S.arputharaj v. The Deputy Commissioner Of Income Tax, Central Circle-1, Coimbatore

In the High Court of Judicature at Madras Dated : 10.12.2018 Coram : The Honourable Mr.Justice T.S.SIVAGNANAMand The Honourable Mr.Justice N.SATHISH KUMAR Tax Case Appeal Nos.718 to 720 and 805 to 809 of 2018& CMP.Nos.15383 to 15385, 19838, 19849, 19852 & 19856 of 2018 S.Arputharaj ...Appellant in TCA.Nos.718 to 720 of 2018 & Respondent in TCA Nos.805 to 809 of 2018vs ...Respondent inTCA.Nos.718 to 720 of 2018 The Deputy Commissioner of Income Tax, Central Circle-1, Coimbatore. The Principal Commissioner of IncomeTax, Central-2, Chennai-34 ...Appellant in TCA. Nos.805 to 809 of 2018 Common Prayer in T.C.A.NOs. 718 to 720 and TCA.Nos.805 to809/2018: These APPEALS filed under Section 260A of the IncomeTax Act, 1961 against the common order dated 13.6.2018 maderespectively in ITA Nos.1495, 1493, 1494, 1497, 1495, 1499,1496 and 1498/Chny/2018 on the file of the Income TaxAppellate Tribunal Madras 'C' Bench respectively for theassessment years 2011-12, 2009-10, 2010-11, 2013-14, 2011-12, 2015-16, 2012-13 and 2014-15, ITA.NOs.1495, 1493, 1494,1497, 1495, 1499, 1496 and 1495/chny/2018 respectivelyagainst the Commissioner of Income Tax(Appeals) Chennai-34in ITA Nos.425 to 429/16-17, and ITA.Nos.430 & 431/2016-17dated 19/02/2018 in G.I.No./PAN.NO. for theAssessment years 2011-12, 2009-10, 2010-2011, 2013-14,2011-12, 2015-16, 2015-16, 2012-2013 and 2014-15respectively against the Deputy Commissioner of Income-Tax, https://hcservices.ecourts.gov.in/hcservices/ Central Circle-I, Coimbatore(in PAN/GIR.NO. )ward/circle, Central Circle-1, Coimbatore for theAssessment years 2011-12, 2009-10, 2010-2011, 2013-14,2011-12, 2015-16, 2015-16, 2012-2013 and 2014-2015respectively.For Revenue : Mr.T.R.Senthilkumar, SSC for Mrs.K.G.Usharani For Assessee:Mr.T.P.Prabhakaran forMr.N.Sankarasabari COMMON JUDGMENT (Judgment was delivered by T.S.SIVAGNANAM,J) This is a bunch of appeals filed by both the Revenue aswell as the assessee under Section 260A of the Income TaxAct, 1961 (hereinafter called the Act) against the commonorder passed by the Income Tax Appellate Tribunal, 'C'Bench, Chennai (for short, the Tribunal), respectively inITA.Nos. 1495, 1493, 1494, 1497, 1495, 1499, 1496 and1498/Chny/2018 for the assessment years 2011-12, 2009-10,2010-11, 2013-14, 2011-12, 2015-16, 2012-13 and 2014-15.2. The assessee filed three appeals namely TCA.Nos.718to 720 of 2018 raising the following substantial questionsof law :“i. Whether the Income TaxAppellate Tribunal is correct in law toignore the facts and documentssubmitted in defence by the appellantbefore the Commissioner of Income Tax(Appeals) as well as before theAssessing Officer for assessing theincome respectively for the assessmentyears 2011-12, 2009-10 and 2010-11without proper application of mind toconfirm the assessment of income forcertain issues ? And ii. Whether the Income TaxAppellate Tribunal is correct in law toconfirm the order of the Commissionerof Income Tax (Appeals) in certainissues respectively for the assessmentyears 2011-12, 2009-10 and 2010-11 forstatisticalpurposeswithoutappreciating the materials and evidencemade available before the AppellateTribunal in proper perspective ?” 3. TCA.Nos.718 to 720 of 2018 relate to the assessmentyears 2009-10 to 2011-12. The substantial questions of laware identical and the only difference being the assessmentyear. 4. The Revenue has filed five appeals namelyTCA.Nos.805 to 809 of 2018 raising the following threesubstantial questions of law, which are common in all theappeals except for the appeal against the order passed bythe Tribunal in ITA.No.1498/Chny/2018 relating to theassessment year 2014-15 (TCA.No.809 of 2018) : “i. Whether, on the facts and in 3. TCA.Nos.718 to 720 of 2018 relate to the assessmentyears 2009-10 to 2011-12. The substantial questions of laware identical and the only difference being the assessmentyear. 4. The Revenue has filed five appeals namelyTCA.Nos.805 to 809 of 2018 raising the following threesubstantial questions of law, which are common in all theappeals except for the appeal against the order passed bythe Tribunal in ITA.No.1498/Chny/2018 relating to theassessment year 2014-15 (TCA.No.809 of 2018) : “i. Whether, on the facts and in the circumstances of the case, theTribunal was justified in holding thatembezzlement made by an employee ofM/s.Miracle Cars India P. Ltd., inwhich, the assessee is a director tothe tune of Rs.8.30 Crores, cannot beassessed in the hands of the assesseeeven protectively? Andii. Whether, on the facts and inthe circumstances of the case, theTribunal was correct in not drawing aninference that the source for theassessee's various investments are fromthe embezzled sum of Rs.8.30 Crores byusing the employee Ms.Dhanalakshmi as aconduit in the light of its own findingthat the assessee has not been able toestablish the source for its variousinvestments ?” 5. The three additional questions raised in TCA.No.809of 2018 are as follows : “i. Whether, on the facts andcircumstances of the case, the Tribunalwas correct in law in deciding thataddition, if any, can be made in thehands of M/s.Arputharaj Associates andnot in the hands of the assesseewithout appreciating the fact thatM/s.Arputharaj Associates is only aproprietary concern of the assessee andthe income of such concern isassessable only in the hands of theassessee ?ii. Whether, on the facts and inthe circumstances of the case, theTribunal was legally justified inaccepting the assessee's contentionthat the sales abstract was preparedonly for obtaining bank loan at face value,withoutanysupportingdocumentary evidence ? Andiii. Whether, on the facts and inthe circumstances of the case, theTribunal was right in law in holdingthat no addition could be made only onthe basis of sales abstract found inthecourseofsearchwithoutappreciating the decision of this Courtin the case of CIT Vs. RangroopchandChordia [reported in 241 Taxman 221]?” 6. Before the Tribunal, other issues were raised andthey have been remanded to the Assessing Officer for afresh consideration. The Revenue is not on appeal againstthose findings. 7. We have heard Mr.T.P.Prabhakaran, learned counselappearing on behalf of Mr.N.Sankarasabari, learned counselon record for the assessee and Mr.T.R.Senthilkumar,learned Senior Standing Counsel accepting notice for theRevenue. 8. In our considered view, there may not be anynecessity for this Court to examine the factual matrix ofthe case for the purpose of answering the substantialquestions of law, as we are convinced that the mattersshould be remanded to the Tribunal for a freshconsideration. We support such a conclusion with thefollowing reasons : 6. Before the Tribunal, other issues were raised andthey have been remanded to the Assessing Officer for afresh consideration. The Revenue is not on appeal againstthose findings. 7. We have heard Mr.T.P.Prabhakaran, learned counselappearing on behalf of Mr.N.Sankarasabari, learned counselon record for the assessee and Mr.T.R.Senthilkumar,learned Senior Standing Counsel accepting notice for theRevenue. 8. In our considered view, there may not be anynecessity for this Court to examine the factual matrix ofthe case for the purpose of answering the substantialquestions of law, as we are convinced that the mattersshould be remanded to the Tribunal for a freshconsideration. We support such a conclusion with thefollowing reasons : 9. As against the orders passed by the Commissioner ofIncome Tax (Appeals)-18, Chennai [hereinafter called theCIT(A)], the assessee filed appeals before the Tribunal.The Tribunal, by the common impugned order, recorded thatthe assessee raised as many as 22 grounds challenging theadditions made by the Assessing Officer and the findings ofthe CIT(A). However, it is seen that the learned counsel,who was appearing for the assessee, withdrew his appearanceon the date, when the Tribunal heard the appeals i.e.13.6.2018. This is recorded by the Tribunal in paragraph4.2 of the common impugned order. The Tribunal was welljustified in proceeding with the matters because theTribunal cannot dismiss the appeals for non prosecution orfor default on the part of the assessee and it isnecessarily required to examine the matters on merits.Therefore, the procedure adopted by the Tribunal cannot befaulted. 10. In our considered view, the assessee invited theproblem firstly because he has not given properinstructions to the learned counsel, who had filed vakalaton his behalf nor given any instructions to the learnedcounsel, who was instructed to appear in the matters.Secondly, the assessee filed W.P.No.12569 of 2018challenging the demand notice dated 07.5.2018 issued by the Tax Recovery Officer. The assessee represented before thelearned Single Judge that they had filed appeals before theTribunal along with stay petitions and since the matterswere pending before the Tribunal, they contended that theTax Recovery Officer should not take any coercive actionfor recovery of tax and penalty. Taking note of thesubmissions made by the assessee that the appeals werepending before the Tribunal along with stay petitions, thelearned Single Judge of this Court, while disposing of thesaid writ petition by order dated 16.5.2018, directed theTribunal to consider the appeals filed by the assesseealong with stay petitions and pass appropriate orders inaccordance with law within a period of two weeks from thedate of receipt of a copy of that order. A time frame wasfixed by the learned Single Judge directing the Tribunal todispose of the appeals and stay petitions within a periodof two weeks from date of receipt of a copy of that order. 11. When the Tribunal took up the matter for hearing,the learned counsel appearing for the assessee at that timereported no instructions and withdrew his vakalat.Therefore, the Tribunal was well justified in proceedingwith the matters as done in this case, which culminated inthe common impugned order. After the common impugned orderwas passed, since the demand notices were issued pursuantto the assessment orders passed in 2016, the assessee movedthe second set of writ petitions before this Court namelyW.P.Nos.20447 to 20449 of 2018. The second set of writpetitions were disposed of by another learned Single Judgeof this Court vide common order dated 09.8.2018 wherein itwas noted that though the Tribunal passed the order on13.6.2018, for over a period of two months, the assesseedid not prefer any appeal before the Division Bench of thisCourt. Further, the learned Single Judge did not fault theDepartment for issuing the notices demanding payment ofarrears of tax assessed on the appellant – assessee. Thelearned Single Judge observed that in all fairness, theassessee should have filed appeals before the DivisionBench of this Court and sought for interim relief as soughtfor in the second set of writ petitions and that grantingone more opportunity to the assessee did not arise. 12. However, the learned counsel, who appeared beforethe learned Single Judge pleaded and also gave anundertaking that the assessee would file regular statutoryappeals before the Division Bench of this Court within aperiod of two weeks. Recording such an undertaking, thesecond set of writ petitions stood disposed of by directingthe Assessing Officer to keep the demand notices dated09.7.2018 in abeyance for a period of two weeks from thedate of receipt of the copy of that order. The learnedSingle Judge further made it clear that he had notexpressed any view on the merits of the contentions raised by the assessee. It is stated that as undertaken before thelearned Single Judge, the assessee filed appeals beforethis Court within the time permitted. 13. As rightly pointed out by the learned SeniorStanding Counsel for the Revenue, the assessee had beenfrequently approaching this Court by filing writ petitionswith a view to stall the recovery proceedings. Be that asit may, we are of the considered view that the assesseeshould have an effective opportunity to put forth his casebefore the Tribunal. In the instant case, the assessee wasnot represented before the Tribunal on account of the factthat the learned counsel, who was appearing for theassessee at that time, withdrew his vakalat. 14. We also come across such situations where thelearned counsel appearing for the parties reports noinstructions and this Court has been consistently followingthe practice of issuing notice to the party from theRegistry intimating that his counsel has withdrawn thevakalat and that he has to make alternate arrangements onthe next hearing date. Had such an approach been adopted bythe Tribunal, probably the assessee might have engaged adifferent counsel. However, the Tribunal could not do sobecause of the peremptory time limit prescribed in thesecond set of writ petitions filed by the assessee.Therefore, neither of them can be wholly blamed for such asituation. However, considering the complexity of thematter and the assessee being an individual and also theTribunal having noted that as many as 22 grounds wereraised by the assessee, we deem it appropriate that theassessee should be granted one more opportunity before theTribunal. However, such an opportunity will also containstringent conditions on the assessee. 15. With regard to the Revenue’s appeals, two commonquestions were raised in all the appeals in respect of theprotective assessment done in the hands of the assessee tothe tune of Rs.8.30 Crores. 15. With regard to the Revenue’s appeals, two commonquestions were raised in all the appeals in respect of theprotective assessment done in the hands of the assessee tothe tune of Rs.8.30 Crores. 16. The assessee’s case is that one of the employeesby name Ms.Dhanalakshmi had swindled the amounts, that theassessee had lodged a complaint and that the Central Bureauof Investigation (CBI) had taken up the matter forinvestigation and laid the first information report. As ondate, the CBI filed the final report before the SpecialCourt. 17. The Revenue’s case is that the saidMs.Dhanalakshmi is the conduit of the assessee. They reliedupon the bill books seized from the assessee’s premises,which, according to the learned Senior Standing Counsel forthe Revenue, are sufficient to safely presume that thosewere the monies of the assessee. 18. However, taking note of the fact that a criminalcase is pending, the Assessing Officer only made a protective assessment. The Tribunal, in the common impugnedorder, deleted it and directed the same to be assessed inthe hands of the company namely M/s.Millennium Motors. Inour considered view, since the CBI filed the final reportbefore the Special Court, any finding, as given by theAssessing Officer though as a protective assessment, mayrender the criminal case a futile exercise. That apart, wefound that the reasons given by the Tribunal are notsufficient to delete the protective assessment in the handsof the assessee with a direction to assess the same in thehands of the company namely M/s.Millennium Motors. 19. The learned counsel for the assessee submits thatthere are sufficient records to show that the saidMs.Dhanalakshmi swindled substantial amount and theassessee is ready and willing to substantiate the samebefore the Tribunal, if one opportunity is granted. 20. As pointed out earlier, for the assessment year2014-15, three additional substantial questions of law areraised by the Revenue. These pertain to the issue as towhether the assessment should be made in the hands ofM/s.Arputharaj Associates or in the hands of the assesseeherein and as to what would be the effect of the documents,which were recovered during the search operations, forwhich, the Revenue relies upon the decision of this Courtin the case of CIT Vs. Rangroopchand Chordia [reported in241 Taxman 221]. 21. The learned counsel for the assessee would submitthat these issues will be substantiated by the assesseebefore the Tribunal, if this Court is convinced that thematters should be remanded for a fresh consideration. 22. Thus, considering the peculiar facts andcircumstances of the case, we deem it appropriate to remandthe matters to the Tribunal to consider the above referredto substantial questions of law. We make it clear that inso far as the issues, which have been remanded by theTribunal to the Assessing Officer, against which, noappeals have been filed by either the Revenue or theassessee, we do not interfere with the same and theAssessing Officer is directed to carry out the directionsissued by the Tribunal. 23. In the result, the above tax case appeals areallowed, the common impugned order passed by the Tribunalis set aside to the extent indicated above and the Tribunalshall afford an opportunity to the learned counsel for theassessee to make his submissions and consider the mattersin accordance with law. The assessee shall not take anyadjournment before the Tribunal and fully cooperate withthe Tribunal by arguing the matters and placing all thematters before the Tribunal. In the light of the above, thesubstantial questions of law are left open for a decisionby the Tribunal. No costs. Consequently, the connected CMPs are closed. 24. The learned Senior Standing Counsel for theRevenue submits that the recovery proceedings have beenstalled. 23. In the result, the above tax case appeals areallowed, the common impugned order passed by the Tribunalis set aside to the extent indicated above and the Tribunalshall afford an opportunity to the learned counsel for theassessee to make his submissions and consider the mattersin accordance with law. The assessee shall not take anyadjournment before the Tribunal and fully cooperate withthe Tribunal by arguing the matters and placing all thematters before the Tribunal. In the light of the above, thesubstantial questions of law are left open for a decisionby the Tribunal. No costs. Consequently, the connected CMPs are closed. 24. The learned Senior Standing Counsel for theRevenue submits that the recovery proceedings have beenstalled. 25. We find from the common order passed inW.P.Nos.20447 to 20449 of 2018 dated 09.8.2018 that thisCourt directed the demand notices dated 09.7.2018 to bekept in abeyance for a period of two weeks. Therefore, itis well open to the assessee to move for appropriateinterim protection, if so advised. Since we have remandedthe matter for a fresh consideration before the Tribunal onthe issues raised before us, we direct the Department tokeep the recovery proceedings in abeyance for a period oftwo weeks from the date of receipt of a copy of thisjudgment and it is open to the assessee to move forappropriate interim orders before the Tribunal within thesaid period. Sd/- Assistant Registrar(CS V) //True Copy// Sub Assistant Registrar To 1.The Income Tax Appellate Tribunal, Chennai 'C' Bench.2.The Principal Commissioner of Income Tax,Central-2, Chennai-34. 3.The Commissioner of Income Tax(Appeals),Chennai-34. 4.The Deputy Commissioner of Income Tax,Central Circle-I,Coimbatore. +1cc to Mr.T.R.Senthilkumar, Advocate sr.no.85607 +1cc to Mr.N.Sankarasabari, Advocate sr.no.84837 TCA.No.718 of 2018etc. cases rji(co)nr 21/01/2019