Ita/238/2010 Of The Commissioner Of Income Tax, Calicut v. Shri.p.m.kunhammed, Calicut

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 FRIDAY, THE 11TH DAY OF APRIL 2014/21ST CHAITHRA, 1936 ITA.No. 238 of 2010 ( ) ------------------------ AGAINST THE ORDER IN IT(S&S)A 141/2004/COCH/O4 of I.T.A.TRIBUNAL,COCHINBENCH DATED 31-07-2009. APPELLANT(S)/APPELLANT : ----------------------- THE COMMISSIONER OF INCOME TAX, CALICUT. BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT/RESPONDENT : --------------------- SHRI.P.M.KUNHAMMED, C/O.M/S.GALAXY BUILDERS, R.C.ROAD, CALICUT. BY ADVS. SRI.ANIL D. NAIR. SRI.NIVEDITA A.KAMATH. THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 11-04-2014, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: APPENDIX PETITIONER'S ANNEXURES: RESPONDENT'S ANNEXURES: NIL. //TRUE COPY// P.A TO JUDGE Manjula Chellur, C.J. & A.M. Shaffique, J.=-=-=-=-=-=-=-=--=-=-=-=-=-=-=-=-=-=I.T.A. No. 238 of 2010 =-=-=-=-=-=-=-=-=--=-=-=-=-=-=-=-=-=Dated this, the 11[th]day of April, 2014. J U D G M E N T Shaffique, J. Revenue has filed this appeal against the order passedby the Income Tax Appellate Tribunal, Cochin Bench in I.T.(S & S) A No. 141/Coch/04 dated 31.7.2009. Respondentherein is the assessee. The assessment relates to the blockperiod 1991-1992 to 2001-2002. 2.Pursuant to a search conducted at the businesspremises of the assessee, assessment under Section 158BCwas completed on 31.3.2003. Assessing Officer estimatedthe undisclosed income at Rs. 1,09,00,716/- and made agross demand of Rs. 81,49,713/-. 3.The assessee preferred an appeal before theCommissioner of Income Tax (Appeals). By order dated10.9.2004, the First Appellate Authority partly allowed theappeal. Against the said order, the assessee as well asrevenue preferred appeals before the Tribunal. By theimpugned order, the Tribunal formed an opinion that theclaim for amounts payable for purchase of steel andelectrical items were not allowed and no mention was madewith reference to letter received on 1.4.2003, which wasrelied on by the authorities in order to compute theundisclosed income of the assessee. Accordingly, the I.T.A. No. 238 of 2010 appeal filed by the assessee was allowed and the appealof the revenue was only partly allowed. 4.The revenue, while filing the appeal, inter aliacontends that when the draft assessment order wassubmitted before the Additional Commissioner ofIncome Tax, whose prior permission was required forcompletion of the assessment, the assessee had writtena letter dated 27.3.2003 on the basis of which theauthority had revised the draft order after allowing firsttwo claims of the assessee. This aspect of the matterwas not properly considered by the Department.Annexure A is the said letter which reads as under: “I heard my case before you and the DeputyCommissioner of Income Tax, Central circle, Calicut.I am informed that the draft order proposing the blockassessment of undisclosed income in my case is at Rs.1,38,01,809/-. The payment to Mr. C.T. Basheer towards the landprice, towards the land price, future profit andcompensation Rs.28,50,000/- may be allowed as adeduction. I may also request you to reduce Rs.3,01,093/- from the gross receipt on account Mr. K.V.Saleem on the basis of the evidence produced beforethe Assessing Officer. It is also submitted that the expenses payable for thepurchase of Steel Rs. 5,35,000/- and Electrical andPlumbing work Rs. 4,88,800/- may allowed in theregular assessment for the A.Y. 2001-02. I.T.A. No. 238 of 2010 “I heard my case before you and the DeputyCommissioner of Income Tax, Central circle, Calicut.I am informed that the draft order proposing the blockassessment of undisclosed income in my case is at Rs.1,38,01,809/-. The payment to Mr. C.T. Basheer towards the landprice, towards the land price, future profit andcompensation Rs.28,50,000/- may be allowed as adeduction. I may also request you to reduce Rs.3,01,093/- from the gross receipt on account Mr. K.V.Saleem on the basis of the evidence produced beforethe Assessing Officer. It is also submitted that the expenses payable for thepurchase of Steel Rs. 5,35,000/- and Electrical andPlumbing work Rs. 4,88,800/- may allowed in theregular assessment for the A.Y. 2001-02. I.T.A. No. 238 of 2010 I am eager to have a speedy settlement of the pendingassessment and therefore I am in agreement tocomplete the assessment in the above manner and noappeal will be preferred if the above are allowed fromthe proposed total income of the block period. It isrequested to take a lenient view in the matter ofpenalty proceedings. It is requested to allowverification for any mistake in the computation ofincome. I will not claim the deduction of Rs. 28,50,000/- in theregular assessment for the assessment year 2001-02. The entire tax due will be paid within the period of sixmonths from the due date for the payment of tax.” 5.On this basis, the following questions of lawhave been framed: “1.Whether, on the facts and in the circumstances ofthe case, (the case being one requiring the priorsanction of the additional CIT) and in the light ofthe letters addressed to the additional CIT both bythe assessee and the Assessing Officer, theTribunal is right in law and fact in interferingwith the assessment based on the concession bythe assessee?the case, (the case being one requiring the priorsanction of the additional CIT) and in the light ofthe letters addressed to the additional CIT both bythe assessee and the Assessing Officer, theTribunal is right in law and fact in interferingwith the assessment based on the concession bythe assessee? 2.Whether, on the facts and in the circumstances ofthe case and in the light of letters, markedannexures A and B are not the reasoning andconclusion of the Tribunal in paragraphs 6.3 and7.1 of the order vitiated, perverse and againsthuman conduct and commonsense?the case and in the light of letters, markedannexures A and B are not the reasoning andconclusion of the Tribunal in paragraphs 6.3 and7.1 of the order vitiated, perverse and againsthuman conduct and commonsense? 3.Whether, on the facts and in the circumstances ofthe case, will not the amounts that are not foundentered in the regular books of accounts at thetime of search form part of the “undisclosedthe case, will not the amounts that are not foundentered in the regular books of accounts at thetime of search form part of the “undisclosed I.T.A. No. 238 of 2010 income” of the assessee for the block period and isnot the finding of the Tribunal to the contraperverse and against law and logic? 4.Whether, on the facts and in the circumstances ofthe case and in the light of establishment ofsuppression of sales by the Assessing Officer bybringing out the differences in the futures enteredin the separate ESSAR diary seized (A21) and theledger maintained by the assessee and saleagreements, the ITAT is right in law and fact ininterfering with the addition on that account?the case and in the light of establishment ofsuppression of sales by the Assessing Officer bybringing out the differences in the futures enteredin the separate ESSAR diary seized (A21) and theledger maintained by the assessee and saleagreements, the ITAT is right in law and fact ininterfering with the addition on that account? 4.Whether, on the facts and in the circumstances ofthe case and in the light of establishment ofsuppression of sales by the Assessing Officer bybringing out the differences in the futures enteredin the separate ESSAR diary seized (A21) and theledger maintained by the assessee and saleagreements, the ITAT is right in law and fact ininterfering with the addition on that account?the case and in the light of establishment ofsuppression of sales by the Assessing Officer bybringing out the differences in the futures enteredin the separate ESSAR diary seized (A21) and theledger maintained by the assessee and saleagreements, the ITAT is right in law and fact ininterfering with the addition on that account? 5.Whether, on the facts and in the circumstances ofthe case and considering the agreement of theassessee the Tribunal is justified and right in lawin interfering with the assessment for any of thereasons noted in the order of ITAT and are not thefinding and conclusion of the Tribunal perverse,arbitrary and against all reasonableness?”the case and considering the agreement of theassessee the Tribunal is justified and right in lawin interfering with the assessment for any of thereasons noted in the order of ITAT and are not thefinding and conclusion of the Tribunal perverse,arbitrary and against all reasonableness?” 6.On a perusal of the questions of law raised,apparently, the issues involved are questions of fact.However, it is contended by the learned standingcounsel appearing for the revenue that the findingswith reference to paragraphs 6.3 and 7.1 of the orderpassed by the Tribunal are perverse and therefore thesame is liable to be interfered. Further arguments havebeen raised with reference to appreciation of evidenceby the Tribunal, especially in regard to the diary seizedduring search, which was relied upon as A21, theledger maintained by the assessee and the saleagreements. I.T.A. No. 238 of 2010 7.In paragraph 6.3 of the Tribunal's order, it isindicated that in the letter dated 27.3.2003, though theassessee had agreed for a speedy settlement based onthe draft order of Assessing Officer, he has alsoindicated that he will not be preferring any appeal, ifthe expenses of purchase of steel amounting to Rs.5,35,000/- and electrical and plumbing work amountingto Rs. 4,88,800/- are allowed. The Tribunal found thatit was only a conditional letter even assuming for thesake of argument that the letter was filed prior to theassessment order. It was further held that though thesaid letter had been issued, the same will not take awaythe right of appeal to the assessee as the statutory rightcannot be waived in law. The Tribunal also took note ofthe admission made by the Department that the letterdated 27.3.2003 was received in the office of AssessingOfficer on 1.4.2003. Therefore, it is clear that theAssessing Officer was not having the luxury of seeingthe letter dated 27.3.2003 and therefore theassessment was proceeded on a different basis. 8.In paragraph 7.1 of the order the Tribunalobserved that consent letter cannot be considered as avalid piece of evidence for having any evidentiary valuesince the same was received after the date of I.T.A. No. 238 of 2010 -: 6 :- assessment. 8.In paragraph 7.1 of the order the Tribunalobserved that consent letter cannot be considered as avalid piece of evidence for having any evidentiary valuesince the same was received after the date of I.T.A. No. 238 of 2010 -: 6 :- assessment. 9. Learned standing counsel appearing onbehalf of the revenue, however, placed much relianceon the seized records in order to show that theAssessing Officer had considered the income from thesale of flats as shown in the personal ledger at A21.With reference to the same, the Tribunal formed anopinion that when the books inventried as A37 and A38are maintained on a day today fashion as early as on3.3.1997, the said books cannot be brushed aside andconsidered as not maintained in the regular course.That apart, it is found that A15 to A20, A21, A37 andA38 were considered by the CIT (Appeals) as well asthe Tribunal and observed that they were allmaintained in the normal course of business asregular books of account. In fact, the Assessing Officerconsidered the income from sale of flat as shown in hispersonal ledger as A21. In A15 to A20, only banktransactions were shown whereas in A37 and A38,cash expenses were reflected. The Tribunal found thatit is not possible to presume that the assessee wouldnot have incurred any cash expenses especially in theline of business it was engaged. Therefore, theTribunal formed an opinion that those documents were I.T.A. No. 238 of 2010 -: 7 :- also part of its regular books, which is credible and canbe taken into consideration. 10.When two authorities, viz. the fact findingauthorities, had formed an opinion on the basis ofavailable records and it is seen that such finding of factis possible, we cannot agree with the learned counselfor the revenue that those findings are perverse. Under these circumstances, we do not think thatthe questions of law framed can be answered in favourof the revenue and accordingly the appeal is dismissed. Sd/- Manjula Chellur, Chief Justice Sd/- A.M. Shaffique, Judge. Tds/ [True copy] P.S. to Judge.