 24 ACCEPTED THAT THE SHARES ARE SHOWN BY THE ASSESSEE IN THE BALANCE SHEET AS CLOSING STOCK AND LATER ON THE ASSESSEE HAS CHANGED THE HEADING AS INVESTMENT IN SHARES, THE POSITION WILL NOT CHANGE SINCE DURING T HE ASSESSMENT YEAR IN QUESTION NO PROFIT WAS EARNED BY THE ASSESSEE ON THE SALE OF SHARES FOR WHICH THE HEADING WAS BONA FIDELY CHANGED. THIS FACT IS CLEAR FROM THE DETAILS OF SCRIPT-WISE AND DATE-WISE PURCH ASES AND SALES OF SHARES PLACED IN THE PAPER BOOK. WE AL SO FOUND THAT THERE IS NOT A SINGLE TRANSACTION WHERE T HE ASSESSEE SQUARED UP THE TRANSACTION ON THE SAME DATE WITHOUT TAKING DELIVERY OF THE SHARES. IT IS UNDISPUTE D THAT THE ASSESSEE HAD TAKEN DELIVERY OF ALL THE SHA RES BY MAKING FULL PAYMENT AND THE SHARES ARE SHOWN IN THE BALANCE SHEET AS INVESTMENT AND VALUED AT COST. NOTHING POSITIVE WAS BROUGHT ON RECORD BY THE DEPARTMENT TO ALLEGE THAT THE SHARES HELD BY THE MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 25 25 ASSESSEE WERE NOT VALUED AT COST BUT AT THE MARKET PRICE OR THE COST WHICHEVER IS LOWER. IN CASE THE S HARES ARE HELD AS STOCK IN TRADE, AT THE END OF THE YEAR, THEY ARE VALUED AT MARKET PRICE OR COST OF ACQUISITION WHICHEVER IS LOWER AS PER THE STANDARD ACCOUNTING PRACTICES. HOWEVER, IN THE INSTANT CASE BEFORE US, DURING THE PRECEDING, SUCCEEDING AND CURRENT YEAR, THE ASSESSEE HAS VALUED THE SHARES AT COST ONLY. SO FAR AS FREQUENCY OF PURCHASES AND SALE OF SHARES IS CONCERNED, THE SAME IS DUE TO THE ELECTRONIC SYSTEM OF STOCK EXCHANGE. A SINGLE ORDER PLACED FOR PURCHASES MAY BE COMPLETED BY WAY OF SMALL EQUITIES OF SHARES AVAILABLE FOR SALE TO MEET OUT THE DEMAND OF THE PURCHASER. THEREFORE, A SINGLE ORDER IS NOT NECESSA RY TO BE COMPLETED BY A SINGLE TRANSACTION OF ENTIRE QUAN TITY OF SHARES. LIKEWISE, IN THE CASE OF SALES, THE SAME MAY BE DIVIDED AS PER THE REQUIREMENT OF THE PURCHASER AT MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 26 26 STOCK EXCHANGE; THE FACT THAT IN ALL THE PRECEDING YEARS, WHERE THE ASSESSEE HAD LIQUIDATED HIS INVESTMENT IN EQUITY SHARES IN INDIAN COMPANIES, TH E DEPARTMENT HAS ACCEPTED THE POSITION EXCEPT THE ASSESSMENT YEAR IN QUESTION, WHEREIN THE DEPARTMENT TREATED THE GAIN FROM PURCHASE AND SALE OF SHARES AS BUSINESS INCOME. THE DETAILS OF SUCH CAPITAL GAINS IN PRECEDING AND SUBSEQUENT YEARS ARE ALSO PLACED ON RECORD. IT IS CLEAR FROM THE DETAILS THAT IN THE FI NANCIAL YEAR 2003-04 RELEVANT TO ASSESSMENT YEAR 2004-05, THE ASSESSEE HAD OFFERED SHORT TERM CAPITAL GAINS O F RS. 2,46,526/-. THE DEPARTMENT HAD ACCEPTED THE SAME. THE ASSESSEE HAD SHOWN THE SHARES AS INVESTMENT IN ITS BALANCE SHEET FOR ALL THE YEARS SINCE 2003-04 T O 2008-09. THUS, THE INTENTION OF THE ASSESSEE, NATURE OF ACTIVITIES, MODUS OPERANDI OF ASSESSEE AND THE MANN ER IN WHICH HE HAS KEPT HIS RECORD AND PRESENTED THE MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 27 27 SHARES AS INVESTMENT IN THE BALANCE SHEET CLEARLY SUGGESTS THAT THE GAIN ARISING OUT OF THEIR SALE IS L IABLE TO BE ASSESSED AS CAPITAL GAINS AND NOT AS BUSIN ESS PROFITS. IT IS ALSO RELEVANT TO MENTION HERE THAT FOR DOING SYSTEMATIC AND ORGANIZED ACTIVITIES OF PURCHAS E AND SALE OF SHARES, THE ASSESSEE IS REQUIRED TO HAV E AN INFRA STRUCTURE IN THE FORM OF OFFICE, EMPLOYEES, EQUIPMENTS ETC., WHERE AS IN THE INSTANT CASE, THE ASSESSEE WAS NOT HAVING SUCH INFRASTRUCTURE AND WHATEVER DECISION OF INVESTMENT OR SALE OF SHARES I S TAKEN, THE SAME WAS MATERIALIZED THROUGH BROKER. THUS, THERE WAS NO ORGANIZED EFFORTS TO OBTAIN PROF ITS EXCEPT THAT SHARES ARE PURCHASED CAUTIOUSLY AND WHENEVER IT IS FELT THAT PRICES OF SUCH SHARES ARE QUOTED NICELY, THEY WERE SOLD. THE DECISION TO DISP OSE OF INVESTMENT AT A SHORT INTERVAL IS BEING TAKEN BY THE ASSESSEE KEEPING IN VIEW THE EVENTUALITY OF DOWN TRE ND MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 28 28 IN THE MARKET SENTIMENTS OVER A PARTICULAR SCRIPT. MERELY BECAUSE THE ASSESSEE WAS ABLE TO REALIZE BET TER PRICES OF ITS INVESTMENT AT A SHORT INTERVAL, CANNO T BE SOLITARY YARDSTICK FOR TREATING SUCH ACTION AS AN ADVENTURE IN THE NATURE OF TRADE, GIVING RISE TO BUSINESS PROFITS, WHEN ALL THE SURROUNDING CIRCUMSTANCES, INDICATE OTHERWISE. NO WHERE THE AO HAS INDICATED ANY TRANSACTION OF PURCHASE OF SHARES WITHOUT TAKING DELIVERY AND MAKING FULL PAYMENT OF SUCH INVESTMENT. EVEN IN THE CASE OF INVESTMENT IT I S FOR THE ASSESSEE TO DECIDE WHEN TO DISPOSE THEM OFF SO AS TO HAVE A MAXIMUM RETURN OUT OF THEM. THERE IS NO THEORY THAT THE SHARES HELD AS INVESTMENT SHOULD BE DISPOSED OF ONLY AT THE TIME OF NEED OR IN EMERGENC Y. THE ASSESSEE HAD ALL THE RIGHTS TO DISPOSE THE INVESTMENT TO REAP THE MAXIMUM BENEFIT WHEN THE PRICES OF SCRIPTS ARE HIGH SO AS TO EARN BETTER GAI N. IT IS MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 29 29 TRUE THAT FREQUENCY AND VOLUME OF TRANSACTION IS ONE O F A GUIDING FACTORS TO FIND OUT AS TO WHETHER ASSESSEE DEAL IN SHARES AS TRADING ASSET OR HOLD SHARES AS INVESTOR, BUT CERTAINLY NOT A CRITERIA. A PRUDENT INVESTOR ALWAYS KEEP A WATCH ON THE MARKET TREND AN D, THEREFORE, NOT BARRED UNDER LAW FROM LIQUIDATING HI S INVESTMENT IN SHARES. THE LAW ITSELF HAS RECOGNIZED THIS FACT BY TAXING THESE TRANSACTIONS UNDER THE HEA D SHORT TERM CAPITAL GAINS BEING SHARES WHICH ARE SOLD WITHIN 12 MONTHS OF ITS ACQUISITION. UNDER THES E CIRCUMSTANCES, IF THE CONTENTION OF THE AO AND CIT(A ) IS ACCEPTED, THEN IT WOULD BE AGAINST THE LEGISLATIV E INTENT ITSELF. 12. MERELY BECAUSE THE ASSESSEE LIQUIDATES ITS INVESTMENT WITHIN A SHORT SPAN OF TIME, WHICH HAD GIVEN BETTER OVERALL EARNING TO THE ASSESSEE, WOULD NOT LEAD TO THE CONCLUSION THAT THE ASSESSEE HAD NO MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 30 30 INTENTION TO KEEP ON THE FUNDS AS INVESTOR IN EQUIT Y SHARES, BUT WAS ACTUALLY INTENDED TO TRADE IN SHARES. THE FACT THAT THE ASSESSEE WAS IN FULL TIME EMPLOYM ENT OF KRISHIDHAN SEEDS LIMITED AS A MANAGING DIRECTOR AND WAS NOT HAVING TIME TO CARRY THE BUSINESS OF PURCHASE AND SALE OF SHARES, IS NOT IN DISPUTE. AS A MANAGING DIRECTOR, HE WAS ALWAYS BUSY IN THE AFFAIRS OF THE COMPANY AND OFTEN HE HAS TO GO OUTSIDE THE TOWN AS WELL AS OUTSIDE THE COUNTRY. THUS, THERE IS NO SCOPE TO INFER THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF PURCHASE AND SALE OF SHARES. FOR THE FU LL TIME ENGAGEMENT IN THE AFFAIRS OF THE COMPANY HE WA S PAID HANDSOME REMUNERATION OF RS. 15 LAKHS PER ANNUM. 13. HERE, IT IS PERTINENT TO MENTION THE INTENTION OF GOVERNMENT FOR INTRODUCING THE SECURITY TRANSACTI ON TAX AND EXEMPT THE LONG TERM CAPITAL GAIN EARNED FR OM MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 31 31 SALE OF SHARES AND LEVYING 10 % TAX ON SHORT TERM CAPITAL GAIN AND EARNED ON SALE OF SHARES. 14. IT IS NOTED THAT UNDER THE OLD PROVISIONS OF THE INCOME-TAX ACT, PROFITS OR GAINS ARISING TO AN INVESTOR FROM THE TRANSFER OF SECURITIES WERE CHARG ED TO TAX EITHER AS LONG TERM CAPITAL GAINS OR SHORT T ERM CAPITAL GAINS DEPENDING ON THE PERIOD OF HOLDING OF THE SAID SECURITIES; SHORT-TERM CAPITAL GAINS ARISI NG FROM TRANSFER OF SECURITIES WERE TAXED AT THE APPLICABLE RATES (NORMAL RATE) AND LONG-TERM CAPITA L GAINS WERE TAXED @ 20%, AFTER ADJUSTING FOR INFLATI ON BY INDEXING THE COST OF ACQUISITION. FOR LISTED SECURITIES, THE TAXPAYER HAD AN OPTION TO PAY TAX O N LONG-TERM CAPITAL GAINS @ 10% BUT WITHOUT INDEXATION. FOR FOREIGN INSTITUTIONAL INVESTORS (FI IS), THE LONG-TERM CAPITAL GAINS AND SHORT-TERM CAPITAL GAINS WERE TAXED AT THE RATE OF 10% (WITHOUT INDEXATION) AND 30% RESPECTIVELY. IN CASE OF A TRAD ER IN SECURITIES, HOWEVER, THE GAINS WERE TAXED AS ANY MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 32 32 OTHER NORMAL BUSINESS INCOME. THUS TAX LIABILITY ON THE INCOME FROM PURCHASE & SALE OF SHARES AS REGARDS TO THE STCG & BUSINESS INCOME WAS AT PAR. HOWEVER, THE ISSUE OF TREATMENT OF INCOME FROM SHARE TRANSACTION AS CAPITAL GAIN OR BUSINESS INCOME HAS IN-FACT ARISEN AFTER THE AMENDMENT BROUGHT WITH FINANCE ACT - 2004 BY INSERTION OF PROVISIONS OF SECTION 111A AND 10(38) AS REGARDS TO LEVY OF TRANSACTION TAX AND EXEMPTION / CONCESSION ON CAPITAL GAIN ARISING FROM SECURITIES ENTERED IN A RECOGNIZED STOCK EXCHANGE. WITH A VIEW TO SIMPLIFY THE TAX REGIME ON SECURITIES TRANSACTIONS, A TAX AT THE RATE OF 0.015 PER CENT. (SEE: CHANGE IN RATES O N SECURITIES TRANSACTIONS, BY FINANCE ACTS, AT APPROPRIATE HEAD) IS LEVIED ON THE VALUE OF ALL THE TRANSACTIONS OF PURCHASE OF SECURITIES THAT TAKE PLACE IN A RECOGNIZED STOCK EXCHANGE IN INDIA. THIS TAX IS COLLECTED BY THE STOCK EXCHANGE FROM THE PURCHASER OF SUCH SECURITIES AND PAID TO THE MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 33 33 EXCHEQUER. THE PROVISIONS RELATING TO THE SECURITIE S TRANSACTIONS TAX ARE CONTAINED IN CHAPTER VII OF TH E FINANCE (NO.2) BILL, 2004, AND CAME INTO EFFECT FRO M 01.10.2004. FURTHER, CLAUSE (38) HAS BEEN INSERTED IN SECTION 10 OF THE INCOME-TAX ACT, SO AS TO PROVI DE EXEMPTION FROM LONG-TERM CAPITAL GAINS ARISING OUT OF SECURITIES SOLD ON THE STOCK EXCHANGE. A NEW SECTION 111A HAS ALSO BEEN INSERTED AND SECTION L15AD IS AMENDED, SO AS TO PROVIDE THAT SHORT-TERM CAPITAL GAINS ARISING FROM SALE OF SUCH SECURITIES TO AN INVESTOR INCLUDING FIIS SHALL BE CHARGED AT THE RATE OF TEN PER CENT. THESE AMENDMENTS APPLY TO ASSESSMENT YEAR 2005-2006 AND SUBSEQUENT YEARS. THROUGH FINANCE ACT, 2008, SECTIONS 111A AND 115AD HAVE FURTHER BEEN AMENDED WHEREBY THE RATE OF TAX ON SUCH SHORT-TERM CAPITAL GAIN HAS BEEN RAISED TO FIFTEEN PERCENT. THUS, W.E.F. 01.10.2004 ; ON THE SHARE TRANSACTIONS SUBJECTED TO STT; CONCESSIONAL TAX RATE OF 10% (WHICH HAS BEEN MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 34 34 INCREASED TO 15% FROM AY 2009-10) ARE APPLICABLE IN RESPECT OF STCG WHEREAS NO TAX IS CHARGEABLE IN RESPECT OF LTCG. IT IS ALSO NOTED THAT THE CBDT VID E ITS CIRCULAR NO.4/2007, DATED 15.06.2007 HAS ALSO RECOGNIZED POSSIBILITY OF TWO PORTFOLIOS, I.E. ONE 'INVESTMENT PORTFOLIO' COMPRISING OF SECURITIES WHI CH ARE TO BE TREATED AS CAPITAL ASSETS AND THE OTHER 'TRADING PORTFOLIO' COMPRISING OF STOCK IN TRADE WHICH ARE TO BE TREATED AS TRADING ASSETS. FROM THE RECORD, WE FOUND THAT THE ASSESSEE WAS WORKING AS MANAGING DIRECTOR OF A COMPANY AND WAS FULLY EMPLOYED IN MANAGEMENT OF THE AFFAIRS OF THE COMPANY. HE WAS NOT INVOLVED IN BUSINESS OF TRADING IN SHARES. THE ASSESSEE HAS INVESTED MAJOR INCOME IN PAST YEARS SAVING IN THE SHARES FOR THE PURPOSE OF EARNING DIVIDEND INCOME AND ALSO GETTING GOOD BENEFITS OF APPRECIATION IN PRICE OF SHARES WHICH EVERY INVESTOR ALWAYS DOES IN SHARES. MERELY BECAUSE SOME OF THE FUNDS WERE BORROWED ON MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 35 35 INTEREST WILL NOT DISENTITLE THE ASSESSEE TO LOOSE HIS CHARACTER AS INVESTOR AND DOES NOT BECOME A TRADER. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE WAS NOT DOING ANY JOBBING OR F & O ACTIVITIES AS A REGULAR DEALER IN SHARES. IN VIEW OF THESE FACTS, PROFIT AR OSE ON SHARES IN RESPECT OF DELIVERY BASED TRANSACTION ARE LIABLE TO BE TAXED AS CAPITAL GAIN AND NOT AS BUSINESS INCOME. 15. SIMILAR IS THE FACTS AND CIRCUMSTANCES IN CASE OF SHRI ASHISH SUBHASHCHANDRA KARWA, WHEREIN THE ASSESSEE HAS TREATED EQUITY SHARES OF INDIAN COMPANY AS INVESTMENT ALL ALONG. THE DETAILS OF INVESTMENT IN SHARES AS ON 31.3.2006 ARE AS UNDER : - S.NO. NAME OF SECURITIES NO. OF SHARES AMOUNT DATE OF PURCHASE NO. OF SHARES 1. KRISHIDHAN SEEDS LTD.PS 80000 800000 18.02.2005 80000 2. KRISHIDHAN SEEDS LTD.ES 617890 6178900 30.03.2003 21700 18.02.2005 56400 31.03.2006 539790 617890 MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 36 36 3. RAJENDRA SEEDS CO.PVT.LTD. 3087 308700 31.03.2004 3087 4. UNION BANK SHARE 38390 20.02.2006 16. IN THE PRECEDING YEARS ALSO THE ASSESSEE LIQUIDATED HIS INVESTMENT IN EQUITY SHARES OF INDIA N COMPANIES WHICH WERE ACCEPTED BY THE DEPARTMENT ACCEPTED, EXCEPT IN THE ASSESSMENT YEAR IN QUESTION WHERE IN THE DEPARTMENT TREATED THE GAIN FROM PURCHASE AND SALES OF SHARES AS BUSINESS INCOME. TH E YEAR WISE DETAILS OF CAPITAL GAIN EARNED IN PRECEDI NG YEARS ARE AS UNDER :- A.Y. CAPITAL GAIN/LOSS ON SALES OF SHARES OFFERED IN RETURN OF INCOME (RS.) REMARK 2004-05 2,46,526/- COPY OF COMPUTATION OF INCOME AND ACKNOWLEDGEMENT ENCLOSED IN PAPER BOOK 2005-06 8,73,652/- COPY OF COMPUTATION OF INCOME AND ACKNOWLEDGEMENT ENCLOSED IN PAPER BOOK MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 37 37 17. IN THE CASE OF SMT. SUDHA SUSHIL KARWA, THE FACTS ARE PARI MATERIA. IN PRECEDING AND SUBSEQUENT YEARS ALSO THE ASSESSEE LIQUIDATED HIS INVESTMENT IN EQUITY SHARES OF INDIAN COMPANIES AND DEPARTMENT ACCEPTED THE SAME, EXCEPT IN THE ASSESSMENT YEAR IN QUESTION WHEREIN THE DEPARTMENT TREATED THE GAIN FROM PURCHASE AND SALES OF SHARES AS BUSINESS INCOME. THE YEAR WISE DETAILS OF CAPITAL GAIN EARNE D IN PRECEDING AND SUBSEQUENT YEARS ARE AS UNDER :- A.Y. CAPITAL GAIN/LOSS ON SALES OF SHARES OFFERED IN RETURN OF INCOME RS. REMARK 2004-05 2,47,226/- COPY OF COMPUTATION OF INCOME AND ACKNOWLEDGEMENT ENCLOSED IN PAPER BOOK 2005-06 2,73,442/- COPY OF COMPUTATION OF INCOME AND ACKNOWLEDGEMENT ENCLOSED IN PAPER BOOK 2007-08 25,18,668 COPY OF COMPUTATION OF INCOME AND ACKNOWLEDGEMENT ENCLOSED IN PAPER BOOK MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 38 38 18. DETAILS OF INVESTMENT IN SHARES AS ON 31 ST MARCH, 2006 WAS AS UNDER :- S.NO. NAME OF SECURITIES NO OF SHARES AMOUNT DATE OF PURCHASE NO. OF SHARES 1 KRISHIDHAN SEEDS LTD. E S 562649 5626490 .00 27.03.97 30600 30.03.98 9800 30.03. 02 114900 31.03.2006 407349 562649 2 RAJENDRA SEEDS CO PVT LT 4349 434900.00 27 /03/ 97 1500 31/03/2004 2849 4349 3 SUBHASH FERTILIZERS P. LTD 61500 615000.00 31/03/200 0 39600 31/03/2003 21900 61500 4 UNION B ANK SHARES 4800.00 BEFORE 31/03/2005 5 GARDAN SILK 2000 167939.63 23/09/2005 6 IVR CONSTRU 1000 08/12/2005 400 20/12/2005 1600 23/12/2005 2000 02/01/2006 1000 3704327.11 17/02/2006 7 RPG TRANSMISSION 2000 348182.50 06/03/2 006 8 SSTILES 15000 573418.40 13/01/2006 9 UPPAR GANGA 2000 12/01/2006 500 13/01/2006 2000 16/01/2006 2000 2181749.88 17/01/2006 19. IN THE CASE OF MANISH JAYNARAIN KARWA, THE FACTS AND CIRCUMSTANCES ARE PARI MATERIA. THE ASSESSEE WAS HOLDING SHARES AS INVESTMENT AND SHOWN MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 39 39 THE SAME AS CAPITAL ASSETS IN THE BALANCE SHEET. IN PRECEDING AND SUBSEQUENT YEAR ALSO THE ASSESSEE LIQUIDATED HIS INVESTMENT IN EQUITY SHARES OF INDIA N COMPANIES WHICH WERE ACCEPTED BY THE DEPARTMENT EXCEPT IN THE ASSESSMENT YEAR IN QUESTION WHEREIN TH E DEPARTMENT TREATED THE GAIN FROM PURCHASE AND SALES OF SHARES AS BUSINESS INCOME. THE YEAR WISE DETAILS OF CAPITAL GAIN EARNED IN PRECEDING AND SUBSEQUENT YEARS ARE AS UNDER:- ASSESSMENT YEAR CAPITAL GAIN/LOSS ON SALES OF SHARES OFFERED IN RETURN OF INCOME REMARK 2002-03 RS.1,22,419/- COPY OF ACKNOWLEDGEMENT ENCLOSED. 2004-05 RS.2,47,226/- COPY OF COMPUTATION OF INCOME AND ACKNOWLEDGEMENT ENCLOSED 2005-06 RS.10,11,082/- COPY OF COMPUTATION OF INCOME AND ACKNOWLEDGEMENT IS ENCLOSED IN PAPER BOOK. 2007-08 RS.1,64,993/- COPY OF COMPUTATION OF INCOME AND ACKNOWLEDGEMENT IS ENCLOSED IN PAPER BOOK. 20. DETAILS OF INVESTMENT IN SHARES AS ON 31 ST MARCH, 2006 WAS AS UNDER :- S.NO. NAME OF SECURITIES NO OF AMOUNT DATE OF PUR CHASE NO. OF MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 40 40 SHARES SHARES 1 KRISHIDHAN SEEDS LTD. PS 100000 1000000.00 18/02/2005 100000 2 KRISHIDHAN SEEDS LTD. ES 378649 3786490 .00 27 /03/ 97 9400 30 /03/ 98 21040 30 /03/ 00 33750 30/03/02 104700 31/03/03 196000 31/03/04 29 1 8/02/05 13730 378649 3 RAJENDRA SEEDS CO PVT LT 2500 250000 .00 27 /03/ 97 2500 4 SUBHASH FERTILIZERS P. LTD 31200 312000 .00 31/03/2000 28100 31/03/200 3 3100 31200 5 MERIGOLD WAREHOUSING & FINANCIALSERVICES LTD. 39040 390400.00 05/10/2005 23/06/2005 26540 12500 39040 6 SHARES OF UNION BANK 4800 .00 BEFORE 31/03/2005 7 MALWA COTTON 1000 152855 .00 13 /0 2 /2006 8 SSTELLA SILKS 6000 233709.96 19/01/2006 9 UPPER GANGA SUGHAR 3000 1344009.98 24/01/2006 21. IN CASE OF SHRI MUKUND JAYNARAIN KARWA, THE FACTS AND CIRCUMSTANCES ARE PARI MATERIAL AND T HE ASSESSEE HAD ACQUIRED THE SHARES WITH INTENTION OF INVESTMENT, ACCORDINGLY TREATED IN THE BALANCE SHEE T AS CAPITAL ASSETS. IN PRECEDING YEARS ALSO THE ASSESSE E LIQUIDATED HIS INVESTMENT IN EQUITY SHARES OF INDIA N COMPANIES AND DEPARTMENT ACCEPTED THE SAME, EXCEPT IN THE ASSESSMENT YEAR IN QUESTION WHEREIN THE MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 41 41 DEPARTMENT TREATED THE GAIN ON PURCHASE AND SALES O F SHARES AS BUSINESS INCOME. THE YEAR WISE DETAILS OF CAPITAL GAIN EARNED IN PRECEDING YEARS ARE AS UNDER :- ASSESSMENT YEAR CAPITAL GAIN/LOSS ON SALES OF SHARES OFFERED IN RETURN OF INCOME REMARK 2002-03 RS.1,22,419/- COPY OF ACKNOWLEDGEMENT ENCLOSED. 2004-05 RS.1,49,677/- COPY OF COMPUTATION OF INCOME AND ACKNOWLEDGEMENT ENCLOSED 2005-06 RS.4,92,221/- COPY OF COMPUTATION OF INCOME AND ACKNOWLEDGEMENT IS ENCLOSED IN PAPER BOOK. 22. DETAILS OF INVESTMENT IN SHARES AS ON 31 ST MARCH, 2006 WAS AS UNDER :- S.NO. NAME OF SECURITIES NO OF SHARES AMOUNT DATE OF PURCHASE NO. OF SHARES 1 KR ISHIDHAN SEEDS LTD. PS 100000 1000000.00 18/02/2005 100000 2 KRISHIDHAN SEEDS LTD. ES 569559 5695590 .00 30/03/2002 4 58 00 3 1 /03/2003 319 50 3 1 /03/2004 759 491050 569559 3 RAJENDRA SEEDS CO PVT LT 18700 187000 .00 31/03/2004 1870 4 SUBHASH FERTILIZERS P. LTD 3225 0 32250 0.00 31/03/200 0 276 00 31/03/2003 4650 32250 MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 42 42 5 MERIGOLD WAREHOUSING & FINANCIALSERVICES LTD. 39040 390400.00 05/10/2005 23/06/2005 26540 12500 39040 6 SHARES OF UNION BANK 640 0.00 BEFORE 31/03/2 005 3839 0.00 20 /0 2 /2006 23. IN THE CASE OF SUBHASH P.KARWA, HUF, THE ASSESSEE STARTED INVESTMENT IN EQUITY SHARES OF IND IAN COMPANY SINCE 27.03.1997. ALL ALONG THE SHARES ARE TREATED AS INVESTMENT IN THE ACCOUNTS MAINTAINED BY THE ASSESSEE. A DETAILED DATE WISE LIST OF INVESTMEN T IN SHARES WAS PLACED IN PAPER BOOK. IT IS UNDISPUTED TH AT THE ASSESSEE TREATED THE EQUITY SHARES OF INDIAN COMPANIES AS INVESTMENT I.E. CAPITAL ASSETS ALL ALONG. HOWEVER, DURING THE YEAR UNDER CONSIDERATION, THE AO TREATED THE SHORT TERM CAPITAL GAINS AS BUSINESS PROFIT BY OBSERVING THAT ASSESSEE HAD SHOWN THE SHARES AT THE YEAR END AS CLOSING STOCK IN HIS BALANCE SHEET. THE CONTENTION OF LD. AUTHORIZED REPRESENTATIVE WAS THAT ALL THE SHARES HELD BY MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 43 43 ASSESSEE WERE DISPOSED OFF AND NO SHARES WERE HELD BY ASSESSEE AT YEAR END, THEREFORE, NO QUESTION ARISES FOR SHOWING THE SAME AS CLOSING STOCK. OUR ATTENTION WAS ALSO INVITED TO BALANCE SHEET OF ASSESSEE, WHEREIN WE FOUND THAT AT THE YEAR END NOTHING WAS HELD BY ASSESSEE AS CLOSING STOCK. SINCE NO SHARES REMAINED WITH ASSESSEE AT THE YEAR END, THE FINDING RECORDED BY AO IS FACTUALLY INCORRECT. THE ASSESSEE HAS GIVEN A PARTICULAR TREATMENT I.E. INVESTMENT OF THE SHARES I N ALL THE EARLIER YEARS, THE ASSESSING OFFICER CANNOT CHAN GE THE NATURE OF THE ASSET. IN THIS CASE ASSESSEE HAS N OT TREATED THE INVESTMENT IN EQUITY SHARES OF INDIAN COMPANIES AS STOCK-IN-TRADE, THUS, THE LD A.O. AND CIT (A) ERRED IN TREATING THE PROFIT EARNED FROM PURCHASE AND SALES OF SHARES WHICH WERE ENTERED BY THE ASSESSEE AS INVESTMENT IN BOOKS OF ACCOUNTS. IT IS ALSO UNDISPUTED THAT THERE IS NOT A SINGLE TRANSACTIO N MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 44 44 WHERE THE ASSESSEE SQUARED OFF THE TRANSACTION ON T HE SAME DATE WITHOUT TAKING DELIVERY OF THE SHARES. IT IS ALSO UNDISPUTED THAT THE ASSESSEE HAS TAKEN THE DELIVERY OF ALL THE SHARES BY MAKING FULL PAYMENT A ND THE SHARES ARE SHOWN IN BALANCE SHEET AS INVESTMENT AND VALUED AT COST IN ALL THE PRECEDING YEARS. THE CONTENTION OF LD. A.O. & CIT(A) THAT FREQUENCY TRANSACTION ARE VERY HIGH IS NOT CORRECT IN VIEW OF DETAILS OF PURCHASES AND SALES WHICH ARE PLACED IN PAPER BOOK. THE ASSESSEE UNIFORMLY AND CONSISTENTLY HAD BEEN SHOWING THE PURCHASE OF EQUITY SHARES OF INDIAN COMPANY AS INVESTMENT WHICH IS CLEAR FROM TH E FOLLOWING YEAR WISE BALANCE SHEETS OF THE ASSESSEE FOR THE ASSESSMENT YEARS 2005-06 TO 2007-08. THAT IN PRECEDING YEAR I.E. IN ASSESSMENT YEAR 2005-06 ALSO THERE WAS A SHORT TERM CAPITAL GAIN OF RS. 6,28,570 /- MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 45 45 WHICH WAS ACCEPTED BY THE DEPARTMENT, THOUGH U/S 143(1) OF THE ACT. 24. DETAILS OF INVESTMENT IN SHARES AS ON 31 ST MARCH, 2006 WAS AS UNDER :- S.NO. NAME OF SECURITIES NO OF SHARES AMOUNT DATE OF PURCHASE NO. OF SHARES 1 KRISHIDHAN SEEDS LTD. E S 861457 8614570 .00 27. 0 3.97 91400 30.03.98 107000 30.03.02 73500 31.03.03 31000 31.03.04 597 31.03.06 557960 861457 2 RAJENDRA SEEDS CO PVT LT 990 99000 .00 3 1 /03/ 97 990 3 SUBHASH FERTILIZERS P. LTD 136200 136200 0.00 3 1 /03/20 00 46200 31/03/200 1 90000 136200 25. IN THE CASE OF SMT. SUVARNA KARWA, THE ASSESSEE STARTED INVESTMENT IN EQUITY SHARES OF IND IAN COMPANY SINCE 27.03.1997. ALL ALONG THE SHARES ARE TREATED AS INVESTMENT IN THE ACCOUNTS MAINTAINED BY THE ASSESSEE. A DETAIL DATE WISE LIST OF INVESTMENT IN SHARES IS PLACED ON RECORD. IT IS UNDISPUTED THAT T HE MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 46 46 ASSESSEE TREATED THE EQUITY SHARES OF INDIAN COMPANIES AS INVESTMENT I.E. CAPITAL ASSETS ALL ALONG. IT IS NOT PERMISSIBLE EITHER FOR THE ASSESSE E OR FOR THE ASSESSING OFFICER TO TREAT THE SAME AS STOCK -IN- TRADE. IN PRECEDING AND SUBSEQUENT YEAR ALSO THE ASSESSEE LIQUIDATED HIS INVESTMENT IN EQUITY SHARES O F INDIAN COMPANIES AND DEPARTMENT ACCEPTED THE SAME, EXCEPT IN THE ASSESSMENT YEAR IN QUESTION WHEREIN TH E DEPARTMENT TREATED THE GAIN FROM PURCHASE AND SALES OF SHARES AS BUSINESS INCOME. THE YEAR WISE DETAILS OF CAPITAL GAIN EARNED IN PRECEDING AND SUBSEQUENT YEA RS ARE AS UNDER:- ASSESSMENT YEAR CAPITAL GAIN/LOSS ON SALES OF SHARES OFFERED IN RETURN OF INCOME REMARK 2004-05 RS.2,11,308/- COPY OF COMPUTATION OF INCOME AND ACKNOWLEDGEMENT ENCLOSED. 2005-06 RS.3,82,830/- COPY OF COMPUTATION OF INCOME AND ACKNOWLEDGEMENT IS ENCLOSED IN PAPER BOOK REFER PAGE NO. 6 2007-08 RS.17,150/- COPY OF COMPUTATION OF INCOME A ND ACKNOWLEDGEMENT IS ENCLOSED IN PAPER BOOK PAGE NO. 9 MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 47 47 26. IN THE CASE OF VISHNU KARWA, THE ASSESSEE STARTED INVESTMENT IN EQUITY SHARES OF INDIAN COMPANY SINCE 27.03.1997. ALL ALONG THE SHARES ARE TREATED AS INV ESTMENT IN THE ACCOUNTS MAINTAINED BY THE ASSESSEE. A DETAILED DATE WISE LIST OF INVESTMENT IN SHARES IS PLACED ON RECORD. I T IS UNDISPUTED THAT THE ASSESSEE TREATED THE EQUITY SHA RES OF INDIAN COMPANIES AS INVESTMENT I.E. CAPITAL ASSETS ALL ALONG. THE ASSESSEE UNIFORMLY AND CONSISTENTLY SHOWING THE PURCHASES OF EQUITY SHARES OF INDIAN COMPANY AS INV ESTMENT WHICH WILL BE CLEAR FROM THE YEAR WISE BALANCE SHEE TS OF THE ASSESSEE FOR THE ASSESSMENT YEARS 2005-06 TO 2007-0 8 ENCLOSED IN PAPER BOOK. IN PRECEDING YEARS ALSO THE ASSESSEE LIQUIDATED HIS INVESTMENT IN EQUITY SHARES OF INDIAN COMPANIES AND DEPARTMENT ACCEPTED THE SAME, EXCEPT IN THE ASSESSMENT YEAR IN QUESTION WHEREIN T HE DEPARTMENT TREATED THE GAIN FROM PURCHASES AND SALE S OF SHARES AS BUSINESS INCOME. THE YEAR WISE DETAILS OF CAPITAL GAIN EARNED IN PRECEDING YEAR ARE AS UNDER :- MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 48 48 ASSESSMENT YEAR CAPITAL GAIN/LO SS ON SALES OF SHARES OFFERED IN RETURN OF INCOME REMARK 2004 - 05 LOSS RS. 1,74,166/ - COPY OF COMPUTATION OF INCOME AND ACKNOWLEDGEMENT ENCLOSED . 2005 - 06 RS. 9,59,819/ - COPY OF COMPUTATION OF INCOME AND ACKNOWLEDGEMENT ENCLOSED IN PAPER BOOK . 27. IN THE CASE OF SMT. MATHURADEVI JAYNARAIN KARWA, THE ASSESSEE STARTED INVESTMENT IN EQUITY SHARES OF INDIAN COMPANY SINCE 1995-96. ALL ALONG THE SHARES ARE TRE ATED AS INVESTMENT IN THE ACCOUNTS MAINTAINED BY THE ASSESS EE. A DETAILED LIST OF YEAR WISE INVESTMENT IN SHARES IS PLACED ON RECORD. IT IS UNDISPUTED THAT THE ASSESSEE TREATED THE EQUITY SHARES OF INDIAN COMPANIES AS INVESTMENT I.E. CAPI TAL ASSETS ALL ALONG. 28. IN PRECEDING YEARS ALSO THE ASSESSEE LIQUIDATED HI S INVESTMENT IN EQUITY SHARES OF INDIAN COMPANIES AND DEPARTMENT ACCEPTED THE SAME, EXCEPT IN THE ASSESSM ENT YEAR IN QUESTION WHEREIN THE DEPARTMENT TREATED GAIN FRO M MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 49 49 PURCHASE AND SALES OF SHARES AS BUSINESS INCOME. TH E YEAR WISE DETAILS OF CAPITAL GAIN EARNED IN PRECEDING YE ARS ARE AS UNDER :- ASSESSMENT YEAR CAPITAL GAIN/LOSS ON SALES OF SHARES OFFERED IN RETURN OF INCOME REMARK 2004-05 RS.2,47,226/- COPY OF COMPUTATION OF INCOME AND ACKNOWLEDGEMENT ENCLOSED 2005-06 RS.3,55,481/- COPY OF COMPUTATION OF INCOME AND ACKNOWLEDGEMENT IS ENC LOSED IN PAPER BOOK . 29. DETAILS OF INVESTMENT IN SHARES AS ON 31 ST MARCH, 2006 WAS AS UNDER :- S.NO. NAME OF SECURITIES NO OF SHARES AMOUNT DATE OF PURCHASE 1 KRISHIDHAN SEEDS LTD. ES 198526 1985260.00 SINCE 1995-96 AND FURTHER INCREASES TIME TO TIME. 2 RAJENDRA SEEDS CO PVT LT 50800 50800.00 SINCE 1995-96 AND FURTHER INCREASE TIME TO TIME. 3 SUBHASH FERTILIZERS P. LTD. 62850 628500.00 SINCE 1995-96 AND FURTHER INCREASE TIME TO TIME. 4 SHARES OF UNION BANK 6400.00 BEFORE MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 50 50 31/03/2005 30. IN THE CASE OF SHRI ANUP SUBHASH KARWA, THE ASSESSEE STARTED INVESTMENT IN EQUITY SHARES OF IND IAN COMPANY SINCE 31.03.2000. ALL ALONG THE SHARES ARE TREATED AS INVESTMENT IN THE ACCOUNTS MAINTAINED BY THE ASSESS EE. A DETAILED DATE WISE LIST OF INVESTMENT IN SHARES IS PLACED ON RECORD. THAT IT IS UNDISPUTED THAT THE ASSESSEE TR EATED THE EQUITY SHARES OF INDIAN COMPANIES AS INVESTMENT I.E . CAPITAL ASSETS ALL ALONG. IN PRECEDING YEARS ALSO THE ASS ESSEE LIQUIDATED HIS INVESTMENT IN EQUITY SHARES OF INDIA N COMPANIES AND DEPARTMENT ACCEPTED, EXCEPT IN THE ASSESSMENT YEAR IN QUESTION WHERE IN THE DEPARTMENT TREATED THE GAIN FROM PURCHASE AND SALES OF SHARES AS BUSIN ESS INCOME. THE YEAR WISE DETAILS OF CAPITAL GAIN EARNE D IN PRECEDING YEARS ARE AS UNDER:- ASSESSMENT YEAR CA PITAL GAIN/LOSS ON SALES OF SHARES OFFERED IN RETURN OF INCOME REMARK 2004 - 05 RS.1,49,675/ - COPY OF COMPUTATION OF INCOME AND ACKNOWLEDGEMENT ENCLOSED 2005 - 06 RS.11,09,967/ - COPY OF COMPUTATION MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 51 51 OF INCOME AND ACKNOWLEDGEMENT IS ENCLOSED IN PAPER BOOK. 31. DETAILS OF INVESTMENT IN SHARE AS ON 31 ST MARCH, 2006, WAS AS UNDER :- S.NO. NAME OF SECURITIES NO OF SHARES AMOUNT DATE OF PURCHASE NO. OF SHARES 1 KRISHIDHAN SEEDS LTD. PS 100000 1000000.0 0 18/02/2005 100000 2 KRISHIDHAN SEEDS LTD. ES 953085 9530850.0 0 30/03/2002 47500 30/03/2003 18550 30/03/2004 175 18/02/2005 75100 31/03/2006 811760 95308 5 3 RAJENDRA SEEDS CO PVT LT 2522 252200.00 31/03/2004 2522 4 SUBHASH FERTILIZERS P. LTD 15400 154000.00 31/03/2000 10600 31/03/2003 4800 15400 5 SHARES OF UNION BANK 4800.00 BEFORE 31/03/2005 6 BANK OF BARODA 74520.00 17/01/2006 32. IN THE CASE OF SMT. ARTI KARWA, THE ASSESSEE STARTED INVESTMENT IN EQUITY SHARES OF INDIAN COMPA NY SINCE 31.03.2002. ALL ALONG THE SHARES ARE TREATED AS INVESTMENT IN THE ACCOUNTS MAINTAINED BY THE MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 52 52 ASSESSEE. A DETAIL DATE WISE LIST OF INVESTMENT IN SHARES IS PLACED ON RECORD. IT IS UNDISPUTED FACT THAT TH E ASSESSEE TREATED THE EQUITY SHARES OF INDIAN COMPANIES AS INVESTMENT I.E. CAPITAL ASSETS ALL ALONG. IN PRECEDING YEARS ALSO THE ASSESSEE LIQUIDA TED HIS INVESTMENT IN EQUITY SHARES OF INDIAN COMPANIES AND DEPARTMENT ACCEPTED, EXCEPT IN THE ASSESSMENT YEAR IN QUESTION WHERE IN THE DEPARTMENT TREATED THE GAIN FROM PURCHASE AND SALES OF SHARES AS BUSINESS INCOME. THE YEAR WISE DETAILS OF CAPITAL GAIN EARNE D IN PRECEDING YEARS ARE AS UNDER:- ASSESSMENT YEAR CAPITAL GAIN/LOSS ON SALES OF SHARES OFFERED IN RETURN OF INCOME REMARK 2004-05 RS.2,11,908/- COPY OF COMPUTATION OF INCOME AND ACKNOW LEDGEMENT ENCLOSED 2005-06 RS.3,89,662/- COPY OF COMPUTATION OF INCOME AND ACKNOWLEDGEMENT IS ENCLOSED IN PAPER BOOK REFER PAGE NO. 6 MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 53 53 33. DETAILS OF INVESTMENT IN SHARES AS ON 31 ST MARCH, 2006, WAS AS UNDER :- S.NO. NAME OF SECURITIES NO OF SHARES AMOUNT DATE OF PURCHASE NO. OF SHARES 1 KRISHIDHAN SEEDS LTD. ES 389765 3897650.00 30/03/2002 76600 31/03/2003 15600 31/03/2004 46 18/02/2005 6619 31/03/2006 290900 389765 2 RAJENDRA SEEDS CO PVT LT 2640 264000.00 31/03/2004 2640 3 MERIGOLD WAREHOUSING & FINANCIAL SERVICE LTD. 5625 56250.00 23/06/2000 5625 4 SHARES OF UNION BANK 6400.00 BEFORE 31/03/2005 34. IN THE CASE OF SHRI SUSHIL JAYNARAIN KARWA, THE DETAILS OF INVESTMENT AS ON 31 ST MARCH, 2006, WAS AS UNDER :- S.NO. NAME OF SECURITIES NO OF SHARES AMOUNT DATE OF PURCHASE 1 KRISHIDHAN SEEDS LTD. PS 120000 1200000.00 SINCE 1995-96 AND FURTHER INCREASE TIME TO TIME. 2 KRISHIDHAN SEEDS LTD.ES 775214 7752140.00 SINCE 1 995-96 AND FURTHER INCREASE TIME TO TIME. 3 RAJENDRA SEEDS P LTD (SHARE) 104700 1047000.00 SINCE 1995-96 AND FURTHER INCREASE TIME TO TIME 4 SUBHASH FERTILIZERS P. LTD 88100 881000.00 SINCE 1995-96 AND FURTHER INCREASE TIME TO TIME 5 UNION BANK SHARES 6400.00 BEFORE 31/03/2005 38390.00 2/20/2006 MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 54 54 6 ESSAR STEEL 1200 55860.00 4/19/2005 7 MALWA COTTON 1000 11/7/2005 1800 11/23/2005 1000 2/23/2006 4000 1210157.15 1/25/2006 8 RAMSWARUP 10000 831661.00 2/13/2006 9 STATE BANK OF TRAVANCORE 10 20273.10 04/12/2005 10 UPPER GANGES SUGAR 2000 1/17/2006 1000 1/23/2006 1306 1/24/2006 1000 1857000.00 1/25/2006 35. IF THE CONCLUSION DRAWN IN THE IMPUGNED ORDERS, OBSERVATIONS MADE FROM THE ASSESSMENT ORDERS, ASSER TIONS MADE BY RESPECTIVE COUNSEL AND THE MATERIAL AVAILAB LE ON RECORD ARE KEPT IN JUXTAPOSITION AND ANALYZED, WE F IND THAT THE ASSESSEE HAD BEEN CONSISTENTLY INVESTING IN SHARES AND INCOME ARISING FROM DELIVERY BASED TRANSACTION OF SALE AND PURCHASE OF SHARES HAD BEEN SHOWN AS CAPITAL GAINS I.E. LTCG AN D STCG DEPENDING UPON PERIOD OF HOLDING. ANALYSIS OF BALAN CE SHEET OF ASSESSEE REFLECTS OF HOLDING OF SHARES AS INVESTMEN T. IN THE CASE OF GOPAL PUROHIT, 228 CTR 528 (BOM), SLP WAS F ILED BY THE DEPARTMENT AGAINST THE DECISION OF BOMBAY HIGH COURT AND THE SAME WAS DISMISSED BY HON'BLE APEX COURT VI DE ORDER DATED 15.11.2010. IN THE SPEECH BY HON'BLE FINANCE MINISTER MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 55 55 REGARDING DIRECT TAX CASES (UNION BUDGET 2004-05) , ESPECIALLY CLAUSE 111, THE INTENTION OF GOVERNMENT FOR INTRODUCING THE SECURITY TRANSACTION TAX AND EXEMPT ING THE LONG TERM CAPITAL GAIN OR FROM SALE OF SHARE AND LE VYING 10% TAX ON SHORT TERM CAPITAL GAIN OR FROM SALE OF SHAR ES ALSO SUPPORTS THE CASE OF ASSESSEE. THE IDEA BEHIND INTR ODUCTION OF SECURITY TRANSACTION TAX IS TO END THE LITIGATION O N THE ISSUE, WHETHER THE PROFIT EARNED FROM DELIVERY BASED SALE OF SHARES IS CAPITAL GAINS FOR BUSINESS PROFIT. 36. EVEN THE HON'BLE APEX COURT IN THE CASE OF K.P. VERGHESE VS TO, 131 ITR 597 (SC) OBSERVED AS UNDER: - THE TASK OF INTERPRETATION OF A STATUTORY ENACTMENT IS NOT MECHANICAL TASK. IT IS MORE THAN A MERE READING OF MATHEMATICAL FORMULAE BECAUSE FEW WORD POSSESSES THE PRECISION OF MATHEMATICAL SYMBOLS. IT IS AN ATTEMPT TO DISCOVER THE INTENT OF THE LEGISLATURE FROM THE LANGUAGE USED BY IT AND IT MUST ALWAYS BE MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 56 56 REMEMBERED THAT LANGUAGE IS AT BEST AN IMPERFECT INSTRUMENT FOR THE EXPRESSION OF HUMAN THOUGHT AND, AS POINTED OUT BY LORD DENNING, IT WOULD BE IDLE TO EXPECT EVERY STATUTORY PROVISIONS TO BE DRAFTED WITH DIVINE PRESCIENCE AND PERFECT CLARITY. WE CAN DO BETTER THAN REPEAT THE FAMOUS WORDS OF JUDGE LEARNED HAND WHEN HE SAID. THE ABOVE OBSERVATIONS OF HON'BLE JUDGES OF THE APE X COURT WAS REITERATED BY HON'BLE APEX COURT IN THE CASE OF KERALA STATE INDUSTRIAL CORPORATION, 259 ITR 51 (SC) HOLDI NG AS UNDER:- THAT THE FINANCE MINISTERS SPEECH CAN BE RELIED UPON TO THROW LIGHT ON THE OBJECT AND PURPOSE OF TH E PARTICULAR PROVISIONS INTRODUCTION BY THE FINANCE B ILL HAS BEEN RECOGNIZED BY THIS COURT IN K.P. VERGHESE VS ITO 1981), 131 ITR 597 (SC), AT 609. AGAIN IN TH E MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 57 57 CASE OF R & B FALCON (A) PVT. LTD VS CIT (2008) 301 ITR 309 (SC), IT WAS HELD THAT (PAGE 323):- RULES OF EXECUTIVE CONSTRUCTION IN A SITUATION OF THIS NATURE MAY ALSO BE APPLIED. WHERE A REPRESENTATION IS MADE BY THE MAKERS OF LEGISLATION AT THE TIME OF INTRODUCTION OF BILL OR CONSTRUCTION THEREUPON IS P UT BY THE EXECUTIVE UPON ITS COMING INTO FORCE, THE CARRI ES GREAT WEIGHT. THE HON'BLE DELHI HIGH COURT IN ARJ SECURITY PRINTE RS, 264 ITR 276 AND NEO POLLYPACK PVT LTD. 245 ITR 492 (DEL.) HELD THAT EVEN WHEN THE DOCTRINE OF RES JUDI CATA DOES NOT APPLY TO INCOME TAX PROCEEDINGS, WHERE A ISSUE HAS BEEN DECIDED CONSISTENTLY IN EARLIER ASSESSMENT YEARS IN PARTICULAR MANNER, THE SAME VIE W SHOULD PREVAIL IN SUBSEQUENT YEARS UNLESS THERE IS A MATERIAL CHANGE IN FACTS, MEANING THEREBY, THERE MU ST BE MATERIAL CHANGE IN THE FACTS. AS MENTIONED EARLI ER, MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 58 58 THE LD. CIT(A), IDENTICALLY FOR ASSESSMENT YEAR 20 02-03 ALLOWED THE CLAIM OF THE ASSESSEE AND THE SAME HAS BEEN ACCEPTED BY THE DEPARTMENT. 3.2 THE INDORE BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS OM PRAKASH SURI (SUPRA) HELD AS UNDER:- 3. WE HAVE CONSIDERED THE SUBMISSIONS PUT FORTH BY THE LEARNED SENIOR DR AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. BRIEF FACTS ARE THAT IN THE PAST THE ASSESSEE WAS ENGAGED IN ROAD BUILDING CONTRACTOR AND WAS DERIVING INCOME FROM CONTRACT RECEIPTS AS WELL AS FROM SALE OF GITTI AND DURING T HE IMPUGNED YEAR, VENTURED INTO INVESTMENT IN SHARE MARKET. THE INCOME ARISING FROM F&O TRANSACTIONS AND DAILY TRADING IN SHARES (WITHOUT PHYSICAL DELIVERY) REFLECTED AS SPECULATIVE BUSINESS WHEREAS THE INCOME ON DELIVERY BASED TRANSACTIONS OF SALE AND PURCHASE OF SHARES, INCOME WAS SHOWN FROM CAPITAL GAINS. THE LEARNED AO CONSIDERED THE INCOM E WHICH WAS BASED ON PURCHASE AND SALE OF SHARES AS MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 59 59 BUSINESS INCOME ON THE GROUNDS AS NARRATED IN THE ASSESSMENT ORDER AS WELL AS AT PAGES 3 AND 4 OF THE APPELLATE ORDER. BROADLY, THE LEARNED AO WAS OF TH E VIEW THAT THE INTENTION OF THE ASSESSEE SINCE BEGINNING WAS SALE OF SHARES AS TRADING ACTIVITIES, AS EVIDENT FROM AUDITED PROFIT AND LOSS ACCOUNT BY NOT SHOWING THE SAME AS SHORT TERM CAPITAL GAIN AND ALSO IN FORM 3CD THE ASSESSEE HAS MENTIONED THE NATURE OF BUSINESS AS TRADING/DEALING IN SHARES/SECURITIES AND MUTUAL FUNDS. THE FREQUENCY OF TRANSACTIONS WAS ALSO CONSIDERED, CONSEQUENTLY H E TREATED THE AMOUNT OF RS.49,81,915/- AS BUSINESS INCOME FROM SHARE TRADING. HOWEVER, BEFORE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) THE BASIS OF ADDITIONS WAS EXPLAINED AS EVIDENT FROM PARA 3.1.1 ONWARDS. THE CRUX OF CLAIM OF THE ASSESSEE IS THAT IN THE AUDITED ACCOUNTS, THE SALE OF SHARES AMOUNTING TO RS. 9.43 CRORES IN WHICH DELIVERY HAD BEEN TAKEN, STT WAS PAID AND THE MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 60 60 SHARES WERE SOLD AFTER HOLDING FOR A FEW DAYS/FEW WEEKS. THE MUTUAL FUNDS OF RS. 2.91 LACS WERE SOLD AND WERE TREATED AS INCOME FROM SHORT TERM CAPITAL GAINS. BEFORE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) THE ASSESSEE ALSO FILED A DETAILED NO TE ON THE PURCHASE PROCESS FOR DELIVERY BASE SHARES, DETAILS OF DIVIDEND RECEIVED ON THE BASIS OF RELEVA NT STATEMENTS BY PLACING RELIANCE ON THE DECISION OF T HE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF JM SHARES & STOCK BROKERS V. JCIT DATED JANUARY, 2009. BRIEFLY, THE CLAIM OF THE ASSESSEE BEFORE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) WAS THAT THE DELIVERY BASED TRANSACTIONS WERE MADE WIT H AN INVESTMENT MOTIVE AND AS SUCH THE INCOME THEREFROM WAS IN THE NATURE OF SHORT TERM CAPITAL GAINS WHEREAS THE INCOME AROSE FROM F&O TRANSACTIONS AND DAILY TRADING IN SHARES WERE WITH THE BUSINESS MOTIVE WHICH WERE SHOWED AS BUSINESS INCOME ONLY WHICH WAS MAINLY THROUGH STOCK BROKER, MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 61 61 ARIHANT CAPITAL MARKETS LIMITED, REGISTERED WITH NSC, NSE AND BSE. IT IS ALSO SEEN THAT IN THE IMPUGNED ORDER THE BOARD CIRCULAR NO. 4/2007 DATED 15.6.2007 WHEREIN IT WAS EMPHASIZED THAT IT IS POSSIBLE FOR A TAX PAYER TO HAVE TWO PORT FOLIOS I. E. AN INVESTMENT PORT FOLIO COMPRISING OF SECURITIES WHIC H ARE TO BE TREATED AS CAPITAL ASSET AND TRADING PORT FOLIO COMPRISING STOCK IN TRADE WHICH ARE TO BE TRE ATED AS TRADING ASSET, WAS CONSIDERED. THE BOARD FURTHER CLARIFIES THAT NO SINGLE PRINCIPLE WOULD BE DECISIV E AND THE TOTAL PROPOSITION NEEDS TO BE CONSIDERED. T HE ASSESSEE HAS MAINTAINED ONLY ONE PORT FOLIO AND CLAIMED THAT TO BE AN INVESTMENT FOLIO. UNDISPUTEDLY, THE PERIOD OF HOLDING IS LESS THAN ON E YEAR, CONSEQUENTLY, THERE IS NO INFIRMITY IN HOLDIN G THAT THESE TRANSACTIONS WOULD BE TREATED AS SHORT TERM CAPITAL GAIN ON WHICH THE APPLICABLE TAX IS @ 10% ONLY. IN VIEW OF THIS UNCONTROVERTED FACT, THE RE MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 62 62 IS NO MERIT IN THE APPEAL OF THE REVENUE AND THE SA ME IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 4 TH AUGUST, 2010. 37. THE AFORESAID DECISION WAS AFFIRMED BY THE HON'BLE JURISDICTIONAL HIGH COURT REPORTED IN (2012) 19 ITJ 326 M.P). THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF SHA NTILAL M JAIN VS ACIT VIDE ORDER DATED 27-04-2011 (ITA NO. 269/MUM/2010) HELD THAT DESPITE LARGE VOLUME OF SHA RES TRANSACTIONS, THE ASSESSING OFFICER CANNOT IGNORE T HE RULE OF CONSISTENCY TO TREAT THE GAINS ON SALE OF SHARES AS STCG. IN THAT CASE, THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF TRADING OF INVESTMENT IN SHARES AND SECURITIES OFFERED RS. 1.54 CRORES AS SHORT TERM CAPITAL GAIN AND RS. 2.91 CRORES FRO M LONG TERM CAPITAL GAIN. THE LONG TERM CAPITAL GAIN WAS ACCEPT ED WHEREAS SHORT TERM CAPITAL GAIN WAS HELD TO BE BUSINESS PR OFIT. SINCE IN EARLIER ASSESSMENT YEARS THE CLAIM OF THE ASSES SEE WAS CONSISTENTLY ACCEPTED AS SHORT TERM CAPITAL GAIN, IT WAS HELD THAT THE RULE OF CONSISTENCY AS PROPOUNDED BY HON'B LE BOMBAY MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 63 63 HIGH COURT IN THE CASE OF GOPAL PUROHIT (SUPRA), IT IS FAIRLY APPLICABLE AND THE INCOME HAS TO BE TREATED AS SHOR T TERM CAPITAL GAIN. IDENTICALLY IN THE CASE OF NAGINDAS P SETH (ITA NO.961/MUM/2010) IT WAS HELD THAT DESPITE LARGE NUM BER OF TRANSACTIONS IN SHARES, THE PROFIT CAN BE ASSESSED AS CAPITAL GAINS UNDER THE FACTS OF THE CASE. THE CASE OF THE ASSESSEE IS FURTHER FORTIFIED BY THESE DECISIONS MORE SPECIFICA LLY WHEN THE ASSESSEE WAS HOLD THE SHARES IN HIS BOOKS AS INVE STOR, WAS NOT HAVING OFFICE OR ADMINISTRATIVE SET UP, NO INTE REST WAS PAID ON THE FUNDS AND THERE WAS NOT A SINGLE INSTANCE WH ERE THE ASSESSEE SQUARED UP THE TRANSACTIONS ON THE SAME WI THOUT TAKING THE DELIVERY OF SHARES. THE DECISION IN THE CASE OF JANAK S RANAWALA, 11 SOT 627 (MUM.) FURTHER SUPPORTS THE CASE OF THE ASSESSEE. LIKEWISE, THE DECISION FROM HON'BLE MADRAS HIGH COURT IN CIT VS N.S.S. INVESTMENT PVT LTD. 227 ITR 149 (MAD), CIT VS ASSOCIATED INDUSTRIAL DEVELOPMENT COM PANY, 82 ITR 526 (SC) SUPPORTS THE CASE OF THE ASSESSEE. IN THE PRESENT APPEAL, WE NOTE THAT THE ASSESSEE MADE INVESTMENT IN SHARES WITH INTENTION TO EARN DIVIDEND INCOME ON APPRECIAT ION OF PRICE MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 64 64 OF SHARES. THEREFORE, IT CANNOT BE SAID THAT THE A SSESSEE WAS DOING BUSINESS. MORE SPECIFICALLY WHEN, THE ASSESS EE EITHER UTILISED HIS OWN FUNDS/ FAMILY FUNDS OR DID NOT PAY ANY INTEREST AND DEPICTED THE TRANSACTIONS IN SHARES UN DER INVESTMENT PORTFOLIO. DURING HEARING, IT WAS ALSO E XPLAINED BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT ACCOUNTS WERE MAINTAINED BY THE ASSESSEE IN TWO SEPARATE CAPACIT IES I.E. TRADER AND INVESTOR AND NEVER TREATED THE SAME AS H OLDINGS OF SHARES AS STOCK IN TRADE WHICH CLARIFIES THE INTENT ION OF THE ASSESSEE. THIS ASSERTION WAS NOT CONTROVERTED BY TH E REVENUE. 38. THE LD. SR. DR PLACED RELIANCE UPON THE DECISION OF THIS TRIBUNAL IN ACIT VS SHRI NAVEET KUMAR (ITA NO.346/IND/2013) ORDER DATED 30-08-2013. WE HAVE PE RUSED THIS ORDER AND FOUND THAT IT HAS BEEN CLARIFIED THA T IF THE SHARES ARE SHOWN AS INVESTMENT AND NOT AS STOCK IN TRADE, PROFIT ARRIVING FROM SUCH SHARES WILL BE CAPITAL G AINS AND NOT BUSINESS PROFIT. THE MATTER WAS RESTORED TO THE A SSESSING OFFICER TO EXAMINE THE FACTS AND THEN DECIDE ACCORD INGLY. THEREFORE, THIS JUDICIAL PRONOUNCEMENT MAY NOT HELP THE MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 65 65 REVENUE. THE OTHER CASES RELIED UPON BY THE REVENUE HAVE ALSO BEEN PERUSED AND ARE OF THE VIEW THAT THE FACT S ARE NOT IDENTICAL, THEREFORE, THESE MAY NO HELP THE REVEN UE. THE BOARD CIRCULAR NO. 4.2007 DATED 15-06-207 ALSO EMPH ASIZES THAT IT IS POSSIBLE FOR A TAX PAYER TO HAVE TWO POR TFOLIOS NAMELY, AN INVESTMENT PORTFOLIO, COMPRISING OF SECURITIES, WHICH ARE TO BE TREATED AS CAPITAL ASSETS AND TRADING PORTFOLIO COMPRISING OF STOCK IN TRADE WHICH ARE TO BE TREATED AS TRADE ASSETS. NO SINGLE PRINCIPLE WOULD BE DECISIVE AND THE FACT HAS TO BE CONSIDERED IN ENTIRETY. THIS PROPOSITION HAS BEEN C ONFIRMED BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE O F SHRI OM PRAKASH SURI (SUPRA). THE TOTALITY OF FACTS PLAINLY INDICATE THAT THE LD. FIRST APPELLATE AUTHORITY RIGHTLY DIRECTE D THE ASSESSING OFFICER TO TREAT THE SHORT TERM CAPITAL GAIN AS EA RNED FROM INVESTMENT IN SHARES. INSTRUCTION NO.1827 DATED 31 ST AUGUST, 1989 WAS SUPPLEMENTED BY CBDT CIRCULAR NO. F.NO.149/287/2005-TPL [REPORTED IN 210 CTR 29 (ST.) ], ADVISING THE ASSESSING OFFICERS THAT THE PRINCIPLES CONTAINED IN THE CIRCULAR SHOULD GUIDE THEM IN DETERMINING WHETH ER, IN MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 66 66 GIVEN CASES, THE SHARES ARE HELD BY THE ASSESSEE A S INVESTMENT (AND THEREFORE, GIVING RISE TO CAPITAL GAINS) OR STOCK-IN-TRADE (AND THEREFORE, GIVING RISE TO BUSIN ESS PROFIT) BY FURTHER OPINING THAT NO SINGLE PRINCIPLE WOULD BE D ECISIVE AND TOTAL EFFECT OF ALL THE PRINCIPLES SHOULD BE CONSID ERED. IF THE NUMBER OF TRANSACTIONS ARE ANALYSED, WE NOTE THAT, IN A COMPUTER BASED TRADING SYSTEM/ E-FILING, THE FIGURE S, BEING SPLIT UP, GIVE MISLEADING HIGH FIGURES, REFLECTING THE INDIVIDUAL COMPONENT OF THE TRANSACTION BUT REALLY, IF THESE F IGURES ARE SYNCHRONISED THEN CLEAR PICTURE OOZES OUT. SINCE TH E GAIN HAS BEEN EARNED FROM THE DELIVERY BASED TRANSACTIONS, T HEREFORE, RESPECTFULLY FOLLOWING THE DECISION FROM HON'BLE JU RISDICTIONAL HIGH COURT IN THE CASE OF SHRI OM PRAKASH SURI (SUP RA), WE DO NOT FIND ANY MERIT IN THE CONCLUSION DRAWN BY THE L OWER AUTHORITIES FOR TREATING THE GAINS ARISING OUT OF S ALE OF SHARES AS BUSINESS INCOME RATHER THAN CAPITAL GAIN. ACCORD INGLY, WE DIRECT THE ASSESSING OFFICER TO TREAT THE GAIN ARIS ING OUT OF SALE OF SHARES AS CAPITAL GAINS . WE DIRECT ACCORDINGLY. MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 67 67 ADDITION U/S 2(22)(E) ON ACCOUNT OF DEEMED DIVIDEND : 39. DURING THE COURSE OF SCRUTINY ASSESSMENT IN THE CASE OF SUSHIL JAI NARAYAN KARWA, THE AO FOUND THAT PART OF THE INVESTMENT WAS MADE BY THE ASSESSE E OUT OF LOAN TAKEN FROM KRISHIDHAN SEEDS LIMITED IN WHICH ASSESSEE WAS THE DIRECTOR. ACCORDINGLY, THE ADDITION OF RS. 1,50,67,070/- WAS MADE UNDER THE HEAD DEEMED DIVIDEND. BY THE IMPUGNED ORDER, THE LD. CIT(A) CONFIRMED THE ACTION OF THE AO AGAINST WHI CH THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 40. IT WAS ARGUED BY THE LD. AUTHORIZED REPRESENTATIVE, SHRI PRAKASH JAIN, C. A., THAT THE AO HAS WRONGLY INCLUDED THE SHARES HELD BY THE HUF AND MINOR CHILDREN OF THE ASSESSEE, WHILE COMPUTING SHAR E HOLDING OF ASSESSEE IN M/S. KRISHIDHAN SEEDS LIMITE D. IT WAS SUBMITTED THAT HUF AND MINORS COULD NOT BE MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 68 68 INCLUDED FOR WORKING OUT THE HOLDING. AS PER LD. AUTHORIZED REPRESENTATIVE, THE INCOME-TAX ACT DOES NOT DEFINE THE VOTING RIGHTS, HENCE, FOR THE VOTING RIGHTS, THE PROVISIONS OF THE COMPANIES ACT 1956, AR E APPLICABLE, ACCORDING TO WHICH MINOR CANNOT ONLY BE THE MEMBER OF THE COMPANY, BUT THEY CAN ALSO EXERCIS E THEIR VOTING RIGHTS. PROVISIONS OF SECTION 41 OF TH E COMPANIES ACT, AND THE NOTIFICATION ISSUED BY THE COMPANY LAW BOARD, SPELLS THAT A MINOR CAN ALSO BE A MEMBER OF THE COMPANY IF THE SHARES, WHICH HE HOLDS ARE FULLY PAID UP. OUR ATTENTION WAS ALSO INVIT ED TO A LETTER OF DEPARTMENT OF COMPANIES AFFAIRS NO. 8/18(41)/63-PR DATED 31.3.1964, CLARIFYING THAT REGISTRAR SHOULD NOT RAISE ANY OBJECTION TO THE ALLOTMENT OF SHARES TO A MINOR AND ENTRY OF THE NAM E OF THE MINOR IN THE REGISTER OF MEMBERS OR IN THE RETURN OF ALLOTMENT OR IN ANY OTHER RETURN. MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 69 69 41. RELIANCE WAS ALSO PLACED BY THE LD. AUTHORIZED REPRESENTATIVE ON THE DECISION OF THE I.T.A.T., COCHIN BENCH IN THE CASE OF SMT. PARVATHAVARDHINI AMAL, 24 ITD 243. FURTHER RELIANCE WAS PLACED ON THE DECISION OF THE I.T.A.T., MUMBAI SPECIAL BENCH IN THE CASE OF BHOMIK COLOR LAB, 313 (AT) /146, WHICH WAS FURTHER CONFIRMED BY THE HON'BL E MUMBAI HIGH COURT IN SUPPORT OF THE PROPOSITION THAT FOR INVOKING PROVISIONS OF SECTION 2(22)(E), THE ASSESSEES MUST BE REGISTERED AS WELL AS BENEFICIAL OWNER OF THE SHARES. ABSENCE OF ANY ONE OF THE CONDITIONS WILL EXCLUDE THE ASSESSEE FROM DEEMING PROVISIONS OF SECTION 2(22)(E). FURTHER RELIANCE WAS ALSO PLACED ON THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. INDIAN TECHNOCRATS LIMITED, ORDER DATED 11 TH FEB.,2011, WHEREIN AFTER CONSIDERING THE DECISION OF THE HON'BLE SUPREME COURT MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 70 70 IN THE CASE OF C. P. SARATHY MUDALIAR, IT WAS HELD T HAT TO ATTRACT FIRST LIMB OF PROVISIONS OF SECTION 2(22 )(E), THE PAYMENT MUST BE TO A PERSON, WHO IS A REGISTERED HOLDER OF SHARE, THE EXPRESSION SHAREHOLDER FOUND IN THE 1961 ACT, HAS TO BE CONSTRUED AS APPLYING TO REGISTERED SHAREHOLDER. IN THE NUT-SHELL, IT WAS HEL D THAT THE ASSESSEE MUST BE A REGISTERED SHAREHOLDER AS WELL AS BENEFICIAL OWNER OF THE SHARE FOR BRINGING HIM WITHIN THE MISCHIEF OF SECTION 2(22)(E) OF THE ACT. 42. ON THE OTHER HAND, THE LD. CIT DR RELIED ON THE DECISION OF RAMESHWAR LAL SANWARMAL, 82 ITR 628, AND SUBMITTED THAT WHERE SHARES ARE HELD BY KARTA, WHEN SHARES WERE ACQUIRED FROM THE FUNDS OF THE HUF, COULD BE CONSIDERED TO BE THE SHARES HELD B Y THE HUF AND THE LOANS MADE TO THE FAMILY MEMBERS COULD FALL WITHIN THE DEFINITION DIVIDEND U/S 2(22) (E) OF THE INCOME-TAX ACT, 1961. RELIANCE WAS ALSO PLACE D MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 71 71 ON THE JUDGMENT REPORTED AT 305 ITR 227, IN THE CASE OF SAURASHTRA KUTCH STOCK EXCHANGE LIMITED AND DS.A.I.NARAYAN RAO, 64 ITR 67. IN VIEW OF THESE JUDGMENTS, THE LD. CIT DR ARGUED THAT SHARES HELD BY HUF AND MINOR CHILDREN OF ASSESSEE SHRI SUSHIL KARWA HAS TO BE ADDED IN THE SHARES HELD BY HIM IN HIS INDIVIDUAL CAPACITY, AS A RESULT OF WHICH HOLDI NG OF SHARES AND VOTING POWERS GOES ABOVE 10 %. THEREFORE , THE LOAN RECEIVED BY HIM FROM M/S. KRISHIDHAN SEEDS LIMITED IN WHICH HE IS MANAGING DIRECTOR, FALL WITH IN THE DEFINITION OF DIVIDEND U/S 2(22)(E) OF THE INCO ME- TAX ACT, 1961, AND HENCE IT IS TAXABLE IN HIS HANDS. 43. WE HAVE CONSIDERED THE RIVAL CONTENTIONS, CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND ALSO DELIBERATED UPON THE CASE LAWS CITED BY LD. AUTHORIZED REPRESENTATIVE AND LD. CIT DR ALONGWITH LD. SENIOR D.R. DURING THE COURSE OF HEARI NG MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 72 72 BEFORE US, IN THE CONTEXT OF FACTUAL MATRIX OF THE INSTANT CASE. FROM THE RECORD, WE FOUND THAT THE ASSESSEE SHRI SUSHIL KARWA IS IN WHOLE TIME EMPLOYMENT WITH KRISHIDHAN SEEDS LIMITED AND HAD RECEIVED GROSS SALARY OF RS. 15 LAKHS FROM IT. IN ADDITION TO IT, SHRI SUSHIL KARWA WAS ALSO HAVING INCOME FROM HOUSE PROPERTY, INTEREST ON FDRS, SAVIN G BANK ACCOUNT AND DIVIDEND INCOME. SHRI SUSHIL KARWA IS ALSO SHAREHOLDER OF KRISHIDHAN SEEDS LIMITED AND HOLDING 7,75,214 EQUITY SHARES OUT OF TOTAL ISSUE AND SUBSCRIBED AND PAID UP EQUITY SHARES OF RS. 80,05,316/-, WHICH CONSTITUTED 9.68 % OF THE TOTAL ISSUE, SUBSCRIBED AND PAID UP SHARE CAPITAL OF THE COMPANY. HOWEVER, THE AO ALSO INCLUDED 4,84,460 SHARES HELD BY SUSHIL JAI NARAYAN KARWA HUF, 10,900 SHARES HELD BY GOKUL KARWA (MINOR SON ) AND 32,400 SHARES HELD BY SHARDA KARWA (MINOR DAUGHTER). AFTER MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 73 73 ADDING THE SHARES HELD BY HUF AND MINOR SON AND DAUGHTER OF THE ASSESSEE, THE AO FOUND THAT THE SHAREHOLDING OF ASSESSEE IN M/S. KRISHIDHAN SEEDS LIMITED EXCEEDED 10 %. THEREFORE, HE ATTRACTED PROVISIONS OF SECTION 2(22)(E) AND TAXED THE AMOUNT OF LOAN RECEIVED BY HIM FROM KRISHIDHAN SEEDS LIMITED U/S 2(22)(E) OF THE INCOME-TAX ACT, 1961. FROM THE RECORD, WE FOUND THAT THESE SHARES WERE REGISTERED IN THE NAME OF HUF AND MINOR SON AND DAUGHTER OF THE ASSESSEE AND NOT IN THE NAME OF THE ASSESSEE HIMSEL F. AS PER THE PROVISIONS OF THE COMPANIES ACT, A MINOR CANNOT ONLY BE A MEMBER OF THE COMPANY BUT THEY CAN ALSO EXERCISE THEIR VOTING RIGHTS U/S 41 OF THE COMPANIES ACT. THERE IS ALSO NO DISPUTE TO THE FACT THAT THE SHARES HELD BY THE MINOR SONS WERE FULLY PA ID. THEREFORE, THERE IS NO QUESTION OF INCLUSION OF THE SHARES REGISTERED IN THE NAME OF MINOR CHILDREN, WH ILE MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 74 74 COMPUTING SHAREHOLDING OF THE ASSESSEE. THERE IS A LSO NO RESTRICTION IN ALLOTMENT OF SHARES TO THE HUF. H UF CAN APPLY FOR SHARES IN A COMPANY AND THE SAME CAN BE ALLOTTED IN THEIR NAMES. THESE SHARES ARE DULY REGISTERED IN THE NAME OF HUF. THE SHARES SO REGISTERED IN THE NAME OF HUF CANNOT BE TREATED AS SHARES HELD BY THE ASSESSEE FOR THE PURPOSE OF SECT ION 2(22)(E). THE PROPOSITION LAID DOWN BY THE I.T.A.T. , SPECIAL BENCH IN THE CASE OF BHOMIK COLOR LAB (SUPR A) CLEARLY LAID DOWN THE CONDITION FOR BRINGING THE ASSESSEE WITHIN THE MISCHIEF OF SECTION 2(22)(E), ACCORDING TO WHICH CONDITIONS OF REGISTERED SHAREHOLDERS AS WELL AS BENEFICIAL SHAREHOLDERS IS REQUIRED TO BE COMPLIED WITH FOR BRINGING THE ASSES SEE WITHIN THE PURVIEW OF SECTION 2(22)(E). IF ANY ONE OF THE CONDITIONS ARE ABSENT, AN ASSESSEE CANNOT BE BROUGHT WITHIN THE MISCHIEF OF SECTION 2(22)(E) OF T HE MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 75 75 ACT. HON'BLE MUMBAI HIGH COURT HAVE DULY APPROVED THE PROPOSITION LAID DOWN BY I.T.A.T., SPECIAL BENC H IN THE CASE OF BHOMIK COLOR LAB (SUPRA). 44. NOW WE DEAL WITH THE FOLLOWING DECISIONS CITED BY LD. CIT DR, WITH REGARD TO THEIR APPLICABI LITY TO THE ISSUE OF SECTION 2(22)(E) OF THE INCOME-TAX ACT, 1961: (I) CIT VS. RAMESHWARLAL SANWARMAL [1980] 122 ITR 1 (SC) (II) S.A.I. NARAYANA ROW 64 ITR 67 (SC) (III) SAURASHTRA KUTCH STOCK EXCHANGE LTD. 305 IT R 227 (SC) 45. WE HAD CAREFULLY GONE THROUGH THE ABOVE DECISIONS AND FIND THAT THE FACTS OF THESE DECISION S ARE DISTINGUISHABLE FROM THE FACTS OF INSTANT CASE THERE FORE PROPOSITION LAID DOWN IN THESE CASES ARE NOT APPLIC ABLE TO THE FACTS OF ASSESSEES CASE. FURTHERMORE THE R ATIO LAID DOWN BY THE HONBLE SUPREME COURT IN THE ABOVE DECISIONS DO NOT APPLY TO THE FACTS OF THE ASSESSEE S MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 76 76 CASE WHICH WILL BE CLEAR FROM THE FOLLOWINGS DISCUSSIONS: (I). RAMESHWARLAL SANWARMAL (SUPRA) (A) IN THE CASE OF RAMESHWARLAL SANWARMAL (SUPRA) THE SHARES OF HUF WAS REGISTERED IN THE PERSONAL NA ME OF THE KARTA WHILE IN THE CASE OF ASSESSEE THE SHARES ARE REGISTERED IN THE NAME OF SUSHIL J. KARWA HUF AND N OT IN THE NAME OF ASSESSEE . THIS FACT IS CLEAR FROM THE ANNUAL RETURN OF THE COMPANY KRISHIDHAN SEEDS LTD FILED UNDER THE COMPANY LAW. A XEROX COPY OF THE SAME IS ALSO PLACED ON RECORD BY THE ASSESSEE. (B) THIS DECISION OF THE SUPREME COURT PROVIDES THA T THE PROVISIONS RELATING TO DEEMED DIVIDEND IS APPLI CABLE TO LOAN PROVIDED TO A REGISTERED SHAREHOLDER OF A COMPANY AND NOT TO THE BENEFICIAL OWNER OF THE SHARES. THIS DECISION OF THE SUPREME COURT PROVIDES THAT FOR THE SATISFACTION OF THE DEFINITION OF DEEMED DIVIDEND AND FOR THE APPLICABILITY OF THE PROVISION S, THE SHAREHOLDER SHOULD BE A REGISTERED SHAREHOLDER. IN THE MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 77 77 ASSESSEES CASE THE REGISTERED SHARE HOLDER IS S USHIL J. KARWA HUF AND NOT ASSESSEE . THUS THE RATIO OF TH E DECISION OF CIT VS. RAMESHWARLAL SANWARMAL (SUPRA) IS NOT APPLICABLE AND AS SUCH THE RATIO OF THIS DECISI ON COULD NOT BE APPLIED IN THE ASSESSEES CASE ONLY ON THIS SCORE. (C ) THIS DECISION HAS BEEN PRONOUNCED UNDER SECTI ON 2(6A)(E) OF THE INCOME-TAX ACT, 1922, WHICH CORRES PONDS TO THE DEFINITION OF DEEMED DIVIDEND UNDER SECTION 2(2 2)(E) OF THE INCOME-TAX ACT, 1961. THE DEFINITION UNDER THE INCO ME-TAX ACT, 1922 PROVIDED THAT THE PROVISIONS RELATING TO DEEMED DIVIDEND ARE APPLICABLE ONLY IN THE CASE OF REGISTE RED HOLDER. THUS, IN ACCORDANCE TO THE PROVISIONS AND THE ABOV E MENTIONED DECISION OF THE SUPREME COURT, IF THE LO AN HAS BEEN GIVEN TO THE BENEFICIAL OWNER, THEN THE PROVIS IONS OF DEEMED DIVIDEND SHALL NOT BE APPLICABLE SINCE THE BENEFICIAL OWNER IS NOT THE REGISTERED HOLDER. (D) HOWEVER, THE DEFINITION OF DEEMED DIVIDEND UND ER SECTION 2(22)(E) OF THE INCOME- TAX ACT, 1961 HAS B EEN MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 78 78 AMENDED TO READ IN ITS PRESENT FORM AND NO LONGER CORRESPONDS TO THE DEFINITION UNDER SECTION 2(6A)( E) OF THE INCOME-TAX ACT, 1922. 46. AS PER THE DEFINITION OF DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE INCOME-TAX ACT, 1961, THE PROVISIONS ARE APPLICABLE TO A PERSON WHO IS REGIST ERED SHAREHOLDER, AND ALSO A PERSON WHO IS THE BENEFICIA L OWNER OF THE SHARES . (E) THUS, FOR THE APPLICABILITY OF THE PROVISIONS RELATING TO DEEMED DIVIDEND, THE FOLLOWING TWO CONDITIONS PR ECEDENT FOR INVOKING SECTION 2(22)(E) SHOULD BE SATISFIED: (I) THE PERSON RECEIVING THE AMOUNT, BEING A SHAREHOLDER SHOULD BE THE REGISTERED HOLDER OF SHARES; AND (II) SUCH PERSON SHOULD ALSO BE THE BENEFICIAL OWNE R OF SHARES. MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 79 79 47. THUS, AS PER THE AMENDED DEFINITION, MERELY BEING A REGISTERED HOLDER OF THE SHARES WILL NOT BE SUFF ICIENT FOR THE APPLICABILITY OF THE PROVISIONS AND SUCH PERSON SHO ULD ALSO BE THE BENEFICIAL OWNER OF SUCH SHARES. THUS, UNDER TH E PRESENT PROVISIONS, IF A LOAN HAS BEEN GIVEN TO A REGISTER ED HOLDER OF SHARES, WHO IS NOT THE BENEFICIAL OWNER OF SHARES, THEN THE PROVISIONS UNDER SECTION 2(22)(E) OF THE INCOME-TAX ACT, 1961 SHALL NOT BE APPLICABLE. (F) IN THE PRESENT CASE NEITHER THE SHARES ARE REG ISTERED IN THE NAME OF ASSESSEE NOR THE ASSESSEE IS A BENEF ICIAL OWNER OF THE SHARES AS SAME ARE REGISTERED IN THE NAME OF SUSHIL J.KARWA HUF AND BENEFICIAL OWNER IS ALSO SUSHIL J. KARWA HUF. (G) IT IS PERTINENT TO MENTION HERE THAT THERE IS N O BAR UNDER THE COMPANY LAW FOR REGISTRATION OF SHARES I N THE NAME OF HUF LIKE A INDIVIDUAL COMPANY MUTUAL FUND , INSURANCE FUND, VENTURE CAPITAL FUND, WHICH IS CLE AR FROM THE APPLICATION FORM ISSUED FOR SUBSCRIBING T HE SHARES IN PUBLIC ISSUE. MOREVER, IN THE ANNUAL RETU RN OF MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 80 80 THE COMPANY KRISHIDHAN SEEDS LTD UNDER THE COLUMN DETAILS OF SHARE HOLDERS THE COMPANY IS MENTIONING THE NAME OF HUF IN RESPECT OF SHARES HELD BY THE SUSHI L JAINARAIN KARWA HUF AND NOT OF THE ASSESSEE. (H) IN THE CASE OF CIT VS. INDIAN TECHNOCRAFT LTD ,ITA NO. 352 OF 2011 ORDER DATED 11 TH MAY, 2011 THE HONBLE DELHI HIGH COURT BY CONSIDERING THE DECISION OF C.P.SARAT HY MUDALIAR (1972) 83 ITR 170 AND RAMESHWARLAL SANWAR MAL VS. CIT (1980) 122 ITR 1 (SC) HELD AS UNDER:- PAGE 46 PARA 22 IT IS THUS CLEAR FROM THE AFORESAID PRONOUNCEMENT OF THE HONBLE SUPREME COURT THAT TO ATTRACT THE FIRST LIMB OF THE PROVISIONS OF SECTION 2 (22) (E) THE PAYMENT MUST BE TO A PERSON WHO IS A REGISTERED HOLDER OF SHARES. AS ALREADY MENTIONED THE CONDITION UNDER THE 1922 ACT AND THE 1961 ACT REGARDING THE PAYEE BEING A SHAREHOLDER REMAINS THE SAME AND IT IS THE CONDITION UNDER THAT SUCH SHAREHOLDER SHOULD BE BENEFICIAL OWNER OF THE MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 81 81 SHARES AND THE PERCENTAGE OF VOTING POWER THAT SUCH SHAREHOLDER SHOULD HOLD THAT HAS BEEN PRESCRIBED AS AN ADDITIONAL CONDITION UNDER THE 1961 ACT. THE WORD SHAREHOLDER ALONE EXISTED IN THE DEFINITION OF DIVIDEND IN THE 1922 ACT. THE EXPRESSION SHAREHOLDER HAS BEEN INTERPRETED UNDER THE 1922 ACT TO MEAN A REGISTERED SHAREHOLDER. THIS EXPRESSION SHAREHOLDER FOUND IN THE 1961 ACT HAS TO BE THEREFORE CONSTRUED AS APPLYING ONLY TO REGISTERED SHAREHOLDER. IT IS A PRINCIPLE OF INTERPRETATION OF STATUTES THAT WHERE ONCE CERTAIN WORDS IN AN ACT HAVE RECEIVED A JUDICIAL CONSTRUCTION IN ONE OF THE SUPERIOR COURTS, AND THE LEGISLATURE HAS REPEATED THEM IN A SUBSEQUENT STATUTE, THE LEGISLATURE MUST BE TAKEN TO HAVE USED THEM ACCORDING TO THE MEANING WHICH A COURT OF COMPETENT JURISDICTION HAS GIVEN THEM. PAGE 46 PARA 23 MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 82 82 IN THE 1961 ACT, THE WORD SHAREHOLDER IS FOLLOWED BY THE FOLLOWING WORDS BEING A PERSON WHO IS THE BENEFICIAL OWNER OF SHARES. THIS EXPRESSION USED IN SECTION 2 (22)(E) , BOTH IN THE 1961 ACT AND IN THE AMENDED PROVISIONS W.E.F. 1 ST APRIL ,1968 ONLY QUALIFIES THE WORD SHAREHOLDER AND DOES NOT IN ANY WAY ALTER THE POSITION THAT THE SHAREHOLDER HAS TO BE A REGISTERED SHAREHOLDER. THESE PROVISIONS ALSO DO NOT SUBSTITUTE THE AFORESAID REQUIREMENT TO A REQUIREMENT OF MERELY HOLDING A BENEFICIAL INTEREST IN THE SHARES WITHOUT BEING A REGISTERED HOLDER OF SHARES. THE EXPRESSION BEING IS A PRESENT PARTICIPLE. A PARTICIPLE IS A WORD WHICH IS PARTLY A VERB AND PARTLY AN ADJECTIVE. IN SECTION 2(22) (E) , THE PRESENT PARTICIPLE BEING IS USED TO DESCRIBED THE NOUN SHAREHOLDER LIKE AN ADJECTIVE. THE EXPRESSION BEING A PERSON WHO IS THE BENEFICIAL OWNER OF MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 83 83 SHARES IS THEREFORE A FURTHER REQUIREMENT BEFORE A SHAREHOLDER CAN BE SAID TO FALL WITHIN THE PARAMETERS OF SECTION 2 (22) (E) OF THE ACT. IN THE 1961 ACT, SECTION HAS ALSO TO BE BENEFICIAL OWNER OF SHARES ( NOT BEING SHARES ENTITLED TO A FIXED RATE OF DIVIDEND WHETHER WITH OR WITHOUT A RIGHT TO PARTICIPATE IN PROFITS) HOLDING NOT LESS THAN TEN PERCENT OF THE VOTING POWER. IT IS NOT POSSIBLE TO ACCEPT THE CONTENTION OF THE LEARNED DEPARTMENTAL REPRESENTATIVE THAT UNDER THE 1961 ACT THERE IS NO REQUIREMENT OF A SHAREHOLDER BEING A REGISTERED HOLDER AND THAT EVEN A BENEFICIAL OWNERSHIP OF SHARES WOULD BE SUFFICIENT. PAGE 47 PARA 24 THE EXPRESSION SHAREHOLDER BEING A PERSON WHO IS THE BENEFICIAL OWNER OF SHARES REFERRED TO IN THE FIRST LIMB OF SECTION 2(22) (E) REFERS TO BOTH A REGISTERED SHAREHOLDER AND BENEFICIAL MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 84 84 SHAREHOLDER. IF A PERSON IS A REGISTERED SHARES HOLDER BUT NOT HE BENEFICIAL THEN THE PROVISION OF SECTION 2(22) (E) WILL NOT APPLY. SIMILARLY IF A PERSON IS A BENEFICIAL SHAREHOLDER BUT NOT A REGISTERED SHAREHOLDER THEN ALSO THE FIRST LIMB OF PROVISIONS OF SECTION 2 (22) (E) WILL NOT APPLY . PAGE 47 PARA 46 IN VIEW OF THE ABOVE, THIS APPEAL IS ALSO DISMISSED. A XEROX COPY OF THE ORDER WAS ALSO ENCLOSED HEREWITH. RELIANCE WAS ALSO PLACED ON THE FOLLOWIN G DECISIONS:- (I) ACIT VS. BHAUMIK COLOUR P.LTD (2009) 313 ITR (A.T) 146 (MUMBAI) (SB). (II) JCIT VS. KUNAL ORGANICS (P) LTD. 164 TAXMAN 169 (AHD.) THUS EVEN WITH THE CHANGE IN THE DEFINITION UNDER THE CURRENT PROVISIONS OF THE INCOME-TAX ACT, 1961, WHE REIN THE DEFINITION OF DEEMED DIVIDEND IS APPLICABLE TO LOAN OR ADVANCE GIVEN TO A REGISTERED AND A BENEFICIAL SHAREHOLDER, THE MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 85 85 AFOREMENTIONED DECISION OF THE SUPREME COURT IN T HE CASE OF RAMESHWARLAL SANWARMAL (SUPRA) IS NOT APPLICABLE TO THE FACTS OF ASSESSEES CASE. (II). SAI NARAYAN ROW (SUPRA) THIS CASE DEALS WITH THE REFUND OF THE ILLEGAL LEV Y OF TAXES AND THUS HAS FACTS WHICH ARE MATERIALLY DIFFERENT FROM THE PRESENT FACTS AND THUS THE SAME CANNOT BE MADE APPL ICABLE. (III) SAURASHTRA KUTCH STOCK EXCHANGE LTD: THIS DECISION OF THE SUPREME COURT DEALS WITH THE ISSUE RELATING TO THE MEANING OF THE WORDS MISTAKE APPA RENT ON THE FACT OF THE RECORD AND WHETHER IT WAS DULY EXERCIS ED BY THE TRIBUNAL OR NOT. THE FACTS AND THE RATIO OF THIS D ECISION ARE MATERIALLY DIFFERENT FROM THE PRESENT FACTS AN D THUS THE SAME IS NOT APPLICABLE TO THE PRESENT ISSUE BEF ORE YOUR HONOUR. IN THE CASE OF SEAMIST PROPERTIES (P) LTD VS. ITO ( 2005) 95 TTJ (MUM)201, IT WAS HELD THAT DIVIDEND UNDER SECTION 2 (22)(E) COULD NOT BE TAXED IN THE HANDS OF A PERSON OTHER THAN A REGISTERED SHAREHOLDERS. MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 86 86 48. IF THE CONCLUSION DRAWN IN THE IMPUGNED ORDERS, OBSERVATIONS MADE FROM THE ASSESSMENT ORDERS, ASSER TIONS MADE BY RESPECTIVE COUNSEL AND THE MATERIAL AVAILAB LE ON RECORD ARE KEPT IN JUXTAPOSITION AND ANALYZED, WE F IND THAT THE ASSESSEE IS NOT COMING WITHIN THE MISCHIEF OF 2(22) (E). 49. IN VIEW OF THE ABOVE DISCUSSIONS WE DO NOT FIND ANY MERIT IN THE ACTIONS OF LOWER AUTHORITIES IN INVOKI NG THE PROVISIONS OF SEC. 2(22)(E) OF IT ACT 1961, IN CASE OF SUSHIL KARWA. 50. THE ASSESSEE IS ALSO AGGRIEVED FOR ADDITION OF RS. 6,04,988/- MADE U/S 2(22)(E) IN CASE OF ANOOP KARWA FOR THE ASSESSMENT YEAR 2006-07. 51. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND FOUND THAT SHRI ANOOP KARWA HAS TAKEN A LOAN FROM M /S. KRISHI DHAM SEEDS LIMITED. WE FOUND THAT SHRI ANOOP KARWA HAS MORE THAN 10 % VOTING RIGHTS IN THE SHARE CAPIT AL OF KRISHI DHAM SEEDS LIMITED, THEREFORE, THE PROVISIONS OF SE CTION 2(22)(E) IS CLEARLY APPLICABLE FOR LOANS AND ADVAN CES SO TAKEN MANISH KARWA, SUSHIL KARWA, SMT. SUDHA KARWA,VISHNU KARWA, SUBHASH CHAND KARWA, SUSHIL J. KARWA, MUKU ND KARWA, ANOOP KARWA,ASHISH KARWA, SMT. ARTI KARWA, SMT. SURVARNA KARWA, SMT. MATHURA DEVI KARWA I.T.A.NOS. 307 TO 315/IND/2009 AND 346 TO 348/IND/2 009 ASSESSMENT YEAR : 2006-07 87 87 BY THE ASSESSEE. ACCORDINGLY, THE ADDITION MADE BY THE ASSESSING OFFICER U/S 2(22)(E) WAS PERFECTLY JUSTIF IED. 52. IN THE RESULT, THE APPEALS ARE ALLOWED IN PART IN TERMS INDICATED HEREINABOVE. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 20 TH DECEMBER, 2013. SD/- SD/- (R.C.SHARMA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 20 TH DECEMBER, 2013. CPU* 1710.20.12