Baby Antony L/H Varkey Antony, Alappuzha V. ITO, Alappuzha

ITA 806/COCH/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 4351 (ITAT-COCHIN)
• Duration Of Justice: 3 year(s) 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-06-2010
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 07-03-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 07-09-2006
• Court: TRIBUNAL
• Department Lawyers: ANTONY WIFE
• Keywords: Unexplained cash credit
• Section: 43B; 142(1); 133A; 143(1); 147; 131; 148; 144

Judgement Text

IN THE INCOME TAX APPELLATE T RIBUNAL COCHIN BENCH, COC HIN BEFORE S/SHRI N.VIJAYAKUMARAN, JM AND SANJAY ARORA, AM I.T.A. NO. 806/COCH./2007 ASSESSMENT YEAR : 2003-04 SMT. BABY ANTONY, WIFE AND LEGAL HEIR OF LATE SHRI VARKEY ANTONY, NENMELIPARAMBIL, EZHUPUNNA POST, CHERTHALA. [PAN: AESPA 9628L] VS. .THE ITO, WARD-3, ALLEPPEY. (ASSESSEE-APPELLANT) (REVENUE-RESPONDENT) ASSESSEE BY NONE REVENUE BY DR. BABU JOSEPH, SR. DR O R D E R PER SANJAY ARORA, AM: THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDER BY THE COMMISSIONER OF INCOME- TAX (APPEALS)-IV, KOCHI (CIT(A) FOR SHORT) DATED 18.6.2007, AND THE ASSESSMENT YEAR (A.Y.) UNDER REFERENCE IS 2003-04. 2. NONE APPEARED ON BEHALF OF THE APPELLANT, WH EN HER APPEAL WAS CALLED OUT FOR HEARING; THE ASSESSEE PREFERRING AN ADJOURNMENT APP LICATION BY THE LD. COUNSEL IN WRITING, CITING AILMENT AS THE REASON FOR THE SAME. AS THIS CASE HAS BEEN ADJOURNED TIME AND AGAIN FOR HEARING AT THE REQUEST FROM THE ASSESSEE, MADE BY THE LD. AR, WITH NO ACCENTUATING CIRCUMSTANCE, WITH THE PRESENT ADJO URNMENT APPLICATION ALSO BEING NOT PRESENTED THROUGH ANY PERSON, THE BENCH DECLINED TH E ADJOURNMENT REQUEST IN VIEW OF THE MATTER BEING OLD, AND PROCEEDED TO DISPOSE THIS APPEAL AFTER HEARING THE LD. DR IN THE MATTER. 3.1 IT SHALL BE RELEVANT AND IN ORDER TO RECOUNT TH E BACKGROUND FACTS OF THE CASE BEFORE WE PROCEED TO DECIDE THE INDIVIDUAL GROUNDS. THE RETURN OF INCOME FOR THE YEAR ITA. NO. 806/COCH./2007 2 WAS FILED BY THE ASSESSEE, LT. SH. VERKEY ANTONY, P ROPRIETOR, ENVEES INN, BAR &RESTAURANT, ERAMALLOOR, ON 30.11.2003 AT AN INCOME OF RS. 2,18,720/- AND AGRICULTURAL INCOME AT NIL. THE SAME STOOD PROCESSE D U/S. 143(1) OF THE INCOME-TAX ACT, 1961 (THE ACT HEREINAFTER). SUBSEQUENTLY, A NOTICE U/S. 148 OF THE ACT WAS ISSUED ON 4.10.2005 BY FOLLOWING THE DUE PROCESS OF LAW, TO WHICH THE ASSESSEE DID NOT RESPOND. THIS WAS FOLLOWED BY A NOTICE U/S. 142(1) OF THE ACT DATED 29.5.2006, TO WHICH AN ADJOURNMENT FOR ONE MONTH WAS SOUGHT. THE SAME STOOD GRANTED, THOUGH TO NO RESPONSE BY THE ASSESSEE ON THE NEXT DATE OF HEA RING, I.E., 28.6.2006, WHEREAT THE ASSESSEE AGAIN REQUESTED FOR AN ADJOURNMENT FOR ONE MONTH. A DETAILED LETTER DATED 11.7.2006 WAS ISSUED, TOGETHER WITH SUMMONS FOR PER SONAL APPEARANCE AND PRODUCTION OF BOOKS OF ACCOUNTS. HOWEVER, THE ASSESSEE EXPIRED ON 20.7.2006. IN VIEW OF THE ASSESSEES DEMISE, PETITIONS FOR ADJOURNMENT WERE L ODGED BY HIS WIFE AND LEGAL REPRESENTATIVE, SMT. BABY ANTONY, WHICH STOOD GRANT ED BY THE ASSESSING OFFICER (AO). FINALLY, A DETAILED SHOW-CAUSE NOTICE WAS ISS UED FOR COMPLETING ASSESSMENT UNDER SECTION 144 OF THE ACT, INVITING OBJECTIONS O N EACH OF THE PROPOSED ADDITIONS. THE ASSESSEES BUSINESS PREMISES WAS SUBJECT TO SUR VEY U/S. 133A OF THE ACT ON 17.3.2003, AND BOOKS OF ACCOUNTS AND OTHER INCRIMIN ATING MATERIAL AS FOUND, IMPOUNDED. ON THE BASIS THEREOF, THE ASSESSEES LIQ UOR BAR SALES AND RESTAURANT SALES WERE WORKED OUT, AND WHICH WERE FOUND TO BE FAR IN EXCESS OF THOSE RECORDED IN THE REGULAR BOOKS OF ACCOUNTS. ACCORDINGLY, THE ASSESSE ES TURNOVER FOR THE YEAR IN RESPECT OF BOTH THESE SECTIONS WAS ESTIMATED - BY ASSUMING A 340 WORKING-DAY YEAR - AT RS. 268.46 LAKHS AND RS. 9.96 LAKHS RESPECTIVELY, I.E., AS AGAINST THE DISCLOSED TURNOVER OF RS. 191.42 LAKHS AND 6.06 LAKHS RESPECTIVELY. INVEN TORIES OF STOCK WERE ALSO TAKEN THEREAT, AND WHICH REVEALED BOTH SHORTAGES AND EXCE SSES IN DIFFERENT FOREIGN LIQUORS BEING SOLD, FURTHER SUBSTANTIATING THE INFERENCE OF THE ASSESSEE BEING ENGAGED IN OUT- OF-BOOKS PURCHASES AND SALES. THE GROSS PROFIT ON T HE LIQUOR SALES WAS WORKED OUT ON THE BASIS OF COST AND THE SALE PRICE PER UNIT FOR D IFFERENT PRODUCTS, TO ARRIVE AT AN AVERAGE GROSS PROFIT OF 28.59% AND, ACCORDINGLY, TH E AO APPLIED THE GROSS PROFIT ON THE TOTAL ESTIMATED TURNOVER OF 278.42 LAKHS AT 28% , I.E., AT RS. 77,95,642/-, EVEN AS IN HIS VIEW THE NORMATIVE GROSS PROFIT ON COOKED FOOD SALES WAS NOT LESS THAN 45%. ITA. NO. 806/COCH./2007 3 DEDUCTING THERE-FROM THE TOTAL EXPENSES OF RS. 3,39 1,955/-, I.E., AS CLAIMED BY THE ASSESSEE PER HIS P & L A/C FOR THE YEAR FORMING PAR T OF THE RETURN OF INCOME, SAVE THE SALES-TAX ARREARS OF RS. 5,00,359/-, THE NET PROFIT FOR THE YEAR STOOD ESTIMATED AT RS. 44,03,687/-. THE NON-ALLOWANCE OF SALES-TAX WAS ON ACCOUNT OF THE NON-SATISFACTION OF THE MANDATE OF S. 43B OF THE ACT. FURTHER ON, APPROACHING THE MATTER FROM THE OTHER SIDE, THE AO FOUND UNEXPLAINED CREDITS IN THE CAPITAL ACCOUNT AND UNEX PLAINED INVESTMENTS AGGREGATING TO RS. 27,57,686/-. THE SAME, IN HIS VIEW, REPRESENTED THE UNDISCLOSED INCOME EARNED BY THE ASSESSEE FROM HIS BUSINESS, ROUTED THUS, IN PAR T, THROUGH HIS BOOKS, TO FINANCE THE SAME; IT HAVING BEEN ESTABLISHED THAT THE ASSESSEE WAS RUNNING UNACCOUNTED BUSINESS AS WELL. ADDING THIS TO THE RETURNED INCOME WOULD R ESULT IN AN INCOME ESTIMATE OF RS. 29,76,406/-. AS SUCH, A CASE FOR TELESCOPING OF TH E TWO, ACCORDING TO HIM, WAS MADE OUT UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. AVERAGING THE TWO WORKINGS, SO AS TO NEGATE ALL CHARGES OF EXCESSIVENESS, THE BUSINES S INCOME FROM THE BAR AND RESTAURANT WAS ESTIMATED BY HIM AT RS. 36.90 LAKHS. ADDING ANOTHER INCOME OF RS. 65,000/-, WHICH STOOD ADMITTED BY THE ASSESSEE IN A NSWER TO QUESTION NO. 17 OF HIS SWORN STATEMENT U/S. 131 DATED 19/3/2003 AS INCOME FROM 8 ACRES OF NILAM OWNED AT EZHUPUNNA FOR CHEMMEEN KETTU, BEING NON-AGRICULTURA L IN NATURE, THE TOTAL INCOME FOR THE YEAR STOOD ASSESSED AT RS. 3,755,000/- VIDE ORDER U/S. 144 OF THE ACT DATED 12/12/2006. 3.2 IN APPEAL, THE MATTER STOOD REMITTED BACK BY THE LD. CIT(A) TO THE FILE OF THE AO TO ALLOW ANOTHER ROUND OF OPPORTUNITY TO THE ASSESS EE TO MEET THE FINDINGS OF THE ASSESSING OFFICER. THE MATTER WAS AGAIN EXAMINED BY THE AO, ALLOWING OPPORTUNITY TO THE ASSESSEE TO STATE ITS CASE, AND A REMAND REP ORT SUBMITTED ON ITS BASIS. THE SAME STOOD ELABORATELY DEALT WITH BY THE LD. CIT(A), FAI THFULLY RECORDING THE SAME AT PAGES 3 TO 9 OF THE APPELLATE ORDER, FOLLOWED BY HER FINDIN GS, WHICH READ AS UNDER, CONFIRMING THE ASSESSMENT: 6. I HAVE CAREFULLY GONE TROUGH THE ISSUES RAISED BY AO WHICH CAN BE BRIEFLY SUMMARIZED AS UNDER:- ITA. NO. 806/COCH./2007 4 (1) THE SET OF BOOKS PRODUCED BEFORE TH E AO DURING REMAND PROCEEDINGS ARE ENTIRELY DIFFERENT FROM THE BOOKS FROM WHICH THE S TATEMENT OF ACCOUNTS FILED WITH THE RETURN HAVE BEEN PREPARED. (2) THERE ARE DISCREPANCIES IN THE FIGURES OF LIQU OR SALES AND COOKED FOOD SALES AS PER THE IMPOUNDED BOOKS DURING SURVEY AND THE B OOKS NOW PRODUCED BY THE APPELLANT DURING REMAND PROCEEDINGS. (3) THE BOOKS OF ACCOUNTS WERE PRODUCED BY SMT. B ABY ANTONY BEFORE THE COMMERCIAL TAX OFFICER ON 26.8.2006, BUT NOT PRODU CED BEFORE THE AO ON SUBSEQUENT DATES. AFTER CAREFULLY CONSIDERING THE ARGUMENTS OF THE AO , I AM OF THE VIEW THAT THE AO HAS BEEN VERY JUDICIOUS IN ESTIMATING THE INCOME FROM E NVEES INN, BAR & RESTAURANT. I, THEREFORE, SEE NO REASON TO INTERFER E IN THE COMPUTATION OF INCOME MADE BY THE ASSESSING OFFICER. AS REGARDS THE INCOM E FROM CHEMEEN KETTU, THERE IS NO DOUBT THAT THE SAME IS TAXABLE AND HAS BEEN CORRECTLY ASSESSED. AGGRIEVED, THE ASSESSEE IS IN APPEAL. 4. WE HEARD THE LD. DR, AND PERUSED THE MATERIAL ON RE CORD. 4.1 WE FIRSTLY OBSERVE A CHALLENGE TO THE INVOC ATION OF SECTION 147 AND 144 OF THE ACT, RAISED PER ITS TWO GROUNDS, ALLEGING IT TO BE BAD IN LAW. WE, HOWEVER, DO NOT FIND ANY SUBSTANTIATION OF ITS CLAIM BY THE ASSESSEE, SO THAT THE SAME IS WITHOUT ANY BASIS. THE REVENUE HAS IN ITS POSSESSION DETAILED MATERIAL S AND FINDINGS, ARISING FROM SURVEY OPERATION AND, THEREFORE, TO STATE THAT THERE ARE N O REASONS TO BELIEVE OF THE ASSESSEE HAVING NOT RETURNED HIS CORRECT INCOME, OR SOME INC OME HAVING ESCAPED INCOME, IS, ON THE FACE OF IT, UNTENABLE. AS EXPLAINED BY THE HON BLE APEX COURT TIME AND AGAIN, THE SUFFICIENCY OR EVEN THE CORRECTNESS OF THE MATERIAL IS NOT AN ISSUE AT THE STAGE OF THE ISSUE OF NOTICE U/S. 148, WHAT ALONE BEING RELEVANT AT THE TIME IS THE EXISTENCE OF MATERIAL IN THE POSSESSION OF THE REVENUE WHICH WOU LD LEAD, PRIMA FACIE , TO THE FORMATION OF AN HONEST AND SINCERE BELIEF THAT SOME INCOME HAS ESCAPED ASSESSMENT, PARTICULARLY WHERE THE REASSESSMENT IS BEING INITIA TED WITHIN FOUR YEARS OF THE RELEVANT YEAR, AS IS THE INSTANT CASE (REFER: RAYMOND WOOLLEN MILLS LTD. V. ITO , 236 ITR 34 (SC)). SIMILARLY, AS THE NARRATION OF THE EVENTS WO ULD BEAR OUT, THERE BEING NO ITA. NO. 806/COCH./2007 5 COMPLIANCE BY THE ASSESSEE ON MORE THAN ONE OCCASSI ON, I.E., TO THE NOTICE ISSUED U/S. 142(1), EVEN AS ONE IS SUFFICIENT FOR THE PURPOSE, EVIDENCING SUSTAINED NON-EXTENSION OF COOPERATION BY THE ASSESSEE, APPLICATION OF SECT ION 144, AND WHICH STOOD APPLIED BY THE AO BY STRICTLY OBSERVING THE PROCEDURE LAID DOW N FOR THE PURPOSE OF PASSING AN ORDER THERE-UNDER, WE FIND NO BASIS FOR THE CHALLEN GE TO THE SAME. 4.2 WITH REGARD TO THE ESTIMATION OF INCOME AS MADE BY THE AO; AS DETAILED BOTH IN THE ASSESSMENT ORDER AND THE REMAND REPORT, WHICH F INDS REPRODUCTION IN THE IMPUGNED APPELLATE ORDER, IT IS ON THE BASIS OF SUBSTANTIVE MATERIALS FOUND IN SURVEY, DRAWING COGENT AND REASONABLE INFERENCES THEREON, TO NO REB UTTAL BY THE ASSESSEE AT ANY STAGE, THAT THE INCOME STANDS ESTIMATED, WHICH IS INCIDENT AL TO THE ASSESSMENT WHEN THE INCOME IS BEING ASSESSED ON THE BEST JUDGMENT BASIS ; IN THE PRESENT CASE, BEING ACCOMPANIED BY THE REJECTION OF THE BOOKS OF ACCOUN T, FINDING THEM AS BOTH INCORRECT AND INCOMPLETE, SO THAT THE CORRECT INCOME OF THE A SSESSEES BUSINESS IS NOT DEDUCIBLE THERE-FROM, WITH THE ASSESSEE HAVING BEEN FOUND TO BE ENGAGED IN UNACCOUNTED BUSINESS AS WELL. AS REGARDS THE REASONABLENESS OF THE ESTIMATION, THE ASSESSEES BOOKS ITSELF REVEAL ITS ESTABLISHMENT TO BE CLOSED ON ON LY THREE DAYS DURING THE YEAR, WHILE THE AO HAS ESTIMATED THE TURNOVER, BASED ON ACTUAL AND UNDISPUTED DATA, ON THE BASIS OF A 25 DAY CLOSURE OF BUSINESS DURING THE YEAR. FU RTHER, AS ALREADY NOTED EARLIER BY US, THE AO HAD FURTHER SCALED DOWN THE ESTIMATION BY, F IRSTLY, IGNORING THE HIGHER GROSS PROFIT OBTAINING ON THE RESTAURANT SALES AND, SECON DLY, BY AVERAGING THE INCOME ESTIMATES BASED ON TWO ALTERNATIVE METHODS, I.E., T HE INCOME METHOD AND THE INVESTMENT METHOD, EXHIBITING FAIRNESS IN APPROACH. IN FACT, THE INVESTMENT METHOD ITSELF CORROBORATES THE FINDING OF EXISTENCE OF UNA CCOUNTED BUSINESS AND, THUS, GENERATION OF UNDISCLOSED INCOME THERE-FROM, AND IT IS ON THAT BASIS ONLY THAT THE TELESCOPING IS JUSTIFIED. THIS IS PARTICULARLY SO A S SOME ESTIMATION IS INEVITABLE IN ANY ESTIMATION EXERCISE, SO THAT WHAT THEREFORE IS TO B E GUARDED AGAINST IS THE UNREASONABLENESS IN THE UNDERLYING ASSUMPTIONS, WHI LE NONE STAND POINTED OUT. THE LD. CIT(A) HAS ALSO BEEN VERY FAIR IN ALLOWING ANOTHER ROUND OF OPPORTUNITY BEFORE THE AO TO THE ASSESSEE, EVEN AS IT WAS NOT INCUMBENT ON HIM TO DO SO IN VIEW OF THE ITA. NO. 806/COCH./2007 6 ADHERENCE TO THE PRESCRIBED PROCEDURE, INCLUDING EX TENSION OF OPPORTUNITY BEFORE FRAMING THE ASSESSMENT, BY THE AO. THE ASSESSEE PRO DUCED A DIFFERENT SET OF ACCOUNT BOOKS IN THE REMAND PROCEEDINGS, AND WHICH FACT STA NDS ENDORSED VIDE THE IMPUGNED ORDER. CLEARLY, NO CREDENCE TO THE SAME CAN BE GIVE N, AND WHICH, RATHER, POINT OUT TO THE ASSESSEE HAVING NO CASE WITH REFERENCE TO ITS O RIGINAL SET OF BOOKS, I.E., WHICH STOOD IMPOUNDED IN SURVEY, AND ON THE BASIS OF WHIC H THE RETURN OF INCOME STOOD FILED, EVEN AS THERE IS EVEN OTHERWISE NO SCOPE FOR RELYING ON FRESH MATERIAL IN VIEW OF THE FACT OF THE ASSESSMENT BEING U/S. 144 (REFER: CIT V. RAYALA CORPORATION (P.) LTD ., 215 ITR 883 (MAD.)). THAT THE ASSESSEE FAILS TO FUR NISH ANY EXPLANATION(S) TO MEET THE AOS FINDINGS, AND THUS JUSTIFY ITS REQUEST FOR GRA NT OF OPPORTUNITY, ACCEDED TO BY THE LD. CIT(A) AND, RATHER, SEEKS TO INTRODUCE `FRESH MATERIALS AND MANIPULATED RECORDS, INCONSISTENT WITH THE MATERIALS ON RECORD, AND ON T HE BASIS OF WHICH THE ASSESSMENT STANDS FRAMED, IS UNFORTUNATE, AND SUGGESTIVE OF MALA FIDES . NEEDLESS TO ADD, NO EVIDENCE TO VALIDATE THE CLAIM QUA SALES-TAX DEMAND OF RS. 5 LACS AND ODD, STOOD FURNISHED IN THE REMAND PROCEEDINGS OR THE APPELLAT E PROCEEDINGS. 5. IN VIEW OF THE FOREGOING, THE FINDINGS AND TH E CONCLUSIONS BY THE AO, SINCE CONFIRMED BY THE FIRST APPELLATE AUTHORITY, AND FOR THE SAME REASONS, SO THAT THE SAME CONSTITUTE THE REVENUES CASE, ARE REASONABLE AND D O NOT SUFFER FROM THE VICE OF EXCESSIVENESS OR ARBITRARINESS; THE ASSESSEE HAVING NOT LED ANY MATERIAL TO SHOW IT AS SO. ALSO, AS NOTED EARLIER, THE ASSESSEES LEGAL CH ALLENGE TO THE ASSESSMENT IS ALSO NOT TENABLE. WE, THEREFORE, FIND NO REASON FOR INTERFER ENCE WITH THE IMPUGNED ORDER ON ANY SCORE AND, CONSEQUENTLY, DECLINE TO DO SO. 6. IN THE RESULT, THE ASSESSEES APPEAL IS DISMISSE D. SD/- SD/- ( N.VIJAYAKUMARAN) (SA NJAY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: ERNAKULAM DATED: 28TH JUNE, 2010 ITA. NO. 806/COCH./2007 7 GJ COPY TO: 1. SMT. BABY ANTONY, WIFE & LEGAL REPRESENTATIVE OF LATE SHRI VARKEY ANTONY, NENMELIPARAMBIL, EXHUPUNNA POST, CHERTHALA. 2. THE INCOME-TAX OFFICER, WARD-3, ALLEPPEY. 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)