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Shri Kalpesh Natvarlal Shah Versus The DCIT, Circle-2 (1) , Baroda

2016 (4) TMI 115 - ITAT AHMEDABAD

Gains on sale of shares/securities - business income instead OR capital gains - Held that:- The taxpayer cannot be allowed to take advantage of holding two portfolio, primarily with a motive to avoid tax liability or to reduce tax incidence. In the instant case, eventhough the assessee is maintaining two distinct portfolios, but facts speak otherwise. The volume of transaction is greater in investment portfolio. The law does not permit a taxpayer that under the garb investment transaction he can .....

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4/Ahd/2011 - Dated:- 16-2-2016 - SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER And SHRI KUL BHARAT, JUDICIAL MEMBER For The Appellant : Shri Milin Mehta, AR For The Respondent : Shri Dinesh Singh, Sr.DR ORDER PER SHRI KUL BHARAT, JUDICIAL MEMBER : This appeal by the Assessee is directed against the order of the Ld.Commissioner of Income Tax(Appeals)-II, Baroda [ CIT(A) in short] dated 01/11/2010 pertaining to Assessment Year (AY) 2006-07. The Assessee has raised the following grounds of appeal:- All t .....

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nitiating penalty proceedings u/s.271(1)(c) and 271-B of the Act. 3. Your appellant craves the right to add to or alter, amend, substitute, delete or modify all or any of the above ground of appeal. 2. Briefly stated facts are that the case of the assessee was picked up for scrutiny assessment and the assessment u/s.143(3) of the Income Tax Act,1961 (hereinafter referred to as the Act ) was framed vide order dated 28/11/2008. While framing the assessment, the Assessing Officer (AO in short) trea .....

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f ₹ 8,54,452/- on sale of shares/securities as business income instead of capital gain as claimed by the assessee. The ld.counsel for the assessee reiterated the submissions as were made before the ld.CIT(A) and submitted that the ld.CIT(A) was not justified in confirming the addition. He submitted that the assessee is maintaining two portfolios; one on account of proprietary-concern and another on individual account. He submitted that assessee is a subbroker in shares and carries out his .....

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opposed the submissions of the ld.counsel for the assessee and supported the orders of the authorities below. He submitted that the ld.CIT(A) has given a finding on fact which is not controverted by the assessee that in the balance-sheet no investment was reflected except for ₹ 500/- being shares of a co-operative society. He submitted that volume of the transactions, the regularity of the transaction and the fact that the income from all other sources including salary was much less than .....

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e case of ACIT vs. Mr.Nishil Marfatia in ITA No.1526/Ahd/2008 for AY 2004-05 dated 12/11/2010 and decision of Coordinate Bench (ITAT C Bench Ahmedabad) rendered in the case of ACIT vs. Shri Bhupendra Shantilal Shah in ITA No.1496/Ahd/2011 for AY 2006-07 dated 28/08/2015. On the other hand, ld.Sr.DR has relied on the judgement of the Hon ble High Court of Allahabad in the case of Sangam Investments Ltd. vs. CIT, Allahabad reported at (2014) 51 taxmann.com 279 (Allahabad), judgement of Hon ble Ape .....

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e of dispute related to sale of shares to be treated as business income or investment. The revenue authorities have treated surplus arising out of sale of shares as business income contrary to the claim of the assessee as capital gain. To determine whether surplus arising out of sale of shares is business income or capital gain, necessarily would depend upon fact of each case. No straight jacket formula is prescribed under the provisions of the Act by which it can be deduced that a particular ac .....

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o shown income from salary ₹ 98,020/- and profit from proprietary business ₹ 2,66,347/-. If all the income from other activities are added, then also the capital gain as claimed under the individual portfolio is higher. Under these facts, the AO held that the surplus of the share transactions received by the assessee in the year under consideration is a business income and is not long term capital gain or short term capital gain. The ld.CIT(A) confirmed the view of the AO by observin .....

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while the transaction done in the appellant s own name is done at residential address and therefore the contention that there are two portfolios is proved. The appellant has made an alternative plea that in case is submission is not accepted this case may be decided on the basis of ratio of decision in the case of Sugamchand C.Shah (2010 TIOL 336) ITAT (Ahd) wherein it has been held that shares held for less than 30 days should be treated as business transaction and shares held for 30 or more d .....

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and he s doing share transactions very regularly and in huge volumes. This fact is undisputed. It is also undisputed that in the balance sheet share only worth ₹ 500/- shown as investment. In my considered opinion this is the determining factor in deciding whether the transaction done is on account of investment or as trading transaction. The fact that different Demat accounts are maintained is not important. In fact it is questionable as to whether an individual can maintain two Demat ac .....

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is clearly identifiable having shares of only ₹ 500/-. The appellant has argued that his averages holding of share is for 80 days and therefore it follows that transaction is on account of investment. This argument is self contradictory and not sustainable on the facts of the appellant s case. When two separate portfolios are not maintained and both types of transaction are mixed up, only then this argument will hold. When two identifiable separate portfolios are maintained it is immateri .....

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e totality of fact as noted above, I do not find any reason to differ with the finding of the Assessing Officer on this issue. This ground is rejected. 4.1. The ld.counsel for the assessee has relied upon the decision of Coordinate Bench (ITAT A Bench Ahmedabad) rendered in the case of ACIT vs. Mr.Nishil Marfatia in ITA No.1526/Ahd/2008 for AY 2004-05 dated 12/11/2010, wherein the Coordinate Bench has followed the decision rendered in the case of Shri Suganchand C. Shah vs. ACIT, Surat in ITA No .....

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e has also relied upon the decision of Coordinate Bench rendered in the case of ACIT vs. Shri Bhupendra Shantial Shah in ITA No.1496/Ahd/2011 for AY 2006-07(supra) to buttress the contention that assessee can maintain two separate portfolios. In our considered view, there is no ambiguity in position of law with regard to maintaining of two separate portfolios. The assessee is within his right to maintain two separate portfolios, even if he is having main business as share-trading. But the assess .....

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