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2017 (8) TMI 1711 - AT - Income TaxReopening of assessment - withdrawal of the exemptions granted u/s.10(38) - disallowance u/s.14A r/w Rule 8D - HELD THAT:- Admittedly, the re-opening has been done beyond the period of four years from the end of the relevant assessment year and consequently, the reasons recorded must disclose the failure on the part of the assessee to disclose fully and truly all material facts required for assessment. In the present case, the reasons recorded do not specify the failure on the part of the assessee to disclose truly and fully all the material facts in respect of the assessment. A perusal of the reasons recorded clearly shows that the same is a verbatim extract of the audit objection. On both these grounds, the reopening is bad in law. However, as the assessee has withdrawn the ground in respect of the challenge to the disallowance u/s.14A, we are unable to quash the re-opening, as if the re-opening assessment is validly initiated in respect of one of the issues, then the AO would be entitled to examine other issues also in the course of the re-opened assessment. In these circumstances, as the assessee has withdrawn the ground in respect of the challenge to the disallowance made u/s.14A, we are of the view that the re-opening is valid. In these circumstances, Ground Nos.1 & 2 of the assessee’s concise grounds stands dismissed. Claim u/s.10(38) in respect of the long term capital gains - A perusal of the Assessment Orders for the earlier years clearly shows that the Revenue has recognized that the assessee is in the business of Derivative, Future & Options in shares and the assessee is having investments in shares which has given rise to long term capital gains and short term capital gains which are being assessed as offered. It is only during this year that the Revenue has shifted its stand and has attempted to tax the long term capital gains disclosed by the assessee and claimed as exempt u/s.10(38) as a business income of the assessee. Circular issued by the CBDT in Circular No.6/2016 in F.No.225/12/2016-ITA-II clearly shows that “In respect of listed shares and securities held for a period of more than 12 months immediately preceding the date of its transfer, if the assessee desires to treat the income arising from the transfer thereof as Capital Gain, the same shall not be put to dispute by the Assessing Officer. However, this stand, once taken by the assessee in a particular Assessment Year, shall remain applicable in subsequent Assessment Years also and the taxpayers shall not be allowed to adopt a different/contrary stand in this regard in subsequent years" This applies to the Revenue also. In the present case, the assessee has been consistently holding his claim of long term capital gains in respect of his investments in shares. This being so, we are of the view that the AO is not justified in denying the assessee’s claim of deduction u/s.10(38). In these circumstances, the AO is directed to grant the assessee, the claim u/s.10(38) in respect of the long term capital gains disclosed by the assessee.
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