N.J.Thomas & Co., Kottayam V. ACIt, Kottayam

MA 2/COCH/2011

• Counselvise Citation: [2011] 123 COUNSELVISE.COM (IT) 7355 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 14 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 27-12-2011
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 16-09-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 13-12-2010
• Court: TRIBUNAL
• Department Lawyers: S VIJAYAPRABHA
• Assessee Lawyers: R KRISHNA IYER CAAR
• Section: 133A; 147; 148; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND SANJAY AROR A, AM M.P. NOS. 01 & 02/COCH/2011 (ARSG. OUT OF I.T.A NOS. 237 & 238/COCH/2010) ASSESSMENT YEARS: 2005-06 & 2006-07 N.J. THOMAS & CO., MATTEETHRA COLONY, YWCA LANE, KOTTAYAM [PAN:AAEFN 3878P] VS. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-1, KOTTAYAM. (ASSESSEE-APPLICANT) (REVENUE- RESPONDENT) ASSESSEE BY SHRI R.KRISHNA IYER, CA-AR REVENUE BY MS. S. VIJAYAPRABHA, JR.DR DATE OF HEARING 14/10/2011 DATE OF PRONOUNCEMENT 27/12/2011 O R D E R PER SANJAY ARORA, AM: THESE ARE A SET OF TWO MISCELLANEOUS PETITIONS BY THE ASSESSEE, DIRECTED AGAINST THE ORDER BY THE TRIBUNAL DATED 26-10-2010 IN RESPE CT OF ITS APPEALS FOR THE ASSESSMENT YEARS (A.YS.) 2005-06 AND 2006-07. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E, A PARTNERSHIP FIRM, IS A CIVIL CONTRACTOR. IT FILED ITS RETURN OF INCOME FOR THE A Y 2005-06 ON 01-12-2005 DECLARING AN INCOME OF ` 11.10 LAKHS. THE ASSESSMENT WAS COMPLETED U/S. 143 (3) OF THE INCOME-TAX ACT, 1961 ('THE ACT', HEREINAFTER) ON 21-12-2007 AT AN INCOME OF ` 14,59,970/-, THOUGH FINALLY ASSESSED AT ` 11,59,970/- ON THE BASIS OF AN ORDER BY THE TRIBUNA L. THE BASIC FACTS FOR A.Y. 2006-07 ARE ALSO THE SAME, EXCEPT THAT THE RETURN FOR THE YEAR, FILED ON 31-10- 2006 AT AN INCOME OF ` 7.60 LAKHS, STOOD PROCESSED AS SUCH U/S. 143(1) OF THE ACT. A M.P. NOS.01 & 02 /COCH/2011 N.J. THOMAS & CO. V. ASSTT. CIT, KOTTAYAM 2 SURVEY U/S. 133A OF THE ACT WAS CONDUCTED AT ITS PR EMISES ON 23-01-2008, AND ON THE BASIS OF THE BOOKS OF ACCOUNTS AND OTHER DOCUMENTS IMPOUNDED, THE ASSESSEE WAS FOUND TO BE NOT ACCOUNTING FOR SOME OF THE CONTRACT RECEI PTS. ACCORDINGLY, NOTICE U/S. 148 OF THE ACT WAS ISSUED FOR A.Y. 2005-06 AND 2006-07 ON 23/1 /2008 AND 02/12/2008 RESPECTIVELY. THE INCOME ARISING ON THE UNACCOUNTED CONTRACT RECE IPTS, WHICH WERE ON THE BASIS OF THE IMPOUNDED RECORDS WORKED OUT BY THE ASSESSING OFFIC ER (AO) AT ` 162.77 LAKHS AND ` 81.58 LAKHS FOR THE TWO CONSECUTIVE YEARS RESPECTIV ELY, AND WHICH HAD THUS ESCAPED ASSESSMENT, FORMED THE SUBJECT MATTER OF THE RE-ASS ESSMENT FOR THE RELEVANT YEARS. IN THE VIEW OF THE AO, THE ASSESSEE WAS TO BE PRESUMED TO HAVE DULY ACCOUNTED FOR AND, THUS, BEEN ALREADY ALLOWED INDIRECT EXPENSES, BEING COMMO N FOR ITS ENTERPRISE, IN THE ORIGINAL ASSESSMENT AND, ACCORDINGLY, SOUGHT TO BRING THE GR OSS PROFIT ON THE SUPPRESSED CONTRACT RECEIPT TO TAX, ADOPTING THE DISCLOSED BOOK RESULTS FOR THE PURPOSE, I.E., AT 17.6% AND 19.8% RESPECTIVELY FOR THE TWO CONSECUTIVE YEARS. IN APPEAL, VIDE SEPARATE ORDERS DATED 19-02-2010, THE FIRST APPELLATE AUTHORITY CONFIRMED THE ADDITION TOWARD INCOME ON SUPPRESSED TURNOVER AT 9% THEREOF, RELYING ON THE D ECISION BY THE TRIBUNAL IN THE CASE OF ASSESSEES SISTER CONCERN, M/S. AMALA CONSTRUCTIONS , IN THE SAME TRADE (IN I.T.A. NO. 771/COCH/1990 DATED 05-07-1996 FOR A.Y. 1984-85). IN FURTHER APPEAL BEFORE THE TRIBUNAL, THE ASSESSEE CONTESTED THE REVENUES ACTI ON, BY CONTENDING, AS WAS DONE BEFORE THE AUTHORITIES BELOW ALSO, THAT THE IMPOUNDED BOOK S DISCLOSED A LOSS, AND WHICH FACT COULD NOT BE IGNORED IN VIEW OF THE PROVISIONS OF S . 132(4A) AND S. 292C OF THE ACT, WITH THE LATTER SECTION BEING AMENDED BY FINANCE ACT, 20 08 W.R.E.F. 01-06-2002 TO COVER THE BOOKS OF ACCOUNTS, OTHER DOCUMENTS, ETC. FOUND DURI NG THE COURSE OF SURVEY AS WELL. THE SAID ARGUMENT WAS CONSIDERED BY THE TRIBUNAL AND FO UND NOT ACCEPTABLE VIDE ITS IMPUGNED CONSOLIDATED ORDER FOR THE TWO YEARS. THE BASIS OF THE TRIBUNALS REJECTION (OF THE ASSESSEES CLAIM) WAS THAT THE LOSS HAD NOT BEEN CL AIMED PER THE ORIGINAL RETURN, SO THAT IT COULD NOT BE ALLOWED IN THE RE-ASSESSMENT PROCEEDIN GS, WHICH ARE ONLY FOR THE BENEFIT OF THE REVENUE AND NOT THE ASSESSEE. THE RELEVANT DISC USSION & FINDINGS APPEARS AT PARAS 9, 10 & 12 OF THE IMPUGNED ORDER. ON QUANTUM, THE TRIB UNAL CONFIRMED THE VIEW OF THE LD. CIT(A), SO THAT THE UNDISCLOSED PROFIT, I.E., RELAT ABLE TO THE UNACCOUNTED TURNOVER, WAS SUSTAINED AT 9% THEREOF FOR BOTH THE YEARS. ACCORDI NGLY, THE ASSESSEES ALTERNATE M.P. NOS.01 & 02 /COCH/2011 N.J. THOMAS & CO. V. ASSTT. CIT, KOTTAYAM 3 OBJECTION, THAT THE INCOME DEEMED TO BE EARNED OUGH T TO BE BASED ON THE INCOME ALREADY ASSESSED, WORKING OUT THE SAME AT 3.44% AND 4.55% ( OF THE TURNOVER) FOR AYS 2005-06 AND 2006-07 RESPECTIVELY, WAS ALSO CONSIDERED BY IT . THE RELEVANT OBSERVATIONS AND FINDINGS OF THE TRIBUNAL ARE AT PARAS 11 TO 13 OF I TS ORDER. 3. THE ASSESSEE HAS NOW MOVED THE TRIBUNAL U/S. 254 (2) OF THE ACT. IT CLAIMS THAT THERE BEING NO DISPUTE THAT THE INCOME ON ITS TOTAL RECEIPT, INCLUDING UNDISCLOSED RECEIPT, RESULTED IN A LOSS, I.E., ON THE BASIS OF THE MATER IALS FOUND IN SURVEY, NO INCOME COULD BE BROUGHT TO TAX U/S. 147 OF THE ACT, PLACING RELIANC E ON THE DECISION BY THE TRIBUNAL IN THE CASE OF VIDEOCON LEASING & INDUSTRIAL FINANCE LTD. VS. JOIN T CIT (2006) 103 ITD 309 (AHD.), WHEREIN UNDER LIKE CIRCUMSTANCES THE REASSE SSMENT PROCEEDINGS WERE DROPPED. THIS IS AS THE SCOPE OF THE RE-ASSESSMENT PROCEEDIN GS, EVEN AS CLARIFIED BY THE APEX COURT IN THE CASE OF SUN ENGINEERING WORKS PVT. LTD. VS. CIT (1992) 198 ITR 297 (SC), IS ONLY TOWARD ASSESSMENT OF INCOME CHARGEABLE TO TAX THAT HAD ESCAPED ASSESSMENT, I.E., THE INCOME UNDER-ASSESSED. FURTHER, THE ASSESSEE HAD NO WHERE CLAIMED ANY DEDUCTION OR SET OFF OF THE LOSS INCURRED AND REFLECTED PER ITS BOOK S OF ACCOUNTS AGAINST THE INCOME RETURNED. 4. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. WE FIND THAT THE SUBJECT MATTER OF THE ASSESSEES PRINCIPAL OBJECTIO N IN ITS APPEAL BEFORE THE TRIBUNAL STANDS PROJECTED PER ITS GROUND NO. 2 FOR A.Y. 2005-06 AND GROUND NOS. 2 & 3 FOR A.Y. 2006- 07 OF ITS MEMORANDUM OF APPEAL/S. 4.1 OUR FIRST OBSERVATION IS THAT THE ASSESSEES PRINCIPAL, AS WELL AS THE ALTERNATE, CONTENTION STANDS CONSIDERED BY THE TRIBUNAL PER IT S IMPUGNED ORDER (ALSO REFER PARA 3 OF THIS ORDER). THE SCOPE OF THE INSTANT PROCEEDINGS B EING LIMITED, THEREFORE, OUR DUTY THERE- UNDER IS CONFINED TO EXAMINING IF AT ALL THERE HAS OCCURRED ANY MISTAKE BY THE TRIBUNAL IN DISPOSING THE SAME, WITHIN THE MEANING OF S. 254(2) OF THE ACT. IN THIS REGARD, WE FIND NO MISTAKE WITH REGARD TO THE ASSESSEES ALTERNATE CON TENTION, WHICH STANDS IN FACT CONSIDERED AND DECIDED BY APPROVING THE DECISION BY THE FIRST APPELLATE AUTHORITY, WHO HAD RELIED ON M.P. NOS.01 & 02 /COCH/2011 N.J. THOMAS & CO. V. ASSTT. CIT, KOTTAYAM 4 AN EARLIER DECISION BY IT (TRIBUNAL) IN THE CASE OF THE ASSESSEESS SISTER CONCERN IN THE SAME TRADE, AND WHICH HAD BEEN FOUND TO BE SIMILARLY ENG AGED IN THE (SAME) MODUS OPERANDI OF NOT FULLY ACCOUNTING ITS CONTRACT RECEIPTS, SO THAT THE ISSUE OF THE EXTENT OF INCOME THAT IS LIABLE TO BE ASSESSED ON DETECTION OF THE SUPPRESSE D TURNOVER CAME TO BE DECIDED ON THAT BASIS. 4.2 AS REGARDS THE ASSESSEES FIRST AND PRINC IPAL STAND/OBJECTION, THE ASSESSEE CONTENDS THAT THE TRIBUNALS VIEW HAS BEEN RENDERED BY MISCO NSTRUING ITS CLAIM AS BEING FOR SET OFF OF THE LOSS EXHIBITED BY THE IMPOUNDED DOCUMENTS. W E AGREE. THE RELEVANT FINDING BY THE TRIBUNAL (AT PARA 9 OF ITS ORDER) READS AS: ` 9. THEREFORE, THE LOSS AS CLAIMED BY THE ASSESSE E WHICH WAS NOT CLAIMED IN THE ORIGINAL RETURN, CANNOT BE ALLOWED IN THE REASS ESSMENT PROCEDURE ON THE PRINCIPLE THAT RE-ASSESSMENT IS NOT FOR THE BENEFIT OF THE ASSESSEE . WITH THE SAME.. OBSERVATIONS/FINDINGS TO THIS EFFECT ALSO APPEAR AT PARA 12 OF ITS ORDER, WHILE DISCUSSING THE ASSESSEES CASE WITH REFERENCE TO S. 132(4A) AN D S. 292C OF THE ACT. IN FACT, THERE IS NO BASIS TO STATE SO. THERE WAS NO CLAIM FOR SET OF F OF SUCH LOSS, EVEN THE AMOUNT AND THE EXISTENCE OF WHICH IS NOT CLEAR FROM THE RECORD, I. E., PER THE REGULAR ASSESSMENT OR THE APPELLATE ORDERS, INCLUDING BY THE TRIBUNAL. WHAT T HE ASSESSEE OBJECTS TO IS THE ASSESSMENT OF THE ADDITIONAL INCOME, I.E., QUA THE SUPPRESSED TURNOVER, AND NOT THE NON-ALLOWANCE OF LOSS REFLECTED PER ITS SEIZED/IMPOUNDED ACCOUNTS; I TS RELEVANT GROUND (NO.2), WHICH IS THE SAME FOR BOTH THE YEARS, READS AS UNDER:- 2. THE LD. AUTHORITIES BELOW OUGHT TO HAVE FOUND THAT THE APPELLANT HAS INCURRED HEAVY LOSS WHICH IS EVIDENT FROM THE BOOKS OF ACCOU NTS SEIZED BY THE DEPARTMENT AND THEREFORE THE ADDITIONAL INCOME ASSESSED ON THE ALLEGED UNACCOUNTED CONTRACT RECEIPTS IS NOT CORRECT. NO DOUBT, THE TRIBUNAL HAS CONSIDERED THE ASSESSEE S CASE, AND WITH REFERENCE TO THE DECISION BY THE APEX COURT IN THE CASE OF SUN ENGINEERING WORKS PVT. LTD. VS. CIT (SUPRA), ALSO REPRODUCING THE RELEVANT PART THEREOF. NEVERTH ELESS, THERE HAS BEEN CLEARLY A WRONG ASSUMPTION OF FACT BY THE TRIBUNAL IN DISPOSING THE ASSESSEES RELEVANT GROUNDS, WHICH, IT M.P. NOS.01 & 02 /COCH/2011 N.J. THOMAS & CO. V. ASSTT. CIT, KOTTAYAM 5 IS TRITE, GIVES RISE TO THE JURISDICTION TO RECTIFY . THE ASSESSEES SAID CONTENTION, THEREFORE, MERITS ACCEPTANCE. 4.3 CONTINUING FURTHER, AND WITHOUT PREJUDICE TO THE FOREGOING, WE ARE INCLINED TO ACCEPT THE ASSESSEES CONTENTION QUA ITS PRINCIPAL OBJECTION PER ITS INSTANT APPLICATIO N FOR ANOTHER INTEGRAL REASON AS WELL. THAT IS, THE ABSEN CE OF ANY FINDING IN THE ORDERS BY THE AUTHORITIES BELOW, AS WELL AS BY THE TRIBUNAL, IN R ESPECT OF THE EFFECT OF SEC. 292C OF THE ACT IN THE FACTS AND CIRCUMSTANCES OF ITS CASE. THE SAME WOULD REQUIRE DETERMINATION OF, FIRSTLY, THE APPLICABILITY OF THE SAME TO THE ASSES SEE FOR THE RELEVANT YEARS AND, IF SO, THE EFFECT THEREOF, IN-AS-MUCH AS CLEARLY IF THE BOOKS OF ACCOUNTS OR OTHER DOCUMENTS IMPOUNDED REVEAL A NET LOSS, AS CONTENDED BY THE AS SESSEE, THE APPLICATION OF THE SECTION MIGHT HAVE A BEARING ON ITS IMPUGNED ASSESSMENT/S. WE ARE CONSCIOUS, WHEN WE SAY SO, THAT THIS GIVES RISE TO A QUEER SITUATION AS THE AS SESSEES AUDITED ACCOUNTS FORMING PART OF ITS RETURNS CANNOT BE IGNORED, AND WHICH WOULD NECE SSARILY REVEAL A MUCH HIGHER NET WORTH AND A DIFFERENT ASSET LIABILITY PROFILE. SO, HOWEVER, THE ASSESSEES CLAIM/S OF THE RE- ASSESSMENT PROCEEDINGS AND THE CONSEQUENT RE-ASSESS MENT/S BEING BAD IN LAW IN VIEW OF SS. 132(4A) AND 292C OF THE ACT REMAINS EFFECTIVELY UN-DISPOSED. AND FOR THE SIMPLE REASON THAT TO THE EXTENT THE TRIBUNAL HAS NOT REND ERED ANY DEFINITE FINDING WITH RESPECT THERETO, IT CANNOT BE SAID THAT THE SAME STANDS ADJ UDICATED UPON AND, THUS, DISPOSED OF. ACCORDINGLY, IN-SO-FAR AS THE ASSESSEES CONTENTION WITH REGARD TO THE APPLICATION OF SEC. 292C OF THE ACT TO ITS CASE FOR BOTH THE YEARS HAS NOT BEEN ADJUDICATED UPON BY THE TRIBUNAL, WE CONSIDER THAT THERE HAS OCCURRED A `MI STAKE BY IT FALLING WITHIN THE SCOPE OF S. 254(2) OF THE ACT; THE ASSESSEE HAVING BEEN APPA RENTLY PREJUDICED THEREBY. 5. IN VIEW OF THE FOREGOING, WE CONSIDER IT FIT AND PROPER TO RESTORE THE ASSESSEES APPEALS FOR CONSIDERATION OF THE ASSESSEES GROUND NO. 2 FOR A.Y. 2005-06 AND GROUND NOS. 2 & 3 FOR A.Y. 2006-07 WITH REGARD TO THE APPL ICABILITY OR OTHERWISE OF S. 292C R/W S. 132(4A) OF THE ACT. WE DECIDE ACCORDINGLY. M.P. NOS.01 & 02 /COCH/2011 N.J. THOMAS & CO. V. ASSTT. CIT, KOTTAYAM 6 6. IN THE RESULT, THE ASSESSEES MISCELLANEOUS PETI TIONS ARE ALLOWED ON THE AFORESAID TERMS. SD./- SD/- (N.R.S.GANESAN) (SANJAY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: ERNAKULAM DATED: 27TH DECEMBER, 2011 GJ COPY TO: 1. M/S. N.J. THOMAS & CO., MATTEETHRA COLONY, YWCA LANE, KOTTAYAM. 2. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE -1, KOTTAYAM. 3. THE COMMISSIONER OF INCOME-TAX (APPEALS)-IV, KOC HI. 4. THE COMMISSIONER OF INCOME-TAX, KOTTAYAM. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE .