- Bookmark
- Share
- CaseIQ
Commissioner Of Income Tax, New Delhi v. D.L.F United .
Factual and Procedural Background
The Revenue filed these civil appeals challenging the judgment dated 29 May 1985 of the Delhi High Court. The High Court had answered two references made under Section 256(2) of the Income-tax Act, 1961 for Assessment Year 1962-63—one concerning the quantum of taxable income (ITC No. 29 of 1973) and the other concerning consequential penalty proceedings (ITC No. 30 of 1973). The questions in the first reference asked whether various sums—allegedly earned through benami transactions in land and paid to named individuals—constituted the assessee-company’s income. The Tribunal had decided these questions against the assessee, but the High Court re-examined the evidence and answered in its favour. Relying on these answers, the High Court also held that the penalty reference did not survive. The Revenue appealed.
Legal Issues Presented
- Whether the questions raised in the quantum reference were pure questions of fact, thereby precluding the High Court from re-appreciating evidence contrary to the findings of the Income-tax Appellate Tribunal.
- In light of the proper disposition of the quantum reference, how the penalty reference under Section 271(1)(c) should be dealt with.
Arguments of the Parties
Assessee's Arguments
- The High Court was justified in re-examining the record because the Tribunal had allegedly misappreciated the basis on which the impugned transactions were treated as benami; therefore, the matter involved a question of law.
Table of Precedents Cited
No precedents were cited in the provided opinion.
Court's Reasoning and Analysis
The Court emphasised that the Income-tax Appellate Tribunal is the final fact-finding authority. It noted that all six questions in the quantum reference were framed in terms of “whether there was any evidence before the Tribunal” to reach particular factual conclusions. Such questions are inherently factual. The High Court, however, embarked upon a fresh evaluation of the evidence, for example stating that there was “no evidence to show that the profit of Rs 2,10,000 earned by Raisina was the assessee’s income.” The Supreme Court held that this approach exceeded the High Court’s jurisdiction under Section 256(2), which confines it to questions of law.
As to the assessee’s submission that the Tribunal had erred in treating the transactions as benami, the Court observed that the High Court itself had accepted the benami finding, acknowledging that the individuals involved were “merely dummies” for the assessee-company. Hence, there was no legal question warranting interference.
Because the High Court’s answers in the quantum reference were set aside, its conclusion that the penalty reference had become infructuous could not stand. The Supreme Court therefore remitted the penalty reference to the High Court for fresh consideration on the existing record and in light of the Tribunal’s factual findings.
Holding and Implications
Appeals Allowed. The Supreme Court:
- Set aside the High Court’s answers in the quantum reference (ITC No. 29 of 1973) and dismissed that reference, thereby restoring the Tribunal’s decision against the assessee.
- Set aside the High Court’s order on the penalty reference (ITC No. 30 of 1973) and remitted the matter to the High Court for fresh adjudication consistent with the Tribunal’s factual findings.
Implications are confined to the parties: the assessee’s tax liability as determined by the Tribunal is reinstated, and the penalty proceedings will now be reconsidered by the High Court. No broader precedent was announced.
1. These appeals by the Revenue arise upon the judgment dated 29-5-1985 of the Delhi High Court answering two sets of references made to it under Section 256(2) of the Income Tax Act, 1961 against the Revenue. Both sets of questions relate to Assessment Year 1962-63. The first set of questions relate to the assessee's quantum appeals; the other set relate to the consequential penalty proceedings. The questions read thus:
In ITC No. 29 of 1973
“(1) Whether there was any evidence before the Tribunal to justify the finding that profit of Rs 2,10,000 made by Raisina Cold Storage and Ice Co. Limited was the assessee's income?
(2) Whether there was any evidence before the Tribunal to justify the finding that the payment of Rs 41,039.67 made to Surjit Singh, Sham Singh and Rajinder Singh was the assessee's income and was rightly taxed as such in its hands?
(3) Whether there was any evidence before the Tribunal to justify the finding that the sum of Rs 3,78,329 was the income of the assessee liable to tax as such?
(4) Whether, in any view of the matter, the sum of Rs 3,78,329 was the assessee's income during the relevant year ending on 31-10-1960?
(5) Whether there was any evidence before the Tribunal to justify the finding that the payment of Rs 10,402 made to A.D Gupta, Kartar Singh and S.K Burman was the assessee's income?
(6) If answers to Questions (1), (2), (3) and (5) are in the affirmative, whether the findings of the Tribunal in respect of the amounts referred to in the said questions are otherwise legally justified?”
In ITC No. 30 of 1973
“(1) Whether on the facts and in the circumstances of the case, the levy of penalty under Section 271(1)(c) of the Income Tax Act, 1961 was justified?
(2) If the answer to the aforesaid question is in the affirmative, whether on the facts and in the circumstances of the case, while levying penalty, the tax sought to be evaded is to be calculated by including in the income returned, the amounts shown in Part F of the return?
(3) Whether on the facts and in the circumstances of the case, for calculation of penalty, item of Rs 3,78,379 has to be disregarded as being income not liable to be returned?
(4) Whether on the facts and in the circumstances of the case, for purpose of calculation of the penalty, assessed income has to be modified by making suitable adjustment in the value of the closing stock consequent upon disallowance of a portion of the purchase price?”
2. It is patent from the questions in the quantum appeal that they are questions of fact. The Income Tax Appellate Tribunal is the final fact-finding authority and it has decided against the assessee. The High Court ought not to have entered into a discussion of the evidence to come to a conclusion on facts contrary to that reached by the Tribunal. That it had done so is clear from the judgment under appeal. Thus, it stated:
“The first question to be asked by us is whether there is any evidence to show that the sum of Rs 2,10,000 received by Raisina in assigning the right to purchase three-fourths share in the land can be treated as the income of the assessee-Company. The question is so framed as to require us to determine the evidence on which such a conclusion can be reached.”
Again, it stated:
“Therefore, the answer to the first question has to be that there is no evidence to show that the profit of Rs 2,10,000 earned by Raisina was the assessee's income.”
3. These quotations are illustrative of the manner in which the High Court has proceeded in relation to all the questions in the first reference.
4. Mr Salve, learned counsel for the assessee submitted that what was considered by the High Court was really a question of law in that the Tribunal had not correctly appreciated the basis upon which it could be held that there had been “benami” transactions. The submission has to be rejected because the High Court has not differed from the Tribunal's finding that there had been “benami” transactions, as shown by the following sentence:
“No doubt, these persons are benami of the assessee-Company in the sense that they were merely dummies to get the land transferred to the assessee-Company. However, they were necessary dummies because….”
5. We have, therefore, no hesitation in setting aside the judgment of the High Court insofar as it relates to the first reference, i.e, the quantum appeal. The answers to the questions in the first reference are set aside and the reference is dismissed, affirming the view taken by the Tribunal.
6. Having regard to the answers that were given by the High Court on the quantum appeal, it came to the conclusion that the reference on the penalty appeal did not survive and it answered the questions thereon accordingly. We do not have the record of the penalty appeal before us so as to be able to decide the reference thereon. Having regard to the conclusion that we have reached on the quantum appeal, it is clear that the reference on the penalty appeal shall have to be decided on the record on the basis of the Tribunal's findings of fact, for which purpose we set aside the order of the High Court thereon and remit the reference on the penalty appeal (ITC No. 30 of 1973) to the High Court to be heard and decided afresh.
7. The appeals are, accordingly, allowed. There shall be no order as to costs.
Alert