TaxTMI 
TaxTMI 
2011 (8) TMI 975
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....ed Commissioner of Income-tax is bad on facts as the assessee's motive and intention were not to trade in shares but to earn dividend and capital appreciation only. He ought to have considered that during the year number of transactions were 27 in aggregate and that too in specified scrips of 13 companies only. Some of the shares were purchased in the earlier years and sold during the year. His transactions were delivery based only. The assessee has also dealt in investments of his minors there by earning longterm capital gain also. 4. That the learned Commissioner of Income-tax ought to have considered the fact that there was not much volume or frequency nor continuity or regularity in purchase or sale transactions of shares of listed companies with recognised stock exchanges ; hence capital gain earned could not be assessed to tax under the head 'Income from business'. 5. That the learned Commissioner of Income tax ought to have further considered that the assessee was deriving income from salary and is holding the equity shares of various companies as 'investment' as evident from books. Income earned on share transaction was being regularly and consistently assessed to tax as ....
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....led chart of the purchases and sales effected during the year was furnished and it was seen that even on the same date the transactions in shares were effected and the period of transactions between purchase and sale varied from five days to more than two months. The facts which become obvious from the submissions of the assessee are that frequent transactions were effected in shares, numbering in all to 27, and the fact of borrowed funds being invested in shares was also accepted. On the issue of intention of the assessee, it was the case of the learned authorised representative that the investments in shares were disclosed in the balance-sheet as investment and not as stock-in-trade and dividend income was duly earned. The learned authorised representative also placed reliance on the various case law on the issue of capital gain versus business income and also challenged the validity of the notice under section 263 of the Income- tax Act, 1961, based on various decisions. No doubt the assessee has earned on investments the long-term capital gain with dividend income, but the assessee has traded in shares by effecting purchases on the same date and these are the transactions which....
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....ically derives income from salary and was also holding equity shares of various companies as investment for many years. Income earned on these shares were regularly assessed by the Department as long-term/short-term capital gains. Dividend earned thereon was also assessed as income from other sources. There was no change in the intention of the assessee in acquiring these shares during the year under consideration nor in the method of accounting for these shares in the books of account. In the course of scrutiny assessment, after applying its mind the Assessing Officer accepted the long-term capital gains and short-term capital gains offered by the assessee, because the transactions were not frequent and the shares were held as investment in the same manner as was held in the earlier years. The Assessing Officer also found that the interest paid on borrowing was also not claimed as business expenditure nor claimed or allowed as set-off against the interest income. We have carefully gone through the year wise history of transactions entered into by the assessee with respect to sale of shares, which were held as investment and found that in the assessment years 2003-04, 2004-....
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....to the power of Commissioner of Income-tax under section 263 as per our considered view, when the Assessing Officer after applying his mind had taken a view, which is tenable in law, such order cannot be branded as erroneous only on the plea that it is prejudicial to the interests of the Revenue. There is no dispute to the well-settled legal proposition that before exercising powers under section 263, the learned Commissioner of Income-tax has to satisfy two conditions simultaneously to the effect that the order of the Assessing Officer was erroneous and a prejudice has been caused to the Revenue because of such erroneous order. Only when both these conditions are being satisfied can the learned Commissioner of Income-tax validly exercise his powers of revision under section 263. A bare reading of the provisions of section 263 makes it clear that the prerequisite to exercise of jurisdiction by the Commissioner of Income-tax suo motu under it is that the order of the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue. If one of them is absent-if the order of the Income-tax Officer is erroneous but is not prejudicial to the Revenue or if it....