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2015 (4) TMI 753 - AT - Income TaxTreatment of income from trading in shares - Business income or Capital gain - Principle of res judicata - Held that:- The AO has not brought out anything to controvert this fact that the sale and purchase of shares by the assessee was not a regular business activity and therefore profit derived by the assessee from the same cannot be treated to be business income from profit. From Paper book page no. 13 to 15, we note that the assessee has shown investment in shares as in AY 2005-06, 2006- 07 and 2007-08 and the same has been shown at cost and not as stock-intrade which is valued at cost or market price whichever is lower. From balance sheet page no. 13, we also note that in AY 2007-08, the capital brought forward by the assessee was ₹ 1,19,66,247 whereas investment in shares was of ₹ 59,94,734. At the same time from Paper book page no. 3 to 6, we also observe that short term capital gain of ₹ 79 lakh was earned from 25 scrips only and the profit declared as capital gain was earned from delivery based purchase and sale of shares and delivery was taken after making full payment for such transaction. We also note that as per Paper Book page no. 3 and 5 of the assessee, short term capital gain was earned out of 3 scrips which only comes to 93.62% of the total profit from purchase and sale of shares and major part of the capital gain was earned from the shares held by the assessee for more than 30 days. The AO has not brought out any fact or material to controvert or to demolish above facts supporting the case of the assessee. We are in agreement with this legal contention of the ld. DR that principle of res judicata does not apply to the taxation proceedings but at the same time, we cannot ignore this legal proposition that the rule of consistency has to be followed in good conscience and bona fide until and unless changed facts and circumstances are found in the subsequent assessment yeas. As we have noted earlier that the assessee has shown shares in its balance sheet during the preceding assessment years as an investment and the same has been valued at cost of purchase. We are inclined to hold that the AO was not justified in treating the income from purchase and sale of shares as business income ignoring the treatment given by the assessee in his books of accounts and financial statement filed along with the return of income and in the light of above noted facts, the CIT(A) was right in following the principle of consistency and reach to a logical conclusion that the income accrued to the assessee from purchase and sale of shares was capital gains. We are unable to see any ambiguity, perversity or any other valid reason to interfere with the impugned order and we uphold the same. Accordingly, sole ground in both the appeals of the revenue being devoid of merits is dismissed. - Decided against the revenue.
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