Ita/30/2010 Of The Commissioner Of Income Tax v. C.sivanandan

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE B.P.RAY MONDAY, THE 31ST JANUARY 2011 / 11TH MAGHA 1932 ITA.No. 30 of 2010() -------------------- AGAINST THE ORDER IN ITA.113/COCH/2002 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT/ APPELLANT ----------------------------- THE COMMISSIONER OF INCOME TAX, THIRUVANANTHAPURAM. BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT(S): / RESPONDENT --------------- C.SIVANANDAN, P.L.HOUSE, PALACE WARD, THAGASSERY, KOLLAM. ADV. SRI.S.ARUN RAJ FOR R1 THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 31/01/2011, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: C.R. C.N.RAMACHANDRAN NAIR & BHABANI PRASAD RAY, JJ. ---------------------------------- ITA No.30 of 2010 --------------------------------- Dated, this the 31[st] day of January, 2011 J U D G M E N T Ramachandran Nair, J. This Appeal is filed by the Revenue challenging the order of the Tribunal declaring the income escaping assessment made underSection 147 of the Income Tax Act (hereinafter referred to as the Actfor short) on the respondent assessee for the assessment year1992-93 as invalid. 2.We have heard learned Senior counsel appearing for theRevenue and Shri.Arun Raj, learned counsel appearing for therespondent assessee. 3.Return filed by the assessee for the assessment year1992-93 was initially processed under Section 143(1)(a) andthereafter a scrutiny assessment was made under Section 143(3) ofthe Act. A search was carried out in the residential and businesspremises of the assessee on 25/11/1998 and block assessmentunder Section 158BC was made for the block period from01/04/1988 to 25/11/1998. In the block assessment specific additions were made for the assessment year 1992-93 representingarbitration award amount received by the assessee and also intereston various Bank deposits maintained in the name of assessee'srelatives. It is pertinent to note that the Assessing Officer assessedonly the interest from these deposits as assessee's income and thedeposit amounts in the names of the relatives were not assessed asundisclosed income of the assessee for the year 1992-93 which fellwithin the block period. 4.When the block assessment was challenged in appeal,the CIT (Appeals) upheld the assessee's claim that arbitrationamount was included in the income originally returned and 8% ofwhich was assessed as estimated income from contract receipts andso much so there is no scope for treating arbitration amount laterreceived as undisclosed income. So far as assessment of interestfrom various Bank deposits held in the names of relatives of theassessee is concerned, the CIT (Appeals), except for a small amountof interest attributable to 1/3[rd] of the deposit amount maintained inthe name of the assessee's deceased mother, all other additionswere cancelled. In short,the block assessment was substantiallyallowed in appeal by the CIT (Appeals) and the only additionretained is 1/3[rd] of the interest income received, in respect of the Bank deposit that was in the name of assessee's deceased mother.There is also a clear finding by the CIT (Appeals) that deposits invarious Banks were not undisclosed income of the assessee becausethose deposits belong to the family members of the assessee. TheDepartment's 2[nd] appeal against the order of the CIT (Appeals)before the Tribunal was unsuccessful. In between, after the CIT(Appeals)'s order, the Assessing Officer initiated proceedings underSection 147 and income escaping assessment was made for theassessment year 1992-93 assessing the deposit amounts in the sixBank deposits maintained in the names of assessee's relatives,details of which were collected in the course of search made underSection 132 of the Act, as escaped income of the assessee. Bank deposit that was in the name of assessee's deceased mother.There is also a clear finding by the CIT (Appeals) that deposits invarious Banks were not undisclosed income of the assessee becausethose deposits belong to the family members of the assessee. TheDepartment's 2[nd] appeal against the order of the CIT (Appeals)before the Tribunal was unsuccessful. In between, after the CIT(Appeals)'s order, the Assessing Officer initiated proceedings underSection 147 and income escaping assessment was made for theassessment year 1992-93 assessing the deposit amounts in the sixBank deposits maintained in the names of assessee's relatives,details of which were collected in the course of search made underSection 132 of the Act, as escaped income of the assessee. 5.When the assessee filed appeal against the incomeescaping assessment completed under Section 147, the CIT(Appeals) cancelled the same for the reason that addition of sameamounts were considered while making block assessment and afterdropping the proposal to assess the deposit amounts asundisclosed income, only interest from such deposits were assessedas income of the assessee which itself was substantially cancelled in the appeal filed against the block assessment. When second appealwas filed by the Revenue before the Tribunal, the Tribunal held that reassessment completed under Section 147 is only a result ofchange of opinion of the Assessing Officer. Consequently, theyupheld the CIT (Appeals)'s order, who cancelled the incomeescaping assessment, against which this Appeal is filed. 6.Learned Senior counsel appearing for the Revenuecontended that there is no change of opinion on the part of theAssessing Officer as found by the Tribunal, and according to him,the Assessing Officer is free to make income escaping assessment,no matter a block assessment under Section 158BC was completedcovering this year also. Learned counsel appearing for the assessee,on the other hand, relied on the decision of the Allahabad HighCourt in Vishwanath Prasad Ashok Kumar Sarrafv. Commissionerof Income Tax and Others, reported in (2010) 327 ITR 190, and adecision of the Bombay High Court in Smt.Mira Ananta Naik & Ors.v. Deputy Commissioner of Income Tax (Investigation) & Ors.reported in (2009) 221 CTR (Bom) 149, and contended that incomeassessed in a block assessment under Section 158BC cannot beagain brought to tax under Section 147 after the appellate authoritycancels or modifies the block assessment. We find force in thecontention of the assessee because in this case, the incomeassessed under Section 147 i.e. the amount covered by deposit receipts maintained in Banks, were considered in the blockassessment and at that time, the Assessing Officer treated onlyinterest income as income of the assessee and not the depositamounts as such, as undisclosed income of the assessee. However,when the CIT (Appeals) cancelled the block assessment holding thatBank deposits were that of family members of the assessee andtherefore interest income therefrom could not be assessed in hishands, the Assessing Officer tried to bring to tax the depositamounts itself by invoking the powers under Section 147 of the Act.Even though block assessment under Section 158BC and incomeescaping assessment under Section 147 can probably be made forthe same period, on different basis we do not think assessmentscould be successively made one after another for the same periodunder these provisions based on the same materials. Oncematerials are gathered either during search under Section 132 orduring survey under Section 132A, it is up to the Assessing Officerto make block assessment under Section 158BC or if he feels thatincome escaping assessment is called for under Section 147, it is upto him to elect between the two and make assessment under theprovision he finds appropriate. However, once the AssessingOfficer, after conducting search and based on materials gathered during search under Section 132, proceeds to make blockassessment under Section 158BC, then he cannot based on thesame materials which in this case is deposit amounts found duringsearch proceed to make income escaping assessment under Section147 after block assessment was cancelled by the first appellateauthority. The Assessing Officer obviously cannot get over thefindings in the order of the first appellate authority against a blockassessment by invoking powers under Section 147. During blockassessment, the Assessing Officer obviously considered as towhether Bank deposits in the names of family members of theassessee found during search represent his undisclosed income butaccepted the assessee's contention that the same belong to hisfamily members. Rightly or wrongly only the interest from thesedeposits were assessed as part of undisclosed income of theassessee for the block period. In appeal the CIT (Appeals) cancelledthe assessment on interest income. We are of the view that theAssessing Officer cannot after cancellation of block assessment bythe CIT (Appeals) proceed to make an income escaping assessmentfor assessing the very same Bank deposits as escaped income. Wedo not think the Assessing Officer has jurisdiction to assess the verysame amount, which was considered and given up while making block assessment. Even though learned standing counsel submittedthat deposit amounts were not considered in block assessment, wecannot accept it because when interest from the same deposits wereassessed as undisclosed income of the block period, it can belegitimately assumed that the Officer considered the depositamounts for assessment but gave up the same. In this context, thefindings of the Tribunal that reassessment under Section 147 is aresult of change of opinion of the Assessing Officer, cannot be saidto be illegal or incorrect because what was not treated asundisclosed income in block assessment is later treated as escapedincome in another round of assessment under a different provisionof the Act (S.147) which in our opinion is impermissible. We,therefore, uphold the order of the Tribunal and dismiss thedepartmental Appeal. (C.N.RAMACHANDRAN NAIR, JUDGE) (BHABANI PRASAD RAY, JUDGE)