I.t.a Nos. 27/2013 & Connected Cases v. I.t.a Nos. 27/2013 & Connected Cases

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE ANTONY DOMINIC & THE HONOURABLE MR. JUSTICE DAMA SESHADRI NAIDU MONDAY, THE 4TH DAY OF JULY 2016/13TH ASHADHA, 1938 ITA.No. 27 of 2013 () ---------------------- AGAINST THE ORDER/JUDGMENT IN ITA 127/COCH/2011 ofI.T.A.TRIBUNAL,COCHIN BENCH DATED 07.09.2012 APPELLANT/RESPONDENT: ---------------------------- M/S.KOTTAKKAL WOOD COMPLEX, MAIN ROAD, KOTTAKKAL, PAN: AACFK 6874A BY ADV. SRI.ANIL D. NAIR RESPONDENT(S)/APPELLANT: --------------------------------- THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2, KOZHIKODE - 673 001. R1 BY ADV. SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) R1 BY ADV. SRI.GEORGE K. GEORGE, SC FOR IT THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 04-07-2016, ALONG WITH ITA. 28, 29, 35, 36, 42 & 53 of 2013, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: 04-07-2016, ALONG WITH ITA. 28, 29, 35, 36, 42 & 53 of 2013, ITA.No. 27 of 2013 () APPENDIX : 2 : PETITIONER'S ANNEXURES: ANNEXURE A :TRUE COPY OF THE ORDER OF ASSESSMENT. ANNEXURE B :TRUE COPY OF THE ORDER OF THE COMMISSIONER OFINCOME TAX.INCOME TAX. ANNEXURE C:TRUE COPY OF THE ORDER OF THE INCOME TAXAPPELLATE TRIBUNAL.APPELLATE TRIBUNAL. ANNEXURE D :TRUE COPY OF THE ARGUMENT NOTE. RESPONDENTS' ANNEXURES:NIL //TRUE COPY// rv P.A. TO JUDGE. ANTONY DOMINIC & DAMA SESHADRI NAIDU, JJ. ------------------------------------------- ------------------------------------------ Dated this the 4[th] day of July, 2016. JUDGMENT Antony Dominic, J. These appeals are filed by the assessee aggrieved by the common order passed by the Tribunal for Income Tax AppellateTribunal, Cochin Bench in I.T.A. Nos. 127-133/Coch/2011concerning the assessment years 2002-2003 and 2008-2009. Bythe said order, the appeals filed by the assessee were dismissed. 2. Briefly stated the facts of the case are as follows: The appellant assessee is a partnership firm, engaged in the business of furniture. Survey under Section 133A of the IncomeTax Act was conducted in the premises of the appellant on12.09.2007 in connection with the search under Section 132 of theAct in the concern, viz, M/s.Classy the Antique Designed Furniture.This resulted in an assessment under Section 153C for theassessment years 2002-2003 and 2007-2008 and an assessmentunder Section 143 for the assessment year 2008-2009. 3. The assessee filed appeals before the Commissioner (Appeals), which were partly allowed. Further appeals that were filedbefore the Tribunal were dismissed by the impugned common order.It is aggrieved by these orders, the assessee has filed these appeals. 4. We heard the learned counsel for the appellant and thelearned Senior Standing Counsel for the Revenue. 5. The contention raised by the learned counsel for theappellant is mainly that the entire assessments are based on thestatement of Sri. V.A. Ahammed, a Salesman of the appellant,recorded under Section 133A of the Act, and that in the absence ofany corroborative evidence, the assessments are illegal. In support ofthis contention, the learned counsel has placed reliance on thejudgments of this Court and the Madras High Court in Paul Mathewsand Sons v. Commissioner of Income Tax[1] and Commissioner ofIncome Tax v. S. Khader Khan Son[2] respectively and the judgment ofthe Apex Court in Commissioner of Income Tax v. S. Khader KhanSon[3] where the judgment of the Madras High Court was confirmed.On the other hand, the learned senior Counsel appearing for the 1263 ITR 1012[2008] 300 ITR 157 (Mad)3[2013] 352 ITR 480 (SC) 2[2008] 300 ITR 157 (Mad)3[2013] 352 ITR 480 (SC) 1263 ITR 1012[2008] 300 ITR 157 (Mad)3[2013] 352 ITR 480 (SC) 2[2008] 300 ITR 157 (Mad)3[2013] 352 ITR 480 (SC) Revenue contended that the statement under Section 133A has itsevidentiary value, and according to him, so long as the assessee hasnot proved that the contents of the statement are incorrect, theassessment made relying on the statement cannot be interfered with.The learned counsel also invited our attention to the assessmentorder, where in addition to the statement under Section 133A, reliancehas been placed on the proceedings for imposition of penalty underSection 67 of the KVAT Act on the allegation of suppression of stock.He also invited our attention to the assessment order where reliancehas been placed on letter dated 18.09.2007 issued by Sri. V. Ahamed,a salesman of the appellant. Therefore, according to him, theprinciple laid down in the judgments of this Court and Madras HighCourt cannot be applied to the facts of this case. In fact, the learnedcounsel invited our attention to the judgment of the Bombay HighCourt in Dr. Dinesh Jain v. ITO (Bom)[4] where the Bombay High Courthas distinguished the judgment in S. Khader Khan Son (supra). 6. We have considered the submissions made. It is a fact thatthe statement under Section 133A of Sri. V. Ahammed, the salesman I.T.A Nos. 27/2013 & connected cases -4- of the appellant, was recorded during the survey conducted. It is alsotrue that an assessment made entirely relying on such a statementcannot be sustained. Law in this behalf has been clarified by thisCourt in Paul Mathews and Sons v. Commissioner of Income Tax[5],wherein this Court has held thus: “Section 133A(3)(iii) enables the authority to record the statement ofany person which may be useful for, or relevant to, any proceeding underthe Act. Section 133A, however, enables the income-tax authority only torecord any statement of any person which may be useful, but does notauthorize taking any sworn statement. On the other hand, we find that sucha power to examine a person on oath is specifically conferred on theauthorised officer only under Section 132(4) of the Income-tax Act in thecourse of any search or seizure. Thus, the Income-tax Act, whenever itthought fit and necessary to confer such power to examine a person on oath,the same has been expressly provided whereas section 133A does notempower any Income-tax Officer to examine any person on oath. Thus, incontradistinction to the power under Section 133A, Section 132(4) of theIncome-tax Act enables the authorised officer to examine a person on oathand any statement made by such person during such examination can alsobe used in evidence under the Income-tax Act. On the other hand, whateverstatement is recorded under Section 133A of the Income-tax Act it is notgiven any evidentiary value obviously for the reason that the officer is notauthorised to administer oath and to take any sworn statement which alonehas evidentiary value as contemplated under law. Therefore, there is muchforce in the argument of learned counsel for the appellant that the statementelicited during the survey operation has not evidentiary value and theIncome-tax Officer was well aware of this.” The judgment in Paul Mathews (supra) was relied on by the Madras High Court in S. Khader Khan Son. The judgment of the Madras High 5263 ITR 101 Court was confirmed by the Apex Court by dismissing the appeal filedby the Revenue. 7. However, insofar as this case is concerned, we find force in The judgment in Paul Mathews (supra) was relied on by the Madras High Court in S. Khader Khan Son. The judgment of the Madras High 5263 ITR 101 Court was confirmed by the Apex Court by dismissing the appeal filedby the Revenue. 7. However, insofar as this case is concerned, we find force in the submission of the learned Senior Counsel for the Revenue that theassessments made is not based only on the statement under Section133A of the Act. On the other hand, the assessment order itselfreveals that the Revenue has placed reliance on the proceedingsinitiated against the appellant for imposition of penalty under Section67 of the KVAT Act based on an inspection held on 17.08.2006. It isseen that the Revenue relied on letter dated 18.09.2007 issued by V.Ahammed to the Assistant Director of Income Tax (Investigation)clarifying his statement under Section 133A of the Act. This showsthat the maker of the statement himself has re-affirmed thestatement and nothing has been produced by the assessee to showthat the contents of the statement are incorrect. In such a situation,we cannot accept the contention now raised by the learned counselfor the assessee and hold the assessments to be illegal. 8. However, we find from the order of the Assessing Officerwhich now stand confirmed that the quantification of the volume of I.T.A Nos. 27/2013 & connected cases suppression allegedly made by the assessee is based on the quantitydetected by the authorities under the KVAT Act in the inspection heldon 17.08.2006. It is stated that the proceedings for levy of penaltyunder Section 67 of the KVAT Act were initiated on finding of excessstock of `14,38,785, and that the suppression of sale was worked outat `17,81,971 by adding gross profit to the excess stock. This isevident from the assessment order, wherein it has been stated thus: “The contention of the assessee is not accepted. Assessee is asisterconcern of Classy group which is a family concern of Adattil Mohammed.The modus operandi regarding the suppression of sale by understating thesale is common in all the firms as it is evident from the statement of Sri.Adattil Jabir and Sri. V. Ahammed as mentioned above. There was aninspection by the intelligence officer of Commercial Taxes of Tirur in thecase of Kottakkal Wood Complex on 17.08.2006 and excess stock of14,38,785/- was found and the Department of Commercial Taxes has issueda show cause notice bearing No. TRL-08/06-07 dated 16.10.2007 forimposing penalty u/s.67(6) of the KVAT Act. In response to the said showcause notice assessee vide letter dated 10.04.2007 replied that the stockdifference existed only in the case of 12 items out of 31 items. This showsthat the assessee is regularly suppressing the sale of goods while computingthe understated sale, branded items, sales to Banks etc. are excluded.Further, the sharp fall in GP could not be satisfactorily explained fromwhich it is clear that the assessee has suppressed the sales. Therefore, thesuppression of sale worked out as above at Rs.17,81,971/- is added to thetotal income as undisclosed business income. Penalty proceedings u/s 271(1)(c) is initiated for concealment of income.” 9. During the course of hearing, the learned for the appellant produced before us order No.TRL-08/06-07 dated 08.08.2007, 9. During the course of hearing, the learned for the appellant produced before us order No.TRL-08/06-07 dated 08.08.2007, whereby the penalty proceedings under Section 67 of the Act werecompounded by the assessee on payment of `28000/- ascompounding fee. This order shows that the total suppressiondetected was only `2,10,595/-. This means that the penaltyproceedings were initiated on the basis that there was excess stock of`14,38,785. In the final order that was passed, the said amount isnow reduced to `2,10,595. Since the assessment under the IncomeTax Act has been completed quantifying the suppression of salebased on the excess stock detected in the inspection conducted bythe authorities under the KVAT Act on 17.08.2006, the reduction inthe excess stock as seen in the final order passed in the proceedingsunder Section 67of the KVAT Act, should have an impact on theassessment under the Income Tax Act also. Therefore, though weconfirm the orders impugned before us, we are of the view that theassessee is entitled to get the benefit of the reduced excess stock asdetermined by the authorities of the KVAT Act in their order No.TRL-08/06-07 dated 08.08.2007. For that matter, we remit theproceedings to the Assessing Officer, who will issue revised orderstaking into account the order dated 08.08.2007 passed by the -8- Intelligence Officer, Squad No.II, Tirur. The appeals are accordingly disposed of remitting the matter tothe Assessing Officer to pass fresh orders as directed above. Thisshall be done within a period of six months from the date of receipt ofa copy of this judgment. ANTONY DOMINIC, JUDGE. DAMA SESHADRI NAIDU, JUDGE. Rv I.T.A Nos. 27/2013 & connected cases