Sri.P.M.Paul, V. ITO, Kottayam

ITA 213/COCH/2006

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58252 (ITAT-COCHIN)
• Duration Of Justice: 5 year(s) 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2012
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Assessment Year: 1998-1999
• Appeal Filed On: 20-03-2006
• Court: TRIBUNAL
• Department Lawyers: S VIJAYAPRABHA
• Assessee Lawyers: P BALAKRISHNAN
• Keywords: Business income; Salary income
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND SANJAY AROR A, AM I.T.A NOS. 213 & 214/COCH/2006 & 103 5/COCH/2005 ASSESSMENT YEARS: 1998-99,2000-01 & 1999-2000 SHRI P.M.PAUL, GLEN TEA FACTORY, GLEN MARY P.O., PEERMADE. [PAN: ADJPM 4604N] VS. THE INCOME TAX OFFICER, WARD-3, KOTTAYAM. (ASSESSEE-APPELLANT) (REVENUE- RESPONDENT) M.P. NO. 02/COCH/2007 (ASRG. OUT OF I.T.A NO. 1035/COCH/200 5) ASSESSMENT YEAR: 1999-2000 THE INCOME TAX OFFICER, WARD-3, KOTTAYAM. VS. SHRI P.M.PAUL, GLEN TEA FACTORY, GLEN MARY P.O., PEERMADE. [PAN: ADJPM 4604N] (REVENUE-APPLICANT) (ASSESSEE - RESPONDENT) ASSESSEE BY SHRI P.BALAKRISHNAN, ADV. REVENUE BY MS. S. VIJAYAPRABHA, JR.DR DATE OF HEARING 28/11/2011 DATE OF PRONOUNCEMENT 31//01/2012 O R D E R PER SANJAY ARORA, AM: THESE ARE A SET OF THREE APPEALS BY THE ASSESSEE; THE RELEVANT ASSESSMENT YEARS (AYS) BEING 1998-99 TO 2000-01, ARISING OUT OF SEPA RATE ORDERS BY THE COMMISSIONER OF INCOME-TAX (APPEALS)-IV, KOCHI (CIT(A) FOR SHORT) DATED 31-01-2006 (FOR A.Y. 1998- 99 & 2000-01) AND 18-07-2005 FOR A.Y. 1999-2000. TH E MISCELLANEOUS PETITION BY THE I.T.A. NOS. 213 & 214/COCH/2006 & 1035/COCH/05& M.P. NO. 02/COCH/2007 P.M.PAUL VS.I.T.O. KOTTAYAM 2 REVENUE IS IN RESPECT OF AN ORDER PASSED BY THE TRI BUNAL REJECTING THE SAME VIDE ITS ORDER DATED 12-03-2007, SINCE RESTORED ON THE DIRECTION B Y THE HONBLE JURISDICTIONAL HIGH COURT. 2. THE FACTS AND CIRCUMSTANCES OF THE CASE BEING TH E SAME, THE APPEALS WERE HEARD TOGETHER, AND ARE BEING DISPOSED OF VIDE A COMMON, CONSOLIDATED ORDER. THIS IS THE SECOND ROUND BEFORE THE TRIBUNAL. IN THE FIRST ROUN D, THE TRIBUNAL, VIDE ITS SEPARATE ORDERS FOR A.Y. 1998-99 AND 2000-01 (DATED 06-10-2006) AND (FOR A.Y. 1999-2000 (DATED 26- 06-2006), DISMISSED THE REVENUES APPEALS ON THE GR OUND OF JURISDICTION, HOLDING THAT THE ACTION U/S. 147 OF THE INCOME TAX ACT, 1961 (THE A CT HEREINAFTER) BY THE REVENUE WAS WITHOUT JURISDICTION, SO THAT THE ASSESSMENTS FRAME D THUS WERE BAD IN LAW. THE REVENUE MOVED AN APPLICATION U/S. 254(2) OF THE ACT IN RESP ECT OF THE ORDER BY THE TRIBUNAL FOR A.Y. 1999-2000 (IN I.T.A. NO. 1035/COCH/2005), AND WHICH, AGAIN, STOOD DISMISSED BY IT VIDE ITS ORDER DATED 12-03-2007. THE REVENUE CARRIE D THE MATTER IN APPEAL BEFORE THE HONBLE JURISDICTIONAL HIGH COURT, WHICH SET ASIDE ALL THE FOUR ORDERS BY THE TRIBUNAL, AND REMANDED THE MATTER BACK TO ITS FILE FOR RECONSIDER ATION (BY IT) AFTER GIVING AN OPPORTUNITY OF HEARING TO BOTH THE SIDES, FURTHER ALLOWING LIBE RTY TO THE ASSESSEE TO PLEAD THE NON- MAINTAINABILITY OF THE INSTANT APPEAL/S IN VIEW OF THE BOARDS CIRCULAR AS WELL (VIDE ITS JUDGMENT DATED 10/2/2010 IN ITA NOS. 775,1234,1247 & 1328 OF 2009). THIS IS HOW THE MATTER COMES UP BEFORE THE TRIBUNAL FOR THE PRESENT HEARING. 3.1 THE COMMON ISSUE ARISING IN THESE APPEALS IS TH E MAINTAINABILITY OF THE NOTICE U/S. 148 OF THE ACT, ISSUED ON 18-03-2005 (FOR A.Y. 1998 -99 AND 2000-01) AND ON 04-08-2004 (FOR A.Y. 1999-2000), IN VIEW OF THE FACT THAT THE NOTICES STOOD ISSUED AFTER A PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR (EXCEPT FOR A.Y. 2000-01). THE BASIS FOR THE ASSESSEES CHALLENGE, WHICH FOUND ACC EPTANCE BY THE TRIBUNAL IN THE FIRST ROUND, WAS THAT NO NOTICE U/S. 143(2) HAD BEEN ISSU ED, SO THAT THE REVENUE COULD NOT TAKE RECOURSE TO THE PROCEEDINGS U/S. 147. THE MATTER, EVEN AS NOTED BY THE HONBLE HIGH COURT PER ITS REMAND ORDER, HAS ATTAINED FINALITY WITH TH E DECISION BY THE HONBLE APEX COURT IN THE CASE OF A CIT VS. RAJESH JHAVERI STOCK BROKERS (P.) LTD. (2007) 291 ITR 500 (SC). IN I.T.A. NOS. 213 & 214/COCH/2006 & 1035/COCH/05& M.P. NO. 02/COCH/2007 P.M.PAUL VS.I.T.O. KOTTAYAM 3 FACT, EVEN EARLIER, THE HONBLE JURISDICTIONAL HIGH COURT HAD IN THE CASE OF CIT VS. ABAD FISHERIES , 258 ITR 641 (KER.), RELYING ON THE DECISION IN TH E CASE OF MAHANAGAR TELEPHONE NIGAM LTD. VS. CHAIRMAN, CBDT , 246 ITR 173 (DELHI), UNEQUIVOCALLY HELD THAT SO LONG AS THE CONDITIONS OF S. 147 ARE FULFIL LED, THE ASSESSING OFFICER (AO) IS FREE TO INITIATE PROCEEDINGS U/S. 147, AND THE FAILURE TO T AKE STEPS U/S.143(2) WILL NOT RENDER THE AO POWERLESS TO INITIATE RE-ASSESSMENT PROCEEDINGS EVEN IF INTIMATION U/S. 143(1) HAD BEEN ISSUED. IN FACT, EVEN PRIOR THERETO, IT HAD I N THE CASE OF CIT VS. K.V. MANIKARAN & CO. , 245 ITR 353 (KER.) HELD THAT AN INTIMATION U/S. 1 43(1)(A) IS NOT AN ORDER, SO THAT BY ITS ISSUE, THERE IS NO EXPRESSION OF OPINION BY THE ASSESSING AUTHORITY. 3.2 A FURTHER CONTENTION, HOWEVER, HAS BEEN RAI SED BY THE ASSESSEE IN THE INSTANT CASE, I.E., THAT IN EACH CASE THE RE-ASSESSMENT NOTICE WA S ISSUED BEYOND A PERIOD OF FOUR YEARS, SO THAT IT WOULD NOT LIE WHERE THERE HAS BEEN A TRU E AND FULL DISCLOSURE OF ALL THE MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT BY THE ASSESSEE PER THE RETURN OF INCOME. THERE IS NO CHARGE BY THE REVENUE IN THIS RESPECT, I.E., OF A F ALSE OR AN INCOMPLETE DISCLOSURE BY THE ASSESSEE, AND WHICH IS EVEN OTHERWISE APPARENT FROM THE FACT THAT THE INFORMATION LEADING TO THE FORMATION OF BELIEF BY THE AO IN RESPECT OF THE INCOME ESCAPING ASSESSMENT HAS ONLY BEEN GATHERED ONLY FROM THE RETURN/S OF INCOME . WE, HOWEVER, DO NOT FIND THE ASSESSEES SAID CONTENTION AS RELEVANT AND, THUS, M AINTAINABLE. THIS IS AS, EVEN AS POINTED OUT BY THE LD. DR DURING HEARING, THE SAID CONSIDER ATION QUA DISCLOSURE IS RELEVANT ONLY WHERE THE ASSESSMENT STOOD FRAMED U/S. 143(3) OF TH E ACT, WHILE IN THE INSTANT CASE THE RETURNS FOR ALL THE THREE YEARS HAVE BEEN ADMITTEDL Y ONLY PROCESSED U/S. 143(1). IN FACT, AS AFORE-NOTED, THE NOTICE U/S. 148 FOR A.Y. 2000-01 I S WITHIN FOUR YEARS, SO THAT THE ARGUMENT IS ALSO FACTUALLY INVALID FOR THAT YEAR. T HE ONLY RELEVANT CONSIDERATION QUA TIME PERIOD IS THE COMPLIANCE OF SEC. 149. THE SAME ENAB LES ISSUE OF NOTICE U/S. 148 BEYOND FOUR YEARS, BUT BEFORE SIX YEARS FROM THE END OF TH E RELEVANT ASSESSMENT YEAR, I.E., THE TIME FRAME UNDER WHICH THE NOTICE U/S. 148 FALLS FOR A.Y . 1998-99 AND 1999-2000, WHERE THE INCOME CHARGEABLE TO TAX AND WHICH HAS ESCAPED ASSE SSMENT, AMOUNTS TO OR IS LIKELY TO AMOUNT TO ` 1 LAKH OR MORE. THE SAID LIMIT IS EASILY CROSSED IN THE INSTANT CASE, AND FOR ALL I.T.A. NOS. 213 & 214/COCH/2006 & 1035/COCH/05& M.P. NO. 02/COCH/2007 P.M.PAUL VS.I.T.O. KOTTAYAM 4 THE YEARS; THE RELEVANT INCOME, AND ADMITTEDLY SO, FOR THE THREE CONSECUTIVE YEARS BEING ` 2,19,758/-, ` 2,61,834/- AND ` 2,85,205/- RESPECTIVELY. 3.3 IN VIEW OF THE FOREGOING, WE, ACCORDINGLY, F IND NO MERIT IN THE ASSESSEES CHALLENGE TO HIS ASSESSMENTS UNDER REFERENCE QUA JURISDICTION. 4. COMING TO THE ISSUE ON MERITS, THE ONLY ISSUE, A ND FOR WHICH THE ASSESSMENTS WERE IN FACT RE-OPENED, IS THE SET OFF OF THE INTEREST P AID BY THE ASSESSEE, WHICH IS ALLOWED TO FIVE FIRMS, AGAINST SALARY INCOME RECEIVED FROM ONE OR MORE OF THOSE PARTNERSHIP FIRMS. THE BASIS OF THE ASSESSEES CLAIM IS THAT THE SAID SALARY INCOME IS ASSESSABLE AS BUSINESS INCOME U/S. 28 OF THE ACT, AND THAT THERE IS A CLOS E NEXUS BETWEEN THE SAID INCOME AND THE INTEREST ALLOWED TO THE PARTNERSHIP FIRMS, BOTH ARI SING IN PURSUANCE TO THE PARTNERSHIP AGREEMENT/S. THE SAME DID NOT FIND ACCEPTANCE BY TH E REVENUE ON THE GROUND THAT THERE IS NO NEXUS BETWEEN THE SALARY INCOME RECEIVED FROM TH E FIRMS, EVEN THOUGH ASSESSABLE AS BUSINESS INCOME, AND THE INTEREST PAYMENTS THERETO. WHILE SALARY IS RECEIVED FOR THE SERVICES RENDERED, AND WHICH DOES NOT ENTAIL ANY EX PENDITURE BY WAY OF INTEREST, THE LATTER IS ONLY IN RESPECT OF THE CAPITAL BORROWED, DEDUCTI BLE U/S. 36(1)(III) OF THE ACT, WHERE FOR THE PURPOSE OF BUSINESS/PROFESSION CARRIED ON THE A SSESSEE DURING THE RELEVANT YEAR. THE ASSESSEE HAS NOT BEEN ABLE TO SHOW ANY FACTUAL OR L EGAL INFIRMITY IN THE SAID FINDING BY THE REVENUE. WHEN THE ASSESSEE CLAIMS A NEXUS A MATTE R OF FACT - IT IS FOR HIM TO SHOW AS TO HOW THE CAPITAL BORROWED (BY HIM) ENABLES THE RENDE RING OF SERVICE BY HIM TO THOSE FIRMS, AND IN RESPECT OF WHICH HE RECEIVES REMUNERATION AS A WORKING PARTNER. THE CLAIM IS QUIZZICAL AND TOTALLY UNSUBSTANTIATED. RATHER, IT O UGHT TO BE SUPPORTED BY INFORMATION AS TO THE CAPITAL BORROWED FROM EACH FIRM AND THE SALA RY EARNED THERE-FROM, FOR THE CURRENT AS WELL AS THE PRECEDING YEARS. AS FAR AS WE UNDERS TAND, THE RENDERING OF SERVICES BY A PARTNER IS INDEPENDENT OF AND MAY WELL BE WITHOUT H IS HAVING BORROWED ANY CAPITAL FROM THE FIRM. ON THE CONTRARY, AND AS IS GENERALLY THE CASE, IT IS ACCOMPANIED BY A CAPITAL CONTRIBUTION BY HIM (THE PARTNER) IN THE FIRM. APAR T FROM RAISING A CLAIM IN ITS RESPECT, THE ASSESSEE HAS NOT ADVANCED ITS CASE IN ANY MANNER, E VEN NOT FURNISHING ANY BASIS FOR THE I.T.A. NOS. 213 & 214/COCH/2006 & 1035/COCH/05& M.P. NO. 02/COCH/2007 P.M.PAUL VS.I.T.O. KOTTAYAM 5 SAME. WE, ACCORDINGLY, FIND NO MERIT IN THE ASSESSE ES CLAIM/S QUA THE SUBJECT MATTER OF THE ADDITION/S, I.E., ON MERITS, AND DISALLOW ITS R ELEVANT GROUNDS. WE DECIDE ACCORDINGLY. 5. IN VIEW OF OUR HAVING DECIDED THE ASSESSE ES APPEAL FOR AY 1999-00 ON MERITS, THE REVENUES MISCELLANEOUS PETITION CHALLENGING THE DI SMISSAL BY THE TRIBUNAL OF THE APPEAL FOR THAT YEAR ON THE GROUND OF JURISDICTION, DOES N OT REQUIRE ANY SPECIFIC ADJUDICATION, AND IS RENDERED INFRUCTUOUS. SO, HOWEVER, IT IS TO BE I N RESULT CONSIDERED AS ALLOWED. WE DECIDE ACCORDINGLY. 6. IN THE RESULT, THE ASSESSEES APPEALS FOR THREE YEARS ARE DISMISSED, AND THE REVENUES MISCELLANEOUS APPLICATION, ALLOWED. SD/- SD/- (N.R.S.GANESAN) (SANJAY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: ERNAKULAM DATED: 31ST JANUARY, 2012 GJ COPY TO: 1. SHRI P.M.PAUL, GLEN TEA FACTORY, GLEN MARY P.O., PEERMADE. 2. THE INCOME TAX OFFICER, WARD-3, KOTTAYAM. 3. THE COMMISSIONER OF INCOME-TAX (APPEALS)-IV, KOC HI. 4. THE COMMISSIONER OF INCOME-TAX, KOTTAYAM. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE . BY ORDER ASSISTANT REGISTRAR ITAT, COCHIN BENCH