Ita/78/2016 Of Dr.p.sasikumar v. The Commissioner Of Income Tax (Central)

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON TUESDAY, THE 9TH DAY OF JANUARY 2018 / 19TH POUSHA, 1939 ITA.No. 78 of 2016 AGAINST THE ORDER/JUDGMENT IN ITA 207/2015 of I.T.A.TRIBUNAL,COCHIN BENCH APPELLANT(S)/APPELLANT/ ASSESSEE DR.P.SASIKUMAR “POOJASREE”, VALIAPADAM P.O, CHOKKANATHAPURAM, PALAKKAD 678 005. BY ADVS.SRI.T.M.SREEDHARAN (SR.) SRI.V.P.NARAYANAN SMT.DIVYA RAVINDRAN SRI.V.V.VARGHESE RESPONDENT(S)/RESPONDENT/REVENUE.: THE COMMISSIONER OF INCOME TAX (CENTRAL) 5TH FLOOR, KANDAMKULATHY TOWER, M.G. ROAD, KARIKKAMURI, SHENOYS, KOCHI 682 011. R1 BY ADV. SRI.K.G.GOURI SANKAR RAI R BY SRI.KMV.PANDALAISRI P K R MENONSRI JOSE JOSEPH THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 09-01-2018,ALONG WITH ITA 79/2016, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ::2:: APPENDIX APPELLANT'S ANNEXURES: ---------------------- ANNEXURE A: TRUE COPY OF THE ASSESSMENT ORDER DATED 27/30.07.2014 ISSUED BY THEASSESSING OFFICER FOR AY-2007-08 ANNEXURE B: TRUE COPY OF THE ORDER OF THE CIT (APPEALS)iv IN ita nO.t-01 TO t-07/cit(a)-iv/12-13 DATED 22.01.21015 FOR AY-2007-08 ANNEXURE C: CERTIFIED COPY OF THE THE COMMON ORDER IN ITA NO.207/COCH/2015 DATED 09.02.2016 ISSUED BY THE ITAT, COCHIN BENCH FOR AY-2007-08 RESPONDENTS ANNEXURES :NIL -------------------------- TRUE COPY P.A TO JUDGE jma K. Vinod Chandran & Ashok Menon, JJ. ------------------------------------------------------- I.T Appeal Nos. 78 & 79 of 2016 ------------------------------------------------------- Dated, this the 09[th] day of January, 2018J U D G M E N T Vinod Chandran, J: The appellant is aggrieved with the penalty order, as modified by the First Appellate Authority, which has beenconfirmed in appeal by the Income Tax Appellate Tribunal. Thequestion of law raised is as to whether the Tribunal was justifiedin sustaining the penalty under Section 271(1)(c), for the twoassessment years; in the absence of any tangible materialrecovered in search and seizure forming the basis of addition onthe ground of concealment of income. The additions were mereestimations and just as, the penalty with respect to the otheryears and a sizable quantum for these years, were deleted; so thebalance too ought to have been deleted, argued learned SeniorCounsel. ITA Nos.78 & 79/2016 2. The assessment years are 2007-08 and 2008-09. The respective orders of penalty imposed an amount of Rs.4,18,627/- and Rs.4,23,111/- for the two years, the exact quantum of taxevaded; which was at the minimum as permitted. Annexure A is the order of penalty produced in both the appeals. Theproceedings were taken for block assessment on the basis of asearch and seizure operation under Section 132 of the IncomeTax Act, 1961, conducted on 05.12.2007. 3. Additions were made by the Assessing Officer in the assessment, which were subjected to an appeal. Somemodifications were made in the first appeal and later there werefurther modification made by the Tribunal. On the basis of theTribunal's order and the additions sustained by the Tribunal, theAssessing Officer invoked the powers under Section 271(1)(c) ITA Nos.78 & 79/2016 for imposition of penalty; which are the orders impugned here. We are informed that the Revenue filed a further appeal from theorder of the Tribunal in which certain additions deleted by theTribunal were restored by the High Court. However, theconsideration of the present appeal stands unaffected by theHigh Court's orders since the additions which were restoredhave not been dealt with in the present penalty orders. Theassessse did not take up a further appeal from the Tribunal'sorder and the additions sustained by the Tribunal has attainedfinality, on which, presently the penalty is imposed. ITA Nos.78 & 79/2016 for imposition of penalty; which are the orders impugned here. We are informed that the Revenue filed a further appeal from theorder of the Tribunal in which certain additions deleted by theTribunal were restored by the High Court. However, theconsideration of the present appeal stands unaffected by theHigh Court's orders since the additions which were restoredhave not been dealt with in the present penalty orders. Theassessse did not take up a further appeal from the Tribunal'sorder and the additions sustained by the Tribunal has attainedfinality, on which, presently the penalty is imposed. 4. For the assessment years 2007-08, the additions sustained in Second Appeal by the Tribunal were (i)Rs.8,48,400/- as profit from surgery and sale of lenses, (ii)Rs.1,88,250/- being excess salary to employees claimed by the ITA Nos.78 & 79/2016 assessee and (iii) Rs.2,07,033/- the expenses claimed onconsumable medicines disallowed by the Assessing Officer.Similarly in the year 2008-09 the respective additions on the verysame heads were (i) Rs.8,70,000/-, (ii) Rs.1,88,250/- and (iii)Rs.1,86,745/-. 5. Penalty orders were issued in all the years right from 2002-03 to 2008-09 by the Assessing Officer. Appeals were filedagainst the penalty orders as produced in the present revision, ofthe two years and also the other five years before the firstappellate authority. The penalty on additions made with respectto excess salary paid to employees and dis-allowance ofexpenditure on consumable medicine were deleted by the firstappellate authority on the ground that they were mere estimatesby the Assessing Officer as sustained and modified by the ITA Nos.78 & 79/2016 Tribunal. The additions made in 2002-03 to 2006-2007 also weresuch estimates which also stood deleted. Eventually byAnnexure B appellate order in the seven appeals, what wassustained is only the penalty imposed with respect to theadditions made on account of receipt from surgery and sale oflenses, that is Rs.8,48,400/- in the year 2007-08 and Rs.8,70,000/-in the year 2008-09. 6. The learned Senior Counsel would contend thateven the said addition is based on an estimate. The sale of lenswas found to have generated a profit of Rs.1800/- per lens. Theassessee was found to have conceded only very low profit on thesale of lens. The Tribunal found that the price of lens rangedbetween 100 to 1800 and the average profit could be only 30% ofthe sale value. The learned Senior Counsel for the Department ITA Nos.78 & 79/2016 would contend that this was not based on mere estimation but was on the basis of the deposition of the assessee and theirsuppliers. 7. We see from Annexure B order that the order of the Tribunal sustaining the said additions were extracted by the firstappellate authority. The assessee on a question being posed tohim, admitted that there was some profit margin on sale ofPMMA lenses, which was not conceded. The supplier of suchlens one M/s. J.N. Surgi Cure; the proprietor of which wasexamined also could not give any convincing explanation withregard to the selling price of PMMA lens. It was hence theAssessing Officer found that there was a profit element in thesale of lenses which was concealed by the assessee. It was to thatextend, the additions were made by the Assessing Officer which ITA Nos.78 & 79/2016 was reduced considerably and confined to 30% of sale price. 7. We see from Annexure B order that the order of the Tribunal sustaining the said additions were extracted by the firstappellate authority. The assessee on a question being posed tohim, admitted that there was some profit margin on sale ofPMMA lenses, which was not conceded. The supplier of suchlens one M/s. J.N. Surgi Cure; the proprietor of which wasexamined also could not give any convincing explanation withregard to the selling price of PMMA lens. It was hence theAssessing Officer found that there was a profit element in thesale of lenses which was concealed by the assessee. It was to thatextend, the additions were made by the Assessing Officer which ITA Nos.78 & 79/2016 was reduced considerably and confined to 30% of sale price. 8. We are of the opinion that the additions made is noton a mere estimation. Only on the search and seizure and thesubsequent statement from the assessee conceding a profitmargin, not clearly stated that the addition was made by theAssessing Officer. Neither the assessee nor their supplier couldoffer a satisfactory explanation for the low profit conceded of thesale of lenses. This is the incriminating evidence which wasrevealed on the proceedings pursuant to search and seizure thatled to the addition. It cannot be said that the same is a mereestimation. We hence sustain the Tribunal's order. However, wemake it clear that the Assessing Officer has to redo the penaltyand impose it only to the extend of the tax evasion with respectto the additions of Rs8,48,400/- and Rs.8,70,000/- in the respective ITA Nos.78 & 79/2016 years. The tax evaded on that component of addition with respect to the profit derived on lens, would be the penalty, whichis at the minimum as permitted in Section 271(1). Income Tax appeal is rejected answering the question raised on sustenance of penalty to the extent confirmed by theTribunal, in the affirmative and against the assessee. No costs. Sd/-K.VINOD CHANDRANJudge jma/- //true copy// Sd/-ASHOK MENONJudge P.A to Judge