Ita/1456/2009 Of The Commissioner Of Income Tax,Cochin v. Shri.v.m.mathai,Palarivattom

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON THURSDAY ,THE 13TH DAY OF DECEMBER 2018 / 22ND AGRAHAYANA, 1940 ITA.No. 1456 of 2009 AGAINST THE ORDER/JUDGMENT IN IT(S&S)A No.35(COCH)/1997 ofI.T.A.TRIBUNAL,COCHIN BENCH DATED 28-08-2002 APPELLANT/S:/RESPONDENT/REVENUE: THE COMMISSIONER OF INCOME TAX,COCHINCOCHIN. BY ADV.SRI. PKR MENON SR COUNSEL FOR GOI (TAXES)SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT/S:/APPELLANT/ASSESSEE: SHRI.V.M.MATHAI, VTM BUILDERS, PENTA ESTATE,, PALARIVATTOM. BY ADVS.SRI.BECHU KURIAN THOMAS (SR.)SRI.RONY JOSE THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 13.12.2018, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: K.VINOD CHANDRAN & ASHOK MENON, JJ. -------------------------------------------ITA No.1456 of 2009------------------------------------------- Dated this the 13[th] day of December, 2018 J U D G M E N T Vinod Chandran, J. The block assessment for the years 1993-94 to 1996-97 has come up for consideration in this appeal. Theassessee's premises was subjected to a search under Section132 on 11.01.1996. Block assessment was made which led to atotal undisclosed income being determined of Rs.31,43,985/-.The assessee unsuccessfully filed first appeal, but succeededin the appeal before the Income Tax Appellate Tribunal. Thefollowing questions of law arise from the order of theTribunal, according to the Revenue: “(1) Whether, on the facts and in thecircumstances of the case, since the assesseeneither returned the income of Rs.16,30,925/- inthe return filed for assessment year 1996-97 northe Revenue included the same in the regularassessment completed on 29.01.1999, the Tribunalis justified in deleting the addition ofundisclosed income of Rs.16,30,925/- from theblock assessment?(2)Whether, on the facts and in thecircumstances of the case and also in view of thefact that the return filed by the assessee forthe assessment year 1993-94 being belated (andhence non-est) the Tribunal is justified indeleting the addition of Rs.51,210/- assessed asundisclosed income in the block assessment?(3)Whether, on the facts and in thecircumstances of the case the Tribunal is rightin law and fact in deleting Rs.76,850/- on theground that “the addition have been made only onestimate basis” and can not the assessing authority estimate concealed income in a blockassessment?”2.On the first question, it is to be noticed thatthe search itself was conducted on 11.01.1996. At that time,the time for filing the return for the assessment year 1996-97had not reached. On the basis of certain loans detected fromthe books of accounts, the same was found to be undisclosedincome. There was absolutely no reason to find it asundisclosed income, since the assessee had not filed returnsfor the said year, and the same was deleted from the blockassessment. We do not find any reason to interfere with thesame, since the AO himself could have considered the same atthe time of filing of the return on the basis of the materialsrecovered on inspection. The Revenue's contention is that theassessee did not show it in the return of that year nor the AOassessed it. That is the folly committed by the AO since itwas included in the block assessment; which definitely was notpermissible. We, hence, answer the said question in favour ofthe assessee and against the Revenue and uphold the deletionof the addition of undisclosed income of Rs.16,30,925/- forthe year 1996-97. 3.The second question relates to the addition ofRs.51,210/- in the year 1993-94. In that year, the assesseehad filed a belated return showing the income as Rs.51,210/-.On receiving notice under Section 158BC, the assessee hadfiled a return for Rs.50,000/-. The learned Senior Counsel,Government of India (Taxes) submits that the return filedbelatedly is of no consequence and hence it has to be taken as 3.The second question relates to the addition ofRs.51,210/- in the year 1993-94. In that year, the assesseehad filed a belated return showing the income as Rs.51,210/-.On receiving notice under Section 158BC, the assessee hadfiled a return for Rs.50,000/-. The learned Senior Counsel,Government of India (Taxes) submits that the return filedbelatedly is of no consequence and hence it has to be taken as undisclosed income. We agree with the said submission, buthowever, if the belated return is of no consequence, theundisclosed income has been returned by the assessee in areturn filed on a notice issued after search. Hence, there isno warrant for adding on the income declared in a belatedreturn. If at all, only Rs. 1,210 could have been added onbeing the excess income shown in the belated return. We donot think there is any warrant for making any such addition atthis stage. The second question, hence, is answered in favourof the assessee and against the Revenue upholding thedeletion of Rs.51,210/- for the assessment year 1993-94. 4.The last question is for the addition made withrespect to the deficiency in drawings in each of the years ofblock assessment. We see that the AO had looked at thepossible expenses that would have been incurred by theassessee for his personal needs and also looked at thedrawings as per the balance sheet. In the first year, theassessee was found to be staying in a rented house.Considering the house-hold expenses, the annual requirementwas treated as Rs.60,000/-. For personal expenses, thedrawings, as were revealed from the accounts, were onlyRs.39,650/-. The balance was brought to tax as undisclosedincome. The estimation carried out by the Assessing Officerin the subsequent years is also found to be reasonable. Theassessee's drawings had also increased in the said years andon a reasonable basis, there was an increase in the house-holdexpenses estimated by the AO. The Tribunal had deleted the same on the ground that additions have been made on anestimation basis. We do not think that the AO carrying outthe block assessment is divested of the power of estimationwhich every assessment Officer carries with the office. Insuch circumstances, we are of the opinion that deficiency inthe drawings for the years 1993-94, 1994-95 and 1995-96 are tobe confirmed. We also notice that there was an addition madeon deficiency in drawings in the year 1996-97 of Rs.12,000/-.As we noticed with respect to the first question, the assesseehad not filed return and the time for that had not reached atthe time of inspection. In such circumstances, there is nowarrant for making such an addition in that year. Theaddition for that year alone would stand deleted. The thirdquestion of law is, hence, answered in favour of the Revenueand against the assessee. The Income Tax Appeal is allowed in part. No costs. Sd/- K.VINOD CHANDRAN JUDGE Sd/- ASHOK MENON JUDGE APPENDIX [True Copy] jg