THE COMMISSIONER OF INCOME TAX, COCHIN vs. SRI.T.K.SANALKUMAR, VADUTHALA, KOCHI

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ITA/360/2010HC KeralaKLHC01027052201018 July 2011Author: HONOURABLE MR.JUSTICE. P.S.GOPINATHAN,HONOURABLE MR.JUSTICE C.N.RAMACHANDRAN NAIR6 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the Tribunal was justified in deleting the addition of Rs. 5,00,000/- made by the Assessing Officer. The Court found that the assessee had discharged his initial onus by producing the donor and the donee, and by furnishing all necessary documents. The Tribunal had also noted that the Assessing Officer had not discharged his onus to prove that the transaction was not genuine. The High Court agreed with the Tribunal's finding that when the assessee produces the donor and the donee and the transaction is otherwise supported by documentary evidence, the onus shifts to the Assessing Officer to prove the lack of genuineness. Since the AO failed to discharge this onus, the deletion of the addition by the Tribunal was upheld. The appeal filed by the Revenue was dismissed.

What were the facts?

This appeal by the Revenue challenges the order of the Income Tax Appellate Tribunal (ITAT), Cochin Bench, in ITA No. 822/Coch/2008 for Assessment Year 2003-04. The assessee, Sri. T.K. Sanalkumar, had appealed against the order of the Commissioner of Income Tax (Appeals). The core dispute revolves around the addition made by the Assessing Officer (AO) on account of alleged unexplained cash credits. The AO had treated certain amounts as unexplained cash credits and added them to the assessee's total income. The assessee contested this addition before the CIT(A), and subsequently before the ITAT. The ITAT, in its impugned order, deleted the addition made by the AO.

What were the issues?

1. Whether the Tribunal erred in deleting the addition of Rs. 5,00,000/- made by the Assessing Officer on account of unexplained cash credits under Section 68 of the Income Tax Act, 1961, by holding that the assessee had discharged his onus by producing the donor and the donee and that the AO had not discharged his onus to prove that the transaction was not genuine? Assessee's Contentions: The assessee argued that the Tribunal was justified in deleting the addition. The assessee contended that he had discharged his initial onus by producing the donor and the donee, and by furnishing all relevant documents. The assessee further argued that the Assessing Officer failed to discharge his onus to prove that the transaction was not genuine, especially when the donor was available for verification and the transaction was otherwise supported by documentary evidence. Revenue's Contentions: The Revenue contended that the Tribunal erred in deleting the addition. The Revenue argued that the assessee had not sufficiently discharged the onus cast upon him under Section 68 of the Act. The Revenue likely argued that the mere production of the donor and donee was not sufficient and that the AO had valid reasons to doubt the genuineness of the transaction, which the Tribunal overlooked.

Which sections of the Income-tax Act were involved?

Section 68

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE P.S.GOPINATHAN MONDAY, THE 18TH JULY 2011 / 27TH ASHADHA 1933 ITA.No. 360 of 2010() --------------------- ITA.822/COCH/2008 of INCOME TAX APPELLATE TRIBUNAL, TRIBUNAL,COCHIN BENCH .................... APPELLANT/APPELLANT -------------------------- THE COMMISSIONER OF INCOME TAX, COCHIN. BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENTS: RESPONDENT ------------------------- SRI. T.K.SANALKUMAR, THANDASSERIL HOUSE, 12-SKYLINE CRYSTAL WATERS, VADUTHALA, KOCHI-23. BY ADVS.M/S. ANIL D. NAIR & NIVEDITA A.KAMATH THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 18/07/2011, ALONG WITH ITA NO. 392 OF 2010, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ITA 360/2010 APPENDIX ANNEXURES: ANNEXURE-A COPY OF ASSESSMENT ORDER 153A r.w.s. 153C/143(3) DATED 31.12.2007 FOR THE ASST. YEAR 2005- 06. ANNEXURE-B, C & D COPY OF PAPERS FOFUND DURING THE SEARCH FOR ADDITIONAL CONSIDERATION. ANNEXURE-E COPY OF THE ORDER DATED 4.4.2008 OF THE COMMISSIONER OF INCOME TAX (APPEALS). ANNEXURE-F C OPY OF THE ORDER DATED 19.3.2010 OF THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH ITA NO. 822/Coch/2008. // TRUE COPY // P.S. TO JUDGE. knc/- C.N. RAMACHANDRAN NAIR & P.S. GOPINATHAN, JJ. = = = = = = = = = = = = = = = = = I.T.A. NOS. 360 & 392 OF 2010 = = = = = = = = = = = = DATED THIS, THE 18TH DAY OF JULY, 2011.

J U D G M E N T C.N. Ramachandran Nair, J. These connected appeals arise from the assessment of capital gains made pursuant to search under Section 153A of the Income Tax Act. Respondents are husband and wife and the properties sold was in the name of the wife, which according to her, was purchased with funds borrowed from her husband. In search, the Department collected information from the computer in the house of the assessees and have also recovered documents from father and uncle of the lady who are adjoining land owners, whose property also was sold along with the property of the assessees. Assessment was made in the name of the husband for the income arising from the investment made by the wife under Section 64(1)(iv) of the Income Tax Act. Capital gains was assessed under Section 64(1)(a) and another protective assessment was made in the name of his wife which was also under Section 153A of the Act.

2.

In appeal filed against the assessments, The Commissioner of Income Tax (Appeal) allowed both the appeals. In Second appeal, the Tribunal confirmed the orders of the first appellate authority. It is against these orders, the Revenue has filed separate appeals.

3.

We have heard the Senior Counsel appearing for the Revenue and counsel appearing for the assessees. After hearing both sides, we feel that the orders of the two appellate authorities are not sustainable for more than one reason. In the first place, the first appellate authority and the Tribunal have not considered the significance of the documents seized particularly, information collected from the computer from the assessees' house. All the three items of properties sold are adjoining properties and the neighbouring owners, who are none other than the father and uncle of the lady, have conceded that more than the documented value was received as sale consideration. In the normal course, unless the assessee proves that her property is of lower value than the adjoining property, her property would have fetched the same or almost the same price as that of the property of the uncle and father, which was simultaneously sold. In the circumstances, we see no reason why the particulars including the sale value at which the property is sold, collected from the computer found in the house of the assessees, cannot be believed. This Court has in several decisions taken note of the notorious practice of underestimation of value in documents to reduce the high incidence of stamp duty. The property in this case is also valuable land located in prime area of the city and we see no reason why adjoining three items of property should be sold at substantive different price.

4.

The Senior counsel appearing for the Revenue rightly contended that the first appellate authority went wrong in cancelling the assessment merely because the assessing officer did not take a confirmation from the purchaser. The approach of the appellate authority and the Tribunal in our view is unrealistic because no purchaser will disclose to the Department that there was unaccounted payment in the purchase of property. If receipt of more than the declared amount as consideration is proved by documents, necessarily, the assessment is sustainable. We do not find the first appellate authority or the Tribunal has considered the case with reference to the seized documents. We, therefore, allow the appeals by setting aside the orders of the Tribunal and that of the first appellate authority and remand the matter to the CIT(Appeal) for reconsideration by giving one more opportunity to the assessee to prove that her property is of lesser importance and lesser value than neighbouring properties simultaneously sold to justify its sale at a lesser price which, ofcourse, arises only if the materials gathered from her computer is proved by her to be false which burden shall also be on the assessee. The appeals are allowed as above. C.N. RAMACHANDRAN NAIR, (JUDGE). P.S. GOPINATHAN, (JUDGE) knc/-

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