SAURIN J. SHAH vs. DY.C.I.T.

ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) 1.By way of this Appeal, the appellant – original assessee having lost before all the authorities has approached this Hon'ble Court against the judgment and order of the Assessing Officer, Commissioner (Appeal) and the order of the Tribunal. 2.While admitting the matter on 07.10.2003, the following substantial questions of law were framed by this Court :- “[1] Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in confirming the action of the respondent in disallowing the trading loss of Rs.23,01,770/-, in view of the fact that the appellant had produced various details on record of the Tribunal to substantiate its claim of the said loss? [2] Whether, on the facts and in the circumstances of the case the Tribunal was justified in rejecting the alternative contention raised by the appellant that the said loss be allowed as bad debt?” 3.The facts of the case which give to this Tax Appeal are as under :- The appellant is a stock broker registered with Ahmedabad Stock Exchange and was carrying on his business in broking. He entered into various transactions and for the liability of payment of the Stock Exchange, the assessee has to make payment of Rs.23,01,770/=. The appellant filed his original return of income for the A.Y. 1994-1995 on 31.10.1994 declaring total income of Rs.2,92,540/-. Thereafter, in response to notice u/s. 148 of the Act, the appellant once again filed his return of income on 22.10.1997 declaring the same income as declared in the original return. Vide order dated 15.03.2000, the respondent assessed the appellant at total income of Rs.31,48,460/-. The appellant challenged the said order by filing an Appeal before the Commissioner of Income Tax (Appeal), Ahmedabad. The CIT (A) by his order dated 25.07.2000 dismissed the said appeal. The appellant challenged the said order of the ICT (A) before the Income Tax Appellant Tribunal and ITAT partly allowed the said Appeal. Against this order, the appellant preferred a Miscellaneous Application u/s. 254(2) of the Act, for there were certain apparent mistakes in the impugned order of ITAT. Being aggrieved by the order passed by the ITAT, the appellant begs to challenge the said order by way of the present Appeal. 4.Learned Senior Counsel for the appellant has mainly contended that all the authorities have committed an error in coming to the conclusion that merely because entries are not made in the account of Prashant Sarawgi, the same is required to be refused. 5.Learned Senior Counsel S.N. Soparkar has relied on the decision of the Hon'ble Apex Court in the case of Tuticorin Alkali Chemicals

and Fertilizers

Ltd.

v. Commissioner of Income-Tax reported in 227 Income Tax Reports 172. Relevant part of the above decision is reproduced as under :- “It is true that this court has very often referred to accounting practice for ascertainment of profit made by a company or value of the assets of a company. But when the question is whether a receipt of money is taxable or not or whether certain deductions from that receipt are permissible in law or not, the question has to be decided according to the principles of law and not in accordance with accountancy practice. Accounting practice cannot override section 56 or any other provision of the Act As was pointed out by Lord Russell in the case of B.S.C. Footwear Ltd. [1970] 77 ITR 857, 860(CA), the income-tax law does not march step by step in the footprints of the accountancy profession.” 6.In view of the accounting provision, learned Senior Counsel has also relied on the decision of the Supreme Court in the case of Dr. T.A. Quereshi v. Commissioner of Income- Tax reported in 287 Income Tax Reports 547. Relevant part of the decision is reproduced as under :- “In our opinion, the High Court has adopted an emotional and moral approach rather than a legal approach. We fully agree with the High Court that the assessee was committing a highly immoral act in illegally manufacturing and selling heroin. However, cases are to be decided by courts on legal principles and not on one's own moral views. Law is different from morality, as the positivist jurists Bentham and Austin pointed out.” Therefore, learned Senior Counsel contended that all the authorities have committed an error as the loss was not a specific loss of business but a business loss, which is required the appellant is duty bound as a Stock Broker. 7.Learned Senior Standing Counsel Mrs. Mauna M. Bhatt with learned Junior Standing Counsel Mr. Chintan Dave contended that the view taken by the authority is just and proper. Both of the Counsels have taken us to the order of the Assessing Officer and contended that at least the amount of Rs.10,00,000/= which stands in the name of client ought to have been given as a set off against the loss. 8.We have heard learned Advocates appearing for the respective parties. 9.Regarding the first contention of learned Senior Counsel Mr. S.N. Soparkar, the accounting entry is a must in view of the observations made by the Hon'ble Supreme Court in Tuticorin Alkali Chemicals and Fertilizers Ltd. (supra).