Ita/13/2018 Of Nayyar Patel v. The Assistant Commissioner Of Income Tax (Inv)

IN THE HIGH COURT OF KERALA AT ERNAKULAMPRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR.JUSTICE VIJU ABRAHAM THURSDAY, THE 30 DAY OF SEPTEMBER 2021 / 8TH ASWINA, 1943 ITA NO. 13 OF 2018 AGAINST THE ORDER/JUDGMENT IN OTHERS 67/2005 OF I.T.A.TRIBUNAL,COCHIN BENCH,ERNAKULAM APPELLANT/S: NAYYAR PATEL PATEL COMPLEX, BASIN ROAD, ERNAKULAM - 682 031. BY ADVS.SRI.K.I.MAYANKUTTY MATHERSRI.R.JAIKRISHNA RESPONDENT/S: 1THE ASSISTANT COMMISSIONER OF INCOME TAX (INV)CIRCLE 2, DIVISION - I, ERNAKULAM - 682 018.CIRCLE 2, DIVISION - I, ERNAKULAM - 682 018. 2INCOME TAX OFFICERWARD 2(3), RANGE 2, KOCHI - 682 018.WARD 2(3), RANGE 2, KOCHI - 682 018. 3COMMISSIONER OF INCOME TAXI.S PRESS ROAD, KOCHI - 682 018.I.S PRESS ROAD, KOCHI - 682 018. BY ADV SRI.JOSE JOSEPH, SC, FOR INCOME TAX SC SR ADV. P.K. R. MENON THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 30.09.2021, THECOURT ON THE SAME DAY DELIVERED THE FOLLOWING: -2- JUDGMENT S.V.BHATTI,J. Heard learned Adv.K.I Mayankutty Mather and learnedSenior Advocate Sri. P.K.R Menon for parties. 2.Nayyar Patel/Assessee is the appellant. The Assistant Commissioner of Income Tax (Inv), Circle 2, Division- I, Ernakulam and two others/Revenue are the respondents. The assessee being aggrieved by the order dated 15.01.2018 in IT(SS)A NO.67/Coch/2005 filed the instant appeal by raising the following substantial questions of law: I) Whether the authorities below were right in relying solely on the statement given by theappellant under Section 132(4) of the Income Tax Actto make additions in the income of the appellant? Arenot the authorities below including the Tribunal inerror in discarding Annexure D statement given bythe assessee and the lack of corroborative materialson the side of the revenue in the matter? ii) Whether addition based on statements givenunder Section 132(4) of the Income Tax Act should besupported by corroborative evidence, especiallywhen that was the spirit and mandate of the remandorder (Annexure 1)? iii)Whether the authorities below were correct incompletely ignoring the retracted statements givenby the appellant in the instant case? 3.The issues concerning the block assessment carried out by the Department for the block period 1989-90 to 1998-99 and the small broken period covered between 01.04.1998 and22.06.1998, has been the subject matter of the consideration ofthe court in ITA No.98 of 2009 of this Court. Vide judgmentdated 07.07.2015, this Court set aside the order of the Tribunalin IT(SS)A No.67/Coch/2005 and remitted the matter toTribunal for consideration and decision afresh in accordancewith law. We find it convenient to excerpt the operativeportion of the judgment in ITA No.98 of 2009 on its turn whilechronologically referring to the happenings in the matter. 4.On 22.06.1998 at 2.30 A.M, the first respondentcarried out a search and seizure operation at the residence ofthe appellant. The first respondent at the conclusion of the ITA NO. 13 OF 2018 -4- out by the Department for the block period 1989-90 to 1998-99 and the small broken period covered between 01.04.1998 and22.06.1998, has been the subject matter of the consideration ofthe court in ITA No.98 of 2009 of this Court. Vide judgmentdated 07.07.2015, this Court set aside the order of the Tribunalin IT(SS)A No.67/Coch/2005 and remitted the matter toTribunal for consideration and decision afresh in accordancewith law. We find it convenient to excerpt the operativeportion of the judgment in ITA No.98 of 2009 on its turn whilechronologically referring to the happenings in the matter. 4.On 22.06.1998 at 2.30 A.M, the first respondentcarried out a search and seizure operation at the residence ofthe appellant. The first respondent at the conclusion of the ITA NO. 13 OF 2018 -4- rsearch/seizure, recorded the statement of the appellant undeSection 132(4) of the Income Tax Act (for short, the Act). Theappellant claims to have received the copy of the statementAnnexure-C on 27.07.1999, and the appellant throughAnnexure-D dated 28.07.1999 retracted the statement given bythe appellant to first respondent on 22.06.1998. The firstrespondent completed the assessment through Annexure-Eorder dated 09.06.2000. The assessee filed appeal before theCommissioner of Income Tax (Appeals) (for short, CIT(Appeals)) and the CIT (Appeals) on 23.12.2004 allowed theappeal filed by the assessee in part. The grievance of theassessee against the order of the CIT (Appeals) is that the CIT(Appeals) ignored the retracted statement as per Annexure-Dwhile making the order in Annexure-F. The assessee filedsecond appeal before the Income Tax Appellate Tribunal,Cochin and on 24.10.2008 the Tribunal deleted the additionsmade by the Assessing Officer in Annexure-E Assessment Order ITA NO. 13 OF 2018 -5- dated 09.06.2000, particularly by referring to the statementrecorded in Annexure-C and also alternatively the retractionmade in Annexure-D. The revenue filed ITA No. 98/2009before this Court and this Court on 07.07.2015 throughAnnexure- I judgment, set aside the order of the Tribunaldated 24.10.2008 and remitted the matter to Tribunal forconsideration and disposal in accordance with the law. ThisCourt while examining the approach in the order underappeal before it in I.T.A No.98/2009 and the mistakecommitted by the Tribunal in completely ignoring thestatement made by the assessee in Annexure- C, directed theTribunal as follows: 11. When the law is thus evident from the statutoryprovision and the judgments of this Court referred toabove, it can be seen that in so far as this case isconcerned, almost 13 months after the recording of thestatements, the assessee had sought to retract from hisstatements, though partially, by his letter dated28.7.1999. Even in this letter, the reasons stated by himare that the statement dated 22.6.1998 was recorded atthe unearthly hour of 02.30 a.m. and that he was underfear and trepidation. He has not adduced any evidence 11. When the law is thus evident from the statutoryprovision and the judgments of this Court referred toabove, it can be seen that in so far as this case isconcerned, almost 13 months after the recording of thestatements, the assessee had sought to retract from hisstatements, though partially, by his letter dated28.7.1999. Even in this letter, the reasons stated by himare that the statement dated 22.6.1998 was recorded atthe unearthly hour of 02.30 a.m. and that he was underfear and trepidation. He has not adduced any evidence to substantiate his allegations to retract from hisstatements under Section 132(4). The assessee had alsonot stated why he had confirmed the correctness of thedisclosures made in his statement of 22.06.1998, in thesubsequent statements made by him on 24.06.1998 and06.07.1998. That apart, if as stated by him, he was underfear and trepidation when the statement of 24.6.1998was recorded, there is absolutely no reason for him tohave awaited till 28.7.1999 to retract from hisstatement. The fact that he was served a copy of thestatements only on 27.7.1999, cannot in any mannerjustify the delay on the part of the assessee in retractingfrom his statement, especially in a case where theassessee even in his letter of retraction does not statethat he was unaware of the contents of the statementsrecorded till he received a copy thereof on 27.7.1999.For this reason, according to us, the retraction of thestatements made is only to be ignored and the matterhas to be taken to its logical conclusion. 12. Though the law has already been declared by thisCourt, reading of the Tribunal's order shows that theTribunal seems to harbour the impression thatwhenever the assessee wants to retract the statement,he will be free to do so. In our view, there is no law tothat effect and nothing has been shown to us tosubstantiate these findings in the order of the Tribunal.In our view, therefore, the Tribunal was totally in errorin brushing aside the statements of the assesseerecorded under Section 132(4) and deciding the caseprimarily on that basis. Instead, according to us, theTribunal should have given due evidentiary value thatthe statements of the assessee deserve under Section132(4) of the Act and with reference to the othermaterials produced by the Revenue, decided the appealin accordance with law. This has not been done by theTribunal and for that reason, we set aside the impugnedorder and dispose of the appeal answering the questionsin favour of the Revenue. The matter will stand remitted to the Tribunal and theTribunal will re-consider the appeal filed by theassessee with notice to the parties in accordance withlaw. 5.The Tribunal through the order impugned, has allowed the appeal in part. Hence the second appeal at theinstance of assessee. 6.Learned counsel appearing for the assessee relied on the judgments reported in Kailashben Manharlal Chokshi Vs. Commissioner of Income Tax[1] and M.Narayanan andBros. V. Assistant Commissioner of Income Tax[2]for theproposition that the statement record at wee hours cannot beconsidered as voluntary statement and that the retractedstatement of the assessee in Annexure-D arises thepresumption that in respect of any of the additions made bythe Assessing Officer the basis is completely erased by thestatement in Annexure-D. Therefore, unless and until, there is 1[2010] 328 ITR 411 (guj) 2[2011] 339 ITR 192 (MAD) ITA NO. 13 OF 2018 -8- sufficient material, the additions which are now confirmed bythe Tribunal by exclusively referring to the statementrecorded on 22.06.1998 is illegal and to that extent he prays forsetting aside the order of the Tribunal confirming theadditions made by the Assessment Officer in Annexure-E orderdated 09.06.2000. 1[2010] 328 ITR 411 (guj) 2[2011] 339 ITR 192 (MAD) ITA NO. 13 OF 2018 -8- sufficient material, the additions which are now confirmed bythe Tribunal by exclusively referring to the statementrecorded on 22.06.1998 is illegal and to that extent he prays forsetting aside the order of the Tribunal confirming theadditions made by the Assessment Officer in Annexure-E orderdated 09.06.2000. 7.Per contra, Sir. P.K.R menon contends that thejudgment between the parties in Annexure-I dated 07.07.2015as relevant and bearing on further consideration to beundertaken by the Tribunal upon remand of case by this Court.The judgments relied on by the assessee are distinguishable tothe facts and circumstances of the case. According to him, thisCourt has not held whether the statement in Annexure-Cshould be accepted or entirely deleted from the consideration.This Court while appreciating the statement made inAnnexure-C by the assessee and the retracted statementmade on 28.07.1999 desired that “ due evidentiary value” is ITA NO. 13 OF 2018 -9- attached to the statement made by the assessee on 22.06.1998.Therefore it means and presupposes that the the statementmade 22.06.1998, cannot and could not be completely set asideon the ground that it has been made at wee hours by theassessee. And at the same time it shall not constitute theexclusive basis for making any addition in assessment ordermade in Annexure-E. Therefore, he argues that dueevidentiary value once is given, the assessee is not precludedin the manner known to law to displace the reliance madeeither by the Assessing Officer or by the Tribunal on thestatement made in Annexure-C dated 22.06.1998. Whileappreciating the circumstances the assessee was also free toplace sufficient material before the Tribunal. He invites ourattention to the effect order made and the detailedconsideration undertaken by the Tribunal while allowing theappeal of assessee in part and submits that all relevant aspectshave been considered independently and exhaustively by the ITA NO. 13 OF 2018 -10- Tribunal. The Tribunal in the case on hand is carrying out theobservation of this Court made in Annexure- I judgment andno exception to the procedure followed by the Tribunal couldbe taken by the assessee in further round of litigation. Heargues with vehemence that this Court while considering thelegality of the order under appeal ought not to disturb any ofthe findings recorded by this Court in Annexure-I judgmentdated 07.07.2015. He prays for dismissing the appeal. 8.As we have already noted, the solitary ground ofchallenge laid by the assessee against the order of the Tribunalis whether the Tribunal in law and fact is entitled to rely onthe statement by the assessee on 22.06.1998 and /or whetherthe assessee by referring to the judgments relied on inKailashben Manharlal Chokshi and M.Narayanan andBros. Cases (supra) could be allowed to contend that thestatement in Annexure-C should completely be excluded andadditions made by the Assessment Officer are reversed. ITA NO. 13 OF 2018 -11- 8.As we have already noted, the solitary ground ofchallenge laid by the assessee against the order of the Tribunalis whether the Tribunal in law and fact is entitled to rely onthe statement by the assessee on 22.06.1998 and /or whetherthe assessee by referring to the judgments relied on inKailashben Manharlal Chokshi and M.Narayanan andBros. Cases (supra) could be allowed to contend that thestatement in Annexure-C should completely be excluded andadditions made by the Assessment Officer are reversed. ITA NO. 13 OF 2018 -11- 9.We have excerpted the operative portion of thejudgment of this Court in ITA No.98/2009. This court hasreiterated very precisely upon appreciating the chronology ofthe dates, events and consequence of the statements made bythe assessee at various points in time. This Court observedthat the appreciation of principle of law by the Tribunal forexcluding the original statement by referring to the retractedstatement of the assessee was found to be illegal anderroneous. The cumulative effect of these two circumstancesin the judgment in I.T.A No.98/2009 is that, this Court directedto give due evidentiary value to the statement made by theassessee at the first instance on 22.06.1998. Now let usappreciate the consideration of the issues by the Tribunal uponremand by this Court. We have perused the effect order given,statements and retracted statements of the assessee,evidentiary value given by the tribunal and the inescapableconclusion that could be drawn in respect of each one of the ITA NO. 13 OF 2018 -12- additions now confirmed by the Tribunal. The findingsrecorded cannot and could not be said as completelyunavailable and illegal. As noted supra, due evidenciary valueis given and no other material is placed by the assessee beforethe tribunal in spite of observation made by this Court toerase the impact of statement in Annexure-C. Unless and untilillegality or infirmity is made out against the findings recordedby the tribunal, this Court if considers the substantialquestions exclusively by referring to the judgments on whichthe assessee is relying upon, would virtually be disturbingwhat has been already recorded as a relevant circumstance bythis Court in Annexure-I judgment between the parties. Weare convinced that the grounds raised are not available in thecircumstances of this case, the assessee failed to demonstrateexistence of question of law against any of the findingsconfirmed by the Tribunal. Further with the affirmation of thefindings by the Tribunal, the concurrent view taken by the -13- Commissioner and the Tribunal is also kept in mind, we see noreason to interfere with the order under appeal. Excepting theanswered ground, no other ground is urged by the assessee. The questions are answered in favour of revenue andagainst the assessee. Appeal fails and dismissed. No order asto costs. Sd/- S.V.BHATTIJUDGE Sd/-VIJU ABRAHAMJUDGE JS ITA NO. 13 OF 2018 APPENDIX APPELLANT'S ANNEXURES ANNEXURE ATRUE COPYOF THE LIST OF DOCUMENTS AND BOOKS OFACCOUNTS ANNEXURE BTRUE COPY OF THE LISTS OF OTHER ASSETS. ANNEXURE CTRUE COPY OF THE SWORN STATEMENTS RECORDED FROM THE APPELLANTFROM THE APPELLANT ANNEXURE DTRUE COPY OF THE LETTER ISSUED BY THE APPELLANTTO THE 1ST RESPONDENTTO THE 1ST RESPONDENT ANNEXURE ETRUE COPY OF THE ASSESSMENT ORDER PASSED BY THE 1ST RESPONDENTTHE 1ST RESPONDENT ANNEXURE FTRUE COPY OF THE ORDER PASSED BY THE FIRST APPELLANT AUTHORITYAPPELLANT AUTHORITY ANNEXURE GTRUE COPY OF THE ORDER PASSED BY THE TRIBUNAL ANNEXURE HTRUE COPY OF THE MODIFIED ORDER PASSED BY THE 1ST RESPONDENT1ST RESPONDENT ANNEXURE ITRUE COPY OF THE JUDGMENT OF THIS HONBLE COURTIN ITA NO.98/09IN ITA NO.98/09 ANNEXURE JTRUE COPY OF THE ORDER OF THE COMMISSIONER OF INCOME TAX-II KOCHIINCOME TAX-II KOCHI ANNEXURE KTRUE COPY OF THE ORDER OF TRIBUNAL IN IT(SS)A NO.67/COCH/2005NO.67/COCH/2005