ACIT, Cir-10(1), Hyderabad V. Shri P. Udaya Bhaskara Reddy, S'bad, Secunderabad

ITA 356/HYD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66249 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 6 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 09-03-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AMISHA S GUPT
• Keywords: Capital asset; Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 356/HYD/2011 ASSESSMENT YEAR: 2007-08 ASSTT. COMMISSIONER OF INCOME TAX, ... APPELLANT CIRCLE 10(1), HYDERABAD VS. SRI P. UDAYA BHASKARA REDDY, RESP ONDENT SECUNDERABAD. (PAN AIXPP4618G) APPELLANT BY : SMT. AMISHA S. GUPT RESPONDENT BY : SHRI MOHD AFZAL DATE OF HEARING : 19/07/2012 DATE OF PRONOUNCEMENT : 14/0 9/2012 ORDER PER ASHA VIJAYARAGHAVAN, J.M.: THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED A GAINST THE ORDER OF THE CIT(A)-VI, HYDERABAD DATED 15/11/2010 FOR THE A SSESSMENT YEAR 2007-08. 2. THE ONLY ISSUE ON APPEAL IS AGAINST THE ORDER OF CIT(A) DIRECTING THE AO TO TREAT PROFIT ON SALE OF SHARES AS CAPITAL GAI NS. THE ASSESSEE, WHILE FILING THE RETURN OF INCOME OFFERED RS.2,33,29,142/ - AS SHORT TERM CAPITAL GAINS. THE ASSESSING OFFICER WHILE GOING THROUGH T HE ACCOUNTS FOUND THAT THE ASSESSEE HAD UNDERTAKEN NUMEROUS TRANSACTIONS W HEREIN THE SHARES WERE PURCHASED AND SOLD WITHIN A VERY SHORT PERIOD OF TIME. ACCORDINGLY, HE HAS HELD THAT THE PROFIT ON SALE OF SHARES SHOUL D BE ASSESSED AS BUSINESS INCOME AND NOT SHORT TERM CAPITAL GAINS. 2 ITA NO. 356/HYD/2011 SRI P. UDAY BHASKARA REDDY 3. THE ASSESSING OFFICER, THEREFORE, ASSESSED A SUM OF RS.2,31,45,944 AS BUSINESS INCOME. 4. AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN APP EAL BEFORE THE CIT(A). AFTER HEARING THE ELABORATE ARGUMENTS OF T HE ASSESSEE THE CIT(A) HELD THAT THE PROFIT ON SALE OF SHARES SHOULD BE AS SESSED AS SHORT TERM CAPITAL GAINS ON THE BASIS OF THE FOLLOWING: I HAVE CAREFULLY GONE THROUGH THE GROUNDS OF APPEA L, WRITTEN SUBMISSION AND DETAILS OF THE ASSESSMENT ORDER AND CONSIDERED ALL THE RELEVANT MATERIAL PERTAINING TO THE ISSUES INVOLVED IN THIS APPEAL. THE AO OBSERVED THAT THE APPELLANT FREQUENTLY INDULGED IN SALE PURCHASE OF S HARES IN HIGH VOLUMES AND CONCLUDED IT AS BUSINESS ACTIVITY. ON ANALYSIS OF THE ABOVE MATERIAL ON RECORD, THE FOLLOWING POINTS ARE NOTEWORTHY TO SAY THAT THE APPELLANT DID NOT INDULGE IN THE BUSINESS ACTIVITY OF TRADING SHARES BUT MADE INVESTMENTS ON WHICH HE GAINED AND DECLARED THE SAME AS SHORT TERM GAINS: A) THE APPELLANT IS AN INDIVIDUAL AND AN ENGINEER, WHO DERIVES INCOME FROM AGRICULTURAL ACTIVITIES AND ALSO RENDERS TECHNICAL EXPERTISE FOR SUCH AGRICULTURAL ACTIVITIES. B) HE PURCHASED SHARES OF M/S. PENNAR INDUSTRIES LTD F ROM M/S.ICICI BANK, AND IN ADDITION TO THIS, HE HAS SHOWN INVESTMENTS I N OTHER SCRIPTS ALSO WHICH THE AO PREPARED IN A TABULAR FORM AND MADE IT A PART OF THE ASSESSMENT ORDER UNDER THE HEAD LIST OF TRANSACTIO NS OF SHARES FOR THE FINANCIAL YEAR 2006-07. C) CONTRARY TO THE OBSERVATION OF THE AO, THE APPELLAN T TOOK DELIVERY OF THE SHARES ON DEMAT ACCOUNT. A PERUSAL OF THE ASSESSME NT ORDER SHOWS THAT THE AO PREPARED TWO TABLES ON THE BASIS OF THE DETA ILS OF THE DEMAT ACCOUNT ONLY. THEREFORE, THE AO HAS NOT BROUGHT OU T ANY INSTANCE WHEREIN THE APPELLANT WAS INDULGING IN TRADING OF S HARES WITHOUT TAKING THE DELIVERY. D) THE AO CITED EXAMPLES OF THE TRANSACTIONS THAT THE APPELLANT UNDERTOOK ON 21.6.2006 AND 29.9.2006 AND STATED THAT THE APPELLA NT ENTERED INTO NUMBER OF TRANSACTIONS ON THESE DAYS, INSTEAD OF CO UNTING THE NUMBER OF TIMES, THE BOMBAY STOCK EXCHANGE COMPUTER EXECUTED THE SALE ORDER AND MATCHED THE SAME WITH THE CORRESPONDING PURCHASE OR DERS FROM OTHERS WHO ENTERED INTO BOMBAY STOCK EXCHANGE FROM VARIOUS LOCATIONS IN THE COUNTRY. FROM THESE NATURE OF TRANSACTIONS, THE AO DREW AN INFERENCE THAT THE APPELLANT INDULGED IN DAY TRADING AND CITE D VARIOUS DATES IN THE ASSESSMENT ORDER LIKE 30/06, 01/08, 03/08, 10/08, 2 2/08, 28/08, 29/08, 07/09, 05/10, 20/10, 09/11, 30/11/2006 AND 12/02/20 07 WHERE HE STATED THAT BOTH PURCHASE AND SALE WAS DONE ON THES E DATES. A PERUSAL OF THE RECORD SHOWS THAT THE SALE OF SHARES IS MADE FR OM THE OPENING BALANCE OF SHARES THAT EXISTED AT THE BEGINNING OF EACH DAY AS QUOTED ABOVE. THE AO HAS NOT BROUGHT OUT ANY INSTANCE WHE REIN HE MADE AN 3 ITA NO. 356/HYD/2011 SRI P. UDAY BHASKARA REDDY ENQUIRY AND INVESTIGATED THAT THE APPELLANT PURCHAS ED X NUMBER OF SHARES OF X COMPANY AND SOLD THE SAME X NUMBER OF SHARES OF X COMPANY ON THE SAME DAY BEFORE THE CLOSE OF THE MAR KET TO CALL IT A DAY TRADING. E) THE AO HAS NOT ENQUIRED OR MADE SUFFICIENT EFFERTS TO INVESTIGATE AND QUOTE AN INSTANCE IN HIS ORDER THAT THE APPELLANT I S INDULGED IN SPECULATIVE TRANSACTIONS, FUTURES AND OPTIONS OR DERIVATIVES OR DID DAY TRADING WITHOUT TAKING THE DELIVERY OF SHARES ON DEMAT ACCOUNT. F) IN FACT THE APPELLANT SUBMITTED A DIVIDEND WARRANT WHERE A DIVIDEND OF RS.14,00,000 HAS BEEN EARNED AND DECLARED IN HIS RE TURN OF INCOME. A DIVIDEND IS A MONITORY GAIN ON AN INVESTMENT WHICH IS VERY MUCH LIKE EARNING INTEREST ON A BANK ACCOUNT. IT IS NOT A ST OCK DIVIDEND BUT WAS PAID IN CASH. G) A PERUSAL OF THE BALANCE SHEET SHOWS THAT THE INVES TMENT IN SHARES IS SHOWN ON THE ASSETS SIDE OF THE BALANCE SHEET AND I T IS NOT SHOWN AS TOCK IN TRADE. THERE IS NO CAPITAL CALCULATION BY THE A PPELLANT TO MAKE DECISIONS SUCH AS WHETHER TO INCREASE OR DECREASE T HE STOCK FOR INVENTORY REPLENISHMENT. H) A PERUSAL OF THE RECORD SHOWS THAT STT WAS PAID ON EACH AND EVERY DELIVERY BASED TRANSACTIONS BY THE APPELLANT. I) THE AO MADE CERTAIN INCORRECT OBSERVATIONS IN THE A SSESSMENT ORDER WHICH THE APPELLANT HAS BROUGHT OUT IN PARA 15 AND PARA 16 OF THE WRITTEN SUBMISSIONS. IT WAS STATED BY THE APPELLANT THAT H E HAS BUYING AND SELLING VARIOUS SCRIPTS AT VARIOUS TIMES, SOMETIMES THE SHARES OF THE COMPANY WAS PURCHASED AT AN EARLIER TIME AND WERE S OLD AT A LATER DATE AND THE NEW SHARES OF THE SAME COMPANY WERE PURCHAS ED AT A LATER TIME. SOMETIMES IT WAS POSSIBLE THAT THE SHARES OF THE PA RTICULAR COMPANY WOULD HAVE BEEN SOLD AT DIFFERENT TIMES AND IN DIFF ERENT LOTS. THESE FACTS, DOES NOT TALLY TO THE FACTS AND CIRCUMSTANCES OF TH E APPELLANT AND NEEDS CORRECTION BECAUSE THE APPELLANT DID NOT ADVANCE TH ESE SUBMISSIONS DURING THE ASSESSMENT PROCEEDINGS AND THEY HAVE BEE N WRONGLY INCORPORATED FROM THE ASSESSMENT ORDERS OF OTHER CA SES HAVING ALMOST IDENTICAL FACTS. THIS KIND OF WRONG OBSERVATIONS A ND INCORPORATION MADE BY THE ASSESSING OFFICER IS NOT JUSTIFIED TO SUGGES T THAT THE APPELLANT IS INVOLVED IN TRADING ACTIVITY WITHOUT CHECKING THE C ORRECT FACTS PERTAINING TO THE APPELLANT. J) THE APPELLANT DOES NOT HAVE THE INFRASTRUCTURE TO C ONDUCT A SYSTEMATIC ORGANIZED ACTIVITY WITH A PROFIT MOTIVE TO INDICATE A TRADING ACTIVITY. THERE ARE NO ANALYSTS DEALING ASSISTANTS OR THE APPELLANT ACQUIRED ASSETS LIKE COMPUTER HARDWARE AND SOFTWARE ETC., TO INDICATE AN ORGANIZED ACTIVITY SUPPORTING THE PRESUMPTION OF BUSINESS. ON THE OTH ER HAND INVESTING THROUGH A DISCRETIONARY PORTFOLIO MANAGER IS INDICA TIVE OF AN INVESTMENT. THE APPELLANTS MAIN ACTIVITY WAS AGRICULTURE. THE ASSESSING OFFICER IN THE ASSESSMENT ORDER HAS R EFRAINED FROM GOING INTO THE LENGTH TO EXAMINE THE OTHER ISSUES PERTAINING T O THE OTHER SHARES. HE SELECTIVELY HIGHLIGHTED ONLY FEW DETAILS TO DRAW AD VERSE CONCLUSION WHILE THE REMAINING INFORMATION WAS NOT LOOKED AT ALL OR WAS IGNORED THOUGH WAS RELEVANT FOR CONSIDERATION. HE MERELY WENT BY THE NUMBER OF TRANSACTIONS TO SUPPORT HIS CONCLUSION THAT THE INCOME SHOULD BE TR EATED AS BUSINESS INCOME. 4 ITA NO. 356/HYD/2011 SRI P. UDAY BHASKARA REDDY THERE IS NO FIXED FORMULA TO DETERMINE WHETHER THE ACTIVITY OF THE APPELLANT IS TO BE REGARDED AS BUSINESS ACTIVITY OR INVESTMENT A CTIVITY. NO SINGLE FACT IS DETERMINATIVE TO CONCLUDE WHETHER PURCHASE OF SHARE S IS AN INVESTMENT OR BUSINESS ACTIVITY. ALL THE RELEVANT FACTORS SHOULD BE CONSIDERED IN TOTALITY TO DETERMINE THE NATURE OF ACTIVITY. THE CIT(A) REFER RED TO THE DECISION OF ITAT MUMBAI BENCH IN THE CASE OF JANAK RANGWALA 11SOT 62 7 (MUM) AND HELD THAT IT IS CLEAR THAT THE MAGNITUDE AND FREQUENCY OF TRANSACTIONS ARE NO GROUNDS TO DETERMINE WHETHER THE SAME IS CAPITAL GA IN OF BUSINESS INCOME. WHAT IS IMPORTANT IS THE INTENTION OF THE APPELLANT AND THE TREATMENT GIVEN BY HIM IN HIS BOOKS OF ACCOUNTS. THE APPELLANT IN HIS RETURN OF INCOME HAS TREATED THE PURCHASE OF SHARES AS IN INVESTMENT WIT H AN INTENTION DERIVE AN ENDURING PROFIT IN THE FORM OF DIVIDEND AND ACCORDI NGLY DECLARED THE SAME. THE CIT(A) OBSERVED THAT THE TERM FREQUENCY IS OF C OURSE A VAGUE TERM AND FRANKLY NUMBER OF TRANSACTIONS CANNOT BE SPECIFIED AND THE ASSESSING OFFICER SEEMS TO HAVE COUNTED THE NUMBER OF TIMES AN ORDER WAS EXECUTED IN A DAY AND CONSTRUED IT TO BE NUMBER OF TRANSACTIONS BUT O NE HAS TO TAKE INTO ACCOUNT, THE NATURE, SOURCE AND COMPOSITION OF INCO ME AND THE FUNDING PATTERN OF SHARE TRANSACTIONS AMONG OTHER FACTORS. THE CIT(A) NOTED THAT THE APPELLANT HAS RELIED ON T HE DECISON OF THE HONBLE SUPREME COURT IN THE CASE OF JANKI RAM BAHAUR RAM V S. CIT, CALCUTTA REPORTED IN 57 ITR 21. THE CIT(A) POINTED OUT THAT THE APPELLANT ALSO STA TED THAT IN THE APPELLANTS CASE THE SHARES WERE HELD AS INVESTMENT BUT NO SHAR ES WERE HELD FOR BUSINESS PURPOSES. THE INTENTION AT THE TIME OF AC QUIRING THE SHARES FROM M/S.ICICI BANK IS MOST PREDOMINANT AND IT IS ALSO N OT A CASE WHERE THE APPELLANT IS HOLDING SHARES AS AN INVESTOR IN SOME CASES AND A TRADER IN SOME CASES AND THAT THERE IS A SHIFTING STAND SO THAT TH E ASSESSING OFFICERS OBSERVATION THAT THE APPELLANT IS A TRADER HOLDS GO OD. FURTHER, THE CIT(A) OBSERVED THAT THE HONBLE SUPREME COURT DID ACCEPT THE DUAL STATUS OF THE PERSON HOLDING THE SHARES IN THE CASE OF A) 41 ITR P.534(SC) B) 73 ITR P.652 (SC) C) 82 ITR P.586 (SC) THE CIT(A) FURTHER POINTED OUT THAT THE APPELLANT ALSO RELIED ON THE CITATION IN THE CASE OF CIT (CENTRAL) VS. ASSOCIATED INDUSTRIAL DEVELOPMENT CO PVT LTD., 82 ITR 586, WHERE THE HONBLE SUPREME COURT HAS OBS ERVED THAT WHETHER A PARTICULAR HOLDING OF SHARES IS BY WAY OF INVESTMEN T OR FORMS PART OF THE STOCK IN TRADE IS A MATTER WHICH IS WHETHER THE KNOWLEDGE OF THE ASSESSEE WHO HOLDS THE SHARES AND HE SHOULD, IN NORMAL CIRCUMSTA NCES, BE IN A POSITION TO PRODUCE EVIDENCE FROM HIS RECORDS AS TO WHETHER HE HAS MAINTAINED ANY DISTINCTION BETWEEN THOSE SHARES WHICH ARE HIS STOC K IN TRADE AND THOSE WHICH ARE HELD BY WAY OF INVESTMENT. 10. THE CIT(A) HELD THAT MERELY BECAUSE THE APPELL ANT SOLD THE SHARES ON FREQUENT BASIS AND IN HIGH VOLUMES CANNOT BE CONSTR UED AS A BUSINESS 5 ITA NO. 356/HYD/2011 SRI P. UDAY BHASKARA REDDY TRANSACTION. HE ALSO RELIED ON THE CBDT CIRCULAR W HICH CLEARLY INDICATES THAT ALL RELEVANT FACTORS SHOULD BE CONSIDERED IN TOTALI TY TO DETERMINE THE NATURE OF THE ACTIVITY AND NO ISOLATED FACTOR SHOULD BE CONSI DERED TO CONCLUDE THAT THE APPELLANT IS A TRADER ANDT THE CBDT CIRCULAR RELIED UPON BY THE ASSESSING OFFICER DESCRIBES TO PORTFOLIOS ONE AS AN INVESTMEN T COMPRISING OF SECURITIES TREATED AS A CAPITAL ASSET AND AN ANOTHER AS A TRAD ING ONE COMPRISING OF STOCK-IN-TRADE TO BE TREATED AS TRADING ASSET. HE S TATED THAT THE CIRCULAR HAS TO BE TAKEN IN A RIGHT SPIRIT IN TOTALITY AND NO SI NGLE FACTOR OR AN ISOLATE ACTIVITY IS DETERMINATIVE TO SAY THAT IT IS A BUSINESS INCOM E. SECTION 111A CLEARLY ENUMERATES THAT A CONCESSIONAL RATE OF 10% ON THE S ECURITIES THAT SUFFERED STT IS MANDATORY AND RELIED ON THE JUDICIAL PRONOU NCEMENT IN THE CASE OF CIT VS. DHARMA REDDY (1969), 73 ITR 751 (SC) WHERE THE TERM BUSINESS HAS BEEN DEFINED TO BE A CONTINUOUS EXERCISE OF AN ACTI VITY. IN THE PRESENT CASE, THE APPELLANT HELD THE SHARES FOR CERTAIN TIME BEFO RE SELLING THE SAME AND HELD THAT ON THESE FACTS, IT IS NOT POSSIBLE TO HOL D THAT THE APPELLANT CARRIED ON TRADING IN SHARES AS A CONTINUOUS AND REGULAR ACTIV ITY. THEREFORE, THE ASSESSING OFFICER WAS DIIRECTED BY THE CIT(A) TO RE CALCULATE THE PROFIT FROM SALE/ PURCHASE OF SHARES AS INCOME FROM SHORT TERM CAPITAL GAINS. 5. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US AN D THE LEARNED DR RELIED ON THE ORDER OF THE ITAT, MUMBAI BENCH IN TH E CASE OF SADHANA NABERA VS. ACIT IN ITA NO. 2586/MUM/2006 FOR AY 200 5-06, DATED 26 TH MARCH, 2010 AND MATHESON BOSANQUET ENTERPRISES LTD. VS. DCIT, [2009] 316 ITR 375 (MAD). 6. THE LEARNED COUNSEL FOR THE ASSESSEE SHRI MOHD. AFZAL POINTED TO THE CHART AT PAGE 10 OF THE ASSESSEES PAPER BOOK W HEREIN HE HAD COMPARED THE CASE OF THE ASSESSEE WITH THAT OF THE DECISION OF THE MUMBAI BENCH OF ITAT IN THE CASE OF GOPAL PUROHIT, AND IN PAGE 11 COMPARISON BETWEEN THE ASSESSEE AND SMK SHARES AND STOCK BROKING, MUMBAI. 7. THE LEARNED COUNSEL FOR THE ASSESSEE FILED WRITT EN SUBMISSIONS AT PAGES 2 TO 11 OF PAPER BOOK AND THE LEARNED COUNSEL ALSO FILED ADDITIONAL WRITTEN SUBMISSIONS ON 29/05/2012 IN RESPONSE TO TH E QUERY OF THE BENCH SEEKING INFORMATION IN RESPECT OF THE SALE AND PURC HASE OF SHARES OTHER THAN SHARES OF M/S PENNAR INDUSTRIES LTD. THE COUNS EL ALSO FILED DETAILS OF PENNAR INDUSTRIES LTD. ALONG WITH THE DETAILS OF SH ARES PURCHASED DURING 6 ITA NO. 356/HYD/2011 SRI P. UDAY BHASKARA REDDY THE ASSESSMENT YEAR. 8. WE HAVE HEARD THE ARGUMENTS OF BOTH THE PARTIES, PERUSED THE RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW. WE FIND THAT THE ASSESSEE HAS MADE FREQUENT SALE AND PURCHASE OF SHARES IN HIGH VOLUMES. THE ASSESSING OFFICER HAS EXTRACTED AT PAG ES 2 TO 5 OF HIS ORDER, THE DETAILS OF SHARE TRANSACTIONS. WE HAVE ALSO CAR EFULLY CONSIDERED THE SUBMISSIONS OF THE ASSESSEE BEFORE THE CIT(A) AND B EFORE US. WE DRAW OUR CONCLUSION AS FOLLOWS: I) FREQUENT PURCHASE AND SALE OF SHARES IS TO BE TREAT ED AS BUSINESS ACTIVITY ONLY. II) THE ASSESSEE HAS INDULGED IN DAY TRADING AND HAS PU RCHASED THE SHARES ON FREQUENT BASIS AND SOLD THEM REGULARL Y, THOUGH, THE FACT MIGHT BE THAT HE HAD NEVER RE-ENTERED INTO ANY OF THE SCRIPT, WHICH HE HAD SOLD ONCE. III) IT IS THE FINDING OF THE ASSESSING OFFICER FROM THE DMAT ACCOUNT OF THE ASSESSEE THAT THE ASSESSEE HAS NOT T AKEN ANY DELIVERY OF THE SHARES AND MAINTAINED THE SAME IN T HE POOL ACCOUNT OF THE BROKER. IV) THE PROXIMITY OF THE DATES SUGGEST THAT THE ASSESSE E WAS MOTIVATED WITH A VIEW TO MAKE SOME GAIN, WHICH IS C LEARLY A MARK OF TRADING IN SHARES. V) THE ASSESSEE HAS PRODUCED YEARLY TRANSACTION STATEM ENT FROM BROKER WITHOUT ANY DISTINCTION OF SHARES HELD FOR S TOCK-IN- TRADE AND INVESTMENT, THEREFORE, THE INTENTION OF T HE ASSESSEE IS NOT CERTAIN AS TO WHETHER THE SHARES WERE TRANSA CTED FOR THE PURPOSE OF INVESTMENT. VI) THE ASSESSEE HIMSELF ADMITTED THAT THE PROFITS DERI VED FROM AN EARLIER TRANSACTION WAS RE-INVESTED WITH RECURRI NG ACTIVITY OF INVESTING, WHICH SHOWS HIM OUT AS A TRADER AND N OT AN INVESTOR. 7 ITA NO. 356/HYD/2011 SRI P. UDAY BHASKARA REDDY VII) THE ASSESSING OFFICER HAS OBSERVED THAT THE ASSESSE E HIMSELF HAS ACCEPTED THAT HE HAD BORROWED FUNDS ON VARIOUS DATES FOR PURCHASING SHARES FROM DIFFERENT INDIVIDUALS. THIS WOULD INDICATE THE FACT THAT THE SALES WERE NOT MADE UNDE R ANY FINANCIAL NEED OR PURCHASES WERE MADE OUT OF SURPLU S FUNDS AVAILABLE WITH THE ASSESSEE AND THE TRANSACTIONS IN SHARES, IS AN ADVENTURE IN NATURE OF TRADE. VIII) IT WAS BROUGHT TO OUR NOTICE THAT THE ASSESSEES MA IN OCCUPATION IS AGRICULTURE AND HE IS ALSO TECHNICAL EXPERT IN AGRICULTURAL ACTIVITIES. HOWEVER, THIS FACT WOULD N OT DETER HIM FROM PURSUING HIS INTEREST AND ABILITY TO DEAL IN S HARES AND EARN PROFIT BY TRADING, THUS, PROJECTING AS A PERSO N HAVING MULTI VARIOUS ACTIVITIES. 9. THE CO-ORDINATE BENCH IN THE CASE OF SPECTRA SHA RES & SCRIPTS (P) LD. VS. DCIT IN ITA NO. 748/HYD/2011 FOR AY 2006-07 , ORDER DATED 5 TH AUGUST, 2001, HELD AS UNDER: 51. IN OUR OPINION, WHETHER OR NOT A PERSON CARRIE D ON BUSINESS IN A PARTICULAR COMMODITY MUST DEPEND UPON VOLUME, FREQUENCY, CONTI NUITY AND REGULARITY OF TRANSACTIONS OF PURCHASE AND SALE IN A CLASS OF GOO DS AND THE TRANSACTION MUST ORDINARILY BE ENTERED INTO WITH A PROFIT MOTIVE. SU CH MOTIVE MUST PERVADE THE WHOLE SERIES OF TRANSACTION EFFECTED BY THE PERSON IN THE COURSE OF HIS ACTIVITY. TO INFER FROM A COURSE OF TRANSACTIONS THAT IS INTENDE D THEREBY TO CARRY ON BUSINESS ORDINARILY THE CHARACTERISTICS OF VOLUME, FREQUENCY AND REGULARITY INDICATING AN INTENTION TO CONTINUE THE ACTIVITY OF CARRYING ON T HE TRANSACTION MUST EXIST. LOOKING INTO THE VOLUME, FREQUENCY, CONTINUITY AND REGULARI TY OF TRANSACTIONS OF PURCHASE AND SALE IN SHARES BY THE ASSESSEE, IT CANNOT BE SA ID THAT THE ASSESSEE ENTERED INTO THIS ACTIVITY NOT WITH A PROFIT MOTIVE. THEREF ORE, ONLY INFERENCE WHICH CAN BE DRAWN IS THAT THE INCOME EARNED BY THE ASSESSEE OUT OF SALE AND PURCHASE OF THESE SHARES WAS AN INCOME UNDER THE HEAD PROFIT A ND GAINS OF BUSINESS OR PROFESSION. WE SEE NO JUSTIFICATION IN LENGTHY ARG UMENT OF THE ASSESSEES COUNSEL THAT THE PROFIT ARISING TO ASSESSEE ON SALE OF SHARES ACQUIRED BY IT WAS ASSESSABLE AS INCOME FROM CAPITAL GAIN. IN OUR CO NSIDERED OPINION, AFTER CONSIDERING THE CUMULATIVE EFFECT OF THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT IS JUSTIFIED IN TREATING THE PROFIT ARISING OUT OF SALE OF SHARES ACQUIRED BY THE ASSESSEE AS INCOME FROM BUSINESS. 8 ITA NO. 356/HYD/2011 SRI P. UDAY BHASKARA REDDY 10. THE JURISDICTIONAL HIGH COURT IN THE CASE OF PV S RAJU VS. ADDL. CIT, 340 ITR 75, HAS HELD AS FOLLOWS: IT IS EVIDENT FROM THE ORDER OF THE INCOME-TAX APPE LLATE TRIBUNAL THAT THE VOLUMINOUS SHARE TRANSACTIONS WERE IN THE ORDINARY LINE OF THE APPELLANTS BUSINESS; PURCHASE OF SHARES BY THE M WAS NOT FOR THE PURPOSE OF EARNING DIVIDEND BUT WITH THE DOMINA NT INTENTION OF RESALE IN ORDER TO EARN PROFITS; THE PROFIT MADE BY THEM IS NOT OF MERE ENHANCEMENT OF VALUE OF THE SHARES, BUT IS A P ROFIT MADE IN THE CARRYING ON OF A BUSINESS SCHEME OF PROFIT MAKI NG; HUGE VOLUME OF SHARE TRANSACTIONS, THE REPETITION AND CONTINUIT Y OF THE TRANSACTIONS, GIVE THEM A FLAVOR OF TRADE; THE MAG NITUDE, FREQUENCY AND THE RATIO OF SALES TO PURCHASES ON THE TOTAL HO LDINGS IS EVIDENCE THAT THE APPELLANTS HAD NOT PURCHASED THE SHARES AS AN INVESTMENT, BUT WITH THE INTENTION TO TRADE IN SUCH SCRIPS. 11. IN THE PRESENT CASE, THE FACTS ARE SIMILAR TO T HAT OF PVS RAJU VS. ADDL. CIT (SUPRA), RESPECTFULLY FOLLOWING THE DECIS ION OF JURISDICTIONAL HIGH COURT, WE ALLOW THE APPEAL OF THE REVENUE. 12. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED . PRONOUNCED IN THE OPEN COURT ON 14/09/2012. SD/- SD/- ( CHANDRA POOJARI) (ASHAVIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 14 TH SEPTEMBER, 2012. KV COPY TO:- 1) ACIT, CIRCLE 10(1), ROOM NO. 515, AC GUARDS, IT TOWERS, HYDERABAD 2) SRI P. UDAYA BHASKARA REDDY, FLAT NO. 202, GOLDE N APARTMENT, GAUTHAM NAGAR, MALKAJGIRI, SECUNDERABAD. 3) THE CIT (A)-VI, HYDERABAD 4) CIT-V, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDER ABAD.