C. Malathy vs Income Tax Officer

Prabha Sridevan, J.—Originally, the following question of law was framed:

Whether the Income Tax Appellate Tribunal was right in law in dismissing the appeal of the appellant without properly appreciating the facts and evidence produced for proving the entries in the books of account pertaining to the loan obtained from various creditors.

Subsequently, it was redrafted and the following substantial question of law is raised for consideration.

Whether, on the facts and circumstances of the case, the Tribunal was right in law in remitting the matter back to the file of the Assessing Officer only for the limited purposes of examining the credit in the name of Smt. Sivagamasundari even after recording a finding that the Inspector''s report on creditors was not made available for the appellant-assessee on the principles of natural justice.

For the assessment year 1996-97, the assessee filed her return of income on July 16, 1998, pursuant to the notice u/s 148. The original assessment u/s 143(3) in respect of the assessee''s husband was completed on March 31, 1999. It was noticed during the course of assessment proceedings that the assessee and her husband had jointly purchased a property on October 26, 1995 ; that they had paid Rs. 6,00,000 originally and the balance was to be paid at the time of registration. On verification of the books of account of the assessee, the Officer found that the source of funds for the purchase of the property was stated to be on loans received from the creditors. On enquiry, it was found that while some of the creditors could not be verified, the others were found to be not genuine. The Assessing Officer noted that in spite of several opportunities granted, the genuineness of the claim was not substantiated by the assessee.

The assessment was held to be barred by limitation by the Tribunal. Against that, the Department filed Tax Case (A) No. 55 of 2004. By order dated February 26, 2007, this Court held that, "A perusal of the retrospective amendment introduced in this proviso along with the Explanation inserted shows that the requirement of notice u/s 143(2) within the time limit specified is mandatory in all cases in respect of returns furnished on or after October 1, 2005. However, with reference to returns filed from October 1, 1991, to September 30, 2005, the plea of limitation in respect of returns filed pursuant to the notice u/s 148 will not invalidate the assessment proceedings and that such notice would be deemed to be a valid notice. Considering the retrospective amendment, the order of the Tribunal has to be set aside." In this view, the matter was remitted to the Tribunal, "to pass orders on the claim of the assessee."

The Tribunal heard the matter again. The assessee had filed return upon notice u/s 148 of the Act on July 16, 1998, showing a total income of Rs. 69,380. In the assessment order passed u/s 147, the total income was assessed as Rs. 9,84,080. The addition made by the Assessing Officer was a sum of Rs. 9,14,700 representing cash credits in the name of 16 persons. The assessee could furnish the addresses and details only in respect of three creditors, in respect of the other creditors, details were not furnished by the assessee. The Tribunal rightly held that the genuineness of the other creditors could not be verified. Therefore, we are concerned only with the three creditors in respect of whom details were furnished. They are one Lalit Meena, Sivagamasundari and Ravi Kumar.

Before the Tribunal, the counsel representing the assessee submitted that the Inspector who was deputed to carry out the enquiry in respect of these creditors had submitted a report and this report was not made available to the assessee and therefore, the principles of natural justice was violated. It is the specific case of the assessee before the Tribunal that the report was not made available with regard to Sivagamasundari. We extract the order of the Tribunal in this regard:

It was submitted by Shri V. Muthukumarasamy, the learned authorised representative that in respect of Smt. Sivagamasundari, the Inspector was deputed to carry out enquiries and the addition was made on the basis of Inspector''s report without making the report available to the assessee for explanation. There is no material on record to show that the assessee was confronted with the Inspector''s report in respect of Smt. Sivagamasundari. Therefore, the assessment order, in so far as it relates to the addition of Rs. 2,74,700 is violative of the principles of natural justice.

No objection was raised by the assessee with regard to the Inspector''s report in relation to Lalit Meena and Ravi Kumar. The assessee herself complained of the violation of principles of natural justice only in respect of Sivagamasundari and only in these circumstances, the Assessing Officer was directed by the Tribunal to pass the fresh order after giving an adequate opportunity.

The learned Counsel for the appellant submitted that the remittal order ought not to have been restricted with regard Sivagamasundari alone and that the Tribunal ought to have remitted the matter in entirety.

We cannot accept this contention. The assessee herself did not know the addresses or details of the 13 creditors and, therefore, the Inspector made enquiries with regard to three creditors alone. A report was filed by the Inspector in this regard. The assessee complained lack of opportunity only with regard to Sivagamasundari. Therefore, the Tribunal restricted the order of remittal with regard to that creditor alone. Now, this complaint that the matter should have been remitted in entirety is an after thought. So, we do not think that any substantial question of law arises for consideration.

The tax case (appeal) stands dismissed. No costs.