- (1.) Heard Shri Alok Mathur and Manish Mishra learned counsel for the appellant Namit Sharma for respondent.
(2.) This is an appeal under Section 260-A of Income Tax Act 1961 (hereinafter referred to as "Act 1961") arising from the judgement and order dated 28.02.05 passed by Income Tax Appellate Tribunal, Lucknow Bench, Lucknow in ITA No. 702/Alld/1994. It was admitted on the following substantial question of law. "(i) Whether under the facts and circumstances of the case, the Income Tax Appellate Tribunal was justified in saying thatthe factum of conversion from investment into stock in trade of shareholding was proved, when the learned CIT (A) had given no such finding of fact for A.Y 1990-91 when conversion took place and when no such matter was taken further in appeal, and without considering the fact that shares were held by partners during A.Y 1986-87 as found High Court and when there is nothing on record to show that said shares were transferred by partners to appellant firm or when there is nothing on record to prove that the appellant firm was the owner of the said shares on the date of its conversion into stock in trade. (ii) Whether Income Tax Appellate Tribunal was justified in upholding the said conversion merely because it is allowed under the provisions of law without considering the connected facts that the shares were allegedly converted into stock in trade, sold to the partners at a huge loss, conveniently adjusted against huge profits of appellant firm, arising on such conversion, and further when one of those partners to whom 90%of those shares were transferred, sold said shares in the market, earning huge profits that were adjusted against its business loss in construction activities. (iii)" Whether on the peculiar facts and the special circumstances especially on the ground taken herein above Income Tax Appellate Tribunal was right in upholding finding of first appellate order in applying provisions of Section 45 (2)".
(3.) The brief facts relevant for adjudication of the above questions are that Assesses is a Firm constituted in 1995. As per partnership deed dated 30.07.1988, business of the Firm continued to be that of civil engineering construction and execution of existing contracts in hand and/or take and execute any other contract or contracts and to invest in shares and securities etc. and/or such other business as partners will mutually decide from time to time.;