Shri Rajan Vasudev Dapki, Ahmedabad V. The Dy.CIT.,Cent.Circle-1(3), Ahmedabad

ITA 425/AHD/2011

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0760 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 6 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-09-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 13-01-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 15-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: URVAHSI SODHAN
• Keywords: Capital asset; Business income; Tax effect
• Section: 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH (BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER & SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER) ITA. NOS: 522 & 787/AHD/2010 (ASSESSMENT YEAR: 2006-07) SMT. SHILPABEN RAJANBHAI DAPKI A-7, TULIP BUNGALOWS, NR. SURDHARA CIRCLE, OPP. T.V. TOWER, THALTEJ, AHMEDABAD- 380006 PAN NO.AASPD6097L ASSTT. COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE- 1(3), AHMEDABAD V/S V/S ASSTT. COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE- 1(3), AHMEDABAD SMT. SHILPABEN RAJANBHAI DAPKI A-7, TULIP BUNGALOWS, NR. SURDHARA CIRCLE, OPP. T.V. TOWER, THALTEJ, AHMEDABAD- 380006 PAN NO.AASPD6097L (APPELLANT) (RESPONDENT) ITA. NOS: 523/AHD/2010 & 425/AHD/2011 (ASSESSMENT YEARS: 2005-06 & 2006-07) SHRI RAJAN VASUDEV DAPKI 163 KAMDHENU COMPLEX, ASE BUILDING, AMBAWADE AHMEDABAD AHMEDABAD- 380015 PAN NO. AAWPD3172C SHRI RAJAN VASUDEV DAPKI V/S ASSTT. COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE- 1(3), AHMEDABAD ITA NOS. 522 , 523 & 787/AHD/2010 & ITA NO. 4 25/AHD/2011 . A.YS. 2005- 06 & 2006-07 2 163 KAMDHENU COMPLEX, ASE BUILDING, AMBAWADE AHMEDABAD AHMEDABAD- 380015 PAN NO. AAWPD3172C V/S DY. CIT CENTRAL CIRCLE- 1(3), AHMEDABAD (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. URVAHSI SODHAN, AR RESPONDENT BY : SHRI SANJAY KUMAR, SR. D.R. ( )/ ORDER DATE OF HEARING : 31 -08-201 6 DATE OF PRONOUNCEMENT : 06 -09-2016 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. ITA NOS. 522 & 787/AHD/2010 ARE CROSS APPEALS BY TH E ASSESSEE I.E. SMT. SHILPABEN RAJANBHAI DAPKI AND THE REVENUE PREF ERRED AGAINST THE VERY SAME ORDER OF THE LD. CIT(A)-I, AHMEDABAD DATED 12.01.2010 PERTAINING TO A.Y. 2006-07. ITA NOS. 523 /AHD2010 & 425/AHD/2011 ARE APPEALS BY THE ASSESSEE I.E. SHRI RAJAN VASUDEV DAPKI PREFERRED AGAINST THE ORDER OF THE LD. CIT(A) -I, AHMEDABAD DATED 18.11.2009 & 19.11.2010 PERTAINING TO A.Y. 20 05-06 & 2006- 07. 2. ALL THESE APPEALS HAVE COMMON SET OF FACTS; THEREFO RE, THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CO MMON ORDER FOR THE SAKE OF CONVENIENCE. 3. THE SUBSTANTIVE GRIEVANCE OF THE ASSESSEE I.E. SMT. SHILPABEN RANJANBHAI DAPKI READS AS UNDER:- ITA NOS. 522 , 523 & 787/AHD/2010 & ITA NO. 4 25/AHD/2011 . A.YS. 2005- 06 & 2006-07 3 1. THE LEARNED C.I.T. (APPEALS) ERRED BOTH IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER TO TREAT THE SHORT TERM CAPITAL GAIN AMOUNTING TO RS.34,81,086/- AS BUSINESS INCOME. ON THE FACTS OF THE CASE AND IN VIEW OF THE CORRECT LEGAL POSITION THE APPELLANT HAD RIGHTLY OFFERED THE ENTIRE INCOME OF SALE OF SHARES AS SHORT TERM CAPIT AL GAIN. THE LEARNED C.I.T. (APPEALS) OUGHT TO HAVE DIRECTED TO GIVE THE SAME TREATMENT TO THE GAIN OF RS.34,81,086/- BEING SHORT TERM CAPITAL GAIN AS HE HAS GIVEN IN RESPECT OF BALANCE GAIN OF RS.21,91,090/-. IT BE SO HELD NOW A ND THE ENTIRE AMOUNT OF SHORT TERM CAPITAL GAIN AMOUNTING TO RS.56,72,176/- BE HELD AS SHORT TERM CAPITAL GAIN LIABLE TO TAX AT 10% AS CLAIMED. 4. AND THE SUBSTANTIVE GRIEVANCE OF THE REVENUE READS AS UNDER:- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIR ECTING THE ASSESSING OFFICER TO TAX SUCH SURPLUS OF RS. 21,91,090/- ARISING FROM SALE OF SHARES AND SECURITIES AS SHORT TERM CAPITAL GAINS AS PER THE P ROVISIONS OF SECTION 111A AND NOT AS BUSINESS INCOME. 5. THE SUBSTANTIVE GRIEVANCE OF THE ASSESSEE I.E. SHRI RAJAN VASUDEV DAPKI FOR A.Y. 2005-06 READS AS UNDER:- 1. THE LEARNED C.I.T. (APPEALS) ERRED BOTH IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER TO TREAT THE SHORT TERM CAPITAL GAIN AMOUNTING TO RS.26,53,102/- (ERRONEOUSLY TAKEN AS R S. 26,60,522/-) AS BUSINESS INCOME. ON THE FACTS OF THE CASE AND IN VI EW OF THE CORRECT LEGAL POSITION THE APPELLANT HAD RIGHTLY OFFERED THE ENTI RE INCOME OF SALE OF SHARES AS SHORT TERM CAPITAL GAIN. IT BE SO HELD NOW AND T HE ENTIRE AMOUNT OF SHORT TERM CAPITAL GAIN AMOUNTING TO RS. 26,53,102/- BE H ELD AS SHORT TERM CAPITAL GAIN LIABLE TO TAX AT 10% AS CLAIMED INSTEA D OF BUSINESS INCOME. ITA NOS. 522 , 523 & 787/AHD/2010 & ITA NO. 4 25/AHD/2011 . A.YS. 2005- 06 & 2006-07 4 6. THE SUBSTANTIVE GRIEVANCE OF THE ASSESSEE I.E. SHRI RAJAN VASUDEV DAPKI FOR A.Y. 2006-07 READS AS UNDER:- 1. THE LEARNED C.I.T. (APPEALS) ERRED BOTH IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER TREATING THE INCOME OF RS. 95,69,636/- AND INCOME OF RS. 46,283/- AS BUSINESS INCOME AS AGAINS T THE SHORT TERM CAPITAL GAIN DECLARED BY THE APPELLANT. THE LD. CIT(A) FAIL ED TO APPRECIATE THE FACTS STATED IN THE STATEMENT OF FACTS THAT THE A.O. HAD MISCONCEIVED THE FACTS OF TRANSACTIONS WITH RUPAL NARESH PANCHAL GROUP AND AS THE APPELLANT IS AN INVESTOR IN SHARES AS IN THE PAST, THE PROFIT EARNE D FROM GENUINE LEGAL INVESTMENT TRANSACTIONS OUGHT TO HAVE BEEN ACCEPTED AS RESULTING INTO CAPITAL GAIN AS DECLARED. IT BE SO HELD NOW AND THE ENTIRE SUM OF RS. 1,04,78,963/- BE DIRECTED TO BE ASSESSED AS SHORT TERM CAPITAL GAIN AT THE RATES PRESCRIBED U/S. 111-A AS CLAIMED IN THE RETURN. 7. A PERUSAL OF THE ABOVE CLEARLY SHOWS THAT THE GRIEV ANCE OF THE ASSESSEE AND THE REVENUE EMANATE FROM THE SAME SET OF FACTS RELATING TO THE TREATMENT OF GAINS ARISING OUT OF THE SALE O F SHARES PARTLY AS BUSINESS INCOME AND PARTLY UNDER THE HEAD SHORT TE RM CAPITAL GAIN. 8. WHILE SCRUTINIZING THE RETURN OF INCOME, THE A.O. F OUND THAT IN THE COMPUTATION OF INCOME, THE ASSESSEE HAS SHOWN THE I NCOME UNDER THE VARIOUS HEADS SUCH AS SHORT TERM CAPITAL GAIN AND LONG TERM CAPITAL GAIN. THE ASSESSEE WAS ASKED TO JUSTIFY HE R CLAIM. THE ASSESSEE WAS ALSO ASKED TO FURNISH COMPLETE DETAILS OF APPLICATIONS FOR SUBSCRIBING TO IPOS OF VARIOUS COMPANIES THROUGH OT HER ENTITIES AS WELL AS IN HER OWN NAME. ITA NOS. 522 , 523 & 787/AHD/2010 & ITA NO. 4 25/AHD/2011 . A.YS. 2005- 06 & 2006-07 5 9. ASSESSEE FILED A DETAILED REPLY VIDE LETTER DATED 3 0.08.2008 AND THE SAME READS AS UNDER:- 4.2 IN RESPONSE TO NOTICE, VIDE LETTER DATED 13.08. 2008, THE ASSESSEE HAS FURNISHED THE REQUIRED DETAILS. ON PERUSAL OF THE DETAILS FUR NISHED FROM TIME TO TIME BY THE ASSESSEE, THE FOLLOWING FACTS EMERGES: (I) THAT THE ASSESSEE HAD PURCHASED/TRANSFERRED TH E SHARES FROM VARIOUS PARTIES THROUGH OFF MARKET TRANSACTIONS AND SALE OF SUCH SH ARES IN THE OPEN MARKET AND PROFIT MADE THERE FROM ETC. AND CLAIMED THE ABOVE T RANSACTIONS AS SHORT TERM CAPITAL GAIN. (II) SECONDLY, THE ASSESSEE REPEATEDLY CLAIMED THA T NO INVESTMENT WERE MADE IN IPOS IN THE OWN CAPACITY AS WELL AS THROUGH OTHER P ARTIES. (III) THIRDLY, THE ASSESSEE CLAIMED THAT INVESTMEN T IS MADE FOR LONG TERM BASIS AND NOT TO RESALE AT A PROFIT . (IV) FOURTHLY, THE ASSESSEE CLAIMED THAT SHE DID N OT MAKE ANY APPLICATION IN THE IPOS IN HNI OR ANY CATEGORY. (V) FIFTHLY, THE ASSESSEE REBUTTED THAT SHE HAS NE VER MADE ANY APPLICATION IN THE IPOS, THE SURPLUS RECEIVED ON RECEIPT OF REFUND/ALL OTMENT OF PARTICULAR IPO AND INVESTMENT IN ANOTHER IPO. (VI) FURTHER, THE ASSESSEE CLAIMED THAT SHE WAS HOL DING THE INVESTMENT WITH THE INTENTION TO HOLD FOR THE LONG PERIOD AND TO EARN D IVIDEND AS WELL AS APPRECIATION. (VII) THE ASSESSEE ALSO CLAIMED THAT THE VOLUME OF INVESTMENT/DISINVESTMENT DURING THE YEAR INCREASE AS COMPARED TO THE PREVIOU S YEAR IS IRRELEVANT IN DETERMINING THE STATUS OF A PERSON I.E. TRADER OR I NVESTOR. 10. AFTER CONSIDERING THE REPLY OF THE ASSESSEE, THE A. O. WAS NOT CONVINCED WITH THE SAME AND OBSERVED AS UNDER:- (I)THE ASSESSEE HERSELF OFFERED THE INCOME FROM THE SHARE TRANSACTIONS WITH VARIOUS PARTIES BEFORE THE INVESTIGATION WING. THE ASSESSEE HAD INITIALLY CLAIMED THAT THE PROFIT MADE FROM THE SHARE TRANSACTIONS WA S ITS SHORT TERM CAPITAL GAIN ITA NOS. 522 , 523 & 787/AHD/2010 & ITA NO. 4 25/AHD/2011 . A.YS. 2005- 06 & 2006-07 6 AND AS SUCH TAX WAS TO BE PAID AT THE RATE OF 10 PE R CENT ON ONLY SUCH GAINS. HOWEVER, AFTER ANALYZING THE FACTS OF THE CASE, THE INVESTIGATION WING VIDE LETTER NO. ADIT(INV)/L(L)/131(LA)/05-06 DATED 27.1.2006, R EQUESTED TO PAY TAX ON INCOME EARNED FROM SHARE TRADING ACTIVITY TREATING IT AS I TS INCOME FROM 'BUSINESS AND PROFESSION'. THE ASSESSEE VIDE ITS LETTER DATED 7.2 .2006 INTIMATED TO THE INVESTIGATION WING THAT TAX OF RS. 715,000/-HAS BEE N PAID TREATING ITS INCOME FROM SHARE TRADING ACTIVITY AS BUSINESS INCOME. 4.4 DURING THE YEAR, THE ASSESSEE HAS MADE PURCHAS E AND SALES OF SHARES OF VARIOUS COMPANIES IN LARGE QUANTITY. CONSIDERING TH E ACQUISITION OF SHARES OF CERTAIN IPOS THROUGH THE PERSONS INVOLVED IN IPO SC AM, FUNDS DEPLOYED IN PURCHASE AND SALE OF SHARES AND SECURITIES AND MULT IPLICITY OF THE TRANSACTIONS, A SHOW-CAUSE NOTICE DATED 20.08.2008 WAS ISSUED AND S ERVED UPON THE ASSESSEE REQUIRING HER TO SHOW CAUSE AS TO WHY SURPLUS ARISI NG OUT OF PURCHASE AND SALE OF SHARES SHOULD NOT BE TREATED AS BUSINESS INCOME. TH E RELEVANT PORTION OF THE SAID SHOW-CAUSE NOTICE IS REPRODUCED HEREUNDER: 'IN RESPONSE TO THE ABOVE, VARIOUS DETAILS HAVE BEE N FILED. ON GOING THROUGH THE SAID DETAILS, IT IS NOTED THAT DURING THE YEAR UNDE R CONSIDERATION, SHARES OF IDFC LTD., HAVE BEEN SHOWN AS PURCHASES AND SALES. IN TH IS REGARD, VIDE NOTICE DATED 10.10.2007 ISSUED U/S 142(1) OF THE ACT ALONG WITH QUESTIONNAIRE, YOU WERE REQUESTED TO SUBMIT COMPLETE DETAILS OF APPLICATION S MADE IN VARIOUS NAMES, AMOUNT PAID ON APPLICATION, DETAILS OF ALLOTMENT OF SHARES, DETAILS OF REFUNDS, IF ANY, DETAILS OF SALE OF SHARES ALLOTTED WITH DATE - RATE - NAME OF THE PERSON TO WHOM SOLD, FOR EACH IPOS IN WHICH MULTIPLE APPLICAT IONS HAVE BEEN MADE BY YOU OR THROUGH YOU. YOU WERE ALSO REQUESTED TO SHOW-CAU SE AS TO WHY THE INCOME AS COMPUTED UNDER THE PROVISIONS OF I. T. ACT ARISING OUT OF AFORESAID ACTIVITY SHOULD NOT BE TREATED AS YOUR INCOME FROM BUSINESS OR PROF ESSION INSTEAD OF SHORT TERM CAPITAL GAIN AS SHOWN BY YOU. IN RESPONSE TO THE AB OVE, YOU HAVE SUBMITTED THE REQUIRED DETAILS VIDE LETTER DATED 13.08.2008. FROM THE ABOVE, IT IS NOTED THAT APART FROM THE SHA RES OF IDFC LTD., , YOU HAVE TRADED AS WELL AS INVESTED IN VARIOUS SCRIPS DURING THE YEAR UNDER CONSIDERATION AND SURPLUS ARISING OUT OF THE PURCHASE AND SALE OF SHARES OF IPOS (OWN) AND ITA NOS. 522 , 523 & 787/AHD/2010 & ITA NO. 4 25/AHD/2011 . A.YS. 2005- 06 & 2006-07 7 OTHER COMPANIES AS STATED ABOVE HAVE SHOWN AS SHORT TERM CAPITAL GAINS BY YOU, WHICH IS NOT ACCEPTABLE ON THE BASIS OF BELOW MENTI ONED FACTS EMERGING FROM THE RECORDS. (1) ON GOING THROUGH THE RETURNS OF INCOME FOR THE YEAR UNDER CONSIDERATION IT IS NOTICED THAT THE PURCHASE AND SALES OF SECURITIES I S A/LIED TO YOUR USUAL TRADE OR BUSINESS OR INCIDENTAL TO IT AND IT WAS NOT AN O CCASIONAL INDEPENDENT ACTIVITY. (2) ON MOST OF THE OCCASIONS WHERE THE SHARES WERE ACQU IRED WITH THE INTENTION TO RESALE AT A PROFIT ONLY AND THERE WAS NO INTENTION TO HOLD THEM FOR LONG TERM APPRECIATION. (3) THE DETAILS SUBMITTED SHOWS THAT THE ACTIVITY OF SU BSCRIBING TO VARIOUS IPOS THROUGH THE COMPANIES AS REFERRED TO ABOVE OR HNL C ATEGORY WAS ON LARGE SCALE. (4) IT IS ALSO NOTED THAT ON RECEIPT OF REFUND/ALLOTMEN T OF A PARTICULAR IPO, AGAIN THE SURPLUS FUNDS WERE INVESTED IN ANOTHER IPO. THE SAID PATTERN HAS BEEN FOLLOWED REGULARLY. (5) THE RATIO OF SALES TO PURCHASE IS VERY NARROW RE SULTING INTO HOLDING OF SHARES OF A PARTICULAR COMPANY FOR A SHORTER PERIOD . (6) ON COMPARISON OF THE DETAILS OF PURCHASE AND SALE O F SHARES OF VARIOUS COMPANIES OF CURRENT YEAR WITH PREVIOUS YEARS, IT A PPEARS THAT THE VOLUME INCREASED OVER THE YEARS WHICH SHOWS THAT THE COMPA NY CEASED TO BE AN INVESTOR AND BECOME TRADER. IN VIEW OF ABOVE, YOU ARE REQUESTED TO SHOW CAUSE A S TO WHY THE SURPLUS AMOUNTING TO RS. 56,72,176/- ARISING OUT OF PURCHAS E AND SALE OF SHARES VARIOUS COMPANIES SHOULD NOT BE TREATED AS BUSINESS INCOME IN THE YEAR OF ITS SALE. 11. IN RESPONSE TO THE ABOVE OBSERVATIONS OF THE A.O., THE ASSESSEE STRONGLY REPLIED THAT SHE HAD NEVER INVESTED IN THE IPO OF IDFC LTD. THE PURCHASES OF SHARES WERE MADE FROM OFFLINE MARK ET AND THE SAME HAS BEEN SHOWN AS INVESTMENT. IT WAS FURTHER EXPLAI NED THAT THE ITA NOS. 522 , 523 & 787/AHD/2010 & ITA NO. 4 25/AHD/2011 . A.YS. 2005- 06 & 2006-07 8 ASSESSEE NEVER TRADED IN THE SHARES OF IDFC BUT RIG HT FROM THE BEGINNING REMAINED AS AN INVESTOR. THE DETAILED EXPLANATION/SUBMISSION OF THE ASSESSEE DID NOT FIND ANY FAVOUR WITH THE A.O. WHO PROCEEDED BY TREATING THE ENTIRE SURPL US UNDER THE HEAD BUSINESS INCOME. THE MAIN REASONS GIVEN BY THE A .O. ARE AS UNDER:- (I) THE SUBJECT MATTER OF REALIZATION QUA THE VOLUME IN VOLVED. (II) THE LENGTH OF THE PERIOD OF HOLDING. (III) THE FREQUENCY/NUMBER OF TRANSACTIONS. (IV) UTILIZATION OF BORROWED FUNDS FOR PURCHASE OF SHARE S. 12. THE ASSESSEE VEHEMENTLY ASSAILED THE ASSESSMENT ORD ER BEFORE THE FIRST APPELLANT AUTHORITY AND REITERATED HER CL AIM OF BEING AN INVESTOR AND NOT A TRADER. AFTER CONSIDERING THE FA CTS AND THE SUBMISSIONS, THE LD. CIT(A) SUMMARIZED THE FACTS AS UNDER:- 7.1 BEFORE DECIDING THE ISSUE, THE FACTS ARE REQUIR ED TO BE RECAPITULATED. THE FACTS EMERGING IN THE PRESENT CASE ARE:- (A) THE APPELLANT, IN THE PREVIOUS YEAR UNDER CONSI DERATION, HAS GOT SURPLUS OF RS.56,72,176/- IN THE SHARE TRANSACTIONS. IN THE RE TURN, THE AFORESAID SURPLUS AMOUNT HAS BEEN OFFERED TO TAX AS STCG, WHICH IS TA XED @ 10%. (B) OUT OF TOTAL SURPLUS AMOUNT OF RS.56,72,176/-, THE SURPLUS AMOUNT OF RS.34,81,086/- HAS BEEN GENERATED IN THE SALE / PUR CHASE OF SHARES OF THE COMPANIES, THE SHARES OF WHICH WERE ACQUIRED THROUG H RUPAL NARESH PANCHAL. THE BALANCE GAIN OF RS.21,91,090/-, IS ON THE TRANS ACTIONS OF THE SHARES PURCHASED FROM OTHERS. THE MODUS OPERAND! OF THESE GROUPS HAS ALSO BEEN MENTIONED IN THE INSTANT APPELLATE ORDER. (C) THE POSITION OF THE FUNDS PROVIDED BY THE APPEL LANT TO .SMT. RUPAL NARESH PANCHAL FOR MAKING MULTIPLE APPLICATION OF IPOS AND THEREBY GETTING SHARES IN THE ITA NOS. 522 , 523 & 787/AHD/2010 & ITA NO. 4 25/AHD/2011 . A.YS. 2005- 06 & 2006-07 9 IPOS THROUGH FRAUDULENT METHODS, HAS BEEN MENTIONED BY THE A.R OF THE APPELLANT IN LETTER DATED NIL (FILED ON 07.01.2010). THE DETA ILS ARE. AS UNDER :- 'DETAILS OF THE TRANSACTIONS WITH THE PANCHAL GROUP :- DURING THE YEAR, APPELLANT RECEIVED ONLY SHARES OF ONE COMPANY. I.E IDFC. APP ELLANT HAS GIVEN CHEQUES OF RS.2,14,20,000/- ON 22.07.2005 TO RUPAL PANCHAL AND AMOUNT RECEIVED BACK BY CHEQUES OF RS.1,73,50.,200/.- ON 10.08.2005. THE BA LANCE AMOUNT OF RS.40,69,800/- HAVE BEEN RECEIVED BY WAY OF 119700 SHARES OF IDFC @RS.34/-. HOPE THAT YOUR HONOUR WILL CONSIDER THE ABOVE IN OR DER AND APPELLANT REQUEST HEREWITH TO GIVE THE APPROPRIATE ITSELF. (D) DURING THE YEAR, THE APPELLANT HAS EARNED RS.34 ,81,086/- ON THE SHARES RECEIVED FROM PANCHAL GROUP. THE MODUS OPERENDI OF THESE SHARE TRANSACTIONS HAS BEEN MENTIONED AT PARA 3 OF THE INSTANT APPELLA TE ORDER. 13. THUS, THE FIRST APPELLANT AUTHORITY BIFURCATED THE TOTAL SHORT TERM CAPITAL GAIN OF RS. 56,72,176/- IN TWO PARTS (A) RS. 34,81,086/- GENERATED IN THE SALE OF SHARES OF THE COMPANIES, THE SHARES OF WHICH WERE ACQUIRED THROUGH SMT. RUPAL NA RESH PANCHAL AND (B) RS. 21,91,090/- FROM THE TRANSACTIONS OF THE SH ARES PURCHASED FROM OTHERS. THE FIRST APPELLATE AUTHORITY PROCEEDE D BY TREATING THE SURPLUS OF RS. 34,81,086/- AS BUSINESS INCOME OF TH E ASSESSEE BEING HEAVILY INFLUENCED BY THE INQUIRY OF SEBI IN THE CA SE OF SMT. RUPAL NARESH PANCHAL AND OTHERS. THE FINDINGS OF THE LD. CIT(A) READS AS UNDER:- 9.1 IN THE PRESENT CASE, THE APPELLANT HAS FINANCED MORE THAN RS.2.14 CRORES TO RUPAL PANCHAL GROUP WITH THE INTENTION THAT THESE G ROUPS WOULD MAKE MULTIPLE APPLICATIONS IN THE IPO OF CERTAIN COMPANIES. NO SE CURITY OF ANY KIND HAS BEEN TAKEN BY THE APPELLANT BEFORE ADVANCING SUCH A HUGE FUNDS TO 'PANCHAL' GROUP. IN OTHER WORDS, THE APPELLANT WAS AWARE THAT RUPAL PANCHAL GROUP IS ENGAGED IN MAKING LARGE NUMBER OF APPLICATIONS IN THE IPO OF D IFFERENT COMPANIES IN ITA NOS. 522 , 523 & 787/AHD/2010 & ITA NO. 4 25/AHD/2011 . A.YS. 2005- 06 & 2006-07 10 FICTITIOUS NAMES WITH THE INTENTION TO CORNER LARGE ' NUMBER OF SHARES RESERVED FOR RETAIL INVESTORS: THE APPELLANT WAS ALSO AWARE THAT A PART OF SHARES SO ALLOTTED, SHALL ALSO BE SHARED BY THESE 'GROUPS' WITH THE APP ELLANT. SUCH AN ACTIVITY HAS TO BE TERMED AS AN ORGANIZED AND SYSTEMATIC ACTIVITY, CARRIED ON CONTINUOUSLY WITH A VIEW TO EARN PROFITS. THE SOLE INTENTION AT THE TIM E OF ACQUISITION OF SHARES THROUGH SUCH MODE WAS TO IMMEDIATELY SELL THESE SHARES AT A PROFIT. SUCH AN ORGANIZED AND SYSTEMATIC ACTIVITY HAS TO BE CONSTRUED AS ADVENTUR E IN THE NATURE OF TRADE. IN SUCH SITUATION, THE SURPLUS OF RS.34,81,086/- HAS TO BE TAXED AS GAIN FROM THE ADVENTURE IN THE NATURE OF TRADE AM; SAME HAS TO BE TAXED AS BUSINESS INCOME. THE ASSESSING OFFICER IS DIRECTED TO TAX THE GAIN OF RS.34,81,086 /- AT THE RATES APPLICABLE IN THE CASE OF BUSINESS. 14. AGGRIEVED BY THIS, THE ASSESSEE IS BEFORE US. 15. INSOFAR AS, THE GAIN OF RS. 21,91,090/- IS CONCERNE D, THE FINDINGS OF THE LD. CIT(A) READS AS UNDER:- 9.2. AS REGARDS TO BALANCE GAIN OF RS.21,91,090/-, THIS GAIN HAS ARISEN AS THE APPELLANT HAD INVESTED IN SHARES IT'S OWN FUNDS. IT IS ALSO NOTICED THAT INVESTMENT IN SHARES IS SHOWN BY THE APPELLANT IN THE ACCOUNT UNDER THE HEAD INVESTMENT AND NOT STOCK IN TRADE. THUS, THE APPELLANT'S INTENTION OF MAKING INVESTMENT WAS CLEAR. THERE IS NO MOTIVE OF TRADING IN SHARES ESTABLISHED BY THE ASSESSING OFFICER EXCEPT REFERRING TO THE VOLUME AND NUMBER OF TRANSACTIONS. I ALSO APPRECIATE THE ARGUMENTS THAT THE ASSESSING OFFICER'S CONTENTION A BOUT PERIOD OF HOLDING ARE NOT CORRECT PARTICULARLY IN VIEW OF THE FACT THAT DEFIN ITION OF SHORT TERM CAPITAL ASSET IN RESPECT OF SHARES AND SECURITIES ITSELF SPECIFICALL Y PROVIDES THAT THE PERIOD OF HOLDING WOULD BE LESS THAN ONE YEAR. THIS ITSELF SU GGEST THAT THE SHORT PERIOD OF HOLDING IS NOT THE CRITERIA TO BE CONSIDERED AS TRA DING TRANSACTIONS. APART FROM THIS, THE SECTION 111A ALSO PROVIDES FOR SPECIFIC T REATMENT OF TAX IN RESPECT OF SHORT TERM CAPITAL GAIN, PARTICULARLY WHEN STT HAS BEEN PAID. IN APPELLANT'S CASE, ITA NOS. 522 , 523 & 787/AHD/2010 & ITA NO. 4 25/AHD/2011 . A.YS. 2005- 06 & 2006-07 11 THE TRANSACTIONS ARE SUBJECTED TO STT AND SUCH STT HAS NOT BEEN CLAIMED OR ALLOWED IN THE COMPUTATION OF INCOME. FOR THIS PROP OSITION, REFERENCE MAY BE MADE TO THE BOMBAY ITAT DECISION IN THE CASE OF GOP AL PUROHIT 29 SOT 117, WHICH SUPPORTS THE APPELLANT'S EXPLANATION. IN THE CIRCUMSTANCES THE ASSESSING OFFICER IS DIRECTED TO TREAT GAIN OF RS. 21,91,090/ - AS SHORT TERM CAPITAL GAIN. 16. AGGRIEVED BY THIS, THE REVENUE IS BEFORE US. 17. RIVAL CONTENTIONS HAVE BEEN HEARD AT LENGTH. HAVING HEARD THE RIVAL CONTENTIONS, WE HAVE CAREFULLY PERUSED THE OR DERS OF THE AUTHORITIES BELOW. INSOFAR AS THE PURCHASE OF SHARE S FROM SMT. RUPAL NARESH PANCHAL IS CONCERNED, THIS ISSUE HAS COME UP EARLIER BEFORE THE TRIBUNAL IN THE CASE OF SEER FINLEASE PVT. LTD. IN ITA NOS. 3326 & 3340/AHD/2009 AND IN THE CASE OF SHRI BHANUPRASAD T . TRIVEDI IN IT(SS)A NOS. 460, 461 & 256/AHD/2010. IN ALL THESE APPEALS ARE IDENTICAL FACTS WERE CONSIDERED BY THE TRIBUNAL IN RELATION TO THE PURCHASE OF SHARES FROM SMT. RUPAL NARESH PANCHAL A ND ORS. THROUGH OFFLINE MARKET TRANSACTION AND THE TREATMENT OF GAI NS ARISING OUT OF THE SALE OF SUCH SHARES AS BUSINESS INCOME. IN THE CASE OF SHRI BHANUPRASAD T. TRIVEDI (SUPRA), THE RELEVANT FINDIN GS OF THE TRIBUNAL READ AS UNDER:- 24. COMING TO THE GRIEVANCE OF THE ASSESSEE WHICH RELATES TO THE SURPLUS ARISING OUT OF THE SALE OF SHARES OF IDFC BEING TAXED UNDER THE HEAD BUSINESS INCOME. 25. THE REASONS GIVEN BY THE A.O. ARE IDENTICAL TO THE REASONS GIVEN IN IT(SS)A NO. 460/AHD/2010 (SUPRA) FOR A.Y. 2005-06. 26. THE FACTS RELATING TO THE TREATMENT OF SURPLU S ON SALE OF SHARES OF IDFC ARE THAT THE SHARES HAVE BEEN PURCHASED IN AUGUST, 2005 FROM SMT. RUPAL NARESH PANCHAL THROUGH OFF MARKET TRANSACTIONS. THE REVENU E AUTHORITIES IN THE CASE OF SMT. RUPAL NARESH PANCHAL HAD FOUND THAT SHE HAD CO RNERED IPOS SHARES THROUGH ITA NOS. 522 , 523 & 787/AHD/2010 & ITA NO. 4 25/AHD/2011 . A.YS. 2005- 06 & 2006-07 12 MULTIPLE APPLICATIONS IN THE NAME OF BENAMI/FICTITI OUS APPLICANTS. THE REVENUE AUTHORITIES ALSO FOUND THAT THE SEBI HAD NOTICED LA RGE SCALE OFF MARKET TRANSACTIONS DEMATED IN FICTITIOUS/BENAMI NAMES. ON THE STRENGTH OF THESE FACT, THE REVENUE AUTHORITIES TREATED THE SURPLUS ON SALE OF SHARES OF IDFC UNDER THE HEAD BUSINESS INCOME. 27. AFTER HEARING AT LENGTH THE RIVAL SUBMISSIONS , WE FIND THAT EXCEPT FOR THE REASONS MENTIONED HEREINABOVE. THERE IS NOTHING ON RECORD BROUGHT BY THE REVENUE AUTHORITIES WHICH COULD SUGGEST THAT THE AS SESSEE WAS ACTUALLY TRADING IN THE SHARES OF IDFC. 28. ONCE, WE HAVE HELD THE ASSESSEE TO BE AN INVES TOR, WE DO NOT FIND ANY REASON/LOGIC IN TREATING THE SAME ASSESSEE AS A TRA DER IN THE TRANSACTIONS RELATING TO THE SHARES OF IDFC. SECONDLY, THERE IS NO BAR IN MAKING PURCHASES OUTSIDE THE FLOOR OF STOCK EXCHANGE AND THERE IS NOTHING ON REC ORD WHICH COULD SHOW THAT THE PURCHASE OF SHARES WERE NOT AT THE PREVALENT MARKET PRICE, THE SHARES SO PURCHASED WERE TRANSFERRED TO THE DEMAT ACCOUNT OF THE ASSESSEE FROM WHERE THEY WERE SOLD. THE MODE OF ACQUISITION WOULD NOT BE A F ACTOR TO DECIDE THE NATURE OF TRANSACTION. UNDER THIS ALLEGED MODUS OPERANDI, (IN THE CASE OF SMT. RUPAL NARESH PANCHAL), THE ASSESSEE COULD PROCURE LARGE N UMBER OF SHARES, BUT THAT WOULD NOT CHANGE THE CHARACTER OF TRANSACTION FROM INVESTMENT TO TRADER. FURTHER, THERE IS NO EVIDENCE WITH THE REVENUE TO ESTABLISH THE NEXUS. THERE IS NO EVIDENCE ON RECORD WHICH CAN DEMONSTRATE THAT THE ASSESSEE H AS COLLUDED WITH SMT. RUPAL NARESH PANCHAL IN A MANNER THAT WOULD INDICATE THAT SHARES WERE ACQUIRED FOR THE PURPOSE OF TRADE. SUCH NEXUS HAS NOT BEEN ESTAB LISHED. THE OBSERVATIONS OF THE REVENUE AUTHORITIES ARE ONLY INFERENTIAL WITHOUT AN Y CONCRETE MATERIAL IN THE POSSESSION OF THE A.O. 29. IN OUR CONSIDERED OPINION, THE ACTIVITY OF THE ASSESSEE BY VIRTUE OF MODE OF ACQUISITION OF SHARES CANNOT BE SEGREGATED INTO TWO PARTS. THE FIRST APPELLATE AUTHORITY HAS ERRED IN CREATING AN ARTIFICIAL DISTI NCTION ONLY ON THE BASIS OF MODE OF ACQUISITION. ITA NOS. 522 , 523 & 787/AHD/2010 & ITA NO. 4 25/AHD/2011 . A.YS. 2005- 06 & 2006-07 13 30. WE HAVE NO HESITATION IN SETTING ASIDE THE FI NDINGS OF THE LD. CIT(A) AND DIRECTING THE A.O. TO TAX THE SURPLUS ON SALE OF SH ARES OF IDFC UNDER THE HEAD SHORT TERM CAPITAL GAINS. 18. THE CO-ORDINATE BENCH IN THE CASE OF SEER FINLEASE PVT. LTD. (SUPRA) HAS, INTERALIA, HELD AS UNDER:- WE FAILED TO FIND OUT THE BASIS OF RECORDING THIS FINDING. IF DURING THE INVESTIGATION CARRIED OUT BY THE SEBI OR THE INCOME TAX DEPARTMENT IT EMERGES OUT THAT THERE IS A CONSPIRACY BETWEEN THE ASSESSEE AND SMT.RUPAL NARESH PANCHAL AND SUGANDH ESTATE AND INVESTMENT PVT. LTD. FOR ACQUIRING THE SHARES IN THIS MANNER, THEN ONE CAN SAY THAT MODUS OPERAND! W AS OF A BUSINESS NATURE. DURING THE COURSE OF HEARING, WE HAVE CONFRONTED TH E ID. DR TO SHOW US ANY EVIDENCE WHICH CAN ESTABLISH NEXUS BETWEEN THE ASSE SSEE AND SMT.RUPAL NARESH PANCHAL AND SUGANDH ESTATE AND INVESTMENT PVT. LTD. FOR ACQUIRING THE SHARES OF FIVE COMPANIES WITH THIS MODUS OPERAND!. THE ID .CO UNSEL FOR THE ASSESSEE HAS EMPHASIZED THAT MODE OF ACQUISITION WOULD NOT BE A FACTOR TO DECIDE THE NATURE OF TRANSACTION. UNDER THIS ALLEGED MODUS OPERAND!, AT THE MOST, THE ASSESSEE COULD PROCURE LARGE NUMBER OF SHARES, BUT CAN THAT WOULD CHANGE THE CHARACTER OF TRANSACTION FROM INVESTMENT TO TRADER. THERE IS NO EVIDENCE WITH THE REVENUE TO ESTABLISH THE NEXUS. THE MOMENT A CARTEL IS BEING F ORMED BY NUMBER OF PERSONS TO CARRY OUT AN ACTIVITY IN AN ORGANIZED MANNER WITH P ROFIT MOTIVE AND THE ACTIVITY IS AKIN TO BUSINESS OR TRADE AS DEFINED IN SECTION 2(1 3) OF THE INCOME TAX ACT, THEN THE ARGUMENTS RAISED BY THE ID. COUNSEL FOR THE ASS ESSEE WOULD NOT STAND. BUT THE AO HAS NEITHER RECORDED STATEMENT OF THE ASSESSEE N OR COLLECTED ANY MATERIAL WHICH CAN DEMONSTRATE THAT THE ASSESSEE HAS COLLUDE D WITH SMT.RUPAL NARESH PANCHAL AND SUGANDH ESTATE AND INVESTMENT PVT. LTD. IN A MANNER THAT WOULD INDICATE THAT SHARES WERE ACQUIRED FOR THE PURPOSE OF TRADE. SUCH NEXUS HAS NOT BEEN ESTABLISHED. THE OBSERVATION OF THE CIT(A) IS ONLY INFERENTIAL WITHOUT ANY CONCRETE MATERIAL IN THE POSSESSION OF THE AO. THER EFORE, IN OUR OPINION, THE ACTIVITY OF THE ASSESSEE BY VIRTUE OF MODE OF ACQUI SITION OF SHARES CANNOT BE ITA NOS. 522 , 523 & 787/AHD/2010 & ITA NO. 4 25/AHD/2011 . A.YS. 2005- 06 & 2006-07 14 SEGREGATED INTO TWO PARTS. THE ID.CIT(A) HAS ERRED IN CREATING AN ARTIFICIAL DISTINCTION ONLY ON THE BASIS OF MODE OF ACQUISITIO N. WE ALLOW THE APPEAL OF THE ASSESSEE AND DIRECT THE AO TO TAX THE SURPLUS ON SA LE OF SHARES UNDER THE HEAD 'SHORT TERM CAPITAL/LONG TERM CAPITAL INSTEAD OF 'B USINESS INCOME' TREATED BY HIM. CONSEQUENTLY, THE APPEAL OF THE REVENUE IS DISMISSE D. 19. CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE I N HAND QUA THE FACTS CONSIDERED BY THE CO-ORDINATE BENCHES (SUPRA) , WE DO NOT FIND ANY DIFFERENCE BETWEEN THE FACTS. THEREFORE, RESPEC TFULLY FOLLOWING THE FINDING OF THE CO-ORDINATE BENCHES ON THE SAME SET OF FACTS, WE SET ASIDE THE FINDINGS OF THE LD. CIT(A) AND DIRECT THE A.O. TO TREAT THE SURPLUS ARISING OUT OF THE SALE OF IDFC SHARES UNDE R THE HEAD SHORT TERM CAPITAL GAIN. 20. APPEAL FILED BY THE ASSESSEE IS ACCORDINGLY ALLOWED . 21. COMING TO THE REVENUES APPEAL IN ITA NO. 787/AHD/2 010, WE FIND THAT THE TAX IMPLICATION ON THE GRIEVANCE RAIS ED BY THE REVENUE IS LESS THAN RS. 10 LACS. IN OUR CONSIDERED OPINION, T HE APPEAL OF THE REVENUE HAS TO BE DISMISSED IN THE LIGHT OF THE CBD T CIRCULAR NO. 21 OF 2015 DATED 10.12.2015 BY WHICH THE CBDT HAS PRESCRI BED THE MONETARY LIMIT FOR FILING THE APPEAL BEFORE THE TRI BUNAL. SINCE THE TAX EFFECT IN THE PRESENT APPEAL OF THE REVENUE IS LESS THAN THE PRESCRIBED MONETARY LIMIT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 22. APPEALS OF SHRI RAJAN VASUDEV DAPKI IN ITA NOS. 523/AHD/2010 & 425/AHD/2011 FOR A.Y. 2005-06 & 2006 -07. ITA NOS. 522 , 523 & 787/AHD/2010 & ITA NO. 4 25/AHD/2011 . A.YS. 2005- 06 & 2006-07 15 23. AS MENTIONED ELSEWHERE, THE FACTS ARE IDENTICAL TO THE FACTS CONSIDERED BY US IN THE APPEAL OF ASSESSEES WIFE ( SUPRA). THEREFORE, AVOIDING THE REPETITION AND FINDING THAT THE FACTS ARE IDENTICAL, WE DIRECT THE A.O. TO FOLLOW OUR DECISION GIVEN IN THE CASE OF ASSESSEES WIFE SMT. SHILPABEN RAJANBHAI DAPKI. 24. IN THE RESULT, THE APPEALS FILED BY THE ASSESSEES A RE ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 06- 09- 20 16. SD/- SD/- (RAJPAL YADAV) (N. K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD