Calcutta H.C : Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding the view that the loss of Rs. 11,79,420 was a short-term capital loss?

High Court Of Calcutta

CIT vs. Britannia Industries Ltd.

Sections 45(1), 73, Expln.

Asst. Year 1979-80

Y.R. Meena & Arun Kumar Mitra, JJ.

IT Ref. No. 29 of 1994

26th September, 2001

Counsel Appeared

Mullick, for the Revenue : Dr. Pal, for the Assessee

ORDER

BY THE COURT :

On an application under s. 256(2) of the IT Act, 1961, this Court has directed the Tribunal to refer the following question set out at page of the statement of the case for the opinion of this Court : “Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding the view that the loss of Rs. 11,79,420 was a short-term capital loss?”

In compliance of our direction the aforesaid question has been referred for the opinion of this Court. During the course of assessment, the AO noticed that the assessee has claimed the short-term capital loss on account of share transaction. He rejected that claim. According to him, in the absence of the balance-sheets of the companies for which the loss could not be ascertained. In appeal before the CIT(A), the CIT(A) vide his order dt. 1st June, 1983, in para 11 has stated that the mere fact of non-filing of the balance-sheets of the companies, the shares of which were sold cannot be made a ground for rejection of the short-term capital loss and the order of the AO was set aside and sent back with direction to AO that the appellant should be given reasonable opportunity to produce necessary evidence, such as broker’s notes, quotations in the stock exchange and balance-sheets of the companies concerned. In compliance with the direction of the CIT(A), the AO instead of considering the materials produced, he disallowed the claim of short-term capital loss invoking the Explanation to s. 73 of the Act. In appeal before the CIT(A) in second round, the CIT(A) vide his order dt. 20th Dec., 1988, he allowed the claim of the assessee following the view taken by the CIT(A) in the case of this assessee in the asst. yr. 1980-81. In appeal before the Tribunal, the Tribunal has also confirmed the view taken by the CIT(A) in the order dt. 20th Dec., 1988. Heard learned counsel for the parties.

Mr. Mullick, learned counsel for the Revenue, submits that, in spite of the direction, the balance-sheets of the companies are not produced by the assessee before the AO in the second round. Similarly, the broker’s note was also not produced. Therefore, when the directions were not complied with, in the second round, the CIT(A) as well as the Tribunal should not allow the claim of short-term capital loss in share transactions.

Dr. Pal, learned counsel for the assessee, submits that the assessee-company is not an investment company and whether Explanation to s. 73 of the Act has any application that has been considered by the CIT(A), in the asst. yr. 1980-81 in the case of this very assessee and found that the Explanation to s. 73 has no application in the case of this assessee. That order dt. 20th Dec., 1988, for the asst. yr. 1980-81 of the CIT(A) has been accepted by the Department. He further submits the shares are quoted in the stock exchange. Therefore, when the details are given, no broker’s note is needed. He further submits that when the balance-sheet of the assessee has been filed the balance-sheets of the concerned companies need not be filed when the full address of purchasers and sellers has been given, the AO could verify the genuineness of the transactions. That has not been done. Even otherwise also, in the first round, the CIT(A) itself has considered and was of the view that the claim of the assessee cannot be rejected only on the ground that the balance-sheets of the concerned companies are not filed. Therefore, it is immaterial that the balance-sheets of the concerned companies are not filed.

The admitted facts that the claim of the assessee was rejected by the AO only on the ground that the assessee has failed to submit the balance-sheets of the concerned companies from whom the shares were purchased. That has been considered by the CIT(A) in para 11 of his order dt. 1st June, 1983, wherein the CIT(A) himself expressed his opinion that by non-filing of the balance-sheets of the concerned companies, the shares of which were sold, cannot be made ground for rejection of the short-term capital loss. Once that view has been taken, the claim of the assessee cannot be denied on that very ground in the second round. That has not been done so also by the CIT(A).

In consequence of the direction of the CIT(A) in the order dt. 1st June, 1983, the AO instead of complying with those directions and consider materials referred to in the order dt. 1st June, 1983, he rejected the claim of the assessee only on taking into account the Explanation to s. 73 of the Act. The CIT(A) has considered this issue and the CIT(A) found that in the facts and circumstances, the Explanation to s. 73 has no application, as the assessee is not an investment company. That order of the CIT(A) in the asst. yr. 1980-81 has not been challenged by the Department. Once order has been accepted and when the facts are more or less similar in the assessment year in hand, i.e., 1979-80, there is no reason to disagree with the view taken by the Tribunal in the asst. yr. 1979-80.

Learned counsel for the Revenue has not shown any provision of law that this Court in the absence of the balance- sheets of the companies concerned, the claim of the assessee should not be allowed. Considering the facts referred to above, we find no infirmity in the order of the Tribunal.

In the result, we answer the question in the affirmative, i.e., in favour of the assessee and against the Revenue. The reference, so made, stands disposed of.

[Citation : 257 ITR 225]

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