T JAYACHANDRAN Vs. DEPUTY COMMISSIONER

JUDGEMENT

(1.) The assessee has preferred Tax Case (Appeals) Nos. 366 to 368 of 2005 as against the order of the Income Tax Appellate Tribunal, raising the following substantial questions of law:

(2.) It is seen from the facts herein that in the course of the assessment proceedings for the assessment year 1991-92, the assessee was asked to submit the report on the types of security transactions done by the assessee, the transactions made in securities, profit and loss accounts for each head of income, transactions in shares and debentures where the assessee acted as a broker and transactions in shares and debentures where the assessee had acted on his own. Apart from that, details sought for also included the details of call money transactions and the brokerage received. The assessee accordingly submitted these details.

(3.) It is seen from the facts herein that one of the transactions undertaken by the assessee related to purchase of securities for and on behalf of Indian Bank. The facts herein were that the assessee herein acted as a broker for Indian Bank in purchasing securities at a particular rate quoted by the Bank and selling them to Indian Bank. Bank of Madura was the routing bank through which the securities were purchased and sold to Indian Bank, for which, Bank of Madura charged service charges. In respect of the transactions done on behalf of Indian Bank, the assessee was paid certain commission. On enquiry with Bank of Madura, it was found that the assessee had directed them to buy the securities at a particular rate from banks or financial institutions and sell the same only to Indian Bank at a particular price. Under instructions from the Indian Bank, a portion of the amount realised from the security transactions carried on behalf of Indian Bank was paid as by way of additional interest to certain public sector undertakings on the deposits made with the Indian Bank. According to the assessee, his role was only that of a conduit for taking demand drafts in respect of additional interests payable to the public sector undertakings and the "demand drafts taken" on behalf of the Indian Bank did not form part of the total income of the assessee. According to the Assessing Officer, this gave the assessee a profit of Rs. 16,74,79,420/-. According to the assessee, a sum of Rs. 15,17,44,653/- represented additional interest payable by Indian Bank to eight public sector undertakings who had made fixed deposits with Indian Bank. The assessee pointed out that a sum of Rs. 14,78,91,000/-, in fact, did not belong to the assessee and they, in fact, represented money belonging to Indian Bank, which were utilised for the purpose of taking demand drafts in favour of eight public sector undertakings, namely towards additional interest payable by Indian Bank on the deposits kept by the public sector undertakings; the details were as follows: