M.V.Subba Rao, Hyderabad V. DCIT, Hyderabad

ITA 481/HYD/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2946 (ITAT-HYDERABAD)
• Duration Of Justice: 3 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 11-08-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 30-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M H NAIK
• Assessee Lawyers: S RAMA RAO
• Keywords: Capital asset; Business income; Opportunity of being heard; Rule of consistency; Speculative transactions
• Section: 115JB; 43(5); 263; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, J UDICIAL MEMBER (1) ITA NOS. 481/HYD/10 & 1311/HYD/11 ASSTT. YEARS : 2006-07 & 2008-09. AND (2) ITA NOS. 482/HYD/10 &1310/HYD/11 A.YEARS 2006-07 & 20 08-09 (1) SRI M.V. SUBBA RAO, HYDERABAD. PAN: AAPTM6378E V/S. DY CIT, CIR-16(2), HYDERABAD. (2) SMT. M. JAYASHREE, HYDERABAD. PAN: ABIPM9233C (APPELLANTS ) DY CIT, CIR-16(2), HYDERABAD. (RESPONDENT) APPELLANTS BY : SRI S. RAMA RAO DEPARTMENT BY : SHRI M.H. NAIK DATE OF HEARING 1 2 - 3 - 2013 DATE OF PRONOUNCEMENT 31 -5-2013 . O R D E R PER SAKTIJIT DEY, JUDICIAL MEMBER: THESE FOUR APPEALS FILED BY TWO DIFFERENT ASSESSEES ARE DIRECTED AGAINST SEPARATE ORDERS OF CIT (A)-V, HYDERABAD PERTA INING TO ASSESSMENT YEARS 2006-07 AND 2008-09. SINCE THE ISSUES INV OLVED IN THESE APPEALS ARE COMMON AND IDENTICAL, THESE ARE CLUBBED TOGETHER AND DISPOSED OF BY THIS COMBINED ORDER FOR THE SAKE OF CO NVENIENCE. ITA NOS 481 AND 482 AND OTHERS M.V. SUBBA RAO & SMT. JAYASHREE, HYD. 2 ITA NO. 481 /HYD/10: SRI M.V. SUBBA RAO 2. FIRST, WE WILL DEAL WITH ITA NO.481/HYD/10 PERTAIN ING TO THE ASSESSMENT YEAR 2006-07. THE ONLY ISSUE WHICH ARISES OUT OF THE GROUNDS RAISED BY THE ASSESSEE IS WITH REGARD TO CLAIM OF THE ASSESSEE TO TREAT THE INCOME DERIVED FROM SALE OF SHARES AS CAPITA L GAIN AND NOT AS INCOME UNDER THE HEAD BUSINESS OR PROFESSION. 3. BRIEFLY THE FACTS ARE, THE ASSESSEE IS AN INDIVIDUAL. FOR THE ASSESSMENT YEAR UNDER DISPUTE, THE ASSESSEE FILED HIS RETUR N OF INCOME ON 27-6-2006 DECLARING INCOME OF 41,08,560/- C OMPRISING OF INCOME FROM SALARIES, INCOME FROM CAPITAL GAIN AND INCOME FROM OTHER SOURCES. INITIALLY, THE RETURN WAS PROCESSED U/S 143(1) OF THE ACT. SUBSEQUENTLY, ASSESSEES CASE WAS SELECTED FOR SCRUTINY ASSESSMENT. IN COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICE R NOTED THAT DURING THE YEAR UNDER DISPUTE, THE ASSESSEE H AS OFFERED SHORT TERM CAPITAL GAIN OF RS.38,97,155/- AND SHOWN LON G TERM CAPITAL GAIN OF RS.53,76,968/- AS EXEMPT U/S 10(38) OF THE ACT OUT OF SALE OF SHARES. THE ASSESSING OFFICER ON VERIFYING THE INFORMATI ON CALLED FOR NOTICED THAT ALL THE SHARES WERE SOLD OR PURCHASED BY MOV VA SECURITIES LIMITED IN ITS NAME. THE ASSESSING OFFICER FURTHER NOTED THAT THE ASSESSEE DOES NOT HAVE ANY DEMAT ACCOUNT AND THERE ARE NO CONTRACT NOTES ALSO TO INDICATE THAT THE SHARES ARE PURCHASED OR SOL D IN THE NAME OF THE ASSESSEE. 4. THE ASSESSEE STATED BEFORE THE ASSESSING OFFICER THAT MO VVA SECURITIES LTD., IN WHICH THE ASSESSEE IS A DIRECTOR, IS SELL ING AND ITA NOS 481 AND 482 AND OTHERS M.V. SUBBA RAO & SMT. JAYASHREE, HYD. 3 PURCHASING SHARE ON HIS BEHALF AND THE COMPANY MAINTAINS SEPARATE ACCOUNT IN ITS BOOKS IN THE NAME OF THE ASSESSEE FOR RECORD ING PURCHASES AND SALES EFFECTED ON HIS BEHALF. THE ASSESSING O FFICER FURTHER NOTED THAT THE TRANSACTIONS SHOW THAT THE ASSESSEE NEVER TOOK DELIVERY OF SHARES PURCHASED OR SOLD AS ALL THE TRANSACTION S ARE DONE BY THE COMPANY IN ITS NAME ONLY. THE ASSESSING OFFICER FURT HER FOUND THAT THE SHORT TERM CAPITAL GAINS SHOWN ALSO INDICATE THAT THE PURCHASES AND SALES ARE WITHOUT ANY DELIVERY I.E., SETTLEMENT BY WAY OF PAYING THE DIFFERENCE BETWEEN THE PURCHASE AND SALE PRICE WITHOUT ACTUALLY TAKING DELIVERY OF SHARES. 5. THE ASSESSING OFFICER ON THE BASIS OF THE ABOVE FACTS WA S OF THE VIEW THAT THE NATURE OF TRANSACTION IS COVERED WITHIN T HE DEFINITION OF SPECULATION TRANSACTION AS DEFINED U/S 43(5) OF THE ACT. WHEN THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE ENTIRE INCOME OF LONG AND SHORT TERM CAPITAL GAIN SHOULD NOT B E TREATED AS SPECULATIVE BUSINESS, THE ASSESSEE STATED THAT DEMAT ACCOUNT W AS NOT MANDATORY DURING THE RELEVANT PERIOD. IT WAS FURTHER STATED THAT THE COMPANY SHOULD BE TREATED AS AN AGENT OF THE ASSESSEE AND ALL THE PURCHASES AND SALES EFFECTED ON BEHALF OF THE ASSESSEE IN TH E NAME OF THE COMPANY SHOULD BE TREATED AS PURCHASES OR SALES IN THE NAME OF THE ASSESSEE. THE ASSESSING OFFICER HOWEVER DID NOT ACCEPT TH E CONTENTIONS OF THE ASSESSEE. HE WAS OF THE VIEW THAT IN T HE ABSENCE OF DEMAT ACCOUNT OR CONTRACT NOTE, IT IS NOT POSSIBLE TO KNO W WHETHER SHARES ARE ACTUALLY PURCHASED OR SOLD IN THE NAME OF THE ASSESSEE. HE FURTHER HELD THAT SALE OF SHARES WITHOUT TAKING DELIVE RY OF THE SAME, IS CLEARLY COVERED UNDER THE DEFINITION OF SPECULATIVE TRA NSACTION. ACCORDINGLY, THE ASSESSING OFFICER TREATED THE INCOME DERI VED FROM SALE OF SHARES AS SPECULATIVE BUSINESS INCOME REJECTING THE ASSESSEES CLAIM ITA NOS 481 AND 482 AND OTHERS M.V. SUBBA RAO & SMT. JAYASHREE, HYD. 4 OF SHORT TERM CAPITAL GAIN AND LONG TERM CAPITAL GAINS . THE ASSESSEE BEING AGGRIEVED OF THE ASSESSMENT ORDER PREFERRED AN APPEAL BEFORE THE CIT (A). 6. DURING THE HEARING OF APPEAL BEFORE THE CIT (A), THE ASSESSEE CONTENDED THAT HE HAS INVESTED HIS OWN FUNDS IN PURCHASE O F SHARES AND THE TRANSACTIONS WERE NOT SPECULATIVE IN NATURE. I T WAS FURTHER CONTENDED THAT THE PURCHASE AND SALE OF SHARES WAS DONE T HROUGH A SUB-BROKER M/S MOVVA SECURITIES LIMITED IN WHICH THE ASSESSE E WAS THE DIRECTOR AND THEREAFTER THE ACTIVITY OF PURCHASE AND SAL E OF SHARES WAS CARRIED ON THROUGH HSE SECURITIES LIMITED. IT WAS SUBMITT ED THAT THERE WAS SOME SOFTWARE PROBLEM IN HSE SECURITIES IN TRANSFERRI NG THE SHARES TO THE CLIENTS ACCOUNTS; THEREFORE THEY CONTINUED TO TRA NSFER THE SHARES TO MOVVA SECURITIES LIMITED WHICH CONTINUED UPTO 31-3- 2006. THEREAFTER THE SHARES WERE TRANSFERRED DIRECTLY THROUGH DEMAT ACCOUNT OF THE ASSESSEE. IT WAS CONTENDED THAT AS THE ASSESSEE HAS INV ESTED HIS OWN FUND IN PURCHASE OF SHARES AND DID NOT BORROW AN Y FUND AND SINCE THE SHARES WERE HELD BY THE ASSESSEE AS INVESTMENT AND NOT STOCK IN TRADE, THE INCOME FROM SALE OF SHARES SHOULD BE TREA TED AS INCOME FROM CAPITAL GAIN. THE ASSESSEE FURTHER CONTENDED THAT H E WAS HOLDING THE SHARES FROM THE YEAR 1999 ONWARDS AND WAS DERIVING INCOME FROM DIVIDENDS. 7. THE CIT (A) CONSIDERING THE CONTENTION OF THE ASSESSEE IN THE LIGHT OF VARIOUS JUDICIAL PRECEDENTS AS REFERRED TO BY H IM IN HIS ORDER WAS OF THE VIEW THAT FOR ANY TRANSACTION WHERE DELIV ERY HAS NOT TAKEN PLACE, THE TRANSACTIONS SHALL BE A SPECULATIVE ONE U/S 43(5 ) OF THE ACT. THE DELIVERY OF SHARES MUST BE ACTUAL AND NOT NOTIONAL. HE FURTHER OPINED THAT THOUGH THE DELIVERY OF SHARES DOES NOT HAV E TO BE IN THE ITA NOS 481 AND 482 AND OTHERS M.V. SUBBA RAO & SMT. JAYASHREE, HYD. 5 DEMAT ACCOUNT OF THE ASSESSEE AND CAN BE IN THE DEMAT ACCOUN T OF HIS AGENT BUT THERE MUST BE A CLEAR CUT NEXUS BETWEEN EACH D ELIVERY OF SHARES AND THE TRANSACTIONS OF THE ASSESSEE. THE CIT (A) NOT ED THAT THE SHARES WERE NEVER DELIVERED TO THE DEMAT ACCOUNT OF THE ASSESSEE. HE FURTHER FOUND THAT THOUGH THE ASSESSEE STATED THAT DUE TO CERTAIN SOFTWARE PROBLEMS IN THE SYSTEMS OF HSE SECURITIES DELIVE RY OF SHARES IN THE DEMAT ACCOUNT OF ASSESSEE WAS PREVENTED, HOWEVER, THE EVIDENCE SUBMITTED BY THE ASSESSEE IN THE FORM OF LETTER DATED 28-1- 2009 FROM HSE SECURITIES DOES NOT SUBSTANTIATE THE CLAIM O F THE ASSESSEE. THE CIT (A) FURTHER NOTED THE FACT THAT DURIN G THE APPEAL PROCEEDINGS EVEN THOUGH THE ASSESSING OFFICER WAS ASKED TO VERIFY THE CLAIM OF THE ASSESSEE WITH REGARD TO ACTUAL DELIVERY OF SH ARES, THE ASSESSING OFFICER WAS NOT PRESENTED WITH ANY EVIDENCE TO PR OVE THAT THE DELIVERY HAD INDEED BEEN TAKEN EITHER BY THE ASSE SSEE OR HIS AGENT. THE CIT (A) FURTHER NOTED THAT THE CONTRACT NOTES SUBM ITTED BY THE ASSESSEE DURING THE APPEAL HEARING ARE NOT CERTIFIED AN D SIGNED BY ANYONE FROM M/S HSE SECURITIES LTD. HE FURTHER NOTED TH AT THE CONTRACT NOTE EVEN DO NOT MENTION THAT THE DELIVERY OF SHARES HAD EITHER BEEN TAKEN BY THE ASSESSEE OR BY ANY AGENT ON BE HALF OF THE ASSESSEE. HE OBSERVED THAT NEITHER HSE SECURITIES LTD., NO R MOVVA SECURITIES HAVE CERTIFIED THAT DELIVERY HAS BEEN TAKEN FOR ANY SHARE ON BEHALF OF THE ASSESSEE. THE CIT (A) OBSERVED THAT ONLY EVIDENCE WHICH COULD HAVE INDICATED THE ACTUAL DELIVERY OF SHAR ES IS DEMAT ACCOUNT OF EITHER HSE SECURITIES LTD., OR MOVVA SECURITIES LTD., HOWEVER NONE OF THESE DEMAT ACCOUNTS HAVE BEEN PRODUCED AS EVIDENCE NOR ANY OF THESE AGENTS HAVE CERTIFIED THAT T HEY HAVE TAKEN DELIVERY OF SHARES ON BEHALF OF THE ASSESSEE AND HAD HELD THEM ON ASSESSEE S BEHALF FOR A PERIOD OF TIME. THE CIT (A) UL TIMATELY ON THE BASIS OF THE ABOVE CONCLUSION HELD THAT SINCE THE DELIVER Y OF SHARES WAS ITA NOS 481 AND 482 AND OTHERS M.V. SUBBA RAO & SMT. JAYASHREE, HYD. 6 NEITHER TAKEN BY THE ASSESSEE NOR BY THE BROKER OR SUB BROKER ON HIS BEHALF, THE TRANSACTIONS MADE BY THE ASSESSEE ARE IN THE NATURE OF SPECULATIVE TRANSACTIONS. IN SUPPORT OF SUCH CONCLUSIONS, T HE CIT (A) RELIED UPON THE DECISION HON'BLE SUPREME COURT IN CA SE OF JUTE INVESTMENTS CO. LTD. V/S. CIT (121 ITR 56). ACCORDIN GLY, THE CIT (A) CONFIRMED THE VIEW OF THE ASSESSING OFFICER. 8. THE LEARNED AR SUBMITTED BEFORE US THAT THE A PPELLANT STARTED INVESTING SHARES PORTFOLIO FROM THE YEAR 1998 ONWARDS A ND THE SHARES WERE SHOWN AS INVESTMENT ONLY AND NOT AS STOCK IN TRADE . AT NO POINT OF TIME, THE ASSESSEE BORROWED FUNDS FOR INVESTING IN SHAR ES. HE UTILISED HIS OWN FUNDS FOR THE PURPOSE OF INVESTMENT AN D ANY SURPLUS GENERATED HE REINVESTED IN THE SHARE PORTFOLIO. IT WAS SUBMITTED THAT THAT IN ALL THE PRECEDING ASSESSMENT YEARS THE ASSESSEE HAS AD MITTED THE INCOME ONLY UNDER THE CAPITAL GAIN AND THE SHARES W ERE SHOWN AT COST PRICE AND NOT COST AT MARKET VALUE. IT WAS SUBMITTE D THAT THE ASSESSEE DID NOT MAINTAIN SEPARATE BOOKS OF ACCOUNTS FOR THE PURPOSE OF THE SHARE TRANSACTIONS AND NO EXPENDITURE FOR CARRYI NG OUT THE ACTIVITY OF PURCHASE AND SALE OF SHARES WAS EVER CLAIMED B Y THE ASSESSEE. IT IS FURTHER SUBMITTED THAT ALL ALONG THE IT DEPARTMENT HAS ACCEPTED THE STATEMENT GIVEN TO THE INCOME DERIVED FROM THE SALE OF SHARES IN THE ASSESSMENT YEAR 2005-06. ONLY IN THE ASSE SSMENT YEAR 2006-07, THE DEPARTMENT WAS OF THE VIEW THAT THE PUR CHASE AND SALES WERE AFFECTED WITHOUT DELIVERY OF SHARES AND WITHOUT M AINTENANCE OF DEMATS ACCOUNT. 9. THE LEARNED AR SUBMITTED THAT THE CONCLUSION ARRIV ED AT BY THE DEPARTMENT IS NOT CORRECT AS IT WAS DEMONSTRATED BEFORE THE DEPARTMENTAL AUTHORITIES THAT THE ASSESSEE HAD IN FACT TAKEN DELIVERY ITA NOS 481 AND 482 AND OTHERS M.V. SUBBA RAO & SMT. JAYASHREE, HYD. 7 OF STOCK AT THE TIME OF PURCHASE AND HANDED OVER THE DE LIVERY OF SHARES AT THE TIME OF SALE. IT IS SUBMITTED THAT THE OBSERVAT ION MADE BY THE REVENUE AUTHORITIES THAT THE DEMAT ACCOUNT WAS NOT M AINTAINED BY THE ASSESSEE IS FACTUALLY IN CORRECT AS DUE TO THE DIFFICULTY IN MAINTAINING COMPUTER SYSTEMS BY THE HSE, THE DEMAT ACCOUNT COULD NOT BE OPERATED TILL THE END OF SEPT. 2005. THEREAFTER TH E DEMAT ACCOUNT WAS COMMENCED AND WAS OPERATED BY THE ASSESSEE WHICH HAS BEEN CER TIFIED BY THE HSE ITSELF. IT WAS FURTHER SUBMITTED THE ASSESSEE H AS FURNISHED ALL THE DETAILS OF SHARES HELD BOTH UNDER SHORT TERM AND LONG TERM CAPITAL GAINS WHICH WOULD SHOW THAT THE SHARES WERE HEL D FOR A SUBSTANTIAL PERIOD ON MANY OCCASIONS. NONE OF THE SHARE S WERE SOLD PRIOR TO THEIR PURCHASE. ALL THE SHARES WERE PURCHASED, TAKEN POSSESSION OF AND AT THE TIME OF SALE OF SHARES POSSESSION W AS HANDED OVER. IT WAS SUBMITTED THAT THE PHYSICAL DELIVERY OF SHARES WAS EFFECTED BOTH AT THE TIME OF PURCHASE AND AT THE TIME OF SALE THROUGH DEMAT ACCOUNT. THE LEARNED AR REFERRING TO THE CON FIRMATION MEMO ISSUED BY M/S MOVVA SECURITIES AND THE CERTIFICATE ISSUED B Y HSE WHICH WAS SUBMITTED ALONG WITH PAPER BOOK , SUBMITTED THAT THESE CERTIFICATES CLEARLY PROVES THE FACT THAT THE ASSESSEE HAS TA KEN DELIVERY OF SHARES AT THE TIME OF PURCHASE AND HANDED OVER THE P OSSESSION OF THE SHARES AT THE TIME OF SALE. WITH REGARD TO THE AL LEGATION BY THE CIT (A) THAT THE CONFIRMATION LETTERS ARE NOT CERTIFIED AN D NOT SIGNED, THE LEARNED AR SUBMITTED THAT THERE IS NO NEED FOR CERTI FYING AS THEY ARE COMPUTER GENERATED. HE FURTHER SUBMITTED THAT THE IF THE CIT (A) HAD ANY DOUBT HE SHOULD HAVE MADE ENQUIRY BEFORE COMING T O HIS CONCLUSION ON PRESUMPTION AND SURMISES. THE LEARNED AR SUBMITTED THE FACTS AVAILABLE ON RECORD WOULD PROVE THAT THE INCO ME DERIVED ON SALE OF SHARES IS ASSESSABLE UNDER THE HEAD CAPITAL GAIN A ND NOT UNDER THE HEAD BUSINESS. HE FURTHER SUBMITTED THAT THE ASS ESSEE DERIVED ITA NOS 481 AND 482 AND OTHERS M.V. SUBBA RAO & SMT. JAYASHREE, HYD. 8 SUBSTANTIAL DIVIDEND INCOME WHICH WOULD ESTABLISH THE F ACT THE SHARES WERE HELD FOR INVESTMENT AS THE SALE OF SHARES IS TO PRO TECT THE CAPITAL AND IT IS ONLY EXCHANGE FROM CAPITAL ASSET TO ANOTHER CAP ITAL ASSET FOR THE PURPOSE OF PROTECTING THE CAPITAL INVESTED AND TH E INTENTION OF THE ASSESSEE IS ONLY TO MAKE INVESTMENT IN THE SHARES AND RET AIN SUCH INVESTMENT WITHOUT LOSS OF CAPITAL. IN SUPPORT OF SUCH CONTENTION, THE LEARNED AR ALSO RELIED UPON VARIOUS JUDICIAL PRECEDENT S AS MENTIONED IN THE WRITTEN SUBMISSIONS. 10. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORT ING THE ORDERS OF THE REVENUE AUTHORITIES SUBMITTED THAT THE ASSESSEE CARRIED ON ACTIVITY OF PURCHASE AND SALE OF SHARES ONLY THROUGH HSE SECURITIES AND DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE HIMSELF DECLARE D AS THERE WAS SOME SOFTWARE PROBLEMS, THE SHARES COULD NOT BE TRANSFERRED IN THE ASSESSEES DEMAT ACCOUNT. HE FURTHER SUBMITTED THAT THE DELIVERY OF SHARES DOES NOT HAVE TO BE IN THE DEMAT A CCOUNT OF THE ASSESSEE BUT CAN BE IN THE DEMAT ACCOUNT OF HIS AGENT. BUT , THERE HAS TO BE A CLEAR CUT NEXUS BETWEEN EACH DELIVERY OF SHARES A ND TRANSACTIONS OF THE ASSESSEE. HE FURTHER SUBMITTED THAT T HE ASSESSEE WAS NOT ABLE TO TAKE DELIVERY OF SHARES TO DEMAT ACCOUN T HE COULD HAVE TAKEN A SPECIFIC DELIVERY CERTIFICATE FROM HSE SECURITIES L TD., OR MOVVA SECURITIES LTD. THE LEARNED DEPARTMENTAL REPRESENTATI VE SUBMITTED THAT IN ABSENCE OF ANY EVIDENCE TO THAT EFFECT IT IS CLE AR THAT THE DELIVERY OF SHARES WAS NEITHER TAKEN BY THE ASSESSEE NOR B Y THE BROKER OR SUB-BROKER ON HIS BEHALF. THEREFORE, IN VIEW OF THE RATIO LAID DOWN IN THE DECISIONS RELIED UPON BY THE CIT (A) HE TRANSACTI ONS MADE BY THE ASSESSEE ARE IN THE NATURE OF SPECULATIVE TRANSACTIONS, H ENCE THE ADDITIONS MADE BY THE ASSESSING OFFICER ARE CORRECTLY SUSTA INED BY THE CIT(A). ITA NOS 481 AND 482 AND OTHERS M.V. SUBBA RAO & SMT. JAYASHREE, HYD. 9 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED T HE MATERIAL AVAILABLE ON RECORD. IT IS APPARENT FROM T HE ORDERS OF THE REVENUE AUTHORITIES, THE ASSESSEES CLAIM OF SHORT TERM CA PITAL GAINS AND LONG TERM CAPITAL GAINS SHOWN FROM SALE OF SHARES W ERE REJECTED AND TREATED AS TRANSACTION IN THE NATURE OF SPECULATIVE BUSINESS U/S 43(5) OF THE ACT ON THE GROUND THAT THE ASSESSEE HAS FIL ED TO PRODUCE ANY EVIDENCE TO SHOW THAT THE SHARES WERE TAKEN DELIVE RY BY THE ASSESSEE IN ABSENCE OF DEMAT ACCOUNT OR CONTRACT NOTE. THOUG H THE ASSESSEE HAS PRODUCED CONTRACT NOTE FROM M/S MOVVA SECURITIES AND M/S HSE SECURITIES LTD., IN SUPPORT OF HIS CLAIM THAT TH E ASSESSEE HAS IN FACT HAS TAKEN THE DELIVERY OF SHARES AT THE TIME O F PURCHASE AND HAS HANDED OVER POSSESSION WHEN THEY WERE SOLD. THE EVIDENC ES PRODUCED WERE DISBELIEVED BY THE CIT (A) ON THE GROUND THAT T HE CONTRACT NOTES ARE UNSIGNED AND NOT CERTIFIED AND THEY DO NOW OR MEN TION THAT THE DELIVERY OF SHARES HAD EITHER BEEN TAKEN BY THE ASSESSEE OR ANY AGENT ON BEHALF OF HIM. HOWEVER, IT IS THE SPECIFIC CONTENTION OF THE LEARNED AR THAT THE PURCHASE AND SALE OF SHARES ARE PROVED DEMAT S ACCOUNTS ONLY AND THE ASSESSEE ACTUALLY TAKEN DELIVERY OF SHARES AT THE TIME OF PURCHASE. IN THIS CONTEXT, THE LEARNED AR HAS REFER RED TO THE COPIES OF DEMAT TRANSACTION STATEMENT, CONTRACT NOTE ISSUED BY TH E HSE AND MOVVA SECURITIES WHICH ARE PAGES 18 TO 42 OF THE PAPER BOOK. HOWEVER, THE ASSESSEE IS REQUIRED TO ESTABLISH THE FACT THA T THE SHARE TRANSACTIONS REFERRED TO IN THE CONTRACT NOTES AND DEMAT STATEMENTS WERE PURCHASED IN THE NAME OF THE ASSESSEE AND THE ASSESSEE HAD TAKEN DELIVERY OF THE SAME. SIMILARLY, BEFORE ARRIV ING AT THEIR CONCLUSION TO THE EFFECT THAT THE SHARE TRANSACTION IS IN THE NATURE OF SPECULATIVE TRANSACTION AS PER SECTION 43(5) OF THE ACT, T HE REVENUE AUTHORITIES SHOULD HAVE CONDUCTED ADEQUATE ENQUIRY TO B RING SUFFICIENT ITA NOS 481 AND 482 AND OTHERS M.V. SUBBA RAO & SMT. JAYASHREE, HYD. 10 MATERIAL ON RECORD TO ESTABLISH THE FACT THAT THE SHARES PURCHASED IN THE NAME OF THE ASSESSEE WERE NOT TAKEN DELIVERY BY HIM. 12. FROM THE REMAND REPORT SUBMITTED BY THE ASSESSING O FFICER DURING THE APPEAL PROCEEDINGS BEFORE THE FIRST APPELLA TE AUTHORITY, IT IS SEEN THAT EVIDENCE WAS PRODUCED BEFORE HIM BY THE ASSESSEE IN SUPPORT OF HIS CLAIM THAT WHO WAS HAVING DEMAT ACCOUNT W ITH HSE SECURITIES LTD., THE ASSESSEE ALSO PRODUCED THE CONTRACT NOTE S ENTERED WITH HSE SECURITIES LTD., AND MOVVA SECURITIES LTD. WH EN THE ASSESSEE HAS PRODUCED CERTAIN EVIDENCES, IT IS INCUMBENT UPON THE REVENUE AUTHORITIES TO PROPERLY VERIFY THE AUTHENTICITY OF E VIDENCES BEFORE REJECTING AS NOT ACCEPTABLE. AS IT APPEARS FROM THE ORD ERS OF REVENUE AUTHORITIES NO ENQUIRY HAS BEEN CONDUCTED TO FIND OUT THE FACT AS TO WHETHER THE ASSESSEE HAS IN FACT HAS TAKEN DELIVERY OF SHA RES SO AS TO HOLD IT AS A SPECULATIVE TRANSACTION U/S 43(5) OF THE ACT. THAT APART BEFORE REJECTING THE ASSESSEES CLAIM OF INCOME DECLARED FRO M SALE OF SHARES AS SHORT TERM CAPITAL GAINS AND LONG TERMS CAPITAL G AINS AND TREAT IT AS BUSINESS INCOME, THE ASSESSING OFFICER HAS TO CONSI DER WHETHER THE INTENTION TO HOLD THE SHARES AS INVESTMENT FOR EARNING DIVIDEND OR TRADING PURPOSE TO EARN PROFIT. THE FRE QUENCY AND VOLUME OF TRANSACTION ON SHARES, THE PERIOD OF HOLDING ARE A LSO RELEVANT FACTORS REQUIRED TO BE CONSIDERED TO FIND OUT WHETHER I T IS TRADING OR INVESTMENT ACTIVITY. ALL THESE FACTS HAVE NOT BEEN PROP ERLY EXAMINED BY THE LOWER AUTHORITIES, WE ARE INCLINED TO REMIT TH E MATTER BACK TO THE FILE OF THE ASSESSING OFFICER WHO SHALL CONSIDER THE ISSUE AF RESH AFTER TAKING INTO ACCOUNT ALL THE MATERIALS AND EVIDENCES AVAI LABLE ON RECORD WHICH MAY BE PRODUCED BY THE ASSESSEE BEFORE HIM. THE ASSESSING OFFICER SHOULD ALSO KEEP IN VIEW THE PARAMETERS LAID DO WN BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF PVS RAJU AND ANOTHER ITA NOS 481 AND 482 AND OTHERS M.V. SUBBA RAO & SMT. JAYASHREE, HYD. 11 V/S. ADDITIONAL CIT (340 ITR 75) AND IN JUDGMENT DAT ED 21-2-2013 IN CASE OF M/S SPECTRA SHARES AND SCRIPS V/S. CIT WHILE DECIDI NG THE ISSUE AS TO WHETHER THE INCOME DERIVED FROM SALE OF SHAR ES IS TO BE TREATED AS CAPITAL GAIN OR INCOME FROM BUSINESS. THE A SSESSING OFFICER SHALL AFFORD A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ITA NO.1311/HYD/11 M.V. SUBBA RAO: - 13. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- 1. THE ORDER OF THE CIT (A) IS ERRONEOUS BOTH ON F ACTS AND IN LAW. 2. THE CIT (A) ERRED IN HOLDING THAT THE ACTIVITY O F THE APPELLANT IN PURCHASE AND SALE OF SHARES IS A BUSIN ESS ACTIVITY WITHOUT CONSIDERING THE FACT THAT THE APPE LLANT IS CARRYING ON THE ACTIVITY AS AN INVESTMENT. 3. THE CIT (A) ERRED IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER IN TREATING THE LONG TERM CAPITAL GAIN DERI VED BY THE APPELLANT OF RS.32,64,233/- AS INCOME FROM BUSI NESS. 4. THE CIT (A) OUGHT TO HAVE SEEN THAT THE INVESTME NT IN SHARES HAS TO BE CONSIDERED PURELY AS AN INVESTMENT MADE BY HIM AND IT CANNOT BE CONSIDERED AS AN INVESTMENT MADE FOR THE PURPOSE OF CARRYING ON BUSINESS. 5. THE CIT(A) ERRED IN HOLDING THAT THE SHORT TERM CAPITAL GAIN DERIVED ON SALE OF SHARES OF RS.28,29,652/- AS THE INCOME FROM BUSINESS. 14. BRIEFLY THE FACTS ARE, THE ASSESSEE FOR THE IMPUGN ED ASSESSMENT YEAR FILED HIS RETURN OF INCOME DECLARING A TOTAL INCOM E OF RS.31,97,080/-. DURING THE SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT DURING THE PREVIOUS YEAR R ELEVANT YEAR UNDER DISPUTE THE ASSESSEE HAS SOLD SHARES AND DECLARED THE INCOME ITA NOS 481 AND 482 AND OTHERS M.V. SUBBA RAO & SMT. JAYASHREE, HYD. 12 DERIVED THERE-FROM AS LONG TERM CAPITAL GAIN AND SHORT TERM CAPITAL GAIN AMOUNTING TO RS.32,64,233/- AND RS.28,29,652/- RESPECTI VELY. WHEN THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN AS TO WH Y THE INCOME FROM SALE OF SHARES SHOULD NOT BE TREATED AS BUSINE SS INCOME, THE ASSESSEE SUBMITTED THAT HE IS A MERE INVESTOR IN SHARE S AND DID NOT CARRY OUT ANY ACTIVITY OF PURCHASE OF SALES OF SHARES AS A TRADER. IT WAS FURTHER STATED THAT THE INVESTMENT IN SHARES WERE OUT O F HIS OWN FUNDS WITHOUT UTILIZING ANY BORROWED AMOUNTS. HE FURTHER ST ATED THAT HE MAINTAINS DEMAT ACCOUNT AND MOST OF THE SHARES WERE HELD FOR LONG TIME. THE INTENTION OF THE ASSESSEE AT THE TIME OF ACQU IRING THE SHARES IS TO HOLD THEM AS INVESTMENT. HOWEVER, IF HE FINDS TH AT HOLDING OF THE SHARES FOR LONGER PERIOD IS DETRIMENTAL TO THE INTEREST THE SAME WAS SOLD WHATEVER BE THE GAIN OR LOSS FROM SALE. 15. THE ASSESSING OFFICER ON VERIFYING THE DETAILS SUBMIT TED BY THE ASSESSEE FOUND THAT THE PURCHASES WERE MADE FROM SUBSTANTIA L AT FREQUENT INTERVALS WHEN THE VALUE OF SCRIP OF VARIOUS COMPANIES IS AT A LOWER RATE. HE FURTHER NOTED THAT THOUGH THE SHARES W ERE HELD FOR SUBSTANTIAL PERIOD TO IMPRESS UPON THE CHARACTER OF LONG TERM INVESTMENT HOWEVER SHARES OF VARIOUS COMPANIES WERE ALSO SO LD AT QUITE FREQUENT INTERVALS WHEN THE VALUE OF SCRIP IS AT A HIGHER RATE. THE ASSESSING OFFICER FURTHER OF THE VIEW THAT THE MAGNITUD E OF PURCHASE AND SALES OF SHARES CLEARLY INDICATE THAT THE MOTIVE OF THE ASSESSEE IS TO EARN PROFIT. HE THEREFORE OPINED THAT THE SHARES HELD BY THE ASSESSEE ARE TRADING ASSET AND NOT CAPITAL ASSET. THE ASSESSI NG OFFICER FURTHER HELD THAT THE ASSESSEE S CASE SQUARELY FALLS IN TH E PRINCIPLES LAID IN BOARD CIRCULAR NO.4 OF 2007 DATED 15-6-2007. THE ASSESSING OFFICER FURTHER OPINED THAT THE FREQUENCY OF PURCHASES AND SALES REVEALS THAT THE SHARES ARE PURCHASED WITH THE INTENTION OF SELLING THEM AT PROFIT ITA NOS 481 AND 482 AND OTHERS M.V. SUBBA RAO & SMT. JAYASHREE, HYD. 13 AND AS SUCH AN ACTIVITY IS AN ADVENTURE IN THE NATURE O F TRADE. HE FURTHER HELD THAT THE PURCHASE AND SALE OF SHARES FOR SUB STANTIAL AMOUNT CANNOT BE TREATED AS CHANGE IN INVESTMENT BUT HA S TO BE TREATED AS DEALING IN SHARES. THE ASSESSING OFFICER RELYIN G UPON THE DECISIONS OF HON'BLE SUPREME COURT IN CASE OF RAJPUTANA T EXTILES (AGENCIES) LIMITED V/S. CIT (42 ITR 743) AND RAJA BA HADUR VISHESHWARA SINGH V/S. CIT (41 ITR 685) HELD THAT TH E SHARES HELD BY THE ASSESSEE IS TRADING ASSET AND NOT CAPITAL ASSET AND DEAL ING IN SHARES IS IN THE NATURE OF TRADE. ACCORDINGLY, HE REJECTED T HE INCOME SHOWN UNDER THE HEAD LONG AND SHORT TERM CAPITAL GAIN AND T REATED THE SAME AS PROFITS AND GAINS OF BUSINESS OR PROFESSION U/S 28 OF TH E ACT. AGAINST THE ASSESSMENT ORDER SO PASSED, THE ASSESSEE PREFERRED AN APPE AL BEFORE THE CIT (A). 16. IN COURSE OF HEARING BEFORE THE FIRST APPELLATE AUTHORITY, THE ASSESSEE REITERATING HIS CONTENTIONS MADE BEFORE THE ASSESSING OFFICER SUBMITTED THAT HE MAINTAINED A DEMAT ACCOUNT DURING TH E YEAR UNDER CONSIDERATION AND ALL THE SHARES WERE ACTUALLY RECEIVED I N HIS DEMAT ACCOUNT AND THE SALE OF SHARES WERE ALSO THROUGH DEMAT ACCO UNT. THE SHARES WERE POSSESSED BY THE ASSESSEE AND WAS GIVEN DELIVERY THROUGH DEMAT ACCOUNT. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE USED HIS OWN FUNDS FOR THE PURPOSE OF INVESTMENT IN SHARES AND TH ERE WAS SUBSTANTIAL GAP BETWEEN THE DATE OF ACQUISITION AND DA TE OF SALE OF SHARES. THE SHARES WERE NEVER HELD AS STOCK IN TRADE BUT WERE HELD AS INVESTMENT. HE THEREFORE SUBMITTED THAT THE PROFIT AR ISING ON SALE OF SHARES IS ASSESSABLE AS CAPITAL GAINS AND NOT AS BUSINESS INCOME. IN SUPPORT OF SUCH CONTENTION, ASSESSEE ALSO RE LIED UPON VARIO US DECISIONS OF THIS INCOME-TAX APPELLATE TRIBUNAL AS WELL AS DIFF ERENT HIGH COURTS. THE CIT (A) ON EXAMINING THE SUBMISSIONS MADE ON BEHAL F OF THE ITA NOS 481 AND 482 AND OTHERS M.V. SUBBA RAO & SMT. JAYASHREE, HYD. 14 ASSESSEE IN THE LIGHT OF CIRCULAR NO.4 OF 2007 DATED 15-6 -2007 AND VARIOUS JUDICIAL PRECEDENTS AS MENTIONED IN HIS ORDER FO UND THE FOLLOWING IMPORTANT FACTS :- (I) THE ASSESSEE IS THE DIRECTOR OF MOVVA SECURITIES LT D., WHICH DEALS WITH PURCHASE AND SALE OF SHARES ON BEH ALF OF VARIOUS CLIENTS. AS A DIRECTOR OF THE COMPANY, ASS ESSEE IS THE MAIN ADVISER TO THE PEOPLE ON PURCHASE AND SALE OF SHARES. IN THIS CONTEXT, THE CIT(A) REFERRED TO A D ECISION OF HON'BLE SUPREME COURT IN CASE OF RAJA J. RAMESWA RA RAO (42 ITR 179) WHEREIN IT WAS HELD THAT WHERE THE PERSON CONDUCTS A PARTICULAR BUSINESS THEN EVEN A S INGLE TRANSACTION MADE BY THAT PERSON WITH HIS OWN MONEY IN THAT LINE OF BUSINESS IS TO BE TAKEN AS BUSINESS TRANSACTION. II) THE NUMBER OF TRANSACTIONS ENTERED INTO BY THE ASSESSEE CLEARLY INDICATES THE INTENT OF THE ASSESSEE . THE NUMBER OF TRANSACTIONS INCLUDING BOTH SHORT TERM AND LONG TERMS GAINS DISCLOSED AS MORE THAN 1200. THERE ARE MORE THAN 550 TRANSACTIONS OF SALE IN FINANCIAL YEAR 2007-08 PERTAINING TO THE CURRENT ASSESSMENT YEAR. III) MORE THAN 80% OF THE TRANSACTIONS ARE PURCHASE S AND SALES OF SHARES IN THE CURRENT YEAR ITSELF. IV) THE RATIO OF HOLDING TO PURCHASES IS VERY HIGH I.E., CLOSE TO 1, INDICATING THAT NOT MANY SHARES ARE HELD AS INVE STMENT. 17. THE CIT (A) FURTHER NARRATED CERTAIN INSTANCES OF SA LE OF SHARES WHERE ON 2-8-2007, 2000 SHARES OF WS INDUSTRIES WERE P URCHASED FOR RS.68.41 PER SHARE. ON 3-8-2007, 400 OF THE SHARES WER E SOLD FOR RS.72.2 PER SHARE. ON 8-8-2007 ANOTHER 1000 SHARES WER E SOLD FOR RS.77.3 PER SHARE. THEREAFTER ON 20-8-2007, 603 SHARE S OF THE SAME COMPANY WERE PURCHASED FOR RS.85.3 PER SHARE ON THE SAME 500 OF ITA NOS 481 AND 482 AND OTHERS M.V. SUBBA RAO & SMT. JAYASHREE, HYD. 15 EARLIER SHARES WERE SOLD AT RS.85.93 PER SHARE. FROM TH ESE, THE CIT (A) OBSERVED THAT THE TRANSACTIONS CLEARLY SHOW THAT THE ASSESSEE IS QUICKLY BOOKING PROFIT AND THERE IS NO ELEMENT WHATSOE VER OF ANY RETURN ON INVESTMENT IN TERMS OF DIVIDEND. THE CIT (A) ALSO REFERRED TO CERTAIN OTHER SPECIFIC INSTANCES OF PURCHASE AND SALE OF SHARE S WITHIN A SHORT DURATION. SO FAR AS LONG TERM CAPITAL GAIN IS CO NCERNED, THE CIT (A) ON EXAMINATION OF FACTS ON RECORD NOTED THAT THE A SSESSEE BEGAN PURCHASING STOCK OF NAGARJUN CONSTRUCTION AT RS.319.96 AN D AS THE STOCK PRICE FELL TO RS. 217.80 PER SHARE, THE ASSESSEE KEPT PICKING UP MORE SHARES TO REDUCE THE AVERAGE PRICE OF THE PURCHASE S. THEREFORE, THE AVERAGE PRICE AT WHICH THE ASSESSEE PURCHASED THE SHAR ES OF NAGARJUNA CONSTRUCTION CAME TO RS.275.49 PER SHARE. FR OM THESE FACTS, THE CIT (A) WAS OF THE OPINION THAT THE STRATEGY ADOPTED BY THE ASSESSEE IS NOT THE STRATEGY OF A GENUINE INVESTOR BUT OF A PERSON WHO DOES BUSINESS OF SALE AND PURCHASE OF SHARES. THE CIT(A) FU RTHER NOTED THAT FROM 29-11-2006 TO 24-7-2007 , THE ASSESSEE WAITED FOR SEVEN MONTHS TO SEE WHETHER SHARE PRICE WAS RISING OR FALLING. THEREAFTER ON 24 TH AND 25 TH JULY, 2007, THE ASSESSEE SOLD 100 SHARES OF NAGARJUNA CONSTRUCTION AT AN AVERAGE PRICE OF RS.206 PER SHARE THE REBY BOOKING A SMALL LOSS. THE AMOUNT RECEIVED ALONG WITH AVAILABLE A MOUNT WAS UTILISED BY THE ASSESSEE TO PURCHASE THE SHARES OF ASIAN ELECT RICAL LIMITED AND OTHERS. 18. FROM THE AFORESAID PATTERN OF TRANSACTION, IT I S CLEAR THAT THE ASSESSEE PURCHASES SHARES AT QUICKLY REDUCES THE AVERAGE PURCH ASE PRICES AS THE SHARE PRICE FALLS. THEREAFTER HE WAITED A SHORT WHILE AND DID NOT WAIT FOR THE LONG TERM RETURN FROM THE SHARE S. RATHER, HE MADE AN EXIT FROM A PORTION OF SHARES BY BOOKING A SMALL L OSS RATHER THAN WAITING FOR LONG TERM PERFORMANCE OF THE COMPANY I.E. M/S NAGARJUNA ITA NOS 481 AND 482 AND OTHERS M.V. SUBBA RAO & SMT. JAYASHREE, HYD. 16 CONSTRUCTIONS. THE AMOUNT RECEIVED ON SALE WAS UTILISED IMMEDIATELY TO TRADE IN OTHER SHARES. THE CIT(A) WAS OF THE OP INION THAT ASSESSEE QUICKLY JUMPS FROM ONE SHARE TO ANOTHER AND DOES NOT MI ND MAKING A SMALL LOSS IN SOME SHARES AS LONG AS HE CAN UTILIZE THAT MO NEY AND QUICKLY MAKE PROFIT BY PURCHASE OF SOME OTHER SHARES. T HE CIT (A) FURTHER NOTED THAT AS THE SHARE PRICE OF NAGARJUNA CO NSTRUCTION ROSE BEYOND RS.300 PER SHARE, THE ASSESSEE EXITED FROM HIS HOLD ING AND KEPT ON SELLING THE SHARES UNTIL THE ENTIRE HOLDING WA S DISPOSED OF. THIS ACCORDING TO THE CIT (A) IS A TYPICAL PATTERN OF BUSIN ESS IN SHARES. THE CIT (A) FURTHER HELD THAT AN INDIVIDUAL INVESTOR CAN STUDY OR TAKE ADVICE ABOUT THE FEW COMPANIES AND THEIR SHARES AND INVEST HIS MONEY SO AS TO OBTAIN RETURN IN THE FORM OF DIVIDENDS, BONUS SHAR ES ETC. THE INVESTOR CANNOT HAVE KNOWLEDGE ABOUT LARGE NUMBER OF SHARES AND ALSO CANNOT QUICKLY KEEP ON CHANGING ON PORTFOLIOS. WH EREAS THE ASSESSEE HAS SOLD AND PURCHASED SHARES FROM MORE THAN 65 COMPANIES. ON THE BASIS OF AFORESAID FINDING THE CIT ( A) ULTIMATELY CONCLUDED THAT THE ASSESSEE IS CARRYING ON BUSINESS OF PURCHASE AND SALE OF SHARES GIVING THE ENTIRE NATURE OF TRANSACTION A ND HIS INTIMATE KNOWLEDGE OF SHARE TRADING AS WELL AS MAIN BUSINESS OF HIS OWN COMPANY. ACCORDINGLY, HE UPHELD THE VIEW OF THE ASSESSI NG OFFICER THAT THE INCOME FROM SALE OF SHARES IS TO BE ASSESSED AS INCOM E UNDER THE HEAD BUSINESS. 19. THE LEARNED AR IN ADDITION TO THE SUBMISSIONS MAD E RELATING TO THE APPEAL FOR THE ASSESSMENT YEAR 2006-07 HEREINABOVE FURTHER SUBMITTED THAT VARIOUS JUDICIAL PRECEDENTS ALSO SUPPORT T HE CLAIM OF THE ASSESSEE THAT THE INCOME FROM SALE OF SHARES IS TO BE TREAT ED AS CAPITAL GAIN. THE LEARNED AR SUBMITTED THAT IN CASE OF GOPA L PUROHIT V/S. JCIT (122 TTJ 87) THE MUMBAI BENCH OF INCOME-TAX APPE LLATE TRIBUNAL ITA NOS 481 AND 482 AND OTHERS M.V. SUBBA RAO & SMT. JAYASHREE, HYD. 17 HELD THAT WHETHER THE TRANSACTION IS AN INVESTMENT OR A TRADE IS TO BE CONSIDERED WITH REFERENCE TO RULE OF CONSISTENCY. THE TR IBUNAL FURTHER HELD THAT THE SHARES WERE HELD FOR MORE THAN 12 MONTH S IN CERTAIN CASES AND THE INCOME IS DETERMINED AS SHORT TERM OR LONG T ERM CAPITAL GAIN ON THE BASIS OF THE FACT WHETHER THE DELIVERY HAS BEEN TAKEN OR GIVEN AND SECURITY TRANSACTION TAX HAS BEEN PAID. IT W AS SUBMITTED THAT WHEN THE AFORESAID ORDER OF THE TRIBUNAL WAS CHAL LENGED BEFORE THE HONBLE HIGH COURT OF MUMBAI, THE HIGH COURT HELD TH AT RULE OF CONSISTENCY HAS TO BE MAINTAINED AND APPROVED THE ORDER PASSED BY THE TRIBUNAL. THE ASSESSEE ALSO RELIED UPON VARIOUS OTHER DECISIONS OF THE TRIBUNAL IN SUPPORT OF HIS CLAIM THAT THE INCOME FROM SALE OF SHARES SHOULD BE ASSESSED AS CAPITAL GAIN. THE LEARNED AR RELYING UPON THE JUDGMENT DATED 21-2-2013 OF THE HONBLE AP HIGH COUR T IN CASE OF SPECTRA SHARES AND SCRIPS PVT. LTD. V/S. CIT AND SPECIFI CALLY REFERRED TO PARA- 47 OF THE JUDGMENT. 20. THE LEARNED AR SUBMITTED THAT IF THE REASONING S AS LAID DOWN IN THE SAID PARAGRAPH-47 OF THE JUDGMENT OF JURISDICTIONA L HIGH COURT ARE CONSIDERED IN CASE OF THE ASSESSEE THEN THE ASSESSEES CONTENTI ON THAT HE IS AN INVESTOR OR NOT A TRADER IS FOUND TO BE CORRECT . THE LEARNED AR SUBMITTED THAT FROM THE ASSESSMENT YEAR 1998-99 ONWAR DS THE ASSESSEE IS ADMITTING THE INCOME UNDER THE HEAD CAPITAL GA IN FROM SALE OF SHARES AND THE IT DEPARTMENT HAS ACCEPTED THE INCOMES UPTO THE ASSESSMENT YEARS 2005-06. HENCE, THE RULE OF CONSISTENCY SUPPO RTS THE ASSESSEE. HE FURTHER SUBMITTED THAT ONLY BECAUSE THE TRANSACTIONS ARE VOLUMINOUS AND THEREFORE THE BUSINESS ACTIVITY BUT N OT AN INVESTMENT IS NOT A PROPER CONCLUSION. THE LEARNED AR REFERRING TO THE JUDGMENT OF JURISDICTIONAL HIGH COURT IN CASE OF SPECTRA SHARES AND SCRIPS PVT. LTD. V/S. CIT (SUPRA) SUBMITTED THAT THE ACT IVITY WOULD NOT ITA NOS 481 AND 482 AND OTHERS M.V. SUBBA RAO & SMT. JAYASHREE, HYD. 18 DEPEND UPON THE VOLUME OF TRANSACTION BUT DEPEND UPON THE NATURE OF TRANSACTION INVOLVED AND THE INTENTION OF THE ASSESSEE . HE FURTHER SUBMITTED THAT THE ASSESSEE HAS INVESTED ONLY HIS OWN FUND S AND TO PROTECT THE CAPITAL SO INVESTED IS SAFEGUARDING THE CA PITAL WITHOUT ITSELF BEING DIMINISH ITS VALUE. THE LEARNED AR SUBMITTED THAT THE INVESTMENT IS NOT A SINGLE SHARE BUT IT IS IN A SHARE POR TFOLIO AND ANY PERSON WHO INVESTS IN ASSET LIKE SHARES WOULD NOT INVEST IN ONE OR TWO SHARES BUT INVEST IN MULTIPLE SHARES KNOWN AS SHARE PORTF OLIO. WHEN CERTAIN AMOUNT IS INVESTED THE ASSESSEE HAS TO PRESERVE THE CAPITAL SO INVESTED BY CAREFULLY MONITORING SUCH SHARES. THEREFORE, A FEW OF TRANSFER OF SHARES SHOULD TAKE PLACE. SOME TIMES, WHILE PRESERVING THE CAPITAL THERE MAY BE CERTAIN VOLUMINOUS TRANSACTIONS, BUT IT IS THE INTENTION OF THE ASSESSEE TO CARRY OUT SUCH TRANSACTIONS WHI CH IS RELEVANT. THE INTENTION OF THE ASSESSEE IS TO KEEP CERTA IN INVESTMENT IN SHARES AS HIS INVESTMENT IN THE SHARES AND WHILE PRESERVIN G THE SAME THERE MAY BE CERTAIN TRANSACTIONS AND THOSE TRANSACTIONS CA NNOT BE TERMED AS BUSINESS TRANSACTIONS AS THE ASSESSEE NEVER HAD ANY INTENTION TO DO SO. 21. THE LEARNED AR REFERRING TO THE BOARDS CIRCULAR NO.4 OF 2007 DATED 15-6-2007 SUBMITTED THAT THE CIRCULAR LAYS DOWN THREE CRITERIA WHICH ARE (I) WHETHER THE POWER TO PURCHASE OR SALE OF SHARES IS PERMITTED UNDER THE MEMORANDUM OR NOT, (II) THE SUBST ANTIAL NATURE OF TRANSACTION, THE MANNER OF MAINTAINING OF BOOKS, THE M AGNITUDE IN PURCHASE AND SALE AND THE RATIO IN PURCHASE AND SALES AN D THE HOLDING AND (III) THE BOARD DISTINGUISHED BETWEEN THE PURCHA SE AND SALE OF SHARES FOR MAKING A PROFIT AND SALE OF SHARES AND DERIVI NG PROFIT BY MAKING A CHANGE IN INVESTMENT. THE LEARNED AR SUBM ITTED THAT IF THE ASSESSEE S CASE IS EXAMINED IN THE CONTEXT OF THE CRITER IA LAID DOWN ITA NOS 481 AND 482 AND OTHERS M.V. SUBBA RAO & SMT. JAYASHREE, HYD. 19 BY THE BOARDS CIRCULAR THEN IT CAN BE SEEN THAT THE ASSE SSEE DID NOT MAINTAIN ANY BOOKS OF ACCOUNT SO FAR AS SHARES ARE CONCERNED . NO PROFIT AND LOSS A/C WAS DRAWN. NONE OF THE EXPENDITURE CLAIMED BY THE ASSESSEE INCLUDING SECURITY TRANSACTIONS TAX AND SO FAR AS MA GNITUDE IN PURCHASE AND SALE OF SHARE IS CONCERNED, THAT IS, NOT A F ACTOR TO BE CONSIDERED AS PER THE DECISION OF THE JURISDICTIONAL HIGH C OURT. HE FURTHER SUBMITTED THAT IN SO FAR AS ASSESSEE IS CONCERNED, IT IS A CHANGE IN THE INVESTMENT FROM ONE SHARE TO ANOTHER SHAR E. IT WAS SUBMITTED THAT IT CAN BE SEEN FROM PATTERN OF INVESTMEN T THAT THERE IS GAIN BUT IN THE PROCESS OF CHANGE IN INVESTMENT AND NOT IN THE PROCESS OF BUSINESS. THE ASSESSEE RELYING UPON A DECISION OF THE I NCOME-TAX APPELLATE TRIBUNAL MUMBAI BENCH IN CASE OF ACIT V/S., . JAHANGIR T. NAGRI (23 SOT 512) SUBMITTED THAT IT IS THE INTENTION OF THE ASSESSEE WHICH IS MORE RELEVANT FOR THE PURPOSE OF DETERMINING WHETHER THE SHARES WERE HELD AS INVESTMENT OR TRADING ASSETS. SINCE IN THE PRESENT CASE, THE INTENTION OF THE ASSESSEE IS TO HOLD THE SHARES AS INVESTMENTS IT CANNOT BE TREATED AS INCOME FROM BUSINESS. 22. THE LEARNED DEPARTMENTAL REPRESENTATIVE IN HIS WRITTEN SUBMISSIONS SUBMITTED THAT THE ASSESSEE IS THE DIRECTOR OF THE COMPANY M/S MOVVA SECURITEIS LTD., WHICH DEALS IN PURCHASE AND SALE OF SHARES ON BEHALF OF VARIOUS CLIENTS. AS A DIRECTOR O F THE COMPANY THE ASSESSEE IS THE MAIN ADVISOR TO PEOPLE ON PURCHASE AND SALE OF SHARES. THEREFORE, IN VIEW OF RATIO LAID DOWN BY TH E HON'BLE SUPREME COURT IN CASE OF RAJA J. RAMESHWARA RAO (42 ITR 179) THE TRANSACTIONS IN THE INDIVIDUAL STATUS WILL ALSO HAVE TO BE TREATED AS BUSINESS INCOME. IT WAS SUBMITTED THAT THE NUMBER OF TR ANSACTION CLEARLY INDICATE THE INTENTION OF THE ASSESSEE. MORE THA N 80% OF THE TRANSACTIONS ARE PURCHASES AND SALE OF SHARES DURING THE CURR ENT YEAR ITA NOS 481 AND 482 AND OTHERS M.V. SUBBA RAO & SMT. JAYASHREE, HYD. 20 ITSELF AND THE RATIO OF HOLDING TO PURCHASES IS ALSO VER Y HIGH. HE SUBMITTED THAT THE PATTERN OF INVESTMENT IN SHARES ALSO INDICATES THAT THE ASSESSEE IS NOT A GENUINE INVESTOR BUT A TRADER IN SH ARES. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT T HE FACT INVOLVED IN THE CASE OF SPECTRA SHARES AND SCRIPS PVT. LTD. V/S. CIT (SUPRA) IS NOT APPLICABLE TO THE ASSESSEE FIRSTLY BECAUSE THAT IS A CAS E U/S 263 OF THE ACT AND SECONDLY IN THE PRESENT CASE, THE ASSESSEE HAS MA DE SEVERAL TRANSACTIONS OF PURCHASES OF SALES DURING THE RELEVA NT YEAR UNDER CONSIDERATION AND THEIR HIGH VOLUME FREQUENCY AN D THE REGULARITY OF THEIR ACTIVITY CARRIED ON BY THE ASSESSEE IN A SYSTEMATI C MANNER. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT I F THE ASSESSEE S CASE IS CONSIDERED WITHIN THE PARAMETERS LAID DOWN BY TH E JURISDICTIONAL HIGH COURT IN CASE OF PVS RAJU V/S. ADDITIONAL CIT (3 40 ITR 75) THEN THE ACTIVITY CARRIED ON BY THE ASSESSEE IN PURCHASE AND S ALE OF SHARES WOULD PARTAKE THE CHARACTER OF BUSINESS ACTIVITY AND IT CANNOT BE SAID THAT THE ASSESSEE HAD MERELY MADE INVESTMENTS IN SHARES. THE LEARNED DEPARTMENTAL REPRESENTATIVE ALSO RELIED UPON THE DECISION OF INCOME-TAX APPELLATE TRIBUNAL, HYDERABAD BENCH IN CASE O F ACIT V/S. ANIL KUMAR JAIN ( 55 SOT 77). 23. THE LEARNED AR IN HIS REJOINDER SUBMITTED THAT THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF PV S RAJU V/S. ADDITIONAL CIT (SUPRA) IS NOT APPLICABLE TO THE FACTS OF THE ASSESSEES CASE AS IN CASE OF PVS RAJU THERE IS NO CONSISTENCY WHEREAS T HE ASSESSEE HAS CONSISTENTLY TREATED THE SHARES AS HIS INVESTMENTS AND DECLARED INCOME FROM SALE OF SHARES AS CAPITAL GAIN. HE FURTHER SUBMITTED THAT WHILE IN CASE OF PVS RAJU (SUPRA) THE SH ARES WERE HELD FOR SHORT TERM AND NOT AN INVESTMENT, THE ASSESSEE HAS HEL D THE SHARES AS INVESTMENT AND NEVER HELD HIS SHARES FOR SHORT PERIOD. WHILE IN CASE ITA NOS 481 AND 482 AND OTHERS M.V. SUBBA RAO & SMT. JAYASHREE, HYD. 21 OF THE ASSESSEE FROM INCEPTION OF THE ACTIVITY TILL DATE, THE ENTIRE PORTFOLIO WAS AN INVESTMENT PORTFOLIO AND NOT A TRADI NG PORTFOLIO AND IN CASE OF PVS RAJU DIFFERENT TREATMENTS WERE GIVEN TO TH E VARIOUS ACTIVITIES CARRIED ON BY THE ASSESSEE. IT WAS SUBMITTED THA T IN CASE OF PVS RAJU THE PROFIT MADE HAS NOT ENHANCED THE VALUE OF SHARES BUT IS A PROFIT MADE IS CARRYING ON THE BUSINESS. WHEREAS IN CASE O F THE ASSESSEE IT IS MERE INCREASE IN THE CAPITAL AND NOT PROFIT DERIVED IN THE PROCESS OF TRADING. IN CASE OF PVS RAJU, SHARES WERE SOL D EVEN PRIOR TO PURCHASE. HOWEVER, IN CASE OF THE ASSESSEE NO SHARE WAS SOL D PRIOR TO THE PURCHASE AND MAJORITY OF SHARES WERE HELD FOR A LON G TERM. ALL SHARES WERE TAKEN DELIVERY AND WERE GIVEN DELIVERY. T HE LEARNED AR RELIED UPON A JUDGMENT DATED 9-1-2013 OF HONBLE DEL HI HIGH COURT IN CIT V/S. AVINASH JAIN AND SUBMITTED THAT THE BOAR DS CIRCULAR NO.4 OF 2007 DATED 15-6-2007 WAS INTERPRETED BY THE HONBLE DELHI HIGH COURT AND HELD THAT A TAX PAYER COULD HAVE TWO PORTFOLIOS N AMELY AN INVESTMENT PORTFOLIO AND TRADING PORTFOLIO. IN OTHE R WORDS, THE ASSESSEE COULD OWN SHARES FOR PURPOSES OF INVESTMENT AND /OR FOR THE PURPOSE OF TRADING. 24. WE HAVE CONSIDERED THE CONTENTIONS OF THE PARTIES M ADE ORALLY AND AS WELL AS THROUGH WRITTEN SUBMISSIONS. WE HAVE AL SO PERUSED THE MATERIAL ON RECORD. WE HAVE ALSO CAREFULLY APPLIED OU R MIND TO THE DECISIONS CITED BEFORE US. WHILE IT IS THE CLAIM OF THE A SSESSEE THAT HE WAS HOLDING THE SHARES AS INVESTMENT ONLY AND NEVER AS STO CK IN TRADE. HOWEVER, IT IS THE CASE OF DEPARTMENT THAT THE ASSESSEE HA S CARRIED ON THE SHARE TRANSACTION AS A TRADING ACTIVITY. THEREFOR E, TO FIND OUT WHAT IS THE TRUE NATURE OF TRANSACTION, THE INTENTION WITH WHICH SUCH ACTIVITIES CARRIED ON IS A RELEVANT FACTOR. IF AN OWNER OF AN IN VESTMENT REALIZES IT AND OBTAINS GREATER PRICE THAN THE PRICE AT WHICH HE H AS ORIGINALLY ITA NOS 481 AND 482 AND OTHERS M.V. SUBBA RAO & SMT. JAYASHREE, HYD. 22 ACQUIRED IT , THE ENHANCED VALUE OBTAINED FROM REALI ZATION OF CONVERSION MAY BE PROFIT FROM BUSINESS. IF THE TRANSACTI ON IS IN THE ORDINARY LINE OF ASSESSEE S BUSINESS THERE WOULD BE HARD LY BE ANY DIFFICULTY CONCLUDING IT TO BE A TRADING TRANSACTION. B UT WHERE IT IS NOT A FACT THEN IT MUST BE PROPERLY ASSESSED TO DETERMINE WHETH ER IT IS IN THE NATURE OF TRADE. THE SURPLUS REALISED ON THE SALE OF SHARES COULD BE CAPITAL IF THE ASSESSEE HAS AN ORDINARY INVESTOR REALIZES H IS HOLDING BUT IT WOULD BE REVENUE IF HE DEALS THEM AS A TRADER. IF THE ASSESSEE IS AN ORDINARY INVESTOR, THE INCOME ARISING OUT OF SALE OF SHARES IS A CAPITAL GAIN. ON THE OTHER HAND, IF HE TRADES IN SHARES IN A REGULAR AND SYSTEMATIC MANNER WITH AN INTENTION TO EARN PROFIT THE N IT WILL BE INCOME FROM BUSINESS. SIMILARLY, IF AN INDIVIDUAL INV ESTS IN SHARES FOR THE PURPOSE OF EARNING DIVIDEND HE IS NOT CARRYING ON BUSINESS. 25. WHETHER THE TRANSACTION IN SHARES CARRIED BY AN ASSE SSEE CONSTITUTES BUSINESS ACTIVITY OR IS IN THE NATURE OF INVE STMENT HAS TO BE DETERMINED ON THE BASIS OF FACTS AND THE CIRCUMSTANCES OF EACH CASE. THERE IS NO STRAIGHT JACKET FORMULAE TO DETERMINE SUCH AN ISSUE. THE JURISDICTIONAL HIGH COURT WHILE CONSIDERING A SIMILAR ISSU E OF TRANSACTION IN SHARES WHETHER CONSTITUTES INCOME FROM BUSINESS OR CAPITA L GAINS IN CASE OF PVS RAJU V/S. ADDITIONAL. CIT (SUPRA) HELD THA T THE CHARACTER OF TRANSACTION CANNOT BE DETERMINED SOLELY ON THE APPLICAT ION OF ANY ABSTRACT RULE, PRINCIPLE OR TEST. THE HONBLE HIGH CO URT FURTHER OBSERVED THAT NO SINGLE CRITERION IS DECISIVE IN DETERMIN ING THE QUESTION WHETHER PARTICULAR RECEIPT IS CAPITAL OR REVENUE. THE JURISDICTIONAL HIGH COURT AFTER TAKING INTO CONSIDERATION THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT AND DIFFERENT HIGH COURTS LAID DOWN CERT AIN PARAMETERS FOR DIFFERENTIATING BUSINESS INCOME FROM CAPITAL GAIN. THE TESTS LAID DOWN ARE AS FOLLOWS:- ITA NOS 481 AND 482 AND OTHERS M.V. SUBBA RAO & SMT. JAYASHREE, HYD. 23 (A) THE FREQUENCY OF BUYING AND SELLING OF SHARES BY TH E APPELLANTS WERE HIGH; (B) THE PERIOD OF HOLDING WAS LESS; C) THE QUANTUM OF TURNOVER WAS ON ACCOUNT OF FREQUENCY OF TRANSACTIONS, AND NOT BECAUSE OF HUGE INVESTMENT; D) THE INTENTION OF THE ASSESSEE TO MAKE QUICK PROFITS ON A HUGE TURNOVER; E) NO. OF SCRIPS SHARES HELD FOR FEWER DAYS; F) WHETHER ENGAGED IN DEALING IN THE SAME SCRIPS FREQUENTL Y; G) INTENTION OF THE ASSESSEE IN BUYING SHARES IS NOT TO DER IVE INCOME BY WAY OF DIVIDEND ON SUCH SHARES, BUT TO EARN PR OFITS ON THE SALE OF THE SHARES; H) WHETHER THE ASSESSEES HAD INDULGED IN MULTIPLE TRANSACTION S OF LARGE QUANTITIES WITH HIGH PERIODICITY. THESE PERIODIC TRANSACTIONS SELECTING THE TIME OF ENTRY AND EXIT IN EACH SCRIP, CALLED FOR REGULAR DIRECTION AND MANAGEMENT WHICH WOU LD INDICATE THAT IT WAS IN THE NATURE OF TRADE; I) REPEATED TRANSACTIONS, COUPLED WITH THE SUBSEQUENT CONDUCT OF THE ASSESSEE TO RE-ENTER THE SAME SCRIP OR SOME OTHER SCR IP, IN ORDER TO TAKE ADVANTAGE OF MARKET FLUCTUATIONS LEN T THE FLAVOUR OF TRADE TO SUCH TRANSACTIONS; J) THE ASSESSEES WERE PURCHASING AND SELLING THE SAME SCRIPS REPEATEDLY, AND WERE SWITCHING FROM ONE SCRIP TO ANOTHE R; K) MERE CLASSIFICATION OF THESE SHARE TRANSACTIONS AS INVESTMENT IN THE ASSESSEES BOOKS OF ACCOUNTS WAS NOT CONCLUSIVE. L) THE INTENTION OF THE ASSESSEES AT THE TIME OF PURCHASE WAS ONLY TO SELL THE SHARES IMMEDIATELY AFTER PURCHASES; ITA NOS 481 AND 482 AND OTHERS M.V. SUBBA RAO & SMT. JAYASHREE, HYD. 24 M) FREQUENCY OF PURCHASE AND SALE OF SHARES SHOWED THAT THE ASSESSEE NEVER INTENDED TO KEEP THESE SHARES AS INVESTMENT; AND N) IT IS ONLY FOR THE PURPOSE OF CLAIMING BENEFIT OF LOW ER RATE OF TAX, UNDER SEC. 111A OF THE ACT, THAT THEY HAD CLAIME D CERTAIN SHARES TO BE INVESTMENT, THOUGH THESE TRANSACTIONS WERE ON LY IN THE NATURE OF TRADE. 26. THE AFORESAID DECISION OF JURISDICTIONAL HIGH COURT I N CASE OF PVS RAJU WAS AGAIN CONSIDERED BY THE HONBLE AP HIGH COURT IN CASE OF SPECTRA SHARES AND SCRIPS PVT. LTD. V/S. CIT IN ITTA NOS. 512 OF 2011 AND 177 OF 2012. THE HONBLE HIGH COURT THOUGH AGREE D WITH THE CRITERION FIXED IN THE CASE OF PVS RAJU (SUPRA) BUT TH E HONBLE HIGH COURT HELD THAT THE PARAMETERS LAID DOWN WOULD N OT APPLY TO THE CASE OF SPECTRA SHARES AND SCRIPS PVT. LTD., (SUPRA) WHE REIN THE ISSUE OF EXERCISE OF JURISDICTION U/S 263 WAS INVOLVED TO WH ICH TOTALLY DIFFERENT PARAMETERS WOULD APPLY. THE HONBLE HIGH C OURT AFTER TAKING INTO CONSIDERATION BOARDS CIRCULAR NO.4 OF 2007 DATED 15-6-2007 AND VARIOUS OTHER DECISIONS HELD THE TRANSACTION IN SHARES TO BE AN INVESTMENT ACTIVITY DUE TO THE REASONS SET OUT IN PARA 4 7 OF THE JUDGMENT WHICH ARE AS FOLLOWS. (A) INVESTMENTS ARE MADE WITH OWN FUNDS AND NOT WITH BORROWED FUNDS. (B) THE CLOSING STOCK WAS VALUED IN THE BOOKS OF ACCOUNTS CONSISTENTLY AT COST AND NOT AT COST OR MARKET PRICE WHICHEVER IS LOWER. IT HAD EARNED SUBSTANTIAL DIVIDEND INCOME. ITA NOS 481 AND 482 AND OTHERS M.V. SUBBA RAO & SMT. JAYASHREE, HYD. 25 (D) MORE THAN 99% OF THE TOTAL GAINS ARE LONG TERM CAPITAL GAINS AND LESS THAN 1% IS SHORT TERM CAPITAL GAIN, 40% OF THE INVESTMENTS ARE IN MUTUAL FUND. (E) THE ASSESSEE NEVER DEALT IN FUTURES, DERIVATIVES AND OPTIONS. (F) ALL THE TRANSACTIONS OF PURCHASES AND SALES WERE DELIV ERY BASE EXCEPTING ONE SOLITARY INSTANCE OF RELIANCE INDUSTRI ES LTD. (G) THE ASSESSEE WAS REGISTERED AS NBFC WITH RBI. (H) THE ASSESSEE NEVER CLAIMED SET OFF OF THE LOSSES ARISING FROM SALE OF INVESTMENTS AGAINST OTHER INCOME. (I) MERELY BECAUSE OF LARGE FREQUENCY OF VOLUME OF TRANSACSTION, A CONCLUSION THAT AN ASSESSEE IS A TRADER CANNOTBE DRAWN WITHOUT CONSIDERING THE PERIOD OF HOLDI NG OF THOSE SHARES BY THE ASSESSEE. (J) A TRADER IN SHARES NORMALLY HOLDS THEM FOR A SHORT TIME ONLY AND IS UNLIKELY TO INVEST IN UNQUOTED SHARES OR I N MUTUAL FUNDS HE IS LIKELY TO BORROW FUNDS FOR HIS TRA DING ACTIVITY. (K) THE FACT THAT THE ASSESSEE IS MONITORING THE STOCK MAR KET AND BUYING AT DIPS AND SELLING AT HIGHS WITH AN INTE NTION TO MAKE PROFIT FROM THESE TRANSACTIONS IS NOT CONCLUSIVE OF T HE FACT THAT THE ASSESSEE IS A TRADER BECAUSE EVEN AN INVESTO R WOULD NOT BUY OR SELL BLINDLY AND TAKE THE RISK OF SU FFERING LOSSES. (L) THE FACT THAT THE ASSESSEE HAS A ADMINISTRATIVE SET UP AND INCURS CONSIDERABLE ADMINISTRATIVE COSTS IS NOT A FACTOR TO HOLD THAT THE ASSESSEE IS A TRADER. ITA NOS 481 AND 482 AND OTHERS M.V. SUBBA RAO & SMT. JAYASHREE, HYD. 26 (M) THE FACT THAT THE ASSESSEE IS MAKING REPETITIVE PURCHA SES AND SALES OF SAME SHARES IS A FACTOR IN FAVOUR OF HOLDIN G THAT THE ASSESSEE IS AN INVESTOR IN VIEW OF THE AMENDMEN TS TO SECTION 10(38) AND SECTION 115JB OF THE ACT. (N) THE REVENUE HAD ACCEPTED THAT THE ASSESSEE WAS AN INVESTOR WHOSE INCOME IS CHARGEABLE UNDER THE HEAD CAPITA L GAINS FOR A NUMBER OF YEARS. 27. IT IS THE CONTENTION OF THE LEARNED AR FOR THE ASSESSEE THAT THE PARAMETERS LAID DOWN IN CASE OF PVS RAJU (SUPRA) WILL NOT APPLY TO THE ASSESSEE SINCE WHILE THE ASSESSEE HAS TREATED THE INCOME FROM SHARES AS CAPITAL GAIN IN CASE OF PVS RAJU (SUPRA) DIFFERENT TR EATMENT WAS GIVEN TO INCOME FOR SHARES. IN CASE OF PVS RAJU SHARES WE RE HELD AS SHORT TERM BASIS AND NOT AS AN INVESTMENT WHEREAS THE ASSESSE E HELD THE SHARES AS INVESTMENT AND NEVER HELD FOR SHORT PERIO D. WHILE IN CASE OF THE ASSESSEE FROM THE INCEPTION OF THE ACTIVITY TH E ENTIRE PORTFOLIO WAS AN INVESTMENT PORTFOLIO IN CASE OF PVS RA JU DIFFERENT TREATMENTS WERE GIVEN TO VARIOUS ACTIVITIES CARRIED ON B Y HIM. WHILE IN CASE OF PVS RAJU THE COURT OBSERVED THAT THE PROFIT MA DE BY PVS RAJU HAS NOT ENHANCED THE VALUE OF SHARES BUT IS A PROFIT MAD E CARRYING ON THE BUSINESS IN CASE OF THE ASSESSEE , IT IS A MERE INCREASE IN CAPITAL AND NOT PROFIT DERIVED IN THE PROCESS OF TRADING. IN CASE OF PVS RAJU, IT WAS FOUND THAT THE SHARES WERE SOLD EVEN PRIOR TO PURCH ASE WHEREAS IN CASE OF THE ASSESSEE , NO SHARE WAS SOLD PRIOR TO PURCHASE AN D MAJORITY OF SHARES WERE HELD FOR A LONG TIME AND ALL THE SHARE WERE TAKEN DELIVERY AND GIVEN DELIVERY. IT IS FURTHER CONTENTIO N OF THE LEARNED AR THAT THE TESTS LAID DOWN BY THE HONBLE AP HIGH COURT FOR HOLDING THE ACTIVITY AS AN INVESTMENT ACTIVITY IN CASE OF SPECTRA SHA RES AND SCRIPS (SUPRA), ON THE OTHER HAND, SQUARELY APPLIES TO THE FA CTS OF THE ITA NOS 481 AND 482 AND OTHERS M.V. SUBBA RAO & SMT. JAYASHREE, HYD. 27 ASSESSEES CASE AS THE ASSESSEE HAS INVESTED HIS OWN FUNDS AND NO T INVESTED BORROWED FUNDS IN SHARES. CLOSING STOCK HAS BEEN CONSISTENTLY VALUED AT COST. DIVIDEND IS SUBSTANTIAL COMPARED TO TH E INVESTMENT. MAJOR PART OF THE GAIN IS FROM LONG TERM CAPITAL GAIN . THE ASSESSEE DID NOT TRADE IN FUTURES, DERIVATIVES AND OPTIONS. ALL THE TRANSACTIONS ARE DELIVERY BASED. THE ASSESSEE HAS NOT INCURRED ANY ADMINIST RATIVE COST. THE REVENUE HAS ACCEPTED THE ASSESSEE AS AN INVESTOR BY ACCEPT ING THE INCOME DECLARED FROM SALE OF SHARES AS CAPITAL GAIN FROM T HE ASSESSMENT YEAR 1999-2000 TO 2005-06. 28. AS CAN BE SEEN FROM THE ABOVE SUBMISSION MADE BY THE ASSESSEE IN EARLIER YEARS I.E., TILL ASSESSMENT YEAR 2005-06, TH E ASSESSEES INCOME HAS BEEN ACCEPTED AS CAPITAL GAIN, FURTHER THE AS SESSEE BEING AN INVESTOR HAS NOT BORROWED ANY FUND TO MAKE INVESTME NT IN SHARES BUT HAS USED HIS OWN FUNDS. THERE IS ALSO NO INTRA-DAY TRANSACTION. IF THESE FACTS ARE CORRECT AND THE ASSESSEE HAS USED HIS OWN FUN DS AND CARRIED ON THE ACTIVITIES AS INVESTOR AND IS CONSISTENTLY SHOWING THE INCOME UNDER THE HEAD CAPITAL GAIN AND THE DEPARTMENT WAS ALSO ACCEPTING THIS POSITION UPTO ASSESSMENT YEAR 2005-06 THEN THE RATIO LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT IN CASE OF M/S SPECTRA SHARES AND SCRIPS V/S. CIT (SUPRA) WOULD APPLY. 29. THE CIT (A), THOUGH, IN HIS ORDER HAS MENTIONED SPECIFIC INSTANCES OF SHARES BEING HELD FOR A VERY SHORT PERIOD WH ILE COMING TO HIS CONCLUSION THAT THE ASSESSEE IS NOT AN INVESTOR BUT IS ENG AGED IN A TRADING ACTIVITY. HOWEVER, HE HAS NOT PROPERLY EXAMIN ED THE FACTS WHETHER THE ASSESSEE HAS USED HIS OWN FUNDS AND NOT BORROW ED FUNDS IN THE INVESTMENT IN SHARES, THE DEPARTMENT HAS BEEN A CCEPTING THE INCOME FROM SHARES AS CAPITAL GAIN UPTO ASSESSMENT YEAR 2005 -06, ITA NOS 481 AND 482 AND OTHERS M.V. SUBBA RAO & SMT. JAYASHREE, HYD. 28 THERE IS NO INTRA-DAY TRANSACTIONS. THESE FACTS DEFINITEL Y WILL HAVE A BEARING IN COMING TO A CONCLUSION AS TO WHETHER THE INCO ME FROM SHARES SHOULD BE ASSESSED AS INCOME FROM BUSINESS OR CAPITAL GAI N. SINCE NEITHER THE ASSESSING OFFICER NOR THE CIT(A) HAVE E XAMINED ALL THESE ASPECTS, IN OUR VIEW, THE ENTIRE ISSUE OF ACTIVITY IN SHARES IS IN THE NATURE OF INVESTMENT OR TRADING REQUIRES TO BE CON SIDERED AGAIN AT THE LEVEL OF THE ASSESSING OFFICER IN THE LIGHT OF THE RATIO LAID DOWN BY THE JURISDICTIONAL HIGH COURT IN CASE OF PVS RAJU V/S. CIT (SUPRA) AND M/S SPECTRA SHARES AND SCRIPS (SUPRA). OF COURSE, IT IS A FACT THAT NEITHER THE ASSESSING OFFICER NOR THE CIT(A) HAD THE BEN EFIT OF THE AFORESAID JUDGMENTS OF THE HONBLE JURISDICTIONAL HIGH CO URT AT THE TIME OF DECIDING THE ISSUE. THEREFORE, CONSIDERING THE F ACTS AND CIRCUMSTANCES OF THE CASE, IN THE LIGHT OF THE DECISIONS OF HONBLE JURISDICTIONAL HIGH COURT IN CASE OF PVS RAJU (SUPRA) AN D SPECTRA SHARES AND SCRIPS (SUPRA), WE ARE INCLINED TO REMIT THE MATTER TO THE FILE OF THE ASSESSING OFFICER WHO SHALL CONSIDER THE ENT IRE ISSUE OF INCOME FROM SALE OF SHARES WHETHER TO BE TREATED AS CA PITAL GAIN OR BUSINESS INCOME KEEPING IN VIEW THE RATIO LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT IN CASE OF PVS RAJU V/S. ADDIT IONAL.CIT (SUPRA) AND SPECTRA SHARES AND SCRIPS V/S. CIT (SUPRA ). THE ASSESSING OFFICER SHALL CONSIDER ALL THE MATERIAL AND EVIDENCES AVA ILABLE ON RECORD AND ANY FURTHER MATERIAL AND EVIDENCES WHICH MAY BE P RODUCED BY THE ASSESSEE IN COURSE OF THE PROCEEDINGS. NEEDLESS TO SAY THE ASSESSING OFFICER SHALL AFFORD A REASONABLE OPPORTUNITY OF BEIN G HEARD TO THE ASSESSEE IN THE MATTER BEFORE FINALIZING THE PROCEEDINGS. THEREFORE, THIS APPEAL IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ITA NOS. 482/HYD/10 & 1310/HYD/2011- SMT. M. JAYASR EE, ASST. YEARS 2006-07 & 2008-9. ITA NOS 481 AND 482 AND OTHERS M.V. SUBBA RAO & SMT. JAYASHREE, HYD. 29 30. IN VIEW OF OUR DECISION IN SRI M.V. SUBBA RAO IN ITA NOS. 481/HYD/10 AND 1311/HYD/2011 PERTAINING TO THE SAME ASSE SSMENT YEARS, AS THE GROUNDS RAISED IN THESE APPEALS ARE ALSO QUI TE SIMILAR AND IDENTICAL, ON THE AFORESAID REASONS AS MENTIONED ABOVE I N THIS ORDER IN THE CASE OF SRI M.V. SUBBARAO (SUPRA), THE ISSUES PERT AINING TO THE ASSESSMENT YEARS 2006-07 AND 2008-09 IN CASE OF SMT. M. JA YASREE ARE ALSO REMITTED BACK TO THE FILE OF THE ASSESSING OFFICE R WITH THE SAME DIRECTION AS MENTIONED ABOVE IN THIS ORDER. 31. IN THE RESULT, ALL FOUR APPEALS FILED BY BOTH THE ASSESSEES ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSE. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 31 ST MAY, 2013 . SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER SD/- (SAKTIJIT DEY) JUDICIAL MEMBER HYDERABAD, DATED THE 31 ST MAY, 2013 JMR* COPY FORWARDED TO: 1. 2. 3. 4. 5 C/O SRI S. RAMA RAO, ADVOCATE, FLAT NO.102, SHRIYA S RESIDENCY, HIMAYATNAGAR, HYDERABAD. ACIT, CIR-16(2),HYDERABAD. CIT (A) V, HYDERABAD. CIT CONCERNED, HYDERABAD. THE DR B BENCH ITAT, HYDERABAD. ITA NOS 481 AND 482 AND OTHERS M.V. SUBBA RAO & SMT. JAYASHREE, HYD. 30