MOTILAL L Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(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 :

(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.

(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.