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Smt. Amrita Pankaj Talwar, Mumbai Versus Asstt. Commissioner of Income (OSD) , Tax 15 (1) , Mumbai and Vica-Versa

2016 (1) TMI 852 - ITAT MUMBAI

Penalty levied u/s 271(1)(c) - whether the gains arising on sale of shares constitute business income or capital gains - Held that:- The average holding period was reasonably good. The repetition of transactions were very minimal, i.e, upto a maximum of four transactions only. The assessee has not borrowed funds for purchasing the shares. The assessee has held major shares for more than one year and has declared long term capital gains. We notice that the assessing officer has ignored all other .....

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sequently rendered incorrect. Under these set of facts, we are of the view that there is merit in the contentions of Ld A.R that the assessing officer was not justified in assessing the gains arising on sale of shares as business income of the assessee.

In view of the foregoing discussions, we are of the view that the Ld CIT(A) was justified in directing to assess the Long term capital gains under the head Capital gains only. In respect of Short term capital gains, we set aside his or .....

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N (AM) AND SANJAY GARG, (JM) For The Assessee : S/Shri S C Tiwari and Ms.Rutuja Pawar For The Revenue : Shri Ravindr Sindhu ORDER Per Bench: The assessee has filed appeals for assessment years 2005-06 to 2008-09 and the revenue has filed appeals for assessment years 2006-07 and 2007-08 challenging the appellate orders passed Ld CIT(A)-26, Mumbai against the quantum assessment orders of respective years. The revenue has filed appeal for assessment year 2007-08 challenging the cancellation of pena .....

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on sale of shares held for more than 12 months is assessable as Long term capital gain instead of Business income. 4. In the appeal filed by the revenue in respect of penalty proceedings, the revenue is aggrieved by the decision of Ld CIT(A) in cancelling the penalty levied for AY 2007-08. 5. The facts relating to the case are stated in brief. The assessee is an individual and she filed her return of income for AY 2006-07 declaring Short term capital gain of ₹ 177.59 lakhs and long term c .....

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eight scrips was less than one month. Hence the AO took the view that the assessee is dealing in shares as trader and accordingly assessed both Long term Capital gains and Short term capital gains as business income of the assessee. 6. In assessment year 2005-06, the assessee had declared Short term capital gain arising on sale of shares at ₹ 41.35 lakhs. In view of the decision taken by the assessing officer in AY 2006-07, he reopened the assessment of assessment year 2005-06 and assesse .....

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scrutiny, the appeal filed by the assessee challenging the assessment order of AY 2006-07 had been disposed of by Ld CIT(A) by confirming the assessment of Short term capital gain as Business income. However, the Ld CIT(A) had directed the AO to assess the Long term capital gain as Capital gains only. However, the assessing officer chose to assess both Short term capital gain and Long term capital gains as business income of the assessee in assessment year 2007-08. 8. In the year relevant to th .....

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is aggrieved by the said decision of Ld CIT(A) in both the above said years. In all the years, the Ld CIT(A) upheld the action of the AO in assessing the Short term capital gain as business income of the assessee. Hence the assessee has filed appeals for assessment year 2005-06 to 2008-09 challenging the said decision of Ld CIT(A). 10. Thus, it can be noticed that the assessment order and appellate order passed for assessment year 2006-07 have been followed in other years. 11. The Ld A.R submitt .....

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investments only in her books of account. Further the shares have been shown at purchase cost only in the Balance Sheet. He further submitted that the assessee has not indulged in repetitive transactions barring one or two exceptions. He further submitted that the assessee has dealt in only few scrips and since the assessee had purchased shares in high quantity, the volume appeared to be high. 12. He further submitted that the assessing officer has chosen to assess the gains arising on sale of s .....

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he assessing officer in respect of Short term capital gains and accordingly upheld the view of the AO in respect of Short term capital gain, which is not justified. He further submitted that the assessing officer has accepted the loss arising on sale of shares as Short term capital loss in assessment year 2009-10. He further submitted that the assessing officer did not consider various criterias in favour of the assessee. 13. On the contrary, the ld D.R submitted that the frequency and volume of .....

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e question as to whether the gains arising on sale of shares constitute business income or capital gains has to be decided on the basis of various criteria, which have been given as illustration by the Courts and also by CBDT in its circular. Some of the main criterias are the intention of the party at the time of purchasing of shares, his conduct thereafter, the manner of funding, holding period of shares, dividend received, other activities of the assessee etc. One has to examine various facto .....

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btained from her father for purchasing the shares, i.e., the assessee has not borrowed interest bearing funds for purchasing shares. We further notice that the shares have been shown as investments in the Balance Sheet. The fall, if any, in the value of shares has not been recognized. Further, the profit or loss arising on intra day transactions have been declared as speculation profit. The assessee has taken delivery of all shares. 16. We notice that the number of scrips dealt by the assessee w .....

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h, some times for more than six months. There are few instances, where the assessee has held the shares for a week only, but otherwise the shares have been held for a reasonable period. We notice that the assessee has declared dividend income in all the years except AY 2005-06. We further notice that there are only one or two cases of repetitive transactions and hence generally the shares purchased by the shares have been sold after holding the same for a reasonable period and repurchase of same .....

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d following points to hold that the assessee has dealt in the shares as a trader:- (a) The holding period in majority of shares was less than a month. (b) Volume of transactions is high. However a critical analysis of the transactions of the assessee would show that the assessee has dealt with 24 scrips, 27 scrips, 26 scrips and 17 scrips respectively in the years relevant to the assessment years 2005-06, 2006-07, 2008-09 and 2009-10. We have earlier noticed that the assessee has purchased each .....

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