TaxTMI 
TaxTMI 
2006 (1) TMI 80
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....e Commissioner of Income-tax under section 263 of the Income-tax Act? (2) Whether the Appellate Tribunal is right in law and on facts in observing that the income was required to be taxed as capital gain and not as business income?" The assessment year is 1987-88 and the relevant previous year is the year commencing on July 1, 1985 and ending on June 30, 1986. The assessee was originally assessed under section 143(1) of the Act on July 28, 1987. The Commissioner of Income-tax, Rajkot ("the CIT") issued notice under section 263 of the Act on February 19, 1990. The assessee submitted a detailed reply dated March 2, 1990. However, the Commissioner of Income-tax passed an order on March 12, 1990 in the following terms: "(3) The assesse....
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....cess, holding that, on the facts, the Commissioner had failed to point out any error committed by the Assessing Officer. Mr. B.B. Naik, learned standing counsel appearing on behalf of the applicant-Revenue, has been heard. Though served, there is no appearance on behalf of the respondent-assessee. Mr. Naik assailed the impugned order of the Tribunal on two counts. Firstly, it was submitted that the Commissioner having merely sent back the matter to the Assessing Officer to redo the assessment after considering the points stated by him in his order and after giving the assessee a reasonable opportunity of presenting his case, the Tribunal ought not to have interfered as no prejudice had been caused to the assessee. Secondly, it was con....
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....unal is well within its jurisdiction to examine as to whether the Commissioner had rightly exercised jurisdiction under section 263 of the Act. In other words, whether the assessment order made by the Assessing Officer could be treated to be erroneous and prejudicial to the interests of the Revenue, which are the two prerequisite conditions for assumption of jurisdiction under section 263 of the Act. In this process, if the Tribunal examines the facts and evidence which were available on record before the Commissioner at the time of framing of the order under section 263 of the Act, it cannot be stated that the Tribunal has committed any error in recording findings in relation to such facts and evidence on record. All that the Tribunal does....
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....nation of the aforesaid record, the Tribunal recorded that the assessee had given an effective answer to the show-cause notice and thereafter, proceeded to record the following findings: (1) There was a large time-gap between the dates of acquisition of the shares and the sale thereof. (2) Thus, the intention to sell cannot be inferred at the point of time of the purchase. (3) That merely because the sale had resulted in a profit did not mean that when the assessee purchased the shares, it was with an intention to sell them at a profit. (4) That an investor may sell the shares when he gets a good price for the shares. (5) That the assessee had shares in 25 to 30 companies and the value of the total holding was between Rs. 57,....
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....uj), after analysing various decisions of the apex court, this court has formulated certain tests to determine as to whether an assessee can be said to be carrying on business. (a) The first test is whether the initial acquisition of the subject-matter of transaction was with the intention of dealing in the item, or with a view to finding an investment. If the transaction, since the inception, appears to be impressed with the character of a commercial transaction entered into with a view to earn profit, it would furnish a valuable guideline. (b) The second test that is often applied is as to why and how and for what purpose the sale was effected subsequently. (c) The third test, which is frequently applied, is as to how the assesse....
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....The findings of fact recorded by the Tribunal on the basis of the evidence available before it cannot be termed to be without any evidence, and once this is so, it is not possible to state that the Tribunal committed any error when it came to the conclusion that the assessment order was not erroneous. That as a consequence, the Commissioner of Income-tax could not have assumed jurisdiction under section 263 of the Act. As already stated hereinbefore, once an assessee has exercised its right to file a statutory appeal against the order of the Commissioner of Income-tax made under section 263 of the Act, the Tribunal is bound to examine whether the Commissioner of Income-tax had rightly invoked the provisions of section 263 of the Act. The ba....