VS, 2000 PTD-CALCUTTA-HIGH-COURT-INDIA 161 (1998)

(a) Income-tax---

----Loss---Loss on sale of shares---Purchase and sale of shares made through broker ---Assessee furnishing name of company from whom shares purchase and sold date of sale, amount of purchase money and amount of salt money---Failure of broker to maintain books and failure to produce them did not mean that transactions of sale and purchase of shares were not genuine No. proper steps taken by I.T.O. to bring on record materials to controver claim of assessee---Tribunal finding that the assessee had discharged initial burden that lay on it---Finding of Tribunal not perverse---Transaction was genuine and loss was allowable deduction.

(b) Income-tax---

----Cash credit ---Income-tax Officer finding cash credit in name of creditor in books of assessee---Assessee failing to furnish confirmation letter of creditor and only income-tax file number of creditor filed---Mere filing of income-tax file number not enough to prove genuineness of cash credit---Creditor should be identified and there should be creditworthiness---Tribunal finding identity of person, creditworthiness and genuineness of transaction proved by assessee---Finding of Tribunal perverse and not based on any relevant material.

For the assessment year 1984-85, the assessee claimed loss of Rs.1,50,520 on purchase and sale of 4,000 shares of a company. Both the purchase and sale were made through a broker. The Income-tax Officer summoned the broker and the broker asked for lime to produce its books of account and when the broker failed to produce the books, the Income-tax Officer disallowed the claim of loss. On appeal, the Commissioner of Income-tax (Appeals) confirmed the order of the Income-tax Officer. On further appeal to the Tribunal, the assessee furnished the name of the company, number of shares purchased, date of sale, amount of purchase money, amount of sale money, etc. The Tribunal found that the assessee had discharged its initial burden and if the broker did not maintain any accounts, the transaction could not be doubted for no fault of the assessee. The Tribunal, thus, allowed the claim of loss of the assessee. On a reference:

Held, that the Tribunal had found that the assessee had discharged its initial burden that lay on it and, therefore, it could not be said that such a conclusion of the Tribunal was unreasonable or perverse or based on no evidence. Once the assessee had discharged its initial burden, no investigation or proper steps had been taken by the Income-tax Officer to bring on record the materials to controvert the claim of the assessee. The claim of the assessee could not be denied merely on the ground that the broker through whom the transaction was made had failed to produce his books. It was not the case of the Revenue that the assessee had not maintained books of account Therefore, the transactions relating to the assessee's loss on the sale of shares was genuine and the loss was deductible.

During the assessment proceedings, the Income-tax Officer found that the books of account of the assessee showed introduction of cash credit amounting to Rs.21,800 in the name of a creditor. Since the assessee failed to furnish the confirmation of the creditor before the Income-tax Officer, he treated the amount as income from undisclosed sources. On appeal, the Commissioner of Income-tax (Appeals) upheld the order of the Income-tax Officer. On further appeal, the Tribunal allowed the claim of the assessee on the ground that even though initially no confirmation of the creditor was filed before the Income-tax Officer at the appellate stage, i.e., before the Commissioner (Appeals), the income-tax file number .was given. On a reference:

Held, that on a perusal of the order of the Income-tax Officer, the Commissioner of Income-tax (Appeals) and the Tribunal, there was no reference to confirmation. In the Tribunal's order there was only a reference to the income-tax file number but it was not known when it was given and mere filing of income-tax file number of the creditor was not enough to prove the genuineness of the cash credit. There was do affidavit of this effect by the creditor on record. The creditor should be identified. There should be creditworthiness. There should be genuine transaction: The assessee had failed to prove the genuineness of the cash credit. Therefore, the finding of the Tribunal that the identity of the person, her creditworthiness and genuineness of the transaction in respect of the cash credit in the name of the creditor had been proved by the assessee was not based -on any relevant material and was perverse.

CIT v. Orissa Corporation (Pvt.) Ltd. (1986) 159 ITR 78 (SC) ref.

Standing Counsel for the Commissioner.

Khaitan for the Assessee.

JUDGMENT

Y. R. MEENA, J.---By this reference application, the following questions are referred for our opinion:

"(1) Whether the finding of the Tribunal that the transactions relating to the assessee's share loss of Rs.1,50,520 were proved and whether such finding is based on any relevant material or perverse?

(2) Whether, on the facts and in the circumstances of the case, the finding of the Tribunal that the identity of the person, her creditworthiness and genuineness of the transaction in respect of cash credit in the name of Smt. Kausalya Devi Gupta have been proved by the assessee is based on any relevant material or perverse?"

The assessee is Korley Trading Co. Ltd. and the assessment year involved is 1984-85. The assessee claimed loss of Rs.1,50,520 on the purchase and sale of 4,000 shares of D. C. Mills. Both the purchase and sale were made through a broker, Dayco. The broker was summoned to produce its books of account. The broker wanted time and ultimately it failed to submit the account books. When the books of account were not produced, the claim of loss was not allowed on the ground that the assessee failed to prove that it suffered loss in share transactions.

In appeal, the view taken by the Income-tax Officer was confirmed by the Commissioner of Income-tax (Appeals). In the second appeal before the Tribunal, same facts were put forth before the Tribunal. Even the specific amount of sale price and purchase price was also brought on record. The assessee has furnished the name of the company, number of shares purchased, date of sale, amount of purchase money amount of sale money, etc. Thus, the assessee has discharged its initial burden. If the broker does not maintain the accounts, the transactions could not be doubted for no fault of the assessee. Considering these facts the claim of the assessee was allowed by the Tribunal. .

In reference before us, the aforesaid facts are not in dispute. Sri Khaitan learned counsel for the assessee, brought to out' notice the decision of the apex Court in CIT v. Orissa Corporation (Pvt.) Ltd. (1986) 159 ITR 78, wherein their Lordships have taken the view that when the respondent has given the names and addresses of the alleged creditors. it was in the knowledge of the Revenue that the said .creditors were income-tax assessee. Their index numbers were on the file of the Revenue. But the Revenue did not examine the source of income of such alleged creditors to find out whether they were creditworthy. There were no efforts made to pursue the so-called creditors. In such circumstances, the respondent could not do anything further. The Tribunal has come to the conclusion that the respondent has discharged its burden that lay on it and, therefore, it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. In the case in hand, the assessee has given the name of the company, who issued the concerned shares, number of shares purchased, when purchased, for to much amount the same was purchased, when it was sold, for how much amount it was sold and through whom it was sold. Even the broker appeared before the Income-tax Officer and prayed for time to produce his proper books. It is not the case of the Revenue that the assessee has not maintained the books. The case of the Revenue is that as the broker did not maintain the books and has failed to produce the books, the transaction. is not genuine.

We are unable to accept this proposition put forward by counsel for the Revenue. Once the assessee has discharged its initial burden, no proper steps have been taken by the Income-tax Officer to bring on record, the materials to controvert the claim of the assessee. The claim of the assessee cannot be denied only on the ground that the broker through whom the transaction was made has failed to produce the proper books. Therefore, the transaction could not but be said to be genuine.

Considering the facts of the case, we are of the view that the assessee has discharged its initial burden. No proper investigation was made by the Income-tax Officer. No material has been brought to disbelieve such transaction. In view of the above, it cannot be said that the finding of the Tribunal is perverse. When the finding is not perverse, no interference is called for. Accordingly, we answer question No.1 so far as it relates to whether the assessee has proved the transaction, we answer it in the affirmative, that is in favour of the assessee and against the Revenue. So far as it relates to the finding as to perversity, we answer it in the negative, that is in favour of the assessee and against the Revenue.

During the assessment, the Income-tax Officer found that the books of account of the assessee showed introduction of case credit of Rs.21,800 (rupees twenty-one thousand eight hundred) in the name of Kausalya Devi Gupta and interest payable is Rs.1,800. The assessee failed to furnish even the confirmation of the creditor before the Income-tax Officer. Accordingly, the amount was treated as the assessee's income from undisclosed sources. The view taken by the Income-tax Officer was upheld by the Commissioner of Income-tax (Appeals). .In the second appeal before the Tribunal, the Tribunal has allowed the claim of the assessee on the ground that initially no confirmation was filed before the Income-tax Officer but, subsequently, at the appellate stage, the income-tax file number was given. 'Shri Khaitan, learned counsel appearing for the assessee, submits that even confirmation by the creditors has been filed before the Commissioner of Income-tax (Appeals). On a perusal of the orders of the Income-tax Officer, the Commissioner of Income-tax (Appeals) and the Tribunal, there is no reference to confirmation. In the Tribunal's order there is only reference to the income-tax file number but it is not known when it was given and mere filing of the income-tax file number of the creditors is not enough to prove the genuineness of the cash credit. The creditor should be identified. There should be creditworthiness. There should be a genuine transaction. The income-tax file number has been given but that is not enough to prove the genuineness of the cash credit. Admittedly, there is no affidavit to this effect, by the creditor, on-record. Considering these facts, we find that the finding of the Tribunal in this regard is- perverse. The assessee has failed to prove the genuineness of the cash credit. Accordingly, we answer question No.2 so far as it relates to whether the cash credit has been proved, in the negative, that is, in favour of the Revenue and against the assessee and in so far as it relates to whether the finding of the Tribunal is perverse or not, we answer it in the affirmative, i.e., in favour of the Revenue and against the assessee.

M.B.A./3279/FCOrder accordingly.