BHARGAVA, J. - (1.) THE assessee is a Hindu undivided family carrying on money lending business on a small scale and also a business of dealing in shares. THE assessee had been dealing in shares for a number of years and prior to the assessment year 1943-44 all the shares held by the assessee were treated by it as stock-in-trade. On September 2, 1942, the closing day of the account year August 25, 1941, to September 2, 1942, relevant to the assessment year 1943-44 the assessee made an entry in the books of account of certain shares in an account styled as investment account. THE shares transferred to the investment account were : 30 Muir Mills ordinary 4 Muir Mills preference 100 Samastipur Central Sugar Co. ordinary 975 Kanpur Textiles ordinary 200 Hansgua Tea Co. ordinary 20 Calcutta Safe Deposit Co. ordinary 10 Elgin Co-operative Credit Society ordinary
(2.) IT was contended by the assessee that these shares were put in investment account in order to make the position of the family safe so that these shares would remain apart from stock-in-trade of the share business. The return for the assessment year 1943-44 was filed on November 13, 1943, and in that return the transfer of the stock-in-trade in respect of these shares was shown as a transfer to investment account. In assessment proceedings the Income-tax Officer accepted this transfer as a genuine one and held that since the shares had been transferred from stock-in-trade, the transfer should be taken into account for purposes of calculating the profits of the share business at market rate and not at cost. The market rate was computed and thereupon the difference of Rs. 1,819 was included in the taxable income assessed for the assessment year 1943-44. The Income-tax Officer added a remark to his assessment order that in future no profit or loss will be taken on the investment shares. Apart from the 975 shares of Kanpur Textile Mills which were then transferred to the investment account the assessee had another 500 Kanpur Textile Mills shares which were retained as part of the stock-in-trade. Some time in June, 1943, a date which fell in the accounting year September 3, 1942, to September 1, 1943, relevant to the assessment year 1944-45 bonus shares of the Kanpur Textiles were issued at the rate of one bonus share for ever ordinary share held by a shareholder. As a result in June, 1943, the assessee received 975 bonus shares by virtue of his holding 975 ordinary shares which had been transferred to the investment account and another 500 bonus shares by virtue of holding 500 shares which were still a part of his stock-in-trade of the share business. None of these shares was sold in the accounting period September 2, 1943, to August 22, 1944, relevant to the assessment year 1945-46 (sic). The assessee gifted 200 shares out of 975 ordinary shares which were held in the investment account. This gift was made in favour of the daughter of one Lala Ram Chandra on the occasion of her marriage. The remaining 775 ordinary shares which remained out of those transferred to the investment account and 975 bonus shares received by virtue of those ordinary shares held in investment account were sold during this very previous year relevant to the assessment year 1945-46 resulting in a profit of Rs. 19,415. During this previous year the assessee sold the lot of 500 bonus shares which he had received by virtue of his holding shares of the Kanpur Textiles as stock-in-trade. These shares were sold for as sum of Rs. 7,156. The Income-tax Officer held that both of these sums, Rs. 19,415 and Rs. 7,156, were taxable income of the assessee earned in the previous year September 2, 1943, to August 2, 1944, relevant to the assessment year 1945-46 and added these sums to the income assessed for the assessment year. That decision was upheld by the Appellate Assistant Commissioner as well as by the Income-tax Appellate Tribunal. Thereupon the assessee moved an application under section 66 of the Indian Income-tax Act and prayed that certain question of law be referred to this court for opinion. The Tribunal has on these facts submitted the following questions for our opinion : (1) Whether the Income-tax Officer is estopped from challenging the finding and undertaking of the Income-tax Officer given in the assessment order for 1943-44 ? (2) Whether there was material on which the Tribunal came to the conclusion that the assessee went on dealing with the so-called investment shares in the same manner as his other shares which were his stock-in-trade ? (3) Whether the bonus shares received by the assessee were a part of the stock-in-trade ? (4) Whether the surplus of Rs. 19,415 and Rs. 7,156 are revenue receipts in the hands of the assessee and as such liable to be assessed ? When this reference was argued before us, learned counsel for the assessee held to concede that so far as the first question in concerned, he could not support the stand taken by the assessee in respect of it. It is now a well established principle that the finding recorded by an Income-tax Officer in proceedings for assessment for one year do not operate as res judicata in assessments of the same assessee in subsequent years. If the findings in an earlier year did not operate as res judicata, there is no question of the Income-tax Officer, dealing with subsequent proceedings, being estopped from going into those questions afresh. It was not a case where the Income-tax Officer has given any assurance during the assessment for the year 1943-44 on which basis the assessee might have taken some action which he would not have otherwise taken so that even the principle of estopped laid down in section 115 of the Indian Evidence Act cannot be invoked by the assessee. It may, however, be mentioned that it has also been recognised now that orders of assessment made in the case of an assessee in an earlier year are relevant and can be read as evidence in proceedings for assessment in subsequent years. The finding given by the Income-tax Officer in the assessment for the year 1943-44 did not, therefore, bind the Income-tax Officer in the proceedings for the assessment year 1945-46 but were relevant and could be taken into account. This is our answer to the first question.
(3.) SO far as the second question is concerned, we may before answering it deal with the point which was raised by learned counsel for the Department, who instead of confining himself to the statement of the case and the appellate order of the Income-tax Tribunal, desired us to take into account the findings and the reasoning that were recorded by the Income-tax Officer and the Appellate Assistant Commissioner. It may be noted that the Income-tax Appellate Tribunal in its appellate order did go to the extent of affirming the decision of the Income-tax Officer that the proceeds of the shares transferred to the investment account would be assessable to income-tax but the Tribunal did not adopt the reasoning on which this view was expressed by the Income-tax Officer or the Appellate Assistant Commissioner. The Tribunal gave its own independent reasons. The order of the Income-tax Officer and the Appellate Assistant Commissioner were not annexed to the statement of the case and were not made a part of the statement of the case. Therefore, those orders cannot be taken into account when answering this question, and we must confine ourselves to the facts as given in the statement of the case and the appellate order of the Tribunal. In the statement of the case as well as the appellate order of the Tribunal the finding has been recorded in the following words :;