TMI Blog2012 (10) TMI 1092X X X X Extracts X X X X X X X X Extracts X X X X ..... ee declared the Long Term Capital Gain on the sale of the equity shares at ₹ 17,35,20,205/-. As observed by the A.O, the Long Term Capital Gain declared by the assessee includes the sum of ₹ 67,73,196/- pertaining to his minor son Master Akah Parakh. The assessee sold out part of 35420 shares in Parakh Foods Ltd. (PFL) to Cargill Mauritious Ltd. for a consideration of ₹ 18,06,60,955/- and on the said transaction, the assessee declared the Long Term Capital Gain. The assessee also claimed the expenditure towards Bank guarantee and expenses to the extent of ₹ 86,40,745/-. The A.O sought the explanation of the assessee on the allowability of the said deduction. The assessee filed the reply justifying the claim which is reproduced in the assessment order on page Nos. 3 to 7. The A.O. rejected the claim of the assessee after considering the explanation and held that the claim of deduction of ₹ 86,40,745/- was not allowable to the assessee. 4. Now the issue which is the subject matter for exercises of jurisdictional revision u/s. 263 of the Act by the Ld CIT is in respect of the Short Term Capital Gain of ₹ 65,33,174/- declared by the assessee. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... axable under the head income from business . ii. For earning business income from sale/purchase of shares, you had utilized the services of Portfolio Management Services (hereinafter referred as PMS ). The activity of earning income through the PMS provider is business income in view of the systematic and organized nature of transactions undertaken by the PMS provider. The transactions handled by the PMS provider were carried out in a thoroughly professional manner. The organized and systematic approaches to the transactions by the PMS provider clearly show that the intention was to maximize profits by resorting to frequent trading rather than to earn dividend by holding the shares for long durations. iii. All the transactions during the previous year through PMS were short-term in nature and the motive of purchasing the shares was clearly profit booking by selling at higher rates and not for earning dividend. iv. The way in which business was conducted speaks of professionalism. v. From the chart showing details of capital gains submitted by you during the assessment proceedings, it is evident that you had made 94 sales transactions during the year. This in itself es ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd remitting the issue of Short Term Capital Gain to the file of the A.O are as under : 4.1. On a careful examination of the case records it is clear that the Assessing Officer did not deal with this issue during the course of the assessment proceedings. The mere mention in the assessment order that the assessee had made investments in shares through Enam Securities, a portfolio management services (PMS), would not by itself lead to a conclusion or inference that the Assessing Officer has duly considered this issue. This aspect is also evident from the information called for vide the order sheet noting dt. 04.12.2008 and the assessee s response thereto vide letter dated Nil. The assessee had merely submitted that as per the agreement with ENAM, the PMS provider, it had discretion to invest the funds on behalf of the assessee and that the assessee would not be giving directions to invest in stock market. It was also contended that the funds were entrusted to ENAM since it had expertise and that the assessee had invested only surplus funds and not by way of borrowed funds. No discussion has been made by the Assessing Officer on this aspect in the assessment order. In fact, there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business activity and not any investment activity. An organized trading activity would constitute business as inclusively defined in sub-sec. (13) of sec. 2 of the Incometax Act, 1961. Therefore, considering the high volume, frequency, continuity and regularity of the share transactions which were done in an organized manner patently for deriving profits, the element of business can be easily attributed to such transactions. In such circumstances the transactions are liable to be taxed under the head income from business . 5.2 For earning business income from sale/purchase of shares, the assessee had utilized the services of Portfolio Management Services (hereinafter referred as PMS ). The transactions handled by the PMS provider were carried out in a thoroughly professional manner. The organized and systematic approaches to the transactions by the PMS provider would go to show that the intention was to maximize profits by resorting to frequent trading . In any case, the intention was not to earn dividend by holding the shares for long durations. The above inference derives further strength from the fact that all the transactions during the previous year through the PMS were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here is a specific query by the A.O as under : A has claimed STG of ₹ 65,53,179/- against the sale of shares with Enam Securities (PMS). A was asked as to why the same shall not be considered as business income . Again as per the order sheet entry dated 22 December 2008, the A.O has made the noting in respect of the expenses claimed by the assessee against the Short Term Capital Gain. The grievance of the Ld CIT is that there is a lack of enquiry on the part of the A.O on this issue. We are unable to accept the view taken by the Ld CIT on the issue of assessing Short Term Capital Gain under the head Capital Gain . After examining the explanation and information filed by the assessee, the A.O. came to the conclusion that the gain on the sale of the shares is to be assessed under the head capital gain . Once it is seen that the A.O has made the enquiry on the issue, then the Ld CIT, even if he is not convinced with the view taken by the A.O, cannot evoke the provisions of Sec. 263. 9. In the case of Sunbeam Auto Ltd. (Supra), the Hon ble Delhi High Court has explained the difference between the expressions lack of enquiry and inadequate enquiry. In the said case, th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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