COMMISSIONER OF INCOME TAX Vs. KUNDAN INVESTMENT LTD

JUDGEMENT

(1.) In this reference, three questions have since been referred to viz. :

(2.) From the above questions, it appears that there are two parts in this case. One part relates to the subscription to share capital and the other part relates to loss in share transaction. So far the capital part is concerned, the same can be divided into two parts. One in respect of promoters' quota and the other in respect of public issue. Loss of share : Question No. 3

(3.) We may deal with the loss in share transaction first. The grounds disallowing share loss by the AO affirmed by the CIT(A) were those that out of the four blocks of shares delivery of three blocks were received after five months and the price was also paid after five months, but were immediately sold at a loss. The other grounds were that the share broker only in respect of one group was produced but the other share brokers did not appear despite notice. The books of accounts of the share broker, who appeared, also show some discrepancies in the entries made. On these grounds this transaction was held to be ingenuine. Whereas the Tribunal had found that all relevant documents relating to contract notes, bills, the quoted price and other materials were produced. The transactions were made through cheques. All the shares related to the reputed companies and were quoted shares in the stock exchanges and were purchased and sold at the prevalent quoted market rates, which was verified from the statement of the stock exchanges. On these basis, the learned Tribunal found that the CIT(A) had proceeded on the basis of suspicion that there might be some ingenuinity in the transactions. On the basis of the materials produced, the learned Tribunal came to a finding of fact, which in our view does not seem to be perverse. Whether the share could be sold immediately on the date of purchase or not was a question of business expedience. Whether the decision was correct or wrong cannot be a question, which can be a subject-matter of decision in such a case. In order to find out whether the transaction is genuine or ingenuine, it is neither the expedience or correctness of the decision nor the business expertise of the person to be considered. It is to be considered on the basis of the materials that there was no such transaction and that these share transactions were paper transactions. The suffering of loss could not be a factor for such purpose.