COMMISSIONER OF INCOME TAX BOMBAY CITY Vs. H HOLCK LARSEN

JUDGEMENT

(1.) THIS is a reference under section 66 (1) of the Income-tax Act, 1922, and the question which we have to consider is whether the Income-tax Officer had jurisdiction to re-open the assessment proceedings of the assessment years 1957-58 and 1958-59, under section 34 (1) (b) of the Act.

(2.) THE assessee had shown the profit arising from the sale of shares held by him in M/s. Larsen and Toubro Ltd. , as capital gains, on the footing that the shares were held by him as investment. The claim of the assessee that he was an investor was accepted by the Income-tax Officer, as, indeed, a similar claim was accepted in the previous years. The assessments of the two years were completed by the Income-tax Officer on the 29th of January, 1958, and the 9th of October, 1958, respectively.

(3.) THE very same Income-tax Officer then took up assessment proceedings of assessment years 1959-60 and 1960-61. In those proceedings, he reviewed the entire course of transactions from the year 1946, and held that though the assessee was an investor till the 31st of March, 1954, he had converted his investment shares into stock-in-trade after the 1st of April, 1954, and had become a dealer in shares. Accordingly, the Income-tax Officer brought to tax the profits made by the assessee by the sale of shares, as a business profit.