COMMISSIONER OF INCOME-TAX VS CURRENCY INVESTMENT CO. LTD., 2002 PTD-CALCUTTA-HIGH-COURT-INDIA 1241 (1999)

Income‑tax‑‑‑

‑‑‑‑Business loss‑‑‑Loss on account of dealing in shares ‑‑‑ Identity of purchaser and seller not disputed‑‑‑Failure to produce broker through whom shares were sold does not affect genuineness of transactions‑‑‑Loss on account of share transactions‑‑‑Deductible‑‑‑Indian Income Tax Act, 1961.

The assessee, an investment company, claimed loss on account of share transactions. The assessee purchased and sold the shares but since the assessee could not produce the broker through whom the sales were made, with the books of account, the Income‑tax Officer treated the share transactions as bogus and not genuine and disallowed the loss. The Tribunal found that the loss on account of share transactions was genuine. On a reference:

Held, that the question whether the assessee suffered loss on account of share transactions was basically an issue based on finding of fact The identity of the share brokers and the person through whom the shares were purchased and shares were sold was not disputed. The payment was received by an account payee cheque and the payment was also made by account payee cheque when the shares were purchased. Merely because the assessee could not produce the broker through whom the shares were sold it did not affect the genuineness of the transactions when the assessee disclosed the identity of the persons from whom the shares were purchased and sold. Even when two opinions are possible if the view taken by the Tribunal is possible it cannot be said to be perverse. The loss was deductible.

JUDGMENT

On the reference application under section 256(1) of the Income Tax Act, 1961, the Tribunal has referred the following question set out at page 2 of the statement of case for our opinion:

"Whether, on the facts and in the circumstances of the case the Tribunal was justified in law in not confirming the finding of the Commissioner of Income‑tax (Appeals) that the share loss claimed by the was not genuine?"

The assessee is an investment company. It claimed loss amounting to Rs.48,390 incurred in the course of dealing in shares during the accounting period. The assessee purchased 3,000 shares of Gwalior Rayon Silk Manufacturing Ltd, or November 16, 1981, as per contract note filed from the broker, Ram Narayan Kayan & Co. The sales of those shares were made through D.B. & Co. and the shares were sold on October 22, 1982, as per contract notes filed. The shares were delivered on November 9, 1982. The assessee‑company produced, the broker Ram Narayan Kayan with its books of account before the Income‑tax Office for examination. But the assessee‑company could not produce the broker D.B. and Co. with books of ground, the Income‑tax Officer has treated the share transaction as bogus and not genuine. So, he disallowed the loss claimed by the assessee account of dealing in shares.

In appeal, the Commissioner of Income‑tax (Appeals) confirmed the view taken by the Income‑tax Officer

In appeal before the Tribunal, the Tribunal found that the loss on account of share transaction as genuine.

None appeared for the assessee. Heard learned counsel for the Revenue. Learned counsel for the assessee reiterated the argument before the Tribunal which was advanced before the Income‑tax Officer and the Commissioner of Income‑tax (Appeals). The Tribunal has considered the argument of assessee in paragraph 6 of its order which reads as under

"The prices were failing is not doubted if the prices were falling in its own interest the appellant‑company considered it just and proper to sell the shares without making delivery. There is nothing wrong in this line, of action. Therefore, the burden is on the Income‑tax Officer to call upon the purchase broker to find out the genuineness of the transaction and even otherwise it cannot be said that the sale of shares is not genuine. On the basis of the contrast note, delivery of shares was made and the payment was received by account payee cheques from Vijaya Bank. There is no doubt that almost one year's gap thereafter entering into the, contract note. Sri Purohit has explained that there is a procedure to enter into a contract note and o purchase the shares. If once that is done it is immaterial when the delivery of shares has taken place. The appellant‑company waited to timid out whether it could get better price by selling them. As such the appellant‑company was losing its hope of getting its proper price, and therefore, considered it to sell them in November, 198L. Therefore, we do not find any inconsistency or falsehood in the explanation submitted on behalf of the appellant‑company."

The learned Tribunal has concluded that in view of the facts of this case, the assessee has made out a case of a genuine loss in share transaction. Whether the shares were sold or not and for how much the shares were purchased and for how much the shares were sold is basically a question of fact. The identity of the parties through whom the shares were purchased and to whom the shares were sold is disclosed. Even the broker through whom the shares were purchased w& produced. The payment was received by an account payee cheque and the payment was also made by the account payee cheque when the shares were purchased. The identity of the share brokers and the person through whom the shares were purchased and shares were sold is not disputed. Merely because the assessee could not produce a broker through whom the shares were sold or the person to whom the shares were sold, it does not affect the genuineness of shares in case when the assessee came with a fact and disclosed the identity of the persons from whom the shares were purchased and sold. If the assessee failed to produce those persons, that alone does not the genuineness of transactions.

Summons can be issued under section 131 of the Act to compel them to appear before the Income‑tax Officer or the Assessing Officer. But that has not been done. One more factor has been highlighted by the Assessing Officer that the delivery of shares is on November 9, 1982, when the sale was on October 22, 1982. Merely because of the fact that all shares were delivered after 10/15 days from the date of sale also does not affect the claim of the assessee‑regarding the genuineness of sale of shares by the assessee and when there is no evidence on record that the shares are not purchased by the assessee, there is no justification to disallow the loss only on the ground that delivery of shares has been taken on the same date, when the shares are delivered to purchaser.

Whether the assessee suffered loss on account of the share transactions in question is basically an issue based on finding of fact and on the given facts, it cannot be said that the finding of the Tribunal is perverse. Even when two opinions are possible if one view possible is taken by the Tribunal that cannot be said as perverse.

In the result we answer the question in the affirmative, i.e. in favour of the assessee and against the Revenue.

All parties are to act on a xeroxed signed copy of this dictated order on the usual undertaking.

M.B.A./613/FC?????????????????????????????????????????????????????????????????????????????????? Reference answered.