What did the Tribunal hold?

The Tribunal followed its previous order in the assessee's own case for a prior assessment year, upholding the CIT(A)'s decision. The Tribunal agreed that the shares were held as investments and the profits/losses should be treated as capital gains.

The assessee declared short-term capital loss and long-term capital gains from share transactions. The Assessing Officer treated these as business income. The CIT(A) directed the AO to assess them as capital gains.

What were the issues?

Whether share transactions should be treated as capital gains or business income. The key issue is whether the assessee is an investor or a trader in shares.

ACIT vs Rajesh Damji Nandu | ITAT Mumbai 2017

Income Tax Appellate Tribunal, MUMBAI BENCH “D” MUMBAI

Before: SHRI SAKTIJIT DEY & SHRI N.K. PRADHAN

For Appellant: Shri Manish Sanghavi, AR

For Respondent: Shri Purushottam Kumar, DR, Shri Manish Sanghavi, AR

Hearing: 01/02/2017Pronounced: 19/04/2017

ORDER

PER N.K. PRADHAN, AM

This is an appeal filed by the revenue. The relevant assessment year is 2010-11. The appeal is directed against the order of the Commissioner (Appeals) – 35, Mumbai and arises out of order u/s 143(3) of the Income Tax Act, 1961 (the ‘Act’).

The grounds of appeal filed by the revenue read as under:

i. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in treating the assessee as investor and assess the profit on sale of delivery based shares as Short Term Capital Loss to the tune of Rs. 23,09,931/- to be carried forward to A.Y. 2011- 12 for set off and Long Term Capital Gain of Rs. 17,24,828/- although the assessee is engaged in trading in shares consistently. ii. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed to appreciate the fact that the assessee has withdrawn the appeal filed against the similar addition in A.Y. 2008-09 and accepted that share transactions entered by him was his business income. iii. The appellant prays that the order of the CIT(A) on the above ground be set aside and that of the Assessing Officer be restored.

The assessee filed his return of income for the A.Y. 2010-11 on 30.07.2010 declaring total income of Rs. 53,53,262/-. The assessee had declared Short Term Capital Loss (STCL) of Rs. 23,09,931/- in share transactions and carried forward the same to the A.Y. 2011-12. The assessee had also earned Long Term Capital Gains (LTCG) of Rs. 17,24,828/-. The Assessing Officer (AO) followed the order of the learned CIT(A) in the case of the assessee for the A.Y. 2008-09 and brought the STCL of Rs. 23,09,931/- and LTCG of Rs. 17,24,828/- under the head business and brought to tax the net amount of Rs. 5,85,103/- as business income.

Aggrieved by the order of the AO the assessee filed an appeal before the learned CIT(A). We find that the learned CIT(A) followed the order of her predecessor-in-office for the A.Y. 2009-10 and directed the AO to assess the profit on sale of shares as capital gains.

Before us, the learned DR relies on the order of the AO. On the other hand the learned counsel of the assessee relies on the order of the learned CIT(A) and also the order of the Tribunal in the case of the assessee for the A.Y. 2009-10 (ITA No. 5866/Mum/2013) decided by “D” Bench, Mumbai.

We have heard the rival submissions and perused the relevant material on record. We find that similar issue arose before the Co- ordinate Bench in the case of the assessee for the immediate preceding assessment year2009-10. The ground of appeal before the Tribunal was the following:

“On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in treating the assessee as investor and assess the profit on sale of delivery based shares as Short Term / Long Term Capital Gain to the tune of Rs. 3,957/- and Rs. 21,06,430/- respectively despite the fact that in A.Y. 2008-09 the assessee has accepted that he is engaged in trading of shares” The Tribunal held as under:

“4. We find that issue in appeal was decided in favour of assessee by CIT(A) vide their orders dated 27.04.2009 for A.Y. 2008-09 and 12.02.2010 for A.Y. 2009-10. In fact, CIT(A) has followed this order for A.Y. 2006-07. Hon’ble Bombay High Court in case of CIT vs. Gopal Purohit in Income Tax Appeal No.1121 of 2009 dated 06.01.2010, wherein issue was whether a particular holding of shares is by way of investment or forms part of stock in trade is a matter which is within the knowledge of assessee who holds the shares. Hon’ble High Court held that particular holding of shares is by way of investment or forms part of stock in trade is a matter which is within the knowledge of assessee who holds the shares in case of assessee. Same has been disclosed at the time of acquisition of shares that shares were acquired as investment and not as trading in shares. Hence, Assessing Officer should not presume otherwise, more particularly when nothing has been brought on record by him to substantiate his findings. The shares purchased by assessee on which capital gain was admitted, were shown as investment in balance sheet and in earlier years claim of capital gain has been accepted and assessee has consistently been following the method of admitting the profit on sale of shares shown as investment under the head ‘capital gain’. Assessing Officer has not disputed the fact that all the shares were transferred in the name of assessee as evidenced by demat account and as such all are delivery based transactions in respect of which assessee admitted capital gain. In view of above, CIT(A) rightly directed the Assessing Officer to treat the assessee as investor and assess the profit on sale of delivery based shares as Short Term/Long Term Capital Gains as declared by assessee. This view is supported by the decision of ITAT ‘D’ Bench, Mumbai in assessee’s own case in and others for A.Y. 2006-07 & 2007-08 as discussed above.”

6.1. Facts being similar, we follow the above order of the Co- ordinate Bench and uphold the order of the learned CIT(A).

In the result, the appeal filed by the revenue is dismissed.

Order pronounced in the open Court on 19/04/2017

ASST CIT 32(3), MUMBAI vs. RAJESH DAMJI NANDU, MUMBAI

What did the Tribunal hold?

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