Commissioner Of Income Tax, Udaipur v. M/S Swastik Enterprises, Saheli Marg, Udaipur

HIGH COURT OF JUDICATURE FOR RAJASTHAN ATJODHPUR D.B. Income Tax Appeal No. 36 / 2009 Commissioner of Income Tax, Udaipur. ----Appellant Versus M/S Swastik Enterprises, Saheli Marg, Udaipur. ----Respondent _____________________________________________________ For Appellant(s) : Mr. K.K. Bissa. For Respondent(s) : Mr. D.R. Bhandari. _____________________________________________________ HON'BLE THE ACTING CHIEF JUSTICE HON'BLE DR. JUSTICE PUSHPENDRA SINGH BHATIJudgment 07/03/2017 By way of this appeal, the appellant has challenged thejudgment and order passed by the Income Tax Appellate Tribunal,Jodhpur whereby the Tribunal has allowed the appeal preferred bythe assessee. This Court, while admitting the appeal, has framed following questions of law: “(i)Whether in the facts and in the presentcircumstances of the case as well as in the law, theTribunal was justified in setting aside of the order ofthe CIT(A) by reducing the addition of Rs.71,00,000/-to Rs.35,75,000/-? (ii)Whether in the facts and in the presentcircumstances of the case as well as in the law, theTribunal was justified in deleting the entire addition ofRs.71,75,000/- made by the AO on account of it beingin the nature of short term capital gain andcommission accrued thereon?” The preliminary objection raised by the learned counsel forthe respondent is that two appeals ought to have been filed andone appeal against two judgments is not permissible. Without going into technicalities, we have heard the matteron merits. The Tribunal has recorded specific finding in the impugned judgment and order which reads as under: “11. The Revenue has also not brought on record anymaterial to set aside the finding of fact reached by theld. CIT(A) in his order where he has found that theamount of Rs.24 lakhs received from the appellant byJTFSPL stands utilized for the purpose of their owninvestment. Under such peculiar facts even though ShriGajendra Porwal or his group companies may beengaged in the business of providing entries in theshape of loan etc., it cannot be accepted that theagreement under consideration did not give right tothem to get the property transferred in their own nameor in the name of any of its nominees. In fact, the AOhimself vide Para 3 at internal page 4 of theassessment order has recorded a finding of fact asunder: “The assessee in the year underconsideration sold Hotel Park. However, itdiverted the part of the profit (Rs. 71 lakhs) inthe hands of JTFSPL which was set off against theloss arising out of sale of shares in the books ofJTFSPL”. He also computed income at para 14 of theassessment order and treated the amount of Rs. 71lakhs as diverted income but added the same to betaxed in the hands of the assesse. The AO nowheremade out a case that this was a case of application ofincome and not that of diversion of income by over-riding title. It however is also not disputed that thehotel building under consideration has finally beentransferred at a sale consideration of Rs. 151.00 lakhs.The appellant M/s Swastik Enterprises under peculiarfacts were under obligation to divert the amount ofdifference between the amount of sale consideration ofRs. 151.00 lakhs and agreed sale consideration of Rs.80 lakhs to JTFSPL as there was an overridingobligation. 12.The test laid down in CIT Vs. Sheetal Das (1961)41 ITR 367 (SC) clearly shows that it is not every obligation to apply income in a particular way thatresults in diversion of income before it reaches theassessee. In that case, it was held as under:- 12.The test laid down in CIT Vs. Sheetal Das (1961)41 ITR 367 (SC) clearly shows that it is not every obligation to apply income in a particular way thatresults in diversion of income before it reaches theassessee. In that case, it was held as under:- “In our opinion, the present case is one inwhich the wife and children of the assessee whocontinued to be members of the family receivedportion of the income of the assessee, after theassessee had received the income as his own.The case is one of application of a portion of theincome to discharge an obligation and not a casein which by an overriding charge the assesseebecame only a collector of another’s income. Thematter in the present case would have beendifferent if such an overriding charge had existedeither upon the property or upon its income,which is not the case”. 13.Keeping in view the overall conspectus of thecase, we find that the amount of Rs. 71 lakhs, in fact,did not reach the assessee as his own income but theobligation income which he has received stood factuallydiverted to JTFSPL. The ld. CIT(A) however laid nobasis or material to hold that an amount of Rs. 35.75lakhs has come back to the assessee from JTFSPL norany cogent and reliable material has been brought onrecord to corroborate the oral statement made forreturn of money by JTFSPL to the appellant.Accordingly, finding no justification in his decision tohold the amount of Rs. 35.75 lakhs as accommodationentries, we set aside his decision on that account andallow the ground in appeal raised by the assessee. Asa consequence of that and in view of the findingsreached hereinbefore, the ground in appeal by therevenue being devoid of any merit also stands rejected.13.In the result the appeal of the assessee standsallowed and appeal by the revenue stands dismissed.” In view of the specific finding of the Tribunal and the earlier applications filed by the Commissioner of Income Tax (Appeals),we are of the considered view that the view taken by the Tribunalis just and proper. The issue has already been decided in favourof the assessee. The appeal stands dismissed accordingly. (DR. PUSHPENDRA SINGH BHATI)J. (K.S. JHAVERI)ACTING C.J.