Reassessment can cover other escaped income; share-sale loss treated as capital loss where evidence showed investment intent.

Reassessment under section 34(1)(b) was held to extend to other escaped items of income discovered on the basis of information in the officer's possession, not merely the item that initially triggered reopening. The phrase "such income" was construed to cover escaped income generally, so the reassessment proceedings could validly include additional items. On the share-loss issue, the Tribunal's finding that the shares were acquired and dealt with as capital investment, rather than trading stock, was supported by the evidence and was not perverse. The loss on sale was therefore treated as a loss on realisation of investment, not a trading loss.

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Issues: (i) Whether reassessment under section 34(1)(b) could validly include items of escaped income other than the item which had led to the reopening. (ii) Whether the loss on sale of shares was a trading loss arising from share dealing or a loss on realisation of investment.

Issue (i): Whether reassessment under section 34(1)(b) could validly include items of escaped income other than the item which had led to the reopening.

Analysis: The statutory language empowered the Income-tax Officer, once reassessment was validly initiated in consequence of information in his possession, to assess or reassess such income, profits or gains as had escaped assessment. The phrase "such income" was held to refer to the escaped income generally and not merely to the precise item that first prompted the reopening. Additional information gathered from the subsequent year's assessment, including the treatment of the shares in board resolutions, sale vouchers, and balance-sheets, constituted information sufficient to support the reassessment proceedings.

Conclusion: The reassessment proceedings under section 34(1)(b) were valid, and the Income-tax Officer was competent to consider other escaped items in the same proceedings.

Issue (ii): Whether the loss on sale of shares was a trading loss arising from share dealing or a loss on realisation of investment.

Analysis: The Tribunal relied on the assessee's prior treatment of the shares as investment, the board resolutions describing the purchases as investment, the sale vouchers describing the sales similarly, and the timing of the later resolution attempting to classify the shares as stock-in-trade only after substantial losses had arisen. The volume and frequency of transactions, borrowings, and authority under the articles were relevant circumstances, but they were not conclusive. On the material accepted by the Tribunal, the conclusion that the shares had been acquired as capital investment and that the loss arose on realisation of investment was a possible and supported inference, not a perverse one.

Conclusion: The loss of Rs. 5,14,295 was not a trading loss and was correctly treated as a loss on realisation of investment.

Final Conclusion: Both referred questions were answered against the assessee, and the revenue's stand on reassessment and the character of the share-sale loss was upheld.

Ratio Decidendi: In a valid reassessment under section 34(1)(b), the Income-tax Officer may bring to tax other escaped income found on the basis of information in his possession, and a finding that share transactions were capital investments rather than trading transactions will not be interfered with unless it is unsupported by evidence or is perverse.

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