TMI Blog2013 (4) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... after giving opportunity of hearing to the concerned parties. Appeal of the revenue is allowed for statistical purpose. - ITA No.2324/Ahd/ 2010 - - - Dated:- 15-2-2013 - Shri G. C. Gupta Versus Shri Anil Chaturvedi,JJ. Shri Rahul Kumar, Sr. D.R. Shri J.P. Shah, A.R. ORDER This is Revenue's appeal against the order of ld. CIT(A)-II, Surat, dated 14.05.2010. 2. The facts, as culled out from the order of the assessment are as under:- Assessee is a proprietor of Avanti Chem. The assessee is engaged in the trading business of weaving of grey cloth and twisting of yarn on job work basis. The assessee filed the return of income on 29.10.2007 and declared total income of Rs.7,50,488/-. The case was selected for scrutiny and thereafter the assessment was framed u/s 143(3) vide order dated 30.11.2009 and the total income was determined at Rs.17,32,010/-. Aggrieved by the order of the A.O. the assessee carried the matter before the CIT(A). CIT(A) vide its order dated 14.05.2010 allowed the assessee's appeal. It is against the aforesaid order of CIT(A) the Revenue is now in appeal before us. The only effective ground raised in the appeal is deletion of Rs.14,91,740/- m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and that, the grounds on which the AO treated the LTCG and STCG as business income have remained the same, and the AR has also taken the same grounds as in the AY 2006-07, it becomes imperative for me to follow the findings given by me and the decision taken in the said year. The relevant portions of my order dated 15-07-2009 in CAS/II/380/2008- 09, for the AY 2006-07 are reproduced hereunder: "5. I have carefully considered the findings and conclusion of the AO on one hand and the detailed submissions of the AR on the other. I have also gone though the case-laws relied upon both by the AO and the AR. Firstly, I find that the regular business activity of the Assessee during the year was the manufacture and sale of grey cloth weaving of cloth and twisting of yarn on job work basis. The Assessee owned 80 Power Looms and 10 TFO machines, is also engaged in the trading of gum which is used in the textile industry. During the year, he made substantial capital investments in his business, as was stated before the AO and reiterated in appellate proceedings. Even though it is not unusual for a business person to be engaged in more than one business activity as in the case of the Assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was to be treated as business income then the closing stock ' would have to be revalued at the lower of cost or market value which would result in the disclosed short term capital gain of Rs. 16.28 lacs being reduced to the business income of Rs. 13.10 lacs. This, the AO had failed to consider. The AR has also shown that the Assessee had no separate infrastructure in the form of an office, employees, computer system, bolt, online trading facility, etc. to carry out the business of share trading. The Assessee had not made any borrowing and the shares were purchased with the help of the capital gain earned from the sale which were reinvested. Otherwise, the /Assessee had only invested his own funds which clearly showed that he was only an investor and was not engaged in the business of trading in shares. All such facts clearly support the claim of the AR that the capital gain both short term and long term could not be treated as business income. 5.2 I further find that the facts of the assessee's case are directly covered by the decision of the Mumbai Bench of the ITAT, in the case of in the case of M/s. J.M. Shares Stock Brokers Ltd. vs. JCIT, Special Range-22, Mumbai in ITA No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... having good knowledge of share market, nothing is brought on record by the Department to prove that the impugned shares were held by the assessee as stock in trade. Under these facts, we are of the considered opinion that the profit earned by the assessee on sales of these shares, which were held by it as investment is assessable under the head capital gains and not under the head business income. This ground of the assessee is allowed...." 5.3 The Assessee 's contention that the surplus resulting due to change in investments for better reinvestments must be treated as capital accretion and not business income, also gets supported by the decision of Allahabad High Court in the case of IT vs. Raja Jagdish Pratap Sahi (1971) 79 ITR 235 (All) and the fact that mere magnitude of the transaction does not change the nature of transaction, has also been upheld by the Hon'ble Mumbai Bench of the Tribunal in the case of Janak S. Rangwala v. ACIT (2007) 11 SOT 627 (Mumbai). 5.4 In view of the facts of the case, the parameters laid down in Circular No.4 of 2007 dtd.15.6.2007, and various judicial pronouncements which have been discussed above in considerable detail. It is held that ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee during the year under consideration and the income derived there from whether same is business income or long term/ short term capital gain as claimed by the assessee. We find that the impugned order as passed by the Ld. CIT(Appeal) is cryptic as he has not considered the observation of the Assessing Officer and the case laws as relied by him. The operating part of the order of Learned CIT(Appeals) is reproduced hereinbelow:- "in view of the facts of the case, the parameters laid down in Circular No.4 of 2007 dtd. 15.06.2007 and various judicial pronouncements which have been discussed above in considerable detail. It is held that there was simply no basis for the Assessing Officer to treat the short term and long term capital gains totaling Rs.18,17,907/- as business income of the assessee. The Assessing Officer is directed to accept the assessee's claim of STCG of Rs.16,19,876/- and LTCG of Rs.1,98,925/-" Ld. CIT(Appeals) has not adverted any thing on the case laws as relied upon by the Assessing Officer as to why they are not applicable under the facts and circumstances of the present case. We also find force in the contention of Ld. A.R. that in the event of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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