Commissioner Of Income Tax108, Mahatma Gandhi Roadchennai v. Mr. K.gopalakrishnan

IN THE HIGH COURT OF JUDICATURE AT MADRAS CORAM THE HONOURABLE MR. JUSTICE R.SUDHAKARANDTHE HONOURABLE MS. JUSTICE K.B.K.VASUKI T.C.A. NOS. 311 TO 314 OF 2015ANDM.P. NOS. 1 OF 2015 Commissioner of Income Tax108, Mahatma Gandhi RoadChennai.... Appellant in all the appeals - Vs -Mr. K.Gopalakrishnan ... Respondent in TCA 311/2015Mr. G.Visalan... Respondent in TCA 312/2015Mr. S.V.Subramanian... Respondent in TCA 313/2015Mr. K.Janardhan... Respondent in TCA 314/2015 Appeals filed under Section 260-A of the Income Tax Act againstthe order dated 19.5.14 passed by the Income Tax Appellate Tribunal,'A' Bench, Chennai, made in IT (SS) A Nos.21, 22, 23 & 24/Mds/2013. As against the order passed by the Commission of Income Tax(Appeals)-I, Chennai - 34 inITA No.45/09-10 dated, 28.12.2010 ITA No.42/09-10 dated, 07.03.2011 ITA No.26/10-11 dated, 27.12.2010 respectively as againstthe order passed by the Assistant Commissioner of Income Tax CentralCircle - I(1), Chennai dated 29.05.2009 in PAN/GIR No. forthe Block Assessment Year 1991-92 to 2000-01 and 2001-02(part),PAN/GIR No.G-68, dated 29.05.2009 in Block Assessment Year 1991-92 to2000-01 and 2001-02(part) and; PAN/GIR No.ABCPSO634D, dated30.04.2009 for the Assessment Year 1991-92 to 2000-01 and 2001-02respectively (TCA Nos.311 to 313 of 2015) and https://hcservices.ecourts.gov.in/hcservices/ The Commissioner of Income Tax, Central - I, Chennai - 34 dated30.03.2012 in C.No.1523/6/C-1/2011-12 as against the order passed bythe Assistant Commissioner of Income Tax, Central Circle - I(1),Chennai dated 29.05.2009 in PAN.GIR No. for the BlockAssessment Year 1991-92 to 2000-01 and 2001-02(part) (TCA No.314 of2015) COMMON JUDGMENT(DELIVERED BY R.SUDHAKAR, J.) Mr.S.Sridhar, learned counsel is directed to take notice for therespondent in the respective appeals. 2. Aggrieved by the orders passed by the Tribunal in allowing theappeals filed by the respective assessee, the Revenue/appellant isbefore this Court by filing the present appeals by raising thefollowing questions of law:-“i) Whether on facts and in the circumstances, theAppellate Tribunal was justified in setting aside theorder passed u/s 263 of the Act holding that theassessment order is not erroneous and prejudicial tothe interest of the Revenue?ii) Whether on facts and in the circumstances ofthe case, the Appellate Tribunal was justified inallowing 505 of the expenditure, when the entire'undisclosed income' is required to be brought to taxas per Section 158B (b) of the Income Tax Act?iii) Whether on facts and in the circumstances ofthe case, the Appellate Tribunal was right infollowing the Tribunal's judgment rendered in the caseof Shri K.Venugopal, which is also subject matter ofappeal pending before the High Court of Madras?” 3. The respective respondents/assessees are individuals engagedin the business of financing and commission agent with Sree GokulamChits & Finance Company Ltd. A search action u/s 132 of the IncomeTax Act was conducted in the business/office/branch/residentialpremises of M/s.Sree Gokulam Chits and Finance Company on 28.11.2000.During the said search operations, several incriminating materials 3. The respective respondents/assessees are individuals engagedin the business of financing and commission agent with Sree GokulamChits & Finance Company Ltd. A search action u/s 132 of the IncomeTax Act was conducted in the business/office/branch/residentialpremises of M/s.Sree Gokulam Chits and Finance Company on 28.11.2000.During the said search operations, several incriminating materials were seized. The search further revealed that employees/agents ofthe company were in receipt of commission, which was not admitted inthe respective returns of income. Accordingly, notice u/s 158-BD ofthe Act was issued to the respective assessees. While therespondents/assessees in TCA Nos.311, 313 and 314 of 2015 filedreturns of income, the respondent/assessee in TCA No.312/2015 did notfile return of income and, accordingly another notice under Section142 (1) of the Act was issued for which the assessee sought for onemonth time. However, even thereafter the respondent/assessee failedto file the return of income. Accordingly, the assessing officerwhile determined the total income for the three assessees, who filedreturn of income, and accordingly demanded tax including surchargeand interest, in respect of the other assessee, who failed to filethe return, the assessing officer passed an exparte order demandingtax including surcharge and interest. 4. Aggrieved by the said block assessment, the respectiverespondents/assessees preferred appeals before the CIT (Appeals), whopartly allowed the appeals. 5. In the meanwhile, the block assessments were revised byissuing notices u/s 263 of the Act to the respectiverespondents/assessees to bring to tax the 50% expenditure on thecommission amount received from the company. After considering thesubmissions, respective revision orders were passed directing theassessing officer to disallow the 50% expenditure on the commissionreceipts and also consider withdrawal of the basic exemption granted. 6. Aggrieved by the said orders, the respectiverespondents/assessees filed appeals before the Appellate Tribunal.The Tribunal, following its earlier order in the case of K.Venugopal- Vs - JCIT allowed the appeals holding that the earning of income isalways at the cost of expenditure and that commission income cannotbe earned without any efforts and allowing of certain amount by wayof expenditure by the assessing officer is correct. Aggrieved by thesaid order, the appellant/Revenue is before this Court by filing thepresent appeals. 7. Learned counsel appearing for the respondents/assessees,raised a preliminary objection as to the maintainability of the caseof the appellant by submitting that as per Instruction No.1979 dated27.3.2000 read with Instruction No.2 of 2005 dated 24.10.2005, forpreferring a tax case appeal, monetary limit is fixed and only if thetax effect exceeds Rs.4 Lakhs, appeal can be filed in respect ofsingle cases and in respect of group cases, each case should individually satisfy the monetary limits and, therefore, cumulativetax effect cannot be taken into consideration. It is the submissionof the learned counsel for the assessees/respondents that theassessees do not fall within any of the exceptions provided in theinstruction mandating the department to prefer an appeal. Thelearned counsel appearing for the assessees also pleaded that thecase of the assessees do not fall within the exceptions specified inInstruction No.1979 issued by the Central Board of Direct Taxes on27.3.2000, where irrespective of revenue effect the matter should becontested by the Department. In the above backdrop, learned counselfor the assessees submit that the present appeals are notmaintainable. 8. Heard the learned standing counsel appearing for theappellant/Department and the learned counsel appearing for therespondents/assessees and perused the materials available on record. 8. Heard the learned standing counsel appearing for theappellant/Department and the learned counsel appearing for therespondents/assessees and perused the materials available on record. 9. Even at the outset, this Court is not inclined to entertainthese appeals in view of the preliminary objection made by thelearned counsel for the respondents that the monetary limit to preferan appeal is pegged at Rs.4,00,000/- by the Central Board of DirectTaxes vide Instruction No.2 of 2005, dated 24.10.2005 read withInstruction No.5 of 2007, dated 16.7.2007. 10. In the case on hand, the demand of tax is on the commissionamounts received, inclusive of surcharge and interest. Thepreliminary objection of the respective assessees, the incomeassessed and the tax liability are as under:Preliminary objection on maintainability ofDepartment's Tax Case Appeal:Instruction No.1979 dated 27.03.2000 read withInstruction No.2 of 2005 dated 24.10.2005 fixed themonetary limit to prefer a Tax Case Appeal only ifthe tax effect exceeds Rs.4 Lakhs for each case takensingly, i.e., in group cases, each case shouldindividually satisfy the monetary limits andtherefore cumulative tax effect cannot be taken intoconsideration. The Assessee submits that theAssessee does not fall within any of the exceptionsprovided in the instruction mandating the departmentto prefer an appeal. The total tax effect includinginterest is as follows: The 11. As regards the plea of the learned counsel appearing for theassessees that the case of the assessees do not fall within theexceptions specified in Instruction No.1979 issued by the CentralBoard of Direct Taxes on 27.3.2000, where irrespective of revenueeffect the matter should be contested by the Department, the relevantportion of the said instruction reads as under: 12. The learned Standing Counsel for the Revenue is not disputingthe fact that the tax effect in the present cases is less than Rs.4Lakhs and that the case of the respective respondents/assessees donot fall within the exceptions specified in Instruction No.1979,dated 27.3.2000. 13. It is brought to the notice of this Court that in an earlierdecision in Commissioner of Income Tax, Salem – Vs – Dr. C.T.Kiruba(T.C. (A) Nos.1011 & 1012 of 2007 – dated 19.1.2015), in similar setof facts, this Court has dismissed the appeal filed by the Departmentas not maintainable. 14. Considering the circulars issued by the Central Board ofDirect Taxes and the tax effect involved in the cases on hand, thisCourt is not inclined to entertain these appeals. Accordingly,without going into the merits of the questions of law formulated andin the light of the earlier decision of this Court in Dr.C.T.Kiruba's https://hcservices.ecourts.gov.in/hcservices/ case (supra), these appeals are dismissed as not maintainable.Consequently, connected miscellaneous petitions are closed. However,there shall be no order as to costs. Sd/- Assistant Registrar(CS IV) //True Copy// Sub Assistant RegistrarGLNTo1.Commissioner of Income Tax Chennai.2.The Income Tax Appellate Tribunal 'A' Bench, Chennai.3.The Commissioner of Income Tax(Appeals)-I, 46, Mahatma Gandhi Road, Nungambakkam, Chennai - 344.The Commissioner of Income Tax,(Central-I) 46, Mahatma Gandhi Road, Nungambakkam, Chennai - 34.5.The Assistant Commissioner of Income Tax, Central Circle - I(1), Chennai.+4cc's to Mr.S.Sridhar, Advocate, S.R.No.36881 to 36884+2cc's to Mr.T.R.Senthil Kumar, Advocate, S.R.No.37111 T.C.A. NOS.311 TO 314 OF 2015 PVR(CO)CA(20/08/2015)