Ita/15/2014 Of Romi.r v. The Commissioner Of Income Tax (Central)

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HON'BLE THE CHIEF JUSTICE DR. MANJULA CHELLUR & THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE THURSDAY, THE 6TH DAY OF MARCH 2014/15TH PHALGUNA, 1935 ITA.No. 15 of 2014 -------------------------- [AGAINST THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH, COCHIN DATED 23/08/2013 IN I.T.A. NO.I.T (S&S) A. NO.13/COCH/96 FOR THE BLOCK PERIOD 01/04/1985 TO 15/09/1995] ................. APPELLANT/APPELLANT/ASSESSEE: ------------------------------------------------------ R.ROMI, DEVI VILASOM, MEENAD, CHATHANNOOR, KOLLAM DISTRICT. BY SRI.T.M.SREEDHARAN, SENIOR ADVOCATE, ADVS.SRI.V.P.NARAYANAN, SMT.BOBY M.SEKHAR, SMT.DIVYA RAVINDRAN. RESPONDENT/RESPONDENT/REVENUE:---------------------------------------------------------- THE COMMISSIONER OF INCOME TAX, AYYAKKAR BHAVAN, KOWDIAR, THIRUVANANTHAPURAM. BY SRI.JOSE JOSEPH, S.C, I.T. THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 06-03-2014, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: I.T.A. NO.15/2014: APPENDIX PETITIONER'S ANNEXURES: RESPONDENT'S ANNEXURES: NIL. //TRUE COPY// P.A. TO JUDGE. Manjula Chellur, C.J. & A.M. Shaffique, J.=-=-=-=-=-=-=-=--=-=-=-=-=-=-=-=-=-= I.T. Appl. No. 15 of 2014=-=-=-=-=-=-=-=-=--=-=-=-=-=-=-=-=-=Dated this, the 6[th]day of March, 2014. J U D G M E N T Shaffique, J. This appeal is filed by the assessee challenging theorder passed by the Income-tax Appellatre Tribunal, CochinBench in IT(S&S)A No. 13/Coch/96. The assessmentrelates to the block period from 1.4.1985 to 15.9.1995. 2.The facts involved in the case would disclosethat the assessee was assessed to income tax for the blockperiod from 1.4.1985 to 15.9.1995 under Section 143(3) readwith Section 158BC of the Income-tax Act, pursuant to asearch under Section 132 in the premises of one Sri. BabuRajendra Prasad and Sri. Sasidharan on 15.9.1995. Noticeunder Section 158BC was issued to the assessee on25.6.1996. He filed return of income declaring nilundisclosed income on 22.8.1996. Subsequently, theAssessing Officer passed an order under Section 143(3) readwith Section 158 BC of the Act on 27.9.1996 determiningthe total undisclosed income at Rs. 9,55,380/- anddemanding income tax of Rs. 5,73,228/-. 3.The assessee preferred an the appeal before theIncome-tax Appellate Authority, which was disposed ofreducing the estimated additions made in the assessmentorder. The assessee had taken a contention that the entire I.T. Appl. No. 15 of 2014 assessment ought to have been set aside as no noticewas issued under Section 143(2) of the Income-tax Act.However, the Tribunal did not accept the saidcontention and modified the order only to a limitedextent. 4.The assessee has now produced before thisCourt certain information received under the Right toInformation Act. Annexure D is the said information.The question was whether notice under Section 143(2) ofthe Income-tax Act was issued to the assessee for theblock period from 1.4.1985 to 15.9.1985. The answerwas that no such notice was issued. On this basis, it iscontended by the assessee that the entire proceedingsare liable to be set aside. 5.Theassesseesubstantial questions of law: has raised the following I.T. Appl. No. 15 of 2014 assessment ought to have been set aside as no noticewas issued under Section 143(2) of the Income-tax Act.However, the Tribunal did not accept the saidcontention and modified the order only to a limitedextent. 4.The assessee has now produced before thisCourt certain information received under the Right toInformation Act. Annexure D is the said information.The question was whether notice under Section 143(2) ofthe Income-tax Act was issued to the assessee for theblock period from 1.4.1985 to 15.9.1985. The answerwas that no such notice was issued. On this basis, it iscontended by the assessee that the entire proceedingsare liable to be set aside. 5.Theassesseesubstantial questions of law: has raised the following “(i)Whether, on the facts and in thecircumstances of the case, did not theAppellate Tribunal err in law in not settingaside the assessment order Annexure-A for theblock period 1.4.1985 to 15.9.1995 on theground of violation of mandatory requirementof Sec. 143(2) of the Income Tax Act, 1961?circumstances of the case, did not theAppellate Tribunal err in law in not settingaside the assessment order Annexure-A for theblock period 1.4.1985 to 15.9.1995 on theground of violation of mandatory requirementof Sec. 143(2) of the Income Tax Act, 1961? ii.Should not the Appellate Tribunal have heldthat the block assessment order Annexure-A isinvalid in the absence of any undisclosedincome of the appellant evidenced by seizedmaterial?that the block assessment order Annexure-A isinvalid in the absence of any undisclosedincome of the appellant evidenced by seizedmaterial? I.T. Appl. No. 15 of 2014 -: 3 :- (iii)Did not the Appellate Tribunal err in law inpartially sustaining the estimate ofundisclosed income when the entireassessment is illegal and invalid?partially sustaining the estimate ofundisclosed income when the entireassessment is illegal and invalid? (iv)Is not the order of the Appellate TribunalAnnexure-C arbitrary and illegal and liable tobe set aside?”Annexure-C arbitrary and illegal and liable tobe set aside?” 6.We have heard the learned counsel for theappellant as well as the learned standing counselappearing for the Department as well. We haverequested the learned standing counsel to verify thecorrectness of the information received in terms ofAnnexure-D and the learned standing counsel fairlysubmitted that the information given was correct andthat no notice under Section 143(2) of the Income TaxAct was issued to the assessee for the block period from1.4.1985 to 15.9.1995. 7.The Tribunal had considered this issue inparagraph 5 of the order, which reads as under: “5.With regard to the second legal issue, viz., non-issuance of notice u/s 143(2) of the Act, we notice thatthe assessee has raised this legal issue simply for thereason that the notice u/s 143(2) was not available inhis record. The assessee was subjected to search in1995 and we are hearing the appeal afresh in 2013.Thus, almost 18 years have elapsed since the date ofsearch and hence the possibility of misplacing the 143(2) notice cannot be ruled out. The assessee did noturge this legal issue at the time of filing appeal beforethe Tribunal, but urged for the first time before us after a lapse of considerable years. We also noticethat the assessee has not taken any step to inspect theassessment record in order to ascertain whether theAO has issued the notice u/s 143(2) of the Act beforecompleting the block assessment. It is well settledproposition of law that it is the responsibility of theperson making allegations to prove the same withcredible evidence. In the instant case, the assesseehas failed to prove the allegation with any material.Under these circumstances, we do not find anyjustification in admitting this legal ground at thisstage and accordingly dismiss the same in limine.” after a lapse of considerable years. We also noticethat the assessee has not taken any step to inspect theassessment record in order to ascertain whether theAO has issued the notice u/s 143(2) of the Act beforecompleting the block assessment. It is well settledproposition of law that it is the responsibility of theperson making allegations to prove the same withcredible evidence. In the instant case, the assesseehas failed to prove the allegation with any material.Under these circumstances, we do not find anyjustification in admitting this legal ground at thisstage and accordingly dismiss the same in limine.” 8.But, apparently, on the basis of Annexure-D,it is not open for the Department to contend that noticewas issued under Section 143(2). The Tribunal hasproceeded on the basis that notice would have beenissued especially since the matter was being consideredafter 18 years and it would have been misplaced. Thisfinding of the Tribunal is now found to be incorrect onthe basis of the specific answer given by the authorityconcerned. Section 143(2) reads as under: “(2)Where a return has been furnished underSection 139, or in response to a notice under sub-section (1) of section 142, the Assessing Officer shall,--(i)where he has reasons to believe that any claimof loss, exemption, deduction, allowance or reliefmade in the return is inadmissible, serve on theassessee a notice specifying particulars of suchclaim of loss, exemption, deduction, allowance orrelief and require him, on a date to be specifiedtherein to produce, or cause to be produced, anyevidence or particulars specified therein or onwhich the assessee may rely, in support of suchclaim:section (1) of section 142, the Assessing Officer shall,--(i)where he has reasons to believe that any claimof loss, exemption, deduction, allowance or reliefmade in the return is inadmissible, serve on theassessee a notice specifying particulars of suchclaim of loss, exemption, deduction, allowance orrelief and require him, on a date to be specifiedtherein to produce, or cause to be produced, anyevidence or particulars specified therein or onwhich the assessee may rely, in support of suchclaim: I.T. Appl. No. 15 of 2014 Provided that no notice under this clause shallbe served on the assessee on or after the 1[st] dayof June, 2003; (ii)notwithstanding anything contained in clause (i),if he considers it necessary or expedient toensure that the assessee has not under-statedthe income or has not computed excessive lossor has not under-paid the tax in any manner,serve on the assessee a notice requiring him, ona date to be specified therein, either to attendhis office or to produce, or cause to be producedthere, any evidence on which the assessee mayrely in support of the return:if he considers it necessary or expedient toensure that the assessee has not under-statedthe income or has not computed excessive lossor has not under-paid the tax in any manner,serve on the assessee a notice requiring him, ona date to be specified therein, either to attendhis office or to produce, or cause to be producedthere, any evidence on which the assessee mayrely in support of the return: Provided that no notice under clause (ii) shall beserved on the assessee after the expiry of sixmonths from the end of the financial year inwhich the return is furnished.” 9.As contended by the learned counselappearing for the appellant, it is not in dispute that inorder to make assessment under Section 143(3) readwith Section 158 BC, notice should be issued underSection 143(2) and omission to issue such a notice is nota procedural irregularity and is not curable. Thejudgment relied upon is Assistant Commissioner ofIncome-tax & another v. Hotel Blue Moon, (2010)321 ITR 362. Having regard to the law laid down bythe Supreme Court in the above judgment and havingregard to the fact that it is now admitted by theDepartment that no notice was issued under Section 143 I.T. Appl. No. 15 of 2014 -: 6 :- 9.As contended by the learned counselappearing for the appellant, it is not in dispute that inorder to make assessment under Section 143(3) readwith Section 158 BC, notice should be issued underSection 143(2) and omission to issue such a notice is nota procedural irregularity and is not curable. Thejudgment relied upon is Assistant Commissioner ofIncome-tax & another v. Hotel Blue Moon, (2010)321 ITR 362. Having regard to the law laid down bythe Supreme Court in the above judgment and havingregard to the fact that it is now admitted by theDepartment that no notice was issued under Section 143 I.T. Appl. No. 15 of 2014 -: 6 :- (2) of the Income Tax Act to the assessee, we areinclined to set aside the orders passed by the Tribunalas well as the Assessing Officer and accordingly, thisappeal is allowed answering the questions of law infavour of the assessee. The appeal is hence allowed, setting aside the order passed by the Tribunal and the Assessing Officer, Sd/- Manjula Chellur, Chief Justice. Sd/- A.M. Shaffique, Judge. Tds/ [True copy] P.S. to Judge.