Case Law Details

Case Name : The DCIT Circle-2 Vs Shri Mahender Kumar Bader (ITAT Jaipur)
Appeal Number : ITA Nos. 605/JP/2013
Date of Judgement/Order : 18/03/2016
Related Assessment Year : 2008-09
Courts : All ITAT (7012) ITAT Jaipur (202)

CA Saurabh Chokhra

Brief of the case:

The ITAT Bench Jaipur in the above cited case held that as per CBDT circular 6/2016 dated 29.02.2016 , if the assessee has treated the securities as investment and not as stock in trade earlier  years,the revenue is not permitted to take a contrary view in the present year to claim  that the security is stock in trade

Facts of the case:

1. Assessee filed his return of income declaring total income of Rs. 85,86,760/-. During the course of assessment proceedings, the AO observed that the assessee claimed investment activity and shown short term capital gain from share transaction of Rs 73,70,214/-.

2. AO examination of records of assessee observed that assessee has done voluminous transactions in shares & units. The transactions are frequent and amount involved is very large. On careful analysis of the entire portfolio and resultant purchase andsale of scrips, the AO observed that there has been a systematic and regular trading pattern and shares have been purchased and sold at very regular intervals. This feature is seen in respect of buying of shares of a single company or in respect of buying and selling of shares of many a company for a very short holding period of a few days and few months.

3. AO rejected the contention of the assessee that shares were purchased as investment by observing that out of total no. of shares, most of transactions held is for less than 5 months, many of the shares have been sold within few days of purchase.

4. Accordingly, in his order AO assessed such income as business income. CIT(A) , however, allowed assessee’s appeal by holding that in earlier assessment years also short term capital gain declared by the assessee was not disturbed and further assessee had not indulged in any squaring-up of the transactions on the same day(intraday settlement without delivery of shares).

5. Aggrieved revenue is in appeal before ITAT.

Contention of the Assessee:

It was submitted that the assesseehas consistently declared the gains/losses under the head Capital Gains, even if thesame was disadvantageous to the assessee in some previous years. Therefore, when earlier the department not disturbed the treatment made by assessee then why now the same being questioned.

Held by ITAT Jaipur:

1. The question to be decided was that whether the income earned by the assessee on account of share is required to be treated as business income or required to be treated as short term capital gain.

2. ITAT considered the latest CBDT Circular No.6/2016 dated 29.02.2016 clarifying the taxability of share transactions. As per this circular , if the assessee has treated the securities as investment and not as stock in trade in all the years,the revenue is not permitted to take a contrary view in the present year to claim that the security is stock in trade and, therefore, the profit/gain caused to the assessee be treated as business income. It is because the consistency in treatment made by assessee should be given due regard particularly when the revenue earlier not questioned such treatment.

3. In result the appeal of revenue was dismissed.

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