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Judgment
D. Murugesan, J.—Tax Case Appeal No. 686 of 2005 is by the Revenue and T.C. No. 2 of 2009 is by the assessee against the order of
the income tax Appellate Tribunal, Chennai ""A"" Bench, dated October 14, 2003, passed in I. T. (SS) A. No. 193/Mds/1997. As against the said
order, the Revenue raises the following substantial questions of law for consideration :
Whether, in the facts and circumstances of the case, the Tribunal had enough material to hold and was right in deleting the additions made by the
Assessing Officer ?
Whether, in the facts and circumstances of the case, the Tribunal was right in ignoring the massive volume of evidence and findings based
thereon put forward by the Assessing Officer ?
Whether, in the facts and circumstances of the case, the Tribunal was right in deleting the additions made of deposits/properties in the name of
benamis on the ground that such properties are not in the name of the assessee ?
In the appeal filed by the assessee, the following substantial questions of law have been raised for consideration :
Whether in the income tax Appellate Tribunal was justified in holding that the assessment u/s 158BA is not confined to income disclosed by
materials gathered during the search u/s 132 and the income tax Officer was entitled to make further investigation and collect materials for making
further additions to the income determined based on the materials gathered during the search ?
Whether in view of the finding of the Tribunal that the appellant and his family members were in receipt of substantial agricultural income, the
Tribunal was justified in law in holding that Rs. 49,90,000, Rs. 4,68,335, Rs. 68,000 and Rs. 26,070 represented undisclosed income taxable
under the income tax Act, 1961 ?
The brief facts leading to the present appeals are as follows :
The appeals relate to the block assessment years 1986-87 and 1996-97 up to July 17, 1996. A search u/s 132 of the income tax Act, 1961 (in
short ""the Act""), was conducted on July 17, 1996, at a flat in Adyar, which was in the name of the wife of the assessee. The assessee was
examined u/s 132(4) of the Act. He was taken to his native village Kulumani, near Trichy and was examined on July 18, 1996. On the basis of the
statement of the assessee, an undisclosed income for the period of ten years was arrived to the extent of Rs. 1.33 crores and explanation of the
assessee was also sought for. Finally, the assessee made a disclosure of unaccounted income to an extent of Rs. 77,69,000 and agreed to pay the
tax by filing necessary return. However, in response to the notice issued u/s 158BC, the assessee filed a nil return. In the meantime, the
Department of Vigilance and Anti Corruption searched for the assessee on August 17, 1996, as he was absconding and arrested him on
September 25, 1996, and later, released on bail. In spite of a number of notices/letters seeking explanation as to the various investments, the
assessee did not file any clarification or reply to the notices and ultimately, the Assessing Officer determined the composition of undisclosed income
of Rs. 5,40,07,340, which reads as follows :
(A) Items considered in the assessee''s own hands directly, on the basis of search materials
Rs. Rs.
(i) Cash 9,02,150
(ii) Jewellery 10,21,946
(iii) Silver jewellery 81,088
(iv) Diamond jewellery 80,000
(v) Household articles 2,50,000
(vi) Cars 3,70,000
(vii) Trax jeep 1,55,000
(viii) Car 2,75,000
(ix) Old car 1,15,000
(x) Fire-arm 1,00,000
(xi) Blank promissory notes 10,00,000
Total of ""A"" 43,50,184
(B) Addition on the basis of materials seized, but relating to other persons
(i) Deposit in the name of Shri K. 7,01,961
Ramakrishnan.�(IOB)
Total of ""B"" 7,01,961
(C) Additions based on post-search enquiries
(i) Deposits with Bank of Baroda 49,90,000
(ii) Interest thereon 26,070
(iii) Deposit in the name of Paramasivam and 40,00,000
Periyakal
(iv) Deposit in the name of Palaniammal 11,33,814
(v) Deposit in the name of Chittibabu 34,34,894
(vi) Deposit in the name of P. Krishnan 53,86,498
(vii) Deposit in the name of K. Ramakrishnan 54,93,133
(viii) Deposit in other SB accounts 32,75,252
(ix) Deposit in the name of G. Malliga 12,47,380
(x) Deposit in the name of Siranjeevi 29,392
Total of ""C"" 2,90,16,433
(D) Immovable properties in the name of other persons
(i) House property at Kodaikanal 8,17,280
(ii) Estimated cost of additions 13,83,757
(iii) House at Kumaran Nagar, Trichy 24,34,800
(iv) Land at Manigandam 8,75,150
(v) Land at Vadagam, Kodaikanal 13,21,470
(vi) Plots at Anna Nagar, Trichy 7,21,200
(viii) Property in the name of Poongundran 90,000
(ix) Flat at 9/3 Nehru Nagar, Adayar 6,59,900
Total of ""D"" 92,08,957
(E) Property in the name of assessee
Property at Kuzhamani 11,94,000
Total of ""E"" 11,94,000
(F) Income from bus operation 60,58,154
Total of ""F"" 60,58,154
(G) Miscellaneous income
(i) Investment in Sudar Creations 2,00,000
(ii) Education expenses of children 2,18,264
(iii) Election expenses 4,15,000
(iv) Estimated family expenses 12,60,000
(v) Donation to AIADMK Party 10,00,000
(vi) Payment to Jaya Publication 20,000
(vii) Salary income 2,24,000
(viii) House property income 6,79,800
Total of ""G"" 40,17,064
Gross total 5,45,46,753
Less : Deductions considered by the Assessing
Officer :
(i) 80L 53,684
(ii) Standard deductions 67,369
(iii) Salary available 2,24,600
(iv) Agricultural income 1,93,760 5,39,413
5,40,07,340
As the above order was in respect of block assessment period, the assessee took the matter to the income tax Appellate Tribunal, Chennai
Bench, by filing an appeal. The assessee also filed an application seeking to produce additional evidence like adungal records, certificates issued by
the Village Administrative Officers, lease deed copies, etc., and also the evidence relating to 13 persons, who had independent holdings of
agricultural lands, with commensurate agricultural income available for disposal. These documents were admitted and considered by the Tribunal
and ultimately passed the impugned order confirming and deleting certain additions. The relevant paragraphs 40 to 45 read as under :
As seen from the above paragraphs, we have considered each and every addition made by the Assessing Officer by arranging these items
under convenient groups and heads reflected in the tables given in the paragraphs above. We have confirmed five additions under different heads
and have deleted all other items included by the Assessing Officer in computing the undisclosed income.
The following items are confirmed :
Rs.
(i) Jewellery 4,68,335
(ii) Fire-arm 68,000
(iii) Promissory notes 10,00,000
(iv) Bank of Baroda deposits 49,90,000
(v) Interest due thereon 26,070
65,52,405
While completing the assessment, it is seen that the Assessing Officer has given the following deductions :
Rs.
80L 53,684
Standard deductions 67,369
Salary available 2,24,600
Agricultural income 1,93,760
5,39,413
As we have already deleted the addition on account of salary income, the Assessing Officer need not give a further deduction towards
standard deduction and salary available amounting to Rs. 67,369 and Rs. 2,24,600 respectively. While considering the sources of income, we
have considered the agricultural income and deleted the many additions. Therefore, a further deduction by way of agricultural income to the extent
of Rs. 1,93,760 is not called for.
The Assessing Officer is, therefore, directed to give only one deduction u/s 80L amounting to Rs. 53,694.
As a result of these adjustments, the net revised undisclosed income will be Rs. 64,98,721 (Rs. 65,52,405 (-) Rs. 53,684).
The Assessing Officer is directed to modify the block assessment on the above lines. In the result, the block assessment appeal is partly
allowed. Order accordingly.
The above order is put in issue by the Revenue in T. C. (A) No. 686 of 2005 and by the assessee in T. C. (A) No. 2 of 2009.
We have heard elaborately Mr. K. Ramasamy, learned senior standing counsel appearing for the Revenue in both the appeals and Mr. R.
Venkataraman, learned senior counsel, for Mr. R. Sivakumar and Mr. A. Sathyaseelan, Learned Counsel, both appearing for the assessee in the
respective appeals.
It is the contention of the Revenue that in terms of rule 29 of the income tax (Appellate Tribunal) Rules, the Tribunal ought not to have
entertained the additional evidence as only in the event the Tribunal requires additional evidence to be adduced or witnesses to be examined, it can
do so, but not at the instance of the assessee. Further, in any case, there was no opportunity given to the Revenue to rebut the additional
documents marked by the assessee and in the wake of rule 46A of the income tax Rules, the Tribunal ought to have either remitted the matter to
the Assessing Officer or should have given opportunity to the Assessing Officer in respect of those documents and, finally, even assuming that these
documents can be entertained by the Tribunal, they have not been properly appreciated by the Tribunal.
On the other hand, Mr. R. Venkataraman, learned senior counsel and Mr. A. Sathyaseelan, Learned Counsel, appearing for the assessee in
both the appeals, have submitted that the Revenue had not objected to the application filed by the assessee to let in additional evidence by filing
certain documents. In fact, in the written statement, the Revenue had only stated that they leave the issue to the decision of the Tribunal. The
Tribunal also had found that these documents were not controverted by the Revenue and, therefore, they were admitted. In these circumstances, it
is not open to the Revenue to canvass the said point before this Court, particularly when no substantial question of law was raised in this regard.
As far as the second contention of the Revenue is concerned, the learned senior counsel would submit that at the time of hearing, sufficient
opportunity was given for the Revenue to controvert the documents. Nevertheless, the documents which were filed before the Tribunal were not
controverted and, therefore, the Tribunal had chosen to decide the appeal by placing reliance on those documents. In so far as the last contention
is concerned, the learned senior counsel would argue that the Tribunal had properly appreciated the documents with reference to the order of the
Assessing Officer. As far as the order of the Tribunal in confirming certain additions, which have not been declared by the assessee, it is contended
that the Tribunal had not properly appreciated though relevant materials were placed.
We have carefully considered the rival submissions.
Point No. 1
As it is a block assessment, as against the order of the Assessing Officer, the assessee had the benefit of filing appeal only before the Tribunal,
as there was no provision for appeal before the Commissioner of income tax (Appeals) at the relevant point of time. In these circumstances, the
provision relating to the Commissioner of income tax (Appeals), viz., rule 46A of the income tax Rules, 1962 (for brevity ""the IT Rules"") cannot be
pressed into service. Rule 29 of the income tax (Appellate Tribunal) Rules, 1963, (for brevity ""the ITAT Rules""), of course, contemplates a
provision that if the Tribunal requires any document to be produced or any witness to be examined or any affidavit to be filed to enable it to pass
orders or for any other substantial cause, or, if the income tax authorities have decided the case without giving sufficient opportunity to the assessee
to adduce evidence either on points specified by them or not specified by them, the Tribunal, for reasons to be recorded, may allow such
document to be produced or witness to be examined or affidavit to be filed or may allow such evidence to be adduced.
Though a reading of the said rule shows that it is a power conferred only on the Tribunal, the rule had been interpreted by the courts to confer a
right on the assessee as well to produce additional evidence.
In this context, we may refer to the judgment of this Court in R.S.S. Shanmugam Pillai and Sons Vs. Commissioner of Income Tax, wherein
the scope of the powers of the Tribunal under rule 29 of the income tax (Appellate Tribunal) Rules to either entertain or reject the evidence was
considered. It has been held that the Tribunal has got a wide discretion to admit or reject documents at the stage of appeal, nevertheless, such
discretion cannot be exercised in the arbitrary manner. The Tribunal may be justified in satisfying itself that the documents filed are quite relevant for
the purpose of deciding the issue before it, but the question is whether it would be well within its power to admit the evidence, consider the same
or remit the matter to the lower authorities for such consideration. In Anaikar Trades and Estates (P.) Ltd. (No. 2) Vs. Commissioner of Income
Tax, the said principle was reiterated by this Court.
That apart, rule 18(4) of the income tax (Appellate Tribunal) Rules is also referable. That rule provides that if any party desires to file additional
evidence, then the same shall be filed by way of a separate paper book containing such particulars as are referred to in sub-rule (3) accompanied
by an application stating the reasons for filing such additional evidence. If rule 18(4) is read with rule 29, there cannot be any difficulty in holding
that in terms of rule 29, an additional evidence can also be produced by the assessee on an application, provided the Tribunal should satisfy as to
the reasons before entertaining such additional evidence and the Tribunal should also afford sufficient opportunity to the Revenue to rebut those
additional evidence. Therefore, the contention of the Learned Counsel for the Revenue that the Tribunal ought not to have entertained additional
evidence at the instance of the assessee is not well-founded. That apart, there was no specific objection raised by the Revenue at the time when the
application was filed and the Revenue, in fact, had allowed the Tribunal to entertain such application. In this context, we may also refer to the
observation of the Tribunal that the Revenue did not contradict any of the averments made by the assessee in the petition seeking for production of
additional evidence. The Tribunal also observed that the Revenue had not questioned the veracity of the documents and the particulars filed by the
assessee.
In view of the above, the first submission of the learned senior standing counsel appearing for the Revenue cannot be accepted and the same is
rejected.
Point No. 2
As far as the second contention is concerned, the details of the documents are referable. These documents are the copies of adungal records,
certificates issued by the Village Administrative Officers, lease deed copies and the affidavits of 13 persons stating that they are the holders of
agricultural lands and they had sufficient income to commensurate the agricultural income which was available for their disposal. It is also pertinent
to note that the above 13 persons filed their respective returns disclosing the same properties and also explaining the source of income and the
Revenue also made assessments of the individual returns on protective basis.
We have perused those documents, which were filed before us in a separate typed set from page 20 onwards. For example, we may refer the
English translation of the certificate issued by the Village Administrative Officer dated May 10, 1996, stating that the assessee owns 0.49.5,
0.35.5, 0.46.5 and 0.06.0 hectares of land in different survey numbers at Varaganeri village of Trichy Taluk and District. The certificate is on the
basis of an adungal record and it does not contain any seal except referring to a copy of the adungal, which is also dated May 10, 1996. It is
contended that the veracity has not been questioned by the Revenue at the time it was filed. The finding of the Tribunal in this regard appears to us
that it is only for entertaining the said document and nothing more. Once a document is admitted as an additional evidence, there are two options
for the Tribunal, viz., (1) either the Tribunal may consider the document and decide the case on its own or it may remit the matter to the Assessing
Officer. In the event, a document, which cannot be disputed on the face of it, for example, a original record maintained by the Government is
produced as an additional evidence, the Tribunal could be justified in considering the said document by itself and decide the case. On the other
hand, if the document is such that requiring a detailed consideration and is disputed or even is liable to be disputed, the Tribunal shall adopt the
second option by remitting the matter to the Assessing Officer to find out the veracity/genuineness of the document and thereafter consider the
same to pass final orders.
In the given facts of the case, being a block assessment, and in the absence of any appeal to the Commissioner of income tax (Appeals), the
Tribunal is considered to be the first appellate authority. It is true that before the documents filed by way of additional evidence were considered,
the Revenue had the opportunity to refute those documents. Nevertheless, in terms of rule 29 of the income tax (Appellate Tribunal) Rules, a
provision of opportunity is contemplated and, in our opinion, such opportunity shall be given to the Assessing Officer. Rebuttal must be only by the
Assessing Officer, who will be in a better position to verify the genuineness of those documents and accordingly, he may accept or may not accept
the case of the assessee. In the event certain doubts are entertained on the basis of the documents produced as additional evidence, it would be
only proper for the Tribunal to remit the matter.
The Tribunal had also taken into consideration the statement of one Manickam, which was notarised on May 6, 1997, wherein he has stated
that he has given on lease the agricultural lands in various survey numbers to the assessee by name K. P. Krishnan and is cultivating plantain,
paddy, toor dhall, cotton, gingelly, etc., for the period from 1980 and 1991. The questions as to whether the lands in these survey numbers belong
to the assessee or not and whether the assessee had entered into lease agreement with the said Manickam or not are all matters to be considered
in detail to find out the genuineness of those documents. All additional evidence/documents are more or less on the same lines. In this regard, we
have gone through the order of the Tribunal and the Tribunal had accepted almost all the documents without there being any detailed consideration.
Rule 29 mandates the Tribunal to satisfy itself as to whether those documents can be entertained, and if entertained, shall apply its mind to the
veracity of those documents. This being a power vested in the Tribunal with certain element of discretion attached to it, such power shall be
exercised with great care and caution and not arbitrarily. Merely because the opposite party did not seriously object to those documents, the
obligation of the Tribunal under rule 29 cannot be ignored. Hence, in our considered opinion, the Tribunal ought to have remitted the matter to the
Assessing Officer for consideration. The details of the issue, additions made in the assessment order and the deletions made by the Tribunal are as
follows :
Sl. No. Issue Addition under assessment Deletion under ITAT order Rs.
order Rs.
(1) (2) (3) (4)
1 Cash found during search 9,02,150 9,02,150
2 Gold jewellery 10,21,946 5,53,611
3 Silver jewellery 81,088 81,088
4 Diamond jewellery 80,000 80,000
5 Household articles 2,50,000 2,50,000
6 Investment in cars and jeep 11,65,000 11,65,000
7 Investment in fire arms 1,00,000 32,000
8 10 Promissory note for value 10,00,000 �
9 Claim by the assessee of cash left by deceased Rejected in the assessment Rejected by the Tribunal
father order
10 Account in Bank of Baroda, Dindigul in the name49,90,000
of Rajendran, Selvam and
Thangavelu�outsiders
11 Deposits in the name of Paramasivam and 40,00,000 40,00,000
Periyakka�father and mother of the assessee
12 Deposit in the name of Selvi Palaniammal 11,12,000 11,12,000
13 Fixed deposits in the name of A. A. Govindarajan
and A. G. Chittibabu�father-in-law and 34,34,894 34,34,894
brother-in-law of the assessee
14 Deposits in the name of P. Krishnan 53,86,498 53,86,498
15 Deposits in the name of K. 54,93,133 54,93,133
Ramakrishnan�brother of the assessee
16 Credits in the bank account of assessee 32,75,352 32,75,352
17 Deposits in the name of Mallika Krishnan�wife
12,47,380 12,47,380
of the assessee
18 Deposits in the name of Master
29392 29392
Chiranjeevee�son of the assessee
19 Investment in others name in the house property 22,01,037
22,01,037
at Fernhill, Kodaikanal
20 Investment in others name in the house property
24,34,800 24,34,800
at Kumaran nagar, Trichy
21 Investment in others name in the land at
8,75,150 8,75,150
Manikandam Panchayat
22 Investment in others name in the plots at Anna
7,21,200 7,21,200
Nagar, Trichy
23 Investment in others name in land at Vadagaunji
13,21,240 13,21,240
village
24 Investment in others name in the flat at Nehru
9,05,400 9,05,400
Nagar, Adyar
25 Investment in improvement of the residential
11,94,000 11,94,000
house at Kulumani village by the assessee
26 Investment in others name in flat at Nehru Nagar,
6,59,900 6,59,900
Adyar
27 Investment in the name of others on the
90000 90000
agricultural land in Wuraiyur
28 Investment in the name of Janshi Rani in Bus No.
10,72,480 10,72,480
45E 7000 and the operational income
29 Investment in the name of A.G. Ayyavoo in Bus
8,66,308 8,66,308
No. TN 45 X 3565 and the operational income
30 Investment in the name of P. Thangiah in Bus No.
7,73,887 7,63,887
TN 45 E 1582 and the operational income
31 Investment in the name of Chandrahassan in Bus
10,38,809 10,38,809
No. TN 45 D 0525 and the operational income
32 Investment in the name of Chandrahassan in Bus
17,22,842 17,22,842
No. TN 45 C 7857 and the operational income
33 Investment in the name of others in Sudar
2,00,000 2,00,000
Creation
34 Expenditure on Children''s education by the
2,13,264 2,13,264
assessee
35 Election expenses, donation to party and payment
14,35,000 14,35,000
to Jaya Publication
36 Expenditure on family maintenance 12,60,000 12,60,000
37 Salary income Net income after deduction Net income after deduction
38 Income from house property 6,79,800 6,79,800
39 Deduction towards agricultural income 1,93,760 1,93,760
By placing reliance solely on the documents filed as additional evidence, the Tribunal had confirmed the assessment order to the tune of Rs.
65,52,405/- and interfered with the order of the assessing officer by deleting the rest of the assessment. For the said reason also, we are inclined to
hole that the Tribunal ought not to have gone into the additional evidence and rather should have remitted the matter to the assessing officer. For all
these reasons, we are constrained to set aside the order of the Tribunal and remit the matter to the assessing officer, who shall now consider the
documents filed as additional evidence by the assessee and pass fresh orders. Accordingly, the order of the Tribunal is set aside, the tax case
appeals are allowed and the substantial questions of law are answered accordingly. Connected M.P. is closed.