Sen, J. - (1.) This reference relates to the income-tax assessment of Messrs. Karam Chand Thapar & Sons Ltd., for the assessment year 1957-58, the relevant accounting year being the year ended on the 30th June, 1956. The assessee, at the material time, held shares in various companies valued at Rs. 81,69,853 consisting of "quoted investments" and "unquoted investments". The assessee since 1943-44 has been purchasing and selling shares every year, but in all these past years the assessee had not been treated as a dealer in shares. In the assessment year in question transactions in such purchase and sale of shares resulted in a profit of Rs. 3,21,837-9-0 on sale of certain shares and also a loss of Rs. 71,462-15-0 on sale of other shares. The assessee disclosed in its return a sum of Rs. 86,601 as capital gains. The Income-tax Officer, however, assessed as business profits a sum of Rs. 2,50,375 holding that the same was realised on sale of shares as a trading profit. The Income-tax Officer based his findings on the following : (a) One of the objects of the assessee was to take part in the formation of other companies. (b) The assessee sold the shares of different companies in furtherance of such object. (c) The assessee was also an investment trust company. (d) The frequency of purchase and sale of shares and magnitude of the transactions indicated that dealing in shares was in fact carried on as a business during the year.
(2.) Being aggrieved, the assessee preferred an appeal where the Appellate Assistant Commissioner held that the surplus realised on sale of the shares was not trading profit and could only be assessed as capital gains. He found that in the past years the assessee had not been held to be a dealer and that there was nothing to show that the assessee had become a dealer in the year in question. Hs also found that some of the shares sold had been acquired several years back and held for a long period which indicated that they were not the stock-in-trade of the assessee.
(3.) Being aggrieved by this order, the revenue preferred a further appeal to the Income-tax Appellate Tribunal. It was contended in the appeal that the earlier assessments were made without full investigation and, in any event, the findings in the earlier years would not necessarily lead to the same finding in the year in question. It was further contended that the objects clause in the memorandum of the assessee permitted dealing in shares. Contentions to the contrary were made on behalf of the assessee.;