Delhi High Court
Cit vs Bharti Overseas Trading Co on 29 February, 2012
Author: Sanjiv Khanna
Bench: Sanjiv Khanna, R.V. Easwar
$~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.
ITA 401/2011 Page 1 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.
ITA 401/2011 Page 2 of 9
4. Accordingly, we are inclined to allow the present appeal
to this extent, after framing substantial question of law.
5. At this stage, learned counsel for the respondent-
assessee submits that the payment of Rs.2,13,84,360/- was not
out of accumulated profits but this contention was not examined
by the CIT (A) and Income Tax Appellate Tribunal as the
respondent had succeeded on the other ground mentioned
above. He submits that the matter should be remitted to the
Tribunal for adjudication on the said aspect. The request/prayer
made by the respondent-assessee is correct and deserves to be
accepted in view of the observations made by the CIT (A) in
paragraph 2.5.
6. The second issue which arises for consideration is the
disallowance of long term capital loss of Rs.1,19,22,414/-.
Learned counsel for the Revenue submits that the order passed
by the Tribunal is perverse. He has drawn our attention to the
assessment order which records that property No.D-819, New
Friends Colony, New Delhi was originally owned by Deepika
Mittal, wife of one of the partners. By the Agreement to Sell
dated 25th February, 2000, the property was agreed to be sold to
the partnership firm i.e. the respondent-assessee for
Rs.3,15,00,000/-. Subsequently, vide an agreement dated 2nd
May, 2003 the respondent-assessee sold the property in favour
of M/s. Shitiz Metals Ltd. for consideration of Rs.2,40,00,000/-.
The assessment order refers to certain factual aspects including
the return filed by Deepika Mittal assessment year 2001-02 etc.
It is submitted that Deepika Mittal had not shown and paid
capital gains and the capital gains column had been left blank.
It was simultaneously claimed that a note was enclosed with the
return stating that long term capital gains on the sale of the
property was exempt under Section 54, consequent upon her
purchase of a residential house in Vasant Vihar for more than
Rs.13 crores. 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
ITA 401/2011 Page 3 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."
3. On 15.2.2012, we recorded the contentions of the parties on the
second aspect. Mr. Kamal Sawhney, ld. senior standing counsel
during the course of arguments had submitted that the respondent-
assessee had paid Rs.50 lacs when the agreement to sell dated 25th
February, 2000 was executed for purchase of the property No.D-819,
ITA 401/2011 Page 4 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
ITA 401/2011 Page 5 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
ITA 401/2011 Page 6 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
ITA 401/2011 Page 7 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.?"
ITA 401/2011 Page 8 of 9
10. In view of the decision of this Court in National Travel
Services (supra), the aforesaid question is answered in favour of the
Revenue and against the respondent-assessee. We may note that the
respondent-assessee had raised a contention that the payment of
Rs.2,13,84,360/- was not out of accumulated profits but this aspect
was not examined by the CIT(Appeals) and the Tribunal as the
respondent-assessee had succeeded on the other ground mentioned
above. Accordingly, the said aspects/contentions of the
respondent/assessee will be examined by the Tribunal.
Parties/authorized representative will appear before the Additional
Registrar of the Tribunal on 30th March, 2012, when a date of
hearing will be fixed.
The appeal is disposed of. No costs.
SANJIV KHANNA, J.
R.V.EASWAR, J. February 29, 2012/vld ITA 401/2011 Page 9 of 9