Sunday, June 12, 2011

Sec 260A - Can assessee raise a new question of law, not framed ear

Income tax - Sec 260A - Can assessee raise a new question of law, not framed earlier, at time of final hearing - YES, says HC

SHIMLA, AUG 11, 2010: THE issue before the High Court is - Whether as per the provisions of section 260A which are pari materia to section 100 of the Civil Procedure Code it is permissible to raise a new question of law, not framed earlier, at the time of final hearing. And the answer is YES.

Facts of the case

Assessee filed appeal against the decision of ITAT. At the time of admission, a question of law in relation to conversion of stock in trade into capital asset and nature of income thereof was framed. However at the time of final hearing the counsel for the assessee raised a new question of law in which he challenged the action of the AO apropos section 148. The Counsel for the revenue objected to this.

However the High Court after referring to the decision of Apex Court in the case of Kondiba Dagadu Kadam vs. Savitribai Sopan Gujar and others, held that,

++ the law is very well settled that the onus is on the assessee to show that his investment is a long term investment. Whether a particular holding of shares is by way of long term investment or is a stock in trade is a matter solely within the knowledge of the assessee who holds the shares. Normally, it is the assessee alone who would be in a position to produce evidence whether he has maintained any distinction between those shares, which are stock in trade, and those shares, which are long-term investment. Another important principle of law is that the initial intention of the assessee as to whether he holds the shares as stock in trade or his investment is relevant and has to be taken into consideration while deciding the nature of holding of the assessee.

++ it is apparent that due to issuance of bonus shares and splitting of shares the value of the shares of Information Technology rose sharply and realizing that the company would be liable to pay 30% tax, the assessee started claiming the profits realized from sale of these shares as long term capital gains. After going through the entire record the revenue authorities have come to the conclusion that the shares of Information Technology was purchased by the assessee not by way of assessment but by way of trading. This is a pure finding of fact and not of law. It is true that the principles of law have to be applied and the question as to whether certain shares had been purchased by way of trade or by way of investment may be a mixed question of fact and law but if the authorities have properly considered the legal position then the resultant finding is basically a finding of fact. In the present cases, we find no error in the orders of the revenue. Therefore, we answer the second question against the assessee and in favour of the revenue.

Assessee's appeal dismissed.

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