ITA No. 1496/Ahd/2011, (Assessment Year: 2006-2007). Case: Asstt. Commissioner of Income Tax Vs Bhupendra Shantilal Shah. ITAT (Income Tax Appellate Tribunal)
| Case Number | ITA No. 1496/Ahd/2011, (Assessment Year: 2006-2007) |
| Counsel | For Appellant: D.C. Mishra, Sr. DR and For Respondents: K.P. Shah, AR |
| Judges | Rajpal Yadav, Member (J) and Manish Borad, Member (A) |
| Issue | Income Tax Act, 1961 - Section 143(3) |
| Judgement Date | August 28, 2015 |
| Court | ITAT (Income Tax Appellate Tribunal) |
Order:
Manish Borad, Member (A), (ITAT Ahmedabad 'C' Bench)
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This appeal of the Revenue is against the order dated 25th March, 2011 passed by CIT(A)-VI, Ahmedabad.
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The assessment was framed on 28.11.2008 by the Dy. CIT, Circle-7, Ahmedabad, under section 143(3) of the Income-tax Act, 1961 (hereinafter referred to as the Act) for Assessment Year 2006-07. The only issue in this appeal of Revenue is against the order of CIT(A) partly confirming addition made by the A.O. by way of treating short-term capital gains on the shares held for less than 30 days as business income, out of short-term capital gains of Rs. 23,69,436/- as shown by the assessee in his return of income. For this Revenue has raised the following ground of appeal:-
1. The ld. CIT(A) has erred in law and on facts in directing the Assessing Officer to treat the income of Rs. 23,69,436/- as short term capital gain as claimed by the assessee instead of business income, as assessed by the Assessing Officer.
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Brief facts of the case are that the assessee filed his return of income showing income from short term and long term capital gains, income from business of trading in shares of F & O market and income from other sources. During the course of assessment and after examining the transactions relating to purchase and sale of shares with reference to short term capital gain shown by the assessee, the AO made a finding that as the assessee is indulging in frequent buying and selling of shares of a very large scale continuously during the year as well as year after year and for the purpose of earning profit. The AO found no other justification for the frequent buying and selling of shares since it could not be for the purpose of investment and since the assessee was also engaged in shares trading in F & O segment he believed that the transactions of shares in purchase and sale falling under the category of short term capital gain and therefore taxed short term capital gain(STCG) as income from business. Aggrieved, assessee went in appeal before CIT(A).
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The CIT(A) referred to CBDT Circular No. 4/007 dated 15.6.2007, decision of Hon'ble Supreme Court in the case of CIT(Central), Calcutta v. Associated Industrial Development Co. Pvt. Ltd. 82 ITR 586 and other judgments in relation to examining the facts of the case on the principles laid down for finding that whether the transactions of purchase and sale of shares constitute under this activity or short term/long term capital or both depending upon the treatment given by the assessee in his books of accounts. However, the CIT(A) heavily relied on the decision of ITAT, Ahmedabad in the case of Shri Sugam Chand C. Shah v. ACIT, Circle-3, Surat in ITA No. 3554/Ahd/2008 for AY 2005-06 and 1932/Ahd/2009 for AY 2006-07 and made the following finding:-
"2.3 I have considered the facts of the case, assessment order and appellant's submission. Assessing Officer treated short-term capital gain disclosed by the appellant as business profit on the ground that appellant was not making investment but trading in shares. On the identical facts, ITAT Ahmedabad in the case of Shri Sugam Chand C. Shah v. ACIT, Circle-3, Surat in ITA Nos. 3554/Ahd/2008 for AY 2005-06 and 1932/Ahd/2009 for AY 2006-07 held that in cases the shares are held for more than 30 days, the transaction has to be categorized on an investment transaction whereas the sales held for a period upto 30 days, the same shall be treated as business transactions. In arriving at this decision, the ITAT Ahmedabad has considered several decisions of various benches of ITAT, High Courts and Supreme Court. The ITAT Ahmedabad has also considered the circular issued by the Central Board of Direct Taxes and has come to this considered finding the relevant extract of the order is quoted below:
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In respect of profit of Rs. 55,40,679/- being 'short-term capital gain' as claimed by the assessee and held as profits assessed under that business by two authorities, we find that in many cases there is delivery of shares and share were registered in the name of the assessee. The holding period of the shares is from '0' days to '366' days. In some cases, the frequency of transactions are apparently substantial as on one day the assessee has purchased several scripts and sold several of them on the same day.
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The question is whether therefore, merely from frequency of the transactions carried on by the assessee, he is treated as dealer in shares or still he is held as investor. As found in the case of Sarnath Infrastructure (P) Ltd. v. Asstt. CIT(supra) also, assessee adduced evidence to show that his holdings are for investment as recorded in the books of account. The holdings are valued at cost, and such accounting has been accepted by the Revenue in earlier years. There is no material to show that assessee has declared himself as a trader in shares and legal requirements therefor have been complied with. It is also a fact that he has not borrowed any money for investing in shares. Merely...
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