Hari Singh Malhiyan vs Commissioner of Income Tax

This petition is u/s 256(2) of the income tax Act, 1961 (''the Act''). The petitioner had earlier filed a petition u/s 256(1) before the Tribunal stating the following question of law arising out of the order dated 13-12-1990 of the Tribunal to be referred to this Court for its opinion: "Whether, on the facts and in the circumstances of the case, and in law, and on the basis of the material on record, the Tribunal was correct in ruling that an additional sum of Rs. 46,312 was assessable in the hands of the assessee by way of income from property, on the sole ground, that the lease of the property by the assessee to another lessee-firm was a sham and collusive deal and liable to be ignored on a true and correct interpretation of section 23(1) of the income tax Act, 1961 ?"

Thereafter, it appears the petitioner filed various applications u/s 254(2) of the Act, which were dismissed. The last such application is, however, dated 3-8-1993 whereby the petitioner sought amendment of the aforesaid question by raising as many as six questions, which the petitioner now seeks to have referred to this Court as questions of law for its opinion (sic):

"1. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the annual letting value of the house property at N-26, Panchsheel Park be calculated on the basis of monthly rent of Rs. 7,000 received from the assessee (sic) notwithstanding the fact that the assessee entered into a collusive agreement with the lessee-firm which is controlled by him and the lessee is realising Rs. 12,000 per month from letting out the above property ?

Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the Assessing Officer was required to follow the decision taken in the earlier years on this issue notwithstanding the fact that the principle of res judicata does not apply to taxation statutes?

Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that loss of Rs. 80,000 arising from sale of shares is a bona fide transaction and, consequently, the long-term capital loss is allowable ?"

We have heard the learned standing counsel appearing for the revenue as also the learned counsel appearing for the assessee. In our opinion, question No. 1 as proposed by the revenue is not properly worded although the said question does give rise to a question of law. So far as the question No. 2 is concerned, we agree with the Tribunal that the same does not strictly arise out of the order of the Tribunal. So far as the question No. 3, as proposed by the revenue, is concerned, in our opinion the same is based on appreciation of the evidence and the decision arrived at by the Tribunal is a pure finding of fact. In view of the aforesaid findings we decline to issue any direction to refer to this Court a statement of case on question Nos. 2 and 3 as proposed by the revenue. However, exercising our inherent powers we reframe question No. 1 as proposed by the revenue in the following manner, which in our opinion is a question of law, and, accordingly, requires to be called for the opinion of this Court:

"Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the annual letting value of the house property at N-26, Panchsheel Park be calculated on the basis of monthly rent of Rs. 7,000 received from (sic) the assessee notwithstanding the agreement of the assessee with the lessee-firm which is controlled by him and in pursuance of which the lessee is realising Rs. 12,000 per month by letting out the above property ?"

We, accordingly, direct the Tribunal to state the case and refer the aforesaid reframed question of law to this Court for its opinion. This petition is, accordingly, disposed of with the aforesaid direction. No costs.