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TMI Blog2015 (4) TMI 753X X X X Extracts X X X X X X X X Extracts X X X X ..... d in rejecting the AO's contention of treating the trading in shares as business income instead of capital gains despite the nature of transactions made by the assessee and the frequency and the volume of transactions." 3. We have heard arguments of both the sides and carefully perused the relevant material placed on record before us. Apropos aforesaid ground of the revenue, ld/ DR submitted that the CIT(A) was not justified in rejecting the action of the AO treating the income from trading in shares as business income instead of capital gains as claimed by the assessee. Ld. DR vehemently contended that the CIT(A) ignored the nature of transactions made by the assessee and the frequency and the volume of the transactions effected by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reliance on the decision of Hon'ble Supreme Court in the case of CIT vs Associated Industrial Development Company (P) Ltd. [1971] 82 ITR 586 (SC), ld. DR vehemently contended that where a particular holding of shares is by way of investment or forms part of stockin- trade is a matter which is in the knowledge of the assessee who hold shares and it should, in normal circumstances, be in a position to produce evidence from its record as to whether it has maintained any distinction between those shares which are its stock-in-trade and those which are held by way of investment. Ld. DR finally submitted that the AO went in detail to decide the issue of stock-in-trade and investment following all the principles as per CBDT Circular and various j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... written synopsis/submissions to support the stand of the assessee which reads as under:- "Assessee is a Chartered Accountant by profession and is partner in M/s. Sunil Gupta and Co, Chartered Accountants ; - Shares were held and classified as "investments" and not as "stock in trade" in the books of account [refer balance sheet for the year ended 31.03.2005, 31.03.2006, 31.03.2007 & l31.03.2008 - pages 13-15 of the paper book); - Shares held as investments are consistently valued at costand not at cost or market price, whichever is lower; -. Assessee had no infrastructure/ staff/employee to undertake business activity of trading in shares. Investment transactions were undertaken by giving instructions on phone to the broker; - Entire i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pted by the assessing officer in the succeeding assessment year 2009-10 vide order dated 25.11.2011 passed under section 143(3) of the Act [refer pages 37-39 of the paper book)." 6. Ld. counsel lastly submitted that aforementioned facts clearly establish beyond any doubt that the investment made by the assessee in shares/securities were part of the investment on capital account and the same was not stock-in-trade and, therefore, the AO was not justified in holding that the income arising from transfer of such shares was business income and the CIT(A) was right in concluding that the income arose from transfer of shares which was kept as investment was clearly in the nature of capital gains as declared by the assessee. 7. On careful consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted to tax profit of Rs. 79,80,789 from sale of shares as Short Term Capital Gain @10% u/s 111A and grant full exemption to the profit of Rs. 93,089/- as Long Term Capital Gain. This ground is therefore allowed. " 8. In view of above, we are of the considered opinion 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he taxation matter and hence if claim of the assessee was allowed in the preceding years in the assessment finalised u/s 143(1) of the Act, then department is not prevented to verify and examine the issue in the succeeding years i.e. 2007-08 and 2008-09. However, ld. DR fairly accepted that similar classification of shares and treatment of profit submitted by the assessee was accepted by the AO in the succeeding AY i.e. 2009-10 vide order dated 25.11.2011 (supra) passed u/s 143(3) of the Ac t. 11. At the outset, 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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