Commissioner of Income Tax-II, Cochin v. V. U. Siddique & Export & Import

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE ANTONY DOMINIC & THE HONOURABLE MRS. JUSTICE ANU SIVARAMAN FRIDAY, THE 11TH DAY OF AUGUST 2017/20TH SRAVANA, 1939 ITA.No. 156 of 2012 ------------------ AGAINST THE ORDER IN ITA 383/2010 of I.T.A.TRIBUNAL,COCHIN BENCH DATED 09-03-2012 APPELLANT/RESPONDENT: ----------------------- THE COMMISSIONER OF INCOME TAX-II, COCHIN. BY ADVS.SRI.P.K. RAVEENDRA NATHA MENON SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT/APPELLANT: ------------------------ V.U. SIDDIQUE V.S.EXPORT & IMPORT, PUTHUPAPPDY, PERUMATTOM, MUVATTUPUZHA-686673. BY ADV. SRI.S.ARUN RAJ THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 11-082017, ALONG WITH ITA. 161/2012, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ## **ANTONY DOMINIC & ANU SIVARAMAN, JJ.** **= = = = = = = = = = = = = = = = = = = =** ## **I.T.A.Nos.156 & 161 of 2012** **= = = = = = = = = = = = = = = = = = = = Dated this the 11[st] day of August, 2017** ## **JUDGMENT** ## **Antony Dominic, J.** - 1.These two appeals are filed by the Revenue, challenging the common order passed by the Income Tax Appellate Tribunal, Cochin Bench in I.T.A.Nos.383 of 2010 and 384 of 2010 concerning the assessment years 2006-2007 and 2007-2008. Since the parties are common and the issues involved are similar and the order appealed against is also common, these appeals were heard together and are disposed of by this common judgment. - 2.In so far as I.T.A.No.156/2012 is concerned, the questions of law framed are the following:- - 1) Whether on the facts and in the circumstances of the case and in view of the admission of the assessee in the sworn statement that the commission was approximately Rs.1500/- per lakh, the Tribunal is right in law and fact in fixing the same at Rs.1000/- per lakh and is not the fixation I.T.A.Nos.156 & 161/12 2 of the quantum on the ipsi dixit of the Tribunal, perverse and arbitrary? - 2) Whether on the facts and in the circumstances of the case and in the absence of the genuineness of the credit being proved by the assessee the Tribunal is right in law in deleting the unexplained cash credit? - 3) Whether, on the facts and in the circumstances of the case: - (a) did the assessee discharge the burden of proof that lay on it. - (b) should not the Tribunal have put the assessee to proof. 3.In so far as the first question of law is concerned, we find that during the course of search under Section 132, the statement of the assessee was recorded under Section 132(4) where, in the answer to question No.16, the assessee had explained that the commission percentage he had received was Rs.1000/- to Rs.2000/- per lakh. In response to question No.28, the assessee has further stated that the commission received was approximately Rs.1500/- per lakh. Based on the statement so I.T.A.Nos.156 & 161/12 3 given by the assessee, the assessment was completed accepting Rs.2000/- per lakh as the commission received by the assessee for the whole year. However, the Commissioner of Income Tax (Appeals) though confirmed the addition made by the Assessing Officer, reduced the commission to Rs.1500/per lakh. In the appeal which was filed by the assessee before Tribunal, the Tribunal passed the impugned order, where the Tribunal has reduced the commission arrived to Rs.1000/- per lakh. It is this variation made by the Tribunal in the rate of commission that has given rise to the question of law that is framed for our consideration. - 4.We heard the learned Senior Counsel appearing for the assessee. From the order of the Tribunal, we find that it has taken note of the statement made by the assessee that it was receiving commission from Rs.1000/- to Rs.2000/-per lakh and that in answer to question No.28, the assessee has further stated that approximate commission he was receiving was Rs.1500/- per lakh. However, though no other materials were I.T.A.Nos.156 & 161/12 4 available on record to suggest that the actual commission received by the assessee was anything different from the version given by the assessee himself, the Tribunal has adopted the rate of the commission at Rs.1000/- per lakh stating that such rate of commission was as claimed by the assessee in response to question No.16. 5.First of all, in view of the provisions contained in Section 132 (4), the Revenue was entitled to complete assessment based on the assertions made by the assessee. In this case, in answer to question No.16 the assessee himself had stated that he was receiving commission at the rate of Rs.1000/- to 2000/- per lakh. Thereafter in answer to question No.28 the assessee again stated that he was receiving approximately Rs.1500/per lakh. It was on the basis of the statement made by the assessee under Section 132(4) that the First Appellate Authority reduced the rate of commission to Rs.1500/- per lakh. Such a fixation of commission cannot be said to be vitiated for any reason. I.T.A.Nos.156 & 161/12 5 6.Secondly, the Tribunal was also factually wrong in stating that the assessee himself had claimed in response to question No.16 that the commission he was getting was Rs.1000/- per lakh. On the other hand, the answer given by the assessee himself would show that what he has stated was that he was getting commission at the rate of Rs.1000/- to 2000/- per lakh. Therefore, the conclusion of the Tribunal is untenable and we therefore set aside the finding with respect to the rate of commission and restore the finding of the First Appellate Authority. - 7.The second issue is wholly with reference to the unexplained cash credit of Rs.11 lakhs. It is true that when cash credit is found the burden is entirely on the assessee to prove the source of cash credit, the creditworthiness of the creditor and the genuineness of the transaction. In so far as this case is concerned, it is seen that the First Appellate authority had obtained a remand report from the assessing officer himself I.T.A.Nos.156 & 161/12 6 and paragraph 15 of the order of the Tribunal would show that the assessing officer had reported that the assessee had availed a loan of Rs11 lakhs and deposited in Account Number LADNo.253 of Dhanalaxmi Bank, Muvattupuzha branch which was transferred by the bank on 12.08.2005 and credited in the account No.DP 15 of the creditor on the same day. The creditor by cheque No.2060969 gave Rs.11 lakhs on the same day to the assessee. It was on the basis of these findings that the assessing officer submitted the remand report stating that the credit can be considered as explained. 8.The facts found by the Tribunal itself show that the creditor of the assessee was one Aboobacker, Poothayil, a non-resident, who had a deposit in the Dhanalaxmi Bank, Muvattupuzha, against which he had availed a loan of Rs.11 lakhs which was eventually transferred to the assessee. The facts being so, the assessee cannot be found to have failed in proving either the source of cash credit, the creditworthiness of the creditor or the genuineness of transactions. It was taking into account I.T.A.Nos.156 & 161/12 7 these three factors that the Tribunal has decided this issue in favour of the assessee. We have no reason to interfere with this finding of the Tribunal. 9.The third issue is the undisclosed investment in the construction of a building. In so far as this issue is concerned, it is seen that the assessee was maintaining books of account for the purpose of construction. The books of account showed the cost of construction at the rate of Rs.24,75,382/-. Though the books of account were not rejected by the assessing officer, the assessing officer referred the matter to the Departmental Valuation Officer who reported that the cost of construction would be Rs.40,94,461/-. It was on the basis of this report that a differential amount of Rs.16,19,079/- was added as unexplained investment. This addition was confirmed by the first appellate authority and was rily deleted by the Tribunal. The reason adopted by the Tribunal was that having not rejected the books of account of the assessee, the assessing officer could not have referred the matter for 8 I.T.A.Nos.156 & 161/12 valuation by the Departmental Valuation Officer and completed assessment on the basis of the report so obtained. This view that the Tribunal has taken is fully in accordance with the law as declared by the Supreme Court in **Sargam Cinema v. Commissioner of Income Tax** [(2010) 328 ITR 153 (SC), **Commissioner of Income Tax v. Lucknow Public Educational Society** [(2011) 339 ITR 588 (All) and judgment of the Madras High Court in **Family of Sp.S.S.Sp.Subramanian Chettiar v. I.T.Officer** [(2015) 372 ITR 203. 10.Though the learned Senior Counsel for the Revenue contended that having considered the provisions contained in Section 142A, inserted by the Finance Act, 2004, it was not necessary for the assessing officer to have rejected the books of account to obtain report of the Valuation Officer. However, we cannot accept the said contention for the reason that Section 142A was inserted with retrospective effect from 15.11.1972. Despite the insertion of such provision, the above I.T.A.Nos.156 & 161/12 9 judgments were rendered by the Apex Court and other High Courts holding that rejection of the books of accounts was necessary for obtaining the report. In that view of the matter, the Tribunal's finding on these issues also cannot be interfered with. - 11.Therefore, this appeal is disposed of answering the first question of law in favour of the Revenue and against the assessee and questions of law Nos.2,3 and 4 are answered against the Revenue and in favour of the assessee. - 12.ITA No.161/2012, pertains to the assessment year 2007-2008 and the questions of law framed, read as under:- 1. Whether on the facts and in the circumstances of the case and in view of the admission of the assessee in the sworn statement that the commission was approximately Rs.1500/- per lakh, the Tribunal is right in law and fact in fixing the same at Rs.1000/- per lakh and is not the fixation of the quantum on the ipsi dixit of the Tribunal, perverse and arbitrary? I.T.A.Nos.156 & 161/12 10 2. Whether on the facts and in the circumstances of the case and in the absence of the genuineness of the credit being proved by the assessee the Tribunal is right in law in deleting the unexplained cash credit? 3. Whether, on the facts and in the circumstances of the case: (a) did the assessee discharge the burden of proof that lay on it. - (b) should not the Tribunal have put the assessee to proof. In the light of our conclusions in ITA No.156/2012, the first question of law is answered in favour of the Revenue and the other two questions of law are answered against the Revenue. This appeal is also accordingly disposed of. ## sd/- **Antony Dominic, Judge** sd/- **Anu Sivaraman, Judge** sj11/8 /TRUE COPY/- PA TO JUDGE