MOHINI KULWANT GHAI vs. C I T

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ITA/779/2008HC Punjab & HaryanaPHHC01080804200825 February 2010Author: MR. JUSTICE M.M. KUMAR,MR. JUSTICE JITENDRA CHAUHAN3 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the question of whether the assessee held property as stock-in-trade or investment is a finding of fact. The Court noted that the assessee was represented by her husband before the AO, who offered substantial income for taxation. The assessee did not dispute her husband's statement at any stage, and she was a shareholder in a property development company. The Tribunal's finding that it would be unreasonable to hold the husband's statement as not binding, especially when the assessee was aware of it and no prejudice was caused, was considered a factual determination. The Court concluded that the intention behind the transactions was ascertained in accordance with law, which is a finding of fact that cannot be gone into under Section 260A. Therefore, no substantive question of law arose for determination.

What were the facts?

The assessee, Mohini Kulwant Ghai, filed an appeal under Section 260A of the Income Tax Act, 1961, challenging an order dated 9.5.2007 passed by the Income Tax Appellate Tribunal (ITAT). The assessment year in question is 2001-02. The assessee's original return of income was Rs. 74,94,636, and the assessment was framed at Rs. 82,07,155 by the Assessing Officer (AO) on 22.3.2004. The assessee appealed to the Commissioner of Income Tax (Appeals) [CIT(A)], who partially allowed the appeal on 9.2.2005, finding that the AO's conclusion regarding treating profits from property sale and purchase as long-term capital gain was based on a statement by the assessee's husband, which was not confronted to the assessee, violating principles of natural justice. The Revenue appealed to the ITAT, which restored the AO's conclusion.

What were the issues?

1. Whether, under the facts and circumstances, the Tribunal's order is sustainable in treating all assets as stock-in-trade without examining the intention behind holding them? (Question of law/mixed law and fact, turning on the interpretation of the nature of assets held by the assessee). Assessee's Contention: The assessee argued that merely being engaged in the business of buying and selling property through a company does not automatically mean all property held in her individual name is stock-in-trade. She contended that most property had been held for ten years, with no frequent purchase/sale in her individual name, implying an investment intent. The intention behind property transactions is a finding of fact. Revenue's Contention: The Revenue argued, and the Tribunal agreed, that the assessee was represented by her husband before the AO, who offered income of over 70 lakhs for taxation on her behalf. The assessee never claimed her husband's statement was not binding, nor raised doubts. The husband dealt with property purchase and sale on her behalf, and she was a shareholder in a property development company, making it unreasonable to disregard his statement. No prejudice was caused to the assessee by relying on her husband's statement.

Which sections of the Income-tax Act were involved?

Section 260A,Section 143(2)

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
ITA No. 779 of 2008 (O&M) 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. ITA No. 779 of 2008(O&M) Date of decision 25 .2.2010 Mohini Kulwant Ghai ... Appellant Versus Commissioner of Income Tax (A) ... Respondent CORAM: HON'BLE MR. JUSTICE M.M. KUMAR HON'BLE MR. JUSTICE JITENDRA CHAUHAN Present: Mr. Pankaj Jain ,Advocate for the appellant. 1.To be referred to the Reporter or not ? 2.Whether the judgement should be reported in the Digest ? M.M.KUMAR, J. This is an assessee's appeal filed under Section 260A of the Income Tax Act, 1961 (for brevity 'the Act') challenging order dated 9.5.2007 passed by Income Tax Appellate Tribunal, Chandigarh Bench, Chandigarh (for brevity 'the Tribunal') in ITA No. 621/CHD/ 2005 in respect of the assessment year 2001-02. The petitioner has claimed that following substantive question of law would arise for determination of this Court: “ Whether under the facts and circumstances the Tribunal order is sustainable having treated all the assets as stock in trade without examining the intention behind holding thereof ?” Brief facts of the case are that the assessee had filed a return of income on 31.7.2001 reflecting Rs. 74,94,636/-. The Assessment was framed for an amount of Rs. 82,07,155/- by an order dated 22.3.2004 (A.1) under Section 143(2) of the Act. The assessee challenged order dated 22.3.2004 before the CIT(A). The appeal of the assessee was partially ITA No. 779 of 2008 (O&M) 2 allowed vide order dated 9.2.2005 (A.2). According to the CIT(A), the findings of the Assessing Officer that profit on sale and purchase of property could not have been charged to tax as long term capital gain on the basis of statement made by the husband of the assessee Shri Kuldip Singh Ghai. The aforesaid statement was recorded by the Deputy Director Investigation, Ludhiana on 23.4.2001. The basis of the aforesaid finding is that the statement made by the husband of the assessee was never confronted to the assessee nor any show cause notice was issued to her to the effect that she was actually engaged in the frequent sale and purchase of property as business. Accordingly it has been found that principles of natural justice stood violated. The Revenue approached the Tribunal by filing the appeal and the Tribunal came to the conclusion that the findings recorded by the CIT (A) were erroneous and restored the conclusion arrived by the Assessing Officer. In para 18 of the order of the Tribunal it has been pointed out that the CIT(A) has over-looked the material aspect of this case because the assessee herself never appeared before the Assessing Officer and was always represented by her husband. Her husband had offered more than 70 lakhs of income for taxation on behalf of his wife which was accepted by her. The Tribunal further found that at no stage opportunity was claimed by the assessee asserting that the statement of her husband was not binding nor any doubt had arisen at any stage. The husband of the assessee has been dealing with the purchase and sale of property on behalf of his wife and the assessee herself is a share holder in the company known as Ghai Estate Developers Ltd. which is engaged in the business of sale and purchase of property. Therefore the Tribunal found that it would be unreasonable to ITA No. 779 of 2008 (O&M) 3 hold that the statement of the husband of the assessee made in his capacity as her husband was not binding especially when she was fully aware of such statement. In any case no prejudice has been caused to the assessee by placing reliance on the statement made by her husband in the Assessment

Order.

We have heard the learned counsel for the appellant. It has been found as a fact that merely because the assessee was engaged in the business of buying and selling of property in the name of the company would not result into an inference that she would not held some property as investment in her own name by keeping in view the fact that most of the property had been held by the assessee for the last ten years and that there was no frequent purchase/ sale of the property made in her individual name. Therefore, the intention with regard to transaction of sale and purchase of property has been ascertained in accordance with law which is necessarily a finding of fact which cannot be gone into. It would not constitute a substantive question of law warranting admission of appeal. Therefore, no question of law much less a substantive question of law would arise for determination of this Court. Dismissed. (M.M.Kumar) Judge (Jitendra Chauhan) 25.2.2010 Judge okg

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