High Court Of Allahabad
CIT vs. Shekh Mohammad Arif
Section 263
Asst. Year 1979-80, 1980-81
R.K. Agrawal & Prakash Krishna, JJ.
IT Ref. No. 57 of 1987
25th November, 2004
Counsel Appeared :
Dhananjay Awasthi, for the Revenue : Vikram Gulati, for the Assessee
JUDGMENT
Prakash Krishna , J. :
The Tribunal, Allahabad, at the instance of CIT has referred the following questions of law under s. 256(1) of the IT Act, 1961 (hereinafter referred to as ‘the Act’) for opinion to this Court :
“1. Whether the Tribunal was right in coming to the conclusion that no enquiries need be made by the ITO relating to the issue of transfer of property in favour of wife in lieu of Mehar and investment in property, once it had given finding that the CIT was correct in fact and in law in setting aside the order of the ITO as the ITO had framed the assessment without making proper enquiries ?
Whether, in law and circumstances of the case, the Tribunal is justified in holding that there is no need to make any further enquiry about the loan from Shri D.K. Gupta ?
Whether, in law and on the facts of the case, the Tribunal is justified in excluding the income of property at Nawal Kishore Road, Lucknow from the assessment of the assessee while there is no legal transfer of that property as itself held by the Tribunal ?
Whether, in law and circumstances of the case, the Tribunal is justified in following the judgment of Andhra Pradesh High Court in the case of Ghiasuddin Babu Khan vs. CIT (1985) 47 CTR (AP) 72 : (1986) 153 ITR 707 (AP) ?
In other words, it ought to have made distinction between the ‘prompt’ and ‘deferred dower debt’.”
2. Briefly stated, the facts giving rise to the present reference are as follows : This reference relates to the asst. yrs. 1979-80 and 1980-81. In the course of assessment proceedings for the asst. yr. 1979-80 the assessee-respondent disclosed certain investments to the extent of Rs. 1,37,593 in a property known as Skylark. He further has shown in the balance sheet a sum of Rs. 70,000. In the note appended to the balance sheet it was mentioned that a sum of Rs. 70,000 was taken as a loan from one Dhruv Kumar Gupta. After calling explanation on various points, the ITO completed the assessment proceedings under s. 143(3) of the Act. During the course of assessment proceedings, certain directions were given to the ITO by the IAC. Those directions were taken into account by the ITO while framing the assessment order. Thereafter a notice under s. 263 of the Act was issued on 25th Jan., 1984 by the CIT as he was of the view that the ITO had failed to consider the income from the property bearing No. C- 43/28/1 situate at Naval Kishore Road, Hajratganj, Lucknow. This property according to the assessee was transferred by him to his wife in discharge of dower debt. The CIT was of the opinion that the ITO did not make full enquiries in respect of the investment of Rs. 70,000 through loan from Shri D.K. Gupta. He was also of the view that the property at Naval Kishore Road having not been transferred by a registered deed, therefore, the property should be considered in the hands of the assessee. He concluded that the assessment order was erroneous and prejudicial to the interest of Revenue and, therefore, set aside it and directed the ITO to make fresh assessment and to calculate the taxable income after making full and complete enquiry regarding the assessee’s business and investment activities and about the claim of the transfer of the property. The same view was taken by the CIT for the asst. yr. 1980-81 and similar directions were issued to the ITO to redo the assessment work. The matter was taken up by the assessee in the second appeal before the Tribunal. The Tribunal was of the view that the claim of the assessee in respect of borrowing of Rs. 70,000 from Shri D.K. Gupta was supported by the affidavit dt. 3rd March, 1981 filed by Shri D.K. Gupta. Besides it, the assessee had clarified the position in the course of assessment proceedings for the asst. yr. 1981-82. On the question of transfer of property at Naval Kishore Road not under a registered deed, the Tribunal accepted that there was no transfer of property but was of the opinion that there was nothing in Muslim Law to prevent a husband from choosing to pay the dower debt or the wife from accepting it. It was of the view that since the entire matter has been carefully gone into and examined by the ITO before making the assessment in the asst. yr. 197778 and in the reassessment proceedings of the asst. yr. 1978-79, no further enquiry was required.
3. Heard Shri Dhananjay Awasthi, the learned standing counsel for the Department and Shri Vikram Gulati, the learned counsel for the assessee.
4. The learned standing counsel for the Department submitted that the Tribunal committed illegality in setting aside the order passed by the CIT. He submitted that having it found by the Tribunal that the revisional jurisdiction was rightly exercised by the CIT as the assessment orders were erroneous and prejudicial to the interest of Revenue, the Tribunal should not have interfered in appeals. In contra, the learned counsel for the assessee-respondent placed in extenso the order of the Tribunal and submitted that the Tribunal rightly considered the material on the record and reached to the conclusion that there was no necessity to remand the matter to the assessing authority for fresh consideration.
5. The learned standing counsel has placed reliance upon a judgment of Supreme Court in the case of Malabar Industrial Co. Ltd. vs. CIT (2000) 159 CTR (SC) 1 : (2000) 243 ITR 83 (SC). In this case the Supreme Court has held that phrase “prejudicial to the interest of Revenue” is not an expression of art and is not defined in the Act. This phrase should be read in conjunction with an erroneous order passed by the AO. Every loss of revenue as consequence of an order of the AO cannot be treated as “prejudicial to the interest of Revenue”. For example, when an ITO adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and ITO has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order “prejudicial to the interest of Revenue” unless the view taken by the ITO is unsustainable in law. In the case in hand, the Tribunal found that the CIT rightly exercised the jurisdiction under s. 263 of the Act, as proper enquiries had not been made by the ITO while framing the assessment orders.
The Tribunal examined the contention of the assessee-respondent with regard to the borrowing of Rs. 70,000 from Shri D.K. Gupta. A supporting affidavit by Shri D.K. Gupta was filed before the ITO clarifying the position that he had advanced loan to the assessee-respondent. The Tribunal has taken into consideration the fact that in the course of assessment for the asst. yr. 1981-82 the matter was examined in detail by the ITO as there was also a further loan by Shri D.K. Gupta to the tune of Rs. 30,000 having interest of Rs. 24,600 which was paid by the assessee. The Tribunal, therefore, concluded that it would be unnecessary for the ITO to go into enquiry once again as it would prolong the agony of the assessee and wastage of the time and energy. The learned standing counsel could not point out any error to the aforesaid approach of the Tribunal in the matter except that the Tribunal should not have undertaken exercise upon itself. Therefore, we find no illegality in the order of the Tribunal on this point and answer the question No. 2 in affirmative accordingly, i.e., against the Revenue and in favour of the assessee. Now we take up the question Nos. 1, 3 and 4 as they are interrelated. The assessee claimed that he has transferred the property bearing No. C-43/28/1 situate at Naval Kishore Road, Hajratganj, Lucknow in lieu of Mehar to his wife. Therefore, the income from the said property may not be included in his hands. He claimed that he had handed over the property to his wife as part payment of Mehar due to her and that the municipal records were mutated and the property stands in the name of his wife, who is paying water tax and other municipal taxes to the local authority. She has let out the said property and receiving the rents from the tenants. The case of the Department is that indisputably the alleged transfer during the previous year relevant to the assessment year in question by the assessee-respondent to his wife is not through a registered document. It was submitted that in view of the judgment of the Allahabad High Court in the case of Ghulam Abbas vs. Mt. Razia Begum AIR 1951 All 86 (FB), no transfer of property could take place in absence of a registered transfer deed. There is no dispute that the assessee-respondent has not executed a registered deed of transfer with respect to the property in question in favour of his wife. The Tribunal has examined this matter and has placed reliance upon a decision of the Supreme Court in the case of R.B. Jodha Mal Kuthiala vs. CIT (1971) 82 ITR 570 (SC). The Supreme Court has interpreted s. 9 of the old IT Act, 1922 with reference to the word “owner”. It has been observed that s. 9 (old IT Act) brings to tax the income from property and not the interest of a person in the property. A property cannot be owned by two persons, each one having independent and exclusive right over it. Hence, for the purpose of s. 9, the owner must be that person who can exercise the rights of owner, not on behalf of owner but in his own right. The facts as found do disclose that the property was transferred by the assessee in favour of his wife though without a registered deed. The wife after the transfer started dealing with the property as owner thereof. She let out the property to the tenants and realized the rent from them. Her name has also been mutated in the municipal records. In view of these facts the Tribunal rightly came to the conclusion that the assessee-respondent ceased to be “owner” of the property in question after the transfer and his wife became the “owner” within the meaning of s. 22 of the Act. In the case of Addl. CIT vs. U.P. State Agro Industrial Corpn. Ltd. (1981) 20 CTR (All) 141 : (1981) 127 ITR 97 (All), a Division Bench of this Court following the judgment of the Supreme Court in the case of R.B. Jodha Mal Kuthiala (supra) has held that the scope of expression “property of which the assessee is owner” used in s. 9 of the 1922 Act and “property owned by the assessee” used in s. 32 of the Act 1961, is the same. This Court has held that the expression “building owned by the assessee” in s. 32 of the Act has not been used in the sense of the property, complete title in which vests in the assessee. The assessee will be considered to be an owner of the building under s. 32 of the Act if he is in a position to exercise the right of owner not on behalf of the person in whom the title vests but in his own rights.
8. In our opinion, the aforesaid judgment of this Court is binding on us for the purpose of s. 22 of the Act also. The learned standing counsel could not place anything to the contrary to persuade us to take a different view. He also could not point out any illegality in the order of the Tribunal holding that under the Muslim law a husband is liable to pay dower to his wife. Therefore, the question Nos. 1, 3 and 4 are answered in affirmative, i.e., against the Revenue and in favour of the assessee. However, there shall be no order as to costs.
[Citation : 278 ITR 461]
