2021 (4) TMI 960 - HC - Income Tax

Computation of capital gain - appellant entitlement to adjust the indexed cost of acquisition under the second proviso to Section 48 while computing capital gains on the sale of shade trees during the assessment year 2007-08 - Whether the findings of the Tribunal that it was incumbent on the appellant to allege during the assessment proceedings that the trees which were now sold were in existence prior to 01.04.1981 and no such material / evidence was brought on record before the Tribunal or the lower authorities is perverse, contrary to the record and illegal? - assessee submitted that the finding recorded by the Tribunal in this regard is perverse, as the same is based on surmises and conjectures - HELD THAT - After perusal of the record, in our considered opinion, the factual controversy between the parties requires adjudication afresh, in the light of the material available on record. The impugned orders passed by the Tribunal / Commissioner of Income Tax (Appeals) as well as by the Assessing Officer are hereby quashed. The matter is remitted to the Assessing Officer to make a fresh assessment again.

Summary

Issues:
1. Entitlement to adjust indexed cost of acquisition under Section 48 of the Income Tax Act, 1961 for computing capital gains on the sale of shade trees during the assessment year 2007-08.
2. Perversity of Tribunal's findings regarding the existence of trees prior to 01.04.1981 and lack of evidence.

Entitlement to Adjust Indexed Cost of Acquisition:
The case involved an appeal under Section 260A of the Income Tax Act, 1961 against the Income Tax Appellate Tribunal's judgment. The appellant, a company engaged in tea/coffee business, declared short term capital gain and long term capital loss on the sale of timber for the assessment year 2007-08. The Assessing Authority re-opened the case, determining the capital gain at 30% of the total sale consideration. Appeals to higher authorities were dismissed, with the Tribunal holding that the appellant failed to prove the trees' existence prior to 1981. The appellant argued that the Tribunal's finding was based on conjecture and requested a remand for factual adjudication. The High Court, after considering submissions, quashed the previous orders and remitted the matter to the Assessing Officer for fresh assessment, keeping all contentions open.

Perversity of Tribunal's Findings:
The Tribunal's finding that the appellant did not establish the trees' existence before 1981 was challenged as perverse by the appellant's counsel. The Revenue's counsel suggested directing the Assessing Officer to re-do the assessment. The High Court, upon review, concluded that the factual dispute required fresh adjudication based on available evidence. Consequently, the impugned orders were set aside, and the matter was remitted to the Assessing Officer for a fresh assessment. The High Court refrained from addressing the substantial questions of law framed in the appeal, disposing of the case with the aforementioned directions to the Assessing Officer.