COMMISSIONER OF INCOME-TAX vs. M/S.PARASRAM KARAMCHAND

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ITR/114/1997HC GujaratGJHC24020278199709 April 2008Bench: HONOURABLE MR. JUSTICE D.A.MEHTA,HONOURABLE MR. JUSTICE Z.K.SAIYED4 pages
AI SummaryRemanded

What did the High Court hold?

The High Court held that the questions referred by the Tribunal did not arise out of the impugned order of the Tribunal dated 26.12.1996. The Court noted that the ITAT, Bombay Bench-D, had already set aside the CIT's order under Section 263 in the case of Rakhi Beneficiary Trust. Since the assessment orders in the assessee's case for the years 1983-84 to 1985-86 were framed under Section 143(3) as a consequence of the CIT's order under Section 263, and that order was set aside, the consequential assessment orders could not stand. The Deputy Commissioner (Appeals) was justified in deleting the impugned additions, and this was confirmed by the Tribunal. Therefore, the reference was disposed of without answering the questions as they did not arise from the Tribunal's order. No specific finding was given on the merits of the three questions themselves, as the reference was disposed of on a procedural ground.

What were the facts?

The Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench-B, referred three common questions of law to the Gujarat High Court at the instance of the Commissioner of Income-tax (Revenue). The assessment years under consideration were 1983-84 to 1985-86. The assessment orders for these years were framed under Section 143(3) of the Income Tax Act, 1961, pursuant to an order passed by the Commissioner of Income-tax (CIT) under Section 263. This order by the CIT was a consequence of his own order under Section 263 in the case of one Rakhi Beneficiary Trust. The ITAT, Bombay Bench-D, had previously set aside the CIT's order under Section 263 in the case of Rakhi Beneficiary Trust. Consequently, the assessments in the assessee's case, which were consequential to the set-aside CIT order, could not operate, and additions made under Section 64(1)(viii) were deleted by the first appellate authority and confirmed by the Tribunal.

What were the issues?

The Tribunal referred three questions for the opinion of the High Court: 1. Whether, on the facts and circumstances, the Tribunal was right in holding that there was no formation of cross trusts? 2. Whether the Tribunal was right in law in holding that this is not a case of cross gifts because the amounts settled and the number of beneficiaries involved were not the same, and the settlement had taken place at two different points of time? 3. Whether, on the facts and circumstances and in law, the Tribunal was right in holding that the provisions of Section 64(i)(vii) of the Act are not applicable? The Revenue contended that the assessment orders were framed under Section 143(3) pursuant to a Section 263 order by the CIT. The assessee's contentions are not recorded as there was no appearance on behalf of the assessee. The Tribunal's finding, as quoted in the judgment, was that since the ITAT, Bombay, had set aside the CIT's order under Section 263 in the case of Rakhi Beneficiary Trust, the consequential assessment orders under Section 143(3) in the assessee's case could not operate, justifying the deletion of additions by the Deputy Commissioner (Appeals).

Which sections of the Income-tax Act were involved?

Section 256(1),Section 143(3),Section 263,Section 64(1)(viii),Section 64(i)(vii)

AI-generated summary — verify with the full judgment below

ITR/114/1997 1/4 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX REFERENCE No. 114 of 1997 For Approval and Signature: HONOURABLE MR.JUSTICE D.A.MEHTA HONOURABLE MR.JUSTICE Z.K.SAIYED ========================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ========================================================= COMMISSIONER OF INCOME-TAX - Applicant(s) Versus M/S.PARASRAM KARAMCHAND - Respondent(s) ========================================================= Appearance : MR BB NAIK for Applicant(s) : 1, SERVED BY RPAD - (N) for Respondent(s) : 1, ========================================================= CORAM : HONOURABLE MR.JUSTICE D.A.MEHTA and HONOURABLE MR.JUSTICE Z.K.SAIYED Date : 09/04/2008 ORAL JUDGMENT (Per : HONOURABLE MR.JUSTICE D.A.MEHTA)

ITR/114/1997 2/4 JUDGMENT 1. The Income Tax Appellate Tribunal, Ahmedabad Bench-B, has referred the following three common questions for the opinion of this Court, under sec. 256(1) of the Income Tax Act, 1961 (the Act), at the instance of the Commissioner of Income Tax. 1. Whether on the facts and circumstances of the case, the Tribunal was right in holding that there was no formation of cross trusts? 2. Whether the Tribunal was right in law in holding that this is not a case of cross gifts because the amounts settled and the number of beneficiaries involved was not the same and the settlement had taken place at two different points of time? 3. Whether of the facts and circumstances of the case and in law, the Tribunal was right in law in holding that provisions of Sec. 64(i)(vii) of the Act are not applicable in the present case ? 2. The Assessment Years are 1983-84 to 1985-86. It is not necessary to set out the facts in detail for the reasons that follow hereinafter. 3. Heard Mr. B.B. Naik learned Standing counsel for the applicant _ Revenue. Though served, there is no appearance on behalf of the assessee. 4. It is an admitted position that the assessment orders have been framed under sec. 143(3) of the Act

ITR/114/1997 3/4 JUDGMENT pursuant to order made by Commissioner of Income Tax (CIT) under sec. 263 of the Act. The CIT has framed the order under sec. 263 of the Act as a consequence of his own order under sec.263 of the Act in case of one Rakhi Beneficiary Trust. 5. It has been concurrently found, both by the first Appellate Authority and the Tribunal that the Tribunal, Bombay Bench-D vide its order dated 30.11.1990 in the case of Rakhi Beneficiary Trust, has set aside the order of CIT made under sec. 263 of the Act. Therefore, the assessments in the case of assessee for the three years under consideration framed under sec. 143(3) of the act pursuant to order under sec. 263 of the Act cannot operate and the additions made under sec. 64(1)(viii) of the Act have been deleted by the Appellate Authority. This order has been confirmed by the Tribunal. The Tribunal has recorded thus; “We have heard the ld. DR and have also gone through the orders of the authorities below. We find that the ITAT Bombay vide its order dated 30th Nov., 1990 in the case of Rakhi Beneficiary Trust has already set aside the order of the CIT passed under sec. 263 of the Act. During the assessment years under consideration the assessment orders were completed by the A.O. Under sec. 143(3) of the Act in pursuance to the order of CIT, Bombay City, Bombay made under sec. 263 of the Act. The orders under sec. 143 in the assessee's case were framed as a consequential order. In that view of the matter, the DC(A) was justified in deleting the

ITR/114/1997 4/4 JUDGMENT impugned additions and, therefore, we do not find any infirmity in the order of the DC(A).” 6. In the aforesaid factual matrix, it is apparent that the questions raised and referred by the Tribunal, are not questions which arise out of the impugned order of Tribunal dated 26.12.1996. Accordingly, the Reference stands disposed of without answering the questions as the questions do not arise out the order of Tribunal. (D.A. MEHTA, J.) (Z.K. SAIYED, J.) mandora/

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