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TMI Blog2012 (7) TMI 594X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement amongst the respondent - assessee and its erstwhile partners, had been suppressed or not disclosed by the firm and therefore the tax liability under Chapter-XIV-B of the Act, but this order having been reversed by the Tribunal on an erroneous assumption of facts and law, the order is vitiated and is liable to be set aside etc. 3. At the time of admitting this appeal, this court had framed the following questions as arising out of the order of the Tribunal and meriting our examination in this appeal. "1. Whether the Tribunal was correct in holding that capital gains should be brought to tax in the year in which the dissolution of the firm takes place and not the year in which consequent to such dissolution the distribution of assets takes place as per Section 45[4] of the Act? 2. Whether the Tribunal was correct in arriving at a conclusion that the assets held by the assessee was treated as its stock in trade and therefore could not be brought to tax under the head capital gains despite there being no evidence to arrive at such a conclusion or a categorical assertion from the assessee that these assets had been treated as its stock in trade except the stray observation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of avoiding legal consequence of transfer of the assets of the firm taking place as on 1.6.1992 under the agreement of the even date and this development had been deliberately withheld from the revenue for evading payment of tax on the possible capital gains that arises in the hands of the firm for transferring the assets of the firm which were two parcels of immovable properties in favour of some of the partners alone and in consideration of the other partners relinquishing their entitlement to the shares in the company which was a partner to which the assets came to be transferred and such value of shares which were relinquished by some of the partners in favour of the company itself or other partners was indicated to be Rs.4 crores and based on this value of two parcels of land which were assets of the firm, the assessing authority computed the capital gains worked out at a sum of Rs.3,43,49,543/- and brought this amount to tax as the income of the firm during the block period. It is this liability which became the bone of contention between the assessee and the revenue. 7. The assessee carried the matter by way of appeal to the Commissioner of Income Tax [Appeals], but without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arily brought to tax as the capital gains of the firm in the year in which the transfer has taken place in terms of the provisions of section 45[4] of the Act. 11. In support of such submission, Sri. M V Seshachala, learned counsel has placed reliance on the Judgment of the Bombay High Court in the case of 'The Commissioner of Income Tax Vs. A N Naik & Associates' reported in [2004] 265 ITR 346 [Bom] which has been followed and applied by this court in the case of 'Commissioner of Income Tax Vs. Gurunath Talkies' reported in 328 ITR 59. The two cases wherein the legislative history of section 45[4] read with section 2[47] had been elaborately discussed and therefore urges that the Tribunal is definitely in error in not following the ratio of these cases for disposing the appeal before the Tribunal and concluding to the contrary. 12. Mr. Seshachala has urged with some vehemence that the Tribunal overlooking the legal position and particularly by opining that the subject assets had been held as stock in trade is a finding which is not based on any material on record and is more an assumption and allowing the appeal on such premise is also an error committed in law etc. 13. Sri. Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s Ramaleela Enterprises, which were available at the place of search and claimed to be seized documents and it is further claimed that the source of information is certain entries in the books of account of M/s Ramaleela Enterprises, wherein the assessee's name figured as a debtor and a statement said to be given by a partner, and the three documents referred to and relied upon by the authorities were not part of the material unearthed during the search and therefore has submitted that the other materials could not have been used for the purpose of bringing to tax the undisclosed income of the block period. 18. It is also submitted by Sri Shankar that even the factum of dissolution, distribution of shares and revaluation were all part of the revelation made by each of the partners of the firm and not as though there was a total nondisclosure of the development to the revenue. 19. In support of these contentions, Sri Shankar has placed reliance on a good number of authorities. 20. We have bestowed our attention to the submissions made at the Bar and perused the order of the tribunal, as also the grounds urged in support of the memorandum of appeal. 21. We find that the tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... even assuming that the firm was dissolved after 25-3-1987, in the sense that the firm was dissolved on or before 1-4-1987 also, the provisions of sub-section (4) of Section 45 of the Act is good enough and this coupled with the provisions of Section 189 of the Act, has a legal effect of bringing to tax the gain of the firm in view of transfer being on 1-6-1992, as on this date, this argument is again on an assumption of facts and therefore not warranting an examination in law. We say so for the reason that even the fact that the transfer took place only on 1-6-1992 is a fact which is not definite as a finding on fact and on the other hand it is one to be inferred on a reading of all three documents, referred to above. 26. If the revenue is to rely upon these three documents for some part of them to claim that the documents reveal some undisclosed income of the assessee which has escaped tax and earned during the block period, we find at the same time not giving same importance to the other parts of the documents, but understanding the other clauses by way of inference or on a logic attributing certain motives to the assessee is not a proper way of reading the document, assuming th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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