Commissioner of Income Tax vs B.D. Goenka and Others

Ramanujam, J.—The assessee this case has filed a return of income for the asst. yr. 1972-73 disclosing a total income of Rs. 1,12,470. In

his return the assessee has disclosed a profit of Rs. 11,587 on sale of shares. He also claimed a loss of Rs. 3,51,550 arising out of the sales of

28,535 shares. The ITO found that the shares which were claimed to have been sold to the assessee''s father stood in the name of the father even

prior to the transactions of sale, that this and other circumstances clearly showed that there was no sale or purchase of shares and that the entire

transaction relating to the sale or purchase of shares noted in the assessee''s books were bogus in nature. In this view, the ITO refused to take the

sum of Rs. 11,587 as profits arising from the shares and disallowed the claim for set off of loss claimed as arising from the sale of shares.

Aggrieved by the order of the ITO the assessee took the matter to the AAC contending that the shares were held as vestment which

represented his capital assets and, therefore, the loss arising from the sale of these assets were to be allowed as capital loss. The AAC accepted

the said contention and held that the assessee was entitled to set off of the loss from the sale of the shares, after rejecting the finding of the ITO that

the transactions of sale in shares were not genuine and, therefore, there was no real loss to be allowed as deduction. Aggrieved by the order of the

AAC the revenue took the matter in appeal to the ITAT contending that the AAC erred in allowing the set off when there was no real transaction

of sale resulting in any loss. The Tribunal, however, rejected that contention and held that the transaction was real and the assessee was entitled to

set off the loss. In support of its finding that the transaction of shares by the assessee was real and not bogus, the Tribunal relied on the following

circumstances : (1) Though certain shares stood in the names of other persons, the dividend income from those shares were included and assessed

in the assessee''s hands. (2) The shares were also shown in the assessee''s wealth tax returns as the assessee''s own assets and accepted by the

department for nearly a decade. The Tribunal also took note of the finding given by the AAC that all transactions of sale of shares were not after

adjustment but part of the sales were for cash and that the transactions of sale have been affected through stock-brokers. Aggrieved by the order

of the Tribunal, the revenue seeks a direction from this court u/s 256(2) of the IT Act, 1961 to refer the following question of law :

Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is correct in law in holding that the assessee is entitled to the set

off of loss from sale of shares to the extent of Rs. 3,51,550 for the asst. yr. 1972-73 ?

We are however, of the view that so long as the finding of the Tribunal that the sales of shares are real transactions, stands, the assessee''s claim for

set off of the loss arising from the sales of shares has to be upheld. The finding of the Tribunal that the sales of shares are real transactions and not

bogus as found by the ITO has not been specifically challenged. Further, it is seen that the finding to the Tribunal that the sales of shares are real

transactions and not bogus is based on the facts and certain special circumstances referred to by the Tribunal. If we are to go by the finding to the

Tribunal that the sales are real transactions and not bogus, then the Tribunal is right in allowing the set off of the loss arising from the sales of shares;

since the decision of the Tribunal is based on its factual finding that the sales are real transactions and the sales have resulted in loss, then the

consequent loss arising out of the sales of shares has to be allowed as be allowed as set off. In this view of the matter, we do not see any

justification for directing a reference. The petition is, therefore, dismissed. No costs.