CIT vs. BHARTI OVERSEAS TRADING CO

ITA 401/2011 Page 1 of 9

$~5

* IN THE HIGH COURT OF DELHI AT NEW DELHI

% Date of Decision : 29th February, 2012.

+ ITA 401/2011

CIT

..... Appellant Through Mr. Kamal Sawhney, sr. standing counsel with Mr. Amit Shrivastava, Adv.

versus

BHARTI OVERSEAS TRADING CO ..... Respondent Through Mr. C S Aggarwal, Sr. Adv. with Mr. Prakash Kumar, Adv.

CORAM: HON'BLE MR. JUSTICE SANJIV KHANNA HON'BLE MR. JUSTICE R.V. EASWAR

SANJIV KHANNA,J: (ORAL) CM No.3675/2011 (Delay)

This is an application for condonation of delay of 192 days in the refiling of the appeal. Ld. counsel for the respondent states that he has no objection in case the delay is condoned. The statement is taken on record and accepted. Delay in refiling of the appeal is condoned. 2012:DHC:1457-DB

ITA 401/2011 Page 2 of 9

Application is disposed of. ITA 401/2011

The present appeal filed by the Revenue under Section 260A of the Income Tax Act, 1961 (Act, for short) impugns the order dated 23.10.2009 passed by Income Tax Appellate Tribunal (Tribunal, for short) in the case of Bharti Overseas Trading Co., a partnership firm, respondent herein. The assessment year in question is 2004-05. 2. On 16.1.2012 following order was passed : “Two issues have been raised in the present appeal which pertains to the assessment year 2004-05 in the case of a partnership firm M/s. Bharti Overseas Trading Co. The said partnership firm consists of two partners who are also shareholders of Bharti Enterprises Pvt. Ltd. 2. The Assessing Officer held that Rs. 2,13,84,360/- received by the partnership firm from Bharti Enterprises Pvt. Ltd. should be treated as deemed dividend. It may be noted that the two partners hold more than 10% shares in Bharti Enterprises Pvt. Ltd. 3. The CIT (A) and Income Tax Appellate Tribunal have deleted the aforesaid addition under Section 2(22)(e) of the Act on the ground that the partnership firm was not the shareholder in Bharti Enterprises Pvt. Ltd. The aforesaid reasoning/ratio cannot be sustained and is contrary to the decision of this Court in Commissioner of Income Tax v. National Travel Services, [2011] 14 taxmann.com 14 (Delhi). This position is accepted by the respondent-assessee. 2012:DHC:1457-DB

ITA 401/2011 Page 3 of 9

The Assessing Officer expressed reservation/doubt about the exemption claim by Deepika Mittal under Section 54 after stating that only Rs.50 lacs was paid to 2012:DHC:1457-DB

ITA 401/2011 Page 4 of 9

her and balance amount was payable on registration of the sale deed. 7. The CIT (A) in his order has however given a contra finding. Income Tax Appellate Tribunal has confirmed the deletion made by the CIT (A). Contention of the Revenue is that the findings of the CIT (A) and the Tribunal is perverse and factually incorrect. 8. We are repeatedly noticing that the Revenue does not file relevant documents and papers when the question of perversity on factual aspects is challenged before this Court. Without examining the relevant documents and papers we cannot adjudicate and examine the factual matrix raised by the Revenue. In the present case, a similar issue is raised but we cannot answer the issue without looking into the documents/evidence. 9. Accordingly, we permit the Revenue to file the documents/evidence relied upon by them within a period of 15 days subject to payment of costs of Rs.5,000/- to be paid to the Delhi High Court Bar Association Library fund. In case the documents/evidence are not filed, we may have no option but to dismiss the appeal on this ground for failure to produce the relevant documents/evidence. 10. List on 15th February, 2012.”

ITA 401/2011 Page 5 of 9

New Friends Colony, New Delhi from Smt. Deepika Mittal. He had submitted that the balance amount of sale consideration i.e. Rs.2.65 crores was never paid to Deepika Mittal by the respondent-assessee. He had drawn our attention to the fact that Deepika Mittal is the wife of one of the partners of the firm, Sh. Rakesh B. Mittal. 4. Ld. counsel for the respondent-assessee had submitted that Rs.2.65 crores was paid to Deepika Mittal in April, 2000 and the contention raised by the Revenue was false and incorrect. Ld. counsel for the respondent-assessee had submitted that the finding recorded by the Tribunal is factually correct and not false. He had further submitted that the CIT(Appeals) had also recorded a similar factual finding. He had argued that payment of Rs.2.65 crores was not disputed by the Assessing Officer. Ld. standing counsel for the Revenue had disputed the said statement and had referred to the assessment order. 5. In view of the aforesaid position, ld. counsel for the assessee had stated that he shall submit before us relevant details of payment 2012:DHC:1457-DB

ITA 401/2011 Page 6 of 9

to Deepika Mittal. 6. Relevant details have been produced before us, which shows that payment of Rs.50 lacs was made to Deepika Mittal in March, 2000 and a further sum of Rs.2.65 crores was paid to Deepika Mittal by debit in the respondent-assessee’s bank account on 18th April, 2000. Revenue has also produced before us the original assessment record. Notice under Section 133(6) of the Act was issued to Deepika Mittal. In response thereto vide letter dated 20th November, 2006, Deepika Mittal had enclosed her return of income with statement of income for assessment year 2001-02. The statement of income contained the computation of long term capital gain. In the said computation, it is specifically stated that the total sale consideration received in April, 2000 was Rs.3.15 crores. 7. It is clear from the aforesaid that the stand and contention of the Revenue that Rs.2.65 crores was not paid to the respondent- assessee to Deepika Mittal is factually wrong and incorrect. The Revenue should have examined and verified the records before 2012:DHC:1457-DB

ITA 401/2011 Page 7 of 9

raising the said contention in this appeal. 8. We may record here that the Assessing Officer vide noting made on letter dated 20th November, 2006 had recorded : “Ld. AR of the assessee is required to establish how the sale consideration value was reached as well as to comment whether sale by firm was “a slump sale”. Alternatively, it needs to be placed on record that purchase of property from Mrs. Deepika Mittal “ostensibly by way of an agreement to sale” was not sham and an arrangement for syphoning (sic) out profits without attendant payment of tax ---- by allowing a price over and above the market consideration. Adj. for 28/11/06 on Ld. Ar’s request. Further, notional loss “as diminution of share value will not be allowed.”

It is apparent that the Assessing Officer did not proceed further on the said aspects. We may note here that the respondent-assessee and Deepika Mittal had obtained permission under Chapter XXC of the Act from the appropriate authority. It is also apparent that the Assessing Officer did not ask for the valuation report from the appropriate authority. There are questions and doubts, which remain as the property purchased in February/April, 2000 for Rs.3.15 crores was sold in May, 2003 for Rs.2.40 crores, but in the absence of 2012:DHC:1457-DB

ITA 401/2011 Page 8 of 9

enquiries and failure to uncover facts, we cannot proceed and hold that the order of the Tribunal is perverse. Several issues required in- depth examination and consideration but detailed enquiry which was necessary and required was not undertaken. The inquiry made at the assessment stage was incomplete. Accordingly, on the second aspect we cannot interfere in this appeal under Section 260A of the Act. 9. On the first issue of deemed dividend, we have in our order dated 16.1.2012 referred to the concession made by the counsel for the respondent-assessee in view of decision of this Court in Commissioner of Income Tax Vs. National Travel Services (2011) 14 Taxmann.com 14 (Delhi). In these circumstances, accordingly, we frame the following substantial question of law : “Whether the Income Tax Appellate Tribunal was right in holding that Section 2(22)(e) of the Income Tax Act, 1961 is not applicable on the ground that the partnership firm i.e. the respondent-assessee was not a shareholder in Bharti Enterprise Pvt. Ltd.?”

2012:DHC:1457-DB

ITA 401/2011 Page 9 of 9

The appeal is disposed of. No costs.

SANJIV KHANNA, J.

R.V.EASWAR, J. February 29, 2012/vld 2012:DHC:1457-DB