Ita/149/2014 Of Jose Kuruvinakunnel v. The Commissioner Of Income Tax Kottayam

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE ANTONY DOMINIC & THE HONOURABLE MR. JUSTICE SHAJI P.CHALY MONDAY, THE 8TH DAY OF JUNE 2015/18TH JYAISHTA, 1937 ITA.No. 149 of 2014 -------------------------- AGAINST THE ORDER IN ITA 429/2005 of I.T.A.TRIBUNAL,COCHIN BENCH DATED 20-09-2013 APPELLANT: ----------------- JOSE KURUVINAKUNNEL PARTNER, HOTEL MAYURA, POOVARANI PALA, KOTTAYAM. BY ADV. SRI.RAMESH CHERIAN JOHN RESPONDENT: ------------------- THE COMMISSIONER OF INCOME TAX KOTTAYAM R1 BY ADV. SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) R1 BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 08-06-2015, ALONGWITH ITA. 150/2014 & CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THEFOLLOWING: ITA.No. 149 of 2014 APPENDIX PETITIONER'S APPENDIX: ANNEXURE A: TRUE COPY OF THE ORDER DATED 26-3-2004. ANNEXURE B: TRUE COPY OF THE ORDER OF THE CIT (A) DATED23.3.2005. ANNEXURE C: TRUE COPY OF THE FORM OF APPEAL AND GROUNDS OFAPPEAL DATED 1ST APRIL 2005 FILED BEFORE THE APPELLATETRIBUNAL. ANNEXURE D: TRUE COPY OF THE COMMON ARGUMENT NOTES(WITHOUT ANNEXURES) FILED BEFORE the APPELLATE TRIBUNAL AREFOR ASSESSMENT YEARS 1996-97 TO 1999-2000. ANNEXURE E: TRUE COPY OF THE COMMON ARGUMENT NOTES(WITHOUT ANNEXURES) FILED BEFORE THE APPELLATE TRIBUNALARE FOR ASSESSMENT YEARS 1996-97 TO 1999-2000. ANNEXURE F: CERTIFIED COPY OF THE COMMON ORDER DATED 20-9-2013. ANNEXURE G: TRUE COPY OF THE ORDER OF ASSESSMENT UNDERSECTION 147 OF THE ACT COMPLETED ON FRANCIS JOSEPH TREATINGTHE PEAK CREDIT IN THE ACCOUNT IN FEDERAL BANK AS INCOME OFFRANCIS JOSEPH. ANNEXURE H: TRUE COPY OF THE INTIMATION RECEIVED UNDER THERIGHT TO INFORMATION ACT. ANNEXURE I: TRUE COPY OF COMMON NOTICE DATED 23.12.2014ISSUED BY THE INCOME TAX OFFICER, WARD 2, KOTTAYAM. // TRUE COPY // P.A. TO JUDGE ANTONY DOMINIC & SHAJI P. CHALY, JJ. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - I.T.A.Nos.149, 150, 153 & 154 of 2014 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Dated this the 8[th] day of June, 2015 Antony Dominic, J. JUDGMENT These appeals are filed by the assessee challenging the order of theIncome Tax Appellate Tribunal, Cochin Bench in I.T.A.Nos.429, 431, 432 &430 of 2005. Since issues raised are common, these appeals were heardtogether and are disposed of by this common judgment treating ITA149/14 as the leading case. 2. In these appeals, the relevant assessment years are 1996-1997 to2000-2001, and in I.T.A.149/14 the assessee is challenging the additionsmade on three counts. First one is deposit of Rs.3,00,000/- in the bankaccount of one Sri.Francis Joseph, the brother-in-law of the assessee. Thesecond one is the unexplained credit of Rs.5,60,000/- in the capital accountof the firm Hotel Mayura of which the assessee is a partner and the thirdone is relating to a loan of Rs.4,00,000/- taken by the assessee from oneMr.George Joseph. 3. In so far as the addition of deposit of Rs.3,00,000/- in the bankaccount of Mr.Francis Joseph is concerned, facts show that Sri.Francis 2. In these appeals, the relevant assessment years are 1996-1997 to2000-2001, and in I.T.A.149/14 the assessee is challenging the additionsmade on three counts. First one is deposit of Rs.3,00,000/- in the bankaccount of one Sri.Francis Joseph, the brother-in-law of the assessee. Thesecond one is the unexplained credit of Rs.5,60,000/- in the capital accountof the firm Hotel Mayura of which the assessee is a partner and the thirdone is relating to a loan of Rs.4,00,000/- taken by the assessee from oneMr.George Joseph. 3. In so far as the addition of deposit of Rs.3,00,000/- in the bankaccount of Mr.Francis Joseph is concerned, facts show that Sri.Francis Joseph is the brother-in-law of the assessee. Sri.Francis Joseph hadgiven a statement to the DDIT (Inv) that he had opened S.B.AccountNo.3075 in his name at the Federal Bank, Poovarani Branch and that hehad made initial deposits aggregating to Rs.2,00,000/-, which waswithdrawn by him. According to the Mr.Francis Joseph, thereafter allother transactions in the account were operated by the assessee hereinusing blank cheque leaves signed and given by him. On the basis of thisinformation, the assessment officer collected materials from the bankand after considering the explanation offered by the assessee inresponse to the notice issued to him, Rs.3,00,000/- was added to theincome of the assessee during the assessment year in question. Thisaddition was confirmed by the Commissioner of Income Tax Appealsand the Tribunal. 4. Learned counsel for the assessee contended before us thatwhen the Department proceeded to initiate action on the basis of thestatement of Sri.Francis Joseph, Department should have made availableSri.Francis Joseph for cross examination and that it was entirely uptothe Department to prove the allegations against him. Counsel also referred us to Annexure G, an order of assessment in the name ofSri.Francis Joseph, where according to him the very same amount wasassessed in the name of Sri.Francis Joseph himself. Therefore, accordingto the counsel, the addition of this Rs.3,00,000/- to his income cannotbe sustained. This contention now raised by the counsel for theassessee was refuted by the learned counsel for the Revenue andaccording to him, the addition made was perfectly legal. 5. We have considered the rival submissions made. It is true thatas held in the judgment in P.S.Abdul Majeed v. Agricultural IncomeTax and Sales Tax Officer and others [209 ITR 821] when theDepartment is proceeding against an assessee on the basis of thestatement of a third party, it is necessary that the Department shouldmake available that third party for cross examination and the burden toprove the allegation is also on the Department. However, in so far asthis case is concerned, though the proceedings were originated on thebasis of the statement of Sri.Francis Joseph, after collecting the detailsand records from the Bank, all such details were put to the assessee forhis explanation. The assessee thereupon admitted that he operated the I.T.A.Nos.149, 150, 153 & 154 of 2014 bank account of Sri.Francis Joseph, but according to him, such operationof the bank account was on behalf of Sri.Francis Joseph and for hisbenefit only. According to him, it was therefore that the bankdocuments, such as cheque leaves and pay in slips, etc. contained hissignature. I.T.A.Nos.149, 150, 153 & 154 of 2014 bank account of Sri.Francis Joseph, but according to him, such operationof the bank account was on behalf of Sri.Francis Joseph and for hisbenefit only. According to him, it was therefore that the bankdocuments, such as cheque leaves and pay in slips, etc. contained hissignature. 6. This therefore shows that the fact that the assessee hadoperated the bank account of Sri.Francis Joseph, was admitted by theassessee himself. If that be so, the further question that remained waswhether he was acting for and on behalf of Sri.Francis Joseph as claimedby him. The burden to prove a factual assertion made is upon theperson makes the assertion. Therefore, the burden to prove that he wasacting on behalf of Sri.Francis Joseph was not on the Department, but onthe assessee himself. When the burden is on the assessee to prove theaforesaid factual question, it was the assessee's burden to makeavailable Sri.Francis Joseph for cross examination. In this context, weshould also record that the assessing officer had repeatedly issuedsummons to Sri.Francis Joseph, and that though he stood by hisstatement, he declined to appear for cross examination for one reason or the other. This was despite the fact that the burden was that of theassessee to produce him for examination. Therefore, in the facts of thiscase, we are unable to find fault with the Department for not makingavailable Sri.Francis Joseph for cross examination. 7. In so far as the judgment of the Apex Court in Commissioner of Income Tax v. K.Chinnathamban [292 ITR 682] (SC), relied on by thecounsel for the assessee is concerned, it is true that the principle laiddown in the judgment is that when proceedings are initiated based onthe bank deposit, it is for the depositor to explain the same. However,that logic cannot be imported into the facts of this case for the simplereason that the assessee himself has admitted of having operated thebank account, though allegedly on behalf of the account holder. In sucha case, it is for the assessee who has operated the account to offer theexplanation and prove his case and not the deposit holder. 8. However, the contention of the assessee that by Annexure Gassessment order, Sri.Francis Joseph himself was assessed to income taxfor the year 1997-98, merits consideration. That assessment order alsomakes reference to the aforesaid bank account in the name of : 6 : Sri.Francis Joseph and the amounts available therein. According to theassessee, Annexure G assessment order has also become final. 9. Learned counsel for the assessee has placed reliance on thejudgment of the Apex Court in Income Tax Officer, A Ward, Lucknow v.Bachu Lal Kapoor Kewal Ram [60 ITR 74] and submitted that the Actdoes not envisage taxation on the same income twice over. Theprinciple that assessment should be in the hands of the right person andthat there cannot two assessments for the same income, are too wellsettled. Therefore, if, as contended by the counsel for the assessee,Annexure G assessment order has become final against Sri.FrancisJoseph, the very same amount cannot again be assessed in the name ofthe assessee also. 10. We find that this issue was neither raised nor considered bythe assessing officer nor was this issue properly dealt with by theTribunal. Since, prima facie, there is force in what is argued, this is anissue that needs to be considered by the Assessing Officer, who willreconsider the liability of the assessee on this account, duly adverting toAnnexure G order in the name of Sri.Francis Joseph and with notice to the assessee. 10. We find that this issue was neither raised nor considered bythe assessing officer nor was this issue properly dealt with by theTribunal. Since, prima facie, there is force in what is argued, this is anissue that needs to be considered by the Assessing Officer, who willreconsider the liability of the assessee on this account, duly adverting toAnnexure G order in the name of Sri.Francis Joseph and with notice to the assessee. 11. Second issue that arises for consideration is regarding thedeposit of Rs.5,60,000/- in the name of the assessee in the capitalaccount of the firm Hotel Mariya, of which he is a partner. Though thisaddition was confirmed by the Appellate Commissioner and theTribunal, contention raised by the counsel for the appellant is that whenRs.5,60,000/- was shown to the credit of the assessee in the accounts ofthe firm, it is for the firm to explain such a credit and the assesseecannot be called upon to explain the same. In support of thiscontention, he placed reliance of a judgment in Commissioner ofIncome Tax v. Shiv Shakti Timbers [229 ITR 505]. However, as rightlycontended by the learned Standing Counsel for the Department,Rs.5,60,000/- was shown as the deposit made by the assessee in thecapital account of the firm and this amount was not reflected in the cashflow statement filed by him before the assessing officer. This, therefore,shows that Rs.5,60,000/- deposited by him in his capital account is anunexplained investment made by the assessee attracting Section 69 ofthe Income Tax Act. Facts being so, we do not find any illegality in the : 8 : order of the Tribunal confirming the said addition. 12. The third addition that is complained of is Rs.4,00,000/-allegedly borrowed by the assessee from one George Joseph. Accordingto the learned counsel for the assessee, Sri.George Joseph in hisstatement has explained source of this Rs.4,00,000/- by pointing outthat Rs.3,00,000/- was availed by him as loan from a bank andRs.1,00,000/- was from his personal savings. According to the learnedcounsel, George Joseph is having substantial landed properties andagricultural income and therefore, he having explained the source of theamount advanced to the assessee, the addition ought not have beenmade. 13. He also contended that the assessing officer himself and theTribunal having come to a conclusion that the assessee is notmaintaining books of accounts, the addition could not have been madeunder Section 68 of the Income Tax Act. To support this contention,counsel referred us to Commissioner of Income Tax v. Shiv ShaktiTimbers [229 ITR 505]. : 9 : 14. However, the statement of Sri.George Joseph itself show that apart of the amount was borrowed by him from the bank and theremaining part was from his personal savings. Despite this claim made,he did not produce any evidence to substantiate it. Further, as rightlyindicated by the Tribunal, it is too improbable and against humannature that a person who has borrowed money on interest, would lendit without levying interest on the same. Therefore, we are unable toaccept the case of the counsel that the explanation of Sri.George Josephshould have been accepted as the proof of source of the amountadvanced and that the addition should not have made. 15. It is true that Section 68 talks about books of accounts and itis also true that in so far as this case is concerned, the assessee was notmaintaining books of accounts. It is on this basis that the counselcontended that Section 68 could not have been invoked. We are unableto agree. If this logic is accepted, it will be possible for any defaultingassessee to escape from the payment of tax. In our view, Tribunal wasperfectly justified in its' finding that in case of this nature the cash flowstatement could be treated as the account of the assessee. Therefore, in I.T.A.Nos.149, 150, 153 & 154 of 2014 : 10 : 15. It is true that Section 68 talks about books of accounts and itis also true that in so far as this case is concerned, the assessee was notmaintaining books of accounts. It is on this basis that the counselcontended that Section 68 could not have been invoked. We are unableto agree. If this logic is accepted, it will be possible for any defaultingassessee to escape from the payment of tax. In our view, Tribunal wasperfectly justified in its' finding that in case of this nature the cash flowstatement could be treated as the account of the assessee. Therefore, in I.T.A.Nos.149, 150, 153 & 154 of 2014 : 10 : such circumstances, we cannot accept the case of the assessee. Issues raised being common, the above findings would answer the contentionsraised in the remaining appeals also. 16. In the result, we dispose of these appeals setting aside the addition made based on the deposit of Rs.3,00,000/- in the bankaccount of Sri.Francis Joseph and direct that the assessing officer shallreconsider that issue duly adverting to Annexure G order of assessmentissued to Sri.Francis Joseph for the assessment year 1997-98. In all other respects, the orders will stand confirmed. SD/- ANTONY DOMINIC JUDGE jes SD/- SHAJI P. CHALY JUDGE