Dy. CIT Cir- 1 Jalgaon, Jalgaon v. Shri Chhatarmal Gokulchand Chhajer,, Jalgaon

ITA 699/PUN/2012 | 2008-2009
Pronouncement Date: 28-10-2013 | Result: Dismissed

Appeal Details

RSA Number 69924514 RSA 2012
Assessee PAN ABYPC2617C
Bench Pune
Appeal Number ITA 699/PUN/2012
Duration Of Justice 1 year(s) 6 month(s) 23 day(s)
Appellant Dy. CIT Cir- 1 Jalgaon, Jalgaon
Respondent Shri Chhatarmal Gokulchand Chhajer,, Jalgaon
Appeal Type Income Tax Appeal
Pronouncement Date 28-10-2013
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 28-10-2013
Date Of Final Hearing 21-10-2013
Next Hearing Date 21-10-2013
Assessment Year 2008-2009
Appeal Filed On 04-04-2012
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV JUDICIAL MEMBER AND SHRI R.K. PANDA ACCOUNTANT MEMBER ITA NO.699/PN/2012 A.Y. 2008-09 JT. COMMISSIONER OF INCOME TAX RANGE-1 JALGAON APPELLANT VS. SHRI CHHATARMAL GOKULCHAND CHHAJER K-2 MIDC AREA JALGAON PAN: ABYPC2617C RESPONDENT CO NO.29/PN/2013 (ARISING OUT OF ITA NO.699/PN/2012) (A.Y. 2008-09) SHRI CHHATARMAL GOKULCHAND CHHAJER K-2 MIDC AREA JALGAON PAN: ABYPC2617C CROSS OBJECTOR VS. JT. COMMISSIONER OF INCOME TAX RANGE-1 JALGAON RESPONDENT APPELLANT BY : SHRI WALIMB E RESPONDENT BY : SHRI VIN AY KAWADIA DATE OF HEARING: 21.10.2013 DATE OF ORDER : 28.10.2013 ORDER PER SHAILENDRA KUMAR YADAV JM THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-II [(IN SHORT CIT(A)- 2 II] NASHIK DATED 24-01-2012 FOR A.Y. 2008-09 ON TH E FOLLOWING GROUNDS. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A)-II NASHIK ERRED IN DIRECTING THE A. O. TO TREAT THE PROFITS / GAIN EARNED ON THE TRANSACTION OF PURCHASE AND SALE OF SHARES HELD FOR MORE THAN ONE MONTH AS SHORT TERM CAPITAL GAIN AS AGAINST TREATED BY THE AO UNDER THE HEAD BUSINESS INCOME 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE ORDER OF THE CIT(A) BE CANCELLED AND THAT OF THE A. O. BE RESTORED. 2. WHILE THE ASSESSEE HAS FILED CROSS OBJECTIONS WH EREIN THE HE HAS RAISED THE FOLLOWING GROUNDS: 1) RESPONDENT AN INDIVIDUAL WAS A FULL TIME MANAGING DIRECTOR IN M/S MAHAVIR PACKAGING (MANUFACTURERS OF CORRUGATED BOXES). IN ADDITION TO THIS HE WAS ALSO ENGAGED IN ACTIVITY OF TRADING IN FUTURES AND OPTIONS AND A LSO AN INVESTOR IN SECURITIES. 2) HE WAS INVESTING IN SECURITIES SINCE LAST 4-5 YEARS AND CONSISTENTLY SHOWING HIS INCOME THEREFROM AS EITHER STCG OR LTCG AS THE CASE MAY BE. THE SECURITIES WERE ALW AYS CLASSIFIED UNDER THE HEAD INVESTMENTS IN BALANCE SH EET. THIS WAS APPROVED BY CIT(A)-II NASIK IN EARLIER YE AR (A.Y. 2006-07) BY ACCEPTING THE ENTIRE GAIN AS CAPITAL GA IN. 3) FOR A.Y. 2008-09 UNDER THE IDENTICAL FACTS THE AO ACCEPTED THE ASSESSEE'S CLAIM OF LTCG TO THE EXTENT OF RS. 59 41 8197- WHICH IMPLIES THAT SHE HAS ACCEPTED THE ASSESSEE'S CLAIM REGARDING HOLDING OF INVESTMENT PO RTFOLIO. HOWEVER STCG WAS TREATED AS BUSINESS INCOME BY AO. 4) THUS IN VIEW OF THE TOTALITY OF FACTS AND CIRCUMST ANCES OF THE CASE THE DOMINANT PURPOSE OF THE TRANSACTIONS AND THE COMBINED EFFECT OF VARIOUS OTHER FACTORS INCLUDING THE CASE LAWS CITED THE APPELLANT PRAYED BEFORE LEARNED CIT (A)-II NASIK THAT THE INCOME FROM INVESTMENT IN SECURITIES MAY PLEASE BE TREATED AS SHORT TERM CAPITAL GAIN AS CL AIMED IN RETURN OF INCOME. 3 5) HOWEVER LEARNED CIT (A)-II NASIK DIRECTED THE AO TO TREAT THE PROFITS/GAINS EARNED ON THE TRANSACTION OF PURC HASE & SALE OF SHARES HELD FOR MORE THAN ONE MONTH AS STCG AS AGAINST TREATED BY THE AO UNDER THE HEAD 'BUSINESS INCOME'. 6) SINCE RESPONDENT WAS RELUCTANT TO LITIGATE FURTHER ; HE HAD NOT FILED ANY CROSS APPEAL BEFORE HON'BLE ITAT PUNE. 7) DURING F.Y. 2007-08 RESPONDENT TRANSACTED IN ONLY 18 SCRIPS ON DELIVERY BASIS & NEVER UNDERTOOK INTRA-DA Y SALE PURCHASE ACTIVITY. 8) FURTHER ON GOING THROUGH THE APPEAL EFFECT (TO THE ORDER OF CIT(A)-II) GIVEN BY THE AO VIDE ORDER DATED 12.0 3.12 IT CAN BE SEEN THAT ONLY 27% OF TOTAL SHORT TERM CAPIT AL GAIN AS CLAIMED BY RESPONDENT WAS APPROPRIATED UNDER HE AD 'BUSINESS'. THIS PROVES THE INTENTION OF THE RESPON DENT TO HOLD THE SHARES FOR INVESTMENT PURPOSES ONLY. 9) THEREFORE; THE RESPONDENT PRAYS THAT THE ENTIRE GA IN UNDER QUESTION MAY PLEASE BE TREATED AS SHORT TERM CAPITAL GAIN AS DISCLOSED IN RETURN OF INCOME OR WITHOUT PREJUDICE THE ORDER OF LEARNED CIT(A)-II NASIK MAY PLEASE BE CONFIRMED IN TOTO. 3. THE ASSESSEE IS AN INDIVIDUAL AND FULL TIME MANA GING DIRECTOR IN M/S. MAHAVIR PACKAGING. THE ASSESSEE A S AN INDIVIDUAL ALSO ENGAGED IN TRADING OF SHARES INCLUD ING FUTURES AND OPTIONS. THE ASSESSEE FILED HIS RETURN OF INCO ME OF FOR A.Y. 2008-09 ON 30-09-2008 DECLARING TOTAL INCOME OF RS.2 45 42 750/- WHICH CONSISTED OF SHORT TERM CAPI TAL GAINS OF RS.2 55 08 393/- AND LONG TERM CAPITAL GAINS OF RS. 59 41 819/-. THE ASSESSEE HAS BEEN DEALING IN SECURITIES FOR THE LAST 4-5 YEARS. THE ASSESSING OFFICER VIDE ASSESSMENT ORDER DATED 2 0-12-2010 PASSED U/S.143(3) OF THE I.T. ACT TREATED THE SHORT TERM CAPITAL GAINS (HEREINAFTER CALLED AS STCG) AS INCOME FROM B USINESS. MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHO RITY ON THE FOLLOWING GROUNDS. 4 1. THE AO ERRED IN FRAMING THE ASSESSMENT BY NOT APPRECIATING THE FACTS OF THE CASE BOOKS OF ACCOUN TS PRODUCED AND SUBMISSIONS MADE BY THE APPELLANT DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS. 2. THE AO ERRED IN NON CONSIDERING THE DECISION OF HON'BLE CIT(A)-II NASHIK FOR A.Y. 2006-07 IN CASE OF APPELLANT UNDER THE IDENTICAL SET OF FACTS. 3. THE AO MISINTERPRETED THE DECISION IN CASE OF CI T VS. GOPAL PUROHIT WHEREIN IT WAS CLEARLY HELD THAT MODU S OPERAND! OF ASSESSEE REMAINING THE SAME ASSESSEE'S CLAIM DESERVED ACCEPTANCE BY FOLLOWING THE RULE OF CONSIS TENCY. 4. THE AO-ERRED IN UNDERSTANDING THE SALE AND PURCH ASE OF APPELLANT UNDER F & 0 SEGMENT WHICH COMES TO 61% AND 63% RESPECTIVELY AND NOT 6 % AND 8% AS ALLEGED. 5. THE AO ERRED IN TREATING THE INCOME FROM SECURIT IES AS BUSINESS INCOME DESPITE THE FACT THAT THE AVG. PER IOD IN CASE OF APPELLANT IS 1.5 MONTHS (AS WORKED OUT BY A O HERSELF) AND AS PER SETTLED JUDICIAL OPINION IN RES PECT OF SHARES WITH FREQUENT TRANSACTIONS WHERE SHARES ARE HELD FOR MORE THAN A MONTH THEY SHOULD BE TREATED AS INVEST MENT AND ASSESSABLE AS SHORT TERM CAPITAL GAINS. 4. DURING THE COURSE OF APPELLATE PROCEEDINGS THE ASSESSEE MADE DETAILED SUBMISSIONS WHICH ARE DETAILED AS UND ER: 1. THE AO ERRED IN FRAMING THE ASSESSMENT BY NOT APPRECIATING THE FACTS OF THE CASE BOOKS OF ACCOUN TS PRODUCED AND SUBMISSIONS MADE BY THE APPELLANT DU RING THE COURSE OF ASSESSMENT PROCEEDINGS. 2. THE AO ERRED IN NON CONSIDERING THE DECISION OF HON'BLE CIT(A)-II NASHIK FOR A.Y. 2006-07 IN CASE OF APPELLANT UNDER THE IDENTICAL SET OF FACTS. THE AO FAILED TO 5 FURNISH ANY JUSTIFICATION FOR ADOPTING A DIVERGENT APPROACH FOR A.Y. 2008-09 CONTRARY TO THE FINDINGS OF HON 'BLE CIT(A)-II FOR A.Y. 2006-07. 3. WHEN THE HIGHER APPELLATE AUTHORITY HAS CONCLUSIVEL Y ACCEPTED THE BALANCE SHEET OF THE LAST YEAR IN WHIC H THESE SHARES WERE SHOWN AS INVESTMENTS THE AO CANNOT CHA NGE THE OPENING INVESTMENTS AS STOCK-IN-TRADE DURING TH E YEAR OTHERWISE IT WOULD BE CONTRARY TO THE STAND TAKEN B Y THE HIGHER AUTHORITY IN THE EARLIER YEARS. 4. THE AO MISINTERPRETED THE DECISION IN CASE OF CIT V S. GOPAL PUROHIT WHEREIN IT WAS CLEARLY HELD THAT 'MOD US OPERANDI OF ASSESSEE REMAINING THE SAME ASSESSEE'S CLAIM DESERVED ACCEPTANCE BY FOLLOWING THE RULE OF CONSIS TENCY.' FACTS OF THE ABOVE CITED ARE SQUARELY APPLICABLE TO THE C ASE OF THE APPELLANT. OBSERVATION OF THE HON'BLE BOMBAY HIGH C OURT N THE SAID CASE IS REPRODUCED BELOW 'THE ASSESSEE HAS FOLLOWED A CONSISTENT PRACTICE IN REGARD TO THE NATURE OF ACTIVITIES THE MANNER OF KEEPING RECORDS AND THE PRESENTATION OF SHARES AS INVESTMENT AT THE END OF THE YEAR IN ALL THE YEARS . THE TRIBUNAL CORRECTLY ACCEPTED THE POSITION THAT THE PRINCIPLE OF RES JUDICATA IS NOT ATTRACTED SINCE EA CH ASSESSMENT YEAR IS SEPARATE IN ITSELF. THE TRIBUNAL HELD THAT THERE OUGHT TO BE UNIFORMITY IN TREATMENT AND CONSISTENCY WHEN THE FACTS AND CIRCUMSTANCES AR E IDENTICAL PARTICULARLY IN THE CASE OF THE ASSESSEE . THE REVENUE DID NOT FURNISH ANY JUSTIFICATION FOR ADOPT ING A DIVERGENT APPROACH FOR THE ASSESSMENT YEAR UNDER QUESTION' (228 CTR 582) 6 (IT IS PERTINENT TO NOTE HERE THAT SLP OF DEPT. HA S BEEN DISMISSED BY HON'BLE SUPREME COURT IN THE ABOVE CAS E VIDE ORDER DATED 15/11/10 AND THE ISSUE HAS REACHED FINA LITY). THE SAME VIEW HAS BEEN AFFIRMED IN SHANTILAL MJAIN V. ACIT (ITAN0.2690/MUM/2010): 'THOUGH IT IS THE CASE OF THE REVENUE THAT DUE TO V OLUME MAGNITUDE FREQUENCY CONTINUITY REGULARITY THE R ATIO BETWEEN PURCHASE AND SALE CLEARLY INDICATE THAT INC OME ON ACCOUNT OF PURCHASE AND SALE OF SHARES SHOULD BE TR EATED AS INCOME FROM BUSINESS AND NOT AS INCOME FROM STCG T HE AO HAS FROM A.Y. 2003-04 TO 2008-09 (EXCEPT FOR THE IM PUGNED YEAR 2006-07) CONSISTENTLY ACCEPTED THE INCOME AS BEING STCG. IN THESE CIRCUMSTANCES THE RULE OF CONSISTEN CY AS PROPOUNDED BY THE BOMBAY HIGH COURT IN GOPAL PUROHI T 228 CTR 582 (BOM) IS SQUARELY APPLICABLE AND THE IN COME HAS TO BE TREATED AS STCG.' OUR VIEW ALSO STANDS FORTIFIED BY ACIT V. NASHADH V . VACCHARAJANI (ITA NO. 6429/MUM./2009 ORDER DATED 25/02/2011) WHEREIN THE ASSESSEE WAS ALSO HAVING IN COME FROM STCG/LTCG F & O TRADING & SPECULATIVE TRADING AND WHEREIN IT WAS HELD THAT DESPITE HIGH VOLUME AND SH ORT PERIOD OF HOLDING SHARES GAIN IS STCG AND THAT ON THE PRINCIPLES OF CONSISTENCY A DIFFERENT VIEW CANNOT BE TAKEN ON THE SAME FACTS. 5. THE AO ERRED IN UNDERSTANDING THE SALE AND PURCH ASE OF APPELLANT UNDER F & O SEGMENT WHICH COMES TO 61% AND 63% RESPECTIVELY AND NOT 6 % AND 8% AS ALLEGED. AS REGARDS BORROWINGS THE AO FAILED TO APPRECIATE THAT THE APPELLANT HAVE NOT TAKEN ANY UNSECURED LOAN 7 DURING 2007-08. ON THE CONTRARY HE HAS REPAID THE LOANS DURING THE YEAR SUBSTANTIALLY. FURTHER APPEL LANT HAS ADVANCED SUBSTANTIAL ADVANCES DURING 2007-08 TO OTHER PARTIES OUT OF BORROWED FUNDS AS CAN BE VERI FIED FROM RELEVANT ACCOUNT EXTRACTS. (THE RELEVANT TABLE IS ATTACHED AS SCHEDULE-I). THIS PROVES THE MAJOR INVESTMENT MADE IN SHARES WERE FROM OWN CAPITAL AND EARNING OF THE YEAR. WITHOUT PREJUDICE THE AO ERRED IN CONCLUDING THAT THE APPELLANT IS TRADER IN SHARES MERELY ON THE BASIS O F VOLUME OF TRANSACTIONS AND USE OF BORROWED FUNDS A S THIS REASONING LOSES SIGHT OF THE FACT THAT MERELY BECAUSE THERE IS HIGH VOLUME OF TRANSACTIONS AND TH E SHARES HAD BEEN PURCHASED FROM BORROWED FUNDS WOULD NOT CHANGE THE NATURE OF THE TRANSACTION FROM INVESTMENT TO ONE IN THE NATURE OF AN 'ADVENTURE IN THE NATURE OF TRADE'. IN FACT ON THE BASIS OF FOLLOWING FACTUAL MATRIX IDENTICAL TO APPELLANT'S CASE ITAT MUMBAI IN MAHENDRA C.SHAH V. ACIT (ITA NO. 6289/MUM/2008 DATED 18/05/11) HELD THAT SHARES GAIN IS STCG AND NOT BUSINESS PROFIT: ON FACTS THE GAINS HAD TO BE TREATED AS STCG BECAUSE: (A) THE ASSESSEE HAS SHOWN THE SHARES AS INVESTMENT IN THE BALANCE SHEET. (B) IN THE EARLIER YEARS THE AO HAS ACCEPTED U/S 143(3 ) THE STCG AND LTCG OFFERED BY THE ASSESSEE; (C) THE SHARES OFFERED AS LTCG WERE HELD FOR LONG PERIODS OF TIME AND HENCE NOT TRADING PROFIT; 8 (D) THE FACT THAT THE ASSESSEE IS ALSO CARRYING ON SUBSTANTIAL F & O TRANSACTIONS AS SPECULATION BUSINESS IS NOT RELEVANT BECAUSE AS PER CBDT CIRCUL AR ACCEPTED IN GOPAL PUROHIT 34 DTK 52 (BOM) A PERSON CAN HAVE TWO PORTFOLIOS ONE FOR INVESTMENT AND THE OTHER AS STOCK-IN-TRADE; (E) THE FACT THAT THE ASSESSEE BORROWED FOR THE PURPOSE OF BUYING SHARES IS NOT CONCLUSIVE THAT THE ASSESSE E INTENDED TO DO BUSINESS IN SHARES AND NOT MERELY INVEST IN THEM THE FACT OF BORROWING CANNOT BE HELD AGAINST THE ASSESSEE IF THERE ARE OTHER PREDOMINATING FACTORS IN FAVOUR. ALSO AS THE ASSESSEE HAS OWN FUNDS IT CAN BE PRESUMED THAT THE SHARES WERE BOUGHT OUT OF THOSE FUNDS.' 6. THE AO ERRED IN TREATING HT STCG FROM SECURITIES AS BUSINESS INCOME DESPITE THE FACT THAT THE AVG.PERI OD OF HOLDING IN CASE OF APPELLANT IS 1.5 MONTHS (AS WORKED OUT BY THE AO HERSELF) AND AS PER SETTLED JUDICIAL OPINION IN RESPECT OF SHARES WITH FREQUENT TRANSACTIONS WHERE SHARES ARE HELD FOR MORE THAN A MONTH THEY SHOULD BE TREATED AS INVESTMENT AND ASSESSABLE AS SHORT TERM CAPITAL GAINS. FURTHER THE AO ACCEPTED THE ASSESSEES CLAIM OF L TCG TO THE EXTENT OF RS.59 41 819/- WHICH IMPLIES THAT SHE HAS ACCEPTED THE ASSESSEES CLAIM REGARDING HOLDING INVESTMENT PORTFOLIO. 5. THE CIT(A) HAVING CONSIDERED SUBMISSIONS ON BEHA LF OF ASSESSEE HELD AS UNDER: IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND FOLLOWING THE ABOVE REFERRED DECISION OF HONBLE IT AT 9 AHMEDABAD IN THE CASE OF SUGAMCHAND C. SHAH VS. ACI T IT IS HELD THAT SALE OF SHARES HELD FOR MORE THAN ONE MONTH WOULD BE CHARGED CAPITAL GAINS AND SURPLUS OF SHARE S HELD FOR LESS THAN ONE MONTH WILL BE TREATED AS PROFIT F ROM BUSINESS. AO IS DIRECTED TO WORK OUT AND COMPUTE S HORT TERM CAPITAL GAIN AND BUSINESS PROFIT ACCORDINGLY. 6. THE SAME HAS BEEN OPPOSED BEFORE US BY THE REVEN UE INTER- ALIA STATED THAT CIT(A) ERRED IN DIRECTING THE ASSE SSING OFFICER TO TREAT PROFIT / GAIN EARNED ON TRANSACTION OF PURCHA SE AND SALE OF SHARES HELD FOR MORE THAN ONE MONTH AS SHORT TERM C APITAL GAIN AS AGAINST TREATED BY ASSESSING OFFICER UNDER THE H EAD BUSINESS. ON OTHER HAND LEARNED AUTHORIZED REPR ESENTATIVE SUPPORTED THE ORDER OF CIT(A) ON THIS ISSUE. 7. AFTER GOING THROUGH THE RIVAL SUBMISSIONS MADE B Y THE PARTIES WE FIND THAT ASSESSEE IS AN INDIVIDUAL ALO NG WITH OTHER ACTIVITY OF DEALING IN TRADE OF SHARES. ASSESSEE H AD SHOWN SHORT TERM CAPITAL GAINS OF RS.2 55 08 393/- AND LONG TER M CAPITAL GAINS OF RS.59 41 819/- AND CLAIMED EXEMPTION U/S. 10(38) OF I.T. ACT ON ACCOUNT OF TRADING OF SHARES. KEEPING IN VIEW OF VOLUME OF TRANSACTIONS OF SHARES PERIOD OF HOLDING INTENTION OF ASSESSEE USE OF BORROWED FUNDS AND MAGNITUDE OF PU RCHASES AND SALES ASSESSING OFFICER TREATED SHORT TERM CAP ITAL GAINS AS BUSINESS INCOME. ASSESSING OFFICER HOWEVER ALLOWE D EXEMPTION U/S. 10(38) ON ACCOUNT OF LONG TERM CAPITAL GAINS. IN AN IDENTICAL FACTS CIT(A) FOR A.Y. 2006-07 HAD HELD DOMINANT OB JECT OF THE ASSESSEE SHARES BASED ON DELIVERY AS INVESTMENT AN D THAT THE SURPLUS OF SUCH TRANSACTION WAS REQUIRED TO BE TREA TED AS CAPITAL GAIN. CIT(A) IN SAID ORDER FURTHER HELD THAT ASSES SING OFFICER WAS NOT JUSTIFIED IN TREATING SURPLUS ON SALE OF DELIVE RY BASED SHARES AS BUSINESS INCOME. ACCORDINGLY HE DIRECTED THE A SSESSING OFFICER TO TREAT SAID SURPLUS AS SHORT TERM CAPITAL GAINS AS 10 CLAIMED BY THE ASSESSEE. THE ASSESSEE HAS SHOWN TH E INVESTMENT IN THE BALANCE SHEET AND ASSESSING OFFIC ER WAS NOT JUSTIFIED IN TREATING THE SAME AS STOCK IN TRADE DU RING THE YEAR UNDER APPEAL AS STATED ON BEHALF OF ASSESSEE BEFORE CIT(A). ACCORDING TO ASSESSEE HE HAS BEEN CONSISTENTLY FOL LOWING PRACTICE IN REGARD TO NATURE OF ACTIVITIES MANNER OF KEEPING RECORDS AND PRESENTATION OF SHARES AS INVESTMENT AT THE END OF THE YEAR FOR LAST MANY YEARS. THE ASSESSEE MAY HAV E SHORT TERM CAPITAL GAINS AND LONG TERM CAPITAL GAINS AS THE CA SE MAY BE IRRESPECTIVE OF HIGH VOLUME IN SHORT PERIOD OF HOLD ING. THE ASSESSEE WAS MAINLY TRADING IN 20 SCRIPS ONLY. IN TOTAL TRANSACTIONS CARRIED OUT 235 TRANSACTIONS OF PURCHA SE AND 154 TRANSACTIONS OF SALES DURING THE YEAR UNDER APPEAL IN RESPECT OF THESE 20 SCRIPS. WHILE THERE WERE FEW INTRADAY TRA NSACTIONS THE ASSESSEE WAS FOUND TO HAVE SOLD MANY SHARES WITHIN A WEEK OF THEIR PURCHASE. ASSESSING OFFICER HAD CALCULATED O N AN AVERAGE HOLDING PERIOD OF 1.5 MONTHS. WHILE IPCL WAS NOT T RADED AT ALL SHARES OF MANY SCRIPS LIKE BIRLA CORP. DENA BANK HIND MOTOR INFOSYS PRITHIVI INFO SRF TCS SCI SIRPUR ETC. WERE SOLD IN PARTS WITHIN A WEEK OF THEIR PURCHASE. 7.1 REGARDING BORROWED FUNDS IT WAS OBSERVED THAT ASSESSEE MIGHT NOT HAVE RAISED UNSECURED LOAN DURING THE YEA R BUT TOTAL LOAN FUNDS WERE SHOWN AT RS.1.14 CRORES AS AGAINST CURRENT ASSETS LOANS AND ADVANCES AMOUNTING TO RS.83.00 LA KHS ONLY APART FROM INVESTMENT OF RS.3.29 CRORES. IT SHOWS THAT PART OF THE BORROWED FUNDS HAS BEEN UTILIZED FOR BUSINESS O F SHARES. THE ASSESSEE CLAIMED TO HAVE PAID SOME PORTION OF SHARE HOLDING TO RAISE SECURED LOANS. IT WAS ALSO FOUND THAT WHILE TRADING IN SHARE COMPRISES 96% OF THE ASSESSEE TURNOVER ONLY 6% OF TURNOVER WAS FROM F & O ACCOUNT. DETAILS OF THE SAME ARE AS UND ER: 11 PARTICULARS F & O SHARES TOTAL OPENING STOCK 1 55 90 055 PURCHASES 1 99 73 193 (8%) 21 98 99739 (92%) 23 98 72 932 SALES 1 47 78 747 (6%) 23 68 97 231 (94%) 25 16 75 978 CLOSING STOCK 3 29 56 902 PROFIT/LOSS ( - ) 51 94 446 3 43 64 338 THE DETAILS OF AVAILABILITY OF FUNDS WITH ASSESSEE WERE FOUND AS UNDER: OPENING BALANCE 43 58 618 ADD : PROFIT 2 63 08 425 LESS : DRAWINGS 3 69 296 LESS: INCOME TAX 5 00 000 CLOSING BALANCE 2 97 97 747 7.2 FROM THE ABOVE IT WAS FOUND THAT ASSESSEE HAS ITS OWN FUNDS AMOUNT TO RS.43 58 618/- AND CLOSING BALANCE OF RS.2 97 97 747/- INCLUDING PROFIT OF RS.2 63 08 425 /-. ON PERUSAL OF BALANCE SHEET OF THE ASSESSEE IT WAS FU RTHER NOTICED THAT THE STATUS OF LOAN / BORROWED FUNDS WAS AS UND ER: SECURED LOAN 84 2 8 485 UNSECURED LOAD 30 27 890 TOTAL 1 14 56 375 7.3 THE ASSESS WAS ENGAGED IN FREQUENT PURCHASE AND SALE OF SHARES WHICH IS EVIDENT FROM PATTER OF PURCHASE AND SALE OF SHARES OF DENA BANK INFOSYS PRITHVI INFO AND VIJA YA BANK AS DETAILED BELOW: 12 DENA BANK DATE OPENING STOCK PURCHASES SALES 01/04/2007 319200 2000 24/04/2007 15000 04/05/2007 10000 14/05/2007 10000 24/05/2007 10000 08/06/2007 10000 19/06/2007 15000 09/07/2007 10000 11/07/2007 10000 16/07/2007 20000 16/07/2007 13000 18/07/2007 40000 20/07/2007 10000 24/07/2007 40000 26/07/2007 60000 30/08/2007 ' 10000 04/09/2007 76000 07/09/2007 8500 05/10/2007 25000 05/10/2007 10000 08/10/2007 47000 16/10/2007 43000 16/10/2007 5000 05/11/2007 190200 23/01/2008 25000 25/01/2008 25000 11/02/2008 686 31/03/2008 2000 31/03/2008 1814 INFOSYS DATE OPENING STOCK PURCHASES SALES 25/04/2007 500 30/04/2007 1 23/05/2007 1 11/06/2007 500 20/06/2007 1000 25/06/2007 5 19/07/2007 995 20/08/2007 500 21/08/2007 200 28/08/2007 500 11/09/2007 200 27/09/2007 400 09/11/2007 200 19/11/2007 2000 20/11/2007 4500 21/11/2007 1700 13 PRITHVI INFO 22/11/2007 4000 26/11/2007 3 29/11/2007 1000 30/11/2007 3000 07/12/2007 6397 12/12/2007 1000 13/12/2007 5000 14/12/2007 2000 20/12/2007 2000 24/12/2007 4000 11/01/2008 2000 14/01/2008 1000 15/01/2008 4000 16/01/2008 10 16/01/2008 500 17/01/2008 1500 18/01/2008 1 21/01/2008 8 01/02/2008 2000 04/02/2008 2000 08/02/2008 4981 11/02/2008 4000 DATE OPENING STOCK PURCHASES SALES 08/10/2007 5000 09/10/2007 9000 11/10/2007 10 16/102007 1000 14/11/2007 5000 15/11/2007 5000 19/11/2007 20000 20/11/2007 5000 23/11/2007 710 26/11/2007 11500 27/11/2007 4000 28/11/2007 2800 29/11/2007 8000 30/11/2007 12384 03/12/2007 3000 03/12/2007 2000 10/12/2007 4425 13/12/2007 21459 13/12/2007 14886 20/12/2007 5000 24/12/2007 9629 24/12/2007 6430 26/12/2007 4532 27/12/2007 20000 27/12/2007 10000 31/12/2007 10000 31/12/2007 10000 14 VIJAYA BANK 01/01/2008 5000 01/01/2008 6205 10/01/2008 . 795 10/01/2008 10657 11/01/2008 5000 16/01/2008 16452 23/01/2008 1000 28/01/2008 1000 DATE OPENING STOCK PURCHASES SALES 25/04/2007 75000 30/04/2007 20000 09/07/2007 10000 16/07/2007 10000 23/07/2007 5000 27/07/2007 5000 16/08/2007 6439 17/08/2007 20000 20/08/2007 10000 21/08/2007 4000 22/08/2007 20000 24/08/2007 10000 04/09/2007 81000 07/09/2007 8500 12/09/2007 100 25/09/2007 26935 26/09/2007 147000 03/10/2007 - 904 05/10/2007 25000 05/10/2007 15000 08/10/2007 20575 09/10/2007 93997 10/10/2007 5000 12/10/2007 400 16/10/2007 11010 19/10/2007 50 01/11/2007 3500 05/11/2007 190000 13/11/2007 35000 16/11/2007 40000 19/11/2007 281632 01/02/2008 6263 11/02/2008 30000 15 8. CONSIDERING THE TOTALITY AND PECULIARITY OF T HE FACTS CIT(A) TAKING ALL FACTS AND CIRCUMSTANCES INTO CONSIDERATI ON HELD THAT SALE OF SHARES HELD FOR MORE THAN ONE MONTH WOULD B E CHARGED CAPITAL GAIN AND SURPLUS OF SHARES HELD FOR LESS TH AN ONE MONTH WILL BE TREATED AS PROFIT FROM BUSINESS. CIT(A) WA S NOT JUSTIFIED TO MAKE ABOVE CLASSIFICATION. THIS CLASSIFICATION IS NOT REASONABLE. TAKING ALL FACTS AND CIRCUMSTANCES AS DISCUSSED ABO VE WE HOLD THAT ALL THE SHARE TRANSACTIONS UNDERTAKEN BY ASSES SEE WILL BE CHARGED TO CAPITAL GAIN IRRESPECTIVE OF THEIR HOLDI NG PERIOD. ASSESSING OFFICER IS DIRECTED TO COMPUTE CAPITAL GA IN ACCORDINGLY. THIS TAKE CARE OF ISSUE RAISED IN CROSS OBJECTION B Y ASSESSEE AS WELL. 9. IN THE RESULT THE APPEAL FILED BY REVENUE IS DI SMISSED AND CROSS OBJECTIONS FILED BY ASSESSEE ARE ALLOWED AS I NDICATED ABOVE. PRONOUNCED IN THE OPEN COURT ON THE DAY OF 28 TH OCTOBER 2013. SD/- SD/- (R.K. PANDA) (SHAILENDRA KUMAR YADA V) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE DATED: 28 TH OCTOBER 2013 GCVSR COPY TO:- 1) DEPARTMENT 2) ASSESSEE 3) THE CIT(A)-II NASHIK 4) THE CIT-II NASHIK 5) THE DR B BENCH I.T.A.T. PUNE. 6) GUARD FILE //TRUE COPY// BY ORDER SENIOR PRIVATE SECRETARY I.T.A.T. PUNE