PCIT Vs Sarah Faisal Hawa (Bombay High Court)
The appeal before the Bombay High Court was filed under Section 260A of the Income Tax Act, 1961, challenging the order dated 11 September 2017 passed by the Income Tax Appellate Tribunal (ITAT), Mumbai. The principal question of law was whether the ITAT was justified in treating income from share transactions as long-term and short-term capital gains instead of business income and in setting aside the revisionary order passed by the Commissioner under Section 263.
The assessee filed a return of income for Assessment Year 2008–09 declaring total income of ₹2.63 crore. This included short-term capital gains of ₹2.45 crore taxable at a concessional rate under Section 111A and long-term capital gains of ₹7.40 crore claimed as exempt under Section 10(38). However, during scrutiny proceedings for Assessment Year 2007–08, it had been held that the assessee was engaged in the business of trading in shares, and accordingly, similar income was treated as business income.
Based on this earlier finding, reassessment proceedings under Section 148 were initiated for Assessment Year 2008–09 to bring to tax income alleged to have escaped assessment. Despite this, the Assessing Officer initially accepted the returned income by order dated 30 November 2011.
