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

ITSSA 532/AHD/2011

• Counselvise Citation: [2016] 122 COUNSELVISE.COM (IT) 1611 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 6 month(s) 13 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 22-03-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 11-03-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 09-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS VIBHA BHALLA
• Assessee Lawyers: S N SOPARKAR WITH MR P M MEHTA
• Keywords: Business income
• Section: 143(3); 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH BEFORE: S H RI PRAMOD KUMAR , ACCOUNTANT MEMBER AND SHR I S. S. GODARA , JUDICIAL MEMBER THE DCIT, CENTRAL CIRCLE - 1, SURAT (APPELLANT) VS M/S. TEJAS SECURITIES, 7/2, PRAKASH SHOPPING CENTRE, ATHWALINES, SURAT - 395009 (RESPONDENT /CROSS OBJECTOR ) REVENUE BY : MRS. VIBHA BHALLA, CIT - D . R. ASSESSEE BY: S H RI S.N. SOPARKAR WITH MR. P.M. MEHTA , A.R. DATE OF HEARING : 11 - 03 - 2 016 DATE OF PRONOUNCEMENT : 22 - 03 - 2 016 / ORDER P ER : S. S. GODARA , JUDICIAL MEMBER : - THESE TWO REVENUE S APPEAL S FOR A.Y. 2008 - 09 AND 2009 - 10 FOLLOWED BY ASSESSEE S CROSS OBJECTION IN FORMER CASE , AR ISE FROM TWO SEPARATE ORDER S OF THE CIT(A) - II, AHMEDABAD DATED 01 - 07 - 2011 & 07 - 07 - 2011 I N APPEAL NO S. CIT(A) - II/CC.1/115/2010 - 11 & CIT(A) - I T (SS) A NO S . 531, 532 & CO NO. 205 / A H D/20 11 A SSESSMENT YEAR 200 8 - 09 TO 2009 - 10 I.T(SS).A NOS.531 TO 532 & CO NO. 201/AHD/2011 A.Y. 2008 - 09 TO 2009 - 10 PAGE NO DCIT VS. M/S. TEJAS SECURITIES 2 II/CC.1/109/2010 - 11; RESPECTIVELY , IN PROCEEDINGS UNDER SECTION 143(3) R.W.S. 153C OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. WE COME TO RIVAL PLEADINGS FIRST. THE REVENUE S APPEALS CHALLENGE THE LOWER APPELLATE ORDERS DELETING ADDITIONS OF RS. 2,59,43,473/ - AND RS. 1,01,11,129/ - THEREBY CONSIDERING ASSESSEE S SHARE PROFIT AS SHORT TERM CAPITAL GAINS INSTEAD OF BUSINESS INCOME; AS TAKEN BY THE ASSESSING OFFICER IN THE TWO IMPUGNED ASSESSMENT YEARS. THE ASSESSEE S GRIEVANCE IN ITS CROSS OBJECTION FILED IN THE FORMER CASE POSES CHALLENGE TO LEGALITY OF SECTION 153C PROCEEDINGS. 3. BOTH PARTIES EXPRESS AGREEMENT THAT THE SOLE SUBSTANTIVE ISSUE OF TREATMENT OF ASESSEE S SHARE PROFIT AS SHORT TERM CA PITAL GAINS OR BUSINESS INCOME IS COMMON IN THE TWO ASSESSMENT YEARS. WE PROCEED TO TREAT THE FORMER ASSESSMENT YEAR 2008 - 09 INVOLVING REVENUE S APPEAL IT (SS) A 531/AHD/2011 AND ASSESSEE S CO FILED THEREIN AS LEAD CASES. 4. WE COME TO RELEVANT FACTS. T HE ASSESSEE IS A PARTNERSHIP FIRM TRADING IN DERIVATIVES. IT EMERGES THAT THE DEPARTMENT CARRIED OUT A SEARCH IN CASE OF M/S. GARDEN SILK GROUP OF CASES ON 12 - 06 - 2008. THIS CULMINATED IN ISSUANCE OF SECTION 153C NOTICE DATED 31 - 12 - 2008. THE ASSESSEE FIL ED RETURN ON 31 - 03 - 2009 STATING INCOME OF RS. 8,18,67,567/ - . THE SAME STOOD PROCEEDED ON 24 - 03 - 2010. THE ASSESSING OFFICER TOOK UP SCRUTINY. HE NOTICED IN COURSE THEREOF ASSESSEE S SHARE TRANSACTIONS AND RELEVANT DETAILS AS FOLLOWS: - I.T(SS).A NOS.531 TO 532 & CO NO. 201/AHD/2011 A.Y. 2008 - 09 TO 2009 - 10 PAGE NO DCIT VS. M/S. TEJAS SECURITIES 3 THE ASSESSEE HAS SHOWN BUSINESS INCOME OF RS. 81874066/ - . THE ASSESSEE HAS ALSO SHOWN SHORT TERM CAPITAL GAIN OF RS. 34064983/ - ON SALE OF SHARES AND LONG TERM CAPITAL GAIN OF RS. 5369128/ - ON SALE OF SHARES. DURING THE COURSE OF ASSES SMENT, IT WAS NOTED THAT THE AS SESSE E HAS ENTERED IN TO FREQUENT TRANSACTIONS OF PURCHASE/SALE OF SHARES FROM WHICH SHORT TERM CAPITAL GAIN HAS BEEN SHOWN AS EARNED. THE ASSESSEE HAS OPENING STOCK OF RS. 30463511/ - (EQUITY SHARE OF RS. 30463511, MF UNITS OF RS. NIL) AND CLOSING BALANCE OF R S. 69632791/ - (EQUITY SHARES OF RS . 47129771, M F UNITS OF RS. 22503030 ). IN THE SHORT TERM CAPITAL GAIN STATEMENT, THE ASSESSEE HAS SHOWN SALE OF SHARES OF RS. 204752211/ - (EQUITY SHARES OF RS. 204752211, MF UNITS OF RS. NIL) AND PURCHASED SHARES OF RS. 191492612/ - (EQUITY SHARES OF RS. 191492612, MF UNITS OF RS. NIL). THE MAGNITUDE OF TRANSACTIONS WAS ALSO FOUND TO BE VERY LARGE. 5. THE ASSESSING AUTHORITY ISSUED A NOTICE DATED 18 - 04 - 2010 SEEKING TO TREATING ASSESSEE S PROFIT FROM SALE OF SHARES AND MU TUAL FUNDS AMOUNTING TO RS. 2,59,43,473/ - AS BUSINESS INCOME INTER ALIA ON THE GROUND THAT ITS SCRIPS HAD BEEN DEALT WITH AS AN ADVENTURE IN THE NATURE OF TRADE, FREQUENCY THEREOF INDICATED TRADING ELEMENT THEREIN AND SO WERE THE RELEVANT HOLDING PERIOD, Q UANTUM OF SCRIPS AND PRESENCE OF PROFIT MOTIVE IN THE CORRESPONDING TRANSACTIONS. 6. THE ASSESSEE FILED ITS REPLY ON 18 - 04 - 2010. IT PLEADED TO HAVE ENTERED INTO CORRESPONDING SHARES AND MUTUAL FUND TRANSACTIONS AS INVESTMENT NOT INVOLVING ANY TRADING A DVENTURISM. IT TERMED ITS PROFITS THEREFROM AS MERELY INCIDENTAL ARISING FROM ITS SHARES AND MUTUAL FUND INVESTMENTS. THE ASSESSEE STATED THAT THE RELEVANT FINANCIAL YEAR INVOLVED INVESTMENTS AT COST OF RS. 7,37,69,971/ - AS ON 31 - 03 - 2008. NEXT SUBMISSIO N WAS THAT MERE NUMBER AND FREQUENCY OF I.T(SS).A NOS.531 TO 532 & CO NO. 201/AHD/2011 A.Y. 2008 - 09 TO 2009 - 10 PAGE NO DCIT VS. M/S. TEJAS SECURITIES 4 TRANSACTIONS WOULD NOT FORM THE SOLE PARAMETER FOR AD - JUDGING THIS ISSUE. IT SUBMITTED THAT IT HAD ONLY DEALT WITH IN A FEW LISTED COMPANIES IN BSE AND NSE. AND THAT THE RELEVANT INTENTION WAS ONLY TO MAXIMIZE PROF IT FROM APPRECIATION IN MARKET VALUE OF INVESTMENTS WHICH WERE SOLD BECAUSE OF BULL RIDE IN STOCK MARKET. THE ASSESSEE HIGHLIGHTED THAT ITS ACCOUNT HAD ALREADY TREATED THE SAME AS INVESTMENTS ON COST PRICE. IT DREW ASSESSING OFFICER S ATTENTION TOWARDS B OARD S CIRCULAR DATED 01 - 06 - 2006 PRESCRIBING CERTAIN TEST ON THE ISSUE. THE ASSESSEE FURTHER RAISE S AN ALTERNATE PLEA THAT IF ITS SHARES AND MUTUAL FUNDS PROFITS ARE TREATED AS BUSINESS INCOME, NECESSARY COROLLARY WOULD BE THAT THE SAID GAINS ARISING IN C ASE OF BONUS SHARES DESERVE TO BE TREATED AS CAPITAL GAINS ONLY SINCE RECEIVED AS A PART OF CAPITAL INVESTMENTS. 7. THIS CASE FILE REVEALS THAT THE ASSESSING OFFICER DID NOT GET IMPRESSED WITH ASSESSEE S MULTI - FACETED SUBMISSION NARRATED HEREINABOVE. HE QUOTED A CATENA OF CASE LAWS ON THIS ISSUE FIRST. HE OBSERVED THAT ASSESSEE S MOTIVE IN EARNING THE IMPUGNED PROFITS IN VIEW OF THE RELEVANT HOLDING PERIOD RANGING FROM ONE MONTH TO THREE MONTHS WAS TO EARN TRADING RETURNS. THE ASSESSING OFFICER PREP ARED A TABULATION OF HOLDING PERIOD REVEALING 32, 42, 35 AND 51 TRANSACTIONS IN 1 - 30 DAYS, 31 - 91 DAYS, 91 - 180 DAYS AND 181 - 365 DAYS RESPECTIVELY. HE TOOK NOTE OF FREQUENCY OF SALE OF SHARES TO BE REGULAR THROUGHOUT THE YEAR. RELEVANT PREVIOUS YEAR INVOL VED 85 PURCHASED TRANSACTIONS AND 67 SALE TRANSACTIONS. THE ASSESSING OFFICER WAS OF THE OPINION THAT FACTS OF THE INSTANT CASE INDICATED THE I.T(SS).A NOS.531 TO 532 & CO NO. 201/AHD/2011 A.Y. 2008 - 09 TO 2009 - 10 PAGE NO DCIT VS. M/S. TEJAS SECURITIES 5 ASSESSEE TO BE INVOLVED IN REGULAR BUSINESS OF SHARES NOT GIVING RISE TO ANY NEED FOR FUNDS AS IN CASE OF AN INV ESTOR. HE REMARKED THAT THE ASSESSEE S INTENTION PRE - DOMINANTLY APPEARED TO ACQUIRE CONTROLLING INTEREST IN THE CORRESPONDING CORPORATE ENTITY. THE ASSESSING OFFICER S VIEW WAS THAT THESE SHORT TERM TRADING PROFITS WERE ONLY AN EXTENDED ARM OF THE REGUL AR DERIVATIVE BUSINESS . HE WOULD GO THROUGH ASSESSEE S OPENING STOCK OF RS. 3,04,63,511/ - AND CLOSING STOCK OF RS. 6,96,32,791/ - OF THE RELEVANT INVESTMENTS TO CONCLUDE THAT THE ASSESSEE WAS IN FACT INVOLVED IN SHARES TRADING AND ITS IMPUGNED PROFITS THER EFROM HAD TO BE TREATED AS BUSINESS INCOME IN ASSESSMENT ORDER DATED 29 - 10 - 2010. 8. THE CIT(A) REVERSES ASSESSING OFFICER ACTION AS UNDER: - 5.1 I HAVE GIVEN A CAREFUL CONSIDERATION TO THE BASIS GIVEN BY THE ASSESSING OFFICER FOR HIS FINDINGS AS A LSO THE DETAILED SUBMISSIONS MADE ON BEHALF OF THE APPELLANT - FIRM AND ALSO PERUSED THE DECISIONS CITED BY THE LEARNED A.R. IN MY VIEW THE QUESTION IN THE PRESENT CASE HAS TO BE CONSIDERED AND DETERMINED ON THE BASIS OF THE FACTUAL POSITION WHICH EMERGES F ROM THE RECORDS AND FROM THE DISCUSSION GIVEN ABOVE. IN THE WRITTEN SUBMISSIONS THE A PPELLANT HAS COMMENTED ON THE VARIOUS GROUNDS INDICATED BY THE ASSESSING OFFICER FOR TREATING THE SHORT TERM CAPITAL GAIN AS BUSINESS INCOME. THE MOST IMPORTANT POINT WHIC H 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 OFF ICER HAS MENTIONED THAT THE SHARES WERE PURCHASED WITH THE MOTIVE OF SELLING WITHIN A SHORT PERIOD OF TIME RANGING FROM ONE MON TH TO THREE MONTHS WITH THE MOTIVE TO EARN QUICK BUSINESS PROFIT. IN THIS REGARD HE HAS ALSO BRUSHED ASIDE THE TERM AND CONDITION IN THE PARTNERSHIP DEED DEBARRING THE FIRM TO ENGAGE IN TRADING OF SHARES AND MUTUAL FUNDS. HAVING REGARD TO THE CLEAR FACT S OF THIS CASE, I DO NOT FIND ANY SUBSTANCE IN THIS ASSUMPTION OF THE ASSESSING OF FIC ER. FROM THE DETAILS FURNISHED, 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 NOS.531 TO 532 & CO NO. 201/AHD/2011 A.Y. 2008 - 09 TO 2009 - 10 PAGE NO DCIT VS. M/S. TEJAS SECURITIES 6 VAR IOUS PERIODS RANG ING FROM 1 DAY TO 180 DAYS, APPELLANT HAS INCURRED LOSS OF AROUND RS. 1.27 CRORES. THERE COULD HAVE BEEN NO MOTIVE TO INCUR SUCH LOSS BY WAY OF SHORT TERM CAPITAL LOSS AND GET A SET OFF AGAINST SHORT TERM CAPITAL LOSS AND GET A SET OFF AG AINST SHORT TERM CAPITAL GAIN WHICH WOULD SAVE TAX @ 10% . THE APPELLANT COULD HAVE VERY WELL SHOWN THE ABOVE LOSS AS BUSINESS INCOME WHICH WOULD HAVE SAVED SUBSTANTIALLY MORE TAX. FURTHER, THE STIPULATION OF THE PARTNERSHIP DEED REPRODUCED ABOVE IS CLEAR AND CATEGORICAL. WHILE THE FIRM IS PERMITTED TO CARRY ON TRADING IN BONDS, DEBENTURES AND DERIVATIVES, IT IS DEBARRED FROM ENGAGING IN TRADING IN SHARES AND MUTUAL FUNDS. THE PARTNERSHIP DEED IS A LEGAL DOCUMENT AND IS BINDING ON ALL THE PARTNERS. THERE ARE FOUR PARTNERS IN THE APPELLANT - FIRM AND THE TERMS AND CONDITIONS OF THE PARTNERSHIP DEED ARE BINDING ON THEM. IF A PARTNERSHIP FIRM FLOUTS MANDATORY PROVISIONS OF THE PARTNERSHIP DEED WHICH IS A LEGAL CONTRACTUAL AGREEMENT, THE OPPOSING PARTNERS CAN A LWAYS CHALLENGE AND ALL THE LEGAL CONSEQUENCES WOULD FOLLOW. FURTHER, A LEGAL DOCUMENT HAS TO BE READ AS A WHOLE AND NOT IN PIECEMEAL AND ON SELECTIVE BASIS. WHILE THE ASSESSING OFFICER ACCEPTS THE AUTHENTICITY OF THE ONE PART OF THE PARTNERSHIP DEED HE HA S 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 HAVE BEEN MAINTAINED FOR THE BUSINESS ACTI VITY AND FOR THE INVESTMENT ACTIVITY. INVESTMENT IN SHARES, FROM THE VERY BEGINNING, HAS BEEN REFLECTED AT COST PRICE IN THE BALANCE SHEET UN DER THE HEAD INVESTMENT AND WAS NEVER REFLECTED IN TRADING AND P&L ACCOUNT EVEN IF THE MARKET VALUE OF SHARES WENT FOLLOWED BY THE APPELLANT - FIRM FOR THE PAST SEVERAL Y EARS. THE ASSES SING OFFICER HAS NOT REJECTED THESE BOOKS OF ACCOUNT AND HE HAS NOT DISTRIBUTED THE QUANTUM OF THE INCOME. HE HAS ONLY TREATED THE SHORT TERM CAPITAL GAIN AS BUSINESS INCOME. ANOTHER IMPORTANT POINT IS THAT THE APPELLANT HAS BEEN FOLLOWING THE SAME SYSTE M OF ACCOUNTING MUCH PRIOR TO THE INSERTION OF SECTION 111A IN THE I.T. ACT WITH EFFECT FROM 1.4.2005. THIS SHOWS 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. 5.3 I ALSO FIND THAT THE TRANSACTIONS CANNOT BE SAID TO BE FREQUENT TRANSITIONS OF PURCHASES AND SALES WITH A VIEW TO EARN QUICK PROFIT. A TRADER IN SHARES WOULD PURCHASE AND SELL SHARES FREQUENTLY WITHIN A SHORT PERIOD OF TIME. IN THE P RESENT CASE, AS PER DETAILS GIVEN A BOVE I.T(SS).A NOS.531 TO 532 & CO NO. 201/AHD/2011 A.Y. 2008 - 09 TO 2009 - 10 PAGE NO DCIT VS. M/S. TEJAS SECURITIES 7 THE NET SHORT TERM CAPITAL GAIN ENTIRELY COMPRISES OF SALES OF SHARES OF RNRL. AS MENTIONED ABOVE, THE SHARES OF THIS COMPANY WERE PURCHASED FROM 5 TH APRIL, 2007 TO 2 ND JULY, 2007. THESE SHARES WERE HELD BY THE APP ELLANT FOR VARIOUS PERIODS RANGING FROM 246 DAYS TO 334 DAYS AND WERE SOLD ON 4 TH MARCH, 2008 ON ONE DAY. OBVIOUSLY, THIS WAS DONE BY THE APPELLANT HAVING REGARD TO THE MARKET TREND. IT IS ALSO SIGNIFICANT TO NOTE THAT THE SHARES OF THIS COMPANY WERE ACC UMULATED WITHOUT ANY SALES HAVING TAKEN PLACE BEFORE PURCHASE OF TOTAL ACCUMULATED SHARES OF PARTICULAR SCRIPT. THEREAFTER, THE SHARES WERE HELD FOR SUFFICIENTLY LONG PERIOD OF TIME. IN MY VIEW THERE CAN BE NO ASSUMPTION THAT THE MOTIVE WAS TO TRADE IN S HARES OF THIS COMPANY. I ALSO FIND THAT SIMILARLY I N RESPECT OF OTHER SCRIPS ALSO THE SHARES ARE NOT FREQUENTLY PURCHASED AND SOLD BUT ARE PURCHASED FROM TIME TO TIME AND THEREAFTER ACCUMULATED SHARES WERE SOLD. EVEN THE ASSESSEE FIRM HAS NOT INVOLVED IT SELF IN HEDGING TRANSACTIONS OF SHARES. SUMMARY OF SOME TRANSACTIONS ARE AS UNDER: - STATEMENT OF SCRIP GAIN ON INVESTMENTS DURING THE Y EAR 2007 - 08 DATE OF PURCHASE DATE OF SALE ACQ. NOS. NOS. ACQ. R S RS. SALE NOS NOS. SALE VALUE RS. STCG R S. GMDC 30 JUL 07 2500 517087 GMDC 12 OCT07 2500 937458 12FEB 08 5000 184770 5 393160 HINDUSTAN COPPER 7 NOV 07 1000 427000 HINDUSTAN COPPER 10 DEC 07 500 220896 HINDUST AN COPPER 2 JAN 08 3500 200065 5 1 I.T(SS).A NOS.531 TO 532 & CO NO. 201/AHD/2011 A.Y. 2008 - 09 TO 2009 - 10 PAGE NO DCIT VS. M/S. TEJAS SECURITIES 8 13FEB 08 5000 26585 51 5000 143783 2 - 1220719 RIIL 5 APR 07 1000 121142 3 RIIL . 10 MAY 07 1000 307682 8 RI LL 23 MAY 07 1500 41889 31 RIIL 2 JUL 07 1000 24397 38 RIIL 2 JUL07 1000 21637 09 14FEB 08 5500 13080 63 0 5500 795940 8 - 5121222 INFOSYS 4 AUG 08 12 JUL 07 1000 16956 32 1000 191832 7 222695 INFOSYS 12OCT06 12 JUL 07 350 70970 8 350 677168 5 - 38022 INFOSYS 21 OCT 06 12 JUL 07 251 524524 251 481694 - 42830 INFOSYS 3 JAN 07 12 JUL 07 500 11519 3 3 500 959551 - 192382 LAXMI MACHINE 15SEP 06 90 21077 9 LAXMI MACHINE 15SEP06 400 94357 8 I.T(SS).A NOS.531 TO 532 & CO NO. 201/AHD/2011 A.Y. 2008 - 09 TO 2009 - 10 PAGE NO DCIT VS. M/S. TEJAS SECURITIES 9 1 APR 07 490 11543 57 7 490 409322 - 94036 5.4 I ALSO FEEL THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN DRAWING ANY ADVERSE INFERENCE FROM THE BOARD S CIRCULAR REFERRED TO ABOVE. THE CIRCULAR ONLY STIPULATES CE RTAIN 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 OF SHAREHOLDING, DELIVER Y OF SHARES, PAYMENT FOR PURCHASE OF SHARES, REGISTRY OF SHARES IN ITS NAME ETC ETC. 9. WE HAVE HEARD BOTH THE PARTIES. CASE FILE PERUSED. THE SOLE ISSUE ON MERITS IS AS TO WHETHER THE ASSESSEE PROFITS OF RS. 2,59,43,473/ - ARE TO BE TREATED AS SHORT TE RM CAPITAL GAINS ARISING FROM INVESTMENTS OR BUSINESS INCOME. WE HAVE ALREADY NARRATED RELEVANT FACTS IN PRECEDING PARAGRAPHS. THERE IS NO DISPUTE THAT THE ASSESSEE HAS NOT USED ANY BORROWED FUNDS IN ITS SHARE TRANSACTIONS. HON BLE JURISDICTIONAL HIGH C OURT IN TAX APPEAL 77 TO 78 OF 2010 CIT VS. VAIBHAV J. SHAH DECIDED ON 27 - 06 - 2012 HOLDS THAT THIS ISSUE HAS TO BE ADJUDICATED IN VIEW OF NO. OF SHARES SALE/PURCHASE TRANSACTIONS, VOLUME, FREQUENCY, CONTINUITY AND REGULARITY FOLLOWED BY NECESSARY INFERENCE TO BE DRAWN FROM MAGNITUDE OF TRANSACTIONS AND HOLDING PERIOD ETC. A PERUSAL OF THE CASE FILE REVEALS THAT THE ASSESSEE HAS ALWAYS BEEN TREATED AS AN INVESTOR AND NOT A TRADER. CASE RECORDS CONTAINED CIT(A) S DIFFERENT ORDERS; ALL DATED 07 - 07 - 2011 IN AS SESSMENT YEARS 2003 - 04 TO 2007 - 08 TREATING ASSESSEE S SHORT TERM CAPITAL GAINS/LOSSES OF RS. 2,12,522/ - , RS . 1,45,680/ - , RS. 3,10,332/ - , RS . 9,63,528/ - AND RS. 17,32,831/ - NOT AS BUSINESS LOSSES. THE REVENUE DOES NOT POINT OUT ANY EXCEPTION IN THE IMPUGNE D I.T(SS).A NOS.531 TO 532 & CO NO. 201/AHD/2011 A.Y. 2008 - 09 TO 2009 - 10 PAGE NO DCIT VS. M/S. TEJAS SECURITIES 10 ASSESSMENT YEAR. IT ALSO DOES NOT INDICATE THAT THE SAME HAVE NOT ATTAINED FINALITY TILL DATE OR ANY LITIGATION THEREFROM IS PENDING IN ANY HIGHER FORUM. IT IS FURTHER TO BE SEEN FROM THE CASE FILE PAGES 51 - 60 THAT THE ASSESSEE S PARTNERSHIP DEED CO NTAINS A NEGATIVE COVENANT THAT ITS BUSINESS SHALL NOT INCLUDE TRADING IN EQUITY SHARES AND MUTUAL FUNDS UNITS AS UNDER: - THE BUSINESS OF THE PARTNERSHIP SHALL NOT INCLUDE TRADING IN EQUITY SHARES AND UNITS ISSUED BY MUTUAL FUNDS. THE PARTNERSHIP, CAN H OWEVER, INVEST THE FUNDS OF THE PARTNERSHIP INTO EQUITY SHARES THROUGH THE PRIMARY OR SECONDARY MARKET OR THROUGH ANY PORTFOLIO MANAGEMENT SCHEMES RECOGNIZED BY THE SECURITIES AND EXCHANGE BOARD OF INDIA AND/OR IN UNITS OF MUTUAL FUNDS AND SUCH EQUITY SHAR ES/UNITS SHALL CONSTITUTE THE INVESTMENT PORTFOLIO OF THE PARTNERSHIP AND NOT STOCK IN TRADE 10. WE PROCEED FURTHER AND FIND THAT THE ASSESSEE HAS ALWAYS VALUED ITS INVESTMENTS AT COST PRICE AND NOT MARKET PRICE. ITS SHORT TERM CAPITAL GAINS READ THE I MPUGNED SUMS OF RS. 2,59,43,473/ - COMPRISING A SUM OF RS. 2,95,48,114/ - FROM A SINGLE SCRIP NAMELY M/S. RELIANCE NATURAL RESOURCES LT D. PURCHASED ON 5 TH APRIL, 10 TH MAY, 23 RD MAY AND 2 ND JULY 2007 (THIS LAST DAY INVOLVES THREE TRANSACTIONS). THIS FOLLOWED SALE OF THE SCRIP INVOLVING ALL SHARES ON 04 - 03 - 2008. THE SAME MAKES IT CLEAR THAT THE ASSESSEE S HOLDING PERIOD OF THESE SHARES RANGING FROM 8 TO 11 MONTHS DURING WHICH NOT EVEN A SINGLE SHARE WAS SOLD. IF WE EXCLUDE THIS SCRIP, WHAT IS LEFT IS NET RES ULT OF LOSS OF RS. 36 LACS APPROXIMA TE LY. WE CONFRONTED THE REVENUE WITH ALL THIS FACTUAL EVIDENCE . IT FAILS TO CONTROVERT THE LOWER I.T(SS).A NOS.531 TO 532 & CO NO. 201/AHD/2011 A.Y. 2008 - 09 TO 2009 - 10 PAGE NO DCIT VS. M/S. TEJAS SECURITIES 11 APPELLATE AUTHORITIES FINDINGS THAT THE ASSESSEE HAS ALWAYS BEEN TREATING ITS SHARES AND MUTUAL FUNDS IN QUESTION AS INV ESTMENTS BY MAINTAINING A SEPARATE ACCOUNT ACCEPTED FOR THE LAST MANY YEARS. THIS IS NOT THE REVENUE S CASE THAT ASSESSEE HAS BEEN ENGAGED IN ANY INTRA - DAY SALE/PURCHASE TRANSACTIONS. WE REPEAT THAT ASSESSEE HAS CARRIED OUT 85 PURCHASE TRANSACTIONS AND 6 7 SALE TRANSACTIONS DURING THE RELEVANT PREVIOUS YEAR . MEANING THEREBY THAT THERE IS NO TRANSACTION CARRIED OUT IN MORE THAN OF THE RELEVANT PREVIOUS YEAR. WE CONCLUDE IN THESE PECULIAR FACTS AND CIRCUMSTANCES THAT THE CIT(A) HAS RIGHTLY TREATED ASSESS EE S PROFITS OF RS . 2,59,43,473/ - A SHORT TERM CAPITAL GAIN AND NOT BUSINESS INCOME. WE REJECT REVENUE S CONTENTIONS SEEKING TO REVIVE ASSESSING OFFICER S FINDING HEREINABOVE. ITS ITA 531/AHD/2011 FAILS. OUR THESE F INDINGS ON MERITS RENDER ASSESS EE S C O NO.205/AHD/2011 AS TO HAVE BECOME INFRUCTUOUS ACCORDINGLY. 11. THIS LEAVES US WITH REVENUE S APPEAL IT (SS) A 532/AHD/2011 IN ASSESSMENT YEAR 2009 - 10 SEEKING TO REVIVE ASSESSING OFFICER S ACTION IN TREATING ASSESSEE S PROFITS OF RS. 1,01,11,129/ - FROM SAL E OF SHARES AND MUTUAL FUNDS AS BUSINESS INCOME INSTEAD OF SHORT TERM CAPITAL GAINS AS HELD BY THE CIT(A). BOTH PARTIES EXPRESS AGREEMENT THAT OUR FINDINGS IN ASSESSMENT YEAR 2008 - 09 HEREINABOVE SQUARELY COVER THIS SOLE SUBSTANTIVE GROUND. WE HOLD IN THE SE FACTS THAT THIS REVENUE S APPEAL SHALL ALSO FOLLOW SUIT AS IN PRECEDING ASSESSMENT YEAR HEREINABOVE. I.T(SS).A NOS.531 TO 532 & CO NO. 201/AHD/2011 A.Y. 2008 - 09 TO 2009 - 10 PAGE NO DCIT VS. M/S. TEJAS SECURITIES 12 12. THE REVENUE S APPEALS IT (SS) AS 531 & 532/AHD/2011 ARE DISMISSED. ASSESSEE S CO NO. 205/AHD/2011 IS DISMISSED AS HAVING BEEN RENDERED INFRU CTUOUS . ORDER PR ONOUNCED IN THE OPEN C OURT ON 22 - 03 - 201 6 SD/ - SD/ - ( PRAMOD KUMAR ) ( S. S. GODARA ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD : DATED 22 /03 /2016 AK / COPY OF ORD ER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,