M/s Prakash Publicis, Vijayawada V. The ACIT, Central Circle, Vijayawada

ITA 353/VIZ/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 50288 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 18-04-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 16-06-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: T LUCAS PETER
• Assessee Lawyers: Y SURYACHANDRA RAO
• Keywords: Search and seizure; Document seized; Opportunity of being heard; Additional evidence; Question of law; Documents seized
• Section: 132

Judgement Text

ITA NOS 352 TO 355 OF 2009 PRAKASH PUBLICIS VIJAYAW ADA PAGE 1 OF 7 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NOS.352 TO 355/VIZAG/2009 ASSESSMENT YEAS: 2002-03 TO 2005-06 PRAKASH PUBLICIS, VIJAYAWADA VS. ACIT CENTRAL CIRCLE, VIJAYAWADA (APPELLANT) PAN NO: AACFP 7333 D (RESPONDENT) APPELLANT BY: SHRI Y. SURYACHANDRA RAO, CA RESPONDENT BY: SHRI T. LUCAS PETER, CIT (DR) ORDER PER BENCH: ALL THESE FOUR APPEALS OF THE ASSESSEES ARE DIRECTE D AGAINST THE COMMON ORDER DATED 26 TH MARCH, 2009 PASSED BY LEARNED CIT(A)-I HYDERABAD, AND THEY RELATE TO THE ASSESSMENT YEARS 2002-03 TO 2005-06. 2. IN ALL THESE APPEALS, IDENTICAL GROUNDS HAVE BEEN RAISED. FOR THE SAKE OF CONVENIENCE, WE EXTRACT BELOW THE GROUNDS RAISED IN THE APPEAL RELATING TO ASSESSMENT YEAR 2002-03: I) THE ORDER OF THE CIT (A) IS OPPOSED TO LAW, WEI GHT OF EVIDENCE AND ALL PROBABILITIES OF THE CASE. II) THE LEARNED CIT (A) ERRED BOTH ON FACTS AND IN LAW IN SUSTAINING THE DISPUTED ADDITIONS. III) THE LEARNED CIT (A) ERRED BOTH ON FACTS AND IN LAW IN NOT CONSIDERING ADDITIONAL GROUNDS OF APPEAL AND ADDITIONAL EVIDENCE. IV) ANY OTHER GROUNDS THAT MAY BE RAISED AT THE TIME OF HEARING WITH THE LEAVE OF THE HON'BLE TRIBUNAL GROUND NOS.(I) AND (IV) ARE IN GENERAL NATURE AND H ENCE THEY DO NOT REQUIRE ANY ADJUDICATION. ITA NOS 352 TO 355 OF 2009 PRAKASH PUBLICIS VIJAYAW ADA PAGE 2 OF 7 3. THE FACTS RELATING TO THE CASE ARE STATED IN BRI EF. THE ASSESSEE FIRM IS ENGAGED IN ADVERTISEMENT BUSINESS. ITS HEAD OFFI CE IS LOCATED IN VIJAYAWADA AND BRANCH OFFICE IS LOCATED IN VISAKHAP ATNAM. THE DEPARTMENT CARRIED OUT SEARCH AND SEIZURE OPERATIONS UNDER SEC TION 132 OF THE ACT IN THE HANDS OF THE ASSESSEE ON 12.10.2004. DURING THE COURSE OF SEARCH, CERTAIN MATERIALS, IN THE FORM OF INTER OFFICE CORR ESPONDENCES BETWEEN THE HEAD OF OFFICE AND BRANCH OFFICE, WERE FOUND. THE S AID MATERIALS REVEALED THAT THE ASSESSEE HAS BEEN MAKING ILLEGAL PAYMENTS TO GOVT. SERVANTS AND OTHERS. BESIDES THE ABOVE, IT ALSO CAME TO LIGHT TH AT THE ASSESSEE HAS NOT BEEN FULLY ACCOUNTING THE EXPENDITURE INCURRED BY I T. THE ASSESSING OFFICER COLLATED THE DETAILS OF SUCH PAYMENTS/EXPENDITURE A ND ADDED THEM IN THE HANDS OF THE ASSESSEE IN ALL THE 4 YEARS AS DETAILE D BELOW: (A) ASSESSMENT YEAR 2002-03: ILLEGAL PAYMENTS RS. 65,000/- (B) ASSESSMENT YEAR 2003-04: I) ILLEGAL PAYMENTS RS. 65,000/- II) PAYMENTS OUTSIDE BOOKS OF ACCOUNT RS.1,76,16 6/- (C) ASSESSMENT YEAR 2004-05 I) ILLEGAL PAYMENTS RS. 30,600/- II) OUTSIDE BOOKS OF ACCOUNT RS.1,39,299/- III) ILLEGAL PAYMENTS TO GOVT.OFFICIALS RS.1,71,000 (D) ASSESSMENT YEAR 2005-06 I) PAYMENT OUTSIDE BOOKS OF ACCOUNT RS. 75,000/- II) SITE RENT PAID IN CASH RS. 1,11,974/- THE ASSESSEE CHALLENGED THESE ADDITIONS BEFORE THE LEARNED CIT (A) BUT WAS UNSUCCESSFUL. THE ASSESSEE ALSO RAISED CERTAIN ADDI TIONAL GROUNDS OF APPEAL AND ALSO FILED CERTAIN ADDITIONAL EVIDENCES. THE L EARNED CIT(A) DECLINED TO ADMIT THE SAID ADDITIONAL GROUNDS AS WELL AS THE AD DITIONAL EVIDENCES. HENCE THE ASSESSEE IS IN APPEAL BEFORE US. 4. WE SHALL FIRST DEAL WITH GROUND NO.3 REFERRED AB OVE. BEFORE THE LEARNED CIT (A), THE ASSESSEE RAISED CERTAIN ADDITI ONAL GROUNDS OF APPEAL ITA NOS 352 TO 355 OF 2009 PRAKASH PUBLICIS VIJAYAW ADA PAGE 3 OF 7 AND ALSO FILED CERTAIN ADDITIONAL EVIDENCES. THE LE ARNED CIT (A) NOTICED THAT THE ASSESSEE HAS RAISED CERTAIN NEW PLEAS BY WAY OF ADDITIONAL GROUNDS AND THE SAID PLEAS ARE NOT BASED UPON THE FACTS ALREADY AVAILABLE ON RECORD AND THEY REQUIRE FRESH INVESTIGATION OF FACTS. HENCE, THE LEARNED CIT(A) DECLINED TO ADMIT THE ADDITIONAL GROUNDS WITH THE F OLLOWING OBSERVATIONS: 04.3 IT IS ALSO RELEVANT IN THIS CONNECTION TO RE FER TO THE LAND MARK DECISION OF HON'BLE SUPREME COURT IN THE CASE OF NTPC VS. CIT (299 ITR 383), WHERE HON'BLE SUPREME COURT DISCUSSED THE ISSUE REGARDING ENTERTAINING OF ADDIT IONAL GROUND BY ITAT. IT WAS HELD BY THE HON'BLE SUPREME C OURT THAT ITAT HAD JURISDICTION TO EXAMINE A QUESTION OF LAW WHICH ARISES FROM THE FACTS AS FOUND BY THE AUTHORITIES B ELOW AND HAVING A BEARING ON THE TAX LIABILITY OF THE ASSESS EE. IN THIS DECISION HON'BLE SUPREME COURT REFERRED TO THE VIEW EXPRESSED IN THE EARLIER DECISION OF APEX COURT IN THE CASE OF JUTE CORPORATION OF INDIA (187 ITR 688), AND OBSERVE D THAT THE SAME PRINCIPLE WOULD APPLY TO APPEALS BEFORE IT AT ALSO. A COMBINED READING OF BOTH THE DECISIONS OF HON'BLE S UPREME COURT MENTIONED ABOVE WOULD INDICATE THAT ADDITIONA L GROUNDS OF LEGAL NATURE ARISING OUT OF FACTS ON REC ORD ARE TO BE PERMITTED IN APPELLATE PROCEEDINGS. THIS WOULD, IMPLIEDLY MEAN THAT RAISING OF ADDITIONAL GROUNDS REQUIRING F RESH INVESTIGATION INTO FACTS MAY NOT BE PERMITTED BY TH E APPELLATE AUTHORITY. IN THE PRESENT CASE, THE APPELLANT HAS T AKEN AN ALTOGETHER DIFFERENT STAND REGARDING THE NATURE AND SOURCE OF EXPENDITURE INDICATED FROM SEIZED DOCUMENTS AT THE APPELLATE STAGE THAN WHAT WAS TAKEN BEFORE THE ASSESSING OFFI CER FOR THESE ASSESSMENT YEARS. IN MY CONSIDERED OPINION, TH IS CANNOT BE SAID TO BE BONAFIDE AND HAS TO BE CONSIDE RED ONLY AS AFTERTHOUGHT. ACCORDINGLY, I REFUSE TO ADMIT THE ADDITIONAL GROUNDS TAKEN BY THE APPELLANT IN THESE APPEALS. THE LEARNED CIT (A) ALSO NOTICED THAT THE ADDITIONA L EVIDENCES FILED BEFORE HIM RELATED TO THE ADDITIONAL GROUNDS WHICH WERE DE CLINED TO BE ADMITTED. HENCE THE LEARNED CIT (A) DECLINED TO ADMIT THE SAI D ADDITIONAL EVIDENCES ALSO. 4.1 WE ALSO NOTICE THAT THE ASSESSEE HAS TAKEN NEW PLEAS BY WAY OF ADDITIONAL GROUNDS BEFORE THE LEARNED CIT (A) AND T HERE IS NO DISPUTE THAT ITA NOS 352 TO 355 OF 2009 PRAKASH PUBLICIS VIJAYAW ADA PAGE 4 OF 7 THE SAID PLEAS REQUIRE INVESTIGATION OF FRESH FACTS . FOR EXAMPLE THE ASSESSEE HAS CLAIMED THAT THE PARTNERS OF THE ASSESSEE FIRM ARE HAVING ENOUGH RESOURCES TO MEET THE ALLEGED EXPENDITURES ADDED BY THE ASSESSING OFFICER. THE FACTS RELATING TO THE SAID CLAIM ARE NOT AVAILA BLE ON RECORD. HENCE IN OUR VIEW, THE LEARNED CIT (A) HAS RIGHTLY DECLINED TO A DMIT THE ADDITIONAL GROUNDS OF APPEAL AND ALSO THE ADDITIONAL EVIDENCES WHICH ARE RELATED TO THE SAID ADDITIONAL GROUNDS. IN VIEW OF THE ABOVE, WE DO NOT FIND MERIT IN THIS GROUND AND ACCORDINGLY WE DISMISS THE SAME. 5. IN GROUND NO.2, THE ASSESSEE IS ASSAILING THE DEC ISION OF THE LEARNED CIT (A) IN SUSTAINING THE ADDITIONS MADE BY THE ASS ESSING OFFICER. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE MATERIALS UNEARTHED DURING THE COURSE OF SEARCH ARE ONLY INTER OFFICE C ORRESPONDENCES WHICH CANNOT BE TAKEN AS A VALID MATERIAL EVIDENCING ILLE GAL PAYMENTS AND OTHER EXPENDITURE. ALTERNATIVELY, THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT THE PARTNERS OF THE ASSESSEE FIRM ARE HAVING E NOUGH RESOURCES AND HENCE IT SHOULD BE PRESUMED THAT THE IMPUGNED PAYME NTS HAVE BEEN MET BY THE PARTNERS. 6. ON THE OTHER HAND THE LEARNED DEPARTMENTAL REPRE SENTATIVE SUBMITTED THAT THE INTER OFFICE CORRESPONDENCES ARE VALID MATERIAL TO PROVE THE ILLEGAL PAYMENTS AS THEY ARE TANTAMOUNT TO ADMI SSION BY THE ASSESSEE ITSELF. ACCORDINGLY HE SUBMITTED THAT THE ILLEGAL PAYMENTS NOTED IN THOSE MATERIALS HAVE BEEN RIGHTLY ADDED BY THE ASSESSING OFFICER AND CONFIRMED BY LEARNED CIT(A). HE FURTHER SUBMITTED THAT THE A SSESSEE HAS INCURRED CERTAIN EXPENSES OUTSIDE THE BOOKS OF ACCOUNT AS EV IDENCED BY THE SEIZED MATERIAL. THESE EXPENSES ARE EITHER CONTRACTUAL LI ABILITIES LIKE RENTAL PAYMENTS OR LIABILITIES TOWARDS SERVICES UTILIZED L IKE TAXI BILLS AND HENCE NO OTHER EVIDENCE IS REQUIRED TO PROVE THAT THEY HAVE BEEN PAID OUTSIDE THE BOOKS OF ACCOUNT. ACCORDINGLY, THE LEARNED DEPARTM ENTAL REPRESENTATIVE SUBMITTED THAT THE ORDER OF LEARNED CIT(A) SHOULD B E CONFIRMED. ITA NOS 352 TO 355 OF 2009 PRAKASH PUBLICIS VIJAYAW ADA PAGE 5 OF 7 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND CARE FULLY PERUSED THE RECORD. WE HAVE GONE THROUGH THE COPIES OF SEIZED MATERIALS PLACED IN THE PAPER BOOK COMPILED BY THE ASSESSEE. AS CONTENDED BY LEA RNED DEPARTMENTAL REPRESENTATIVE, WE ARE ALSO OF THE VIEW THAT THE AV ERSION MADE IN THE INTER OFFICE CORRESPONDENCES CONSTITUTES GOOD PIECE OF EV IDENCE TO PROVE THE ACTIVITIES OF THE ASSESSEE. HENCE, SUCH CORRESPOND ENCES CANNOT BE SIMPLY BRUSHED AGAINST. IN SO FAR AS ILLEGAL EXPENSES ARE CONCERNED, THERE CANNOT BE ANY OTHER EVIDENCE EXCEPT THE NOTING/ADMISSION M ADE BY THE ASSESSEE ITSELF. VIEWED FROM THIS ANGLE, IN OUR VIEW, THE I NTER OFFICE CORRESPONDENCES CONSTITUTE GOOD PIECE OF EVIDENCE. 7.1 THE CONTENTION OF LEARNED AUTHORISED REPRES ENTATIVE WAS THAT THE ALLEGED ILLEGAL PAYMENTS HAVE BEEN MENTIONED AS TO BE PAID IN SOME CORRESPONDENCES AND HENCE SUCH LETTERS CANNOT BE TA KEN A PROOF OF ACTUAL PAYMENT OF THE AMOUNTS SO MENTIONED. WE FIND FORCE IN THE SAID CONTENTIONS. IF IT IS STATED THAT THE ILLEGAL PAYME NTS ARE TO BE PAID IN SOME DOCUMENT, THEN IT CANNOT BE PRESUMED THAT THE PAYME NT SO MENTIONED THEREIN HAS ACTUALLY BEEN EFFECTED, UNLESS THERE IS ANY OTHER CORROBORATIVE MATERIAL EVIDENCING THE ACTUAL PAYMENT THEREOF. 7.2 HOWEVER, IF THE ILLEGAL PAYMENTS HAVE BEEN MENTIONED AS PAID, FOR EXAMPLE, THE AMOUNT OF RS.50,000/- PAID TO THE REGI STRAR DURING THE YEAR RELEVANT TO THE ASSESSMENT YEAR 2002-03, THEN IT IS REASONABLE TO PRESUME THAT THE ASSESSEE HAS EFFECTED SUCH PAYMENTS AND HE NCE THEY ARE REQUIRED TO BE ADDED TO THE INCOME OF THE ASSESSEE. 7.3 HOWEVER, IN OUR VIEW, THE ABOVE SAID CRITER IA SHOULD NOT BE APPLIED IN RESPECT OF EXPENSES WHICH ARE OTHERWISE LEGAL IN NA TURE. IN SO FAR AS EXPENSES ARE CONCERNED, IT CAN BE REASONABLY PRESUM ED THAT THE ASSESSEE HAS INCURRED THOSE EXPENSES OUTSIDE THE BOOKS OF AC COUNT, IF THE SAID ITA NOS 352 TO 355 OF 2009 PRAKASH PUBLICIS VIJAYAW ADA PAGE 6 OF 7 PAYMENT IS REQUIRED TO BE MADE IN PURSUANCE OF CONT RACT (ORAL OR WRITTEN) OR FOR UTILIZATION OF SERVICES. FOR INSTANCE, TAXI BI LL, SITE RENT ETC. ARE EXAMPLES OF CERTAIN EXPENSES WHICH FALL IN THE CATEGORY DISC USSED ABOVE. HENCE, IN OUR VIEW, IT WOULD BE REASONABLE TO PRESUME THAT TH E ASSESSEE HAS PAID THOSE AMOUNTS EVEN IF THERE IS NO MATERIAL EVIDENCI NG ACTUAL PAYMENT. 8. THE LEARNED AUTHORISED REPRESENTATIVE CONTENDE D THAT THE IMPUGNED PAYMENTS COULD BE PRESUMED TO HAVE BEEN PAID OUT OF THE SOURCES AVAILABLE WITH THE PARTNERS. THE VERY SAME PLEA RAISED BEFOR E THE LEARNED CIT(A) BY WAY OF ADDITIONAL GROUNDS OF APPEAL WAS REJECTED BY THE FIRST APPELLATE AUTHORITY AND THE SAID DECISION WAS ALSO CONFIRMED BY US IN THE PRECEDING PARAGRAPHS. HENCE WE ARE UNABLE TO ACCEPT THE SAID PLEA OF THE ASSESSEE. 9. THE FOREGOING DISCUSSIONS SHOW THAT THE ENTIR E ADDITIONS REQUIRE RE- EXAMINATION IN THE LIGHT OF PRINCIPLES DISCUSSED AB OVE. ACCORDINGLY, WE SET ASIDE THE ORDER OF LEARNED CIT(A) AND RESTORE THE I SSUES TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO RE-EXAMINE TH E ISSUES AFRESH IN THE LIGHT OF PRINCIPLES DISCUSSED ABOVE AND TAKE APPROP RIATE DECISION IN ACCORDANCE WITH LAW. NEED LESS TO STATE, THE ASSES SEE SHOULD BE GIVEN NECESSARY OPPORTUNITY OF BEING HEARD. 10.. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE ARE TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 24 TH JUNE, 2011. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM, DATE:24-06-2011 ITA NOS 352 TO 355 OF 2009 PRAKASH PUBLICIS VIJAYAW ADA PAGE 7 OF 7 COPY TO 1 M/S PRAKASH PUBLICIS, D.NO. 27-29-30 MUSEUM ROAD, GOVERNORPET, VIJAYAWADA 520 002 2 THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, VIJAYAWADA 3 4. THE CIT CENTRAL, HYDERABAD THE CIT(A)-I, HYDERABAD 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM