DR.A.G.JAYAKRISHNAN, V. ASST.COMMISSIONER OF INCOME TAX

ITA/1743/2009

AI Insights

The case involves two appeals by Dr. A.G. Jayakrishnan against the orders of the Income Tax Appellate Tribunal, Cochin Bench, concerning a block assessment and a surcharge levied on him. The block assessment covered the period from 01.04.1990 to 18.12.2000, following searches at Sree Uthradam Tirunal Hospital and Dr. Jayakrishnan's premises, which uncovered documents related to undisclosed income. The Tribunal upheld the additions made to the assessee's income based on these documents and his sworn statements. The surcharge was contested separately, leading to its removal by the High Court based on the Supreme Court's precedent that the relevant legal provision was not retroactive.

• Counselvise Citation: [2018] 140 COUNSELVISE.COM (IT) 698227 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 25-10-2018
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income Tax v. Vatika Township P.Ltd., Assistant Commissioner v. Hotel Bluemoon
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: JOSE JOSEPH
• Assessee Lawyers: E K NANDAKUMAR; K MATHAI; P THOMAS
• Keywords: Block assessment; Income from house property; Surcharge; Undisclosed income
• Section: 143(3); 132; 158BC; 158BB

Judgement Text

"IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON THURSDAY, THE 25TH DAY OF OCTOBER 2018 / 3RD KARTHIKA, 1940 ITA. No.1743 of 2009 AGAINST THE ORDER IN ITA NO.203/2005 OF THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH DATED 30-04-2009 APPELLANT/RESPONDENT/ASSESSEE: DR.A.G.JAYAKRISHNAN, VILLA A THE PYRAMID, FALMIR, MAIN ROAD, FALMIR, MANGALORE. BY ADVS. SRI.E.K.NANDAKUMAR SRI.K.JOHN MATHAI SRI.P.BENNY THOMAS RESPONDENT/APPELLANT/REVENUE: ASST.COMMISSIONER OF INCOME TAX CENTRAL CIRCLE, THIRUVANANTHAPURAM. BY ADVS. SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 25.10.2018, ALONG WITH ITA NO.1747/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ITA. Nos.1743 & 1747 of 2009 2 IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON THURSDAY, THE 25TH DAY OF OCTOBER 2018 / 3RD KARTHIKA, 1940 ITA. No.1747 of 2009 AGAINST THE ORDER IN ITA NO.184/2005 OF THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH DATED 30-04-2009 APPELLANT/APPELLANT: DR.A.G.JAYAKRISHNAN, MANGALORE. BY ADVS. SRI.E.K.NANDAKUMAR SRI.K.JOHN MATHAI SRI.P.BENNY THOMAS RESPONDENT/RESPONDENT: ASST.COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, THIRUVANANTHAPURAM. BY ADVS. SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 25.10.2018, ALONG WITH ITA NO.1743/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ITA. Nos.1743 & 1747 of 2009 3 JUDGMENT K. Vinod Chandran, J. These two appeals are filed by one Doctor against the block assessment carried out. 2. ITA No.1747 of 2009 is against the block assessment itself and ITA No.1743 of 2009 is against the surcharge levied. The assessee is a Doctor, who was practicing in Trivandrum in various hospitals and is said to have had consultations also outside Trivandrum. The assessee was also a non-resident for a period of time. On 16.11.2000, the Department conducted a search in the premises of Sree Uthradam Tirunal Hospital, Trivandrum, where the assessee had been working between 1993 to 1998. Certain documents were recovered, which showed the remuneration paid to the assessee, which were also not returned by the assessee in full in the respective assessment years. The Department then initiated a search in the premises of the assessee on 18.12.2000 under ITA. Nos.1743 & 1747 of 2009 4 Section 132 of the Income Tax Act, 1961 [for brevity, the Act]. A sworn statement was also taken from the assessee. Later, proceedings were issued under Section 158BC read with Section 143(3) of the Act. Block assessment was proposed between 01.04.1990 to 18.12.2000. Additions were proposed on the basis of the materials recovered from the SUT Hospital and also with respect to some other undisclosed income referable to materials recovered on search from the assessee's premises. The proposals were given effect to and surcharge was also imposed on the tax demanded. 3. The assessee filed an appeal before the CIT appeals. The CIT appeals deleted all additions, except that made on account of the materials recovered and estimation made with respect to the income from SUT Hospital. The surcharge levied was also deleted. The assessee was in appeal from the addition made and the Revenue from the deletion of additions and surcharge. The Tribunal confirmed ITA. Nos.1743 & 1747 of 2009 5 the additions in the appeal of the assessee and set aside the order of the CIT appeals with respect to surcharge in the Revenue's appeal. The deletion of additions by the first appellate authority were left untouched. Hence; the two appeals from the separate orders of the Tribunal in the appeals filed by the asessee and the Revenue. We will take up the block assessment first, since if the same is found to be bad, there is no question of any surcharge levy on the assessee. 4. The questions of law as framed in the appeal memorandum are as follows: 1. Whether the Hon'ble Tribunal was right in law and on facts in holding that the assessing authority was justified in arriving at a finding of undisclosed income based on evidence that was not recovered from the appellant's premises during the search under Section 132 of the IT Act? 2. Whether the Hon'ble Tribunal was right in law and on facts in upholding the ITA. Nos.1743 & 1747 of 2009 6 findings of the assessing authority and the CIT(A) on the issue of undisclosed income more so when there was no material obtained during the search at the appellant's premises that would justify an assessment under Section 158BC? 3. Ought not the Hon'ble Appellate Tribunal to have found that there was no legal basis for entering a finding against the appellant as regards undisclosed income and that the findings entered by the lower authorities were based on pure conjectures and speculation? 5. The learned Counsel for the assessee would submit that necessarily when a block assessment is proceeded with under Section 158BC, the computation of the undisclosed income for the block period has to be done under Section 158BB. When such computation of income is done under Section 158BB of the Act, it should be on the basis of evidence found as a result of search or requisition of Books of Accounts or other ITA. Nos.1743 & 1747 of 2009 7 documents and such other materials or information as are available with the Assessing Officer and relatable to such evidence. In the present case, it is true that the Department had received some documents from the search conducted in the premises of SUT hospital. However, that alone will not result in undisclosed income being found in the hands of the assessee, unless there is some evidence recovered from the search conducted in the assessee's own premises, which is relatable to what is collected from the premises of SUT Hospital. There being no such evidence collected from the assessee's premises, as also many of the documents obtained from SUT hospital not being authenticated by the assessee, there could be no computation of undisclosed income on that basis and in such circumstances, the block assessment itself would be rendered nugatory goes the arguments. 6. The learned Senior Standing Counsel, ITA. Nos.1743 & 1747 of 2009 8 Government of India [Taxes] would take us through the assessment order, meticulously and the statement made by the assessee under Section 132(4) of the Act. It is pointed out that the assessee had specifically deposed on the manner in which remuneration was agreed upon between the assessee and the SUT Hospital. The same tallied with the documents recovered from the SUT hospital. It was hence the Assessing Officer made an addition and also estimated the income on the basis of the arrangement specifically deposed on by the assessee. 7. We see the extract of the sworn statement from the assessment order produced as Annexure A in ITA No.1743 of 2002. The specific questions and answers are extracted therein. The assessee had deposed that he joined SUT Hospital in 1993 on an assurance of minimum monthly remuneration of Rs.75,000/- per month. However, if the assessee brought in income, more than the minimum agreed ITA. Nos.1743 & 1747 of 2009 9 upon, by reason of additional procedures carried out, then he was entitled to that excess amounts also. The arrangement was elucidated in the following manner. If the monthly procedure fee received by the Hospital, exceeds Rs.75,000/-, the assessee would get that excess amounts also. However, if in a particular month, the procedure fee entitled to the assessee falls below Rs.75,000/-, then the hospital had a duty to make good the shortfall; so as to ensure a minimum remuneration of Rs.75,000/- per month. 8. The documents as recovered from the SUT Hospital tallied with the sworn statement made by the assessee under Section 132(4) of the Act. The assessee had a contention that he returned only the amounts received through Bank accounts and there was a claim raised against the hospital, which was referred for arbitration and later given up. The arrangement between the assessee and the hospital having been specifically deposed to, ITA. Nos.1743 & 1747 of 2009 10 under Section 132(4) of the Act; if a contrary case is set up, then the onus to prove it, is on the assessee. The assessee made no attempt to prove that he had not received the said amounts, nor disputed individually the documents as received from the SUT hospital. Section 132(4) of the Act raises a statutory presumption, in so far as the statement made under oath being permitted to be used in evidence, which has to be deemed to be true. Unless there is contra evidence to dispel such presumption the statements have an evidentiary value as conferred by the statute. The sworn statement under Section 132(4) of the Act in the present case is the evidence relatable to the material or information as available with the Assessing Officer in the nature of the documents recovered from the SUT Hospital. 9. It is also pertinent that the CIT appeals had confirmed only those additions made on account of the undisclosed income from the SUT Hospital ITA. Nos.1743 & 1747 of 2009 11 and had deleted all the other additions. There was a departmental appeal from the order of the CIT appeals with respect to the additions deleted also, but the Revenue has not chosen to challenge the order of the Tribunal allowing the appeal of the Revenue. The appeal of the Revenue was allowed only with respect to the surcharge levied and the loss claimed on “income from house property”. 10. In such circumstances, we do not think that there is any scope for interference in the block assessment as modified by the first appellate authority, affirmed by the Tribunal. The questions of law raised as to whether the Tribunal was correct in having affirmed the additions sustained by the first appellate authority, in the context of there being no evidence recovered from the search in the assessee's premises relatable to the materials or information available with the Assessing Officer is answered against the assesee and in favour of the revenue on the reasoning ITA. Nos.1743 & 1747 of 2009 12 above. ITA No.1747 of 2009 would stand rejected. 11. Two questions arise in the appeal numbered as 1743 of 2009 which are re-framed as follows: 1. Whether the assessee is liable to surcharge on tax which was made effective from 01.06.2002 alone? 2. Whether the assessee's claim for loss on house property can be set off against income computed for the block period? 12. On the question of surcharge, a larger Bench of the Hon'ble Supreme Court in 2015 (1) SCC 1 [Commissioner of Income Tax v. Vatika Township P.Ltd.] held that the proviso to section 132 introduced by the Finance Act of 2002 is prospective in operation. There could hence be no surcharge prior to the date on which the said proviso was made effective, i.e. prior to 01.04.2002. The first question is hence answered against the Revenue and in favour of the assessee. 13. As for the second question, the claim of the assessee is that he has two properties both with residential buildings, one of which is rented ITA. Nos.1743 & 1747 of 2009 13 out and the rental income declared regularly. There is yet another property purchased; availing some loans as against which loss on income from house property is claimed. It is not clear as to why the said amounts were not claimed in the regular assessment. In fact, the Assessing Officer indicates that the income including the undisclosed income declared in the returns filed for the block period is less than that of the regular income for six years. The assessee has a contention that he can substantiate the loss on income from house property. In any event, the assessee is entitled to make such claim even during the block period as has been held by the Hon'ble Supreme Court in Assistant Commissioner v. Hotel Bluemoon [2010(3) SCC 259]. The question is answered in favour of the assessee and against the Revenue but however, the computation is left to the Assessing Officer. The assessee shall produce the details before the Assessing Officer who shall ITA. Nos.1743 & 1747 of 2009 14 consider the same and allow it to the extent permissible under the Income Tax Act. ITA 1743 of 2009 is allowed, deleting the levy of surcharge and remanding the matter on the issue of loss on house property. Sd/- K. VINOD CHANDRAN JUDGE Sd/- ASHOK MENON JUDGE jma/sp/26/10/18 //True Copy// P.A. To Judge ITA. Nos.1743 & 1747 of 2009 15 APPENDIX OF ITA NO.1743/2009 PETITIONER'S EXHIBITS: ANNEXURE A A TRUE COPY OF THE ASSESSMENT ORDER DATED 31.12.2002. ANNEXURE B A TRUE COPY OF THE APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) DATED 21.01.2003. ANNEXURE C TRUE COPY OF THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) DATED 01.08.2005. ANNEXURE D CERTIFIED COPY OF THE ORDER DATED INCOME TAX APPELLATE TRIBUNAL, DATED 30.04.2009. RESPONDENT'S EXHIBITS:- NIL APPENDIX OF ITA 1747/2009 PETITIONER'S EXHIBITS: ANNEXURE A A TRUE COPY OF THE ASSESSMENT ORDER DATED 31.12.2002. ANNEXURE B A TRUE COPY OF THE APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) DATED 21.01.2003. ANNEXURE C THE COPY OF THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) DATED 01.08.2005. ANNEXURE D TRUE COPY OF THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL, DATED 30.04.2009. RESPONDENT'S EXHIBITS:- NIL //TRUE COPY// P.A. TO JUDGE ITA. Nos.1743 & 1747 of 2009 16 "