Ita/79/2012 Of The Commissioner Of Income-Tax-Ii v. Rajesh Guptha

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT:- THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR.JUSTICE ASHOK MENON MONDAY, THE 12TH DAY OF NOVEMBER 2018 / 21ST KARTHIKA, 1940 I.T.A.No.68 of 2012 AGAINST THE ORDER IN I.T.A.NO.380/COCH/2009 DATED 25.07.2011OF INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH, COCHIN APPELLANT/RESPONDENT: THE COMMISSIONER OF INCOME-TAX-II,KOCHI. BY SRI.JOSE JOSEPH, STANDING COUNSEL FOR GOI (TAXES) RESPONDENT/APPELLANT: SHRI.RAJESH GUPTA,RR FINANCIAL SERVICES, G.RADHABHAI BUILDING, GOPALA PRABHU ROAD, COCHIN-35. BY ADVS.SRI.T.M.SREEDHARAN (SR.)SRI.V.P.NARAYANANSMT.BOBY M.SEKHARSMT.NISHA JOHN THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 12.11.2018, ALONG WITH ITA.79/2012, ITA.74/2012, ITA.78/2012, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: 12.11.2018, ALONG WITH ITA.79/2012, ITA.74/2012, ITA.78/2012, IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON MONDAY, THE 12TH DAY OF NOVEMBER 2018 / 21ST KARTHIKA, 1940 I.T.A.No.79 of 2012 AGAINST THE ORDER IN I.T.A.NO.383/COCH/2009 DATED 25.07.2011OF INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH, COCHIN APPELLANT/RESPONDENT: THE COMMISSIONER OF INCOME-TAX-II,KOCHI. BY ADVS.SRI.P.K.RAVINDRANATHA MENON, SENIOR COUNSEL FOR GOI (TAXES)SRI.JOSE JOSEPH, STANDING COUNSEL FOR GOI (TAXES) RESPONDENT/APPELLANT: SHRI.RAJESH GUPTA, RR FINANCIAL SERVICES, G.RADHABHAI BUILDING, GOPALA PRABHU ROAD, COCHIN-35. THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 12.11.2018, ALONG WITH ITA.74/2012, ITA.78/2012, ITA.68/2012,THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR.JUSTICE ASHOK MENON MONDAY, THE 12TH DAY OF NOVEMBER 2018 / 21ST KARTHIKA, 1940 I.T.A.No.74 of 2012 AGAINST THE ORDER IN I.T.A.NO.382/COCH/2009 DATED 25.07.2011OF INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH, COCHIN APPELLANT/RESPONDENT: THE COMMISSIONER OF INCOME-TAX-II,KOCHI. BY SRI.JOSE JOSEPH, STANDING COUNSEL FOR GOI (TAXES) RESPONDENT/APPELLANT: SHRI.RAJESH GUPTA,RR FINANCIAL SERVICES, G.RADHABHAI BUILDING, GOPALA PRABHU ROAD,KOCHI-35. BY ADVS.SRI.T.M.SREEDHARAN (SR.)SRI.V.P.NARAYANANSMT.BOBY M.SEKHARSMT.NISHA JOHN THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 12.11.2018, ALONG WITH ITA.79/2012, ITA.78/2012, ITA.68/2012, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR.JUSTICE ASHOK MENON MONDAY, THE 12TH DAY OF NOVEMBER 2018 / 21ST KARTHIKA, 1940 No.78 of 2012 AGAINST THE ORDER IN I.T.A.NO.381/COCH/2009 DATED 25.07.2011OF INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH, COCHIN APPELLANT/RESPONDENT: THE COMMISSIONER OF INCOME TAX-II,KOCHI. BY ADVS.SRI.P.K.RAVINDRANATHA MENON, SR.COUNSEL FOR GOI (TAXES)SRI.JOSE JOSEPH, STANDING COUNSEL FOR GOI (TAXES) RESPONDENT/APPELLANT: SHRI.RAJESH GUPTA,RR FINANCIAL SERVICES, G.RADHABHAI BUILDING,GOPALA PRABHU ROAD, COCHIN-35. BY ADVS. SRI.T.M.SREEDHARAN (SR.)SRI.R.BHASKARA KRISHNANSRI.V.P.NARAYANAN THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 12.11.2018, ALONG WITH ITA.79/2012, ITA.74/2012, ITA.68/2012, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: JUDGMENT [ ITA 68/2012, ITA.79/2012, ITA.74/2012, ITA.78/2012 ]Vinod Chandran,J. No.78 of 2012 AGAINST THE ORDER IN I.T.A.NO.381/COCH/2009 DATED 25.07.2011OF INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH, COCHIN APPELLANT/RESPONDENT: THE COMMISSIONER OF INCOME TAX-II,KOCHI. BY ADVS.SRI.P.K.RAVINDRANATHA MENON, SR.COUNSEL FOR GOI (TAXES)SRI.JOSE JOSEPH, STANDING COUNSEL FOR GOI (TAXES) RESPONDENT/APPELLANT: SHRI.RAJESH GUPTA,RR FINANCIAL SERVICES, G.RADHABHAI BUILDING,GOPALA PRABHU ROAD, COCHIN-35. BY ADVS. SRI.T.M.SREEDHARAN (SR.)SRI.R.BHASKARA KRISHNANSRI.V.P.NARAYANAN THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 12.11.2018, ALONG WITH ITA.79/2012, ITA.74/2012, ITA.68/2012, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: JUDGMENT [ ITA 68/2012, ITA.79/2012, ITA.74/2012, ITA.78/2012 ]Vinod Chandran,J. Pursuant to search under Section 132 of the IncomeTax Act, 1961 [for brevity "IT Act"] conducted on 28.07.2007as also recoveries made, the assessment with respect to theassessee who is carrying on financial services was completedunder Section 153A read with Section 143(3). The assessmentyears were 2003-04, 2004-05, 2005-06 and 2006-07. Thereliance placed was mainly on the entries made in a note-bookrecovered at the time of search as also the sworn statementunder Section 132(4) of the Act. Additions were made withrespect to a Chit carried on by the assessee, the rentalincome, loans availed by the assessee, i.e., and thoseavailed from individuals as also from financial institutions.The assessee contended that the figures as disclosed in thenote-book has different multipliers. With respect to theChit, it was claimed that the multiplier applied could onlybe '100' and for rental income the multiplier was '1000'. Onloans, it was contended that those from individuals themultiplier to be applied is '10000', while that fromfinancial institutions the multiplier is '100000'. 2. Number of additions were made in all the years,some of which were modified in first appeal. The assessee wasbefore the Tribunal, who directed the Assessing Officer toadopt the multiplier as contended by the assessee for all thetransactions. The Tribunal found that there was absolutely nocorroborative material with the Assessing Officer to applythe multiplier contrary to what was conceded by the assessee.In the present appeals, first 3 years are concerned withinterest income as assessed from the Chit carried on by theassessee in the name of 'Bhaghyalakshmi'; being interest onthe amounts received from the subscribers. The last year,being the year in which the search was conducted, the loansreceived from the individuals as also the financialinstitutions were added on for applying the multiplier of'100000'. 3. The questions of law arising in the appeals are re-framed by us as follows: (i)In the facts and circumstances of the case as alsothe figures seen from the note-book recoveredwithout distinguishable marks and the swornstatement of the assessee, ought not the Tribunalhave confirmed the additions made by the AssessingOfficer?the figures seen from the note-book recoveredwithout distinguishable marks and the swornstatement of the assessee, ought not the Tribunalhave confirmed the additions made by the AssessingOfficer? (ii)In the context of the evidence recovered by way ofthe note-book with figures, which were admitted tothe note-book with figures, which were admitted to be undisclosed income surreptitiously recorded andthe admissions made in the sworn statement, oughtnot the Tribunal have held that there need be nofurther corroborative material to be unearthed bythe Assessing Officer? (iii)Considering the evidence recovered as also theadmissions made under Section 132(4), ought not theTribunal have held that the onus shifts to theassessee to prove the multiplier as applied to thedifferent figures and are not the findings of theTribunal perverse on the facts and circumstances ofthe case? (ii)In the context of the evidence recovered by way ofthe note-book with figures, which were admitted tothe note-book with figures, which were admitted to be undisclosed income surreptitiously recorded andthe admissions made in the sworn statement, oughtnot the Tribunal have held that there need be nofurther corroborative material to be unearthed bythe Assessing Officer? (iii)Considering the evidence recovered as also theadmissions made under Section 132(4), ought not theTribunal have held that the onus shifts to theassessee to prove the multiplier as applied to thedifferent figures and are not the findings of theTribunal perverse on the facts and circumstances ofthe case? 4. The materials recovered in the search being the note-book in which the entries were made is produced asAnnexure-C in the appeals, at pages (2) and (3). There arefigures evident from pages (2) and (3) of Annexure-C enteredas against individuals, financial institutions, 'Draw'referring to the Chit as admitted by the assessee and rentalincome. We also notice that these four categories can bedistinguished and it is very probable that there would havebeen different multipliers applied for these four categories. 5. As far as rental income is concerned, the assessee had proved that the income received from theCoimbatore property was Rs.65,000/- per month. There is noaddition seen made in the assessment order with respect to that rental income. The multiplier of '1000' as conceded bythe assessee on rental income was accepted. 6. The major income made addition of in all theyears is with respect to the "DRAWS" indicated in thenote-book. The assessee's contention was that there were 300members with monthly subscription of Rs.100/- and each of thepersons whose name is drawn in a month would be gettingRs.30000/- and would then be excluded from further draws. Thenumber of draws remaining is shown as 243, indicating 57monthly draws having already been carried out. AssessingOfficer refused to accept the plea of the assessee that thefigure shown as against “DRAW” has to be multiplied with'100'. The assessee had produced certain confirmations fromthe subscribers indicating that the multiplier is only '100'.However, one or two subscribers did not give a clear picture.The Tribunal found that since the majority of the subscribersconfirmed the multiplier to be '100', the same has to beapplied with respect to the amount shown against 'DRAW'.7. We see from the figures as revealed from thenote-book that the total amount payable is shown as “290/50”,which, by the figures as against the institution shown, evenaccording to the assessee is the multiplier of '100000'. TheAssessing Officer also found that the total payable would be Rs.2,90,50,000/-, including the unit values of 'Bhaghyalakshmi' draw. However, the Assessing Officer adopted'1000' as the multiplier for the draw. This is not supportedby any evidence unearthed, The Draw is a distinguishable itemand the assessee's version has to be accepted especially inthe context of the confirmations produced before the A.O. Insuch circumstances, we are of the opinion that the assessee'scontention that the multiplier was '100' is more probable,which also stands supported by the confirmations from thevarious subscribers. Assessing Officer having not obtainedany other material to prove that the multiplier is '1000',the adoption of such multiplier can only be said to be a meresurmise or conjecture. We also notice that the figure shownagainst Draw is clearly distinguishable and a separatemultiplier is also possible of easy identification. We,hence, uphold the order of the Tribunal to that extent. 8. Now we are concerned with the multipliercontended of '10000' for individual loans and '100000'against institutional loans. Admittedly the multiplier forinstitutional loans has to be applied at '100000'. We wouldhave found the amounts as against individual loans also to bepossible of a different multiplier, since they are clearlydistinguishable from the institutional amounts but for the fact that the statement under Section 132(4) was contrary tosuch a different multiplier being applied for all suchindividual amounts. We notice from the order of the AssessingOfficer that as against one Mohandas, the figure shown is'.2' and claim was that the multiplier is '10000' indicatinga loan of Rs.2,000/-. However, there is a clear receipt ofRs.20,000/- under the letter head of Assam Kerala Roadways, atransport company whose proprietor is one Mohandas. Thisclearly disproves the contention of the assessee that themultiplier to be applied is only '10000' and not '100000'.The assessee on being confronted with this, had produced aletter from one Mohandas claiming that a loan of Rs.20,000/-was availed on 18.06.2005 and a sum of Rs.18,000/- wasreturned on the very next day, on 19.06.2005. However, thereis nothing to indicate the refund and the figure entered wason 01.08.2005. 9. Further, as against advance to Kapil, thespecific statement of the assessee under Section 132(4) wasthat he had given a loan of Rs.20,00,000/- to one NagpalBuilders. The figure shown in the note-book as against Kapilwas '20.0' and, hence, the multiplier to be adopted is'100000'. The assessee had detracted his statement which,however, we find to be a self-serving one and not believable. We also notice that in the course of search the assessee wasseen to have launched a prosecution under Section 138 of theNegotiable Instruments Act on the dishonour of a cheque ofRs.4,00,000/-. The contention of the assessee was that theloan was only of Rs.14,000/-. In such circumstances, we donot think any credence can be placed on the submission of theassessee that with respect to the individuals the multiplierto be applied is '10000' and that to the institutions'100000'. Even with respect to certain individuals, theassessee had stated on oath that the multiplier to be appliedis '100000'. This has to be applied across the board to allthe individuals, since there is no substantiating materialproduced; as confirmation from the individuals. The assesseehas also no explanation as to how the multiplier can beapplied differently when the figures and names are notedwithout any distinguishable marks. 10. We, in the above circumstances, answer thequestions of law in favour of the Revenue and against theassessee; but, however, confirm the order of the Tribunalwith respect to the Chit transaction directing the adoptionof the multiplier as contended by the assessee. The AssessingOfficer shall re-do the assessment in accordance with thedirections herein above. Vku/- The appeals would stand partly allowed. No costs. Sd/-K.VINOD CHANDRANJUDGE Sd/-ASHOK MENONJUDGE APPENDIX OF ITA 68/2012 APPENDIX OF ITA 79/2012 APPENDIX OF ITA 74/2012 APPELLANT'S ANNEXURES: APPENDIX OF ITA 78/2012 APPELLANT'S ANNEXURES: Vku/- [true copy]