COMMISSIONER OF INCOME TAX Vs. C F RAJU

JUDGEMENT

(1.) I.T.R. 134/99 at the instance of the Revenue is a reference under Sec.256 (2) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act' for short). In the said income tax reference, the commissioner of Income Tax, Cochin assails the order of the Income Tax Appellate Tribunal in I.T.A.859/Coch 1992 which was an appeal filed by the respondent namely C.F. Johnson, the assessee. I.T.A. 123/00 is an appeal filed by the commissioner of Income Tax, Cochin, under Sec.260 A of the Act challenging Annexure 'D' order of the Income Tax Appellate Tribunal passed in I.T.A.187/Coch/1994 in the matter of the assessment of the respondent, C.F. Raju. Both the proceedings relate to the assessment year 1989-90. The Tribunal had, inter alia, accepted the contention of the assessees that there was no evidence of the assessees having obtained a sum of Rs.10,00,000/- (Rupees ten lakhs) by way of pakidi from their tenant one Sundaresa Pai to whom the ground floor of a commercial building situated by the side of M.G. Road, Ernakulam was let out as per an unregistered lease deed executed on 10-2-1989.

(2.) We heard Sr. Advocate Sri. P.K. Raveendrantha Menon appearing of for the revenue and the learned counsel appearing for the two assessees respectively.

(3.) Supporting the order of the Tribunal, the learned counsel appearing for the assessees made the following submissions before us: - There was no transfer of interest in immovable property either under the provisions of the Act or under the Transfer of Property Act, 1882 so as to attract capital gains. The lease deed dated 10-2-1989 is an unregistered document where under the monthly rent reserved was Rs.5,000/- and the period of lease fixed was 20 years. It was, therefore, a compulsorily registrable instrument within the meaning of Sec.17(1)(d) of the Registration Act, 1908 and Sec.107 of the Transfer of Property Act, 1882. Although the transaction recorded in the said instrument is a lease, legally there is no transfer of a capital asset so as to attract capital gains tax. Moreover, the document recites payment of a refundable security of Rs.2 lakhs only. There is no whisper in the document to suggest payment of Rs.10 lakhs by the tenant to the assessees by way of pakidi. When the document is silent about the payment of any amount by way of pakidi it is impermissible to find such a case. On the very same date on which a search was conducted in the premises of the tenant, the department has conducted a search in the premises of one of the assessees namely C.F. Johnson. Nothing could be unearthed to indicate receipt of any amount over and above the sum of Rs.2 lakhs recited in the document of lease. In the absence of any circumstance to indicate receipt of any amount by way of pakidi by the assessees, it is not permissible to draw inferences founded on mere conjectures to conclude that the assessees had received a sum of Rs.10 lakhs by the way of pakidi. The solitary piece of material namely the sworn statement by Sundaresa Pai was not put to the assessees nor were they given an opportunity to cross-examine the said Sundaresa Pai. Hence, the Tribunal was right in dislodging the findings reached by the assessing authority and the appellate authority that the assessees had obtained a sum of Rs.10 lakhs by way of pakidi and that the said amount was liable to be assessed as capital gains in the hands of the assessee.