Gauhati High Court
Commissioner Of Income-Tax vs Bihariji Construction (India) Ltd. on 27 November, 2006
Equivalent citations: [2007]289ITR303(GAUHATI)
Author: D. Biswas
Bench: D. Biswas, A. Hazarika
JUDGMENT D. Biswas, J.
1. This appeal is directed against the order dated August 31, 2000, passed by the Income-tax Appellate Tribunal, Guwahati Bench, Guwahati, in I.T.A. Nos. 43 (Gauhati) of 1998, 391 (Gauhati) of 1998, 44 (Gauhati) of 1998, 116 (Gauhati) of 1997 and 392 (Gauhati) of 1998. The appeal was admitted by this Court on August 8, 2001, for adjudication of the following questions:
1. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in accepting the Commissioner of Income-tax (Appeals)' view in deleting the disallowances of share loss of Rs. 9,55,000 for the assessment year 1991-92, Rs. 1,57,000 for the assessment year 1993-94 and Rs. 2,18,700 for the assessment year 1994-95 on the ground that the transactions were done through brokers without considering the aspect of avoidance of tax payment by planning outside the frame work of law?
2. Whether, on the facts and in the circumstances of the case, the 1 Tribunal was correct in holding that the investment in flat was made utilizing the fund arising from the sale of shares and realization of loans and advances ignoring the fact firstly that the assessee had to take loan for such investment and, secondly, that the nexus between the loan and investment was established by the Assessing Officer, and consequently in deleting the disallowance of interest of Rs. 11,53,588 for the assessment year 1992-93, Rs. 9,06,615 for the assessment year 1993-94 and Rs. 16,05,500 for the assessment year 1995-96?
3. Whether the finding of the Tribunal that the investment in the flat was made out of sale of shares and realisation of loans and advances is based on any materials on record and is not the said finding perverse?
2. The assessee (respondent) is an investment company. The company filed returns for the assessment years 1991-92,1993-94 and 1994-95 claiming loss in share transactions at Rs. 11,05,000, Rs. 1,57,000 and Rs. 2,18,700, respectively. The Assessing Officer observed that the shares purchased at Rs. 10 were sold at varying prices from Rs. 2 to Rs. 6 per share, in some cases on the second day of purchase and in other cases after a few months. The Assessing Officer observed that the variation of prices was not due to volatile nature of the share and that there was also no resolution in the minutes book according consent either to purchase or sell at such a low price. It was further observed that the transactions were made through transfer entry and no evidence could be produced by the assessee to show that the shares were physically delivered. The Assessing Officer disallowed the loss claimed on account of share transactions. The Assessing Officer also disallowed the claim in respect of interest paid on loan for the assessment years 1992-93 to 1995-96 on the ground that the fund was utilised for non-business assets. Against both the decisions, the assessee preferred appeal before the Commissioner of Income-tax (Appeals), Guwahati. The Commissioner of Income-tax deleted the disallowance of loss on account of share transactions as well as the interest paid on loan secured for purchase of a flat in Bombay. On appeal, the learned Tribunal affirmed the decision of the Commissioner of Income-tax (Appeals). It is against these concurrent findings, the Revenue has preferred this appeal.
3. Reappreciation of facts is not the usual course for a court of appeal exercising powers under Section 260A of the Income-tax Act. The questions of law formulated are directed against the, appreciation of facts by the Commissioner of Income-tax (Appeals) as well as by the Tribunal. Keeping this in mind, we would like to proceed in the matter.
4. As regards disallowance of loss of Rs. 11,05,000 in share transactions in respect of M/s. Four Dimensions Commerce Limited, the Commissioner of Income-tax (Appeals) found that there was neither any profit nor any loss as the shares worth Rs. 36,134 were sold at Rs. 36,135. The Commissioner of Income-tax (Appeals) found that the cost price of the shares as held by the Assessing Officer to be Rs. 1,86,188 is totally incorrect. The Commissioner of Income-tax (Appeals) also examined the papers and documents produced by the authorized representative before coming to the conclusion. Hence, the Commissioner of Income-tax (Appeals) reduced the total income by a sum of Rs. 1,50,044. In respect of loss of Rs. 1,85,934 in the shares of Jacquward Commercial Limited and Rs. 7,70,000 in Behariji Projects Limited, the Commissioner of Income-tax (Appeals) on perusal of the contract note and bills and other documents came to the conclusion that sale and purchase of shares have been duly supported by contract note and bills. Payments and receipts were also made by cheques. The Commissioner of Income-tax (Appeals) was of the view that the Assessing Officer proceeded on the basis of probabilities and not on evidence. The Assessing Officer did not rely upon any evidence even to suggest that the transactions duly supported by contract notes and bills are not a good piece of evidence. There is no controversy with regard to the proposition of law that trading results cannot be disturbed merely on surmises and conjectures. Relying upon the contract notes and the bills produced, the Commissioner of Income-tax (Appeals) reversed the finding of the Assessing Officer.
5. With regard to disallowance of interest of Rs. 9,06,615, the Commissioner of Income-tax (Appeals) noticed that the purchase of flat by the assessee in the assessment year 1992-93 is not in dispute. The acquisition was duly verified with reference to the accounts as reflected in the balance-sheet. The Commissioner of Income-tax (Appeals) held that investments made in shares may not yield any dividend, but the borrowings made for the purpose of making investments in shares would entitle the assessee to claim interest in respect of such borrowings. According to the Commissioner of Income-tax (Appeals), the Assessing Officer erred in appreciating the facts of the case in proper perspective.
6. The learned Tribunal in its reasoned judgment, on appreciation of facts, approved the findings of the learned Commissioner of Income-tax (Appeals). Nothing could be shown before this Court that there was improper appreciation of facts resulting in loss to the Revenue. Tax planning to reduce the burden of tax is not an offence unless it is violative of any of the provisions of the Income-tax Act. There is nothing on record to show that the transactions are not genuine and that there was an attempt on the part of the assessee to defraud the Revenue. It is contended by Mr. Bhuyan, learned Counsel for the Revenue that the conclusions reached by the Tribunal is not supported by proper discussion of the materials and no exercise was undertaken either by the Commissioner of Income-tax (Appeals) or the Tribunal to scrutinize the accounts. But the orders passed by both the authorities, as discussed hereinabove, on the other hand suggest that both the authorities, particularly the Commissioner of Income-tax (Appeals), have examined the records. In our considered view, the conclusions reached by the Tribunal are findings of facts and supported by evidence on record. We have also taken into consideration the decisions in McDowell and Co. Ltd. v. CTO , M.V. Valliappan v. ITO , Union of India v. Azadi Bachao Andolan reported in [2003] 263 ITR 706 (SC), CIT v. George Williamson (Assam) Ltd. , CIT v. Korlay Trading Co. Ltd. , Amarchand Sobhachand v. CIT and CIT v. Carbo Industrial Holdings Ltd. relied upon by learned Counsel for both the parties. There is no dispute with the proposition of law. Tax planning to reduce the burden of tax not inconsistent with the provisions of the Income-tax Act cannot be a reason for rejection of the allowances claimed. Therefore, there is no scope for interference with the impugned order.
7. The questions framed are answered in the negative and against the Revenue. The appeal fails and is dismissed.
8. No costs.