P.Abdul Kareem, Palakkad V. DCIT, Thrissur

ITSSA 113/COCH/2005

• Counselvise Citation: [2012] 121 COUNSELVISE.COM (IT) 8128 (ITAT-COCHIN)
• Duration Of Justice: 7 year(s) 1 month(s) 3 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 29-06-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 26-04-2012
• Assessment Year: misc
• Appeal Filed On: 26-05-2005
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S R SENAPATI
• Assessee Lawyers: C R HARISH

Judgement Text

1 IT( I.T(SS)A NO. 113 & 140/COCH/2005 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(SS)A NO. 113/COCH/2005 (BLOCK PERIOD 01-04-1996 TO 28-08-2002) SHRI P ABDUL KAREEM VS DY.CIT, CENT.CIR PAZHERI HOUSE THRISSUR THENKARA, MANNARKKAD PALAKKAD PAN : ADJPK0489K (APPELLANT) (RESPONDENT) I.T(SS)A NO. 140/COCH/2005 (BLOCK PERIOD 01-04-1996 TO 28-08-2002) DY.C.I.T., CENT.CIR VS SHRI P ABDUL KAREEM THRISSUR MANNARKKAD, PALAKKAD (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI C.R. HARISH REVENUE BY : SHRI S.R. SENAPATI DATE OF HEARING : 26-04-2012 DATE OF PRONOUNCEMENT : 29-06-2012 O R D E R PER N.R.S. GANESAN (JM) BOTH THE APPEALS OF THE ASSESSEE AND THE REVENUE A RE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX(A)-I, KOCHI DATED 21-03-2005 AND PERTAIN TO BLOCK PERIOD 01-04-1996 TO 28-08-2002. SINCE BOTH THE AP PEALS ARISE OUT OF THE SAME ORDER OF COMMISSIONER OF INCOME-TAX(A), WE HEARD THE SAME TO GETHER AND DISPOSE THEM OF BY THIS COMMON ORDER. 2 IT( I.T(SS)A NO. 113 & 140/COCH/2005 2. LET US FIRST TAKE UP THE ASSESSEES APPEAL IN IT SS 113/COCH/2005. 3. THE FIRST GROUND OF APPEAL IS WITH REGARD TO EST IMATION OF AGRICULTURAL INCOME OF RS. 20,04,828. 4. SHRI C.R. HARISH, THE LD.REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS DISCLOSED AGRICULTURAL INCOME IN THE C ASH FLOW STATEMENT AND ALSO IN THE RETURN OF INCOME. ACCORDING TO THE LD.REPRESENTATI VE, THE ASSESSEE HAS ALSO DISCLOSED ADDITIONAL AGRICULTURAL INCOME IN RESPECT OF PROPER TY SUBSEQUENTLY ACQUIRED BY WAY OF POWER OF ATTORNEY. THE LD.REPRESENTATIVE SUBMITTED THAT THE ASSESSEE HAS ACQUIRED 8 ACRES OF RUBBER ESTATE AND 10.28 ACRES OF COCONUT, ARECA NET, PEPPER, PLANTAIN, ETC. ACCORDING TO THE LD.REPRESENTATIVE, THE ASSESSEE IS NOT MAINTAINING ANY BOOKS OF ACCOUNT FOR THE AGRICULTURAL ACTIVITIES. THEREFORE, THE IN COME WAS DISCLOSED ON ESTIMATE BASIS. ACCORDING TO THE LD.REPRESENTATIVE, THE ASSESSING O FFICER ESTIMATED THE AGRICULTURAL INCOME AT RS.4,06,255 AND THE BALANCE OF RS.20,04,8 28 WAS ADDED AS UNDISCLOSED INCOME. ACCORDING TO THE LD.REPRESENTATIVE, IN THE ABSENCE OF ANY MATERIAL FOUND DURING THE COURSE OF SEARCH OPERATION THERE CANNOT BE ANY ADDITION. 5. ON THE CONTRARY, SHRI S.R. SENAPATI, THE LD.DR S UBMITTED THAT THE ASSESSEE HAS DISCLOSED RS.8,29,822 AS AGRICULTURAL INCOME FOR TH E BLOCK PERIOD IN THE REGULAR RETURNS FILED. HOWEVER, IN THE BLOCK RETURN, THE ASSESSEE HAS DISCLOSED RS.29,45,000 AS AGRICULTURAL INCOME. ACCORDING TO THE LD.REPRESENT ATIVE, THE ADDITIONAL AGRICULTURAL INCOME WAS DUE TO ACQUISITION OF PROPERTY BY WAY OF POWER OF ATTORNEY. NEITHER THE ACQUISITION OF LAND NOR THE AGRICULTURAL INCOME WAS DISCLOSED TO THE DEPARTMENT EARLIER. THEREFORE, IT CANNOT BE HELD THAT THE ASSESSEE HAS EARNED AGRICULTURAL INCOME. THE FACT REMAINS IS THAT THE ASSESSEE HIMSELF HAS DISCLOSED THE SAME IN THE REGULAR RETURNS. THEREFORE, IN THE ABSENCE OF ANY MATERIAL TO SUBSTA NTIATE THE CLAIM OF THE ASSESSEE, THE SAME HAS TO BE TREATED AS UNDISCLOSED INCOME. ACCO RDING TO THE LD.REPRESENTATIVE, THE 3 IT( I.T(SS)A NO. 113 & 140/COCH/2005 COMMISSIONER OF INCOME-TAX(A) HAS RIGHTLY CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE HAS DIS CLOSED RS. 29,45,000 AS AGRICULTURAL INCOME IN THE BLOCK RETURN. IT IS A DISCLOSURE MAD E BY THE ASSESSEE VOLUNTARILY. IN THE ABSENCE OF ANY MATERIAL TO SUPPORT THE CLAIM OF THE ASSESSEE TOWARDS AGRICULTURAL INCOME, THE ASSESSING OFFICER HAS TAKEN THE SAME AS UNDISCLOSED INCOME. WHEN THE ASSESSEE CLAIMS THAT THE AGRICULTURAL INCOME WAS EA RNED IT IS FOR THE ASSESSEE TO SUPPORT THAT THE INCOME WAS EARNED DURING THE YEAR UNDER CO NSIDERATION. MOREOVER, WHAT WAS SAID TO BE ACQUIRED ADDITIONALLY WAS 8 ACRES OF RUB BER ESTATE AND 10.28 ACRES OF COCONUT, ARECA NUT, PEPPER, PLANTAIN, ETC. OUT OF THIS, THE ASSESSEE COULD NOT HAVE EARNED SO MUCH AGRICULTURAL INCOME AS DISCLOSED IN THE BLOCK RETURN. BUT THE FACT REMAINS IS THAT THE ASSESSEE HAS INVESTED THE MONEY IN THE PARTNERS HIP FIRM. THEREFORE, THE SAME HAS TO BE NECESSARILY ADDED AS UNDISCLOSED INCOME. THE REFORE, THIS TRIBUNAL DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LOWER AUTHORITY. ACC ORDINGLY, THE ORDER OF COMMISSIONER OF INCOME-TAX(A) IS CONFIRMED. 7. THE NEXT GROUND OF APPEAL IS WITH REGARD TO INCO ME FROM PAZHERI COMMUNICATIONS. 8. SHRI C.R. HARISH, THE LD.REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS STARTED A PROPRIETORY CONCERN AS A FRA NCHISE OF ESCOTEL MOBILE SERVICE. THE MAIN SOURCE OF INCOME OF THE PROPRIETORY CONCERN IS COMMISSION RECEIVED FROM THE PRINCIPAL. APART FROM THAT THE PARTNER CONCERNED D EALS IN HANDSETS, PREPAID CARD AND OTHER ACCESSORIES. THE ASSESSEE IS NOT MAINTAINING ANY BOOKS OF ACCOUNT. DURING THE COURSE OF SEARCH OPERATION, THE PROFIT & LOSS ACCOU NT WAS FOUND AND ON THE BASIS OF THAT THE ASSESSING OFFICER ESTIMATED THE INCOME FROM PAZ HERY COMMUNICATIONS AT RS.1,77,124 AS ON 31-03-2002 AND RS.40,000 FOR THE PERIOD ENDED AUGUST, 2002. 4 IT( I.T(SS)A NO. 113 & 140/COCH/2005 ACCORDING TO THE LD.REPRESENTATIVE, THERE IS NO BAS IS FOR CONSIDERING THIS AS UNDISCLOSED INCOME FOR THE BLOCK PERIOD. THE LD.REPRESENTATIVE SUBMITTED THAT PAZHERI COMMUNICATION WAS RUN ONLY FOR A PERIOD SIX MONTHS, THEREFORE, INCLUSION OF ENTIRE INCOME FOR THE WHOLE YEAR IN THE HANDS OF THE ASSES SEE IS NOT CORRECT. 9. ON THE CONTRARY, SHRI S.R. SENAPATI, THE LD.DR S UBMITTED THAT AS PER THE PROFIT & LOSS ACCOUNT FOUND DURING THE COURSE OF SEARCH OPER ATION, FROM 01-04-2001 TO 18-03- 2002 WHICH WAS MARKED AS RRA2, THE ASSESSING OFFICE R COMPUTED THE TOTAL INCOME. ACCORDING TO THE LD.DR, THIS INCOME WAS NOT DISCLOS ED TO THE DEPARTMENT EARLIER WHICH WAS UNEARTHED DURING THE COURSE OF SEARCH OPERATION . 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS NOT IN DISPUTE THAT PAZHERI COMMUNICATION WAS A PROPRIETORY CONCERN DEALING IN MOBILE, HANDSETS, PR EPAID SIM CARD AND OTHER ACCESSORIES. BUT THE INCOME FROM THIS PROPRIETORY CONCERN WAS NOT DISCLOSED TO THE DEPARTMENT EARLIER. IT WAS ADMITTEDLY UNEARTHED DU RING THE COURSE OF SEARCH OPERATION. DURING THE COURSE OF SEARCH OPERATION THE PROFIT AN D LOSS ACCOUNT AND BALANCE SHEET FOR THE PERIOD 01-04-2001 TO 31-03-2002 WAS FOUND. THE ASSESSING OFFICER COMPUTED THE INCOME ONLY ON THE BASIS OF THE PROFIT & LOSS ACCOU NT AND BALANCE-SHEET FOUND DURING THE COURSE OF SEARCH OPERATION. IT IS NOT THE CASE OF THE ASSESSEE THAT THE BALANCE-SHEET AND PROFIT & LOSS ACCOUNT FOUND DURING THE COURSE O F SEARCH OPERATION DOES NOT RELATE TO THE ASSESSEE. IN THESE CIRCUMSTANCES, THIS TRIBUNA L DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LOWER AUTHORITY. ACCORDINGLY THE ORDER OF T HE COMMISSIONER OF INCOME-TAX(A) IS CONFIRMED. 11. THE NEXT GROUND OF APPEAL IS WITH REGARD TO ADD ITION OF RS.3,75,857 TOWARDS CAPITAL GAIN. 5 IT( I.T(SS)A NO. 113 & 140/COCH/2005 12. SHRI C.R. HARISH, THE LD.REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER MADE ADDITION OF RS. 35,78,857 AS UNDISCLOSED CAPITAL GAIN FOR THE BLOCK PERIOD. ACCORDING TO THE LD.REPRESENTATIVE, A PROP ERTY WAS SOLD BY THE ASSESSEE AND ONE SHRI MOHANDAS OF KARIMBA TO SHRI ABDUL SALAM BY MEA NS OF FOUR REGISTERED SALE DEEDS. THE SALE CONSIDERATION AS PER THE REGISTERED DOCUME NT WAS RS.15,50,000. THE ASSESSEE RETURNED FOR THE ASSESSMENT YEAR 1999-2000 A CAPITA L GAIN OF 50% OF THE SALE CONSIDERATION. HOWEVER, DURING THE COURSE OF SEARC H OPERATION AN AGREEMENT SIGNED BY THE PURCHASER AND THE SELLERS ON 25-09-1998 WAS FOU ND WHICH DISCLOSED THE ACTUAL SALE CONSIDERATION OF RS.79,56,000. ACCORDING TO THE LD .REPRESENTATIVE, THE ASSESSING OFFICER HAS TAKEN THIS AMOUNT AS ACTUAL SALE CONSIDERATION AND COMPUTED THE CAPITAL GAIN. HOWEVER, THE COMMISSIONER OF INCOME-TAX(A) FOUND TH AT THE ASSESSEE HAS ADMITTED RS.32,03,000 IN ADDITION TO HIS SHARE OF CAPITAL GA IN ALREADY DISCLOSED IN THE RETURN OF INCOME. THEREFORE, THE ADDITION MADE BY THE ASSESS ING OFFICER TO THE EXTENT OF RS.35,78,857 IS NOT CORRECT. ACCORDING TO THE LD.RE PRESENTATIVE, THE 50% OF THE SHARE OF THE ASSESSEE ON THE DEDUCTION OF INDEXED COST OF AC QUISITION OF LAND SHALL BE RS.7,51,715. THE COMMISSIONER OF INCOME-TAX(A) WIT HOUT ANY DISCUSSION RESTRICTED THE CAPITAL GAIN AT RS.3,75,857. 13. ON THE CONTRARY, SHRI S.R. SENAPATI, THE LD. DR SUBMITTED THAT THE COMMISSIONER OF INCOME-TAX(A) HAS NOT PASSED A SPEAKING ORDER. THE COMMISSIONER OF INCOME-TAX(A) WITHOUT ANY DISCUSSION AND APPLICATION OF MIND HAS ACCEPTED THE CLAIM OF THE ASSESSEE. ACCORDING TO THE LD.DR, THE AGREEMENT WHICH WAS FOU ND DURING THE COURSE OF SEARCH OPERATION DISCLOSES THE SALE CONSIDERATION AT RS.79 ,56,000. THEREFORE, THE COMMISSIONER OF INCOME-TAX(A) IS NOT CORRECT IN ACC EPTING THE EXPLANATION OF THE ASSESSEE. 14. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE COMMISSIONER OF INCOME-TAX(A) ADMITTEDLY ACCEPTED THE CLAIM OF THE ASSESSEE WITHOUT APPLICATION OF MI ND. IN FACT, THERE WAS NO DISCUSSION 6 IT( I.T(SS)A NO. 113 & 140/COCH/2005 IN THE ORDER. THE COMMISSIONER OF INCOME-TAX(A) HAS TO DISCUSS THE MATTER ON MERIT AND RECORD HIS REASONING EITHER FOR ACCEPTING OR NOT AC CEPTING THE CLAIM OF THE ASSESSEE. SINCE NO SUCH EXERCISE WAS MADE BY THE COMMISSIONER OF INCOME-TAX(A)(, THIS TRIBUNAL IS OF THE OPINION THAT THE MATTER NEEDS TO BE CONSIDE RED BY THE COMMISSIONER OF INCOME- TAX(A). ACCORDINGLY, THE ORDER OF THE COMMISSIONER OF INCOME-TAX(A) IS SET ASIDE AND THE ISSUE WITH REGARD TO CAPITAL GAIN IS REMITTED BACK TO THE FILE OF THE COMMISSIONER OF INCOME-TAX(A). THE COMMISSIONER OF INCOME-TAX(A) S HALL RECONSIDER THE ISSUE IN THE LIGHT OF MATERIAL FOUND DURING THE COURSE OF SEARCH OPERATION AND THEREAFTER DECIDE THE ISSUE IN ACCORDANCE WITH LAW AFTER GIVING REASONABL E OPPORTUNITY TO THE ASSESSEE. 15. NOW COMING TO THE DEPARTMENTAL APPEAL FILED BY THE ASSESSEE, THE ONLY ISSUE IS WITH REGARD TO DELETION OF RS.5,26,500 BEING THE DE FICIENCY IN THE AGRICULTURAL INCOME OF SMT. P KHADEEJA. 16. SHRI S.R. SENAPATI, THE LD.DR SUBMITTED THAT TH E DEFICIENCY IN THE CASH FLOW STATEMENT FILED BY THE ASSESSING OFFICER WAS ADDED AS UNDISCLOSED INCOME IN THE HANDS OF THE ASSESSEE. ACCORDING TO THE LD.REPRESENTATIV E, SMT. KHADEEJA IS MOTHER OF THE ASSESSEE. THE COMMISSIONER OF INCOME-TAX(A), HOWEV ER, DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. THE LD.DR SUBMITTED THAT TH E DEFICIENCY FOUND IN THE CASH FLOW STATEMENT FILED BY SMT. P KHADEEJA HAS TO BE TREATE D AS UNDISCLOSED INCOME OF THE ASSESSEE. 17. ON THE CONTRARY, SHRI CR HARISH, THE LD.REPRESE NTATIVE FOR THE ASSESSEE SUBMITTED THAT IF THERE IS ANY DEFICIENCY IN THE AGRICULTURAL INCOME OF SMT. P KHADEEJA, IT HAS TO BE TREATED AS HER INCOME FOR THE BLOCK PERIOD OR IN TH E REGULAR ASSESSMENT. IT CANNOT BE TREATED AS UNDISCLOSED INCOME OF THE ASSESSEE. THE REFORE, ACCORDING TO THE LD.REPRESENTATIVE, THE COMMISSIONER OF INCOME-TAX(A ) HAS RIGHTLY DELETED THE ADDITION. 7 IT( I.T(SS)A NO. 113 & 140/COCH/2005 18. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE CASH FLOW STATEM ENT FILED BY SMT. P KHADEEJA CANNOT BE THE BASIS FOR MAKING ADDITION IN THE HANDS OF TH E PRESENT ASSESSEE. AS RIGHTLY POINTED OUT BY THE COMMISSIONER OF INCOME-TAX(A) IN THE ABS ENCE OF ANY MATERIAL FOUND DURING THE COURSE OF SEARCH OPERATION, THE DEFICIENCY FOUN D IN THE CASH FLOW STATEMENT OF SMT. P KHADEEJA REPRESENTS HER OWN INCOME. THEREFORE, T HIS TRIBUNAL DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LOWER AUTHORITY. ACC ORDINGLY, THE SAME IS CONFIRMED. 19. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED AND THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 29 TH JUNE, 2012. SD/- SD/- (B.R. BASKARAN) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 29 TH JUNE, 2012 PK/- 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