Share-dealing status and annual tax computation may be re-examined despite earlier investor treatment

Repeated share transactions in 1943 and 1944 supported the finding that the assessee was carrying on share-dealing activity, so the challenge based on no evidence failed. For income-tax computation in 1945-46, prior treatment of the assessee as an investor did not bind the authorities because each assessment year is a separate unit and earlier assessments do not create res judicata or estoppel. Since the assessee was already a dealer before the opening day of the relevant account year, the profits on sale of shares were correctly computed on original cost rather than the market value at the start of the year, and the assessment was sustained.

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Issues: (i) Whether there was evidence to support the finding that the assessee was a dealer in shares in 1943 and 1944. (ii) Whether, in computing the profits from sale of shares in the assessment year 1945-46, the market value of the shares on the opening day of the account year had to be taken as the cost, notwithstanding that the assessee had been treated as an investor in earlier years.

Issue (i): Whether there was evidence to support the finding that the assessee was a dealer in shares in 1943 and 1944.

Analysis: The finding of dealership rested on the frequency and multiplicity of transactions in shares, including repeated purchases and sales in 1943 and 1944. The records showed a sufficient tempo of dealings to justify the inference that the assessee was carrying on share-dealing activity. The rule of no evidence could not be invoked on those facts.

Conclusion: The finding that the assessee was a dealer in shares in 1943 and 1944 was upheld and was in favour of Revenue.

Issue (ii): Whether, in computing the profits from sale of shares in the assessment year 1945-46, the market value of the shares on the opening day of the account year had to be taken as the cost, notwithstanding that the assessee had been treated as an investor in earlier years.

Analysis: In income-tax matters, each assessment year is a separate unit and prior assessments do not operate as res judicata or estoppel by record. The earlier treatment of the assessee as an investor did not prevent the taxing authorities from examining when its trading activity in shares began for the purpose of computing the profits of the relevant year. Since the assessee was found to have been a dealer before the opening day of the relevant account year, the principle applicable where investment shares are first converted into stock-in-trade did not apply.

Conclusion: The profits were correctly computed by taking the original cost price and not the market value on the opening day of the year, and this issue was decided in favour of Revenue.

Final Conclusion: The appeal failed because both the factual finding of share-dealing in the earlier year and the method of profit computation for the relevant assessment year were sustained, leaving the assessment intact.

Ratio Decidendi: In recurring annual income-tax assessments, a prior assessment does not create res judicata or estoppel for a later year, and the authorities may examine an earlier year's status whenever necessary to determine the correct computation of profits for the year under assessment.

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