The Commissioner Of Income-Tax, Salem v. M/S.sri Ranganathar & Co., 4B, Laxmipuram, Gandhi Road, Salem-636 007

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 06.08.2007 CORAM : THE HONOURABLE MR.JUSTICE D.MURUGESAN AND THE HONOURABLE MR.JUSTICE P.P.S.JANARTHANA RAJA Tax Case (Appeal) Nos.1059 and 1060 of 2007 The Commissioner of Income-tax,Salem. ..Appellant in both the T.Cs./AppellantVs M/s.Sri Ranganathar & Co.,4B, Laxmipuram,Gandhi Road,Salem-636 007. ..Respondent in both the T.Cs./Respondent Appeals under Section 260A of the Income-tax Act, 1961against the order of the Income-tax Appellate Tribunal, Bench"SMC-III(D)", Chennai in I.T.A. Nos.1006 and 1007/Mds/2005 dated16.11.2005 for the assessment years 2000-01 and 2001-02. againstthe order of the Commissioner of Income Tax (Appeals) Salem forthe Assessment year of 2000-01 and 01-02 dated 8/2/05 in ITA Nos.16 and 19/04-05 and against the Assessment order of the AssistantCommissioner of Income Tax Circle I Salem (I/C) dated 31.3.2007PAN/GIR NO. IEFS0002 respectively For Appellant :Mr.N.Muralikumaran,Sr.Standing Counsel forIncome-tax DepartmentJUDGMENT (Judgment of the Court was delivered byP.P.S.Janarthana Raja, J.) These appeals are filed under Section 260A of the Income TaxAct, 1961 by the Revenue, against the order of the Income-taxAppellate Tribunal, Bench "SMC-III(D)", Chennai in I.T.A. Nos.1006and 1007/Mds/2005 dated 16.11.2005 raising the following commonsubstantial question of law:- https://hcservices.ecourts.gov.in/hcservices/ "When the assessee itself has declared thatthe income of the Balaji Trust is to beclubbed with the income of the assessee, forthe earlier Assessment Years, treating theincome of Balaji Trust as separately for theAssessment Years 2000-2001 to 2001-2002 thatof the assessee, whether would be opposed toconsistency and logic?" 2.The facts leading to the above substantial question oflaw are as under: (Judgment of the Court was delivered byP.P.S.Janarthana Raja, J.) These appeals are filed under Section 260A of the Income TaxAct, 1961 by the Revenue, against the order of the Income-taxAppellate Tribunal, Bench "SMC-III(D)", Chennai in I.T.A. Nos.1006and 1007/Mds/2005 dated 16.11.2005 raising the following commonsubstantial question of law:- https://hcservices.ecourts.gov.in/hcservices/ "When the assessee itself has declared thatthe income of the Balaji Trust is to beclubbed with the income of the assessee, forthe earlier Assessment Years, treating theincome of Balaji Trust as separately for theAssessment Years 2000-2001 to 2001-2002 thatof the assessee, whether would be opposed toconsistency and logic?" 2.The facts leading to the above substantial question oflaw are as under: The assessee is a Civil Engineering Contractor and PetrolProduct Dealer for Indian Oil Corporation. The relevantassessment years are 2000-2001 and 2001-2002 and the correspondingaccounting years ended on 31.03.2000 and 31.03.2001, respectively.For the assessment year 2000-2001, the assessee filed Return ofincome declaring "NIL" income on 19.10.2000. The Return wasprocessed under Section 143(1) of the Income-tax Act ("Act" inshort) on 02.11.2000. Subsequently notice under Section 148 ofthe Act was issued on 23.09.2002 and notice under Section 143(2)of the Act was issued on 26.06.2003. In response to the saidnotice, the assessee, by its letter dated 02.12.2003 has informedthat the Return filed on 19.10.2000 may be taken as propercompliance to the above notice. The Assessing Officer completedthe assessment under Section 143(3) of the Act. For theassessment year 2001-2002, the assessee filed Return of incomedeclaring a loss of Rs.32,78,940/- and claiming refund ofRs.42,12,380/-. Later, the case was selected for scrutiny andnotice under Section 143(2) was issued and the assessment wascompleted under Section 143(3) of the Act. While completing theassessments, the Assessing Officer was of the view that the incomeof the Trust, namely, Sri Balaji Trust, has to be included in thetotal income of the assessee as the members of the AOP assesseeand trustees of the alleged Trust are one and the same and theincome of the Trust are being enjoyed by the members of the AOPassessee only. Further it was found out that the AOP assesseeitself have availed benefit under the scheme of KVSS and paid thetax arrears for the earlier years wherein it has preferred to clubthe income of Sri Balaji Trust with the income of the AOP assesseefrom the assessment year 1987-88 onwards. Hence the AssessingOfficer clubbed the income of Sri Balaji Trust in the case of theassessee for the above two assessment years. Aggrieved by theorders, the assessee filed appeals to the Commissioner of Income-tax (Appeals). The C.I.T.(A) allowed the appeals of the assesseeand held as follows:-"For the asst. year 2000-01, the objection isagainst clubbing of income from Balaji Trustof Rs.8,91,060/-. This issue was consideredby me in ITA No.4/02-03 for asst. Year 99-00by order dated 4-12-2003. As per page 2 ofpara 3 of the order, respectfully following https://hcservices.ecourts.gov.in/hcservices/ https://hcservices.ecourts.gov.in/hcservices/ ITAT/Mds./Bench 'C' in ITA No.989/Mds. /90-91for asst. year 87-88 and ITA No.1001/Mds./91for asst. year 87-88 in case of M/s.BalajiTrust and in ITA No.803/Mds./91 for asst. year87-88 in assessee's own case, it was held thatthe clubbing of income is not valid in law.Therefore, respectfully following the ordersof higher appellate authorities in the case ofSri Balaji Trust as well as of the assessee,the AO is directed to delete the amount ofRs.8.91 lakhs."Aggrieved, the Revenue filed appeals before the Income-taxAppellate Tribunal ("Tribunal" in short). The Tribunal dismissedthe appeals filed by the Revenue by following its earlier orderand held as follows:-"After hearing both the parties, I find thatthe Assessing Officer made the disallowancebecause according to him, Sri Balaji Trust wasnot genuine. I further find from the order ofthe Tribunal 'C' Bench Madras in the case ofassessee in ITA No.989/Mds/1991 (copy of theorder was filed on record by the ld. counsel)that the trust was held to be genuine.Therefore, I think, now there is nojustification in the addition in respect ofthe trust income and therefore the order ofthe ld. CIT (Appeals) calls for nointerference and the same is confirmed." Hence the present tax cases by the Revenue. 3.Learned Senior Standing Counsel appearing for theRevenue submitted that the members of the AOP assessee andTrustees of the alleged Trust are one and the same and the incomeof the Trust is enjoyed by the members of the AOP assessee only.Further it is stated that the alleged Trust was not a genuine oneand also the AOP assessee itself have availed benefit under thescheme of KVSS and paid tax arrears for earlier years, wherein itpreferred to club the income of Sri Balaji Trust with the incomeof the assessee from the assessment year 1987-88 onwards. Hencethe Assessing Officer is right in clubbing the income of SriBalaji Trust with that of the assessee's income. 4.Heard the counsel. In respect of the earlier assessmentyears in the assessee's own case as well as in the case of SriBalaji Trust, the C.I.T.(A) as well as the Tribunal had given afinding that the Trust is a genuine one and that the AssessingOfficer was wrong in clubbing the income of the said Sri BalajiTrust with the assessee's income. In the present cases, theTribunal followed its earlier order and held that the AssessingOfficer cannot club the income of Sri Balaji Trust with the income https://hcservices.ecourts.gov.in/hcservices/ of the assessee. The Tribunal correctly followed its earlierorder as the facts involved in the present cases are the same asin the earlier assessment years. When the present matter came upfor hearing on 23.07.2007, the counsel appearing for the Revenuewas directed to find out as to whether the Revenue has preferredany appeal against the earlier order of the Tribunal to the HighCourt, or not and also he has undertaken to furnish a copy of theearlier order of the Tribunal. Further the case was adjourned to31.07.2007. On 31.07.2007, the counsel for the Revenue againrequested the Court to adjourn the matter finally to enable him toget the details from the Department. Hence the matter wasadjourned today. Even today, the counsel for the Revenue isunable to furnish any details regarding the earlier order of theTribunal and is also unable to furnish a copy of the same.Therefore, the earlier order of the Tribunal has become final.Further the counsel for the Revenue is also unable to give anycompelling reason or point out any material change in the presentassessment years. Hence, we are of the view that the Tribunalcorrectly followed its earlier order and held that the AssessingOfficer cannot club the income of Sri Balaji Trust in the hands ofthe assessee. In view of this, we do not find any error orillegality in the order of the Tribunal so as to warrantinterference. 5.Under these circumstances, we are of the view that nosubstantial question of law arises for consideration of this Courtand accordingly the tax cases are dismissed. No costs. km Sd/ Asst.Registrar /true copy/ Sub Asst.Registrar To 1. The Assistant Registrar, Income-tax Appellate Tribunal, Bench "SMC-III(D)", Chennai. Income-tax Appellate Tribunal, Bench "SMC-III(D)", Chennai. 2. The Commissioner of Income-tax (Appeals) Salem. Salem. 3. The Assistant Commissioner of Income-tax Circle I, Salem.(I/C) Circle I, Salem.(I/C) 4. The Secretary, Central Bureau of Direct ZoneNew DelhiNew Delhi +2cc to Mr. N. Muralikumaran, Advocate s nos. 49090 and 49094 nsm(co)nm(20.08.07) T.C.(A) Nos.1059 and 1060 of 2007