AISHABI Vs. COMMISSIONER OF INCOME TAX MADRAS

JUDGEMENT

(1.) THIS is a reference under s. 256 (1) of the I. T. Act, 1961, made by the Income-tax Appellate Tribunal, Madras Bench, referring the following questions for the opinion of this court "1. Whether, on the facts and circumstances of the case, the reopening of the assessment is justified under section 147 (a) of the income-tax Act "

(2.) WHETHER, on the facts and circumstances of the case, the Tribunal was justified in holding that a sum of Rs. 1, 75, 000 is not a windfall which is not liable to tax"

(3.) THE ITO made enquiries with Kalaran also, On 23rd november, 1962, the ITO wrote a letter to Kalaran stating that the assessee's version was that the 3 buses had been sold for Rs. 60, 000 on April 20, 1959, and that the balance of Rs. 1, 75, 000 had been waived by Kalaran in favour of the assessee and that the receipt was in the nature of a windfall. THE ITO pointed out also that in his own assessment proceedings Kalaran had claimed that the 3 buses had been purchased by him for a total consideration of Rs. 2, 41, 741. THE ITO requested Kalaran to explain the variation between the two versions and state whether he had any evidence in support of his version. THEre was a letter from Kalaran on 1st December, 1962, in which the assessee's version was denied. He stated that he had not waived or written off the entire amount of Rs. 1, 75, 000. In substance, in his letter Kalaran stated that the buses had been acquired for a sum of Rs. 2, 35, 000. THE contents of this letter were put to the assessee and there was no reply from him THE ITO completed the assessment on 24th December, 1962, and placed on record a note which to the extent relevant runs as follows "after considering all the materials obtained and placed on record, it is my finding that Sri Kalaran cannot claim this payment to the assessee as part of the purchase cost of the buses, as the documents reveal the sale price of the three buses had been agreed upon at Rs. 60, 000 only. Whatever sums over and above were paid on pronotes and waived would rightly constitute gifts. Sri Kalaran himself has admitted that he has more or less foregone the right of collecting the debts due from the assessee. THEre is no evidence in the sale transaction which obviously is a collusion between the two parties that there was an element of route value embedded in the sale of buses. At any rate, no mention of it has been made in the document of agreement of sale filed. Even at this stage both these parties do not admit that there was any route value attached to the buses. This position has been intimated to the Second Income-tax Officer, assessing Sri V. Kalaran for suitable action in his handsif after scrutiny by the Second Income-tax Officer, any material comes to notice that the excess amount received by the assessee constituted only consideration of route valued then suitable action will be taken to reopen this assessment and include appropriate capital gains. For the present, the admitted capital gain of Rs. 3, 032 does not come up for capital gains tax. . . . . . " *