2009 (8) TMI 1126 - HC - Income Tax

Revision u/s 263 - nature of receipts - receipt of compensation - Whether on the facts and circumstances of the case s. 28(va) of Act 1961 applies ? - HELD THAT - Payment is for not carrying out any activity or for refraining from carrying out activity in relation to fish farming business which otherwise was being allowed to be carried out by the petitioner by the erstwhile owner Mr. Vasant Manohar Wagle. In our view in the facts and circumstances of the case at hand this s. 28(va)(a) squarely applies. AO therefore was justified in holding that the amount was received by the assessee by way of compensation and/or a sum for not carrying out any activity in relation to business and was the income of the assessee chargeable to income-tax under the head of profits and gains of business or profession. Admittedly order passed by the AO was not appealed against by the petitioner. It is apposite to refer to the s. 246 of the Act 1961. Sec. 246 provides appeal against orders. There is no dispute about the proposition that there is no inherent right of appeal. It is to be specifically conferred by the statute providing for an appeal. The appellate authority in an appeal against an order of assessment has power to confirm reduce enhance or annul the assessment or to set aside the assessment or refer the case back to the ITO or make fresh assessment (s. 251). It is thus clear that what remains is final order after giving effect to the orders of the appellate authority is an order under ss. 143 and 144. It is in this way appeal is of continuation of the exercise of assessing the income of the assessee. Substantive statutory right of appeal by way of s. 246 thus is made available to the aggrieved person/assessee. Suffice it to say that such substantive right was not resorted to in the case on hand by the petitioner/assessee. As apparent from s. 264 that there is a wide power with the CIT under revisional jurisdiction. He may call for records of proceeding under this Act may make such inquiry or cause such inquiry to be made and pass such order thereon however not being an order prejudicial to the assessee. Even though power vested with the learned CIT seems to be wide under s. 264 it cannot be said to be too wide to that of the power vested with the appellate authority while deciding an appeal filed by the assessee under s. 246. There is a discretion vested with the CIT to pass such order as he deems fit on the facts obtaining in the case. However such discretion has to be exercised by the CIT judiciously i.e. in a judicious manner. The categorical observation made by the CIT that the assessee was not having any legal rights as a tenant in the property sold by the land owner to M/s Goa International School (P) Ltd. is legal and proper. With this observation learned CIT has repelled the ground pertaining to s. 45 of the Act 1961. CIT has also referred to the submissions made by the Authorised Representative and in para 6 reference is made to the written submissions made by the petitioner s Authorised Representative Mr. Mahesh Dhond chartered accountant. The learned CIT reached the conclusion that there is no transfer of any capital asset by the assessee for the compensation received in his hands as capital gains. CIT reached to the conclusion that there is no case for interference with in revisional jurisdiction. On examination of the order passed by the learned CIT within the parameters of s. 264 in our opinion contention on behalf of the petitioner that it is a non-speaking order cannot be accepted. In our view the learned CIT has passed a well reasoned order referring to the material available on record and considering the submissions made on behalf of the parties. We are unable to find any fault with the order passed by the learned CIT under s. 264 of the Act 1961. Relevant question No. 2 accordingly answered against the petitioner. Judicial review under Arts. 226 and 227 of the Constitution - Nomenclature alone does not decide the invocation of powers of this Court by the citizen. We have considered the pleadings in the writ petition with prayer. Learned counsel for the petitioner submitted that the case for judicial review is established. Learned Government advocate Mr. Rivonkar submits that there is no case for invocation of extraordinary jurisdiction of this Court. We have also considered the provisions laid down under ss. 153 154 and 260A of the Act 1961. Apart from this we have considered the material placed on record by the petitioner along with the writ petition; judicial review by this Court under Arts. 226 227 has its own self-impose restrictions and limitations. In our considered opinion there is no case for interference in the order passed by the learned CIT in the case on hand question No. 3 accordingly answered against the petitioner.

Issues Involved:
1. Application of Section 28(va) of the Income Tax Act, 1961.
2. Legality and propriety of the order passed by the CIT under revisional jurisdiction.
3. Establishment of a case for judicial review under Articles 226 and 227 of the Constitution.

Issue-wise Detailed Analysis:

1. Application of Section 28(va) of the Income Tax Act, 1961:
The primary issue was whether the sum of Rs. 25 lakhs received by the assessee from M/s Goa International School (P) Ltd. for stopping fish farming in certain ponds was chargeable to tax under Section 28(va) of the Income Tax Act, 1961. The Assessing Officer (AO) concluded that the amount constituted income under Section 28(va) as it was received under an agreement for not carrying out any activity in relation to any business. The court agreed with the AO, stating that the agreement explicitly indicated that the payment was for refraining from business activity (fish farming). The court reasoned that the five ingredients of Section 28(va)(a) were met: a definite sum of money, received by the person, either in cash or kind, under an agreement, for not carrying out any activity in relation to any business.

2. Legality and propriety of the order passed by the CIT under revisional jurisdiction:
The assessee challenged the AO's order by filing a revision application under Section 264 of the Act, which was dismissed by the CIT. The court examined whether the CIT's order was a non-speaking order and whether it was legally and properly passed. The court found that the CIT had considered the facts and submissions, including the contention that the Rs. 25 lakhs should be treated as capital gains under Section 45. The court concluded that the CIT's order was well-reasoned and addressed the relevant issues, including the lack of legal rights of the assessee as a tenant in the property. The court upheld the CIT's decision, noting that the revisional power under Section 264 was exercised judiciously.

3. Establishment of a case for judicial review under Articles 226 and 227 of the Constitution:
The petitioner sought judicial review, arguing that the CIT's order was non-speaking and that the case warranted interference under Articles 226 and 227. The court considered the self-imposed restrictions and limitations of judicial review. It found no fault with the CIT's order, which was based on a thorough examination of the material on record and the submissions made. The court emphasized that the CIT's decision was not prejudicial to the assessee and was within the scope of revisional jurisdiction. Consequently, the court dismissed the writ petition, concluding that there was no case for judicial review.

Conclusion:
The court upheld the AO's decision to tax the Rs. 25 lakhs under Section 28(va) and found the CIT's revisional order to be legally sound and properly reasoned. The petition for judicial review was dismissed, and the court ruled against the petitioner on all three issues.

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