- (1.) : This is a reference under s. 66(1) of the Indian IT Act, 1922. The assessee is a shareholder of several limited companies. The assessment years are 1954-55, 1955-56, 1956-57 and 1957-58. The corresponding accounting years are years ending on 31st July, 1953, 1954, 1955 and 1956 respectively. We are concerned in this reference principally with the asst. yr. 1954-55. For this assessment year the assessee had claimed a loss of Rs. 9,40,467 on account of depreciation in the value of shares in the stock and Rs. 28,518 on sale of shares.
(2.) THE ITO by his order dt. 29th Nov., 1957, disallowed the first loss and allowed the second loss only to the extent of Rs. 20,853. THE ITO was of the view that the only shares which were held for not less than 24 months before the sale could be taken as part of the assessees' trading stock. He also held that the holding of shares in 9 companies which according to him were associated concerns of M/s Surajmull Nagarmull were not part of the assessees' trading stock. About the remaining companies the ITO agreed to value the opening and closing stock at the cost price or market price whichever was lower and made the assessment accordingly. THE AAC did not accept the segregation by the ITO of shares in the companies which were associated concerns of M/s Surajmull Nagarmull. He thought that all the shares held by the assessee whether of associated concerns or not became part of the trading stock of the assessee on 1st Aug., 1952. THE AAC accordingly set aside the assessment of the ITO and directed him to make a fresh assessment on the basis that the assessee became a dealer in shares on 1st Aug., 1952. He further directed that the cost or the market price whichever was lower should be the basis of valuation on and from 1st Aug., 1952. THE Department did not challenge the finding of the AAC that all the shares of the assessee became its trading stock on 1st Aug., 1952. THE assessee also did not challenge his direction that the cost or the market price whichever was lower should be the basis of the valuation for all the shares. The ITO, when the matter came back to him, made a fresh assessment by his order dt. 31st July, 1958, on the basis of valuation prescribed by the AAC. The assessee went again to the AAC. Its grievances this time were confined to certain arithmetical errors in the order of the ITO and wrong application of the principles laid down by the AAC in respect of certain shares.
(3.) THE assessee then came up before the Tribunal with the contention that in respect of shares in two of the companies, viz., Naskarpara Jute Mills Co. Ltd. and West Bengal Jute Co. Ltd., the IT authorities were not justified in valuing the shares in the opening stock at cost price which was admittedly lower than the market price and that on the date on which the shares became a part of the trading stock, the shares should have been valued at market price so that loss on account of sales would have been higher. THE Department on the other hand contended before the Tribunal that the shares in dispute were not a part of the assessees' trading stock on 1st Aug. 1952. The Tribunal took the view that the respective contentions aforesaid of the assessee and of the Department were determined by the first order of the AAC made on 27th Feb., 1958, and since there was no appeal against that order either by the assessee or by the Department, no part of it could be challenged in the course of the appeal before the Tribunal. It is further pointed out by the Tribunal that the assessee's challenge to the principle of valuation was not thrown even when the AAC was considering the matter for the second time. The Tribunal in these circumstances refused to entertain the assessee's contentions relating to principles of valuation.;