SHIKHA GUPTA, MUMBAI V. ACIT 15(3), MUMBAI

ITA 7711/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3663 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-05-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 17-04-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 15-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Business income; Transactions in derivatives; Speculation loss; Futures and options; Speculative transactions
• Section: 28

Judgement Text

1 ITA NO . 7711/M/2011, A.Y 2007-08 IN THE INCOME TAX APPELLATE TRIBUNALMUMBAI BENCHES E , MUMBAI BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ITA NO. : 7711/MUM/2011 ASSESSMENT YEAR : 2007-08 ASSESSEE BY : MR. PRADIP KEDIA REVENUE B Y : MRS. PARMINDER / DATE OF HEARING 17.04.2013 / DATE OF ORDER 08.05.2013 O R D E R PER AMIT SHUKLA, J.M. THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAI NST ORDER DATED 16.9.2011 PASSED BY CIT(APPEALS)-26, MUMBAI FOR THE QUANTUM OF ASSESSMENT PASSED UNDER SECTION 143(3), FOR THE ASSESSMENT YEA R 2007-08. THE ONLY GROUND TAKEN BY ASSESSEE IS THAT THE COMMISSIONER OF INCO ME-TAX (APPEALS) HAS ERRED IN TREATING THE SHORT TERM CAPITAL GAIN OF RS.11,25 ,860 AS BUSINESS INCOME UNDER SECTION 28 OF THE ACT. 2. THE BRIEF FACTS OF THE CASE AS NOTED BY THE ASSE SSING OFFICER ARE THAT ASSESSEE IS A INVESTOR IN EQUITY STOCKS AND SHARES AND IS INVOLVED IN MRS. SHIKHA GUPTA A-1401, OBEROI SPLENDOR, JOGESHWARI- VIKHROLI LINK ROAD, OPP. MAJAS BUS DEPOT., ANDHERI EAST, MUMBAI-400060 PAN NO: AFKPG4583M ASST. COMMISSIONER OF INCOME TAX, CIRCLE 15(3), MUMBAI (APPELLANT) VS. (RESPONDENT) 2 ITA NO . 7711/M/2011, A.Y 2007-08 THE PURCHASE AND SALE OF SHARES, BOTH FROM THE SECO NDARY AND PRIMARY MARKET. SHE HAS DECLARED BUSINESS INCOME BY WAY OF COMMISSI ON AND BROKERAGE RECEIVED FROM INDIA INFOLINE EQUITIES PVT. LTD. AND HAS ALSO DEALT IN THE DERIVATIVES MARKET IN THE FUTURES AND OPTIONS. IT W AS ALSO NOTED BY THE A.O THAT THE ASSESSEE WAS INVOLVED IN SPECULATION BUSINESS A S SPECULATIVE LOSS OF RS. 4039 HAS BEEN DECLARED. FURTHER FROM THE PROFIT & L OSS ACCOUNT HE NOTICED THAT ASSESSEE HAS SHOWN SHORT TERM CAPITAL GAIN OF RS.11 ,25,859 ON SALE OF SHARES AND HAS ALSO DECLARED BUSINESS INCOME BY WAY OF COM MISSION BROKERAGE AT RS.3,55,638, AGAINST WHICH SHE HAD APPROPRIATED LOS S FROM FUTURES AND OPTIONS EQUITY OF RS.1,44,067. THE TOTAL EXPENSES CLAIMED A GAINST EARNING OF SUCH INCOME WAS AT SHOWN RS.34,662. THE LONG TERM CAPITA L GAINS OF RS.23,47,474 ON SALE OF SHARES WAS CLAIMED AS EXEMPT UNDER SECTI ON 10(36) AND INCOME IN THE RETURN OF INCOME WAS MOSTLY OFFERED FROM SHORT TERM CAPITAL GAINS. IN VIEW OF THESE FACTS THE ASSESSING OFFICER ISSUED A DETAI L SHOW CAUSE NOTICE TO THE ASSESSEE AS TO WHY THE SHORT TERM CAPITAL GAINS SHO ULD NOT BE TREATED AS PROFITS ARISING OUT OF BUSINESS ACTIVITY. THE ENTIRE CONTEN T OF THE SHOW CAUSE NOTICE HAS BEEN REPRODUCED BY THE ASSESSING OFFICER FROM PAGES 2 TO 5 OF THE ASSESSMENT ORDER. IN RESPONSE, THE ASSESSEE SUBMITTED THAT SHE WAS NOT A DEALER OF SHARES AND THEREFORE THERE WAS NO QUESTION OF EARNING BUSI NESS PROFIT FROM LIQUIDATION OF SHARES AS SHE IS NOT ENGAGED IN ORGANIZED SETUP OF BUSINESS LIKE HAVING OFFICE, STAFF ETC. THE MAIN RELIANCE WAS PLACED ON THE DECISION OF THE TRIBUNAL IN THE CASE OF GOPAL PUROHIT IN ITA NO.485 4/M/2008, BESIDES VARIOUS OTHER CASES. THE ASSESSEES DETAIL EXPLANAT ION IN RESPONSE TO THE SHOW CAUSE NOTICE HAS ALSO BEEN INCORPORATED BY THE ASSE SSING OFFICER FROM PAGES 5 TO 9 OF THE ASSESSMENT ORDER. THE ASSESSING OFFIC ER HOWEVER, REJECTED THE 3 ITA NO . 7711/M/2011, A.Y 2007-08 ASSESSEES ENTIRE CONTENTION AND AFTER DETAIL ANALY SIS ON THE VARIOUS DECISIONS CAME TO THE CONCLUSION THAT ASSESSEE IS ACTUALLY CO NDUCTING THE BUSINESS OF PURCHASE OF SALE AND SHARES ONLY FOR PROFIT. THE RE LEVANT OBSERVATION OF THE A.O ARE REPRODUCED HERE UNDER FOR THE SAKE OF READY REF ERENCE:- APART FROM THE ABOVE, THE CAREFUL ANALYSIS OF ASSES SEES APPROACH TO THE SECURITIES MARKET BETRAYS HER INTENTION FOR PROFIT MAKING RATHER THAN AWAIT APPRECIATION OF THE VALUE OF SECU RITY FOR LARGER GAINS ON LONG TERM BASIS. IF IT WERE THE INTENTION OF ASSESSEE TO APPROACH THE STOCK MARKET AS INVESTOR, REGARDLESS O F THE MANNER BY WHICH SHE HAS KEPT HER BOOKS OF ACCOUNTS FOR REC ORDING THESE TRANSACTIONS, IT WOULD HAVE BEEN HELD ON LONG TERM BASIS FOR ENABLING ITS APPRECIATION AND OR FOR EARNING A REGU LAR STREAM OF INCOME BY WAY OF DIVIDENDS. IN ASSESSEES CASE, THI S SITUATION DOES NOT PREVAIL, SIMPLY BECAUSE THE SHARES HELD BY ASSE SSEE ARE PARKED IN THE DEMAT ACCOUNT FOR SUCH PERIOD AS THE MARKET VOLATILITY WOULD ALLOW AND AS AND WHEN OPPORTUNITIES PRESENTED THEMS ELVES FOR MAKING GAINS OR TO GENERATE FUNDS FOR TRADING IN MO RE PROFITABLE VENTURES IN THE EQUITY MARKET, ASSESSEE DID NOT MIS S AN OPPORTUNITY TO CAPITALIZE ON THE SAME AS IS EVIDENT FROM THE DE TAILS FURNISHED BY HER. IT IS FURTHER STATED IN THIS REGARD, THAT THE INTENTION OF THE PERSON IS NOT ONLY MANIFEST THROUGH THE COURSE OF H IS/HER INITIAL INCURSION IN THE STOCK MARKET FOR MAKING GAINS BUT ALSO THE END RESULT THEREOF WHICH MOTIVATES HIM/HER TO FURTHER P ARTICIPATE IN THE SERIES OF SUCH TRANSACTIONS FOR THE PURPOSES OF MAK ING PROFIT. THIS IS AS MUCH A BUSINESS ACTIVITY AS ANY ADVENTURE IN THE NATURE OF TRADE CAN BE. THESE POINTS HAVE BEEN ELABORATELY CO VERED IN THE SHOW CAUSE NOTICE ISSUED BY THE REVENUE AGAINST ASS ESSEE TO WHICH ONLY PASSING REFERENCE HAS BEEN MADE BY ASSESSEE IN HER SUBMISSIONS. ACCORDINGLY HE TREATED THE SHORT TERM CAPITAL GAIN FROM SALE OF SHARES AS BUSINESS INCOME OF THE ASSESSEE. 4 ITA NO . 7711/M/2011, A.Y 2007-08 3. BEFORE THE CIT(A) THE ASSESSEE MADE VERY ELABORA TE SUBMISSIONS WHICH HAVE BEEN INCORPORATED FROM PAGES 3 TO12 OF THE APP ELLATE ORDER. THE SUM AND SUBSTANCE OF ASSESSEES CONTENTION WERE AS UNDER. I) THE ASSESSEE HAS CARRIED ON THREE TYPE OF TRANSACTI ON IN THE SECURITIES MARKET DURING THE YEAR, THAT IS, TRADING IN FUTURE AND OPTIONS, INTRA-DAY TRADING WHICH WERE NON-DELIVERY BASED TRANSACTIONS (SPECULATION) AND DELIVERY BASED TRANSACTIONS. THE DELIVERY BASED TRA NSACTIONS WERE ONLY WITH THE INTENTION OF THE INVESTMENT AND NOT FOR TH E BUSINESS. HENCE PURCHASE WAS SHOWN AS LONG TERM CAPITAL GAIN AND SH ORT TERM GAIN. THE CLOSING INVESTMENT AT THE YEAR END WAS VALUED AT AC TUAL COST INSTEAD OF ACTUAL COST OR MARKET VALUE WHICHEVER IS LESS, WHIC H IS DONE IN THE CASE OF STOCK-IN-TRADE. II) THE FREQUENCY AND VOLUME HAD TO BE SEEN SCRIP WISE, AS THERE WAS A LITTLE FREQUENCY IN THE TRANSACTIONS OF PURCHASE AND SALE OF SHARES. IT IS ONLY WHEN PARTICULAR SCRIP IS BOUGHT AND SOLD A NUMBER O F TIMES OVER A SHORT PERIOD, THEN AN INFERENCE OF TRADING CAN BE DRAWN. THE SUMMARY OF SCRIP WISE FREQUENCY AND VOLUME OF SALE WAS GIVEN WHICH H AS BEEN INCORPORATED BY THE CIT(A) FROM PAGES 4 TO 6 OF THE APPELLATE ORDER. (IT IS VERY RELEVANT TO MENTION HERE THAT THE LEARNED C OUNSEL AT THE TIME OF HEARING HAD SUBMITTED THAT IN THE SECOND COLUMN OF THE TABLE WHERE IT HAS BEEN MENTIONED AS NUMBER OF DAYS DURING THE YEAR, I T SHOULD BE TREATED AS NUMBER OF TIMES BECAUSE IT HAS BEEN WRONGLY PRIN TED BY CIT(A) AS DAYS INSTEAD OF TIMES). 5 ITA NO . 7711/M/2011, A.Y 2007-08 III) THE PERIOD OF HOLDING IN MOST OF THE SCRIP WAS FAIR LY LONG AS MOST OF THE GAIN HAS BEEN EARNED FROM THE SCRIP WHICH WERE HELD FOR LONGER DURATIONS. THE SAID DETAILS WERE AS UNDER. PERIOD GAIN UP TO 30 DAYS 72,965 31-60 DAYS 139,009 61-90 DAYS 123,613 91-180 DAYS 231,320 181-365 DAYS 558, 953 TOTAL 1,125,860 IV) IN THE INVESTMENT PORT FOLIO OPENING BALANCE OF INV ESTMENT AS ON 31.3.2006 WAS RS.30,07,784 WHEREAS, AS ON 31.3.2007 IT WAS AT RS.62,79,441, WHICH CLEARLY INDICATES THAT THERE WA S INCREASE IN THE HOLDING OF INVESTMENT FOR THE PURPOSE OF EARNING DI VIDEND AND CAPITAL APPRECIATION. V) THE ASSESSEE HAS NOT BORROWED ANY FUNDS FOR THE PUR POSE OF MAKING INVESTMENT IN SHARES BUT HAS BEEN MADE FROM EARLIER FUND WHICH SUGGEST THAT SHARES WERE BASICALLY HELD AS CAPITAL ASSET. VI) THE DECISION RELIED UPON WERE THE ASSESSING OFFICER WERE DISTINGUISHED AND RELIANCE WERE PLACED ON THE DECISION OF GOPAL P UROHIT VS. JCIT AND OTHER DECISIONS. 4. THE LEARNED CIT(A) AFTER CONSIDERING THE RATIO LAID DOWN BY THE TRIBUNAL IN GOPAL PUROHIT CASE WHICH HAS BEEN AFFIR MED BY THE HON'BLE HIGH COURT ALSO AND THE OTHER DECISIONS HAS ANALYZED THE FACTS OF THE 6 ITA NO . 7711/M/2011, A.Y 2007-08 ASSESSEES CASE AND CAME TO THE CONCLUSION THAT ASS ESSEE WAS A TRADER IN SHARES AND NOT A INVESTOR. THE RELEVANT OBSERVATION AND TH E CONCLUSION DRAWN BY THE CIT(A) ARE REPRODUCED HERE UNDER:- IT IS NOTED THAT IN THE INSTANT CASE THE FOLLOWING IMPORTANT FACTORS CLEARLY INDICATE THAT THE APPELLANT HAS ACT ED AS A TRADER OF SHARES AND NOT AS INVESTOR AS CLAIMED BY HIM- 1) ASSESSEE WAS ACTIVELY INVOLVED IN LARGE SCALE TRANS ACTIONS OF PURCHASE AND SALE OF SHARES ON REGULAR BASIS. 2) ASSESSEE IS ACTIVELY INVOLVED IN THE VARIOUS BUSINE SS ACTIVITIES RELATING TO SHARES RANGING FROM INTRADAY SPECULATIVE TRANSACTIONS TO FUTURE OPTIONS AS WELL AS DELIVERY BASED PURCHASE AND SALE OF SHARE. 3) THE APPELLANT HAS NOT EARNED SUBSTANTIAL DIVIDEND D URING THE YEAR. 4) THE PERIOD OF HOLDING OF DIFFERENT SHARES IS OF FEW DAYS IN MANY OF THE SHARES AND IN SEVERAL CASES THE SHARES HAS ALSO BEEN SOLD ON THE SAME DATE OR AFTER A DAY OR T WO OR WITHIN A WEEK OR A FORTNIGHT . 5) AT SEVERAL OCCASIONS, ASSESSEE HAD PURCHASED LARGE QUANTITIES OF SHARES IN ONE GO AND SOLD THEM IN SMA LL QUANTITIES OVER A PERIOD OF TIME, ACTING AS A STOCK IEST, PURCHASING GOODS IN BULK AND SELLING IT IN RETAIL L IKE A NORMAL TRADER . 6) ASSESSEE HAS NOT EARNED ANY LONG TERM CAPITAL GAIN, EVEN IN A SINGLE SCRIP, WHEREAS SHE HAS TRANSACTED IN A LARGE NUMBER OF SCRIPS. 7) FURTHER, THE TURNOVER IS ALSO VERY HIGH. A CUMULATIVE ANALYSIS OF ALL THESE FACTORS LEAVES N O DOUBT ABOUT THE INTENTION OF THE APPELLANT, WHO IS A TRAD ER AND NOT AN INVESTOR IN SHARES. ACCORDINGLY, IT IS HELD THAT TH E A.O HAS CORRECTLY ASSESSED THE INCOME FROM SHARES DISCLOSED AS SHORT TERM CAPITAL GAINS AS BUSINESS INCOME. 7 ITA NO . 7711/M/2011, A.Y 2007-08 ACCORDINGLY, HE CONFIRM THE ACTION OF THE A.O, THA T THE INCOME FROM SALE OF SHARES HAS TO BE ASSESSED AS BUSINESS INCOME AND NOT SHORT TERM CAPITAL GAIN. 5. BEFORE US LEARNED COUNSEL SUBMITTED THAT THE ASSESS EE THOUGH, HAS CONDUCTED TRADING IN FUTURES AND OPTIONS AND NON-DE LIVERY BASED TRANSACTION, HOWEVER, THE SAME PERTAIN TO VERY FEW SCRIPS. FOR E XAMPLE IN FUTURES AND OPTIONS THE ASSESSEE HAS ONLY TAKEN A TRANSACTION O F ONLY ONE SCRIP OF ALLAHABAD BANK ON 31 ST OCTOBER 2005. EXCEPT FOR THIS, IN NO OTHER SCRIPS THE ASSESSEE HAS CARRIED OUT ANY FUTURES AND OPTIONS TRADING. JUST B Y TRADING IN ONE SCRIP IN F&O, THE ASSESSEE CANNOT BE HELD TO BE TRADER IN SHARES. EVEN THE LOSS IN SPECULATIVE TRANSACTIONS, THE NUMBER OF SCRIPS ARE ONLY THREE, HENCE SPECULATIVE TRANSACTIONS WAS NOT A REGULAR FEATURE. OTHERWISE THE ASSESSEE H AS MAINTAINED A SEPERATE PORTFOLIO OF INVESTMENT SO FAR AS PURCHASE OF SHARE S ARE CONCERNED, WHICH GOES TO SHOW THAT THE ASSESSEE HAS BEEN PURCHASING ONLY FOR THE PURPOSE OF EARNING GAINS AND NOT FOR THE TRADING PURPOSE. HE REITERATE D THE SUBMISSIONS MADE BEFORE THE CIT(A) AND SUBMITTED THAT, IF THE OVER A LL GAIN FROM THE SALE OF SHARES HAS TO BE SEEN, THEN OUT OF GAIN OF RS.11,25 ,860 SHOWN UNDER THE HEAD SHORT TERM CAPITAL GAIN, THERE IS GAIN OF RS.8,0000 0 ON THE SHARES WHICH WERE HELD FOR A PERIOD OF MORE THAN 3 MONTHS THAT IS FRO M 91 TO 365 DAYS. THE INTENTION OF THE ASSESSEE CAN ALSO BE GAUGED, FROM THE FACT THAT THE ASSESSEE HAS NOT BORROWED ANY FUNDS FOR MAKING THE INVESTMENT IN SHARES AND SECONDLY ALL THE SHARES WERE DELIVERY BASED WHICH HAS BEEN SHOWN UNDER THE HEAD INVESTMENT, ON WHICH SHORT TERM CAPITAL GAINS HAS B EEN DECLARED. THE FINDINGS OF THE CIT(A) ARE NOT CORRECT THAT THE ASSESSEE WAS INVOLVED IN INTRA-DAY SPECULATIVE TRANSACTION AND IN FUTURE & OPTIONS, AS THESE TRANSACTIONS WERE ONLY IN ONE OR TWO SCRIPS. THE EARNING OF SUBSTANTIAL DI VIDEND 8 ITA NO . 7711/M/2011, A.Y 2007-08 CANNOT BE THE CRITERIA TO HOLD THAT SHARES WERE PUR CHASED FOR THE PURPOSE OF DIVIDEND BECAUSE THE MAIN CRITERIA FOR ANY BUYER OF SHARES IS TO EARN GAIN FROM ESCALATION OF PRICES OF THE SHARES. HE ALSO MADE DE TAIL SUBMISSION ON EACH AND EVERY OBSERVATION MADE BY THE CIT(A) AND CONTENDED THAT THE RATIO OF GOPAL PUROHITS DECISION IS SQUARELY APPLICABLE ON THE FA CTS OF THE ASSESSEES CASE ALSO. LASTLY, HE ALSO POINTED OUT THAT GAIN ON SIMI LAR KIND OF TRANSACTION HAVE BEEN ACCEPTED TO BE INCOME FROM SHORT TERM CAPITAL GAINS, EVEN THOUGH ASSESSMENTS HAVE BEEN FINALIZED UNDER SECTION 143(1 ), WHICH HAS NOT BEEN DISTURBED. 6. ON THE OTHER HAND, LEARNED DR HEAVILY RELIED UPON T HE FINDINGS OF THE CIT(A) AND SUBMITTED THAT THE REASONS GIVEN BY THE CIT(A) IN PARA 3.2.3 IS BASED ON FACTUAL RECORD AND THEN ONLY HE HAD REACHE D TO THE CONCLUSION THAT THE ASSESSEE WAS A TRADER IN SHARES AND IS NOT AN INVES TOR. SHE EXTENSIVELY READ THE RELEVANT OBSERVATION OF THE ASSESSING OFFICER AND C IT(A). 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS, PERUSED THE RELEVANT FINDINGS OF THE A.O AS WELL AS CIT(A) AND ALSO THE MATERIAL PLACED ON RECORD. THE MAIN ISSUE FOR CONSIDERATION BEFORE US IS WHETH ER THE GAIN OF RS.11,25,860 ARISING OUT OF SALE OF SHARES CAN BE HELD AS BUSINE SS INCOME OR SHORT TERM CAPITAL GAIN. FROM THE DETAILS AND RECORDS SUBMITTE D BEFORE US, IT IS GATHERED THAT THE ASSESSEE HAD SHOWN NET LONG TERM CAPITAL G AIN OF RS.23,47,474 FROM SALE OF SHARES, WHICH HAS BEEN CLAIMED AS EXEMPT. T HIS LONG TERM CAPITAL GAIN HAS BEEN ACCEPTED BY THE ASSESSING OFFICER. THE ASS ESSEE HAS ALSO PURCHASED NUMBER OF SCRIPS WHICH HAS BEEN SOLD DURING THE YEA R, AGGREGATING TO RS.65,07,179 ON WHICH SHORT TERM CAPITAL GAIN OF RS .11,25,860 HAS BEEN DECLARED. 9 ITA NO . 7711/M/2011, A.Y 2007-08 AROUND FIFTY PERCENT OF SCRIPS HAVE BEEN HELD FOR A PERIOD RANGING BETWEEN SIX MONTHS TO ONE YEAR, THE OTHER SCRIPS HAVE BEEN HELD FOR THE PERIOD RANGING MOSTLY BETWEEN 2 TO 6 MONTHS. THERE ARE ONLY FEW SC RIPS WHICH HAS BEEN HELD UP TO THE PERIOD OF 30 DAYS ON WHICH SHORT TERM CAP ITAL GAIN RS.72,965 HAS BEEN SHOWN. THE PORTFOLIO OF THE SHARES SHOWS THAT THE SAME HAVE BEEN HELD UNDER THE HEAD INVESTMENT IN THE BALANCE SHEET. I N CASE OF SPECULATIVE TRANSACTIONS THE ASSESSEE HAS DEALT ONLY IN THREE S CRIPS WHICH HAS RESULTED INTO LOSS OF RS.4039 AND IN CASE OF FUTURES & OPTIONS, T HE ASSESSEE HAS DEALT ONLY WITH ONE SCRIP OF ALLAHABAD BANK OF 1500 SHARES ON 31 ST OCTOBER 2005, WHICH WAS SOLD ON 15 TH MAY 2006. EXCEPT FOR THE TRANSACTION OF THESE FEW SCRIPS, THE ASSESSEE HAS NOT CARRIED OUT ANY NON-DELIVERY BASED TRANSACTION OR FUTURE & OPTIONS TRANSACTION. ON THESE FACTS, THE FINDINGS O F THE CIT(A) THAT THE ASSESSEE WAS ACTIVELY INVOLVED MOSTLY IN INTRA-DAY SPECULATIVE TRANSACTION AND FUTURE OPTIONS, APPEARS NOT TO BE CORRECT. THE PERC ENTAGE OF GAIN DERIVED FROM VARIOUS SHARES HELD FOR DIFFERENT PERIOD WERE AS UN DER:- PERIOD GAIN % UP TO 30 DAYS 72965.29 6.48 31-60 DAYS 139008.93 12.35 61-90 DAYS 123613.01 10.98 91-180 DAYS 231319.7 20.55 181-365 DAYS 558951.98 49.65 TOTAL 1125858.91 100.00 WHICH GOES TO SHOW THAT MAXIMUM GAIN HAS COME FROM THE SHARES, WHICH WERE HELD FOR LONGER DURATION. 10 ITA NO . 7711/M/2011, A.Y 2007-08 8. IT IS ALSO NOT DISPUTED FROM THE RECORDS THAT TH E ASSESSEE HAS NOT BORROWED ANY FUNDS FOR MAKING THE INVESTMENT IN SHA RES AND SEPARATE PORTFOLIO HAS BEEN MAINTAINED FOR THE PURPOSE OF INVESTMENT. IT IS ALSO NOTED THAT IN THE EARLIER YEARS SIMILAR NATURE OF TRANSACTION AND INC OME FROM SALE OF SHARES WAS SHOWN UNDER THE HEAD SHORT TERM CAPITAL GAINS AND L ONG TERM CAPITAL GAINS AND THE SAME HAS NOT BEEN DISTURBED, THOUGH RETURN OF I NCOME HAS BEEN ACCEPTED UNDER SECTION 143(1). FROM THESE FACTS, IT CAN DEFI NITELY BE GATHERED THAT THE INTENTION OF THE ASSESSEE IN UNDERTAKING PURCHASE A ND SALE OF SHARES WERE NOT FOR THE PURPOSE OF TRADING BUT AS AN INVESTOR TO GE T GAIN FROM THE ESCALATION OF THE SHARE PRICES. IT HAS BEEN QUITE A PHENOMENON IN LAST DECADES THAT THE PEOPLE HAVE BOUGHT AND SOLD SHARES IN LARGE VOLUME FOR EARNING GAIN BECAUSE OF VOLATILE NATURE OF THE SHARE MARKET. THE PEOPLE HAVE ALSO INVESTED FOR A SHORT PERIOD TO EARN MAXIMUM GAIN IN SHORT TIME. SO ME OF THE CRITERIA WHICH HAS TO BE JUDGED IN SUCH KIND OF FREQUENT PURCHASE AND SALE OF SHARES IS FIRSTLY, WHETHER IT IS DELIVERY BASED TRANSACTIONS, SECONDLY , WHETHER THE SHARES HAVE BEEN KEPT UNDER THE PORTFOLIO OF INVESTMENT IN THE BOOKS OF ACCOUNT, THIRDLY, WHETHER ANY BORROWED FUNDS HAVE BEEN UTILIZED FOR T HE PURCHASE OF SHARES AND THERE IS NO CLAIM OF INTEREST AS EXPENDITURE ON BOR ROWED FUNDS AND LASTLY, PRAGMATIC APPROACH HAS TO BE TAKEN TO GAUGE THE INT ENTION OF THE ASSESSEE BECAUSE EVEN THE NUMBER AND VOLUME OF TRANSACTIONS UNDERTAKEN CANNOT LEAD TO INFERENCE THAT THE ASSESSEE WAS DOING TRADING IN SHARES. IN THIS CASE AS PER THE MATERIAL ON RECORD, IT CANNOT BE HELD THAT THE ASSESSEE WAS DOING TRADING IN SHARES BUT HAS HAD HELD THE SHARES FOR THE PURPOSE OF INVESTMENT. THIS CAN ALSO BE SEEN FROM AN ANOTHER ANGLE THAT MAJOR GAIN HAS C OME BY WAY OF LONG TERM CAPITAL GAIN AND EVEN IN SHORT TERM CAPITAL GAIN TH E PERIOD OF HOLDING IN MOST OF THE CASES WERE RANGING BETWEEN 3 TO 12 MONTHS. T HUS THE INCOME EARNED FROM SALE AND PURCHASE OF SHARES IN THE CASE OF THE ASSESSEE CAN VERY WELL BE 11 ITA NO . 7711/M/2011, A.Y 2007-08 HELD AS INCOME FROM SHORT TERM CAPITAL GAINS. ACCOR DINGLY WE HOLD THAT THE INCOME ASSESSED AT RS.11,25,860 AS BUSINESS INCOME BY THE ASSESSING OFFICER AND CONFIRMED BY CIT(A) IS NOT CORRECT AND SAME SHO ULD BE ASSESSED UNDER THE HEAD SHORT TERM CAPITAL GAINS. THUS THE GROUND RAIS ED BY THE ASSESSEE IS ALLOWED. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED ON 8TH MAY, 2013. SD/- (B. RAMAKOTAIAH) ACCOUNTANT MEMBER SD/- (AMIT SHUKLA) JUDICIAL MEMBER MUMBAI, DATED : 08.05.2013 / COPY OF THE ORDER FORWARDED TO : (1) !'# / THE ASSESSEE; (2) $% / THE REVENUE; (3) & &' ( # ) / THE CIT(A)-8, MUMBAI (4) & &' / THE CIT, MUMBAI CITY CONCERNED; (5) ()#& , & ##& , / THE DR, ITAT, MUMBAI; (6) )*! + / GUARD FILE. (7) ,& / TRUE COPY / BY ORDER SUBODH KUMAR PRIVATE SECRETARY - / .& $# / (DY./ASSTT. REGISTRAR) & ##& , / ITAT, MUMBAI