AI Drafter 
TaxTMI 
TaxTMI 
2021 (4) TMI 679
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....ed 23.08.2018 had passed the order on merits in ITA No.5178/Del/2012 in favour of the Revenue. However, vide order dated 29.05.2020 in Misc. Application filed by the Revenue being MA No.621/Del/2018, this Tribunal had recalled the earlier order vide order dated 23.08.2018 to be heard afresh and to hear denovo. Hence, the finding given in the earlier order may not have any binding precedent. 3. The facts in brief are that the assessee is engaged in the business of providing financial consultancy and all allied and auxiliary services. However, as per MOA, the business has been stated to be of buying, selling and dealing in securities of various kinds. The assessee has declared income from business and profession to the tune of Rs. 1,41,84,797/-; and income from short term capital gain (STCG) of Rs. 35,14,66,127/-. The ld. Assessing Officer required the assessee to show cause as to why the STCG shown in share transaction should not be treated as business income. In response to which assessee filed very detailed reply which has been incorporated in the assessment order from pages 2 to 9 of the assessment order. In sums and substance, assessee's contention was that, during the yea....
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....er, the ld. Assessing Officer has made following observations;- (a) The assessee is not maintaining separate books of accounts for the alleged investments and regular business. No separate bank account is maintained for diffracting the alleged investment made and for business activity. The assessee was utilizing the sales proceeds of the alleged investments for the purpose of business. Similarly, the assessee was utilizing the funds of business for alleged purchase of investment/ shares. Merely, an assumption by the assessee that a particular purchase is investment is not sufficient. If it is allowed then every person shall opt for income trading of shares as capital gain income, only because tax on capital gain is either levied lesser rate or Nil rate. (b) The turnover of these shares was to the tune of Rs. 69,06,09,30,892/-. This in itself shows that it was trading activity. 6. Finally, the Assessing Officer treated the income from sale of investment in share as business income after observing and holding as under: "In Asstt. Year 2007-08, the assessee itself treated its income as income from business and profession and considering this fact....
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.... "In the assessment order, the Assessing Officer has mentioned that appellant was doing frequent transactions of sales and purchase of shares throughout the year. However, it is seen from the details tiled by the appellant that appellant did not either purchased or sold any shares in the month of June 2007, July 2007 and October 2007. It is also seen that in several months the appellant has transacted' only in single scrip. It is also observed that in the month of April appellant acquired shares of one company and did not sold anything. In the month of May appellant acquired shares of one company and sold shares of two companies. In the month of June and July there was no purchase or sale. In the month of August appellant acquired shares of one company only and did not sale anything. In the month of September and October, appellant did not make any investment in shares and sold only shares of one company in the month of September. In the month of November appellant acquired shares of one company but did not sell anything. In the month of December appellant acquired shares of two companies and also sold shares of two companies. In the month of January appellant acquire....
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....as expenditure. During the course of appellant proceedings the AR of the appellant has drawn my attention to para 3 of the assessment order wherein the ASSESSING OFFICER has mentioned that the appellant's main business is sale and purchase of shares. This observation of the ASSESSING OFFICER is factually incorrect. As stated above the appellant is engaged in the business of Financial Consultancy and advisors and from that business it has shown income of Rs. 141,84,797/- during the year. During the course of appellate proceedings, the appellant submitted that all transactions have been delivery based and were settled by way of payment, the appellant has also submitted that it has maintained separate records for investment and trading of shares without delivery. The holding of the shares on which short term capital has been claimed ranges from few days to few months. It is claimed by the appellant that investment was made in the shares with the intentions to hold the same for long term appreciation and for earning dividends. However, the investments was offloaded because of appreciation and maximizing the wealth. It is also contended by the appellant that p....
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....t the ASSESSING OFFICER to treat the surplus received on sale and purchase of shares as short term capital gain as declared by the appellant in its return of income. As a result this ground of appeal of the appellant is allowed." 8. Before us, ld. CIT-DR, first of all pointed out that here in this case, the appeal was decided by the Tribunal through an ex-parte judgment, vide order dated 23.01.2017 wherein the Revenue's appeal was allowed. Thereafter, it was recalled being an ex parte order and was fixed to be heard on merits. Thereafter, the Tribunal again vide order dated 23.08.2018 had passed a detailed order on merits, wherein the Tribunal has decided the issue against the assessee holding that assessee has purchased and sold scrips multiple times, on various dates and looking to the magnitude of purchase of shares which is very large, therefore, the gain is to be taxed as 'Business income'. However, the said order has again been recalled by the Tribunal to be heard fresh. She further submitted that in earlier years, the assessee itself had shown the transaction of shares as business income and only in this year the assessee has claimed transaction of short term capital g....
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....en at page 29 of Paper Book as under:-. "1. Overview Divya Shakti Trading Services limited ("the company") was incorporated on November 02, 2006. The Company is in business of providing financial consultancy and all allied and auxiliary services. 10. Ld. Counsel submitted that learned Assessing Officer while treated the short-term capital gain amounting to Rs. 35,14,66,127/- earned on entire sale and purchase of shares as business income has noted that "In Asstt. Year 2007-08, the assessee itself treated its income as income from business and profession". He pointed out that which has also been noted by learned Assessing Officer that assessee has moved petition u/s 264 in light of the guidelines issued by Central Board of Direct Taxes in circular no. 4/2007 dated 15.06.2007 that profit from sale of shares of GHCL be taxed under the head 'capital gain' and not under the head 'business income'. He further added that in the preceding years i.e. assessment year 2007-08 assessee company earned profit from sale of shares of only in one company, namely GHCL and has no shares at the end of preceding assessment years on the contrary in the year under consideratio....
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..... - 5,300 10,72,805 5,300 10,58,740 Omaxe Ltd. - - 24,426 75,72,060 24,426 86,15,121 Orchid Chemical & Pharmaceuticals Ltd. - - 5,40,230 14,06,48,490 5,40,230 14,21,53,703 BGR energy Systems Ltd. - - 5,838 28,02,240 5,838 52,18,963 Reliance Power Ltd. - - 1,42,896 6,43,03,200 1,42,896 4,98,57,585 Grabal Alok Impex Ltd. - - 19,00,000 20,02,05,731 19,00,000 18,79,64,808 Reliance Energy Ltd. - - 4,08,982 60,98,09,848 4,08,982 63,53,57,960 Prakash Industries Ltd. - - 12,50,000* 23,75,00,000 - - 13. Thus, in all, there are only 10 scrips in which investment had been made during the year and out of which disinvestment was made in 9 scrips. One of the controversies is that there are large number frequencies of purchase and sale of shares. However, the monthly frequency of transactions for the entire financial year shows that there not much frequency as alleged by Assessing Officer. This is quite evident from the following: Month Purchase Sale April Acquired share of 1 co Nil May Acquired share....
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....d that from Assessment Year 2009-10 onwards, the profit and loss from sale of shares have been taxed under the head 'capital gain' which has been accepted by the Assessing Officer in scrutiny proceedings u/s.143(3) right from the Assessment Years 2009-10 to 2014-15, the details of which have been already incorporated above. This also goes to show that from this year onwards assessee's share transaction was always intended to be shown as investment and the gain has been offered under the head Capital Gain which has been accepted by the department mostly in scrutiny proceedings. 16. Further, Hon'ble Bombay High Court in the case of CIT vs. Gopal Purohit, 336 ITR 287 (Bom) has upheld the proposition that it is open for the assessee to maintain two separate portfolio one relating to investment in share and another relating to business activities involving dealing in shares. Here, in this case also, the assessee has maintained separate portfolio and the shares in question have been treated as investment. In the financial statement, it has been valued as cost of the profit has been disclosed a sole of investment. The principle laid down by the Hon'ble Bombay High Court in the case of ....
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....stment portfolio and not a trading portfolio. We also notice that the Tribunal has mentioned that the assessee has received substantial dividend income of more than '19 lakhs and '27 lakhs in the assessment year 2005-06 and 2006-07. The Assessing Officer as noticed above was influenced to a large extent of the fact that the assessee had earned huge profits during the year in question from the sale of the said shares. This can happen even in case of investment portfolio because when investment is liquidated to earn gains and. change their portfolio. Element of uncertainty and risk is always there when a person deals in securities but this factor cannot be determinative factor whether the assessee is trading in shares or is an investor. Some investors do take risk. The Assessing Officer has recorded that during the financial year 2006-07, the assessee had indulged in frequent and regular trade in securities. The Assessing Officer did not refer to and specifically dealt with the transactions in question though the chart and the figures noted above in this order were available and on record at the time of original assessment. He has not mentioned whether the assessee had indulg....
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....ITCO LTD. QUANTITY RATE AMOUNT DATE QUANTITY RATE AMOUNT PROFIT 8-May-07 5,300 2,02,416 10,72,805 30-May-07 5,300 10,58,740 5,300 10,72,805 5,300 10,58,740 (14,065) OMAXE LIMITED QUANTITY RATE AMOUNT DATE QUANTITY RATE AMOUNT PROFIT 2-Aug-07 24,426 310.00 75,72,060 20-Sep-07 24,426 380.89 88,15,121 24,426 75,72,060 24,426 88,15,121 12,43,061 DLF LIMITED QUANTITY RATE AMOUNT DATE QUANTITY RATE AMOUNT PROFIT 6-Nov-07 19,55,000 924.77 180,79,29,653 27-Dec-07 14,96,000 1,006.12 150,51,53,326 ....
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.... RATE AMOUNT PROFIT 26-Dec-07 5,838 480 28,02,240 3-Jan-08 5,838 893.96 52,18,963 5,838 28,02,240 5,838 52,18,963 24,16,723 RELIANCE POWER LTD. 1-Feb-08 1,42,896 450 6,43,03,200 13-Fbe-08 1,42,896 348.91 4,98,57,585 1,42,896 6,43,03,200 1,42,896 4,98,57,585 (1,44,46,615) RELIANCE ENERGY LIMITED (Currently known as Reliance Infrastructure LtdO). QUANTITY RATE AMOUNT DATE QUANTITY RATE AMOUNT PROFIT 15-Feb-08 2,50,000 1,712.00 42,80,00.927 27-Feb-08 2,50,000 1720 42,99,49,131 24-Mar-08 1,58,982 1,143.58 16,18,08,920 25-Mar-08 1,58,982 1292 20,54,08,830....