ELINJIPPURATH VELAYUDHAN KOCHUMON,THRISSUR vs. ITO WARD 2(2), THRISSUR

Appellant by: Shri Dileep Balachandran, CA Respondent by: Smt. J.M. Jamuna Devi, Sr. D.R. Date of Hearing: 21.12.2023 Date of Pronouncement: 29.01.2024 O R D E R Per: Sanjay Arora, AM This is an Appeal by Assessee directed against the Order by the Commissioner of Income Tax (Appeals), Income Tax Department (CIT(A)), the first appellate authority under the Income Tax Act, 1961 (‘the Act’), dismissing the assessee’s appeal contesting his assessment under section 143(3) of the Act dated 14.09.2017 for Assessment Year (AY) 2015-16 vide order dated 28.10.2022.

(AY: 2015-16) Elinjippurath Velayudhan Kochumon v. ITO due to which he faced considerable difficulties therein. This led to overlooking the notices of hearing and, thus, non-compliance thereof. The appeal, it was accordingly prayed by Shri Balachandran, the learned counsel for the assessee, be restored back to the file of the first appellate authority for being adjudicated afresh, wherein he assured proper participation by the assessee. He also raised a legal issue, assailing the assessment as invalid in the absence of specification of the section under which the impugned addition of Rs.44.01 lakhs stands made. Reliance toward the same was placed by him on the decision in Dhirubhai Kantilal Sharma v. ITO (in dated 06.09.2023), reading the operating part thereof. Smt. Devi, the ld. Sr. DR, would, on the other hand, rely on the impugned order.

, admitting it under rule 11 of the Income Tax (Appellate Tribunal) Rules, 1963. The relevant part of the Tribunal’s order in Dhirubhai Kantilal Sharma (supra) reads as under:

7. Heard both the parties and perused all the relevant material available on record. It is pertinent to note that from the Assessment Order the Assessing Officer has not categorically mentioned as to how VAS Infrastructure Limited script itself was blacklisted from SEBI report or not. Besides this, the Assessing Officer has also not given the details as to how the assessee is involved in manipulation of the bogus Long Term Capital Gain/bogus Short Term Capital Loss/bogus Business Loss entries. The Assessing Officer failed to give the description as to how the assessee is involved in anything related to wrongly claiming the Short Term Capital Loss or Long Term Capital Gains. The CIT(A) also failed to give the reasons as to how the transactions of the assessee while dealing with VAS Infrastructure Limited in the present case is a bogus Long Term Capital Gain/bogus Short Term Capital Loss/bogus Business Loss. In fact, the Assessing Officer has also not mentioned as to under which provision of Income Tax Statute the addition has been made. Thus, the Assessing Officer was not justified in making the addition to the extent of Rs.3,33,411/-. Thus, the appeal of the assessee is allowed.” (pg. 4) (emphasis, ours) We are appalled at the inference drawn by Shri Balachandran in respect of the said adjudication by the Tribunal. It, as apparent, found no material or basis for the impugned addition on account of bogus capital gain/loss by the Revenue. It was in 2

(AY: 2015-16) Elinjippurath Velayudhan Kochumon v. ITO this context that it made reference to the non-mention of even any section in the assessment order. It would be ludicrous to read the same as the basis of its’ decision or it’s ratio – which only is binding; the same only emphasizing the Tribunal’s dilemma in understanding the basis on which the impugned addition stands made. As explained by the Hon'ble Apex Court time and again, and for which we may refer to it’s decision in CIT vs. Sun Engineering Works Pvt. Ltd. [1992] 198 ITR 297 (SC): “It is neither desirable nor permissible to pick out a word or a sentence from the judgment of the Supreme Court divorced from the context of the question under consideration and treat it to be the complete law declared by the court. The judgment must be read as a whole and the observations from the judgment have to be considered in the light of the questions which were before the court. A decision of the Supreme Court takes its colour from the questions involved in the case in which it is rendered and, while applying the decision to a later case, courts must carefully try to ascertain the true principle laid down by the decision.” In fact, even as the assessment and the first appellate order are not before us, it may be that no section is required to be stated by the Revenue where, as it appears, the nature of the receipt as income is not in dispute, which concerns it’s nature; the Revenue doubting the genuineness thereof as a capital gain/loss. Be that as it may, it is again well-settled, and for which we may refer to Hukumchand Mills Ltd. vs. State of Madhya Pradesh [1964] 52 ITR 583 (SC) as authority, that non reference or wrong reference to the power under which an action was taken would not per se vitiate that action if it could be justified under some other power under which the said action could lawfully be taken. Failure to refer to section 5 was accordingly held by it as not invalidating the Notification. Case law in the matter is legion. In the facts of the instant case, the addition has been made on account of unexplained cash deposits in the assessee’s bank accounts, and toward which the assessee has during assessment proceedings furnished a cash-flow statement. This, then, forms the basis of the addition sought to be impugned before us. The same, to the extent unexplained, would stand to fall u/s. 69A of the Act. The assessee’s ground is without any basis, either on the facts or in law.

(AY: 2015-16) Elinjippurath Velayudhan Kochumon v. ITO 3.2 Coming to the assessee’s second plea, made per a sworn affidavit, the same, we are afraid, again does not stand the test of scrutiny. The notices of hearing, the last of which was for 21.10.2022, spanning a period of nearly two years, were sent at the registered e-mail ID of the appellant, even as noted at para 5 of the impugned order. The e-mail ID as per Form-35 (the memo of appeal before the first appellate authority) is not of the assessee, but of his counsel, Shri Ajit Kamal, CA, who represented him in the assessment proceedings and, as apparent, also filed the appeal before the first appellate authority. The matter was put to Shri Balachandran, who would clarify that the email id provided in Form 35 is indeed of CA Ajit Kamal, who filed the said appeal and, further, along with him, i.e., Sh. Balachandran, is a partner in the firm M/s. Krishan & Kamal, CAs, representing the appellant. Though he would seek to justify the affidavit, stating that: ‘Due to these technical issues, I inadvertently overlooked critical notices’, i.e., the words employed in the affidavit, refers only to the assessee’s inability to access his account on the Revenue’s e-portal, we are hardly impressed. The e-mail ID provided for communication is not of the assessee, who, therefore, cannot be said to have overlooked these notices, not sent at his mail address. Further, the very fact of the e-mail ID provided being of the assessee’s counsel itself shows that there would be valid reasons for the same, including the assessee’s inability to access his email id or his account on the Revenue’s portal, much less respond to the notices, responsibility for which would in any case be assigned thereto, i.e., his counsel. Why, the returns filed by the assessee, as indeed the appeals before the appellate authorities, are again only by the assessee’s – who continues to be represented by the same firm of CAs, counsel/s. Even otherwise, inability to access account on the Revenue’s portal cannot furnish a reason for overlooking notices of hearing sent per e-mail and, further, at the address provided. A person approaching a court must come with clean hands. The affidavit dated 16/12/2023 is clearly false and, in any case, misleading. The assessee’s case of a (AY: 2015-16) Elinjippurath Velayudhan Kochumon v. ITO valid reason for non-appearance before the first appellate authority, and for that reason seeking restoration, does not pass muster, and is, accordingly, not accepted.

3.3 We next consider the impugned order on merits. To begin with, even as stated therein, it does not apparently meet the requirement of section 250(6), requiring the first appellate authority to state the points for determination and his decision thereon along with reasons therefor. So, however, even as stated therein, in the absence of any assistance by the assessee and, therefore, any improvement being made in his case, the appellate authority – which can only grant the parties before him an opportunity of being heard, can only go by the material on record in determining the validity or otherwise of the order under challenge before it. The order of assessment, where found reasonable and valid, is to adopted and confirmed. As explained in CIT v. K.Y. Pilliah & Sons [1967] 63 ITR 411 (SC) in the context of the Tribunal, the second appellate and the final fact finding authority under the Act, in failing to record reasons where it agrees fully with the view expressed by the Appellate Commissioner and has no other ground to record in support of its conclusion, it does not act illegally or irregularly merely because it does not repeat the grounds on which the decision was rendered by the first appellate authority. The same would equally apply to the order by the first appellate authority. Though no argument qua the merits of the case was advanced before us, we yet consider it relevant to clarify this aspect; no improvement in his case, despite being afforded time for the purpose, being made.

3.4 Continuing further, the sole addition in assessment, as afore-noted, is in respect of the cash deposited by the assessee, the proprietor of an Auto Garage, in his several bank accounts, on the basis of the cash flow statement – reproduced by the AO in his order, i.e., by taking into account the cash available from disclosed sources, and that deposited in his bank accounts. No infirmity therein has been pointed out before us; the AO making addition for the peak value of the cash deficit, which is on 15.09.2014. Though he further observes the assessee to have made unaccounted cash 5

(AY: 2015-16) Elinjippurath Velayudhan Kochumon v. ITO payment of Rs.13.65 lakhs, and also not accounted for income received on the remodeling of three cars (Rs.2.70 lakhs), the same are not included in the addition for Rs.44.01 lakhs on the ground of the same being subsumed therein. Clearly, this would not be the case where the investment in property (Rs.13.65 lakhs) and/or the business receipt of Rs.2.70 lakhs, is, to whatever extent, after 15.09.2014. This is as the addition for rs. 44 lakhs would transform the cash on that date to nil, so that no cash is available for investment, while non-accounting of the said receipt is admitted. Even so, the AO having regarded the same as subsumed, without though mentioning the said date/s, he has in fact allowed the assessee relief which may not necessarily arise on merits. No interference in his order, in our view, is accordingly warranted; we having stated this fact only to show that the AO has acted reasonably.