R.G. AGRAWAL & CO. VS COMMISSIONER OF INCOME-TAX
1998 PTD 2161
[221 I T R 750]
[Madhya Pradesh High Court (India)]
Before A.R. Tiwari and N. K. Jain, JJ
R.G. AGRAWAL & CO.
versus
COMMISSIONER OF INCOME-TAX
Miscellaneous Civil Case No. 147 of 1989, decided on 12/02/1996.
Income-tax---
----Reference---Assessee showing trading loss and cash credit---Tribunal not accepting assessee's claim---Whether there is material justifying Tribunal's decision---Questions of law arise---Indian Income Tax Act, 1961, S.256(2).
The assessee was partnership-firm trading as an indenting agent for sale of cloth manufactured by G industries. It also purchased and sold cloth of other mills. For the assessment year 1980-81, the assessee showed a sum of Rs.21,000 as received from one and a trading loss of Rs.22,198. The Tribunal did not accept this. The assessee's application for reference was rejected. On an application under section 256(2) of the Income Tax Act, 1961:
Held, that whether there was any material before the Tribunal to hold that the damages of Rs.22,198 was not allowable as trading loss and whether there was any material justifying the Tribunal to hold that the addition of Rs.21,000 by the Income-tax Officer was justified were questions of law that were to be referred.
Orient Trading Co. Ltd. v. CIT (1963) 49 ITR 723 (Bom.) ref.
G. M. Chaphekar with Subhash Samvatsar and Sharda for the Assessee.
D.D Vyas for the Commissioner.
JUDGMENT
A. R. TIWARI, J.---The applicant-assessee has filed this application under section 256(2) of the Income Tax Act, 1961 (for short, "the Act ), seeking a direction to the Tribunal to state the case and refer the proposed questions of law (as extracted below) arising out of the order passed by the Tribunal on October 16, 1986, in I.T.A. No.250/(Ind) of 1984 for the assessment year 1980-81 (Annexure "C"), for our opinion:
(1) Whether, on the facts and in the circumstances of the case, the a Tribunal has not erred in law in quashing the order of the Commissioner of Income-tax (Appeals) and restoring the order of the Income-tax Officer on the point of disallowance of loss of Rs.22,198?
(2) Whether, on the facts and in the circumstances of the case, there was any material before the Tribunal in law to hold that there was no contract of purchases and loss occurred on account of damages of Rs.22,198 is not a trading loss allowable as business expenses?
(3) Whether, on the facts and in the circumstances of the case, the finding of the Tribunal regarding disallowances of loss of damages of Rs.22,198 is based on a misreading of the material on record?
(4) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in quashing the order of the Commissioner of Income-tax (Appeals) and restoring the order of the Income-tax Officer on the points of addition of Rs.21,000 for credits of Shri D.K. Lunia, when on the findings of the Tribunal the assessee had discharged the primary burden and the Department had not adduced any evidence to rebut the same?
(5) Whether, on the facts and in the circumstances of the case, the findings of the Tribunal regarding addition of Rs.21.000 for credits of Shri D.K. Lunia is based on a misreading of the material on records?"
Briefly stated, the facts of the case are that the applicant is a partner ship firm trading as an indenting agent for sales of cloth manufactured by Gwalior Rayon Silk Manufacturing (Wvg.) Co. Ltd., now Grasim Industries Ltd., Gwalior. It also purchases and sells clothes of other mills. During the assessment year 1980-81, the applicant showed that it received a sum of Rs.21,000 from a creditor, Shri D.K. Lunia, and that it suffered trading loss of Rs.22,198. These two items were, however, not accepted by the Tribunal. The appeal of the non-applicant was partly allowed by the Tribunal on October 16, 1986, and the order of the Income-tax Officer was restored. The applicant filed the application seeking statement of case which was registered as R.A. No. 187/(Ind) of 1986. That application was rejected by the Tribunal on November 21, 1988 (Annexure "E"). The applicant, then filed this application under section 256(2) of the Act.
We have heard Shri G.M. Chaphekar, learned senior counsel, with Shri Subhash Samvatsar and Shri Sharda for the applicant, and Shri D.D. Vyas, learned counsel for the non-applicant.
Counsel for the applicant has proposed the reshaped two questions only as placed on record instead of five questions proposed in the application and noted above. The reshaped two questions are extracted below:
"(1) Whether, on the facts and in the circumstances of the case, there was any material before the Tribunal to hold that the damages of Rs.22,198 is not allowable as a trading loss?
(2) Whether, on the facts and in the circumstances of the case, there was any material justifying the Tribunal to hold that the addition of Rs.21,000 by the Income-tax Officer was justified?"
Counsel for the applicant submitted that when trading loss of Rs.16,000 was accepted, then, there is no valid reason as to why the trading loss of Rs.22,198 should have been disallowed. He also submitted that when the assessee established the genuineness of the entry of Rs.21,000, then, the burden had shifted to the authorities to prove that the entry was fictitious. Counsel has placed reliance on Orient Trading Co. Ltd. v. CIT (1963) 49 ITR 723 (Bom.).
Shri Vyas, on the other hand, submitted that the order of the Tribunal is on a firm foundation and there is no referable question of law.
However, considering the facts and features but, without expressing any opinion on the merits of the matter, we hold that the aforesaid reshaped two questions do arise out of the order of the Tribunal for our opinion.
In the circumstances, we deem it proper to call upon the Tribunal to state the case and refer the aforesaid two questions for our opinion within a period of nine months from the date of the receipt of this order.
We, therefore, allow this case, but without any orders as to costs. Counsel fee for each side is fixed at Rs.750, if certified.
Transmit a copy of this order to the Tribunal for compliance.
M.B.A./1322/FC Order accordingly.