COMMISSIONER OF INCOME-TAX VS A. M. ZAINALABDEEN MUSALIAR
1996 P T D 661
[212 I T R 188]
[Kerala high Court (India)]
Before T. L. Viswanatha Iyer and Mrs. K. K. Usha, JJ
COMMISSIONER OF INCOME-TAX
versus
A. M. ZAINALABDEEN MUSALIAR
Original Petition No. 11950 of 1991-S, decided on 06/10/1994.
(a) Income-tax---
----Reference---Assessment---Appeal to CIT (Appeals)---Remand---Open order of remand ---I.T.O. justified in considering fresh material---Tribunal correct in upholding order of I.T.O.---No question of law arises---Indian Income Tax Act, 1961,S.256.
The assessee was an exporter of cashew. There was an inspection in the premises by the officers of the Sales Tax Department when it was alleged that unaccounted purchases of raw nuts to the extent of Rs-2,98,877 were discovered. On a discussion of the materials available, the assessing authority made an addition of Rs.45,650 to the returned income of the assessee. The Commissioner of Income-tax (Appeals) set aside the assessment and remitted the matter to the assessing authority for consideration de novo. The assessment was completed afresh by the assessing authority after complying with the principles of natural justice and after putting the assessee on notice of the materials. Substantial additions were made to the returned income on the basis of the materials gathered and available with the assessing authority. One of the items of addition was an amount of Rs.7,70,816 consequent on enhancement of the value of the suppressed closing stock of raw nuts and kernels. The 'Tribunal noted that the assessee had filed a statement before the sales tax authorities besides another statement before the Income Tax Officer. There were material differences between the two statements in relation to the opening and closing stock of raw nuts and kernels. The Tribunal, however, reiterated that the statement filed before the sales tax authorities was not based on any primary records and that the figures given before the sales tax authorities could not be the correct figures. Therefore, purporting to proceed on the basis of the statement filed before the Income Tax Officer, the Tribunal allowed the appeal and deleted the addition of Rs.7,70,816. On an application-to direct reference, inter alia, the assessee had raised a contention before the Tribunal that the assessing authority had on remand adopted a different method of determining the taxable income which, according to him, was not warranted by the terms of the order or remand. The Tribunal did not accept this contention:
Held, that the order of remand which was an open one and unrestricted did not fetter the power of the Income Tax Officer to deal with the matter with reference to all matters before him. The Tribunal was correct in its order. No question of law arose from it.
(b) Income-tax---
----Reference---Income from business---Widely different statements with regard to stocks made before sales tax and income-tax authorities---Tribunal whether justified in disregarding statement made before sales tax authorities and deleting addition to income in its entirety---Question of law---Indian Income Tax Act, 1961, S.256.
Assessee had made two separate and widely different statements before the Sales Tax Officer and before the Income Tax Officer. The question whether the statement filed before the Sales Tax Officer which was to the prejudice of the assessee could be discarded in the manner done by the Tribunal was a question which arose for consideration. The question whether the Tribunal was justified in deleting the addition in. its entirety had to be referred.
Moideenkutty (K. P.) v. CIT (1981) 131 ITR 135 (Ker.) fol.
C.I.T. v. Damodaran (V) (1980) 121 ITR 572 (SC) ref.
P. K. R. Menon and N. R. K. Nair for Petitioner
G. Sivarajan and Kochunni Nair for Respondent.
JUDGMENT
T. L. VISWANATHA IYER, J. ----The Revenue seeks to have the following questions referred to this Court under section 256(2) of the Income Tax Act, 1961:
"(1) Whether, on the facts and in the circumstances of the case (and after having found that the accounts of the assessee are defective), the Tribunal is right and had materials to delete the addition in its entirety?
(2) Whether, on the facts and in the circumstances of the case,--
(i) the Tribunal is right and had materials to hold that 'the figures given before sales tax authorities could not be correct figures' and is not the above finding wrong, unreasonable and based on conjectures and surmises?
(ii)Did the assessee discharge the burden of proof?
(3) Whether, on the facts and in the circumstances of the case, the Tribunal is right in holding that 'since there are only two figures before us and one figure is not based on any proper material, the other figure is the only figure which we would adopt' and is not the above approach reasoning and finding unreasonable, perverse and against law and logic?"
The Tribunal dismissed the application for reference and, therefore, the Revenue is before us.
The assessee is an exporter of cashew. The assessment year concerned is 1981-82. There was an inspection in the premises by the officers of the Sales Tax Department when it was alleged that unaccounted purchases of raw nuts to the extent of Rs.2,98,877 were discovered. On a discussion of the materials available, the assessing authority made an addition of Rs.45,650 to the returned income of the assessee. The matter was taken up in appeal and the of Income-tax (Appeals) set aside the assessment and remitted the matter to the assessing authority for de novo consideration. He stated that the assessment had been completed in a somewhat hurried manner and, therefore, it required to done afresh with full and fair opportunity to the assessee Accordingly, he aside the assessment and directed the Income Tax Officer to make afresh assessment in accordance with law after affording adequate opportunity to the assessee to put forward his case in regard to the controversial issues and contested additions. The Income Tax Officer was left to make any enquiry or investigation as he thought fit in regard to the various points dealt with by him in the assessment order subject only to the condition that a proper opportunity should be given to the assessee before the materials gathered were made use of in the fresh assessment directed to be done.
The assessment was completed afresh by the assessing authority after complying with the principles of natural justice and after putting the assessee on notice of the materials. Substantial additions were made to the returned income on the basis of the materials gathered and available with the assessing authority. One of the items of addition was an amount of Rs.7,70,816 consequent on enhancing the value of the suppressed closing stock of raw nuts and kernels. The Commissioner (Appeals) did not find his way to accepting the contentions of the assessee and accordingly confirmed the assessment subject to some minor deletions being made. The assessee challenged the matter in second appeal before he Tribunal. The arguments before the Tribunal mainly centred on the addition of Rs.7,70,816 referred to earlier. The Tribunal noted that the assessee had filed a statement before the sales tax authorities besides another statement before the Income-tax Officer. There were material differences between the two statements in relation to the opening and closing stock of raw nuts and kernels. The Tribunal, however, reiterated that the statement filed before the sales tax authorities was not based on any primary records and that the figures given before the sales tax authorities could not be the correct figures Therefore, and purporting to proceed on the basis of the statement filed before the Income-tax Officer, the Tribunal allowed the appeal and deleted the addition of Rs.7,70,816. That has resulted in the Revenue filing this petition to compel reference, their application for reference before the Tribunal having been dismissed.
Inter alia, the assessee had raised a contention before the Tribunal that the assessing authority had on remand adopted a different method of determining the taxable income which, according to him, was not warranted by the terms of the order of remand. The Tribunal did not accept this contention in the view that the order of remand was an open one which did not at all fetter the Income-tax Officer in considering any materials available, which were relevant for completing the assessment. The Tribunal also relied on a decision of this Court in K.P. Moideenkutty v. CIT (1981) 131 ITR 356 in which Balakrislina Eradi, C. J., speaking for the Court, held that the order of the Appellate Assistant Commissioner was not restricted to dealing with the subject-matter of the appeal and that he may examine all matters covered by the assessment order and correct the assessment in respect of such matters even to the prejudice of the assessee. He may even remand the case to the Income Tax Officer for enquiring into the items which were not the subject-matter of the appeal. Having regard to the enunciation of the power of the Appellate Assistant Commissioner the Tribunal felt that the remand which was an open one and unrestricted did not fetter the power of the Income-tax Officer to deal with the matter with reference to all matters before him.
When the application for reference was filed by the Revenue, the assessee in his turn sought to raise the following question of law for being referred to this Court in case the Revenue's application was being allowed relying on the decision of the Supreme Court in CIT v. V. Damodaran (1980) 121 ITR 572, namely:
Whether the Income Tax Officer while making a fresh assessment according to the directions of the Commissioner of Income-tax (Appeals) can make an addition on an item which was not considered in the original assessment?
Counsel for the assessee submits before us that in case we are inclined to allow the reference sought by the Revenue in this petition as aforesaid, the questions raised by him before the Tribunal may also be referred.
We have perused the order of the Tribunal and having regard to the facts and circumstances of the case, we are of the view that a question of law does arise out of the order of the Tribunal which is liable to be referred to this Court at the instance of the Revenue. We have already noted that the assessee had made two separate and widely different statements before the Sales Tax Officer and before the Income tax Officer. The question whether the statement field before the Sales Tax Officer which was to the prejudice of the assessee could be discarded in the manner done by the Tribunal is one which arises for L serious consideration in this matter. We are, therefore, inclined to redraft the question raised by the Revenue and to refer the following question for the determination of this Court, these questions, in. our opinion, being comprehensive enough to take in all the aspects of the matter covered by the questions framed by the Revenue:
"(1) Whether, on the facts. and in the circumstances of the case, the Tribunal was justified in deleting the addition in its entirety?
(2) Whether, on the facts and in the circumstances of the case, the Tribunal had acted on materials or evidence before it to hold that the figures given before the sales tax authorities could not be the correct figures and that since there were only two figures before the Tribunal and that one figure was not based on any proper material, the other figure is the only figure which it may adopt?"
So far as the question raised by the assessee is concerned, we do not find any substance in it. A perusal of the original order of the Commissioner of Income-tax (Appeals) shows that the remand was an open one which left open all the questions for the determination of the Income-tax Officer with a full and fair opportunity to the assessee to put forward and prove his case and that there are no restrictions imposed by the said order. Having regard to this fact, the question raised does not arise for consideration apart from the fact that the matter is also covered by the decision in K.P. Moideenkutty's case (1981) 131 ITR 356 (Ker.), already referred to. We, therefore, decline to refer this question.
The Tribunal is accordingly directed to state a case and refer the questions as refrained by us and mentioned in paragraph 7 above for the determination of this Court under section 256(2) of the Income Tax Act, 1961.
Communicate a copy of this judgment under the seal of this Court and the signature of the Registrar to the Income-tax Appellate Tribunal, Cochin Bench, for information and compliance.
M.B.A./1070/FOrder accordingly.