2024 (11) TMI 95 - HC - Income Tax

LTCG - relevant date, by virtue of which the transfer of rights in favour of the assessee had taken place - Date of Right to own the property was established/ accrued to the Appellant - Correct date of transfer of tenancy rights - ITAT held that the transfer of the property in question took place in favour of the assessee on 04 November 2004 and not on 22 February 2007 when the Deed of Confirmation was registered HELD THAT - We find substance in the contention as urged on behalf of the assessee. It is clear from the appeal memo as filed by the assessee before the Tribunal that the ground, which was inter alia raised before the Tribunal, was whether the tenancy rights were converted into ownership rights, as per the consent decree dated 28 May 1999 and not in A.Y. 2007-08 when the agreement giving ownership right was registered through a transfer deed, which was in fact registered on 22 February 2007. It clearly appears from the observations which are made by the Tribunal that the Tribunal did not adjudicate on those specific grounds, which were raised, however, it delved to adjudicate on an issue which was not raised by the Revenue namely that necessarily the transfer ought to be recognized to have taken place on 04 November 2004 when tripartite agreement was entered between the parties. Keeping aside the core issue as raised in ground 1 as raised by the Revenue, which was either the rights having crystallized as per the consent terms dated 28 May 1999 or on 22 February 2007, when the Deed of Confirmation was registered and relevant to the A.Y. 2007-08 the Tribunal decided to adjudicate on an issue which was not specially put to the parties. It is thus the case that the Tribunal decided to keep aside the specific ground as raised by the Revenue and without adjudicating on such ground, has proceeded to decide an issue which in fact had not fell for consideration and/or not raised by the Revenue specifically. Thus there was an apparent error of law in the approach of the Tribunal in deviating itself from the course of adjudication of the appeal when the specific grounds which were raised by the Revenue were not adjudicated and in fact, what was adjudicated, was on a question which was not raised by the Revenue as any of the grounds even remotely in the memo of appeal. It is also not case that the revenue has raised any additional ground in the manner known to law so the Tribunal has jurisdiction to delve on such issue We may observe that it can never be the scope of judicial adjudication which would delve on an adjudication alien to or not call upon to be answered. Adjudication of the Tribunal would be confined to the ground which was raised and which were supposed to be contested by the assessee in the present case. We are, therefore, of the clear opinion that on such limited ground, the orders passed by the Tribunal would be required to be set aside and the proceedings be remanded before the Tribunal for a denovo adjudication, however keeping open all contentions of the parties on the facts and on law. We accordingly answer question (b) in favour of the assessee and against the revenue.

Summary

Issues Involved:

1. Determination of the correct date of transfer of tenancy rights for tax purposes.
2. Whether the Tribunal erred in adjudicating on an issue not raised by the parties.

Issue-wise Detailed Analysis:

1. Determination of the Correct Date of Transfer of Tenancy Rights for Tax Purposes:

The core issue in this case was to determine the correct date of transfer of tenancy rights, which affects the assessment of capital gains tax. The appellant argued that the right to ownership of the premises accrued on 28 May 1999, when the consent terms were filed in the High Court, and not on any subsequent date. The Assessing Officer (AO), however, contended that the relevant date was 22 February 2007, when a Deed of Confirmation was executed, as this document confirmed the transfer of ownership rights. The Commissioner of Income Tax (Appeals) [CIT (A)] sided with the appellant, stating that no transfer occurred in the Assessment Year 2007-08, as ownership rights were acquired in the Assessment Year 2000-01. The Tribunal, however, concluded that the transfer took place on 4 November 2004, when an agreement was executed in compliance with the consent decree, thus rejecting the Revenue's appeal. The Tribunal's decision was based on the execution of a tripartite agreement on this date, which it deemed as the effective date of transfer.

2. Whether the Tribunal Erred in Adjudicating on an Issue Not Raised by the Parties:

The appellant challenged the Tribunal's approach, arguing that the Tribunal erred by adjudicating on an issue not raised by the parties, specifically the date of 4 November 2004. The appellant contended that the Tribunal's decision was based on an issue that was not part of the grounds raised by the Revenue in the appeal. The Tribunal's focus on the 4 November 2004 date was not a matter that had been put forth for consideration by the parties, and thus, the Tribunal's findings on this date were inappropriate. The Tribunal's jurisdiction is confined to the subject matter of the appeal, and it should not have ventured into deciding on an unraised issue. The appellant cited precedents, such as the case of Pokhraj Hirachand vs. Commissioner of Income-Tax, to support the argument that the Tribunal acted beyond its jurisdiction by addressing an issue not contested by the parties.

Conclusion:

The High Court found merit in the appellant's contention that the Tribunal had erred in adjudicating on an issue that was not raised by the parties. The High Court emphasized that the Tribunal's role is to adjudicate based on the grounds raised in the appeal and not to introduce new issues. Consequently, the High Court set aside the Tribunal's order and remanded the matter for a de novo adjudication, instructing the Tribunal to confine its adjudication to the issues raised by the parties. The High Court directed the Tribunal to resolve the matter expeditiously within four months, ensuring that all contentions of the parties on facts and law remain open for consideration. The appeal was thus disposed of in favor of the appellant, with no costs awarded.