Dr T.M.Kuriachan, Adimaly V. ACIT, Ernakulam

ITSSA 21/COCH/1998

• Counselvise Citation: [2010] 124 COUNSELVISE.COM (IT) 9180 (ITAT-COCHIN)
• Duration Of Justice: 12 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 01-06-2010
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Assessment Year: misc
• Appeal Filed On: 16-04-1998
• Court: TRIBUNAL
• Department Lawyers: A K THATTAICIT
• Assessee Lawyers: R KRISHNAN
• Keywords: Opportunity of being heard; Question of law; Block assessment
• Section: 133A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.VIJAYAKUMARAN & SHRI SANJAY ARORA I.T.(S&S)A.NO.21/COCH/1998 BLOCK PERIOD 01 - 04 - 1986 TO 01 - 04 - 1996 DR. T.M. KURIACHAN, ADIMALI. PA NO.APJPK1355C VS. THE ASST. COMMISSIONER OF INCOME-TAX, CENTRAL CIRICLE-II,ERNAKULAM. (APPELLANT) ( RESPONDENT ) I.T.A.NOS.484 TO 486/COCH/2005 ASST. YEARS:1995-96 TO 1997-98 DR. T.M. KURIACHAN, ADIMALI. PA NO.APJPK1355C VS. THE ASST. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-3, ERNAKULAM. (APPELLANT) (RESPONDENT) & I.T.A.NOS.405 TO 407/COCH/2006 ASST. YEARS:1995-96 TO 1997-98 THE DY. COMMISSIONER OF INCOME-TAX, CENTRAL CIRICLE-1, ERNAKULAM. VS. DR. T.M. KURIACHAN, ADIMALI. PA NO.APJPK1355C (AP PELLANT) (RESPONDENT) ASSESSEE BY SHRI R. KRISHNAN, C.A. RE VENUE BY SHRI A.K. THATTAI,CIT .,DR. O R D E R PER BENCH: ALL THESE SEVEN APPEALS WERE HEARD TOGETHER, AS TH E ISSUE IS COMMON ON QUANTUM AND THE PENALTY APPEALS ARE CONSEQUENTIAL TO THAT. IT(S&S)A NO. 21/COCH/1998 & OTHERS 2 2. THE BLOCK ASSESSMENT AND RE-OPENED ASSESSMENT APPEALS ARE BY THE ASSESSEE. THE PENALTY APPEALS ARE BY THE DEPARTMENT AGAINST THE DELETION OF PENALTY. T HEY WERE HEARD AND DISPOSED OFF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 3. THE SOLITARY BLOCK APPEAL RELATES TO BLOCK PERIO D 01-04- 1986 TO 01-04-1996. AS PER THE DIRECTION OF THE HO NBLE JURISDICTIONAL HIGH COURT, THE MATTER IS REMITTED T O THE TRIBUNAL FOR FRESH CONSIDERATION IN ACCORDANCE WITH LAW AND IN THE LIGHT OF THE OBSERVATIONS MADE IN THE JUDGME NT DATED 27-03-2003 IN ITA NO.106 OF 2000. THE OBSERVATION OF THE HONBLE HIGH COURT IN PARA.6 OF THE JUDGMENT IS REP RODUCED FOR THE PURPOSE OF PROPER ADJUDICATION BY THE INCOM E-TAX APPELLATE TRIBUNAL: THE TRIBUNAL ACCORDING TO US, HAS FAILED TO NOTE THAT THE VERY PROCEEDINGS IS AGAINST THEE ASSESSEE ONLY UNDER SECTION 158BD OF THE ACT. SECTION 158BB OF THE ACT IS ATTRACTED ONLY IN A CASE WHERE THE ASSESSING OFFICER IS SATISFIED THAT ANY UNDISCLOSED INCOME BE LONGS TO ANY PERSON OTHER THAN THE PERSON WITH RESPECT TO WHOM SEARCH WAS MADE UNDER SECTION 132 OR WHOSE BOOKS OF ACCOUNTS OR OTHER DOCUMENTS OR ANY ASSETS WERE REQUISITIONED UNDER SECTION 132A. FROM THE NOTICE ISSUED BY THE ASSESSING OFFICER IT IS CLEAR THAT THE ASSESSEE IS PROCEEDED AGAINST ONLY ON THE BASIS OF IT(S&S)A NO. 21/COCH/1998 & OTHERS 3 THE SEARCH CONDUCTED IN THE PREMISES OF M/S. EASTER N RETREADS LTD., ADIMALY AND NOT SOLELY ON THE BASIS OF THE SURVEY UNDER SECTION 133A CONDUCTED IN THE PREMISES OF THE ASSESSEE. IN SUCH CIRCUMSTANCES, THE TRIBUNAL SHOULD HAVE CONSIDERED THE QUESTION WAS TO WHETHER THE MATERIALS OBTAINED IN THE SEARCH CONDUC TED IN THE PREMISES OF M/S. EASTERN RETREADS LTD. DISCL OSED ANY UNDISCLOSED INCOME ATTRACTING THE PROVISIONS OF SECTION 133B OF THE ACT. CERTAINLY THAT HAS TO BE CONSIDERED WITH REFERENCE TO THE PROVISIONS OF SECT ION 158BB(3) AND OTHER RELATED PROVISIONS OF THE ACT AL SO. THE TRIBUNAL NOT HAVING CONSIDERED THE QUESTION IN THE LIGHT OF THOSE CIRCUMSTANCES, WE ARE OF THE VIEW TH AT THE MATTER MUST GO BACK TO THE TRIBUNAL FOR A FRESH CONSIDERATION IN ACCORDANCE WITH LAW. ACCORDINGLY WE SET ASIDE THE ORDER OF THE TRIBUNAL AND REMIT THE M ATTER TOP THE TRIBUNAL FOR FRESH CONSIDERATION IN ACCORDA NCE WITH LAW AND IN THE LIGHT OF THE OBSERVATIONS MADE IN THIS JUDGMENT. 4. THE LD. COUNSEL RAISED ADDITIONAL GROUNDS 1 TO 3 . AFTER HEARING ON THE ADDITIONAL GROUNDS, WHICH IS A PURE QUESTION OF LAW ADMITTED AND IT IS MANDATED TO ADJUDICATE TH E ADDITIONAL GROUNDS FIRST. 5. THE FACTS RELEVANT ARE THAT THE ASSESSEE AND HIS WIFE DR. MONICA KURIACHAN ARE DOCTORS AND BOTH OF THEM A RE ASSESSES TO INCOME-TAX. THE PREMISES OF DR. KURIA CHAN HAS BEEN SURVEYED U/S.133A ON 17-6-1986. SWORN STATEM ENT OF THE ASSESSEE AND HIS WIFE WERE RECORDED ABOUT THE S OURCE OF IT(S&S)A NO. 21/COCH/1998 & OTHERS 4 FUNDS FOR VARIOUS INVESTMENTS MADE AND EXPENDITURE INCURRED DURING THE BLOCK PERIOD FROM 01-04-1986 TO 01-04- 1996. 6. BESIDES, THERE WAS A SEARCH IN THE PREMISES OF M /S. EASTERN RETREADS LTD., WHICH IS A CLOSELY RELATED C ONCERN OF M/S. EASTERN GROUP OF COMPANIES. THE ASSESSEES S ON DR. BINOY KURIEN IS A DIRECTOR OF M/S. EASTERN RETREADS (P) LTD., VAZHAKKULAM. CERTAIN DOCUMENTS WERE ALSO SEIZED IN THE SAID SEARCH. SUBSEQUENTLY, SWORN STATEMENT WAS ALSO RECORDED FROM THE DIRECTORS OF THE SAID COMPANY. 7. THE ASSESSING OFFICER ISSUED NOTICE U/S. 158BC R.W.S. 158BD FOR THE BLOCK ASSESSMENT ON THE ASSESSEE. T HAT BLOCK ASSESSMENT WAS REMITTED BACK TO THE TRIBUNAL BY THE HONBLE HIGH COURT OF KERALA FOR FRESH CONSIDERATIO N ON THE GROUND THAT THE TRIBUNAL SHOULD HAVE CONSIDERED THE QUESTION AS TO WHETHER MATERIAL OBTAINED IN THE SEA RCH CONDUCTED IN THE PREMISES OF M/S. EASTERN RETREADS LTD. DISCLOSED ANY UNDISCLOSED INCOME ATTRACTING THE PRO VISIONS OF SECTION 133B OF THE ACT. THE TRIBUNAL SHOULD HAVE CONSIDERED THE PROVISIONS OF SECTION 158BB(3) AND O THER RELATED PROVISIONS OF THE ACT ALSO. IT(S&S)A NO. 21/COCH/1998 & OTHERS 5 8. THE LD. COUNSEL BY RELYING ON THE DIRECTION OF T HE HONBLE SUPREME COURT IN THE CASE OF MANISH MAHESWARI 289 ITR 341 CONTENDED THAT THE REQUIRED SATISFACTION WAS NOT RECORDED BY THE ASSESSING OFFICER AND HENCE THE MANDATORY REQUIREMENT FOR ISSUING 158BD NOTICE IS N OT SATISFIED, IS THE BONE OF CONTENTION ON BEHALF OF T HE ASSESSEE. 9. ON THE OTHER HAND, THE LD. COMMISSIONER OF INCOM E-TAX, DR BY REFERRING TO PARA.6 OF THE JUDGMENT OF THE HO NBLE HIGH COURT CONTENDED THAT 158BD ASSESSMENT IS VALID . THE ASSESSEE FILED 2B RETURN WITH NIL UNDISCLOSED INCOM E. ITEMS 1 TO 9 WERE THE ITEMS OF EXPENDITURE. THE A.28 IS THE SEIZED MATERIAL TOTALING RS.11,73,000/-. 158BD WAS FRAMED BASED ON SEIZED MATERIALS. 132(4) STATEMENT ALSO RECORDED FROM THE ASSESSEE. THE ADDITIONS ARE BASED ON THE VALID SEARCH AND SEIZED MATERIALS. HENCE, THE LD. COMMI SSIONER OF INCOME-TAX, DR MAINTAINED THAT 158BD IS VALID. HE RELIED ON THE DECISION OF THE DELHI BENCHES IN THE CASE OF NAPAR DRUGS (P) LTD. VS. DY. CIT (2006) 98 IT 285 (DELHI) (TM) . 10. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD INCLUDING THE IT(S&S)A NO. 21/COCH/1998 & OTHERS 6 PRECEDENTS RELIED ON. THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF MANISH MAHESWARI CITED SUPRA WAS NOT MADE AVAILABLE AT THE TIME OF DELIVERING THE JUDGMENT BY THE HONBLE HIGH COURT. THE RATIO OF THE HONBLE SUPREM E COURT IS SQUARELY APPLIES. THE TRIBUNAL CONSISTENTLY HO LDING THAT THERE MUST BE A RECORDED SATISFACTION OF THE CONCER NED ASSESSING OFFICER IN WHOSE JURISDICTION THE SEARCH WAS MADE. HE HAS TO SATISFY THAT THE SEIZED MATERIALS DISCLOS ES THE UNDISCLOSED INCOME OF THIRD PARTY AND AFTER RECORDI NG SUCH SATISFACTION TAKE OVER THE FILES TO THE CONCERNED A SSESSING OFFICER FOR INITIATING ACTION U/S.158BD/158BC ASSES SMENT. IT IS NOT DISPUTED BEFORE US THAT BOTH THE ASSESSEE AND THE SEARCHED EASTERN GROUP ARE ASSESSED BY DIFFERENT AS SESSING OFFICER. HENCE, RESPECTFULLY FOLLOWING THE DECISI ON OF THE HONBLE SUPREME COURT, WE QUASH THE 158BD R.W.S.158 BC ASSESSMENT MADE ON THE ASSESSEE. 11. IN THE RESULT, THE ASSESSEES APPEAL IN IT(S&S) A.NO.21/COCH/1998 IS ALLOWED ON TECHNICAL GROUND. 12. COMING TO THE QUANTUM APPEAL MADE FOR THE THREE INDIVIDUAL ASSESSMENT YEARS 1995-96, 1996-97 AND 19 97-98, THEY ARE ALL MADE U/S.144 R.W.S. 147. THESE INDIV IDUAL ASSESSMENT YEARS FALL WITHIN THE BLOCK AND BROKEN P ERIOD IT(S&S)A NO. 21/COCH/1998 & OTHERS 7 UPTO THE DATE OF SEARCH DATED 17-06-1996. FOR THE PURPOSE OF DISCUSSION, WE WILL TAKE UP THE ASSESSMENT YEAR 1995-96, AS THE ISSUE BEING COMMON FOR ALL THESE THREE YEARS . BASED ON THE INFORMATION AND WITH RELEVANCE TO THE SEIZED PAPER A.28 WHICH SHOWS INVESTMENT IN M/S. EASTERN RETREAD S (P) LTD. AND EXPENDITURE INCURRED BY THE ASSESSEE FOR H IS TWO CHILDREN, VIZ. BINOY KURIAN (SON) AND MISS SONU KUR IAN (DAUGHTER) BOTH WERE HAVING THEIR EDUCATION AT KMC COLLEGE, MANGALORE AND AS PER INFORMATION SUPPLIED BY THE DE AN OF KMC COLLEGE, REGARDING ANNUAL TUITION FEES, HOSTEL FEE AND MESS INCLUDING THE EXPENDITURE FOR DRESS, BOOKS, ET C. WAS PROBED BY THE ASSESSING OFFICER IN THE RE-OPENED ASSESSMENT. THE ASSESSEE OBJECTED THE SAME AND ON APPEAL TO THE LD. CIT(APPEALS), THE ASSESSEE RAISED AS MU CH AS SIX GROUNDS, VIZ. 1. THE RE-OPENING OF ASSESSMENT IS BAD IN LAW. 2. THE ESTIMATION OF EDUCATIONAL AND INCIDENTAL EXPENSES OF CHILDREN IS VERY MUCH ON THE HIGHER SIDE. THIS IS PURELY A GUESS WORK. 3. THE TAXING OF INVESTMENT OF RS.5,88,000/- ALLEGE D TO HAVE BEEN MADE BY THE APPELLANTS SON DR. BINOY KURIAN IN EASTERN RETREADS (P) LTD. IS BAD IN LAW. IT(S&S)A NO. 21/COCH/1998 & OTHERS 8 4. FIRST OF ALL THE INVESTMENT HAS BEEN MADE BY THE APPELLANTS SON AND THE ASSESSING OFFICER ERRED IN TAXING THE SAME IN THE HANDS OF THE APPELLANT AS HAVING COME OUT OF HIS HANDS. 5. THE PIECE OF PAPER RELIED UPON BY THE ASSESSING OFFICER DOES NOT INDICATE ANY INVESTMENT. EVEN THE DATES ARE NOT CLEAR. IT IS NOT ANYBODYS CASE THAT THIS REPRESENTS INVESTMENT IN THE COMPANY. 6. THE REASONS GIVEN BY THE ASSESSING OFFICER ARE N OT AT ALL SUFFICIENT TO WARRANT AN ADDITION IN THE HAN DS OF THE APPELLANT. 13. WE HAVE HEARD RIVAL SUBMISSIONS. THE LD. COUN SEL FOR THE ASSESSEE REITERATED THE SAME CONTENTIONS WHICH WERE ADVANCED BEFORE THE LOWER AUTHORITIES. THE LD. COMMISSIONER OF INCOME-TAX, DR SUPPORTED THE FINDIN G OF THE LOWER AUTHORITIES. 14. THE INFORMATION POSSESSED BY THE ASSESSING OFFI CER IS BASED ON THE SEIZED MATERIAL AND POST SEARCH INQUIR IES. THE INVESTMENTS WERE FOUND MADE BY THE ASSESSEE. NOW IT IS FOR THE ASSESSEE TO PROVE THE SOURCE FOR THOSE INVE STMENTS. THE SAME BURDEN IS ON THE ASSESSEE TO PROVE THE SOU RCE FOR EXPENSES INCURRED. NOW THE BLOCK ASSESSMENT IS CAN CELLED. THE REGULAR ASSESSMENT IS PARALLEL TO THE SAME. T HE IT(S&S)A NO. 21/COCH/1998 & OTHERS 9 ASSESSEE HAS TO DISCHARGE THE BURDEN. THE ASSESSE E HAS TO GIVE VALID REASONS FOR THE SOURCE TO THE SATISFACTI ON OF THE ASSESSING OFFICER OTHERWISE THE ASSESSEE WILL FAIL. AS THE BLOCK ASSESSMENT WAS KNOCKED OFF THE SOURCE WHICH T HE ASSESSEE ATTEMPTED TO SHOW HAS TO BE ADJUDICATED AT THE LEVEL OF THE ASSESSING OFFICER AND THE ASSESSEE SHO ULD BE GIVEN OPPORTUNITY TO PROVE THE AVAILABLE SOURCE BOT H FOR EXPENDITURE INCURRED AND FOR THE ALLEGED INVESTMENT . THE ORIGINAL ASSESSMENT ALSO MADE U/S.144 R.W.S.147. H ENCE, IN THE INTEREST OF JUSTICE, WE SET ASIDE THE ORDERS OF THE AUTHORITIES AND REMIT THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION IN ACCORDA NCE WITH LAW. IT IS NEEDLESS TO MENTION THAT THE LD. ASSESS ING OFFICER SHOULD AFFORD SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. AS IT IS AN OLD MATTER, THE ASSESSEE IS DIRECTED TO CO-OPERATE WITH THE DEPARTMENT AND PRODUCE ALL THE RELEVANT DETAILS THAT MAY BE REQUIRED BY THE ASSESSING OFFIC ER WITHOUT DELAY SO AS TO ENABLE THE DEPARTMENT TO DECIDE THE ISSUE IN ACCORDANCE WITH LAW FOR ALL THE ABOVE THREE ASSESSM ENT YEARS. 15. IN THE RESULT, THE QUANTUM APPEALS ARE ALLOWED FOR STATISTICAL PURPOSE. IT(S&S)A NO. 21/COCH/1998 & OTHERS 10 16. TURNING TO THE PENALTY APPEALS RELEVANT FOR THE ABOVE ASSESSMENT YEARS, THE QUANTUM APPEALS WERE REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJU DICATION FROM THE SIDE OF THE ASSESSING OFFICER. AS ON THI S DATE, NO QUANTUM IS SUBSISTING, THE THREE PENALTY APPEALS PR EFERRED BY THE DEPARTMENT WILL NOT SURVIVE. THOSE ARE LIA BLE TO BE DISMISSED AND ACCORDINGLY THEY ARE DISMISSED. HOW EVER, THE ASSESSING OFFICER IS AT LIBERTY TO REVIVE THE P ENALTY ON THE OUTCOME OF THE QUANTUM PROCEEDING WHICH WE HAVE REMITTED BACK TO THE LD. ASSESSING OFFICER FOR FRES H ADJUDICATION. HENCE, THESE PENALTY APPEALS ARE DI SMISSED AS INFRUCTUOUS FOR THE PRESENT. 17. IN THE RESULT, THE DEPARTMENTAL APPEALS ON PENA LTY ARE DISMISSED. THE BLOCK ASSESSMENT APPEAL OF THE ASS ESSEE IS ALLOWED AND THE THREE QUANTUM APPEALS ON THE ABOVE CAPTIONED ASSESSMENT YEARS ARE ALLOWED FOR STATISTI CAL PURPOSES. SD/- SD/- (SANJAY ARORA) (N.VIJAYKUMARAN) ACCOUNTANT MEMBER JUDICIAL M EMBER ERNAKULAM, DATED THE 01 ST JUNE,2010. PM. IT(S&S)A NO. 21/COCH/1998 & OTHERS 11 COPY FORWARDED TO: 1. DR. T.M. KURIACHAN, KURIANS CLINIC, ADIMALI. 2. THE DY. CIT., CENTRAL CIRICLE-1, ERNAKULAM. 3. THE ACIT., CENTRAL CIRICLE-II,ERNAKULAM. 4. THE ACIT., CENTRAL CIRICLE-3,ERNAKULAM. 5. CIT(A)-I, KOCHI. 6. CIT, CENTRAL,KOCHI. 7. D.R.