Ita/156/2012 Of The Commissioner Of Income Tax-Ii v. V.u. Siddique

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE ANTONY DOMINIC &THE HONOURABLE MRS. JUSTICE ANU SIVARAMAN FRIDAY, THE 11TH DAY OF AUGUST 2017/20TH SRAVANA, 1939 ITA.No. 156 of 2012 ------------------ AGAINST THE ORDER IN ITA 383/2010 of I.T.A.TRIBUNAL,COCHIN BENCHDATED 09-03-2012 APPELLANT/RESPONDENT: ----------------------- THE COMMISSIONER OF INCOME TAX-II, COCHIN. BY ADVS.SRI.P.K. RAVEENDRA NATHA MENON SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT/APPELLANT:------------------------ V.U. SIDDIQUE V.S.EXPORT & IMPORT, PUTHUPAPPDY, PERUMATTOM, MUVATTUPUZHA-686673. BY ADV. SRI.S.ARUN RAJ THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 11-08-2017, ALONG WITH ITA. 161/2012, THE COURT ON THE SAME DAY DELIVEREDTHE FOLLOWING: ANTONY DOMINIC &ANU SIVARAMAN, JJ. = = = = = = = = = = = = = = = = = = = = I.T.A.Nos.156 & 161 of 2012 = = = = = = = = = = = = = = = = = = = = Dated this the 11[st] day of August, 2017 JUDGMENT Antony Dominic, J. 1.These two appeals are filed by the Revenue, challenging thecommon order passed by the Income Tax Appellate Tribunal,Cochin Bench in I.T.A.Nos.383 of 2010 and 384 of 2010concerning the assessment years 2006-2007 and 2007-2008.Since the parties are common and the issues involved aresimilar and the order appealed against is also common, theseappeals were heard together and are disposed of by thiscommon judgment. 2.In so far as I.T.A.No.156/2012 is concerned, the questions oflaw framed are the following:-law framed are the following:- 1) Whether on the facts and in the circumstances of the caseand in view of the admission of the assessee in the swornstatement that the commission was approximatelyRs.1500/- per lakh, the Tribunal is right in law and fact infixing the same at Rs.1000/- per lakh and is not the fixationand in view of the admission of the assessee in the swornstatement that the commission was approximatelyRs.1500/- per lakh, the Tribunal is right in law and fact infixing the same at Rs.1000/- per lakh and is not the fixation I.T.A.Nos.156 & 161/12 of the quantum on the ipsi dixit of the Tribunal, perverseand arbitrary?and arbitrary? 2) Whether on the facts and in the circumstances of the caseand in the absence of the genuineness of the credit beingproved by the assessee the Tribunal is right in law indeleting the unexplained cash credit?and in the absence of the genuineness of the credit beingproved by the assessee the Tribunal is right in law indeleting the unexplained cash credit? 3) Whether, on the facts and in the circumstances of the case: (a) did the assessee discharge the burden of proof that lay onit.it. (b) should not the Tribunal have put the assessee to proof. 3.In so far as the first question of law is concerned, we find thatduring the course of search under Section 132, the statementof the assessee was recorded under Section 132(4) where, inthe answer to question No.16, the assessee had explained thatthe commission percentage he had received was Rs.1000/- toRs.2000/- per lakh. In response to question No.28, theassessee has further stated that the commission received wasapproximately Rs.1500/- per lakh. Based on the statement soduring the course of search under Section 132, the statementof the assessee was recorded under Section 132(4) where, inthe answer to question No.16, the assessee had explained thatthe commission percentage he had received was Rs.1000/- toRs.2000/- per lakh. In response to question No.28, theassessee has further stated that the commission received wasapproximately Rs.1500/- per lakh. Based on the statement so I.T.A.Nos.156 & 161/12 given by the assessee, the assessment was completed I.T.A.Nos.156 & 161/12 given by the assessee, the assessment was completed accepting Rs.2000/- per lakh as the commission received bythe assessee for the whole year. However, the Commissionerof Income Tax (Appeals) though confirmed the addition madeby the Assessing Officer, reduced the commission to Rs.1500/-per lakh. In the appeal which was filed by the assessee beforeTribunal, the Tribunal passed the impugned order, where theTribunal has reduced the commission arrived to Rs.1000/- perlakh. It is this variation made by the Tribunal in the rate ofcommission that has given rise to the question of law that isframed for our consideration. 4.We heard the learned Senior Counsel appearing for theassessee. From the order of the Tribunal, we find that it hastaken note of the statement made by the assessee that it wasreceiving commission from Rs.1000/- to Rs.2000/-per lakh andthat in answer to question No.28, the assessee has furtherstated that approximate commission he was receiving wasRs.1500/- per lakh. However, though no other materials wereassessee. From the order of the Tribunal, we find that it hastaken note of the statement made by the assessee that it wasreceiving commission from Rs.1000/- to Rs.2000/-per lakh andthat in answer to question No.28, the assessee has furtherstated that approximate commission he was receiving wasRs.1500/- per lakh. However, though no other materials were I.T.A.Nos.156 & 161/12 available on record to suggest that the actual commission received by the assessee was anything different from theversion given by the assessee himself, the Tribunal hasadopted the rate of the commission at Rs.1000/- per lakhstating that such rate of commission was as claimed by theassessee in response to question No.16. 5.First of all, in view of the provisions contained in Section 132(4), the Revenue was entitled to complete assessment based onthe assertions made by the assessee. In this case, in answer toquestion No.16 the assessee himself had stated that he wasreceiving commission at the rate of Rs.1000/- to 2000/- perlakh. Thereafter in answer to question No.28 the assesseeagain stated that he was receiving approximately Rs.1500/-per lakh. It was on the basis of the statement made by theassessee under Section 132(4) that the First AppellateAuthority reduced the rate of commission to Rs.1500/- perlakh. Such a fixation of commission cannot be said to bevitiated for any reason. I.T.A.Nos.156 6.Secondly, the Tribunal was also factually wrong in stating thatthe assessee himself had claimed in response to questionNo.16 that the commission he was getting was Rs.1000/- perlakh. On the other hand, the answer given by the assesseehimself would show that what he has stated was that he wasgetting commission at the rate of Rs.1000/- to 2000/- per lakh.Therefore, the conclusion of the Tribunal is untenable and wetherefore set aside the finding with respect to the rate ofcommission and restore the finding of the First AppellateAuthority.the assessee himself had claimed in response to questionNo.16 that the commission he was getting was Rs.1000/- perlakh. On the other hand, the answer given by the assesseehimself would show that what he has stated was that he wasgetting commission at the rate of Rs.1000/- to 2000/- per lakh.Therefore, the conclusion of the Tribunal is untenable and wetherefore set aside the finding with respect to the rate ofcommission and restore the finding of the First AppellateAuthority. 7.The second issue is wholly with reference to the unexplainedcash credit of Rs.11 lakhs. It is true that when cash credit isfound the burden is entirely on the assessee to prove thesource of cash credit, the creditworthiness of the creditor andthe genuineness of the transaction. In so far as this case isconcerned, it is seen that the First Appellate authority hadobtained a remand report from the assessing officer himselfcash credit of Rs.11 lakhs. It is true that when cash credit isfound the burden is entirely on the assessee to prove thesource of cash credit, the creditworthiness of the creditor andthe genuineness of the transaction. In so far as this case isconcerned, it is seen that the First Appellate authority hadobtained a remand report from the assessing officer himself I.T.A.Nos.156 and paragraph 15 of the order of the Tribunal would show that the assessing officer had reported that the assessee hadavailed a loan of Rs11 lakhs and deposited in Account NumberLADNo.253 of Dhanalaxmi Bank, Muvattupuzha branch whichwas transferred by the bank on 12.08.2005 and credited in theaccount No.DP 15 of the creditor on the same day. Thecreditor by cheque No.2060969 gave Rs.11 lakhs on the sameday to the assessee. It was on the basis of these findings thatthe assessing officer submitted the remand report stating thatthe credit can be considered as explained. 8.The facts found by the Tribunal itself show that the creditor ofthe assessee was one Aboobacker, Poothayil, a non-resident,who had a deposit in the Dhanalaxmi Bank, Muvattupuzha,against which he had availed a loan of Rs.11 lakhs which waseventually transferred to the assessee. The facts being so, theassessee cannot be found to have failed in proving either thesource of cash credit, the creditworthiness of the creditor orthe genuineness of transactions. It was taking into account I.T.A.Nos.156 & 161/12 these three factors that the Tribunal has decided this issue in favour of the assessee. We have no reason to interfere withthis finding of the Tribunal. 9.The third issue is the undisclosed investment in theconstruction of a building. In so far as this issue is concerned,it is seen that the assessee was maintaining books of accountfor the purpose of construction. The books of account showedthe cost of construction at the rate of Rs.24,75,382/-. Thoughthe books of account were not rejected by the assessingofficer, the assessing officer referred the matter to theDepartmental Valuation Officer who reported that the cost ofconstruction would be Rs.40,94,461/-. It was on the basis ofthis report that a differential amount of Rs.16,19,079/- wasadded as unexplained investment. This addition was confirmedby the first appellate authority and was rily deleted by theTribunal. The reason adopted by the Tribunal was that havingnot rejected the books of account of the assessee, theassessing officer could not have referred the matter for I.T.A.Nos.156 8 valuation by the Departmental Valuation Officer and completed assessment on the basis of the report so obtained.This view that the Tribunal has taken is fully in accordancewith the law as declared by the Supreme Court in SargamCinema v. Commissioner of Income Tax [(2010) 328 ITR153 (SC), Commissioner of Income Tax v. Lucknow Public Educational Society [(2011) 339 ITR 588 (All) and judgmentoftheMadrasHighCourtinFamilyofSp.S.S.Sp.Subramanian Chettiar v. I.T.Officer [(2015) 372ITR 203. 10.Though the learned Senior Counsel for the Revenue contended that having considered the provisions contained inSection 142A, inserted by the Finance Act, 2004, it was notnecessary for the assessing officer to have rejected the booksof account to obtain report of the Valuation Officer. However,we cannot accept the said contention for the reason thatSection 142A was inserted with retrospective effect from15.11.1972. Despite the insertion of such provision, the above Educational Society [(2011) 339 ITR 588 (All) and judgmentoftheMadrasHighCourtinFamilyofSp.S.S.Sp.Subramanian Chettiar v. I.T.Officer [(2015) 372ITR 203. 10.Though the learned Senior Counsel for the Revenue contended that having considered the provisions contained inSection 142A, inserted by the Finance Act, 2004, it was notnecessary for the assessing officer to have rejected the booksof account to obtain report of the Valuation Officer. However,we cannot accept the said contention for the reason thatSection 142A was inserted with retrospective effect from15.11.1972. Despite the insertion of such provision, the above judgments were rendered by the Apex Court and other HighCourts holding that rejection of the books of accounts wasnecessary for obtaining the report. In that view of the matter,the Tribunal's finding on these issues also cannot be interferedwith. 11.Therefore, this appeal is disposed of answering the firstquestion of law in favour of the Revenue and against theassessee and questions of law Nos.2,3 and 4 are answeredagainst the Revenue and in favour of the assessee.question of law in favour of the Revenue and against theassessee and questions of law Nos.2,3 and 4 are answeredagainst the Revenue and in favour of the assessee. 12.ITA No.161/2012, pertains to the assessment year 2007-2008 and the questions of law framed, read as under:- 1. Whether on the facts and in the circumstances of the caseand in view of the admission of the assessee in the swornstatement that the commission was approximatelyRs.1500/- per lakh, the Tribunal is right in law and fact infixing the same at Rs.1000/- per lakh and is not the fixationof the quantum on the ipsi dixit of the Tribunal, perverseand arbitrary?and in view of the admission of the assessee in the swornstatement that the commission was approximatelyRs.1500/- per lakh, the Tribunal is right in law and fact infixing the same at Rs.1000/- per lakh and is not the fixationof the quantum on the ipsi dixit of the Tribunal, perverseand arbitrary? I.T.A.Nos.156 & 161/12 2. Whether on the facts and in the circumstances of the caseand in the absence of the genuineness of the credit beingproved by the assessee the Tribunal is right in law indeleting the unexplained cash credit?and in the absence of the genuineness of the credit beingproved by the assessee the Tribunal is right in law indeleting the unexplained cash credit? 3. Whether, on the facts and in the circumstances of the case:(a) did the assessee discharge the burden of proof that lay onit.(a) did the assessee discharge the burden of proof that lay onit. (b) should not the Tribunal have put the assessee to proof. In the light of our conclusions in ITA No.156/2012, the firstquestion of law is answered in favour of the Revenue and theother two questions of law are answered against the Revenue. This appeal is also accordingly disposed of. sd/-Antony Dominic, Judge sd/-Anu Sivaraman, Judge sj11/8/TRUE COPY/- PA TO JUDGE