ACIT, CIR-44, KOLKATA, KOLKATA vs. SHRI DAULAL KOTHARI, KOLKATA

This is an appeal filed by the revenue against the order of Ld. CIT(A)-13, Kolkata dated 20.03.2015 for AY 2010-11.

The sole issue involved in this appeal of revenue relates to characterization of the income arising from sale of shares by the assessee i.e, whether it attracts capital gains or it is to be treated as business income. 3. Briefly stated facts are that in this case, assessment was completed u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”) on 26.11.2012. During the year, the assessee had sold certain shares and shown Long Term Capital Gain of Rs.45,36,643/-, and also Short Term Capital Gain of Rs.13,86,748/-, totaling to Rs.59,23,391/-. During the course of assessment proceedings, the assessee was asked to explain as to why these transactions should not be treated as business transactions instead of transactions in investment as shown by the assessee. In reply, the assessee submitted that similar issue was involved in the earlier year and the submission filed in that year be treated as the submission filed in this year. Dissatisfied with the reply of the assessee, the AO relying on certain case laws, volume of business, frequency of transaction, repetitiveness of the transaction and facts of profit maximization treated the share transactions by the assessee as business activities and addition was made on the account of share business amounting to 2 Daulal Kothari., AY, 2010-11 Rs.59,23,391/-. Aggrieved, assessee preferred an appeal before the Ld. CIT(A), who allowed the assessee’s appeal and directed the AO to accept the income from share transaction as offered by the assessee i.e. Short Term Capital Gains and Long Term Capital Gains. Aggrieved, revenue is in appeal before us.

After hearing the rival submissions and carefully considering the same, we note that the issue involved is duly covered in favour of the assessee by the Coordinate Bench of this Tribunal in assessee’s own case in and ITA No. 195/Kol/2013 for AY 2008-09 dated 27.07.2015, wherein the Tribunal has held as under: “3. The only issue involved in the appeal relates to whether the income derived by the assessee on the purchase and sale of shares held by the assessee as investment and treating the gain from share transactions as business income or capital gain. 4. After hearing the rival submissions and carefully considering the same, we noted that the issue involved is duly covered in favour of the assessee by the order of the Hon’ble Calcutta High Court in G.A. No. 2489 of 2014 in ITAT No. 113 of 2014, in which the Hon’ble Calcutta High Court in the case of assessee’s wife vide order dated 01.09.2014 took the view on the similar issue in the assessment year 2007-08 that the income will be assessable not as business income but as capital gain. The relevant findings of the Hon’ble Calcutta High Court are reproduced as under:- “We find that the Tribunal while negating the conclusion of the revenue had referred to the order of the CIT(A). The relevant portion of the order passed by the CIT(A) is as under:- “5. The contentions o f the appellant as summed up above have been considered in the context of the findings arrived at by the Assessing Officer in his order while treating the income from share transactions as appellant’s business income. It is seen that the appellant has consistently been showing her shares as investments and the same has been accepted as such by the department in earlier years and the Assessing Officer has not brought in any fresh evidence in his Assessment Order for the present year to the contrary. He has simply ref erred to the magnitude of share transaction and co me to his own conclusions about the intentions of the appellant. The detailed evidences and write up given by the appellant in support her arguments, substantiate her claim o f being an investor. It is also clear that the assertion that she is an investor can only be challenged on the basis of her own record s and transactions which could indicate that it is actually doing trading business. This is not there in the appellant's ca se and the A.O. has failed to do so other than making a long winding analysis of the guidelines 'laid out in CBDT Circular No .4/20 07. The reliance of Assessing Officer on the decision of ITO Vs. Lily Exports Pvt. Ltd. of Hon'ble I.T.A.T. 'A' -Bench, Kolkata is based on different facts and cannot be applied in the appellant's case. In the aforementioned case the Hon'ble I.T.A.T. has referred to several factors while holding that the income was normal business profit referring to short period o f retention and other factors which are missing in the case of appellant. On the other hand, the decisions in the case of M/s. Astrix Enterprises and M/s. Eterna Steel & Investment Pvt. Ltd . Supra are squarely applicable in the appellant's case. It may also be mentioned that the matter had been considered in appeal in her own case for AY 1 992-93, and decided in her favour by the CIT(A )XXVI, Kolkata in his order dated 27-02-2002. Considering the above, the contention of the appellant is accepted and the income from share transactions of Rs. 43,59,492/- is to be treated as offered by appellant in its Long Term Capital Gain and Income-tax Return as Rs.18,39,391/- as Short Term Capital Gains."