Ita/305/2010 Of Commissioner Of Income Tax,Kottayam v. T.o.abraham, Thiruvalla

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE P.S.GOPINATHAN TUESDAY, THE 2ND AUGUST 2011 / 11TH SRAVANA 1933 ITA.No. 305 of 2010() --------------------- AGAINST THE ORDER DATED 29/01/2010 IN ITA.264/COCH/2003 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT/APPELLANT --------------------------------------- THE COMMISSIONER OF INCOME TAX, KOTTAYAM BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT(S): REPONDENT ------------------------ T.O.ABRAHAM, M/S.T.O.ABRAHAM & COMPANY THIRUVALLA-689 107. ADV. SRI.V.V.ASOKAN SRI.R.JAIKRISHNA THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 02/08/2011, ALONG WITH ITA NOS. 317, 322 OF 2010, 97 & 99 OF 2011 THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: APPENDIX APPELLANT'S EXHIBITS ANNEXURE-A :COPY OF AGREEMENT DATED 07/06/1996.ANNEXURE-B :COPY OF SWORN STATEMENT RECORDED BEFORE FERA DATED09/07/1998.ANNEXURE-C :COPY OF LETTER DATED 16/12/99.ANNEXURE-D :COPY OF LETTER DATED 24/12/99.ANNEXURE-E :COPY OF ASSESSMENT ORDER DATED 28/03/02.ANNEXURE-F :COPY OF RETURN.ANNEXURE-G :COPY OF ORDER OF THE CIT(A) DATED 24/03/2003.ANNEXURE-H :COPY OF ORDER OF THE TRIBUNAL DATED 29/01/2010. //TRUE COPY//PA TO JUDGE. jg C.N.RAMACHANDRAN NAIR & P.S.GOPINATHAN, JJ. ---------------------------------- I.T.A.Nos.305, 317, 322 of 2010, 97 & 99 of 2011--------------------------------- Dated, this the 2[nd] day of August, 2011 C.R. J U D G M E N T Ramachandran Nair, J. The only question raised in the five connected appeals filed by the Revenue is whether the Tribunal was justified incancelling assessments on the respondent assessees made onunexplained investment under Section 69 of the Income TaxAct (hereinafter referred to as the Act for short).2.We have heard learned Standing Counsel appearingfor the appellant Revenue and learned counsel appearing forthe assessee, Shri.T.O.Abraham. Even though notice wasserved on this assessee's brother, Shri.T.O.Alias, he has notchosen to engage a counsel or appeared in Court. However,we do not think there is any need to keep ITA Nos.97 & 99 of2011 in which Shri.T.O.Alias is the respondent assessee,pending any longer because the issue involved is one and the ITA Nos.305, 317, 322 of 2010 & 97 & 99 of 2011-2- same and the learned counsel appearing for the respondentassessee in the connected appeals exhaustively argued thematter. 3.The facts leading to the disputed assessment on therespondent assessees pertain to sale of 29.5 cents of land in aprime location on the side of M.G.Road, Ernakulam, Cochincity. The property was jointly owned by family members, theeldest of whom is one Shri.M.Gopinath, who is an educatedman engaged in shipping business at Cochin. One of the jointowners happened to be a Non Resident Indian andunexplained Indian Rupees credited in his Bank account led toFERA enquiry. Before the Chief Enforcement Officer,Shri.M.Gopinath, the eldest member of the family whonegotiated the sale of the property with the respondentassessees, and Shri.Jayakumar brother of Mr.Gopinath gavestatements, which were recorded in their own handwriting tothe effect that the above referred land belonging to theirfamily were sold on a sale consideration of Rs.16,00,000/-(Rupees sixteen lakhs only) per cent even though in the sale ITA Nos.305, 317, 322 of 2010 & 97 & 99 of 2011 -3- ITA Nos.305, 317, 322 of 2010 & 97 & 99 of 2011 -3- deeds the value declared is only Rs.4,00,000/- (Rupees fourlakhs only) per cent. Based on the statements recorded by theChief Enforcement Officer, the Income Tax authorities issuednotice to Shri.M.Gopinath, who wrote Annexure-C letterfollowed by Annexure-D to the Deputy Commissioner ofIncome Tax in his own letter head, which are produced in ITANo.305/2010. In Annexure-C letter, Shri.Gopinath reiteratesall what he has stated before the Chief Enforcement Officerthat the land belonging to the family members was sold at anagreed price of Rs.16,00,000/- (Rupees sixteen lakhs only)per cent. However, in Annexure D letter, Shri.Gopinathexpressed his fears that if the contents of Annexure C letterare leaked out, there may be problem for sale of the balanceportion of the property. Admittedly, the property was sold indifferent pieces and under different documents and it mayprobably to suit the convenience of the parties to makepayment in black and white. Shri.Gopinath has also furnishedentire details of the deposits of sale consideration made byhim in Bank accounts and he has filed return after paying ITA Nos.305, 317, 322 of 2010 & 97 & 99 of 2011 -4- advance tax of Rs.7,60,000/- (Rupees seven lakhs and sixtythousand only) for the income partly accounted as capitalgains and partly as income from other sources. Other familymembers who sold the land clearly stated before the IncomeTax Officer that Shri.Gopinath being the eldest member of thefamily negotiated for sale of the property and what he hasstated are true facts. Based on the statements recorded by theChief Enforcement Officer and the letter written byShri.Gopinath to the Deputy Commissioner, assessment wasinitiated against the respondent assessees who are brotherswho purchased the property in pieces from the sellers.However the respondent assessees denied payment of anyamount towards the sales consideration over and above thesale price shown in the documents. The Income Tax Officergave an opportunity to the respondents to cross-examineShri.Gopinath and other sellers, and the respondents declinedto avail the opportunity probably because by then they hadcoerced Shri.Gopinath to backtrack from his letters andstatements by stating before the Income Tax Officer that the ITA Nos.305, 317, 322 of 2010 & 97 & 99 of 2011-5- cash credited in his Bank accounts is income from othersources which are commission and other brokerage receivedby him from the shipping business, about which no detailedexplanation was offered. The Income Tax Officer overruledthe objection raised by the respondents and based on theevidence available in the form of written statements recordedby the Chief Enforcement Officer from two of the joint sellersand Annexure C letter written by Shri.Gopinath andcorroborative evidence of credits in the joint account ofShri.Gopinath and his wife and the return filed and payment oftax by Shri.Gopinath, assessments were made under Section69 of the Act on the excess amount paid by the respondentsover the value accounted in the sale deeds by the respondentsin the purchase of property. 4.In the case of Shri.T.O.Abraham, assessments weremade based on payments made for the assessment years1997-98, 1998-99 & 1999-2000 and in the case of hisbrother Shri.T.O.Alias, assessments were made only for 1997-98 & 1998-99 as payments made by him were only for these In the case of Shri.T.O.Abraham, assessments were ITA Nos.305, 317, 322 of 2010 & 97 & 99 of 2011-6- two years. 4.In the case of Shri.T.O.Abraham, assessments weremade based on payments made for the assessment years1997-98, 1998-99 & 1999-2000 and in the case of hisbrother Shri.T.O.Alias, assessments were made only for 1997-98 & 1998-99 as payments made by him were only for these In the case of Shri.T.O.Abraham, assessments were ITA Nos.305, 317, 322 of 2010 & 97 & 99 of 2011-6- two years. 5.The appeals filed by both the assessees were heardby different Commissioner (Appeals). While one Commissionerthrough a detailed order confirmed the assessment anddismissed the appeal in the case of Shri.T.O.Abraham for theassessment year 1997-98 vide Annexure G order produced inITA No.305/2010, the Commissioner who considered otherappeals allowed the same by vacating the assessment. Onfurther appeals by the assessees as well as by the Revenue,the Tribunal decided the case in favour of the respondentassessees by deleting the addition. It is against these orders,the Department has filed separate appeals for restoration ofthe assessments. 6.Learned Standing Counsel appearing for theRevenue referred to the provisions of the FERA Act, which inSection 67 incorporates the provisions of the Customs Act,1962, namely Sections 107, 108, 138B, and submits that thestatements recorded have evidentiary value. In this case,admittedly, Shri.Gopinath the eldest member of the family, ITA Nos.305, 317, 322 of 2010 & 97 & 99 of 2011 -7- who contracted the sale of the property with the respondentsclearly gave statement in his own handwriting stating that theland involved was sold at a price of Rs.16,00,000/- (Rupeessixteen lakhs only) per cent. Shri.Gopinath is an educatedperson and he has no dealings in foreign exchange and he hadnothing to conceal from the Enforcement Department. So isthe position with his brother Shri.Jayakumar, who also gaveconfirmatory statement to the effect that the entire amountcredited in the Bank account is sales proceeds received fromthe sale of their family property. Besides the statements givento the Chief Enforcement Officer, Shri.Gopinath throughAnnexure-C above referred wrote a letter to the DeputyCommissioner of Income Tax in his own letterhead stating truefacts that sale of the property is at the rate of Rs.16,00,000/-(Rupees sixteen lakhs only) per cent. The genuineness of thisletter and the correctness of the contents therein arereconfirmed in Annexure D letter, wherein he expressed hisfears that if the true facts stated by him confidentially to theDepartment are leaked out that will lead to problem in the sale ITA Nos.305, 317, 322 of 2010 & 97 & 99 of 2011 -8- of balance portion of the family property. We do not think anymore evidence is required to accept the correctness of thecontents of the letter written by Shri.Gopinath voluntarily tothe Deputy Commissioner of Income Tax. It is seen thatbesides the statements recorded by the Chief EnforcementOfficer and the letter written by Shri.Gopinath, his statementsare corroborated with other evidence i.e. credits ofcorresponding amount in the Bank accounts of Shri.Gopinathand his wife every details of which were discussed in theassessment order as well as in the order of the CIT producedas Annexure G in ITA No.305/2010. Therefore, we do notwant to discuss the factual position in detail becauseShri.Gopinath besides making statement, gave details ofvarious deposits made in each and every Bank and he had evenpaid advance tax of Rs.7,60,000/- (Rupees seven lakhs sixtythousand only) followed by filing of return and payment ofbalance tax on the sale transactions. However, in order tosave the respondents, Shri.Gopinath returned the income asincome from other sources, which is an after thought after ITA Nos.305, 317, 322 of 2010 & 97 & 99 of 2011 -9- ITA Nos.305, 317, 322 of 2010 & 97 & 99 of 2011 -9- sending letters to the Deputy Commissioner of Income Tax.We are of the view that the contrary oral statements given byShri.Gopinath to the Deputy Commissioner of Income Tax isonly an attempt to save the respondents, and the AssessingOfficer rightly rejected it. 7.Above all, this Court has taken note of the notoriousfact that invariably in every sale deed, sale considerationdeclared is much below the market value, which is mainly toavoid huge stamp duty and registration charge totaling 13.5%of the value. In this case, it is seen that the property sold issituated in the most prime location in Ernakulam city i.e. onthe side of M.G.Road, where the value shown is onlyRs.4,00,000/-, which everyone knows is notoriously low.When sellers are only interested to receive market value fortheir land, they are unconcerned whether there is evasion ofincome tax or stamp duty by the purchasers. In this case, theseller happened to be an honest man though he was laterforced to make contrary statements and he has in factdeposited the cash received in Bank accounts and paid tax ITA Nos.305, 317, 322 of 2010 & 97 & 99 of 2011-10- also arising therefrom. Therefore, we only conclude that theorders of the Tribunal are perverse and unrealistice andcannot survive in the light of the clear evidence available in theform of admissions made by one of the sellers of the property,who being the senior member of the family arranged sale ofthe family property to the respondents. These appeals are consequently allowed by vacating the orders of the Tribunal and by confirming Annexure G order ofthe CIT(Appeals) in the case of Shri.T.O.Abraham for the year1997-98 and by reversing the orders of the CIT(Appeals) inthe case of both the assessees for all the remaining years. (C.N.RAMACHANDRAN NAIR, JUDGE) (P.S.GOPINATHAN, JUDGE) jg