Dr. Joy P. Chungath vs Commissioner of Income Tax

G. Sivarajan, J.—The matter arises under the Income Tax Act, 1961 (for short "the Act"). The appellant is a doctor by profession and is an assessee to Income Tax under the Act. The assessment year concerned is 1992-93. For the said assessment year, the assessee filed a return on June 23, 1992, disclosing an income of Rs. 62,020 including capital gain of Rs. 3,500. The return was processed u/s 143(1)(a). Subsequently, a notice u/s 143(2) was issued and the assessment was completed u/s 143(3) on March 28, 1995, fixing the total income at Rs. 1,31,020 including long-term capital gain of Rs. 72,500 after allowing deduction u/s 48(2) of the Act. While computing the capital gain the assessee claimed to have received from his former tenants during the year under consideration a sum of Rs. 1,50,000 and this was shown as an additional compensation on the sale of property effected as per document No, 1488 of 1990, dated October 19, 1990. The Commissioner of Income Tax, on perusal of the records, formed the opinion that treating this sum of Rs. 1,50,000 as additional compensation by the Assessing Officer was erroneous and prejudicial to the interests of the Revenue. He accordingly set aside the assessment by invoking the provisions of Section 263 of the Act by order dated August 24, 1995, and directed the Assessing Officer to redo the assessment in accordance with law. Pursuant to the order of the Commissioner of Income Tax, the Assessing Officer issued notice to the appellant requesting him to furnish the names and addresses of the tenants who had paid Rs. 1,50,000 as compensation for not evicting them from the property purchased. The appellant by letter dated September 28, 1995, furnished the names and addresses of the tenants from whom the said amount was stated to have been received. The Assessing Officer thereafter issued notice to all the tenants calling for the details of the payment. However, the said notices were returned with the postal endorsement "addressee expired". The Assessing Officer thereafter noticed that the assessee had sold 14.95 cents of land and shop room thereon as per document No. 1488 of 1990, dated October 19, 1990, to his brother, Sri Baby Chungath, for a consideration of Rs. 1,50,000 and that the assessee in his return admitted a long-term capital gain of Rs. 12,200 in respect of the property sold which was accepted by the Assessing Officer while processing the return u/s 143(1)(a) and the refund of Rs. 7,142 claimed was granted. The assessee had taken a stand in the return filed on June 23, 1992, that the balance portion of the property was also sold on May 15, 1991, for Rs. 1,50,000 during this period. Subsequently, the assessee by letter dated March 27, 1995, admitted that it was a mistake to mention a separate sale but in fact, the amount of Rs. 1,50,000 received from the tenants represented compensation for not evicting them. The Assessing Officer took the view that the assessee''s contention regarding compensation cannot be accepted as true and correct since the letters issued to the tenants from whom the assessee is stated to have received the said sum were returned unserved. The Assessing Officer also noted that in the registered document of sale it was specifically stipulated that any further dealings by the tenants was to be with the purchaser and not with the assessee and also the fact that the document does not mention anything about any liability to be discharged by the tenants in favour of the assessee subsequent to the disposal of the property in 1990. It was in those circumstances, the Assessing Officer took the view that a sum of Rs. 1,50,000 deposited by the assessee in the Canara Bank on June 3, 1991, has to be treated as the assessee''s income from other sources.

Before the first appellate authority the assessee had produced confirmation letters said to have been received from four persons by name Sri P.I. Mathu, Sri T.V. Chackochan, Sri P.T. Uthuppooru and Mrs. C.V. Kunhitty on May 16, 1991, May 19, 1991, May 16, 1991 and May 19, 1991, respectively. The first appellate authority, on the basis of the said confirmation letters, took the view that there was no explanation for the cash credits is not correct and accordingly the addition made amounting to Rs. 1,50,000 was deleted and allowed the appeal filed by the appellant. The Department took up the matter in appeal before the Tribunal. The Tribunal after considering the aforesaid facts and circumstances observed that if these confirmatory letters issued by the tenants in May, 1991, were actually available the assessee should have produced the same before the Assessing Officer at the time of assessment itself. The Tribunal also observed that there is considerable force in the reasoning of the Assessing Officer that in the document No. 1488 of 1990, dated October 19, 1990, it is specifically mentioned that all the future dealings by the tenants in respect of the shop rooms sold should be done with the new landlord directly and not with the assessee in the instant case. The Tribunal accordingly set aside the order of the first appellate authority and restored the order of the assessing authority.

Sri Jayasankaran Nambiar, learned counsel for the appellant, submits that the only grievance of the Department before the Tribunal was regarding the acceptance of the additional evidence in the form of confirmatory letters and the adjudication of the question by the first appellate authority. In other words, according to counsel, the contention of the Department was that when the appellant had produced additional evidence in the form of confirmatory letters the appellate authority should have set aside the assessment and remitted the matter to the Assessing Officer for fresh disposal after enquiry in the matter with reference to those documents and therefore the Tribunal was not justified in considering the merits of the matter and restoring the order of the assessing authority. Counsel also submitted that under the provisions of Section 251 of the Act the first appellate authority has got co-extensive power with that of the assessing authority and therefore the appellate authority itself can receive additional evidence and decide the matter on those evidence and that in the instant case what the first appellate authority has done is to consider the matter on the basis of the evidence produced before it. Counsel further submits that in fact the Tribunal did not find fault with the procedure adopted by the Commissioner of Income Tax (Appeals) and that the only reason stated by the Tribunal is that the appellant has not produced the confirmatory letters which were obtained in May, 1991, before the Assessing Officer at the time of the original assessment. Counsel accordingly submitted that the Appellate Tribunal has erroneously decided the matter against the assessee and that at any rate the Tribunal should have set aside the first appellate order and remitted the matter to the assessing authority so that the appellant could have adduced all further evidence in support of the confirmatory letters.

Sri P.K.R. Menon, learned senior standing counsel for taxes appearing for the respondent, submits that the Tribunal was perfectly justified in setting aside the order of the first appellate authority and in restoring the assessment order on the facts of the case and that no question of law much less any substantial question of law does arise from the order of the Tribunal.

We have considered the rival contentions. It is true that the Department has filed the appeal before the Tribunal with the specific contention that the first appellate authority was not justified in entertaining the additional evidence and in deciding the issue without affording an opportunity to the Assessing Officer to consider the same at the first instance and therefore the Appellate Tribunal in the normal course is expected to consider only the said question. The Tribunal, however, had noted that the case of the assessee initially before the Assessing Officer was that the sum of Rs. 1,50,000 represented additional compensation on the sale of the property ; that at the subsequent stage the assessee furnished the details of the tenants from whom the amount was received, that the notice issued to those tenants were returned with the endorsement "addressee expired", that the assessee filed a letter dated March 27, 1995, admitting that it was by a mistake it is stated the amount represents separate sale proceeds and that the amount represents compensation received from the tenants for not evicting them from the premises, that before the appellate authority it was contended that the assessee had advanced various amounts to the tenants for making further improvements to the building in 1989 and the same was returned by them during the assessment year under consideration. The appellate authority accepted this contention based on the confirmatory letters produced before him. It is in view of the indefinite case of the assessee the Tribunal went into the genuineness of the claim. As already noted the confirmatory letters which are produced before the first appellate authority are dated May 16, 1991, and May 19, 1991, and even the original assessment u/s 143(3) of the Act was completed only on August 28, 1995. If as a matter of fact the said documents were with the assessee he could have produced the same before the Assessing Officer so that the Assessing Officer would have gone into the genuineness of the said documents at that time itself. In fact the case of the assessee at that time before the Assessing Officer was totally different. The case was that the money which is deposited in the bank is the consideration paid by the tenants for permitting them to continue in occupation of the premises even after the sale of the property by the appellant. It is with reference to the said plea the Assessing Officer had referred to the registered sale deed where it is specifically stated that all future correspondence in respect of the property in question must be made only with the transferee, who is the brother of the assessee and further stipulation that the assessee has no liability at all in respect of this property, The Tribunal had taken note of all the circumstances and made adverse comments against the non-production of the confirmatory letters before the Assessing Officer if those letters were actually in the possession of the appellant at the relevant time. It is also relevant to note that notices were issued to the tenants who are alleged to have made the payments as per the confirmatory letters but all the notices were returned with the endorsement "addressee expired".

It was on a consideration of all these circumstances, the Tribunal has come to the finding that the first appellate authority was not justified in relying on the confirmatory letters in granting the relief by way of deletion of a sum of Rs. 1,50,000. In spite of the persuasive argument made by learned counsel for the assessee, we are of the view that the Tribunal has entered a factual finding on an appreciation of the materials available on record and that there is no question of law much less any substantial question of law arising from such finding warranting interference by us.

In the above circumstances, there is no merit in this appeal. It is accordingly dismissed.