THE COMMISSIONER OF INCOME TAX,KOZHIKODE vs. A.C.JOSEPH,AMAKATTU HOUSE, MULLANKOLLY

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ITA/34/2011HC KeralaKLHC01026382201116 January 2014Bench: HONOURABLE MR.JUSTICE A.M.SHAFFIQUE,HONOURABLE THE CHIEF JUSTICE DR. MANJULA CHELLUR5 pages
AI SummaryRemanded

What did the High Court hold?

The High Court decided to reconsider several issues. Regarding the undisclosed investment in Chola Huts and Bar and Victoria Hotel & Bar, the Court noted that the authorities below opined similarly by referring to the orders of another assessee, Devasia Devasia. The Court found that the unexplained loan from Devasia Devasia for the investment in the rubber estate at Nilambur, amounting to Rs. 36,19,617/-, deserved reconsideration by the First Appellate Authority. The Assessing Officer had doubted the loan's believability as no interest was received, but the First Appellate Authority accepted Devasia Devasia's cash flow statement. The Tribunal simply followed the First Appellate Authority's opinion without disclosing its own. For foreign travel expenses of Rs. 1,00,000/-, the Court did not differ from the Appellate Authorities, finding it possible that the assessee, being a partner in bar hotels, could have received sponsorship. However, for chitty payments and investment in Maria Bankers, the Tribunal confirmed the First Appellate Authority's orders without discussion. The Court opined that since a major portion of the assessed amounts were to be reconsidered, these amounts should also be reconsidered by the First Appellate Authority. Therefore, except for the foreign travel expenses, all other amounts were to be reconsidered by the First Appellate Authority.

What were the facts?

The appeal concerns the assessment of undisclosed income for the respondent assessee, A.C. Joseph. The total undisclosed income assessed amounted to Rs. 1,34,59,960/-, comprising several heads including undisclosed investments in Chola Huts and Bar, Victoria Hotel & Bar, unexplained loan from Devasia Devasia for rubber estate investment, unexplained foreign travel expenses, unexplained chitty payments, unexplained investment in Maria Bankers, and unexplained loan from friends and relatives. The Assessing Officer, First Appellate Authority, and the Tribunal had differing opinions on various components of this assessment. The High Court is considering an appeal against the order of the Income Tax Appellate Tribunal (ITAT), Cochin Bench, dated August 20, 2010.

What were the issues?

1. Whether the Tribunal erred in its decision regarding the undisclosed investment in Chola Huts and Bar and Victoria Hotel & Bar, by relying on the orders concerning another assessee, Devasia Devasia, without independent consideration. 2. Whether the Tribunal correctly upheld the First Appellate Authority's decision to disregard the loan of Rs. 36,19,617/- from Devasia Devasia for rubber estate investment, based on Devasia Devasia's cash flow statement, despite the Assessing Officer's doubts about the genuineness of the loan due to the absence of interest. 3. Whether the Tribunal's finding on the unexplained foreign travel expenses of Rs. 1,00,000/-, accepting the assessee's claim of sponsorship from M/s. McDowell, was justified. 4. Whether the Tribunal correctly confirmed the orders of the First Appellate Authority regarding unexplained chitty payments and unexplained investment in Maria Bankers without detailed discussion. Assessee's contentions: Not explicitly recorded for all issues. For foreign travel expenses, the assessee claimed sponsorship from M/s. McDowell. Revenue's contentions: The Assessing Officer doubted the loan from Devasia Devasia as no interest was received. The revenue's overall appeal is against the ITAT order which seems to have favoured the assessee on certain points.

Which sections of the Income-tax Act were involved?

Section 68

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 THURSDAY, THE 16TH DAY OF JANUARY 2014/26TH POUSHA, 1935 ITA.No. 34 of 2011 ----------------------- AGAINST THE ORDER IN IT 45/COCH/2006 of I.T.A.TRIBUNAL, COCHIN BENCH DATED 20-08-2010 ................. APPELLANT/APPELLANT : ----------------------------- THE COMMISSIONER OF INCOME TAX, KOZHIKODE. BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT/RESPONDENT : --------------------------------- A.C.JOSEPH, AMAKATTU HOUSE, MULLANKOLLY, PULPALLY WAYANAD-673 579. R1 BY ADVS. SRI.ANIL D. NAIR

SRI.J.R.PREM NAVAZ

SMT.NIVEDITA A.KAMATH THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 16-01-2014, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

Manjula Chellur, C.J. & A.M. Shaffique, J. - - - - - - - - - - - - - - - - - - - - - - - - - - - - I.T.A. No. 34 OF 2011 - - - - - - - - - - - - - - - - - - - - - - - - - - - - Dated this the 16th day of January, 2014 JUDGMENT Manjula Chellur, C.J. So far as the respondent/assessee in this case, the undisclosed income assessed represent the following amounts: “ 1. Undisclosed investment in Chola Huts and Bar : Rs.32,20,000/- 2. Undisclosed investment in Victoria Hotel & Bar : Rs.45,50,000/- 3. Unexplained loan from Devasia Devasia for the investment in rubber estate at Nilambur : Rs.36,19,617/- 4. Unexplained foreign travel expenses : Rs.1,00,000/- 5. Unexplained chitty payments : Rs.9,00,000/- 6. Unexplained investment in Maria Bankers : Rs.9,47,840/- 7. Unexplained loan from friends and relatives : Rs.1,10,000/- 8. Unexplained payment of cash towards loan processing charges to Kerala Financial Corpn. : Rs. 12,500/- ------------------- Rs.1,34,59,960/- ===========”

2.

So far as the undisclosed investment in M/s.Chola Huts and Bar and Victoria Hotel and Bar, simply referring to the orders of another assessee; Devasia Devasia, the authorities below have opined similar view in the case of present assessee.

ITA No. 34 of 2011 -:2:- 3. Then coming to the unexplained loan from Devasia Devasia for the investment in rubber estate at Nilambur the amount of `36,19,617/-, the Assessing Officer opined that in the total investment in Kottamala Rubber estate, the assessee was able to establish the loan from Kerala Financial Corporation and Indian Overseas Bank and the balance amount `36,19,617/- said to have been taken as loan from Devasia Devasia was not believable as neither the assessee nor his counsel could bring any evidence substantiating the claim that he had taken a loan from Devasia Devasia. 4. So far as the First Appellate Authority based on the cash flow statement of Devasia Devasia the authority opines that there was no need to consider this `36,19,617/-; the loan from Devasia Devasia; the First Appellate Authority accepted this cash flow statement of Devasia Devasia. Though the assessing officer opined that when Devasia Devasia did not receive any interest for this `36,19,617/- from Sri.A.C. Joseph it would be difficult to believe such statement. However, the Tribunal did not disclose

ITA No. 34 of 2011 -:3:- its opinion with reference to any material but simply followed the opinion of the First Appellate Authority. In that view of the matter, we are of the opinion, this also deserves to be reconsidered by the First Appellate Authority. 5. So far as the foreign travel expenses, assessee claims to have the benefit of sponsorship from M/s.Mc Dowell. It is quite possible that the respondent assessee being partner of two Bar Hotels and Restaurant could have had the benefit of sponsorship on account of these two Hotels doing good business so far as the company is concerned. Therefore, we are not inclined to differ from the opinion of the Appellate Authorities. 6. So far as Chitty payments and unexplained investment in Maria Bankers, Tribunal simply confirms the orders of First Appellate Authority without going into any discussion. Since the major portion of the amounts assessed are to be reconsidered by the First Appellate Authority, we are of the opinion, these amounts also could to be reconsidered by the First Appellate Authority. In other words, except `1,00,000/- said to

ITA No. 34 of 2011 -:4:- be the foreign travel expenses all other amounts could be reconsidered by the First Appellate Authority. Manjula Chellur, Chief Justice. A.M. Shaffique, Judge.

ttb/18/01

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