Ita/101/2016 Of M/S. Malayil Bankers v. Commissioner Of Income Tax, Kowdiyar

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON WEDNESDAY,THE 19TH DAY OF DECEMBER 2018 / 28TH AGRAHAYANA, 1940 ITA.No. 6 of 2012 AGAINST THE ORDER/JUDGMENT IN ITA 758/2008 ofI.T.A.TRIBUNAL,COCHIN BENCH DATED 29-07-2011 APPELLANT/S: THE COMMISSIONER OF INCOME TAX,THIRUVANANTHAPURAM. BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT/S: M/S. MALAYIL BANKERSC/O SHRI. GEORGE VARGHESE, MALAYIL HOUSE, KUSAVARKAL ROAD, NALANCHIRA, THIRUVANANTHAPURAM-695015. BY ADVS.SRI.T.M.SREEDHARAN (SR.)SMT.BOBY M.SEKHARSMT.NISHA JOHNSRI.V.P.NARAYANAN THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON19.12.2018, ALONG WITH ITA.33/2012, ITA.56/2012, ITA.60/2012,ITA.101/2016, ITA.102/2016, ITA.162/2015, & ITA.163/2015, THECOURT ON THE SAME DAY DELIVERED THE FOLLOWING: IN THE HIGH COURT OF KERALA AT ERNAKULAMPRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON WEDNESDAY,THE 19TH DAY OF DECEMBER 2018 / 28TH AGRAHAYANA, 1940 ITA.No. 33 of 2012 AGAINST THE ORDER/JUDGMENT IN ITA 20/2007 ofI.T.A.TRIBUNAL,COCHIN BENCH APPELLANT/S: THE COMMISSIONER OF INCOME TAXTHIRUVANANTHAPURAM. BY ADVS. SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES)SRI.JOSE JOSEPH, SC FOR INCOME TAX RESPONDENT/S: M/S.MALAYIL BANKERSC/O.SHRI.GEORGE VARGHESE, MALAYIL HOUSE, KUSAVARKAL ROAD, NALANCHIRA, THIRUVANANHTPAURAM-695033. BY ADVS.SRI.T.M.SREEDHARAN (SR.)SMT.DIVYA RAVINDRANSRI.V.P.NARAYANAN THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON19.12.2018, ALONG WITH ITA.102/2016, ITA.101/2016, ITA.163/2015,ITA.162/2015, ITA.56/2012, ITA.6/2012, & ITA.60/2012, THE COURTON THE SAME DAY DELIVERED THE FOLLOWING: IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON WEDNESDAY,THE 19TH DAY OF DECEMBER 2018 / 28TH AGRAHAYANA, 1940 ITA.No. 56 of 2012 AGAINST THE ORDER/JUDGMENT IN ITA 5/2007 ofI.T.A.TRIBUNAL,COCHIN BENCH DATED 29-07-2011 APPELLANT/S: THE COMMISSIONER OF INCOME TAX, THIRUVANANTHAPURAM. BY ADVS.SRI.P.K.R.MENON, SENIOR COUNSEL, GOI(TAXES)SRI.JOSE JOSEPH, SC FOR INCOME TAX RESPONDENT/S: M/S.MALAYIL BANKERS, C/O.SHRI.GEORGE VARGHESEMALAYIL HOUSE, KUSAVARKAL ROAD, NALANCHIRA, THIRUVANANTHAPURAM-695 033. BY ADVS.SRI.T.M.SREEDHARAN (SR.)SMT.BOBY M.SEKHARSMT.NISHA JOHNSRI.V.P.NARAYANAN THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON19.12.2018, ALONG WITH ITA.102/2016, ITA.101/2016, ITA.163/2015,ITA.162/2015, ITA.33/2012, ITA.6/2012, ITA.60/2012, THE COURT ONTHE SAME DAY DELIVERED THE FOLLOWING: IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON WEDNESDAY,THE 19TH DAY OF DECEMBER 2018 / 28TH AGRAHAYANA, 1940 ITA.No. 60 of 2012 AGAINST THE ORDER/JUDGMENT IN ITA 759/2008 ofI.T.A.TRIBUNAL,COCHIN BENCH DATED 29-07-2011 APPELLANT/S: THE COMMISSIONER OF INCOME TAXTHIRUVANANTHAPURAM. BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT/S: M/S. MALAYIL BANKERSC/O.SHRI GEORGE VARGHESE, MALAYIL HOUSE, KUSAVARKAL ROAD, NALANCHIRA, THIRUVANANTHAPURAM. BY ADVS.SRI.T.M.SREEDHARAN (SR.)SMT.BOBY M.SEKHARSMT.NISHA JOHNSRI.V.P.NARAYANAN OTHER PRESENT: THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON19.12.2018, ALONG WITH ITA.102/2016, ITA.101/2016, ITA.163/2015,ITA.162/2015, ITA.33/2012, ITA.56/2012, & ITA.6/2012, THE COURTON THE SAME DAY DELIVERED THE FOLLOWING: IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON WEDNESDAY,THE 19TH DAY OF DECEMBER 2018 / 28TH AGRAHAYANA, 1940 ITA.No. 101 of 2016 AGAINST THE ORDER/JUDGMENT IN OTHERS 5/2007 ofI.T.A.TRIBUNAL,COCHIN BENCH APPELLANT/S: M/S. MALAYIL BANKERSC/O.SHRI GEORGE VARGHESE, MALAYIL HOUSE, KUSAVARKAL ROAD, NALANCHIRA, THIRUVANANTHAPURAM. BY ADVS.SRI.T.M.SREEDHARAN (SR.)SMT.BOBY M.SEKHARSMT.NISHA JOHNSRI.V.P.NARAYANAN OTHER PRESENT: THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON19.12.2018, ALONG WITH ITA.102/2016, ITA.101/2016, ITA.163/2015,ITA.162/2015, ITA.33/2012, ITA.56/2012, & ITA.6/2012, THE COURTON THE SAME DAY DELIVERED THE FOLLOWING: IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON WEDNESDAY,THE 19TH DAY OF DECEMBER 2018 / 28TH AGRAHAYANA, 1940 ITA.No. 101 of 2016 AGAINST THE ORDER/JUDGMENT IN OTHERS 5/2007 ofI.T.A.TRIBUNAL,COCHIN BENCH APPELLANT/S: M/S. MALAYIL BANKERSMALAYIL HOUSE, AGRA, KUSAVARKAL ROAD, NALANCHIRA, THIRUVANANTHAPURAM, REPRESENTED BY EX-MANAGING PARTNER, GEORGE VARGHESE. BY ADVS.SRI.T.M.SREEDHARAN (SR.)SMT.DIVYA RAVINDRANSRI.V.P.NARAYANAN RESPONDENT/S: COMMISSIONER OF INCOME TAX, KOWDIYARKOWDIYAR, THIRUVANANTHAPURAM. BY ADVS.SRI.P.K.R.MENON,SENIOR COUNSEL, GOI(TAXES)SRI.JOSE JOSEPH, SC FOR INCOME TAX THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON19.12.2018, ALONG WITH ITA.102/2016, ITA.163/2015, ITA.162/2015,ITA.33/2012, ITA.56/2012, ITA.6/2012, & ITA.60/2012, THE COURTON THE SAME DAY DELIVERED THE FOLLOWING: IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON WEDNESDAY,THE 19TH DAY OF DECEMBER 2018 / 28TH AGRAHAYANA, 1940 ITA.No. 102 of 2016 AGAINST THE ORDER/JUDGMENT IN OTHERS 53/2008 ofI.T.A.TRIBUNAL,COCHIN BENCH APPELLANT/S: M/S. MALAYIL BANKERSMALAYIL HOUSE, AGRA, KUSAVARKAL ROAD, NALANCHIRA, THIRUVANANTHAPURAM, REPRESENTED BY EX- MANAGING PARTNER, GEORGE VARGHESE. BY ADVS.SRI.T.M.SREEDHARAN (SR.)SMT.DIVYA RAVINDRANSRI.V.P.NARAYANAN RESPONDENT/S: COMMISSIONER OF INCOME TAXKAWDIYAR, THIRUVANANTHAPURAM - 695 001. BY ADV. SRI.JOSE JOSEPH, SC FOR INCOME TAX THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON19.12.2018, ALONG WITH ITA.101/2016, ITA.163/2015, ITA.162/2015,ITA.33/2012, ITA.56/2012, ITA.6/2012, & ITA.60/2012, THE COURTON THE SAME DAY DELIVERED THE FOLLOWING: IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON WEDNESDAY,THE 19TH DAY OF DECEMBER 2018 / 28TH AGRAHAYANA, 1940 ITA.No. 162 of 2015 AGAINST THE ORDER/JUDGMENT IN ITA 758/2008 ofI.T.A.TRIBUNAL,COCHIN BENCH APPELLANT/S: M/S. MALAYIL BANKERS, THIRUVANANTHAPURAMMALAYIL HOSE, AGRA, KUSAVARKAL ROAD, NALANCHIRA,THIRUVANANTHAPURAM, REPRESENTED BY EX-MANAGING PARTNER,GEORGE VARGHESE BY ADVS.SRI.T.M.SREEDHARAN (SR.)SMT.DIVYA RAVINDRANSRI.V.P.NARAYANAN RESPONDENT/S: THE COMMISSIONER OF INCOME TAX, KOWDIAR, THIRUVANANTHAPURAM – 695001. BY ADVS.SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON19.12.2018, ALONG WITH ITA.102/2016, ITA.101/2016, ITA.163/2015,ITA.33/2012, ITA.56/2012, ITA.6/2012, ITA.60/2012, THE COURT ONTHE SAME DAY DELIVERED THE FOLLOWING: IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON WEDNESDAY,THE 19TH DAY OF DECEMBER 2018 / 28TH AGRAHAYANA, 1940 ITA.No. 163 of 2015 AGAINST THE ORDER/JUDGMENT IN ITA 759/2008 ofI.T.A.TRIBUNAL,COCHIN BENCH DATED 29-07-2011 APPELLANT/S: M/S. MALAYIL BANKERS, THIRUVANANTHAPURAMMALAYIL HOUSE, AGRA, KUSAVARKAL ROAD, NALANCHIRA, THIRUVANANTHAPURAM, REPRESENTED BY EX-MANAGING PARTNER, GEORGE VARGHESE. BY ADVS.SRI.T.M.SREEDHARAN (SR.)SMT.DIVYA RAVINDRANSRI.V.P.NARAYANAN RESPONDENT/S: THE COMMISSIONER OF INCOME TAX, KOWDIYAR, THIRUVANANTHAPURAM. BY ADVS.SRI.JOSE JOSEPH, SC, FOR INCOME TAX IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON WEDNESDAY,THE 19TH DAY OF DECEMBER 2018 / 28TH AGRAHAYANA, 1940 ITA.No. 163 of 2015 AGAINST THE ORDER/JUDGMENT IN ITA 759/2008 ofI.T.A.TRIBUNAL,COCHIN BENCH DATED 29-07-2011 APPELLANT/S: M/S. MALAYIL BANKERS, THIRUVANANTHAPURAMMALAYIL HOUSE, AGRA, KUSAVARKAL ROAD, NALANCHIRA, THIRUVANANTHAPURAM, REPRESENTED BY EX-MANAGING PARTNER, GEORGE VARGHESE. BY ADVS.SRI.T.M.SREEDHARAN (SR.)SMT.DIVYA RAVINDRANSRI.V.P.NARAYANAN RESPONDENT/S: THE COMMISSIONER OF INCOME TAX, KOWDIYAR, THIRUVANANTHAPURAM. BY ADVS.SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON19.12.2018, ALONG WITH ITA.102/2016, ITA.101/2016, ITA.162/2015,ITA.33/2012, ITA.56/2012, ITA.6/2012, ITA.60/2012, THE COURT ONTHE SAME DAY DELIVERED THE FOLLOWING: JUDGMENT [ITA 6/2012, ITA.33/2012, ITA.56/2012, ITA.60/2012,ITA.101/2016, ITA.102/2016, ITA.162/2015, ITA.163/2015]Vinod Chandran, J. Of the eight appeals coming up for consideration,four are by the Revenue and four by the assessee. Twoappeals of the Revenue arise from the block assessmentof the assessee for the period 01.04.1987 to 05.09.1997and those are I.T.A.Nos. 33/2012 and 56/2012. Theassessee's appeals from the block assessment arenumbered as I.T.A.Nos.101/2016 and 102/2016. Since thenotice issued under Section 158BC read with Section143(3) of the Income Tax Act, 1961 (for brevity “theAct”) was stayed by this Court, the Assessing Officer(for brevity “A.O.”) had completed the assessments forassessment years (for brevity “AY”) 1995-96 and1996-97 under Section 143(3); lest the limitation setin. Two appeals each by the Revenue and the assesseearise from such regular assessments also. The appealsof the assessee are numbered as I.T.A.Nos.162/2015 and163/2015. The appeals of the Revenue are numbered asI.T.A.Nos.6/2012 and 60/2012. Common questions arise in the above appeals, since the individual assessments asalso the block assessments have been completed on thebasis of the materials recovered on search. 2. On facts, we have to notice that the assesseehad filed returns for AY 1995-96 on 31.10.1995 and forAY 1996-97 on 30.10.1996. The return for AY 1995-96 wasselected for verification under Section 143(2). Theassessee though responded to the notice, dragged the matter on one pretext or the other. A survey underSection 133A of the Act was carried out, at thebusiness premises of the assessee, i.e., at the HeadOffice at Thiruvananthapuram and Branch Offices atPeroorkada and Vattiyoorkavu; on 19.12.1996. Thediscrepancies and anomalies in the accounts as also thecorrupt business practices revealed huge unaccountedbusiness and systematic suppression of income. Thediscrepancies noticed were the following: (1) The pledge register in Form-M showed theassessee having lend money on the security ofgold with interest chargeable at 18% perannum; but, however, interest received was atthe rate of 36% per annum. Only 50% of thetotal interest received on gold loans, ie., 18% was disclosed in the regular books ofaccounts. Section 131 indicated that the deposit receipts were with the auditor. The auditor who appeared on summonsdenied the same. An audit under Section 142(2A) of the co-operate. The return for the AY 1996-97 was alsotaken up for scrutiny by issuance of notice under Section 143(2). At this juncture, the Revenue initiatedsearch and seizure proceedings under Section 132 of theAct in the business premises of the assessee as well asthe residential premises of the Directors. The searchcommenced on 19.08.1997 and continued till 05.09.1997.The assessee having challenged the action before thisCourt, the block assessments were kept pending; but theregular assessment for AY 1995-96 and 1996-97 werecompleted. 18% was disclosed in the regular books ofaccounts. Section 131 indicated that the deposit receipts were with the auditor. The auditor who appeared on summonsdenied the same. An audit under Section 142(2A) of the co-operate. The return for the AY 1996-97 was alsotaken up for scrutiny by issuance of notice under Section 143(2). At this juncture, the Revenue initiatedsearch and seizure proceedings under Section 132 of theAct in the business premises of the assessee as well asthe residential premises of the Directors. The searchcommenced on 19.08.1997 and continued till 05.09.1997.The assessee having challenged the action before thisCourt, the block assessments were kept pending; but theregular assessment for AY 1995-96 and 1996-97 werecompleted. 4. As to the block assessment, notice under Section158BC was issued on 01.12.1997 for the block periodfrom 01.04.1987 to 05.09.1997. No return was filed inresponse to the notice. The assessment, hence, wascompleted determining the undisclosed income for theblock period at Rs.1634.47 lakhs, vide order dated03.03.1999. The same was set aside by the CIT underSection 263, since the matter was pending before thisCourt. Subsequently, after securing permission of thisCourt by order dated 11.01.2002, the assessment wascompleted afresh at Rs.1649.55 lakhs, vide order underSection 144 read with Section 158BC(c) dated 26.3.2002. Commissioner of Income Tax from the regular assessmentsof AY 1995-96 and AY 1996-97 with delay of 3292 daysand 1643 days respectively. The first appellateauthority, after condoning the delay, adjudicated theassessee's appeals. The block assessment was alsoappealed by the assessee before the Commissioner of Income Tax. In block assessment, the questions arising were the following: “(i)Whether the assessee was liable to be treatedas an association of persons as distinguishedfrom a firm ? (ii) Whether the huge deposits found in the booksof accounts without the details of the depositors could be added as unaccountedcredits under Section 68 ?(iii)Whether the addition of 18% interset on goldloans in addition to the 18% disclosed inthe books of accounts was proper? 6. On the question of Association of Persons, theCommissioner of Appeals found on the evidence recordedby the A.O. that there is no ground for treating theassessee as a firm. The assessee had not produced anyregistration as a partnership firm and in such circumstances, the evidence and findings of the A.O.were affirmed. The assessee was in appeal before theTribunal on that question. The issue of addition ofcash credits as unexplained credits were remanded bythe first appellate authority on the ground that therewas an insolvency petition filed by the assessee beforethe Sub Court, Thiruvananthapuram, wherein there was alist of creditors given, which was adjudicated upon and approved by the Civil Court and, hence, the saidcreditors are to be taken as genuine. To that extent,the first appellate authority directed the A.O. todelete the addition made as unexplained cash credit. Onthe question of addition of 36% of interest actuallyreceived in the gold loans, 18% was deleted and theA.O. was directed to accept the interest as disclosedfrom the books of accounts. The first appellateauthority, on an interim application filed later,modified its earlier order directing the A.O. to allowcredit with respect to any subsequent list produced,which stands approved by the Civil Court subsequent to approved by the Civil Court and, hence, the saidcreditors are to be taken as genuine. To that extent,the first appellate authority directed the A.O. todelete the addition made as unexplained cash credit. Onthe question of addition of 36% of interest actuallyreceived in the gold loans, 18% was deleted and theA.O. was directed to accept the interest as disclosedfrom the books of accounts. The first appellateauthority, on an interim application filed later,modified its earlier order directing the A.O. to allowcredit with respect to any subsequent list produced,which stands approved by the Civil Court subsequent to the order or in future. The Department filed appealfrom these findings to the Tribunal.7.The Tribunal by a common order found the statusof the assessee as has been found by the lowerauthorities to be one of Association of Persons. Thegrounds raised by the assessee with respect to thepreliminary list of creditors as issued by theInsolvency Court on 30.08.2006 for a total amount ofRs.1125.54 lakhs and seven more depositors for a totalof Rs.7.55 lakhs, not included in the list; were bothconsidered together as one issue. In this context, theTribunal also noticed that the first appellateauthority had specifically directed any subsequent listapproved by the Civil Court to be given effect to bythe A.O. Though such direction was there, thesubsequent list was not taken into account, was thecontention urged by the assessee before the Tribunal inits cross-objection. The Tribunal found that thepreliminary list of creditors as approved by the civilcourt cannot be taken without further evidence of thegenuineness of the claims made by the depositors. It was found that the Adjudicating Authority under the Actis not bound by the order passed by the Civil Court inan Insolvency Petition and the A.O. would have to beconvinced of the genuineness of the parties bysufficient evidence adduced before the A.O. The remandorder of the C.I.T. (Appeals), though confirmed,specific directions were issued by the Tribunal as tohow the preliminary list of creditors and anysubsequent list as approved by the Civil Court are tobe taken into account. With respect to the additionmade of 18% towards the interest received on the goldloans not disclosed in the books of accounts, theTribunal based on various evidences before the A.O.,held that the Revenue's case would stand un-impeached.The dis-allowance of interest on deposits were alsofound to be monies diverted and withdrawn from thebusiness by the partners, in proof of which substantialevidences, direct as well as corroborative, were found during the search. These evidences, according to theTribunal, stood un-controverted. Even then, the saidissues were restored to the files of the first appellate authority, since there was an absence of a speaking order by the first appellate authority. 8.The following questions, as reframed by us, arise insofar as the block assessments are consideredin the assessee's appeal: i)Whether the Tribunal was correct in havingaffirmed the status of the assessee asAssociations of Persons ? ii) Ought not the Tribunal have confirmed thedeletion of cash credit under Section 68 andheld that on facts the list approved by theCivil Court in the Insolvency Petition filedby the assessee adjudicated upon thegenuineness of the depositor, especially inthe context of the Receiver appointed by theCivil Court having taken possession of theproperties and also made the pro-ratadistribution of amounts due to suchdepositors ? iii)Ought not the Tribunal have accepted thefinding of the first appellate authoritythat there was absolutely no material to addon 18% of the interest as disclosed in thebooks of accounts, insofar as the gold loansare concerned ? 9.The Revenue's appeals raise the following questions of law, as re-framed by us:- i)Ought not the Tribunal have found the iii)Ought not the Tribunal have accepted thefinding of the first appellate authoritythat there was absolutely no material to addon 18% of the interest as disclosed in thebooks of accounts, insofar as the gold loansare concerned ? 9.The Revenue's appeals raise the following questions of law, as re-framed by us:- i)Ought not the Tribunal have found the deletion of cash credits by the first appellate authority to be erroneous and restored the order of the AssessingAuthority ?Authority ? ii)Having found on facts the additional levyof interest at 18% as also the same havingbeen diverted to the partners, ought notthe Tribunal have restored the order of theA.O. deleting the direction of the first appellate authority to accept the books of accounts of the assessee ? 10. The questions can be considered together, insofar as they arise from the common order of theTribunal and refer almost to the very same transactions, which were the subject of the assessmentin the block period. 11. On the question of the status of the assessee, the A.O. found on the basis of the materials recovered on search that there was existence of multiple entitiesbut unity of control, inter-locking and inter-lacingof funds, as also the premises in which the various entities function, recording of transactions, etc. The decision in Prithvi Insurance Co. v. C.I.T., 63 ITR 632 (SC) was relied upon, specifically finding that theassessee had not refuted the findings of the A.O. atany point. The supporting materials, includingdocuments and the sworn statements of key personnelwere found to be compelling satisfactory evidence insupport of finding the status of the assessee to be ofan Association of Persons. It was found that when thelist of 1064 creditors were submitted by the assessee,there was no distinction as to the creditors being ofone or other of the eight firms of the assessee. Thebusiness was run in all the eight premises in the nameof “Malayil Bankers”. There was no partnership deedfiled, which was duly registered for at least fourentities constituted with effect from 01.04.1996. TheA.O. had called for the details of the link between thesaid four entities and the four others constituted as a partnership. The assessee had failed to produce anysuch evidence. The registration as a firm, inclusiveof all the entities carrying on business in common, being not established by the assessee, the compellingevidence as recovered under the survey and seizurewould commend us also to find that the status of theassessee is one of Association of Persons. We do notthink any question of law arises from the said aspect,since the lower authorities had found such status onthe strength of the evidence recovered and on the basisof facts. We, hence, decline to answer the said question raised in the appeal of the assessee anduphold the order of the Tribunal affirming the findingof the lower authorities. 12. The other two questions remaining in the assessee's appeals and that raised in the Revenue'sappeals are inter-connected. The assessee had soughtfor sustaining the order of the first appellateauthority, insofar as deletion of the cash credit underSection 68 and the acceptance of interest on gold loansas per the books of accounts. The Revenue insists that the said directions are not sustainable and alsofurther impugn the Tribunal's order remanding the saidissues to the A.O. question raised in the appeal of the assessee anduphold the order of the Tribunal affirming the findingof the lower authorities. 12. The other two questions remaining in the assessee's appeals and that raised in the Revenue'sappeals are inter-connected. The assessee had soughtfor sustaining the order of the first appellateauthority, insofar as deletion of the cash credit underSection 68 and the acceptance of interest on gold loansas per the books of accounts. The Revenue insists that the said directions are not sustainable and alsofurther impugn the Tribunal's order remanding the saidissues to the A.O. 13. We see that the assessee has produced the orderof the Civil Court in I.A.No.2967/2016 inI.T.A.No.162/2015. The assessee had relied on thepreliminary list of creditors produced as Annexure Dbefore this Court. It indicates that various amountswere claimed by almost 1064 persons. In this context,it has to be noticed that the insolvency petition isfiled by the assessee before the Civil Court, pointingout the assets owned by the assessee and also thecreditors of the assessee. The prayer is, insofar asthe amounts due to the creditors far exceeding thevalue of the assets held by the assessee, which is theground on which declaration of insolvency is soughtfor. The Civil Court then would take out necessarypublication and the further claims filed before theCivil Court are also taken on record. A Receiver isappointed and the assets of the assessee are takenpossession of. Pursuant to which, after adjudicatingthe claims, there is a pro-rata distribution made fromthe assets of the assessee. The question here,however, is as to whether the Income Tax authorities are bound by the finding of the Civil Court as toamounts being due to various respondents as arrayed inan insolvency proceeding. 14. We have to first observe that in an insolvencyproceeding when the petitioner itself array therespondents as creditors, there need be no furtheradjudication on the same, since the assessee admitssuch debts to the said persons. There could also becircumstances of the assessee in the insolvencyproceedings making claims through others for whichsubstantiating documents also could be profferedsubsequently. As far as the assessment for income taxpurposes are concerned, it should relate back to thedate of search and the materials recovered at the pointof search. The assessee too had to explain the variousdiscrepancies found and produce materials to supportthe explanation offered. Having not produced any suchmaterials at the time of search or when a notice wasissued for filing of returns, the assessee cannot laterat the appellate stage, rely on a Civil Courtproceeding, that too, in an insolvency petition and assert that the creditors shown therein were the realdepositors with the assessee. 15. We find that the preliminary list of creditorsin the insolvency proceeding does not at all commend tous, as a substantiating material to interfere with theassessment proceedings. We also notice the order ofthe District Court in appeal, wherein it isspecifically indicated that there was a scheme ofcomposition filed and approved by the Civil Court. Theorder of adjudication of the trial court also stoodannulled in terms of Sections 38 and 40 of theInsolvency Act. Hence, what has been done by theassessee is to file a scheme of composition and effectpro-rata distribution of its assets to thoserespondents included in the scheme of composition.This cannot lead to any interference of the assessmentorder under the income tax act. The assessee, at thetime of search nor later after issuance of noticeproduced any substantiating materials as to thegenuineness of the depositors. 16.We herewith extract the order of the C.I.T.(Appeals), which was extracted by the Tribunal also, as follows: 16.We herewith extract the order of the C.I.T.(Appeals), which was extracted by the Tribunal also, as follows: “I therefore hold that the list ofdepositors approved by the Civil Court has to betaken as genuine and there is no reason toconclude otherwise, especially without anyenquiry. The addition of the deposits asunexplained cash credits is not correct as it ismade without any enquiry and is deleted.” This is the operative portion of the order, which washeld to be non-speaking by the Tribunal. We agree withthe Tribunal, but when the Tribunal is also a factfinding authority it was appropriate that the Tribunalitself examine the facts. In fact the Tribunal did so;which findings we find, are against the assessee.Despite that the Tribunal remanded the issue, which wasimproper. After clearly finding that the civilproceedings would not regulate the assessment under theI.T. Act,, there was no ground for modifying the orderof the C.I.T.(Appeals) directing the A.O. to examinethe genuineness of the creditors. We find that thepreliminary list of creditors as approved by the CivilCourt in the insolvency proceedings, is not sufficientmaterial to upset the additions made in an assessmentunder the I.T. Act. 17. It is further to be noticed that the Tribunalitself found that the General Manager, Alex Kurian andthe Managing Partner, George Varghese admitted in theirsworn statement under Section 132(4) that all the namesof the depositors as entered in the registers are notreal and that whenever there was a shortage of funds,deposits in the names of partners or other bogus nameswere entered. The managerial personnel admitted to havedestroyed the copies of the original deposits bearingthe signatures of the depositors. The assessee alsohad a contention that the deposit forms where with theauditor, which was specifically denied by the auditor,who was summoned. We agree with the Tribunal that theCivil Court proceedings in the insolvency petitionwould have no bearing on the assessment proceedings.Even then, the Tribunal had made a remand insofar aspermitting the assessee to produce additional evidence.We do not think a remand was proper, especially lookingat the facts as found by the Tribunal and the delayoccasioned in filing the statutory appeals. 18. We noticed that the appeals before the firstappellate authority were itself delayed and now we areconsidering the block period 1988-89 and 1997-98 in theyear 2018. The appeals by the assessee before thisCourt were also delayed, having been filed andreturned; after which representation was made withdelay respectively of 1676 and 1683 days. Havingfound the list of creditors in the insolvency petitionto have no bearing insofar the assessment proceedingsunder the I.T.Act, we are of the opinion that theremand order is erroneous. The insolvency proceedingeventually was concluded with a composition scheme. Wealso have found that the Tribunal itself on the basisof the facts found the deletion of the cash credits bythe first appellate authority to be bad. In suchcircumstances, we answer the questions raised hereinabove both in the appeals of the assessee and theRevenue in favour of the Revenue and against theassessee. We restore the assessment order with respectto the addition of cash credits under Section 68. 19.On the question of interest on gold deposits asalso the expenditure by way of interest on deposits, wefind the Tribunal having affirmed the order of the A.O.on facts and evidences, which were before the A.O. asrevealed from the survey and seizure. As in the earlierissue, we feel that the Tribunal ought not have remandedthe issue, especially having found compelling evidence to 19.On the question of interest on gold deposits asalso the expenditure by way of interest on deposits, wefind the Tribunal having affirmed the order of the A.O.on facts and evidences, which were before the A.O. asrevealed from the survey and seizure. As in the earlierissue, we feel that the Tribunal ought not have remandedthe issue, especially having found compelling evidence to substantiate such additions made. The Tribunal hadnoticed that the Cashier sitting at the counter waswriting down the accounted and unaccounted portions ofthe interest, one in the register and other on a piece ofpaper, which was impounded. The paper recovered fromthe business premises, indicated additional interesthaving been received at the rate of 18% per annum, whichwas in addition to the interest income recorded in theregisters maintained, as revealed from the regular booksof accounts. The said finding was also established bythe Department through a decoy, an Inspector, who availeda small loan from the assessee and closed it. Theassessee received from the said decoy also 36% interest;18% of which alone was revealed in the books of accounts. 20. The further evidences were also noticed by the Tribunal. T.G.Alexander, Branch Manager, Peroorkada inhis sworn statement dated 19.08.1999 during the searchproceedings, admitted the charge of interest at therate of 36% per annum and accounting having beencarried out only at the rate of 18% per annum. Thesaid deponent also admitted to collecting servicecharge at the rate of Rs.3/- per Rs.1000/- of a loan.The excess cash in hand found in survey was admitted tobe unaccounted interest for the day, ie., 19.12.1996.The Branch Cashier at Peroorkada and the Branch Managerof Vattiyoorkavu also confirmed the statements ofT.G.Alexander. Alex Kurian, General Manager confirmedthe same as per his statement under Section 132(4) on being confronted with the seized materials. Theinterest accounted of 18% per annum while retained atthe branch where it was collected, the excessunaccounted amounts were transmitted to the Head Office on a periodic basis, entering it separately in a dailysheet with the heading 'Malayil'. The seized materialsfrom the residence of T.G.Alexander also indicated charge of interest at 36% per annum. The seizedmaterials also indicated that the gold loans for higheramounts, ie., in excess of Rs.10,000/-, were being recorded separately. 21.On the question of dis-allowance of interest ondeposits also, the Tribunal found it to be amountsdiverted and withdrawn by the partners of the business,for which there was direct and corroborative evidence. The Tribunal clearly held that the finding of theC.I.T.(Appeals) that the accounts are to be treated asgenuine was erroneous. The C.I.T. (Appeals), accordingto the Tribunal, was labouring under an impression thatwhat was to be examined was only a question of law;while the facts were totally ignored as reflected fromthe materials available before the A.O. by way of thesworn statements and other documents. The books ofaccounts failed to stand the test of verification,especially with reference to the direct and indirectevidence in the possession of the Revenue in respect ofthe business/financial transactions of the assessee.The business expenditure whatever there be, stood already claimed and allowed in the regular assessmentsand hence there could be no further claim ofexpenditure by way of interest paid on deposits. True,the Tribunal found that the C.I.T.'s (Appeal) order wasnot speaking. However, when the Tribunal had gone intothe evidences, as revealed from the survey and search,which it was competent to do, as the last fact findingauthority, we are of the opinion that there was nowarrant for a further remand to the A.O. already claimed and allowed in the regular assessmentsand hence there could be no further claim ofexpenditure by way of interest paid on deposits. True,the Tribunal found that the C.I.T.'s (Appeal) order wasnot speaking. However, when the Tribunal had gone intothe evidences, as revealed from the survey and search,which it was competent to do, as the last fact findingauthority, we are of the opinion that there was nowarrant for a further remand to the A.O. 22. The C.I.T.(Appeals) having found the books ofaccounts to be genuine without any discussion thereon,the order has to be set aside. However, the Tribunalhaving looked into the facts and found the books ofaccounts to be not worthy of acceptance, especially inthe context of the compelling evidences available byway of materials recovered in survey and search, therewas no question of any further consideration by theA.O. We hence answer the said questions raised both inthe cases of the Revenue and that of the assessee infavour of the assessee and against the Revenue. We, hence, allow I.T.A.Nos.101/2016 and 102/2016 and rejectI.T.A.Nos.33/2012 and 56/2012. 23. As to the regular assessments, the question oflaw, insofar as the assessee is concerned, other thanthat already answered in the appeals from the blockassessment, is only with respect to the additionshaving been already made in the block assessment. The said question of law is as follows: “(i) Should not the Appellate Tribunal havefound and held that in the light of theBlock Assessment for the period 1-4-1987 to5-9-1997, separate additions made in theassessment for 1995-96 & 1996-97 covered bythe Block Assessment period is not legal orvalid and should have accepted the order ofthe First Appellate Authority ?” As far as the Revenue is concerned, they are aggrieved with the remand made of the various issues, the questions arising in which appeals have now beenanswered by us in favour of the Revenue. 24. The question raised by the assessee is as to the income assessed in the block period having alsobeen assessed in the two years where regular assessment was also taken up. There is no such duplication ofassessment, as can be seen from the order of the A.O.We need only refer to the computation in the assessmentorder for the various years as available in the blockassessment. The additions made in each of theassessment years of the block period is seen from thelast page of the assessment order (Annexure C inI.T.A.No.102/2016). In page 33, after having computed the various additions, that assessed in regularassessment for the years 1995-96 and 1996-97 coming toa total of Rs.51,48,230/- has been reduced in the blockasessement. We, hence find the question raised ofduplication, in the appeals of the assessee, notarising at all. As to the question raised by theRevenue on the sustainability of remand, we havealready considered the same in the block assessment andfound the remand to be unjustified. We hence restorethe orders of the A.O. 25. We also notice that the issue of fixed depositreceipts found in the two banks, in bogus names wasalso telescoped and the A.O. in the subject assessment years had made addition only to the extent of Rs.27.22lakhs. This is not liable to be interfered with.Hence, we restore the regular assessments made againstthe assessee for the years 1995-96 and 1996-97 findingthe deletion of the various additions and the directionto accept the books of accounts as genuine, made by theC.I.T.(Appeals), to be erroneous and the remand order 25. We also notice that the issue of fixed depositreceipts found in the two banks, in bogus names wasalso telescoped and the A.O. in the subject assessment years had made addition only to the extent of Rs.27.22lakhs. This is not liable to be interfered with.Hence, we restore the regular assessments made againstthe assessee for the years 1995-96 and 1996-97 findingthe deletion of the various additions and the directionto accept the books of accounts as genuine, made by theC.I.T.(Appeals), to be erroneous and the remand order made by the Tribunal, to the A.O. and the C.I.T.(Appeals) to be not justified in the light of thefacts having been elaborately gone into by the Tribunaland the assessments found to be valid in law. Theappeals of the assessee, I.T.A.Nos.162/2015 and163/2015 would stand dismissed. The Revenue's appeals,I.T.A.Nos.6/2012 & 60/2012 would stand allowed. Theparties will suffer their respective costs in all theappeals. Sd/- K.VINOD CHANDRANJUDGESd/-ASHOK MENON JUDGE APPENDIX OF ITA 6/2012 APPELLANT'S/S ANNEXURES: ANNEXURE-A TRUE COPY OF THE ORDER OF THE ASSESSINGOFFICER 143(3) DATED 5/2/1998 ANNEXURE-BANNEXURE-C TRUE COPY OF THE ORDER OF THE COMMISSIONEROF INCOME TAX (APPEALS) DATED 12/2/2008. TRUE COPY OF THE ORDER OF THE INCOME TAXAPPELLATE TRIBUNAL DATED 29/7/2011. APPENDIX OF ITA 33/2012 APPELLANT'S/S ANNEXURES: ANNEXURE-A TRUE COPY OF THE ORDER OF THE ASSESSINGOFFICER 144 R.W.S. 158BC DATED 26/3/2002. ANNEXURE-BANNEXURE-C TRUE COPY OF THE ORDER OF THE COMMISSIONEROF INCOME TAX (APPEALS) DATED 27/11/2006. TRUE COPY OF THE ORDER OF THE INCOME TAXAPPELLATE TRIBUNAL DATED 29/7/2011. APPENDIX OF ITA 56/2012APPELLANT'S/S ANNEXURES:ANNEXURE-A TRUE COPY OF THE ORDER OF THE ASSESSINGOFFICER 144 R.W.S. 158BC DATED 26/3/2002. ANNEXURE-BANNEXURE-C TRUE COPY OF THE ORDER OF THE COMMISSIONEROF INCOME TAX (APPEALS) DATED 27/11/2006.TRUE COPY OF THE ORDER OF THE INCOME TAXAPPELLATE TRIBUNAL DATED 29/7/2011. APPENDIX OF ITA 60/2012 APPELLANT'S/S ANNEXURES: ANNEXURE-ATRUE COPY OF THE ORDER OF THE ASSESSINGOFFICER 143(3) DATED 14/01/1999. ANNEXURE-BTRUE COPY OF THE ORDER OF THE COMMISSIONEROF INCOME TAX (APPEALS) DATED 12/02/2008. ANNEXURE-C TRUE COPY OF THE ORDER OF THE INCOME TAXAPPELLATE TRIBUNAL DATED 29/07/2011. APPENDIX OF ITA 101/2016 APPELLANT'S/S ANNEXURES: ANNEXURE-ATRUE COPY OF ASSESSMENT ORDER DATED12/02/2008 ISSUED U/S.143(3) FOR THEASSESSMENT YEAR 1995-96 PASSED BY THEASSESSING OFFICER. ANNEXURE-BTRUE COPY OF ASSESSMENT ORDER DATED14.01.1999 ISSUED U/S 143(3) FOR THEASSESSMENT YEAR 1996-97 PASSED BY THEASSESSING OFFICER.ANNEXURE-CTRUE COPY OF ASSESSMENT ORDER DATED26/03/2002 FOR THE BLOCK PERIOD 01/04/1987TO 05/09/1997 PASSED BY THE ASSESSINGOFFICER. ANNEXURE-DTRUE COPY OF THE ORDER OF COMMISSIONER OFINCOME TAX (APPEAL) IN IT 127/T/06-07 DATED27/11/2006.ANNEXURE-ETRUE COPY OF THE APPELLATE TRIBUNAL'S ORDERDATED 29/07/2011 IN IT (SS) A NO.5/COCH/07. APPENDIX OF ITA 102/2016 APPENDIX OF ITA 162/2015 ANNEXURE-DTRUE COPY OF PRELIMINARY LIST OF CREDITORSOF OP (IP) 2/98, ON THE FILE OF 1STADDITIONAL SUB COURT, THIRUVANANTHAPURAM ASON 14/08/2006 FILED BEFORE THE 1ST ADDL.DISTRICT COURT, THIRUVANANTHAPURAM.OF OP (IP) 2/98, ON THE FILE OF 1STADDITIONAL SUB COURT, THIRUVANANTHAPURAM ASON 14/08/2006 FILED BEFORE THE 1ST ADDL.DISTRICT COURT, THIRUVANANTHAPURAM. ANNEXURE-ETRUE COPY OF ADDITIONAL LIST OF CREDITORSOF OP (IP) 2/98 ON THE FILE OF 1STADDITIONAL SUB COURT, THIRUVANANTHAPURAM ASON 09/04/2007 FILED BEFORE THE 1ST ADDL.DISTRICT COURT, THIRUVANANTHAPURAM.OF OP (IP) 2/98 ON THE FILE OF 1STADDITIONAL SUB COURT, THIRUVANANTHAPURAM ASON 09/04/2007 FILED BEFORE THE 1ST ADDL.DISTRICT COURT, THIRUVANANTHAPURAM. APPENDIX OF ITA 162/2015 ANNEXURE-DTRUE COPY OF PRELIMINARY LIST OF CREDITORSOF OP (IP) 2/98, ON THE FILE OF 1STADDITIONAL SUB COURT, THIRUVANANTHAPURAM ASON 14/08/2006 FILED BEFORE THE 1ST ADDL.DISTRICT COURT, THIRUVANANTHAPURAM.OF OP (IP) 2/98, ON THE FILE OF 1STADDITIONAL SUB COURT, THIRUVANANTHAPURAM ASON 14/08/2006 FILED BEFORE THE 1ST ADDL.DISTRICT COURT, THIRUVANANTHAPURAM. ANNEXURE-ETRUE COPY OF ADDITIONAL LIST OF CREDITORSOF OP (IP) 2/98 ON THE FILE OF 1STADDITIONAL SUB COURT, THIRUVANANTHAPURAM ASON 09/04/2007 FILED BEFORE THE 1ST ADDL.DISTRICT COURT, THIRUVANANTHAPURAM.OF OP (IP) 2/98 ON THE FILE OF 1STADDITIONAL SUB COURT, THIRUVANANTHAPURAM ASON 09/04/2007 FILED BEFORE THE 1ST ADDL.DISTRICT COURT, THIRUVANANTHAPURAM. ANNEXURE-FTRUE COPY OF ORDER DATED 09/10/2007 IN IANO.2619/2007 IN AS NO.60/2003 OF THE 1STADDL. DISTRICT JUDGE, THIRUVANANTHAPURAMALONG WITH REPORT FILED BY THE OFFICIALRECEIVER.NO.2619/2007 IN AS NO.60/2003 OF THE 1STADDL. DISTRICT JUDGE, THIRUVANANTHAPURAMALONG WITH REPORT FILED BY THE OFFICIALRECEIVER. ANNEXURE-GTRUE COPY OF ORDER DATED 07/03/2008 IN ASNO.60/2003 OF THE 1ST ADDITIONAL DISTRICTJUDGE, THIRUVANANTHAPURAM.NO.60/2003 OF THE 1ST ADDITIONAL DISTRICTJUDGE, THIRUVANANTHAPURAM. APPENDIX OF ITA 163/2015 APPELLANT'S/S ANNEXURES: ANNEXURE-ATRUE COPY OF ASSESSMENT ORDER DATED14/01/1999 ISSUED U/S. 143(3) FOR THEASSESSMENT YEAR 1996-97 PASSED BY THEASSESSING OFFICER.14/01/1999 ISSUED U/S. 143(3) FOR THEASSESSMENT YEAR 1996-97 PASSED BY THEASSESSING OFFICER. ANNEXURE-BTRUE COPY OF THE APPELLATE ORDER IN ITANO.244-T/06-07 DATED 12/02/2008 PASSED BYTHE CIT (A) I, TRIVANDRUM.NO.244-T/06-07 DATED 12/02/2008 PASSED BYTHE CIT (A) I, TRIVANDRUM. ANNEXURE-CTRUE COPY OF THE COMMON ORDER IN ITANO.758/COCH/2008 AND CO NO.96/COCH/2008 ANDCONNECTED CASES DATED 29/07/2011.NO.758/COCH/2008 AND CO NO.96/COCH/2008 ANDCONNECTED CASES DATED 29/07/2011.