Girdharilal Bagadia vs Addl. Commissioner of Income Tax

Sohani, J.—The order in this case will also govern the disposal of Miscellaneous Civil Case No. 245 of 1976.

The following two questions of law have been referred to us by the Income Tax Appellate Tribunal, Indore Bench. Initially, the Tribunal had referred the following question to the court for its opinion:

"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the amount of Rs. 57,200, which was allowed as loss on shares in the assessment year 1951-52, is profit assessable to tax u/s 41(1) of the Income Tax Act, 1961, in the assessment year 1965-66 ?"

Subsequently, as directed by this court on an application u/s 256(2) of the Act made by the assessee, the following question was also referred to this court, for its opinion by the Tribunal:

"Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was justified in holding that the amount of Rs. 57,200, which is allowed as loss on sale of shares in the assessment year 1951-52, in the status of an individual is profit assessable to tax u/s 41(1) of the Act in the hands of the applicant-Hindu undivided family in the assessment year 1965-66 ?"

The material facts giving rise to this reference, briefly, are as follows :

In the assessment year 1951-52, the assessee, who was assessed as an individual, was allowed a sum of Rs. 57,200 as business loss caused by the fall in the market price of shares of Hukumchand Mills Limited held in stock at the close of the relevant accounting year. In the assessment year 1965-66, the status of the assessee was Hindu undivided family. In the previous year corresponding to that assessment year, the shares of Hukumchand Mills Limited were sold by the assessee for a sum of Rs. 2,04,225. The purchase price of the shares was Rs. 2,07,744. The Income Tax Officer held that as the shares were sold virtually for the same price for which they were purchased, there was no loss. Bat the Income Tax Officer held that a sum of Rs. 57,200, which was: allowed as business loss in the assessment year 1951-52, would be deemed to be profit by virtue of the provisions of Section 41(1) of the Act. The assessee filed an appeal which was allowed by the Appellate Assistant Commissioner. But in further appeal by the Revenue, the Tribunal upheld the view taken by the Income Tax Officer. At the instance of the assessee, the Tribunal referred question No. 1 as aforesaid, but refused to refer the question in the form in which it was formulated by the assessee on the ground that the question of status of the assessee was never argued before the Tribunal. The assessee thereupon made an application before this court u/s 256(2) of the Income Tax Act; praying that the Tribunal be directed to send a supplementary statement of the case and refer the question in the form in which it was stated by the assessee in his reference application. By an order dated October 19,, 197;8, passed in Miscellaneous Civil Case No. 245 of 1976, in Omprakash Vs. Addl. Commissioner of Income Tax, a Division Bench of this court allowed that application and directed the Tribunal to submit a supplementary statement of the case and refer the question in the form in which it was formulated by the assessee. That is how question No. 2 has been referred to this court for its opinion.

Having heard learned counsel for the parties, we have come to the conclusion that these references have to be answered in favour of the asses-see and against the Revenue. It is now well-settled that for the applicability of the provisions of Section 41(1) of the Act, the assessee getting an amount or benefit must be the same assessee who had got advantage of the allowance or deduction earlier. In COMMISSIONER OF Income Tax, M. P. Vs. HUKUMCHAND MOHANLAL., it was held by this court that the assessee made liable u/s 41(1) of the Act must be the same assessee to whom art allowance had been granted earlier. This decision was approved by the Supreme Court in Commissioner of Income Tax, Madhya Pradesh Vs. Hukumchand Mohanlal, .

In the instant case, it has come on record that while the status of the assessee in the assessment year 1951-52, to whom the amount of Rs. 57,200 was allowed as business loss was that of an individual, the status of the assessee made liable u/s 41(1) of the Act is that of the Hindu undivided family. In view of these facts, the Tribunal, in our opinion, erred in holding that the amount of Rs. 57,200 could be deemed to be profit assessable to tax u/s 41(1) of the Act. Our answers to the questions referred to this court are, therefore, in the negative and in favour of the assessee.

References answered accordingly. No order as to costs.