Saumik Ketan Doshi, Mumbai vs Department Of Income Tax

The present appeal has been preferred by the Revenue against the order of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] dated 18.02.2011 relevant to assessment year 2007-08.

2. The sole issue raised in this appeal is as to whether the income generated from the sale and purchase of shares by the assessee is to be treated as short term capital gains as claimed by the assessee or as business income as was assessed by the Assessing Officer (hereinafter referred to as the AO). The assessee during the year had purchased shares of two companies and sold the same during the year under consideration itself and earned gains of ITA No.3826/M/2011 2 Shri Saumik Ketan Doshi

Rs.72,33,034/- which was offered by the assessee as short term capital gains. The AO, however, treated the transactions of purchase and sale of shares by the assessee as business activity and therefore assessed the above stated gains as business income of the assessee.

3. In appeal, the Ld. CIT(A) accepted the claim of the assessee and directed the AO to treat the income from purchase and sale of shares as short term capital gains observing as under:

"3.2 I have considered the submissions of the appellant and also gone through the order of the AO. In the detailed order, the AO has held that the appellant was engaged in the systematic business activity and accordingly the income accrued to him on sale of shares was an activity conducted for earning of profit and thus to be treated as 'Business Income'. On the contrary, the appellant during the proceedings has submitted that only two scripts on one single day i.e. on 04.10.2006 were purchased and sold on different dates in the year. Appellant has further submitted that the frequency, quantity and volume of purchase &sale was not much and systematic which can be called as continuous business activity. It is also submitted that appellant since many years is engaged in investment in shares of companies and such scripts were shown under "investment" in the Balance-sheet at the end of the year. Further, no loan was taken and interest was paid for such purchase of shares by him, therefore, from any stretch of imagination, two-three stray transactions of shares in one day cannot he treated as systematic business activity. The appellant has relied upon the judgement of Hon. Mumbai High Court in the case of CIT Vs Gopal Purohit reported in 228 CTR 582. Reliance is also placed on the decision in the case of Saranath Infrastructure 120 TTJ 216 (Luck). Keeping in view the facts that the appellant was showing constantly the investment in the balance-sheet in his individual capacity and moreover no loan was taken for purchase of such shares, in my opinion, the income on such transaction of shares has wrongly been treated as business income by the AO in the order. The AO is directed to delete the addition as business income and tax the income as short term capital gain of Rs.72,33,034/- shown by the appellant in the return of income. The ground of appeal is allowed."

4. Against the order of the Ld. CIT(A) the Revenue has come in appeal before us. We have considered the rival contentions of the Ld. Representatives of the parties. Admittedly, the assessee had purchased the scripts of two companies only that too on a single day i.e. on 04.10.2006. The above purchased shares were sold by the assessee on 4-5 different dates. Except the ITA No.3826/M/2011 3 Shri Saumik Ketan Doshi

above transactions, the assessee did not carry out any other share transaction during the year. There was no churning of the portfolios i.e. no repeated sale and purchase of the same script. No loan was taken for the purchase of the shares. The shares were shown as investment in the balance sheet of the assessee. The Ld. CIT(A), after appreciation of the facts and circumstances of the case, has held that from any stretch of imagination, 2-3 stray transactions of shares done by the assessee cannot be treated as systematic business activity. The Ld. CIT(A), after relying upon the various judicial decisions on the issue, has given a well reasoned finding that activity of the assessee in shares transactions cannot be treated as business activity. We do not find any infirmity in the order of the Ld. CIT(A) and the same is therefore upheld.

5. In the result, the appeal of the Revenue is hereby dismissed.

Order pronounced in the open court on 17.04.2015.

Sd/- Sd/- (R.C. Sharma) (Sanjay Garg) ACCOUNTANT MEMBER JUDICIAL MEMBER

Mumbai, Dated: 17.04.2015. * Kishore, Sr. P.S.

Copy to: The Appellant The Respondent The CIT, Concerned, Mumbai The CIT (A) Concerned, Mumbai The DR Concerned Bench //True Copy// [

By Order

Dy/Asstt. Registrar, ITAT, Mumbai.