Ita/1/2010 Of Jayesh S Mehta v. The Deputy Commissioner Of Income Tax

IN THE HIGH COURT OF KARNATAKA AT BENGALURUDATED THIS THE 8 DAY OF JANUARY 2020 PRESENT| THE HON’BLE MR. JUSTICE ALOK ARADHE AND| THE HON’'BLE MR. JUSTICE RAVI V.HOSMANL LT.A. NO.1 OF 2010 BETWEEN: SRI. JAYESH S. MEHTA)PROP: SHANTHILAL O MEHTA|No.6, R.M.C. YARDTLPTUR., .., APPELLAN | (By Sri. SHANKAR A, SENIOR COUNSEL FORSri. M. LAVA, ADV.) AND THE DEPUTY COMMISSIONER OF INCOME TAX.CIRCLE-1, RAMAKRISHNA NAGAR.KUNIGAL ROAD, TUMKUR-572 102. ... RESPONDENT (By Sri. K.V. ARAVIND, ADV.) THIS I.T.A. IS FILED UNDER SECTION 260-A OF I.T.ACT, 1961 ARISING OUT OF ORDER DATED 13-8-2009|PASSED|IN|LTANO.12/BNG/2009,FORTHE|BLOCK.ASSESSMENT PERIOD 1/4/1996 TO 23/1/2003, PRAYING TO}FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED.THEREIN. ALLOW THE APPEAL AND SET ASIDE THE ORDER|PASSED BY THE ITAT BANGALORE IN ITA No.12/BNG/2009, DATED 13-8-2009, IN THE INTEREST OF JUSTICE AND.EQUITY. THIS I.7T.A. COMING ON FOR HEARING, THIS DAY,ALOK ARADHE J.,DELIVERED THE FOLLOWING: JUDGMENT Mr. Shankar A., learned Senior counsel for)Sri.M.Lava, learned counsel for the appellant. Mr.K.V.Aravind,iearnec|counsel]for.tnerespondent. 2. This appeal under Section 260-A of the Income|Tax Act, 1961 (hereinafter referred to as ‘the Act’, forShort) has been filed by the assessee which wasadmitted py a Bencn of this Court on the followingsubstantial questions of law: a) Whether the Assessing Officer wasjustified in law in not following the direction oftheorderpassedDyTribunaldated17.12.2009, wherein it has held that the|undisclosed income hes to be calculated at 2%of total turnover taking tne average ofsubsequent three years on the facts andcircumstances of the case? b) Whether the Tribunal was Justified inlaw in holding that the Assessing Officer hasrigntly given effect to tne airection of theTribunal on the facts and circumstances of theCase ? 3. Facts giving rise to the filing of this appeal|briefly stated are that the appellant is an individual andis carrying on proprietary business of copra under thename and style of M/s. Shantilal O Mehta since1.4.1999. A search was conducted under Section 132 ofthe Act on 23.01.2003 in the business and residential|premises of the appellant. The Assessing Officer issueda notice dated 29.05.2003 under Section 158BC of the!Act to the appellant which was served on 05.06.2003. |The appellant thereupon filed a return and declared anundisclosed income of|462,2/7,305/-. The AssessingOfficer re-computed the income declared by _ thappellant and passed an order of assessment on.28.02.7005 under Section 158BC read with Section.143(3) of the Act for the block period 01.04.1996 to. 4. The appellant filed an appeal against the order|dated 28.02.2005 before the Commissioner of IncomeTax (Appeals). The CIT (Appeals) by an order dated09.04.2007 partly allowed the appeal and directed theAssessingOfficer.tO|adopt|A%Qross|profit ON|undisclosed turnover of 1.30 crores. Being aggrieved,the appellant filed an appeal before the Income TaxAppellate Tribunal (hereinafter referred to as ‘theTribunal’, for short). The Tribunal by an order dated17.12.2007 directed that gross profit be adopted at 2%of the turnover relying on comparable cases. Thus, the.appeal was allowed in part. Being aggrieved, therespondent thereupon filed an appeal namely ITANo.545/2008andconnected|matter.whichweredismissed by a Division Bencn of this Court vide orderdated 25.07.7014. | 4. The appellant filed an appeal against the order|dated 28.02.2005 before the Commissioner of IncomeTax (Appeals). The CIT (Appeals) by an order dated09.04.2007 partly allowed the appeal and directed theAssessingOfficer.tO|adopt|A%Qross|profit ON|undisclosed turnover of 1.30 crores. Being aggrieved,the appellant filed an appeal before the Income TaxAppellate Tribunal (hereinafter referred to as ‘theTribunal’, for short). The Tribunal by an order dated17.12.2007 directed that gross profit be adopted at 2%of the turnover relying on comparable cases. Thus, the.appeal was allowed in part. Being aggrieved, therespondent thereupon filed an appeal namely ITANo.545/2008andconnected|matter.whichweredismissed by a Division Bencn of this Court vide orderdated 25.07.7014. | 5. In compliance of the order passed by the|Tribunal, the Assessing Officer by an order dated17.01.2008 adopted gross profit at the rate of 2% onUndisclosed turnover and arrived at an tncome of=21,80,593/-. However, the Assessing Officer adopted|the undisclosed income of.=62,2/7,305/- declared by theappellant in the biock return filed on 14.07.2003. Tneappellant filed an appeal before the Tribunal against theorder of the CIT (Appeals), which was dismissed by anorder dated 15.12.2008. Being aggrieved, the appellantfiled an appeal before the Tribunal which was dismissedby an order dated 13.08.2009. In the aforesaid factualDackground, this appeal Nas been filed. 6. Learned Senior counsel for the appellant)submitted that tne Assessing Officer ougnt to havecomputed the income and given effect to the same as.per the directions of the Tribunal contained in the orderdated 17.12.2007. It is further submitted that during the course of search, unaccounted cash only to theextent of.45,68,000/- was found and there was nodifference in the book stock and physical stock. It isalso submitted that while making an addition ofundisclosed income, the Assessing Officer has traveled.beyond the scope of the directions issued by theTribunal which is not permissible in law and therefore,notning can be added in excess of.V21,80,593/- and on.the aforesaid amount, gross profit ought to have beendetermined at 2%. #£I[t Is also submitted that ordepassed by the higher appellate authority should be|followed by the subordinate authorities. In support of.his submissions, reliance has been placed on the|decisions of the Supreme Court in the case of °UOT Vs.KAMLAKSHI FINANCE CORPORATION LTD.’ AIR19972 SC 711 AND ‘ACCE Vs. DUNLOP INDIA LTD.’154 ITR 172(SC).Lastly, it is urged that by consent.the parties cannot confer jurisdiction and there is noprohibition for the appellate authorities to determine the income less than the returned income. In support ofaforesaid submissions, reference has been made to thedecisions in the case of|‘BHANDARI METALS &ALLOYS LTD. Vs. STATE OF KARNATAKA’ 136 STC292 (KAR) AND ‘"PULLANGODE RUBBER PRODUCECoO. LTD. Vs. STATE OF KERALA’ 91 ITR 18 (SC) 7. On the other nand, learned counsel for the)revenue has submitted that the Assessing Officer, incompliance with the directions issued by the Tribunal ascontained in the order dated 17.12.2007, has assessedthe gross profit at 2%. It is further submitted that theappellant himself had returned undisclosed income of=62,27,305/- in the block return of income filed on|14.07.2003 and therefore, the total undisclosed incomeas per the return filed by the appellant himself has beentaken at.462,27,305/- and the gross profit has beenassessed at 2%. Thus, the Assessing Officer has actedwithin the scope of the directions issued by the Tribunal and the order passed by the Assessing Officer hasrightly been upheld in appeal as well as by the Tribunalwhich does not suffer from any infirmity. It is urgedthat the substantial questions of law framed by theCourt infact do not arise for consideration in this appeal. and the order passed by the Assessing Officer hasrightly been upheld in appeal as well as by the Tribunalwhich does not suffer from any infirmity. It is urgedthat the substantial questions of law framed by theCourt infact do not arise for consideration in this appeal. 8. We have considered the submissions made by|the learned counsel for the parties and have perused therecord. Admittedly, the assessee had returned anundisclosed income of =62,25,305/- in the block returnof income filed on 14.07.2003. It is also pertinent tomention here that the Assessing Officer had made anaddition ofL2,607,58,592/-. The aforesaid addition was|found to be unjustified by the Tribunal and in paragraph 10 of the order of Tribunal it was held as under: "10. The addition that has been meade in thecase of the firm was Rs.41,40,8/70 and in thecase of individual Rs.2,67,58,592. When.this is compared with the various seized|documentsofRs.67.7/7lakhs|andtheconclusions arrived at by the _ authoritie belowand|correlatingthem|withtheinvestments made over the years, it goes toindicate that the claim of the assessee thet|the addition made is high-pitched is Justified.The total of the additions in the hands of thefirm as well as the [Individual for the blockperiod comes to about Rs.3 crores which Is five times the investments found during|search to the tune of Rs.62 lakhs. This gets|further strengthened when it is examined|with reference to the order of assessment for|the assessment years 2003-04 to 2005-06.There, the GP of less comparable cases havenot been shown to be comparable by the|Department in the strict sense of the term,which assessments have been framed much|after the search In the case of the assessee.For the reasons mentioned above, we are of.the opinion that it would be only reasonable|to estimate the GP in the range of 2% takingthe average of subsequent three years. Wedirect the AO to recalculate the addition onthis basis.” 9. Thus, from perusal of the aforesaid paragrapn, it)is evident that the Assessing Officer was directed to re-calculate the addition at the rate of 2% on the grossprofit. The Tribunal nowhere has said that theundisclosed income which was filed by the appellanthimself should not be taken Into account. It Is also.pertinent to mention here that the assessee himselfbefore the Assessing Officer had made a request thatthe income of.L62,2/7,305/- declared by him be acceptedand the assessment be completed. From perusal of theorder passed by the Commissioner of Income Tax(Appeals) also, it is evident that the dispute was onlywith regard to rate of gross profit on the income whichwas not disclosed by the assessee. Therefore, it cannotbe said that the Assessing Officer has disobeyed thedirection contained in the order passed by the Tribunal. 10. In view of the preceding analysis, both the substantial questions of law are answered against the assessee and in favour of the revenue. | 11. In the result, we do not find any merit in theappeal. Tne same fails and Is dismissed. Sd/-JUDGE Sd/-|JUDGE RV|