KAILASHCHANDRA TEJPAL Vs. COMMISSIONER OF INCOME-TAX

JUDGEMENT

(1.) THIS reference has been made by the Income-tax Appellate Tribunal, Bombay, pursuant to two orders passed by this Court on applications made by the assessee kailashchandra Tejpal under Section 66 (2) of the Indian Income-tax Act, 1922, requiring the Tribunal to state the case and refer to this Court certain questions arising out of two orders of the Tribunal disposing of appeals arising out of assessment proceedings against the assessee for the assessment years 1954-55 and 1956-57. As the facts are common, the Tribunal has made a consolidated reference. The questions of law, which the Tribunal was directed to refer to this court for the assessment year 1964-55 are-

(2.) IN the income-tax assessment for the year 1984-55 the assessee claimed Rs. 8,506 as loss on sales in trade of eighty shares of Hukumchand Mills Ltd. , Indore. Similarly he claimed Rs. 12, 500 as loss on sales in trade of 120 shares of the said mills for the assessment year 1966-57. The Income-tax Officer disallowed the loss because in his view the books of account produced before him were not genuine and could not be relied upon and it was not possible to verify whether the assessee suffered the loss. The Appellate Assistant Commissioner upheld the orders of the Income-tax Officer disallowing the assessee's claim on the ground that the shares were purchased and sold by the assessee by way of capital investment and as the assessee was interested in the management of Malwa Mills ltd. and Hukumchand Mills Ltd. and had a share in the managing agency commission of both these Mills, therefore, the loss suffered by him on account of the sale of shares could not be allowed as a trading loss. The Tribunal confirmed the orders of the Appellate Assistant Commissioner disallowing the loss claimed by the assessee in the assessment proceedings for the aforesaid two years.

(3.) THE facts, as found by the Tribunal, are that the assessee carried on forward business in several commodities, such as cotton, bullion, shares etc. He also derived income as a partner in a firm known as Sheonandrai Tejpal and from the managing agency of the Hukumchand Mills Ltd. On the basis of a statement given by the assessee himself showing his transactions of purchase and sale of shares of hukumchand Mills Ltd. , the Tribunal found that the assessee purchased 31 shares of the said Mills on 29th July 1948 at Rs. 658 per share and sold on 9th December 1948 sixteen shares at Rs. 569 per share. The loss incurred in the sale of sixteen shares amounting to Rs. 1,424 was allowed in the income-tax assessment for the assessment year 1950-51. On 26th July 1949 the assessee purchased 85 shares of the Mills at Rs. 425 per share and at the end of S. Y. 2005 he had 100 shares of hukumchand Mills Ltd. on hand. Sometime in 1960 these 100 shares were converted into 300 shares at the rate of three new shares for every one old share and the assessee continued to hold these 300 shares till the accounting year S. Y. 2009 when on 7th December 1952 he sold 100 out of these 800 shares privately to one Gayaprasad. The assessee led no evidence before the Tribunal to show that the sale was at the market rate. He also did not claim in the course of the relevant assessment proceedings the loss said to be incurred by him on account of these 100 shares. The balance of 200 shares was carried forward to the following S. Y. 2010. In that year 80 shares were sold on 30th March 1964 to one Motilal, and according to the assessee he incurred a loss of Rs. 8,660 in the sale of these shares. It is this amount which the assessee claimed as loss in the assessment for the year 1954-65. The remaining 120 shares were carried forward and sold in one lot in S. Y. 2011 to one Jankibai. The loss on account of the sale of these shares amounting to Rs. 12,600 was claimed by the assessee as trading loss in the assessment year 1956-57.