Bombay High Court
Anant Chunilal Kate vs Income Tax Officer on 17 November, 2003
Equivalent citations: (2004) 187 CTR Bom 93, 2004 267 ITR 482 Bom
Author: B Vagyani
Bench: B Vagyani, M Gaikwad
JUDGMENT
B.B. Vagyani, J.
1. Heard.
2. The Tribunal's order dt. 10th Jan., 2000 is challenged by the assessee under Section 260A of the ITAct, 1961.
3. In brief, the facts giving rise to this tax appeal are as under:
The appellant entered into an agreement of sale in respect of agricultural piece of land with one Pardeshi on 23rd Sept., 1979. Pardeshi was the lawful owner of the agricultural land. He agreed to sell the said land to the present appellant. The appellant was to convert this land into non-agriculture. The appellant paid Rs. 10,000 to said Pardeshi by way of earnest money and thereafter Rs. 40,000 were paid to Pardeshi. However, Pardeshi did not execute the sale deed in favour of the appellant.
4. There were in all 23 plots. Out of them, 17 plots were sold. The sale deeds were executed admittedly by Pardeshi. However, the present appellant retained the sale proceeds of Rs. 1,25,418 only. Thereafter, dispute arose in between the appellant and Pardeshi. Pardeshi served notice on the appellant and terminated the contract. The appellant filed Special Civil Suit for grant of specific performance of contract against Pardeshi. The suit was decreed in favour of the appellant. Pardeshi challenged the said decree in this Court by filing First Appeal and in this Court, the appellant and Pardeshi settled the dispute by compromise dt. 19th Jan., 1989. High Court passed compromise decree on the basis of the terms of compromise. As per the terms of compromise, the appellant was to return Rs. 1,25,418 to Pardeshi and was to receive back the earnest money of Rs. 50,000. Accordingly, the compromise decree was drawn.
5. The AO, Dhule, served a notice on the appellant and asked him to submit the return. The appellant submitted his return. In the return, the appellant showed Rs. 3,400 as the profit by way of commission. However, the AO added Rs. 1,25,418 as an additional income by way of sale proceeds of 17 plots. This additional figure was included in the disclosed income of Rs. 3,400. The AO imposed additional tax liability on the appellant to the tune of Rs. 66,715.
6. Feeling aggrieved by the order passed by the AO, Dhule, the appellant filed appeal to the CIT(A), Nasik. The CIT(A), Nasik, dismissed the appeal filed by the appellant. Feeling dissatisfied by the dismissal order passed by the CIT(A), Nasik, the appellant filed further appeal before the Tribunal, Pune. The Tribunal dismissed the appeal filed by the appellant by order dt. 10th Jan., 2000. This dismissal order is challenged by the assessee under Section 260A of the IT Act, 1961, in this Court.
7. We heard learned counsel Shri Kolte for the appellant and learned standing counsel Shri Sonawane for the respondent, at length. Following substantial questions are involved in this appeal :
1. Whether the compromise decree is a lawful decree?
2. Whether the appellant has legal right to receive the sale proceeds of 17 plots and whether the amount of sale proceeds was of revenue nature?
8. We carefully perused the judgment of the Tribunal. The Tribunal did not at all treat the compromise decree as a lawful decree. The Tribunal was under impression that the rights and liabilities of the parties were not determined after applying the mind to the contents of the contract and after appreciation of evidence. The Tribunal has made a distinction between the decree passed after considering various contentions raised and case law referred to by the parties and a decree passed in accordance with compromise reached by the parties outside the Court. The Tribunal's decision in this behalf is contrary to the well-settled legal position. A decree in terms of settlement arrived at by the parties before the Court has the same binding force as in other decree. In case of Kumar Sudhendu Narain Deb v. Renuka Siswas (Mrs.) and Ors. , the apex Court has held that the decree in terms of settlement arrived at by the parties before the Court has the same binding force as in other decree. The settlement was not arrived at outside the Court.
9. In the instant case, the matter was compromised in the High Court and on the basis of terms of compromise, the compromise decree was passed. Under the circumstance, the compromise decree in first appeal, which was pending before the High Court, is a legal decree for all purposes. Under the circumstances, the conclusions drawn by the Tribunal with regard to nature of compromise decree are liable to be set aside. Accordingly, we answer question No. 1 in the affirmative.
10. Section 54 of the Transfer of Property Act speaks about sale of immovable property. Admittedly, Pardeshi, the owner of the land, did not execute sale deed in favour of the appellant. In the absence of sale deed, the appellant does not become lawful owner of the immovable property agreed to be sold in his favour. In the absence of sale deed of the land, the appellant has no legal right to sell the plots. Under the circumstances, it cannot be said that the appellant had right to receive the payment. By way of compromise decree, the appellant was to return amount of Rs. 1,25,418 to Pardeshi and was to receive back his earnest money of Rs. 50,000. The position, therefore, boils to this that the appellant returned sale proceeds of 17 plots i.e., Rs. 1,25,418 to Pardeshi and, therefore, the said amount cannot be added in the disclosed income, which was initially shown by the appellant in the return of income-tax for the year 1981-82.
11. In the case of CIT v. Hindustan Housing & Land Development Trust Ltd. (1986) 161 ITR 524 (SC), the Supreme Court has held that there is clear distinction between the right to receive payment as in dispute and right to receive payment as admitted. In the instant case, the right to receive payment was in dispute and in view of the compromise decree in first appeal, which was pending before the High Court at Bombay, the appellant was required to return whole of the sale proceeds of Rs. 1,25,418 to the land owner Pardeshi. We, therefore, answer question No. 2 in favour of the appellant and against the Revenue. Under the circumstance, the judgment passed by the Tribunal is liable to be quashed and set aside.
12. In the result, tax appeal filed by the assessee is allowed. The order passed by the Tribunal is quashed and set aside. The addition of Rs. 98,818 made in the income of the appellant for the asst. yr. 1981-82 by the respondent is set aside from the return. No order as to costs.
