9911796707
TMI Blog1988 (2) TMI 94X X X X Extracts X X X X X X X X Extracts X X X X ..... were debited to the profit loss account and credited to the accounts of these persons by entries in Nakal Bahi. It is necessary to mention the relationship of the assessee vis-a-vis the above persons. The assessee is a firm consisting of two partners, namely, Sri Gopal Goenka (individual) and Smt. Darupadi (who is mother of Gopal Goenka, partner). These are the only two partners in the assessee-firm. Shri M. R. Goenka is the father of Sri Gopal Goenka. Gopal Goenka, partner is the karta of Gopal Goenka (HUF). Devendra Goenka is the brother of Gopal Goenka, partner, Sarla Goenka is the wife of Devendra Goenka, brother of Sri Gopal Goenka, partner. Madhu Goenka is the wife of Gopal Goenka, partner. Thus, she alleged transactions are between the members of the family itself-brother and brother husband and wife, father and son, karta of the HUF and HUF. The transactions are stated to have been done on phone in April 1978. There is no proof of original entry to show that these transactions were booked in the month of April 1978. The exact date of the transaction is not remembered by anybody. Some dates in the month of April have been mentioned as probable dates. In the statements of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT [1966] 59 ITR 625 (Bom.). 6. Kishinchand Chellaram v. CIT [1980] 125 ITR 713 (SC). 7. CIT v. Daulat Ram Rawatmull [1973] 87 ITR 349 (SC). It was argued that the AAC had not mentioned the correct facts, while disallowing the loss. 3. The Departmental Representative argued that the loss claimed by the assessee was a fictitious loss and it was a clear attempt on the part of the assessee to divert its income in the names of close relations to avoid tax. Shri Devendra Goenka in his statement has admitted in response to one questions that he has not done any such truncation after the abovementioned transactions with the assessee and he did not remember as to whether he did any of the said transaction in the past. He also repelled that he did this transaction with Gopal Co., as he treated this shop as his own. He mentioned that he got the different amount within a month but the copies of his accounts showed that he did not received the amount created to his account even till the end of the year. The transactions as stated to have been entered into in April 1978 but the alleged entry in the books of the assessee in Nakal Bahi has been passed in the cases of Sarla Goenka only o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riginal entry in the shape of Sauda Bahi or a slip of paper which may be a piece of evidence of the transactions alleged to have been entered into on phone with the abovementioned persons in April 1978. (2) The assessee's version is that the transactions were noted in the slip of paper which was later destroyed. (3) All the transactions are with closet relatives (family members) of the partners. (4) These persons had not been entered into and they had denied to have entered into such transactions even later at least they do not remember. (5) The book entry regarding the payment of difference credited to their accounts has been passed after several months, i.e., in the month of August 1978 and in the case of Sarla Goenka on the last day of the previous.year namely on 31-3-1979. (6) None of these persons have received the payments in cash in this year in toto. (7) At least Sarla Goenka and Devendra Goenka and Madhu Goenka did not have any experience in this line of business. There is no evidence to come to such a conclusion. It is no doubt stated that they had knowledge of oil business as the oil business was done in this family but they themselves admittedly did not ente ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the entries made by him cannot, therefore, be regarded as conclusive one way or the other. What is necessary to be considered is the true nature of the transaction and whether in fact it has resulted in profit or loss to the assessee." 8. After looking into the facts, as mentioned above and the case laws, we have we have no hesitation in coming to the conclusion that the losses claimed by the assessee were not genuine losses. There is no evidence at all to come to such a conclusion. Even the paper containing primary entry is stated to have been destroyed by the assessees for reasons best known to them. The benefit of these credits have gone in the accounts of close relatives of the partners. Payments have not been made in cash, only the book entries have been passed. The exact date of the transaction is not remembered by any body. Most of these persons had actually not done any such transaction in the past nor in the future. Even the entries regarding these transactions were passed after several months of the alleged date of transaction and in one case on the last date of the year. From the overwhelming facts mentioned above, the conclusion, in our opinion, is obvious that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee. My disagreement is both as regards facts found by him and conclusion drawn from those facts. 2. I will first refer to the finding contained in paragraph 4 of his order. This para, according to me, contains the facts, which are not in dispute In sub-para (4) of the above paragraph, he has observed that the persons to whom the assessee claimed to have paid the losses had not entered into such transactions and denied to have entered into such transaction even later. That at least they did not remember. In my opinion, this is not the fact. The very first question put forward by the Income-tax Officer to Shri Devendra Goenka as to what was the source of the Income. His reply was that he used to carry on Sauda transactions, which gave him profit. In the second question put by the Income-tax Officer he was required to clarify the nature of these transactions his reply was that they were of the same nature as the one entered into with the assessee. Similarly, Shri Meghraj Goenka in his statement recorded by the Income-tax Officer stated that he was carrying on business in oil as proprietor of M/s. Meghraj Goenka Sons in the HUF capacity. Shri Gopal Goenka, who had entered into tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which clearly go to establish the genuineness of the transactions and thereby the case of the assessee. 6. My learned Brother has held that the losses claimed by the assessee were not genuine for the following brief reasons : (1) There is no evidence to come to the conclusion that the losses claimed by the assessee were genuine. Even the paper containing primary entry is said to have been destroyed by the assessee for reasons best known to him. (2) The benefit of the credits has gone in the accounts of close relatives of the partners. (3) The payments have not been made in cash. Only the book entries have been passed. (4) The exact date of the transaction is not remembered by anybody. (5) Most of the persons had actually not done any transaction in the past or in the future. Even the entries regarding these transactions were passed after the alleged date of transaction. (6) Mere passing of the book entries is not enough to prove a transaction. The examination by revenue has revealed that the book entries were not genuine transactions. 7. I now proceed to deal with each of the above reasons. The assessee's case was that the slip on which the original entries were ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parties to whom the losses had been paid are themselves income-tax assessees. They have duly shown the profits received by them in their respective returns and in most cases their assessments have been completed. It is also relevant to point out here that similar losses were paid by the assessee to Smt. Leelawati, Smt. Gomita Devi and Smt. Jagdisha Devi in the assessment year 1978-79, i.e., in the immediately preceding year and were also allowed by the department. These aspects have not been dealt with in the order of my learned Brother. They clearly prove the genuineness of the transaction and the case of the assessee. Merely because the losses had been paid to the relatives of the partners is no ground to hold against the genuineness of the transactions. The Hon'ble Allahabad High Court in the case of Prakash Narain has held that apart from the relationship between the parties, there must be some material or evidence to support the case of that benami nature of the transaction. The same principle, which is binding upon this Bench of the Tribunal is equally applicable to the genuineness of the transaction. I have already pointed out the evidence which goes to establish the genuine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat mere passing of entries is not enough. But the evidence on record unmistakably proves the genuineness of the transaction, which is duly supported by the relevant law pointed out by both the parties. My learned Brother has not pointed out anything in the examination by the revenue to take a different view. 12. For all these reasons, I respectfully differ from the conclusions of my learned Brother and hold that the transactions relating to payment of Rs. 54,867 were genuine and the assessee was entitled to its deduction from the total income. I may, however, mention that I do not propose to offer any comments on the observations of my learned Brother regarding the claim of the department that the transactions could also be speculative in nature. Such a stand was never taken by the department at any earlier stage nor the assessee was heard on this point by us. 13. On the other grounds, I agree with my learned Brother. STATEMENT UNDER SECTION 255(4) OF THE INCOME-TAX ACT, 1961. There being difference of opinion between the two Members of the Income-tax Appellate Tribunal, B-Bench, Allahabad the case is being referred to the President of the Appellate Tribunal for hearing on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. 4. The learned counsel for the assessee strongly urged that in the assessments of the five parties, the profits in respect of the transaction entered by them with the assessee have been included. Those five parties had business in oil. In respect of some of them even in the earlier year the transactions entered by the assessee with them have been accepted. The entire transactions have been entered in the Nakal Bahi. The primary paper was destroyed after entering the transactions in Nakal Bahi. That is the position even in the case of the transactions with other parties, which have been accepted by the Revenue. On account of rise in the prices, the assessee decided to pay the difference. Merely because those parties are related to the partners of the assessee firm, the transactions, as such, cannot be doubted. Out of those five parties, four have been examined, who have confirmed that they had transactions with the assessee and they were settled by payment of difference amount. The fifth party, being a pregnant lady, could not be produced. Since the assessee had a running account with them, the amounts were credited in their accounts, but on that account the transactions, as su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Since they had running accounts, their accounts have been credited with the amount settled. In the assessments of those five parties, the amounts received by them from the assessee on account of the settlement of the transactions, have been included in their total income. Having done that, the department cannot now say that the loss claimed by the assessee is not allowable. Similar losses claimed by the assessee in respect of the transactions with Smt. Lilawati, Smt. Gomti Devi and Smt. Jagdisha Devi have been allowed by the department in the assessment year 1978-79. Merely because the transactions which resulted in losses were entered into with the relatives of the parties, the claim of the assessee for deduction of losses cannot be disallowed. In my view the transactions with the five parties are genuine and the loss of Rs. 54,867 is allowable as deduction. The decisions relied upon by the Departmental Representative in Nihori Lal Prabhudayal v. CIT [1951] 19 ITR 240 [All.] and McDowell Co. Ltd.'s case have no application to the facts of the instant case. 7. The matter will now go back before the regular Bench for decision according to the majority opinion. ORDER Per S ..... X X X X Extracts X X X X X X X X Extracts X X X X
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