TMI Blog2011 (4) TMI 42X X X X Extracts X X X X X X X X Extracts X X X X ..... see - ITA No. 2690/Mum/2010 - - - Dated:- 27-4-2011 - SHRI D MANMOHAN, SHRI R K PANDA, JJ. Assessee by Shri K Gopal Satendra Pandey Revenue by Shri S K Mahapatra PER R K PANDA, AM This appeal filed by the assessee is directed against the order dated 17.2.2010 of the CIT(A)-23, Mumbai relating to assessment year 2006-07. 2 Facts of the case, in brief, are that the assessee is mainly in the business of trading/investment in shares and securities and commission on sale of various products. The assessee filed his return of income declaring total income of Rs. 1,75,53,777/-, which was on account of salary, income from house property, business income, capital gain and income from other sources. During the course of assessment proceedings, the Assessing Officer noted that the assessee has disclosed income from Short Term Capital Gains (STCG) at Rs. 1,54,03,274/- and Long Term Capital Gains(LTCG) at Rs. 2,91,37,201/- . The Assessing Officer, from the Tax Audit Report, noted that the assessee is dealing in shares business in the form of buying and selling of shares and securities and different other kind of share dealings. Therefore, he was of the opinion that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee is doing business of investment in shares and securities in recognized stock exchange since 1980 when the share certificates in physical form were issued by the companies. The investments were made with the intention of long term holding and earning dividend. Most of the investments were made in earlier years and substantial dividend has been earned. Such income has consistently been shown under the head capital gain . It was submitted that scrips traded intraday and settled compulsorily without delivery like due to non/bad delivery of shares or auction was carried out by the exchange. The income from such transactions is treated under the head speculation business . It was submitted that the assessee has accounted for in the books of account the said shares and securities which were held under the head investments since their acquisition. This method of accounting has been consistently followed and assessed as such u/s 143(3) in the earlier years. The investments were valued at cost and the assessee has not taken any benefit of diminution in the value of shares and securities by way of valuing the stock at cost or market value, whichever is lower since the shares ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in stocks or an investor in stock as per the guidelines laid down by the CBDT are as under: i) Whether the purchase and sale of securities was allied to his usual trade or business/was incidental to it or was an occasional independent activity. ii) Whether the purchase is made solely with the intention f resale at a profit or for long term appreciation and/or for earning dividends and interest. iii) Whether scale of activity is substantial iv) Whether transactions were entered into continuously and regularly during the assessment year. v) Whether purchases are made out of own funds or borrowings vi) The stated objects in the Memorandum and Articles of Association in the case of a corporate assessee vii) Typical holding period for securities bought and sold. viii) Ratio of sales to purchases and holding ix) The time devoted to the activity and the extent to which it is the means of livelihood. x) The characterization of securities in the books of account and in balance sheet as stock in trade or investments. 4.1 The CIT(A) noted from the various details furnished by the assessee that the assessee, in the instant case has indulged in purch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the transactions were carried out by deploying own funds and not out of borrowed funds; therefore,merely treating the entries in the books as investment would not by itself be proof that the same were for investment. The volume, magnitude, frequencies, continuity, regularity, the ratio between purchase and sale clearly indicate trading activity. The period of holding in several instances has been extremely short. The assessee has not maintained separate bank accounts. In view of the above, he upheld the action of the Assessing Officer treating the income from STCG as business income. 5 Aggrieved with such order of the CIT(A), the assessee is in appeal here before us with the following grounds: 1. i) On the facts and in the circumstances and in law, the ld CIT(A) has erred and was not justified in confirming the short term capital gain amounting to Rs. 1,54,03,274/- which was assessed as an income from business instead of income under the head capital gains; ii) The ld CIT(A) has totally ignored and has not taken into consideration relevant facts of the case and also the past assessments of the appellant wherein the same income has been consistently declared and ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e STCG declared by the assessee, which is Rs. 69,38,985/- for Assessment Year 2008-09 and Rs. 33,31,449/- for Assessment Year 2007-08. He submitted that the assessee is maintaining separate bank accounts; one for investment purpose and other one for business purposes. It is not known as to from where the Assessing Officer obtained the information that the assessee has obtained borrowed funds. He submitted that no borrowed funds have been utilised for purchase and sale of shares and the assessee neither paid nor received any interest for the purpose of share trading. 6.3 Referring to pages 18 to 20 of the paper book, he drew the attention of the Bench to para 13 of the reply to the Assessing Officer where it was submitted that the assessee has given loan from his own capital or interest free loans taken from others ; therefore no interest has been charged on loans given. 6.4 On being questioned by the Bench to explain para 10 of the said reply wherein it was submitted that the assessee has taken secured loan from HDFC bank against the hypothecation of shares and securities, ld counsel for the assessee submitted that the assessee has borrowed funds from the Bank against pledg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of Gopal Purohit (supra). 8 In the instant case, we find the assessment order was passed on 31.12.2008 for the Assessment Year 2006-07 wherein the Assessing Officer has treated the STCG as business income. Against this, the assessee filed an appeal before the CIT(A), who vide order dated 17.2.2010 upheld the action of the Assessing Officer. We find, the Assessing Officer in the order passed u/s 143(3) on 29.10.2009 for Assessment Year 2007-08 has accepted the STCG declared by the assessee. The above order of the Assessing Officer was after the order passed u/s 143(3) for the Assessment Year 2006-07 and before the order passed by the CIT(A) upholding the action of the Assessing Officer. However, we find, the Assessing Officer in the order passed u/s 143(3) dated 27.12.2010 for the Assessment Year 2008-09 has accepted the STCG of Rs. 69,39,985/- which is after the order passed by the CIT(A) on 17.2.2010. When the above aspect was confronted to the ld DR by the Bench during the course of hearing, the ld DR could not say anything. Thus, from the details furnished by the ld counsel for the assessee, we find from Assessment Years 2003-04 to 2008-09, the Assessing Officer has cons ..... X X X X Extracts X X X X X X X X Extracts X X X X
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