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Shri Atul A Shah Versus Assistant Commissioner of Income Tax- 25 (3) , Bandra Mumbai

2016 (9) TMI 1200 - ITAT MUMBAI

Purchase and sale of shares - business income or Capital gain computation - Held that:- There were no borrowings by the assessee and no interest was paid. The number of transactions has also come down in the impugned assessment year as compared to the preceding assessment year. The average period of holding was 95 days and number of transactions were 70 , while for assessment year 2005-06 it was 70 days and 119 transaction while for assessment year 2006-07 , the average period of holding was 129 .....

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ins while framing assessment u/s 143(3) of the Act for the assessment year 2005-06. The factual matrix in the instant assessment year under appeal is similar to the preceding assessment years i.e. 2005-06 and 2006-07 and we do not find any reasons of deviating from the settled position in this year. Keeping in view of the above facts and circumstances of the case, we are of the considered opinion that principle of consistency has to be maintained and followed in this year as facts are almost sim .....

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RAMIT KOCHAR, ACCOUNTANT MEMBER For The Assessee : Shri Rahul K. Hakani For The Revenue : Shri Aarsi Prasad ORDER PER RAMIT KOCHAR, Accountant Member This appeal, filed by the assessee, being ITA No. 975/Mum/2013, is directed against appellate order dated 29th November, 2012 passed by learned Commissioner of Income Tax (Appeals)- 35, Mumbai (hereinafter called the CIT(A) ), for the assessment year 2007-08, the appellate proceedings before the learned CIT(A) arising from the assessment order dat .....

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is should be treated as short term capital gains taxable @10%. 3. The brief facts of the case are that the assessee is a partner in partnership firms from which the assessee derived income by way of share of profit, remuneration and interest income. The assessee has also declared capital gains on sale of shares and interest income etc. 4. During the course of assessment proceedings u/s 143(3) read with Section 143(2) of the Act, the A.O. observed that the assessee has entered into transactions i .....

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tiny assessment u/s 143(3) read with Section 143(2) of the Act, it was accepted as capital gain . While for the assessment year 2006-07 the same was treated as business income. The assessee submitted that he has filed appeal before the ld. CIT(A) and submitted that the order of the AO for earlier year suffered from several infirmities against which elaborate submissions were made before the learned CIT(A) and order of the learned CIT(A) is awaited. The A.O. observed that assessee has failed to s .....

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sale of shares were treated as income of the assessee under the head profit and gain from business and profession and hence the gains offered on short term capital gains of ₹ 5,51,677/- was treated as income of the assessee from business vide assessment order dated 16th December, 2009 passed by the AO u/s 143(3) of the Act. 5. Aggrieved by the assessment order dated 16.12.2009 passed by the A.O. u/s 143(3) of the Act, the assessee filed his first appeal before the ld. CIT(A). 6. Before the .....

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786/- also. The assessee submitted that surplus funds are invested in shares and mutual funds. The assessee submitted that majority of the time is devoted in the business and this is not the main activity being a working partner with M/s King Metal Works. The investment in shares was made mainly through the brokers or IPO and mainly in Mutual Funds. It was submitted that in the books of account these transaction were reflected as investment in shares and not as stock-in-trade. No funds were borr .....

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ome. All the share dealings were done through recognized stock exchanges and were delivery based . The said investments are duly recorded in the books of accounts as Investment . It was also submitted that in assessment years 2004-05 and 2005-06 the income was treated as investment income and charged to tax as capital gain in the scrutiny assessment framed by the Revenue, while in the assessment year 2006-07 the same was assessed as business income. Thus, the assessee prayed before the learned C .....

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ge and the objective is to earn profit and not to hold the shares for earning dividend or capital appreciation. The ld. CIT(A) observed that the volume of purchase and sale of the assessee during the previous year was substantially high and purchase and sale of shares was the main activity of the assessee. The transactions were continuous and regular and systematic. The ld. CIT(A) relied upon various decisions which are detailed in his order and came to the conclusion that the assessee is engage .....

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e is to gain profits and hence the decision of the A.O. was upheld by the learned CIT(A) vide appellate order dated 29.11.2012. 7. Aggrieved by the appellate order dated 29.11.2012 passed by the ld. CIT(A), the assessee filed appeal before the Tribunal. 8. The ld. Counsel for the assessee submitted that the assessee had made investments in shares which were purchased through recognized stock exchanges through brokers or IPO. The payments were made through cheque. The investments in shares are sh .....

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ile for assessment year 2006-07 the AO brought the same to tax as income from business. In assessment years 2006-07 the ld. CIT(A) has accepted the purchase and sale of shares as short term capital gain vide order dated 19th August, 2009 which is placed in paper book page 16 to 24. The ld. Counsel submitted that there is no change in the factual matrix of the case in the instant previous year as compared to the earlier years. Principle of consistency has to be maintained and the short term capit .....

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e the similar figure for assessment year 2006-07 being 129 days and 107 transaction. The assessee also submitted a chart vide paper book page 26 to 29 showing the statement of short term capital gains /loss on share transaction for the instant assessment year 2007-08 . The ld. Counsel relied upon the decision of Hon ble Bombay High Court in the case of CIT v. Gopal Purohit (2011) 336 ITR 287(Bom.). 9. The ld. D.R., on the other hand, relied upon the order of the authorities below and submitted t .....

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We have observed that the assessee is a working partner in partnership firms from where he is deriving income from share from partnership firm(exempt), interest on capital and remuneration . We have observed that the assessee has purchased and sold the shares through recognized stock exchanges through brokers or IPO and the payments were made through cheque. The shares /Mutual Funds have been shown as investment in the books of account and valued at cost. There were no borrowings by the assessee .....

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