P.C. Mathew, Kannur V. ACIT, Calicut

ITSSA 7/COCH/2006

• Counselvise Citation: [2011] 124 COUNSELVISE.COM (IT) 8432 (ITAT-COCHIN)
• Duration Of Justice: 5 year(s) 3 month(s) 9 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 29-04-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 09-02-2011
• Assessment Year: misc
• Appeal Filed On: 19-01-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S C SONKAR
• Assessee Lawyers: C B M WARRIARCA
• Keywords: Gift; Block assessment
• Section: 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.VIJAYAKUMARAN & SHRI SANJAY ARORA I.T.(S&S)A.NO.07/COCH/2006 BLOCK A.YS.:1990-91 TO 2000-01 P.C. MATHEW, KANNUR. PA NO.M-713 VS. THE ASSIST.COMMISSIONER OF INCOME -TAX, CENTRAL CIRCLE, CALICUT. (APPELLANT) (RESPONDENT) APPELLANT BY SHRI C . B . M . WARRIAR,CA RESPONDENT BY SHRI S.C. SONKAR. , CIT,DR O R D E R PER N.VIJAYAKUMARAN,J.M: THIS APPEAL IS DIRECTED AGAINST THE ORDER OF THE CIT(APPEALS)-I, KOCHI, DATED 24-11-2005. THE RELEV ANT BLOCK ASSESSMENT YEARS ARE 1990-91 TO 2000-01. THI S APPEAL ARISES OUT OF THE BLOCK ASSESSMENT COMPLETED U/S.158BC R.W.S.158BD OF THE INCOME-TAX ACT,1961. 2. THE RELEVANT FACTS ARE THAT THE ASSESSEE IS THE MANAGING PARTNER OF THE FIRM M/S. HOTEL PANCHAMI, THIRUVALLA. THERE WAS A SEARCH IN HIS RESIDENTIAL PREMISES AT THALIPARAMABA AND THE BUSINESS PREMISES OF THE FIRM M/S. HOTEL PANCHAMI AT THIRUVALLA, ON 29-07-1999. BASED ON THE SEARCH, BLOCK ASSESSMENT PROCEEDINGS WERE INITIATED BY ISSUE IT(S&S)A NO. 07 /COCH/2006 2 OF NOTICE U/S.158BC. IN RESPONSE, ASSESSEE FILE D RETURN OF INCOME DECLARING NIL UNDISCLOSED INCOME. HOWEVER O N APPEAL THE LD. CIT(APPEALS) VIDE HIS ORDER IN ITA C O57/01-02 DATED 10-03-2003 CANCELLED THE ASSESSMENT AND DIREC TED TO INITIATE PROCEEDINGS U/S.158BD. AFTER RECORDING TH E REASONS, THE ASSESSING OFFICER FRAMED THE ASSESSMENT. 3. THE FIRST ISSUE IS REGARDING THE MARRIAGE GIFTS AND PRESENTATIONS TO THE EXTENT OF RS.1,50,000. THE ASSESSEE CLAIMED THAT AT THE TIME OF MARRIAGE IN THE MONTH O F JANUARY 1992 HE RECEIVED A SUM OF RS.1,50,000/- AS GIFTS AN D PRESENTATIONS FROM CLOSE RELATIVES AND FRIENDS. LETTERS OF CONFIRMATION FROM DONORS SHOWING THEIR SOURCE OF IN COME WAS ALSO FILED WITH THE ASSESSING OFFICER AND THE A MOUNT IS INCLUDED IN THE CASH FLOW STATEMENT FILED BY THE AS SESSEE DURING THE ASSESSMENT PROCEEDINGS. IT IS ALSO FURT HER SUBMITTED ON BEHALF OF THE ASSESSEE THAT IT IS A CU STOMARY PRACTICE TO ACCEPT GIFT FROM CLOSE RELATIVES AND FR IENDS IN THE VILLAGE WHERE AGRICULTURIST ARE PREDOMINANTLY LIVIN G. HOWEVER, THE ASSESSING OFFICER DID NOT ACCEPT THE C LAIM OF THE ASSESSEE ASSIGNING ANY REASON FOR NON-ACCEPTANC E. ON APPEAL, THE ASSESSEE REITERATED THE VERY SAME ARGUM ENTS AND FURTHER CONTENDED THAT ASSESSEES FATHER IS AN AGRICULTURIST AND THE OTHER FAMILY MEMBER OWN 25 AC RES OF IT(S&S)A NO. 07 /COCH/2006 3 LAND HAVING CULTIVATION OF RUBBER, ARECANUT, PEPPER ETC. THE LD. CIT(APPEALS) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE ACCEPTED THE GIFT TO THE EXTENT OF RS.1,00 ,000/- AND DIRECTED THE ASSESSING OFFICER TO TAKE THIS AMO UNT AS RECEIPT IN THE CASH FLOW STATEMENT FOR THE ASSESSME NT YEAR 1992-93 COMPRISED IN THE BLOCK ASSESSMENT PERIOD. THE LD. COUNSEL FOR THE ASSESSEE WOULD SUBMIT THAT REJECTIO N OF GIFTS TO THE EXTENT OF RS.50,000/- IS NOT CORRECT PARTICU LARLY WHEN SUPPORTING DOCUMENTS BY WAY OF CONFIRMATION LETTERS ARE AVAILABLE AND THERE IS NO INCRIMINATING MATERIAL WA S SEIZED. IT IS ONLY ASSESSEES CASH FLOW STATEMENT THAT IS R ELIED. IT IS A CUSTOMARY PRACTICE THAT DURING THE MARRIAGE, GIFT S AND PRESENTATIONS FROM CLOSE RELATIVES AND FRIENDS ARE ACCEPTED. ASSESSEE ALSO HAILS FROM AN AFFLUENT FAMILY OF AGRI CULTURISTS HAVING MORE THAN 25 ACRES OF LAND INCLUDING WITH OT HER FAMILY MEMBERS, WHICH ARE CULTIVATED RUBBER, ARECAN UT, PEPPER ETC. IT IS A SETTLED LAW THAT WITHOUT MATE RIAL THIS CANNOT BE TAKEN AS UNDISCLOSED INCOME. WHEN THERE ARE SPECIFIC CONFIRMATIONS FROM THE DONORS, THE LD. CIT (APPEALS) FAILED TO APPRECIATE THE SAME. IT IS NOT DISPUT ED THAT THE ASSESSEE GOT MARRIED IN JANUARY 1992. ON THE OTHER HAND, THE LD. CIT., DR SUPPORTED THE ORDERS OF THE AUTHOR ITIES BELOW BY STRENGTHENING THE DECISIONS OF THE LD. CIT (APPEALS). IT(S&S)A NO. 07 /COCH/2006 4 4. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE ARE OF THE VIEW THAT THE LD. CIT(APPEALS) WAS NOT JUSTIFIED IN RESTRICTING THE CLAIM OF THE ASSESSEE PARTICULARLY WHEN THE DEP ARTMENT HAVING ACCEPTED RS.1 LAKH AS GIFT AND WITHOUT ANY INCRIMINATING MATERIAL REJECTED THE REMAINING AMOUN T OF RS.50,000/-. THE DEPARTMENT HAS NOT FILED ANY CRO SS OBJECTION AGAINST THE ACCEPTANCE OF THE CLAIM TO TH E EXTENT OF RS.1 LAKHS. THERE IS NO INCRIMINATING MATERIA L TO RESTRICT THE GIFT ONLY TO THE EXTENT OF RS.1 LAKH. THE ASSE SSEE HAILS FROM AN AFFLUENT AGRICULTURAL FAMILY. THE CONFIRMA TION LETTERS WERE ALSO FILED. DONORS WERE ALSO CLOSE RELATIVES AND FRIENDS. THEIR SOURCE OF INCOME WAS ALSO FILED WI TH THE ASSESSING OFFICER. THE ASSESSING OFFICER HAS NOT M ADE ANY ENQUIRY BEFORE REJECTING THE EXPLANATION NOR ASKED TO PRODUCE THE PARTIES. THE AMOUNT HAS BEEN INCLUDED IN THE CASH FLOW STATEMENT FILED DURING THE ASSESSMENT PROCEEDINGS. HENCE IT IS AMPLY PROVED THAT GIFTS WE RE MADE DURING THE MARRIAGE OCCASION OF THE ASSESSEE. THE ABOVE FACTS WILL GO TO SHOW THAT THE ADDITION IS WITHOUT ANY MATERIAL AND UNJUSTIFIED IN LAW. HENCE, WE FIND N O REASON TO RESTRICT THE CLAIM OF THE ASSESSEE TO THE EXTENT OF RS.1,00,000/- AND DISALLOW THE REMAINING AMOUNT OF IT(S&S)A NO. 07 /COCH/2006 5 RS.50,000/-. ACCORDINGLY, WE SET ASIDE THE ORDERS O F THE AUTHORITIES BELOW AND ALLOW THE CLAIM OF THE ASSESS EE IN FULL. 5. COMING TO THE OTHER ISSUE OF AGRICULTURAL INCOM E, THE ASSESSEE HAS SHOWN AGRICULTURAL INCOME IN THE REGUL AR RETURN FOR THE ASSESSMENT YEARS 1995-96 TO 1998-99, AS UND ER: ASSESSMENT YEAR AMOUNT RS. 1995 - 96 1,25,000 1996 - 97 1,45,000 1997 - 98 1,25,000 1998 - 99 2,55,000 THE ASSESSING OFFICER WAS OF THE VIEW THAT IN THE S TATEMENT RECORDED U/S.132(4) THE ASSESSEE HAS ACCEPTED THE AGRICULTURAL INCOME ONLY AT RS.40,000/-. HOWEVER, IN THE REGULAR RETURN IT IS STATED AS ABOVE. AT THE COST OF REPETITION THE SEARCH IS 29-07-1999. BEFORE THE D ATE OF SEARCH, IN THE REGULAR RETURN FOR THE ABOVE FOUR YE ARS PERTAINING TO ASSESSMENT YEAR 1995-96 TO 1998-99 TH E ABOVE AMOUNTS WERE DISCLOSED AS AGRICULTURAL INCOME. THER EFORE, THIS IS N INFLATED AGRICULTURAL INCOME AND TREATED AS UNDISCLOSED INCOME AND BROUGHT TO TAX. THIS WAS O BJECTED BY THE ASSESSEE. IT IS THE EXPLANATION OF THE ASS ESSEE THROUGH OUT THE PROCEEDINGS THAT 132(4) STATEMENT A LONE CANNOT BE RELIED FOR MAKING THE ADDITION. PARTICU LARLY HE IT(S&S)A NO. 07 /COCH/2006 6 INVITED OUR ATTENTION TO THE QUESTION NO.2 AND ANSW ER THERETO. QUESTION NO.2 - PLEASE GIVE THE DETAILS OF YOUR IMMOVABLE PROPERTIES? ANS. I HAVE 4 ACRES OF AGRL. LAND AT UDAYAGIRI . THE NET AGRL. INCOME PER YEAR FROM THIS PROPERTY IS ABOUT RS.40,000/-. I DO NOT KNOW WHEN THIS PROPERTY WAS PURCHASED. MY WIFE OWNS 1 ACRES OF AGRL.LAND AT UDAYAGIRI, PURCHASED BEFORE TWO YEARS. THIS IS THE QUESTION NO.2 AND ANSWER THERETO. 6. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN THE REGULAR RETURN CORRECT AGRICULTURAL INCOME HAS BEEN DISCLOSED BECAUSE OF THE FACT THAT THE ASSESSEES ANCESTRAL P ROPERTY IS 20 ACRES. THE ASSESSING OFFICER NEVER CONSIDERED THAT AND HE SIMPLY RELIED ON THE QUESTION AND ANSWER NO.2 UN DER 132(4) STATEMENT. THE TOTAL PROPERTY MANAGED BY H IS PARENTS AND THE AGRICULTURAL INCOME SHOWN IN THE RE TURN WERE BEFORE THE DATE OF SEARCH. THEREFORE, UNDER NO STRETCH OF IMAGINATION IT CAN BE AS UNDISCLOSED INCOME UNDE R THE HEAD OF INFLATED AGRICULTURAL INCOME EXCEPT ANY INCRIMINATING MATERIAL. THE ONLY RELIANCE PLACED BY THE AO IS 132 (4) STATEMENT WHERE PARTICULAR QUESTION WAS WITH REGARD TO THE ASSESSEES IMMOVABLE PROPERTY. THE ASSESSEE IT(S&S)A NO. 07 /COCH/2006 7 WAS NOT ASKED ABOUT THE OTHER ANCESTRAL PROPERTY PARTICULARS. THEREFORE, IT WAS NOT NECESSARY FOR THE ASSESSEE TO EXPLAIN THOSE PROPERTIES. HOWEVER, DU RING THE ASSESSMENT PROCEEDINGS THE ASSESSEE WAS ABLE TO EST ABLISH BY PRODUCING CERTIFICATE FROM THE VILLAGE OFFICER R EGARDING THE NATURE OF THE PROPERTY, AGRICULTURAL EXPENSES, NO., OF TREES IN THE PROPERTY AND THE DETAILS OF GROSS AGRI CULTURAL INCOME AND WITHOUT CONSIDERING THE ABOVE PARTICULAR S, THE PROPERTY SITUATED IN ALAKKODE VILLAGE BESIDES HIS W IFES PROPERTY INCLUDING THE FAMILY PROPERTY WHICH COMES NEARLY TO THE EXTENT OF 25.20 ACRES, WHICH IS CERTIFIED AS BE LONGING TO THE ASSESSEE AND HIS FAMILY WAS GIVEN A GO BY THE ASSESSING OFFICER. THE CERTIFICATE ALSO SAYS THAT THEY WERE CULTIVATING THE ENTIRE 25 ACRES OF LAND BEING LOOKED AFTER BY T HE PARENTS OF THE ASSESSEE. WIFE IS STAYING ALONGWITH PARENT S AND THE ENTIRE FAMILY IS CULTIVATING RUBBER, ARECANUT AND P EPPER,ETC. ALL CASH CROPS. HENCE, THE RETURN OF INCOME ALREA DY FILED BEFORE THE DATE OF SEARCH CANNOT BE DISPUTED AS IT HAS BEEN DISCLOSED THE ENTIRE AGRICULTURAL INCOME FOR THE PU RPOSE OF THE ACT. HENCE, THE DEFINITION OF 158B(B), THE IN COME ALREADY DISCLOSED IN THE RETURN FILE BEFORE THE DAT E OF SEARCH WILL NOT COME UNDER THE CONCEPT OF UNDISCLOSED INCO ME. IN VIEW OF THIS, WE REJECT THE ARGUMENTS MADE BY THE L D. IT(S&S)A NO. 07 /COCH/2006 8 CIT(APPEALS) TO SUPPORT THE FINDINGS OF THE ASSESSI NG OFFICER AND ALLOW THE APPEAL OF THE ASSESSEE ON MERITS. 7. SINCE WE HAVE ALREADY ALLOWED THE APPEAL OF THE ASSESSEE ON MERITS, WE DESIST FROM ADJUDICATING THE PROCEDURAL OBJECTION RAISED BY THE ASSESSEE AND THE ASSUMPTION OF JURISDICTION U/S.158BD AS THE DECISIO N OF THE THIRD MEMBER IN THIS CASE IS ALSO AGAINST THE ASSES SEE AND THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COU RT IN THE CASE OF CIT VS. PANCHAJANYAM MANAGEMENT AGENCIES & SERVICE (2011) 239 CTR (KER) 424. HENCE, THIS REQUIRES NO ADJUDICATION. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED ON MERITS ITSELF. SD/- SD/- (SANJAY ARORA) (N.VIJAYKUMARAN) ACCOUNTANT MEMBER JUDICIAL M EMBER ERNAKULAM, DATED THE 29 TH APRIL,2011. PM. COPY FORWARDED TO: 1. SHRI P.C. MATHEW, POLLIYALIL HOUSE, PO UDAYAGIRI , VIA ALAKKODE, KANNUR DISTRICT. 2. THE ACIT., CENTRAL CIRCLE, CALICUT. 3. CIT(A)-I, KOCHI 4. CIT, CENTRAL,KOCHI 5. D.R.