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2008 DIGILAW 586 (KAR)

Commissioner of Income Tax v. K. Venkatesh Dutt

2008-10-14

C.R.KUMARASWAMY, K.SREEDHAR RAO

body2008
JUDGMENT K. Sreedhar Rao, J.—These three appeals and the cross-objection pertain to the same parties, involving similar questions of fact and law. 2. Hence, we consider them together, hear the parties and pass a common order. 3. The material facts of the case disclose that one K. Venkatesh Dutt-assessee (cross-objector) had filed returns for the assessment years 1986-87, 1987-88 and 1988-89. Intelligence Wing conducted raid and on search of the premises of the same, some incriminating documents were seized. The assessee filed a revised return for the assessment year 1986-87 showing his income as Rs. 62,00,000 as against Rs. 30,00,000 as mentioned in the earlier returns. The assessee had claimed certain deductions. The assessing authority (A.O.) called upon the assessee to produce necessary documents to justify the deductions claimed. Documents were not produced by the assessee. The assessing authority assessed the income of the assessee at Rs. 1,03,00,000 for the year 1986-87. The assessee filed an appeal to the Commissioner of Income Tax (CIT). The appellate authority set aside the order of the Assessing Officer and remanded the matter for fresh consideration. The State aggrieved by the order of remand has filed three appeals before the Tribunal. 4. The assessee filed cross-objection contending that the revised assessment filed for the year 1986-87 is in fact a nullity in law. The assessee, as a panic reaction to the search, had disclosed the income of the firm Inter Corps Associates (ICA, for short) a partnership firm of which K. Venkatesh Dutt (KVD, for short) is a managing partner, and his father, K S. Dattatreya (KSD, for short)) as his income in the revised return. It is, therefore, submitted that the revised return is to be rejected as time barred and that the income disclosed in the revised return does not really pertain to him. It was also contended by the assessee that the income of the firm and KSD in the hands of the assessee had been wrongly assessed as the income of the assessee for all the three years and that the Assessing Officer should not reckon the income of the firm and KSD as his income. The State submitted before the Tribunal that the appeals filed against the order of remand may be permitted to be withdrawn and that the State should pursue its remedy against the assessee before the assessing authority. The State submitted before the Tribunal that the appeals filed against the order of remand may be permitted to be withdrawn and that the State should pursue its remedy against the assessee before the assessing authority. The assessee, however, maintained that the cross-objection to be heard. 5. The question involved in the cross-objection is an independent issue and that the Tribunal had power and jurisdiction to make assessment. There was also delay in filing the cross-objections. The Tribunal condoned the delay. 6. The State argued before the Tribunal in the cross-objection that the assessee has no right to retract from the revised return filed before the Assessing Officer and that the revised return should bind the assessee in law. 7. The assessee had produced all the accounts of ICA and KSD to show that the items of income included in the revised returns pertain to the income of ICA and KSD and does not pertain to him. The State had also filed documents found in the search conducted and also the documents filed by the assessee with the assessing authority. The Tribunal, on thorough consideration of the material on record, has found that the despite withdrawal of the appeals by the State, the assessee can continue with the cross-objection and also found that the assessee is entitled to retract or resile from the revised return since it was shown that the income shown in the revised returns are in fact is the income of ICA and KSD and does not pertain to the assessee. The Tribunal, therefore, passed the following operative order at paragraph 13: 13. In view of our above finding and various decisions cited, we hold that: (a) The assessee is entitled to retract from his earlier settlement application as the same is against the express provision of law and is also erroneous. (b) The income of ICA, including its divisions, other credit entries in its books and other disallowances in respect of income of ICA is to be excluded while computing income of the assessee for all the years under appeal. (c) From the assessment order, it is seen that the income is computed based on computation filed in settlement petition (as reproduced in para 4.4 above). The Assessing Officer shall, therefore, exclude the credits of Rs. 1.40 crores, Rs. 83.80 lakhs and Rs. (c) From the assessment order, it is seen that the income is computed based on computation filed in settlement petition (as reproduced in para 4.4 above). The Assessing Officer shall, therefore, exclude the credits of Rs. 1.40 crores, Rs. 83.80 lakhs and Rs. 68.00 lakhs for the assessment years 1986-87, 1987-88 and 1988-89 respectively as the same pertains to the firm ICA. Similarly the income of Intercorp Associates-Bangalore, Transcorp-Delhi, Megacorp-Bombay, Intercorp-Bombay as computed by the Assessing Officer also be excluded from the income of assessee for all the three years. (d) Any other income of the assessee earned individually will be retained as the same is not challenged in appeal before us and no arguments are advanced for excluding or reducing the same. (e) Interest under Section 139(8) and 215/217 will be charged as per law considering the decision of the hon'ble Supreme Court in Modi Industries Limited, Modinagar and Others Vs. Commissioner of Income Tax, Delhi and Another, (1995) 216 ITR 759 SC. In the result the appeals of the Revenue are dismissed and the cross-objections of the assessee are partly allowed. 8. The State aggrieved by the operative order at paragraph 13(a) to 13(c) has filed these appeals. 9. The following questions of law was proposed by the State for consideration: (1) Whether the Tribunal had jurisdiction to entertain the cross-objections filed by the assessee to the appeal filed by the Revenue when the Revenue's appeal had been dismissed by upholding the order of remand passed by the Appellate Commissioner resulting in the entire assessment order being set aside for consideration afresh ? (2) Whether the Tribunal was correct in proceeding to examine the merits of the assessment proceedings as to whether the income should be assessed in the hands of the assessee or not when the assessment order itself had been set aside and the entire matter was before the Assessing Officer for consideration afresh as the particulars available when passing the original assessments were not sufficient ? (3) Whether the Tribunal was correct in proceeding to entertain the cross-objections and permitting the assessee in the said proceedings for the first time to withdraw his earlier admission and concession that the income declared by him did not belong to him but to certain other entities without basing these conclusions on any cogent material and consequently recorded a perverse finding ? (4) Whether the Tribunal was correct in holding that the income which had been originally included in the assessment proceedings in the hands of the assessee and which had not been included in the hands of M/s. Intercorp Associates and other entities should be excluded from the total income of the assessee as assessments in the case of the firm had been reopened and in the case of one other entity reference application before this hon'ble court had been filed ? (5) Whether the Tribunal was correct in condoning the delay in presenting the cross-objections when no cogent reasons had been assigned by the assessee and especially when the main appeal filed by the Revenue had already been rejected and consequently the cross-objection itself could not be entertained ? 10. This court by order dated January 27, 2004, admitted these appeals for consideration of substantial questions Nos. 3 and 4 formulated by the State. 11. Re. Question No. 3 : It is a well-settled principle that when an assessee files any return or revised return, he/she is always entitled to in law to show that the return filed is by bona fide mistake. It is, therefore, in principle, cannot be argued that the assessee cannot retract from the returns or revised returns filed for the valid reason in law. In that view, question No, 3 is answered in the affirmative. 12. Re. Question No. 4 : The Tribunal in its detailed order, after going through the accounts of ICA and KSD produced by the assessee has found as fact that in the revised return filed by the assessee, income of KSD and ICA has been included wrongly and that the income of the said entities cannot be considered as income of the assessee. The Tribunal in its operative portion of the order further went on to hold that the Transcorp Associates-Delhi, Megacorp-Bombay and Intercorp-Bombay should not be computed as the income of the assessee and the income of the said firm to be excluded from the scrutiny while assessing the income of the assessee. 13. The Tribunal in its operative portion of the order further went on to hold that the Transcorp Associates-Delhi, Megacorp-Bombay and Intercorp-Bombay should not be computed as the income of the assessee and the income of the said firm to be excluded from the scrutiny while assessing the income of the assessee. 13. On a thorough consideration of the order of the Tribunal, it is found that so far income of KSD and ICA is concerned, the Tribunal had the benefit of going through the accounts of the said entities to come to the conclusion that the income reflected in the revised returns of the assessee pertains to all those entities. However, no material in respect of M/s. Transcorp-Delhi, Megacorp-Bombay and Intercorp-Bombay were produced for consideration. Therefore, a direction issued by the Tribunal preventing the Assessing Officer from scrutinizing the accounts of the above entities while assessing the income of the respondent does not appear to be valid in law and not based on any material on record. Hence, the Assessing Officer is entitled to go into the accounts of the said entities to find out whether the income of the said entities have any nexus with the income of the respondent to fasten the tax liability, if any, on the respondent. Therefore, question No. 4 is answered in the affirmative. 14. Accordingly, the appeals are disposed of.