ORDERBusiness loss--Allowability Catch Note:
The assessee was carrying on business in agricultural products like mustard, groundnut, wheat, gram, etc.--It was also engaged in the business of extraction of oil from mustard seeds and groundnut seeds--During the year under consideration it had claimed a loss of Rs. 58,181 alleged to have been suffered by it in the purchase and sale of tobacco through B and K who carried on business at Cooach Bihar--The case of the assessee was that the said parties acted as commission agents of the assessee for the purchase and sale of tobacco and the assessee suffered losses amounting to Rs. 28,167.50 and Rs. 30,014--The assessee's claim of the said losses was investigated by the assessing officer who found that the losses were not genuine and disallowed the same--On appeal, the Appellate Assistant Commissioner took a different view and allowed the assessee's claim--The Commissioner then approached the Tribunal in the aforesaid second appeal and the Tribunal after a very detailed examination of the facts and circumstances of the case, concluded that it was not proved that the assessee entered into any transaction through the said parties and suffered losses--Therefore, the Tribunal reversed the findings of the first appellate authority and restored the order passed by the assessing officer--The assessee's application under section 256(1) having been dismissed, it approached this court and the Tribunal was directed to state a case and refer the question, for the opinion of this court--The Tribunal's finding of fact is based on the material on record and cannot be said to suffer from any legal defect, therefore, in the circumstances of the case, the reference is answered by saying that the question does not arise out of order of the Tribunal.
Held:
As is evident, the question assumes that the Tribunal has held that the assessee suffered losses amounting to Rs. 56,181. This assumption is wrong as the Tribunal had nowhere held that the assessee suffered the alleged losses.
The Tribunal's finding, was that the assessee was not proved to have carried on any business through the said commission agents and did not suffer the losses. Therefore, the question, as referred by the Tribunal for the opinion of this court, does not arise out of the order of the Tribunal.
Whether the assessee suffered the aforesaid losses is a pure question of fact. Although learned counsel for the assessee took us through the three orders of the authorities below at great length to support his contention that the finding of the Tribunal is not sustainable, the court finds that the finding of fact is based on the material on record and cannot be said to suffer from any legal defect. Therefore, there would be no justification for reframing or modifying the question.
In the result, the reference is answered by saying that the question, does not arise out of the order of the Tribunal.
Application:
Also to current assessment year.
Decision:
In favour of revenue.
Income Tax Act 1961 s.256(2) JUDGMENT
1. In compliance with the directions of this court under Section 256(2) of the Income-tax Act, 1961, the Income-tax Appellate Tribunal, Allahabad, has stated a case and referred the following question stated to be of law and to arise out of the Tribunal's order dated January 21, 1978, passed in ITA No. 516 (Alld.) of 1976-77 for the assessment year 1973-74 for the opinion of this court :
"Whether the Tribunal was legally correct to hold that the losses of Rs. 58,181 suffered by the assessee were not allowable deductions ?"
2. We have heard Sri V.K. Upadhya, learned counsel for the assessee, at whose instance this reference has been made, and Sri A.N. Mahajan, learned standing counsel for the Commissioner-respondent.
3. The assessee was carrying on business in agricultural products like mustard, groundnut, wheat, gram, etc. It was also engaged in the business of extraction of oil from mustard seeds and groundnut seeds. During the year under consideration it had claimed a loss of Rs. 58,181 alleged to have been suffered by it in the purchase and sale of tobacco through Bherudan Hardeo Chand and Kishan Lal Bhagirath who carried on business at Cooach Bihar. The case of the assessee was that the said parties acted as commission agents of the assessee for the purchase and sale of tobacco and the assessee suffered losses amounting to Rs. 28,167.50 and Rs. 30,014.
4. The assessee's claim of the said losses was investigated by the Assessing Officer who found that the losses were not genuine and disallowed the same. On appeal, the Appellate Assistant Commissioner took a different view and allowed the assessee's claim. The Commissioner then approached the Tribunal in the aforesaid second appeal and the Tribunal after a very detailed examination of the facts and circumstances of the case, concluded that it was not proved that the assessee entered into any transaction through the said parties and suffered losses. Therefore, the Tribunal reversed the findings of the first appellate authority and restored the order passed by the Assessing Officer.
5. The assessee's application under Section 256(1) having been dismissed, it approached this court and the Tribunal was directed to state a case and refer the question, as stated above, for the opinion of this court.
6. We have heard learned counsel for the parties at substantial length. As is evident, the question assumes that the Tribunal has held that the assessee suffered losses amounting to Rs. 56,181. This assumption is wrong as the Tribunal had nowhere held that the assessee suffered the alleged losses. For facility of reference we reproduce the Tribunal's conclusion with regard to the aforesaid losses as under :
"25. What is the motivation for transferring of the said loss from the books of Kishan Lal Bhagirath to the books of the assessee is not for us to speculate. There could be a hundred and one reasons for it. For the purposes of the disposal of this appeal, it is not necessary for us to go into it, for this appeal has to be determined on the basis of the evidence, which the two sides have placed on record, and as we have already noted, there is no contemporaneous evidence whatsoever to show that Kishan Lal Bhagirath entered into the transactions for and on behalf of the assessee. The entries which the assessee should have made in its books in conformity with the case set up by it have also not been made. The action of the Income-tax Officer, therefore, in rejecting these losses as not pertaining' to the assessee was, in our opinion, correct.
We have already seen that the assessee's books contained no details whatsoever of the aforesaid transaction in the business of tobacco. The said transactions have been made in the books of Bherudan Hardeo Chand and Kishan Lal Bhagirath and it is only towards the end of the year that the resultant losses have been transferred to the books of the assessee-firm by way of adjustment entries. A mere adjustment entry, as pointed out above, would not make transactions of another the transactions of the assessee. In our opinion, the learned Appellate Assistant Commissioner had clearly erred in, not appreciating the facts of this case properly ; he had approached the matter in a rather abstract and theoretical manner without due reference to the facts as brought on record by the Income-tax Officer and by himself."
7. The Tribunal's finding, thus, was that the assessee was not proved to have carried on any business through the said commission agents and did not suffer the losses. Therefore, the question, as referred by the Tribunal for the opinion of this court, does not arise out of the order of the Tribunal.
8. Whether the assessee suffered the aforesaid losses is a pure question of fact. Although learned counsel for the assessee took us through the three orders of the authorities below at great length to support his contention that the finding of the Tribunal is not sustainable, we find that the finding of fact is based on the material on record and cannot be said to suffer from any legal defect. Therefore, there would be no justification for reframing or modifying the question.
9. In the result, the reference is answered by saying that the question, reproduced above, does not arise out of the order of the Tribunal.