TMI Blog1983 (4) TMI 81X X X X Extracts X X X X X X X X Extracts X X X X ..... s open to the assessee to prove that the sale transaction evidenced by registered sale deed was a sham transaction and no sale in fact took place? (2) Whether, the amount of capital gains liable to assessment has been correctly computed in accordance with the provisions of s. 55(2)of the IT Act, 1961"? In other two Income-tax references, viz., 98 and 100 of 1974,questions referred were in respect of exigibility of penalties under ss. 271 (1)(a) and 271(1)(c) respectively. The Hon'ble High Court passed a speaking order in I.T. Ref. No. 99 of 1974, answered question No.1, given above, in favour of the assessee and observed about question No. 2 that it is not necessary to answer the same in view of the finding of their Lordships regarding question No.1. The Hon'ble High Court further directed the Tribunal to determine the real question involved in the case whether the sale of factory in question was a sham transaction and on that basis also held, as above said, that question No.2 in I.T. Ref. No. 99/74 and both the questions in I.T. Ref. Nos.98 and 100/74 need not be answered as the penalty proceedings shall follow the decision in the main case on question No.1 in I.T. Ref No. 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istration with the sales-tax authorities were relied upon including the certificate from the Electricity Department for the release of electricity connection, certificate form the Chaudhry Cotton Ginning and Processing Factory, besides copy of judgment of the Sub-Judge, Mandi Dabwali, dt. 14th July, 1971 as per which the first sale made by the assessee in favour of the Cooperative Society was annulled. The AAC confirmed the action of the ITO rejecting all the contentions raised by the assessee as against them all stood the registered sale deed of the factory in question the capital gains in respect of which is under dispute. 4. When the matter travelled before the Tribunal, the Tribunal also rejected all the contention made by the assessee in order to prove the sale of the factory in question as 'sham transaction', as the Tribunal held that the registered sale deed was final and, therefore, refused to look into other material produced by the assessee with a view to prove its case that the sale transaction was a 'sham transaction'. Out of the said Tribunal's decision, when the assessee wanted to come in reference under s. 256(1)that too was denied and when at the instance of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of CIT vs. Indian Molasses Co.(P) Ltd. (1970) 78 ITR 474 (SC). He mainly relied on the civil court decision annulling the sale in question and from over-whelming evidence, according to him, available on record, there was no sale as such and, therefore, no capital gains could be subjected to tax and when it was so, question of penalties both under s. 27(1) (a) and 271(1) (c)could not arise. 6. The ld. Deptl. Rep. Mr.R.K. Bali, on the other hand, besides relying on the earlier Tribunal decision, submitted that once the sale is registered through a registered sale deed it should not lie in the month of the assessee to go back the way it has gone. In the alternative, he submitted that from the evidence placed by the assessee on record Daulat Ram is a witness to the partnership deed and he was not examined. Similarly, Gurdev Singh was also not examined. In the copy of machinery account, there was no opening balance and Ram Pal, Secretary of the Society, was also not examined. His alternative submission was that at best the assessment matter may be sent back to the ITO for re-adjudication. 7. In reply, the ld. Counsel for the as submitted that a decade has already passed as th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we have been pressing their cotton since that time and before that there was no factory at all." The Electricity Department about the release of power connection vide its certificate dt.24th Jan., 1969 says, as under, which finds place at page 119 of its compilation: "Certified that the power connection of 40 BHP board bearing a/c No.G-126 was released to Sh. Niranjan Bansal Dal Plant and Cotton Factory on 19th Dec., 1963 as per entries in the service register at page 145 of old register." Photostate copy of the sales-tax register number also supports the contention of the assessee. Perusal of the construction account of the factory also shows that it went upto 31st March,1964. If the balance carried over on 31st March, 1964 on the credit side in a figure of Rs. 33,234 is perused, it shows that only insignificant sum was spent on the property in question during the year under consideration. On top of all this, there is a civil court decree in which the sale deed dt. 14th June, 1962 was held as void and ineffective against the rights of the plaintiffs on suit filed by two coparceners Durga Dass and Vijay Kumar and Rajiv Kumar minor sons of Niranjan Dass, who was cashier of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aryana Anr.1977 P.L.J. 230 (Full Bench), we had observed that their Lordships had held that the revenue should keep away from the question whether a decree of a civil court is collusive and in para II of the said order we had extracted and placed the observation from the said decision made at page 241 of the report, which may be reproduced hereunder: "...........The Legislature has not provided for any saving in favour of decrees obtained bonafide as distinguished from collusive decrees for the simple reason that it would be inappropriate for the revenue authorities to go into the question whether the decree of a civil court is collusive..... The rights of persons who are parties to the decision such as they are, remain unaffected inter se." 9. We may be with the ld. departmental representative for the limited extent that some of the people who had given statement in this case are not reliable but with that we cannot ignore other facts such as certificates from the Electricity Department. Sales Tax Department, Municipality and on top of all the civil court decree. We may also, for the sake of argument, accept the contention of the ld. departmental representative that certai ..... X X X X Extracts X X X X X X X X Extracts X X X X
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