Hemesh Family Trust - Applicant(S v. Commissioner Of Income Tax - Respondent(S

ITR/248/1995 IN THE HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX REFERENCE No. 248 of 1995 For Approval and Signature: HONOURABLE MR.JUSTICE R.S.GARG HONOURABLE MR.JUSTICE M.R. SHAH =========================================================1[Whether Reporters of Local Papers may be allowed ]to see the judgment ?2To be referred to the Reporter or not ?1[Whether Reporters of Local Papers may be allowed ]to see the judgment ?2To be referred to the Reporter or not ? 3[Whether their Lordships wish to see the fair copy ]of the judgment ?Whether this case involves a substantial question of law as to the interpretation of the 4constitution of India, 1950 or any order made thereunder ?5[Whether it is to be circulated to the civil judge ]? ========================================================= HEMESH FAMILY TRUST - Applicant(s)Versus COMMISSIONER OF INCOME TAX - Respondent(s) ========================================================= Appearance : MR SN SOPARKARfor Applicant(s) : 1,MR TANVISH U BHATT for Respondent(s) : 1,========================================================= CORAM :HONOURABLE MR.JUSTICE R.S.GARG and HONOURABLE MR.JUSTICE M.R. SHAH Date : 29/08/2006 ORAL JUDGMENT (Per : HONOURABLE MR.JUSTICE R.S.GARG) ITR/248/1995 Mr. SN Soparkar, learned counsel assisted by Ms.VaibhaviParikh, learnedcounselfortheassessee. Mr.Tanvish U . Bhatt, learned counsel for the Revenue. Partiesare heard. 2.At the instance of the assessee, the Income TaxAppellateTribunal, AhmedabadBench'B'hasmadethisReference for opinion of this Court in relation to Income TaxAppeals No 2682 2682 and 2684 Ahd 1990 on the following. , //question; 'Whetheronthefactsandinthecircumstancesofthecasethetribunalwasjustifiedinholdingthatnovalidtrust came into existence on the basis ofalleged deed Dt. 20 4 82 20 9 82 and the. ./. .assessed income as computed by the ITCshouldbesubjecttotaxatratesasapplicable to A O P Under the Act ?' . . . 3.It is to be noted that Reference Application No.1465 Ahd 1994//, 1466 Ahd 1994//andReferenceApplicationNo. 1467 Ahd 1994 were made by the concerned assessee//for referring various questions. Reference Applications wereheard and ultimately in relation to 8 questions proposed intheabovereferred3applications, onesinglequestion, asreferredtoabove, hasbeenreferredtothisCourtfor opinion. 4.The facts, in nutshell, for disposal of the presentReference, arethatoneIshwardasGordhandasPatel,resident of 4 A / , Shivalaya, Chembur, Bombay, executed a-Deed of Settlement on 20[th]April 1982 on two non judicialstamp papers of Rs. 60 bearing No. 467 and another ofvalue of Rs. 40 bearing No. 466 purchased by ShivalayaConstruction Co., on 5[th]July 1982. A submission was madeby the assessee, placing reliance upon the Trust Deed thatbytheDeedofSettlementasumofRs. 1000/- wastransferredto3persons, namely ( ) 1BhagwandasGordhandasGujarati, residentofPune, ( ) 2PurshottamdasBhikhabhai Patel of Dholka, and ( ) 3Smt. Kalindi JayantilalPatel of Dholka as trustees to hold the said sum for thebenefit of three beneficiaries who were mentioned in clause( ) 2of the said Deed of Settlement namely, ( ) 1Hemesh son, of Navnit Kanaiyalal Patel, ( ) 2Pinakin, son of BhagwandasGordhandas Gujarati, and ( ) 3Amrish, son of BhagwandasGordhandas Gujarati. Various arguments were raised beforetheAssessingOfficerthatastheTrusthadcomeintoexistence, the Trustwas required to be assessed. TheAssessing Officer, recording salient features in the matter,observed that the Trust Deed in fact was sham and bogusand was concocted. He decided the matter against theinterestsoftheassesseeandopenedthepenalty ITR/248/19954/11JUDGMENT ITR/248/19954/11JUDGMENT proceedings. Theorder, notbeingpalatabletotheassessee, was challenged at his instance before the C I T. . .(Appeals). The C I T . . . (Appeals) called for Remand Reportfrom the Assessing Officer as per his order dated 6 10 1986 ...The Remand Report was received by the C I T. . . (Appeals)vide Assessing Officer's letter dated 20 1 1990. ., the Reportwasagainsttheinterestsoftheassessee. TheCommissioner of Income Tax (Appeals), after hearing theparties and not agreeing with the Remand Report observed, that there was an arithmatical clerical mistake in mentioning/the date of execution of the document as '20[th]April 1982'becauseinfactthedocumentwasexecutedon20[th]September1982'. Healsoobservedthattheattendingcircumstances like minutes book recorded and cash bookopened by the assessee, the opening of the Bank accountand registration under the Sales Tax Act which were after20[th]September 1982 would show that the Trust Deed wasexecutedandsignedon20[th]September1982. HeaccordinglyallowedtheAppeals. TheRevenue, beingdissatisfied with the order, preferred Appeal to the IncomeTax Appellate Tribunal. The Income Tax Appellate Tribunal,after hearing the parties and after recording the argumentswhich were raised by the parties, observed that the C I T . . .(Appeals) was unnecessarily influenced by the submissionsmade by the assessee. It observed that the Trust Deedwas sham and bogus it could not be executed on 20, [th]April ITR/248/1995 1982onastamppurchasedon5[th]July1982, thattooespecially when the stamp was purchased in the name ofM s Shivalaya Construction Co/ . ., there were difference in thesignatures and there was a serious dispute about the place, of execution of the document. It accordingly allowed theAppeals and held that the Assessing Officer was justified indisowning and disregarding the Trust Deed. The assessee,thereafter, madevariousapplicationsforReference.ReferringtoQuestionNo 1.inReferenceApplicationNo.1465 Ahd 1994//, Mr. Soparkarsubmittedthatnumberofquestions, whichwereconsideredbytheIncomeTaxAppellate Tribunal, were not raised by the parties and noopportunity was afforded to the assessee to meet with thesubmissions. It is also the case of the assessee that thelegal effect of purchase of the stamp in name of some oneelseanddifferenceinplaceofexecution attestation/, ordifference in the signatures and execution of the documenton a date prior to the date of the purchase of the stampswere in fact not argued. He submits that the Income TaxAppellate Tribunal was absolutely unjustified and from theframe of the question proposed by the assessee it wouldclearlyappearthattheassessee allthroughouthadbeencontending that he was condemned unheard. On the otherhand, learned counsel for the Revenue submits that from aperusal of the order passed by the Income Tax AppellateTribunal andParagraph 7ofthe Statement of the Case ITR/248/1995 made by the Tribunal it would clearly appear that not onlythe questions were raised and argued by the Revenue butthose were properly replied by the learned counsel for theassessee. He submits that the Tribunal was justified inrestoring the order passed by the Assessing Officer. Wehave heardthe partiesat length andhave perusedtheReference. 5.It would be trite to say that if a statement isrecordedbytheTribunalinitsorderorjudgmentorproceedings, then that would be taken to be correct unlessthe person aggrieved by such report makes an applicationand files an affidavit of the counsel who have appeared inthematterorthepartywhowaspresentinpersoncontending that such statements which have become partof the proceedings etc., are wrong and bad and in factwerewrongstatementsifnotmisstatements. Inthepresentmatter, immediatelyafterTribunalhadmadeitsorder such an affidavit or an application was not submitted, .Under the circumstances, it will have to be presumed thatthe statements made in the final order of the Income TaxAppellateTribunalwerenotincorrectorwerenotmisstatements of the Tribunal. 5.It would be trite to say that if a statement isrecordedbytheTribunalinitsorderorjudgmentorproceedings, then that would be taken to be correct unlessthe person aggrieved by such report makes an applicationand files an affidavit of the counsel who have appeared inthematterorthepartywhowaspresentinpersoncontending that such statements which have become partof the proceedings etc., are wrong and bad and in factwerewrongstatementsifnotmisstatements. Inthepresentmatter, immediatelyafterTribunalhadmadeitsorder such an affidavit or an application was not submitted, .Under the circumstances, it will have to be presumed thatthe statements made in the final order of the Income TaxAppellateTribunalwerenotincorrectorwerenotmisstatements of the Tribunal. 6.AssumingthattheReferenceApplicationwhichhad raised all these issues and had made allegations of ITR/248/19957/11JUDGMENT wrongstatementsintheordercouldbetakentobeastatementbythepartyorbytheCounsel, thenitwasimperative upon the party or the Counsel to file an affidavitafter the Reference was made in view of the statementrecorded in Paragraph 7 onwards of the Statement of theCase. Paragraph 7 onwards, of the Statement of the Case,is verbatim reproduction of the order passed by the IncomeTax Appellate Tribunal. If on two available opportunitiessuch affidavit is not filed, then it will have to be presumedthat the assessee was not aggrieved by or was not takinganexceptiontotherecordofthecase. Underthecircumstances, theQuestionNo 1.proposedinReferenceApplication No. 1465 Ahd 1994 may come within the sweep//of the final questions but will have to be answered against, the interests of the assessee. 7.TheAssessingOfficer, soalsotheTribunal, tohold that the Trust Deed was sham and bogus and was-ante dated, haverelieduponcertainfactswhichareasfollows; ( )1TheStamppaperwaspurchasedinthename of M s Shivalaya Construction Company/ . ;name of M s Shivalaya Construction Company/ . ;( )2The document is alleged to be executed on--20[th]September 1982 but it bears the date of 20--4 1982;( )3The stamp papers used are dated 5[th]July ( )4 1982; ContrarytotheprovisionsoftheBombayStamp Act, the stamps which were purchased inMaharashtra were used in Gujarat No stamp duty. has been paid to the Government of Gujarat. Variance in the signatures of the trustee the, document is alleged to have been executed atAhmedabadbutitbearstheendorsementotherwisethatthesignaturewereaffixedatDholka. 8.Shri Soparkar, learned counsel for the assessee-submits that the assessee was not to be benefitted by antedatingthedocumentandthecircumstanceswhichwerewithin the reach of the assessee have been submitted byhim before the authorities. He submits that the cash bookwasopenedon20[th]September1982, thetrusteeshad-recordedtheMinutesafter20[th]September, thesales taxregistration was obtained after 20[th]September 1982, andthe Bank accounts were also opened after 20[th]September1982. His submission is that if every action is taken by theTrust after 20[th]September 1982, then these facts if aretaken in juxtaposition would lead to irresistible conclusionthat the Trust Deed was executed on 20[th]September 1982and there was some typographical, arithmatical or clericalerror in putting the date as '20[th]April 1982'. 9.Shri Bhatt, learned counsel for the Revenue, onthe other hand, submits that these circumstances would fallshort to discharge the burden which was very heavy uponthe assessee. According to him, the date of the documentis 20[th]April 1982, but the stamp was purchased on 5[th]July1982. He submits that if on comparison of the attendingcircumstances the Tribunal has recorded a finding then thatwould be a finding of fact and in any case this Court wouldnot be entitled to reverse the findings unless the findingsare perverse or such which could not be arrived at by aprudent person. 10.We have gone through the order passed by theTribunal. We have also gone through the order passed bythe learned Commissioner of Income Tax (Appeals). 9.Shri Bhatt, learned counsel for the Revenue, onthe other hand, submits that these circumstances would fallshort to discharge the burden which was very heavy uponthe assessee. According to him, the date of the documentis 20[th]April 1982, but the stamp was purchased on 5[th]July1982. He submits that if on comparison of the attendingcircumstances the Tribunal has recorded a finding then thatwould be a finding of fact and in any case this Court wouldnot be entitled to reverse the findings unless the findingsare perverse or such which could not be arrived at by aprudent person. 10.We have gone through the order passed by theTribunal. We have also gone through the order passed bythe learned Commissioner of Income Tax (Appeals). 11.The Tribunal in its detailed order has referred to, , every question raised by the parties. Not only that, it hasreferred to each and every circumstance which related toexecution of document, its trustees and the reasons which,persuaded the Tribunal not to rely upon the document. 12.When we had asked Mr. Soparkar as to how thestamps purchased by M s/ . Shivalaya Construction Companycame in hands of the settlor, Mr. Soparkar submitted that ITR/248/1995 the present settlor was an employee with M s/ . ShivalayaConstruction Company, therefore he could obtain the stampand use it to his benefit. The explanation is bad. Anemployee could not use or utilise the stamps purchased byhis master. In the present case, the master has not comeforward to say that he ever authorised his employee to usethe stamps which were purchased for and on behalf of orby the master himself. In any case, the stamps werepurchasedon5[th]July1982. Anydocumentcouldbedetailed on such stamps after its purchase and not prior to5[th]July, because prior to 5[th]July 1982 the stamps were notin existence. The Tribunal has considered the circumstanceswhich are patent on the face of the records and which arelatent in the body of the document. , Ifon comparison ofthe circumstances floating on the surface of the records andthe explanation offered by the assessee, the Tribunal hasrecordedafindingoffactthatthedocumentdoesnotinspire the confidence, then the Tribunalwasjustifiedinrejecting the document.13.Forthereasonsaforesaidandforthereasonsgiven in the order passed by the Tribunal we are unable to, hold that the Tribunal was unjustified in deciding the matteragainst the interests of the assessee. 14.The question is answered against the interests ofthe assessee and in favour of the Revenue. The Reference ITR/248/1995 11/11JUDGMENT stands disposed of. No costs . . rmr [ . . R S Garg J, .][ M R Shah J. . , .]