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TMI Blog2006 (3) TMI 556X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness income from year to year. That apart, the assessee has also invested his personal surplus funds in shares, which are held by him as investments. The assessee maintained two separate books of account, one for his proprietary concern and the other for his personal account. For the year under consideration, the profits or losses on sale of shares, held under investment portfolio in his personal account, being capital asset within the meaning of section 2(14) of the Act, were duly offered for taxation under the head "Capital Gains" under section 45 of the Income-tax Act, 1961. Assessments under section 143(3) for assessment years 1993-94 and 1995-96 were completed accepting the aforesaid contention of the assessee and accordingly, the impugned income was assessed under the head "Capital Gains". Further, for the assessment year 1994-95, the return was processed under section 143(1)(a) without any adjustment. 3. In the course of assessment proceedings, in respect of assessment year 1997-98, the Assessing Officer opined that the receipts on transfer of the impugned shares held under investment portfolio by the assessee constituted business income mainly on the following alleged g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of Arjun Kapur v. Dy. CIT [1999] 70 ITD 161 covering an identical issue under similar circumstances, held that income arising from sale of shares held by the assessee, a share broker, as investment, was assessable under the head "Capital Gains". In respect of the other grounds challenging the re-opening of the assessment under section 148 for assessment years 1993-94 to 1995-96, the CIT(A) ruled as under : "The next issue common for assessment years 1993-94, 1994-95, 1995-96 is pertaining to reopening of the assessment under section 148. This is now become academic as the main ground regarding the assessment of capital gains as business income has been decided in favour of the appellant. No purpose would be served in deliberating on an issue regarding reopening of the assessment under section 148. Accordingly, for statistical purposes, this ground is treated as dismissed." 6. The aforesaid order of the CIT(A) was contested in appeal before the Tribunal by the department. The submissions made before the CIT(A) by the assessee were reiterated before the Tribunal. Further more reliance was inter alia placed on the judgments of the Mumbai Tribunal in the cases of (1) Addl. CIT v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal that assessee has earned sizable amount of dividends over the impugned assessment years which were offered as income from other sources and was accepted as such by the department. The capital accounts of the assessee for the relevant years were available on record before the Hon'ble Tribunal which clearly substantiate the assessee's claim. This is, however, corroborates the assessee's claim that impugned shares were purchased as investments and were got transferred in his name. It was not the case of purchase and sale of shares without taking delivery of the same, which usually happens in the case of dealers in shares. The shares have been held by the assessee on investment account and at no point of time, were they converted into the stock-in-trade. It was also pointed out that the sizable number of shares were purchased by the assessee during the financial year 1991-92 and reflected investments in the balance sheet of the assessee as on 31-3-1992 and the same were accepted by the department. Further, in respect of assessment years 1993-94 to 1995-96, although the assessments were later on reopened illegally under section 143, the treatment of impugned shares as investment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Sundar Iyer and the Order of the Tribunal in the case of Arjun Kapur v. Dy. CIT [1999] 70 ITD 161 (Delhi) and held that assessee held the shares as investments and profit earns on its transfer forms part of capital gain. The other ground through which the reopening was challenged was not adjudicated by the CIT(A) as it be- comes academic in the light of the decision on the main ground. Now, the Tribunal had upset the Order of the CIT(A) by holding that the profit earned by the assessee on transfer of shares is a business receipt and is chargeable to tax. The issue raised by the assessee with regard to the validity of the reopening of the assessments requires to be adjudicated by the first appellate authority. The best course available with the Tribunal while upsetting the order of the CIT(A) is, that to restore the matter back to the file of the CIT(A) with a direction to adjudicate the issue of reopening the assessment instead of restoring the order of the Assessing Officer. But, the Tribunal did not do the same and has straightaway set aside the order of the CIT(A) and restore that of the Assessing Officer. By doing so, the Tribunal has shut the door for the assessee to get a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been held that the profit on sale of certain shares held by the assessee, a share broker, as personal investment, is assessable as capital gain and not as business income when the same were not converted by him into stock-in-trade in the absence of any material to show that these shares were acquired in the course of assessee's business. It was also not taken into account by the Tribunal that the assessee has made investment in shares during the financial year 1991-92 and are reflected as investment in the balance sheet of the assessee as on 31-3-1992 and the same was accepted as such by the revenue. The Tribunal has also not given weightage to the fact that, for the assessment years 1993-94 to 1995-96, assessee has shown the investment in shares and the same was accepted by the revenue and later on the assessment was reopened by the Assessing Officer by issuing a notice under section 148, of which, validity was challenged, but, was not decided by the CIT(A). The Tribunal has decided the issue on the basis of frequency of transactions without examining the source of funds which were invested in shares. The issue regarding the validity of the reopening of the assessment raised by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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