S.K.Sen, J. - (1.) In the instant reference under section 256(2) of Income-tax Act, 1964 the three questions raised at the instance of the Reason for cosideration are as follows: 1. Whether, on the facts and circumstances of the case the finding of the Tribunal that the transactions of sales of shares of two companies viz., (a) The General Fibre Dealers Ltd. (b) Bhagatpur Tea Co. with Shri R.L. Kanoria, Chairman of the assessee company had been proved and were done as an act or prudency, was based on no evidence or partly relevant or partly irrelevant evidence and is otherwise perverse and arbitrary?
(2.) Whether on the facts and in the circumstances of the case the findings of the Tribunal that the Revenue failed to establish its case of false sale transaction of shares of Jokai India Ltd. to Shri R.L.Kanoria, Chairman of the assessee company and had objected the share loss on surmise and conjectures, was based on no evidence or partly relevant or partly irrelevant evidence and is otherwise perverse and arbitrary?
(3.) Whether, considering the totality of the facts and in the circumstances of the case, the Tribunal was correct in law in directing the assessing Officer to allow the share of loss of Rs. 3,38,861.50 to the assessee company? The assessee company claimed loss of Rs. 3,38,861.50 from the following dealings:- Date of Shares No. of Cost Date of Sale Loss purchase Shares Sale price 10.3.74 The General 5760 153867.50 10.7.81 86400 67467.50 Fibre Dealers Ltd. 18.8.76 Bhagatpur Tea 1448 145562.50 " 21720 123842.50 Co. Ltd. 23.6.86 Jokai India 21850 595486.50 " 447925 147551.50 Ltd. 556045 338861.50 All the aforesaid sales were made by the company with the Chairman of the assessee company, Sri R.L.Kanoria. The Assessing Officer disallowed the assessee's claim on the following grounds:- (i) Within 66 days i.e. on 14.9.81, the assessee company repurchased all the shares of Jokai India Ltd. for a sum of Rs. 3,82,375. (ii) On scruitiny of the bank statement of both assessee company and Shri R.L.Kanoria, it transpires that on 10.7.81 the assessee company issued a cheque for a sum of Rs.5,56,000 to Shri R.L.Kanoria when the assessee company had only Rs. 999.37 in their credit balance. (iii) On the same date Shri R.L. Kanoria issued a cheque for Rs. 6,56,046 to the assessee company to purchase the above noted shares when Shri R.L.Kanoria had only Rs. 434.53 in Bank Account for disposal. Both the assessee company and Shri R.L.Kanoria had their account with United Commercial Bank at 2, India Exchange Place, Calcutta and neither actual transfer of money took place nor the transfer had any source to purchase the shares. (iv) While re-purchasing the shares of Jokai India Ltd. again Shri R.L.Kanoria issued a cheque for Rs. 3,82,000 to the assessee company and the assessee company issued a cheque for Rs. 3,82,375 for re-purchase. Here also the parties had only petty balance in their Bank Accounts and had no money for such transaction. From above facts the Assessing Officer held that no real business transaction between the assessee company and Shri R.L.Kanoria took place and the loss shown in the accounts was nothing but an eye-wash. Moreover, the Assessing Officer found that the transactions were not effected through any recognised broker, when no private dealing of listed share within 10 kms. of the place where Stock Exchange being situated were permissible and were void under the Seruity Contracts (Regulation) Act, 1956. 2. The loans taken by the company from Shri R.L.Kanoria and the payments made by the assessee are as follows:- The assessee took following loans for Shri Kanoria: vir7.htm 4. Against the above loan receipt the assessee made following payments immediately after the receipt: Rs. 13.4.81 By clearing 5525.53 8.6.81 " " 200000.00 23.6.81 " " 100165.00 21.7.81 " " 1081.00 14.9.81 By transfer 3,82,375 30.9.81 " " 1,000 3. C.I.T. (Appeal) after considering the facts of this case confirmed the order of I.T.O. inter alia for the following reasons:- On the facts of the case, the shares transactions with the Chairman Shri R.L.Kanoria do not appear to be a genuine tranactions.They appear to have been entered into with the object of reducing the appellant's liability to tax as per a scheme of tax planning or tax avoidance.;