C.D. Boss Proptietor, Thrissur V. ACIT, Thrissur

ITSSA 157/COCH/2005

• Counselvise Citation: [2010] 124 COUNSELVISE.COM (IT) 8816 (ITAT-COCHIN)
• Duration Of Justice: 5 year(s) 2 month(s) 9 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 27-10-2010
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 01-09-2010
• Assessment Year: misc
• Appeal Filed On: 17-08-2005
• Court: TRIBUNAL
• Assessee Lawyers: AND CONTESTING APPELLATE
• Keywords: Rectification of order; Document seized; Wrong claim; Block assessment; Documents seized
• Section: 143(3); 132; 154

Judgement Text

IN THE INCOME TAX APPELLAT E TRIBUNAL COCHIN BEN CH, COCHIN BEFORE S/SHRI N.VIJAYAKUMARAN, JM AND SANJAY AR ORA, AM I.T(SS).A NOS. 157/COCH/ 2005 BLOCK PERIOD: 1.4.1990 TO 12.10.2000 SHRI C.D.BOSE, PROPRIETOR, CHEMMANNUR FASHION JEWELLERY, CHEMMANNUR HOUSE, AVENUE ROAD, THRISSUR [PAN: ACFPB 6596D] VS. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE, THRISSUR. (ASSESSEE -APPELLANT) (REVENUE - RESPONDENT) I.T.(SS)A NOS. 164 & 165/COCH/ 2005 BLOCK PERIOD : 1.4.1990 TO 12.10.2000 THE DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE, THRISSUR. VS. SHRI C.D.BOSE, PROPRIETOR, CHEMMANNUR F ASHION JEWELLERY, CHEMMANNUR HOUSE, AVENUE ROAD, THRISSUR (REVENUE-APPELLANT) (ASSESSEE -RESPONDENT) OR D E R PER SANJAY ARORA, AM: THESE ARE CROSS-APPEALS, I.E., BY THE ASSESSEE AND THE REVENUE, CONTESTING THE APPELLATE ORDER BY THE COMMISSIONER OF INCOME-TAX ( APPEALS)-I, KOCHI (CIT(A) FOR SHORT) DATED 7.6.2005 DISMISSING THE ASSESSEES APP EAL AGAINST ITS ASSESSMENT FOR THE BLOCK PERIOD 1.4.1990 TO 12.10.2000 VIDE ORDER U/S. 158BC R/W S. 143(3) OF THE INCOME-TAX ACT, 1961 ('THE ACT' HEREINAFTER) DATED 29.10.2002. THE THIRD APPEAL (IT(SS)A NO. ASSESSEE BY DR. K.B. MOHAMMED KUTTY, SR. COUNSEL-AR REVENUE BY SHRI S.C.SONKAR, CIT-DR REVENUE BY SHRI S.C.SONKAR, CIT-DR ASSESSEE BY DR. K.B.MOHAMMED KUTTY, SR. COUNSEL-AR IT(SS)A.NOS.157 /COCH./2005 & 164 & 165/COCH/2005 2 164/COCH/2005) IS BY THE REVENUE IMPUGNING THE APPE LLATE ORDER BY THE LD. CIT(A) OF EVEN DATE IN RESPECT OF THE RECTIFICATION ORDER U/S . 154 DATED 22.9.2004 PASSED IN ITS CASE. 2. WE SHALL TAKE UP THE ASSESSEES APPEAL FIRST. TH E SAME RAISES A SINGLE ISSUE, I.E., THE CONFIRMATION OF THE NON-ACCEPTANCE OF THE CASH INFL OW AT RS. 13,29,280/- INCLUDED BY THE ASSESSEE IN HIS CASH FLOW STATEMENT PREPARED TO EXP LAIN HIS VARIOUS ASSETS/INVESTMENTS; THE BLOCK ASSESSMENT BEING FRAMED BY THE ASSESSING OFFI CER (A.O.) ON THE NET ACCRETION TO WEALTH METHOD, I.E., OVER THE BLOCK PERIOD. 3. THE BACKGROUND FACTS OF THE CASE ARE THAT THE AS SESSEE, AN INDIVIDUAL, IS IN RETAIL BUSINESS IN GOLD JEWELLERY THROUGH HIS PROPRIETARY CONCERN, CHEMMANNUR FASHION JEWELLERY AT PALAKKAD. A SEARCH U/S. 132 OF THE AC T WAS CONDUCTED AT HIS BUSINESS AND RESIDENTIAL PREMISES ON 12.10.2000 AND VARIOUS BOOK S OF ACCOUNTS AND DOCUMENTS SEIZED, INCLUDING CASH (RS. 2 LAKHS) AND GOLD JEWELLERY (38 51.95 GMS.). THE SEIZED DOCUMENTS LISTED AS `KPU-AI(5) INCLUDED A LOOSE SHEET SHOWIN G SALES AS ON 11.10.2000 OF 2849.88 GMS. (AT RS. 13,51,827/-) AT PALAKKAD SHOP, WHILE T HE BOOKS OF ACCOUNTS REFLECTED SALES AT 90.83 GMS. AT RS. 42,531/- ONLY. THE DOCUMENTS ALS O REVEALED ADMITTED UNACCOUNTED STOCK OF 788.52 GMS. AT THE SHOP AS ON THE DATE OF SEARCH. 4. COMING TO THE SOLE ISSUE UNDER REFERENCE, TH E BASIS FOR THE AOS NON-ACCEPTANCE OF THE STATED NATURE AND SOURCE OF THE IMPUGNED CASH ( INFLOW) OF RS. 13.29 LACS WAS THE NON- SUBSTANTIATION OF THE EXPLANATION/S IN RESPECT THER EOF, I.E., OF IT REPRESENTING SALE PROCEEDS OF THE DEPOSITS OF GOLD ORNAMENTS BY THE GOLDSMITHS WITH IT AS A PART OF THE CUSTOMARY TRADE PRACTICE. THE SAME STOOD CONFIRMED BY THE LD . CIT(A) ON THE SAME BASIS. IT WAS FURTHER OBSERVED BY HIM THAT A SIMILAR CLAIM, MADE IN THE SUM OF RS. 27.69 LAKHS, IN THE CASE OF THE ASSESSEES FATHER, SHRI C.I. DEVASSIKUT TY, PROPRIETOR, CHEMMANNUR GOLD SUPER MARKET, VADAKARA FOUND NON-ACCEPTANCE BY THE FIRST APPELLATE AUTHORITY VIDE ITS ORDER DATED 5.1.2004. THE FACTS AND CIRCUMSTANCES OF THE CASE BEING THE SAME, HE SAW NO REASON TO TAKE A DIFFERENT VIEW, EVEN AS HE AGREED AND ENDORSED THE AOS FINDING OF THE ASSESSEE HAVING MADE A FALSE CLAIM. AGGRIEVED, THE ASSESSEE IS IN APPEAL. IT(SS)A.NOS.157 /COCH./2005 & 164 & 165/COCH/2005 3 5. WE HAVE HEARD THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE MATTER IS WHOLLY FACTUAL AND, WITHOUT DOUBT, THE FACTS AND THE CIRCU MSTANCE OF THE CASE AND THAT OBTAINING IN THE CASE OF THE ASSESSEES FATHER, SHRI C.I. DEV ASSIKUTTY, WHOSE PREMISES WERE ALSO SEARCHED ALONG WITH, THE SAME; THE AMOUNT INVOLVED BEING HIGHER AT RS. 27.69 LACS. THIS WAS ALSO THE AGREED POSITION BETWEEN THE PARTIES AT THE TIME OF HEARING, WITH THE APPELLANT-ASSESSEE BEING REPRESENTED BY THE SAME CO UNSEL, I.E., AS IN THAT CASE, RAISING THE SAME CONTENTIONS/ARGUMENTS. THE TRIBUNAL (COCHIN BE NCH) IN THE SAID CASE, AFTER A DETAILED EXAMINATION OF THE ENTIRE EVIDENCES RELIED UPON BY THE ASSESSEE, UPHELD THE ORDERS OF THE AUTHORITIES BELOW AND CONFIRMED THE A DDITION VIDE ITS ORDER DATED 5.10.2010 (COPY ON RECORD). WE HAVE PERUSED THE ORDER BY THE TRIBUNAL. EACH OF THE ASPECTS RAISED BY THE ASSESSEE AND THE REVENUE, INCLUDING THE LEGA L ARGUMENT/S ADVANCED, STAND CONSIDERED BY THE TRIBUNAL, RENDERING ITS FINDINGS VIDE PARA 4 OF ITS ORDER, CONFIRMING THE ORDERS BY THE REVENUE AUTHORITIES. WE HAVE, AS SUCH , NO HESITATION IN ADOPTING THE FINDINGS BY THE TRIBUNAL IN THAT CASE AND UPHOLDING THE FIND INGS BY THE AUTHORITIES BELOW IN THE PRESENT CASE. THE ASSESSEES SPECIFIC GROUND NO. 3 BEFORE US IS, AGAIN, ONLY IN RESPECT OF ONE SUCH EVIDENCE, WHICH IS ALLEGED TO HAVE NOT BEE N PROPERLY APPRECIATED BY THE REVENUE AUTHORITIES. THE SAME GROUND STOOD ALSO RAISED AND CONSIDERED BY THE TRIBUNAL IN THE CASE OF SHRI C.I.DEVASSIKUTTY VIDE PARA 4.8 OF ITS ORDER . THE MATTER THUS STANDS SQUARELY COVERED BY THE SAID ORDER BY THE TRIBUNAL. WE DECID E ACCORDINGLY, DISMISSING THE ASSESSEES GROUNDS OR APPEAL. 6. THE REVENUES APPEAL RAISES A SINGLE ISSUE, I.E., QUA THE MAINTAINABILITY OF THE LEVY OF SURCHARGE ON THE TAX ASSESSED IN BLOCK ASSESSMEN T, I.E., FOR THE SEARCHES CONDUCTED PRIOR TO 1/6/2002, THE DATE OF AMENDMENT TO S. 113 OF THE ACT. THE SAME STANDS DELETED BY THE LD. CIT(A) ON THE BASIS THAT THE AMENDMENT, EFFECTIVE 1/6/2002, TO SECTION 113 OF THE ACT PER FINANCE ACT, 2001, WHEREBY THE LEVY OF SURCHARGE STOOD EXTENDED TO ASSESSMENTS U/S. 158BC, IS ONLY PROSPECTIVE IN NATU RE, AND WOULD THUS NOT BE APPLICABLE IN THE PRESENT CASE; THE BLOCK PERIOD ENDING ON 12. 10.2000. THE MATTER HAS SINCE BEEN CLARIFIED BY THE HONBLE APEX COURT VIDE ITS DECISI ONS IN THE CASE OF CIT V . SURESH N. GUPTA , 297 ITR 322 (SC) AND CIT VS. RAJIV BHATARA , 310 ITR 105 (SC), HOLDING THE IT(SS)A.NOS.157 /COCH./2005 & 164 & 165/COCH/2005 4 PROVISO TO SECTION 113 TO BE CLARIFICATORY AND CURATIVE IN NATURE, SO THAT IT WOULD THEREFORE BE APPLICABLE TO ALL ASSESSMENTS MADE UNDER CHAPTER XIV-B AS PER THE RATE SPECIFIED UNDER THE RELEVANT FINANCE ACT, I.E., THAT APPLICAB LE TO THE DATE OF SEARCH. THERE IS WE OBSERVE NO DISPUTE WITH REGARD TO THE RATE OF THE S URCHARGE - WHICH IN ANY CASE IS ONLY A MATTER OF RECORD - BUT ONLY WITH REGARD TO ITS APPL ICABILITY OF THE SAID SECTION. THE ISSUE THUS STANDS RESOLVED IN FAVOUR OF THE REVENUE. I.T.A. 164/COCH/2005 (REVENUES APPEAL) 7.1 THE FACTS OF THE CASE IN BRIEF ARE THAT THE ASS ESSEE, SUBSEQUENT TO HIS ASSESSMENT UNDER CHAPTER XIV-B OF THE ACT (FOR THE BLOCK PERIO D ENDING 12.10.2000) ON 29.10.2002, MOVED AN APPLICATION U/S. 154 OF THE ACT ON 15.11.2 002 STATING THAT THERE HAD OCCURRED A MISTAKE THEREIN IN-AS-MUCH AS IT STANDS ALLOWED DED UCTION, IN COMPUTING HIS NET WEALTH AS ON 12.10.2000, IN RESPECT OF KURI LIABILITY AT RS. 5,07,556/- AS AGAINST THE CORRECT AMOUNT OF RS. 28,27,556/-, LEADING TO AN OVER-ASSESSMENT O F HIS CAPITAL AND, THUS, INCOME FOR THE BLOCK PERIOD, BY RS. 23,20,000/-; ALSO FURNISHING T HE BREAKUP OF THE SAID LIABILITY AS UNDER:- (AMOUNT IN RS.) I) SREE GOKULAM CHITS : 23,20,000/- II) OTHERS : 5,07,556/ - 28,27,556/- REFERENCE WAS ALSO PURPORTEDLY MADE TO THE BAL ANCE-SHEET SUBMITTED ALONG WITH THE RETURN OF UNDISCLOSED INCOME, WHEREIN THE AMOUN T OF LIABILITY TO SREE GOKULAM CHITS STOOD REFLECTED PER SCHEDULE `B, NAMELY, `CURRENT ASSETS AND LIABILITIES, THERE-TO. THE AO VIDE HIS ORDER U/S. 154 DATED 20.11.2002, FINDIN G THE ASSESSEES CONTENTION AS CORRECT, RECTIFIED THE SAID MISTAKE, REDUCING THE UNDISCLOSE D INCOME BY THAT AMOUNT TO RS. 17,85,110/- , I.E., AS AGAINST RS. 41,05,110/- ASSESSED EARLIER. 7.2 SUBSEQUENTLY, HOWEVER, IT WAS NOTICED THAT THE VALUE OF THE PORTFOLIO `SUNDRY CREDITORS ADOPTED AT RS. 82,80,482/- , CREDIT IN RESPECT OF WHICH STOOD ALREADY ALLOWED IN THE ASSESSMENT OF INCOME AT RS. 41.05 LAKHS VIDE OR DER DATED 29.10.2002, INCLUDED THE IT(SS)A.NOS.157 /COCH./2005 & 164 & 165/COCH/2005 5 SUM OF RS. 23,20,000/- DUE TO SREE GOKULAM CHITS (SGC). AS SUCH, THE SUB SEQUENT RECTIFICATION ORDER REDUCING THE INCOME BY RS. 23,2 0,000/- WAS A MISTAKEN ONE, AND WAS REQUIRED TO BE AMENDED ACCORDINGLY. NOTICE UNDER S . 154(3) WAS ACCORDINGLY ISSUED TO THE ASSESSEE, WHO REPLIED VIDE HIS LETTERS DATED 20 .1.2003 (PLACED ON RECORD) AND 25.8.2003 (REFER PB PG. 11 TO 15) . THE GIST OF HIS ARGUMENTS IS AS UNDER:- A) THE LIABILITY FOR RS. 23,20,000/- TO SGC STOOD ADMITTEDLY INCLUDED IN THE SUM OF RS.82,80.482/- CREDIT IN RESPECT OF WHICH STANDS AL LOWED IN THE BLOCK ASSESSMENT; B) HOWEVER, LIABILITY FOR RS. 23,71,390/- (FORMING PART OF THE BALANCE-SHEET) STOOD OMITTED TO BE CONSIDERED. THE RESEMBLANCE OF THE S AID FIGURE WITH RS. 23,20,000/- WAS STATED TO BE THE REASON FOR THE EARLIER WRONG CLAIM QUA SREE GOKULAM CHITS. 7.3 THE AO FOUND THAT THE ASSESSEES AFORESTAT ED SECOND CLAIM, UNACCEPTABLE. FIRSTLY, THE ALLOWANCE OF THE CLAIM IN RESPECT OF LIABILITY TO SREE GOKULAM CHITS FOR RS. 23,20,000/- VIDE ORDER U/S. 154 DATED 20.11.2002 WA S ADMITTEDLY A MISTAKE REQUIRING RECTIFICATION. CONSEQUENTLY, THEREFORE, THE CLAIM/ S QUA LIABILITY OF RS. 23.71 LAKHS IS ONLY TO BE CONSIDERED AS A FRESH PETITION U/S. 154. THE CLAIM/S, WHICH COULD NOT BE ALLOWED FOR THE REASON THAT ALL THE ASSESSEES CLAIMS STOOD DUL Y CONSIDERED WHILE FRAMING HIS ASSESSMENT. IN PURSUANCE TO HIS BALANCE-SHEET, AS SUBMITTED BY THE ASSESSEE, A STATEMENT OF ASSETS AND LIABILITIES STOOD COMPILED BY THE AO. OBJECTIONS THERETO WERE CALLED FOR FROM THE ASSESSEE, WITH IT FILING A RECONCILIATION STATEMENT (WHICH WAS MADE BY THE ASSESSING AUTHORITY A PART OF HIS IMPUGNED ORDER), IN WHICH THE SAID LIABILITY/S DID NOT APPEAR. THOUGH FORMING PART OF THE BALANCE SHEET, NO FURTHER INFORMATION OR CONFIRMATION HAD BEEN FILED IN RESPECT THEREOF. EACH OF THE OBJE CTIONS RAISED, I.E., QUA DIFFERENT ASSETS AND LIABILITIES, WERE CONSIDERED, MAKING NECESSARY ADJUSTMENTS WHERE NECESSARY, AND ASSESSMENT COMPLETED ON THAT BASIS. THE IMPUGNED LI ABILITIES THEREFORE CANNOT BE TAKEN AS NOT CONSIDERED; RATHER, THE ASSESSMENT STANDS MADE AFTER DULY CONSIDERING THE SAME. THERE WAS NO MISTAKE, LEAST ONE APPARENT FROM RECORD AND, ACCORDINGLY, HE RESTORED THE ASSESSEES INCOME TO THE AMOUNT AS ORIGINALLY ASSES SED, I.E., RS. 41.05 LAKHS, RECTIFYING THE EARLIER MISTAKE IN ALLOWING IT EXCESS CREDIT FO R RS. 23.20 LACS. IN APPEAL, THE ASSESSEE FOUND FAVOUR WITH THE LD. CIT(A) ON THE GROUND THAT THE LIABILITIES FOR RS. 23.71 LAKHS, IT(SS)A.NOS.157 /COCH./2005 & 164 & 165/COCH/2005 6 REPRESENTING DUES TO DIFFERENT AND IDENTIFIED PARTI ES, FORMED PART OF THE BALANCE-SHEET SUBMITTED BY THE ASSESSEE. IN FACT, TWO OF THEM, A T RS. 7.36 LACS AND RS. 3.40 LACS, ARE DUES TO SHRI C.I. DEVASSYKUTTY AND SHRI C.D. BOBBY, THE ASSESSEES FATHER AND SON RESPECTIVELY, AND WHICH SUMS HAVE BEEN INCLUDED IN THEIR BLOCK ASSESSMENTS. AS SUCH, THE OMISSION TO CONSIDER THE SAME WAS ONLY A MISTAK E APPARENT FROM RECORD AND, ACCORDINGLY, DIRECTED FOR ALLOWING CREDIT IN RESPEC T THEREOF. AGGRIEVED, THE REVENUE IS IN APPEAL. 8. WE HAVE HEARD THE PARTIES, AND PERUSED THE M ATERIAL ON RECORD, INCLUDING, INTER ALIA , THE ASSESSMENT ORDER, BOTH THE RECTIFICATION ORDERS , THE APPELLATE ORDERS IN QUANTUM AND RECTIFICATION PROCEEDINGS, AS WELL AS THE ASSESSEE S PAPER-BOOK. 8.1 THE MATTER IS PURELY FACTUAL. THE ASSESSEE S TOOD ADMITTEDLY ALLOWED CREDIT IN RESPECT OF ITS LIABILITY TO SREE GOKULAM CHITS (AT RS. 23.2 0 LAKHS) PER ITS ASSESSMENT ON 29/10/2002 AND, THEREFORE, THE RECTIFICATION ORDER DATED 20.11.2002 ALLOWING IT FURTHER CREDIT IN RESPECT THEREOF CLEARLY BORE A MISTAKE TO THAT EXTENT REQUIRING RECTIFICATION. AS SUCH, THE SUBSEQUENT DISALLOWANCE THEREOF VIDE THE IMPUGNED ORDER IS CLEARLY IN ORDER, AND NEITHER DO WE OBSERVE ANY DIFFERENCE BETWEEN TH E PARTIES WITH REGARD THERETO. 8.2 COMING TO THE ASSESSEES CLAIM FOR HAVING BE EN NOT ALLOWED CREDIT IN RESPECT OF ITS LIABILITIES AGGREGATING TO RS. 23.71 LAKHS (DETAILE D BELOW) IN ITS ASSESSMENT, THE ISSUE INVOLVED, AS WE SEE IT, HAS TWO ASPECTS, LEADING TO FOLLOWING THREE QUESTIONS: A). WHETHER THE LIABILITY(S) BEING CLAIMED BORNE OUT OF THE RECORDS?; B). WHETHER THERE HAS BEEN AN OMISSION BY THE ASS ESSING AUTHORITY IN CONSIDERING THE CLAIM/S QUA LIABILITIES UNDER REFERENCE WHI LE FRAMING ITS ASSESSMENT?; AND, FINALLY, C). WHETHER THE SAID NON-CONSIDERATION, IF PROVED , COULD BE SAID TO CONSTITUTE A RECTIFIABLE MISTAKE/S? LIABILITIES BEING CLAIMED (AMT. IN RS.) A. LOANS AND BORROWING 12,95,0 90/- B. C.I. DEVASSIKUTTY 7,36,300/- IT(SS)A.NOS.157 /COCH./2005 & 164 & 165/COCH/2005 7 C. C.D. BOBBY 3.40,000/- 23,71,390/- 8.3 IN THE INSTANT CASE, AS WE SHALL PRESENTLY SEE, ONLY THE FIRST OF THE AFORE-STATED QUESTIONS, WHICH REPRESENT THE THREE CONDITIONS FOR A VALID CLAIM U/S. 154, IS SATISFIED. TO BEGIN WITH, EVEN GRANTING FOR THE SAKE OF ARGUMENT THAT CONDITIONS (A) & (B) ARE SATISFIED, I.E., THE CLAIM/S FORMS PART OF THE RECORD, BEING T HE BALANCE-SHEET FILED ALONG WITH THE RETURN OF INCOME, AND NOT CONSIDERED, THE SAME WOUL D ORDINARILY BE A SUBJECT MATTER OF REVISION APPLICATION U/S. 264 OF THE ACT OR APPEAL U/S. 246A OF THE ACT, AND NOT A MATTER OF RECTIFICATION. THIS IS AS ACCEPTANCE OF A CLAIM/S IS NOT CONSEQUENTIAL TO ITS PREFERENCE, I.E., IS NOT AUTOMATIC, AND WOULD REQUIRE BEING PROVED FO R THE SAME TO BE ADMITTED AND THE ASSESSEE ALLOWED RELIEF OR CREDIT IN ITS RESPECT. IT MAY BE THAT THE CLAIM ON CONSIDERATION REMAINS TO BE PROVED OR IS OTHERWISE FOUND INADMISS IBLE. AS SUCH, THE ONLY CERTAIN CONSEQUENCE THAT WOULD FOLLOW NON-CONSIDERATION, WH ERE PROVED, IS A DIRECTION BY THE REVISIONARY AUTHORITY FOR ITS CONSIDERATION, EVEN A S WOULD BE THE CASE WHERE THE NON- CONSIDERATION IS PREJUDICIAL TO THE INTEREST OF THE REVENUE, OR ITS CONSIDERATION BY THE FIRST APPELLATE AUTHORITY WHOSE POWERS ARE CO-TERMINUS WI TH THAT OF THE ASSESSING AUTHORITY. IT IS ONLY WHERE THE CLAIM IS OF A NATURE WHERE ITS VE RY PREFERENCE IS ITSELF SUFFICIENT FOR THE PURPOSE, COULD A VALID CLAIM U/S. 154 IN ITS RESPEC T BE MADE. TAKE THE CASE, FOR EXAMPLE, OF A CLAIM QUA SALARY OR INTEREST TO (WORKING) PARTNER/S, WITH TH E PARTNERSHIP DEED AUTHORIZING THE SAME ON RECORD, OR THERE BEING NO C HANGE IN THE CONSTITUTION OF THE FIRM OR THE TERMS OF THE PARTNERSHIP DURING THE YEAR. THE `BOOK PROFIT BEING A MATTER OF RECORD, AND THE CLAIM/S HAVING BEEN PRESSED, NON-CONSIDERAT ION THEREOF COULD BE SAID TO RESULT IN A `MISTAKE APPARENT FROM RECORD. PUT DIFFERENTLY, S UCH CASES WOULD REPRESENT AN EXCEPTION RATHER THAN A RULE. IN FACT, IN THE PRESENT CASE, THOUGH AN APPEAL STOOD PREFERRED BY THE ASSESSEE, AND WAS ON AT THE RELEVANT TIME; BEING FI NALLY HEARD ONLY ON 7/6/2005, AND THE ASSESSEE ONLY AWARE OF ITS MISTAKE IN HAVING MADE A WRONG CLAIM AND, FURTHER, CLAIMING THE OMISSION AFORESAID, YET, DID NOT RAISE THIS ISS UE IN ITS APPEAL ON MERITS EVEN AFTER THE AO HAD REJECTED ITS CLAIM U/S. 154. THE ANSWER TO THE THIRD QUESTION (C), WHICH ARISES FOR CONSIDERATION ONLY ON AFFIRMATIVE ANSWERS TO THE FI RST TWO, IS IN THE NEGATIVE, I.E., THE SAME IT(SS)A.NOS.157 /COCH./2005 & 164 & 165/COCH/2005 8 WOULD NOT LEAD TO A RECTIFICATION. WE SHALL, HOWEVE R, CONSIDER AND ISSUE FINDINGS IN RESPECT OF THE FIRST TWO QUESTIONS AS WELL. 8.4 WE, NEXT, CONSIDER QUESTIONS (A) & (B), WH ICH FORM THE SUBJECT MATTER OF THE AOS FINDINGS. THE ANSWER TO THE FIRST QUESTION (A) IS CLEARLY IN THE AFFIRMATIVE; THE AO ACCEPTING THE SAME WHEN HE SAYS THAT THESE LIABILIT IES WERE SHOWN IN THE BALANCE-SHEET. THAT BEING THE CASE, WE PROCEED TO CONSIDER QUESTIO N (B). THE AO STATES THAT THE SAME STAND DULY CONSIDERED. THE SAME INVOLVES A FACTUA L FINDING. THE LD. CIT(A) HAS NOT ISSUED ANY FINDING IN ITS RESPECT. HE STATES THAT S INCE THE CLAIM/S IS BORNE OUT BY THE RECORD, NON-ALLOWANCE OF THE DEDUCTION IN RELATION TO THE SAID LIABILITY/S IS A `MISTAKE WARRANTING RECTIFICATION. IN OTHER WORDS, HE PRESUM ES NON-CONSIDERATION (OF THE ASSESSEES CLAIM/S) AND, FURTHER, TREATS IT TO BE A MISTAKE. A S AFORE-STATED, NON-CONSIDERATION WOULD NOT NORMALLY LEAD TO THE FINDING OF A MISTAKE. ON T HE OTHER HAND, IT IS A FAILURE OR OMISSION TO GIVE EFFECT TO AN ALREADY CONSIDERED MATTER, SO THAT THERE IS NO SCOPE FOR ANY DEBATE, THAT WOULD LEAD TO THE INFERENCE OF IT BEING A CASE OF A `MISTAKE APPARENT FROM RECORD, RECTIFIABLE U/S. 154. SO HOWEVER, WE SHALL RENDER FINDINGS OF FACT; THE MATTER BEING PURELY ONE OF FACT, AND NOT CONCLUDE THE MATTER BY STATING THE LAW AND THE FALLACY ATTENDING THE APPROACH OF THE LD. CIT(A). A PERUSAL OF THE RECORD REVEALS THAT A ST ATEMENT OF ASSETS AND LIABILITIES AS ON 12/10/2000 WAS PREPARED BY THE AO ON THE BASIS OF T HE MATERIAL ON RECORD AND COMMUNICATED TO THE ASSESSEE VIDE HIS OFFICE LETTER DATED 23/5/2002, WORKING OUT HIS NET WEALTH AT RS. 60.91 LACS (PB PG. 2 & 3) . THE ASSESSEE RESPONDED VIDE LETTER DATED 19/6/2002 CONVEYING HIS OBJECTIONS TO THE SAID COMP UTATION. ANOTHER LETTER DATED 19/9/2002 WAS ADDRESSED TO THE ASSESSEE CONVEYING T HE REVISED COMPUTATION. THE SAME STOOD RESPONDED TO BY THE ASSESSEE VIDE HIS LETTER DATED 30/9/2002, SUBMITTING A RECONCILIATION STATEMENT, I.E., BETWEEN THE PROPOSE D FIGURES AND THAT AS PER HIS BOOKS OF ACCOUNTS, WHICH FORMS PART OF THE IMPUGNED RECTIFIC ATION ORDER. THE MATTER WAS DISCUSSED WITH THE ASSESSEES REPRESENTATIVE/S OVER SEVERAL H EARINGS, THE LAST OF WHICH WAS ON 21/10/2002, WITH THE ASSESSEE IN FACT ISSUING A NO OBJECTION TO THE PROPOSED COMPUTATION VIDE HIS LETTER DATED 14/10/2002 (REFER PARA 1 & 2 OF THE ASSESSMENT ORDER DTD. IT(SS)A.NOS.157 /COCH./2005 & 164 & 165/COCH/2005 9 29/10/2002; PB PG. 11-13) . THE ASSESSEES OBJECTIONS, AND THE MANNER OF TH EIR DISPOSAL ALSO FIND MENTION IN THE ASSESSMENT ORDER VIDE PARA 3.1 TO 3.5 THEREOF, WITH PARA 3.3 READING AS UNDER:- THE NEXT OBJECTION IS REGARDING SLIGHT VARIATION I N THE VALUE OF THE ASSETS AND LIABILITIES AS PER THE BOOKS OF ACCOUNTS. THIS IS ALSO ACCEPTED THE ONLY AND THE UNMISTAKABLE INFERENCE THAT FOLLOWS THE FOREGOING UNDISPUTED FACTS IS THAT THE COMPUTATION OF THE ASSESSEES NET WEALT H WAS BASED ON THE MATERIALS SUPPLIED BY HIM AS WELL AS THE SEIZED MATERIAL AND, FURTHER, THE FINAL FIGURE/S (OF THE VARIOUS ASSETS AND LIABILITIES) AS ADOPTED WERE AFTER AMPLE OPPORT UNITY THERETO TO FILE HIS OBJECTIONS AND EXPLANATIONS, AND AFTER CONSIDERING THE SAME, INCLU DING BY DISCUSSING THE SAME WITH HIS AUTHORIZED REPRESENTATIVE/S AND, RATHER, AS IT APPE ARS, PROPERLY, AND ONLY TO THE SATISFACTION OF THE ASSESSEE. AS SUCH, IT IS DIFFICULT TO SAY T HAT THERE HAS BEEN AN OMISSION TO CONSIDER THE IMPUGNED LIABILITIES. NON-CONSIDERATION CANNOT BE LIGHTLY INFERRED. FOR A CHARGE OF OMISSION TO LEAD TO A RECTIFIABLE MISTAKE, THE SAME MUST BE ESTABLISHED BEYOND DOUBT AND, SECONDLY, ITS IMPACT CLEAR AND PATENT. IN THE PRESE NT CASE, ON THE OTHER HAND, WE FIND THERE IS SUFFICIENT MATERIAL TO HOLD OTHERWISE. 8.5 WE MAY CONSIDER THE FACTS OF THE CASE MORE SPECIFICALLY. THE LIABILITY CLAIMED BY THE ASSESSEE IN RESPECT OF `SUNDRY CREDITORS, UNDE R WHICH HEAD THE IMPUGNED LIABILITIES WERE REPORTED, AS PER HIS BALANCE-SHEET IS AT RS. 8 5,19,751/-. VIDE THE FIRST COMPUTATION DATED 23/5/2002, THE AMOUNT PROPOSED UNDER THIS HEA D WAS AT RS. 84,79,751/-, I.E., AFTER EXCLUDING ONE FIGURE OF RS. 40,000/-, WHICH REPRESE NTS ONE OF THE FIGURES COMPRISING THE LOANS AND BORROWINGS FROM SEVERAL (SIX) PERSONS FOR AN AGGREGATE SUM OF RS. 12,95,090/-. AS SUCH, EVEN AT THAT STAGE, THERE WAS A REDUCTION IN THE AMOUNT BEING NOW CLAIMED (ALLEGING AN OMISSION) BY RS. 40,000/-; THE BREAK U P OF THE PROPOSED AMOUNT AND THAT AS PER THE REVISED COMPUTATION DATED 19/9/02 BEING AS UNDER: (AMOUNT. IN RS.) LOANS AND BORROWINGS 12,55,090 - C.I.DEVASSIKUTTY 7,36,300 - C.D.BOBBY 3,40,000 - IT(SS)A.NOS.157 /COCH./2005 & 164 & 165/COCH/2005 10 GOLD WORLD SILVER & GOLD INDUSTRIES 42,26,129 42,26,129 L.JAWERCHAND JEWELLERS 19,22,232 14,22,233 SHREE CHINTHAMANI JEWELLERS - 3,12,120 SREE GOKULAM CHITS - 23,20,000 84,79,751 82,80,482 ======= ======= EACH OF THE FIGURES, SAVE ONE, HAS UNDERGONE A CHAN GE, WITH RATHER TWO NEW BEING ADDED. THE CHANGE IN PROFILE ONLY SUGGESTS CONSIDERATION O F THE ASSESSEES CLAIMS. IT CANNOT BE OTHERWISE. EQUALLY, IT CANNOT BE SAID THAT THE FIRS T THREE LIABILITIES WERE IGNORED, I.E., AFTER HAVING FOUND MENTION IN THE FIRST LIST. THIS IS PA RTICULARLY AS THE SAME STOOD ALSO COMMUNICATED TO THE ASSESSEE PRIOR TO FINALIZATION, AND ADOPTED AT THE SUM SO COMMUNICATED WITHOUT RECEIVING ANY ADVERSE COMMENTS . TRUE, THE ASSESSMENT ORDER DOES NOT BEAR ANY REFERENCE TO THE FIRST THREE LIAB ILITIES, BUT, THEN, NEITHER DOES IT TO THE LAST TWO, WHICH ARE ADDITIONS TO THE FIRST LIST. AS AFOR E-STATED, OMISSION CANNOT BE A MATTER OF PRESUMPTION, BUT WOULD REQUIRE BEING PROVED. THE A SSESSEE VIDE HIS LETTER DATED 20/1/2003, REFERRING TO HIS EARLIER COMMUNICATION D ATED 19/6/2002 (IN RESPONSE TO PROPOSAL DATED 23/5/2002), STATES OF HIM HAVING THE REBY OBJECTED TO THE NON-CONSIDERATION OF LOAN LIABILITY OF RS. 12,95,090/- UNDER THIS HEA D. THIS IS CONTRARY TO THE FACTS ON RECORD, AS THE PROPOSAL DATED 23/5/2002 CLEARLY INCLUDED TH E SAME AT A DIFFERENCE OF RS. 40,000/-, I.E., AT RS. 12,55,090/-, SO THAT THE ASSESSEE COUL D HAVE VALIDLY OBJECTED ONLY FOR THE REDUCTION OF RS. 40,000/- (WHICH) AND NOT RS. 12,95 ,090/-, AS DONE. AGAIN, THE REDUCTION MAY NOT NECESSARILY BE AN OMISSION AND, THUS, LEAD TO AN INFERENCE OF A `MISTAKE; RATHER, IT IS UNLIKELY IT IS SO. THE INFERENCE, IF AT ALL, IS OF THE LIABILITY UNDER THIS HEAD HAVING BEEN PROPERLY CONSIDERED, AND, RATHER, AGREED TO. THE SECOND HEAD OF LIABILITY UNDER REFER ENCE IS `KURI LIABILITY. THE SAME STOOD CLAIMED AT RS. 19,14,852/- BY THE ASSESSEE PER HIS BALANCE SHEET. IT WAS INITIALLY PROPOSED AT THIS SUM VIDE COMMUNICATION DATED 23/5/2002. TH E REVISED COMPUTATION OF 19/9/2002 PROPOSED THE SAME AT RS. 5,07,556/-, AT WHICH AMOUN T THE SAME STANDS FINALLY ADOPTED, AND THERE IS NO DISPUTE WITH REGARD THERETO; THE AS SESSEE HAVING ALSO NOT OBJECTED THERETO, IT(SS)A.NOS.157 /COCH./2005 & 164 & 165/COCH/2005 11 EXPLAINING THE DIFFERENCE AS ON ACCOUNT OF DIVIDEND AND BONUS ADJUSTMENT PER THE RECONCILIATION STATEMENT. AGAIN, THE UNMISTAKABLE C ONCLUSION IS ONE OF PROPER CONSIDERATION. THE ANSWER TO THE QUESTION (B) ABOV E IS ALSO ANSWERED IN THE NEGATIVE. 8.6 BEFORE WE CONCLUDE, WE MAY ALSO ADVERT TO T HE REASONS THAT MOVED, AND FOUND FAVOUR WITH, THE LD. CIT(A). EVEN THOUGH, AS DISCU SSED HEREINABOVE, RECTIFICATION MAY NOT RESULT CONSEQUENTIALLY TO A FINDING OF NON-CONS IDERATION OF A CLAIM/S, WE ARE UNABLE TO AGREE WITH THE CHARGE OF NON-CONSIDERATION; THE AO ISSUING DEFINITE FINDINGS TO THE CONTRARY, ENCLOSING THE RECONCILIATION STATEMENT FI LED BY THE ASSESSEE AS A PART OF HIS RECTIFICATION ORDER, AND WHICH CLEARLY SPECIFIES TH E LIABILITY CLAIMED UNDER THE SAID TWO HEADS. IN FACT, THE DIFFERENCE CLAIMED IS SO HU GE, I.E., IN RELATION TO THE ASSESSEES CAPITAL, ON THE BASIS OF WHICH HE STOOD ASSESSED, AND SO STR IKING, THAT IT WOULD RAISE SUBSTANTIAL DOUBT AS TO ITS VERACITY AND AUTHENTICITY TO ANY RE ASONABLE MIND. IF ITS CLAIM/S HAD, AS CONTENDED, TO THAT EXTENT BEEN NOT CONSIDERED, THE ONLY CONSEQUENCE WOULD BE A PROPOSED OVER-ASSESSMENT OF HIS NET WEALTH BY THE AO TO THAT EXTENT, I.E., IN COMPARISON TO HIS BALANCE-SHEET. THE ASSESSEE, ASSUMING AN OMISSION B Y THE AO, ON BEING CONVEYED THE PROPOSAL, WOULD BE PUT TO NOTICE AND, ACCORDINGLY, CONVEY THE ERROR TO THE AO. IN THE PRESENT CASE, THERE IS NO REFERENCE BY THE ASSESSEE OR THE LD. CIT(A) IN THE IMPUGNED ORDER TO THE ASSESSEES CAPITAL AS PER ITS BALANCE-SHEET AS ON 12/10/2000, EVEN AS THE INITIAL PROPOSED CAPITAL WORKED OUT BY THE AO IS AT RS. 60. 91 LACS (COMMUNICATED VIDE HIS LETTER DATED 23/5/2002), REVISING IT TO RS. 57.23 LACS UPO N CONSIDERATION OF THE ASSESSEES OBJECTIONS AND EXPLANATIONS. WHAT IS THE CAPITAL (NET WEALTH) CLAIMED AS PER HIS BALANCE SHEET? NO ANSWER IS AVAILABLE. IN ANY CASE, THE AO PROP OSES THE SAME (NET WEALTH AS ON VALUATION DATE) AT AN EXCESS OF AT LEAST RS. 24 LAC S . THIS IS AS THE REDUCTION UPON REVISION WOULD ALSO BE IN TERMS OF THE ASSESSEES BOOKS OF A CCOUNT. COULD THIS REDUCTION BE WITHOUT REASON, AND AN OUTRIGHT OMISSION? EVEN SO, EVEN THE ASSESSEE DOES NOT NOTICE THE SAME, AND ISSUES A NO OBJECTION, AFTER AT LENGTH PR OCEEDINGS INVOLVING HEARING ON SEVERAL DATES AND, FURTHER, REQUISITION, SUBMISSION, AND CO NSIDERATION OF OBJECTIONS TO HIS PROPOSED WORKING BY THE AO. WOULD THIS ALL LEAD TO AN INFERENCE OF OMISSION OR IT(SS)A.NOS.157 /COCH./2005 & 164 & 165/COCH/2005 12 AGREEMENT? NOT ONLY THAT, THE FILES A SPECIFIC GROUND IN RES PECT OF NON-CONSIDERATION OF LIABILITY TO SREE GOKULAM CHITS (GD. # 3) IN ITS AP PEAL BEFORE THE FIRST APPELLATE AUTHORITY, WHICH IS NOT WITHDRAWN AND/OR SUBSTITUTED EVEN AS H E BECAME AWARE THAT ITS SAID CLAIM WAS WRONG (AS ADMITTED BY HIM VIDE HIS LETTER DATED 20/1/2003 TO THE AO), EVEN THOUGH THE APPELLATE PROCEEDINGS WERE ON, RESULTING IN A F INDING TO THE SAME EFFECT BY THE FIRST APPELLATE AUTHORITY. IN FACT, IT IS PERTINENT TO NO TE THAT BOTH, THE SAID GROUND (PER APPEAL INSTITUTED ON 26/11/2002) AS WELL AS ITS OBJECTION (VIDE APPLICATION U/S. 154 DATED 15/11/2002), WERE SPECIFIC, I.E., OF NON-CONSIDERAT ION OF `KURI LIABILITY TO SREE GOKULAM CHITS FOR RS. 23.20 LACS. THE LIABILITIES BEING NO W CLAIMED ARE TO SEVERAL PERSONS, NONE OF WHICH IS A KURI LIABILITY. THE LD. CIT(A) HAS ALSO MENTIONED ABOUT THE IDENTITY OF TWO CREDITORS, BEING THE ASSESSEES FATHER AND BROTHER, DUES TO WHOM WERE CL AIMED TO HAVE BEEN ASSESSED AS THEIR UNDISCLOSED INCOME FOR THE BLOCK PERIOD, BEING SUBJ ECT TO A SIMULTANEOUS SEARCH. IN THIS REGARD; FIRSTLY, THE IDENTITY OF THE CREDITORS IS I RRELEVANT; WHAT IS MATERIAL IS WHETHER THERE IS ANY MISTAKE/S APPARENT FROM THE RECORD, AND THE LIABILITY MAY WELL BE IN FAVOUR OF ANY OTHER PARTY, AS INDEED A SUBSTANTIAL PORTION OF THE CLAIMED SUM IS. SECONDLY, THE STATEMENT IS UNSUBSTANTIATED, BOTH BEFORE US AS WEL L AS BEFORE THE LOWER AUTHORITIES, AS APPARENT FROM THEIR ORDERS, AS WELL AS BEFORE US. T HIS BECOMES PARAMOUNT IN VIEW OF THE SPECIFIC FINDINGS BY THE AO. IN FACT, OUR ANSWER I N THE NEGATIVE TO QUESTION (B) RENDERS THIS ARGUMENT AS OF NO MOMENT. 8.7 IN SUMMATION, THE RECORD SHOWS THAT A DETAI LED EXAMINATION OF THE VARIOUS FIGURES OF ASSETS AND LIABILITIES PRECEDED THEIR ADOPTION I N THE ASSESSMENT AT THE AMOUNTS DONE. TO SAY, THEREFORE, THAT THERE HAS BEEN AN OMISSION MERITING RECTIFICATION WOULD BE UNWARRANTED IN THE LEAST. WE HAVE ALSO SUBJECT THE ASSESSEES CLAIM/S TO A VALIDATION TEST, WHICH IT HAS FAILED. IF AT ALL, THERE HAS BEEN AN OMISSION AT THE END OF THE ASSESSEE IN FILING OBJECTIONS AND/OR PROPER EXPLANATION/S IN THE ASSES SMENT PROCEEDINGS. THE ONLY COURSE OPEN TO THE ASSESSEE, IF STILL AGGRIEVED, WAS, AS A FORE-STATED, TO PREFER AN APPEAL ON THE MERITS OF THE EXCLUSION, AND NOT TO PLEAD A MISTAKE WHICH ALLOWS NO SCOPE FOR TWO VIEWS BUT ONLY ONE, UNEQUIVOCAL, VIEW UNDER ALL CIRCUMSTA NCES. IT(SS)A.NOS.157 /COCH./2005 & 164 & 165/COCH/2005 13 8.8 IN VIEW OF THE FOREGOING, IN OUR CONSIDER ED VIEW, THE ASSESSEES CLAIM/S IS WHOLLY WITHOUT MERIT AND STANDS RIGHTLY REJECTED BY THE AO AND, THEREFORE, WE REVERSE THE FINDINGS OF THE LD. CIT(A) IN THE MATTER, RESTORING THAT OF THE AO. WE DECIDE ACCORDINGLY. 9. IN THE RESULT, THE ASSESSEES APPEAL IS DISM ISSED AND THE REVENUES APPEALS ARE ALLOWED. SD/- SD/- (N.VIJAYAKUMARAN) (SANJAY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: ERNAKULAM DATED: 27TH OCTOBER, 2010 GJ COPY TO: 1. SHRI C.D.BOSE, PROPRIETOR CHEMMANNUR FASHION JEW ELLERY, CHEMMANNUR HOUSE, AVENUE ROAD, TRICHUR. 2. THE DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL C IRCLE, THRISSUR. 3. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CENTRA L CIRCLE, THRISSUR. 4. THE COMMISSIONER OF INCOME-TAX (APPEALS)-I, KOCH I. 5. THE COMMISSIONER OF INCOME-TAX, CENTRAL, KOCHI. 6. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 7. GUARD FILE. BY ORDER (ASSISTA NT REGISTRAR)