Calcutta H.C : Whether, the finding of the Tribunal that the loss incurred by the assessee in share dealings is genuine and accordingly allowing the loss is based on any evidence or based on ignoring the relevant material or relying on irrelevant material and whether such finding is otherwise unreasonable and perverse ?

High Court Of Calcutta

CIT vs. Emerald Commercial Ltd. & Anr.

Section 28(i)

Asst. Year 1985-86

Y.R. Meena & Arunabha Barua, JJ.

IT Ref. No. 175 of 1991

23rd March, 2001

Counsel Appeared

Jaydeb Saha, for the Revenue : J.P. Khaitan, Sanjoy Banerjee & M.K. Tiwari, for the Assessee

JUDGMENT

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 common questions in the case of both the assessees :

“1. Whether, the finding of the Tribunal that the loss incurred by the assessee in share dealings is genuine and accordingly allowing the loss is based on any evidence or based on ignoring the relevant material or relying on irrelevant material and whether such finding is otherwise unreasonable and perverse ?

2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the losses incurred in share dealings disallowed by the ITO confirmed by the CIT(A) are based on presumption and are not warranted by facts and evidence on record ?’

2. In pursuance of our direction the Tribunal has referred the abovesaid questions for our opinion. The assessees during the asst. yr. 1985-86 suffered loss of Rs. 1,31,735 and Rs. 2,03,405, respectively, in share dealings in respect of shares in investment companies. The loss was disallowed by the ITO on account of failure of the assessee to produce the share brokers for verification of the transaction. The ITO disallowed the loss claimed in the share transaction, the CIT (A) has also confirmed the above. In appeal before the Tribunal, the Tribunal has allowed the claim of loss of both the assessees and concluded its judgment in para 6 of his order which reads as under : “I have examined the assessment orders as well as the order of the CIT(A). The loss incurred in share dealings is disallowed by the ITO and confirmed by the CIT(A) on the presumption that no prudent business man would under loss and investments are always made to earn income by banks and (sic). This concept does not appear proper. To make investment in share dealings is also made for earning income. While doing so, if any loss is incurred it cannot be said that the loss is incurred to divert the income or it is stagemanaged. The appellants found that at the end of the financial year the value of the shares were going down and the assessee thought it proper to fetch whatever it was possible by selling the shares at that time at a lower rate. That act does not mean that the loss is stagemanaged.”

3. It is also brought to our notice that on almost similar facts this Court has considered the similar issue in the case of CIT vs. Carbo Industrial Holdings Ltd. (2000) 161 CTR (Cal) 282 : (2000) 244 ITR 422 (Cal) and answered the question in favour of the assessee.

4. The admitted facts in this case are that the details of purchase and sale of shares are furnished. The payment and receipt are by account payee cheque. The identity of seller and purchaser is not in dispute. The disallowance is basically made on the ground that the assessee failed to produce the brokers for verification of the transaction. Following our view in the earlier case referred to non-production of the share broker by the assessee does not disentitle the assessee for claim of loss in a genuine transaction of shares. Considering the aforesaid facts and our view expressed in the case of CIT vs. Carbo Industrial Holdings Ltd. (supra), we answer question No. 1 whether the finding of the Tribunal is based on material, in the affirmative and whether this finding of the Tribunal is perverse, we answer it in the negative, i.e., in favour of the assessee and against the Revenue.

5. In the second question the issue has been raised whether the Tribunal was justified in holding that the finding of the ITO and the CIT(A) are based on presumption, we answer in the negative, i.e., in favour of the assessee and against the Revenue.

The reference application for both the assessees thus stands disposed of accordingly.

[Citation : 250 ITR 539]

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