The Commissioner of Income Tax-II vs Sri. Arun David

A.M. Shaffique, J.—This is an appeal filed by the revenue against the order passed by the income tax Appellate Tribunal, Cochin Bench in I.T. (S & amp; S) A. No. 22/Coch/2006. This appeal is with reference to the block assessment for the period from 1.4.1996 to 18.12.2012. The facts of the case disclose that the assessee is a civil contractor. In response to a notice u/s 158BC, the assessee filed return showing the income as ''Nil''. The assessment was completed u/s 158BC determining the undisclosed income for the block period at Rs. 68,37,610/-. The assessing officer found that the assessee had failed to disclose the income derived by him for carrying out the contract work and on the basis of documents, seized from the assessee, the undisclosed income was arrived at Rs. 8 lakhs for the work done for Sterling Holiday Resorts at Munnar. Similarly, for the work done at KHDP Factory at Moovattupuzha, the assessing officer, based on seized documents, computed undisclosed income at Rs. 1,25,420/-. Some materials were obtained by the assessing officer, especially two agreements dated 23.9.1998 and 20.12.2000 executed between one T.J. George, Sri. N.C. Thomas and the assessee evidencing sale of petrol pump. Taking into consideration the possible investment that the assessee would have made in the acquisition of the said petroleum pump, the unaccounted investment of Rs. 40 lakhs was added to the income of the assessee. That apart, a further amount of Rs. 7,96,477/- was treated as unaccounted amount received from Sri. N.C. Thomas as final settlement of IBP petrol pump.

The assessee preferred an appeal before the Commissioner of income tax (Appeals), Kochi. The appellate authority deleted all these additions and the undisclosed income for the block period was reduced to Rs. 54,500/-. The revenue preferred an appeal before the Tribunal and the Tribunal initially passed an ex parte order determining the undisclosed income as Rs. 17,76,400/-. The assessee preferred an appeal before this Court as I.T.A. No. 191/2010 and by judgment dated 11.6.2010, this Court having set aside the order passed by the Tribunal, remitted back the matter to the Tribunal for fresh consideration. Pursuant to the same, the Tribunal revised the undisclosed income to Rs. 54,500/-.

It is impugning the aforesaid order that this appeal is filed raising the following substantial questions of law:

(a) Whether, on the facts and in the circumstances of the case and regular books of accounts being not maintained by the assessee, the Tribunal is right in law--

i. in not relying on the seized document evidencing carrying out contract work;

ii. in placing reliance on post search documents, like denial certificate, without proper verification by any authority?

(b) Whether, on the facts and in the circumstances of the case, the Tribunal is right in law and fact in deleting the addition of Rs. 8,00,000/- added as undisclosed income?

Whether, on the facts and in the circumstances of the case, is the Tribunal right in law in not taking cognizance of the seized document evidencing carrying out of contract work and in placing reliance on post-search documents being denial certificate, without proper verification by any authority, especially when no regular books of account are maintained by the assessee with reference to contract works, and thus confirming the order of the CIT(A)?

(a) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in disregarding the document seized at the time of search merely on the basis of a letter filed subsequently when the original seized document was not disputed during the course of search?

(b) Is not estimation profit and at 8% and in accordance with law?

Whether, on the facts and in the circumstances of the case,-

a) the Tribunal is right in law in confirming the order of the CIT(a) who has entertained the additional evidence produced by the assessee for the first time without compliance of Rule 46A (3) of the income tax Rules;

b) if the answer to the above question is in the affirmative are not the orders of CIT (A) and the ITAT on the issue vitiated and non est?

c) is not the interference with the unaccounted investment, wrong and unjustified?

Whether the Tribunal is right in law in disregarding the document (KPU-A 84) seized at the time of search and will not the same prove the case of the Revenue?

The Tribunal is right in law in interfering with the various additions for the reasons stated in the order?

Whether, on the facts and in the circumstances of the case, the Tribunal is right in law and fact in restricting the addition of unaccounted investment of Rs. 40,00,000/- to Rs. 54,498/-? and is not the order of Tribunal perverse?

As far as the undisclosed income of Rs. 8 lakhs as profit from Sterling Holiday Resorts at Munnar is concerned, the assessing officer had made the assessment based on a certificate dated 18.6.1996 issued by M/s. High Rise contractors and construction professionals. It was, inter alia, stated in the said certificate that the assessee had completed the work for Sterling Holiday Resorts, Munnar, amounting to Rs. 1 crore. According to the assessee, this certificate had been obtained for pre-qualifying in some other contract, and it is not an instance where the assessee had actually done the said work. The appellate authority formed an opinion that the statement of account, day book and ledger of the firm for the relevant period were produced for verification and it was evident that the certificate was issued only for the purpose of providing experience certificate and it was not a certification of the real execution of work. That apart, the assessing officer ought to have verified the aforesaid certificate by examining the partner of M/s. High Rise contractors who had issued the said certificate. Apparently, other than the aforesaid certificate, there is no other material available to consider the aforesaid addition of undisclosed income. The Tribunal also concurred with the aforesaid view.

The learned standing counsel, however, strongly relies upon the certificate issued by M/s. High Rise contractors in order to contend that in the absence of any other material to indicate otherwise, the said certificate has to be taken into consideration and it is thereafter for the assessee to prove that he had not carried out any such work. But, both the authorities have expressed doubt regarding the sufficiency of the said document as prima facie material and it is after verifying the statement of accounts, day book and ledger that they have formed an opinion that the certificate alone was not enough to mulct such a liability for payment of tax on the assessee. Since there is no perversity in the said findings of the appellate authorities, we do not think that the contentions urged by the revenue can be taken as a substantial question of law available in the case.

The same is the situation as far as the undisclosed income of Rs. 1,25,420/- is concerned. In that case, a certificate is issued by M/s. Fourmates Developers and Builders (P) Ltd. The same is issued indicating that the assessee has carried out certain work. It is, inter alia, found by the appellate authorities that M/s. Harrison Malayalam Ltd., has allotted the work of KHDP Project at Moovattupuzha in favour of M/s. Fourmates Developers and Builders (P) Ltd., by three work orders and they have effected payment to the said company. There is no involvement of the assessee in the said matter. There is also a clear finding that the necessary TDS certificates were issued in favour of M/s. Fourmates Developers and Builders (P) Ltd., which is reflected in the balance sheet of the company as on 31.3.1997 and 31.3.1998. It is under these circumstances that the appellate authorities have found that the assessment of undisclosed income in favour of the assessee was not justified. In this instance also, we do not think that the appellate authorities have committed any perversity or illegality in coming to a finding based on the available materials with reference to the disputed questions of fact, which is found in favour of the assessee and therefore no substantial question of law arises in the case.

Another item of undisclosed investment is with reference to an amount of Rs. 40 lakhs as invested in IBP petrol pump. The appellate authority found that the assessee could explain Rs. 31,70,502/- lakhs and the unexplained investment was only Rs. 54,498/-. To arrive at the aforesaid conclusion, the appellate authority has considered all the documents produced and has clearly narrated the source of income for the purpose of the said investment. This view of the appellate authority had been confirmed by the Tribunal as well and therefore we do not think that a different opinion is possible on the ground that the said finding is either perverse or illegal. With reference to the unaccounted receipt from Sri. N.C. Thomas amounting to Rs. 7,96,477/-, the authorities came to the conclusion that seized documents do not disclose any such material. Copy of the agreement, which is relied upon for the assessment is only a draft agreement wherein the amounts are not specified. It is stated in the assessment order that Sri. N.C. Thomas paid Rs. 7,96,477/- to the appellant. There is no evidence for the same and no statement is taken from Sri. N.C. Thomas. The assessee was also not questioned regarding the said investment when a statement u/s 132(4) was taken on the date of search.

Having regard to these findings by the appellate authority and the Tribunal confirming the same, based on the material evidence available in the case, we do not think that any of the findings have given rise to any substantial question of law as narrated in the memorandum of appeal. The validity of the documents relied upon by the assessing officer had been considered in great detail and the first appellate authority had narrated the availability of evidence for arriving at the conclusions with reference to the undisclosed income alleged to have been made by the assessee. Since it is not shown that any of these findings are either perverse or illegal and not based on the materials on record, it will not be possible for this Court to interfere in the matter as the questions of law now raised are based on factual circumstances involved in the case.

In the result, we do not find any merit in the above appeal and accordingly, the same is dismissed.