Asst. Director of Income-tax (Intl.Txn)-II, Hyderabad V. M/s Midwest Granite (P) Limited, Hyderabad

ITA 725/Hyd/2013

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 6278 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-11-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB-A
• Assessment Year: 2006-2007
• Appeal Filed On: 12-05-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITRA
• Keywords: Reopening of assessment; Business income; Capital Gains
• Section: 147; 148; 263; 12; 143(3); 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERAB AD BENCH “B”, HYDERABAD BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI S AKTIJIT DEY, JUDICIAL MEMBER ITA Nos. 1059, 1060, 1061 & 1062/Hyd/2013 Assessment Years : 2005,06, 2007-08, 2009-10 & 2010-11 Asst. Commissioner of Income- tax, Circle – 3(2), Hyderabad. M/s Spectra Shares and Scrips Pvt. Ltd., Hyderabad PAN – AADCS 4013R (Appellant) (Respondent) ITA No. 725/Hyd/2013 Assessment Year : 2008-09 M/s Spectra Shares and Scrips Pvt. Ltd., Hyderabad PAN – AADCS 4013R Asst. Commissioner of Income- tax, Circle – 3(2), Hyderabad. (Appellant) (Respondent) Revenue by Shri Rajat Mitra Assessee by Shri Vijay Mehta Date of hearing 10-09-2014 Date of pronouncement 05-11-2014 O R D E R PER S AKTIJIT DEY, J.M.: These are bunch of five appeals, four by the department and one by the assessee, directed against separate orders of CIT(A)-IV, Hyderabad pertaining to AY 2005-06, 2007-08, 2008-09, 2009-10 and 2010-11. W hile appeal relating to AY 2008-09 has been filed by assessee, rest of the appeals are of the department. As facts are identical and issue in dispute is common, all these appeals are 2 I T A N o s . 1 0 5 9 t o 1 0 6 2 / H y d / 2 0 1 3 a n d I T A N o . 7 2 5 / H y d / 1 2 M / s S p e c t r a S h a r e s & S c r i p s P v t . L t d . clubbed and heard together, therefore, the same are disposed of in this consolidated order for the sake of convenience. ITA NO. 1059/HYD/2013 by the department for AY 2005-06. 2. The department has raised the following grounds: “1. The learned CIT(A) erred in law and on facts of the case. 2. The Hon’ble CIT(A) erred in holding that there was no tangible material to conclude that there was escapement of income though it was recorded clearly by the AO that there was escapement of income and failure on the part of the assessee in disclosing the material facts. 3. The Hon’ble CIT(A) erred in holding that the assessee’s dealing in shares is investment only, without identifying the fact that the assessee has been buying and selling shares and units of mutual funds throughout the year continuously and regularly through an organized, full time and day-to-day activity as also through day trading transactions. 4. The Hon’ble CIT(A) ought to have appreciated the fact that the nature of activity in purchasing and selling of shares pertaining to the AY 2005-06 is purely of business in nature. 5. The Hon’ble CIT(A) ought to have appreciated the fact that the order of Hon’ble High Court for the AY 2006-07 is based on the specific facts and transactions corresponding to that particular year and is not in tune with that for the AY 2005- 06. 6. The Hon’ble CIT(A) erred in applying the decision of the Hon’ble High Court order for the AQY 2005-06 without analyzing the nature of transactions. 7. Any other ground(s) that may be urged at the time of hearing.” 3. As can be seen, ground nos. 1 & 7 are general in nature, hence, not required to be adjudicated. 4. In ground No. 2, department has challenged the finding of the CIT(A) that the initiation of proceeding u/s 147 to be invalid. Ground 3 I T A N o s . 1 0 5 9 t o 1 0 6 2 / H y d / 2 0 1 3 a n d I T A N o . 7 2 5 / H y d / 1 2 M / s S p e c t r a S h a r e s & S c r i p s P v t . L t d . Nos. 3 to 6 are on the issue as to whether CIT(A) was justified in treating the transactions in shares by assessee as investment only and thereby treating the gain there from as capital gain in stead of business income as held by AO. 5. Briefly the facts are, assessee a company is engaged in the business of buying and selling of shares and scrips and units of mutual funds. For the AY under consideration, assessee filed its return of income on 30/10/05 declaring ‘nil’ income under normal provisions after setting off brought forward losses of Rs. 20,48,744. Assessee also declared book profit of Rs. 2,43,153 u/s 115 JB of the Act. Assessment in case of assessee was originally completed u/s 143(3) of the Act vide order dated 08/11/07 determining the income at Rs. 89,26,133. Appeal filed by assessee against the said assessment order was allowed by CIT(A). Department’s appeal against the order of CIT(A) was also dismissed by the Tribunal in ITA No. 1434/Hyd/2008 dated 23/01/2009. W hen the matter stood like this, AO reopened the assessment by issuing a notice u/s 148 of the Act on 15/02/2012. In response to the said notice, assessee requested the AO to treat the return originally filed to be a return in pursuance to section 148 of the Act and further requested the AO to communicate the reasons for reopening. After going through the reasons to believe recorded by AO, though, assessee objected to the initiation of proceeding u/s 147, however, assessee nevertheless furnished details regarding trading in shares and mutual funds. Assessee also furnished scrip-wise details of shares and units purchased and sold and filed separate trading accounts for shares and units. Assessee again submitted that gain from purchase and sale of shares and units should be assessed as income from capital gains and not as business income. AO overruling the objections of the assessee in respect of reopening of assessment u/s 147 and after going through the details furnished by assessee observed that during the year, assessee had 4 I T A N o s . 1 0 5 9 t o 1 0 6 2 / H y d / 2 0 1 3 a n d I T A N o . 7 2 5 / H y d / 1 2 M / s S p e c t r a S h a r e s & S c r i p s P v t . L t d . turnover of Rs. 9.53 crores in shares and Rs. 10.18 crores in units of mutual funds. After going through the details submitted by assessee, AO observed that assessee was involved in repeated buying and selling of the same shares in respect of 62 companies. He also observed that assessee purchased and sold units of mutual funds of 82 companies. From this, he concluded that assessee is regularly in the activity of buying and selling of shares and units. He observed that facts and figures make it clear that assessee is not investor making investment with an intention of deriving dividend and the sole motive of assessee in selling and buying of shares and units is to make profit. For coming to such conclusion, he also referred to Director’s report wherein it was stated as under: “In the directors report while reviewing the operations of the company director writes that “during the year, the market was upbeat and the sensex was at 6492.82 and Nifty at 2035.65 as on 31 March and as such your company’s investment in shares and mutual funds have yielded good result. This shows that the main & sole operation of the company is tracking movement of sensex and accordingly buying and selling of shares.” The AO noted that assessee has been regularly buying and selling shares and units of mutual funds on a very high volume through out the year. He further noted that as the assessee is doing buying and selling of shares and units on a day-today basis, it shows that assessee is monitoring the stock markets and buying at dips and selling at highs with an intention to make profit form these transactions. He observed that assessee has been consistently investing in shares and rotating the funds again and again in various scrips to make profit. He opined that this intention to make profit in the share market has to be held as carrying on business activity. AO observed that earning dividend income is incidental to the trading activity as stocks held by it through rolling at any given point of time is so huge that on the record dates, assessee has been able to receive dividend income also. AO observed that the activity of buying and selling of shares in a systematic and regular manner with high 5 I T A N o s . 1 0 5 9 t o 1 0 6 2 / H y d / 2 0 1 3 a n d I T A N o . 7 2 5 / H y d / 1 2 M / s S p e c t r a S h a r e s & S c r i p s P v t . L t d . frequency and volumes, repetitive purchases and sales of the same scrip shows that assessee is trading in shares to earn profit. Therefore, such an activity is to be considered as business and the profit or loss has to be assessed as business income or business loss. In this context, he relied on two decisions of the ITAT, Mumbai Bench. Further, AO observed that the very name of assessee is indicative of its business activity of dealing in shares and scrips. AO also relied upon the decision of ITAT in assessee’s own case for AY 2006-07 wherein the ITAT upheld the order passed u/s 263 of the Act directing AO to treat the income from share transactions as business income. On the aforesaid basis, AO, ultimately, completed the assessment vide order dated 07/11/12 by treating the income from share transactions as income under the head ‘business or profession’. As a result of which total income was determined at Rs. 1,56,78,513. Being aggrieved of the assessment order, so passed, assessee preferred appeal before the CIT(A) challenging the assessment order both on the validity of the reopening u/s 147 as well as on the merit of treating the income derived from share transactions as business income. 6. So far as the legal issue is concerned, before the first appellate authority, assessee submitted that AO while alleging that assessee has failed to disclose fully and truly all material facts relating to assessment has not been specified the specific material facts, which assessee has failed to disclose. It was submitted by assessee that assessability or otherwise of gain from transactions in shares and units was discussed in detail both at the original assessment stage and during the consequential appeal proceedings, hence, initiation of reassessment proceeding, that too after expiry of four years from the end of the relevant AY, on a mere change of opinion is not valid in law. It was also submitted, at the time of reopening of assessment, AO must have in his possession tangible material on the basis of 6 I T A N o s . 1 0 5 9 t o 1 0 6 2 / H y d / 2 0 1 3 a n d I T A N o . 7 2 5 / H y d / 1 2 M / s S p e c t r a S h a r e s & S c r i p s P v t . L t d . which escapement of income would be established. However, the reasons recorded by AO do not disclose any such fact and only relying on the observations of the CIT in order passed u/s 263 for the AY 2006-07, assessment was reopened. In course of hearing, it was submitted by assessee that not only at the time of recording of reasons, but, in the assessment order also, AO has heavily relied upon the finding of CIT in his order u/s 263 for AY 2006-07, which was confirmed by ITAT. However, Hon’ble High Court of AP, in judgment dated 21/02/12 in ITTA NO. 512 of 2011, had set aside the orders of ITAT as well as of CIT while accepting assessee’s claim that income derived from share transactions is to be assessed as capital gain. 7. The CIT(A) after considering the submissions of assessee and examining the facts on record found that reopening of assessment was made after a period of four years from the end of the assessment year, which attracts proviso to section 147. She noted that though AO has stated in his order that assessee has failed to make full and true disclosure of material facts, but, he has not specified what are those facts. CIT(A) observed that the reasons recorded by AO do not show any such failure on the part of assessee in making full and true disclosure of material facts. She, therefore, concluded that as there is no failure on the part of assessee to disclose fully and truly all material facts, the requirement of proviso to section 147 is not met, hence, the proceeding initiated u/s 147 becomes null and ab-initio void. In this context, learned AR relied upon a decision of Bombay High Court in case of Hindustan Leverl Ltd. Vs. R.B. Vadikar & Others, 268 ITR 332 (Bom.). Further, referring to the decision of Hon’ble Supreme Court in case of CIT Vs. Kelvinator of India Ltd. [2010] 320 ITR 561, learned CIT(A) observed that there must be tangible material before the AO while recording reasons for reopening of assessment. On examining the reasons 7 I T A N o s . 1 0 5 9 t o 1 0 6 2 / H y d / 2 0 1 3 a n d I T A N o . 7 2 5 / H y d / 1 2 M / s S p e c t r a S h a r e s & S c r i p s P v t . L t d . recorded by AO, CIT(A) held that the reasons recorded by AO do not show presence of any tangible material to conclude that there was escapement of income. The finding of the learned CIT(A) in this regard is extracted hereunder: “4.9 The first reason, as listed above, is a general observation of the auditor and cannot be termed to be material to a conclusion on the assessability of the income either as business income or capital gains. In any event, the fact that this was a part of the return filed by the appellant goes to establish that there was no failure on the part of the appellant to furnish this information. The observations in the appellate order of the ITAT may also be termed to be general introductory observations and not a finding of fact, particularly when this was not an issue in appeal for the years in question. The AO has been largely guided in his conclusions by the order u/s 263 of the CIT for the AY 2006-07. However, in view of the fact that the order of the CIT (as well as the consequential assessment) has been set aside by the High Court in its order in ITTA No. 512 of 2011, dated 21/02/2013, these conclusions of the AO cannot be held to be valid. The observation in the Annual Report as a basis of conclusions about the nature of activities of the appellant has been commented upon by the High Court in the following words in the appellant’s case for AY 2006-07: ‘We are unable to understand how the respondent at para 5.13 infers from the name of the assessee i.e. Spectra Shares and Scrips Pvt. Ltd. and a statement in the Director’s report for the year 2005-06 that ‘during the year the market is upbeat and the directors were hopeful of good results’ indicates that it is only doing trading activity as there is nothing in these circumstances to show that the assessee cannot be an investor.’ 4.10 I, therefore, hold that the reasons recorded by the AO do not show presence of any tangible material to conclude that there was escapement of income.” 8. So far as the merits of the issue as to whether the gain from share transactions and units of mutual funds to be treated as ‘profits and gains of business or income from capital gain, learned CIT(A) observed that in para 9 of the reasons recorded for reopening the assessment, AO has referred to the fact that facts in assessee’s case for the impugned assessment year are similar to AY 2006-07. In this context, learned CIT(A) referred to the judgment of the Hon’ble 8 I T A N o s . 1 0 5 9 t o 1 0 6 2 / H y d / 2 0 1 3 a n d I T A N o . 7 2 5 / H y d / 1 2 M / s S p e c t r a S h a r e s & S c r i p s P v t . L t d . High Court in assessee’s case for AY 2006-07 wherein the Hon’ble High Court accepted assessee’s claim that gain derived from share transactions is to be assessed as income from capital gains on the following reasons: “a. The closing stock was valued at cost and not at cost or market price, whichever is lower. b. The appellant had earned substantial dividend, Rs. 38,24,976 during the year. c. The LTCG was 94% of the total gains. d. The appellant had not dealt in futures, derivatives and options. e. All the transactions were delivery based. f. The appellant had never claimed set off of losses from sale of investments against other incomes. Learned CIT(A) observed that the factors on which the Hon’ble High Court held the transactions of assessee in A.Y. 2006-07 to be in the nature of investment, also remain valid for the year under consideration. She observed that, in fact, the turnover of the assessee in the impugned assessment year is much less as compared to AY 2006-07. Accordingly on merits also, learned CIT(A) held that the income derived from transactions of purchase and sale of shares and units was assessable as capital gains only. Being aggrieved of the aforesaid order of learned CIT(A), department is in appeal before us. 9. The learned DR, though, agreed that the issue in dispute is more or less covered by the judgment of the Hon’ble AP High Court in assessee’s own case, but, he nevertheless made an attempt to justify the view of the AO in not only reopening the assessment, but, also treating the gain derived from transactions of shares and units as income from business and profession. 10. The learned AR, on the other hand, submitted before us that the issue is squarely covered by the judgment of the Hon’ble AP High Court in assessee’s own case for AY 2006-07 and in this context, he 9 I T A N o s . 1 0 5 9 t o 1 0 6 2 / H y d / 2 0 1 3 a n d I T A N o . 7 2 5 / H y d / 1 2 M / s S p e c t r a S h a r e s & S c r i p s P v t . L t d . specifically referred to the observations made by the Hon’ble High Court, which is reported in 354 ITR 35. The learned AR submitted that as facts involved in the present assessment year is identical, judgement of the Hon’ble High Court will squarely apply to the facts of the present case. The learned AR submitted that department itself is accepting assessee as an investor in shares and units since A.Y. 1998-99. The learned AR submitted even in AY 2011-12 also during the scrutiny assessment proceeding, AO proposed to treat the gain derived from share transaction in shares and units as business income. However, when the assessee brought relevant facts and explained why it is to be treated as income from capital gain, AO accepted assessee’s submission and treated it as income from capital gain while completing assessment u/s 143(3). A copy of the said assessment order was also produced before the bench. Thus, it was submitted by learned AR that when the manner and mode of investment in transaction in shares and units remained consistent from the date of inception itself and which has been accepted by AO till the assessment order was revised for AY 2006-07 by CIT u/s 263 and even latest assessment order passed for AY 2011-12, there is no reason to reopen the assessment only for the purpose of assessing the income from transactions in shares and units as income from business or profession. 11. W e have heard the submissions of the parties and perused the orders of revenue authorities as well as other materials on record. The undisputed facts are, assessee is transacting in shares and units from the inception itself. Income shown by assessee from transactions in shares and units as capital gain was also accepted by the AO till the assessment year 2006-07. Assessment completed for AY 2006-07 was revised by CIT u/s 263 by holding that income from share transactions to be assessed as business income of assessee. ITAT also dismissed assessee’s appeal while confirming the order 10 I T A N o s . 1 0 5 9 t o 1 0 6 2 / H y d / 2 0 1 3 a n d I T A N o . 7 2 5 / H y d / 1 2 M / s S p e c t r a S h a r e s & S c r i p s P v t . L t d . passed by CIT u/s 263. It is quite evident from the facts on record that on the basis of the order passed by CIT u/s 263 for AY 2006-07 assessments for AY 2008-09 and 2009-10 were completed by AO by treating the gain derived from share transactions as income from business. On the very same basis also, assessments for AY 2005-06 and 2007-08 were reopened. It is also an undisputed fact that assessments for the impugned AY was reopened after expiry of four years from the end of relevant AY. Therefore, as per the proviso u/s 147(1) in a case where assessment is completed u/s 143(3) reopening of assessment can be made after expiry of four years if the escapement of income is on account of failure on the part of assessee to disclose fully and truly all material facts necessary for his assessment. However, on perusal of the reasons recorded, a copy of which is at page 31 of the paper book and also forming part of the assessment order, no such failure in furnishing material facts truly and fully is either visible or evident from the reasons recorded. It is clearly evident, assessment has been reopened primarily on the basis of the order passed by CIT u/s 263 for AY 2006-07, which was upheld by ITAT and only for the purpose of assessing the gain derived from share transaction as profits and gains of business or profession in stead of capital gain as claimed by assessee and accepted in the original assessment. In these circumstances, as there is no failure on the part of assessee to disclose fully and truly all material facts necessary for its assessment, the reopening of assessment beyond a period of four years is in violation of statutory provision, hence, invalid in law. Further, on a perusal of the reasons recorded it becomes clear that there are no fresh and tangible material before the AO on the basis of which AO could have formed belief that income has escaped assessment. Moreover, after the decision of the Hon’ble High Court accepting assessee’s transactions in shares and units as investments and not trading activity in A.Y. 2006-07, the very foundation on which assessment was reopened do 11 I T A N o s . 1 0 5 9 t o 1 0 6 2 / H y d / 2 0 1 3 a n d I T A N o . 7 2 5 / H y d / 1 2 M / s S p e c t r a S h a r e s & S c r i p s P v t . L t d . not survive. Therefore, the finding of the learned CIT(A) with regard to the validity of reopening u/s 147 has to be sustained. 12. So far as merits of the issue is concerned, a perusal of the assessment order would clearly reveal the fact that AO has treated the transaction in shares and units as a trading activity only on the consideration that they are very high in frequency and volume. Though, AO has observed that assessee has indulged in repetitive purchases and sales of the same scrip, but, he has not given a single instance where the same share purchased by assessee was sold either on the same day or within a short duration. Only, because assessee had frequently purchased and sold shares of the same company does not mean that the same share was sold. Further, the statement made in director’s report in no way helps in coming to a conclusion that the share transactions are in the nature of trading activity and not investment. It is further to be noted that AO has also observed that the very name of the assessee company indicates that the activity in share transaction is in the nature of business activity. In this context, he relied upon the order of the Tribunal in assessee’s own case for AY 2006-07. Thus, from the aforesaid facts it becomes clear that while coming to the conclusion that transactions in shares and units are in the nature of trading activity, AO more or less has adopted the observation/finding of CIT and ITAT for AY 2006-07. However, the aforesaid finding of both CIT and ITAT were found to be devoid of merit by the Hon’ble AP High Court while deciding assessee’s appeal for AY 2006-07. The Hon’ble AP High Court after exhaustively dealing with the nature of transactions and examining in detail found that the transactions carried out by assessee in shares and units of mutual funds are in the nature of investments only for the following reasons: “(a) investments are made with own funds and not with borrowed funds. 12 I T A N o s . 1 0 5 9 t o 1 0 6 2 / H y d / 2 0 1 3 a n d I T A N o . 7 2 5 / H y d / 1 2 M / s S p e c t r a S h a r e s & S c r i p s P v t . L t d . (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. (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 delivery base excepting one solitary instance of Reliance Industries 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 transaction, a conclusion that an assessee is a trader cannot be drawn without considering the period of holding 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 in mutual funds he is likely to borrow funds for his trading activity. (k) The fact that the assessee is monitoring the stock market and buying at dips and selling at highs with an intention to make profit from these transactions is not conclusive of the fact that the assessee is a trader because even an investor would not buy or sell blindly and take the risk of suffering 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. (m) The fact that the assessee is making repetitive purchases and sales of same shares is a factor in favour of holding that the assessee is an investor in view of the amendments 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 capital gains for a number of years.” Accordingly, the Hon’ble Jurisdictional High Court set aside the order of ITAT as well as that of CIT. It is very much evident from the 13 I T A N o s . 1 0 5 9 t o 1 0 6 2 / H y d / 2 0 1 3 a n d I T A N o . 7 2 5 / H y d / 1 2 M / s S p e c t r a S h a r e s & S c r i p s P v t . L t d . reasons recorded as well as assessment order that only on the basis of the order passed in case of assessee for AY 2006-07, AO has concluded that income derived from transactions in shares and units should be assessed as income from business activity. As the Hon’ble AP High Court has upheld the assessee’s claim for AY 2006-07 and the department has failed to bring any material before us to show that facts obtaining in the impugned assessment year are different from the facts considered by the Hon’ble AP High Court in AY 2006-07 or for that matter, the parameters laid down by the Hon’ble High Court in 2006-07 do not apply to the facts of the present case, we do not find any reason to interfere with the order of learned CIT(A). Accordingly, we dismiss the grounds raised by department. 13. In the result, appeal of the department is dismissed. ITA NOs. ITA Nos. 1060 to 1062/Hyd/2012 by the department 14. The facts and issues involved in these appeals of the department are identical. The only difference being, in assessment year 2007-08 reopening made is within a period of four years whereas AY 2009-10 and 2010-11, are regular assessments. However, the inference drawn by the AO in the aforesaid assessment years is more or less on the basis of the order passed by CIT u/s 263 of the Act for AY 2006-07 and confirmed by ITAT while disposing of assessee’s appeal. As the issue is squarely covered by the judgement of Hon’ble AP High Court in assessee’s own case, referred to herein before, following our detailed observation in ITA No. 1059/Hyd/12, we dismiss grounds raised by the department in these appeals. 15. In the result, the aforesaid appeals of the department are dismissed. 14 I T A N o s . 1 0 5 9 t o 1 0 6 2 / H y d / 2 0 1 3 a n d I T A N o . 7 2 5 / H y d / 1 2 M / s S p e c t r a S h a r e s & S c r i p s P v t . L t d . ITA No. 725/Hyd/12 – appeal by assessee for AY 2008-09. 16. The only effective ground of assessee as contained in concise grounds of appeal filed in course of hearing is as under: “The learned CIT(A) erred in upholding the view of the AO that the long-term capital gain on sale of shares of Rs. 4,65,32,913 and short-term capital gain of Rs. 6,87,824 (Rs. 4,99,011 + 1,88,813) is to be assessed as business income.” 17. W e have heard the parties and perused the materials on record as well as the orders of revenue authorities. As can be seen, the learned CIT(A) has confirmed the order of AO in treating the income derived from sale of shares and units as profit and gains of business or profession by relying upon the order of CIT passed u/s 263 and that of ITAT confirming the CIT’s order u/s 263 for AY 2006-07. W e have already dealt with the issue in department’s appeal in ITA No. 1059/Hyd/12 and upheld the order of CIT(A) in treating the income derived from sale of shares and units of mutual funds as ‘income from capital gains’. As the facts involved in the present appeal is materially same, and as nothing contrary has been brought to our notice by the department to show that the transactions in sale of shares and units of mutual funds in the impugned assessment year is any way different from AY 2006-07, hence, the parameters applied by the Hon’ble AP High Court while upholding assessee’s claim of capital gain will not apply, we are inclined to respectfully follow the judgment of Hon’ble AP High Court in assessee’s own case and hold that income derived from sales of shares and units of mutual funds has to be assessed ‘as income from capital gains’ as they are in the nature of investment only. In fact, it will be relevant to mention here in the latest assessment order for the assessment year 2011-12, the AO himself while completing assessment u/s 143(3) vide order dated 26/03/2014 has accepted assessee’s transaction in shares and units of mutal fund as investment activity and assessed the gain derived therefrom as capital gain. In view of the aforesaid, we set aside the order of 15 I T A N o s . 1 0 5 9 t o 1 0 6 2 / H y d / 2 0 1 3 a n d I T A N o . 7 2 5 / H y d / 1 2 M / s S p e c t r a S h a r e s & S c r i p s P v t . L t d . learned CIT(A) on this issue and allow the ground raised by assessee. 18. In the result, appeal of the assessee is allowed. 19. To sum up, all the appeals of department are dismissed and appeal of assessee is allowed. Pronounced in the open court on 5 t h November’14. Sd/- Sd/- (P.M. J AGTAP) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER Hyderabad, Dated: 5 t h November, 2014 kv Copy to:- 1) ACIT, Circle – 3(2), 7 t h Floor, B Block, IT Towers, AC Guards, Hyderabad. 2) M/s Spectra Shares & Scrips Pvt Ltd., 104 & 105, Pancom Centre, Ameerpet, Hyderabad. 3) CIT(A)-IV, Hyderabad 4) CIT-III, Hyderabad 5)The Departmental Representative, I.T.A.T., Hyderabad.