Ita/105/2010 Of The Commissioner Of Income Tax, Cochin v. Metro Stocks And Shares Pvt. Ltd

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE P.S.GOPINATHAN WEDNESDAY, THE 28TH SEPTEMBER 2011 / 6TH ASWINA 1933 ITA.No. 105 of 2010() --------------------- ITA.521/COCH/2008 OF INCOME TAX APPELLATE .TRIBUNAL,COCHIN BENCH APPELLANT/APPELLANT ------------------------------------ THE COMMISSIONER OF INCOME TAX, COCHIN. BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT/ RESPONDENT ----------------------------------------- METRO STOCKS AND SHARES PVT. LTD., C/O.V.M. THOMAS NO.14, VASANTHA AVENUE, MRC NAGAR, SANTHOME, CHENNAI - 600 028. BY ADV. SRI.A.KUMAR THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 28/09/2011, ALONG WITH ITA NO. 148 OF 2010 , THE COURT ON THE SAME DAY,DELIVERED THE FOLLOWING: I.T.A. NO. 105/2010 APPENDIX // TRUE COPY // KNC/- P.S. TO JUDGE. C.N. RAMACHANDRAN NAIR &P.S. GOPINATHAN, JJ. = = = = = = = = = = = = = = = = = = I.T.A. NOS. 105 & 148 OF 2010 = = = = = = = = = = = = = = = = = = DATED THIS, THE 28TH OF SEPTEMBER, 2011. J U D G M E N T C.N. Ramachandran Nair, J. These connected appeals arise from common order issued by theTribunal disposing of one appeal filed by the assessee and the other by theRevenue for the assessment year 1992-93. 2. We have heard the learned standing counsel appearing for theRevenue and Sri. A. Kumar, learned counsel for the assessee. The assesseeis a private limited company engaged in the business of stocks and shareswith permanent membership in the Cochin Stock Exchange and is acting asstock brokers. The accounts produced for the assessment year 1992-93 werecomplicated and vague and therefore, the assessing officer appointed aspecial auditor as provided under Section 142(2A) of the Income Tax Act.The special auditor noticed various discrepancies in the accounts and basedon the audit report assessee was asked to explain the discrepancies pointedout by the special auditor. But the case of the assessing officer was that the assessee was not co-operating by producing the books of accounts andtherefore, the assessing officer estimated the income by taking into accountthe discrepancy pointed out by the special auditor. The assessing officercomputed the total income at 1.80 crores and on an estimate, the net incomewas fixed at Rs. 90 lakhs. The appeal filed by the assessee before CIT(Appeals) was allowed directing to produce the books of accounts andassessment was also ordered in the name of the directors of the assesseecompany. Even after two years of the remand order issued by the appellateauthority, the assessee refused to produce the books of accounts and did notco-operate with the assessing officer. He therefore, reconsidered thecontention raised and estimated the income based on the objection to theaccounts noted by the special auditor in his report. The gross income wasrefixed as Rs. 1,50,99,946/- and net income was again estimated at Rs. 90lakhs against which the assessee filed another round of litigation. 3. In the appeal filed against the revised assessment pursuant to thefirst round of remand, the CIT (Appeals) allowed the appeal in part byfixing the total income at Rs. 39 and odd lakhs, against which the assesseeas well as the Department filed appeals before the Tribunal. The Tribunal,vide Annexure C order produced in I.T.A. 105/2010, remanded the matter back to the file of the CIT (Appeals) with a direction to decide the issueafresh, after considering the additional evidence produced by the Assessee. After stating that the assessee's appeal is allowed for statistical purposeonly the Tribunal dealt with the the appeal filed by the Department anddisposed of the same as follows: 3. In the appeal filed against the revised assessment pursuant to thefirst round of remand, the CIT (Appeals) allowed the appeal in part byfixing the total income at Rs. 39 and odd lakhs, against which the assesseeas well as the Department filed appeals before the Tribunal. The Tribunal,vide Annexure C order produced in I.T.A. 105/2010, remanded the matter back to the file of the CIT (Appeals) with a direction to decide the issueafresh, after considering the additional evidence produced by the Assessee. After stating that the assessee's appeal is allowed for statistical purposeonly the Tribunal dealt with the the appeal filed by the Department anddisposed of the same as follows: “Now let us turn to the revenue's appeal inITA No. 952/Coch/04. Since the matterhas already been restored back to the file ofthe CIT (Appeals) while dealing with theassessee's appeal in ITA No. 1075/Coch/04as above, this appeal of the revenuebecomes infructuous and deserves to bedismissed.” 4. Even though the Tribunal has restored the appeal back to the CIT (Appeals) for reconsideration, the CIT (Appeals) took the view that theremand was for the limited purpose of considering the additional evidenceproduced by the assessee in support of their challenge against theassessment and consequently, he considered only the correctness of theaddition sustained by him in the first round which was the subject matter ofremand in the assessee's case. According to the Department, the closure ofthe Department's appeal by the Tribunal as above, which is based on theTribunal's order of remand in assessee's appeal, the entire re-assessment I.T.A. NOS. 105 & 148/2010 was open for the CIT(Appeals) for reconsideration. Since the CIT(Appeals)did not accept this contention, the Department filed appeal against therevised orders issued by the CIT (Appeals) after remand. The assessee alsofiled appeal to the Tribunal against the revised order of the CIT(Appeals)wherein he granted only a reduction of 9 lakhs and estimating the incomeas Rs. 30 lakhs. The Tribunal substantially allowed the appeal by holdingthat the net income has to be fixed at 50% of the gross income as done bythe assessing officer and in addition to that the assessee is also entitled tothe deduction allowed by the CIT (Appeals). So far as the Departmentalappeal is concerned, the Tribunal dismissed the case by holding that theDepartment's appeal is not maintainable. It is against this common order ofthe Tribunal, the Department has filed these two separate appeals. 5. Two issues are raised in the appeal filed by the Department. Firstone is about the correctness of the order of the Tribunal in dismissing theappeal filed by the Department. The second issue is on the relief granted bythe Tribunal by way of reduction in the estimation of net income granted bythe CIT (Appeals). 6. After hearing both sides, we find that the Tribunal's order is notsustainable on both grounds raised by the Department. In the first place, in 5. Two issues are raised in the appeal filed by the Department. Firstone is about the correctness of the order of the Tribunal in dismissing theappeal filed by the Department. The second issue is on the relief granted bythe Tribunal by way of reduction in the estimation of net income granted bythe CIT (Appeals). 6. After hearing both sides, we find that the Tribunal's order is notsustainable on both grounds raised by the Department. In the first place, in the earlier round, the Tribunal closed the Department's appeal as infructuousfor the reason that the matter is restored back to the CIT(Appeals) in theappeal filed by the assessee. Restoring back a matter to the CIT(Appeals)only means restoration of the rev ised order and the appeal before the CIT(Appeals) for the first appellate authority to consider the appeal afresh.After restoring back the appeal to the CIT(Appeals), the Tribunal found thatthe Department's appeal is infructuous. The Department's appeal beforeTribunal will become infructuous only if the remand is an open remand forreconsideration of all the issues including those issues raised by theDepartment in their appeal for reconsideration by the CIT(Appeals). We,therefore, find that the impugned order of the Tribunal is contrary to theirearlier order of remand issued vide Annexure C. So much so, we hold thatthe Department appeal was maintainable before the Tribunal. We therefore,allow this ground raised by the Department by reversing the finding of theTribunal on this issue. 7. The next ground raised is on the merits of the case wherein theTribunal has held that the estimation of net income at 50% of the grossincome fixed by the assessing officer is not correct. However, the finding inthe Tribunal's order is that the CIT (Appeals) has allowed relief to the I.T.A. NOS. 105 & 148/2010 assessee, based on evidence, on his appeal and thereafter there is no scopefor estimation of net income from gross income . In the Department appealit is alleged that if estimation of net income is to be made it has to befrom the gross income. On the other hand, the Tribunal proceeded toestimate the net income not with reference to gross income but withreference to net income refixed by the CIT(Appeals) after remand. TheTribunal's order, in our view, is patently wrong and therefore, we allow theappeal on this issue as well by reversing the findings of the Tribunal. 8. What we notice from the revised order issued by the assessingofficer is that the assessee has not produced books of accounts even aftertwo years of remand. The assessment itself pertains to 1992-93. Theassessing officer has made the assessment based on accounts produced andthe audit report prepared by the special auditor. It is for the assessee toproduce evidence with regard to the expenditure and deductions admissiblefor determining the income, failing which estimation is the only solution.In view of the non co-operative attitude adopted by the assessee, the officerwas left with no option except to estimate the income. We therefore, feelthere is no scope for any more remand either to the first appellate authorityor to the assessing officer. I.T.A. NOS. 105 & 148/2010 Accordingly, we allow the appeals, setting aside the orders of the Tribunal and that of the first appellate authority and remand the matter tothe Tribunal to decide both the appeals afresh on merit after givingopportunity to the assessing officer as well as to the assessee and theTribunal shall pass final orders determining the income of the assessee,without making any more remand. C.N. RAMACHANDRAN NAIR,(JUDGE) KNC/- P.S. GOPINATHAN,(JUDGE)