Rajasthan H.C : admission by assessee ,an important piece of evidence, is not evidence only if assessee proves as such

High Court Of Rajasthan

Hukum Chand Jain Vs. ITO

Assessment Year 1999-2000

Section : 147

Arun Mishra, Cj. And Mohammad Rafiq, J.

D.B. It Appeal No. 325 Of 2009

March  14, 2011

JUDGMENT

Mohammad Rafiq, J. – This income-tax appeal has been filed by the assessee against the order dated September 30, 2008, passed by the Income-tax Appellate Tribunal (for short “ITAT”), Jaipur whereby his appeal challenging the order of the Commissioner of Income-tax (Appeals) dated September 27, 2007, was dismissed and the order of assessment passed by the Assessing Officer dated December 22, 2006 in respect of the assessment year 1999-2000 was upheld. The aforesaid order of assessment was framed on the basis of notice dated March 28, 2006 issued to the appellant under section 148 of the Income-tax Act, 1961 (for short “the Act”) for reopening of the assessment.

2. Shri J.K. Ranka, learned counsel for the appellant has argued that a survey under section 133A of the Act was conducted at the business premises of the assessee by the income-tax authorities on January 16, 2002. On account of coercive effect and the pressure exerted by the income-tax officials, the appellant made a statement before the income-tax authorities and surrendered a sum of Rs. 6,00,000 for the assessment year 2002-03. The assessee submitted a return on October 17, 2002 declaring net taxable income of Rs. 1,33,600 along with the past history before the Income-tax Officer wherein it was clearly stated that he sold certain properties and the money received by way of sale of the properties along with agricultural income, LIC claim, etc. were invested by him in his residential house property. The original assessment order under section 143(3) was passed on March 28, 2005 which included Rs. 6,00,000 as unexplained investment in construction of house property. This order was upheld by the Commissioner of Income-tax (Appeals). When the further appeal was filed before the Income-tax Appellate Tribunal, the Income-tax Appellate Tribunal allowed the appeal vide its judgment dated February 27, 2006 and deleted the addition of Rs. 6,00,000 observing that the assessee may produce the evidence/material regarding investment in the property. Further, observations were made that the Assessing Officer is free to verify these investments in the year in which they are made and examine the investments as per law.

3. Shri J.K. Ranka, learned counsel further argued that mere observation of the Income-tax Appellate Tribunal in this manner could not be construed as evidence of investment made by the assessee in respect of earlier years. Learned counsel submitted that the property in question even as per the report of the District Valuation Officer was constructed during the financial years 1997-98, 1998-99 and 1999-2000, which has also verified the fact that construction commenced in the year ending March 31, 1999. Municipal authorities have also given certificate of completion accordingly. Investment in the property was thus completed prior to the financial year ending on March 31, 2002. It is this argument which was accepted by the Income-tax Appellate Tribunal, therefore, the assessment could not have been reopened by recourse to section 148. The petitioner demanded reasons for reopening and subjected his objections on such reasons. Those observations were not properly understood. There is no additional or fresh material with the Assessing Officer to justify his finding regarding all these investments. Notice under section 148 was even otherwise barred by limitation. The Assessing Officer by his order dated December 22, 2006 illegally made an addition of Rs. 4,07,800 holding that the investment in the residential house property was unexplained during the financial year 1998-99, whereas the evidence was to the effect that construction was started, continued and completed during above referred to three assessment years and not just one and therefore addition only to the extent of the investment made in the relevant assessment year could be made. It was argued that section 148 could not be invoked on the self same material on which addition was set aside by the Income-tax Appellate Tribunal earlier.

4. Learned counsel cited the judgment of the apex court in the case of Pullangode Rubber Produce Co. Ltd. v. State of Kerala [1973] 91 ITR 18 (SC) to argue that the Supreme Court in that case held that even though admission or statement given by the assessee during survey proceedings may be an important piece of defence, it is not conclusive and it is always open to the assessee who has made such admission, to show that it was incorrect.

5. Per contra, Ms. Parinitoo Jain, learned counsel for the Revenue argued that notice under section 148 for reopening of the assessment of year 1999-2000 was issued because this issue was left open by the Income-tax Appellate Tribunal in its order dated February 27, 2006 while deleting the addition of Rs. 6,00,000 from the original assessment order dated March 28, 2005. The Income-tax Appellate Tribunal in its order dated February 27, 2006 clearly observed that the Assessing Officer is free to verify these investments in the year in which they are made and examine the investments as per law. It cannot therefore be said that the issuance of notice under section 148 was without justification. Learned counsel submitted that though the Assessing Officer earlier included Rs. 6,00,000 in the assessee’s total income on the basis of notice issued under section 143(3) of the Act for the assessment year 2002-03 as unexplained investment in house property, the Income-tax Appellate Tribunal while allowing the appeal of the assessee observed that assessee may produce before the Assessing Officer sufficient material/evidence that the investment in property was made in the financial year ending on March 31, 2002. The period of construction mentioned in the Income-tax Appellate Tribunal’s order includes financial year 1998-99, which is relevant to the assessment year 1999-2000 and also other financial years. The Income-tax Appellate Tribunal thus rightly observed that the Assessing Officer would be free to verify these investments in the year in which they are made and examine the investments as per law. The revised balance-sheet which was filed by the assessee along with the returned income for the financial year 2002-03 was not accepted being afterthought. Accordingly, proceedings under section 147 were initiated after issuing notice under section 148. Notice contains reasons and also it was issued after obtaining valid sanction from the Joint Commissioner of Income-tax, Range-II, Kota. Even after service of notice under section 148, the assessee did not file his return. Notice under section 142(3) was issued and served upon the assessee on September 30, 2006. The assessee requested to supply reasons which were made available to him. Objections raised while initiating proceedings under section 148 were rejected by passing an interlocutory order and the assessee failed to put forward his claim despite repeated opportunities being given. Since limitation for making fresh assessment was to expire on December 31, 2006, the Assessing Officer was left with no alternative except to make assessment under section 144 of the Income-tax Act on the basis of material available on record. The total value of construction was estimated by the valuer at Rs. 5,85,000, therefore, the average investment for the assessment year 1998-99 relevant to the assessment year 1999-2000 was worked out to Rs. 4,07,800 which remained unexplained and unrecorded. The same was therefore rightly added to the income of the assessee as income from other sources.

6. Successive appeals filed by the assessee were dismissed by the Commissioner of Income-tax (Appeals) as also by the Income-tax Appellate Tribunal. It is therefore prayed that the appeal be dismissed.

7. On hearing learned counsel for the parties and considering the material on record, we find that notice under section 148 for reopening of the assessment was issued to the assessee on the basis of observations made by the Income-tax Appellate Tribunal in its order dated February 27, 2006 where the Income-tax Appellate Tribunal left it open to the Assessing Officer to verify these investments in the year in which they are made and examine the investments as per law. This observation was made accepting the argument of the assessee that the investments made in the construction of house property could not be added to the income of the assessee for the assessment year 2002-03. The further argument of the assessee was that the municipal authorities and the District Valuation Officer in his report have mentioned that the construction commenced in the year ending March 31, 1999, and the period of construction was financial years 1997-98, 1998-99 and 1999-2000. Accepting this plea of the assessee, the Income-tax Appellate Tribunal in that order observed that the investment in the property appears to have been completed prior to the year March 31, 2002. It was in that context that the Assessing Officer was given freedom to verify these investments in the year in which they are made and examine the investments as per law. We are therefore not persuaded to countenance the argument that the Assessing Officer was precluded from reopening the assessment by invoking section 148. The reasons demanded by the assessee were supplied to him by the Assessing Officer and his objections were also considered. But then the assessee thereafter has adopted a totally non-co-operative attitude with the sheer object of frustrating the assessment proceedings so as to ensure that the limitation for making such assessment is crossed. The Assessing Officer in his order has given detailed reasons including about the number of opportunities given to the assessee after reasons were supplied to him and ultimately notice was given to show cause as to why an ex parte assessment under section 144 of the Act may not be made in his case as he failed to comply with the notices issued to him from time to time and the date was fixed on December 20, 2006. In the notice, it was proposed to make an ex parte assessment under section 144 so as to add total amount of Rs. 4,07,800 as unexplained investment in the construction of house property made in the financial year 1998-99 relevant to assessment year 1999-2000. The assessee failed to dispute that and could not produce any other evidence to the contrary to show that investments were actually made in different years than this. The Assessing Officer faced with this situation that limitation was expiring on December 31, 2006, passed the assessment order on December 22, 2006. All the arguments which have been made merely pertain to the questions of fact and none of them raise any legal issue. It may be true that the Income-tax Appellate Tribunal in the earlier order dated February 27, 2006 accepted the position of law settled by the Apex Court in Pullangode Rubber Produce Co. Ltd. [1973] 91 ITR 18 (SC) as regards the statement/admission of the assessee that such admission despite being an important piece of evidence, is not conclusive and it is open to the assessee to show that it is not correct. But in this case, no such effort was made by the assessee because no such material was produced by him. In that view of the matter, the admission made by the assessee could not be taken to have been dislodged by him.

8. We therefore do not find any merit in this appeal, which is accordingly dismissed.

[Citation : 334 ITR 197]

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