Law:

Section:

Section 2(14) of the Income-tax Act, 1961 (Corresponding to section 2(4) of the Indian Income-tax, 1922) - Adventure in nature of trade - Assessment year 1950-51 - Whether unless there be indicia of trade or of trading activity evidently commercial in nature, gains and profits are more likely to be an accretion of capital and not an yield of income which may be brought to tax - Held, yes - Whether where assessee purchased land with sole intention for using it as garden and agricultural land and underlook agricultural operation and subsequently, sold land at profit, transaction could not be said to be adventure in nature of trade and hence profit was exempted from tax - Held, yes Section 254 of the Income-tax Act, 1961 (Corresponding to section 33(4) of the Indian Income-tax Act, 1922) - Appellate Tribunal - Powers of - Assessment year 1950-51 - Whether Tribunal while dealing with issue in particular assessment year had no power or jurisdiction to direct ITO to tax assessee for earlier assessment year - Held, yes FACTS For the relevant assessment year the assessment of the assessee was originally made on a total income being 1/3rd of his share in the firm of 'U'. Subsequently, on information received by the ITO that the assessee had purchased land for the purpose of in the names of his wife and his brother's wife and subsequently sold the same at a huge profit proceedings under section 34(1)(a) of the 1922 Act were initiated. The assessee submitted a return disclosing the same income as was originally returned by him. The ITO on March 24, 1954, completed the assessment by adding to his income two sums, namely, as profits on the sale of land; and income from undisclosed sources. On appeal, the AAC found that the profits on the sale of land were of a casual and non-recurring nature not derived from business and that the transaction which gave rise to the same was not an adventure in the nature of trade and hence was exempt from tax by reason of section 4(3)(vii) of 1922 Act. He accordingly directed on that basis that the addition in respect of profit on sale of land, made in the income be deleted and further, opined that the profit in question, if at all taxable,…

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