T.K.Salim, Perumbavoor V. DCIT, Ernakulam

ITA 130/COCH/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 65050 (ITAT-COCHIN)
• Duration Of Justice: 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 12-12-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 14-05-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S VIJAYAPRABHA
• Assessee Lawyers: T M SREEDHARANSR
• Keywords: Unexplained investment; Principle of natural justice
• Section: 263; 132

Judgement Text

1 ITA NO.130/COCH/2012 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI B.R. BASKA RAN(AM) I.T.A NO. 130/COCH/2012 (ASSESSMENT YEAR 2005-06) SHRI T.K. SALIM VS THE DY.CIT, CENT.CIR.1 SHELTER, T.B. ROAD ERNAKULAM PERUMBAVOOR PAN : AFAPS5790L (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI TM SREEDHARAN, SR COUNSEL RESPONDENT BY : SMT. S VIJAYAPRABHA DATE OF HEARING : 12-12-2012 DATE OF PRONOUNCEMENT : 21-12-2012 O R D E R PER N.R.S. GANESAN (JM) THIS APPEAL OF THE TAXPAYER IS DIRECTED AGAINST TH E ORDER OF THE ADMINISTRATIVE COMMISSIONER U/S 263 OF THE INCOME-T AX ACT FOR THE ASSESSMENT YEAR 2005-06. 2 ITA NO.130/COCH/2012 2. SHRI T.M. SREEDHARAN, THE LD.SENIOR COUNSEL FOR THE TAXPAYER SUBMITTED THAT THE ADMINISTRATIVE COMMISSIONER BY R ELYING ON THE STATEMENT OF ASSETS AND LIABILITIES FOUND THAT THER E WAS UNEXPLAINED INVESTMENT IN THE GOLD JEWELLERY. ACCORDING TO THE LD.SENIOR COUNSEL THE ENTIRE EVIDENCE IS AVAILABLE ON RECORD WHICH WOULD CLEARLY SHOW THAT THE GOLD JEWELLERY WAS ACQUIRED FROM THE ASSESSMENT YEAR S 2002-03 TO 2008- 09. THE VALUE OF THE GOLD ORNAMENT WAS ESTIMATED I N TERMS OF QUALITY. THE VALUE WAS ACCEPTED FOR ALL THE ASSESSMENT YEARS FRO M ASSESSMENT YEARS 2002-03 TO 2008-09 WITHOUT ANY CHANGE. THIS IS FUR THER CONFIRMED BY STATEMENT RECORDED U/S 132(4) OF THE ACT. THE LD.S ENIOR COUNSEL FURTHER SUBMITTED THAT WHAT WAS FOUND DURING THE COURSE OF SEARCH OPERATION IS ONLY THE QUANTITY AS PER THE STATEMENT MADE U/S 132 (4) OF THE ACT. THEREFORE, ACCORDING TO THE LD.REPRESENTATIVE, THE EXERCISE OF JURISDICTION U/S 263 OF THE ACT IS NOT JUSTIFIED. 3. ON THE CONTRARY, SMT. VIJAYAPRABHA, THE LD.DR SUB MITTED THAT THE INVESTMENT IN THE GOLD JEWELLERY WAS NOT AT ALL DISC USSED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. THE ASSESSMENT OR DER DOES NOT DISCLOSE ANYTHING ABOUT THE INVESTMENT IN THE GOLD JEWELLERY AND THE RECEIPT FROM 3 ITA NO.130/COCH/2012 M/S PROGRESSIVE COMBINES. SINCE THE ORDER OF THE A SSESSING OFFICER IS SILENT AND NO ENQUIRY WAS CONDUCTED BY THE ASSESSING OFFIC ER, THE COMMISSIONER OF INCOME-TAX(A) HAS RIGHTLY EXERCISED HIS JURISDICT ION U/S 263 OF THE ACT. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. ADMITTED LY, THERE WAS A SEARCH IN THE PREMISES OF THE TAXPAYER AND STATEMENT U/S 132( 4) WAS ALSO RECORDED. THE TAXPAYER HAD DISCLOSED GOLD ORNAMENTS WORTH RS. 83 LAKHS IN THE NAME OF WIFE AND CHILDREN. FOR THE ASSESSMENT YEAR 2004 -05 THE TAXPAYER HAS DISCLOSED ONLY 120 GMS OF JEWELLERY IN THE STATEMENT OF WEALTH. THEREFORE, THE ADMINISTRATIVE COMMISSIONER FOUND THAT THE EXCE SS JEWELLERY SHOWN IN THE WEALTH-TAX STATEMENT FOR THE ASSESSMENT YEAR 20 05-06 OVER AND ABOVE THE WEALTH SHOWN FOR THE ASSESSMENT YEAR 2004-05 WA S PURCHASED IN THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR UNDER CON SIDERATION. THE ADMINISTRATIVE COMMISSIONER HAS ALSO FOUND THAT DUR ING THE YEAR UNDER CONSIDERATION THE TAXPAYER HAS RECEIVED RS.21,000 F ROM M/S PROGRESSIVE COMBINES IN WHICH THE TAXPAYER IS A PARTNER. THERE IS A DIFFERENCE BETWEEN THE WEALTH STATEMENT FOR THE ASSESSMENT YEARS 2004- 05 AND 2005-06. THIS DIFFERENCE WITH REGARD TO GOLD JEWELLERY WAS NOT EXA MINED BY THE ASSESSING 4 ITA NO.130/COCH/2012 OFFICER. MOREOVER, THE RECEIPT OF RS.21,000 FROM M /S PROGRESSIVE COMBINES IN WHICH THE TAXPAYER IS A PARTNER WAS ALSO NOT EXA MINED BY THE ASSESSING OFFICER. 5. THE ASSESSING OFFICER BEING A QUASI JUDICIAL AUTH ORITY IS EXPECTED TO PASS A SPEAKING ORDER FOR ACCEPTING OR NOT ACCEPTIN G THE CLAIM OF THE TAXPAYER. THE REASON FOR NOT ALLOWING THE CLAIM OF THE TAXPAYER WAS CONTAINED IN THE ASSESSMENT ORDER ITSELF. THE ASSE SSMENT ORDER IS SUBJECT TO APPEAL / REVISION UNDER THE PROVISIONS OF THE IN COME-TAX ACT. UNLESS AND UNTIL THE ASSESSING OFFICER RECORDS HIS REASONS FOR ACCEPTING OR NOT ACCEPTING THE CLAIM OF THE TAXPAYER IT MAY BE DIFFICULT FOR T HE APPELLATE / REVISIONAL AUTHORITY TO EXCISE THEIR STATUTORY JURISDICTION. M OREOVER GIVING REASON IN THE ASSESSMENT ORDER WOULD ENSURE FAIRNESS IN THE D ECISION MAKING PROCESS. ADMITTEDLY, THERE WAS NO REFERENCE IN THE ASSESSMEN T ORDER ABOUT THE DIFFERENCE IN THE GOLD JEWELLERY BETWEEN ASSESSMENT YEARS 2004-05 AND 2005-06. THEREFORE, THE ASSESSING OFFICER IS BOUND TO EXAMINE THE SAME. THE RECEIPT OF RS.21,000 FROM M/S PROGRESSIVE COMBI NES WAS ALSO NOT EXAMINED BY THE ASSESSING OFFICER. WE FIND THAT TH E PUNJAB & HARYANA HIGH COURT HAD AN OCCASION TO EXAMINE THIS ISSUE IN COMM ISSIONER OF INCOME-TAX 5 ITA NO.130/COCH/2012 VS SUNIL KUMAR GOEL (2005) 274 ITR 53 (P&H). THE P UNJAB & HARYANA HIGH COURT AFTER CONSIDERING THE JUDGMENT OF THE APEX COU RT IN MUKHERJEE (S.N.) VS UOI (1990) AIR 1990 SC 1984 HAS OBSERVED AS FOLL OWS: IN S.N. MUKHERJEE V. UNION OF INDIA, AIR 1990 SC 1 984, A CONSTITUTION BENCH OF THE SUPREME COURT DISCUSSED T HE DEVELOPMENT OF LAW ON THIS SUBJECT IN INDIA, AUSTRAL IA, CANADA, ENGLAND AND THE UNITED STATES OF AMERICA AND AFTER MAKING REFERENCE TO A LARGE NUMBER OF JUDICIAL PRECEDENTS, THEIR LORDSHIPS CULLED OUT THE FOLLOWING PROPOSITIONS (PA GE 1995): THE DECISIONS OF THIS COURT REFERRED TO ABOVE IND ICATE THAT WITH REGARD TO THE REQUIREMENT TO RECORD REASO NS THE APPROACH OF THIS COURT IS MORE IN LINE WITH THAT OF THE AMERICAN COURTS. AN IMPORTANT CONSIDERATION WHICH HAS WEIGH ED WITH THE COURT FOR HOLDING THAT AN ADMINISTRATIVE AUTHOR ITY EXERCISING QUASI-JUDICIAL FUNCTIONS MUST RECORD THE REASONS FOR ITS DECISION, IS THAT SUCH A DECISION IS SUBJECT TO THE APPELLATE JURISDICTION OF THIS COURT UNDER ARTICLE 136 OF THE CONSTITUTION AS WELL AS THE SUPERVISORY JURISDICTION OF THE HIGH COURTS UNDER ARTICLE 227 OF THE CONSTITUTION AND THAT THE REASON S, IF RECORDED, WOULD ENABLE THIS COURT OR THE HIGH COURT S TO EFFECTIVELY EXERCISE THE APPELLATE OR SUPERVISORY P OWER. BUT THIS IS NOT THE SOLE CONSIDERATION. THE OTHER CONS IDERATIONS WHICH HAVE ALSO WEIGHED WITH THE COURT IN TAKING TH IS VIEW ARE THAT THE REQUIREMENT OF RECORDING REASONS WOULD (I) GUARANTEE CONSIDERATION BY THE AUTHORITY; (II) INTRODUCE CLAR ITY IN THE DECISIONS; AND (III) MINIMIZE CHANCES OF ARBITRARIN ESS IN DECISION MAKING. IN THIS REGARD A DISTINCTION HAS BEEN DRAW N BETWEEN ORDINARY COURTS OF LAW AND TRIBUNALS AND AUTHORITIE S EXERCISING JUDICIAL FUNCTIONS ON THE GROUND THAT A JUDGE IS TRAI NED TO LOOK AT THINGS OBJECTIVELY UNINFLUENCED BY CONSIDERATIONS OF POLICY OR EXPEDIENCY WHEREAS AN EXECUTIVE OFFICER GENERALL Y LOOKS AT THINGS FROM THE STAND POINT OF POLICY AND EXPEDIENC Y. 6 ITA NO.130/COCH/2012 REASONS, WHEN RECORDED BY AN ADMINISTRATIVE AUTHOR ITY IN AN ORDER PASSED BY IT WHILE EXERCISING QUASI-JUDI CIAL FUNCTIONS, WOULD NO DOUBT FACILITATE THE EXERCISE O F ITS JURISDICTION BY THE APPELLATE OR SUPERVISORY AUTHORI TY. BUT THE OTHER CONSIDERATIONS, REFERRED TO ABOVE, WHICH HAVE ALSO WEIGHED WITH THIS COURT IN HOLDING THAT AN ADMINIST RATIVE AUTHORITY MUST RECORD REASONS FOR ITS DECISION, ARE OF NO LESS SIGNIFICANCE. THESE CONSIDERATIONS SHOW THAT THE R ECORDED OF REASONS BY AN ADMINISTRATIVE AUTHORITY SERVICES A S ALUTARY PURPOSE, NAMELY, IT EXCLUDES CHANCES OF ARBITRARINE SS AND ENSURES A DEGREE OF FAIRNESS IN THE PROCESS OF DECI SION-MAKING. THE SAID PURPOSE WOULD APPLY EQUALLY TO ALL DECISIO NS AND ITS APPLICATION CANNOT BE CONFINED TO DECISIONS WHICH A RE SUBJECT TO APPEAL, REVISION OR JUDICIAL REVIEW. IN OUR OPIN ION, THEREFORE, THE REQUIREMENT THAT REASONS BE RECORDED SHOULD GOV ERN THE DECISIONS OF AN ADMINISTRATIVE AUTHORITY EXERCISING QUASI- JUDICIAL FUNCTIONS IRRESPECTIVE OF THE FACT WHETHER THE DECISION IS SUBJECT TO APPEAL, REVISION OR JUDICIAL REVIEW. I T MAY, HOWEVER, BE ADDED THAT IT IS NOT REQUIRED THAT THE REASONS SHOULD BE AS ELABORATE AS IN THE DECISION OF A COUR T OF LAW. THE EXTENT AND NATURE OF THE REASONS WOULD DEPEND ON PA RTICULAR FACTS AND CIRCUMSTANCES. WHAT IS NECESSARY IS THAT THE REASONS ARE CLEAR AND EXPLICIT SO AS TO INDICATE THAT THE A UTHORITY HAS GIVEN DUE CONSIDERATION TO THE POINTS IN CONTROVERS Y. THE NEED FOR RECORDING OF REASONS IS GREATER IN A CASE WHERE THE ORDER IS PASSED AT THE ORIGINAL STAGE. THE APPELLATE OR REV ISIONAL AUTHORITY, IF IT AFFIRMS SUCH AN ORDER, NEED NOT GI VE SEPARATE REASONS IF THE APPELLATE OR REVISIONAL AUTHORITY AG REES WITH THE REASONS CONTAINED IN THE ORDER UNDER CHALLENGE. IN TESTEELS LTD V. N.M. DESAI (1970) 37 FJR 7; AIR 1970 GUJ 1, A FULL BENCH OF THE GUJARAT HIGH COURT HAS MAD E AN EXTREMELY LUCID ENUNCIATION OF LAW ON THE SUBJECT AN D WE CAN DO NO BETTER THAN TO EXTRACT SOME OF THE OBSERVATIO NS MADE IN THE DECISION. THE SAME ARE (HEADNOTE OF AIR 1970 ( GUJ)): 7 ITA NO.130/COCH/2012 THE NECESSITY OF GIVING REASONS FLOWS AS A NECESS ARY COROLLARY FROM THE RULE OF LAW WHICH CONSTITUTES ON E OF THE BASIC PRINCIPLES OF THE INDIAN CONSTITUTIONAL SET-U P. THE ADMINISTRATIVE AUTHORITIES HAVING A DUTY TO ACT JUDI CIALLY CANNOT THEREFORE DECIDE ON CONSIDERATIONS OF POLICY OR EXP EDIENCY. THEY MUST DECIDE THE MATTER SOLELY ON THE FACTS OF THE PARTICULAR CASE, SOLELY ON THE MATERIAL BEFORE THEM AND APART FROM ANY EXTRANEOUS CONSIDERATIONS BY APPLYING PRE- EXISTING LEGAL NORMS TO FACTUAL SITUATIONS. NOW THE NECESSI TY OF GIVING REASONS IS AN IMPORTANT SAFEGUARD TO ENSURE OBSERVA NCE OF THE DUTY TO ACT JUDICIALLY. IT INTRODUCES CLARITY, CHEC KS THE INTRODUCTION OF EXTRANEOUS OR IRRELEVANT CONSIDERAT IONS AND EXCLUDES OR, AT ANY RATE, MINIMIZES ARBITRARINESS I N THE DECISION-MAKING PROCESS. ANOTHER REASON WHICH COMPELS MAKING OF SUCH AN ORD ER IS BASED ON THE POWER OF JUDICIAL REVIEW WHICH IS PO SSESSED BY THE HIGH COURT UNDER ARTICLE 226 AND THE SUPREME CO URT UNDER ARTICLE 32 OF THE CONSTITUTION. THESE COURTS HAVE THE POWER UNDER THE SAID PROVISIONS TO QUASH BY CERTIORARI A QUASI-JUDICIAL ORDER MADE BY AN ADMINISTRATIVE OFFICER AND THIS PO WER OF REVIEW CAN BE EFFECTIVELY EXERCISED ONLY IF THE ORD ER IS A SPEAKING ORDER. IN THE ABSENCE OF ANY REASONS IN S UPPORT OF THE ORDER, THE SAID COURTS CANNOT EXAMINE THE CORRE CTNESS OF THE ORDER UNDER REVIEW. THE HIGH COURT AND THE SUP REME COURT WOULD BE POWERLESS TO INTERFERE SO AS TO KEEP THE ADMINISTRATIVE OFFICER WITHIN THE LIMITS OF THE LAW . THE RESULT WOULD BE THAT THE POWER OF JUDICIAL REVIEW WOULD BE STULTIFIED AND NO REDRESS BEING AVAILABLE TO THE CITIZEN, THER E WOULD BE INSIDIOUS ENCOURAGEMENT TO ARBITRARINESS AND CAPRIC E. IF THIS REQUIREMENT IS INSISTED UPON, THEN, THEY WILL BE SU BJECT TO JUDICIAL SCRUTINY AND CORRECTION. IF THE ORDER PASSED BY THE TRIBUNAL IS SCRUTINIZED IN THE LIGHT OF THE AFOREMENTIONED PROPOSITION OF LAW, WE DO NOT FIND ANY DIFFICULTY IN SETTING ASIDE THE SAME ON THE GRO UND OF VIOLATION OF THE RULES OF NATURAL JUSTICE. THE FLOW ERY LANGUAGE 8 ITA NO.130/COCH/2012 USED BY THE TRIBUNAL TO JUSTIFY ITS ACCEPTANCE OF TH E RESPONDENTS PLEA THAT HE DID NOT KNOW THE LAW DOES NOT WARRANT OUR AFFIRMATION. IN OUR OPINION, THE TRIBU NAL WAS DUTY BOUND TO RECORD TANGIBLE AND COGENT REASONS FOR UPS ETTING WELL REASONED ORDERS PASSED BY THE ASSESSING OFFICER AND THE COMMISSIONER OF INCOME-TAX (APPEALS). IT SHOULD HA VE DIRECTED ITS ATTENTION TO THE LANGUAGE OF SECTION 2 71D AND 271E OF THE ACT IN CONJUNCTION WITH OTHER PROVISIONS OF THE SAME FAMILY AND THEN DECIDED BY A REASONED ORDER WH ETHER THE RESPONDENT HAD BEEN ABLE TO MAKE OUT A CASE FOR DELETING THE PENALTY. THE ORDER PASSED BY THE TRIBUNAL SHOU LD HAVE CLEARLY REFLECTED THE APPLICATION OF MIND BY THE LE ARNED MEMBERS. 6. THE APEX COURT ALSO HAD AN OCCASION TO CONSIDER THIS ISSUE IN TOYOTA MOTOR CORPORATION VS COMMISSIONER OF INCOME-TAX (20 08) 306 ITR 52 (SC). THE APEX COURT HAS OBSERVED AS FOLLOWS AT PAGE 53 O F THE ITR: WE ARE NOT INCLINED TO INTERFERE WITH THE IMPUGNE D ORDER OF THE HIGH COURT. THE HIGH COURT HAS HELD T HAT THE ASSESSING OFFICER HAD DISPOSED OF THE PROCEEDINGS S TATING THE PENALTY PROCEEDINGS INITIATED IN THIS CASE UNDER SE CTION 271C READ WITH SECTION 274 OF THE INCOME-TAX ACT, 1961 A RE HEREBY DROPPED. ACCORDINGLY TO THE HIGH COURT, THERE WAS NO BASIS INDICATED FOR DROPPING THE PROCEEDINGS. THE TRIBUN AL REFERRED TO CERTAIN ASPECTS AND HELD THAT THE INITIATION OF PROCEEDINGS UNDER SECTION 263 OF THE INCOME-TAX ACT, 1961 (IN S HORT, THE I.T. ACT) WAS IMPERMISSIBLE WHEN CONSIDERED IN THE BACKGROUND OF THE MATERIALS PURPORTEDLY PLACED BY T HE ASSESSEE BEFORE THE ASSESSING OFFICER. WHAT THE HI GH COURT HAS DONE IS TO REQUIRE THE ASSESSING OFFICER TO PAS S A REASONED ORDER. THE HIGH COURT WAS OF THE VIEW THAT THE TRI BUNAL COULD NOT HAVE SUBSTITUTED ITS OWN REASONINGS WHICH WERE REQUIRED 9 ITA NO.130/COCH/2012 TO BE RECORDED BY THE ASSESSING OFFICER. ACCORDING TO THE ASSESSEE, ALL RELEVANT ASPECTS WERE PLACED FOR CONS IDERATION AND IF THE OFFICER DID NOT RECORD REASONS, THE ASSE SSEE CANNOT BE FAULTED. WE DO NOT THINK IT NECESSARY TO INTERFERE AT THIS STAGE. IT GOES WITHOUT SAYING THAT WHEN THE MATTER BE TAKEN U P BY THE ASSESSING OFFICER ON REMAND, IT SHALL BE HIS DUTY T O TAKE INTO ACCOUNT ALL THE RELEVANT ASPECTS INCLUDING THE MATE RIALS, IF ANY, ALREADY PLACED BY THE ASSESSEE, AND PASS A REASONED ORDER. 7. IN VIEW OF THE ABOVE IT IS INCUMBENT UPON THE AS SESSING OFFICER TO EXAMINE THE CLAIM OF THE TAXPAYER AND RECORD REASON FOR ALLOWING OR NOT ALLOWING THE CLAIM IN THE ASSESSMENT ORDER ITSELF. SINCE THE ASSESSING OFFICER FAILED TO PASS A SPEAKING ORDER IN RESPECT OF THE D IFFERENCE FOUND IN THE GOLD JEWELLERY AND THE RECEIPT OF RS.21,000 FROM M/S PROG RESSIVE COMBINES, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ASSE SSING OFFICER HAS RIGHTLY EXERCISED HIS JURISDICTION U/S 263 OF THE ACT. WE D O NOT FIND ANY INFIRMITY IN THE ORDER OF THE LOWER AUTHORITY. ACCORDINGLY THE SAME IS CONFIRMED. 8. IN THE RESULT, THE APPEAL OF THE TAXPAYER IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 21 ST DECEMBER, 2012. SD/- SD/- (B.R. BASKARAN) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 21 ST DECEMBER, 2012 PK/- 10 ITA NO.130/COCH/2012 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE COMMISSIONER OF INCOME-TAX 4. THE COMMISSIONER OF INCOME-TAX(A) 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH