Punjab & Haryana H.C : the assessment made under section 148 was justified without having communicated the reasons recorded for initiating and completing the reassessment proceedings

High Court Of Punjab & Haryana

J.R. Ahuja vs. CIT

Assessment Years : 1991-92 To 1993-94

Section : 147

Adarsh Kumar Goel And Ajay Kumar Mittal, JJ.

IT Appeal Nos. 148 Of 2004, 435 & 436 Of 2006

November 8, 2010

JUDGMENT

Ajay Kumar Mittal, J.-This order will dispose of Income-tax Appeal Nos. 148 of 2004 and 435 and 436 of 2006, as similar questions have been claimed therein. The facts have, however, been taken from Income-tax Appeal No. 148 of 2004.

2. This appeal under section 260A of the Income-tax Act, 1961 (for short “the Act”), has been filed by the assessee against the order dated December 10, 2003, passed by the Income-tax Appellate Tribunal, Chandigarh Bench (A), Chandigarh (in short “the Tribunal”) in I. T. A. No. 411/ Chandi/98 in respect of the assessment year 1993-94.

3. The assessee has claimed the following questions for determination by this court :

1.(a) Whether, under the facts and circumstances of the case, the Tribunal and the authorities below were justified in not adjudicating the legal ground of appeal challenging the very issuance of notice under section 148 being bad in law which goes to the foundational aspect of the dispute ?

(b) Whether, under the facts and circumstances of the case, the assessment made under section 148 was justified without having communicated the reasons recorded for initiating and completing the reassessment proceedings ?

2. Whether, under the facts and circumstances of the case, the Tribunal was justified in upholding the addition on the wrong and mis-appreciation of arguments and evidence by having adopted the wrong assumption of facts and devoid of legal force to stand ?

3.(i) Whether, under the facts and circumstances of the case and on the true and correct interpretation of the facts and evidence, the Tribunal was justified in upholding the addition on the estimated basis relying on the documents and material not having reasonable and rational nexus with the additions made ?

(ii) Whether, under the facts and circumstances of the case, the Tribunal was justified in upholding the addition by making multiplication of the receipts being de hors the material available ?

(iii) Whether, under the facts and circumstances of the case and on the true and correct interpretation of the facts and evidence, the Tribunal was justified in relating back the documents for upholding the addition on the basis of the statement taken four years later than the completed and concluded assessment ?

4. Briefly stated, the facts necessary for adjudication, as narrated in the appeal, are that the appellant-assessee is a lecturer and derives income from salary, interest accrued on the deposits made and also a small income from royalty from the books. His wife is a teacher in Government school. On May 12, 2004, the premises of the appellant were searched by the income-tax authorities in the wake of an allegation that he was engaged in giving private tuitions and had an additional income therefrom which he had not been declaring in the return of income. Certain documents were seized during the course of the search of the premises. On the basis of that material and after complying with the requirement of issue of notice under section 148 of the Act, the Assessing Officer, vide order, annexure A-3, made additions to the income of the assessee for the assessment years 1991-92, 1992-93 and 1993-94, which are as under :

Assessment year Additions made by the Assessing Officer Rs. Addition sustained by the CIT(A) Rs. Addition upheld by the Tribunal Rs.
1991-92 69,400 17,150 34,700
1992-93 1,72,000 43,000 86,000
1993-94 2,00,000 49,450 98,900

 

5. The matter went up to the Commissioner of Income-tax (Appeals), (hereinafter referred to as “the CIT(A)”). The said appellate authority partly upheld the order of the Assessing Officer, vide order dated January 28, 1998, annexure A-2. The Revenue and the appellant-assessee preferred appeals before the Tribunal. The Tribunal, while partly allowing the appeal of the Revenue, ordered the addition of Rs. 98,900 as against Rs. 49,450 sustained by the Commissioner of Income-tax (Appeals), which the appellant is now disputing in this appeal, alleging that the same was without any basis or material on record. The Tribunal dismissed the appeals of the assessee whereas partly allowed those preferred by the Revenue, vide order dated August 8, 2002, annexure A-4.

6. This is how the assessee is in appeal before us.

7. We have heard learned counsel for the parties and perused the record.

8. A perusal of the order of the Tribunal in Income-tax Appeal No. 148 of 2004 relating to the assessment year 1993-94 clearly shows that the assessee had not challenged the validity of reassessment proceedings under section 148 of the Act before the Tribunal and, therefore, question No. 1 does not arise in this appeal. However, the assessee in the appeals relating to the assessment years 1991-92 and 1992-93 had filed miscellaneous application under section 254(2) of the Act claiming that the argument regarding validity of reassessment proceedings had not been adjudicated by the Tribunal. Thereupon, the Tribunal, after considering the submissions of the respective parties, had rejected the plea of the assessee, vide order dated May 9, 2005. Examining the validity of the reassessment proceedings under section 148 of the Act, it is noticed that the Tribunal had held the same to be justified with the following observations :

“After hearing the rival submissions and perusing the order of the tax authorities and the case law cited by the assessee, we are of the considered view that there is force in the plea of the Revenue that the Assessing Officer has acted on a bona fide belief. The Assessing Officer’s action is based on the surrounding circumstances like infrastructures, class rooms, statements of students, list of students, etc. Therefore, the assumption of jurisdiction was on the basis of material existing on record and there was sufficient material to enable the Assessing Officer to believe that the income has escaped assessment. In the case of (1) Praful Chunilal Patel ; (2) Vasant Chunilal Patel v. M. J. Makwana, Asst. CIT [1999] 236 ITR 832 (Guj), it was observed that at the initial stage, formation of reasonable belief is needed and not a conclusive finding on the facts. The provisions of section 147 require that the Assessing Officer should have reason to believe that any income chargeable to tax has escaped assessment. The word ‘reason’ in the phrase ‘reason to believe’ would mean cause or justification. If the Assessing Officer has a cause or justification to think or suppose that income had escaped assessment, he can be said to have a ‘reason to believe’ cannot mean that the Assessing Officer should have finally ascertained the facts by legal evidence. In the said case, the hon’ble Gujarat High Court held that the question of non-assessment of an item of income can warrant formation of requisite belief under section 147. In the case of Devgon Rice and General Mills v. CIT [2003] 263 ITR 391 (P&H) a writ petition challenging the validity of proceedings under section 147 was dismissed as the information given by the assessee at the time of assessment was later on found to be false. In the said case, reliance was placed on the case of S. Narayanappa v. CIT [1967] 63 ITR 219 (SC), wherein it was opined that if there are in fact some reasonable ground for the Income-tax Officer to believe that there had been any non-disclosure as regards any fact, which could have a material bearing on the question of underassessment, that would be sufficient to give jurisdiction to the Income-tax Officer to issue notice. Therefore, in view of the above discussion and the case law discussed above, we have no hesitation in dismissing the common ground of appeal in both the years.”

9. It is undisputed that during search and seizure operation at the premises of the assessee on May 12, 1994, incriminating material, particularly, annexure A-20 was found which depicted that the assessee was engaged in imparting tuition to students for consideration and was not disclosing the income therefrom to the Department. In this back ground, the plea of the assessee challenging the validity of reassessment proceedings is unsustainable. The Tribunal was, thus, right in upholding the reassessment proceedings to be valid.

10. The next point for consideration in these appeals is, whether the additions sustained by the Tribunal on account of undisclosed tuition fee is legal and valid ? The Tribunal, while sustaining the addition as noticed earlier, had recorded the following findings in paragraph 9 of its order :

“We have heard both the parties at some length and carefully considered the rival submissions. We have also examined the facts, evidence and material on record. We have also referred to the relevant pages of the paper book to which our attention has been drawn. Similar issue came up before the Tribunal for the assessment years 1991-92 and 1992-93. The assessee had made submissions that it did not provide coaching for commercial considerations but he only provided coaching to some brilliant students. These submissions were considered by the Tribunal but were rejected. The finding of the Commissioner of Income-tax (Appeals) that the assessee must have provided coaching to 50 per cent. students free of cost, was also not accepted. However, referring to the two statements of the parents of the students who availed of such coaching from the assessee, upheld the estimate of income at Rs. 150 per month per student in respect of 10+2 and 10+1 students and also of Rs. 400 per month per student for PMT and CET test. In this manner, the orders of the Commissioner of Income-tax (Appeals) were modified and income for the assessment year 1992-93 was confirmed at Rs. 86,000. Relevant finding of the Income-tax Appellate Tribunal’s order dated August 8, 2003, as recorded in paragraphs 6 and 7 of the aforesaid order are as under.

6. We have heard both the parties at some length and carefully considered their rival submissions. We have also examined the facts, evidence and material on record. We have also referred to annexure A-20 seized during the course of search, which does show that the assessee did undertake tuition work during the accounting years under reference on regular basis. It would be relevant to refer to the noting made in the said document as under :

(i) Pages 1 and 3 contain the names of 20 (10 + 2) students during the period from June, 1990 to August 1990.

(ii) Page 4 contains the names of 16 students of (10 + 2) with a noting that “to report on December 1, 1990, at 7.15 a.m”.

(iii) Pages 6 to 8 contain the names of 23 students of (10 + 1) who were to report on December 1, 1990, at 3.30 p.m.

(iv) Pages 11 and 12 contain the names of 17 students for PMT/ CET tests and date indicated is March 7, 1991. These relate to the assessment year 1991-92.

(v) Pages 13 and 14 contain the names of 33 students of (10 + 2) (boys group) from May 22, 1991, at 6.30 p.m.

(vi) Page 15 also mentions the names of two waitlisted students.

vii) Pages 16 and 17 contain the names of 27 students of (10+2) (girls groups) from May 22, 1991, at 7.30 a.m.

(viii) Pages 18 and 19 contain the names of 26 students (10 + 2) from November 1, 1991, at 3.45 p.m.

(ix) Pages 20 and 21 contain the names of 24 students in respect of tuition to start from October 23, 1991, at 8.30 a.m.

(x) Page 23 also mentions the name of one waitlisted student.

(xi) Pages 24 and 25 contain the names of 16 students of 10 + 2 for classes to start from November, 1991, at 8.30 a.m.

(xii) Pages 26 and 27 contain the names of 23 students of (10+ 1) for coaching to start from October 23, 1991, at 8.30 a.m.

(xiii) Pages 28 to 30 contain the names of 38 students of 10 + 1 for coaching from May 15, 1991.

(xiv) Page 31 also contains the names of some students directed to report on May 14, 1991, at 8.30 a.m.

(xv) Page 32 contains the names of 26 students for CET/PMT tests.

(xvi) Pages 34 and 35 contain the names of some other 10 + 2 and 10 + 1 students for coaching to start in June, 1991.

The details mentioned at Sr. Nos. (v) to (xvi) relate to the assessment year 1992-93. Thus, from the details noted above in the seized document, annexure A 20, it is clear that the assessee had been carrying on tuition work at a large scale even in the accounting year relevant to the assessment years 1991-92 and 1992-93. The submission of the assessee that he undertook such work for coaching some brilliant students is without any merit. No evidence to this effect has been produced either before the authorities below or even before us. Therefore, on the basis of such documents, seized from the residence of the assessee, income has to be estimated by applying a reasonable rate of tuition fee per month. We also do not find any justification for considering only those students against whom “P” was noted. The assessee was not running a charitable institution. Therefore, it is reasonable to believe that the assessee must have charged fee from each student when in fact some of the students were shown as waitlisted. Thus, we do not find any justification for the Commissioner of Income-tax (Appeals) to sustain the addition only in respect of students against whom letter “P” was marked. The Assessing Officer had referred to such noting, i.e., “P” to demolish the contention of the assessee that the assessee had given coaching only to brilliant students without any commercial consideration. However, while estimating income, the Assessing Officer has considered a number of students recorded in document annexure A-20. The extent and number of students found recorded in annexure A-20 clearly show that the assessee was carrying on tuition work for commercial consideration. Thus, in the absence of any evidence, the Commissioner of Income-tax (Appeals) was not justified in reducing the addition only in respect of students against whom “P” has been marked and treating the balance as ex gratia. We, therefore, set aside the finding of the Commissioner of Income-tax (Appeals) in this regard and restore that of the Assessing Officer for estimating the income in respect of all students listed in the seized document, annexure A-20. However, the estimate made by the Assessing Officer by taking the fee at Rs. 300 p.m. per students in respect of 10 + 2 and 10 + 1 students and also fee of Rs. 800 p.m. per student in respect of CET/PMT tests appears to be on the higher side. We find that during the course of assessment proceedings, the Assessing Officer recorded the statement of Shri R. S. Bhatti, father of Shri Shivdeep Singh, a student of 10 + 2 class who undertook tuition from the assessee. The statement is at page 35 of the paper book. His father replied that he had paid Rs. 900 to Shri Ahuja for tuition of his son. The period for which such coaching was provided is not known. Admittedly, such coaching must have been for a period of three months. The Assessing Officer also recorded the statement of Shri Kirpal Singh, father of Shri Jagdeep Singh, a student of 10 + 2 class who received coaching from the assessee in the year 1993. He stated that he had paid an amount of Rs. 525 for three months at Rs. 175 per month. His statement is at page 38 of the paper book. It is obvious that these students undertook tuition from the assessee in the subsequent period. Therefore, the assessee must have charged either the same amount or lower amount in the earlier assessment years for which the Commissioner of Income-tax (Appeals) was justified in reducing the addition to 50 per cent., i.e., Rs. 150 p.m. in respect of 10 + 2 and 10 + 1 students and at Rs. 400 per month in respect of CET/PMT tests. Thus, we sustain the order of the Commissioner of Income-tax (Appeals) to the extent estimating the income by taking the order of the Commissioner of Income-tax (Appeals) to the extent estimating the income by taking the tuition fee at 50 per cent., i.e., Rs. 150 p.m. per student in respect of 10 + 2 and 10 + 1 students and also fee of Rs. 400 p.m. per student for PMT/ CET tests. Thus, we modify the orders of the Commissioner of Income-tax (Appeals) and sustain 50 per cent. of the additions, i.e., Rs. 34,700 and Rs. 86,000 for the assessment years 1991-92 and 1992-93 respectively as against additions sustained of Rs. 17,300 and Rs. 43,000 respectively by the learned Commissioner of Income-tax (Appeals). Accordingly, while the grounds of appeals of the Revenue are partly allowed, the grounds of appeals of the assessee are dismissed.”

7. Before parting with these appeals, we wish to mention that the learned counsel for the assessee relied on the two decisions of the Income-tax Appellate Tribunal, Chandigarh Bench, in the cases of Shri Beant Singh, Professor, Patiala v. ACIT in I. T. A. Nos. 1244/ Chandi/96, etc., for the assessment years 1991-92, 1992-93 and 1995-96, and ACIT v. S. B. Mangla, Lecturer, Patiala in I. T. A. Nos. 1025/Chandi/96, etc., for the assessment years 1993-94, 1990-91, 1991-92, 1992-93, 1994-95. We have referred to both the decisions. In the case of ACIT v. S. B. Mangla, Lecturer, Patiala in I. T. A. Nos. 1025/Chandi/96, etc., for the assessment years 1993-94, 1990-91, 1991-92, 1992-93, 1994-95, the Tribunal confirmed the order or the learned first appellate authority in deleting the addition for the assessment years 1990-91 to 1992-93 on the ground that during the course of search no material was found to show that the assessee was carrying on tuition work in those assessment years. The present cases are clearly distinguishable inasmuch as during the course of search itself documents were seized which indicated that the assessee was carrying on tuition work in these assessment years. Similarly, in the case of Shri Beant Singh, Professor, Patiala v. ACIT in I. T. A. Nos. 1244/Chandi/96 supra, the assessee had himself disclosed an amount of Rs. 25,000 each for the assessment years 1991-92. During the course of search no material was found to show that the assessee was undertaking such tuition work in the accounting year relevant to the assessment years 1991-92 and 1992-93. Therefore, the order of the learned Commissioner of Income-tax (Appeals) in deleting the additions was upheld. But, in the present cases, seized document clearly shows that the assessee was carrying on tuition work on regular basis in the assessment years under reference. Therefore, the ratio of both the decisions relied upon by the learned counsel is not applicable to the facts of the present case.

The facts of the case for the assessment year 1993-94 are similar to the facts of the case for the assessment years 1991-92 and 1992-93 except that for the assessment year under reference the Assessing Officer and the Commissioner of Income-tax (Appeals) have taken the increase in such income by 15 per cent. Since the tuition income for the assessment years 1992-93 was confirmed by the Tribunal at Rs. 86,000 and after taking into account 15 per cent. increase over the assessment year 1992-93, total amount for the assessment year 1993-94 from tuition work would work out to Rs. 98,900 (i.e., Rs.86,000 + 15 per cent.). Thus, modifying the order of the Commissioner of Income-tax (Appeals) we sustain the addition of Rs.98,900 for the assessment year 1993-94 as against the addition of Rs. 49,450 sustained by the Commissioner of Income-tax (Appeals). Thus, while the ground of appeal of the assessment for the assessment year 1993-94 is rejected, the ground of appeal of the Revenue is partly allowed.”

11. The Tribunal on appreciation of material on record by relying upon document annexure A-20 which was seized during search and seizure at the premises of the assessee on May 12, 1994, had concluded that the assessee had undisclosed income from tuition work and the additions to the extent noticed in the order on that account was justified.

12. Nothing could be shown that the aforesaid findings recorded by the Tribunal were erroneous or perverse which may warrant interference by this court in exercise of its jurisdiction under section 260A of the Act, particularly, when the assessee did not dispute the existence of annexure A-20. The only effort of the learned counsel for the assessee was to reappreciate the material on record and to adjudicate the matter in favour of the assessee. This does not fall within the domain of section 260A of the Act. The Tribunal has taken a plausible view on the basis of evidence on record. Accordingly, finding no merit in the appeal, the same is dismissed.

[Citation : 344 ITR 523]

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