2010 (6) TMI 405 - HC - Income Tax

Loss on sale of shares - Tribunal upheld the action of the Assessing Officer of treating the loss on sale of shares as capital loss ignoring the fact that instead of showing the shares as stock-in-trade in the balance-sheet it was shown by the assessee under the head investments different view not to be taken for subsequent year no substantial question of law Appeal dismissed

Summary

Issues:
1. Whether the Tribunal was justified in not upholding the action of the Assessing Officer treating the loss on the sale of shares as capital loss?
2. Whether the Tribunal was correct in applying the principle of res judicata in the assessee's case?

Analysis:
1. The appeal pertains to the assessment year 2003-04. The Assessing Officer treated the loss on the sale of shares as a capital loss, disregarding the fact that the shares were shown under the head 'investments' in the balance sheet instead of 'stock-in-trade.' The assessee contended that the nature of the transaction should not change based on how it is recorded in the books. Previous assessments for the years 1997-98 and 2002-03 had similar queries, and the Assessing Officer accepted the assessee's explanation. The Tribunal noted the consistency in facts and upheld the decision based on the principle that a change in view was not warranted when a fundamental aspect had been considered and answered in previous assessments. The Tribunal's decision was in line with the Supreme Court's ruling in Radhasoami Satsang v. CIT [1992] 193 ITR 321. The High Court concurred with the Tribunal's decision, citing the principle that each assessment year must be considered separately, but when a matter was previously addressed and responded to, a change in view was not necessary.

2. Regarding the application of res judicata, the High Court emphasized that while it does not directly apply to income tax proceedings, consistency in decision-making based on previously addressed issues is crucial. The court referred to the Division Bench's decision in Karsondas Ranchhoddas v. CIT [1972] 83 ITR 256 to support the stance that maintaining a consistent view on fundamental aspects is essential. As the Tribunal's decision was based on the established facts and previous assessments, the High Court dismissed the appeal, finding no substantial question of law arising from the Tribunal's ruling.