The Judgment of the Court was delivered by
WESTON, C.J. - This is an application Section 66(2) of the Income-tax Act by one Jamna Das. The circumstances on which the application is based are these. The applicant is a partner in a firm Jamna Das Rameshwar Das, Cloth Merchants of Delhi, but he also did business on his own behalf at the material time both in piece-goods and in speculation in silver, gold and linseed. In his income-tax return for the year 1946-47 the applicant showed his total net income as Rs. 26,000 odd but he showed a gross ioss in spculative transaction of Rs. 24,000 odd and his net loss under this heading as Rs. 23,412. In support his claim for loss on the speculative transactions the applicant produced eight invoices from arhtias at Indore, Bikaner and Muzaffarnagar. The amounts of these losses were also entered in his books. He produced no sauda bahi, nor did he produce any yearly statement from his arhtias showing the total transactions entered into by him with them. The Income-tax Officer accepted the gross income of the applicant as appearing in his books but in respect of his claim for loss on speculative transactions held that the books could not be accepted as no sauda bahi or other contemporaneous record of the transactions as and when made was maintained, that there was only one item of profit shown, and that there was nothing to show that all the satta transactions had been incorporated in the account books. The Income-tax Officer remarked that any number of profit transactions could with impunity be kept outside the books. In the circumstances he disallowed the claim for an alleged net loss of Rs. 23,412. The applicant went in appeal to the Appellate Assistant Commissioner who upheld the findings of the Income-tax Officer but expressed himself in somewhat different language. He seemed to think that in the absence to full record of the transactions he could not allow the claim for loss on the eight items for which the applicant had produced vouchers without making what he called an add-back of a similar amount for possible omission of profit. The applicant then went to the Appellate Tribunal which dismissed his appeal. The Appellate Tribunal based their decision shortly on these grounds, that were a source of assessees business was established the onus was on the assessee to prove his income or loss from that source taken as a whole, and in case of speculative business it was necessary for the assessee, seeking to prove loss, that records be kept of all his transactions so as to afford a check to find out whether the results of all the transactions had or had not been taken into account. They held that in the case of the present applicant they were not satisfied that the assessee had shown the true state of affairs regarding the speculative transactions. They held that the absence of a saudi bahi was not without purpose particularly when the applicant had kept regular accounts of his other business activities. They held that the loss had not been proved to their satisfaction although, no doubt, particular terms of loss evidence by the vouchers may have been correct. They held therefore that the claim to loss of Rs. 23,412 was rightly disallowed. The applicant then applied to the Tribunal to state a case to this Court. The Tribunal had held that the evidence was insufficient to prove the loss and that the finding was purely one of fact and no question of law arose which could be the subject of reference. The applicant has now come to us under Section 66(2) of the Income-tax Act.
Mr. Grover for the applicant has urged that accounts of his client similar to those for the year in question were accepted by the Income-tax Department in earlier years and the applicant was allowed in those earlier years losses as shown in his books. I do not think this is in any way material. The Income-tax department is entitled to judge the accounts each year on their merits. There is no question of estoppel and because they may have accepted a particular form of accounts as sufficient in one year there is nothing to debar them from holding later that particular items or particular claims made by the assessee in later years have not been established. Mr. Grover claims that as the claim of actual losses to the amounts stated by his client has been accepted as having been incurred by the Income-tax Tribune, the Appellate Assistant Commissioner an the Income-tax Officer, it was not open to them to make an arbitrary estimate of an amount of profits sufficient to offset these proved losses. Some support to this argument can be found from the manner in which the Appellate Assistant Commissioner worded his order. It seems to me, however, that the correct approach to the case was that taken by the Appellate Tribunal. This is not a case where the assessee has been assessed to be an arbitrary amount of profits from his business or from one side of his business. What has been done in the result is that one side of his business has been ignored altogether for the purposes of income-tax. As stated by the Appellate Tribunal it was for the assessee claiming to offset a particular amount of loss to establish that he had incurred such amount of loss. The Income-tax authorities in may opinion undoubtedly were entitled to take into consideration the fact that the assessee kept no contemporaneous record of the speculative transactions into which he entered. He purports to have made his entries in his accounts only on receiving invoices from his arhtias. When he received these invoices he was naturally aware whether the transactions resulted in a profit or a loss, and there was nothing already appearing in his accounts which would be an impediment to his omission to enter in his accounts any transaction which had resulted in a profit. The Income-tax authorities also were entitled to take into consideration the circumstances that except for one of the eight transactions all purported to have been entered into at Indore or Bikaner where it would be almost impossible for the Income-tax Department at that time to obtain any information. It cannot be said therefore that there was no material upon which this claim for loss could be disallowed. As I have said, there is no question of an arbitrary assessment. It is merely a question whether an assessee has established a particular fact. I do not think therefore there is any question of law upon which we can require a reference to be made.
I would therefore dismiss this application with costs which I would assess at Rs. 150.
FALSHAW, J. - I agree.