Ita/78/2009 Of Commissioner Of Income Tax,Kottayam v. Shri.devasia Devasia,Pala,Kottayam

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 THURSDAY, THE 16TH DAY OF JANUARY 2014/26TH POUSHA, 1935 ITA.No. 78 of 2009 -------------------AGAINST THE ORDER IN IT(S&S)A 73/COCH/2005 of I.T.A.TRIBUNAL,COCHIN BENCH DATED 10-09-2008 ............ APPELLANT/RESPONDENT : ------------------------------- THE COMMISSIONER OF INCOME TAX, KOTTAYAM. BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT/APPELLANT : ------------------------------ SHRI DEVASIA DEVASIA, KULAMKKAL HOUSE, PALAI. BY ADV. SRI.P.BALAKRISHNAN (E) THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 16-01-2014, ALONG WITH ITA No.112 OF 2010,THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: Manjula Chellur, C.J. & A.M. Shaffique, J. - - - - - - - - - - - - - - - - - - - - - - - - - - - - I.T.A. No. 78 of 2009andI.T.A. No. 112 of 2010 - - - - - - - - - - - - - - - - - - - - - - - - - - - -Dated this the 16[th] day of January, 2014 Manjula Chellur, C.J. JUDGMENT These two appeals are taken up together and disposed of by common order as they pertain to appeal andcross appeal filed before the Income Tax Tribunal. 2. These two appeals also relate to the assessee in question, who is one Devasia Devasia a partner of variousfirms carrying on business in Finance, Hotel etc. He waspartner in several business concerns. So far as the presentappeals are concerned, these appeals pertain to hisundisclosed investments made in M/s.Maria Bankers Chits andInvestments, similar investment in M/s.Chola Huts andM/s.Hotel Victoria Bar attached, Kattappana. Apart from this,expenses incurred for various tours also became the subjectmatter of assessment. Admittedly there was a searchsimultaneously in the business premises and in the residence ofthe partners on 28.06.2001. Several documents came to berecovered during search operation at the residence and also -:2:- business premises which became the basis for arriving at theassessment orders by the Assessing Officer apart from thestatement of other partners recorded during the course of search.3. So far as these two appeals, a sum of `13,85,210/-noticed from documents or material referred to CDW1 from theresidence of the assessee was the basis. The other amount`29,96,065/- became the second item which was reflected asunexplained investment from the records recovered from thebusiness premises of M/s.Maria bankers Chits and Investments.From the statement of another partner Sri.A.C. Joseph, and alsothe records pertaining to the Hotel business indicated, so far asM/s.Chola Huts, there were three partners including the assesseeand in Hotel Victoria, Bar attached there were two partners. Therespondent/assessee and Mr.A.C.Joseph, Ammukkattu House,Pulpally, Wayanad are the common partners. So far as HotelChola Huts the third partner is one Kuruvila Augustine. Theunexplained investments so far as the present assessee withreference to Hotel Victoria, Bar attached was taken as`45,50,000/- so far as M/s.Chola Huts it was taken as -:3:- `38,50,000/-. The expenses for Foreign Tours assessed was at`5,00,000/-. 4. During the course of assessment process after -:3:- `38,50,000/-. The expenses for Foreign Tours assessed was at`5,00,000/-. 4. During the course of assessment process after referring to the details of CDW1 at paragraph 3 of theassessment order, the assessing officer opined that the materialrecovered from the house of respondent during the searchoperations disclosed an undisclosed investment of `13,85,210/-in M/s.Maria Bankers Chits and Investments. The second item iswith reference to Section 158BC so far as `29,96,065/-. This isbased on a sheet referred to as VSK/B&D/S-26 seized from thebusiness premises of M/s.Maria Bankers and so far as page No.41of VSK/B&D/S-22 seized from the very same bank premises.From these two documents the figures reflected as undisclosedinvestment made by the respondent/assessee was the aboveamount. A reply was sought from the assessee but his reply wasthat he was not able to trace out the above sum from these twodocuments. According to the assessee, the figures reflected inthese two documents are different from the amount shown inCDW1, therefore he disputed the said amounts. While referring ITA No. 78 of 2009 -:4:- to the assessment made pertatining to M/s.Maria Bankers Chits and Investments, there was a categorical admission by thepartners that the figures shown in the documents recoveredreflect only 1/100[th] of the actual amounts, therefore, the figuresshown in the material recorded must be multiplied by 100 whichwould give the correct picture. As a matter of fact such deviceadopted by M/s.Maria Bankers Chits and Investments clearlyindicates similar methods being adopted by this assessee as theassessee is the managing partner of M/s.Maria Bankers Chitsand Investments along with another partner Mr.Basil Thomas.When the records pertaining to undisclosed investment ofM/s.Maria Bankers Chits and Investments so far as theinvestment made by the assessee has to be ascertained, it has tobe ascertained with reference to the material recovered at thepremises of M/s.Maria Bankers Chits and Investments. 5. If the documents from M/s.Maria Bankers Chitsand Investments reflected the total undisclosed investment ofrespondent/assessee as `29,96,065/-, we fail to understand howthere can be undisclosed investment of this assessee amounting -:5:- to `13,85,210/- based on the material recovered from the house of respondent/assessee. The figures ascertainable fromM/s.Maria Bankers Chits and Investments did not tally with thefigures ascertainable from the material recovered from therespondent/assessee. These two amounts cannot becomeundisclosed investment, therefore, it has to be presumed that`13,85,210/- forms part of the undisclosed investment reflectedfrom the records seized at M/s.Maria Bankers Chits andInvestments, i.e. `29,96,065/-. The assessing officer went wrongso far as this aspect of the matter. 6. Then coming to the first Appellate Authority, thoughthe First Appellate Authority was justified for the reasonmentioned by us above that `13,85,210/- has to be deleted, butwent wrong so far as `29,96,065/- being brought down to`16,84,565/-. We notice from the orders of the First AppellateAuthority it totally deleted `29,96,065/- and in its place broughton record `16,84,565/- as the amount received from DevasiaDevasia which is reflected in the deposits of 40 personsamounting to `33,64,815/-. The First Appellate Authority having -:6:- regard to the fact of giving set off for an amount of `33,64,815/-being the deposits accepted by the firm, while makingassessment orders of the firm relies upon the said deposits of`33,64,815/- to conclude that only`16,84,565/- is theundisclosed investment of Devasia Devasia purely based on thestatement of respondent/assessee without any other evidence.The appellant has not explained how `29,96,065/- could be`16,84,565/-. 7. This is where the First Appellate Authority has gone -:6:- regard to the fact of giving set off for an amount of `33,64,815/-being the deposits accepted by the firm, while makingassessment orders of the firm relies upon the said deposits of`33,64,815/- to conclude that only`16,84,565/- is theundisclosed investment of Devasia Devasia purely based on thestatement of respondent/assessee without any other evidence.The appellant has not explained how `29,96,065/- could be`16,84,565/-. 7. This is where the First Appellate Authority has gone wrong and so far as the Tribunal is concerned, from paragraph 10onwards the Appellate Authority has arrived at the conclusionthat the reasons mentioned at paragraph 10 with reference toundisclosed gold loan advances and unaccounted daily loanbusiness of M/s.Maria Bankers Chits and Investments. We fail tounderstand how this `39,26,190/- and `10,15,927/- could berelated to the facts and figures revealed during the searchproceedings. So far as `16,84,565/- by relating it to the saidamounts the Tribunal opines, this amount of `16,84,565/- wasalso in the hands of the assessee as per the records. Admissions were made by the other partner that there were unaccounted withdrawals by the respondent/assessee, therefore there is nojustification for adding `16,84,565/-. As already stated abovethere is no proper consideration so far as material regarding`29,96,065/- found as undisclosed investment in the bank andfurther it is totally against the provisions of Section 158BB. Theunaccounted withdrawals were taken into consideration which iserroneous and incorrect, therefore, this issue deserves to bereconsidered. 8. Then coming to the investment in the two Hotels so far as the material pertaining to these two Hotels, the basis wasthe statement of partner, Sri.A.C.Joseph, and other documentsrecovered from the premises of Sri.A.C. Joseph. The partnershipdocuments further shows the respondent herein is a partner inboth the Hotels. So far as Hotel Chola, the partnership shows,that each partner has 1/3[rd] stake in the investment and so far asthe other Hotel, it is 50% between the two partners so far as therespondent/assessee. -:8:- 9. On going through the orders of both the AppellateAuthorities, they have not applied their mind at all so far as thematerial that came to light during the search operation regardingthese invesatments. So far as the reason for rejecting the caseof Revenue, dates of investment seems to be much prior to thedocument of partnership and therefore there was no possibility ofinvesting huge amounts even before the partnership could comeinto existence. This explanation of the assessee was blindlyaccepted by the First Appellate Authority. It is quite possible thaton an oral understanding a business can be ventured by two orthree persons and later on, the terms of partnership could bereduced to writing. Tribunal simply opining that the FirstAppellate Authority has considered all the material, proceeded toconfirm the opinion of the First Appellate Authority. Therefore,we opine that there is no application of mind by two AppellateAuthorities so far as investments made by therespondent/assessee in both the Hotels, i.e. Hotel Chola andHotel Victoria. In the light of the above observations, we are ofthe opinion, this aspect of the matter also to be reconsidered by the First Appellate Authority which simply accepted the statement of the representative of the assessee. So far as the expenses of`5,00,000/- for travel abroad said to have been sponsored byM/s.Show Wallace Company, we feel there is no requirment ofany remand. In the light of the above observations, the matter isremanded back to the First Appellate Authority to reconsider thematter only with reference to `29,96,065/-, the undisclosedinvestment in M/s.Maria Bankers Chits and Investments and sofar as `21,84,565/- in the two Hotels as stated above. Manjula Chellur, Chief Justice. A.M. Shaffique, Judge. ttb/18/01 ITA No. 78 of 2009 the First Appellate Authority which simply accepted the statement of the representative of the assessee. So far as the expenses of`5,00,000/- for travel abroad said to have been sponsored byM/s.Show Wallace Company, we feel there is no requirment ofany remand. In the light of the above observations, the matter isremanded back to the First Appellate Authority to reconsider thematter only with reference to `29,96,065/-, the undisclosedinvestment in M/s.Maria Bankers Chits and Investments and sofar as `21,84,565/- in the two Hotels as stated above. Manjula Chellur, Chief Justice. A.M. Shaffique, Judge. ttb/18/01 ITA No. 78 of 2009 and ITA No.112 of 2010