DCIT, Trivandrum V. Smt Anitha P. Ninan, Trivandrum

ITSSA 3/COCH/2008

• Counselvise Citation: [2011] 124 COUNSELVISE.COM (IT) 8116 (ITAT-COCHIN)
• Duration Of Justice: 3 year(s) 7 month(s) 30 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 13-09-2011
• Appeal Filed By: Department
• Bench Allotted: DB
• Next Hearing Date: 03-08-2011
• Assessment Year: misc
• Appeal Filed On: 14-01-2008
• Court: TRIBUNAL
• Department Lawyers: S R SENAPATI
• Assessee Lawyers: C B M WARRIER CAAR
• Keywords: Income from undisclosed sources; Question of law; Block assessment; Tax effect

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. 21/COCH/2007 & 03/COCH/2008 BLOCK PERIOD : 31.3.1986 TO 12.9.1997 THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1(2), RANGE- 1,TRIVANDRUM. VS. ANITHA P. NINAN, NO. 1, AKKULAM AVENUE, THURUVICKAL P.O., TRIVANDRUM. (REVENUE-APPELLANT) (ASSESSEE -RESPONDENT) REVENUE BY SHRI S.R.SENAPATI, SR. DR ASSESSEE BY SHRI C.B.M.WARRIER, CA-AR DATE OF HEARING 03/08/2011 DATE OF PRONOUNCEMENT 13/09/2011 O R D E R PER SANJAY ARORA, AM: THESE ARE A SET OF TWO APPEALS BY THE REVENUE ARIS ING OUT OF SEPARATE ORDERS BY THE COMMISSIONER OF INCOME-TAX (APPEALS)-I, TRIVANDRUM (CIT(A) FOR SHORT). THE APPEALS ARE IN RELATION TO THE BLOCK ASSESSMENT FOR THE PER IOD 1.4.1986 TO 12.9.1997, THE DATE OF SEARCH, IN RESPECT OF THE QUANTUM AND RECTIFICATION PROCEEDINGS, VIDE ORDERS DATED 15.11.2006 AND 3.7.2007 RESPECTIVELY. 2.1 THE APPEALS BEING IN RELATION TO THE SAME A SSESSMENT, WERE HEARD TOGETHER, AND ARE BEING DISPOSED OF BY A COMMON, CONSOLIDATED ORDER. WE SHALL TAKE UP THE APPEAL IN RESPECT OF QUANTUM PROCEEDINGS FIRST. THE BRIEF FAC TS OF THE CASE ARE THAT THE BLOCK ASSESSMENT IN THE CASE OF THE ASSESSEE WAS COMPLETE D ON 26.9.2000 AT A TOTAL INCOME OF ` 45.62 LAKHS. THE SAME STOOD REDUCED TO ` 6.79 LAKHS CONSEQUENT TO THE FIRST APPEAL, I.E., ON BEING DECIDED IN TERMS OF DIRECTIONS TO THE ASSE SSING OFFICER (AO). THE ASSESSEE, I.T.(SS)A. NOS. 03/COCH/2008 & 21/COCH/2007 2 AGAIN, CARRIED THE MATTER IN APPEAL WHEREUPON THE M ATTER WAS AGAIN RESTORED TO THE FILE OF THE ASSESSING AUTHORITY WITH FURTHER DIRECTIONS. A CCORDINGLY, THE INCOME STOOD ASSESSED AT ` 307700/- VIDE ORDER DATED 30.1.2004. THIS WAS AGAI N CONTESTED BEFORE THE FIRST APPELLATE AUTHORITY, WHO, VIDE HIS ORDER DATED 19.5.2004 DIRE CTED THE AO TO VERIFY THE DOCUMENTARY EVIDENCE IN THE ASSESSEES POSSESSION IN RESPECT OF THE LABO UR CHARGES FOR ` 253500/- INCURRED IN RELATION TO THE CONSTRUCTION OF HER RES IDENTIAL HOUSE, THE CONSTRUCTION OF WHICH WAS COMPLETED SOMETIME IN JULY, 1997. ON CONSIDERIN G THE SAME, THE AO FOUND NO REASON TO MODIFY THE ASSESSMENT AS FRAMED AND, ACCO RDINGLY, ASSESSED IT AS AT THE SAME SUM OF ` 307700/- VIDE ORDER DATED 23.7.2004. THE LD. CIT(A ), IN APPEAL, AGAIN REQUIRED THE ASSESSING OFFICER TO EXAMINE THE WITNESSES AGAI N, BY AFFORDING A PROPER OPPORTUNITY TO THE ASSESSEE; AS ALSO TO DECIDE AS TO WHETHER TH EY HAVE A GOOD FINANCIAL STANDING. ACCORDINGLY, THE AO EXAMINED THE LABOUR CONTRACTORS , PAYMENTS TO WHOM WERE MADE BY THE ASSESSEE, AND CONFIRMED THE ASSESSMENT AS FRAME D VIDE ORDER DATED 09/11/2005. THE SAME STOOD DELETED IN APPEAL LEADING TO THE PRESENT APPEAL BY THE REVENUE. 2.2 THE FACT IN ISSUE IS THE PERIOD OF PAYMENTS TO THE THREE LABOUR CONTRACTORS ENGAGED BY THE ASSESSEE FOR THE CONSTRUCTION OF HER RESIDEN TIAL HOUSE, BEING SHRI A. SOMAN ASARI, CARPENTER (AT ` 97,500/-), SHRI R.RADHAKRISHNAN, HEAD MASON ( ` 60,000/-) AND SHRI R.VIJAYA KUMAR, PAINTER ( ` 96,000/-). THE MATERIAL FOUND IN SEARCH REVEALED T HE SAID AMOUNTS AS OSTENSIBLY PAID AS LABOUR CHARGES TOWARD THE SAID CONSTRUCTION. THE ASSESSEES CLAIM IS THAT THESE SUMS REPRESENT AMOUN TS PAYABLE TO THEM FOR THE WORK UNDERTAKEN. THAT IS, THOUGH THE RELEVANT WORK HAD B EEN COMPLETED AS ON THE DATE OF SEARCH (12/9/1997), PAYMENTS IN ITS RESPECT STOOD N OT MADE, AND WERE SO ONLY SUBSEQUENTLY, I.E., AFTER THE COMPLETION OF THE CON STRUCTION, I.E., IN OCT.-NOV., 1997 AND MAY, 1998 (RADHAKRISHNAN). THOUGH ALL OF THEM CONFI RMED AND SUPPORTED THE ASSESSEES STAND, THE SAME WAS NOT FOUND ACCEPTABLE BY THE AO AS THE PAYMENTS TO THE LABOURERS WOULD ONLY BE MADE DURING THE COURSE OF THE CONSTRU CTION; THEY COULD NOT POSSIBLY WAIT FOR MONTHS TOGETHER TO GET THEIR PAYMENTS/DUES. THE IR STATEMENTS WERE, IN FACT, IN CONTRADICTION/AT VARIANCE WITH THEIR EARLIER STATEM ENT/S, WHEREIN THEY CLEARLY STATED TO HAVE RECEIVED THE IMPUGNED SUMS DURING THE COURSE OF CON STRUCTION ITSELF. ALSO, NONE OF THEM I.T.(SS)A. NOS. 03/COCH/2008 & 21/COCH/2007 3 WAS ASSESSED TO INCOME-TAX. THE ASSESSEES CASE, ON THE OTHER HAND, IS THAT EACH OF THE PAYEES OR THE LABOUR CONTRACTORS REPRESENTS A GROUP OF 3 TO 9 WORKERS, WORKING UNDER HIM. THE WORKERS ARE PAID A PART OF THE PAYMENT, I.E., A T THE RATE OF ` 100/- (SAY) PER DAY, BY THE GROUP LEADER ON A DAILY BASIS, AND THE BALANCE ` 60-75 PER DAY; THE GOING RATE BEING ` 160 AND ` 175 PER DAY, WAS PAID SUBSEQUENTLY. AS SUCH, THE L ABOURERS COULD SURVIVE ON THE DAILY WAGES GIVEN TO THEM. THE SAME FOUND FAVOUR W ITH THE LD. CIT(A), SO THAT THE REVENUE IS IN APPEAL. 3. BEFORE US, WHILE THE LD. DR REITERATED THE REVEN UES STAND, THE LD. AR WOULD SUBMIT THAT IT IS PARADOXICAL THAT WHILE THE REVENU E AGREES TO THE PURCHASE OF MATERIALS USED IN THE CONSTRUCTION AS BEING ON CREDIT, REFUSE S TO ACCEPT THE SAME WHEN IT COMES TO LABOUR. THE REASON STATED BY THE AO, I.E., THAT TH E PAYEES WERE NOT INCOME-TAX ASSESSES, IS OF LITTLE RELEVANCE, AS, EVEN AS POINTED OUT BY THE LD. CIT(A), EVEN THE PAYMENT OF ` 160- 170/- PER DAY WOULD NOT LEAD TO THEIR INCOME EXCEED ING THE MAXIMUM AMOUNT NOT CHARGEABLE TO TAX. 4. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. 4.1 WE FIRSTLY OBSERVE THAT THERE IS NO CONTEMPORANEOUS RECORD EITHER WITH THE ASSESSEE OR WITH THE CONCERNED PAYEES, IN RESPECT OF THE LAB OUR CHARGES DUE AND PAID/RECEIVED . THE REMAND BY THE LD. CIT(A) ON 19/5/2004 WAS ONLY ON THE BASIS THAT THERE IS DOCUMENTARY EVIDENCE IN ITS RESPECT WITH THE ASSESS EE, AND WHICH THEREFORE REMAINED TO BE EXAMINED BY THE AO. NO SUCH EVIDENCE WAS FURNISH ED IN THE SET ASIDE PROCEEDINGS OR STANDS BROUGHT ON RECORD BY THE ASSESSEE AT ANY STA GE. THIS IS IN FACT NOT SURPRISING AS THE ASSESSEE IS ADMITTEDLY NOT MAINTAINING ANY DAY-TO-D AY RECORD IN RESPECT OF HER UNACCOUNTED INCOME OR QUA THE EXPENDITURE INCURRED THERE-AGAINST OR IN ITS R ESPECT. UNDER THE CIRCUMSTANCES, IT WOULD IN THE NORMAL COURSE ON LY RECORD THE PAYMENTS MADE TO THE LABOURERS. IT IS RATHER THE LABOURERS/LABOUR CONTR ACTORS, WHO, WHERE NOT COLLECTING THEIR CHARGES ON A DAILY/REGULAR BASIS, WOULD NEED TO MAI NTAIN A RECORD FOR RAISING A BILL/DEMAND AGAIN PRESUMABLY ONLY PERIODICALLY - ON THAT BASIS, AND WHICH WOULD AGAIN I.T.(SS)A. NOS. 03/COCH/2008 & 21/COCH/2007 4 REQUIRE BEING DULY VERIFIED AND CONFIRMED BY THE AS SESSEE, I.E., WITH REFERENCE TO THE WORK DONE, AND SETTLE THE SAME ON THE BASIS OF THE PAYME NTS ALREADY MADE, IF ANY. THAT IS, THE ASSESSEE IN THE NORMAL COURSE WOULD ONLY MAINTAIN A RECORD OF THE PAYMENTS MADE AND NOT OF THE EXPENDITURE ACCRUED OR LIABILITY INCURRE D IN ITS RESPECT. THE APEX COURT IN CIT V. P. CHIDAMBARAM (1971) 80 ITR 467 (SC) CLARIFIED THAT NO CLAIM TOW ARD FOLLOWING ANY SYSTEM OF ACCOUNTING (MERCANTILE, IN THE INSTANT CA SE) QUA UNDISCLOSED INCOME COULD HOLD. FURTHER, THERE IS NO REFERENCE TO ANY DATES OR THE PERIOD FOR WHICH THE EXPENDITURE IS INCURRED OR THE WORK PERFORMED, AND WHICH CANNOT BE , I.E., IF SUCH A RECORD, AS CONTENDED, WAS IN FACT BEING MAINTAINED. AFTER ALL, THE `AMOUN T PAYABLE WOULD ONLY RUN FROM THE TIME THE WORK IS UNDERTAKEN, OR THE LAST PAYMENT MA DE, TO THAT OF THE DISCHARGE OF THE LIABILITY BY PAYMENT, I.E., IS INEXTRICABLY LINKED TO THE TIME (OR WORK) TO WHICH IT RELATES. THAT IS, IT HAS TO, BY DEFINITION, EITHER RECORD TI ME OR WORK, THE TWO PARAMETERS ON THE BASIS OF WHICH THE LABOUR IS CHARGED. THE COMPLETIO N OF THE CONSTRUCTION, OR EVEN ITS DATE, IS NOT VERY RELEVANT, BUT THE PERIOD DURING WHICH T HE WORK WAS UNDERTAKEN WOULD DEFINITELY BE, AND WHICH WE OBSERVE AS CONSPICUOUS BY ITS ABSENCE. 4.2 FURTHER ON, APART FROM THE ABSENCE OF ANY R ECORD, SO THAT THE ASSESSEES CASE IS UNSUBSTANTIATED, WE FIND IT TO BEAR A CONTRADICTION . THIS IS AS THE ASSESSEE, AS WELL AS THE LABOURERS/LABOUR CONTRACTORS, ADMIT THAT A PART OF THE DUES WERE PAID ON A DAILY BASIS, AND ONLY THE BALANCE WAS PAID SUBSEQUENTLY. HOWEVER, TH E IMPUGNED SUM ADMITTEDLY REPRESENTS THE VALUE OF THE LABOUR CHARGES FOR THE ENTIRE WORK UNDERTAKEN BY THEM. HOW COULD THIS BE ? WAS IT THEN THAT THE LABOUR CONTRACTORS PAID THE LA BOURERS IN THEIR GROUP FROM THEIR OWN RESOURCES WITHOUT GETTING ANYTHING F ROM THE ASSESSEE ? THAT IS, THE ENTIRE WORK, WHICH WOULD COST THEM ANYWHERE BETWEEN ` 2000/- TO ` 6000/- PER WEEK, WAS FINANCED BY THE CONTRACTORS THEMSELVES. EVEN SO, WH Y WOULD ONE WAIT FOR MONTHS EVEN AFTER COMPLETION OF THE WORK, WHICH, AT ANY RATE, S TOOD COMPLETED BY MID JULY, 1997, WITH ONE OF THE WORKERS STATING TO HAVE BEEN PAID IN MAY , 1998. HERE IT WOULD BE PERTINENT TO STATE THAT THE AO HAS ALLOWED DUE CREDIT AGAINST TH E COST OF CONSTRUCTION, INCLUDING LABOUR CHARGES, FOR ALL THE RECEIPTS BY THE ASSESSEE DURIN G THE PERIOD OF CONSTRUCTION, I.E., JUNE, 1993 TO JULY, 1997, WHICH (THE PERIOD OF CONSTRUCTI ON) WAS IN FACT INITIALLY REPORTED (BY I.T.(SS)A. NOS. 03/COCH/2008 & 21/COCH/2007 5 THE DVO) AS FROM JUNE, 1994 TO JANUARY, 1996. IT A LSO NEEDS TO BE APPRECIATED THAT APART FROM THE FINANCIAL CAPACITY, NON COLLECTION OF DUES ON A REGULAR BASIS ALSO ENTAILS A RISK. AS SUCH, IN THE ABSENCE OF ANY EVIDENCE OR CORROBOR ATION BY ANY MATERIAL, THE CONTENTION, RAISED SUBSEQUENTLY, IS EXTREMELY IMPROBABLE. IT I S IN THIS CONTEXT THAT THE LD. CIT(A) HAD REMITTED THE MATTER BACK TO THE AO TO EXAMINE THE F INANCIAL STANDING OF THE LABOUR CONTRACTORS, AND WHEREAT, AGAIN, NO MATERIAL TO EST ABLISH THE SAME STOOD BROUGHT FORTH BY THE ASSESSEE. IT IS, AGAIN, IN THIS CONTEXT ONLY T HAT THE OBSERVATION BY THE AO THAT NONE OF THE PAYEES WERE INCOME-TAX ASSESSES, HAS TO BE VIEW ED AND UNDERSTOOD, AND NO OTHER. 4.3 THE LD. CIT(A) IN OUR VIEW HAS FAILED TO SEE THAT THE ASSESSEES CLAIM, I.E., OF THE IMPUGNED SUMS AS REPRESENTING ONLY A UNPAID LIABILI TY, PAID LATER, IS DE HORS ANY DOCUMENTARY EVIDENCE AND/OR SPECIFIC MATERIALS; WIT HOUT EVEN REFERENCE TO ANY PERIOD TO WHICH IT RELATES; AND BASED ON A CHANGED STAND BY T HE LABOURERS; WHILE THE STAND BY THE REVENUE ACCORDS WITH THE PRESUMPTION/BASIS ATTENDIN G THE MATERIALS FOUND IN SEARCH [REFER: CIT V. P. CHIDAMBARAM (SUPRA)]; THE NORMAL HUMAN CONDUCT AND PREPONDERAN CE OF PROBABILITIES, I.E., IS ON SOUND AND FIRM/COGENT BA SIS. THE SECOND SET OF STATEMENTS FROM THE CONTRACTORS, I.E., TAKING A DIFFERENT STAND, WE RE RECORDED YEARS AFTER THE PERIOD TO WHICH THE PAYMENTS RELATE AND, SECONDLY, DO NOT CON TAIN ANY EXPLANATION FOR THE CHANGE IN ESSENTIAL FACTS, AS APPARENT FROM THE ORDERS OF THE AUTHORITIES BELOW, SO THAT LITTLE CREDENCE, AS OBSERVED BY THE AO, COULD BE PLACED TH EREON. THE ASSESSEE, IN OUR VIEW, HAS NOT BEEN ABLE TO EFFECT ANY SIGNIFICANT IMPROVEMENT IN ITS CASE, I.E., AS WAS FOUND BY THE AO VIDE HIS FIRST ORDER DATED 30/1/2004, AND CONTIN UES TO BE UNSUBSTANTIATED, COMPRISING OF BALD, UNPROVED STATEMENTS; RATHER LEADING TO ANO MALIES AND CONTRADICTIONS. WE, THEREFORE, ARE UNABLE TO BE IN AGREEMENT WITH THE A SSESSEES CASE AND, CONSEQUENTLY, REVERSE THE FINDINGS OF THE LD. CIT(A), RESTORING T HAT OF THE AO. WE DECIDE ACCORDINGLY. 4.4 THERE IS NO QUESTION OF DRAWING ANY ANALO GY FROM THE CREDIT PURCHASE OF MATERIALS USED IN THE CONSTRUCTION, AS ARGUED BEFORE US BY TH E LD. AR. FIRSTLY, IT IS NOT KNOWN IF ANY MATERIALS IN ITS RESPECT WERE FOUND DURING THE SEAR CH OR THE PROPERTY STOOD SUBJECT TO TAX, AS IS NORMALLY THE CASE, ON THE BASIS OF ITS VALUAT ION. SECONDLY, THE SAME IS ON AN ENTIRELY I.T.(SS)A. NOS. 03/COCH/2008 & 21/COCH/2007 6 DIFFERENT FOOTING IN-AS-MUCH AS THE PURCHASE OF GOO DS ON CREDIT IS AN ACCEPTED BUSINESS PRACTICE, A MATTER OF COMMON DAY OBSERVATION AND EX PERIENCE, AND WHICH WOULD NOT BE INFLUENCED BY WHETHER THE PAYMENT BEING MADE BY THE PURCHASER IS OUT OF HIS ACCOUNTED OR UNACCOUNTED FUNDS. THIRDLY, THE SAME HAS BEEN A CCEPTED BY THE REVENUE ON MERITS, AS WHERE THE SUPPLIERS COULD SHOW W.R.T THEIR REGULAR ACCOUNTS THAT THE SUPPLIES TO THE ASSSESSEE WERE ON CREDIT AND PAID FOR SUBSEQUENTLY. THE LABOUR CONTRACTORS, ADMITTEDLY, ARE NOT MAINTAINING ANY ACCOUNTS, NOR COULD SUBSTAN TIATE, AS OBSERVED BY US AT THE VERY OUTSET, WITH ANY OTHER CONTEMPORANEOUS RECORD WITH THEM, RATHER, ADMITTING (INITIALLY) TO THE PAYMENTS HAVING BEEN MADE TO THEM FROM TIME TO TIME DURING THE COURSE OF CONSTRUCTION, AND WHICH ACCORDS WITH THE USUAL PRAC TICE. ALSO, AS AFOREMENTIONED, THE AO HAS ALLOWED DUE CREDIT AGAINST THE COST OF CONSTRUC TION, INCLUDING LABOUR COST, FOR ALL THE RECEIPTS BY THE ASSESSEE DURING THE PERIOD OF CONST RUCTION. 5. IN THE RESULT, THE REVENUES APPEAL (IN IT(SS)A NO. 21/COCH/2007) IS ALLOWED. 6. COMING TO THE REVENUES SECOND APPEAL (IN IT(SS) A NO. 03/COCH/2008), IT WAS AT THE VERY OUTSET URGED BY THE LD. AR THAT NOTWITHSTA NDING THE MERITS OF THE CASE, THE REVENUES APPEAL IS NOT MAINTAINABLE U/S. 268A OF T HE ACT; THE TAX EFFECT BEING ONLY AT ` 32,520/-, I.E., AT 60% OF THE IMPUGNED INCOME OF ` 54,200/-. THE LD. DR OBJECTED THERETO BY STATING THAT THE APPEAL INVOLVES A LEGAL ISSUE. 7. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. WE FIND THAT THE ASSESSEES OBJECTION IS MAINTAINABLE; THE REVENUES APPEAL BEING OUSTED ON THE BASIS OF THE MONETARY CEILING, THE TAX EFFECT OF ITS APPEAL BEING WELL BELOW THE THRESHOLD LIMIT OF ` 1 LAKH, I.E., AS RELEVANT ON THE DATE OF THE FILING THE APPEAL (14/1/2008). AS REGARDS THE CONTENTION OF THE ISSUE INVOLVED BEING A LEGAL ONE, THE SAME CLEARLY DOES NOT REPRESENT A SUBSTANTIAL QUESTION OF LAW, WHICH ONLY WOULD ENABL E THE ADMISSION OF THE REVENUES APPEAL. WE DECIDE ACCORDINGLY. I.T.(SS)A. NOS. 03/COCH/2008 & 21/COCH/2007 7 8. IN THE RESULT, THE REVENUES APPEAL (IN IT(SS)A NO. 03/COCH/08) IS DISMISSED AS NOT MAINTAINABLE. SD/- SD/- (N.VIJAYAKUMARAN) (SANJAY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: ERNAKULAM DATED: 13 TH SEPTEMBER, 2011 GJ COPY TO: 1. SMT. ANITHA P. NINAN, NO. 1, AKKULAM AVENUE, THU RUVICKAL P.O., TRIVANDRUM. 2. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1( 2), TRIVANDRUM. 3. THE COMMISSIONER OF INCOME-TAX (APPEALS)-I, TRIV ANDRUM. 4. THE COMMISSIONER OF INCOME-TAX, TRIVANDRUM. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE .