The DCIT, Central Circle-1, Surat V. M/s. Vowel Securities, Surat

ITSSA 530/AHD/2011

• Counselvise Citation: [2016] 122 COUNSELVISE.COM (IT) 2288 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 9 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 19-09-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 27-07-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 09-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S N SOPARKAR WITH UKTI PARIKH
• Keywords: Business income; Source of fund
• Section: 143(3); 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH BEFORE: SHR I S. S. GODARA , JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER THE DCIT, CENTRAL CIRCLE - 1, SURAT (APPELLANT) VS M/S. VOWEL SECURITIES B - 502, NOVA APEX, B/H SNEH SANKUL WADI, ANAND MAHAL ROAD, SURAT - 395009 PAN: AADFV8808Q (RESPONDENT) REVENUE BY : S H RI PRASOON KABRA , SR. D . R. ASSESSEE BY: S H RI S.N. SOPARKAR WITH UKTI PARIKH, A.R. DATE OF HEARING : 27 - 07 - 2 016 DATE OF PR ONOUNCEMENT : 19 - 09 - 2 016 / ORDER P ER : S. S. GODARA , JUDICIAL MEMBER : - THE S E TWO REVENUE S APPEAL S AND ASSESSEE S CROSS OBJECTIONS THEREIN FOR A.Y. 2007 - 08 & 2008 - 09 , AR ISE FROM ORDER OF THE CIT(A) - II, AHMEDABAD DATED 01 - 07 - 2011 IN APPEAL NOS. CIT(A) - II/CC - 1/ 7 0 & 71/2010 - 1 1 , IN PROCEEDINGS UNDER SECTION 143(3) R.W.S. 153C OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . I T (SS)A 529 & 530 / A HD/20 11 & CO 5 3 & 54/AHD/2012 A SSESSMENT YEAR 200 6 - 07 & 2007 - 08 I.T (SS).A 529 & 530 /AHD/20 11 & CO 53 & 54 /AHD/2012 PAGE NO DCIT VS. M/S VOWEL SECURITIES 2 2. WE NOTICE AT THE OUTSET THAT THE ASSESSEE S CROSS OBJECTION NOS. 53 & 54/AHD/2012 SUFFER FROM DELAY OF 118 DAYS IN FILING. ITS PARTNER SHRI NAVIN KIKUBHAI DESAI HAS FILED CONDONATION AFFIDAVIT(S) GIVING DETAILS ABOUT ILL - HEALTH OF HIS CO - PARTNER WIFE FORMING THE MAIN REASON FOR THE IMPUGNED DELAY. LEARNED DEPARTMENTAL REPRESENTATIVE IS FAIR ENOUGH IN NOT DISPUTING CORRECTNE SS THEREOF ON FACTS. WE ACCOR DINGLY CONDONE ABOUT SAID DELAY IN FILING OF ASSESSEE S CROSS OBJECTIONS. THE SAME STANDS ADMITTED FOR ADJUDICATION. 3. WE COME TO RIVAL PLEADINGS NOW. THE REVENUE S IDENTICAL SOLE SUBSTANTIAL GROUNDS IN ITS TWO APPEALS CHALLENGES THE CIT(A ) S ORDER REVERSING ASSESSING OFFICER S ACTION IN TREATING ASSESSEE S SHORT TERM CAPITAL GAINS OF RS. 1,31,40,000/ - AND RS. 1,04,29,349 / - AS ITS BUSINESS INCOME. THE ASSESSEE ON THE OTHER HANDS ASSAILS LEGALITY OF SECTION 153C PROCEEDINGS IN BOTH OF ITS CROSS OBJECTIONS . BOTH THE PARTIES AGREE THAT RELEVANT FACTS AND ISSUES ARISING THEREF R O M ARE IDENTICAL IN THE TWO IMPUGNED ASSESSMENT YEARS. WE THEREFORE TAKE UP REVENUE S APPEAL ITA 529/AHD/2011 AND ASSESSEE S CO THEREIN 53/AHD/2011 AS THE LEAD CASES. 4. THE ASSESSEE IS A PARTNERSHIP FIRM. IT IS A TRADER IN DERIVATIVES AS WELL. THE DEPARTMENT CONDUCTED A SEARCH IN GROUP CASES OF M/S. GARDEN SILK MILLS ON 12 - 08 - 2008. IT SEIZED ALLEGED INCRIMINATING MATERIAL BELONGING TO THE ASSESSEE IN COURS E THEREOF. THE ASSESSING OFFICER ISSUED SECTION 153C NOTICE DATED 31 - 12 - 2008. I.T (SS).A 529 & 530 /AHD/20 11 & CO 53 & 54 /AHD/2012 PAGE NO DCIT VS. M/S VOWEL SECURITIES 3 THE ASSESSEE FILED ITS RETURN ON 31 - 03 - 2009 DECLARING INCOME OF RS. 4,24,19,263/ - . THE SAME WAS SUMMARILY PROCESSED. THE ASSESSING OFFICER THEREAFTER TOOK UP SCRUTINY . 5. THE ASSESSEE HAD DECLARED BUSINESS INCOME OF RS. 3,19,89,914/ - ALONG WITH THE IMPUGNED SHORT TERM CAPITAL GAINS OF RS. 1,04,29,349/ - ARISING FROM SALE OF SHARES/MUTUAL FUND UNITS. IT HAD ALSO DISCLOSED LONG TERM CAPITAL LOSS OF RS. 12,61,877/ - FROM SI MILAR TRANSACTIONS . THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE HAD ENTERED INTO FREQUENT TRANSACTIONS IN SALE OF SHARES AND MUTUAL FUNDS QUA THE IMPUGNED SHORT TERM CAPITAL GAINS HEREINABOVE. ITS OPENING STOCK, CLOSING STOCK INTER ALIA READ RESPECTIVE FIGURE OF RS. 3,35,57,138/ - AND RS. 4,83,60,136/ - . THE SHORT TERM CAPITAL GAINS STATEMENT INDICATED SALE OF SHARES OF RS. 11,23,79,611/ - AND SHARES PURCHASED OF RS. 11,67,53,260/ - . THIS MADE THE ASSESSING OFFICER TO ISSUE A SHOW CAUSE DATED 18 - 04 - 2010 PROPOSING TO TREAT THE ABOVE SHORT TERM CAPITAL GAINS AS BUSINESS INCOME. 6. THE ASSESSEE APPEARS TO HAVE FILED ITS REPLY ON THE SAME DAY I.E. 18 - 04 - 2010 ITSELF STATING THEREIN INTER ALIA THAT ALL OF ITS TRANSACTIONS HAD BEEN ENTERED I NTO WITH AN INTENTION OF INVESTMENT ONLY AS THE SAME WAS DULY REFLECTED IN BOOKS AT COST READING RS. 9,74,20,776/ - , THESE TRANSACTIONS SATISFIED ALL PARAMETERS TO BE TREATED AS SHORT TERM CAPITAL GAINS AND THERE WAS NO ADVENTURE IN TRADING ELEMENT IN THESE SHORT TERM CAPITAL GAINS. THE ASSESSING OFFICER IN ASSESSMENT ORDER DATED 07 - 06 - 2010 OBSERVED THAT I.T (SS).A 529 & 530 /AHD/20 11 & CO 53 & 54 /AHD/2012 PAGE NO DCIT VS. M/S VOWEL SECURITIES 4 ASSESSEE S MOTIVE IN DERIVING THE IMPUGNED SHORT TERM CAPITAL GAINS WAS TO MAKE QUICK PROFITS AS THE SHARES CONCERNED HAD HOLDING PERIOD RANGING BETWEEN ON E MONTH TO THREE MONTHS SINCE TIME SPAN OF 1 TO 30 DAYS, 31 TO 90 DAYS, 91 TO 180 DAYS AND 181 TO 365 DAYS INVOLVED 29, 31, 17 AND 18 TRANSACTIONS; RESPECTIVELY TOTALING TO 95 INVOLVING MAJORITY OF THEM TO HAVE HOLDING PERIOD OF LESS THAN 90 DAYS. THE ASSE SSING AUTHORITY THEREAFTER CAME TO FREQUENCY OF SALE OF SHARES. IT NOTICED THAT ASSESSEE ENTERED INTO REGULAR SHARE TRANSACTION ON 92 DAYS WHEREAS IT MADE SALES ON 59 DAYS. THE ASSESSING OFFICER FURTHER STATED IN ASSESSMENT ORDER THAT ASSESSEE HAD NO SOLD ITS SHAR E S FOR NEED OF FUNDS BUT ON REGULAR BASIS INDICATING ITS PROFIT MOTIVE. IT TOOK NOTE OF THE FACT THAT THE ASSESSEE WAS ALREADY IN SHARE BUSINESS . THE ASSESSING OFFICER FURTHER OBSERVED INTER ALIA THAT ASSESSEE S ACCOUNTING TREATMENT WAS NO SUFFI CIENT OF ALL THESE FACTORS, IT HAD AVAILED LOANS OF RS. 5,54,83,096/ - AND OWN CAPITAL OF RS. 3,88,88,381/ - IN BEGINNING OF THE YEAR AS AGAINST CORRESPONDING FIGURE OF RS. 6,81,33,890/ - AND RS. 7,14,83,401/ - ; RESPECTIVELY AT THE TIME OF CLOSING OF THE YEAR. HIS OPINION WAS THAT SOME PORTION OF INVESTMENT COULD BE SAID TO HAV E BEEN ACQUIRED FROM BORROWED FUNDS. WE PROCEED FURTHER TO FIND THAT THE ASSESSING AUTHORITY TOOK INTO ACCOUNT ASSESSEE S PARTNERSHIP DEED CLAUSE ALREADY CONTAINING STIPU LA TION QUA TRADING IN DERIVATIVES, THE FACT THAT SHARES IN QUESTION HAD BEEN PURCHASED FROM SECONDARY MARKET, IT OPERATED FROM TWO DEMAT ACCOUNTS, SHARES IN QUESTION WERE EASILY MARKETABLE AND LIQUID I.T (SS).A 529 & 530 /AHD/20 11 & CO 53 & 54 /AHD/2012 PAGE NO DCIT VS. M/S VOWEL SECURITIES 5 GIVING RISE TO PRESUMPTION OF TRADING, MAGNITUDE OF ITS SALES / PURCHASES OF SHARES ALREADY DEMONSTRATED TRADING INTENTIONS, LOW DIVIDEND AMOUNTS QUA THE IMPUGNED INVESTMENTS TO COME TO A CONCLUSION THAT SHORT TERM CAPITAL GAINS IN QUESTION WERE IN FACT ITS BUSINESS INCOME. HE ACCORDINGLY PROCEEDED IN THE SAME DIRECTION WHILST FINALIZING THE REGULAR ASSESSMENT IN QUESTION. 7. THE ASSESSEE PREFERRED APPEAL RAISING TWO SUBSTANTIVE GROUNDS . FIRST ONE CHALLENGED VALIDITY OF SECTION 153C PROCEEDINGS. LATTER GROUND ASSAILS CORRECTNESS OF ASSESSING OFFICER S ACTION TREATING THE IMPUGNED SHORT TERM CAPITAL GAINS AND BUSINESS INCOME ON MERITS. WE NOTICE THAT THE CIT(A) DECLINES THE FORMER PLEA AND ACCEPTS THE LATTER ONE. HIS FINDINGS ON MERITS READ AS UNDER: - 5.1 I HAVE GIVEN A CAREFUL CONSIDERATION TO THE BA S IS GIVEN BY THE ASSESSING OFFICER FOR HIS FINDINGS AS A LSO THE DETAILED SUBMISSIONS MA DE ON BEHALF OF THE APPELLANT - FIRM AND PERUSED DECISIONS CITED BY THE LEARNED A R. IN M Y VIEW THE QUESTION IN THE PRESENT CASE HAS TO BE CONSIDERED AND DETERMINED ON THE BASIS OF THE FACTUAL POSITION WHICH EMERGES FROM THE RECORDS AND FROM THE DISCUSSION GIVEN ABOVE. IN THE WRITTEN SUBMISSIONS THE A PPELLANT HAS COMMENTED ON THE V ARIOUS GROUNDS INDICATED BY THE ASSESSING OFFICER FOR TREATING THE SHORT TERM CAPITAL G AIN AS BUSINESS INCOME. THE MOST IMPORTANT POINT WHICH CAN BE SAID TO BE RELEVANT FOR DECIDING THE ISSUE IS THE MOTIVE AND INTENTION OF THE APPELLANT AT THE TIME OF PURCHASE OF SHARES. THE ASSESSING OFFICER HAS MENTIONED THAT THE SHARES WERE PURCHASED WITH THE MOTIVE OF SELLING WITHIN A SHORT PERIOD OF TIME RANGING FROM ONE MONTH TO THREE MONTHS WITH THE MOTIVE TO EARN QUICK BUSINESS PROFIT. IN THIS REGARD HE HAS AL SO BRUSHED ASIDE THE STIPULATION IN THE PARTNERSHIP DEE D DEBARRING THE FIRM TO ENGAGE IN TRAD ING OF SHARES AND MUTUAL FUNDS. HAVING REGARD TO THE CLEAR FACTS OF THIS CASE, I DO NOT FIND ANY SUBSTANCE IN THIS ASSUMPTION OF THE ASS ESSING OFFICER. FROM THE DETAIL OF CAPITAL GAIN FURNISHED FOR A.Y. 2006 - 07 AND 2007 - 0 8, WHICH ARE PART OF THE RECORD, IT IS CLEAR THAT ON SALE OF SUCH SHARES WHICH HAVE BEEN HELD BY THE APPELLANT - FIRM FOR I.T (SS).A 529 & 530 /AHD/20 11 & CO 53 & 54 /AHD/2012 PAGE NO DCIT VS. M/S VOWEL SECURITIES 6 VARIOUS PERIODS RANGING FROM 1 DAY TO 180 DAYS I N A.Y. 2007 - 08, THE APPELLANT H AS INCURRED LOSS OF AROUND RS. 37.50 LACS AND THERE COUL D HAVE BEEN NO MOTIVE TO INCUR SUCH LOSS BY WAY OF SHORT TERM CAPITAL LOSS AND GET A SET OFF AGAINST SHORT TERM CAPITAL GAIN WHICH WOULD SAVE TAX @ 10%. THE APPELLANT COULD HAVE VERY WELL SHOWN THE A BOVE LOSS AS BUSINESS LOSS AND COULD HAVE SET OFF THI S LOSS AGAINST OTHER BUSINESS IN COME W HICH WOULD HAVE SAVE D SUBSTANTIALLY MORE TAX. THESE FACTS PROVE THAT APPELLANT HAS CONSISTENTLY SHOWN PROFIT ON SALE OF SHARES AS INCOME FROM CAPITAL GAIN AND HAS HOT OBTAINED ANY BENEFIT OF SET OFF OF LOSS TREATING PARTIAL LOSS AS BUSINESS LOSS WHEN HOLD ING PERIOD IS NOT SIGNIFICANT. FURTHER, THE TERMS AND CONDITIONS OF THE PART NERSHIP DEE D REPRODUCED ABOVE ARE CLEAR AND CATEGORICAL. WHILE THE FIRM IS PERMITTED TO CARRY ON TRADING IN BONDS, DEBENTURES AND DERIVATIVES, IT IS DEBARRED FROM ENGAGING IN TRACI NG, IN SHARES AND MUTUAL FUNDS. THE PARTNERSHIP DEED IS A LEGAL DOCUMENT AND IS BIDDING ON ALL THE PARTNERS. THERE ARE TWO PARTNERS IN THE APPELLANT - FIRM AND THE STIPULATIONS OF THE PARTNERSHIP DEED AR E BINDING ON THEM. IF A PARTNER SHIP FIRM FLOUTS MONET ARY PROVISIONS OF THE PARTNERSHIP DEED WHICH IS A LEGAL CONTRA CTUAL AGREEMENT, TH E OPPOSING PARTNERS CAN ALWAYS CHALLENGE AND ALL THE LEGAL CONSEQUENCES WOULD FOLLOW . FURTHER, A LEGAL DOCUMENT HAS TO BE READ AS A WHOLE AND NOT IN PIECEMEAL AND SELECT IVE BASIS. WHILE THE ASSESSING OFFICER ACCEPTS THE AUT HENTICITY OF THE ONE PART OF THE PARTNERSHIP DEED HE HAS BRUSHED ASIDE ANOTHER PART WHICH IS NOT FAIR. 5.2 ANOTHER IMPORTANT FEATURE WHICH HAS TO BE NOTED HERE IS THAT SEPARATE BOOKS OF ACCOUNT H AVE BEEN MAINTAINED FOR THE BUSINESS ACTIVITY AND FOR THE INVESTMENT ACTIVITY. THE INVESTMENT IN SHARES, FROM THE VERY BEGINNING HAS BEEN REFLECTED AT COST PRICE IN THE BALANCE SHEET UNDER THE HEAD INVESTMENT AND VI/AS NEVER REFLECTED IN TRADING AND P&L AC COUNT EVEN I F THE MARKET VALUE OF SHARES WE NT BELOW THE COST. THIS POLICY IS BEING FOLLOWED BY THE APPELLANT - FIRM FOR THE PAST SEVERAL YEARS. THE ASSESSING OFFICER HAS NOT REJECTED THESE BOOKS OF ACCOUNT AND HE HAS NOT DISTURBED THE QUANTUM OF THE INCOME. HE HAS ONLY TREATED THE SHORT TERM CAPITAL GAIN AS BUSIN ESS INCOME. ANOTHER IMPORTANT POINT IS THAT THE APPELLANT HAS BEEN FOLLOWING THE SAME SYSTEM OF ACCOUNTING MUCH PRIOR TO THE INSERTION OF SECTION 11 1 A IN THE IT. ACT WITH EFFECT FROM 1.4.2005. THIS S HOWS THAT THERE WAS NO MOTIVE OR INTENTION ON THE PART OF THE APPELLANT TO TAKE ANY UNDUE ADVANTAGE OF THE NEWLY INSERTED PROVISION TO REDUCE ITS TAX LIABILITY. RIGHT FROM THE VERY BEGINNING THE SHARES ARE SHOWN I.T (SS).A 529 & 530 /AHD/20 11 & CO 53 & 54 /AHD/2012 PAGE NO DCIT VS. M/S VOWEL SECURITIES 7 AS INVESTMENTS AND NOT AS STOCK - IN - TRADE. EV EN PRIOR TO SEARCH IN CASE OF APPELLANT, ASSESSMENT ORDER UNDER SECTION 143(3) WAS PASSED IN A.Y. 2005 - 06 WHEREIN ASSESSING OFFICER HAS ACCEPTED TREATMENT GIVEN FOR PROFIT ON SALE OF SHARE AS INCOME FROM CAPITAL GAIN BY APPELLANT. ON THIS GROUND ALSO, PRIN CIPLE OF CONSISTENCY IS REQUIR ED TO B E FOLLOWED PARTICULARLY WHEN T HE FACTS ARE SIMILAR . 5.3 I A LSO FIND THAT THE TRANSACTIONS CANNOT BE SAID TO BE FREQUENT TRANSACTIONS O F PURCHASES AND SALES WIT H A VIEW TO EARN QUICK PROFIT. A TRADER IN SHARES WOULD P URCHASE A ND SELL SHARES FREQUENTLY WITHIN A PERIOD OF TIME. IN THE PRESENT CASE, AS PER D DETAILS GIVEN IN PAPER BOO K, IT IS ALSO SIGNIFICANT TO NO TE THAT THE SHARES OF COMPANIES WERE ACCUMULATED WITHOUT ANY SALES HAVING TAKEN I N PLACE IN BETWEEN THE PURC HASE TRANSACTIONS. THEREAFTER, THE SHARES WERE HELD FOR SUFFICIENTLY LONG PERIOD OF TIME. IN MY VIEW THERE CAN BE NO ASSUM PTION THAT THE MOTIVE WAS TO TRADE IN SHARES OF THIS COMPANY. SUMMARY OF SOME TRANSACTIONS ARE AS UNDER STATEMENT OF CAPI TAL SCRIP GAIN ON INVESTMENTS DU RING THE YEAR 2007 - 08 DATE OF PURCHASE DATE OF SALE ACQ. NOS. NOS. ACQ. RS . RS. SALE NOS. NOS. SALE VALUE RS. STCG RS. HELOIS & MTH 26 APR 05 250 0 492045 3 JUN 05 150 0 3633 6 5 JUL 05 100 0 3318 4 30 SEPT 05 500 0 L 23 5000 1074 I.T (SS).A 529 & 530 /AHD/20 11 & CO 53 & 54 /AHD/2012 PAGE NO DCIT VS. M/S VOWEL SECURITIES 8 DEC 05 358 18 JAN 06 5000 1211 765 109886 7 FINANCIAL TECHNOLOGY 4 MAR 05 100 0 323543 1 APR 05 500 1 35884 25 JUL 05 949 78827 3 26 JUL 05 551 4453 2 26 A UG 05 500 48277 8 27NOV05 500 630141 2 DEC 05 500 61915 3 26 SEP 05 1000 1281 941 29 SEP 05 1000 1245 840 7OCT 05 880 1018 279 11 OCT 05 620 6654 05 18 1000 1291 207758 I.T (SS).A 529 & 530 /AHD/20 11 & CO 53 & 54 /AHD/2012 PAGE NO DCIT VS. M/S VOWEL SECURITIES 9 JAN 06 223 4 ABB LIMITED 23NOV04 239 21918 5 24 NOV 04 761 7168L 0 8 DEC 04 500 45347 3 13 DEC 04 500 449668 18 APR 04 2000 2541 538 702403 CROMPTON GREAVES 6 JUL 05 200 0 95573 0 7 JUL 05 300 0 142785 5 17 OCT 05 5000 3062 618 679032 5.4 I ALSO F EEL THAT THE ASSESS ING OFFICER WAS NOT| JUSTIFIED IN DRAWING ANY ADVERSE INFERENCE FROM THE BOAR D'S CIRCULAR REFERRED TO ABOVE. THE CIRCULAR ONLY STIPULATES CERTAIN GUIDELINES WHICH CAN BE APPLIED TO THE PARTICULAR FACTS AND CIRCUMSTANCES OF A GIVEN CASE. IN ANY CASE, EVEN THIS CIRCULAR IS NOT ADVERSE TO THE ASSESSEE FIRM , CONSIDERING THE PURCHASE AND SALES OF SHARES, THE PERIOD OF SHARE HOLDING, DELIVERY OF SHARES, PAYMENT FOR PURCHASE OF SHARES, REGISTRY OF SHARES IN ITS NAME ETC. ETC. I.T (SS).A 529 & 530 /AHD/20 11 & CO 53 & 54 /AHD/2012 PAGE NO DCIT VS. M/S VOWEL SECURITIES 10 5.5 THE ASSESSING OFFICER IN HIS ORDER HAS STAT ED THAT SOME PORTION OF SHARES CAN BE SAID TO BE ACQUIRED F ROM BORROWED FUNDS, WHEREAS THE FACT IS THAT DURING THE YEAR THERE IS INCREASE I N OWN; CAPITAL TO THE TUNE OF RS. 3. 21 CROR E AS AGAINST INCREASE IN INVESTMENT OF RS. 3.08 CRORE , WHICH SUGGESTS THAT NO PART OF INTEREST BEARING FUNDS WERE USED IN INVESTMENT IN SHARES. EVEN APPELLANT HAS ALREADY DISALLOWED INTEREST ON BY RS. 17.99 LACS IN RETURN OF INCOME, WHICH SUGGESTS THAT APPELLANT IS CARRYING INVESTMENT ACTIVITY IN SHARES AND HAD IT BEEN A TRADER, IT WOULD HAVE CLAIMED SUCH INTEREST. EVEN OTHERWISE, RECENTLY THE HON'BLE G UJARAT HIGH COURT IN CASE OF CIV V/S NIRAJ AMIDHAR SURTI REFERRED SUPRA, HAS HELD THAT M ERELY BECAUSE SHARES HAD BEEN PURCHASED FROM BORROWED FUNDS, IT WOULD NOT CHANGE THE NATURE OF TRANSACTION FROM INVESTMENT TO BUSINESS. 5.6 I ALSO FIND THAT THE SHARES WHICH HAVE BEEN PURCHASED BY THE APPELLANT - FIRM HAVE BEEN DELIVERED AND REGISTERED IN THE NAME OF THE FIRM THROUGH A DEMAT ACCOUNT AND THE TRANSACTIONS HAVE NO T BEEN SETTLED THROUGH A BROKER WITHOUT REGISTRATION IN THE NAME OF THE FIRM. FURTHER, DIFFERENT BROKER - CODES HAVE BEEN USED FOR F & O TRANSACTIONS AND FOR PURCHASES AND SALES OF SHARES. IN ANY CASE, THERE IS NO CONNECTION BETWEEN F & O TRANSACTIONS AN D SHARE TRANSACTIONS AS ASSUMED BY THE ASSESSING OFFICER. F & O TRANSACTIONS ARE ONLY IN DERIVATIVES AND NOT ACTUAL PURCHASES OR SALES TAKE PLACE. IN F & O TRANSACTIONS EVEN AT THE TIME OF ENTERING INTO A CONTRACT THERE IS NO INTENTION ON THE PART OF THE CO NCERNED PARTIES TO PURCHASE OR S ELL SHARES AND TRANSACTIONS ARE ULTIMATELY SETTLED WITHOUT ACTUAL PURCHASES AND SALES. 5.7 REGARDING TH E ITAT AHMEDABAD DECISION IN TH E CASE OF SUGAMCHAND C. SHAH (SUPRA), IN MY VIEW THE OBSERVATIONS OF THE HON'BL E TR IBUNAL HAVE TO BE CAREFULLY APPLIED TO A GIVEN CASE AFTER CONSIDERING ALL THE RELEVANT FA CTS OF THAT CASE. THE FINDINGS OF THE HON'BLE TRIBUNAL CONTAINED AT PARA - 19 OF THE ORDER ARE REPRODUCED BELOW : - '19. CONSIDERING THE TOTALITY AND PECULIARITY OF THE F ACTS OF THIS CASE, WE FIND THAT A SSESSEE IS NEITHER FULLY ACTING AS A TRADER NOR AS FULLY INVESTOR. DEMARCATION IS QUITE HAZY; THOUGH IN |THE BOOKS HE IS SHOWING ALL THE PURCHASES AS INVESTMENT BUT FREQUENCY OF TRANSACTION IN SEVERAL CASES IS SO LARGE AND HOLDING PERIOD IN MANY CASES IS SO SMALL - FROM 0 TO A WEEK OR I.T (SS).A 529 & 530 /AHD/20 11 & CO 53 & 54 /AHD/2012 PAGE NO DCIT VS. M/S VOWEL SECURITIES 11 SO THAT ASSESSEE IS DE FACTO AND PURCHASING SHARES AS TRADER. HE IS ALSO HOLDING SHA RES FOR LONG PERIOD - INCLUDING THAT THEY ARE HELD AS INVESTMENT. THEREFORE, A CRITERIA HAS BEEN FIXED FOR D ETERMINING AS TO WHEN HE IS ACTING AS TRADER AND WHEN AS INVESTOR. ACCORDINGLY, WE DECIDE FOLLOWI NG CRITERIA TO HOLD WHEN GAINS ARE TO BE TAXED AS PROFIT TO BE EARNED U NDER THE BUSINESS OR TO BE TAXE D AS SHORT TERM CAPITAL GAIN, WE HOLD THAT IF SHARES ARE NOT HELD EVEN SAY FOR A MONTH, THEN THE INTENTION IS CLEARLY TO REAP PROFIT BY ACTING AS A TRADER AND HE DID NOT INTEND TO HOLD THEM IN INVESTMENT PORT - FOLIO. WE BELIEVE THAT IF A PERSON INTENDS TO HOLD HIS PURCHASES OF SHARES AS INVESTMENT, HE WOULD WATCH THE FLUCTUATION OF RATES IN THE MARKET FOR WHICH A MINIMUM TIME IS NECESSARY, WHICH WE ESTIMATE AT ONE MONTH. WHERE SHARES ARE HELD FOR MORE THAN A MONTH, THEY SHOU LD BE TREATED AS INVESTMENT AND O N THEIR SALE SHORT TERM CAPITAL GAIN SHOULD BE CHARGED. WH EN SHARES ARE HELD FOR LESS THAN A MONTH, GAIN ON THEM SHOULD BE TREATED AS PROFI T FROM BUSINESS.' 5 .8 THE PECULIAR F ACTS OF THE ABOVE CASE WERE THA T THE APPELLANT WAS NEITHER FULLY ACTING AS TRADER NOR AS INVE STOR. THE FREQUENCY IN S EVERAL CASES WAS LARGE AND THE PERIOD OF HOLDING WAS ZERO TO A WEEK. IN THESE PECULIAR FACTS THE HON'BLE TRIBUNAL THOUGHT IT PROPER TO LAY DOWN SOME FORMULAE TO J RESOLVE THE CONTROVERSY. THESE FORMULAE CANNOT HAVE A UNIVERSAL APPLICATION HAVING REGARD TO THE PROVISIONS OF THE IT. ACT ESPECIALLY THE DE FINITION OF SHORT TERM CAPITAL A SSET CONTAINED IN SECTION 2(42A ) OF THE IT. ACT. ANOTHER IMPORTANT POINT TO BE NOTED IN THE PRESENT CASE IS THAT THERE IS CLEAR PROHIBITION IN THE PARTNERSHIP DEED DEBARRING TH E APPELLANT - FIRM F ROM INDULGIN G IN THE BUSINESS OF TRADING IN SHARES AND MUTUAL FUNDS. ANOTHER FEATURE IS THAT, AS ALREADY MENTIONED ABOVE, IN RESPECT OF SHARES WHICH HAVE BEEN HELD FOR SHORT PERIOD OF UP TO 6 MONTHS, THE AP PELLANT HAS INCURRED NET LOS S AND NOT PROFIT. THER EFORE, THE CASE OF SUGAMCHAND C. SHAH CANNOT BE APPLIED TO THE FACTS OF THE PRESENT CASE. 5 .9 CONSIDERING THE ENTIRE FACTS AND CIRCUMSTANCES AS MENTIONED ABOVE, I HAVE NO H ESITATION IN HOLDING THAT ON S ALE OF SHARES THE APPELLANT HAS EARNED ONLY SHORT TERM CAPITAL GAIN AND NOT BUSINESS INCOME. THE ASSESSING OFFICER IS ACCORDINGLY DIRECTED TO TREAT THE SAME AS SHORT T ERM CAPITAL GAIN AND LEVY TAX U /S.111 A. I.T (SS).A 529 & 530 /AHD/20 11 & CO 53 & 54 /AHD/2012 PAGE NO DCIT VS. M/S VOWEL SECURITIES 12 8 . WE HAVE HEARD BOTH THE PARTIES. RELEVANT FACTS NARRATED IN PRECEDING PARAGRAPHS ARE REPEA TED FOR THE SAKE OF BREVITY. THERE IS NO DISPUTE ON FACTS AND FIGURES STATED HEREINABOVE. THE REVENUE S ONLY ENDEAVOUR IS TO TREAT ASSESSEE S SHORT TERM CAPITAL GAINS IN QUESTION AS ITS BUSINESS INCOME. WE PUT UP A SPECIFIC QUERY AS TO WHETHER IT HAS EVE R BEEN TREATED AS A SHARE TRADER IN ORDER TO ASSESS SIMILAR CAPITAL GAINS AS BUSINESS INCOME IN PRECEDING OR SUCCEEDING ASSESSMENT YEARS. SHRI SOPARKAR TAKES US TO PAGE 65 OF THE PAPER BOOK DEMONSTRATING THAT THE ASSESSING OFFICER HIMSELF HAS ACCEPTED THE ASSESSEE TO BE AN INVESTOR IN COURSE OF A REGULAR ASSESSMENT FRAMED ON 23 - 03 - 2007 IN ASSESSMENT YEAR 2003 - 04 AND 2004 - 05. HE INVITES OUR ATTENTION TO PAGE 69 OF THE PAPER BOOK INDICATING ASSESSEE S DIVIDEND INCOME OF RS. 10,89,493/ - AND THAT TOO, PERTAIN ING TO THE IMPUGNED SHORT TERM CAPITAL INVESTMENTS. 9 . THERE IS FURTHER NO ISSUE THAT THE ASSESSEE FIRM HAS BEEN SET UP VIDE ITS PARTNERSHIP DEED AT PAGES 49 TO 50 OF THE PAPER BOOK. THIS DEED CONTAI NS A SPECIFIC CLAUSE BARRING IT FROM TRADING IN EQUITY SHARES AND UNITS ISSUED BY MUTUAL FUNDS. THE REVENUE DOES NOT DISPUTE IN THE COURSE OF HEARING BEFORE US THAT THE ASSESSEE HAS VALUED ITS INVESTMENTS AT COST PRICE, MAINTAIN SEPARATE PORTFOLIO FOR THE IMPUGNED INVESTMENTS AS FOLLOWED BY THE FACT THAT IT HAS TRANSACTED ON 92 DAYS AND 59 DAYS FOR SALE AND PURCHASE OF SHARES. 10. WE HAVE ALREADY NARRATED THAT THE RELEVANT HOLDING PERIOD OF ASSESSEE S INVESTMENTS IN ANY CASE MORE THAN 30 DAYS ON MOST OF I.T (SS).A 529 & 530 /AHD/20 11 & CO 53 & 54 /AHD/2012 PAGE NO DCIT VS. M/S VOWEL SECURITIES 13 THE OCCASIONS. THE ASSESSING OFFICER NOWHERE DOUB TS ASSESSEE S SPECIFIC PLEA THAT THERE HAS BEEN NO USAGE OF BORROWED FUNDS. WE FURTHER FIND THAT A CO - ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEE S GROUP CONCERN CASES IT(SS)A NO 531 AND 532/AHD/2011 DECIDED ON 22 - 03 - 2016 DCIT VS. M/S TEJAS SECURITIES HAS ALREADY CONSIDERED IDENTICAL FACTS TO DECIDE THE VERY ISSUE AGAINST THE REVENUE. LEANED DEPARTMENTAL REPRESENTATIVE FAILS TO POINT ANY DISTINCTION ON FACTS OR LAW. WE FURTHER NOTICE THAT THE HON BLE JURISDICTIONAL HIGH COURT IN TAX APPEAL 77 TO 81/2010 CIT VS. VAIBHAV SHAH DECIDED ON 27 - 06 - 2012 HOLDS THIS ISSUE AS PURELY A FACTUAL ONE TO BE ADJUDICATED IN VIEW OF VARIOUS RELEVANT PARAMETERS I.E. NATURE AND INTENTION OF AN ASSESSEE AT THE TIME OF INVESTMENT, ACCOUNTS TREATMENT, FREQUENCY AND MAGNITUDE OF TRANSACTIONS, SOURCE OF FUNDS, HOLDING PERIOD, TO NAME A FEW. WE MAKE IT CLEAR THAT THE REVENUE S ARGUMENTS DO NOT SATISFY EVEN A SINGLE PARAMETER IN ORDER TO CONCLUDE THAT ASSESSEE S SHORT TERM CAPITAL GAINS ARE IN FACT ITS BUSINESS INCOME. WE ACCORDING LY FIND NO REASON TO INTERFERE IN THE LOWER APPELLATE FINDINGS ON CONSISTENCY PRINCIPLE AS WELL AS MERITS. THE REVENUE S SOLE SUBSTANTIVE GROUND FAILS. SO IS ITS APPEAL ITA 529/AHD/ 2011 11. AFTER ARGUING FOR SOME TIME, LEARNED COUNSEL REPRESENTING A SSESSEE SUBMITS THAT IT NO LONGER WISHES TO PRESS ITS CHALLENGE TO LEGALITY OF THE IMPUGNED SECTION 153C PROCEEDINGS. THE ASSESSEE S CO 53/AHD/2012 IS DISMISSED AS NOT PRESSED. I.T (SS).A 529 & 530 /AHD/20 11 & CO 53 & 54 /AHD/2012 PAGE NO DCIT VS. M/S VOWEL SECURITIES 14 12. SAME ORDER TO FOLLOW IN LATTER ASSESSMENT YEAR ITA 530/AHD/2011 AN D ASSESSEE S CO 54/AHD/2012. 13. THE REVENUE S BOTH APPEALS ARE DISMISSED WHEREAS ASSESSEE S CROSS OBJECTIONS THEREIN ARE DISMISSED AS NOT PRESSED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 19 - 09 - 201 6 SD/ - SD/ - ( MANISH BORAD ) ( S. S. GODARA ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD : DATED 19 /09 /2016 AK / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FIL E. BY ORDER/ , / ,