Ita/195/2011 Of The Commissioner Of Income Tax-Ii, Cochin v. Sri.arun David

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 TUESDAY, THE 4TH DAY OF FEBRUARY 2014/15TH MAGHA, 1935 ITA.No. 195 of 2011 ------------------- AGAINST THE ORDER IN ITA 22/COCH/2006 ofI.T.A.TRIBUNAL,COCHIN BENCH DATED 07-04-2011 APPELLANT(S)/APPELLANT: ------------------------- THE COMMISSIONER OF INCOME TAX-II, COCHIN BY ADVS.SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT(S): RESPONDENT ---------------------------- SRI.ARUN DAVID SON & L/H.OF SRI.C.P.DAVID CHEMBAKOTTUKUDIYIL HOUSE, KOTHAMANGALAM 686 691. BY ADV. SRI.ANIL D. NAIR BY ADV. SRI.J.R.PREM NAVAZ BY ADV. SMT.NIVEDITA A.KAMATH THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARDON 04-02-2014, THE COURT ON THE SAME DAY DELIVERED THEFOLLOWING: Manjula Chellur, C.J. & A.M. Shaffique, J.=-=-=-=-=-=-=-=--=-=-=-=-=-=-=-=-=-= I.T.A. No. 195 of 2011 =-=-=-=-=-=-=-=-=--=-=-=-=-=-=-=-=-=Dated this, the 4[th]day of February, 2014. J U D G M E N T Shaffique, J. This is an appeal filed by the revenue against the orderpassed by the Income-tax Appellate Tribunal, Cochin Benchin I.T. (S&S) A. No. 22/Coch/2006. This appeal is withreference to the block assessment for the period from1.4.1996 to 18.12.2012. 2.The facts of the case disclose that the assessee isa civil contractor. In response to a notice under Section158BC, the assessee filed return showing the income as‘Nil’. The assessment was completed under Section 158BCdetermining the undisclosed income for the block period atRs. 68,37,610/-. The assessing officer found that theassessee had failed to disclose the income derived by himfor carrying out the contract work and on the basis ofdocuments, seized from the assessee, the undisclosedincome was arrived at Rs. 8 lakhs for the work done forSterling Holiday Resorts at Munnar. Similarly, for the workdone at KHDP Factory at Moovattupuzha, the assessingofficer, based on seized documents, computed undisclosedincome at Rs. 1,25,420/-. Some materials were obtainedby the assessing officer, especially two agreements dated I.T.A. No. 195 of 2011 -: 2 :- 23.9.1998 and 20.12.2000 executed between oneT.J.George, Sri. N.C. Thomas and the assesseeevidencing sale of petrol pump. Taking intoconsideration the possible investment that theassessee would have made in the acquisition of the saidpetroleum pump, the unaccounted investment of Rs. 40lakhs was added to the income of the assessee. Thatapart, a further amount of Rs. 7,96,477/- was treated asunaccounted amount received from Sri. N.C. Thomas asfinal settlement of IBP petrol pump. 3.The assessee preferred an appeal before theCommissioner of Income-Tax (Appeals), Kochi. Theappellate authority deleted all these additions and theundisclosed income for the block period was reduced toRs. 54,500/-. The revenue preferred an appeal beforethe Tribunal and the Tribunal initially passed an ex parteorder determining the undisclosed income asRs.17,76,400/-. The assessee preferred an appealbefore this Court as I.T.A. No. 191/2010 and byjudgment dated 11.6.2010, this Court having set asidethe order passed by the Tribunal, remitted back thematter to the Tribunal for fresh consideration.Pursuant to the same, the Tribunal revised theundisclosed income to Rs. 54,500/-. I.T.A. No. 195 of 2011 4.It is impugning the aforesaid order that thisappeal is filed raising the following substantial questionsof law: “1. (a) Whether, on the facts and in thecircumstances of the case and regular books ofaccounts being not maintained by the assessee,the Tribunal is right in law-- i.in not relying on the seized documentevidencing carrying out contract work; ii. in placing reliance on post searchdocuments, like denial certificate, without properverification by any authority? I.T.A. No. 195 of 2011 4.It is impugning the aforesaid order that thisappeal is filed raising the following substantial questionsof law: “1. (a) Whether, on the facts and in thecircumstances of the case and regular books ofaccounts being not maintained by the assessee,the Tribunal is right in law-- i.in not relying on the seized documentevidencing carrying out contract work; ii. in placing reliance on post searchdocuments, like denial certificate, without properverification by any authority? (b)Whether, on the facts and in thecircumstances of the case, the Tribunal is rightin law and fact in deleting the addition of Rs.8,00,000/- added as undisclosed income? 2.Whether, on the facts and in the circumstancesof the case, is the Tribunal right in law in nottaking cognizance of the seized documentevidencing carrying out of contract work and inplacing reliance on post-search documents beingdenial certificate, without proper verification byany authority, especially when no regular booksof account are maintained by the assessee withreference to contract works, and thus confirmingthe order of the CIT(A)?of the case, is the Tribunal right in law in nottaking cognizance of the seized documentevidencing carrying out of contract work and inplacing reliance on post-search documents beingdenial certificate, without proper verification byany authority, especially when no regular booksof account are maintained by the assessee withreference to contract works, and thus confirmingthe order of the CIT(A)? 3.(a) Whether, on the facts and in thecircumstances of the case, the Tribunal wasright in law in disregarding the document seizedat the time of search merely on the basis of aletter filed subsequently when the original seizeddocument was not disputed during the course ofsearch?circumstances of the case, the Tribunal wasright in law in disregarding the document seizedat the time of search merely on the basis of aletter filed subsequently when the original seizeddocument was not disputed during the course ofsearch? I.T.A. No. 195 of 2011 (b) Is not estimation profit and at 8% and inaccordance with law?accordance with law? 4.Whether, on the facts and in the circumstancesof the case,-of the case,- a)the Tribunal is right in law in confirmingthe order of the CIT(a) who has entertained theadditional evidence produced by the assesseefor the first time without compliance of Rule 46A(3) of the Income-tax Rules; b)if the answer to the above question is in theaffirmative are not the orders of CIT (A) and theITAT on the issue vitiated and non est?affirmative are not the orders of CIT (A) and theITAT on the issue vitiated and non est? c)is not the interference with theunaccounted investment, wrong and unjustified?unaccounted investment, wrong and unjustified? 5.Whether the Tribunal is right in law indisregarding the document (KPU-A 84) seized atthe time of search and will not the same provethe case of the Revenue?disregarding the document (KPU-A 84) seized atthe time of search and will not the same provethe case of the Revenue? 6.The Tribunal is right in law in interfering withthe various additions for the reasons stated inthe order?the various additions for the reasons stated inthe order? 7.Whether, on the facts and in the circumstancesof the case, the Tribunal is right in law and factin restricting the addition of unaccountedinvestment of Rs. 40,00,000/- to Rs. 54,498/-?and is not the order of Tribunal perverse?”of the case, the Tribunal is right in law and factin restricting the addition of unaccountedinvestment of Rs. 40,00,000/- to Rs. 54,498/-?and is not the order of Tribunal perverse?” 5.As far as the undisclosed income of Rs. 8lakhs as profit from Sterling Holiday Resorts at Munnaris concerned, the assessing officer had made theassessment based on a certificate dated 18.6.1996issued by M/s. High Rise contractors and construction I.T.A. No. 195 of 2011 -: 5 :- 7.Whether, on the facts and in the circumstancesof the case, the Tribunal is right in law and factin restricting the addition of unaccountedinvestment of Rs. 40,00,000/- to Rs. 54,498/-?and is not the order of Tribunal perverse?”of the case, the Tribunal is right in law and factin restricting the addition of unaccountedinvestment of Rs. 40,00,000/- to Rs. 54,498/-?and is not the order of Tribunal perverse?” 5.As far as the undisclosed income of Rs. 8lakhs as profit from Sterling Holiday Resorts at Munnaris concerned, the assessing officer had made theassessment based on a certificate dated 18.6.1996issued by M/s. High Rise contractors and construction I.T.A. No. 195 of 2011 -: 5 :- professionals. It was, inter alia, stated in the saidcertificate that the assessee had completed the workfor Sterling Holiday Resorts, Munnar, amounting toRs.1 crore. According to the assessee, this certificatehad been obtained for pre-qualifying in some othercontract, and it is not an instance where the assesseehad actually done the said work. The appellateauthority formed an opinion that the statement ofaccount, day book and ledger of the firm for therelevant period were produced for verification and itwas evident that the certificate was issued only for thepurpose of providing experience certificate and it wasnot a certification of the real execution of work. Thatapart, the assessing officer ought to have verified theaforesaid certificate by examining the partner of M/s.High Rise contractors who had issued the saidcertificate. Apparently, other than the aforesaidcertificate, there is no other material available toconsider the aforesaid addition of undisclosed income.The Tribunal also concurred with the aforesaid view. 6.The learned standing counsel, however,strongly relies upon the certificate issued by M/s. HighRise contractors in order to contend that in the absenceof any other material to indicate otherwise, the said I.T.A. No. 195 of 2011 certificate has to be taken into consideration and it isthereafter for the assessee to prove that he had notcarried out any such work. But, both the authoritieshave expressed doubt regarding the sufficiency of thesaid document as prima facie materialand it is afterverifying the statement of accounts, day book andledger that they have formed an opinion that thecertificate alone was not enough to mulct such aliability for payment of tax on the assessee. Sincethere is no perversity in the said findings of theappellate authorities, we do not think that thecontentions urged by the revenue can be taken as asubstantial question of law available in the case. 7.The same is the situation as far as theundisclosed income of Rs. 1,25,420/- is concerned. Inthat case, a certificate is issued by M/s. FourmatesDevelopers and Builders (P) Ltd. The same is issuedindicating that the assessee has carried out certainwork. It is, inter alia, found by the appellate authoritiesthat M/s. Harrison Malayalam Ltd., has allotted thework of KHDP Project at Moovattupuzha in favour ofM/s. Fourmates Developers and Builders (P) Ltd., bythree work orders and they have effected payment tothe said company. There is no involvement of the I.T.A. No. 195 of 2011 7.The same is the situation as far as theundisclosed income of Rs. 1,25,420/- is concerned. Inthat case, a certificate is issued by M/s. FourmatesDevelopers and Builders (P) Ltd. The same is issuedindicating that the assessee has carried out certainwork. It is, inter alia, found by the appellate authoritiesthat M/s. Harrison Malayalam Ltd., has allotted thework of KHDP Project at Moovattupuzha in favour ofM/s. Fourmates Developers and Builders (P) Ltd., bythree work orders and they have effected payment tothe said company. There is no involvement of the I.T.A. No. 195 of 2011 assessee in the said matter. There is also a clearfinding that the necessary TDS certificates were issuedin favour of M/s. Fourmates Developers and Builders(P) Ltd., which is reflected in the balance sheet of thecompany as on 31.3.1997 and 31.3.1998. It is underthese circumstances that the appellate authorities havefound that the assessment of undisclosed income infavour of the assessee was not justified. In thisinstance also, we do not think that the appellateauthorities have committed any perversity or illegalityin coming to a finding based on the available materialswith reference to the disputed questions of fact, whichis found in favour of the assessee and therefore nosubstantial question of law arises in the case. 8.Another item of undisclosed investment iswith reference to an amount of Rs. 40 lakhs as investedin IBP petrol pump. The appellate authority foundthat the assessee could explain Rs. 31,70,502/- lakhsand the unexplained investment was only Rs. 54,498/-.To arrive at the aforesaid conclusion, the appellateauthority has considered all the documents producedand has clearly narrated the source of income for thepurpose of the said investment. This view of theappellate authority had been confirmed by the Tribunal I.T.A. No. 195 of 2011 as well and therefore we do not think that a differentopinion is possible on the ground that the said finding iseither perverse or illegal. 9.With reference to the unaccounted receiptfrom Sri. N.C. Thomas amounting to Rs. 7,96,477/-, theauthorities came to the conclusion that seizeddocuments do not disclose any such material. Copy ofthe agreement, which is relied upon for the assessmentis only a draft agreement wherein the amounts are notspecified. It is stated in the assessment order that Sri.N.C. Thomas paid Rs. 7,96,477/- to the appellant.There is no evidence for the same and no statement istaken from Sri. N.C. Thomas. The assessee was alsonot questioned regarding the said investment when astatement under Section 132(4) was taken on the date ofsearch. Having regard to these findings by the appellateauthority and the Tribunal confirming the same, basedon the material evidence available in the case, we do notthink that any of the findings have given rise to anysubstantialquestionof law as narrated in thememorandum of appeal. The validity of the documentsrelied upon by the assessing officer had beenconsidered in great detail and the first appellate I.T.A. No. 195 of 2011 -: 9 :- authority had narrated the availability of evidence forarriving at the conclusions with reference to theundisclosed income alleged to have been made by theassessee. Since it is not shown that any of thesefindings are either perverse or illegal and not based onthe materials on record, it will not be possible for thisCourt to interfere in the matter as the questions of lawnow raised are based on factual circumstances involvedin the case. In the result, we do not find any merit in the aboveappeal and accordingly, the same is dismissed. Sd/- Manjula Chellur, Chief Justice. Sd/- A.M. Shaffique, Judge. Tds/ (True copy) P.S to Judge.