VASANT GORDHANDAS Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) PETITIONER is an assessee to income tax on the file of the second respondent. The assessment of the petitioner for the year 1991-92 (previous year ended 31. 3. 1990) was completed as per order dated 18. 3. 1996 (Exhibit P1 ). Against the said order, the petitioner filed a revision (Exhibit p2) under Section 264 of the Income-tax Act before the first respondent. The grievance of the petitioner is that the said respondent did not consider the matter with reference to the contentions taken in the revision and passed an order dated 11. 11. 1997 (Exhibit P3) rejecting the revision. Learned counsel appearing for the petitioner submits that the petitioner is engaged in certain business activities as well as a member of the Cochin Stock Exchange. Counsel submits that in the assessment the petitioner contended that he had suffered a loss to the tune of Rs. 2 lakhs from the business but the second respondent without any justification had treated a sum of Rs. 1,00,000/- as the loss on speculation of business along with a sum of rs. 10,000/- as expenditure for the same. Counsel submits that the petitioner had maintained books of accounts with respect to his business from which it can be easily found that the loss was on account of trading business. Counsel further submits that the second respondent instead of verifying the books and accounts while completing the assessment had proposed to disallow a sum of rs. 1,00,000/- as loss on speculation along with a sum of Rs. 10,000/- as expenditure and he had acted on the basis of the proposal stating that the petitioner had agreed to the said addition. Counsel submits that in fact the petitioner had to agree for the addition only for the reason that the second respondent has threatened the petitioner with prosecution steps, if the petitioner did not agree to such addition. Counsel submits that in spite of the fact that the petitioner had stated the aforesaid circumstance before the first respondent in the revision petition and there is no due consideration of the same in Exhibit P3 order. Counsel further submits that in the instant case there was absolutely no justification for disallowing any portion of the loss as loss on speculation. Counsel also took me to the provisions of Explanation 2 to Section 28 of the Act which provides that speculation business is different from other business and also to Section 43 (5) and proviso (b) & (c) thereto regarding the definition of speculative transactions and submits that the petitioner's case would not fall under such speculative transaction. In short the submission of the counsel is that the petitioner did not conduct any speculation business at all.

(2.) SHRI George K. George, learned Standing Counsel government of India (Taxes), on the other hand, submits that there is no scope for a revision at all having regard to the fact that the petitioner had voluntarily agreed for an addition of Rs. 1,00,000/- as loss on speculation business and Rs. 10,000/- towards the expenditure for the same and that the assessing Authority had completed the assessment solely on the basis of the said agreement. Standing Counsel Further submits that the Commissioner of income-tax has also rejected the revision for that reason and there is absolutely no scope for interference by this Court in this proceedings. Standing Counsel pointed out that the second respondent had directed the petitioner to show separately the trading loss as well as the speculation loss with reference to the books of accounts maintained by him and that it is only in the circumstance that the petitioner has not chosen to do so, the question of estimation has arisen and the assessment was completed in the manner stated above.