ASST CIT 5(2) vs. RAJESH D. NANDU, MUMBAI

“1. 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.”

Assessee is an individual and filed his return of income on 30.07.2009 declaring total income of Rs.63,83,949/- in year under consideration. Subsequently, Assessing Officer selected the case for scrutiny and completed the assessment determining the total income at Rs.84,86,420/-. Matter was carried before the First Appellate Authority, wherein various contentions were raised on behalf of assessee and having considered the same, CIT(A) granted relief to assessee.

Same has been opposed on behalf of Revenue, inter alia submitting that under the facts and circumstances of the case, 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 assessee has accepted that he is engaged in trading of shares. Accordingly, order of CIT(A) be set aside and that of Assessing Officer be restored. On other hand, learned Authorized Representative supported the order of CIT(A) and drew our attention to ITAT order for A.Y. 2006-07 in assessee’s own case, wherein similar issue has been decided in favour of assessee by observing as under: A.Y. 09-10 [ACIT vs. Shri Rajesh D. Nandu] Page 3

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 A.Y. 09-10 [ACIT vs. Shri Rajesh D. Nandu] Page 4 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 ITA No.4330/Mum/2009 and others for A.Y. 2006-07 & 2007-08 as discussed above.

As a result, appeal filed by Revenue is dismissed.