1998 (4) TMI 177 - AT - Benami Property

Issues Involved:

1. Limitation of the assessment order.
2. Computation of capital gains for benami properties.
3. Opportunity of being heard.
4. Right to cross-examine and examination of key witnesses.
5. Correctness of the sale consideration.
6. Assessment of capital gains on the sale of Kalmanda property.
7. Payment to Amarlal Kishandas.
8. Sole beneficiary of the sale proceeds.
9. Invocation of section 52(2) of the Income-tax Act.

Detailed Analysis:

1. Limitation of the Assessment Order:
The Tribunal examined whether the assessment order dated 28-3-1988 was barred by limitation. The assessee argued that the assessment should have been completed within the normal two-year period, and the extension of time was not properly invoked. The Tribunal found that the Assessing Officer had issued a notice under section 271(1)(c) on 22-1-1987, which extended the time limit under section 153(1)(b). The Tribunal concluded that the assessment was not barred by limitation as the necessary proceedings were initiated within the prescribed time frame.

2. Computation of Capital Gains for Benami Properties:
The Tribunal considered whether capital gains arising from properties held benami could be taxed in the hands of the real owner despite the Benami Transactions (Prohibition) Act. The Tribunal noted that the properties were purchased in 1973 and sold in 1983, before the enactment of the Benami Transactions (Prohibition) Act in 1988. Citing the Supreme Court's decision in R. Rajagopala Reddy, the Tribunal held that the Act did not have retrospective effect and thus, the capital gains could be assessed in the hands of the real owner.

3. Opportunity of Being Heard:
The Tribunal addressed the assessee's claim that he was not given a proper opportunity to be heard. The Tribunal found that the assessee was given multiple opportunities to present his case, including several adjournments and hearings. The Tribunal concluded that sufficient opportunity was provided, and the assessee was not deprived of his right to be heard.

4. Right to Cross-Examine and Examination of Key Witnesses:
The Tribunal examined whether the assessee was denied the right to cross-examine witnesses whose statements were relied upon by the Assessing Officer. The Tribunal noted that the assessee did not request cross-examination during the assessment proceedings or before the first appellate authority. The Tribunal found that the request for cross-examination was raised for the first time before the Tribunal and deemed it an afterthought. Consequently, the Tribunal rejected this claim.

5. Correctness of the Sale Consideration:
The Tribunal evaluated the claim that the sale consideration of Rs. 110 lakhs was incorrect. The Tribunal reviewed various agreements and statements, concluding that the total sale consideration was indeed Rs. 110 lakhs. The Tribunal dismissed the assessee's contention that only part of the sale consideration was received and that the remaining amount was shared with others.

6. Assessment of Capital Gains on the Sale of Kalmanda Property:
The Tribunal upheld the Assessing Officer's computation of capital gains based on a total sale consideration of Rs. 110 lakhs. The Tribunal found that the assessee was the beneficiary of the entire sale consideration and directed the Assessing Officer to compute the capital gains tax accordingly.

7. Payment to Amarlal Kishandas:
The Tribunal considered whether the finding that Amarlal Kishandas was paid only Rs. 12 lakhs was justified. The Tribunal reviewed the evidence and concluded that the payment to Amarlal Kishandas was correctly determined. The Tribunal directed the Assessing Officer to allow any additional payments made to Amarlal Kishandas, supported by proper evidence, while computing the capital gains.

8. Sole Beneficiary of the Sale Proceeds:
The Tribunal addressed whether the assessee was the sole beneficiary of the cash element related to the sale of the Kalmanda property. The Tribunal found that the assessee was indeed the sole beneficiary and rejected the claim that the sale proceeds were shared with others.

9. Invocation of Section 52(2) of the Income-tax Act:
The Tribunal examined whether the failure to invoke section 52(2) vitiated the assessment. The Tribunal found that the Assessing Officer had determined the sale consideration based on the evidence on record and concluded that there was no need to invoke section 52(2). The Tribunal held that the assessment was not vitiated by the failure to invoke this section.

Conclusion:
The Tribunal dismissed the reference application, concluding that none of the questions raised by the assessee were referable questions of law. The Tribunal's findings were based on facts and did not give rise to any questions of law that warranted reference to the High Court.

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