V.P.Ahammedkutty Haji, Malappuram V. ACIt, Tirur

ITSSA 37/COCH/2004

• Counselvise Citation: [2012] 124 COUNSELVISE.COM (IT) 7539 (ITAT-COCHIN)
• Duration Of Justice: 8 year(s) 11 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 09-05-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 25-04-2012
• Assessment Year: misc
• Appeal Filed On: 28-04-2004
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S R SENAPATI
• Assessee Lawyers: M V VENUGOPAL
• Keywords: Unexplained expenditure; Block assessment
• Section: 132

Judgement Text

1 IT(SS)A NO.37/COCH/2004 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI B.R. BASKARA N(AM) I.T(SS)A NO. 37/COCH/2004 (BLOCK PERIOD 1989-90 TO 1999-2000) SHRI AHMED KUTTY HAJI VS THE A.C.I.T., CIR.1 VALIA PEEDIAKKAL HOUSE TIRUR P.O. PANTHARANGADI MALAPPURAM DIST PAN : NOT AVAILABLE (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI M.V. VENUGOPAL RESPONDENT BY : SHRI S.R. SENAPATI DATE OF HEARING : 25-04-2012 DATE OF PRONOUNCEMENT : 09-05-2012 O R D E R PER N.R.S. GANESAN (JM) THIS APPEAL OF THE ASSESSEE WAS EARLIER DISPOSED O F BY THIS TRIBUNAL BY AN ORDER DATED 09-05-2006. HOWEVER, THE REVENUE HAS FIL ED AN APPEAL BEFORE THE HIGH COURT. THE HIGH COURT, AFTER SETTING ASIDE TH E ORDER OF THE TRIBUNAL DATED 09-05-2006 DIRECTED THE TRIBUNAL TO RECONSIDER THE MA TTER AND DECIDE THE JURISDICTION QUESTION AS WELL AS THE CASE ON MERIT AFTER HEARING BOTH THE PARTIES. THE HIGH COURT HAS FURTHER OBSERVED THAT SINCE THE ASSESSEE HAS OFFERED SUBSTANTIAL AMOUNT OF UNDISCLOSED INCOME, THE DEPAR TMENT CAN SHOW SOME LENIENCY AND GO FOR SETTLEMENT FOR WHICH THE ASSESS EE WAS DIRECTED TO APPROACH 2 IT(SS)A NO.37/COCH/2004 THE COMMISSIONER OF INCOME-TAX. DURING THE COURSE O F HEARING, ON A QUERY FROM THE BENCH WHETHER ANY STEPS WERE TAKEN FOR SETTLING THE MATTER, THE LD.REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT H E HAS ALREADY FILED AN APPLICATION BEFORE THE COMMISSIONER OF INCOME-TAX AN D THE COMMISSIONER OF INCOME-TAX, AFTER TWO ROUNDS OF DISCUSSION, COULD NO T TAKE ANY DECISION. 2. THE LD.DR, SHRI ABHIMANYU SINGH YADAV SUBMITTED THAT THE COMMISSIONER OF INCOME-TAX HAS NO POWER TO SETTLE THE MATTER. T HE SETTLEMENT COULD BE DONE ONLY BEFORE THE SETTLEMENT COMMISSION. THEREFORE, THE LD.DR SUBMITTED THAT THE APPEAL MAY BE DISPOSED OF ON MERIT. 3. THE FIRST ISSUE ARISES FOR CONSIDERATION IS AS T O WHETHER THE BLOCK ASSESSMENT FRAMED BY THE ASSESSING OFFICER IS VALID OR NOT? NO ARGUMENT WAS ADVANCED BY BOTH THE PARTIES WITH REGARD TO THE VAL IDITY OF THE ASSESSMENT. SINCE THE HIGH COURT HAS SPECIFICALLY DIRECTED THE TRIBUN AL TO DECIDE THE JURISDICTION QUESTION ALSO, WE HAVE GONE THROUGH THE ORDER OF TH E LOWER AUTHORITIES AND THE OTHER MATERIALS AVAILABLE ON RECORD. IT APPEARS FR OM THE MATERIAL AVAILABLE ON RECORD THAT THERE WAS A SEARCH U/S 132 OF THE ACT O N 22-10-1998. THE ASSESSEE FILED A BLOCK RETURN DISCLOSING UNDISCLOSED INCOME O F RS.3,77,870. THE ASSESSEE RAISED OBJECTION BEFORE THE COMMISSIONER OF INCOME-T AX(A) WITH REGARD TO THE ASSESSMENT OF UNDISCLOSED INCOME FOR THE BLOCK PERIO D. THE COMMISSIONER OF INCOME-TAX(A) FOUND THAT IN THE COURSE OF SEARCH PRO CEEDINGS MATERIALS WERE FOUND TO BE PERTAINING TO THE ASSESSEE AND THEREFOR E, THE PROCEEDINGS HAVE TO BE INITIATED U/S 158BC R.W.S. 158BD OF THE ACT. HOWEV ER, THE ASSESSING OFFICER OMITTED TO MENTION SECTION 158BD IN THE ASSESSMENT ORDER. THE COMMISSIONER OF INCOME-TAX(A) HAS ALSO FOUND THAT THE VERY SAME A SSESSING OFFICER HAS JURISDICTION TO ASSESS SHRI K.T. MOOSA AND THE PRESE NT ASSESSEE. THE QUESTION 3 IT(SS)A NO.37/COCH/2004 ARISES FOR CONSIDERATION IS WHEN THE VERY SAME OFFI CER HAS JURISDICTION TO ASSESS THE INCOME OF THE BLOCK PERIOD, WHETHER RECORDING OF SATISFACTION WITH REGARD TO MATERIAL FOUND DURING THE COURSE OF SEARCH OPERATIO N IS ESSENTIAL OR NOT? THE KERALA HIGH COURT WHILE CONSIDERING THIS ISSUE FOUND THAT WHEN THE ASSESSING OFFICER WAS SAME FOR THE PERSON SEARCHED AND THE PE RSON IN RESPECT OF WHOM MATERIALS HAVE BEEN FOUND DURING THE COURSE OF SEAR CH OPERATION, IT MAY NOT BE NECESSARY FOR RECORDING SATISFACTION. THE HIGH COU RT FURTHER OBSERVED THAT THE RECORDING OF SATISFACTION IS NECESSARY WHEN THE SEI ZED MATERIALS ARE TRANSFERRED TO THE OTHER OFFICERS FOR THE PURPOSE OF INITIATING AS SESSMENT PROCEEDINGS AGAINST PERSON OTHER THAN THE SEARCHED PERSON. IN VIEW OF THE JUDGMENT OF THE HIGH COURT AND THE ASSESSING OFFICER BEING ONE AND THE S AME FOR THE PERSON SEARCHED AND THE PERSON IN RESPECT OF WHOM MATERIALS HAVE BE EN FOUND DURING THE COURSE OF SEARCH OPERATION, THERE MAY NOT BE ANY NECESSARY FOR RECORDING THE SATISFACTION. FURTHERMORE, IN THE PROCEEDINGS AGAI NST A PERSON OTHER THAN SEARCHED, THE PROCEDURE PRESCRIBED U/S 158BC HAS TO BE FOLLOWED FOR COMPUTING THE UNDISCLOSED INCOME. IN FACT, THE NOTICE CALLIN G FOR THE RETURN OF INCOME HAS TO BE ISSUED U/S 158BC OF THE ACT. THEREFORE, THIS TR IBUNAL IS OF THE CONSIDERED OPINION THAT THE BLOCK ASSESSMENT IS VALIDLY PASSED BY THE ASSESSING OFFICER. 4. NOW COMING TO THE MERIT OF THE ADDITION MADE BY THE ASSESSING OFFICER, THE FIRST ADDITION IS WITH REGARD TO ADDITION OF RS.8,9 7,288 ON ACCOUNT OF ALLEGED PURCHASE OF JEWELLERY. THE LD.REPRESENTATIVE FOR T HE ASSESSEE SUBMITTED THAT DURING THE COURSE OF SEARCH OPERATION SOME BILLS, Q UOTATIONS, SLIPS OF PAPERS SHOWING PURCHASE OF JEWELLERY WAS SEIZED. MAJORITY OF THE SEIZED MATERIALS WERE QUOTATION / ESTIMATES. THEREFORE, THERE CANNOT BE ANY ADDITION ON THE BASIS OF THE QUOTATION FOUND DURING THE COURSE OF SEARCH OPE RATION. 4 IT(SS)A NO.37/COCH/2004 5. ON THE CONTRARY, THE LD.DR SUBMITTED THAT THE AS SESSEE, IN FACT, HAS PURCHASED THE JEWELLERY ON THE BASIS OF THE QUOTATI ONS / ESTIMATES. THEREFORE, THE ASSESSING OFFICER HAS RIGHTLY MADE THE ADDITION . 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. SOME QUOTATIONS / ESTIMATES ITSELF MAY NOT PROVE THE PURCHASE OF JEWELLERY. IT IS A COMMON KNO WLEDGE THAT NOW A DAYS ALL JEWELLERY SHOPS IN THIS COUNTRY ARE ISSUING QUOTATI ONS / ESTIMATES WHILE THE JEWELLERIES WERE PURCHASED BY PAYING CASH. IT DOES NOT MEAN THAT ALL THE QUOTATIONS AND ESTIMATES ARE PERTAINING TO PURCHASE OF JEWELLERY. THERE MAY BE SOME GENUINE QUOTATIONS / ESTIMATES FOR PURCHASE OF JEWELLERY IN FUTURE. THE FACT REMAINS IS THAT SOME BILLS AND SLIPS OF PAPERS SHOW ING THE DETAILS OF PURCHASE OF JEWELLERY WERE ALSO SEIZED. HOWEVER, BOTH THE ASES SEE AND THE REVENUE COULD NOT QUANTIFY THE ACTUAL PURCHASE OF JEWELLERY ON TH E BASIS OF THE BILLS AND SLIPS OF PAPERS FOUND FOR PURCHASE OF JEWELLERY. MOREOVER, THE HIGH COURT, IN ITS JUDGMENT DATED 15-11-2010 WHILE REMANDING BACK THE MAT TER TO THE TRIBUNAL OBSERVED THAT THE ASSESSEE OFFERED SUBSTANTIAL AMOU NT OF UNDISCLOSED INCOME; THEREFORE, THE DEPARTMENT CAN SHOW SOME LENIENCY AN D GO FOR A SETTLEMENT. IN VIEW OF THIS EXPLICIT OBSERVATION MADE BY THE HIGH COURT THE DEPARTMENT CONTENDS THAT THEY HAVE NO POWER TO GO FOR SETTLEME NT. MOREOVER, THE MATTER RELATES TO ASSESSMENT YEARS 1989-90 TO 1999-2000. TH EREFORE, KEEPING THE MATTER PENDING MAY PREJUDICE THE INTEREST OF BOTH P ARTIES. THIS TRIBUNAL IS OF THE OPINION THAT AN ESTIMATED ADDITION OF RS.4 LAKHS WOU LD MEET THE ENDS OF JUSTICE. ACCORDINGLY, THE ORDERS OF THE LOWER AUTHORITIES AR E, THEREFORE, MODIFIED AND THE ASSESSING OFFICER IS DIRECTED TO MAKE ADDITION OF RS .4 LAKHS INSTEAD OF RS.8,97,288 ON ACCOUNT OF ALLEGED PURCHASE OF JEWELLERY. 5 IT(SS)A NO.37/COCH/2004 7. THE NEXT GROUND OF APPEAL IS WITH REGARD TO ADDI TION OF RS.4,21,420 SAID TO BE RECEIVED FROM SHRI K.T. MOOSA. 8. THE LD.REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER MADE ADDITION OF RS.2 LAKHS ON ESTIMATE ON THE BASIS OF THE STATEMENT RECORDED BY THE ASSESSEE SUBSEQUENT TO THE SEARCH. NO STATE MENT WAS RECORDED U/S 132(4) OF THE ACT. ACCORDING TO THE LD.REPRESENTAT IVE, NO MATERIAL WAS FOUND DURING THE COURSE OF SEARCH ALSO. HOWEVER, ON ESTI MATE BASIS, THE ASSESSING OFFICER MADE ADDITION OF RS.2 LAKHS. ON APPEAL BY T HE ASSESSEE, THE COMMISSIONER OF INCOME-TAX(A) FOUND THAT THE INVESTM ENT IN THE PROPERTY WAS MADE BY SHRI K.T. MOOSA. THE COMMISSIONER OF INCOME -TAX(A) HAS ALSO FOUND THAT THE ASSESSEE HAS NOT PAID ANY MONEY FOR PURCHA SE OF PROPERTY. HOWEVER, THE PROPERTY WAS PURCHASED IN THE JOINT NAME OF SHR I K.T. MOOSA AND THE ASSESSEE. HAVING FOUND THAT THE ENTIRE SALE CONSID ERATION OF RS.4,21,420 WAS PAID BY SHRI K.T. MOOSA, THE COMMISSIONER OF INCOME-TAX(A) ASSUMING THAT THIS WOULD HAVE BEEN A REWARD FOR THE SERVICES RENDERED BY THE ASSESSEE, ENHANCED THE ADDITION TO RS.4,21,420 INSTEAD OF RS.2 LAKHS MADE BY THE ASSESSING OFFICER. ACCORDING TO THE LD.REPRESENTTIVE, THIS KIND OF PRES UMPTION AND ASSUMPTION IN THE BLOCK ASSESSMENT IS NOT WARRANTED. WHEN ADMITTEDLY, THE MATERIAL AVAILABLE ON RECORD SHOWS THAT THE MONEY WAS PAID BY SHRI K.T. MO OSA AND THE PROPERTY WAS PURCHASED IN THE NAME OF ASSESSEE, NO ADDITION IS W ARRANTED IN THE HANDS OF THE PRESENT ASSESSEE. 9. ON THE CONTRARY, SHRI S.R. SENAPATI, THE LD.DR S UBMITTED THAT NO DOUBT, THE TRANSACTION SHOWS THAT SHRI K.T. MOOSA PURCHASED THE PROPERTY JOINTLY WITH THE ASSESSEE. THE AMOUNT WAS ALSO PAID BY SHRI K.T. MOO SA ONLY. HOWEVER, NO ONE COULD PAY ANY MONEY FOR FREE. THE ASSESSEE MIGHT H AVE RENDERED SOME SERVICES 6 IT(SS)A NO.37/COCH/2004 TO SHRI K.T. MOOSA, THEREFORE, SHRI K.T. MOOSA MIGHT HAVE REWARDED THE PRESENT ASSESSEE BY PURCHASING PROPERTY IN THE NAME OF THE ASSESSEE ALSO. THEREFORE, THE COMMISSIONER OF INCOME-TAX(A) HAS RIGHTLY ENHANCED T HE ADDITION TO THE EXTENT OF RS. 4,21,420. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. ADMITTEDLY, NO M ATERIAL WAS FOUND DURING THE COURSE OF SEARCH OPERATION. FROM THE ORDER OF ASSE SSMENT, IT IS OBVIOUS THAT A STATEMENT U/S 132(4) OF THE INCOME-TAX ACT WAS RECOR DED BY THE ASSESSEE AND THE ASSESSEE CATEGORICALLY ADMITTED THAT THE EXPENDITUR E NOTED IN THE SEIZED MATERIAL WAS UNEXPLAINED EXPENDITURE. ON THE BASIS OF THE M ATERIAL FOUND DURING THE COURSE OF SEARCH OPERATION AND THE STATEMENT MADE U /S 132(4) OF THE ACT, THE ASSESSING OFFICER MADE ADDITION OF RS.2 LAKHS. HOWE VER, ON APPEAL BY THE ASSESSEE THE COMMISSIONER OF INCOME-TAX(A) PRESUMED THAT SHRI K.T. MOOSA COULD NOT HAVE PURCHASED THE PROPERTY IN THE NAME O F THE ASSESEE UNLESS THE ASSESSEE WAS REWARDED FOR THE SERVICES RENDERED TO SHRI K.T. MOOSA. IN FACT, NO MATERIAL IS AVAILABLE ON RECORD TO SUGGEST THAT THE ASSESSEE RENDERED ANY SERVICES TO SHRI K.T. MOOSA AND IT WAS A REWARD IN RETURN FOR THE SERVICES RENDERED BY THE ASSESSEE. IN THE ABSENCE OF ANY MATERIAL, THE DEPA RTMENT HAS PRESUMED SOMETHING AND COME TO A CONCLUSION THAT WHAT WAS IN VESTED BY SHRI K.T. MOOSA WAS A REWARD GIVEN TO THE ASSESSEE. THE MATERIAL A VAILABLE ON RECORD, AS OBSERVED BY THE COMMISSIONER OF INCOME-TAX(A), CLEA RLY SHOWS THAT THE MONEY WAS INVESTED BY SHRI K.T. MOOSA IN THE NAME OF THE P RESENT ASSESSEE. THEREFORE, WHATEVER INVESTMENT MADE BY SHRI K.T. MOOSA HAS TO B E ADDED IN THE HANDS OF SHRI K.T. MOOSA AND NOT IN THE HANDS OF THE ASSESSEE . THE ASSESSING OFFICER HAS RIGHTLY MADE THE ADDITION OF R.2 LAKHS ON THE BASIS OF THE STATEMENT MADE BY THE ASSESSEE U/S 132(4) OF THE INCOME-TAX ACT. THEREFOR E, THE COMMISSIONER OF 7 IT(SS)A NO.37/COCH/2004 INCOME-TAX(A) IS NOT JUSTIFIED IN ENHANCING THE ADDI TION MADE BY THE ASSESSING OFFICER TO THE EXTENT OF RS. 4,21,420. ACCORDINGLY , THE ORDER OF THE COMMISSIONER OF INCOME-TAX(A) IS SET ASIDE AND THE ASSESSING OFFI CER IS DIRECTED TO MAKE ADDITION OF RS.2 LAKHS AS IT WAS MADE IN THE ORIGINA L ASSESSMENT. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 09 TH MAY, 2012. SD/- SD/- (B.R. BASKARAN) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 09 TH MAY, 2012 PK/- COPY TO: 1. SHRI V.P. AHMED KUTTY HAJI, VALIA PEEDIAKKAL HOUSE, P. O. PANTHARANGADI, MALAPPURAM DIST 2. THE A.C.I.T, CIR.1, TIRUR 3. THE COMMISSIONER OF INCOME-TAX(A)-II, KOZHIKODE 4. THE COMMISSIONER OF INCOME-TAX, CALICUT 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH