Shri V.Mylswamy v. The Assistant Commissioner of Income Tax,Special Investigation Circle-I,Coimbatore

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED :: 06-02-2007CORAMTHE HONOURABLE MR.JUSTICE P.D.DINAKARANANDTHE HONOURABLE MRS.JUSTICE CHITRA VENKATARAMANTAX CASE (APPEAL) Nos.180,181,207,208 OF 2003, 76,77,683,1119 OF 2004 AND 28,1141,1142 OF 2005T.C.(A) No.180 OF 2003 :Shri V.Mylswamy...Appellant (in all the TCA cases)-vs-The Assistant Commissioner of Income Tax,Special Investigation Circle-I,Coimbatore....Respondent(in all the TCA cases)These Tax Case Appeals filed under Section 260 A of the IncomeTax Act, 1961 Appeal against the order of the Income Tax AppellateTribunal 'A” Bench dated 23.08.2002 in ITA NO. 3398, 3399, 3400,3401 and 3200/MAD/90 respectively and 1337/MDS/91 and CO NOS. 201,202, 203, 204 and 205/MDS/90 and 40/MDS/91 (IN ITA NO. 3398, 3399,3400, 3401 and 3200/MDS/90 and 1337/MDS/91 respectively for theAssessment year 1983-84 to 1988-89. as against the order dated21.08.1990, 17.07.1990 and 15.05.1991 Appeal Nos. 267, 268, 269 and271-C, 270-C and 45-C respectively on the file of the Commissionerof Income Tax (Appeals) Coimbatore as against the order dated26.03.1990 and 19.03.1991-PA NO. T2578/SIC-1/CBE respectively onthe file of the Assistant Commissioner of Income Tax SpecialInvestigation Circle I, CoimbatoreFor appellant : Mr.P.J.Rishikesh for M/s.Subbaraya Aiyar PadmanabhanFor respondent : Mr.T.Ravikumar, Junior Standing Counsel. https://hcservices.ecourts.gov.in/hcservices/ COMMON JUDGMENT(Judgment of the Court was delivered by CHITRA VENKATARAMAN,J.)The sum and substance of the questions of law raised in allthese appeals is, whether the Tribunal was correct in confirmingthe orders of assessment for the years under consideration, inestimating the professional income of the appellant ? Apart fromthe said question common in all the appeals, the assessee had alsoquestioned the validity of the reopening under Sec 147 inTC.NOs.180 & 181 of 2003, 1119/04 and 28/05, 76 & 77/04, 683/04 and1141 and 1142/20041. The assessment years involved are: TC NOAssessment yearTC 180&181/031983-84TC 1119/04 and TC 28/051984-85TC 76&77/041985-86TC 683/041986-87TC 207&208/031987-88TC 1141&11421988-89 2. These appeals are at the instance of the assessee. Theassessee is an advocate by profession . The original assessmentwas completed on 20.03.1986 under Section 143 (3). Based on thematerials seized in the search conducted in the premises of theassessee on 28-7-87, the assessments for the assessment years 1983-84 to 1986-87 were re-opened . The assessment for the assessmentyear 1987-88 was completed based on the orders for 1983-84 to 1986-87. The assessee resisted the reopening contending that when theassessing authority had all the materials on hand at the time ofcompletion of the assessment, re-opening of the assessment withoutany fresh material was bad in law. 3. It is seen that in the appeal for the assessment forthe year 87-88, the CIT (Appeals) held that no fresh investmentshad been detected during the search or by the Assessing Officerduring the assessment year 87-88, either in the name of theassessee or in any benami name. In the circumstances, it was notpossible to assume that the proceeds of the chits were utilizedfor any other investment. He also noted that the assessee's wifehad admitted loan given to her husband out of the agriculturalincome she had. The Appellate authority also pointed out that theassessee had agricultural income declared from 900 trees and thatthe same was supported by the village officer's certificate. The https://hcservices.ecourts.gov.in/hcservices/ Appellate authority also pointed out that the assessee hadexplained the utilization of the chit proceeds towards householdexpenses, chit contributions and repayment of earlier loans. Theappellate authority also found that the assessee's professionalincome was estimated on a very conservative basis as against thereturned income. Ultimately, the appellate authority accepted thereturned agricultural income, however granted a partial reductionas regards the professional income. It may be seen that the patternof treatment given to the appeals relating the various assessmentyears was a uniform one. The aggrieved Revenue went on appealbefore the Tribunal. So too the assessee.4. In the appeal preferred by the assessee hecontended that when there were no fresh materials to be considered,the entire re-assessment made for the years 83-84 to 86-87 weretotally without jurisdiction. He contended that the reopeningitself was purely on change of opinion as such it was notmaintainable. The assessee also questioned the estimation of incomefrom the profession.5. As regards the appeal preferred by the revenue, itchallenged the reduction of taxable income as unsustainable as theestimation was based on materials seized at the time of search. Bya common order, the Tribunal allowed the appeals of the Revenue anddismissed the Cross-appeal filed by the assessee. 6. Aggrieved of the same, the assessee has come on appealbefore this Court. 7. Learned counsel appearing for the assessee raised the questionsof law to the effect that the Tribunal erred in disregarding thespecific ground raised in the Cross-objection as regards the re-opening of assessment under Section 147 of the Income Tax Act. Hefurther agitated that the assessment for the years 1983-84 and1984-85 was time barred. He also questioned the assumption ofjurisdiction to re-open the assessment purely as a matter ofchange of opinion. He questioned the correctness of the order ofthe Tribunal confirming of the order of the assessment in fixingthe professional income of the assessee. Equally the appellant hasgrievance has as regards the addition made on the ground that therewas an invisible expenditure when the assessment was made underSection 132 of the Income Tax Act. He also questioned theassessment of the professional income on estimated basis when thereturned income was accepted by the officer. As to the estimationon the agricultural income learned counselsubmitted that the appropriate authority arrived at the incomebased on evidence available on record. That apart, he questionedthe correctness of the order in not giving credit to the returnedincome under profession and agriculture income and the correctnessregarding the chit contribution made by the assessee for the https://hcservices.ecourts.gov.in/hcservices/ assessment years 1986-87 and 1987-88 when the assessee was anincome-tax assessee.8. Learned counsel appearing for the appellant/assesseesubmitted that when the documents before the assessing authoritywere fully disclosed even at the original assessment stage, therewas no ground for re-opening the assessment. He also pointed outthat the assessee was a leading lawyer in Coimbatore and the entireexercise on reopening was made on mere surmises and conjectures,without any material. He also stated that the assessee and hiswife have agricultural income, mainly from 900 coconut trees and,hence, the resources available at the hands of the assessee and hiswife were good enough for contribution towards chits and householdexpenses. He further stated that the assessing authority ignoredthe income through agriculture, that considering the yield from 900coconut trees, the assessee had given a fair return, supported bythe Village Officer's certificate. Under the circumstances, hesubmitted that the estimated income was totally uncalled for. 9. Learned counsel for the assessee submitted hisarguments mainly on the ground of estimates made. 10. On the other hand, learned Standing Counsel appearingfor the Revenue supported the order of the Tribunal that thequestions of fact are not to be interfered with in an appeal underSection 260A.11. A perusal of the facts, as disclosed in the orders ofthe Tribunal and the authorities below show that the estimate ofthe income was made, taking a view that the income from professionwas meager. The premise on which the assessing authority hadproceeded with the re-assessment was that if the professionalincome had been accepted as returned, the assessee could not havemade any investment at all from his earnings. It was also statedthat the process of the chit was quite large. Quite apart fromthis, on the basis of his personal visit to the coconut garden theassessing authority, came to the conclusion that the yield from thecoconut was not commensurate with the age of the trees. It wasfurther held that the number of bunches and nuts were below normal.Consequently, as against the returned figure, the Officer reducedthe income shown from agriculture. The Officer also commented thatthe assessee had a huge volume of professional engagement. As perthe admission of few parties, the advocate had collected fees,ranging from 10% to 15% and, thus, he made an addition at anaverage of 12.5% every year, to result in the estimation of income.The Commissioner of Appeals took note of all the circumstances,particularly as regards the income from agriculture, which wassupported by the Village Officer's certificate. Consequently, heheld that the deduction of agricultural income is totally uncalled https://hcservices.ecourts.gov.in/hcservices/ for. As regards the contribution to the chit through daughter,which was added as an income at the hands of the assessee, theCommissioner held that there are no materials to add it at thehands of the father. The appellate authority also noted that thechit proceeds were utilised at times for payment of loans andtowards household expenses as well as chit contributions. Hefurther pointed out that the estimation of expenses was excessive.Hence, taking note of the other sources of income and the number ofcases handled in the Sessions Court, the Commissioner estimated theprofessional income at Rs.60,000/-, but, at the same time, rejectedthe income returned by the assessee. The CIT, however, directedthe acceptance of agricultural income, as returned.12. A perusal of the order of the Tribunal further showsthat on a comparative analysis of the assessment order and thefirst appellate authority's order, it held that the order passed bythe assessing authority was well reasoned and that the assessmentswere based on bank passbook and chit contributions made by theassessee, apart from the information revealed by the assessee inthe course of examination. The Tribunal also held that to maintainhimself as a good practitioner in legal profession, the assesseehad to go in for a reasonable expenditure. Under thecircumstances, it held that the order of the assessing authoritywas reasonable and to be accepted. 13. Although the Tribunal favoured the finding of theAssessing Authority, except for summary dealing of all the issuesof assessment, there is no detailed analysis of the facts,projected by the assessee as well as the Revenue. Further, thoughthere is extensive quoting from the Commissioner's order,absolutely, there are no reasons given in the order as to why theCommissioner's order was not accepted, to prefer the assessingauthority's order.14. Hence, we are constrained to go in depth into thefacts considered by the authorities below. Although the incomereturned, estimated and assessed vary from one year to another,yet, considering the identical issues in all the years on thebasis of estimation made, we accept the order of the Commissioner,who had gone into the facts in detail, particularly in his order,dated 17.07.1990, relating to the assessment year 1987-88.15. A perusal of the assessment order shows that the totalnumbe rof land belonging to the ass and his wife were more or lessequal in extent. There were 900 trees. For the ass year 83-84, theass admitted an income of Rs. 15,000/- and in the next year Rs.20,000/-. The Officer had stated that he had visited the coconutgarden yet he records his impression that the yield of the coconutdoes not commensurate with the age of the trees. Except for thisimpression, there are absolutely no materials to support the income https://hcservices.ecourts.gov.in/hcservices/ fixed by the assessing authority. As regards the professionalincome estimated, the assessing authority had stated that as perthe admission of the few parties the advocate had collected feesranging from 10% to 15%. The kind of approach by the AO as well asthe Tribunal confirming the same lac ks any sense of direction asto the material that would afford them the basis to fix 10% or 15%.It is an admitted fact that in respect of the estimation ofprofessional income, there are absolutely no materials. Except as amere guesswork, we fail to see any substance in the approach of theauthorities concerned. We would only add that it is totally unsafeto estimate the income of a professional purely on the number ofcases handled in any particular period. Considering thereasonableness in the approach of the CIT (Appeals), and in theabsence of any materials forthcoming from either the assessee orthe Revenue, we restore the order of the Commissioner, both onaccount of the income crom agriculture as well as on the income onthe professional front. 16. As regards the contribution to the chit and the expenditure onthe domestic front, the assessee had explained that the chitproceeds were utilized towards chit contribution as well as forhousehold expenses. The Appellate Authority had discussed about theexplanation given and found that the estimate on household expensesat Rs. 72,000/- was excessive. He also noted that the AssessingAuthority had not given a set off of the amount as against chitcontribution by the wife, when the said sums were not used towardsany other investment. In the light of the said discussion, by theAppellate Authority, which we find reasonable and plausible, giventhe fact that there were no fresh investments during that period,we accept the order of the first Appellate Authority. It may alsobe noted that the Revenue had not alleged any fresh investmentsduring the period under consideration. The Tribunal had gone for acomparative analysis as that of the assessment order and the CIT(Appeals) order to ultimately accept the order of the assessingauthority that the same was more reasonable to be upheld inpreference tbleo the CIT (Appeals) order.As already stated in thepreceding paragraphs, the first Appellate Authority and analysedthe facts and the materials availagble to ultimately determine theincome assessable taking an overall view in this matter. While itcannot be denied that a best judgment is a matter of estimation,yet even this is to be on materials which are capable of leading toa fair result in estimating the income of a person. An estimationhence needs to be logical to lead one to arrive at a conclusionthat it is fair. In the light of the above, we reject the order ofthe Tribunal and restore the order of the Commissioner (Appeals) inall these cases. https://hcservices.ecourts.gov.in/hcservices/

17. On the question of limitation, no serious arguments wereadvanced to consider the same, which are relevant to theassessment years 83-84 to 86-87 covered under TC 180 and 181/03(83-84), TC 1119/04 (84-85), TC 28/05 (84-85), TC 76 and 77/04 (85-86) TC 683/04 (86-87).18. In the above circumstances, we allow the appeals in partby restoring the order of the CIT (Appeals) in all these cases. Noorder as to costs.DixitSd/Asst.Registrar/true copy/Sub Asst.RegistrarTo1. The Assistant Registrar,Income Tax Appellate TribunalIII Floor, Rajaji Bhavan,Besant Nagar, Chennai 600 0902. The Commissioner of Income Tax (Appeals)Coimbatore3. The Assistant Commissioner of Income TaxSpecial Investigation Circle I Coimbatore+ one cc to the P.J. Rishikesh for M/s. Subbaraya Aiyar Advocate srno. 7204+6ccs to Mr. N. Muralikumaran, SSC (Income Tax) sr no. 7317, 7318,7320, 7323 and 7324ms(co)nm(24.03.07) T.C.(A) No.180 OF 2003 BATCH