TaxTMI 
TaxTMI 
TaxTMI 
2013 (9) TMI 157
X X X X Extracts X X X X
X X X X Extracts X X X X
....ares to book profit rather than investment in shares." 2. The facts, as recorded by the CIT(A) are that the assessee is deriving income from capital gains and income from other sources. The assessee is an individual who declared profit, earned from share transactions at Rs. 22,66,873/- under the head short term capital gain and certain income, at Rs. 48,336/-, as speculation. In the course of assessment proceedings, the AO sought justification for the claim of the assessee with regard to short term capital gain (STGC) in the transactions entered into by the assessee, in the shares claimed to be held by the assessee under "investments". The AO sought the details of transactions and other details, with respect to the activity carried on by the assessee. Having regard to the frequency of transactions, quantity of shares purchased and sold and the number of transactions, the AO was of the opinion that it was an organized activity of purchase and sale of shares with profit motive and, therefore, required the assessee to furnish the reasons as to why the same could not be treated as business income. The assessee, vide letter dated 24.12.2009 submitted that the assessee is/was an investo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nbsp; c) Werle & Co. vs. Colqhoun (1988) TC 402; d) CIT vs Motilal Hirabhai Spg. & Wvg. Co. Ltd. 117 ITR 173 (Guj); e) Raja Bahadur Visheshwara Singh vs. CIT 41 ITR 685(SC.); f) Bharat Development (P) Ltd. vs. CIT 4 Taxman 58 (Del.); g) Punjab Co-operative Bank Ltd. vs. CIT 81 ITR 635 (PC) and h) Sardar Indra Singh & Sons Ltd. vs. CIT 24 ITR 514 (SC) (iv) The AO has further noted that the fact that the appellant has held shares for a short period and then sold them off indicates that the only intent of the appellant is to book profit on sale of shares. The fact that the appellant has sold large number of shares within a short period of purchase proves that there was no intention of the appellant to hold the shares as investment and earn dividend on the same. The appellant has repeatedly bought and sold shares after holding them for short duration with only one intent i.e. profit making. Reliance was placed by the AO on the decision of the ITAT Ahmadabad Bench in DCIT vs. Deepa Shah....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tor 17.5.05 100 32,452 3.5.06 100 42,661 10,209 351 Gujarat Gas 20.5.05 10 10,000 3.5.06 10 12,956 2,956 348 Internet Trad 23.5.05 200 24,718 23.8.06 200 32,886 8,168 457 Jeypore Sugar 13.4.06 50 37,174 10.1.07 200 61,219 - 272 21.4.06 50 38,882 - - - 264 18.8.06 100 42,555 - - - - 145 200 1,81,611 - 200 61,219 -57,392 Linc Pen 11.5.05 300 15,360 10.1.07 800 37,518 - 352 18.8.05 500 39,031 - - - - 253 200 54,391 - 800 37,518 -16,873 - W S Ind 18.3.05 2000 60,256 26.4.06 3000 1,73,281 - 404 18.8,05 1000 18,790 - - - - 506 3000 79,046 - 3000 1,73,281 94,235 - Bank of Rajasthan 11.5.05 500 30,559 26.4.06 600 25,862 - 352 18,8.05 100 4,663 - - - - 253 600 35,222 - 600 25,862 -9,360 - Total 12,27,142 5. From the above, the assessee submitted before the CIT(A), that more than 50% of short term capital gain was earned by holding shares for more than 5 to 6 months and, therefore, the AO e....
X X X X Extracts X X X X
X X X X Extracts X X X X
....is seen from the balance sheet that the investment in shares as on 31.3.2006 was Rs. 28,82,919/-.The total sale value of shares on which short term capital gain was admitted by the appellant during this year is Rs. 1,29,92,403/- and when same is compared to the investment in shares as on 31.3.2006 and 31.3.2007, it cannot be said that the appellant was engaged in frequent transactions. The ratio of turnover to investment was around three. it is true that the appellant undertook speculative transactions in the earlier year but that is no bar for the assessee to hold shares as investment and Financial Consultants Pvt. Ltd. vs. Dy. CIT (2 SOT 371). Further the appellant did not claim any payment of interest on borrowed funds which were utilized for investment in shares. A perusal of working of short term capital gains shows that the appellant earned short term capital gains by holding shares as below: No. of days No. of scrips No. of Buying Transactions No. of sale # Transactions Capital Gain/Loss % of Total Gains/Loss 361 & more 3 2 2 93044 4.10% 331-360 4 4 2 10443 0.46% 301-330 1 1 1 466195 20.57% 271-300 1 1 1 -21869 -0.96% 241-270 4 4 2 -49554 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... that the frequency and magnitude of transaction cannot be the criteria for determining the head of income. It was held as under: "The mere volume of transaction transacted by the assessee would not alter the nature of transaction. It is an established principle that income is to be computed with regard to the transaction. The transaction in whole has to be taken into consideration and the magnitude of the transaction does not alter the nature of transaction. Though the principle of res judicata does not apply to the Income-tax proceedings as each year is an independent year of the assessment but in order to maintain consistency, it is a judicially accepted principle that same view should be adopted for the subsequent years, unless there is a material change in the facts. Their lordships of Hon'ble Supreme Court in the Radhasoami Satsang vs CIT [1992] 193 ITR 321 have categorically held as under: "... Strictly speaking, res judicata does not apply to income-tax proceedings. Though, each assessment year being a unit, what was decided in one year might not apply in the following year, ....