TMI Blog2006 (1) TMI 80X X X X Extracts X X X X X X X X Extracts X X X X ..... the Commissioner of Income-tax, Rajkot. "(1) Whether the Appellate Tribunal is right in law and on facts in setting aside the order made by the Commissioner of Income-tax under section 263 of the Income-tax Act? (2) Whether the Appellate Tribunal is right in law and on facts in observing that the income was required to be taxed as capital gain and not as business income?" The assessment year is 1987-88 and the relevant previous year is the year commencing on July 1, 1985 and ending on June 30, 1986. The assessee was originally assessed under section 143(1) of the Act on July 28, 1987. The Commissioner of Income-tax, Rajkot ("the CIT") issued notice under section 263 of the Act on February 19, 1990. The assessee submitted a detailed reply dated March 2, 1990. However, the Commissioner of Income-tax passed an order on March 12, 1990 in the following terms: "(3) The assessee's contentions have been considered. Considering the nature of this transaction year after year, it was clear that the assessee was doing business in shares and shares produced by him were also as stock-in-trade. Simply showing the shares as investment in the books cannot prove the contention of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess in shares and the shares purchased by the assessee were held as stock-in-trade. By holding that the Assessing Officer had failed to inquire into the real nature of the transaction, the Commissioner also opined prima facie that the transactions available on record reveal that the assessee was a dealer in shares. It is in this context that when the contention raised by Mr. Naik herein was raised by the Departmental Representative before the Tribunal that the Tribunal recorded that the order of the Commissioner clearly contains clear expression of his opinion and the Commissioner has asked the Assessing Officer to redo the assessment (after considering the above points), meaning thereby, the points stated by the Commissioner in paragraph No. 3 of his order. However, even if one proceeds on the footing that the Commissioner had not expressed any opinion and had merely set aside the assessment while exercising powers under section 263 of the Act, none the less when an appeal is preferred against such an order, the Tribunal is well within its jurisdiction to examine as to whether the Commissioner had rightly exercised jurisdiction under section 263 of the Act. In other words, wheth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sell cannot be inferred at the point of time of the purchase. (3) That merely because the sale had resulted in a profit did not mean that when the assessee purchased the shares, it was with an intention to sell them at a profit. (4) That an investor may sell the shares when he gets a good price for the shares. (5) That the assessee had shares in 25 to 30 companies and the value of the total holding was between Rs. 57,000 and Rs. 63,000, which was a very small amount considering the number of companies in which the shares were held, thus, denoting that the assessee was a small investor. (6) That the number of transactions are not many every year and the assessee could not be said to indulge in several transactions of purchase and sale every year. The tests laid down by various decisions of the apex court indicate that, in each case, it is the total effect of all relevant factors and circumstances that determines the character of the transaction. Each case has to be determined on the total impression created on the mind of the court by all the facts and circumstances disclosed in a particular case. One of the principal tests is whether the transaction is related to the bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... most important test, is as to the volume, frequency, continuity and regularity of transactions of purchase and sale of the goods concerned. In a case where there is repetition and continuity, coupled with the magnitude of the transaction, bearing reasonable proportion to the strength of holding, then an inference can readily be drawn that the activity is in the nature of business. On the application of the aforesaid tests, if the matter is examined, it is apparent that not only has the Tribunal applied the correct tests, but it has drawn the right inference. The findings of fact recorded by the Tribunal on the basis of the evidence available before it cannot be termed to be without any evidence, and once this is so, it is not possible to state that the Tribunal committed any error when it came to the conclusion that the assessment order was not erroneous. That as a consequence, the Commissioner of Income-tax could not have assumed jurisdiction under section 263 of the Act. As already stated hereinbefore, once an assessee has exercised its right to file a statutory appeal against the order of the Commissioner of Income-tax made under section 263 of the Act, the Tribunal is bound ..... X X X X Extracts X X X X X X X X Extracts X X X X
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