Madras High Court
Commissioner Of Income -Tax vs S.Arputharaj on 28 June, 2022
T.C.A.Nos.433 to 435 of 2014
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 28.06.2022
CORAM :
THE HONOURABLE MR. JUSTICE R. MAHADEVAN
and
THE HONOURABLE MR. JUSTICE MOHAMMED SHAFFIQ
Tax Case Appeal Nos.433 to 435 of 2014
and
M.P.Nos.1 & 1 of 2014
Commissioner of Income -Tax,
Coimbatore. .. Appellant in all the appeals
Versus
S.Arputharaj, Member of
Arputharaj and Radhakrishnan (AOP),
Flat 5, Krishna Nagar,
Sowripalayam,
Coimbatore 641 028.
..Respondent in all the appeals
Appeals preferred under Section 260A of the Income Tax Act, 1961,
against the common order dated 05.12.2013 passed by the Income Tax
Appellate Tribunal, “A” Bench, Chennai, in I.T.A.Nos.35, 36 and
37/Mds/2013.
For Appellant : Mr. M. Swaminathan,
Senior Standing Counsel
Mrs. V.Pushpa,
Standing Counsel
For Respondent : Mr. R. Anish Kumar
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T.C.A.Nos.433 to 435 of 2014
COMMON JUDGMENT
(Judgment of the Court was delivered by R.MAHADEVAN, J.)
These tax case appeals have been filed by the appellant / Revenue,
challenging the common order dated 05.12.2013 passed by the Income Tax
Appellate Tribunal, “A” Bench, Chennai, in I.T.A.Nos. 35, 36 and 37/Mds/
2013, relating to the assessment years 2007- 08, 2008-09 and 2009-10.
2. By order dated 30.08.2016, this court admitted the aforesaid tax case
appeals on the following substantial questions of law:
“(i) Whether under the facts and circumstances of the case, the
Income Tax Appellate Tribunal was right in holding that expenditure which
are reflected in the books of accounts at the time of impounding of records
could be allowed?
(ii) Whether based on materials and evidence available before the
Tribunal, it could have come to the conclusion that the claim for deduction
is allowable in part?"
3. The assessee is a member of Association of Persons (AoP) consisting
of Mr. Arputharaj and Mr. Radhakrishnan. On 28.01.2010, survey was
conducted at the business premises of Arputharaj. During the course of the
same, it was found that the assessee along with the said Radhakrishnan
involved in real estate transactions. It was also found that the income from real
estate transactions jointly done by them, was not disclosed by filing return of
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T.C.A.Nos.433 to 435 of 2014
income. Even thereafter, the assessee did not come forward to file the return of
income. Therefore, the Assessing Officer had reasons to believe that the
income earned by the assessee had escaped from assessment by the failure of
the assessee to file the return of income. Therefore, notice under Section 148
of the Income Tax Act (in short, “the Act”) came to be served on 04.04.2021,
following which, further notice dated 21.07.2021 under Section 142 (1) of the
Act, was also issued, calling upon the assessee to file the return of income.
Consequently, a proposal was sent calling upon the assessee to show cause as
to why the assessment should not be completed under Section 144 of the Act.
Thereafter, the assessee filed the returns of income for the assessment years
2006-2007, 2007-2008, 2008-2009 and 2009-2010. On scrutiny of the same,
the Assessing Officer found that the assessee claimed certain direct
expenditure for the assessment years 2007-08, 2008-09 and 2009-10, the
details of which would run thus:
Particulars 2007-08 2008-09 2009-10
Site cleaning and compensation 5,15,00,000 40,00,000 9,68,000
to farmer
Site development and 2,65,60,000 5,76,500 3,15,000
improvement expenses
Commission paid to others 19,85,000 6,90,000 32,10,000
Travelling and General 25,46,500 5,75,600 2,55,700
expenditure
After having found so, the Assessing Officer concluded that the assessee has
inflated the expenditure incurred by him as the profit and loss account found at
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T.C.A.Nos.433 to 435 of 2014
the time of survey and the return of income submitted by the assessee are
different. Accordingly, by orders dated 29.12.2011, the Assessing Officer
disallowed the claim made by the assessee and determined the assessable
income at Rs.10,32,18,210/-, besides initiating penalty proceedings under
Section 271 (1) (c) of the Act.
4. Assailing the orders dated 29.12.2011 passed by the Assessing
Officer, the Assessee preferred appeals before the Appellate Authority viz.,
Assistant Commissioner of Income Tax, Circle III, Coimbatore. However, the
Appellate Authority dismissed the appeals on 14.11.2012 and confirmed the
orders of assessment passed by the Assessing Officer. The assessee therefore
went on further appeals before the Tribunal. By order dated 05.12.2013 the
Tribunal dismissed the appeal filed by the assessee for the assessment year
2006-2007 and partly allowed the remaining three appeals for the assessment
years 2007-2008, 2008-2009 and 2009-2010. Aggrieved by the same, the
appellant / Revenue has come up with these appeals.
5. The learned Senior Standing counsel appearing for the appellant /
Revenue would mainly contend that the Tribunal did not consider the
expenditure, which was reflected in the books of accounts and the documents
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T.C.A.Nos.433 to 435 of 2014
seized at the time of search, while allowing the appeals preferred by the
assessee. The Tribunal also failed to see that the profit and loss account
recovered at the time of search in the premises of the assessee did not indicate
the expenditure said to have been incurred by the assessee. Even though the
Assessing Officer has given due opportunity to produce the evidence
regarding the expenditure incurred by the assessee and to provide names and
addresses of the persons to whom compensation and commissions were paid,
the assessee did not furnish such details called for to prove the actual
expenditure. Therefore, the real income earned by the assessee could not be
assessed to tax, when the basic evidence required for computation of income
has not been furnished by the assessee. However, the Tribunal, without any
material evidence, has allowed the appeals filed by the assessee, setting aside
the orders of the assessing officer disallowing the claim of expenditure and
making additions. Thus, according to the learned senior standing counsel, the
appeals will have to be allowed by setting aside the impugned order passed by
the Tribunal.
6. The learned counsel appearing for the respondent fairly submitted
that at the time of assessment, the assessee was unable to produce the relevant
records to substantiate their claim. Therefore, if an opportunity is provided to
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T.C.A.Nos.433 to 435 of 2014
the assessee, he will furnish the available material evidence to the authority
concerned for fresh consideration.
7. Heard both sides and perused the materials available on record.
8. The appellant / Revenue questioned the common order passed by the
Tribunal relating to the assessment years 2007-08, 2008-09 and 2009-10,
regarding the expenditure claimed by the assessee by way of deduction. For
the sake of brevity, the relevant portion of the same is reproduced hereunder:
"9. Regarding the remaining three assessment years 2007-08,
2008-09 and 2009-10, again the issue is regarding disallowance of
expenditure claimed by way of deduction. The learned chartered
accountant submitted that the Assessing Officer has disallowed almost
entire expenses claimed by the assessee, which is an indiscriminate act not
justified in the facts and circumstances of the case. The learned chartered
accountant observed that while survey was carried on business premises
of the assessee, the books of account reflected the details and quantum
expenditure incurred by the assessee for the respective assessment years
to carry on his business and to that extent, the expenditure reflected in the
books at the time of survey must be allowed as a deduction.
10. As far as this argument of the learned chartered accountant is
concerned, we agree that it is supported by the provisions of the statute.
The Assessing Officer is justified in disallowing the various expenditure
claimed by the assessee as not reflected in the books of account and
documents seized at the time of survey. It is possible to accept the
argument of the Revenue that such expenditure might have been inflated
by the assessee after the survey and before closing of the accounts of the
previous years. This is because no evidence was produced by the
assessee.
11. But the entire expenditure cannot be disallowed. The
expenditure to the extent reflected in the books of account and documents
seized at the time of survey have to be held as incurred and therefore, to
that extent the claim of expenditure made by the assessee under different
heads for all these three assessment years have to be allowed. We direct
the Assessing Officer to do so.
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T.C.A.Nos.433 to 435 of 2014
12. The assessee is partly successful in his appeals filed for the
assessment years 2007-08, 2008-09 and 2009-10."
It is evident that the entire expenditure claimed by the assessee was disallowed
by the assessing officer on the ground that the assessee did not furnish the
required material evidence to substantiate the same. Whereas, the Tribunal has
allowed certain expenditure that are reflected in the books of account and the
document seized at the time of survey, for the assessment years in question.
Such course adopted by the Tribunal cannot be countenanced, in view of the
admitted fact that the assessee failed to furnish the necessary documents to
support his claim of expenditure incurred.
9. Therefore, taking note of the facts and circumstances of the case and
as agreed by the learned counsel appearing for both sides, we set aside the
order impugned in these appeals and remand the matter to the assessing officer
for quantification of the deduction claimed by the assessee by passing orders
afresh. Such exercise shall be completed by the assessing officer, on merits
and in accordance with law, after providing due opportunity to the respondent/
assessee for submission of both oral and documentary evidence, if any, within
a period of three months from the date of receipt of a copy of this judgment.
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T.C.A.Nos.433 to 435 of 2014
10. Accordingly, all these tax case appeals are disposed of. No costs.
Consequently, connected miscellaneous petitions are closed.
(R.M.D., J.) (M.S.Q., J.)
28.06.2022
Internet : Yes / No
Index : Yes / No
av/rsh
To
1. The Income Tax Appellate Tribunal,
“A” Bench, Chennai.
2. The Commissioner of Income - tax,
Coimbatore.
3. The Assistant Commissioner of Income-tax,
Circle - III, Coimbatore.
4. The Commissioner of Income Tax (Appeals) - I,
Coimbatore.
https://www.mhc.tn.gov.in/judis
T.C.A.Nos.433 to 435 of 2014
R. MAHADEVAN, J.
and
MOHAMMED SHAFFIQ, J.
av
T.C.A.Nos.433 to 435 of 2014
and
M.P.Nos.1 & 1 of 2014
28.06.2022
(3/3)
https://www.mhc.tn.gov.in/judis
