THE COMMISSIONER OF INCOME TAX vs. M/S GOOD EARTH DEVELOPERS

The above

Briefly, the facts of the case as stated by the appellant are that the appellant conducted a search and seizure operation on Mr. Sadiq Shaikh and others on 25.02.2010. Thereafter, a notice under Section 153C was issued on 26.08.2011 which was served on the assessee on 29.08.2011. As there was no response, the assessee was asked to file the return by letter dated 12.10.2010. In response to the said letter, the assessee filed return of income for the first time on 17.10.2011 declaring the income as Nil. Thereafter, a notice under Sections 143(1) and 143(2) dated 18.10.2011 was served on the assessee -respondent on 19.11.2011 calling upon the assessee - respondent to furnish certain details. The Assessing Officer verified all the facts and found by order dated 26.12.2011 that the assessee- respondent has not paid Rs.11,58,16,250/- to Mr. Sadiq Shaikh and others and that the said amount is an income of the assessee-respondent. The matter was carried to the Commissioner of Income Tax (Appeals) who by order dated 14.08.2012 deleted the said amount. The appellant/Revenue thereafter preferred an appeal before the Income Tax Appellate Tribunal which came to be disposed of by order dated 17.05.2013 dismissing the said appeal. Being aggrieved by the said order, the appellant have preferred the 3 present appeal.

Ms. Asha Dessai, learned counsel appearing for the appellant has pointed out that the authorities below have come to a perverse finding on fact that the transaction in question was genuine and not a colourable device to avoid the payment of tax. The learned counsel further pointed out that the documentary evidence which has been produced by the appellant conclusively establishes the ratio laid down in the case of McDowell and Co. Ltd., V/s CTO (1985) reported in 154 ITR 148 is squarely applicable to the facts of the present case. The learned counsel further pointed out that the authorities have misconstrued the provisions of law to arrive at a conclusion that the transaction alleged by the assessee- respondent was genuine transaction in payment of such amount. The learned counsel as such points out that the following substantial question of law arises in the present appeal : “Whether

We have examined the contention of the learned counsel and we have also gone through the records. The Commissioner of Income Tax while examining the appeal preferred by the assessee- respondent has noted at paras 5.5 and 5.6 thus : “5.5 I have gone through the assessment order, perused the submissions made by the appellant and also discussed the case with the A/R of the appellant. The A. O. has added the entire liability of Rs.11.58 crs payable to Mr. Sadiq Shaikh as per detailed reasoning provided in his order but while doing so A. O. has never contradicted or been able to disprove the facts prevalent and existing in the case of appellant.

6 Also, it is seen from the actions of the A.O. that the appellant has been issued notice u/s 226(3) of the Act, wherein appellant has been instructed to pay the money outstanding in the name of Mr. Sadiq Shaikh amounting to Rs.8.33 crs to income tax department towards income tax liablity of Mr. Sadiq Shaikh, failing which the appellant will be considered as assessee in default. In case, the A.O. had the view that this liability is non existing, his further actions are contradictory to his own order. The appellant has made the payment of entire Rs.8.33 crs to income tax department towards the tax liability of Mr. Sadiq Shaikh. Hence, it is seen that appellant has paid up Rs.11.58 crs to Mr. Sadiq Shaikh and Income Tax Department as a tax of Mr. Sadiq Shaikh. As such, the addition made by the A.O. considering the liability of Rs.11.58 crs as on non

The Income Tax Appellate Tribunal while examining the appeal preferred by the appellant - Revenue has taken note of the fact that a sum of Rs.50 lakhs were paid by a demand draft to Mr. Sadiq Shaikh and was required to pay the remaining amount of Rs.11.58 crores to Mr. Sadiq Shaikh. The Tribunal has also noted that in the financial statement for the financial year 2008-2009 as per the balance sheet as on 31.03.2009, the respondent has shown this amount payable to Mr. Sadiq Shaikh. The Tribunal has also noted that in the disputed land, there were tenants and consent of the tenants was required for development of the overall plan of the property. The Tribunal also noted that there was a civil suit which is also pending in respect of the purchased land wherein the legal title of the land is in dispute. The Tribunal after examining the material on record came to the conclusion that this is a liability and the outstanding amount which is not paid by the respondent but was added as the income of the assessee-respondent. The Tribunal thereafter noted that the CIT (A) has deleted this 8 amount as the entire amount is a liability. The Tribunal

On perusal of the said orders of the authorities below, we find that there are concurrent findings of fact arrived at by the authorities below on the basis of evidence on record to come to the conclusion that in fact the amounts were payable to the said Mr. Sadiq Shaikh which was included as the income of the assessee- respondent. The findings of fact by the authorities below to come to the conclusion that the said amount is to be deleted are on the basis of cogent reasons and based on appreciation of the material on record. The Apex Court in the judgment reported in (2005)2 SCC 324 in the case of M. Janardhana Rao V/s Joint Commissioner of Income Tax has observed at paras 10 and 15 thus :

An appeal under Section 260-A can only be in respect of a “substantial question of law”. The expression “substantial question of law” has not been defined anywhere in the statute. But it has acquired a definite connotation through various judicial pronouncements. In Sir Chunilal V. Mehta & Sons Ltd. v. Century Spg. & Mfg. Co. Ltd. this Court laid down the following tests to determine whether a substantial question of law is involved. The tests are: (1) whether directly or indirectly it affects substantial rights of the parties, or (2) the question is of general public importance, or (3) whether it is an open question in the sense that the issue is not settled by pronouncement of this Court or Privy Council or by the Federal Court, or (4) the issue is not 10 free from difficulty, and (5) it calls for a discussion for alternative view. There is no scope for interference by the High Court with a finding recorded when such finding could be treated to be a finding of fact.” Delhi by observing at para 23 thus :