COMMISSIONER OF INCOME TAX,KOTTAYAM vs. M/S.MINI MUTHOOT MUTUAL FUNDS LTD,

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON WEDNESDAY,THE 14TH DAY OF NOVEMBER 2018 / 23RD KARTHIKA, 1940 ITA.No. 594 of 2009 AGAINST THE ORDER/JUDGMENT IN ITA 470(COCH)/1999 of I.T.A.TRIBUNAL,COCHIN BENCH DATED 19-08-2004 APPELLANT/S:/APPELLANT/REVENUE: COMMISSIONER OF INCOME TAX, KOTTAYAM. BY ADVS. SRI.P.K.R.MENON,SENIOR COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH SC FOR INCOME TAX RESPONDENT/S:/RESPONDENT/ASSESSEE: M/S.MINI MUTHOOT MUTUAL FUNDS LTD., KOZHENCHERRY. BY ADVS. SRI.E.K.NANDAKUMAR (SR.) SRI.K.JOHN MATHAI SRI.P.BENNY THOMAS SRI.P.GOPINATH THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 14.11.2018, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

JUDGMENT K.Vinod Chandran, J. The question raised in the appeal as framed by another Division Bench of this Court on 22.02.2010 is as follows: “Whether on the facts and in the circumstances of the case, and also in view of the fact that the Commissioner of Income-tax (Appeals) admitted the fixed deposit register as a fresh evidence without giving an opportunity of being heard to the Assessing Officer as prescribed under Rule 46A(3) of the Income-tax Rules, the Tribunal is right in law, in upholding the finding of Commissioner of Income-tax (Appeals) that the assessee maintained the fixed deposit register properly and is not the finding of the Commissioner of Income-tax (Appeals) and the confirmation of the same by the Tribunal absolutely perverse, against natural justice and the order is null and void?” 2. The assessee is a Nidhi Company. For the assessment year 1996-97, the Assessing Officer (AO) noticed unsecured loans of Rs.6,49,15,063/- credited to the balance-sheet. The assessee was directed to furnish the names and complete details including postal addresses of the persons from whom unsecured loans were received, the dates and mode of receipt of loans as also the manner

ITA 594/09 -3- in which the amounts were transferred. Notice as per the assessment order, is dated 14.1.1999, which was not responded to. 3. Return was filed by the assessee on 2.12.1996, which was processed under Section 143(1) on 29.12.1996. Scrutiny assessment was taken up calling for details and explanations of the claims made in the return. The assessee is said to have sought an adjournment and later an application under Section 144A was also filed before the Additional Commissioner of Income Tax. The assessee was directed to furnish the details as sought for by the AO in the petition under Section 144A. None of these opportunities were availed of and hence, the unsecured loans were made as an addition towards income. In first appeal, the assessee is said to have produced some fixed deposit registers based on which the first appellate authority deleted the addition made by the AO. The first appellate authority found that notice under Section 143(2) was

ITA 594/09 -4- issued first on 27.12.1996, which is not spoken of in the assessment order. On a verification of the records, it was found that the matter was posted on many dates and there was appearance of the authorised representative also. From the records, it was found that there was a noting by the AO that the records of the year 1996-97 were missing. The subsequent proceedings in which the assessee is said to have not responded, was found to be after the records went missing. The first appellate authority entered a finding that, in fact, there is a reasonable presumption of the assessee having produced records before the Assessing Officer, especially since the authorised representative appeared before the AO on an assessment under the Interest Tax Act. 4. The assessee then furnished a list of deposits, a few of which were verified by the first appellate authority. In fact, the first appellate authority; on the assessee producing the records, ought to have remanded the matter to the AO. The

ITA 594/09 -5- first appellate authority found that many of the deposits were verified by the AO in the previous year also. It was also found that some of the deposits were revalidated in the present assessment year. The details of certain depositors were extracted by the first appellate authority and it was found that the payments were made by cheques. If the list of depositors were produced, as we noticed, it would have been appropriate that the matter was remanded back to the AO itself. The verification said to have been done by the appellate authority is only a perusal of the list and not a verification of the genuineness of such transactions. The details as entered in the list of cheque payments were also taken as true by the first appellate authority. We are of the opinion that the first appellate authority erred in having so deleted the addition on mere assumption based on surmises and conjectures; without actually verifying the genuineness of the transactions. The Tribunal also relied on the

ITA 594/09 -6- findings of the CIT (Appeals) with respect to the verification done for the previous years. There is absolutely no verification done as to how many deposits of the previous year were revalidated in the present year. This is a permissible exercise by the AO, who has to do it at the first instance. In fact, the first appellate authority could also have done the said exercise or at least called for a remand report from the AO, which measure was not resorted to. In such circumstances, though after 22 years, we are constrained to remand the matter to the AO. The assessee shall produce the list of depositors and prove their genuineness before the AO. In view of the above, the orders of the appellate authorities are set aside and the question of law is answered in favour of the Revenue and against the assessee. 5. The AO shall obtain the list from the records of the first appellate authority or the assessee shall produce the same with necessary details to ascertain the genuineness of the

ITA 594/09 -7- depositors within a period of three months from the date of receipt of certified copy of this judgment. We make it clear that nothing is expressed on the merits of the matter, since a decision has to be taken by the AO, after verification of the genuineness of the records as above. The Income Tax Appeal is allowed. No costs. Sd/- K.VINOD CHANDRAN JUDGE Sd/- ASHOK MENON JUDGE jg

ITA 594/09 -8- APPENDIX APPELLANT'S/S EXHIBITS: ANNEXURE A COPY OF THE ORDER OF THE A.O. ANNEXURE B COPY OF THE ORDER OF THE CIT (APPEALS). ANNEXURE C COPY OF THE ORDER OF THE ITAT IN ITA NO.470/COCH/99 & CO NO.63/COCH/99 DATED 19.8.2004. [True Copy] jg