Ita/107/2010 Of The Commissioner Of Income Tax v. The Mathrubhumi Printing And Publishing

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON TUESDAY, THE 24TH DAY OF JULY 2018 / 2ND SRAVANA, 1940 ITA.No. 107 of 2010 AGAINST THE ORDER/JUDGMENT IN ITA 144/COCH/2006 of I.T.A.TRIBUNAL,COCHIN BENCHDATED 25-09-2009 APPELLANT(S)/RESPONDENT THE COMMISSIONER OF INCOME TAX, KOZHIKODE. BY ADV. SRI.P.K.R.MENON, SR.COUNSEL (GOI) TAXES, SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT(S)/APPELLANT: M/S.THE MATHRUBHUMI PRINTING AND PUBLISHING CO.LTD., K.P.K.MENON ROAD, CALICUT. BY ADV. SRI.E.K.NANDAKUMAR (SR.) BY ADV. SRI.P.BENNY THOMAS BY ADV. SRI.P.GOPINATH BY ADV. SRI.K.JOHN MATHAI THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 24-07-2018, ALONG WITH ITA NO.135/2010, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: APPENDIX jg-3/8 K.VINOD CHANDRAN & ASHOK MENON, JJ. ------------------------------------------- ITA Nos.107 and 135 of 2010 ------------------------------------------- Dated this the 24[th] day of July, 2018 J U D G M E N T Vinod Chandran, J. The questions of law arising in the aforesaidappeals relating to the assessment years 1999-2000 and2001-2002 are re-framed as follows:- (1)Whether the Tribunal was correct in havingapplied a rule of probability to delete theadditions made under Section 68 of the Income TaxAct, 1961 ('Act' for short), finding that sincemajority of the deposits received from the publicand the agents have been proved by the assessee,the once in which proof was not offered also hasto be taken as being sourced from the public oragents? (2)Whether the Tribunal was correct in findingthat the source is proved as being depositcollected from the public and is not the findingperverse on the facts and circumstances asdisclosed from the records? -2- 2.The assessee, a printing and publishingCompany, had accepted deposits from the public as waspermitted under the Companies Act, 1956. There werealso deposits received from agents of the Company, whoare engaged in distribution of publications by theCompany. The Assessing Officer (AO) sought to treatthe same as unexplained cash credits under Section 68.The assessee proffered evidence in the nature ofconfirmation received from the depositors and theagents. Wherever there was evidence produced to thesatisfaction of the AO, there was no addition made toincome. On those cash credits, which could not besupported by sufficient evidence, addition was made bythe AO. 3. Before the first appellate authority also,certain other materials were produced, specificallywith respect to four depositors and four agents for theyear 1999-2000 and six depositors and four agents forthe year 2001-2002. The first appellate authorityrefused to consider the same under Rule 46A of theIncome Tax Rules, where there was an obligation on theassessee to produce it before the AO. The first appellate authority also from the records found thatthe case was posted on many days before the AO andthere was failure on the part of the assessee toproduce the same. 3. Before the first appellate authority also,certain other materials were produced, specificallywith respect to four depositors and four agents for theyear 1999-2000 and six depositors and four agents forthe year 2001-2002. The first appellate authorityrefused to consider the same under Rule 46A of theIncome Tax Rules, where there was an obligation on theassessee to produce it before the AO. The first appellate authority also from the records found thatthe case was posted on many days before the AO andthere was failure on the part of the assessee toproduce the same. 4.The Tribunal, however, found that the mostimportant aspect to be borne in mind, in examining theissue, is whether the assessee has rightly proved thesources of the deposits reflected in the books ofaccounts as credits. The Tribunal then relied on theprovisions of the Companies Act and the permissiongranted for accepting deposits from the public to findthat there is no dispute as to the deposits having beenaccepted from the public. Merely because there was apermission granted under the Companies Act to acceptdeposits from the public, it does not necessarilyfollow that the deposits shown are really thosereceived from the members of the public or from theagents. Section 68 is a provision which seeks toensure that the income received by an assessee is notfully disclosed, by a ruse employed of showing it ascredits from depositors which are not genuine and theidentity of such depositors are not verifiable. ITA107&135/10 -4- 5.The Tribunal has erred insofar as the findingthat the fundamental fact of the assessee havingcollected deposits from the public stands proved withrespect to the entire cash credits so recovered. Itcan be said to have been proved, only with respect tothe verifiable materials produced before the AO and onwhich the AO had entered a satisfaction. There couldhence be no rule of probability applied as against thespecific provision under Section 68 of the Act. We areof the opinion that the Tribunal acted erroneously andin a perverse manner insofar as directing deletion ofthe addition not proved before the AO; applying therule of probability, which is alien to the Act. Wealso find that there is absolutely no proof offeredwith respect to the additions made. However, we noticethat before the first appellate authority, the assesseehad produced proof of four depositors and four agentsfor the year 1999-2000 and six depositors and fouragents for the year 2001-2002. The same shall beproduced before the AO, who shall consider its veracityand enter a finding on the same. The remand is ITA107&135/10 confined to that aspect, and with respect to the other,the assessee would have to satisfy the tax due. The Income tax appeals are allowed with thelimited remand as above, finding the questions of lawin favour of the Revenue and against the assessee. Noorder as to costs. Sd/- K.VINOD CHANDRAN JUDGE jg Sd/- ASHOK MENON JUDGE