1980 (1) TMI 47 - HC - Income Tax

Summary

Issues Involved:
1. Applicability of Section 269F(9) of the Income Tax Act, 1961, to agreements made prior to the enactment of Chapter XX-A.
2. The admissibility of evidence of an unregistered agreement to sell for rebutting the presumption of untrue statement of consideration.
3. The Tribunal's consideration of the factum of execution of the Banakhat.
4. The Tribunal's inference about the existence of the alleged agreement without sufficient evidence.

Issue-wise Detailed Analysis:

1. Applicability of Section 269F(9) of the Income Tax Act, 1961:
The primary issue was whether Section 269F(9) of the Income Tax Act, 1961, which excludes evidence of an unregistered agreement to sell property, applies to agreements made before Chapter XX-A was enacted. The court held that Section 269F(9) is a rule of evidence and procedure, not a substantive provision of law. It emphasized that procedural laws, including rules of evidence, are generally retrospective unless explicitly stated otherwise. The court cited the principle that procedural amendments apply to all actions, pending and future, unless there is a clear reason against it. Therefore, Section 269F(9) was applicable to agreements made before Chapter XX-A came into force.

2. Admissibility of Evidence of an Unregistered Agreement:
The court examined whether the exclusion of unregistered agreements under Section 269F(9) interferes with vested rights and concluded that it does not. The provision merely determines the quality of evidence admissible for rebutting the presumption of untrue consideration under Section 269C(2)(a). The court noted that this exclusion does not invalidate the agreement itself but limits its use in specific evidentiary contexts. The court also highlighted that unregistered agreements are still admissible for rebutting the presumption of ulterior motive for tax evasion or concealment of income under Section 269C(2)(b).

3. Tribunal's Consideration of the Factum of Execution of the Banakhat:
The Tribunal had failed to adequately consider the factum of the execution of the Banakhat (agreement to sell), despite the competent authority's finding that its execution was not satisfactorily established. The court noted that the Tribunal should have thoroughly examined the evidence regarding the existence and genuineness of the Banakhat. The competent authority must be satisfied about the factum and genuineness of the agreement after giving adequate opportunity to the respondent-transferee to lead evidence.

4. Tribunal's Inference about the Existence of the Alleged Agreement:
The Tribunal inferred the existence of the alleged agreement without sufficient evidence. The court emphasized that the Tribunal must consider all relevant evidence and ensure the factum of the agreement is satisfactorily established. The Tribunal's conclusion that the competent authority was unjustified in excluding the agreement was premature without a thorough examination of the evidence.

Conclusion:
The court set aside the orders of both the Tribunal and the competent authority and remanded the matter to the competent authority for fresh disposal according to the legal principles outlined in the judgment. The court clarified that the procedural provision of Section 269F(9) applies retrospectively and does not interfere with vested rights. The competent authority must re-evaluate the evidence regarding the agreement's factum and genuineness, ensuring a fair and thorough examination. The appeal was allowed with no order as to costs.