9911796707
TMI Blog2008 (10) TMI 158X X X X Extracts X X X X X X X X Extracts X X X X ..... ent year 1996-97. 2. The Revenue being aggrieved has proposed the following questions of law which, according to them, are substantial questions of law. These are as follows: "(i) Whether the Income-tax Appellate Tribunal has erred in law in deleting the disallowance of loss of Rs. 32,10,166 on account of loss in trading of shares, treating as speculation loss by the Assessing Officer? (ii) Whether the Income-tax Appellate Tribunal was correct in law in deleting the disallowance in spite of the decision of apex court in the case of McDowell and Co. Ltd. v. CTO [1985] 154 ITR 148 ? (iii) Whether the order of the Income-tax Appellate Tribunal is perverse, as it has ignored the relevant facts and material on record?" 3. After hearing lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the impugned transactions. 5. Coming back to the facts, the assessee in its return had declared income by way of interest to the extent of Rs. 38,02,385. Against the said income it had claimed expenditure by way of administrative expenses, in the sum of Rs. 2,475, as also interest charges amounting to Rs. 5,62,200. What attracted the attention of the Assessing Officer was the loss claimed by the assessee in share transactions which resulted in a loss return. The Assessing Officer noticed that the assessee had purchased shares worth Rs. 94,46,601 which were sold for a total consideration of Rs. 61,15,206; and consequently, the assessee had claimed a loss of Rs. 33,31,395. The Assessing Officer disallowed this loss. A close scrutiny by the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... succeeding financial year. Mr. Sen had stated before the Assessing Officer that he was not only unaware of the loss suffered in the share transactions but had also not heard of the broker engaged by the assessee. Furthermore, the other director of the assessee Mr. S. P. Kapre, was not produced by the assessee; (iii) the impugned share transactions were carried out at the fag end of the year, i.e., January, 1996, to March 1996, when the income from other sources had almost been determined; (iv) the share transactions involved huge losses and, in none of the transactions, the assessee had earned profits. This was neither prudent nor credible; (v) all transactions had been made through one broker, namely, M/s. Sushil Kumar Jindal and Co. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ally in order and, hence, could not be treated as bogus transactions for the reason that: the assessee had brought on record documentary evidence in the form of contract/delivery notes, purchase and sale bills of broker, as also details of bank accounts showing payments made and received by account payee cheques and details of distinctive number of shares as well as proof of taking physical possession of shares. The Commissioner of Income-tax (Appeals) noted that against 2,30,300 shares purchased by the assessee from the four (4) companies referred to above, the Assessing Officer had doubts with regard to only 8,100 shares against which the assessee had suffered a loss of Rs. 1,21,229. In these circumstances, the Commissioner of Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me-tax (Appeals) preferred an appeal to the Tribunal. The Tribunal after examining the matter in detail sustained the order of the Commissioner of Income-tax (Appeals). The Tribunal's order was in line with the reasoning adopted by the Commissioner of Income-tax (Appeals) which was, that the Assessing Officer could not have treated the entire share transactions as bogus when he had asked the assessee to show cause with respect to only 6000 shares of Jindal Capital Ltd., 1100 shares of Karishma Flouriculture Ltd. and 1000 shares of Bharthari Financial Services Ltd. on the ground that during the month of February-March, 1996, the said shares were being dealt by some other broker in the Bombay Stock Exchange. The Tribunal found the view of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as correct. Both the Commissioner of Income-tax (Appeals) as well as the Tribunal having examined the record and weighed the evidence placed before them came to the conclusion that the transaction was substantially genuine and in their wisdom they thought it fit and reasonable to disallow the loss with respect to 8,100 shares, amounting to Rs. 1,21,600. 11. In our view the question whether the impugned share transaction in which the assessee was engaged was a colourable device or not is essentially a question of fact. The observations of a Division Bench of this court in the case of Bhagat Construction Co. P. Ltd. v. CIT [2001] 250 ITR 291 (at page 301) are apposite. The same are extracted below: "It may be necessary to deal with the ques ..... X X X X Extracts X X X X X X X X Extracts X X X X
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