C. S. P. Singh, J. - In compliance with the orders passed by this Court, the Income-tax Appellate Tribunal, Delhi Bench 'A' has referred the following question for our opinion :-
'Whether on the facts and in the circumstances of the case, the appellate order of the Income-tax Appellate Tribunal containing the finding that the assessee had satisfactorily proved that the speculative transactions were entered into by it on behalf of the persons to whom the profits had been paid, can be supported in law ?'
2. The facts relevant for the decision of this reference may be shortly stated. The assessee is a registered firm and acts as a commission agent in the sale of agricultural produce. In the assessment year 1964-65, the assessee did speculative business. The assessee showed a profit of Rs. 1,14,347/- in respect of some speculative transaction and showed a loss of Rs. 1.13.135/- in respect of others. It showed a net profit of Rs. 1,213/-. The Income-tax Officer on scrutiny of the transactions found that the firm had made a profit of Rs. 16,403/- in speculation with Messrs Chitalia Brothers of Rajkot, but credited to the speculation account a sum of Rs. 1,499/-. The balance of Rs. 14,804/- after deducting commission at Rs. 99/- was shown as having been paid to Messrs Munshilal Trilok Chand of Ballabhgarh district Gurgaon. In another transaction with Messrs Ganga Prasad Rajendra Kumar of Delhi, the assessee had earned a profit of Rs. 15,964/-, but had instead of crediting it in its books showed the amount as having been paid as follows :-
(1) Shivnarain Partner
(2) Krishna Prasad Partner
(3) Gayalal Babulal of Kosikalan
The Income-tax Officer on a certain consideration of other circumstances took the view that the amounts aforesaid represented the profit of the assessee in speculative business and, therefore, added it to his assessable income. The assessee appealed to the Appellate Assistant Commissioner. The Appellate Assistant Commissioner upheld the order of the Income-tax Officer. An appeal filed by the assessee before the tribunal succeeded.
3. After considering the findings of the Tribunal, we are unable to discover any error of law which vitiates it. The Tribunal appears to have accepted the various contentions raised on behalf of the assessee. It is essence found that the speculation of Rs. 14,804/- which had been treated as income of the assessee from speculative business had already been taxed by the Income-tax Officer, Gurgaon in the hands of the Ballabhgarh party. It also accepted the contention of the assessees counsel that the Saudabahi of the assessee in which these transactions were entered were complete in all respects, and could not be rejected solely on the ground that they did not have any overwriting or cutting. The contention of the Departments counsel that the explanation of the assessee should not be accepted on account of the fact that the books of the Ballabhgarh party contained cutting and overwriting, appears to have been repelled, on the ground that the assessee was not responsible for proper maintenance of books of another party. It is also attached weight to the fact that it was not probable that the assessee would credit the speculative profit to the Ballabhgarh party, inasmuch as only one of the partners was related to the Ballabhgarh party, and the other two partners would as such not consent to the entire speculation profit being credited to the relative of only one of the partners. It also found that the speculation profit of Rs. 3,007/- credited to the account of Gaya Lal Babu Lal of Koshikalan in 1964-65 had already been taxed in the hands of that party. Further, that if the intention of the assessee had been as found by the Income-tax Officer, to reduce the assessable profit of the partners, the speculation profit amounting to Rs. 6,252/- and Rs. 6,705/- would have been credited not to the account of Shiv Narain Partner and Shri Kishan Prasad Partner but to the account of the third Partner Jagdish Prasad who had brought forward speculation loss of Rs. 20,273/-. On the contrary, one of the amounts i.e. Rs. 6,232/- had been shown as having been paid to Shiv Narayan Partner, who had brought forward a loss of only Rs. 6,656/-. It also repelled the Departments contention that inasmuch as the purjas in respect of these speculative transactions stood in the name of the assessee firm, they had prima facie to be treated as the business of the assessee. We are of the view that on the material on the record, the Tribunal was justified in reaching the conclusion, which it did.
4. In view of these conclusions, we answer the question referred in the affirmative, against the Department and in favour of the assessee. The assessee is entitled to their costs which is assessed at Rs. 200/-. Counsels fee is assessed at the same figure.