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Issues: Application under Section 66(2) of the Income-tax Act regarding disallowance of claimed net loss on speculative transactions.
Analysis: The applicant, a partner in a firm and also engaged in individual business activities, claimed a net loss on speculative transactions in his income tax return for the year 1946-47. The Income-tax Officer disallowed the claim due to lack of contemporaneous records and the absence of a sauda bahi. The Appellate Assistant Commissioner and the Appellate Tribunal upheld this decision, emphasizing the need for proper records to verify the claimed losses. The Tribunal refused to state a case to the High Court, deeming the evidence insufficient to prove the loss, and stating it as a factual finding without any legal question for reference. Mr. Grover, representing the applicant, argued that similar accounts were accepted in previous years, and the authorities should not arbitrarily estimate profits to offset the proven losses. However, the Court rejected this argument, stating that each year's accounts are judged on their merits, and the absence of records for speculative transactions was a valid reason for disallowance. The Court emphasized that the burden of proof lies with the assessee to establish claimed losses, especially in speculative transactions where proper documentation is crucial. The Court also considered the impracticality of verifying transactions conducted in distant locations like Indore and Bikaner without adequate records. The Court concluded that there was no arbitrary assessment by the Income-tax authorities and upheld the decision to disallow the claimed loss. They emphasized that the lack of contemporaneous records and the specific circumstances of the transactions justified the disallowance. The Court dismissed the application under Section 66(2) of the Income-tax Act, with costs assessed at &8377; 150. In a concurring opinion, Justice Falshaw agreed with the Chief Justice's analysis and decision to dismiss the application. The application was ultimately dismissed by the High Court, affirming the decisions of the lower tax authorities and the Tribunal regarding the disallowance of the claimed net loss on speculative transactions.
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