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TMI Blog2017 (8) TMI 1711X X X X Extracts X X X X X X X X Extracts X X X X ..... e part of the Appellant and ought to have appreciated that all along the Assessee claimed exemption under section 10(38) on sale of shares which was accepted by the Department earlier as well as subsequent assessment years. Hence, there is a mere change of opinion on the part of the Assessment year. Merits 3. The CIT (Appeals) is wrong in holding that the transaction with respect to shares held by the Appellant, will have to be treated as business income and hence Appellant is not entitled exemption under for section 10(38) of the Income Tax Act 1961. Further, the Assessee has shown the purchase of shares as investment in his balance sheet, which reflects the intention of the Assessee. 4. The CIT (Appeals) ought to have seen that a share purchased on a particular day which came to be sold on the very same day is shown as short term capital gains by the Assessee himself and in respect of the shares held beyond 12 months was shown as long term capital gains. 5. The CIT (Appeals) ignored the scope and purport of the CBDT circular bearing no.6 of 2016 dated 29th February 2016, wherein the Assessee' desire to treat the transactions as capital gains would not be open to quest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd truly all material facts. The second was that the reopening was purely based on change of opinion and thirdly the re-opening was done on the dictate of the audit party & the Ld.CIT and there was no independent application of mind by AO. The Ld.AR drew our attention to Page No.6 of the Paper Book, which is a copy of the return to submit that the assessee was doing a business of Futures and Options. It was a submission that during the year the assessee had liquidated substantial portions of investments which were held for period of varying more than one year to nearly five years. The Ld.AR also drew our attention to Page No.15 of the Paper Book which was a copy of the Form No.3CD report, wherein the Auditors have reported the nature of the business of the assessee as Derivative, Future & Options in shares. It was a submission that at Page No.21 in respect of clause No.28(a) of the Form No.3CD report, Auditors have also mentioned that the assessee is carrying on the business of Derivative, Future & Options in shares. The consolidated balance sheet of the assessee was shown at Page No.26 of the Paper Book to show the investments as separately disclosed and the current assets in resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he re-opening had two issues. One in regard to the treatment of the long term capital gains disclosed by the assessee as business income and the second one being the disallowance u/s.14A, and as the assessee having withdrawn his ground in regard to the disallowance u/s.14A, though, the assessee did have a very good case in regard to the re-opening, the same cannot be quashed on account of the withdrawal of the ground in regard to the disallowance u/s.14A. 8. In reply, the Ld.DR vehemently supported the order of the AO and CIT(A) in respect of re-opening. 9. We have considered the rival submissions. A perusal of the reasons recorded at Page No.84 of the Paper Book shows that the re-opening is on two grounds. The first one is in regard to the withdrawal of the exemptions granted u/s.10(38) of the Act and the second one is in regard to the disallowance u/s.14A r/w Rule 8D. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , wherein the business income from Futures and Options are separately shown and his long term capital gains claimed as exempt u/s.10(38) has been accepted. Same also at Page No.149 for the AY 2010-11 and Page No.163 for the AY 2012-13. The Ld.AR further drew our attention to Page No.95 of the Paper Book which was a copy of the break-up of the investment in the shares which has lead to long term capital gains claimed exempt u/s.10(38) to submit that out of the shares sold 77.12% of the shares was held for more than five years, 11.57% was held for a period of 3 to 5 years, 6.75% for a period of 2 to 3 years and 4.5% for a period of 1 to 2 years. It was a further submission that one single holding of M/s.Parry Agro Industries Ltd. which constituted nearly 63.38% of the entire capital given offer by the assessee during the relevant previous year was held as investment for substantial more than five years. The breakup of the shares holding as investment was shown at Page No.97 of the Paper Book. It was a submission that the shares having been held as investment continuously and the same have also been accepted by the Revenue for the earlier years it was not open to the Revenue to turn a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y require the shares to be held stock in trade in the earlier years. If that is so, the market value of the shares would to be determined at the end of the each year and the profits/loss would have been determined and assessed. This has not been done in the assessee's case. 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. A perusal of the Circular issued by the CBDT in Circular No.6/2016 in F.No.225/12/2016-ITA-II which is extracted below:- Circular No.6/2016 Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes North Block, New Delhi, the 29th of February, 2016 Sub: Issue of taxability of surplus on sale of shares and securities - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 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; c) In all other cases, the nature of transaction (i.e. whether the same is in the nature of capital gain or business income) shall continue to be decided keeping in view the aforesaid Circulars issued by the CBDT. 4. It is, however, clarified that the above shall not apply in respect of such transactions in shares/securities where the genuineness of the transaction itself is questionable, such as bogus claims of Long Term Capital Gain / Short Term Capital Loss or any other sham transactions. 5. It is reiterated that the above principles have been formulated with the sole objective of reducing litigation and maintaining consistency in approach on the issue of treatment of income derived from transfer of shares and s ..... 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