TMI Blog2009 (5) TMI 925X X X X Extracts X X X X X X X X Extracts X X X X ..... t years has been found as a matter of fact one way or the other, and parties have allowed such position to be sustained then as held by the Hon'ble Supreme Court in the case of Radhasoami Satsang v. CIT[ 1991 (11) TMI 2 - SUPREME COURT] , the position should not be allowed to change in the subsequent year merely because on the same set of facts, different view is possible. Another aspect to be considered here is that the assessee has not borrowed any money for making the investment in the shares. Moreover, the assessee is consistently holding shares as an investment which is always accepted by the AO in the past. In our opinion, there is no justification for treating the activity of the assessee of purchase and sale of the shares as a 'business' merely on reason of the volume of the transactions. As per well settled principles of law, the frequency of the transactions cannot be per se decisive - We answer this issue in favour of the assessee and direct the AO to treat the profit and gain on the sale of the shares as a capital gain and not as a business income. As both the authorities below have only considered whether the profit declared on the sale of the share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... servation in treating the profits/gains on sales of the shares for assessing it under the head 'Capital gains' as in the opinion of the AO, the activity of the assessee in purchasing and selling of the shares amounts to business and hence the capital gains declared by the assessee should be assessed as a business income. The AO verified the statements of the share transactions and it was noticed that there were numerous transactions on daily basis in respect of the shares. The assessee supported his stand that he was not indulged in the business of the shares but it was an investment and profit/gain arising on the sale of the shares is to be assessed as a capital gain-either short-term or long-term depending on the period of holdings. The assessee contended that : (1)his main occupation is the business of oil and pulses and he was not dependent on the income derived from the shares. (2)he was regularly showing the shares as an investment which were valued at the cost in the books of accounts, and moreover he was consistently showing the profit/gains arising from the sale of the shares as a capital gain in the past many assessment years and the same has been accepted b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,33,196 against the dividend earned at ₹ 15,26,674 in the immediately preceding year 2004-05. Whereas, the dividend income declined from ₹ 15,26,674 to ₹ 8,33,196, the capital gains increased from ₹ 70,42,120 to ₹ 1,09,20,577. These figures indicate that the intention or motive for purchase and sale of shares was more for earning income by way of sale of shares or by trading in these shares and less by way of earning of dividend income. The intention or motive for dealing with shares is further corroborated by the ratio of sales to purchase. In this case, the appellant has purchased shares worth ₹ 2,72,94,433 and sold shares worth ₹ 3,69,83,128. The said ratio works out to ₹ 1.36 crores, which shows that the appellant had intention to trade in shares and to gain profit by trading in shares. There was little or diminished intention to earn the dividend by way of holding the investment for longer period. It is further noticed that the appellant had held several shares for very little time period. Some of such instances are as under : Aegis Chemicals Ltd. shares purchased on 30th Nov., 2004 and sold on 2nd Dec, 2004, 3rd Dec., 2004. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dividend. His shares of profit from partnership firms were disclosed at ₹ 3,10,617. All these factual matrix and the circumstances indicate that the appellant's main source of earning is profit earned by way of share trading and not by way of share of profit from partnership firm or through business income by way of dealing in oils and pulses or by way of dividends. The appellant has also taken active assistance from M/s S.K. Securities Investments, who acted as his broker and who has been shown as a creditor, with credit balance of ₹ 2,96,851 is in the balance sheet as on 31st March, 2005. For supporting the stand of the AO that the profit on the sale of the shares is to be assessed as a business income, the learned CIT(A) relied on the plethora of decisions of the Hon'ble Supreme Court as well as other High Courts, including the decision in the case of : (i) CIT v. Sutlej Cotton Mills Supply Agency Ltd. [1975] 100 ITR 706 (SC); (ii) Sole Trustee, Loka Shikshana Trust v. CIT [1975] 101 ITR 234 (SC); (iii) Raja Bahadur Visheshwara Singh v. CIT [1961] 41 ITR 685 (SC); (iv) Dalhousie Investment Trust Co. Ltd. v. CIT [1968] 68 ITR 486 (SC) : a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re is no dispute about the fact that assessee has the frequency of transaction in respect of the shares though said fact has been denied by the learned counsel. It is also the admitted fact that assessee is indeed in dealings in investment in shares in past for many years. On the perusal of the balance sheet filed by the assessee, we find that the assessee has shown the investment in shares under the head 'Investment' and not as 'stock-in-trade'. It is true that the principles of res judicata do not apply to income-tax proceedings as each and every assessment year is treated as a separate one. As in strict sense, what is decided in one year may not apply in the following year, but, where a fundamental aspect for permeating through the different assessment years has been found as a matter of fact one way or the other, and parties have allowed such position to be sustained then as held by the Hon'ble Supreme Court in the case of Radhasoami Satsang v. CIT [1991] 100 CTR (SC) 267 : [1992] 193 ITR 321 (SC), the position should not be allowed to change in the subsequent year merely because on the same set of facts, different view is possible. Another aspect to be cons ..... X X X X Extracts X X X X X X X X Extracts X X X X
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