Consistency in tax treatment bars reclassification of share losses and interest income absent any change in facts or law.

Consistent tax treatment was decisive: shares accepted as stock-in-trade in the preceding year could not be recharacterised merely because they were sold in the relevant year, so the resulting loss remained business loss rather than short-term capital loss. Likewise, interest earned by an assessee engaged in lending and advances continued to be assessed as business income where the same character had been accepted in earlier years and no change in facts or law was shown. The principle applied was consistency in assessment, and the Revenue could not depart from the settled position without cogent reasons.

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Issues: (i) Whether loss arising from sale of shares was to be treated as business loss or short-term capital loss. (ii) Whether interest income was to be assessed as business income or income from other sources.

Issue (i): Whether loss arising from sale of shares was to be treated as business loss or short-term capital loss.

Analysis: The shares in question had been accepted in the immediately preceding assessment year as stock-in-trade under scrutiny assessment, and the same treatment continued as opening stock in the relevant year. In the absence of any change in facts or law, the treatment could not be altered merely because the shares were sold during the year. The CBDT circular relied upon by the Court also supported the principle that where listed shares are treated as stock-in-trade, income arising therefrom is to be assessed as business income, subject to consistency in the assessee's stand.

Conclusion: The loss was correctly treated as business loss and the Revenue's challenge failed.

Issue (ii): Whether interest income was to be assessed as business income or income from other sources.

Analysis: The assessee was engaged in the business of granting loans and advances, and the interest income had consistently been accepted as business income in earlier years. The assessment order did not disclose any reason or changed circumstance to justify a departure from the settled position. In the absence of any change in facts or law, the character of the income remained business income.

Conclusion: The interest income was rightly assessed as business income and the Revenue's challenge failed.

Final Conclusion: Both additions were rejected, and the Revenue did not succeed on either issue.

Ratio Decidendi: Where a treatment of shares or interest income has been consistently accepted in earlier assessments and there is no change in facts or law, the Revenue cannot depart from that position without cogent reasons.

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