Arvind Kumar vs Commissioner of Income Tax

C. N. Ramachandran Nair, J.—The connected reference cases arise from the block assessment of the Assessee for the block period of ten years ending on 9-2-1996 after a search made in the premises of the Assessee. Based on materials gathered in the course of search, a block assessment was made, which included Rs. 65 lakhs being the consideration received by the Assessee from a firm of which he was previously a partner for the purchase and sale of a theatre building with land thereon. Similarly in the assessment, the Assessees claim for a foreign gift of Rs. 2 lakhs received by him was disallowed. In the appeal against the block assessment, the Tribunal though confirmed the assessment of Rs. 65 lakhs by rejecting the Assessees appeal on this issue, turned down the departments claim for assessment of the foreign gift amount of Rs. 2 lakhs. In the Assessees reference case the question referred is against assessment of Rs. 65 lakhs sustained by the Tribunal. In the reference at the instance of the revenue, the question referred is on the Tribunals order granting exemption on the foreign gift of Rs. 2 lakhs. We have heard advocate Sri P. Balakrishnan appearing for the Assessee and standing counsel appearing for the Respondent.

Even though counsel for the Assessee elaborately argued that the assessment of Rs. 65 lakhs is without any basis, on going through the orders and the evidence available on record we notice that the finding of the Tribunal is based on proper and convincing evidence about the payment of Rs. 65 lakhs to the Assessee by the firm Penta Associates of which the Assessee was a partner. The statement of the managing partner of the firm is that the Assessee approached him offering sale of 55.125 cents of prime land in the city which was previously occupied by a theatre, on brokerage/commission/margin of Rs. 65 lakhs to the Assessee. The Assessee is said to have made arrangement with the owner for sale of the property. Mr. Varghese stated that on bargaining the Assessee reduced his margin for purchase of the property to Rs. 65 lakhs which was agreed upon. Thereafter for the purpose of acquisition of land and for development of the same, a partnership was constituted with the Assessee as one of the partners on specific condition that on purchase of property, the Assessee will retire from the firm. In fact, in terms of the statement of the managing partner, after constitution of the firm the Assessee along with another partner applied to the Income Tax Department for no objection certificate for purchase of the property and from the firm constituted on 15-11-1993, the Assessee retired on 1-11-1994 and on 2-3-1995, the sale deed was registered with the assistance of the Assessee as the applicant who applied for Income Tax clearance. We notice from the findings of the Tribunal and the statement of the managing partner Mr. Varghese that his evidence is absolutely convincing and the Assessees behaviour in joining the partnership, in applying for Income Tax clearance and in retiring from the firm, conform to the statement given by Mr. Varghese. Further, all other partners of the firm gave sworn statement to the department about payment of Rs. 65 lakhs to the Assessee towards consideration for arranging for purchase of property by the firm and in fact in the balance-sheet of the firm and in the block return filed by the firm, the payment of Rs. 65 lakhs to the Assessee is shown as an expenditure. We are of the view that the finding of the Tribunal is based on convincing evidence and therefore, we answer the question referred to us by the Tribunal at the instance of the Assessee in favour of the revenue and against the Assessee.

So far as the reference made by the Tribunal at the instance of the revenue is concerned, we do not find any ground to interfere because the Assessee produced evidence to convince the Tribunal that the gift of Rs. 2 lakhs involved was a foreign gift and not his income. We, therefore, answer the question referred in the revenues reference against the revenue and in favour of the Assessee.

A copy of this judgment under the signature of the Registrar and seal of the High Court shall be forwarded to the Income Tax Appellate Tribunal, Cochin Bench, Cochin.