2014 (5) TMI 819 - HC - Income Tax

Agreement deemed capital transfer under Income Tax Act. Rectification applications rejected, appeals dismissed.

Shri Chandra Prakash Jain Versus Assistant Commissioner of Income Tax (Inv.) Circle & Another

The court held that the agreement dated 7.9.1991 constituted a transfer of capital assets under Section 2(47)(vi) of the Income Tax Act. The rejection of ... Agreement to sell amounts to transfer or not - Whether the Tribunal was justified in holding that the agreement to sell amounts to transfer by virtue of Section 2 (47)(v) and (vi) of the Act – Held that:- The tribunal had given cogent reasons for setting aside the order of CIT(A) – there was no illegality in the tribunal's proceeding to examine the case in the light of Section 2(47) (vi) - All the facts being on record whether transaction is covered by Section 2(47)(v) or 2(47) (vi) was well within the domain of the tribunal – the Tribunal was fully justified in holding that agreement of sale dated 7.9.1991 amounts to transfer of capital assets by virtue of Section 2(47) (vi) of the Act. - Decided against the assessee. Rectification of order – Mistake apparent on record - Assessee relied upon the decision of Apex Court in Honda Siel Power Products Ltd. Vs. Commissioner of Income Tax [2007 (11) TMI 8 - Supreme Court of India] - Held that:- It is well established that no party appearing before the tribunal should suffer on account of mistake committed by the tribunal. In the said case, the tribunal admitted its mistake and rectified the order which order was upheld by the Apex Court. In the present case the tribunal has recorded the categorical finding that no apparent mistake has been committed by the tribunal and no case is made out for rectification. – Decided against the assessee. Issues Involved:1. Whether the agreement to sell dated 7.9.1991 amounts to transfer by virtue of Section 2(47)(v) and (vi) of the Income Tax Act.2. Whether the Appellate Tribunal was justified in making out a new case under Section 2(47)(vi) without allowing an opportunity to the appellant to meet it.3. Whether the Tribunal's rejection of the miscellaneous application for rectification filed by the assessee was justified.Issue-Wise Detailed Analysis:1. Agreement to Sell and Transfer under Section 2(47)(v) and (vi):The primary issue was whether the agreement to sell dated 7.9.1991 constituted a transfer of capital assets under Section 2(47)(v) and (vi) of the Income Tax Act. The tribunal found that possession of the property was with the 1974 purchasers and was handed over after an arbitration award in 1998. The tribunal concluded that Section 2(47)(v) was not applicable as possession was not delivered pursuant to the 1991 agreement. However, the tribunal held that the agreement was covered under Section 2(47)(vi), as it transferred the ownership rights to M/s Agarwal's Associates. The tribunal noted that the agreement enabled the enjoyment of the property and the owners had done everything on their part to transfer the rights in the property, thus constituting a transfer under Section 2(47)(vi).2. Tribunal's New Case under Section 2(47)(vi):The appellant argued that the tribunal made out a new case under Section 2(47)(vi) without allowing an opportunity to the appellant to address it. The court noted that the grounds of appeal included references to Section 2(47), which encompasses both sub-sections (v) and (vi). The tribunal was within its domain to examine the case under Section 2(47)(vi) as all relevant facts were on record. The court found no illegality in the tribunal's approach and rejected the appellant's contention.3. Rejection of Miscellaneous Application for Rectification:The appellants filed miscellaneous applications for rectification of the tribunal's order dated 28th December 2004, alleging apparent mistakes. The tribunal rejected these applications, stating that no apparent mistakes were committed. The court upheld the tribunal's decision, stating that the tribunal did not commit any error in rejecting the rectification applications as no manifest error was identified. The court referenced the Supreme Court's judgment in Honda Siel Power Products Ltd. vs. Commissioner of Income Tax, emphasizing that rectification is justified only when a manifest error is apparent.Conclusion:The court concluded that the tribunal was justified in holding that the agreement dated 7.9.1991 amounted to a transfer of capital assets under Section 2(47)(vi) of the Act. The rejection of the miscellaneous applications for rectification was also upheld. All appeals were dismissed, and the questions framed in the appeals were answered in favor of the revenue and against the assessee.