N.K. Sud, J. - (1.) THE assessee vide this petition under Section 256(2) of the Income-tax Act, 1961 (for short "the Act"), seeks a direction to the Income-tax Appellate Tribunal, Amritsar Bench, Amritsar (for short "the Tribunal"), to draw up a statement of the case and refer the following questions of law for the opinion of this court: "(a) Whether, on the facts and in the circumstances of the case, the learned Tribunal was right in law, that failure on the part of the broker to furnish certain information, could be treated as failure on the part of the assessee ? (b) Whether, on the facts and in the circumstances of the case, the learned Tribunal was right in law, that where any transaction of shares, did not figure in the records of any stock exchange or in the company's office, could not be accepted as a genuine transaction ? (c) Whether, on the facts and in the circumstances of the case, there was any evidence or material to support the findings of the learned Tribunal that the loss suffered on sale of shares Rs. 70,075 was false claim ? (d) Whether the said conclusion was based on conjectures, surmises or suspicion and on a failure to consider relevant evidence in the record judiciously ?"
(2.) FOR the assessment year 1986-87, the assessee a partnership firm, had filed its return of income on July 10,1986, declaring an income of Rs. 55,356. During the course of assessment proceedings, the Income-tax Officer noticed that a sum of Rs. 70,075 had been debited to the profit and loss account on account of the loss suffered from purchase and sale of shares. It was claimed by the assessee that it had purchased 1,250 shares of Orkay Silk Mills Ltd., for Rs. 2,13,200 at Rs. 170.56 per share on October 25, 1985. These shares were sold on November 11, 1985, for Rs. 1,43,125. Thus the assessee suffered a loss of Rs. 70,075 in this transaction. It was further claimed that both, the purchase as well as the sale had been effected through the broker--Bharat Bhushan and Company, New Delhi, who operates from the Delhi Stock Exchange. Since the assessee had advanced a sum of Rs. 8,000 on October 17,1985, to the broker, a balance of Rs. 62,075 (Rs. 70,075-8,000) was sent to him through a bank draft. The assessee was called upon by the Assessing Officer to supply the details of the purchase and sale of shares and mode of placing orders for these transactions. The assessee was further required to prove that actual delivery of the shares was taken at the time of purchase. No such details were furnished by the assessee except copies of purchase and sale bills which were unnumbered and prepared on loose sheets. The Income-tax Officer, therefore, made inquiries from the broker, Bharat Bhushan and Co., who also failed to supply the names of the parties from whom the shares were purchased and to whom the shares were sold nor could it furnish the mode of placing the orders by the assessee. It also could not specify whether actual delivery was taken at the time of purchase or not. Not making a headway, the Income-tax Officer issued a letter to the Stock Exchange, New Delhi, calling for further information as to whether the transactions of sale and purchase of the shares had been registered there or not. He also made enquiries from Orkay Silk Mills Limited as to whether they had any information about the sale and purchase of shares in the name of the assessee. The transactions had neither been registered in the Stock Exchange nor in the books of the company. The Income-tax Officer was, therefore, of the opinion that no genuine transaction for sale and purchase of shares had been made and only accommodation bills had been got issued from the broker so as to reduce the income by making a claim of bogus loss of Rs. 70,075. The Income-tax Officer further observed that it was not possible to believe that a share broker delivered shares worth Rs. 2,13,000 to a stranger without receiving the consideration especially when the seller and purchaser were not even known to each other. He, therefore, disallowed the loss. The Income-tax Officer had also observed that even otherwise since no delivery of shares had been proved to have taken place at the time of purchase and no payment had been made in respect thereof, the transaction was speculative in nature as it had been settled on the basis of difference in sale and purchase value of the shares on the relevant dates. Since the bargain had been settled otherwise than by actual delivery of shares, the loss of Rs. 70,075 was in the nature of speculation loss and as such could not be set off against the business income.
(3.) AGGRIEVED by the order of the Income-tax Officer, the assessee preferred an appeal before the Commissioner of Income-tax (Appeals), Bathinda, which was dismissed on March 13, 1991. On further appeal by the assessee, the Tribunal upheld the findings of the Commissioner of Income-tax (Appeals) by observing as under : "We have considered the rival submissions and perused the orders. During the course of hearing, the Bench raised queries to learned counsel for the assessee about three points indicated by the learned Commissioner of Income-tax (Appeals) as well as the Assessing Officer. The first point was as to why the alleged broker, Bharat Bhushan and Co., could not give the names of the parties from whom the shares were purchased or to whom these were subsequently sold. Learned counsel replied that it was the fault on the part of that broker for which the assessee should not be punished. This explanation is not accepted as the broker was working as an agent of the assessee and whatever was expected by the assessee was supposed to be done by such agent which has failed and this failure can easily be treated as failure on the part of the assessee and rightly treated so by the learned authorities below. Not only this, the transaction did not figure anywhere in the Delhi Stock Exchange as confirmed by the Stock Exchange vide letter No. 2087/Government dated March 1,1988, and the assessee's name did not figure even in the company's office. Lastly, bye-laws regarding delivery and payment has not been observed as noted by the Assessing Officer. This inference remained unexplained and thus the authorities below were justified in treating the transaction as not genuine particularly keeping in view the fact that the assessee, who was earning income below Rs. 50,000 and earned more than Rs. 1 lakh in this year and must be looking to reduce the income earned as this was one of the modes to come forward with a false claim. On the basis of the above discussion, the appeal has no force. The appeal is dismissed.";