TMI Blog1991 (5) TMI 124X X X X Extracts X X X X X X X X Extracts X X X X ..... as business carried on by the assessee through the stock broker M/s Bharat Bhushan Co. The ITO found that shares worth Rs. 15,16,506 were purchased on different dates and shares worth Rs. 12,43,058 were sold and thereby the loss in question was suffered by the assessee. The assessee filed the copy of the account of M/s Bharat Bhushan Co. in its account books. The ITO took the view that the sum of Rs. 15,16,506 was not paid by the assessee to M/s Bharat Bhushan Co., Delhi and that only the difference between the purchase price and the sale price representing the loss in question was paid to M/s Bharat Bhushan Co. He also noticed that the transaction for the purchase of shares of M/s Rathi Alloys was entered into on 11th Aug., 1981 and the amount of these shares was debited to the assessee's account only on 8th January, 1982. He also observed that as per this voucher it was not clear as to whether the delivery of the shares actually purchased was given to the assessee or not. The ITO also observed that the shares purchased were not transferred in the name of the assessee and no dividends had been received by the assessee. The ITO, therefore, took the view that the loss claime ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as a revenue loss or a capital loss. Reliance was placed on behalf of the department on the following decisions : (i) Davenport Co. (P.) Ltd. v. CIT [1975] 100 ITR 715 (SC) ; (ii) Nirmal Trading Co. v. CIT [1980] 121 ITR 54 (SC) ; (iii) Swadeshi Cotton Mills Co. Ltd. v. CIT [1989] 180 ITR 651 (All.) ; (iv) CIT v. Ganesh Das Ram Swaroop Kakani [1990] 181 ITR 93 (Raj.). The learned Departmental Representative also drew our attention to a DO letter No. 2155, dated 28th February, 1985 by the IAC to the ITO, A Ward, Churu during the assessment proceedings for the assessment year in question, which was to the following effect : " The assessee has declared an income of Rs. 89,914 for the assessment year 1982-83. I find that in Delhi branch assessee claimed a loss of Rs. 2,73,053 in share account. The normal business of the assessee is that of dealings in white cement and metal paint. During the account period the assessee, however, purchased shares of various companies for Rs. 15,16,506 through M/s Bharat Bhushan Co. share broker and sold the same during the account period for Rs. 12,43,453 through the same share broker thereby incurring a loss of Rs. 2,73,053. 2. The following in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITO for the assessment year 1981-82 as well as for 1982-83 was the same and he could not purport to take a different view. In this connection reference was made by him to the following decisions : (i) CIT v. Dalmia Dadri Cement Ltd. [1970] 77 ITR 410 (Punj. Har.), (ii) CIT v. Belpahar Refractories Ltd. [1981] 128 ITR 610 (Ori.) and (iii) CIT v. Manaklal Porwal [1986] 160 ITR 243 (Raj.). Reference was also made to the decision of the Calcutta High Court in CIT v. Jessop Co. Ltd. [1989] 79 CTR (Cal.) 246. He submitted that the decision of the Rasthan High Court in the case of Ganesh Ram Swaroop Kakani was not applicable on facts. He pointed out that in the case of Smt. Manaben Bipinbhai v. ITR [1988] SOT 1.739 (Ahd.) the facts were very much similar and the Tribunal had held that the ITO could not change his mind and not treat the sale of shares as business income and treat it as capital gain. Referring to the letter dated 28th February, 1985 of the IAC to the ITO, Shri Gupta submitted that firstly this letter constituted an inter-departmental communication and secondly its copy had not been given to the assessee and in any case the considerations mentioned in that letter did not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erwise legal but gives a special meaning to that expression for the purposes of income-tax. In the case of Nirmal Trading Co. the Supreme Court found that the transactions were settled by handing over delivery orders and payments by cheque. On those facts it was held that there was no evidence that actual delivery of the goods was ever effected either to the appellant or to subsequent purchasers from the appellants. In the case of Swadeshi Cotton Mills Co. Ltd. the Allahabad High Court was considering the case where admittedly the assessee was not a dealer in shares and securities and it is on those facts that it was held that the loss suffered by the assessee on the sale of securities was not deductible as a business loss. In the case of Ganesh Ram Swaroop Kakani a transaction wherein the assessee paid money instead of taking delivery of the commodity was held to be speculative and it was further held that in terms of section 43(5), such a loss was not deductible as a business loss. 6. A perusal of the partnership deed dated 17th April, 1978 shows that though the business of the assessee firm was to be mainly that of purchase and sale of cement and commission agency, the partner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f all material evidence had been considered in the earlier decision. In the case of Belpahar Refractories Ltd. it was held by the Orissa High Court that even though rejudicata is not applicable in the income-tax proceedings, the earlier decision on the same question cannot be reopened if the basic facts of the case are the same as on the earlier occasion. It is in this context that the jurisdictional High Court of Rajasthan had held in the case of Manaklal Porwal that if additional evidence had been produced, which warranted a conclusion different from that arrived at earlier, the previous findings could be departed from. Ahmedabad Bench 'C' of the Tribunal in the case of Smt. Manaben Bipinbhai found that the assessee was recognised by the ITO as the sole proprietor of the concern dealing in sale and purchase of shares in two assessment years and its income was assessed as business income, but in the third assessment year the ITO changed his mind and brought the assessee's income to tax under capital gains. It was held that the ITO's action could not be sustained. In the letter dated 7th February, 1985 (copy at pages 134 135) the assessee wrote to the ITO that the assessee had al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ares (with this aspect we will deal a little later) the broker issued the purchase vouchers. In the purchase vouchers the dates of the contract notes had also been given. The delivery of the shares had been received through purchase vouchers from the broker on 8th January, 1982 and on the same day the share account had also been debited and credited to the account of the broker. This objection of the ITO was, therefore, rightly not accepted by the learned Commissioner(A). The ITO had also raised an objection that only the number of shares had been given in the purchase vouchers. However, we find that in the purchase voucher the names of the parties to whom the shares who sold, the date of issuing, the date of transaction, description regarding name of the company, number of shares, their distinctive numbers, rate and total amounts of shares is mentioned. The date of transactions was that on which the contract note was issued by the broker. Therefore, this observation of the ITO also does not militate against the case of the assessee. 9. Another objection raised was that shares were not transferred in the name of the assessee. In the purchase vouchers, the following note was not a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uantity, names of the companies from whom shares were purchased, distinctive numbers, rate and the total amount. The assessee had also received letter dated 20th January, 1982 and 21st February, 1982 (pages 113 and 115 of the paper book) from the broker in which it had been mentioned that the shares had been delivered. Reference may be made to the letter dated 21st February, 1982 which the broker wrote to the assessee that they had delivered shares against the assessee's purchases vide contract numbers mentioned therein and that cheques may be given against the above deliveries. In reply to the letter dated 21st February, 1982, the assessee wrote on 21st March, 1982 (page 114 of the paper book) that the assessee was making early arrangements for the payment of the shares purchased by it. In the assessment order the ITO had only entertained a doubt whether actual delivery was made. There is no categoric finding. In the letter dated 21st February, 1982, the share broker wrote to the assessee for payment and the assessee wrote on 25th February, 1982 (page 116) that at that time it could not make immediate arrangement for the payment of the shares purchased by it and that since the rat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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