AI Drafter 
TaxTMI 
TaxTMI 
2016 (4) TMI 813
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.... 143(2) was issued and served upon the assessee on 19.8.2009. On scrutiny of the accounts, it revealed to the AO that the assessee has shown long term capital gain as well as short term capital gain on sale of shares. In the opinion of the AO, the transactions undertaken by the assessee are voluminous, and therefore, the assessee is to be treated as trader in the shares. The ld.AO has specifically highlighted the following points: "4.1 The assessee purchased and sold lacs of shares aggregating in total to almost two lakh shares during the year. 4.2 The assessee purchased and sold 48 different types of shares in STCG and 18 different types of shares in LTCG 4.3 The number of times on which the scrips were transacted by the assessee was 425 in STCG and 133 in LTCG during the entire year. 4.4 The number of days on which the shares were purchased was 165 during the year in STCG and 39 in LTCG. 4.5 The number of days on which the shares were sold was 265 during the in STCG and 73 in LTCG. 4.6 Thus, the assessee had adequate knowledge and experience to indulge in share trading. 4.7 The assessee indulged in buying and selling of shares on almost each day that market w....
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....that the appellant has also sold certain shares within a short period of holding which is as low as one day, two day, five days. The period in some cases also go up to fourteen days, twenty eight days, forty eight days etc. (ix) The volume of share transactions totals to Rs. 2.34 crores approx. (x) The purchase and sales of shares has been done in a systematic and organized manner." 6. Accordingly, the ld.CIT(A) has rejected the contentions of the assessee and held that the assessee is to be treated as a trader in shares. The gain arisen to the assessee on sale of shares is to be treated as business income. 7. Before us, the ld.counsel for the assessee reiterated his contentions as were raised before the Revenue authorities below. He specifically took us through the submissions reproduced by the ld.CIT(A). On the other hand, ld.DR relied upon the orders of the Revenue authorities. 8. Before we embark upon an inquiry on the facts of present case so as to find out, whether assessee is to be termed as involving in the trading of shares or is to be treated as a simplicitor investor. We would like to refer certain broad principle culled out by ITAT Lucknow Bench in the ca....
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....dduce evidence to show that his holding is for investment or for trading and what distinction he has kept in the records or otherwise, between two types of holdings. If the assessee is able to discharge the primary onus and could prima facie show that particular item is held as investment (or say, stock-in-trade) then onus would shift to Revenue to prove that apparent is not real. 8. The mere fact of credit of sale proceeds of shares ( or for that matter any other item in question) in a particular account or not so much frequency of sale and purchase will alone will not be sufficient to say that assessee was holding the shares (or the items in question) for investment. 9. One has to find out what are the legal requisites for dealing as a trader in the items in question and whether the assessee is complying with them. Whether it is the argument of the assessee that it is violating those legal requirements, if it is claimed that it is dealing as a trader in that item? Whether it had such an intention (to carry on illegal business in that item) since beginning or when purchases were made? 10. It is permissible as per CBDT's Circular No. 4 of 2007 of 15th June, 2007 that an as....
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....) The last but not the least, rather the most important test, is as to the volume, frequency, continuity and regularity of transaction of purchase and sale of the goods concerned. In a case where there is repetition and continuity, coupled with the magnitude of the transaction, bearing reasonable proposition to the strength of holding then an inference can readily be drawn that the activity is in the nature of business. 10. In the light of the above, if we examine the record carefully, then, it would emerge out that first contention of the assessee was that it had started investment in shares since 1986. In all these years, shares were treated as investment in the accounts maintained by the assessee, and this treatment was never disturbed by the Revenue. This plea of the assessee was rejected by the CIT(A) simply on account of nonapplicability of principle of res judicata on the income tax proceedings. She also observed that in earlier year scrutiny assessment was not made. In law, both these reasons are not valid reasons. It is to be kept in mind that in the present case, circumstances are being evaluated in order to collect the intention of the assessee while purchasing the sh....