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TMI Blog1992 (1) TMI 142X X X X Extracts X X X X X X X X Extracts X X X X ..... ecause, without prejudice, the computation of capital gains is unfounded, arbitrary and biased. 6. Because without prejudice, the appellant--assessee was in law, eligible for the claim of deduction under section 54E of the Income--tax Act, in the circumstances of the case. 7. Because the order under appeal is bad in law as well as on the facts of the case. 8. Because the assessment is illegal, void and against the principles of natural justice. 9. Because proper opportunity was not afforded by the learned Income-tax Officer to the assessee to meet out his case. 10. Because on a proper visualation of the facts of the case, the addition of Rs. 5,200 as unexplained cash is unwarranted and uncalled for. 11. Because, without prejudice, the assessment is excessive. " 2. The brief facts of the case are that the assessee is a partner in a firm M/s Shankar Traders. At the time of framing the assessment order, the ITO found that house No. 88/593 Premnagar, Kanpur, belonging to the assessee, had been sold away during the assessment year for Rs. 1,95,000. The assessee had not shown any income as capital gain during the year, on enquiry the ITO estimated the fair market value of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . M. A. Mohammed Haneefa v. ITO [1987] 23 ITD 409 (Mad.), N. Vajrapani Naidu v. ITO [1989] 28 ITD 459 (Mad.), CIT v. C. N. Patuck [1969] 71 ITR 713 (Bom.), CIT v. M. D. Manohar Rao [1985] 155 ITR 696 (AP). 4. On the other hand, the learned Departmental Representative has stressed that the property was sold for Rs. 1,95,000 and the assessee received the entire amount, i.e., Rs. 45,000 in cash and Rs. 1,50,000 by a credit entry in the account books of the firm M/s. Shankar Traders which being an independent entity in the eyes of law was accountable for the said amount to the assessee. He has thus stressed that no doubt the property was mortgaged, still the assessee received the entire amount and thus was to be assessed on the capital gains of the property which has been rightly computed by the ITO and confirmed by the learned CIT(A). He has relied on the decisions of the Hon'ble Supreme Court reported in CIT v. Sitaldas Tirathdas [1961] 41 ITR 367 and CIT v. Imperial Chemical Industries (India) (P.) Ltd. [1969] 74 ITR 17. 5. We have heard the parties as length and we find that the arguments of the learned counsel for the assessee cannot be lightly brushed aside. The Bench of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounts. The situation would have been the same if the assessee had sold the property burdened with the mortgage, in that event also the purchaser would have retained out to the mortgagee and paid to the assessee only the balance and it cannot be said that the amount so retained was also consideration for transfer because the assessee was not entitled to receive that amount in any event. Thus, in our considered opinion, what was sold was only the equity of redemption and the consideration received was only the amount actually received, not including the amount paid directly to the mortgagees. " 6. More or less the facts of the present case also appear to be similar. Admittedly, the house was mortgaged with the bank. The bank had also filed a suit for recovery of the amount and also alleged to have recovered the same by sale of the mortgaged house. The assessee to avoid the sale by court sold the house himself with the consent of the bank on the assurance that out of the sale proceeds, the bank loan till be paid directly by the purchaser. It is immaterial whether the money is paid by the purchaser to the mortgagee or by the court, as the assessee does not get that amount and he gets ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. Here, the property being under the mortgage, it was not an obligation for the assessee just to utilise the amount for discharge of the bank loan, but it was an obligation for which the assessee was compelled to discharge and the amount was deducted at source by the purchaser himself and deposited in the bank directly through a pay order favouring the bank just to ensure a clear title to him. In fact, the facts of the case are that the assessee was left nothing with him except the equity of redemption and for that the price he got was only Rs. 45,000, as the balance he neither could claim and nor was paid to him, but was paid directly by the purchaser to the bank. A mere entry in the accounts of the firm crediting the alleged amount in his name by itself does not amount to payment of the said amount to the assessee. Admittedly, the firm had run into very heavy losses and this is why the bank was compelled to file a suit for recovery as the firm was no more in a position to pay the amount of loan to the bank. As the assessee had mortgaged his house as security to the bank loan advanced to the firm, the responsibility was of the assessee to pay up the loan and in case he ..... X X X X Extracts X X X X X X X X Extracts X X X X
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