Ita/159/2016 Of Simon Varghese P v. The Commissioner Of Income Tax

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS MONDAY, THE 25TH DAY OF JANUARY 2021 / 5TH MAGHA, 1942 ITA.No.159 OF 2016 AGAINST THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL, COCHINBENCH, IN ITA.NO.778/COCH/2013 & C.O.NO.12/COCH/2014 FOR AY-2010-11, INCLUDED IN COMMON ORDER NO.I.T.A.NOS.776 TO 778/COCH/2013 &CO.NOS.10 TO 12/COCH/2014 DATED 28.03.2014 – AYS – 2008-09 TO2010-11) APPELLANT/ RESPONDENT/ ASSESSEE : SIMON VARGHESE P.,S/O.P.C.VARGHESE, AGED 55 YEARS,PARAKKADATH HOUSE, MANAGALASSERRY,KORATTY SOUTH.P.O., TRICHUR-680 308. BY ADVS.SRI.T.M.SREEDHARAN (SR.)SMT.DIVYA RAVINDRANSRI.V.P.NARAYANANSMR.NISHA JOHN RESPONDENT/ APPELLANT/ REVENUE : THE COMMISSIONER OF INCOME TAXCENTRAL, KOCHI, AMBADI BUILDING,CHITTOOR ROAD, KOCHI-682 016. R1 BY SRI.JOSE JOSEPH, SC, FOR INCOME TAXR1 BY ADV.SRI.P.K.R.MENON, SR.COUNSEL, GOI TAXES THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON25.01.2021, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: JUDGMENT Dated this the 25th day of January 2021 Bechu Kurian Thomas, J. In a search and seizure conducted on 10.02.2010 underSection 132 of the Income Tax Act, 1961 at the residence of theassessee and other places, certain incriminating documents wereseized and an assessment order was passed for the year 2010-11,pursuant to proceedings under Section 153A of the Income Tax Act,1961. 2. During the search, an amount of Rs.20,50,000/- wasseized from the locker belonging to one Sri.T.V.Johnson, who is thebrother-in-law of the assessee. In an attempt to justify the source ofthe money kept in the locker, Sri.T.V.Johnson stated that the amountwas received from one Sri.E.P.Jose, for payment to the assessee aspart of sale consideration for an agreement executed on 08.01.2010between the assessee and Sri.E.P.Jose. The assessee admitted theamounts as belonging to him. 3. The Assessing Officer by order dated 30.12.2011concluded that the amount of Rs.20,50,000/- having been admitted and accepted by the assessee as amounts due to him, the same isliable to be assessed as unaccounted income in the hands of theassessee for the year 2010-11. In coming to such a conclusion theAssessing Officer found that the assessee had several bank accountsand that there was no convincing explanation as to why such a hugesum was kept in the locker. 4. In the challenge before the First Appellate Authority,the addition of Rs.20,50,000/- as unaccounted income in the handsof the assessee was interfered with. It was held that the addition isliable to be deleted since the same, if at all treated as liable to beassessed, should have been assessed as income of Sri.T.V.Johnsonand not that of the assessee. 5. The Department took up the matter in appeal to the Appellate Tribunal. The Appellate Tribunal after an elaborateconsideration of the facts arising in the case, reversed the finding ofthe First Appellate Authority and held that the cash flow statement ofthe assessee did not reflect the payments made by Sri.E.P.Jose toSri.Simon Varghese and what was disclosed by the assessee in thecash flow statement did not tally with the withdrawals made bySri.E.P.Jose. It was also found that the assessee had failed toexplain the possession of amounts due to the assessee with Sri.T.V.Johnson, and that too in the bank locker. It was further heldthat since the assessee had failed to explain the circumstances underwhich it was kept in the bank locker and that too such a hugeamount was kept in cash. The deletion of the addition ofRs.20,50,000/- from the income of the assessee as ordered by theFirst Appellate Authority was interfered with and set aside inITA.No.776 to 778/Coch/2013 dated 28.03.2014. The assesseechallenges the order of the Appellate Tribunal and has raised fourquestions of law as per Section 260A of the Act, as follows :- Sri.T.V.Johnson, and that too in the bank locker. It was further heldthat since the assessee had failed to explain the circumstances underwhich it was kept in the bank locker and that too such a hugeamount was kept in cash. The deletion of the addition ofRs.20,50,000/- from the income of the assessee as ordered by theFirst Appellate Authority was interfered with and set aside inITA.No.776 to 778/Coch/2013 dated 28.03.2014. The assesseechallenges the order of the Appellate Tribunal and has raised fourquestions of law as per Section 260A of the Act, as follows :- (i)Whether on the facts and in the circumstances of the case, isnot the order of the Appellate Tribunal in restoring the addition ofRs.20,50,000/- in the assessment as income under other sourcesbeings unexplained cash, arbitrary, illegal and unsustainable? (ii)Is not the finding of the Appellate Tribunal that the sum ofRs.20,50,000/- found in the locker of Shri T.V.Johnson, appellant'sbrother-in-law, was the unexplained income of the appellant,erroneous, illegal and perverse, when the above sum is admittedly paidby Shri E.P.Jose to Shri T.V.Johnson during the absence of theappellant from India (He being a NRI) towards payment ofconsideration under Agreement dated 08.01.2010? (iii)Did not the Appellate Tribunal err in law in reversing the findingand decision of the CIT (A)-I vide Annexure-B by accepting the sourcefor the sum of Rs.20,50,000/-? (iv)Is not the order of the Appellate Tribunal with respect to therestoration of the addition of Rs.20,50,000/- arbitrary, illegal and unsustainable? 6. The Assessing Officer had found that the amountseized from the locker of Sri.T.V.Johnson was accepted and admittedby the assessee, as amounts belonging to him. After perusing thebank statement of Sri.E.P.Jose, the Assessing Officer found cashwithdrawal of Rs.19,00,000/- on 04.01.2010 and Rs.8,00,000/- on01.02.2010. However, the Assessing Officer was not convinced withthe explanation offered by Sri.Johnson as to why the money was keptin the locker when the assessee had several bank accounts within thevicinity of Sri.Johnson. It had come out on verification that theassessee had bank accounts at the relevant time at different placeslike Irinjalakuda, Chalakudy, Angamaly and Thrissur. It was alsofound that if the amounts were received, as attempted to beexplained, then nothing prevented Sri.T.V.Johnson from depositingthe amounts in the account of the assessee. The story unfolded bythe assessee was found to be not convincing and it was held thatthere was no justification in keeping such a huge amount in thelocker and that since the assessee had claimed that the amountbelongs to him, it was held as liable to be assessed in the hands ofthe assessee by adding the said amount of Rs.20,50,000/- as incomefrom other sources. 7. The First Appellate Authority on the other hand concluded that the amount even if it is regarded as unexplainedincome, the same could have been at the most be assessed in thehands of Sri.T.V.Johnson and not the assessee. However, theAppellate Tribunal, by a detailed order, reversed the order of the FirstAppellate Authority after noting that the alleged payment bySri.E.P.Jose to the assessee was not reflected in the cash flowstatement and nor did it tally with the withdrawals and held the sameas liable to be treated as income of the assessee, thereby restoringthe order of the assessing officer. 8. The above detailed narration of facts is made only to 7. The First Appellate Authority on the other hand concluded that the amount even if it is regarded as unexplainedincome, the same could have been at the most be assessed in thehands of Sri.T.V.Johnson and not the assessee. However, theAppellate Tribunal, by a detailed order, reversed the order of the FirstAppellate Authority after noting that the alleged payment bySri.E.P.Jose to the assessee was not reflected in the cash flowstatement and nor did it tally with the withdrawals and held the sameas liable to be treated as income of the assessee, thereby restoringthe order of the assessing officer. 8. The above detailed narration of facts is made only to analyse whether the finding of fact entered into by the Tribunal asthe final fact finding authority was erroneous or not. From the factsarising in the case, we find that the assessee had accepted ownershipof the money which was in tune with the statement of Sri. T VJohnson that the money belonged to the assessee. So the findingthat the money found in the locker of Sri. T.V Johnson is to beassessed as belonging to the assessee cannot be faulted. 9. However, the assessee has not shown any receipt in hiscash book or day book, about receipt of any income fromSri.E.P.Jose. As a builder engaged in construction of villas and other projects, it is beyond our comprehension to assume that such cashbooks or day books were not maintained by the assessee. In thiscontext, we also bear in mind the place from which the money wasseized, i.e. the bank locker and also that the assessee had severalbank accounts in close proximity for Sri. T.V Johnson to deposit thesame in the bank account. When several accounts were standing inthe name of the assessee, no prudent person would keep such largeamounts of money in a locker without depositing in the bank, unlessthe same was intended to be unaccounted income. 10. The effect of money found in the ownership of anassessee is dealt with under section 69A of the Act. It may beapposite to refer to Section 69A of Act which is extracted as below: “S.69A.Where in any financial year the assessee is found to bethe owner of any money, bullion, jewellery or other valuable article andsuch money, bullion, jewellery or valuable article is not recorded in thebooks of account, if any, maintained by him for any source of income, andthe assessee offers no explanation about the nature and source ofacquisition of the money, bullion, jewellery or other valuable article, orthe explanation offered by him is not, in the opinion of the Income-taxOfficer, satisfactory, the money and the value of the bullion, jewellery orother valuable article may be deemed to be the income of the assesseefor such financial year.". 11. Under section 69A of the Act, where the assessee isfound to be the owner of any money and it is not recorded in thebooks of account, the same can be charged to income tax as deemedto be an income of the assessee for that financial year. The fictiongets attracted under the said provision not only when the assesseeoffers no explanation for the source, but also where the explanationoffered by the assessee about the nature and its source is notsatisfactory in the opinion of the Assessing officer. Thus Section 69Aof the Act considers any sum found to be under the ownership of theassessee in a financial year and not recorded in the books of accountif maintained by him, as a deemed income of the assessee, duringsuch financial year, if the following conditions are satisfied:(i)Assessee offers no explanation about the nature and source ofsuch money, or, (ii).The explanation offered by the assessee aboutthe nature and source of such money is not satisfactory, in theopinion of the assessing officer. 12. At times, assessees misuse bank lockers to keep theirundisclosed income. Many a time assessees contend that the sourceof cash is under one source or the other. In the absence of adequatedocuments to prove the source of the cash, a general statement ofthe source may not suffice and in such circumstances a discretion is vested with the assessing officer whether to treat the money asincome of the assessee or not. The intention of Parliament inenacting S.69A was to confer a discretion on the assessing officer inthe matter of treating the money which has not been satisfactorilyexplained by the assessee, as the income of the assessee. Theexplanation offered must be considered in the light of the facts ofeach case and the satisfaction of the assessing officer need not beinterfered with lightly unless the same is inherently improbable orpatently absurd or the officer acted capriciously or arbitrarily. 13. It is a settled law that the opinion of the assessingofficer for not accepting the explanation offered by the assessees asnot satisfactory, is required to be based on proper appreciation ofmaterial and other attendant circumstances available on record. Theopinion of the assessing officer is required to be formed objectivelywith reference to the material available on record. Application ofmind is the sine qua non for forming the opinion. Reference can bemade to the decision in Commissioner of Income Tax v.P.Mohanakala [(2007) 6 SCC 21] for the above statedproposition. 14. In the instant case, the Tribunal concurred with thefinding of fact and the conclusion drawn by the assessing officer. The findings are based on the material available on record and not onany conjectures and surmises. When the explanation offered by theassessee was found to be unsatisfactory to the assessing officer andthe said conclusion was found favour with the Appellate Tribunal, thisCourt, in the circumstances that has arisen, may not be justified ininterfering with the conclusions drawn by the assessing officer or theTribunal. We are fortified in our conclusion not to interfere with thefindings of the Tribunal on account of the doubtful nature of thetransaction and the manner and the quantum of money that waskept in the locker which caused the assessing officer to come to theconclusion as stated earlier. The Assessing Officer had not actedarbitrarily or capriciously in coming to the conclusion that theamount detected during the search in the locker of the brother-in-law of the assessee should be treated as an income in the hands ofthe assessee. 15. At this juncture, we remind ourselves of the scope ofjurisdiction of this Court under Section 260A of the Act. The appeallies to the High Court under the aforesaid section only if it involves asubstantial question of law. It is a cardinal principle that the Tribunalis the final fact finding authority and a decision on fact found by theTribunal can be gone into by the High Court only if the finding of fact arrived at by the Tribunal is perverse in the sense that it is one that could not reasonably have been arrived at on the material placedbefore the Tribunal. Reference can profitably be made to the decisionin K.Ravindranathan Nair v. Commissioner of Income Tax[(2001) 247 ITR 178]. Since the issue involved in the instant case revolvespurely around facts, we do not find any reason to interfere with theorder of the Appellate Tribunal, it being the final fact findingauthority. We hold that the findings of the Appellate Tribunal areperfectly justified in the circumstances of the case and the questionsof law raised are answered against the assessee. In view of the above, we dismiss this appeal. Sd/-S.V.BHATTI, JUDGE Sd/-BECHU KURIAN THOMAS, JUDGE RKM APPENDIX APPELLANT'S ANNEXURES : could not reasonably have been arrived at on the material placedbefore the Tribunal. Reference can profitably be made to the decisionin K.Ravindranathan Nair v. Commissioner of Income Tax[(2001) 247 ITR 178]. Since the issue involved in the instant case revolvespurely around facts, we do not find any reason to interfere with theorder of the Appellate Tribunal, it being the final fact findingauthority. We hold that the findings of the Appellate Tribunal areperfectly justified in the circumstances of the case and the questionsof law raised are answered against the assessee. In view of the above, we dismiss this appeal. Sd/-S.V.BHATTI, JUDGE Sd/-BECHU KURIAN THOMAS, JUDGE RKM APPENDIX APPELLANT'S ANNEXURES : ANNEXURE A : COPY OF THE ASSESSMENT ORDER ALONG WITH DEMAND NOTICE DATED 30.12.2011 PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX (CENTRAL CIRCLE), THRISSUR.NOTICE DATED 30.12.2011 PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX (CENTRAL CIRCLE), THRISSUR. ANNEXURE B : COPY OF THE ORDER NO.T-78/CIT (A)-I/11-12 DATED 26.09.2013 ISSUED BY THE COMMISSIONER OF INCOME TAX (APPEALS), KOCHI26.09.2013 ISSUED BY THE COMMISSIONER OF INCOME TAX (APPEALS), KOCHI ANNEXURE C : COPY OF THE COMMON ORDER IN ITA.NOS.776 TO 778/COCH/2013 & C.O.NOS.10 TO 12/COCH/2014 DATED28.03.2014778/COCH/2013 & C.O.NOS.10 TO 12/COCH/2014 DATED28.03.2014