THE COMMISSIONER OF INCOME TAX vs. SADIA SHEIKH

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TXA/16/2014HC BombayHCBM05003474201309 April 2014Author: F. M. REIS,HON'BLE SHRI JUSTICE Z. A. HAQ8 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the authorities below (CIT(A) and Tribunal) had concurrently found, based on the appreciation of evidence on record, that there was no transfer of flats and consequently, the income could not be taxed in the hands of the respondents. The Court noted that the person to whom the flats were assigned (Mr. Monserrate) had duly been taxed on such income, and the income from the flats was shown in his return. The High Court emphasized that concurrent findings of fact arrived at by the authorities below based on evidence cannot be re-appreciated by the High Court in an appeal under Section 260A of the Income Tax Act unless perversity is disclosed by the appellant. Citing the Supreme Court judgments in M. Janardhana Rao and Vijay Kumar Talwar, the Court stated that interference is only possible if findings are based on no evidence, inadmissible evidence is considered, legal principles are misapplied, or evidence is misread. As no perversity was pointed out by the revenue, the Court found no substantial questions of law arising in the appeals. Therefore, both appeals were rejected.

What were the facts?

The Commissioner of Income Tax (appellant) filed appeals against the orders of the Commissioner of Income Tax (Appeals) which allowed the appeals of Sadiq Sheikh and Sadia Sheikh (respondents). A search under Section 132 of the Income Tax Act was conducted on the respondents' premises on 25.02.2010. The Assessing Officer added Rs. 2,72,02,000/- as profit from the sale of 11 flats, which was 50% taxed for each respondent. The respondents contended this was double taxation as the amount was already assessed in the hands of Mr. Monserrate for Assessment Year 2006-2007. The CIT(A) deleted the addition, finding no evidence of sale or accrual of income to the respondents, deeming it a notional addition. The Tribunal upheld the CIT(A)'s order, noting an agreement for development and sale of land, assignment of construction rights for 42 flats to Mr. Monserrate, and an addendum allotting 31 flats to Mr. Sadiq Shaikh and 11 to Mr. Monserrate. The agreement was cancelled, and income from 11 flats was offered to tax by Mr. Monserrate.

What were the issues?

1. Whether the High Court can re-appreciate findings of fact arrived at concurrently by the authorities below, based on the appreciation of evidence on record, in an appeal under Section 260A of the Income Tax Act, without any perversity being disclosed. Assessee's Contention: The assessee (respondent) argued that the addition made by the Assessing Officer was a double taxation as the income from the sale of flats was already assessed in the hands of Mr. Monserrate for Assessment Year 2006-2007. The CIT(A) correctly deleted the addition, finding no evidence of sale or accrual of income to the respondents. Revenue's Contention: The revenue (appellant) was not satisfied with the explanation of the assessee and adopted a rate of Rs. 14,000/- per square meter for the surrendered flats, bringing the amount to tax in the hands of the respondents. The revenue likely contended that the CIT(A) and Tribunal erred in deleting the addition, implying that the transaction did result in taxable income for the respondents.

Which sections of the Income-tax Act were involved?

Section 132,Section 5A,Section 260A

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
:1: IN THE HIGH COURT OF BOMBAY AT GOA TAX APPEAL NOS. 15 & 16 OF 2014 TAX APPEAL NO. 15 OF 2014 The Commissioner of Income Tax Karnataka (Central), Bangalore .. Appellant V e r s u s Sadiq Sheikh Nr. Don Bosco, Odxel, Dona Paula Goa. Major in age. PAN : AMFPS2073J .. Respondent AND TAX APPEAL NO. 16 OF 2014 The Commissioner of Income Tax Karnataka (Central), Bangalore .. Appellant V e r s u s Sadia Sheikh Nr. Don Bosco, Odxel, Dona Paula Goa. Major in age, PAN : AKQPS9076A … Respondent Ms. Asha A. Desai, Advocate for the appellant. Mr. A. N. S. Nadkarni, Senior Advocate with Mr. D. Lawande, Advocate for the respondent. :2: Coram : - F. M. REIS & Z. A. HAQ, JJ. Date :- 9 th April, 2014

ORAL ORDER

(Per F. M. Reis, J.)

Heard Ms. Asha Desai, learned counsel appearing for the appellant and Mr. A. N. S. Nadkarni, Senior Advocate appearing for the respondent.

2.

Briefly, the facts of the case as stated by the appellant are that a search under Section 132 of the Income Tax Act was conducted in the residential premises of the assessee - respondent situated near Don Bosco, Odxel, Dona Paula, Goa, on 25.02.2010. Thereafter, the assessee filed the return of income originally on 27.06.2006 declaring the total income of Rs.1,78,440/- which was filed before the Income Tax Department at Chennai on 27.06.2006. In response to the notice, the assessee – respondent filed a return of income on 02.08.2011 by declaring a total income of Rs.1,33,440/- and agricultural income of Rs.45,000/-. It is not in dispute that both the respondents in the above appeals were governed by the system of community of property in force in the State of Goa and according to Section 5A of the Income

:3: Tax Act, the income of the husband and wife under any head of income shall not be assessed as that of community of property but such income of the husband and wife, under each head of income, shall be apportioned equally between the husband and wife and the income so apportioned shall be included separately in the total income of the husband and wife respectively. Considering the said aspect, a consolidated order was passed by CIT (A) in case of the above two assessees being the husband and the wife. The main dispute is with regard to the addition of Rs.2,72,02,000/- on account of profit arising from the sale of 11 flats admeasuring 1943 square metres out of which 50% has been taxed for each of the respondents abovenamed. The Assessing Officer was not satisfied with the explanation given by the assessee - respondent and accordingly a sum of Rs.2,72,02,000/- at the rate of Rs. 14000/- per square metres for 1943 square metres was adopted as the value of the flats surrendered and brought to tax in the hands of the assessee - respondent as income of the assessee. It was the case of the respondent that the said amount was already assessed in the hands of one Mr. Monserrate for Assessment Year 2006 - 2007 and as such the taxation in the hands of the respondent would amount to double addition. But however, the Assessing Officer did not :4: agree with this contention.

3.

The respondent thereafter preferred an appeal before the Commissioner of Income Tax (Appeals), and the Commissioner has held that there was no evidence on record to suggest that the flats were actually sold and that the proceeds of sale of these flats or the income thereof had accrued to the respondent. It was further held that the taxation in the hands of the respondent in such circumstances is only a notional addition of income which is not in order and therefore deleted. The Commissioner further found that no income of transaction arose in the hands of the respondent on the basis of facts on record but however this transaction cannot be claimed as an expenditure by the respondent towards the cost of the project as it does not relate to the transfer of land. Accordingly, the appeal preferred by the respondent was treated to be allowed. The Tribunal upon re- examination of the material has noted that there was an agreement for development and sale of CABO land which was admeasuring 5989.50 square metres. In the said property, there was a tenant and some residential houses. In order to put up such building, construction right were assigned to Mr. Monserrate for the entire 42 flats. Thereafter, the Tribunal

:5: also noted that there was also an addendum dated 09.07.2004 from where 31 flats were to be allotted to Mr. Sadiq Shaikh and 11 flats to the said Monserrate. The agreement was thereafter cancelled and the income of 11 flats was shown in the return of income of the said Mr. Monserrate and such income was offered to tax. Accordingly, the Tribunal found that CIT (A) is justified in his action and as such there was no interference called for on the part of the Income Tax Appellate Tribunal.

4.

From the foregoing narration of facts and the findings arrived at by the authorities below, we find that the authorities below have concurrently found on the basis of appreciation of evidence on record that there was no transfer and as such the income could not be taxed in the hands of the respondent herein. The records also reveal that the person to whom flats have been assigned have duly been taxed on such income. As such the income of the said flats were shown in his return. The concurrent findings of fact arrived at by the authorities below based on evidence on record cannot be re- appreciated by this Court in the present appeal under Section 260A of the Income Tax Act unless any perversity is disclosed by the appellant.

:6:

5.

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 :

“10. Some of the provisions of Section 260-A are in pari materia with various sub-sections of Section 100 CPC. The provisions are Sections 260-A(1), 260- A(2)(c), 260-A(3), 260-A(4) of the Act corresponding to Sections 100(1), 100(3), 100(4) and 100(5) CPC. … ...

15.

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

:7: 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 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 :

“23. A finding of fact may give rise to a substantial question of law, inter alia, in the event the findings are based on no evidence and/or while arriving at the said finding, relevant admissible evidence has not been taken into consideration

or inadmissible evidence has been taken into consideration or legal principles have not been applied in appreciating the evidence, or when the evidence has been misread. (See Madan Lal v. Gopi,

:8: Narendra Gopal Vidyarthi v. Rajat Vidyarthi, Commr. of Customs v. Vijay Dasharath Patel, Metroark Ltd. v. CCE and W.B. Electricity Regulatory Commission v. CESC Ltd.)”

Considering the ratio laid down by the Apex Court in the aforesaid judgments, we find that as no perversity has been pointed out by the learned counsel appearing for the appellant in the said findings of fact of the authorities below and as such there are no substantial questions of law which arise in the present appeal for consideration by this Court. Hence, both the appeals stand rejected. Z. A. HAQ, J F. M. REIS, J at*

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