THE COMMISSIONER OF INCOME TAX vs. G RAJU
What did the High Court hold?
The High Court held that the findings of the ITAT were purely factual and based on the proceedings before the Tribunal. The Court found that these factual findings did not give rise to any question of law that could be considered in an appeal filed under Section 260A of the Income Tax Act, 1961. The Tribunal, in its order, had noted that the assessee had filed a detailed cash flow statement explaining the sources of funds and that improvements to the land were evident. While acknowledging potential defects in records, the Tribunal directed that 55% of the claimed improvement cost be allowed, thereby addressing the Assessing Officer's and Revenue's concerns. The High Court found no reason to interfere with the impugned order.
What were the facts?
The Revenue has filed an appeal before the High Court of Kerala against an order of the Income Tax Appellate Tribunal (ITAT), Cochin Bench, dated August 17, 2016. The ITAT's order in ITA No. 76/Coch/2012, concerning assessment year 2008-2009, partially accepted the assessee's (G. Raju) claim for indexed cost of improvements. The Assessing Officer had passed an order under Section 14(3) on December 31, 2009, and the Commissioner of Income Tax (Appeals) had passed an order on December 28, 2011. The High Court had previously issued directions in ITA No. 23 of 2014 on July 20, 2015.
What were the issues?
The High Court was required to decide the following questions of law: 1. Whether the Tribunal erred in correctly carrying out the directions of the High Court by deciding the appeal without considering vital evidence presented by the Assessing Officer, as per Section 260A of the Income Tax Act, 1961. 2. Whether the Tribunal's decision, relying mainly on a cash flow statement and observing that substantial expenditure was necessary for realizing a high price, was perverse. The Revenue contended that the Tribunal failed to consider vital evidence from the Assessing Officer and that the Tribunal's reliance on a cash flow statement was flawed, leading to a perverse finding. The judgment does not record specific arguments from the assessee.
Which sections of the Income-tax Act were involved?
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Cause title — parties, addresses and appearances
JUDGMENT Antony Dominic,J. The claim for indexed cost of improvements raised by the respondent assessee before the Income Tax Appellate Tribunal has been partially accepted by the Tribunal in I.T.A. No. 76/Coch/2012 concerning the assessment year 2008-2009. It is aggrieved by this order, the Revenue has filed this appeal.
The questions of law framed for consideration are as follows:
In the facts and circumstances of the case, has not the Tribunal erred in correctly carrying out the directions of this Hon'ble Court when it decided the appeal without considering vital evidences brought on record by the Assessing Officer?
Is not the decision rendered by the Tribunal mainly relying on a discredited cash flow statement and observing that without expending substantial amounts, the Assessee could not have realized such high price perverse?
We heard the learned counsel for the Revenue and considered the submissions made.
In Annexure E order passed by the Tribunal, the relevant findings read as follows:
“8. We have heard the rival contentions and perused the facts and records of the case. It is a fact that the assessee has filed a detailed cash flow shown different sources from which the money has been brought in. The assessee also has explained that during those days bank accounts were not so common and large families use to keep cash with themselves as most of the receipts were from agriculture and other allied sources. The fact that without improvements the assessee would not have received this amount is also pointed out. The learned Dr has not raised any specific objection -2- to the cash flow other than the opening balance, the non banking of cash and production of records for the past 26 years from 01.04.1981 onwards. The learned counsel has requested the Hon. Bench to have a pragmatic approach in respect of old records as normally people miss or misplace records after a reasonable period. In the circumstances and facts of the case, it is evident that the assessee has made substantial improvements to the land which is supported by year wise cash flow. The Assessing Officer has simply ignored the cash flow stating various other reasons. The Ld. CIT(A) has considered the cash flow and in order to compensate any probable defects and omissions has made an estimated disallowance of 40% which the learned DR during the course of hearing has accepted as correct except for the size of the amount. However, to meet the interest of justice, the disallowance of cost of improvement is directed to be fixed at 45% of the cost claimed i.e., the assessee is eligible for 55% of the improvement cost claimed. This will take care of defects pointed out by the Assessing Officer and Ld. DR including the opening cash in hand.”
On a reading of the above, it is obvious that these findings are purely factual and based on what has transpired before the Tribunal. Such findings rendered by the Tribunal, according to us, does not give rise to any question of law to be considered by this Court in an appeal filed under Section 260A of the Income Tax Act, 1961. We do not find any reason to interfere with the order impugned. Accordingly, this appeal is dismissed. ANTONY DOMINIC, JUDGE. DAMA SESHADRI NAIDU, JUDGE. Rv -3-
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