C. T. Lukose, Kottayam V. ACIT, Kottayam

ITSSA 61/COCH/2008

• Counselvise Citation: [2013] 121 COUNSELVISE.COM (IT) 9448 (ITAT-COCHIN)
• Duration Of Justice: 4 year(s) 7 month(s) 16 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 16-08-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 06-06-2013
• Assessment Year: misc
• Appeal Filed On: 30-12-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUSAN GEORGE; SR M ANIL KUMAR
• Assessee Lawyers: R KRISHNAN
• Keywords: Unexplained investment; Income from undisclosed sources; Search and seizure
• Section: 54; 132; 154

Judgement Text

IT (SS) A NO. 61/ COCH/ 2008 1 IN THE INCOME TAX APELALTER TIBUNAL COCHIN BENCH , COCHIN BEFORE S/SHRI N.R.S. GANESAN, JM & B. R. S BASKARAN, AM IT (SS) A NO. 61 /COCH/ 2008 ( BLOCK PERIOD 1989 - 90 TO 1998 - 99 & UPTO THE PERIOD 19.8.1998 ) SHRI C T LUKOSE CHIRAYIL HOUSE NEAR RLY OVER BRIDGE A THIRAMPUZHA ROAD, ETTUMANOOR VS THE ASST COMMR OF INCOME TAXC CIRCLE - 1 KOTTAYAM ( APPELLANT) (RESPONDENT) PAN NO. ABOPT0393A ASSESSEE BY SHRI R KRISHNAN REVENUE BY SMT SUSAN GEORGE SR DR & SR M ANIL KUMAR, CIT DATE OF HEARING 6 TH JUNE 2013 DA TE OF PRONOUNCEMENT 16 TH AUG 2013 OREER PER B.R. BASKARAN, AM: THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 7.10.2008 PASSED BY THE LD CIT(A) - IV, KOCH I AND IT RELATES TO THE BLOCK PERIOD ENDING 19.8.1998. THE ASSESSEE IS A SSAILING THE DECISION OF THE LD CIT(A) IN HOLDING THAT THE RECTIFICATION PROCEEDINGS INITIATED BY THE AO U/S 154 OF THE ACT IS VALID IN LAW. 2 THE FACTS RELATING TO THE ISSUE UNDER CONSIDERATION , NARRATED BY THE LD CIT(A) IN PARA 3 OF HIS ORDER ARE AS U NDER: 3. THE APPELLANT IS A PARTNER IN THOMSON HARDWARE AND A DIRECTOR OF THE COMPANY JASS ROLLER FLOUR MILLS PVT LTD. THERE WAS A SEARCH AND SEIZURE ACTION U/S 132 ON THE APPELLANT ON 19 TH AUGUST 1998 AND THE ASSESSMENT WAS COMPLETED U/S 158BC AS PER ORD ER DATED 31.8.2000 DETERMINING THE TOTAL UNDISCLOSED INCOME AT RS. 45,75,006/ - . WHILE COMPLETING THE ASSESSMENT THE AO DECLINED TO ALLOW SET OFF OF THE UNACCOUNTED INCOME AS DETERMINED IN JASS ROLLER FLOUR MILLS AGAINST THE UNEXPLAINED INVESTMENT AS IT (SS) A NO. 61/ COCH/ 2008 2 DETERM INED IN THE ASSESSMENT OF THE APPELLANT STATING THAT THE SAME COULD BE ALLOWED ONLY AFTER DUE VERIFICATION. SUBSEQUENTLY, AS PER ORDER U/S 154 DATED 30 TH SEPT 2001, THE AO ALLOWED SET OFF OF THE UNDISCLOSED INCOME AS DETERMINED IN JASS ROLLER FLOUR MILLS A GAINST THE UNEXPLAINED INCOME AS DETERMINED IN THE HANDS OF THE APPELLANT AND FIXED THE TOTAL INCOME AT RS. 1,51,660/ - . ON THE SAME DATE THE AO AS PER A SEPARATE ACTION REVISED THE QUANTUM OF PENALTY. THE ASSESSEE HAD CARRIED THE MATTER IN APPEAL AND THE APPEAL AGAINST THE ASSESSMENT WAS DISPOSED OF BY THE CIT(A) AS PER HIS ORDER DATED 29.12.2003 ITA 50/K/CIT/IV/2000 - 01 ALLOWING RELIEF AS PRAYED FOR AND THE APPEAL WAS ALLOWED. SO ALSO, THE APPEAL AGAINST THE LEVY OF PENALTY U/ S 158BA (2) WAS ALLOWED BY THE CIT(A) AS PER HIS ORDER DATED 29.12.2003 IN ITA NO. 11/K/INV/CIT - IV/01 - 02 BY CANCELLING THE PENALTY. THEREAFTER, THE AO AS PER PROCEEDINGS U/S 154 DATED 8 TH AUG 2007, HAS WITHDRAWN THE BENEFIT OF SET OFF OF INCOME EARLIER ALLOWED FOR THE REASON THAT THE C OMPANY JASS ROLLER FLOUR MILLS PVT LTD HAD PREFERRED AN APPEAL AGAINST THE ORDER OF THE CIT(A) AS REGARDS THE QUANTUM OF INCOME ASSESSED THEREBY RAISING A DEMAND OF RS. 17,45,411/ - AND ALSO IMPOSED PENALTY VIA THE SAME PROCEEDINGS IN A SUM OF RS. 15,86,737/ - IN THE HANDS OF THE APPELLANT. 2.1 AGAINST THE ORDER PASSED U/S 154 OF THE ACT ON 9 TH AUG 2007, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD CIT(A) CHALLENGING THE VALIDIT Y OF THE PROCEEDINGS INITIATED U/S 154 OF THE ACT . BEFORE THE LD CIT(A), THE ASSESSEE MAINLY CONTENDED THAT THE AO HAS INITIATED THE RECTIFICATION PROCEEDINGS ONLY FOR THE REASON THAT THE ASSESSEE HAS FILED APPEAL BEFORE THE INCOME TAX APPELL ATE TRIBUNAL CHALLENGING THE ORDER PASSED BY THE LD CIT(A), MEANING THEREBY THE AO HAS PRESUMED THAT THE ENTIRE UNDISCLOSED INCOME DETERMINED IN THE HANDS OF THE COMPANY WOULD BE WITHDRAWN BY THE HONBLE TRIBUNAL. THE LD CIT(A), HOWEVER, DID NOT AGREE WITH THE CONTENTION OF THE ASSESSEE. THE FIRST APPELLATE AUTHORITY H ELD THAT THE AO WAS JUSTIFIED TO RESORT TO THE RECTIFICATION PROCEEDINGS TO PROTECT THE REVENUE WHEN THE COMPANY M/S JASS ROLLER FLOUR MILLS PVT LTD ., CHOOSE TO APPEAL BEFORE THE T RIBUNAL CHALLENGING THE ORDER OF THE LD CIT(A). HOWEVER, AT THE TIME OF HEARING, THE LD CIT(A) NOTICED THAT THE TRIBUNAL HAD DISPOSED OF THE APPEAL FILED BY THE COMPANY REFERRED ABOVE ON 12 TH DEC. 2005. HENCE, THE LD CIT(A) EXPRESSED THE VIEW THAT THE AO OUGHT TO HAVE ALLOWED SET OFF OF UNDISCLOSED INCOME, IF ANY, AS RE - DETERMINED BY THE HONBLE TRIBUNAL . ACCORDINGLY, THE LD CIT(A) DIRECTED THE AO TO ALLOW THE IT (SS) A NO. 61/ COCH/ 2008 3 SET OFF OF UNDISCLOSED INCOME AS DETERMINED BY THE TRIBUNAL. AGGRIEVED BY THE SAID ORDER, THE ASSE SSEE FILED THIS APPEAL BEFORE US. 3 WE HAVE HEARD THE RIVAL CONTENTION AND CAREFU LLY PERUSED THE RECORD. IN THE INSTANT CASE, THE AO ISSUED NOTICE U/S 1 54 OF THE ACT O N 7.7.2004. THE LD CIT(A) HAS STATED THAT THE APPEAL FILED BY THE COMPANY M/S JASS ROLLER FLO UR MILLS P LTD., BEFORE THE TRIBUNAL WAS DISPOSED OF ONLY ON12.12.2005 . THUS, IT IS SEEN THAT THE ONLY ORDER THAT WAS AVAILABLE ON THE D ATE OF ISSUE OF NOTICE U/S 154 OF THE A C T, REFERRED ABOVE, IS THE ORDER PASSED BY THE LD CIT(A). HENCE, THE ASSESSEE WAS RIGHT IN HIS CONTENTION THAT THE AO HAS INITIATED RECTIFICATION PROCEEDINGS ONLY ON THE PRESUMPTION THAT THE ENTIRE UNDISCLOSED INCOME DETERMINED IN THE HANDS OF THE COMPANY WOULD BE WITHDRAWN BY THE HON BLE TRIBUNAL. THERE SHOULD NOT BE ANY DISPUTE THAT THE PRESUMPTION ENTERTAINED BY THE AO CANNOT BE CONSIDERED AS MATERIAL AVAILABLE ON RECORD. IN THE ABSENCE OF ANY MATERIAL T O SUPPORT THE VIEW ENTERTAINED BY THE AO, WHICH INSTIGATED HIM TO ISSUE NOTICE U/S 154 OF THE A C T, THE VERY INITIATION OF RECTIFICATION PROCEEDINGS IS LIABLE TO BE QUASH ED . ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LD CIT(A) ON THIS ISSUE AND DIRECT THE AO TO DROP THE RECTIFICATION PROCEEDINGS INITIATED BY HIM ON 7.7.2004. 5 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 16 TH DAY OF AUG 2013. SD/ SD/ - (N.R.S. GANESAN) ( B.R. BASKARAN ) JUDICIAL MEMBER ACCOUNTANT MEMBER COCHIN: DATED 16 TH , AUG 2013 RAJ* IT (SS) A NO. 61/ COCH/ 2008 4 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT , KOTTAYAM 5. DR 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, COCHIN