SRIPAL SATYAPAL Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) THIS appeal is directed against the order of Tribunal, Jodhpur Bench, Jodhpur dt. 14th May, 2002 relating to the asst. yr. 1990 -91. The substantial question of law framed at the time of appeal dt. 4th Sept., 2002 reads as under: Whether the Tribunal was justified in disallowing the claim for set off of business loss of Rs. 2,54,068 in the hands of the appellant by applying Section 43(5) of the IT Act, 1961 and treating the same as speculative loss merely for the reason that transportation charges were not shown to be paid by the appellant ?

(2.) THE facts necessary for the present purpose are that the assessee is cotton merchant and carries on business of purchase and sale of cotton bales. In the previous year relevant to asst. yr. 1990 -91 that is to say for the accounting period ending on 31st March, 1990 amongst other 22 transactions of cotton bales took place which were held by the AO to be speculative transactions. Profit and loss arising therefrom were held to be speculative profit or speculative loss to be treated accordingly under the provisions of IT Act, 1961. For treating the said transaction to be speculative reliance was placed by the AO on Section 43(5) of the Act of 1961 which provides that any transaction of sale and purchase of goods, if is settled on due date or otherwise in any manner otherwise than by actual delivery of the goods is to be treated a speculative transaction and profit or loss arising out of such transaction is to be considered the speculative profit or speculative loss. The other facts which are necessary for the present purpose are that out of 22 transactions, 14 transactions related to the purchase of certain cotton bales through M/s Jairamdas Lokesh Kumar, commission agent. The physical goods in existence were belonging to M/s Ramchandra Jagdish Prasad, the firm situated at Shri Vijaynagar District Sri Ganganagar and were lying in his godowns. On the very same date the said cotton bales were sold by the assessee through the same commission agent on 22nd June, 1989. The purchase of cotton bales was stated to have been made in March, 1989. The sale of the cotton bales purchased through M/s Jairam Das Lokesh Kumar was made to M/s Om Prakash Vimal Kumar who was acting as commission agent for the real purchaser M/s Oswal Cotton Company at Vijaynagar District Ajmer.

(3.) THE facts leading to the present appeal are that the assessee appellant is a cotton merchant having his place of business at Sri Ganganagar. During the previous year relevant to the asst. yr. 1990 -91 with which we are concerned the assessee had made total sales of Rs. 3,09,45,481 which included sales of Rs. 39,19,621.51 in which vouchers of purchases and sales were of the same date respectively. Such transactions numbered in 22. In these transactions the assessee had suffered a loss of Rs. 2,54,638. The AO was of the opinion that this loss was a speculative loss as actual delivery of goods was not taken in these transactions.