Commissioner Of Income-Tax v. Basant Investment Corporation

(1) BY this reference application, the following questions are referred to us for our opinion :

"1. Whether the finding of the Tribunal that the transactions resulting in a loss of Rs. 17,50,071 were genuine is based on any relevant material or arbitrary ?

(2) WHETHER, on the facts and in the circumstances of the case, the Tribunal was justified in law in not holding that the alleged loss of Rs. 17,56,071 was nothing but a cocked up affairs to reduce the total income of the assessee and as such is not allowable ?"

2. The assessee, Basant Investment Corporation, claimed loss of Rs. 17,56,071 in purchase and sale of jute. The Assessing Officer found that originally the assessee has shown purchase of raw jute from Rohini Trader and Exporters Ltd. at Rs. 83,17,141. But, subsequently, it was stated by the assessee that the jute was purchased from four parties, viz. , (1) Rohini Trader and Exporters Ltd. Rs. 25,72,048. 07 ; (2) Senilis Trading Syndicate Ltd. Rs. 23,39,553. 48 ; (3) Olympic General Trading Limited Rs. 26,44,721. 06 and (4) Adarsh Commercial Co. Limited Rs. 7,60,818. 91, totalling to Rs. 83,17,141. 52 and sold it to the Dalhousie Jute Company Limited for Rs. 65,61,071 and thereby suffered a net loss of Rs. 17,56,071 on account of transaction in jute. During the course of assessment, the Income-tax Officer has examined these four parties, viz. , (1) Rohini Traders and Exporters Ltd. ; (2) Senilis Trading Syndicate Ltd. , (3) Olympic General Trading Limited, (4) Adarsh Commercial Co. Limited, and by examining all the books of account of these four parties, the Income-tax Officer found some discrepancies, such as, when in the seller's books, quantity of jute was not found to the extent those sellers sold it to the assessee and in the seller's book, the Income-tax Officer further found that sellers have not maintained day-to-day account of the purchase and sale. Even in the purchase and sale register, the sellers have not shown the details of stock, the Income-tax Officer also pointed out that the selling party has no godown to store such huge quantity of jute and he did not believe the transaction entered into by the assessee with the aforesaid four parties and ho disallowed the claim of the assessee on account of loss in jute transactions with these four parties. Being aggrieved, the assessee carried the matter in appeal before the Commissioner (Appeals). The Commissioner (Appeals) has found the loss, as well as transactions in jute genuine and gave the finding in paragraph 8 of his order. The relevant portion of paragraph 8 of the Commissioner of Income-tax (Appeals) order is set out hereunder :

"i have considered the facts and circumstances of this case. I have also looked into the evidences produced by the appellant before the Income-tax Officer. There is no doubt that the raw jute was actually sold and delivered to Dalhousie Jute Co. Ltd. The appellant-firm purchased such raw jute from four different sellers. All purchase and sale transactions of the appellant-firm are evidenced by contract notes, bills and vouchers and these transactions have been corroborated by the four seller companies as well as the said Dalhousie Jute Co. Ltd, The explanation given by counsel appearing on behasf of the appellant-firm in regard to the qualitywise difference is very clear. There is absolutely no difference between the total quantity of purchases made and what was ultimately sold. It appears that the Income-tax Officer has not really appreciated the explanation given by the appellant-firm which appears to me to be quite convincing."

(3) THE Revenue preferred an appeal before the Tribunal. The Tribunal also considered the entire material oh record and concurred with the finding of the Commissioner of Income-tax (Appeals) that the transactions in question is genuine and the assessee suffered loss in that transaction to the tune of Rs, 17,56,071. The concluding paragraphs of the Tribunal are paragraphs 14 and 15, which read as under :

"we have considered the submissions of both the parties with reference to the papers filed during the course of hearing and are inclined to agree with the learned authorised representative of the assessee that the loss suffered by the assessee is genuine. There is no doubt that the raw jute was actually sold and delivered to Dalhousie Jute Co. Ltd. The asses-see-company purchased such raw jute from four different sellers who confirmed their transactions with the assessee in response to summons under Section 131 issued by the Income-tax Officer. All purchase and sale transactions of the assessee-firm are evidenced by contract notes, bills and vouchers. The explanation given by the authorised representative in regard to the qualitywise difference is very clear. There is absolutely no difference between the total quantity of purchases made and that was ultimately sold. It appears that the Income-tax Officer has not really appreciated the explanation given by the assessee which appeared to us to be quite convincing and acceptable. Similar is the position as regards the explanation of the assessee regarding absence of date of receipt on the receipted challans endorsed by the Dalhousie Jute Co. Ltd. and discrepancy in dates and outstanding amounts on account of receipts of payments by the assessee-firm from the Dalhousie Jute Co. Ltd. We also hold that the other allegations made by the Income-tax Officer are fully explained by the assessee-company and apart from mere suspicion, surmises and conjectures, there appears to be no valid ground for treating the loss suffered by the assessee in purchase and sale of raw jute. The transactions of purchases and sales made by the assessee-company cannot be disbelieved merely on suspicion, surmises and conjectures, particularly when the transactions are fully corroborated and confirmed by both the earlier and ultimate buyer and these are also evidenced by the books of account of the concerned parties. All the transactions have also taken place by account payee cheques through banks. In view of the facts and circumstances stated above, we uphold the order of the Commis- sioner of Income-tax (Appeals) in directing the Income-tax. Officer to allow the loss in the business of purchases and sales of raw jute."

(4) IT is true that some discrepancies are found by the Income-tax Officer on scrutiny of the books of account of the four sellers in question, but if the books are not properly maintained by those sellers how can the asses-see be punished for their mistake--there is no justification to punish the assessee for the mistake of the sellers. The assessee is concerned only with the goods purchased--whether the goods are supplied to the assessee or not and whether the amount has been paid by the assessee for the goods. The concurrent finding of the Commissioner of Income-tax (Appeals) as well as the Tribunal is that the transaction is genuine and the assessee suffered the loss. Whether" the transaction is genuine or not--that is basically a question of fact, and, on the given materials, it cannot be said that the finding is perverse. Assuming on the materials that some other conclusion may also be possible, on that ground, it cannot be said that the finding given by the Commissioner of Income-tax (Appeals) as well as the Tribunal is perverse. When the finding of fact is not perverse, this court should not interfere with the question which is based on the finding of fact.

(5) CONSEQUENTLY, we hold that no case is made out to interfere in the concurrent finding of the Commissioner of Income-tax (Appeals) and the Tribunal regarding genuineness of loss.

(6) ACCORDINGLY, we answer question No. 1, i. e. , whether the finding of the Tribunal is based on the materials on record, is in the affirmative and in favour of the assessee and against the Revenue.

(7) QUESTION No. 2 pertains to whether the Tribunal was justified in law in not holding that the alleged loss of Rs. 17,56,071 was nothing but cooked up affairs to reduce the total income of the assessed. We answer this question also in the affirmative and in favour of the assessee and against the Revenue.