HIGH COURT OF ALLAHABAD
Commissioner of Income-tax
Smt. Saroj Agarwal
IT Appeal No. 242 of 2007
SEPTEMBER 27, 2012
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1. We have heard Sri Dhananjay Awasthi for the appellant. Sri R.R. Agrawal appears for the respondent-assessee.
2. This Income Tax Appeal under Section 260-A of the Income Tax Act, 1961 (the Act) is directed against the order dated 23.06.2006, passed by the Income Tax Appellate Tribunal, Delhi Bench ‘SMC’, New Delhi in Income Tax Appeal No. 3590/Del/2003, relating to the Assessment Year 1997-98, by which the department’s appeal was dismissed.
3. The department has raised the following substantial questions of law for consideration:-
“1. Whether on the facts and circumstances of the case, the ITAT is justified in law and facts in not adjudicating the appeal on the new facts on which action under Section 148 of the Income tax Act was taken by the Assessing Officer?
“2. Whether on the facts and circumstances of the case, the ITAT is justified in law ignoring the new fact on which action under Section 147 of the Income tax Act was initiated and reassessment was made and base its (ITAT) findings entirely on its earlier order?
4. The assessee disclosed both short-term and long-term capital gain, and claimed exemption under Section 54-F of the Act on the ground that the entire sale proceeds of Rs. 4,46,257/- were invested in the construction of house property at Patel Nagar, Ghaziabad. In the original assessment proceedings, completed under Section 143 (3) of the Act on 29.03.2000, the Assessing Officer, denied the exemption claimed by the assessee on the ground that the construction of the house property in which the sale proceeds of shares is stated to have been invested, was complete before the date of transfer of shares. In appeal, the CIT (Appeals), allowed the exemption under Section 54-F of the Act, and observed that the exemption is admissible, if the sale proceeds of long term capital gains are invested in the construction of a house property within the specified time, provided that on the date of transfer, the assessee did not own a house property, the income of which is chargeable to tax as income from house property. The CIT (Appeals) did not agree with the AO that the assessee had shifted to the new house in 1994. He found that the construction started in the year under consideration, continued beyond the financial year. The Tribunal vide order dated 27.05.2005, upheld the order of the CIT (Appeals), with following observations:-
“In view of the above and in the fact and circumstances of the present matter, we are of the view that the Assessing Officer was not justified in denying the benefit of Section 54 F to the assessee on the ground that the assessee was owner of the premises on the date of transfer of shares by her. The learned CIT (Appeals) was, therefore, fully justified in deleting the addition made by the Assessing Officer by denying exemption u/s 54 F.”
5. In the meantime, on an information received that the transaction relating to sale of shares of M/s. Vatsa Music was a sham transaction, the assessment was reopened under Section 148 of the Act in the year 2000. The reassessment was proposed on the materail namely the denial by M/s. Vatsa Music Ltd., that the assessee was a share holder in the Company or that any shares were transferred in her name. The AO treated the entire transaction of sale of shares to be bogus, and accordingly sale proceeds of Rs. 4,46,257/- were added to the total income of assessee as undisclosed income. The CIT (Appeal) examined the records, and found that that the assessee had undertaken the transactions in question, which was properly entered into the records of her authorized agent. There was no system to find out that the certificate issued by the authorized agent of a particular company are genuine certificates or fake certificates. The assessee could not be held responsible, and made to suffer, for the dealings that may have taken place between the company and the authorized agent subsequent to the transaction. The CIT (Appeals) came to a conclusion that the transaction was genuine, and directed the AO, to treat the income as income from long term capital gains.
6. The Tribunal considered the argument that the AO has powers to question the nature of transaction, and has recorded its findings as follows:-
“Thus, when the department had the required material and when the Assessing officer did raise the issue before the CIT (Appeals) and the CIT (Appeals) not having considered the same, the department should have raised this issue in its appeal before the Tribunal. Instead, the ground of the revenue was only on the exemption aspect contending that the assessee was already an owner of the house, the construction of which had been completed much before the year under consideration. Thus, the revenue really missed the bus at that point of time impliedly accepting the genuineness of the transaction. In that manner, when the matter came up before the Tribunal in the first round of litigation, the position was that the genuineness of the transaction stood accepted by the department and hence, the Tribunal did not have the occasion to go into that aspect of the matter, nor was it necessary to do so. On this ground itself, the order of CIT (Appeals) has to be upheld.”
7. We are of the view of that the findings recorded by the Tribunal on the genuineness of the transaction, affirming the order of the CIT (Appeals) are findings of fact. The Tribunal was also justified in assuming that the department could have raised the issue, when the requisite material was already available, in its appeal before the Tribunal in the regular assessment proceedings. The revenue had only pressed on the exemption aspect before the Tribunal.
8. The Income Tax Appeal does not raise any substantial question of law to be considered by the Court, and is accordingly dismissed.