2010 (2) TMI 74 - HC - Income Tax

Nature of asset capital asset or stock in trade - Assessment of wife statement made by husband validity there? - Whether under the facts and circumstances the Tribunal order is sustainable having treated all the assets as stock in trade without examining the intention behind holding thereof? Her husband had offered more than 70 lakhs of income for taxation on behalf of his wife which was accepted by her. The Tribunal further found that at no stage opportunity was claimed by the assessee asserting that the statement of her husband was not binding nor any doubt had arisen at any stage. The husband of the assessee has been dealing with the purchase and sale of property on behalf of his wife and the assessee herself is a share holder in the company known as Ghai Estate Developers Ltd. which is engaged in the business of sale and purchase of property. Therefore the Tribunal found that it would be unreasonable to hold that the statement of the husband of the assessee made in his capacity as her husband was not binding especially when she was fully aware of such statement - held that - It has been found as a fact that merely because the assessee was engaged in the business of buying and selling of property in the name of the company would not result into an inference that she would not held some property as investment in her own name by keeping in view the fact that most of the property had been held by the assessee for the last ten years and that there was no frequent purchase/ sale of the property made in her individual name. decided in favor of revenue

Summary

Issues:
1. Appeal challenging Income Tax Appellate Tribunal's order
2. Treatment of assets as stock in trade without examining intention behind holding

Analysis:
The judgment pertains to an appeal filed under Section 260A of the Income Tax Act, 1961, challenging the order passed by the Income Tax Appellate Tribunal. The main issue raised was whether the Tribunal's order treating all assets as stock in trade without examining the intention behind holding them was sustainable. The assessee contended that the Tribunal erred in not considering the intention behind holding the assets, specifically in the context of the sale and purchase of property.

The facts of the case reveal that the assessee had initially filed a return of income, which was later assessed at a higher amount by the Assessing Officer. The CIT(A) partially allowed the assessee's appeal, disagreeing with the Assessing Officer's treatment of profit on property transactions as long-term capital gains. The CIT(A) found that the principles of natural justice were violated as the assessee was not given an opportunity to respond to certain statements made by her husband, who was representing her in dealings.

Upon the Revenue's appeal, the Tribunal overturned the CIT(A)'s decision and upheld the Assessing Officer's findings. The Tribunal noted that the husband of the assessee, who was representing her, had offered income for taxation on her behalf, and the assessee herself was a shareholder in a property development company. The Tribunal concluded that the husband's statements were binding on the assessee, given her awareness of them, and no prejudice was caused by relying on those statements in the assessment order.

In the High Court's analysis, it was emphasized that the mere involvement of the assessee in property transactions through a company did not preclude her from holding property as an investment individually. The Court held that the intention behind the transactions had been adequately ascertained, constituting a factual finding not open for further inquiry. Consequently, the Court dismissed the appeal, ruling that no substantial question of law arose for consideration.

In conclusion, the High Court upheld the Tribunal's decision, emphasizing that the assessee's involvement in property transactions did not negate the possibility of holding property as an investment individually. The Court found no merit in challenging the factual findings regarding the intention behind the transactions, leading to the dismissal of the appeal.