ACIT 32(2), MUMBAI vs. LAXMI M CHATURVEDI, MUMBAI

आदेश / O R D E R

Per Joginder Singh (Judicial Member) The Revenue is aggrieved by the impugned order dated 19/09/2014 of Ld. Commissioner of Income Tax, Mumbai. The sole ground agitated by the Revenue, before this Tribunal, is with respect to treating the business income as short term capital gains by the CIT(A) ignoring the sale pattern of sales, from sale of 106634 units of sales on which the assessee had hardly earned any dividend. 2. During hearing the learned D.R., Shri Kailash Kanojiya, defended the addition made by the Assessing Officer. On the other hand none was present for the assessee in spite of issuance of Registered AD notice. The assessee neither presented herself nor moved any adjournment petition. It seems that the assessee has nothing to say, therefore, we have no option but to proceed ex-parte, qua the assessee and tend to dispose of this appeal on the basis of material available on record. 2.1 The facts in brief are that the assessee declared income of Rs.1,59,46,840/- in her return filed on 08.10.2010, the income includes short term capital gains on sale of shares of Rs.1,03,50,765/-. The details filed by the assessee were submitted during assessment proceedings and thus the learned Assessing Officer assessed the total income at Rs.1,60,96,901/-. The assessee in her return declared short term capital gain of Rs.1,03,50,765/- on the sale of shares which was treated as business income by the Assessing Officer. On appeal before the learned CIT(A) the factual matrix along with various case laws was discussed by the learned CIT(A) along with the submissions of the assessee and ultimately found that the assessee was dealing in shares both as trader as well as holding the shares as investment and kept both the portfolio separately and the mode of valuation of stock was as investment and the stock held as stock-in-trade was treated differently. The CBDT circular No. 4 of 2007 dated 15.06.2007 was also considered and finally considering the decision from Hon'ble jurisdictional High Court in Yatish Trading Co. P. Ltd. along with the decision from Hon'ble Apex Court in CIT vs. Associate Industrial Development Co. 82 ITR 586 and held that there was no reason to treat the capital gain component as part of income. The Revenue is aggrieved and is in appeal before this Tribunal. 2.2 If the observation made in the assessment order, leading to addition made to the total income, conclusion drawn in the impugned order, material available on record, assertions made by the ld. respective counsel, if kept in juxtaposition and analyzed, we find that there were 160 scrips. It was observed by the Assessing Officer that out of 1066364 units 608956 units were sold within 15 days and 724123 units were sold within 30 days and 840593 units were sold within three months. The Assessing Officer asked the assessee as to why the income from these units should not be treated as business income. The stand of the assessee was that the assessee is trading in shares as well as making investment and whatever investment is made that is with intention to earn dividend. The Assessing Officer was of the view that motive for purchasing the original scrips was not investment since the holding period is less. The learned Assessing Officer relied upon various judicial pronouncements as mentioned in the assessment order and considering the frequency of sale of shares took a particular view. We note that the learned Assessing Officer has not quantified the scrips in a justifiable manner as is oozing out from para 3(4), page 2 of the assessment order and if the total figures are analysed these goes more than the total claimed scrips of 1066364. Identical mistake has been repeated in the impugned order. The stand of the assessee before the learned CIT(A) as well before this Tribunal is that separate accounts have been maintained by the assessee, i.e. for trading as well as investment. As soon as a particular scrip is purchased immediately it is booked either as stock in trade or as investment meaning thereby a particular treatment is given to a particular scrip. So far as frequency of sales is concerned the assessee finds support from the decision of in the case of Ashok Wadia 45 taxmann.com 182 (Del.) and the decision from Hon'ble jurisdictional High Court in Gopal Purohit 228 CTR 582. The learned CIT(A) has deliberated upon the issue with respect to magnitude of purchase and sale of shares, dividend income in relation to holdings. It is a well settled principle that the total turnover and the frequency of sale is not the sole indicator to prove that the assessee is trader in shares. It has been well defined by Hon'ble Apex Court in CIT vs. Associated Industrial Development Co. 82 ITR 586 and Hon'ble jurisdictional High Court in the case of Goapl Purohit wherein it was held as under: - “delivery based transaction should be treated as of the nature of investment transaction and profit therefrom should be treated as short term capital gain or long term capital gains depending upon the period of holding.” There is uncontroverted finding in the impugned order that the assessee maintained separate portfolio and mode of valuation of stock held as investment and the stock held as trade and the same were treated differently. The investment was valued at cost and was duly shown in the Balance Sheet whereas stock in the trade was valued at the cost or market price whichever was lower and the loss, if any, was accordingly claimed in the P & L Account. It is also an admitted position that the sales, held as investment, were sold by the assessee and was not claimed under section 88E of the Act meaning thereby the assessee has not claimed beneficial provision which were applicable to the shares held as stock in trade. So far as the observation that quantum being high cannot be the sole criteria to treat the portfolio as business income. The CBDT circular No. 4 of 2007 dated 15.06.2007 clarifies the position. The decision in CIT vs. Madan Gopal Radhalal 73 ITR 62 clarifies that there cannot be a presumption that every acquisition by a dealer in the particular commodity is an acquisition for the purposes of his business. In each case the intention has to be gathered from the conduct and facts of the case. The Hon'ble judicdictional High Court in Yatish Trading Company has laid down a principle. The closing stock valuation has been done at the time of purchase. Considering the totality of facts and the judicial pronouncements and on the basis of broad principle taken in the impugned order and various judicial pronounce- ments available and the consistent stand taken by the Tribunal in identical situation on the issue in hand, we find no infirmity in the conclusion of the learned CIT(A). In view of the above the appeal filed by the Revenue is dismissed. This order was pronounced in the open court in the presence of Ld. Representative from both sides at the conclusion of the hearing on 18/07/2016. Sd/- Sd/- (Rajesh Kumar) (Joginder Singh) लेखा सद�य / ACCOUNTANT MEMBER �या�यक सद�य / JUDICIAL MEMBER मुंबई Mumbai; �दनांक Dated : 18/07/2016 ÇAÑA P.S/.�न.स.