A P RAJAPPAN, Ernakulam V. ACIT, Ernakulam

ITA 295/COCH/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 65003 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 7 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-12-2012
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Assessment Year: 2004-2005
• Appeal Filed On: 02-05-2011
• Court: TRIBUNAL
• Department Lawyers: SUSAN GEORGE VARGHESE
• Assessee Lawyers: JOHN PRAKASH
• Keywords: Business income; Search and seizure; Opportunity of being heard; Principle of natural justice
• Section: 143(3); 142(1); 153A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND B.R.BASKAR AN, AM I.T.A. NOS. 294 & 295/COCH/2011 ASSESSMENT YEARS: 2003-04 & 2004-05 SHRI A.P. RAJAPPAN, ANICKASSERIL, KADAMATTOM P.O., KOLENCHERY, ERNAKULAM. [PAN: ABHPR 5727R] VS. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-2, ERNAKULAM. (ASSESSEE -APPELLANT) (REVENUE-R ESPONDENT) ASSESSEE BY SHRI JOHN PRAKASH, ADV. REVENUE BY SMT. SUSAN GEORGE VARGHESE, SR. DR DATE OF HEARING 23/10/2012 DATE OF PRONOUNCEMENT 07/12/2012 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEALS OF THE ASSESSEES ARE DIRECTED AGAI NST THE SEPARATE ORDERS DATED 30-12- 2010 PASSED BY THE LD. CIT(A)-III, KOCHI AND THEY R ELATE TO THE ASSESSMENT YEARS 2003-04 AND 2004-05. 2. THE GROUNDS RAISED BY THE ASSESSEE RELATES TO TH E SOLITARY ISSUE, VIZ., WHETHER THE LD. CIT(A) IS JUSTIFIED IN CONFIRMING THE ADDIT IONS MADE IN BOTH YEARS ON THE BASIS OF UNCORROBORATED FINANCIAL STATEMENTS FOUND DURING TH E COURSE OF SEARCH. 3. THE FACTS RELATING TO THE ISSUE ARE STATED IN BR IEF. THE ASSESSEE IS A PWD CONTRACTOR AND HE IS CARRYING OUT THE CONTRACT WORK S THROUGH THE PARTNERSHIP FIRMS FORMED BY HIM VIZ., M/S. A.P. RAJAPPAN & COMPANY, M &R CONSTRUCTIONS AND ST. PETERS CONSTRUCTION. THE DEPARTMENT CONDUCTED SEARCH OPER ATIONS IN THE RESIDENCE OF THE ASSESSEE ON 27-03-2007. DURING THE COURSE OF SEARC H, TWO LOOSE SHEETS CONTAINING FINANCIAL STATEMENTS, I.E., THE PROFIT AND LOSS ACC OUNT AND BALANCE SHEET FOR THE YEARS I.T.A. NOS. 294 & 295.COCH/2011 2 ENDING 31-03-2003 AND 31-03-2004 WERE FOUND. BOTH THE FINANCIAL STATEMENTS WERE TITLED AS A.P. RAJAPPAN, CONTRACTOR, ANIKKASSERIL HOUSE, KADAMATTOM. THE ASSESSING OFFICER, BY INVOKING THE PROVISIONS ENVISAGED IN SE C. 132(4A) OF THE ACT, TREATED THE CONTENTS OF THE FINANCIAL STATEMENTS TO BE TRUE. A CCORDINGLY, THE AO TOOK THE VIEW THAT THE ASSESSEE HAS SUPPRESSED THE INDIVIDUAL BUSINESS INCOME AS DISCLOSED IN THE SAID FINANCIAL STATEMENTS. THOUGH THE ASSESSEE CONTENDED THAT THESE STATEMENTS WERE PREPARED FOR A SPECIFIC PURPOSE OF GETTING PRE-QUA LIFICATION IN A TENDER AND FURTHER THEY WERE NOT SUPPORTED BY ANY BOOKS OF ACCOUNTS, Y ET THE ASSESSING OFFICER DID NOT ACCEPT THOSE CONTENTIONS. ACCORDINGLY, THE ASSESSI NG OFFICER ADDED THE INCOME FOUND IN THE SAID PROFIT AND LOSS ACCOUNTS. VIZ., RS. 10,82, 238/- IN THE ASSESSMENT YEAR 2003-04 AND RS.11,25,440/- IN THE ASSESSMENT YEAR 2004-05. AGGRIEVED, THE ASSESSEE CARRIED THE MATTERS IN APPEAL BEFORE THE LD. CIT(A), BUT CO ULD NOT SUCCEED. HENCE THE ASSESSEE HAS FILED THESE APPEALS BEFORE US SEEKING RELIEF. 4. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE IMPUGNED FINANCIAL STATEMENTS HAVE BEEN PREPARED FOR A SPECIFIC PURPOS E OF GETTING PRE-QUALIFICATION FOR SUBMITTING TENDERS WITH THE KERALA STATE IRRIGATION DEPARTMENT. HE FURTHER SUBMITTED THAT THESE FINANCIAL STATEMENTS HAVE BEEN PREPARED WITHOUT ANY SUPPORTING BOOKS OF ACCOUNTS OR OTHER EVIDENCE. THE SAID CLAIM IS SUPPO RTED BY THE FACT THAT THE ASSESSEE HAS NOT CREATED ANY CORRESPONDING ASSET EQUIVALENT TO PROFIT SHOWN IN THE FINANCIAL STATEMENTS. THE ASSESSEE DID NOT EXECUTE ANY CONTR ACT AS SHOWN IN THE FINANCIAL STATEMENTS AND THE SAID CLAIM IS CORROBORATED BY TH E FACT THAT THE TURNOVER SHOWN IN THE FINANCIAL STATEMENTS WERE NOT SUBJECTED TO ANY TAX DEDUCTED AT SOURCE. THE LD. AR SUBMITTED THAT THE ASSESSEE HAS BEEN ASKED TO PROVE A NEGATIVE FACT, WHICH HE COULD NOT PROVE AT ALL. HE FURTHER SUBMITTED THAT THE A SSESSEE HAS OFFERED THIS EXPLANATION TO THE AO, BUT HE HAS REJECTED THE SAID CLAIM WITHOUT MAKING ANY VERIFICATION AND BY SIMPLY INVOKING THE PROVISIONS OF SEC. 132(4A) OF T HE ACT, THE AO HAS TAKEN ADVERSE INFERENCES AGAINST THE ASSESSEE. THE LD A.R SUBMIT TED THAT THE PRESUMPTION PROVIDED U/S 132(4A) IS A REBUTTABLE PRESUMPTION AND THE ASS ESSEE HAS REBUTTED THE SAME BY OFFERING DUE EXPLANATIONS. I.T.A. NOS. 294 & 295.COCH/2011 3 5. ON THE CONTRARY, THE LD. DR SUBMITTED THAT THE I MPUGNED FINANCIAL STATEMENTS HAVE BEEN CERTIFIED BY A QUALIFIED CHARTERED ACCOUN TANT, WHO HAS GIVEN THE REPORT THAT THESE STATEMENTS HAVE BEEN PREPARED AS PER THE BOOK S OF ACCOUNTS PRODUCED BEFORE HIM. ACCORDINGLY, THE LD D.R SUBMITTED THAT THE AO HAS PRESUMED THAT THESE FINANCIAL STATEMENTS ARE SUPPORTED BY THE BOOKS OF ACCOUNT AN D THE CONTENTS OF THE SAME ARE TRUE, AS PER THE PROVISIONS OF SEC. 132(4A) OF THE ACT. THE LD. DR FURTHER SUBMITTED THAT NON DEDUCTION OF TDS ON THE REPORTED TURNOVER, BY ITSELF SHALL NOT DISPROVE THE GENUINENESS OF THE SAME, AS THERE MAY BE FAILURE ON THE PART OF THE PAYER TO DEDUCT TAX AT SOURCE. ACCORDINGLY, THE LD D.R CONTENDED THAT THE ORDERS PASSED BY LD CIT(A) SHOULD BE UPHELD. 6. IN A REJOINDER, THE LD. AR SUBMITTED THAT THE AS SESSING OFFICER INITIALLY ISSUED THE NOTICES U/S. 142(1) OF THE ACT BY MENTIONING THE PA N NUMBER OF A PARTNERSHIP FIRM, IN WHICH THE ASSESSEE IS A PARTNER. HOWEVER, THE AO C OMPLETED THE ASSESSMENTS IN THE HANDS OF THE ASSESSEE IN HIS INDIVIDUAL CAPACITY. A CCORDINGLY, HE CONTENDED THAT THE IMPUGNED ASSESSMENTS ARE INVALID. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND CAREFULL Y PERUSED THE RECORD. WE NOTICE THAT THE ASSESSMENTS UNDER CONSIDERATION HAVE BEEN COMPLETED U/S. 153A OF THE ACT R.W.S. 143(3) OF THE ACT. THUS, WE NOTICE THAT THE ASSESSING OFFICER HAS ASSUMED JURISDICTION FOR CARRYING OUT THE IMPUGNED ASSESSME NTS U/S. 153A OF THE ACT BY VIRTUE OF SEARCH AND SEIZURE OPERATIONS CONDUCTED IN THE HAND S OF THE ASSESSEE ON 27-03-2007. AS POINTED OUT BY THE LD. AR, WE NOTICE THAT THE AS SESSING OFFICER HAS MENTIONED THE PAN ACCOUNT OF THE PARTNERSHIP FIRM IN THE NOTICES ISSUED U/S. 142(1) OF THE ACT. IN OUR VIEW, THE MISTAKE COMMITTED IN MENTIONING WRONG PA NO. IN THE SAID NOTICE WOULD NOT NULLIFY THE ASSESSMENTS, SINCE THE AO HAS ASSUMED T HE JURISDICTION FOR MAKING ASSESSMENTS U/S 153A OF THE ACT, WHICH IS OTHERWISE VALID. WE ALSO NOTICE THAT THE ASSESSEE HAS APPEARED AND COOPERATED WITH THE AO IN THE ASSESSMENT PROCEEDINGS. ACCORDINGLY, WE DO NOT FIND MERIT IN THE CONTENTION S OF THE ASSESSEE ON THIS ISSUE. I.T.A. NOS. 294 & 295.COCH/2011 4 8. WITH REGARD TO THE IMPUGNED FINANCIAL STATEMENTS FOUND DURING THE COURSE OF SEARCH, THE TAX AUTHORITIES HAVE TAKEN A VIEW THAT THE CONTENTS OF THE SAID FINANCIAL STATEMENTS ARE TRUE AND FOR THAT PURPOSE THEY HAVE PLACED RELIANCE ON SUB SECTION 4A OF SEC. 132 OF THE ACT. THOUGH THE SAID PRESUMPTION I S A REBUTTABLE PRESUMPTION, YET THE TAX AUTHORITIES HAVE TAKEN THE VIEW THAT THE ASSESS EE HAS NOT REBUTTED THE SAME BY PRODUCTION OF ANY OTHER MATERIAL. 9. WE NOTICE THAT THE ASSESSEE HAS EXPLAINED THE OB JECT BEHIND PREPARING THE SAID FINANCIAL STATEMENTS BY WAY OF EXPLANATIONS SUBMITT ED BEFORE THE ASSESSING OFFICER. HOWEVER, WE NOTICE THAT THE TAX AUTHORITIES HAVE SI MPLY REJECTED THE SAID EXPLANATIONS AND THEY HAVE NOT TAKEN ANY STEPS TO DISPROVE THE S AID EXPLANATION. THE AO APPEARS TO HAVE REJECTED THE EXPLANATIONS ON THE REASONING THA T IT IS THE RESPONSIBILITY OF THE ASSESSEE TO DISPROVE THE CONTENTS OF THE FINANCIAL STATEMENTS. HOWEVER, THE CONTENTION OF THE ASSESSEE IS THAT IT WOULD NOT BE POSSIBLE FO R HIM TO PROVE A NEGATIVE FACT. 10. WE NOTICE THAT THE ASSESSEE HAS BEEN DOING TH E CONTRACT BUSINESS THROUGH PARTNERSHIP FIRMS ONLY AND NO EVIDENCE IS BROUGHT O N RECORD TO SHOW THAT THE ASSESSEE HAS BEEN CARRYING ON THE CONTRACT WORKS IN THE INDI VIDUAL CAPACITY. THE IMPUGNED FINANCIAL STATEMENTS HAVE BEEN PRESUMED TO BELONG T O THE INDIVIDUAL STATUS OF THE ASSESSEE, WHICH GOES AGAINST THE FACTS AVAILABLE ON RECORD. VIEWED FROM THIS ANGLE, IN OUR VIEW, IT WOULD BE JUSTIFIABLE ON THE PART OF TH E AO TO EXAMINE THE EXPLANATIONS OFFERED BY THE ASSESSEE IN ORDER TO FIND OUT THE VE RACITY OF THE SAME, INSTEAD OF REJECTING THE SAME ON THE FACE OF IT. ACCORDINGLY, IN THE INTEREST OF NATURAL JUSTICE, THIS ISSUE REQUIRES FRESH EXAMINATION AT THE END OF THE AO. ACCORDINGLY, WE SET ASIDE THE ORDERS OF THE LD CIT(A) IN BOTH THE YEARS AND RESTO RE THEM TO THE FILE OF THE AO WITH THE DIRECTION TO EXAMINE THE VERACITY OF THE EXPLANATIO NS VIS-A-VIS THE IMPUGNED FINANCIAL STATEMENTS AND TAKE OBJECTIVE DECISION ON THEM IN A CCORDANCE WITH LAW AFTER AFFORDING NECESSARY OPPORTUNITY OF BEING HEARD TO THE ASSESSE E. I.T.A. NOS. 294 & 295.COCH/2011 5 11. IN THE RESULT, BOTH THE APPEALS FILED BY THE AS SESSEE ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED ACCORDINGLY ON 07-12-20 12. SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 07TH DECEMBER, 2012 GJ COPY TO: 1. SHRI A.P. RAJAPPAN, ANICKASSERIL, KADAMATTOM P.O ., KOLENCHERY, ERNAKULAM. 2. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CENTRA L CIRCLE-2, ERNAKULAM. 3. THE COMMISSIONER OF INCOME-TAX (APPEALS)-III, KO CHI. 4.THE COMMISSIONER OF INCOME-TAX, CENTRAL KOCHI. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T, COCHIN