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Income Tax Appellate Tribunal, MUMBAI BENCH “E” MUMBAI
Before: SHRI JOGINDER SINGH & SHRI N.K. PRADHAN
ORDER
PER N.K. PRADHAN, AM
This is an appeal filed by the revenue. The relevant assessment year is 2006-07. The appeal is directed against the order against the order of the Commissioner of Income Tax (Appeals)- 33, Mumbai and arises out of order u/s 143(3) of the Income Tax Act, 1961 (the ‘Act’).
The grounds of appeal filed by the revenue read as under:-
i. On the fact and circumstances of the case and in law the Ld. Commissioner of Income-tax (Appeals) has erred in directing the Assessing Officer that business income of Rs. 49,72,382/- should be treated as short term capital pain as shown by the assessee and CIT(A) failed to appreciate the facts that the assessee is engaged full time in the business of share trading in day to day basis buying and the Assessing Officer rightly treated the short term capital gains declared as business income of the assessee. ii. On the fact and circumstances of the case and in law the Ld. Commissioner of Income-tax (Appeals) has failed to appreciate the fact that the volume and frequency of transaction of shares clearly point to business activity done by the assessee and the share transaction were made mainly to earn business profit and the Assessing Officer rightly treated the short term capital gains as business income of the assessee. iii. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in not appreciating the facts that the assessee held most of the shares for a few days and sold them off, indicates that the only intention of the assessee is to book profit on sale of shares and Assessing Officer rightly treated the short term capital gains declared as business income of the assessee. iv. On the facts and circumstances of the case and in law, the Ld. CIT(A) failed to appreciate the facts that borrowed funds have been used by the assessee for buying business/shares transactions and the Assessing Officer had rightly treated the short term capital gains shown as business income of the assessee. v. The appellant prays that the order of the CIT(A) on the above grounds be reversed and that of the Assessing Officer be restored.
The assessee filed his return of income for the A.Y. 2006-07 on 30.10.2006 declaring total loss of Rs.1,81,771/-. In the statement of income the assessee has shown short term capital gains at Rs.49,72,382/-. In response to a query raised by the Assessing Officer (A.O.), the assessee filed the details. Having gone through the details, the A.O. found that the assessee had done transactions for purchase and sale just like a business activity as the transactions were around 230 and he was dealing in more than 68 scrips. The assessee had purchased shares and after selling the same, again bought the same shares on another date. The A.O. analysed the shares of Bharat Earth Movers purchased and sold by the assessee. The details are as under:
BOUGHT SOLD Name of Co Broker Date Qty Amt Broker Date Qty Amt Profit/Loss Bharat Earth Mover Fortis 30.05.05 1000 6,90,880.00 Fortis 08.06.05 1000 662,135,80 (28,744,20) --do-- --do-- 22.06.05 2000 12,41,810.55 --do-- 27.06.05 2000 12,58,245.47 16,434.92 --do-- --do-- 24.06.05 1000 6,24,250.00 --do-- 27.06.05 1000 6,29,122.73 4,872.73 --do-- --do-- 05.08.05 1000 6,61,304.50 --do-- 12.08.05 1000 7,44,847.50 83,543.00 --do-- --do-- 05.08.05 1000 6,79,286.37 --do-- 16.08.05 1000 8,01,395.00 1,22,108.63 --do-- --do-- 11.08.05 1000 7,09,357.47 --do-- 16.08.05 1000 8,01,395.00 9,20,375.53 --do-- --do-- 29.08.05 1000 7,85,411.25 --do-- 30.08.05 1000 7,90,571.25 5,160.00 --do-- --do-- 29.08.05 75 58,474.50 --do-- 30.08.05 75 59,917.50 1,443.00 --do-- --do-- 11.11.05 200 1,76,336.40 --do-- 16.11.05 200 1,75,348.00 (988.40) --do-- --do-- 11.11.05 300 2,64,387.70 --do-- 16.11.05 300 2,63,022.00 (1,365.70) --do-- --do-- 14.11.05 975 8,38,868.55 --do-- 23.11.05 975 8,40,713.25 1,844.70 --do-- --do-- 14.11.05 25 21,509.45 --do-- 05.12.05 25 23,468.23 1,958.78 --do-- --do-- 21.11.05 975 8,42,624.25 --do-- 05.12.05 975 9,15,261.02 72,636.77 --do-- --do-- 29.11.05 1000 9,09,985.24 --do-- 05.12.05 1000 9,38,729.25 28,744.01 --do-- --do-- 14.12.05 805 7,69,779.62 --do-- 09.12.05 805 8,35,525.60 65,745.98 --do-- --do-- 14.12.05 1195 11,42,716.34 --do-- 23.12.05 1195 11,92,610.00 49,893.66 --do-- --do-- 14.12.05 500 4,78,123.99 --do-- 02.01.06 500 5,48,900.00 70,776.01 --do-- --do-- 14.12.05 500 4,78,123.99 --do-- 13.01.06 500 6,52,621.00 1,74,497.01 --do-- --do-- 02.01.06 500 5,54,984.05 --do-- 13.01.06 500 6,52,621.00 97,636.95 Total 15050 119,28,214.22 15050 12,786,449.60 858,235.38
The A.O. found that the assessee purchased the shares and after selling them within a short period, purchased it again. The A.O. then asked the assessee vide his show cause notice dated 17.10.2008 to explain why the transactions should not be treated as business activity. He noted that the assessee has not answered the queries nor produced any supporting documents.
3.1 During the course of assessment proceedings, the A.O. asked the assessee to explain the use of borrowed money of Rs.9,77,000/- reflected in the balance sheet. The assessee stated before the A.O. that the said loan was used for purchase of shares. The A.O. found that (i) the assessee held most of the scrips for a few days only, in fact only few scrips were held for more than a month, (ii) the assessee purchased the scrips and after selling them within a short period, purchased the same scrips at another day and (iii) the frequency of the transactions carried out by the assessee was very high with large volume of shares.
The A.O. held that the assessee was engaged in an organized activity a purchase and sale of shares with a profit motive. Therefore, he held the amount of Rs.49,72,382/- shown as short term capital gains as business income and brought the same to tax.
Aggrieved by the order of the A.O., the assessee filed an appeal before the Ld. CIT(A). The Ld. CIT(A) allowed the appeal filed by the assessee on the reason that (i) an asset acquired by the assessee cannot always be treated as business asset but it is for the A.O. to prove that the same is stock-in-trade, if the assessee contends that it is an investment (ii) the assessee has clearly proved that no funds were borrowed for purchase of shares and that the same was invested in by own funds which clearly proves that the purchases were an investment, (iii) a person can hold assets as stock-in-trade as well as long term investment in the balance sheet, (iv) some shares sold have been acquired several years back and have been held for a long period, clearly indicating that they were not stock-in-trade of the assessee (v) the assessee has shown dividend income and the A.O. has not considered this issue at all, (vi) the A.O. has not taken into account STT paid or the history of the assessee in previous years, (vii) the assessee maintains a separate investment port- folio from that of business, (viii) volume of transaction is no indication of business, (ix) these shares are delivery based transactions and are in the nature of investment.
The Ld. CIT(A) thus agreed with the income of Rs.49,72,382/- being declared by the assessee as short term capital gains and allowed the appeal of the assessee.
Before us, the Ld. D.R. supported the order of the A.O. and relied on the decision in the case of (i) ITAT, ‘F’ Bench decision deated 24.09.2009 in the case of Shri V. Nagesh vs. ACIT, Mumbai, vide A.Y. 2005-06, (ii) ITAT, ‘E’ Bench decision dated 13.10.2010 in the case of Shri. Shailesh L. Shah, HUF vs. DCIT, Mumbai, vide ITA 3991 & 3992/Mum/2008 A.Ys. 2004-05 & 2005-06, (iii) ITAT ‘D’ Bench decision dated 31.08.2010 in the case of Shri Rakesh J Sanghvi vs. DCIT, Mumbai, vide ITA no. 4607/Mum/2008 for A.Y. 2005-06 & ITA No. 5710/Mum/2009 for A.Y. 2006-07, (iv) ITAT ‘D’ Bench decision dated 17.03.2010 in the case of Smt. Rekha Khandewal vs. ACIT, Mumbai, vide ITA No. 785/Mum/2009 for A.Y. 2005-06, (v) ITAT ‘I’ Bench decision dated 26.03.2010 in the case of Shri Sadhana Naberia, Mumbai, vide ITA No. 2586/Mum/2009, (vi) ITAT ‘E’ Bench decision in the case of M/s Synthetic Fibres Trading Co., vide ITA No. 3022/Mum/2009 & ITA No. 3444/Mum/2009.
The Ld. Counsel of the assessee relied on the order the Ld. CIT(A). He also filed a paper book containing (i) Computation of total income, (ii) Balance Sheet as at 31.03.2006, (iii) Statement of stock of shares as on 31.03.2006, (iv) Statement of short term capital gains, (v) Summary of short term capital gains, (vi) Copies of Form 10DB, (vii) Written Submissions before CIT (Appeals). The Ld. Counsel also placed reliance on the decision in the case of CIT vs. Gopal Purohit (2011) 336 ITR 287 (Bom) and filed a copy of it.
We have heard the rival submissions and perused the relevant material on record. In the computation of income for the impugned assessment year, the assessee has shown ‘Dividend (Others)’ amounting to Rs. 18,002/- under the head ‘Income from other sources’. This is a meagre amount in comparison to the investment made.
7.1 We begin with the decision relied on by the learned DR. In Mr. Rakesh J. Sanghvi (supra), the assessee in 14 scrips made a short term capital gain of Rs. 3,72,307/- where the holding period is less than 1 month. Similarly in the case of 16 scrips made a short term capital gain of Rs. 3,05,877/- where the holding period is between 1 month to 3 months. Similarly, the assessee in case of 13 scrips has earned profit of Rs. 6,03,264/- where the holding period is more than 3 months. The Tribunal held that the activity of frequent buying and selling of shares over a short span of period has to be treated as business being adventure in the nature of trade.
In Smt. Rekha Khandelwal (supra), as observed by the Tribunal the shares were not held as investment as in most of the cases they were held only for a few months. The Tribunal held that:
“The disclosure of the shares as investment in the balance sheet is certainly a factor to be reckoned with but if there are other facts or circumstances which throw doubt on the motive of the assessee in acquiring shares, the entry in the balance sheet or the books of account cannot override them and be taken as decisive of the assessee’s intention.” In Smt. Sadhana Nabera (supra), in all the transactions where capital gain shown during the year, the holding period was less than even 6 months. Most of the gain earned by the assessee is in the shares held for a period of 31 to 90 days to an extent of Rs. 30.81 lakhs and 90 day to 180 days i.e. Rs. 51.29 lakhs. In fact there were no shares which were held for more than 6 month on which gains were earned. Thus the maximum holding period was from 1 day to a maximum of 180 days. The Tribunal held the income from the sale of shares declared by the assessee as income from business activity.
In M/s. Synthetic Fibres Trading Co. (supra) the Tribunal found that the assessee had entered repeatedly in the same scrips which it had already disposed off and it goes to show that the motive of the assessee was to maximise the profit from the share transactions and not to remain invested for longer period which generally happens in the case of an investor. The involvement of the assessee in share transactions was carried on regularly in a systemic and organised manner. The short period of holding of shares clearly revealed that there was no intention of the assessee to hold the same for long term for earning dividend income. The Tribunal followed the decision in the case of Sarnath Infrastructure Ltd. vs. ACIT 120 TTJ as well as the guidelines issued by CBDT and held the transaction of purchase and sale of shares by the assessee as in the nature of trade.
7.2 We turn to the decision relied on by the learned counsel of the assessee. In the case of Gopal Purohit (supra), the Hon'ble High Court held:
“Insofar as Question (b) is concerned, the Tribunal has observed in paragraph 8.1 of its judgement that the assessee has followed a consistent practice in regard to the nature of the activities, the manner of keeping records and the presentation of shares as investment at the end of the year, in all the years. The revenue submitted that a different view should be taken for the year under consideration, since the principle of res judicata is not applicable to assessment proceedings. The Tribunal correctly accepted the position that the principle of res judicata is not attracted since each assessment year is separate in itself. The Tribunal held that there ought to be uniformity in treatment and consistency when the facts and circumstances are identical, particularly in the case of the assessee. This approach of the Tribunal cannot be faulted.” 7.3 It is a settled law that the doctrine of res judicata or estoppel by record does not apply to AO’s decisions. A finding or decision of the Income tax authorities in one year may be departed from in a subsequent year. It has been held so in New Jehangir Vakil Mills vs CIT 49 ITR 137 (SC) and Sanakarlinga vs. CIT 4 ITC 226, 241 (FB). The issue whether the nature of transaction of purchase and sale of share is investment or trading is purely a finding of facts. Therefore, each case involving a question of fact has to be decided on its own peculiar facts. It is not to be decided on the basis of finding of facts in another case.
7.4 Let us go back to the transactions reflected in the Paper Book (P/B) filed before us. The relevant pages are 5 to 10. We select a fairly large sample. We put it scrip-wise below:
CREST COMM Date Amount Date Amount Sold Profit/Loss Bought 29.06.2005 16,386.96 04.07.2005 18,475.50 2,088.54 29.06.2005 1,611,384.00 06.07.2005 1,948,209.01 336,825.01 30.06.2005 26,852.25 06.07.2005 33,020.49 6,168.24 30.06.2005 1,047,237.85 07.07.2005 1,276,221.33 228,983.48 06.07.2005 9,723.50 07.07.2005 6,544.72 (3,178.78) 23.01.206 153,280.00 25.01.2006 162,710.00 9,430.00 SOUTHERN IRON Date Amount Date Amount Sold Profit/Loss Bought 22.08.2005 1,053,772.70 24.08.2005 1,174,857.50 121,084.80 12.09.2005 5,371.28 13.09.2005 5,404.00 32.72 12.09.2005 666,038.72 16.09.2005 666,972.29 933.57 13.09.2005 675,765.00 16.09.2005 677,729.90 1,964.90 15.09.2005 6,392.00 16.09.2005 5,378.81 (1,013.19) 15.09.2005 6,278.00 19.09.2005 6,392.00 114.00 15.09.2005 704,620.26 21.09.2005 761,124.00 56,503.74 15.09.2005 5,728.63 21.09.2005 6,188.00 459.38 18.09.2005 5,728.62 04.10.2005 5,210.00 (518.62) 01.12.2005 573,972.50 02.12.2005 569,679.00 (4,352.60)
Date Amount Date Amount Sold Profit/Loss Bought 01.04.2005 168,471.25 04.04.2005 169,450.00 978.75 06.07.2005 827,229.32 11.07.2005 785,394.38 41,834.94 06.07.2005 91,832.68 13.07.2005 85,006.94 (6,825.74) 11.07.2005 85,988.49 13.07.2005 85,143.06 (845.43) 14.07.2005 920,444.80 18.07.2005 950,014.00 29,569.20 14.07.2005 920,444.80 20.07.2005 948,006.20 27,561.40 10.08.2005 418,601.50 11.08.2005 439,200.00 20,598.50 NAG CONS Date Amount Date Amount Sold Profit/Loss Bought 01.04.2005 55,900.00 05.04.2005 72,374.30 16,474.30 06.07.2005 388,747.55 15.07.2005 406,685.00 17,937.45 08.07.2005 398,770.50 15.07.2005 406,685.00 7,914.50 13.07.2005 795,490.05 15.07.2005 813,370.00 17,879.95 13.07.2005 795,490.05 03.08.2005 859,302.36 63,812.31 13.07.2005 397,745.03 08.08.2005 475,395.41 77,650.39 13.07.2005 397,745.03 09.08.2005 473,040.00 75,294.98 20.07.2005 151,568.10 09.08.2005 473,040.00 321,471.90 20.07.2005 15,156.81 12.08.2005 49,860.00 34,703.19 20.07.2005 3,031.36 16.08.2005 11,266.00 8,234.64 20.07.2005 666,899.63 02.09.2005 508,813.38 (158,086.25) 26.07.2005 1,627,476.75 02.09.2005 2,312,788.10 685,311.35 02.08.2005 460,018.00 02.09.2005 578,197.03 118,179.03 09.08.2005 1,010,110.20 02.09.2005 1,156,394.05 146,283.85 12.08.2005 59,732.39 02.09.2005 69,383.64 9,651.26 12.08.2005 985,584.40 04.10.2005 1,183,331.67 197,747.27 19.08.2005 11,172.30 04.10.2005 11,952.85 780.55 23.08.2005 1,131,979.94 04.10.2005 1,195,284.52 63,304.58 08.09.2005 1,211,299.60 07.10.2005 1,147,707.75 (63,591.85) 20.12.2005 1,237,171.33 30.12.2005 1,186,968.75 (50,202.58)
SESA GOA Date Amount Date Amount Sold Profit/Loss Bought 21.06.2005 571,250.08 22.06.2005 584,130.00 12,879.93 21.06.2005 571,250.08 23.06.2005 606,780.00 35,529.93 PETRONET LNG Date Amount Date Amount Sold Profit/Loss Bought 02.06.2005 300,150.00 08.06.2005 319,605.00 19,455.00 07.06.2005 205,410.00 09.06.2005 209,601.60 4,191.60 22.07.2005 1,892,127.50 25.07.2005 1,935,150.00 43,022.50 25.07.2005 6,805.20 26.07.2005 6,460.80 (344.40) 29.07.2005 6,397.20 01.08.2005 6,805.20 408.00 01.08.2005 1,285.25 02.08.2005 1,218.25 (67.00) 01.08.2005 4,883.95 12.08.2005 4,697.75 (186.20) 03.08.2005 1,206.25 12.08.2005 1,236.25 30.00 Date Amount Date Amount Sold Profit/Loss Bought 30.05.2005 628,029.56 07.06.2005 668,660.00 30,630.44 30.05.2005 638,029.56 08.06.2005 675,960.90 37,931.34 31.05.2005 641,280.00 15.06.2005 723,550.00 82,270.00 09.06.2005 671,922.65 16.06.2005 738,857.00 66,934.35 Date Amount Date Amount Sold Profit/Loss Bought 11.07.2005 3,295,936.46 13.07.2005 3,740,913.23 444,976.77 11.07.2005 209,747.79 14.07.2005 221,929.06 12,181.27 15.07.2005 620,121.56 18.07.2005 878,200.00 258,078.44 15.07.2005 620,121.56 20.07.2005 878,200.00 258,078.44 15.07.2005 1,240,243.13 20.07.2005 1,943,085.90 702,822.78 19.08.2005 462,996.24 24.08.2005 446,626.55 (16,369.69) 08.11.2005 303,456.99 10.11.2005 330,632.70 27,175.71 08.11.2005 202,304.66 11.11.2005 224,086.30 21,781.64 CAMLIN Date Amount Date Amount Sold Profit/Loss Bought 23.08.2005 139,816.27 29.08.2005 152,350.00 12,533.73 23.08.2005 279,632.53 01.09.2005 290,789.67 11,157.13 25.08.2005 16,091.90 01.09.2005 15,993.43 (98.47) 25.08.2005 146,290.00 02.09.2005 156,690.00 10,400.00 25.08.2005 130,198.10 05.09.2005 141,225.20 11,027.10 02.09.2005 17,031.85 05.09.2005 17,454.80 422.95 02.09.2005 137,803.15 04.10.2005 101,602.44 (36,200.71) 08.09.2005 18,192.90 04.10.2005 12,557.61 (5,635.29) 08.09.2005 147,197.10 24.03.2006 130,571.90 (16,625.29)
GAMMON INDIA Date Amount Date Amount Sold Profit/Loss Bought 11.05.2005 292,580.00 16.05.2005 304,390.00 11,810.00 11.08.2005 1,170,320.00 17.08.2005 1,194,104.50 23,784.50 18.11.2005 382,791.50 23.11.2005 378,225.00 (4,566.50) 18.11.2005 382,791.50 02.12.2005 401,196.68 18,405.18 22.11.2005 385,659.00 02.12.2005 401,196.68 15,537.68 24.11.2005 1,153,876.45 05.12.2005 1,213,179.90 59,303.45 27.12.2005 817,635.00 29.12.2005 798,364.25 (19,270.75)
VIVMED LABS Date Amount Date Amount Sold Profit/Loss Bought 09.01.2006 336,680.00 12.01.2006 356,708.57 20,028.57 09.01.2006 150,719.46 12.01.2006 159,448.73 8,729.27 09.01.2006 168,590.00 12.01.2006 178,140.00 9,550.00 09.01.2006 17,870.54 13.01.2006 19,363.26 1,492.72 10.01.2006 153,117.85 13.01.2006 163,308.99 10,191.14 10.01.2006 171,272.76 13.01.2006 180,523.90 9,251.14 SONATA SOFTWARE Date Amount Date Amount Sold Profit/Loss Bought 12.01.2006 81,040.00 17.01.2006 81,132.05 92.05 02.02.2006 78,084.00 13.03.2006 179,780.00 101,696.00 02.02.2006 117,126.00 17.03.2006 113,400.00 (3,726.00) 02.02.2006 77,459.24 17.03.2006 75,600.00 (1,859.24) 02.02.2008 116,188.86 21.03.2006 110,880.00 (5,308.86) 01.03.2006 66,871.31 21.03.2006 73,920.00 7,048.69 01.03.2006 100,306.97 21.03.2006 111,000.30 10,693.33 09.03.2006 168,563.75 21.03.2006 74,000.20 (94,563.55)
Date Amount Date Amount Sold Profit/Loss Bought 18.07.2005 468,850.90 22.07.2005 509,441.38 40,590.47 20.07.2005 468,056.10 22.07.2005 509,441.38 41,385.28 CADILA HEALTH CARE Date Amount Date Amount Sold Profit/Loss Bought 10.01.2006 1,013,885.50 16.01.2006 999,794.03 (14,081.47) 30.01.2006 260,231.73 01.02.2006 250,946.84 (9,284.89) 30.01.2006 1,301,158.67 01.02.2006 1,262,093.24 (39,065.43)
HIMACHAL FURT Date Amount Date Amount Sold Profit/Loss Bought 08.03.2006 19,958.00 16.03.2006 18,752.21 (1,205.79) 08.03.2006 470,060.00 16.03.2006 441,228.59 (28,831.41) 09.03.2006 234,300.00 17.03.2006 212,974.80 (21,325.20) 22.03.2006 208,323.18 28.03.2006 258,995.25 50,672.07 TATATIMKEN Date Amount Date Amount Sold Profit/Loss Bought 13.06.2005 455,021.25 23.06.2005 419,760.00 (35,261.25) 16.06.2005 299,388.20 23.06.2005 279,840.00 (19,548.20) 16.06.2005 449,082.30 27.06.2005 412,568.97 (36,513.33) 07.07.2005 266,040.00 15.07.2005 273,760.18 7,720.18 07.07.2005 1,729,260.00 18.07.2005 1,763,749.50 34,489.50 22.07.2005 739,127.70 04.10.2005 750,302.25 11,174.55 22.07.2005 739,127.70 24.10.2005 651,147.63 (87,980.08) 22.07.2005 739,127.70 24.10.2005 651,147.63 (87,980.08) 25.07.2005 371,427.55 27.10.2005 330,084.48 (41,343.07) 25.07.2005 125,183.75 01.11.2005 110,279.00 (14,904.75) 25.07.2005 239,763.70 21.11.2005 237,492.13 (2,271.57) 16.08.2005 151,027.66 21.11.2005 153,757.19 578,370.77 01.09.2005 726,098.75 21.11.2005 729,398.43 (572,341.56) 13.09.2005 790,624.00 21.11.2005 729,398.43 (61,225.57) 14.09.2005 660,284.18 21.11.2005 575,641.24 (84,642.94) 07.10.2005 805,649.30 22.11.2005 720,902.10 (84,747.20) 07.10.2005 805,649.30 30.12.2005 698,600.00 (107,049.30)
29.11.2005 798,646.30 03.01.2006 782,580.00 (16,066.30) 19.12.2005 388,315.00 04.01.2006 403,450.00 15,135.00 19.12.2005 388,315.00 12.01.2006 429,160.00 40,845.00 02.01.2006 761,288.05 16.01.2006 910,038.81 148,750.76 HEG Date Amount Date Amount Sold Profit/Loss Bought 06.02.2006 82,051.45 08.02.2006 83,850.00 1,798.55 15.02.2006 521,170.50 17.02.2006 506,100.00 (15,070.50) 15.02.2006 173,723.50 20.02.2006 174,845.95 1,122.45 15.02.2006 173,723.50 28.02.2006 167,910.00 (5,813.50)
7.5 The following table sums up the holding period of scrips (page 5-10 of P/B):
Period of Holdings Number of (in day) Transactions 1-30 214 31-90 14 91-120 6 121-210 1 7.6 A perusal of the transactions delineated at para 7.4 here-in-above shows that the assessee was engaged in the activity of repetitive purchase and sale of same scrip. It proves that the assessee was doing the transactions of trading in shares. The assessee has earned a meagre dividend of Rs. 18,002/- as shown in the computation of income filed along with the return of income.
7.7 In the case of Manoj Kumar Samdaria vs. CIT (2014) 45 taxmann.com 394 (Delhi), the Hon’ble Delhi High Court held that “where assessee was selling shares very frequently, volume and magnitude was very high and he earned only a meagre amount of dividend, income arising from sales of shares was assessable as business income”.
7.8 In this view of the matter, we are of the considered opinion that that the activity of frequent buying and selling of shares over a short span of period during the impugned year has to be treated as business being adventure in the nature of trade and the income has to be treated as business income and not as capital gains as argued by the learned counsel for the assessee.
The activity of repetitive purchase and sale of same scrip proves that the assessee was doing the transactions of trading in shares. For the aforesaid reasons, we reverse the order of the learned CIT(A) and restore the order of the A.O. with the conclusion that the sale of shares are treated as business transactions and that the profits be assessed as business profits and not as short term capital gains. However, the securities transaction tax paid by the assessee is allowable as a deduction u/s 88E, while computing the business profits. The A.O. is directed to ascertain the details of payments and allow the same as deduction.
In the result, the appeal is partly allowed. Order pronounced in the open Court on 12/05/2017