V.S. Desai, J.
1. The question, which we have to consider on this reference, arises from the assessment order of the assessee as an individual for the assessment year 1952-53, the relevant account year being S. Y. 2007, extending from November 10, 1950, to October 30, 1951. The assessee derived his income as a partner in several firms, one of which was Messrs. National Traders, which did forward business in several commodities including castor seeds. The assessee claimed that in S. Y. 2007 he had himself entered into a few speculative transactions in castor seeds at Veraval and in those transactions he had suffered a loss of Rs. 13,849. According to the assessee these speculative transactions consisted of his purchases of 1,100 khandies of castor seeds on October 3, 1951, and 500 khandies on October 8, 1951, through M/s. Balkrishin Gopalji Sanghvi of Veraval and sale of these 1600 khandies to the same party on the 25th of October, 1951. To establish the genuineness of these transactions, the assessee produced the statements of accounts given to him by the Veraval party and the payment of the loss by him by hundies through the Dena Banking Corporation. The Income-tax Officer, however, disallowed the loss caused to the assessee because in his opinion it was not a genuine loss. The reasons, which he gave for this conclusion of his, were that although the speculative transactions were fairly large, no deposit or advance money had been paid by the assessee to the person through whom they were carried on; that the assessee had never dealt in castor seeds even on a small scale prior to these transactions of a considerable magnitude; that there was hardly any reason why the assessee should have done these speculative transactions at Veraval when his place of business was Bombay and the circumstance that these transactions occurred towards the end of the Samvat year was a circumstance which aroused suspicion about its genuine character. In the appeal, which the assessee filed against the decision and order of the Income-tax Officer, the Appellate Assistant Commissioner remanded the case and called for a remand report because he was of the opinion that it was necessary to get certain further information. The Income-tax Officer accordingly enquired into the matter further and submitted his remand report. Some of the suspicious circumstances, relying on which the Income-tax Officer had held against the genuineness of the transactions, were removed by the enquiry on remand. Thus, for instance, it was found that the assessee had good reason to go to Veraval at about the time when the present transactions were entered into because he had gone there to negotiate his becoming a partner in a Veraval firm in which he was actually admitted as a partner from the beginning of S. Y. 2008. That the margin money or deposit was not paid by the assessee for the transactions in question was not a suspicious circumstance inasmuch as even in subsequent Samvat years the assessee had done speculation in castor seeds through the same party without making any deposit or paying margin money. That although the assessee on his own account had not dealt in speculation in castor seeds before the present occasion, that line of business was not altogether unfamiliar to him because he was a partner in National Traders, which was doing speculative business in castor seeds. In the remand report, the Income-tax Officer in supplementing the reasons which he had already given in his original order indicated a further ground for supporting his order by saying that, since neither the assessee nor the Veraval party had maintained sauda vahi or any other subsidiary accounts, the loss claimed by the assessee was not capable of being accepted.
2. The Appellate Assistant Commissioner, after receiving the remand report, heard and decided the appeal in favour of the assessee. He held that the reasons which the Income-tax Officer had given for coming to the conclusion that the loss was not genuine were not good and sound and the loss, therefore, was properly proved by the assessee. He did not also accept the additional reason advanced by him in his remand report that in the absence of the sauda vahi or other subsidiary accounts the loss could not be allowed because in his view for these few transactions it was not necessary for the assessee to maintain a sauda vahi. He accordingly allowed the appeal and accepted the assessee's claim for deduction of the loss of Rs. 13,849 as being genuinely incurred by him in speculation business in castor seeds carried on at Veraval. Against the decision and order of the Appellate Assistant Commissioner, the department took the matter in appeal to the Tribunal. It was urged before the Tribunal that as the assessee was not maintaining any sauda vahi, the loss should have been disallowed and for this contention reliance was placed on Jamna Das Rameshwar Das v. Commissioner of Income-tax and Mahasukh Ram Madanlal v. Commissioner of Income-tax. The Tribunal was of the opinion that the failure on the part of the assessee to maintain a sauda vahi or other subsidiary account with regard to his speculative transactions disentitled him to claim the loss in respect of the speculative transactions. The departmental authorities were justified in not accepting this loss because in the absence of a sauda vahi it was not possible to ascertain the correct position of the speculative business of the assessee as a whole and in the absence of a sauda vahi the assessee could easily keep profitable transactions from out of his business. The Tribunal was of the opinion that the ratio decidendi of the two cases, on which the department had relied, applied, to the present case and the assessee's claim as to the loss could not be allowed. The Tribunal accordingly allowed the departmental appeal, set aside the order of the Appellate Assistant Commissioner and restored that of the Income-tax Officer. Thereafter, at the instance of the assessee, it has drawn up a statement of the case and referred to this court the following question under section 66(1) of the Indian Income-tax Act :
'Whether, in the absence of sauda vahi the assessee is entitled to claim a deduction of the loss of Rs. 13,849 sustained by it (him) in its (his) forward transactions in castor seeds ?'
3. In our opinion the cases, on which the department and the Tribunal have relied, cannot be said to be applicable to the facts of the present case and on the facts as are found in the present case, the assessee was entitled to the loss as claimed by him. The Appellate Assistant Commissioner had found that there was no reason to hold that the transactions were not genuine. He had also found that these were only the few transactions, two of purchase and one of sale, which the assessee had entered into and there was no other transaction entered into by him. It was also not disputed that the loss, which the assessee had suffered in these transactions, had actually been paid out by him by hundies through the Dena Banking Corporation. Having regard to these facts, it cannot be said that because of the mere absence of a sauda vahi maintained by the assessee, the assessee would be disentitled to the losses. The cases on which reliance was placed on behalf of the department do not lay down an invariable rule that the losses in speculative transactions cannot be allowed in the absence of a sauda vahi being maintained by the assessee. The principle of those cases is that where a person is indulging in a speculative business, his loss or profit in the business must be taken as a whole and he will not be entiled to claim a loss by only producing material with regard to the transactions in which he has suffered the loss. If the position as to the profit or loss sustained by an assessee in a speculative business is to be ascertained, it is necessary for him to maintain a continuous and regular account of all his speculative transactions, because in the absence of such a record, it will be easily possible for him to keep away the transactions in which he had made a profit and only produce material with regard to the other transaction in which he had suffered losses. In both the cases, which were relied on by the department, the assessee had not entered into solitary speculative transactions as is the case before us, but had done speculative business on a fairly considerable scale. In the case before us the assessee, admittedly, had not done any other speculative business in castor seeds on his own account. The entire speculative business which the assessee had carried on individually having consisted of these transactions only, the position of his profit and loss as a whole in his individual speculative business had to be determined from these transactions only and it is not disputed that in respect of them he had produced all the necessary material. That being so, the circumstance that he had not maintained a sauda vahi had no special significance or importance in the present case and its absence could not be regarded as creating a serious impediment in his way in claiming the loss. The position of the profit and loss as a whole in the individual speculative business carried on by the assessee in the present case having been capable of being satisfactorily established even in the absence of the sauda vahi the ratio decidendi of the two case relied on by the Tribunal is not applicable to the present case. In our opinion, therefore, the conclusion of the Appellate Assistant Commissioner that the assessee would be entitled to claim the loss was correct and the Tribunal was in error in reversing the said decision of the Appellate Assistant Commissioner.
4. The result, therefore, is that our answer to the question, which has been referred to us, is in the affirmative. The assessee will get his costs from the Commissioner.
Question answered in he affirmative.