ACIT, New Delhi V. M/s. Ravi Kumar Aggarwal, HUF, New Delhi

ITA 5449/DEL/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81667 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 19-08-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 05-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANOJ KUMAR CHOPRA
• Keywords: Capital asset; Business income; Earning of tax free income; Question of law; Cost of acquisition
• Section: 143(3)

Judgement Text

ITA NO. 5449/DEL/2011 ASSTT.YEAR: 2008-09 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `F NEW DELHI BEFORE SHRI B.C. MEENA ACCOUNTANT MEMBER AND SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER I.T.A.NO.5449/DEL/2011 ASSESSMENT YEAR : 2008-09 ASSTT.COMMISSIONER OF INCOME TAX, VS M/S RAVI KUMAR AGGARWAL, CIRCLE 34(1), NEW DELHI. HUF, FLAT NO. 39, SUDERSHAN APARTMENT, PLOT NO. 82, PATPARGANJ, I.P. EXTN., DELHI-110092 (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI MANOJ KUMAR CHOPRA, SR.DR RESPONDENT BY : SHRI SALIL KAPOOR, SH.VIKAS JAIN, M S VANDANA BHANDARI O R D E R PER CHANDRA MOHAN GARG, JUDICIAL MEMBER THIS APPEAL HAS BEEN PREFERRED BY THE REVENUE AGAI NST THE ORDER OF THE CIT(A)-XXVII, NEW DELHI DATED 28.09.2011 IN APPEAL NO. 106/10-11 FOR AY 2008-09. 2. THE REVENUE HAS RAISED SOLE GROUND IN THIS APPEA L WHICH READS AS UNDER:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD. CIT(A) HAS ERRED IN DIRECTING THE AO TO TREAT THE P ROFIT OF RS.66,17,722/- AS SHORT TERM CAPITAL GAIN ON SALE O F SHARE. ITA NO. 5449/DEL/2011 ASSTT.YEAR: 2008-09 2 3. BRIEFLY STATED THE FACTS GIVING RISE TO THIS APP EAL ARE THAT THE ASSESSEE FILED RETURN DECLARING AN INCOME OF RS. 66,65,080/- SHOWING INCOME FROM SHORT TERM CAPITAL GAINS OF RS.66,17,720/- AND INCO ME FROM INTEREST OF RS.47,357/- AND DIVIDEND INCOME OF RS.42,500/- WHIC H WAS CLAIMED AS EXEMPT INCOME. THE AO IN THE ASSESSMENT ORDER PASS ED U/S 143(3) OF THE ACT HELD THAT INCOME OF THE ASSESSEE APPELLANT SHOW N AS SHORT TERM CAPITAL GAINS IS BUSINESS INCOME AND THE AO TAXED THE SAME AS BUSINESS INCOME. BEING AGGRIEVED BY THE ABOVE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) WHICH WAS ALLOWED BY THE I MPUGNED ORDER. NOW, THE AGGRIEVED REVENUE IS BEFORE THIS TRIBUNAL IN TH IS SECOND APPEAL WITH THE SOLE GROUND AS REPRODUCED HEREINABOVE. 4. WE HAVE HEARD ARGUMENTS OF BOTH THE SIDES AND CA REFULLY PERUSED THE RELEVANT MATERIAL PLACED ON RECORD, INTER ALIA, PAP ER BOOK FILED BY THE ASSESSEE SPREAD OVER 67 PAGES AND ANOTHER PAPER BOO K OF CASE COMPILATION SPREAD OVER 45 PAGES. 5. LD. DR SUBMITTED THAT THE AO RIGHTLY NOTICED THA T THE ASSESSEE HAD CARRIED ON IN A SYSTEMATIC AND ORGANIZED MANNER, NU MEROUS TRANSACTIONS OF SALE AND PURCHASE OF SHARES AND FROM THE CHART CONT AINING THE CAPITAL GAINS, DETAILS AND THE CONTRACT NOTES SUBMITTED BY THE ASS ESSEE DURING THE ASSESSMENT PROCEEDINGS CLEARLY INDICATE THAT NOT ON LY THE ASSESSEE CARRIED ON ITA NO. 5449/DEL/2011 ASSTT.YEAR: 2008-09 3 LARGE NUMBER OF TRANSACTIONS BUT ALSO WITH VOLUME O F OVER RS. ONE CRORE. THE DR FURTHER POINTED OUT THAT THE AO RIGHTLY NOTI CED THAT ALL THE TRANSACTIONS WERE COMPLETED IN A SHORT PERIOD OF BE LOW ONE MONTH WITH THE MINIMUM BEING 1 TO 2 DAYS OR SO, THEREFORE, THE AO RIGHTLY CONCLUDED THAT THE INTENTION OF THE ASSESSEE WAS NOT TO MAKE INVES TMENT BUT TO EARN PROFIT FROM TRANSACTIONS OF PURCHASE AND SALE OF SHARES IN A VERY SHORT SPAN OF A FEW DAYS OR A FEW MONTHS. 6. THE DR VEHEMENTLY CONTENDED THAT THE CIT(A) WAS NOT RIGHT AND JUSTIFIED IN HOLDING THAT THE ASSESSEE HAD ENTERED INTO 16 TRANSACTIONS OF SALE OF SHARES AND OUT OF THE TOTAL INCOME OF RS. 66.12 LAC, INCOME EARNED BY THE ASSESSEE IN RESPECT OF SHAREHOLDING HAVING HOLDING PERIOD OF LESS THAN ONE MONTH WAS ONLY OF RS. 10.32 LAKH. THE DR VEHEMENT LY CONTENDED THAT THE CIT(A) WAS WRONG IN CONCLUDING THAT THE ASSESSEE MA DE INVESTMENT AND THE SAME WAS SHOWN AS INVESTMENT IN THE EARLIER AND SUB SEQUENT YEAR BOOKS OF ACCOUNTS. THE DR ALSO POINTED OUT THAT THE INTENTI ON OF THE ASSESSEE WAS TO HOLD SHARES TO EARN PROFITS AND NOT FOR DIVIDEND AN D APPRECIATION AND, THEREFORE, IMPUGNED ORDER SUFFERS FROM AMBIGUITY AN D PERVERSITY. THE DR FINALLY PRAYED THAT THE IMPUGNED ORDER MAY BE SET A SIDE BY RESTORING THAT OF THE AO. ITA NO. 5449/DEL/2011 ASSTT.YEAR: 2008-09 4 7. REPLYING TO THE ABOVE CONTENTIONS OF THE REVENUE , LD. COUNSEL FOR THE ASSESSEE HAS DRAWN OUR ATTENTION TOWARDS VARIOUS DE CISIONS OF HONBLE JURISDICTIONAL HIGH COURT OF DELHI AND COORDINATE B ENCHES OF ITAT INCLUDING RECENT JUDGMENT OF JURISDICTIONAL HIGH COURT OF DELHI IN THE CASE OF MOHAN GUPTA (HUF) VS CIT (2014) 44 TAXMAN.C OM 171 (DELHI) AND DECISION IN THE CASE OF CIT VS ROHIT ANAND (2010) 327 ITR 445 (DEL) . LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE CIT (A) HAS CATEGORICALLY CONSIDERED RELEVANT ELEMENTS FOR TESTING THE INTENT ION OF THE ASSESSEE THAT WHETHER HIS INTENTION WAS TO MAKE INVESTMENT OR TRA DING OF SHARES. LD. COUNSEL HAS DRAWN OUR ATTENTION TOWARDS PAGE 60 OF THE PAPER BOOK AND SUBMITTED THAT THE ASSESSEE HAD NOT BORROWED ANY FU NDS OR INTEREST FROM OUTSIDE BUT THE ASSESSEE USED ITS OWN AND FAMILY ME MBERS FUNDS TO MAKE INVESTMENTS. LD. COUNSEL HAS FURTHER DRAWN OUR ATT ENTION TOWARDS PAGE 33 AND 67 OF THE PAPER BOOK AND SUBMITTED THAT THE ASS ESSEE VALUED CLOSING INVESTMENT ON COST BASIS AS THE SHARES OF SIYA RAM MILLS LTD. WERE PURCHASED @217/- PER SHARE AND THE MARKET VALUE OF THIS SHARE AT THE END OF THE YEAR I.E. 31.03.2008 WAS RS.96.50 PER SHARE BUT THE ASSESSEE HAD NOT BOOKED ANY LOSS THEREFROM AND SHOWN THE SAME SHARE AT THE COST OF ACQUISITION WHICH CLEARLY ESTABLISHED THAT THE ASSE SSEE HAD THE INTENTION TO ITA NO. 5449/DEL/2011 ASSTT.YEAR: 2008-09 5 MAKE INVESTMENT ONLY, THEREFORE, THE AO WAS QUITE W RONG IN HOLDING THAT THE INTENTION OF THE ASSESSEE WAS TO DO SHARE TRADING. 8. SUPPORTING THE IMPUGNED ORDER, THE LD. COUNS EL OF THE ASSESSEE HAS DRAWN OUR ATTENTION TOWARDS PARA 6 TO 15 OF THE IMP UGNED ORDER WHEREIN THE CIT(A) HAS HELD THAT THE INTENTION OF THE ASSESSEE WAS TO HOLD SHARES FOR APPRECIATION AND NOT FOR EARNING PROFITS BY SHORT T ERM SALE AND PURCHASE OF SHARES. LD. COUNSEL OF THE ASSESSEE ALSO SUBMITTED THAT THE CIT(A) CATEGORICALLY ANALYZED THE INTENTION OF THE ASSESSE E, TREATMENT OF INVESTMENT IN BOOKS OF ACCOUNTS I.E. WHETHER HELD AS STOCK-IN- TRADE OR AS INVESTMENT, FREQUENCY, VOLUME AND REGULARITY OF TRANSACTION AND THE TREATMENT GIVEN BY THE DEPARTMENT IN THE EARLIER AND SUBSEQUENT YEAR. LD. COUNSEL OF THE ASSESSEE SUPPORTED THE IMPUGNED ORDER AND SUBMITTED THAT THE APPEAL OF THE REVENUE IS DEVOID OF MERITS. 9. ON CAREFUL CONSIDERATION OF ABOVE SUBMISSIONS AN D CAREFUL PERUSAL OF THE RELEVANT MATERIAL PLACED ON RECORD, AT THE OUTS ET WE NOTE THAT THE HONBLE JURISDICTIONAL HIGH COURT OF DELHI IN THE CASE OF M OHAN GUPTA (HUF) VS CIT (SUPRA) HAS HELD THAT WHERE THE INCOME FROM SAL E AND PURCHASE OF SHARES WAS TREATED AS CAPITAL GAIN IN THE EARLIER YEAS IN ABSENCE OF ANY NEW MATERIAL, IT CANNOT BE HELD THAT THE SAME WAS BUSINESS INCOME IN THE SUBSEQUENT YEARS. IN THE CASE OF CIT VS ROHIT ANAND SPEAKING FOR THE JURISDICTIONAL HIGH COURT ITA NO. 5449/DEL/2011 ASSTT.YEAR: 2008-09 6 OF DELHI, THEIR LORDSHIPS HELD THAT WHERE THE ASSES SEE INVESTED IN SHARES AND TREATED THE SHARES AS INVESTMENT IN ITS BOOKS OF AC COUNTS, THE INTENTION WAS MANIFESTED BY TREATMENT GIVEN TO SUCH INVESTMENT (I ) INVESTMENT WAS OUT OF OWN FUNDS AND NOT FROM BORROWED FUNDS; (II) THAT TH E INVESTMENT WAS NOT ROTATED FREQUENTLY (III) TOTAL NUMBER OF TRANSACTIO NS WERE VERY FEW AND (IV) ALL SHARES PURCHASED WERE NOT SOLD AND HELD FOR QUI TE A NUMBER OF DAYS. IN SUCH CIRCUMSTANCES, THE TRIBUNAL WAS JUSTIFIED IN H OLDING THAT THE RESPONDENT ASSESSEE WAS NOT A TRADER IN STOCK BUT ONLY AN INVE STOR AND FURTHER HIS INCOME ON SALE OF SHARES WAS CAPITAL GAIN AND NOT BUSINESS INCOME. 10. TURNING TO THE FACTUAL MATRIX OF THE PRESENT CA SE, FROM THE IMPUGNED ORDER, WE OBSERVE THAT THE CIT(A) GRANTED RELIEF FO R THE ASSESSEE AND HELD THAT THE INCOME SHOWN BY THE ASSESSEE AS SHORT TERM CAPITAL GAIN WAS NOT BUSINESS INCOME AND THE CIT(A) SET ASIDE THE OBSERV ATIONS AND FINDINGS OF THE AO ALLOWING APPEAL OF THE ASSESSEE WITH THE FOL LOWING CONCLUSION:- DETERMINATION 6. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE APPELLANT, THE FACTS OF THE CASE AND THE POINTS MAD E BY THE AO IN THE ASSESSMENT ORDER. THE ONLY ISSUE INVO LVED IN THIS CASE, RAISED IN GROUND NO.2, IS WHETHER THE INCOME SHOWN BY THE APPELLANT FROM SALE OF SHARES I S SHORT TERM CAPITAL GAINS AS SHOWN BY THE APPELLANT OR BUSINESS INCOME AS HELD BY THE A.O. THE A.O. HELD T HE INCOME FROM SALE OF SHARES AS BUSINESS INCOME ON TH E GROUND THAT THE APPELLANT CARRIED ON IN A SYSTEMATI C AND ORGANIZED MANNER NUMEROUS TRANSACTIONS OF SALE AND ITA NO. 5449/DEL/2011 ASSTT.YEAR: 2008-09 7 PURCHASE OF SHARES, NOT ONLY CARRIED OUT LARGE NUMB ER OF TRANSACTIONS BUT ALSO WITH VOLUMES OF OVER RS. ONE CRORE AND ALL THE TRANSACTIONS HAD BEEN COMPLETED IN A SH ORT PERIOD OF LESS THAN ONE MONTH WITH THE MINIMUM BEIN G 1- 2 DAYS OR SO. ON THE BASIS OF THESE OBSERVATIONS, T HE A.O. CONCLUDED THAT THE MOTIVE OF THE APPELLANT WHILE BU YING AND SELLING THESE SHARES WAS TO EARN PROFIT AND HE ACCORDINGLY HELD THE INCOME FROM THE SALE OF SHARES AS BUSINESS INCOME. 7. THE APPELLANT ON THE OTHER HAND HAS STATED THAT THERE WERE NO NUMEROUS TRANSACTIONS OF PURCHASE AND SALE OF SHARES. THERE WERE ABOUT 20 TRANSACTIONS IN ALL IN RESPECT OF 8 SHARES. ALL TRANSACTIONS WERE IN RESPE CT DELIVERY BASED SHARES AND THE SHARES WERE DULY PASS ED THROUGH DEMAT ACCOUNT OF THE APPELLANT. HE INVESTED IN SHARES WITH AN INTENTION TO EARN DIVIDENDS (RS. 42, 5001- DURING THE YEAR) AND NOT WITH A VIEW TO INDULGE IN TRADING TO EARN PROFITS. THE INTENTION OF THE APPELLANT CAN ALSO BE INFERRED FROM THE FACT THAT UNSOLD SHARES ARE SHOWN AS INVESTMENTS AT THE END OF THE YEAR. THE INVESTMENTS ARE VALUED AT COST AND NOT AT 'COST OR MARKET VALUE WHI CHEVER IS LESS'. INVESTMENT IN MADE IN THE SHARES OUT OF O WN FUNDS AND NOT OUT OF BORROWED FUNDS. IN EARLIER YEARS ALSO THE APPELLANT HAS SHOWN L TCGS/ STCGS ON SALE OF SHARES WHICH HAS BEEN ACCEPTED BY THE DEPARTMENT. 8. AS HAS BEEN HELD IN NUMEROUS DECISIONS AT VARIO US LEVELS THE RELEVANT FACTORS FOR DECIDING THIS ISSUE ARE INTENTION OF THE ASSESSEE, TREATMENT GIVEN TO SHARE S IN THE BOOKS OF ACCOUNT, FREQUENCY, VOLUME AND REGULARITY OF TRANSACTIONS, DELIVERY BASED OR SQUARING OFF OF TRANSACTIONS, PERIOD OF HOLDING, OWN FUNDS OR BORRO WED FUNDS ETC. NO SINGLE FACTOR IS DECISIVE. RATHER IT IS THE OVERALL FACTUAL MATRIX OF THE CASE THAT DETERMINES THE ANSWER TO THIS QUESTION. 9. WITH REGARD TO INTENTION, IN THE CASE OF VENKATASWAMI NAIDU & CO.(SUPRA) IT HAS BEEN HELD TH AT WHERE THE PURCHASE HAS BEEN MADE SOLELY AND EXCLUSI VELY ITA NO. 5449/DEL/2011 ASSTT.YEAR: 2008-09 8 WITH THE INTENTION TO RESELL AT A PROFIT AND THE PU RCHASER HAS NO INTENTION OF HOLDING THE PROPERTY FOR HIMSEL F OR OTHERWISE ENJOYING OR USING IT. .... THE PRESENCE O F SUCH AN INTENTION IS NO DOUBT, A RELEVANT FACTOR AND UNL ESS IT IS AN OFFSET BY THE PRESENCE OF OTHER FACTORS, IT WOUL D RAISE A STRONG PRESUMPTION THAT THE TRANSACTION IS AN ADVEN TURE IN THE NATURE OF TRADE. EVEN SO, THE PRESUMPTION IS NOT CONCLUSIVE; AND IT IS CONCEIVABLE THAT, ON CONSIDER ING ALL THE FACTS AND CIRCUMSTANCES IN THE CASE THE COURT M AY DESPITE THE SAID INITIAL INTENTION, BE INCLINED TO HOLD THAT THE TRANSACTION WAS NOT AN ADVENTURE IN THE NATURE OF TRADE. IN THE CASE OF SUTLEJ COTTON MILLS (SUPRA) I T HAS BEEN HELD THAT WHERE A PURCHASE IS MADE WITH THE INTENTION OF RESALE, IT DEPENDS UPON THE CONDUCT OF THE ASSESSEE AND THE CIRCUMSTANCES OF THE CASE WHETHER THE VENTURE IS ON CAPITAL ACCOUNT OR IN THE NATURE OF T RADE. A TRANSACTION IS NOT NECESSARILY IN THE NATURE OF TRA DE BECAUSE THE PURCHASE WAS MADE WITH THE INTENTION OF RESALE. A CAPITAL INVESTMENT AND RESALE DO NOT LOSE THEIR CAPITAL NATURE MERELY BECAUSE THE RESALE WAS FORESE EN AND CONTEMPLATED WHEN THE INVESTMENT WAS MADE AND T HE POSSIBILITY OF ENHANCED VALUES MOTIVATED THE INVEST MENT. IN THE CASE OF RAJA BAHADUR KAMAKHEYA NARAYAN SINGH IT HAS BEEN HELD THAT THE FACT THAT THE ORIGINAL PU RCHASE WAS MADE WITH THE INTENTION OF RESELLING IF AN ENHA NCED PRICE COULD BE OBTAINED IS BY ITSELF NOT ENOUGH BUT IN CONJUNCTION WITH THE CONDUCT OF THE ASSESSEE AND OT HER CIRCUMSTANCES IT MAY POINT TO THE TRADING CHARACTER OF THE TRANSACTION. FOR INSTANCE, AN ASSESSEE MAY INVEST H IS CAPITAL IN SHARES WITH THE INTENTION TO RESELL THEM IN FUTURE AND THEIR SALE MAY BRING IN A HIGHER PRICE. SUCH AN INVESTMENT, THOUGH MOTIVATED BY A POSSIBILITY OF ENHANCED VALUE, DOES NOT RENDER THE INVESTMENT A TRANSACTION IN THE NATURE OF TRADE. 10. TREATMENT IN THE BOOKS OF ACCOUNT I.E. WHETHER HELD AS STOCK-IN-TRADE OR AS INVESTMENTS - IN THIS REGAR D IT HAS BEEN HELD IN THE CASE OF JANKI RAM BAHADUR RAM (SUP RA) THAT TREATMENT IN THE BOOKS OF AN ASSESSEE WILL NOT BE CONCLUSIVE AND IF THE VOLUME, FREQUENCY AND REGULAR ITY AT ITA NO. 5449/DEL/2011 ASSTT.YEAR: 2008-09 9 WHICH TRANSACTIONS ARE CARRIED OUT INDICATE SYSTEMA TIC AND ORGANIZED ACTIVITY WITH PROFIT MOTIVE AND THEN IT BECOMES BUSINESS PROFIT AND NOT CAPITAL GAINS. IN T HE CASE OF RAJA BAHADUR KAMAKHEYA NARAYAN SINGH IT HAS BEEN HELD THAT THE TEST OFTEN APPLIED IS, HAS THE ASSESS EE MADE HIS SHARES AND SECURITIES THE STOCK-IN-TRADE OF A B USINESS. IN THE CASE OF KARAMCHAND THAPAR AND BROS. (SUPRA) IT HAS BEEN HELD THAT MANNER OF DISCLOSURE IN THE BALA NCE SHEET THOUGH NOT CONCLUSIVE, WAS A RELEVANT CIRCUMSTANCE. IN THE CASE OF CIT VS. ESSJAY ENTERPR ISES (SUPRA) HONBLE DELHI HIGH COURT HELD THAT WHERE AN ASSESSEE HAS SHOWN THE SHARES HELD BY IT AS AN INVE STMENT AND THERE WAS NOTHING TO SHOW THAT THESE SHARES WER E CONVERTED INTO STOCK IN TRADE, THEN THE GAINS ARISI NG IS CHARGEABLE UNDER THE HEAD CAPITAL GAINS ONLY. 11. CBDT IN ITS CIRCULAR NO. 4/2007 HAS CLARIFIED THAT WHETHER A PARTICULAR HOLDING OF SHARE IS BY WAY OF INVESTMENT OR FORM PART OF THE STOCK IN TRADE IS A MATTER WITHIN THE KNOWLEDGE OF THE ASSESSEE, WHO HOLDS THE SHARES AND HE SHOULD IN NORMAL CIRCUMSTANCES, BE IN A POSITION TO PRODUCE EVIDENCE FROM HIS RECORDS AS TO WHETHER HE IS MAINTAINING ANY STOCK IN TRADE OR HOL DING THE SHARES BY WAY OF INVESTMENT. CBDT HAS EMPHASIZE D THAT IT IS POSSIBLE FOR A TAX PAYER TO HAVE TWO POR TFOLIOS I.E. AN INVESTMENT PORTFOLIO COMPRISING OF SECURITI ES WHICH ARE TO BE TREATED AS CAPITAL ASSETS AND A TRA DING PORTFOLIO COMPRISING OF STOCK IN TRADE WHICH ARE TO BE TREATED AS TRADING ASSETS. WHERE AN ASSESSEE HAS TW O PORTFOLIOS, THE ASSESSEE MAY HAVE INCOME UNDER BOTH HEADS I.E. CAPITAL GAINS AS WELL AS BUSINESS INCOME . THE HON'BLE CBDT ADVISED THE ASSESSING OFFICERS THAT NO SINGLE PRINCIPLE WOULD BE DECISIVE AND THE TOTAL EF FECT OF THE ALL THE PRINCIPLES SHOULD BE CONSIDERED TO DETE RMINE WHETHER IN A GIVEN CASE, THE SHARES ARE HELD BY THE ASSESSEE AS INVESTMENT OR STOCK IN TRADE. 12. FREQUENCY, VOLUME AND REGULARITY OF TRANSACTIO NS- IN THE CASE OF JANAK S. RANGWALA (SUPRA) HON'BLE TRIBUNAL HELD THAT MERE VOLUME/ MAGNITUDE OF ITA NO. 5449/DEL/2011 ASSTT.YEAR: 2008-09 10 TRANSACTIONS DOES NOT ALTER THE NATURE OF TRANSACTI ONS WHICH WERE BEING ASSESSED AS BEING FROM CAPITAL GAI N IN PAST SEVERAL YEARS. IT WAS FURTHER HELD THAT WHERE THE ASSESSEE WAS HOLDING A LARGE MAGNITUDE OF SHARES AS INVESTMENT AND TRANSACTIONS OF SALE AND PURCHASE OF SHARE IN PRECEDING YEARS HAS BEEN HELD TO BE INCOME FROM CAPITAL GAINS, THERE WAS NO BASIS FOR TREATING THE INCOME OF THE ASSESSEE DURING THE INSTANT YEAR AS A TRADER IN SHARES WHEN ITS INTENTION IS TO HOLD THE SHARES AS INVESTMENTS AND NOT AS STOCK IN TRADE. IN THE CASE OF GOPAL PUROHIT IT WAS HELD THAT HON'BLE TRIBUNAL APPRECIATED THE CONTENTION OF THE 'A' THAT INVESTME NT COULD BE AN ORGANIZED ACTIVITY ALSO.---- HENCE: IN OUR VIEW, EMPLOYMENT OF SUCH INFRASTRUCTURE CANNOT TURN AN INVESTMENT ACTIVITY INTO A BUSINESS ACTIVITY. IN TH E CASE OF ROHIT ANAND (SUPRA) IT WAS HELD THAT THE ASSESSING OFFICER MERELY BECAUSE OF THE TOTAL VOLUME OF TRANSACTIONS IS SUBSTANTIAL, IS GUIDED TO HOLD THE INCOME AS BUSINESS INCOME. HOWEVER, HE FAILED TO RECOGNIZE THAT THE VOLUME OF TRANSACTION INCLUDES THE APPRECIATION IN SHARES ALSO AND SUCH APPRECIATION HAS BEEN OFFERED FOR TAX. IF VOLUME OF TRANSACTION IS THE CRITERIA, WHAT IS TO BE EXAMINED IS HOW FREQUENTLY THE TRANSACTION IS DONE, WHETHER THE TRANSACTION IS SETTLED IN THE COURSE OF THE DAY OF TRADING ITSELF OR IN THE SETTLEMENT PERIOD ITSEL F SO AS TO AVOID PAYMENT OF FULL PURCHASE PRICE. HERE THE ASSE SSEE HAS BEEN HOLDING THE SHARES BY TAKING DELIVERY AND MAKING FULL PAYMENT FOR SUCH INVESTMENT. IN SUCH CIRCUMSTANCES, THE TRANSACTIONS ARE TO BE TREATED A S GIVING RISE TO THE CAPITAL GAIN AND CANNOT BE BRAND ED AS TRADING IN SHARES. 13. MIXED QUESTION OF LAW AND FACT - IN THE CASE O F HO1CK LARSEN (SUPRA) IT HAS BEEN HELD THAT THE TRANSACTIONS OF SALE & PURCHASE OF SHARES WERE TRAD ING TRANSACTIONS OR WERE IN THE NATURE OF INVESTMENT WA S A MIXED QUESTION OF LAW AND FACT. IN THE CASE OF RAJA BAHADUR KAMAKHEYA NARAYAN SINGH IT HAS BEEN HELD TH AT SINCE THE EXPRESSION 'ADVENTURE IN THE NATURE OF TR ADE' IMPLIES THE EXISTENCE OF CERTAIN ELEMENTS IN THE ITA NO. 5449/DEL/2011 ASSTT.YEAR: 2008-09 11 TRANSACTION WHICH IN LAW WOULD INVEST THEM WITH THE CHARACTER OF TRADE OR BUSINESS AND THE QUESTION ON THAT ACCOUNT BECOMES A MIXED QUESTION OF LAW AND FACT. FURTHER, THE DISTINCTION BETWEEN THE TWO TYPES OF TRANSACTIONS IS NOT ALWAYS EASY TO MAKE. WHETHER TH E TRANSACTION IS OF ONE KIND OR THE OTHER DEPENDS ON THE QUESTION WHETHER THE EXCESS WAS AN ENHANCEMENT OF T HE VALUE BY REALIZING A SECURITY OR GAIN IN AN OPERATI ON OF PROFIT-MAKING. IF THE TRANSACTION IS IN THE ORDINAR Y LINE OF THE ASSESSEE'S BUSINESS, THERE WOULD HARDLY BE ANY DIFFICULTY IN CONCLUDING THAT IT WAS A TRADING TRAN SACTION, BUT WHERE IT IS NOT, THE FACTS MUST BE PROPERLY ASS ESSED TO DISCOVER WHETHER IT WAS IN THE NATURE OF TRADE. THE SURPLUS REALIZED ON THE SALE OF SHARES, FOR INSTANC E, WOULD BE CAPITAL IF THE ASSESSEE IS AN ORDINARY INVESTOR REALIZING HIS HOLDING; BUT IT WOULD BE REVENUE IF HE DEALS WI TH THEM AS AN ADVENTURE IN THE NATURE OF TRADE. 14. ON CAREFUL CONSIDERATION OF THE APPELLANT'S FAC TS IN THE LIGHT OF THE ABOVE MENTIONED FACTORS AND THE APPLICABLE DECISIONS IT IS SEEN FROM THE CHART OF S HARES PURCHASED AND SOLD, THE APPELLANT HAS ENTERED INTO 16 TRANSACTIONS OF SALE IN ALL. OUT OF THE TOTAL INCOM E OF RS. 66.12 LACS ON SALE OF SHARES, THE INCOME EARNED BY THE APPELLANT IN RESPECT OF SHARES HAVING HOLDING PERIO D OF LESS THAN ONE MONTH WAS ONLY RS.1 0.32 LACS. THE APPELLANT HAS DEALT IN ONLY 8 SHARES. ALL THE SHARE S HAVE BEEN PASSED THROUGH DEMAT ACCOUNT I.E. DELIVERY OF THE SHARES WAS DULY TAKEN. IN THE COPIES OF THE BALANCE SHEET AS ON 31.3.2008, THE APPELLANT HAS SHOWN INVESTMENT IN SHARES UNDER THE HEAD 'INVESTMENTS' AMOUNTING TO RS.80.56 LACS. INVESTMENT IN SHARES IS MADE OUT OF THE APPELLANT'S OWN FUNDS AND NOT FROM BORROWED FUNDS. IN THE PRECEDING YEARS ALSO THE APPELLANT HAS SHOWN LO NG TERM CAPITAL GAIN AMOUNTING TO RS. 37.31 LACS IN TH E ASSESSMENT YEAR 2006-07 AND RS. 58.73 LACS IN ASSESSMENT YEAR 2007-08. THIS SHOWS INTENTION OF TH E APPELLANT IS TO HOLD SHARES FOR APPRECIATION AND NO T FOR EARNING PROFITS. KEEPING IN VIEW OF THESE FACTS, TH E INCOME SHOWN BY THE APPELLANT FROM SALE OF SHARES ITA NO. 5449/DEL/2011 ASSTT.YEAR: 2008-09 12 SHOULD HAVE BEEN TREATED AS SHORT TERM CAPITAL GAIN S AND NOT AS BUSINESS INCOME. THE A.O. IS DIRECTED ACCORDINGLY. 11. AT THIS JUNCTURE, WE RESPECTFULLY TAKE NOTE OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF VENKATASWAMI NAIDU & C O. VS CIT 35 ITR 594 (SC) WHEREIN IT WAS HELD THAT WHERE THE PURCHASE HAS BE EN MADE SOLELY AND EXCLUSIVELY WITH THE INTENTION TO RESELL AT A PROFIT AND THE PURCHASER HAS NO INTENTION OF HOLDING PROFIT FOR HI MSELF OR OTHERWISE ENJOYING OR USING IT, THEN ON ACCOUNT OF SUCH INTEN TION IT WAS A STRONG PRESUMPTION THAT THE TRANSACTION IS AN ADVENTURE IN THE NATURE OF TRADE. THEIR LORDSHIPS FURTHER HELD THAT THE PRESUMPTION IS NOT CONCLUSIVE BUT THE SAME IS CONCEIVABLE THAT ON CONSIDERING ALL THE FACTS AND C IRCUMSTANCES OF THE CASE, THE COURT MAY DESPITE THE SAID INITIAL INTENTION, B E INCLINED TO HOLD THAT THE TRANSACTION WAS NOT AN ADVENTURE IN THE NATURE OF T RADE. 12. IN THE PRESENT CASE, THE ASSESSEE HAS SUBMITT ED A DETAILED CHART APPEARING ON PAGE 49 OF THE PAPER BOOK WHEREIN THE ASSESSEE HAS SUBMITTED DETAILS OF SHORT TERM CAPITAL GAIN DURING THE RELEV ANT FINANCIAL YEAR WHEREIN THE ASSESSEE HAS GIVEN DETAILS OF PARTICULARS OF TH E COMPANY, QUANTITY, DATE AND AMOUNT OF INVESTMENT, QUANTITY, DATE, AMOUNT OF INVESTMENT SOLD, CAPITAL GAIN EARNED AND PERIOD OF HOLDING THE INVESTMENT. FROM THE OPERATIVE PART OF THE IMPUGNED ORDER AS REPRODUCED HEREINABOVE, WE CLEARLY OBSERVE THAT ITA NO. 5449/DEL/2011 ASSTT.YEAR: 2008-09 13 THE CIT(A) HAS LOGICALLY ANALYZED THE INTENTION OF THE ASSESSEE, TREATMENT GIVEN IN THE BOOKS OF ACCOUNTS, FREQUENCY, VOLUME A ND REGULARITY OF THE TRANSACTION AND NUMBER OF COMPANIES, TRANSACTIONS A ND ITS FREQUENCY. ON SPECIFIC QUERY FROM THE BENCH, THE DR FAIRLY ACCEPT ED THAT THE RETURN OF THE ASSESSEE SHOWING CAPITAL GAIN, INCOME FROM SHARES H AS NOT BEEN DISPUTED IN THE EARLIER AND SUBSEQUENT ASSESSMENT YEARS. THE D R HAS ALSO NOT DISPUTED THE FACT THAT THE ASSESSEE HAS SHOWN CLOSING BALANC E OF STOCK AT COST OF ACQUISITION PRICE AND NOT ON THE BASIS OF COST OR M ARKET VALUE WHICHEVER IS LESSER, BASIS. 13. IN VIEW OF ABOVE, WE ARE NOT IN AGREEMENT WITH THE FINDINGS OF THE AO THAT THE INTENTION OF THE ASSESSEE WAS TO DO TRADIN G OF SHARES. ON THE OTHER HAND, WE HAVE NO HESITATION TO HOLD THAT THE CIT(A) WAS RIGHT IN HOLDING THAT THE INTENTION OF THE ASSESSEE WAS TO MAKE INVESTMEN T AND IT HAD NO INTENTION TO DO TRADING OF SHARES. WE ALSO OBSERVE THAT FROM THE TREATMENT GIVEN BY THE ASSESSEE IN ITS BOOKS OF ACCOUNTS AND LOGICAL A NALYSIS OF FREQUENCY, VOLUME AND REGULARITY OF TRANSACTION WHICH WERE CAR RIED OUT ONLY IN EIGHT COMPANIES CLEARLY SHOW THAT THE INTENTION OF THE AS SESSEE COMPANY WAS TO MAKE INVESTMENT AND NOT TO DO TRADING OF SHARES. F ROM THE DETAILS OF SHORT TERM CAPITAL GAIN AS DECLARED BY THE ASSESSEE IN IT S RETURN OF INCOME APPEARING ON PAGE 49 OF THE PAPER BOOK, WE CLEARLY OBSERVE THAT THE ASSESSEE ITA NO. 5449/DEL/2011 ASSTT.YEAR: 2008-09 14 MADE LIMITED TRANSACTION IN ONLY EIGHT COMPANIES AN D BARRING A FEW, THE HOLDING PERIOD WAS IN MONTHS AND IN THIS SITUATION, IT CANNOT BE SAID THAT THE INTENTION OF THE ASSESSEE WAS TO DO TRADING IN SHAR ES. ACCORDINGLY, INCOME SHOWN BY THE ASSESSEE CANNOT BE HELD AS BUSINESS IN COME INSTEAD OF SHORT TERM CAPITAL GAIN AND RESPECTFULLY FOLLOWING THE RE CENT DECISION OF HONBLE JURISDICTIONAL HIGH COURT OF DELHI IN THE CASE OF M OHAN GUPTA HUF VS CIT (SUPRA), WE REACH TO A CONCLUSION THAT THE CIT(A) G RANTED RELIEF FOR THE ASSESSEE ON JUSTIFIED AND ACCEPTABLE GROUNDS AND WE ARE UNABLE TO SEE ANY AMBIGUITY, PERVERSITY OR ANY OTHER VALID REASON TO INTERFERE WITH THE SAME. 14. TO SUM UP, ON THE BASIS OF FOREGOING DISCUSSION , WE REACH TO A CONCLUSION THAT THE AO WAS NOT RIGHT IN HOLDING THA T THE INCOME OF THE ASSESSEE FROM SALE AND PURCHASE OF SHARES WAS BUSIN ESS INCOME. ON THE OTHER HAND, WE ARE OF THE CONSIDERED VIEW THAT THE CIT(A) DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE ON LOGICAL ANALYSIS AND A S PER RATIO OF THE RELEVANT DECISIONS OF HONBLE HIGH COURT OF DELHI ON THE ISS UE AND CIT(A) WAS RIGHT IN HOLDING THAT THE INCOME SHOWN BY THE ASSESSEE FR OM SALE AND PURCHASE OF SHARES WAS INCOME FROM SHORT TERM CAPITAL GAIN. FI NALLY, WE HOLD THAT THE IMPUGNED ORDER SUFFERS NO INFIRMITY OR PERVERSITY A ND SOLE GROUND OF THE REVENUE BEING DEVOID OF MERITS IS DISMISSED. 15. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ITA NO. 5449/DEL/2011 ASSTT.YEAR: 2008-09 15 ORDER PRONOUNCED IN THE OPEN COURT ON 05.09.2014. SD/- SD/- (B.C. MEENA) (CHANDRAMOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DT. 5 TH SEPTEMBER 2014 GS COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. C.I.T.(A) 4. C.I.T. 5. DR BY ORDER ASSTT.REGISTRAR