J.r. Ahuja v. Commissioner Of Income Taxpatiala

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ---- Income Tax Appeal No. 148 of 2004Date of decision: 8.11.2010 J.R. Ahuja --- Appellant Versus Commissioner of Income TaxPatiala --- Respondent CORAM:HON’BLE MR. JUSTICE ADARSH KUMAR GOELHON’BLE MR. JUSTICE AJAY KUMAR MITTAL ---- PRESENT: Mr. Pankaj Jain, Advocatefor the appellant. Mr. Yogesh Putney, Central Govt. StandingCounsel for the respondent. ---- AJAY KUMAR MITTAL, J. This order will dispose of Income Tax Appeal Nos. 148 of2004 and 435 and 436 of 2006, as similar questions have beenclaimed therein. The facts have, however, been taken from Income-Tax Appeal No. 148 of 2004. This appeal under Section 260A of the Income-tax Act,1961 (for short “the Act’”) has been filed by the assessee against theorder dated 10.12.2003, passed by the Income Tax AppellateTribunal, Chandigarh Bench (A), Chandigarh (in short “the Tribunal”)in ITA No. 411/CHANDI/98 in respect of the assessment year1993-94. The assessee has claimed the following questions for determination by this Court: 1(a) Whether under the facts and circumstances of the casethe Tribunal and the authorities below were justified in notadjudicating the legal ground of appeal challenging thevery issuance of notice u/s 148 being bad in law whichgoes to the foundational aspect of the dispute? (b)Whether under the facts and circumstances of the casethe assessment made u/s 148 was justified withouthaving communicated the reasons recorded for initiatingand completing the reassessment proceedings.the assessment made u/s 148 was justified withouthaving communicated the reasons recorded for initiatingand completing the reassessment proceedings. 2.Whether under the facts and circumstances of the casethe tribunal was justified in upholding the addition on thewrong and mis-appreciation of arguments and evidenceby having adopted the wrong assumption of facts anddevoid of legal force to stand. 3(i)Whether under the facts and circumstances of the caseand on the true and correct interpretation of the facts andevidence the tribunal was justified in upholding theaddition on the estimated basis relying on the documentsand material not having reasonable and rational nexuswith the additions made. (ii)Whether under the facts and circumstances of the casethe Tribunal was justified in upholding the addition bymaking multiplication of the receipts being dehors thematerial available.the Tribunal was justified in upholding the addition bymaking multiplication of the receipts being dehors thematerial available. (iii)Whether under the facts and circumstances of the caseand on the true and correct interpretation of the facts andevidence the tribunal was justified in relating back thedocuments for upholding the addition on the basis ofstatement taken 4 years later than the completed andconcluded assessment. Briefly stated, the facts necessary for adjudication asnarrated in the appeal are that the appellant-assessee is a Lecturerand derives income from salary, interest accrued on the depositsmade and also a small income from royalty from the books. His wifeis a teacher in Government School. On 12.5.2004, the premises ofthe appellant were searched by the income tax authorities in thewake of an allegation that he was engaged in giving private tuitionsand had an additional income there from which he had not beendeclaring in the return of income. Certain documents were seizedduring the course of the search of the premises. On the basis of thatmaterial, and after complying with the requirement of issue of noticeunder Section 148 of the Act, the assessing officer vide order,Annexure A-3, made additions to the income of the assessee for theassessment years, 1991-92, 1992-93 and 1993-94, which are asunder: The matter went up to the Commissioner of Income Tax(Appeals), [hereinafter referred to as “CIT(A)”]. The said appellateauthority partly upheld the order of the assessing officer, vide orderdated 28.1.1998, Annexure A-2. The Revenue and the appellant-assessee preferred appeals before the Tribunal. The Tribunal whilepartly allowing the appeal of the Revenue ordered the addition of Rs.98,900/- as against Rs. 49,450/- sustained by CIT(A), which theappellant is now disputing in this appeal, alleging that the same waswithout any basis or material on record. The Tribunal dismissed theappeals of the assessee whereas partly allowed those preferred bythe Revenue, vide order dated 8.8.2002, Annexure A-4. This is how the assessee is in appeal before us. We have heard learned counsel for the parties andperused the record A perusal of the order of the Tribunal in Income TaxAppeal No. 148 of 2004 relating to assessment year 1993-94 clearlyshows that the assessee had not challenged the validity ofreassessment proceedings under Section 148 of the Act before theTribunal and, therefore, question No.1 does not arise in this appeal.However, the assessee in the appeals relating to assessment years1991-92 and 1992-93 had filed miscellaneous application underSection 254(2) of the Act claiming that the argument regardingvalidity of reassessment proceedings had not been adjudicated bythe Tribunal. Thereupon, the Tribunal after considering thesubmissions of the respective parties had rejected the plea of theassessee vide order dated 9.5.2005. Examining the validity of thereassessment proceedings under Section 148 of the Act, it is noticed that the Tribunal had held the same to be justified with the followingobservations:- “After hearing the rival submissions and perusing theorder of tax authorities and the case law cited by theassessee, we are of the considered view that there isforce in the plea of the revenue that the AO has acted ona bona fide belief. The AO’s action is based on thesurrounding circumstances like infrastructures, classrooms, statements of students, list of students etc.Therefore, the assumption of jurisdiction was on the basisof material existing on record and there was sufficientmaterial to enable the AO to believe that the income hasescaped assessment. In the case of Praful Chunilal Patel:Vasant Chunilal Patel v. ACIT, reported in 236 ITR 832, itwas observed that at the initial stage, formation ofreasonable belief is needed and not a conclusive findingon the facts. The provisions of Section 147 require thatthe AO should have reason to believe that any incomechargeable to tax has escaped assessment. The word‘reason’ in the phrase ‘reason to believe’ would meancause or justification. If the AO has a cause orjustification to think or suppose that income had escapedassessment, he can be said to have a ‘reason to believe’cannot mean that the AO should have finally ascertainedthe facts by legal evidence. In the said case, the Hon’bleGujarat High Court held that the question of non-assessment of an item of income can warrant formation of requisite belief u/s 147. In the case of Devgon Riceand General Mills v. CIT, reported in 263 ITR 391 (Pb &Hr) a writ petition challenging validity of proceedings u/s147 was dismissed as the information given by theassessee at the time of assessment was later on found tobe false. In the said case, reliance was placed on thecase of Narayanappa (S) v. CIT, reported in 63 ITR 219(SC), wherein it was opined that if there are in fact somereasonable ground for the ITO to believe that there hadbeen any non-disclosure as regards any fact, which couldhave a material bearing on the question of under-assessment, that would be sufficient to give jurisdiction tothe ITO to issue notice. Therefore, in view of the abovediscussion and the case law discussed above, we haveno hesitation in dismissing the common ground of appealin both the years.” It is undisputed that during search and seizure operationat the premises of the assessee on 12.5.1994, incriminating material,particularly, Annexure A-20 was found which depicted that assesseewas engaged in imparting tuition to students for consideration andwas not disclosing the income therefrom to the Department. In thisback ground, the plea of the assessee challenging validity ofreassessment proceedings is unsustainable. The Tribunal was, thus,right in upholding the reassessment proceedings to be valid. The next point for consideration in these appeals is, whether the additions sustained by the Tribunal on account ofundisclosed tuition fee is legal and valid? The Tribunal while sustaining the addition as noticed earlier had recorded the following findings in para 9 of its order:- “We have heard both the parties at some length andcarefully considered the rival submissions. We have alsoexamined the facts, evidence and material on record. Wehave also referred to the relevant pages of the paperbook to which our attention has been drawn. Similar issuecame up before the Tribunal for the Assessment years1991-92 and 1992-93. The assessee had madesubmissions that it did not provide coaching forcommercial considerations but he only provided coachingto some brilliant students. These submissions wereconsidered by the Tribunal but were rejected. Thefinding of the CIT(A) that the assessee must haveprovided coaching to 50% students free of cost, was alsonot accepted. However, referring to the two statementsof the parents of the students who availed of suchcoaching from the assessee, upheld the estimate ofincome @ Rs. 150/- per month per student in respect of10+2 and 10+1 students and also of Rs. 400/- per monthper student for PMT and CET test. In this manner, theorders of the CIT(A) were modified and income for theAssessment year 1992-93 was confirmed at Rs. 86,000/-.Relevant finding of ITAT’s order dated 8.8.2003 asrecorded in paras 6 & 7 of the aforesaid order are asunder: 6. We have heard both the parties at some lengthand carefully considered their rival submissions. Wehave also examined the facts, evidence andmaterial on record. We have also referred toAnnexure A-20 seized during the course of search,which does show that the assessee did undertaketuition work during the accounting years underreference on regular basis. It would be relevant torefer to the noting made in the said document asunder: (i)Pages 1 & 3 contain the names of 20(10+2)students during the period from June, 90 to Aug. 90.students during the period from June, 90 to Aug. 90. (ii)Page 4 contains the names of 16 students of (10+2)with a noting that “to report on Ist December, 1990at 7.15 a.m.”with a noting that “to report on Ist December, 1990at 7.15 a.m.” (iii)Pages 6 to 8 contain the names of 23 students of10+1) who were to report on 1.12.90 at 3.30 p.m.10+1) who were to report on 1.12.90 at 3.30 p.m. (iv)Pages 11 & 12 contain the names of 17 students forPMT/CET tests and date indicated is 7.3.91. Theserelate to assessment year 91-92.PMT/CET tests and date indicated is 7.3.91. Theserelate to assessment year 91-92. (v)Pages 13 & 14 contain the names of 33 students of(10+2) (boys group) from 22[nd] May, 1991 at 6.30(10+2) (boys group) from 22[nd] May, 1991 at 6.30 p.m. (vi)Page 15 also mentions the names of two waitlistedstudents.students. (vii)Pages 16 & 17 contain the names of 27 students of (10+2) (girls groups) from May 22, 1991 at 7.30 a.m. (viii) Pages 18 and 19 contain the names of 26 students (10+2) from Nov. 1, 1991 at 3.45 p.m. (ix)Pages 20 & 21 contain the names of 24 students in respect of tuition to start from 23.10.91 at 8.30 a.m. (x)Page 23 also mentions the name of one waitlistedstudent.student. (xi)Pages 24 & 25 contain the names of 16 students of10+2 for classes to start from Nov. 1991 at 8.3010+2 for classes to start from Nov. 1991 at 8.30 a.m. (v)Pages 13 & 14 contain the names of 33 students of(10+2) (boys group) from 22[nd] May, 1991 at 6.30(10+2) (boys group) from 22[nd] May, 1991 at 6.30 p.m. (vi)Page 15 also mentions the names of two waitlistedstudents.students. (vii)Pages 16 & 17 contain the names of 27 students of (10+2) (girls groups) from May 22, 1991 at 7.30 a.m. (viii) Pages 18 and 19 contain the names of 26 students (10+2) from Nov. 1, 1991 at 3.45 p.m. (ix)Pages 20 & 21 contain the names of 24 students in respect of tuition to start from 23.10.91 at 8.30 a.m. (x)Page 23 also mentions the name of one waitlistedstudent.student. (xi)Pages 24 & 25 contain the names of 16 students of10+2 for classes to start from Nov. 1991 at 8.3010+2 for classes to start from Nov. 1991 at 8.30 a.m. (xii)Pages 26 & 27 contain the names of 23 students of10+1) for coaching to start from 23.10.91 at 8.3010+1) for coaching to start from 23.10.91 at 8.30 a.m. (xiii) Pages 28 to 30 contain the names of 38 students of10+1 for coaching from 15.5.91.10+1 for coaching from 15.5.91. (xiv) Page 31 also contains the names of some studentsdirected to report on 14[th] May 1991 at 8.30 a.m.directed to report on 14[th] May 1991 at 8.30 a.m. (xv)Page 32 contains the names of 26 students forCET/PMT tests.CET/PMT tests. (xvi) Pages 34 & 35 contain the names of some other10+2 and 10+1 students for coaching to start inJune, 1991.10+2 and 10+1 students for coaching to start inJune, 1991. The details mentioned at Sr. Nos. (v) to (xvi) relateto assessment year 1992-93. Thus from the detailsto assessment year 1992-93. Thus from the details noted above in the seized document, Annexure A- 20, it is clear that assessee had been carrying on tuition work at a large scale even in the accountingyear relevant to assessment years 1991-92 and1992-93. The submission of the assessee that heundertook such work for coaching some brilliantstudents is without any merit. No evidence to thiseffect has been produced either before theauthorities below or even before us. Therefore, onthe basis of such documents, seized from theresidence of the assessee, income has to beestimated by applying a reasonable rate of tuitionfee per month. We also do not find any justificationfor considering only those students against whom“P” was noted. The assessee was not running acharitable institution. Therefore, it is reasonable tobelieve that assessee must have charged fee fromeach student when in fact some of the studentswere shown as waitlisted. Thus, we do not find anyjustification for the CIT(A) to sustain the additiononly in respect of students against whom letter “P”was marked. The AO had referred to such notingi.e. “P” to demolish the contention of the assessthat assessee had given coaching only to brilliantstudents without any commercial consideration.However, while estimating income, the AO hasconsidered number of students recorded indocument Annexure A-20. The extent and number of students found recorded in Annexure A-20 clearlyshow that assessee was carrying on tuition work forcommercial consideration. Thus, in the absence ofany evidence, the CIT(A) was not justified inreducing the addition only in respect of studentsagainst whom “P” has been marked and treating thebalance as ex-gratia. We, therefore, set aside thefinding of CIT(A) in this regard and restore that ofthe AO for estimating the income in respect of allstudents listed in seized document, Annexure A-20.However, the estimate made by the AO by takingthe fee @ Rs. 300 p.m. per students in respect of10+2 and 10+1 students and also fee of Rs. 800/-p.m. per student in respect of CET/PMT testsappears to be on the higher side. We find thatduring the course of assessment proceedings, theAO recorded the statement of Shri R.S. Bhatti,father of Shri Shivdeep Singh, a student of 10+2class who undertook tuition from the assessee.The statement is at page 35 of the paper book. Hisfather replied that he had paid Rs. 900/- to ShriAhuja for tuition of his son. The period for whichsuch coaching was provided is not known.Admittedly, such coaching must have been for aperiod of three months. The AO also recorded thestatement of Shri Kirpal Singh, father of ShriJagdeep Singh, a student of 10+2 class who received coaching from the assessee in the year1993. He stated that he had paid an amount of Rs.525/- for three months @ Rs. 175/- per month. Hisstatement is at page 38 of the paper book. It isobvious that these students undertook tuition fromthe assessee in the subsequent period. Therefore,the assessee must have charged either the sameamount or lower amount in the earlier assessmentyears for which the CIT(A) was justified in reducingthe addition to 50% i.e. Rs. 150/- p.m. in respect of10+2 and 10+1 students and @ Rs. 400/- permonth in respect of CET/PMT tests. Thus, wesustain the order of CIT(A) to the extent estimatingthe income by taking the order of CIT(A) to theextent estimating the income by taking the tuitionfee at 50% i.e. Rs. 150/- p.m. per student in respectof 10+2 and 10+1 students and also fee of Rs.400/- p.m. per student for PMT/CET tests. Thus,we modify the orders of CIT(A) and sustain 50% ofadditions i.e. Rs.34,700/- and Rs. 86,000/- forassessment years 91-92 and 92-93 respectively asagainst additions sustained of Rs. 17,300/- and Rs.43,000/- respectively by ld. CIT(A). Accordingly,while the grounds of appeals of the revenue arepartly allowed, the grounds of appeals of theassessee are dismissed.” 7. Before parting with these appeals, we wish tomention that the ld. Counsel for the assessee reliedon the two decisions of ITAT, Chandigarh Bench inthe cases of Shri Beant Singh, Professor, Patiala v.ACIT Inv. Circle-1, Patiala in I.T.A. Nos.1244/Chandi/96 etc. for the assessment years 91-92, 92-93 and 95-96, and ACIT, Inv. Circle-1, Patialav. S.B. Mangla, Lecturer, Patiala in I.T.A. Nos.1025/Chandi/96 etc. for the assessment years 93-94, 90-91, 92-93, 94-95. We have referred to boththe decisions. In the case of ACIT, Inv. Circle-1,Patiala vs. S.B. Mangla, Lecturer, Patiala in I.T.A.Nos. 1025/Chandi/96 etc. for the assessment years93-94, 90-91, 91-92, 92-93, 94-95, the Tribunalconfirmed the order or learned first appellateauthority in deleting the addition for the assessmentyears 90-91 to 92-93 on the ground that during thecourse of search no material was found to showthat assessee was carrying on tuition work in thoseassessment years. The present cases are clearlydistinguishable inasmuch as during the course ofsearch itself documents were seized whichindicated that assessee was carrying on tuitionwork in these assessment years. Similarly, in thecase of Shri Beant Singh, Professor, Patiala v.ACIT, Inv. Circle-1, Patiala in I.T.A. Nos.1244/Chandi/96 supra, the assessee had himself disclosed an amount of Rs. 25,000/- each for theassessment years 91-92. During the course ofsearch no material was found to show that theassessee was undertaking such tuition work in theaccounting year relevant to assessment years 91-92 and 92-93. Therefore, the order of ld. CIT(A) indeleting the additions was upheld. But in thepresent cases, seized document clearly shows thatthe assessee was carrying on tuition work onregular basis in the assessment years underreference. Therefore, the ratio of both the decisionsrelied upon by the ld. counsel is not applicable tothe facts of the present case. The facts of the case for Assessment year 1993-94 aresimilar to the facts of the case for Assessment years1991-92 and 1992-93 except that for the Assessmentyear under reference the AO and the CIT(A) have takenthe increase in such income by 15%. Since the tuitionincome for the Assessment years 1992-93 was confirmedby the Tribunal at Rs. 86,000/- and after taking intoaccount 15% increase over the Assessment year 1992-93, total account for the Assessment year 1993-94 fromtuition work would work out to Rs. 98,900/- (i.e.Rs.86,000/- +15%). Thus modifying the order of CIT(A) wesustain the addition of Rs. 98,900/- for the Assessmentyear 1993-94 as against addition of Rs. 49,450/-sustained by the CIT(A). Thus, while the ground of appeal of the assessment for Assessment year 1993-94is rejected, ground of appeal of the revenue is partlyallowed.” The Tribunal on appreciation of material on record byrelying upon document Annexure A-20 which was seized duringsearch and seizure at the premises of the assessee on 12.5.1994,had concluded that the assessee had undisclosed income fromtuition work and the additions to the extent noticed in the order onthat account was justified. Nothing could be shown that the aforesaid findingsrecorded by the Tribunal were erroneous or perverse which maywarrant interference by this Court in exercise of its jurisdiction underSection 260A of the Act, particularly, when the assessee did notdispute the existence of Annexure A-20. The only effort of thelearned counsel for the assessee was to re-appreciate the materialon record and to adjudicate the matter in favour of the assessee.This does not fall within the domain of Section 260-A of the Act. TheTribunal has taken a plausible view on the basis of evidence onrecord. Accordingly, finding no merit in the appeal, the same isdismissed. (AJAY KUMAR MITTAL) JUDGE (ADARSH KUMAR GOEL) November 8, 2010 JUDGE*rkmalik*