Ita/1743/2009 Of Dr.a.g.jayakrishnan v. Asst.commissioner Of Income Tax

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON THURSDAY, THE 25TH DAY OF OCTOBER 2018 / 3RD KARTHIKA, 1940 ITA. No.1743 of 2009 AGAINST THE ORDER IN ITA NO.203/2005 OF THE INCOME TAX APPELLATETRIBUNAL, COCHIN BENCH DATED 30-04-2009 APPELLANT/RESPONDENT/ASSESSEE: DR.A.G.JAYAKRISHNAN,VILLA A THE PYRAMID, FALMIR, MAIN ROAD, FALMIR, MANGALORE. BY ADVS.SRI.E.K.NANDAKUMARSRI.K.JOHN MATHAISRI.P.BENNY THOMAS RESPONDENT/APPELLANT/REVENUE: ASST.COMMISSIONER OF INCOME TAXCENTRAL CIRCLE, THIRUVANANTHAPURAM. BY ADVS.SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON25.10.2018, ALONG WITH ITA NO.1747/2009, THE COURT ON THESAME DAY DELIVERED THE FOLLOWING: ITA. Nos.1743 & 1747 of 2009 IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON THURSDAY, THE 25TH DAY OF OCTOBER 2018 / 3RD KARTHIKA, 1940 ITA. No.1747 of 2009 AGAINST THE ORDER IN ITA NO.184/2005 OF THE INCOME TAX APPELLATETRIBUNAL, COCHIN BENCH DATED 30-04-2009 APPELLANT/APPELLANT: DR.A.G.JAYAKRISHNAN,MANGALORE. BY ADVS.SRI.E.K.NANDAKUMARSRI.K.JOHN MATHAISRI.P.BENNY THOMAS RESPONDENT/RESPONDENT: ASST.COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, THIRUVANANTHAPURAM. BY ADVS.SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON25.10.2018, ALONG WITH ITA NO.1743/2009, THE COURT ON THESAME DAY DELIVERED THE FOLLOWING: JUDGMENT K. Vinod Chandran, J. These two appeals are filed by one Doctoragainst the block assessment carried out. 2. ITA No.1747 of 2009 is against the blockassessment itself and ITA No.1743 of 2009 isagainst the surcharge levied. The assessee is aDoctor, who was practicing in Trivandrum invarious hospitals and is said to have hadconsultations also outside Trivandrum. Theassessee was also a non-resident for a period oftime. On 16.11.2000, the Department conducted asearch in the premises of Sree Uthradam TirunalHospital, Trivandrum, where the assessee had beenworking between 1993 to 1998. Certain documentswere recovered, which showed the remuneration paidto the assessee, which were also not returned bythe assessee in full in the respective assessmentyears. The Department then initiated a search inthe premises of the assessee on 18.12.2000 under Section 132 of the Income Tax Act, 1961 [forbrevity, the Act]. A sworn statement was alsotaken from the assessee. Later, proceedings wereissued under Section 158BC read with Section143(3) of the Act. Block assessment was proposedbetween 01.04.1990 to 18.12.2000. Additions wereproposed on the basis of the materials recoveredfrom the SUT Hospital and also with respect tosome other undisclosed income referable tomaterials recovered on search from the assessee'spremises. The proposals were given effect to andsurcharge was also imposed on the tax demanded. 3. The assessee filed an appeal before the CITappeals. The CIT appeals deleted all additions,except that made on account of the materialsrecovered and estimation made with respect to theincome from SUT Hospital. The surcharge levied wasalso deleted. The assessee was in appeal from theaddition made and the Revenue from the deletion ofadditions and surcharge. The Tribunal confirmed the additions in the appeal of the assessee andset aside the order of the CIT appeals withrespect to surcharge in the Revenue's appeal. Thedeletion of additions by the first appellateauthority were left untouched. Hence; the twoappeals from the separate orders of the Tribunalin the appeals filed by the asessee and theRevenue. We will take up the block assessmentfirst, since if the same is found to be bad, thereis no question of any surcharge levy on theassessee. the additions in the appeal of the assessee andset aside the order of the CIT appeals withrespect to surcharge in the Revenue's appeal. Thedeletion of additions by the first appellateauthority were left untouched. Hence; the twoappeals from the separate orders of the Tribunalin the appeals filed by the asessee and theRevenue. We will take up the block assessmentfirst, since if the same is found to be bad, thereis no question of any surcharge levy on theassessee. 4. The questions of law as framed in theappeal memorandum are as follows: 1. Whether the Hon'ble Tribunal wasright in law and on facts in holding thatthe assessing authority was justified inarriving at a finding of undisclosed incomebased on evidence that was not recoveredfrom the appellant's premises during thesearch under Section 132 of the IT Act? 2. Whether the Hon'ble Tribunal wasright in law and on facts in upholding the findings of the assessing authority and theCIT(A) on the issue of undisclosed incomemore so when there was no material obtainedduring the search at the appellant'spremises that would justify an assessmentunder Section 158BC? 3. Ought not the Hon'ble Appellate Tribunal to have found that there was nolegal basis for entering a finding againstthe appellant as regards undisclosed incomeand that the findings entered by the lowerauthorities were based on pure conjecturesand speculation? 5. The learned Counsel for the assessee wouldsubmit that necessarily when a block assessment isproceeded with under Section 158BC, thecomputation of the undisclosed income for theblock period has to be done under Section 158BB.When such computation of income is done underSection 158BB of the Act, it should be on thebasis of evidence found as a result of search orrequisition of Books of Accounts or other documents and such other materials or informationas are available with the Assessing Officer andrelatable to such evidence. In the present case,it is true that the Department had received somedocuments from the search conducted in thepremises of SUT hospital. However, that alone willnot result in undisclosed income being found inthe hands of the assessee, unless there is someevidence recovered from the search conducted inthe assessee's own premises, which is relatable towhat is collected from the premises of SUTHospital. There being no such evidence collectedfrom the assessee's premises, as also many of thedocuments obtained from SUT hospital not beingauthenticated by the assessee, there could be nocomputation of undisclosed income on that basisand in such circumstances, the block assessmentitself would be rendered nugatory goes thearguments. 6. The learned Senior Standing Counsel, Government of India [Taxes] would take us throughthe assessment order, meticulously and thestatement made by the assessee under Section132(4) of the Act. It is pointed out that theassessee had specifically deposed on the manner inwhich remuneration was agreed upon between theassessee and the SUT Hospital. The same talliedwith the documents recovered from the SUThospital. It was hence the Assessing Officer madean addition and also estimated the income on thebasis of the arrangement specifically deposed onby the assessee. 7. We see the extract of the sworn statementfrom the assessment order produced as Annexure Ain ITA No.1743 of 2002. The specific questions andanswers are extracted therein. The assessee haddeposed that he joined SUT Hospital in 1993 on anassurance of minimum monthly remuneration ofRs.75,000/- per month. However, if the assesseebrought in income, more than the minimum agreed 7. We see the extract of the sworn statementfrom the assessment order produced as Annexure Ain ITA No.1743 of 2002. The specific questions andanswers are extracted therein. The assessee haddeposed that he joined SUT Hospital in 1993 on anassurance of minimum monthly remuneration ofRs.75,000/- per month. However, if the assesseebrought in income, more than the minimum agreed upon, by reason of additional procedures carriedout, then he was entitled to that excess amountsalso. The arrangement was elucidated in thefollowing manner. If the monthly procedure feereceived by the Hospital, exceeds Rs.75,000/-, theassessee would get that excess amounts also.However, if in a particular month, the procedurefee entitled to the assessee falls belowRs.75,000/-, then the hospital had a duty to makegood the shortfall; so as to ensure a minimumremuneration of Rs.75,000/- per month. 8. The documents as recovered from the SUTHospital tallied with the sworn statement made bythe assessee under Section 132(4) of the Act. Theassessee had a contention that he returned onlythe amounts received through Bank accounts andthere was a claim raised against the hospital,which was referred for arbitration and later givenup. The arrangement between the assessee and thehospital having been specifically deposed to, under Section 132(4) of the Act; if a contrarycase is set up, then the onus to prove it, is onthe assessee. The assessee made no attempt toprove that he had not received the said amounts,nor disputed individually the documents asreceived from the SUT hospital. Section 132(4) ofthe Act raises a statutory presumption, in so faras the statement made under oath being permittedto be used in evidence, which has to be deemed tobe true. Unless there is contra evidence to dispelsuch presumption the statements have anevidentiary value as conferred by the statute. Thesworn statement under Section 132(4) of the Act inthe present case is the evidence relatable to thematerial or information as available with theAssessing Officer in the nature of the documentsrecovered from the SUT Hospital. 9. It is also pertinent that the CIT appealshad confirmed only those additions made on accountof the undisclosed income from the SUT Hospital and had deleted all the other additions. There wasa departmental appeal from the order of the CITappeals with respect to the additions deletedalso, but the Revenue has not chosen to challengethe order of the Tribunal allowing the appeal ofthe Revenue. The appeal of the Revenue was allowedonly with respect to the surcharge levied and theloss claimed on “income from house property”. 10. In such circumstances, we do not thinkthat there is any scope for interference in theblock assessment as modified by the firstappellate authority, affirmed by the Tribunal. Thequestions of law raised as to whether the Tribunalwas correct in having affirmed the additionssustained by the first appellate authority, in thecontext of there being no evidence recovered fromthe search in the assessee's premises relatable tothe materials or information available with theAssessing Officer is answered against the asseseeand in favour of the revenue on the reasoning above. ITA No.1747 of 2009 would stand rejected. 11. Two questions arise in the appeal numbered as 1743 of 2009 which are re-framed as follows: 1. Whether the assessee is liable tosurcharge on tax which was made effectivefrom 01.06.2002 alone? 2. Whether the assessee's claim for losson house property can be set off againstincome computed for the block period? above. ITA No.1747 of 2009 would stand rejected. 11. Two questions arise in the appeal numbered as 1743 of 2009 which are re-framed as follows: 1. Whether the assessee is liable tosurcharge on tax which was made effectivefrom 01.06.2002 alone? 2. Whether the assessee's claim for losson house property can be set off againstincome computed for the block period? 12. On the question of surcharge, a largerBench of the Hon'ble Supreme Court in 2015 (1) SCC1 [Commissioner of Income Tax v. Vatika TownshipP.Ltd.] held that the proviso to section 132introduced by the Finance Act of 2002 isprospective in operation. There could hence be nosurcharge prior to the date on which the saidproviso was made effective, i.e. prior to01.04.2002. The first question is hence answeredagainst the Revenue and in favour of the assessee. 13. As for the second question, the claim ofthe assessee is that he has two properties bothwith residential buildings, one of which is rented out and the rental income declared regularly.There is yet another property purchased; availingsome loans as against which loss on income fromhouse property is claimed. It is not clear as towhy the said amounts were not claimed in theregular assessment. In fact, the Assessing Officerindicates that the income including theundisclosed income declared in the returns filedfor the block period is less than that of theregular income for six years. The assessee has acontention that he can substantiate the loss onincome from house property. In any event, theassessee is entitled to make such claim evenduring the block period as has been held by theHon'ble Supreme Court in Assistant Commissioner v.Hotel Bluemoon [2010(3) SCC 259]. The question isanswered in favour of the assessee and against theRevenue but however, the computation is left tothe Assessing Officer. The assessee shall producethe details before the Assessing Officer who shall consider the same and allow it to the extentpermissible under the Income Tax Act. ITA 1743 of 2009 is allowed, deleting the levyof surcharge and remanding the matter on the issueof loss on house property. Sd/- K. VINOD CHANDRAN JUDGE Sd/- ASHOK MENON JUDGE jma/sp/26/10/18 //True Copy//P.A. To Judge ITA. Nos.1743 & 1747 of 2009 APPENDIX OF ITA NO.1743/2009 PETITIONER'S EXHIBITS: RESPONDENT'S EXHIBITS:- NIL APPENDIX OF ITA 1747/2009 PETITIONER'S EXHIBITS: RESPONDENT'S EXHIBITS:- NIL //TRUE COPY// P.A. TO JUDGE