ANCY JOHN V. INCOME TAX OFFICER

WP(C)/35020/2016

AI Insights

The case involves a writ petition filed by Ancy John and her husband John Joseph against the Income Tax Department, challenging the reopening of their income tax assessments for the assessment years 2011-12, 2012-13, and 2013-14. The petitioners contended that the reasons provided for reopening the assessments were invalid. However, the respondents argued that the reopening was justified due to evidence of suppressed receipts and unaccounted transactions discovered during a survey at their business premises. The court examined the reasons provided by the Income Tax Department and found them sufficient to justify the reopening of the assessments, leading to the dismissal of the writ petitions.

• Counselvise Citation: [2016] 140 COUNSELVISE.COM (IT) 700255 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 21-12-2016
• Assessment Year: misc
• Other Referred Cases: Income Tax Officer v. Lakhmani Mewal Das [(1976) 103 ITR 437], Commissioner of Income Tax v. Kelvinator of India Ltd [(2010) 320 ITR 561], Messe Dusseldorf India P. Ltd v. Deputy Commissioner of Income-Tax, Transfer Pricing Officer and another [(2010) 320 ITR 565], Milan Supari Stores v. Assistant Income-Tax Commissioner [(1922) 194 ITR 72], Agya Ram v. Commissioner of Income Tax, Delhi (ITA No.290/2004 and connected cases), Unitech Holdings Limited v. Deputy Commissioner of Income Tax (WP(C) No. 12325/2015 & CM No.32738/2015), GKN Driveshafts (India) Ltd v. Income-Tax Officer and Others [(2003) 259 ITR 19]
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: CHRISTOPHER ABRAHAM; K M V PANDALAI
• Assessee Lawyers: V V ASHOKAN; K I MAYANKUTTY MATHER; R JAIKRISHNA
• Keywords: Benami Transactions; Income tax reassessment; Suppression of receipts; Unaccounted cash transactions; Survey Evidence
• Section: 147; 148; 133A; 281-B

Judgement Text

"IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE WEDNESDAY, THE 21ST DAY OF DECEMBER 2016/30TH AGRAHAYANA, 1938 WP(C).No. 35020 of 2016 (B) ---------------------------- PETITIONER(S): ------------- ANCY JOHN, W/O. JOHN JOSEPH, KALLUNKAL HOUSE, KENICHIRA P.O., PANAMARAM, WAYANAD. BY ADVS.SRI.V.V.ASOKAN (SR.) SRI.K.I.MAYANKUTTY MATHER SRI.R.JAIKRISHNA RESPONDENT(S): -------------- 1. INCOME TAX OFFICER WARD NO.2, KALPETTA, WAYANAD - 673 122. 2. ADDITIONAL COMMISSIONER (INCOME TAX) RANGE 2, KOZHIKODE - 673 001. R1,R2 BY ADVS.SRI.CHRISTOPHER ABRAHAM, INCOME TAX DEPARTMENT SRI.K.M.V.PANDALAI, INCOME TAX DEPARTMENT THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 21-12-2016, ALONG WITH WPC. 35054/2016, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: EL WP(C).No. 35020 of 2016 (B) ---------------------------- APPENDIX PETITIONER(S)' EXHIBITS ----------------------- P1 TRUE COPY OF THE ORDER ISSUED UNDER SECTION 281(B) OF THE INCOME TAX ACT BY THE 1ST RESPONDENT DATED 23.2.2015. P2 TRUE COPY OF THE ASSESSMENT ORDER ISSUED BY THE 1ST RESPONDENT DATED 31.3.2015. P2(A) TRUE COPY OF THE PROCEEDINGS IN CONNECTION WITH THE SURVEY CONDUCTED UNDER SECTION 133A DATED 10.12.2014. P2(B) TRUE COPY OF THE LIST OF DOCUMENT SEIZED DATED 10.12.2014. P2(C) TRUE COPY OF THE STATEMENT RECORDED FROM K.M.BABU DATED 10.12.2014. P2(D) TRUE COPY OF THE STATEMENT RECORDED FROM CICY JAISON DATED 10.12.2014. P2(E) TRUE COPY OF THE STATEMENT RECORDED FROM ANCY JOHN DATED 10.12.2014. P3 TRUE COPY OF THE NOTICE ISSUED UNDER SECTION 147 OF THE INCOME TAX ACT BY THE 1ST RESPONDENT (AY-2011-2012) DATED 31.7.2015. P3(A) TRUE COPY OF THE NOTICE ISSUED UNDER SECTION 147 OF THE INCOME TAX ACT BY THE 1ST RESPONDENT (AY-2012-2013) DATED 31.7.2015. P3(B) TRUE COPY OF THE NOTICE ISSUED UNDER SECTION 147 OF THE INCOME TAX ACT BY THE 1ST RESPONDENT (AY-2013-2014) DATED 31.7.2015. P4 TRUE COPY OF THE REQUEST GIVEN BY THE PETITIONER DATED 12.8.2015. P4(A) TRUE COPY OF THE REQUEST GIVEN BY THE PETITIONER DATED 12.8.2015. P4(B) TRUE COPY OF THE REQUEST GIVEN BY THE PETITIONER DATED 12.8.2015. P5 TRUE COPY OF THE SATISFACTION NOTE ISSUED BY THE 1ST RESPONDENT DATED 21.9.2016. P5(A) TRUE COPY OF THE SATISFACTION NOTE ISSUED BY THE 1ST RESPONDENT DATED 21.9.2016. P5(B) TRUE COPY OF THE SATISFACTION NOTE ISSUED BY THE 1ST RESPONDENT DATED 21.9.2016. P6 TRUE COPY OF THE LETTER ISSUED BY THE PETITIONER TO THE 1ST RESPONDENT DATED 05.10.2016. P6(A) TRUE COPY OF THE LETTER ISSUED BY THE PETITIONER TO THE 1ST RESPONDENT DATED 05.10.2016. EL WP(C).No. 35020 of 2016 (B) ---------------------------- P6(B) TRUE COPY OF THE LETTER ISSUED BY THE PETITIONER TO THE 1ST RESPONDENT DATED 05.10.2016. P7 TRUE COPY OF THE LETTER GIVEN BY THE 1ST RESPONDENT DATED 17.10.2016. P7(A) TRUE COPY OF THE LETTER GIVEN BY THE 1ST RESPONDENT DATED 17.10.2016. P7(B) TRUE COPY OF THE LETTER GIVEN BY THE 1ST RESPONDENT DATED 17.10.2016. P8 TRUE COPY OF THE COMMUNICATION GIVEN BY THE 1ST RESPONDENT DATED 17.10.2016. P8(A) TRUE COPY OF THE COMMUNICATION GIVEN BY THE 1ST RESPONDENT DATED 17.10.2016. P8(B) TRUE COPY OF THE COMMUNICATION GIVEN BY THE 1ST RESPONDENT DATED 17.10.2016. RESPONDENT(S)' EXHIBITS ----------------------- NIL TRUE COPY P.S. TO JUDGE EL A.M. SHAFFIQUE, J. =============== W.P. (C) Nos. 35020 & 35054 of 2016 ======================= Dated this, the 21st day of December, 2016 J U D G M E N T These writ petitions have been filed challenging the action taken by the Income Tax Department for reopening the assessment in terms of Sections 147 and 148 of the Income Tax Act, 1961. Petitioners are husband and wife. The main contention urged by the petitioners is that the reason to believe as reflected in Ext.P5 series in WP(C) No. 35020/2016 and Ext.P7 series in WP(C) No. 35054/2016 is not a valid reason to reopen the assessments. 2. A statement has been filed by the respondent controverting the stand and inter alia stating that sufficient reasons had been stated in the impugned documents for the assessing officer to believe that there is escaped turnover. 3. Learned counsel for the petitioners places reliance on the judgments in Income Tax Officer v. Lakhmani Mewal Das [(1976) 103 ITR 437], Commissioner of Income Tax v. Kelvinator of India Ltd [(2010) 320 ITR 561], Messe Dusseldorf India P. Ltd v. Deputy Commissioner of Income-Tax, Transfer W.P(C) Nos.35020 & 35054 /16 -:2:- Pricing Officer and another [(2010) 320 ITR 565], Milan Supari Stores v. Assistant Income-Tax Commissioner [(1922) 194 ITR 72], Agya Ram v. Commissioner of Income Tax, Delhi (ITA No.290/2004 and connected cases), Unitech Holdings Limited v. Deputy Commissioner of Income Tax (WP(C) No. 12325/2015 & CM No.32738/2015) as well as GKN Driveshafts (India) Ltd v. Income-Tax Officer and Others [(2003) 259 ITR 19]. 4. The main contention urged is that the impugned documents do not contain reason to believe. Perusal of Ext.P5 series and Ext.P7 series in either cases would show that the Income Tax Officer proceeded on the basis that a survey under Section 133A was carried out in the business premises of the assessee on 10/12/2014 and during the survey, evidence had been collected showing suppression of actual receipts. Hence, there is reason to believe that income escaped assessment to tax. The reasons for initiating proceedings under Section 148 has been mentioned in the Annexure as well. Annexure to Ext.P5 reads as under: W.P(C) Nos.35020 & 35054 /16 -:3:- “Reasons for initiating proceedings u/s 148- Annexure to the proforma for obtaining the approval of the Joint/Addl.Commissioner of Income Tax. A survey u/s 133A was carried out in the business premises of the assessees 1)Shri John Joseph and 2) Smt.Ancy John, W/o Shri John Jospeh on 10/12/2014. Both the assessees are involved in Real Estate business & Property development, Resort & Hospitality business etc. Even though both the assesses are furnishing their return of income as separate independent individuals, the business activities and related accounts of both the assesses are entirely handled by Shri.John Joseph and his confidantes and key staff members Mr.K.M.Babu, Mrs.Civy Jaison etc. Smt.Ancy John confirmed the same in her sworn statement. The combined real accounts of the assessee were obtained during the course of survey. During the course of survey, evidences regarding 1) Suppression in total receipts 2) Unaccounted cash payment in the purchase of landed properties including agreements 3) Unaccounted cash receipts in the sale of landed properties including agreements 4) Purchase and sale of land in benami names of Shri. K.M.Babu and Smt.Cicy Jaison which were never reflected in actual accounts. The actual particulars of the real estate business of the assessee for financial years 2011- 12, 2012-13 and 2013-4 of Shri John Joseph and his W.P(C) Nos.35020 & 35054 /16 -:4:- wife Smt.Ancy John were submitted to the department by the assessee group themselves vide e mails dated 12.1.2015, 20.1.2015 and 5.1.2015 respectively. The abstract of the same is attached along with as Annexure-II. The turnover difference for AY2012-13 and AY 2013-14 is summarized as under: AY------------------------> 2013-14 2012-13 FY----------------------> 2012-13 2011-12 Actual turnover 50606632 68317450 Returned turnover-John Joseph 3057865 4927430 Returned turnover-Ancy John 2245412 1331005 Suppression in turnover 45303355 62059015 While examining the return of the Shri.John Joseph, it was further noticed that the assessee has made a Capital introduction of Rs.56,79,793 during Financial Year 2010-11 which is way higher than the incomes returned by the assessee during previous years. Similarly property purchases details were obtained in the name of Smt.Ancy John and Shri. John Joseph during financial year 2010-11. During the survey, it was observed that assessee maintains all his receipts and payments which include income and expenditure related to his real estate activities, income from villas, construction agreements, farming and agricultural activities in a consolidated manner with Smt.Cicy Jaison. The daybooks maintained by her however do not reflect agricultural income as claimed by the assessees. Further Smt.Ancy in her statement confirmed that she is involved in farming and agricultural activities W.P(C) Nos.35020 & 35054 /16 -:5:- and she doesn't have any bills or evidences pertaining to the agricultural activities. It appears to me that the assessee group is showing higher agriculture income to make source for the investment activities. The assessee, who was initially co-operating with the post survey enquiries and verifications, however, later started non cooperation on an afterthought and was reluctant to divulge further details. It may be noted that regular scrutiny for AY2012-13 is already completed in the case of John Joseph under the above grounds. The return particulars of Shri.John Joseph (AY2011- 12, AY2013-14) and Smt.Ancy John (AY2011-12, AY2012-13, AY2013-14) are as under: Sri.John Joseph AY Agriculture income Business income Income from other sources Income Returned 2010-11 350000 561870 0 411870 2011-12 734400 490013 29243 519256 2012-13 405400 860895 63574 924469 2013-14 714119 765732 43629 809361 Opening Stock Sales Other income Closing stock 2010-11 2011-12 6727000 4192609 10325247 2012-13 10325247 4927430 10840187 2013-14 10840187 3057865 2482207 11865386 W.P(C) Nos.35020 & 35054 /16 -:6:- Sri Ancy John AY Agriculture Income Business Income 2010-11 250000 230450 2011-12 0 -363310 2012-13 0 63374 2013-14 328200 179633 Opening stock Sales Other income Purchases Closing stock 2010-11 Returns filed u/s 44AD 2011-12 0 2200955 0 1924860 548218 2012-13 548218 1331005 215860 1850770 2248988 2013-14 Returns filed u/s 44AD Considering the above facts, I have reasons to believe that income has escaped assessment in the cases of 1) Shri.John Joseph (AY2011 & AY2013-14) and 2) Smt.Ancy John (AY2011-12, AY2012-13 & AY2013-14)” 5. Similar enclosures had been annexed along with the other documents which indicates reason to believe. Learned standing counsel appearing for the respondents submits that the orders informing reason to believe had been supplied as early as on 27/9/2015 and so far, no steps had been taken by the petitioner either to file the return or such other steps in accordance with law and therefore the writ petitions itself are not W.P(C) Nos.35020 & 35054 /16 -:7:- maintainable for delay and laches. That apart, it is submitted that the reason stated in the enclosure clearly indicates that there is suppression of turnover which itself is enough for the purpose of understanding the reason for reopening the assessment. 6. There is no dispute about the legal position involved in the matter. Before an assessment is reopened in terms of Sections 147 and 148 of the Income Tax Act, necessarily, it is open for the assessee to request for the reason to believe. In this case, when request was made by the assessee, the reason to believe had been given. Though in Ext.P5, at para 12, the following alone has been stated; “12. It may be noted that the findings of survey, which is the basic reason for reopening your case was already discussed in detail with your husband and his staff members who is handling your entire business activities as submitted by you during the post survey proceedings and consolidated day book details for FY2011-12, FY2012-13 and FY2013-14 based on the findings of the survey was even submitted to the department. Further proceedings under Section 143(3) for AY2012-13 which was pending in your husband Shri John Joseph's case was finished on the basis of the said details. Thus it clear that the necessary copies W.P(C) Nos.35020 & 35054 /16 -:8:- regarding the findings of the survey are already available with your group.” the enclosure which has been annexed along with the documents clearly narrates why the assessment had to be reopened. Learned counsel for the petitioners however has a case that the enclosure that had been given was for internal purpose and was not intended to be a notice given to the petitioners indicating the reason to believe. In so far as the enclosure is enclosed along with Ext.P5 series and Ext.P7 series, necessarily, the petitioners are put to notice regarding the reason to believe by which the assessment had been reopened. Under such circumstances, I am of the view that necessary particulars had already been given to the petitioner showing the reasons to believe and there is no reason why this Court should sit in judgment over the same and take a different view in the matter. 7. In the light of the above said facts, I do not think it necessary for this Court to interfere with the impugned orders. Writ petitions are dismissed. Sd/- A.M. SHAFFIQUE, JUDGE Rp21/12/2016 "