SMT.JALAJA NAIR,TRIVANDRUM vs. THE ADIT(INV), TRIVANDRUM

Per CHANDRA POOJARI, AM:

These three appeals are directed against the common order of the CIT(A)-III,

Kochi dated 17/12/2018 for the assessment years 2004-05, 2005-06 and 2007-08.

It is to be noted that this impugned order of the CIT(A) is to be read alongwith the

order of the CIT(A), Trivandrum dated 30/1/2017 for the assessment year 2004-05.

this Tribunal against the different orders of the CIT(A) dated 30/01/2017 for the

assessment years 2004-05, 2005-06 and 2007-08 along with the grounds relating to

the additions made by the Assessing Officer on merits. The assessee has also

raised legal ground with regard to jurisdiction in framing of the assessment u/s.

153C of the I.T. Act in all these assessment years. The Tribunal vide order dated

13/08/2017 in ITA Nos. 257 to 259/Coch/2017 and others remitted the issue to the

file of the CIT(A) with the following observations:

“9 Having heard both the parties and other relevant material on record, we find that the assessee has taken a legal plea on the validity of the search proceedings initiated u/s 132 of the Act, on the ground that the search was carried in violation of provisions of section 132 of the Act as there was no material or evidence was seized at the time of search showing any undisclosed income. Since the legal issue raised by the assessee is emanates from the facts already on record, we deem it appropriate to admit the additional grounds raised by the assessee for adjudication. This view was supported by the decision of the Hon’ble Supreme Court in the case of NTPC Ltd (supra) wherein it was held that there is no reason to restrict the power of the Tribunal u/s 254 of the Act only to decide the grounds raised from the order of the CIT. The assessee as well as the department has a right to file appeal/cross objection before the Tribunal. There is no reason why the Tribunal should be prevented from considering the question of law arising from the assessment proceedings, although not raised earlier. However, we further notice that this legal plea has been taken first time before the Tribunal and the lower authorities did not had an occasion to consider the legal issue raised by the assessee. Whether there was an incriminating material found during the course of search or not, is a matter of fact, which can be find out from the records available with the department. Unless the Assessing Officer or the CIT(A) examine the search folder, it is difficult to conclude that that there was no incriminating material found during the search. Since the lower authorities did not had an occasion to examine the additional ground raised by the assessee challenging the validity of search proceedings in the light of claim of the assessee, we deem it appropriate to set aside the issue to the file of the CIT(A) for his consideration and direct him to admit the additional grounds raised by the assessee and adjudicate the issue as per law.

10 Since we have set aside the issue to the file of the CIT(A) for adjudicating the additional grounds raised by the assessee on the legal issue of validity of search proceedings, the grounds raised by the assessee, challenging the additions made by the Assessing Officer on merits has not been consider at this juncture.

11 In the result, the appeal filed by the assessee is allowed for statistical purpose.”

to jurisdiction in framing the assessment u/s. 153C of the Act which was remitted

to him by the Tribunal for fresh consideration. The CIT(A) observed that the

statement of bank account of the assessee found during the course of search

revealed that there were substantial cash deposits. The search records reveal that

there was incriminating information obtained from the Bank statements of the

assessee unraveled during the search u/s. 132 of the Act in the relevant assessment

years. In view of the above facts, the CIT(A) confirmed the initiation of

assessment proceedings u/s. 153C of the Act in all the assessment years.

assessment proceedings u/s. 153C of the Act. However, at the time of hearing, the

Ld. AR made an endorsement that the assessee was not interested to press the

grounds relating to legal issue before the Tribunal. Accordingly, these grounds are

dismissed as not pressed for all the assessment years.

additions by the CIT(A) for all the assessment years.

had raised the ground relating to addition of Rs.16.50 lakhs. On earlier occasion,

the assessee challenged the sustenance of addition of Rs.9.5 lakhs by the CIT(A)

the addition of Rs.16.50 lakhs made by the Assessing Officer. In the second round,

the CIT(A) adjudicated only the legal issue of initiation of assessment proceedings

u/s. 153C of the Act. He has not adjudicated the grounds relating to the additions.

Originally, the Assessing Officer made the following additions:

a) Cash deposits of Rs.3,50,000/- The assessee claimed that she received a

sum of Rs.3,50,000/- from Mr. Suresh Babu as advance for sale of 3 cents

of land and deposited the same into the above mentioned bank account.

The assessee’s explanation that she received the said sum as advance from

Mr. Suresh Babu for the sale of land she owned was accepted as the same

was supported by advance agreement and sale deed copes of which were

furnished for verification. The CIT(A) deleted the addition.

b) Cash deposit of Rs.2,50,000/- According to the assessee, the deposit was

made out of the sale proceeds of 2.5 cents of land to Mr. Amrutha Kumar

vide document No.2032/2003 dated 10/07/2003. The assessee’s

explanation that she received as advance from one Mr. Amrutha Kumar for

the sale of land she owned was accepted since the same was supported by

advance agreement and sale deed copies of which were furnished for

verification. The CIT(A) deleted this addition also.

c) Cash deposit of Rs. 1 lakh The case of the assessment was that there

was no such entry for the deposit in the bank account statement which the

Assessing Officer relied upon. This explanation of the assessee was

accepted since no such entry was found recorded in the account statement

with the Kerala State Co-operative Bank Ltd., Trivandrum. Hence, the

CIT(A) deleted the addition.

assessee offered the explanation that the deposit was made out of sale proceeds of

3.055 cents of land at Manacaud village sold vide document No.27448/2001 dated

18/10/2001. Out of sale proceeds of Rs.11,00,000/-, Rs.10,00,000/- was invested

in the ration wholesales business, M/s. Ahamed & Company and withdrawn the

same on 10/10/2003 and remitted into her account with the Kerala State Co-

operative Bank ltd. Contradicting the above explanation, it was further contended

that her husband was managing partner of the firm Ahamed & Company and some

of the sale proceeds and daily collections of the firm amounting to Rs.9 lakhs were

given to her in the absence of her husband from the town which in turn had been

deposited into her account. However, during the course of appeal hearing, the

assessee came out with different explanation stating that the borrowal of Rs.9 lakhs

from her sister-in-law Mrs. Kalpana on 10/10/2003 was actually deposited into her

account on the same date.

of the firm M/s. Ahamed & Company had not been established beyond doubt at any

point of time. Similarly, the CIT(A) found that the identity and creditworthiness of

Mrs. Kalpana had not been proved beyond doubt and it was also not known when

the said amount was returned to her and what was the source for that. In view of

the above, the CIT(A) confirmed the addition made on account of unexplained

deposit amounting to Rs.9 lakhs.

8.1 Against this, the assessee is in appeal before us.

8.2 The Ld. AR submitted that the CIT(A) failed to adjudicate the grounds relating

to additions made by the Assessing Officer on merits.

8.3 The ld. DR relied on the order of the CIT(A).

assessment year 2005-06:

13 In this connection, the CIT (A) ought to have found and accepted the appellant's contention that the finding of the learned Appellate Tribunal towards the concluding part of para 9 of the common order in ITA Nos.257/C/2017 dated 31/08/2017 in which Miscellaneous applications were submitted as regards the issue raised in MA Nos.22 to 124/C/2018 clarified the order by observing that “if the assessee is aggrieved by CIT(A)’s orders passed subsequent to the ITAT order dated 31/08/2017, can file appeals to the ITAT, raising all issues raised in the original appeal before the Tribunal, i.e, ITA Nos.257 to 259/C/2017. It is ordered accordingly." It is submitted that the above situation had not arisen in the appellant's case because the CIT (A) has not passed any order subsequent to the ITAT's order dated 31.8.2017 before passing the order in MA Nos. 22 to 24/C/2018 dated 7.9.2018, which is the last order passed. So much so, the CIT (A) ought to have adjudicated both the issues as regards the jurisdiction and the merit of the case. 7

For these and other grounds that may be urged at the time of hearing, the appellant humbly prays that the Hon'ble Income Tax Appellate Tribunal, Cochin Bench, may kindly be pleased to set aside the order of the 1st appellate authority and of the assessing officer, allow the appeal and render justice.

9.1 The assessee has not pressed Ground Nos 2, 3 & 4 and hence, they are

dismissed as not pressed.

assessment was made as per order dated 31.12.2009 u/s 144 r.w.s. 153C of the

Act, after issuing notice u/s 153C dated 20.03.2009. The Assessing Officer

estimated short term capital gain amounting to Rs.29,22,500/-. The assessee sold a

property consisting of 9.21 Cents of land along with old building therein as per

document No.1469/2005 executed on 31.03.2005 in favour of Shri. Byju Devaraj

and Smt. Simi for Rs.19,50,000/-. The Assessing Officer determined the capital gain

by making two adjustments namely – (1) no amount was allowed towards repairs of

the building but considered Rs.5,77,500/- as the cost of the property being Rs. 5

lakhs as the consideration and Rs.77,500/- as the expenditure on stamp duty and

registration. (2) The second adjustment was that the sale consideration of

R.19,50,000/- was enhanced to Rs.35 lakhs by rejecting the sale value as per the

sale deed.

12.1 The Ld. AR submitted that the consideration received for the sale was

Rs.19,50,000/-, which is apportioned in the document towards value of land of

Rs.9,50,000/- and value of building of Rs.10 lakhs). It was submitted that the

assessee had spent a sum of Rs.14,25,000/- on renovation of the building, since the

building was a pretty old at the time of purchase and needed substantial repairs.

The property was purchased on 02.08.2003 and sold in 31.03.2005. Soon after the

purchase, the repairs were commenced and before it could be completed, there was

an offer for purchase from Shri. Byju Devaraj and the assessee agreed to sell the

house for Rs.19,50,000/-. A sum of Rs.50,000/-was spent as brokerage and net

consideration received was Rs.19,50,000/-. It was submitted that the value was

apportioned between land value and building value at Rs.9,50,000/- and Rs.10 lakhs

respectively in the sale deed. The Ld. AR submitted that without disclosing the

statement of Shri Byju Devaraj, the purchaser of the property that the consideration

paid was Rs.35 lakhs, the Assessing Officer fixed the sale value at Rs.35 lakhs. The

Assessing Officer determined the capital gain at Rs.29,22,50O/- (difference between

Rs.35 lakhs - Rs.5,77,500/-). According to the Ld. AR there was no capital gain

arising out of the transaction, because, the cost of improvement carried out to the

building before sale is to be taken into account and secondly, the enhancement of

the sale consideration from Rs.19.5 lakhs to Rs.35 lakhs was contrary to the

consideration as per the registered sale deed and such value wass admitted and

declared before the Sub Registrar at the time of registration. It was submitted that

the Assessing Officer also did not afford reasonable opportunity to the assessee to

cross examine Shri. Byju Devaraj, whose statement was relied on for making the

addition. It was submitted that there was also a co-owner, Smt. Simi who had

purchased the property along Shri. Byju Devaraj, who was also not examined. In

this connection, the Ld. AR submitted that the assessee had already produced in the

course of the hearing a note which was submitted before the CIT(A) along with the

accompanying statements which also may kindly be considered.

12.2 It was submitted that the claim of renovation work carried out through M/s.

Omega Constructions to the building before sale was also made before the CIT(A).

However, the CIT(A) did not consider the issue merely on presumptions and

surmises and without considering the documentary evidence produced before him.

Thus, it was prayed that the documents produced before the CIT(A) may kindly be

considered afresh.

12.3 The Ld. DR relied on the order of the CIT(A).

the assessment year 2007-08:

5. The CIT (A) went wrong in dismissing the appeal by confining his findings to the validity of the proceedings against the assessment u/s.153C of the Act without going into the merits of the addition.

regarding validity of the search as well as adjudication on the merits came to be restored to the CIT (A).

For these and other grounds that may be urged at the time of hearing, the appellant humbly prays that the Hon'ble Income Tax Appellate Tribunal, Cochin Bench, may kindly be pleased to set aside the order of the 1st appellate authority and of the assessing officer, allow the appeal and render justice.

13.1 The assessee has not pressed Ground Nos 2, 3 & 4 and hence, they are

dismissed as not pressed.

Assessment Order dated 31.12.2009, the Assessing Officer has made the following

two additions:

Unexplained Investments - Rs.6,03,950/- 13

Unexplained Investments - Rs.1,55,925/-

The Assessing Officer made two additions viz.

Advance paid to Ms. T.A.Omana - Rs.5,00,000/-

Purchase of 5 cents of property from Mr Sahadevan vide Document No.874/2007 - Rs.1,03,950/- Rs.6,03,950/-

The next addition of Rs.1,55,925/- relates to estimated cost of the remaining 7.5

cents of land in which the house was constructed. The cost of 7.5 cents was

estimated proportionately.

Rs.7,62,008/-.

16.1 The Ld. AR submitted that the actual price of the land along with stamp duty

wass only Rs.1,48,400/- and not Rs.1,55,925/- for the property purchased from

Shri. Vijayan. It was submitted that the property purchased from Shri Vijayan was

for Rs.1,40,000/-, which was paid, out of the sum of Rs.1,50,000/- availed as

financial assistance from Smt. Tara Sadanandan, Kaimanam, Thiruvananthapuram

who had drawn the amount from her bank account and evidence thereof along with

her confirmation, were produced before the CIT(A) and a copy of the purchase

document was also produced herewith for verification.

16.2 So far as the second property is concerned, it was submitted that this was

purchased from the previous owner Shri Sahadevan for a sum of Rs.90,000/- and is

supported by the sale deed. It was submitted that for the purchase of the above

property, the assessee withdrew the amount from her bank account in State Co-

operative Bank on that date. The Ld. AR submitted that her explanation along with

a photo copy of the bank account may be accepted as supported by evidence and

proof.

16.3 The Ld. AR submitted that the second addition of Rs.5,00,000/- included in

the unexplained investment of Rs.6,03,950/- was based on an agreement entered into between the assessee and Smt. T.A. Omana on 17th July 2006 by which the

assessee agreed to purchase a property belonging to Smt. Omana for Rs.30 lakhs

and also agreed to pay an advance of Rs.5 lakhs. According to the Ld. AR, this

transaction did not materialize and neither advance was paid nor the property was

purchased. It was submitted that the agreement was not performed and as such

the estimated addition of Rs.5 lakhs for investment in purchase of immovable

property did not take place. The Ld. AR submitted that since the transaction did not

materialize, the question of payment of advance did not arise. Therefore, the

addition is to be vacated.

16.4 Regarding the observation made by the Assessing Officer that the assessee

made investment towards purchase of immovable property by paying advance of

Rs.5 lakhs on 17.7.2006 to Ms T.A. Omana, it was submitted that it was contrary to

the facts and evidence on record. It was submitted that both the Assessing Officer

and the CIT(A) did not accept the explanation of the assessee . The matter was

taken before the Tribunal which remanded the issue back to the fileof the CIT(A).

Hence, it was submitted that the addition of Rs.5 lakhs may be deleted.

assessment years, the CIT(A) had considered the additional ground with regard to

jurisdiction in framing the assessment u/s. 153C of the Act which was remitted to

him by the Tribunal for fresh consideration. The CIT(A) observed that there was

incriminating information obtained from the Bank statements of the assessee

unraveled during the search u/s. 132 of the Act in the relevant assessment years.

In view of the above facts, the CIT(A) confirmed the initiation of assessment

proceedings u/s. 153C of the Act in all the assessment years. However, he has not

at all adjudicated the additions made by the Assessing Officer on merits. Hence,

we are inclined to remit the issue to the file of the Assessing Officer for fresh

consideration in all the three assessment years as the order of the Assessing Officer

was passed ex parte u/s 144 of the Act. The appeals of the assessee are partly

allowed for statistical purposes.

19. In the result, the appeals of the assessee are partly allowed for statistical

purposes. Order pronounced in the open Court on this 22nd May, 2019.

sd/- sd/- (GEORGE GEORGE K.) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER

Place: Kochi Dated: 22nd May, 2019 GJ Copy to: 1. Smt. Jalaja Nair, Amrutha Nagar, Kaimanam, Trivandrum. 2. The Asst. Commissioner of Income-tax (Inv. Circle), Central Circle-2, Trivandrum 3. The Commissioner of Income-tax(Appeals)-III, Kochi. 4. The Commissioner of Income-tax, Central, Kochi. 5. D.R., I.T.A.T., Cochin Bench, Cochin. 6. Guard File. By Order

(ASSISTANT REGISTRAR) I.T.A.T., Cochin