Research › Search › Judgment

Madras High Court · body

2012 DIGILAW 1487 (MAD)

Commissioner of Income-Tax v. Ku. Pa. Krishnan

2012-03-27

D.MURUGESAN, P.P.S.JANARTHANA RAJA

body2012
Judgment :- D.MURUGESAN, J. 1. Tax Case Appeal No.686 of 2005 is by the Revenue and T.C.No.2 of 2009 is by the assessee against the order of the Income-tax Appellate Tribunal, Chennai 'A' Bench, dated 14.10.2003 passed in I.T.(SS) A.No.193/Mds/1997. As against the said order, the Revenue raises the following substantial questions of law for consideration:- "1.)Whether in the facts and circumstances of the case, the Tribunal had enough material to hold and was right in deleting the additions made by the assessing officer ? 2.)Whether in the facts and circumstances of the case, the Tribunal was right in ignoring the massive volume of evidence and findings based thereon put forward by the assessing officer ? 3.)Whether in the facts and circumstances of the case, the Tribunal was right in deleting additions made of deposits/properties in the name of benamis on the ground that such properties are not in the name of the assessee ?" In the appeal filed by the assessee, the following substantial questions of law have been raised for consideration:- "1.) Whether in the Income Tax Appellate Tribunal was justified in holding that the Assessment under Section 158 BA is not confined to income disclosed by materials gathered during the search under Section 132 and the income tax officer was entitled to make further investigation and collect materials for making further additions to the income determined based on the materials gathered during the search ? 2.)Whether in view of the finding of the Tribunal that the appellant and his family members were in receipt of substantial agricultural income, the Tribunal was justified in law in holding that Rs.49,90,000/-, Rs.4,68,335/-, Rs.68,000/- and Rs.26,070/-represented undisclosed income taxable under the Income Tax Act, 1961 ?" 2. The brief facts leading to the present appeals are as follows:- The appeals relate to Block Assessment Years 1986-87 and 1996-97 upto 17.7.1996. A search under Section 132 of the Income-tax Act, 1961 (in short 'the Act'), was conducted on 17.07.1996 at a flat in Adyar, which was in the name of the wife of the assessee. The assessee was examined under Section 132(4) of the Act. He was taken to his native village Kulumani, near Trichy and was examined on 18.07.1996. A search under Section 132 of the Income-tax Act, 1961 (in short 'the Act'), was conducted on 17.07.1996 at a flat in Adyar, which was in the name of the wife of the assessee. The assessee was examined under Section 132(4) of the Act. He was taken to his native village Kulumani, near Trichy and was examined on 18.07.1996. On the basis of the statement of the assessee, an undisclosed income for the period of ten years was arrived to the extent of Rs.1.33 crores and explanation of the assessee was also sought for. Finally, the assessee made a disclosure of unaccounted income to an extent of Rs.77,69,000/- and agreed to pay the tax by filing necessary return. However, in response to the notice issued under Section 158 BC, the assessee filed a 'Nil' return. In the meantime, the Department of Vigilance and Anti Corruption, searched for the assessee on 17.8.1996, as he was absconding and arrested him on 25.09.1996 and later, released on bail. In spite of number of notices/letters seeking explanation as to the various investments, the assessee did not file any clarification or reply to the notices and ultimately, the assessing officer determined the composition of undisclosed income of Rs.5,40,07,340/-, which reads as follows:- (A). Items considered in assessee's own hands directly, on the basis of search materials. i) Cash-Rs. 9,02,150 ii) Jewellery-Rs.10,21,946 iii) Silver jewellery-Rs. 81,088 iv) Diamond jewellery-Rs. 80,000 v) House hold articles-Rs. 2,50,000 vi) Cars-Rs. 3,70,000 vii) Trax Jeep-Rs. 1,55,000 viii) Car-Rs. 2,75,000 ix) Old car-Rs. 1,15,000 x) Fire-arm-Rs. 1,00,000 xi) Blank promissory notes-Rs.10,00,000 Total of 'A'-Rs.43,50,184 (B)Addition on the basis of materials seized, but relating to other persons: i) Deposit in the name of Shri. K.Ramakrishnan- (IOB) - Rs.7,01,961 Total of 'B' - Rs.7,01,961 (C)Additions based on post-search enquiries: i) Deposits with Bank of Baroda-Rs.49,90,000 ii) Interest thereon.-Rs. 26,070 iii) Deposit in the name of Paramasivam & Periyakal-Rs.40,00,000 iv) Deposit in the name of Palaniammal-Rs.11,33,814 v) Deposit in the name of Chittibabu-Rs.34,34,894 vi) Deposit in the name of P.Krishnan-Rs.53,86,498 vii) Deposit in the name of K.Ramakrishnan-Rs.54,93,133 viii) Deposit in other SB accounts.-Rs.32,75,252 ix) Deposit in the name of G.Malliga-Rs.12,47,380 x) Deposit in the name of Siranjeevi-Rs. 29,392 Total of 'C'-Rs.2,90,16,433 (D) Immovable properties in the name of other persons. i) House property at Kodaikanal-Rs. 8,17,280 ii) Estimated cost of additions-Rs.13,83,757 iii) House at Kumaran Nagar, Trichy-Rs.24,34,800 iv) Land at Manigandam-Rs. 29,392 Total of 'C'-Rs.2,90,16,433 (D) Immovable properties in the name of other persons. i) House property at Kodaikanal-Rs. 8,17,280 ii) Estimated cost of additions-Rs.13,83,757 iii) House at Kumaran Nagar, Trichy-Rs.24,34,800 iv) Land at Manigandam-Rs. 8,75,150 v) Land at Vadagam, Kodaikanal-Rs.13,21,470 vi) Plots at Anna Nagar, Trichy-Rs. 7,21,200 viii) Property in the name of Poongundran-Rs. 90,000 ix) Flat at 9/3 Nehru Nagar, Adayar-Rs. 6,59,900 Total of 'D'-Rs.92,08,957 (E)Property in the name of assessee. Property at Kuzhamani - Rs.11,94,000 Rs.11,94,000 (F) Income from bus operation - Rs.60,58,154 Total of 'F'- Rs.60,58,154 (G)Miscellaneous income i) Investment in Sudar Creations-Rs. 2,00,000 ii) Education expenses of Children-Rs. 2,18,264 iii) Election expenses-Rs. 4,15,000 iv) Estimated family expenses-Rs.12,60,000 v) Donation to AIADMK Party-Rs.10,00,000 vi) Payment fo Jaya Publication-Rs. 20,000 vii) Salary income-Rs. 2,24,000 viii) House property income-Rs. 6,79,800 Total of 'G'-Rs.40,17,064 Gross Total -Rs.5,45,46,753 Less: Deductions considered by the assessing officer: i) 80LRs. 53,684 ii) Standard deductionsRs. 67,369 iii) Salary availableRs.2,24,600 iv) Agrl.incomeRs.1,93,760 Rs. 5,39,413 Rs.5,40,07,340 ============== 3. As the above order was in respect of block assessment period, the assessee took the matter to the Income-tax Appellate Tribunal, Chennai Bench, by filing an appeal. The assessee also filed an application seeking to produce additional evidence like Adungal records, certificates issued by the Village Administrative Officers, Lease Deed copies, etc. and also the evidence relating to 13 persons, who had independent holdings of agricultural lands, which commensurate agricultural income available for disposal. These documents were admitted and considered by the Tribunal and ultimately passed the impugned order confirming and deleting certain additions. The relevant paragraphs 40 to 45 read as under:- 40.) As seen from the above paragraphs, we have considered each and every addition made by the assessing officer by arranging these items under convenient groups and heads reflected in the tables given in the paragraphs above. We have confirmed five additions under different heads and have deleted all other itmes included by the assessing officer in computing the undisclosed income. The following items are confirmed: i) Jewellery-Rs. 4,68,335/-ii) Fire-arm-Rs. 68,000/- iii) Promissory notes-Rs.10,00,000/- iv) Bank of Baroda deposits-Rs.49,90,000/- v) Interest due thereon-Rs. 26,070/- Rs.65,52,405/- 41.) While completing the assessment, it is seen that the assessing officer has given the following deductions: 80L-Rs. 53,684/-Std. Deductions-Rs. 67,369/-Salary available-Rs. 2,24,600/- Agrl. Income-Rs. 1,93,760/- Rs. The following items are confirmed: i) Jewellery-Rs. 4,68,335/-ii) Fire-arm-Rs. 68,000/- iii) Promissory notes-Rs.10,00,000/- iv) Bank of Baroda deposits-Rs.49,90,000/- v) Interest due thereon-Rs. 26,070/- Rs.65,52,405/- 41.) While completing the assessment, it is seen that the assessing officer has given the following deductions: 80L-Rs. 53,684/-Std. Deductions-Rs. 67,369/-Salary available-Rs. 2,24,600/- Agrl. Income-Rs. 1,93,760/- Rs. 5,39,413/- 42.) As we have already deleted the addition on account of salary income, the assessing officer need not give a further deduction towards standard deduction and salary available amounting to Rs.67,369/- and Rs.2,24,600/-respectively. While considering the sources of income, we have considered the agricultural income and deleted the many additions. Therefore, a further deduction by way of agricultural income to the extent of Rs.1,93,760/- is not called for. 43.) The assessing officer is, therefore, directed to give only one deduction under Sec.80L amounting to Rs.53,694/-. 44.) As a result of these adjustments, the net revised undisclosed income will be Rs.64,98,721/- (Rs.65,52,405 (-) Rs.53,684/-). 45.) The assessing officer is directed to modify the Block Assessment on the above lines. In the result, the Block Assessment Appeal is partly allowed. Order accordingly." The above order is put in issue by the Revenue in T.C.(A) No.686 of 2005 and by the assessee in T.C.(A) No.2 of 2009. 4. We have heard elaborately Mr.K.Ramasamy, learned senior standing counsel appearing for the Revenue in both the appeals and Mr.R.Venkataraman, learned senior counsel, for Mr.R.Sivakumar and Mr.A.Sathyaseelan, learned counsel, both appearing for the assessee in the respective appeals. 5. It is the contention of the Revenue that in terms of Rule 29 of the Income-tax (Appellate Tribunal) Rules, the Tribunal ought not to have entertained the additional evidence as only in the event the Tribunal requires additional evidence to be adduced or witnesses to be examined, it can do so, but not at the instance of the assessee. Further, in any case, there was no opportunity given to the Revenue to rebut the additional documents marked by the assessee and in the wake of Rule 46 A of the Income-tax Rules, the Tribunal ought to have either remitted the matter to the assessing officer or should have given opportunity to the assessing officer in respect of those documents and finally, even assuming that these documents can be entertained by the Tribunal, they have not been properly appreciated by the Tribunal. 6. 6. On the other hand, Mr.R.Venkataraman, learned senior counsel and Mr.A.Sathyaseelan, learned counsel, appearing for the assessee in both the appeals, have submitted that the Revenue had not objected to the application filed by the assessee to let in additional evidence by filing certain documents. In fact, in the written statement, the Revenue had only stated that they leave the issue to the decision of the Tribunal. The Tribunal also had found that these documents were not controverted by the Revenue and therefore, they were admitted. In these circumstances, it is not open to the Revenue to canvass the said point before this Court, particularly when no substantial question of law was raised in this regard. As far as the second contention of the Revenue is concerned, the learned senior counsel would submit that at the time of hearing, sufficient opportunity was given for the Revenue to controvert the documents. Nevertheless, the documents which were filed before the Tribunal were not controverted and therefore, the Tribunal had chosen to decide the appeal by placing reliance on those documents. Insofar as the last contention is concerned, the learned senior counsel would argue that the Tribunal had properly appreciated the documents with reference to the order of the assessing officer. As far as the order of the Tribunal in confirming certain additions, which have not been declared by the assessee, it is contended that the Tribunal had not properly appreciated though relevant materials were placed. 7. We have carefully considered the rival submissions. Point No.1:- 8. As it is a block assessment, as against the order of the assessing officer, the assessee had the benefit of filing appeal only before the Tribunal, as there was no provision for appeal before the Commissioner of Income-tax (Appeals) at the relevant point of time. In these circumstances, the provision relating to Commissioner of Income-tax (Appeals), viz., Rule 46A of the Income-tax Rules, 1962 (for brevity 'IT Rules') cannot be pressed into service. In these circumstances, the provision relating to Commissioner of Income-tax (Appeals), viz., Rule 46A of the Income-tax Rules, 1962 (for brevity 'IT Rules') cannot be pressed into service. Rule 29 of the Income-tax (Appellate Tribunal) Rules, 1963, (for brevity 'ITAT Rules'), of course, contemplates a provision that if the Tribunal requires any document to be produced or any witness to be examined or any affidavit to be filed to enable it to pass orders or for any other substantial cause, or, if the income-tax authorities have decided the case without giving sufficient opportunity to the assessee to adduce evidence either on points specified by them or not specified by them, the Tribunal, for reasons to be recorded, may allow such document to be produced or witness to be examined or affidavit to be filed or may allow such evidence to be adduced. 9. Though a reading of the said rule shows that it is a power conferred only on the Tribunal, the rule had been interpreted by the Courts to confer a right on the assessee as well to produce additional evidence. 10. In this context, we may refer to the judgment of this Court in R.S.S. Shanmugam Pillai and Sons v. Commissioner of Income-tax, (1974) 95 ITR 109, wherein the scope of the powers of the Tribunal under Rule 29 of ITAT Rules to either entertain or reject the evdience was considered. It has been held that the Tribunal has got a wide discretion to admit or reject documents at the stage of appeal, nevertheless, such discretion cannot be exercised in the arbitrary manner. The Tribunal may be justified in satisfying itself that the documents filed are quite relevant for the purpose of deciding the issue before it, but the question is whether it would be well within its power to admit the evidence, consider the same or remit the matter to the lower authorities for such consideration. In Anaikar Trades and Estates (P) Ltd. (No.2) v. Commissioner of Income-tax, (1990) 186 ITR 313 (Mad.), the said principle was reiterated by this Court. 11. That apart, Rule 18(4) of the ITAT Rules is also referable. In Anaikar Trades and Estates (P) Ltd. (No.2) v. Commissioner of Income-tax, (1990) 186 ITR 313 (Mad.), the said principle was reiterated by this Court. 11. That apart, Rule 18(4) of the ITAT Rules is also referable. That rule provides that if any party desires to file additional evidence, then the same shall be filed by way of a separate paper book containing such particulars as are referred to in sub-rule (3) accompanied by an application stating the reasons for filing such additional evidence. If Rule 18(4) is read with Rule 29, there cannot be any difficulty in holding that in terms of Rule 29, an additional evidence can also be produced by the assessee on an application, provided the Tribunal should satisfy as to the reasons before entertaining such additional evidence and the Tribunal should also afford sufficient opportunity to the Revenue to rebut those additional evidence. Therefore, the contention of the learned counsel for the Revenue that the Tribunal ought not to have entertained additional evidence at the instance of the assessee is not well-founded. That apart, there was no specific objection raised by the Revenue at the time when the application was filed and the Revenue, in fact, had allowed the Tribunal to entertain such application. In this context, we may also refer to the observation of the Tribunal that the Revenue did not contradict any of the averments made by the assessee in the petition seeking for production of additional evidence. The Tribunal also observed that the Revenue had not questioned the veracity of the documents and the particulars filed by the assessee. 12. In view of the above, the first submission of the learned senior standing counsel appearing for the Revenue cannot be accepted and the same is rejected. 13. As far as the second contention is concerned, the details of the documents are referable. These documents are the copies of Adungal records, certificates issued by the Village Administrative Officers, Lease Deed copies and the affidavits of 13 persons stating that they are the holders of agricultural lands and they had sufficient income to commensurate the agricultural income which was available for their disposal. It is also pertinent to note that the above 13 persons filed their respective returns disclosing the same properties and also explaining the source of income and the Revenue also made assessments of the individual returns on protective basis. 14. It is also pertinent to note that the above 13 persons filed their respective returns disclosing the same properties and also explaining the source of income and the Revenue also made assessments of the individual returns on protective basis. 14. We have perused those documents, which were filed before us in a separate typed set from page 20 onwards. For example, we may refer the English translation of the certificate issued by the Village Administrative Officer dated 10.05.1996 stating that the assessee owns 0.49.5, 0.35.5, 0.46.5 and 0.06.0 hectares of land in different survey numbers at Varaganeri village of Trichy Taluk and District. The certificate is on the basis of an adungal record and it does not contain any seal except referring to a copy of the adungal, which is also dated 10.05.1996. It is contended that the veracity has not been questioned by the Revenue at the time it was filed. The finding of the Tribunal in this regard appears to us that it is only for entertaining the said document and nothing more. Once a document is admitted as additional evidence, there are two options for the Tribunal, viz., 1) either the Tribunal may consider the document and decide the case on its own or it may remit the matter to the assessing officer. In the event, a document, which cannot be disputed on the face of it, for example, a original record maintained by the Government is produced as an additional evidence, the Tribunal could be justified in considering the said document by itself and decide the case. On the other hand, if the document is such that requiring a detailed consideration and is disputed or even is liable to be disputed, the Tribunal shall adopt the second option by remitting the matter to the assessing officer to find out the veracity/genuineness of the document and thereafter consider the same to pass final orders. 15. In the given facts of the case, being a block assessment, and in the absence of any appeal to the Commissioner of Income Tax (Appeals), the Tribunal is considered to be the first appellate authority. It is true that before the documents filed by way of additional evidence were considered, the Revenue had the opportunity to refute those documents. 15. In the given facts of the case, being a block assessment, and in the absence of any appeal to the Commissioner of Income Tax (Appeals), the Tribunal is considered to be the first appellate authority. It is true that before the documents filed by way of additional evidence were considered, the Revenue had the opportunity to refute those documents. Nevertheless, in terms of Rule 29 of the ITAT Rules, a provision of opportunity is contemplated and in our opinion, such opportunity shall be given to the assessing officer. Rebuttal must be only by the assessing officer, who will be in a better position to verify the genuineness of those documents and accordingly, he may accept or may not accept the case of the assessee. In the event certain doubts are entertained on the basis of the documents produced as additional evidence, it would be only proper for the Tribunal to remit the matter. 16. The Tribunal had also taken into consideration the statement of one Manickam, which was notarised on 06.05.1997, wherein he has stated that he has given on lease the agricultural lands in various survey numbers to the assessee by name K.P.Krishnan and is cultivating plantain, Paddy, Toor Dhall, cotton, gingelly, etc. for the period from 1980 and 1991. The questions as to whether the lands in these survey numbers belong to the assessee or not and whether the assessee had entered into lease agreement with the said Manickam or not are all matters to be considered in detail to find out the genuineness of those documents. All additional evidences/documents are more or less on the same lines. In this regard, we have gone through the order of the Tribunal and the Tribunal had accepted almost all the documents without there being any detailed consideration. Rule 29 mandates the Tribunal to satisfy itself as to whether those documents can be entertained, and if entertained, shall apply its mind to the veracity of those documents. This being a power vested in the Tribunal with certain element of discretion attached to it, such power shall be exercised with great care and caution and not arbitrarily. Merely because the opposite party did not seriously object to those documents, the obligation of the Tribunal under Rule 29 cannot be ignored. Hence, in our considered opinion, the Tribunal ought to have remitted the matter to the assessing officer for consideration. Merely because the opposite party did not seriously object to those documents, the obligation of the Tribunal under Rule 29 cannot be ignored. Hence, in our considered opinion, the Tribunal ought to have remitted the matter to the assessing officer for consideration. The details of the issue, additions made in the assessment order and the deletions made by the Tribunal are as follows:- 17. By placing reliance solely on the documents filed as additional evidence, the Tribunal had confirmed the assessment order to the tune of Rs.65,52,405/-and interfered with the order of the assessing officer by deleting the rest of the assessment. For the said reason also, we are inclined to hold that the Tribunal ought not to have gone into the additional evidence and rather should have remitted the matter to the assessing officer. 18. For all these reasons, we are constrained to set aside the order of the Tribunal and remit the matter to the assessing officer, who shall now consider the documents filed as additional evidence by the assessee and pass fresh orders. Accordingly, the order of the Tribunal is set aside, the tax case appeals are allowed and the substantial questions Point No.2:- of law are answered accordingly. Connected M.P. is closed.