THE COMMISSIONER OF INCOME TAX, CALICUT vs. SHRI.P.M.KUNHAMMED, CALICUT

ITA/238/2010HC KeralaKLHC01026930201011 April 2014Author: HONOURABLE MR.JUSTICE A.M.SHAFFIQUE,HONOURABLE THE CHIEF JUSTICE DR. MANJULA CHELLUR9 pages
AI SummaryDismissed

What were the facts?

The Revenue filed an appeal against an order of the Income Tax Appellate Tribunal (ITAT) concerning the block period 1991-1992 to 2001-2002. Following a search, the Assessing Officer (AO) completed the assessment under Section 158BC, estimating undisclosed income at Rs. 1,09,00,716/- and demanding Rs. 81,49,713/-. The Commissioner of Income Tax (Appeals) partly allowed the assessee's appeal. The ITAT, by the impugned order, allowed the assessee's appeal and partly allowed the Revenue's appeal, finding that claims for steel and electrical items were not allowed and a crucial letter dated 1.4.2003 was not considered. The Revenue contended that the assessee's letter dated 27.3.2003, agreeing to a settlement based on revised draft order, was not properly considered by the ITAT.

What did the High Court hold?

The High Court held that the questions of law framed by the Revenue were essentially questions of fact. The Court found that the Tribunal's findings were based on available records and that such findings of fact were possible. Therefore, the Court disagreed with the Revenue's contention that the findings were perverse. Specifically, regarding paragraph 6.3 of the Tribunal's order, the Court noted that the assessee's letter dated 27.3.2003 was conditional and that the statutory right of appeal could not be waived. The Tribunal also correctly observed that the AO did not have the benefit of seeing this letter when proceeding with the assessment, as it was received after the assessment was initiated on a different basis. In paragraph 7.1, the Tribunal rightly held that a consent letter received after the date of assessment cannot be considered valid evidence. Furthermore, the Tribunal's finding that the books of account (A37 and A38) maintained on a day-to-day basis could not be disregarded and were part of the regular books of account was also upheld. The Court concluded that the questions of law could not be answered in favour of the Revenue and accordingly dismissed the appeal.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, and in light of the letters addressed to the Additional CIT, the Tribunal was right in interfering with the assessment based on the concession by the assessee? (Question of law and fact, turning on the interpretation of the assessee's letter and the assessment process). 2. Whether, on the facts and in the circumstances of the case, the reasoning and conclusion of the Tribunal in paragraphs 6.3 and 7.1 of its order are vitiated, perverse, and against human conduct and commonsense? (Question of law and fact, concerning the Tribunal's appreciation of evidence and its conclusions). 3. Whether, on the facts and in the circumstances of the case, amounts not entered in regular books of accounts at the time of search form part of the "undisclosed income", and is the Tribunal's finding to the contrary perverse and against law and logic? (Question of law and fact, concerning the definition of undisclosed income and the treatment of unrecorded expenses). 4. Whether, on the facts and in the circumstances of the case, and in light of the establishment of suppression of sales by the AO, the ITAT is right in interfering with the addition on that account? (Question of law and fact, concerning the AO's findings on suppressed sales based on a seized diary and sale agreements). 5. Whether, on the facts and in the circumstances of the case, considering the agreement of the assessee, the Tribunal is justified in interfering with the assessment for any of the reasons noted in its order, and are the Tribunal's findings perverse, arbitrary, and against all reasonableness? (Question of law and fact, a general challenge to the Tribunal's order). Assessee's Contentions: The assessee's letter dated 27.3.2003 indicated agreement for a speedy settlement if certain expenses were allowed and no appeal would be preferred. The assessee also agreed not to claim certain deductions in regular assessment and to pay tax within six months. The assessee's letter was conditional. The Tribunal noted that the statutory right of appeal cannot be waived. The Tribunal also observed that the AO did not have the benefit of seeing the letter dated 27.3.2003 as it was received on 1.4.2003, after the assessment was proceeded on a different basis. The Tribunal also found that books of account maintained on a day-to-day basis could not be brushed aside and were part of regular books. Revenue's Contentions: The Revenue contended that the Tribunal's findings were perverse and liable to be interfered with. Arguments were raised regarding the appreciation of evidence by the Tribunal, especially concerning a seized diary (A21), the assessee's ledger, and sale agreements. The Revenue argued that the amounts not entered in regular books of accounts should form part of undisclosed income. The Revenue also argued that suppression of sales was established by the AO.

Which sections of the Income-tax Act were involved?

Section 158BC

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HON'BLE THE CHIEF JUSTICE DR. MANJULA CHELLUR & THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE FRIDAY, THE 11TH DAY OF APRIL 2014/21ST CHAITHRA, 1936 ------------------------ AGAINST THE ORDER IN IT(S&S)A 141/2004/COCH/O4 of I.T.A.TRIBUNAL,COCHIN BENCH DATED 31-07-2009. APPELLANT(S)/APPELLANT : ----------------------- THE COMMISSIONER OF INCOME TAX, CALICUT. BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT/RESPONDENT : --------------------- SHRI.P.M.KUNHAMMED, C/O.M/S.GALAXY BUILDERS, R.C.ROAD, CALICUT. BY ADVS. SRI.ANIL D. NAIR. SRI.NIVEDITA A.KAMATH. THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 11-04-2014, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

APPENDIX PETITIONER'S ANNEXURES : ANNEXURE A : COPY OF the LETTER DATED 27-03-2003. ANNEXURE B : COPY OF THE LETTER OF ASSESSING OFFICER DATED 28-3-2003. ANNEXURE C : COPY OF THE ORDER OF THE ASSESSING OFFICER DATED 31-3-2003. ANNEXURE D : COPY OF the ORDER OF the CIT(A) DATED 10-9-2004. ANNEXURE E : COPY OF THE ORDER OF THE ITAT DATED 31-07-2009. RESPONDENT'S ANNEXURES : NIL.

The order continues below.

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