COMMISSIONER OF INCOME-TAX v. CURRENCY INVESTMENT CO. LTD.
IT Ref. No. 204 of 1992, decided on September 6, 1999.
HIGH COURT OF CALCUTTA
BY THE COURT :
On the reference application under section 256 (1) of the IT Act, 1961, the Tribunal has referred the following question set out at p. 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 CIT(A) that the share loss claimed by the assessee was not genuine ?”
2. The assessee is an investment company. It claimed loss amounting to Rs. 48,390 incurred in course of dealing in shares during the accounting period. The assessee purchased 3,000 shares of Gwalior Rayon Silk Mfg. Ltd. on 16th November, 1981 as per contract note filed from the broker, M/s Ram Narayan Kayan & Co. The sales of those shares were made through M/s D.R. & Co. and the shares were sold on 22nd October, 1982, as per contract notes filed. The shares were delivered on 9th November, 1982. The assessee-company produced the broker M/s Ram Narayan Kayan with its books of account before the ITO for examination. But the assessee-company could not produce the broker M/s D. B. & Co. with books of account. On that ground, the ITO has treated the share transaction as bogus and not genuine. So, he disallowed the loss claimed by the assessee on account of dealing in shares.
In appeal, the CIT(A), confirmed the view taken by the ITO.
In appeal before the Tribunal, the Tribunal found the loss on account of share transaction as genuine.
3. None appeared for the assessee. Heard the learned counsel for the Revenue.
4. The learned counsel for the assessee reiterated the argument before the Tribunal which was advanced before the ITO and CIT(A). The Tribunal has considered the argument of the assessee in Para 6 of its order which reads as under :
“The prices were falling down is not doubted. If the prices were falling down in its own interest the appellant-company considered it just and proper to sell the shares without taking delivery. There is nothing wrong in this line of action. Therefore, the burden is vested in the ITO to call upon the purchase broker to find out the genuineness of the transaction and even otherwise or cannot be said that the sale of shares is not genuine. On the basis of the contract 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 to purchase the shares. If once that is done it is immaterial when the delivery of shares has taken place. The appellant-company waited to find 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 Novembermber, 1982. Therefore, we do not find any inconsistency or falsehood in the explanation submitted on behalf of the appellant company.”
5. 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 was produced. The payment was received by an account payee cheque and payment was also made by 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 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 assessee failed to produce those persons that alone does not affect the genuineness of transactions.
Summons can be issued under section 131 of the Act to compel them to appear before the ITO or the AO. But that has not been done, One more factor has been highlighted by the AO that the delivery of shares is on 9th November, 1982, when the sale was on 22nd October, 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 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 shares transactions in question is basically a 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, taken by the Tribunal that cannot be said as perverse.
6. 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.