COMMISSIONER OF INCOME-TAX VS C.F. JOHNSON
1999 P T D 3206
[229 I T R 750]
[Kerala High Court (India)]
Before V. V. Kamat and P.A. Mohammed, JJ
COMMISSIONER OF INCOME-TAX
Versus
C.F. JOHNSON
O. P. No. 15794 of 1995-S, decided on 10/07/1996.
Income-tax---
----Reference---Capital gains---Transfer---Lease of premises---Lessee giving sworn statement that he paid Rs.10 lakhs unaccounted money to lessor apart from security deposit---Lessee not cross-examined---Whether Tribunal right in holding that there was no transfer and no capital gains arose without remitting matter to Assessing Officer to give opportunity to assessee to cross examine lessee---Are questions of law to be referred---Indian Income Tax Act, 1961, Ss1(47)(v) & 256(2). _.
The assessee gave on lease certain premises and received a security deposit. The lessee gave an affidavit that he paid Rs.10 lakhs of unaccounted money to the lessor and also offered it for assessment. The amount was assessed in the hands of the lessor by the Assessing Officer without giving him an opportunity to cross-examine the lessee. The Tribunal. held that there was no transfer and the affidavit could not be acted upon in the circumstances. On a reference application under section 256(2) of the Income Tax Act. 1961:
Held, that (i) Whether, in view of the sworn statement of the lessee that he paid Rs.10 lakhs to the assessee (lessor), the Tribunal was right in holding that there was no material on record to show that the assessee hid received Rs.10 lakhs; (ii) Whether the Tribunal was right in not including the sum of Rs.10 lakhs in the hands of the assessee on the ground that the lessee was not put to cross-examination by the assessee; (iii) Whether the Tribunal was right in not remitting the case to the assessing authority to complete the assessment afresh after giving the assessee an opportunity to cross-examine the lessee; and (iv) Whether, as possession was admittedly handed over and in view of section 2(47)(v) of the Income Tax Act, 1961, the Tribunal was right in holding that there was no transfer under the impugned agreement and so levy of capital gains could not be sustained, were questions of law to be referred.
P. K. R. Mellon and N. R. K. Nair for the Commissioner.
V.V. Asokan for the Assessee,
JUDGMENT
V.V. KAMAT, J.---With regard to the assessment year 1989-90.. in regard to the allegation that the assessee received and one Shri Sundaresa Pai paid an amount of Rs.10 lakhs in addition to Rs.2 lakhs as security deposit, the Income-tax Officer acted on the basis of the sworn affidavit ofShri Sundaresa Pai with regard to the payment made by him and acceptance thereof by theassessee in question in the matter of a lease,, dated February 10, 1989, of the premises covered thereby. It is a lease for a period of 20 years. With regard to the amount in question, as stated, the material was the sworn testimony in the nature of affidavit of the. person who paid. The decision was affirmed by the first appellate authority observing that Rs.2 lakhs being the amount of deposit, refundable as security deposit could not be understood as the capital gains.
The Tribunal firstly observed that the transaction could not be understood as a transfer in law. The Tribunal further observed that the affidavit of Shri Sundaresa Pai could not be legally acted upon because he was not put to cross-examination by the assessee. The evidence of affidavit becomes acceptable unless a right of cross-examination is demanded in regard thereto.
In our judgment, the approach of the Tribunal requires reference because with regard to both the aspects, the situation on the facts and circumstances of the case raise questions of law.
Accordingly, the Income-tax Appellate Tribunal, Cochin Bench, is directed to prepare the statement of case and refer the following three, questions to this Court and remit the matter to this Court within a period of three months from today:
"(1) Whether, on the facts and in the circumstances of the case and in view of the statement by Shri Sundaresa Pai in his 'sworn statement' that 'he had also paid a sum of Rs.10 lakhs to the assessee and his brother on various dates in February, 1989, out of his unaccounted income and offered the same for assessment (and also in the absence of any finding even doubting the veracity of the statement), the Tribunal is right in law and fact in holding that 'there is no material on record to show that the assessee had received Rs.10 lakhs., ' 'there is no basis for including the impugned amount in the hands of the assessee' and are not the above findings wrong, unreasonable and- based on wrong approach?
(2) Whether, on the facts and in the circumstances of the case and in the light of the sworn statement by Shri Sundaresa Pai,---
(i) the, Tribunal is right in interfering with the inclusion of the impugned amount in the hands of the assessee on the ground that Shri Sundaresa Pai was not put to cross-examination by the assessee?
(ii) should not the Tribunal have/is not the Tribunal legally and by all canons of law bound to remit the case to the assessing authority and to complete the assessment afresh after giving the assessee an opportunity to cross-examine Shri Sundaresa Pai and in accordance with law?
(3) Whether, on the facts and in the circumstances of the case (admittedly, possession has been handed over) and also in view of section 2(47)(v) of the Income Tax Act, 1961, the Tribunal is right in law in holding that ' in law there is no transfer under the impugned agreement and, therefore, the levy of capital gains on the same cannot be sustained'?"
The original petition stands disposed as above.
M.B.A./3072/FCPetition disposed.