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TMI Blog1985 (7) TMI 132X X X X Extracts X X X X X X X X Extracts X X X X ..... . . . Rs. 4,22,103 . . . . Sales Date Bales No. Name of the Party Amount 24th March 1981 18068 to M/s. Friends Cotton Co., Kothapura. Rs. 1,68,429 14th March, 1981 17968 to 18067 M/s. Sant Singh Kataria and Sons Rs. 1,88,698 . . . Rs. 3,57,127 3.1. In consequence of it, the ITO asked to prove the actual delivery of the goods to the assessee's counsel, Shri N. K. Bansal, Advocate on 6th May 1983 but no information was sent. Thus, the ITO issued notice for 19th May 1983 under s. 142 (1) of the IT Act, 1961 (herein-after referred to as "the Act" calling for the said information which notice was served on the ld. counsel for the assessee, who appeared on 9th May 1983 and stated that the information was not ready and, therefore, the case should be adjourned to 2nd June 1983. The ITO adjourned the case to 2nd June 1983 but nobody appeared and no explanation about the actual delivery of the goods was filed. 3.2 On account of it, the ITO observed that as is evident from the aforesaid date the purchase and sale has taken place in very brief period, that the accounts did not mention whether these goods were lifted from the alleged sellers and whether these were stoc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the single transaction could not be treated as speculative loss under the IT Act, holding therein in para 5 of his order that since, the assessee had never taken actual or physical delivery of the goods and had not given actual or physical delivery of the goods, the loss if any; arising out of the transactions of purchase and sale of 200 bales of cotton has to be treated as speculation loss under the provisions of s. 43(5) of the IT ACT, 1961. Reliance was placed on the decision of the Hon'ble Supreme Court in the case of Devan Port and Co. (P) Ltd. Regarding the alternative argument, he held that he did not agree with the assessee's counsel that the loss in question had arisen out of the single transaction, since in fact the purchases have been made by the assessee by two separate bills of 100 bales each and sales had also been made to different parties on two different dates. Thus, on these reasons, he upheld the ITO's action in treating the speculation loss arising out of the sale of 200 bales and thereby dismissed the appeal of the assessee on this issue. 5. The assessee being further aggrieved has preferred this appeal. Shir K. R. Jain, ld. counsel for the assessee con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rwise. For rebutting the alternative argument, the ld. Departmental Representative Shri Baldev Sahai has relied upon the order of the CIT (A) and in particular para 5 of his order. 6. We have heard the rival contentions and gone through the record before us. From the record, it is clear to us that the assessee on 11th March 1981 purchased 200 bales of cotton from M/s. Gopal Krishan Prem Nath, Kothapura for a sum of Rs. 2,10,317 (Bales Nos. 18068 to 18167) and for Rs. 2,11,787 (bales Nos. 17968 to 18067) aggregating to Rs. 4,22,103. They were sold to M/s. Friends Cotton Co., Kothapura (Bales No. 18068 to 18167) and to M/s. Sant Singh Kataria and Sons (Bales No. 17968 to 18067) on 24th March 1981 and 14th March 1981 respectively for a sum of Rs. 1,68,429 and Rs. 1,88,689 in toto for Rs. 3,57,127. The ITO on seeing the dates of purchases and sales came to conclusion that the purchases and sales were in short period. Therefore, he asked the assessee's counsel to prove the delivery of cotton purchased on 6th May 1983 but of no use Consequently, the ITO issued notice under s. 142 (1) for 19th May 1983 which was served and in response to it the ld. Counsel for the assessee appeared to s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d above. It is further proved from the fact that the plea of the assessee counsel is that when the goods were ultimately delivered by the purchaser to whom the assessee sold these, then there is actual delivery of the goods and therefore whoever has happened in between is immaterial. This argument, further, shows that the assessee did not at all had the delivery of the cotton bales from M/s. Gopal Krishan Prem Nath and neither he delivered these to M/s. Friends Cotton Co., Kotkapura and M/s. Sant Singh Kataria & Sons. It is further proves that the assessee did not make the delivery of the cotton bales as the assessee charged carriage charges. No doubt, on the basis of these, the ld. counsel for the assessee contends that when the assessee charged carriage charges which are for non-payment of consideration and non taking of the delivery of the goods, then it is proved that the assessee was having the goods in his custody. This argument of the assessee is not at all relevant. In view of the fact that there is no proof that the assessee actually had the delivery of goods from M/s. Gopal Krishan Prem Nath. Moreover, the finding of the CIT (A) are that the last purchaser of cotton bales ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise speculative would not be a speculative transaction within the meaning of Explanation 2 if actual delivery of the commodity or the scrips has taken place on the other, hand, a transaction which is not otherwise speculative in nature may yet be speculative according to Explanation 2 if there is no actual delivery of the commodity of the scripts. The Explanation does not invalidate speculative transaction which are otherwise legal but gives a special meaning to that expression for purpose of income-tax only". Thus, from the above finding of the Hon'ble Supreme Court it is manifest that a transaction is speculative, if in transaction the delivery of goods purchased is not made and taken and the delivery of goods must be actual and physical, it means the purchaser should take physical, possession of the goods purchase, while the seller should deliver these physically to the purchaser in each sale or transaction. 7.2 In the case of Raghunath Prasad Poddar vs. CIT Calcutta 1973 CTR (SC) 359 : (1973) 90 ITR 140 (SC) their Lordships of Supreme Court relied upon the decision in the case of Duni Chand Kataria vs. Bhuwalka Bors. Ltd., which decision was overruled by their lordships of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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