Itr v. The Commr.of Income Tax,Cochin

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE V.K.MOHANAN MONDAY, THE 14TH DECEMBER 2009 / 23RD AGRAHAYANA 1931 ITR.No. 2 of 2004() ------------------- AGAINST THE ORDER IN RA.193 & 242/COCH/98 IN ITA.20/COCH/1997 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPLICANT(S): -------------- MR.ARAVINDKUMAR,28, 109, MAIN AVENUE,PANAMPILLY NAGAR, COCHIN-36. BY ADV.SRI.P.BALAKRISHNAN RESPONDENT(S): --------------- THE COMMISSIONER OF INCOME-TAX,COCHIN. ADV. SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH THIS TAX REFERENCE HAVING BEEN FINALLY HEARD ON 14/12/2009, ALONG WITH ITR NO.3 OF 2004, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: C.N.RAMACHANDRAN NAIR &V.K.MOHANAN, JJ. ....................................................................I.T. Reference Nos.2 & 3 of 2004 .................................................................... Dated this the 14th day of December, 2009. JUDGMENT Ramachandran Nair, J. The connected reference cases arise from block assessment of theassessee for the block period of ten years ending on 9.2.1996 aftersearch made in the premises of the assessee. Based on materialsgathered in the course of search, block assessment was made, whichincluded Rs.65 lakhs being the consideration received by the assesseefrom a firm of which he was previously a partner for the purchase andsale of a theatre building with land thereon. Similarly in theassessment, assessee's claim for a foreign gift of Rs.2 lakhs received byhim was disallowed. In the appeal against block assessment, theTribunal though confirmed the assessment of Rs.65 lakhs by rejectingthe assessee's appeal on this issue, turned down the department's claimfor assessment of the foreign gift amount of Rs.2 lakhs. In the assessee's reference case question referred is against assessment ofRs.65 lakhs sustained by the Tribunal. In the reference at the instanceof the Revenue, the question referred is on the Tribunal's order grantingexemption on the foreign gift of Rs.2 lakhs. We have heard Adv.Sri.P.Balakrishnan appearing for the assessee and Standing Counselappearing for the respondent. 2. Even though counsel for the assessee elaborately argued thatthe assessment of Rs.65 lakhs is without any basis, on going throughthe orders and the evidence available on record we notice that thefinding of the Tribunal is based on proper and convincing evidenceabout the payment of Rs.65 lakhs to the assessee by the firm PentaAssociates of which assessee was a partner. The statement of theManaging Partner of the firm is that the assessee approached himoffering sale of 55.125 cents of prime land in the city which waspreviously occupied by a theatre, on brokerage/commission/margin ofRs.65 lakhs to the assessee. Assessee is said to have made arrangement with the owner for sale of the property. Mr.Varghesestated that on bargaining the assessee reduced his margin for purchaseof property to Rs.65 lakhs which was agreed upon. Thereafter for thepurpose of acquisition of land and for development of the same, apartnership was constituted with assessee as one of the partners onspecific condition that on purchase of property, the assessee will retirefrom the firm. In fact, in terms of the statement of the ManagingPartner, after constitution of the firm the assessee along with anotherpartner applied to the Income Tax Department for No ObjectionCertificate for purchase of the property and from the firm constitutedon 15.11.1993, assessee retired on 1.11.1994 and on 2.3.1995 sale deedwas registered with the assistance of the assessee as the applicant whoapplied for Income Tax clearance. We notice from the findings of theTribunal and statement of the Managing Partner Mr.Varghese that hisevidence is absolutely convincing and the assessee's behaviour injoining the partnership, in applying for Income Tax clearance and in retiring from the firm, confirm to the statement given by Mr.Varghese.Further, all other partners of the firm gave sworn statement to thedepartment about payment of Rs.65 lakhs to the assessee towardsconsideration for arranging for purchase of property by the firm and infact in the Balance Sheet of the firm and in the block return filed by thefirm, the payment of Rs.65 lakhs to the assessee is shown as anexpenditure. We are of the view that the finding of the Tribunal isbased on convincing evidence and therefore, we answer the questionreferred to us by the Tribunal at the instance of the assessee in favourof the Revenue and against the assessee. 3. So far as the reference made by the Tribunal at the instance ofthe Revenue is concerned, we do not find any ground to interferebecause assessee produced evidence to convince the Tribunal that thegift of Rs.2 lakhs involved was a foreign gift and not his income. We,therefore, answer the question referred in the Revenue's referenceagainst the Revenue and in favour of the assessee. A copy of this judgment under the signature of the Registrar andseal of the High Court shall be forwarded to the Income Tax AppellateTribunal, Cochin Bench, Cochin. C.N.RAMACHANDRAN NAIRJudge pms V.K.MOHANANJudge