2019 (5) TMI 196 - HC - Income Tax

Non recording of finding of facts - order is perverse and give rise a substantial question of law - income from sale of shares - assessee is investor in this year also or not - capital gains or business income - HELD THAT - It is true that in respect of the assessment year 2005-2006, the Division Bench has not interfered with the finding of the tribunal that the assessee was an investor and that the gain made out of shares and transaction was a long-term capital gain. What the assessee had to prove before the lower adjudication authorities was that it continued to be an investor in the subject assessment year 2006- 2007 and continued to make capital gains in the manner it did in the assessment year 2005-2006. This finding of fact has not been entered at any stage of the proceedings. In its absence the impugned order of the tribunal dated 20th January, 2012 is erroneous. There is perversity in the adjudication of the case. A substantial question of law arises. The above fact needs to be determined. The order of the tribunal dated 20th January, 2012 is set aside in respect of this issue. The issue is remanded to the tribunal to make a fresh adjudication with reasons in accordance with law. As this appeal is pending for a long period of time, we are not asking the tribunal to remand the matter back to the lower adjudication authority. The tribunal will determine the question itself and shall pass a reasoned order within six months from the date of communication of this order.

Summary

Issues:
1. Whether the assessee can be treated as a dealer or investor in shares.
2. Correctness of the profit earned by the dealer.
3. Binding effect of a previous judgment on a similar issue for a different assessment year.
4. Requirement for the assessee to prove investor status and capital gains for the current assessment year.
5. Perversity in the adjudication leading to a remand for fresh adjudication by the tribunal.

The High Court of Calcutta addressed the issue of whether the assessee could be considered a dealer or investor in shares for the assessment year 2006-2007. The court noted a previous judgment concerning the assessment year 2005-2006 where it was established that the assessee was an investor and had earned long-term capital gains. However, the court emphasized that for the current assessment year, the assessee needed to demonstrate its continued investor status and capital gains. The court found a lack of factual determination in this regard in the proceedings, leading to an erroneous order by the tribunal. Consequently, the court held that there was perversity in the adjudication, necessitating a remand of the issue to the tribunal for a fresh determination with reasons in accordance with the law. The tribunal was directed to provide a reasoned order within six months from the date of communication of the court's decision, avoiding a remand to the lower adjudication authority due to the prolonged pendency of the appeal.

The judgment highlighted the importance of establishing the assessee's status as an investor and the nature of income earned from share transactions for each assessment year. It underscored the need for factual determinations to support claims of investor status and capital gains, emphasizing the requirement for a reasoned adjudication in line with legal principles. The court's decision to remand the issue to the tribunal for a fresh determination aimed to rectify the lack of factual findings and ensure a proper assessment based on the evidence presented. By setting aside the tribunal's order and directing a reevaluation of the issue, the court sought to uphold the integrity of the adjudicative process and maintain consistency in determining the assessee's tax liability based on the nature of income generated from share transactions.