The ACIT, Central Circle-1(3), Ahmedabad V. Shri Bhanuprasad D.Trivedi,HUF, Ahmedabad

ITSSA 461/AHD/2010

• Counselvise Citation: [2016] 122 COUNSELVISE.COM (IT) 2110 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 year(s) 2 month(s) 12 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 11-07-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 05-07-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 29-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R I PATEL
• Assessee Lawyers: S N SOPARKAR
• Keywords: Unexplained cash credit; Capital asset; Business income; Wrong claim; Tax effect
• Section: 133(6); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH (BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER & SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER) IT(SS)A. NOS: 460, 461 & 256/AHD/2010 (ASSESSMENT YEARS: 2005-06 & 2006-07) ACIT, CENTRAL CIRCLE 1(3), AHMEDABAD BHANUPRASAD T. TRIVEDI, HUF A-802, BAGESHREE APPARTMENT SATELLITE ROAD, AHMEDABAD PAN NO. AABHT4038G V/S V/S BHANUPRASAD T. TRIVEDI, HUF A-802, BAGESHREE APPARTMENT SATELLITE ROAD, AHMEDABAD PAN NO. AABHT4038G ACIT, CENTRAL CIRCLE 1(3), AHMEDABAD (APPELLANT) (RESPONDENT) IT(SS)A. NOS: 462 & 578/AHD/2010 (ASSESSMENT YEARS: 2005-06 & 2006-07) ACIT, CENTRAL CIRCLE 1(3), AHMEDABAD DCIT, CENTRAL CIRCLE 1(3), AHMEDABAD V/S V/S BHANUPRASAD T. TRIVEDI, A-802, BAGESHREE APPARTMENT SATELLITE ROAD, AHMEDABAD PAN NO. ABTPT6882D BHANUPRASAD T. TRIVEDI, A-802, BAGESHREE APPARTMENT SATELLITE ROAD, IT(SS)A NO. 460 TO 461, 256 & 578/AHD/10 . A.YS. 2005-06 & 2 006-07 2 AHMEDABAD PAN NO. ABTPT6882D (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R.I. PATEL, CIT/DR RESPONDENT BY : SHRI S.N. SOPARKAR, A.R. ( )/ ORDER DATE OF HEARING : 05-07-2016 DATE OF PRONOUNCEMENT : 11 -07-2016 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. THE ABOVE CAPTIONED APPEALS OF THE ASSESSEE SHRI BH ANUPRASAD D TRIVEDI IN THE STATUS OF HUF AND INDIVIDUAL WERE HE ARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER, SINCE, THEY INVOLVE COMMON ISSUES. 2. IT(SS)A NO. 256/AHD/2010 & IT(SS)A NO. 461/AHD/201 0 ARE CROSS APPEALS BY THE ASSESSEE AND THE REVENUE FOR A.Y. 20 06-07 AND IT(SS)A NO. 462/AHD/2010 & IT(SS)A NO. 578/AHD/2010 ARE APPEALS OF THE ASSESSEE IN THE STATUS OF INDIVIDUAL. APPEALS OF BHANUPRASAD D. TRIVEDI (HUF) FIRST WE TAKE UP IT(SS)A NO. 460/AHD/2010 FOR A.Y. 2005-06. 3. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-III, AHMEDABAD DATED 05.02.2010 PERTAINING T O A.Y. 2005-06. IT(SS)A NO. 460 TO 461, 256 & 578/AHD/10 . A.YS. 2005-06 & 2 006-07 3 4. THE GRIEVANCE OF THE REVENUE IS TWOFOLD;- (I) TREA TMENT OF PROFIT ARISING OUT OF THE SALE OF SHARES UNDER THE HEAD SH ORT TERM CAPITAL GAINS AS AGAINST BUSINESS INCOME ASSESSED BY THE A. O. AND (II) DELETION OF THE ADDITION MADE U/S. 68 ON ACCOUNT OF UNEXPLAINED CASH CREDIT OF RS. 20 LAKHS. 5. WHILE SCRUTINIZING THE RETURN OF INCOME, THE A.O. F OUND THAT THE ASSESSEE HAS DISCLOSED INCOME OF RS. 4,04,21,395/- ON ACCOUNT OF SALE OF SHARES UNDER THE HEAD SHORT TERM CAPITAL GAINS. THE A.O. FOUND THAT THE TOTAL PURCHASES OF SHARES WERE AT RS. 23,11,60, 762/- AND THE SALES WERE AT RS. 20,78,12,094/- . THE A.O. FURTHER FOUND THAT THE SHARES IN HAND AT THE END OF THE FINANCIAL YEAR WERE VALUED A T COST. THE A.O. NOTICED THAT THE ASSESSEE HAS OBTAINED UNSECURED LO ANS OF RS. 15,21,48,804/-. THE A.O. WAS OF THE FIRM BELIEF THA T THE BORROWED FUNDS HAVE BEEN UTILIZED FOR THE PURCHASE OF SHARES AND, THEREFORE, ISSUED A SHOW NOTICE TO THE ASSESSEE TO EXPLAIN WHY THE SURPLUS FROM THE SALE OF SHARES BE NOT TREATED AS BUSINESS INCOM E. ASSESSEE FILED A DETAILED REPLY EXPLAINING WHY THE SURPLUS SHOULD BE TREATED UNDER THE HEAD CAPITAL GAINS. 6. THE DETAILED SUBMISSIONS MADE BY THE ASSESSEE WERE OUT-RIGHTLY REJECTED BY THE A.O. DRAWING SUPPORT FROM THE CBDT CIRCULAR NO. 4/2007 DATED 15.06.2007, THE A.O. PROCEEDED BY TREA TING THE ENTIRE SURPLUS UNDER THE HEAD BUSINESS INCOME. THE MAIN RE ASONS GIVEN BY THE A.O. ARE AS UNDER:- (I) THE SUBJECT MATTER OF REALIZATION QUA THE VOLUM E INVOLVED. (II) THE LENGTH OF THE PERIOD OF HOLDING. (III) THE FREQUENCY/NUMBER OF TRANSACTIONS. (IV) UTILIZATION OF BORROWED FUNDS FOR PURCHASE OF SHARES. IT(SS)A NO. 460 TO 461, 256 & 578/AHD/10 . A.YS. 2005-06 & 2 006-07 4 7. ASSESSEE VEHEMENTLY AGITATED THE ASSESSMENT BE FORE THE LD. CIT(A) WHERE THE CLAIM OF CAPITAL GAINS WAS REITERA TED. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS, THE LD. CIT(A) OBSERVED THAT INVESTMENT IN SHARES IS SHOWN BY THE ASSESSEE IN THE ACCOUNT UNDER THE HEAD INVESTMENT AND NOT STOCK-IN-TRADE. T HE FIRST APPELLATE AUTHORITY WAS OF THE OPINION THAT INTENTION OF MAKI NG INVESTMENT WAS CLEAR. IN SO FAR AS THE UTILIZATION OF BORROWED FUN DS ARE CONCERNED, THE LD. CIT(A) OBSERVED THAT THE ASSESSEE HAS NOT CLAIM ED INTEREST ON BORROWINGS FOR SUCH INVESTMENT. NO MOTIVE WAS ESTAB LISHED BY THE A.O. EXCEPT REFERRING TO THE VOLUME AND NUMBER OF T RANSACTIONS. THE LD. CIT(A) WAS CONVINCED THAT THE SURPLUS ARISING O UT OF THE TRANSACTIONS RESULTING INTO PROFIT WAS IN THE NATUR E OF SHORT TERM CAPITAL GAINS AND DIRECTED THE A.O. TO TAX IT ACCORDINGLY. 8. AGGRIEVED BY THIS, THE REVENUE IS BEFORE US. 9. THE LD. D.R. SUPPORTED THE FINDINGS OF THE A.O. PER CONTRA, THE LD. COUNSEL FOR THE ASSESSEE REITERATED WHAT HAS BEEN S TATED BEFORE THE LOWER AUTHORITIES. 10. THE DISPUTE IS REGARDING THE NATURE OF INCOME ON SA LE AND PURCHASE OF SHARES BY THE ASSESSEE. THE ISSUE, WHET HER THE INCOME FROM SALE AND PURCHASE OF SHARES IN A PARTICULAR CA SE SHOULD BE TREATED AS CAPITAL GAIN OR AS BUSINESS INCOME HAS BEEN A DE BATABLE ISSUE AND THERE ARE CONFLICTING DECISIONS OF THE TRIBUNAL ON THIS ISSUE. EACH CASE IS THEREFORE, TO BE BASED ON ITS OWN FACTUAL SITUAT ION. IN THE BALANCE SHEET, THE ASSESSEE HAS SHOWN SHARES UNDER THE HEAD 'INVESTMENT'. THESE INVESTMENT SHARES HAVE BEEN VALUED AT COST. T HE HON'BLE SUPREME COURT IN THE CASE OF CIT ASSOCIATED INDUSTR IAL DEVELOPMENT IT(SS)A NO. 460 TO 461, 256 & 578/AHD/10 . A.YS. 2005-06 & 2 006-07 5 CO PVT. LTD. 82 ITR 586, WHICH DECISION HAS ALSO BE EN CONSIDERED BY THE CBDT IN ITS CIRCULAR NO. 4/2007 DT. 15.6.2007, HAS OBSERVED THAT:- 'WHETHER A PARTICULAR HOLDING OF SHARES IS BY WAY O F INVESTMENT OR FORMS PART OF THE STOCK-IN-TRADE IS A MATTER WHICH IS -WI THIN THE KNOWLEDGE OF THE ASSESSEE WHO HOLDS THE SHARES AND IT SHOULD, IN NOR MAL CIRCUMSTANCES, BE IN A POSITION TO PRODUCE EVIDENCE FROM ITS RECORDS AS TO WHETHER IT HAS MAINTAINED ANY DISTINCTION BETWEEN THOSE SHARES WHI CH ARE ITS STOCK-IN- TRADE AND THOSE WHICH ARE HELD BY WAY OF INVESTMENT ' 11. THE CBDT HAS FURTHER THROWN LIGHT ON THIS CONTROVER SIAL ISSUE IN ITS CIRCULAR NO. 6/2016 DATED 29.02.2016 AND THE S AME READS AS UNDER:- SUB: ISSUE OF TAXABILITY OF SURPLUS ON SALE OF SHAR ES AND SECURITIES - CAPITAL GAINS OR BUSINESS INCOME INSTRUCTIONS IN ORDER TO REDUCE LITIGATION - REG.- SUB-SECTION (14) OF SECTION 2 OF THE INCOME-TAX ACT , 1961 ('ACT') DEFINES THE TERM 'CAPITAL ASSET' TO INCLUDE PROPERTY OF ANY KIND HELD BY AN ASSESSEE, WHETHER OR NOT CONNECTED WITH HIS BUSINES S OR PROFESSION, BUT DOES NOT INCLUDE ANY STOCK-IN-TRADE OR PERSONAL ASS ETS SUBJECT TO CERTAIN EXCEPTIONS. AS REGARDS SHARES AND OTHER SECURITIES, THE SAME CAN BE HELD EITHER AS CAPITA! ASSETS OR STOCK-IN-TRADE/ TRADING ASSETS OR BOTH. DETERMINATION OF THE CHARACTER OF A PARTICULAR INVE STMENT IN SHARES OR OTHER SECURITIES, WHETHER THE SAME IS IN THE NATURE OF A CAPITAL ASSET OR STOCK-IN- TRADE, IS ESSENTIALLY A FACT-SPECIFIC DETERMINATION AND HAS LED TO A LOT OL UNCERTAINTY AND LITIGATION IN THE PAST. 2. OVER THE YEARS, THE COURTS HAVE LAID DOWN DIFFER ENT PARAMETERS TO DISTINGUISH THE SHARES HELD AS INVESTMENTS FROM THE SHARES HELD AS STOCK- IN-TRADE. THE CENTRAL BOARD OF DIRECT TAXES ('CBDT' ) HAS ALSO, THROUGH INSTRUCTION NO. 1827, DATED AUGUST 31, 1989 AND CIR CULAR NO. 4 OF 2007 DATED JUNE 15, 2007, SUMMARIZED THE SAID PRINCIPLES FOR GUIDANCE OF THE FIELD FORMATIONS. IT(SS)A NO. 460 TO 461, 256 & 578/AHD/10 . A.YS. 2005-06 & 2 006-07 6 3. DISPUTES, HOWEVER, CONTINUE TO EXIST ON THE APPL ICATION OF THESE PRINCIPLES TO THE FACTS OF AN INDIVIDUAL CASE SINCE THE TAXPAYERS FIND IT DIFFICULT TO PROVE THE INTENTION IN ACQUIRING SUCH SHARES/SECURITIES. IN THIS BACKGROUND, WHILE RECOGNIZING THAT NO UNIVERSAL PRI NCIPAL IN ABSOLUTE TERMS CAN BE LAID DOWN TO DECIDE THE CHARACTER OF INCOME FROM SALE OF SHARES AND SECURITIES (I.E. WHETHER THE SAME IS IN THE NAT URE OF CAPITAL GAIN OR BUSINESS INCOME), CBDT REALIZING THAT MAJOR PART OF SHARES/SECURITIES TRANSACTIONS TAKES PLACE IN RESPECT OF THE LISTED O NES AND WITH A VIEW TO REDUCE LITIGATION AND UNCERTAINTY IN THE MATTER, IN PARTIAL MODIFICATION TO THE AFORESAID CIRCULARS, FURTHER INSTRUCTS THAT THE ASS ESSING OFFICERS IN HOLDING WHETHER THE SURPLUS GENERATED FROM SALE OF LISTED S HARES OR OTHER SECURITIES WOULD BE TREATED AS CAPITAL GAIN OR BUSI NESS INCOME, SHALL TAKE INTO ACCOUNT THE FOLLOWING- A) WHERE THE ASSESSEE ITSELF, IRRESPECTIVE OF THE PERIOD OF HOLDING THE LISTED SHARES AND SECURITIES, OPTS TO TREAT THEM AS STOCK-IN-TRADE, THE INCOME ARISING FROM TRANSFER OF SUCH SHARES/SECURIT IES WOULD BE TREATED AS ITS BUSINESS INCOME, B) IN RESPECT OF LISTED SHARES AND SECURITIES HELD FOR A PERIOD OF MORE THAN 12 MONTHS IMMEDIATELY PRECEDING THE DATE OF ITS TRA NSFER, IF THE ASSESSEE DESIRES TO TREAT THE INCOME ARISING FROM THE TRANSF ER THEREOF AS CAPITAL GAIN, THE SAME SHALL NOT BE PUT TO DISPUTE BY THE A SSESSING OFFICER. HOWEVER, THIS STAND, ONCE TAKEN BY THE ASSESSEE IN A PARTICULAR ASSESSMENT YEAR, SHALL REMAIN APPLICABLE IN SUBSEQU ENT ASSESSMENT YEARS ALSO AND THE TAXPAYERS SHALL NOT BE ALLOWED T O ADOPT A DIFFERENT/CONTRARY STAND IN THIS REGARD IN SUBSEQUE NT YEARS; C) IN ALL OTHER CASES, THE NATURE OF TRANSACTION (I .E. WHETHER THE SAME IS IN THE NATURE OF CAPITAL GAIN OR BUSINESS INCOME) SHAL L CONTINUE TO BE DECIDED KEEPING IN VIEW THE AFORESAID CIRCULARS ISSUED BY T HE CBDT. 4. IT IS, HOWEVER, CLARIFIED THAT THE ABOVE SHALL N OT APPLY IN RESPECT OF SUCH TRANSACTIONS IN SHARES/SECURITIES WHERE THE GENUINE NESS OF THE TRANSACTION IT(SS)A NO. 460 TO 461, 256 & 578/AHD/10 . A.YS. 2005-06 & 2 006-07 7 ITSELF IS QUESTIONABLE, SUCH AS BOGUS CLAIMS OF LON G TERM CAPITAL GAIN/SHORT TERM CAPITAL LOSS OR ANY OTHER SHAM TRAN SACTIONS. 5. IT IS REITERATED THAT THE ABOVE PRINCIPLES HAVE BEEN FORMULATED WITH THE SOLE OBJECTIVE OF REDUCING LITIGATION AND MAINTAINI NG CONSISTENCY IN APPROACH ON THE ISSUE OF TREATMENT OF INCOME DERIVE D FROM TRANSFER OF SHARES AND SECURITIES. ALL THE RELEVANT PROVISIONS OF THE ACT SHALL CONTINUE TO APPLY ON THE TRANSACTIONS INVOLVING TRANSFER OF SHARES AND SECURITIES. 12. CONSIDERING THE FACTS IN HAND, IN THE LIGHT OF THE AFOREMENTIONED CIRCULAR OF THE BOARD, IN OUR CONSIDERED OPINION, T HE INTENTION OF THE ASSESSEE AT THE TIME OF THE PURCHASE OF SHARES IS P ARAMOUNT. IF THE ASSESSEE HAS CLEAR INTENTION OF BEING AN INVESTOR A ND SHOWING THE SHARES AS INVESTMENT, WE DO NOT FIND ANY REASON TO DISTURB THE INTENTION OF THE ASSESSEE. THE ASSESSEE UNDER CONSI DERATION IS INVESTOR AND, THEREFORE, ANY GAIN ARISING OUT THE TRANSFER O F SHARES SHOULD BE TREATED AS CAPITAL GAINS BE IT SHORT TERM OR LONG T ERM. 13. IN THE LIGHT OF THE AFOREMENTIONED DISCUSSION, WE HAVE NO HESITATION IN UPHOLDING THE FINDINGS OF THE FIRST A PPELLATE AUTHORITY. GROUND NO. 1 IS ACCORDINGLY DISMISSED. 14. THE SECOND GRIEVANCE RELATES TO THE DELETION OF THE ADDITION OF RS. 20 LAKHS. 15. ON EXAMINING THE BALANCE SHEET OF THE ASSESSEE, THE A.O. ASKED THE ASSESSEE TO PROVE THE GENUINENESS OF THE LOAN O F RS. 20 LAKHS RECEIVED FROM RIGHT FINSTOCK PVT. LTD. THE ASSESSEE FILED NECESSARY DETAILS ALONG WITH CONFIRMATION. THE A.O. CONDUCTED ENQUIRIES U/S. 133(6) OF THE ACT. NECESSARY DETAILS WERE CALLED FR OM THE ASSESSING OFFICER OF RIGHT FINSTOCK PVT. LTD. ON GOING THROUG H THE BALANCE SHEET IT(SS)A NO. 460 TO 461, 256 & 578/AHD/10 . A.YS. 2005-06 & 2 006-07 8 ALONG WITH THE RETURN OF INCOME OF RIGHT FINSTOCK P VT. LTD., THE A.O. FOUND THAT THERE IS NO CORRESPONDING DEBIT ENTRY. 16. THE ASSESSEE WAS GIVEN AN OPPORTUNITY TO EXPLAIN TH E CREDIT ENTRY BY CONFRONTING THE DETAILS OF THE CREDITOR OF RIGHT FINSTOCK PVT. LTD. ASSESSEE EXPLAINED THAT THE AMOUNT OUTSTANDIN G IN THE NAME OF ASSESSEE IN THE BALANCE SHEET OF THE CREDITOR IS GR OUPED IN THE REGULAR BOOKS OF ACCOUNTS UNDER THE HEAD SUNDRY DEBTORS. TH E EXPLANATION FILED BY THE ASSESSEE DID NOT FIND ANY FAVOUR WITH THE A.O. WHO PROCEEDED BY MAKING THE ADDITION OF RS. 20 LAKHS U/ S. 68 OF THE ACT. 17. BEFORE THE LD. CIT(A), THE ASSESSEE FILED ALL THE R ELATED DETAILS JUSTIFYING THE GENUINENESS OF THE CASH CREDIT. IT W AS BROUGHT TO THE NOTICE OF THE LD. CIT(A) THAT M/S. RIGHT FINSTOCK P VT. LTD. HAD NOT ONLY ADVANCED RS. 20 LAKHS TO THE ASSESSEE (HUF) BUT ALS O RS. 53694500/- TO THE ASSESSEE IN HIS INDIVIDUAL CAPACITY OUT OF W HICH RS. 2.25 CRORES HAVE BEEN REPAID. IT WAS ALSO BROUGHT TO THE NOTICE OF THE LD. CIT(A) THAT IN THE BALANCE SHEET OF M/S. RIGHT FINSTOCK PV T. LTD. ONLY THE NET BALANCE OF THE SUNDRY DEBTORS WAS SHOWN. 18. AFTER CONSIDERING THE DETAILED SUBMISSIONS MADE BY THE ASSESSEE ALONG WITH RELATED DOCUMENTARY EVIDENCES, THE LD. C IT(A) OBSERVED THAT M/S. RIGHT FINSTOCK PVT. LTD. WAS AN EXISTING ASSESSEE AND HAD NOT DENIED THIS TRANSACTION. THE LD. CIT(A) WAS OF THE OPINION THAT THE ASSESSING OFFICER HAS MADE THE ADDITIONS ONLY ON TH E PRESUMPTION THAT THE LOAN AMOUNT IS NOT FOUND REFLECTED IN THE BALAN CE SHEET OF RIGHT FINSTOCK PVT. LTD. THE LD. CIT(A) CONCLUDED BY OBSE RVING THAT THE A.O. TOTALLY IGNORED THAT THE FIGURES IN THE BALANCE SHE ET WAS TAKEN AT NET THAT IS THE DIFFERENTIAL AMOUNT OF THE DEBITS AND C REDITS IN THE GROUPING IT(SS)A NO. 460 TO 461, 256 & 578/AHD/10 . A.YS. 2005-06 & 2 006-07 9 UNDER THE HEAD SUNDRY DEBTORS. THE LD. CIT(A) WAS C ONVINCED WITH THE GENUINENESS OF THE LOAN AMOUNT AND ACCORDINGLY DELE TED THE ADDITION OF RS. 20 LAKHS. 19. AGGRIEVED BY THIS, THE REVENUE IS BEFORE US. THE LD . D.R. RELIED UPON THE FINDINGS OF THE A.O. THE LD. COUNSEL FOR T HE ASSESSEE REITERATED WHAT HAS BEEN STATED BEFORE THE LOWER AU THORITIES AND RELIED UPON THE SAME SET OF DOCUMENTS WHICH WERE CONSIDERE D BY THE FIRST APPELLATE AUTHORITY. 20. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORD ERS OF THE AUTHORITIES BELOW. WE FIND THAT THE ASSESSEE HAS SU CCESSFULLY DISCHARGED THE ONUS CAST UPON HIM BY VIRTUE OF SECT ION 68 OF THE ACT. DOCUMENTARY EVIDENCES ON RECORD SHOW THAT THE IDENT ITY OF THE CREDITOR, GENUINENESS OF THE TRANSACTION AND THE CA PACITY OF THE LENDER HAVE BEEN SUCCESSFULLY ESTABLISHED BY THE ASSESSEE. THE FIRST APPELLATE AUTHORITY HAVE THOROUGHLY EXAMINED THE EV IDENCES ON RECORD AND THE LD. D.R. COULD NOT POINT OUT ANY FALLACY/FL AW/ERROR IN THE FINDINGS OF THE FIRST APPELLATE AUTHORITY, THEREFOR E, NO INTERFERENCE IS CALLED FOR. GROUND NO. 2 IS ACCORDINGLY DISMISSED. 21. IT(SS)A NO. 461/AHD/2010 & IT(SS)A NO. 256/AHD/2010 ARE CROSS APPEALS BY THE REVENUE AND THE ASSESSEE PREFE RRED AGAINST THE VERY SAME ORDER OF THE LD. CIT(A)-III, AHMEDABAD DA TED 17.02.2010 PERTAINING TO A.Y. 2006-07. 22. THE GRIEVANCE OF THE ASSESSEE RELATES TO (I) TREAT MENT OF SURPLUS ARISING FROM SALE OF SHARES UNDER THE HEAD SHORT TERM CAPITAL IT(SS)A NO. 460 TO 461, 256 & 578/AHD/10 . A.YS. 2005-06 & 2 006-07 10 GAINS AS AGAINST BUSINESS INCOME TREATED BY THE A.O . AND (II) DELETION OF THE ADDITION MADE U/S. 68 OF THE ACT. 23. THE AFOREMENTIONED GRIEVANCES OF THE REVENUE ARISE OUT OF THE SAME SET OF FACTS WHICH HAVE BEEN DISCUSSED BY US I N IT(SS)A NO. 460/AHD/2010 HEREINABOVE. FOR OUR DETAILED DISCUSSI ON THEREIN IN RESPECT OF THE AFORE-STATED GRIEVANCES AND FOLLOWIN G OUR FINDINGS GIVEN IN THAT APPEAL, THIS APPEAL OF THE REVENUE IS DISMI SSED ON BOTH GROUNDS. 24. COMING TO THE GRIEVANCE OF THE ASSESSEE WHICH RELAT ES TO THE SURPLUS ARISING OUT OF THE SALE OF SHARES OF IDFC B EING TAXED UNDER THE HEAD BUSINESS INCOME. 25. THE REASONS GIVEN BY THE A.O. ARE IDENTICAL TO THE REASONS GIVEN IN IT(SS)A NO. 460/AHD/2010 (SUPRA) FOR A.Y. 2005-0 6. 26. THE FACTS RELATING TO THE TREATMENT OF SURPLUS ON S ALE OF SHARES OF IDFC ARE THAT THE SHARES HAVE BEEN PURCHASED IN AUG UST, 2005 FROM SMT. RUPAL NARESH PANCHAL THROUGH OFF MARKET TRANSA CTIONS. THE REVENUE AUTHORITIES IN THE CASE OF SMT. RUPAL NARES H PANCHAL HAD FOUND THAT SHE HAD CORNERED IPOS SHARES THROUGH MUL TIPLE APPLICATIONS IN THE NAME OF BENAMI/FICTITIOUS APPLICANTS. THE RE VENUE AUTHORITIES ALSO FOUND THAT THE SEBI HAD NOTICED LARGE SCALE OF F MARKET TRANSACTIONS DEMATED IN FICTITIOUS/BENAMI NAMES. ON THE STRENGTH OF THESE FACTS , THE REVENUE AUTHORITIES TREATED THE S URPLUS ON SALE OF SHARES OF IDFC UNDER THE HEAD BUSINESS INCOME. IT(SS)A NO. 460 TO 461, 256 & 578/AHD/10 . A.YS. 2005-06 & 2 006-07 11 27. AFTER HEARING AT LENGTH THE RIVAL SUBMISSIONS, WE F IND THAT EXCEPT FOR THE REASONS MENTIONED HEREINABOVE. THERE IS NOT HING ON RECORD BROUGHT BY THE REVENUE AUTHORITIES WHICH COULD SUGG EST THAT THE ASSESSEE WAS ACTUALLY TRADING IN THE SHARES OF IDFC . 28. ONCE, WE HAVE HELD THE ASSESSEE TO BE AN INVESTOR, WE DO NOT FIND ANY REASON/LOGIC IN TREATING THE SAME ASSESSEE AS A TRADER IN THE TRANSACTIONS RELATING TO THE SHARES OF IDFC. SECOND LY, THERE IS NO BAR IN MAKING PURCHASES OUTSIDE THE FLOOR OF STOCK EXCH ANGE AND THERE IS NOTHING ON RECORD WHICH COULD SHOW THAT THE PURCHAS E OF SHARES WERE NOT AT THE PREVALENT MARKET PRICE, THE SHARES SO PU RCHASED WERE TRANSFERRED TO THE DEMAT ACCOUNT OF THE ASSESSEE FR OM WHERE THEY WERE SOLD. THE MODE OF ACQUISITION WOULD NOT BE A F ACTOR TO DECIDE THE NATURE OF TRANSACTION. UNDER THIS ALLEGED MODUS OPE RANDI, (IN THE CASE OF SMT. RUPAL NARESH PANCHAL), THE ASSESSEE COULD P ROCURE LARGE NUMBER OF SHARES, BUT THAT WOULD NOT CHANGE THE CHA RACTER OF TRANSACTION FROM INVESTMENT TO TRADER. FURTHER, THE RE IS NO EVIDENCE WITH THE REVENUE TO ESTABLISH THE NEXUS. THERE IS N O EVIDENCE ON RECORD WHICH CAN DEMONSTRATE THAT THE ASSESSEE HAS COLLUDED WITH SMT. RUPAL NARESH PANCHAL IN A MANNER THAT WOULD IN DICATE THAT SHARES WERE ACQUIRED FOR THE PURPOSE OF TRADE. SUCH NEXUS HAS NOT BEEN ESTABLISHED. THE OBSERVATIONS OF THE REVENUE A UTHORITIES ARE ONLY INFERENTIAL WITHOUT ANY CONCRETE MATERIAL IN THE PO SSESSION OF THE A.O. 29. IN OUR CONSIDERED OPINION, THE ACTIVITY OF THE ASSE SSEE BY VIRTUE OF MODE OF ACQUISITION OF SHARES CANNOT BE SEGREGAT ED INTO TWO PARTS. THE FIRST APPELLATE AUTHORITY HAS ERRED IN CREATING AN ARTIFICIAL DISTINCTION ONLY ON THE BASIS OF MODE OF ACQUISITIO N. IT(SS)A NO. 460 TO 461, 256 & 578/AHD/10 . A.YS. 2005-06 & 2 006-07 12 30. WE HAVE NO HESITATION IN SETTING ASIDE THE FINDINGS OF THE LD. CIT(A) AND DIRECTING THE A.O. TO TAX THE SURPLUS ON SALE OF SHARES OF IDFC UNDER THE HEAD SHORT TERM CAPITAL GAINS. 31. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. APPEALS OF BHANUPRASAD D. TRIVEDI (INDIVIDUAL) IT(SS)A NOS. 462/AHD/2010 & IT(SS)A NO. 578/AHD/201 0 FOR A.Y. 2006-07. 32. FIRST WE TAKE UP IT(SS)A NO. 462/AHD/2010 FOR A.Y. / 2006-07. 33. THE GRIEVANCE OF THE REVENUE IS TWOFOLD;- (I) TREAT MENT OF SURPLUS ARISING FROM SALE OF SHARES AS SHORT TERM C APITAL GAIN AS AGAINST BUSINESS INCOME TREATED BY THE A.O. AND (II ) DELETION OF THE ADDITION MADE U/S. 68 OF THE ACT. 34. THE AFOREMENTIONED GRIEVANCES OF THE REVENUE ARISE FROM THE SAME SET OF FACTS AND CIRCUMSTANCES AS DISCUSSED BY US IN IT(SS)A NO. 460/AHD/2010 (SUPRA). FOR OUR DETAILED DISCUSSION OF FACTS QUA THE RELATED PROVISIONS OF THE ACT AND FOLLOWING OUR FIN DINGS GIVEN THEREIN, THIS APPEAL OF THE REVENUE IS DISMISSED ON BOTH GRO UNDS. IT(SS)A NO. 578/AHD/2010 FOR A.Y. 2006-07. 35. THE GRIEVANCE OF THE REVENUE RELATES TO THE TREATME NT OF SURPLUS OF RS. 32,39,820/- ARISING FROM THE SALE OF SHARES AS SHORT TERM CAPITAL GAINS AS AGAINST BUSINESS INCOME TREATED BY THE A.O . IT(SS)A NO. 460 TO 461, 256 & 578/AHD/10 . A.YS. 2005-06 & 2 006-07 13 36. THIS APPEAL BY THE REVENUE HAS TO BE DISMISSED IN T HE LIGHT OF THE CBDT CIRCULAR NO. 21/2015 DATED 10.12.2015 BY W HICH THE BOARD HAS FIXED THE MONETARY LIMITS FOR FILING OF APPEALS BY THE DEPARTMENT BEFORE THE ITAT. 37. SINCE, THE TAX EFFECT IN THIS APPEAL IS BELOW THE P RESCRIBED MONETARY LIMIT OF RS. 10 LACS, IN THE LIGHT OF THE AFOREMENTIONED CBDT CIRCULAR, APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 11 - 07 - 201 6. SD/- SD/- (RAJPAL YADAV) (N. K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD