Ita v. Ita

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON TUESDAY ,THE 19TH DAY OF FEBRUARY 2019 / 30TH MAGHA, 1940 ITA.No. 294 of 2010 AGAINST THE ORDER IN ITA 747/2007 of I.T.A.TRIBUNAL,COCHIN BENCH APPELLANT: THE COMMISSIONER OF INCOME TAX,COCHINCOCHIN. BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT: M/S.AMRITHA CYBER PARK (P) LTD,NEDUMCHALIL BUILDINGS, MULLASSERY CANAL ROAD, KOCHI-11. OTHER PRESENT: SMT. S.PARVATHI AMICUS CURIAE THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 19.02.2019, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: -:2:- JUDGMENT K.VINOD CHANDRAN,J. There was none appearing for the respondent,despite the Department having taken out paperpublication,henceweappointedAdvocateS. Parvathy, as Amicus Curiae. 2. The issue arising in the appeal is withrespect to the assessment of Rs.12,49,000/- whichaccording to the Company remained with the companyas an advance for rent and never turned intoincome. The assessee-respondent is engaged inletting out commercial spaces. The assessee is saidto have entered into a contract with one anothercompany, for letting out a commercial space towardswhich the other company had advanced an amount ofRs.13,00,000/- as rent. This was paid by way ofthree cheques on various dates in September, 2001.The same were also encashed. -:3:- 3. The company, who advanced the rent couldnot occupy the premises, allegedly due to thecompany having not received certain licences forcarrying out the proposed business activities.There was a refund of Rs.51,000/- made by theassessee respondent on 31.03.2002. The balanceremained in the accounts. 4.In the relevant previous year i.e.,2003-04,the amount was shown as a liability in the accountsof the assessee. The assessee was asked to explain,as to why the same should not be treated as theassessee's income. The assessee contended that, itstill remains as a liability in its account.Despite notice being issued, none appeared for thecompany which made the advance. The assessee alsodid not produce any agreement before the AssessingOfficer. The Assessing Officer also noticed thatone of the Directors in the assessee company, was aDirector in that other company also. The AssessingOfficer, hence treated it as an unexplainedinvestment under Section 69 of the Income Tax Act, -:4:- 1961. 5.The appellate authority, however, foundthat the money was credited through bank and therewas a conformation letter from the Director of thecreditor company. Hence, there was no cause foradding on the said amount as an unexplainedinvestment or an unexplained cash credit, was thespecific finding. The First Appellate Authoritydeleted the income from taxation. The revenue wasbefore the Tribunal which confirmed the order ofthe lower authorities. 6.Sri. Jose Joseph, learned Standing Counselfor the Department would submit that by the timeassessment was made, the remedy of the othercompany for claiming the aforesaid amounts wasbarred by limitation. The assessee could not alsoprefer any explanation, as to why the amounts werenot returned and how it remains as a liability ofthe assessee company. In such circumstances, it wasadded as an income; which is permissible going bythe decision inCommissioner of Income Tax v. T.V. -:5:- Sundaram Iyengar and Sons Ltd.[1996(222) ITR 345(SC)]. 7. Smt. S.Parvathy, the learned Amicus, wouldrely on the decision of the Hon'ble Supreme CourtinCommissioner of Customs, Mumbai v. Toyo Engineering India Limited [2006(201) E.L.T. 513(S.C.)]and of this Court in Bharat PetroleumCorporation Ltd. v. Union of India [2018(360)E.L.T.848 (Ker.)]to contend that the Assessing Officercould not have deviated from the original proposal. The Assessing Officer found the amounts to be -:5:- Sundaram Iyengar and Sons Ltd.[1996(222) ITR 345(SC)]. 7. Smt. S.Parvathy, the learned Amicus, wouldrely on the decision of the Hon'ble Supreme CourtinCommissioner of Customs, Mumbai v. Toyo Engineering India Limited [2006(201) E.L.T. 513(S.C.)]and of this Court in Bharat PetroleumCorporation Ltd. v. Union of India [2018(360)E.L.T.848 (Ker.)]to contend that the Assessing Officercould not have deviated from the original proposal. The Assessing Officer found the amounts to be unexplained investment, which however was notoriginally proposed so in the notice issued. It isalso contended that even in the relevant financing year, the recovery had not been barred, since therefund made earlier was on 31.03.2003. 8.The questions of law are re-framed as follows: 1.Whether the amount of Rs.12,49,000/-could have been assessed as anunexplained investment, especially whenthere was no proposal to assess it as that under Section 69 of the Income TaxAct? 2.WhethertheFirstAppellateAuthority and the Tribunal erred inso far as setting aside theassessment without looking at,whether the amounts can be assessedunder the Income Tax Act under anyother head? 9.In the context of the submission made as todeviation from the proposal, we have to notice thatthe Assessing Officer had specifically proposed totreat the amount as the assessee company's income, as is seen from the assessment order itself. We arealso of the opinion that it could not have beentreated as an unexplained cash credit or as anunexplained investment; since it was neither. Thesource was clear and there was proper explanationfor the amounts as seen from the books of accounts.We are also of the opinion that under the Income-tax Act, the proposal is essentially to assess aparticular amount, as income, which the assesseehas not reckoned as such in its return. To propose under one head of income and in scrutiny or areassessment to finalise under another head isperfectly permissible. 10.The further question is whether there was any possibility of it being recovered. If the recovery had been barred by limitation,necessarily, it has to be treated as an income fromthe business and the same had to be assessed underthe Income Tax Act as has been held in T.V. Sundaram Iyengar and Sons Ltd.Even if the deviation from the proposal is found to be improper, the assessment has to be sustained, as anincome from business; which was the originalproposal. If the other company had occupied the premises the amounts would definitely be shown asincome from business. 11. With respect to the contention oflimitation having not expired in the relevant previous year, it is to be noticed that theassessment itself was finalised after three years,which is the normal period of limitation for recovery of money, even calculated from the date onwhich the last refund was made. The assessee hadalso not produced any agreement and in allpossibility there would have been a restrictiveclause, in so far as forfeiture of the advanceamounts, if the contract did not fructify. Theassessment order itself was passed, after threeyears from the date of commencement of limitationand there was no claim made by the assessee, whoparticipated in the assessment proceedings, as toany recovery proceedings having been commenced bythe other company or a repayment having beeneffected. In the said circumstances, though we do notapprove of the treatment of the amounts as anunexplained investment or an unexplained cashcredit, we are of the opinion that the assessmenthas to be upheld as an income from business. Thequestions stand answered accordingly and the appealstands allowed, restoring the order of the Assessing Officer; but however making modification -:9:- In the said circumstances, though we do notapprove of the treatment of the amounts as anunexplained investment or an unexplained cashcredit, we are of the opinion that the assessmenthas to be upheld as an income from business. Thequestions stand answered accordingly and the appealstands allowed, restoring the order of the Assessing Officer; but however making modification -:9:- as herein, assessing the rent received in advanceas income in the relevant previous year. No orderas to costs in this appeal. Sd/- K.VINOD CHANDRAN JUDGE DST Sd/- ASHOK MENON JUDGE APPENDIX PETITIONER'S/S EXHIBITS: ANNEXURE--A COPY OF ASSESSMENT ORDER 143(3) R.W.S. 144(1) (B) DATED 28/12/2006 FOR THE ASST.YEAR 2004-05. ANNEXURE-B COPY OF THE ORDER DATED 4/6/2007 OF THE COMMISSIONER OF INCOME TAX (APPEALS) ANNEXURE-C COPY OF THE ORDER DATED 18/3/2010 OF THEINCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH ITA NO. 747/COCH/2007.