JUDGMENT

KANIA, J. :—This is an appeal filed by the Commissioner of Income-tax, Calcutta, by Special Leave against an order of a Division Bench of the Calcutta High Court declining to direct the Income-tax Appellate Tribunal (hereinafter referred to as "the Tribunal") to refer to the court for determination of certain questions raised by the Commissioner of Income-tax.

2. It is necessary to set out a few facts for the appreciation of the controversy in this appeal. In its assessment for the Assessment Year 1959-60 the respondent-assessee claimed deductions inter alia in respect of the loss on the sale of certain shares of Bharat Starch and Chemicals Ltd. and Greaves Cotton & Co. Ltd. for the relevant previous year. The respondent-assessee had sold in the relevant previous year 2500 shares of Bharat Starch & Chemicals Ltd. to M/s. K.C. Thapar & Sons Ltd., a company belonging to the same group. These shares were purchased on 22nd Feb. 1958 and were sold on 31st March, 1959. The loss claimed was of Rs. 26,465/-. The Income-tax Officer concerned disallowed this loss on the ground that the sale price was shown at Rs. 2.50 per share whereas the market quotation on 31st March, 1959 was Rs. 8.06 per share. The Income-tax Officer also relied upon the circumstances that the shares had been sold to a company which was an allied concern of the assessee, that is, belonging to the Thapar group. The Income-tax Officer took the view that the sale had been effected only to enable the assessee to claim the loss and could not be allowed as genuine. The respondent-assessee had also sold 3000 shares of Greaves Cotton & Co. Ltd. on 4th Feb. 1959 to M/s. K.C. Thapar & Sons Ltd., and claimed a loss of Rs. 47,878.55p on this transaction. The Income-tax Officer held that these shares had also been sold to a company belonging to the Thapar group and under the control of that group. The Income-tax Officer took the view that the motive for selling the aforesaid shares and some other shares was to make losses and set them off against the profits and these transactions could not be considered to be in the normal course of business. He held that this type of transaction could not be regarded as genuine and disallowed the claim.

3. The assessee preferred an appeal to the Appellate Assistant Commissioner against the order of the Income-tax Officer. In respect of the sale of the shares of Bharat Starch & Chemicals Ltd. the Appellate Assistant Commissioner accepted that the market quotation of these shares at Rs. 8.06 on 31st March, 1959, was a nominal quotation and there was no transaction in these shares at that rate because there was no buyer at that price and that the Income-tax Officer was wrong in relying upon this circumstance to come to the conclusion that the transaction of sale of these shares was not genuine. He also took the view that the Income-tax Officer was in error when he took the view, because these shares had changed hands between companies controlled by the same group that fact vitiated the sale. He, however, took the view that the disallowance was correct as the shares were, in fact, purchased at Rs.2.50 per share and sold at the same rate, that is, he disagreed with the average cost worked out by the assessee and pointed out that the basis on which such average cost was worked out had not been shown to him. He further took the view that the 2500 shares of this company sold by the assessee constituted a large block and was connected with the acquiring of control over the Bharat Starch & Chemicals Limited and hence the loss should be regarded as an investment loss and not a business loss. As far as the loss on the sale of shares of Greaves Cotton & Co. Ltd. was concerned, after referring to the ground on which the, Income-tax Officer had disallowed this loss the Appellate Commissioner took the view that the holding of these shares could be reasonably attributed to the investment portfolio and hence, the said loss was a capital loss and not a b