DCIT Vs M/s Divya Shakti Trading Services Ltd. (ITAT Delhi)
In this case assessee has purchased and sold scrips multiple times, on various dates alleged to have been held as investment within small duration. The magnitude of purchases on each date has been very large in respect of all these shares. Thus in our considered opinion frequency and volume of purchase and sale of shares shows, intention of assessee was to generate income through trade, rather than invest in them.
In Smt.Prem Jain vs. ITO in ITA No. 2572/Del/2016 for Assessment Year 2011-12, this Tribunal with same combination, placing reliance upon decision of Hon’ble Delhi High Court in the case of CIT vs D&M Components Ltd reported in 364 ITR 179 had observed as under:
“18. We find the Hon’ble Delhi High Court in the case of D & M Components Ltd. (supra) while deciding a somewhat identical issue has held that where there was short duration of holding of shares and lack of clarity in account books, sale and purchase of shares would lead to business income and not short term capital gains. The various other decisions relied by the ld. counsel for the assessee also supports his case that the profits in the instant case of purchase and sale of shares would amount to business income and not short term capital gain as held by the Assessing Officer. In this view of the matter, we set-aside the order of the ld. CIT(A) and direct the Assessing Officer to allow the claim of business income on account of profit on sale of such shares.”
Based on the above decision, the Tribunal held that the income has to be treated as business income.
FULL TEXT OF THE ITAT JUDGMENT
Present Cross Appeals have been filed by Revenue as well as Assessee against order dated 23/07/12 passed by Ld. CIT (A)- 13, New Delhi for Assessment Year 2008-09 on the following grounds of appeal:
1. Whether the Ld. CIT(A) under the facts and circumstances of the case and in law was justified in holding that profit of Rs.35, 14,66,127/- earned by the assessee on sale of shares is short term capital gain and not business
2. The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal.”
ITA No. 5029/Del/2012 (Assessee’s appeal)
1. The Ld.CIT(A) has erred in law and on facts, in confirming the disallowance u/s 1 4A amounting to Rs. 7,60,000/-, without giving due consideration to the facts and circumstances of the case.
2. The Ld.CIT(A) has erred in not considering the ground related to initiation of penalty proceedings u/s 271(1)(c) , as the assessee had neither concealed the particulars of income nor submitted any inaccurate particulars of income.
3. That the assessee craves for liberty to raise any other ground at the time of hearing of appeal.”
2. Brief facts of the case are as under:
For the year under consideration assessee filed its return of income on 08/10/09. The same was processed under section 143 (1) of the Income Tax Act, 1961 (the Act) and was selected for scrutiny. Accordingly, notice under section 143 (2) of the Act along with notice under section 142(1) of the Act, with questionnaire, was served upon assessee. In response to statutory notices Representatives of assessee appeared before Ld.AO and discussed the case.
2.1. Ld.AO observed that during the year under consideration, assessee is stated to be engaged in the business of buying, selling and dealing in securities of any kind, shares, debentures, debentures stock, properties, bonds, units, obligations and other securities. Ld.AO observed that assessee had declared income from business and profession to the tune of Rs.1,41,84,797/-, income from short term capital gains at Rs.35, 14,66,127/-and income from dividend claimed to be exempt at Rs. 16,300/-.
Ld. AO observed that assessee declared to have made investments in shares of 10 companies, the details of which are as under:
