Commissioner of Income Tax, Thiruvananthapuram v. Sushil Thomas Abraham

# **IN THE HIGH COURT OF KERALA AT ERNAKULAM** **THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON** **MONDAY, THE 26TH DAY OF FEBRUARY 2018 / 7TH PHALGUNA, 1939** **------------------** **AGAINST THE ORDER/JUDGMENT IN ITA 387/COCH/2008 of I.T.A.TRIBUNAL, COCHIN BENCH DATED 13.8.2009** ## **APPELLANT(S)/APPELLANT/REVENUE** **THE COMMISSIONER OF INCOME TAX, THIRUVANANTHAPURAM.** **BY ADV.SRI.JOSE JOSEPH, SC, FOR INCOME TAX** ## **RESPONDENT(S)/RESPONDENT/ASSESSEE:** **SUSHIL THOMAS ABRAHAM, PROP. HOLEC BUILDERS, THYCAUD, THIRUVANANTHAPURAM.** **R1 BY ADV. SRI.K.J.SAJI ISAAC R1 BY ADV. DR.ELIZABETH VARKEY** **THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 26-02-2018, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **ITA 94/2010** ## **APPENDIX** ## **APPELLANT'S ANNEXURES** **ANNEXURE-A : COPY OF COMPUTATION OF THE TOTAL INCOME SUBMITTED BY THE ASSESSEE ALONG WITH RETURN.** **ANNEXURE-B : COPY OF ORDER UNDER SECTION 143(3) OF THE ASSESSING OFFICER DATED 26.3.1997.** **ANNEXURE-C : COPY OF ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) DATED 31.12.1997.** **ANNEXURE-D : COPY OF ORDER OF THE APPELLATE TRIBUNAL DATED 4.11.2003. ANNEXURE-E : COPY OF JUDGMENT OF THIS COURT DATED 27.1.2009. ANNEXURE-F : COPY OF JUDGMENT OF THIS COURT DATED 23.7.2008. ANNEXURE-G : COPY OF JUDGMENT OF THIS COURT DATED 27.1.2009.** **ANNEXURE-H : COPY OF ORDER UNDER SECTION 143(3)/254 OF THE ASSESSING OFFICER DATED 11.1.2006.** **ANNEXURE-I : COPY OF ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) DATED 31.10.2007.** **ANNEXURE-J : COPY OF ORDER OF THE APPELLATE TRIBUNAL DATED 13.8.2009.** ## **RESPONDENT'S ANNEXURES** **ANNEXURE-R2(a) : COPY OF MP NO.32/C/10 IN ITA NO.387/2008 BEFORE THE INCOME TAX APPELLATE TRIBUNAL, COCHIN.** **ANNEXURE-R2(b) :COPY OF ORDER MP NO.32/C/10 IN ITA NO.387/2008 BEFORE THE INCOME TAX APPELLATE TRIBUNAL, COCHIN.** **ANNEXURE-R1(c) :COPY OF ORDER NO.AFCPA7962C/Cir.I(2)/TVM/2007-08.** **//TRUE COPY//** **PS TO JUDGE.** jg-7/3 ## K.VINOD CHANDRAN & ASHOK MENON, JJ. ------------------------------------------- ITA No. 94 of 2010 ------------------------------------------Dated this the 26[th] day of February, 2018 ## J U D G M E N T ## Vinod Chandran, J. The Revenue is in appeal before this Court against the order of the Income Tax Appellate Tribunal (Annexure-J). At the outset we have to notice the chequered path taken by the assessment for assessment year 1996-97. The assessee was a contractor who was engaged in building works. In the previous year of the assessment year 1996-97, the assessee had undertaken works at the sites of Skyline Builders. There arose disputes with the Skyline Builders which led to the assessee filing a suit claiming certain amounts. Since disputes were pending, the assessee did not file return of income for the assessment year. A search was conducted under Section 133A of the Income Tax Act, 1961 ('Act', for short) in the business premises on 24.9.1996 and since no return of income was filed within the stipulated date of 31.8.1996, notice under Section 142(1) of the Act was issued. The assessee filed a return disclosing ITA 94/10 -2- an income of Rs.6,08,680/- but without making payment of the admitted tax. The explanation of the assessee was that the amounts have not reached the hands of the assessee for reason of the claims still pending before the Civil Court. The Assessing Officer, however, went ahead and after examining the books of accounts passed an assessment order at Annexure-B computing total income at Rs.25,95,260/-. 2. An appeal was filed before the Commissioner of Income Tax (Appeals) which was rejected as per Annexure-C, finding that the assessee had not paid the admitted tax under Section 140A. An appeal could not have been maintained without payment of admitted tax. The assessee filed a second appeal before the Tribunal in which there was a remand made as per Annexure-D. In Annexure-D, the Tribunal found that the Assessing Officer had relied on the claim made by the assessee against Skyline Builders to estimate the higher income. Since the disputes between Skyline Builders and the assessee were yet to be resolved, there was a direction to the Assessing Officer to re-do the assessment, without ITA 94/10 -3- looking into the claims filed against Skyline Builders. An Income Tax Appeal was filed by the Revenue before this Court as ITA No.91/2007. 3. In the meanwhile, the assessee had approached this Court with WP(C) No.28277/2004 against proceedings initiated for recovery of admitted tax. The said Writ Petition was pending here for four years. On 23.7.2008, that Writ Petition was dismissed as per Annexure-F judgment. By that time, the appellate order at Annexure-D dated 4.11.2003 was passed. Since the Tribunal's order was produced before the learned Single Judge, the learned Single Judge invoked Article 227 of the Constitution of India and set aside the Tribunal's order finding that it is non est in law. Despite that, the learned Single Judge granted time to the assessee to pay the admitted tax, upon which the Commissioner of Income Tax (Appeals) was also directed to re-consider the issue. 4. Later, the Income Tax Appeal (ITA No.91/2007) came before a Division Bench of this Court in which Annexure-E judgment was passed. In Annexure-E judgment, it was noticed that the order ITA 94/10 -4- remanding the matter, was complied with. There was an assessment made as per Annexure-H dated 11.1.2006. Hence, on 27.1.2009, the Income Tax Appeal was dismissed as infructuous and the parties were left to agitate the matter in proceedings pursuant to the assessment. The judgments at Annexures-E and F were in conflict. Hence, the assessee filed a review from AnnexureF. By Annexure-G order, the judgment at Annexure-F was reviewed upholding the principle, but however absolving the assessee from making the payment as directed in the writ petition. 5. The assessment order at Annexure-H was taken up in appeal, in which a remand order was made as per Annexure-I. Annexure-I was challenged in appeal by the Revenue before the Income Tax Appellate Tribunal, which was dismissed as per Annexure-J. A petition filed under Section 254(2) also was rejected as per Annexure-R2(b). 6. The preliminary objection raised by the respondentassessee is that there could be no appeal maintainable as against the original order of the Tribunal, since there is one passed under ITA 94/10 -5- Section 254 now. The assessee relies on the decisions of the Honorable Supreme Court in (1975) 1 SCC 774 [Sushil Kumar Sen v. State of Bihar] and (2000) 6 SCC 359 [Kunhayammed and Others v. State of Kerala and Another] . The decision in Susil Kumar Sen (supra) was with respect to a review under Order 47 Rule 1. Original judgment was challenged in a review, which came to be allowed and modifications were made and a new decree was passed. The Supreme Court held so in such fact situation : “2. It is well settled that the effect of allowing an application for review of a decree is to vacate the decree passed. The decree that is subsequently passed on review, whether it modifies, reverses or confirms the decree originally passed, is a new decree superseding the original one (see Nibaran Chandra Sikdar v. Abdul Hakim [AIR 1928 Cal 418], Kanhaiya Lal v. Baldeo Prasad [ILR (1906) 28 All 240], Brijbasi Lal v. Salig Ram [ILR (1912) 34 All 282] and Pyari Mohan Kundu v. Kalu Khan [ILR (1917) 44 Cal 1011 : 41 IC 497]). 7. Kunhayammed (supra) is an authority for the principle of merger, insofar as the dismissal of a Special Leave Petition not being affirmation of the principles of the impugned judgment and even a mere rejection of the Civil Appeal resulting in merger making ITA 94/10 -6- the principles as laid down by the High Court being that of the Supreme Court itself. True the judgment in Susil Kumar Sen (supra) was followed, but we do not think that the principles laid down would have any application here. 8. Order 47 Rule 1 has wider ambit and scope than Section 254. Section 254 allows only rectification of errors, and in the instant case, the Tribunal has merely rejected the application for rectification of error. Merely because the Revenue had taken all the grounds in the appeal before the Tribunal that would not be sufficient cause to non-suit the Revenue from the above appeal. We hence, reject the said contention raised by the assessee. 9. Going back to the facts of the instant case, we see that Annexure-I order was passed again without the assessee having paid up the admitted tax. Merely because the assessment order was set aside and remand was made for fresh assessment, the statement filed by the assessee would not stand effaced. The appeals before the Commissioner of Income Tax (Appeals) as also that before the Tribunal were not maintainable. Be that as it may, we see that on the ITA 94/10 -7- remand made there was a reassessment carried out as is available at Annexure R2(c). A reading of Annexure-R2(c) shows that the contract receipts received during the year was Rs.14,67,187-/ on which the net profit is estimated at 8.1%. The income tax is calculated with interest under Section 234 A, B and C and there was a demand of only Rs.2,785/-; after adjusting the refund for the earlier year, which was paid by the assessee. We see from the statement of total income as filed by the assessee at Annexure-A that it was filed based on the profit estimated on the income, which would have come to the assessee, if the claims against Skyline Builders were allowed. Definitely the tax on the income can only be assessed after it comes to the hands of the assessee as per the real income theory propounded by the Honourable Supreme Court in United Commercial Bank v. Commissioner of Income Tax, [1999] 240 ITR 355 . In such circumstances, we do not think that there is any reason to set aside the orders of the Commissioner of Income Tax (Appeals) and the Tribunal. The assessment carried out has taxed ITA 94/10 -8- the income which came to the assessee in the relevant year. In the above facts and circumstances, we refuse to answer the questions of law framed and reject the Appeal of the Revenue. No costs. Sd/K.VINOD CHANDRAN JUDGE Sd/ASHOK MENON JUDGE jg/dkr