TMI Blog2006 (10) TMI 380X X X X Extracts X X X X X X X X Extracts X X X X ..... he Madras Hindu Religious and Charitable Endowment Act (hereinafter called the Endowment Act) or the earlier enactments relating to temples applicable to Madras Presidency. Under section 25 of the Endowment Act, every temple is required to maintain a comprehensive register containing all the information relevant to the administration and maintenance of the temple. Under section 25(1)(c) of the said Act the temples are required to state in the register the names of all the offices to which any salary emoluments or perquisites are attached and the nature, time and condition of service in each cases. The register maintained by the temple in accordance with the above statutory requirements showed that one Sri. Gopala Asranna was the archak and was required to perform the following functions at the temple : (a) Yajamanatwa (Pavitra Pani) (b) Pooja (c) Prarthana (d) Purana, and (e) Sahasranama Sr. Gopala Asranna died in the year 1915 leaving behind his son Sri Laxminarayana Asranna who came to hold the above post thereafter. Sri Laxminarayana Asranna died in the year 1956 leaving behind four sons viz., Sri Gopalakrishna Asranna, Sri Srinivasa Asranna, Sri Krishna Asranna an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ender the services throughout the 365 days of the year without any leave. In the event of ashaudha (uncleanliness) arising on account of Vruddhi and Kshaya (birth and death in the family) he cannot enter the temple precinct. He has to arrange the services being performed by competent persons and the expenses relatable thereto will have to be borne by him. The Endowment Act contains detailed procedure for filling up the vacancy in the post of a vilayadhar. On the death of a vilayadhar, one of the heirs will be appointed in his place, if all the legal heirs agree to such appointment. If the legal heirs cannot so agree, one of them will be appointed by the trustees as a fit person . The affected parties have the right of appeal to a hierarchy of appellate authorities. A vilayadhar receives a very nominal salary from the temple. His emoluments primarily accrue in the shape of a share in the seva commission. The devotees of the temple perform various sevas in the temple. For this purpose they are required to pay seva charges to the temple. Such seva charges vary according to the nature of seva. A part of the seva charges so collected by the temple, will be passed on to the archak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the earlier years in consultation with the managing trustee and the same was prevalent during that period. The assessee also furnished a copy of seva batwada rate list prevalent on the date of enquiry. It was explained that the dakshina amount shown in the return for the assessment years 1997-98 and 1998-99 is the amount received by the assessee from the devotees of the temple for giving theerta and prasada within the temple precinct. Vide question number 29 the assessee was also asked why he did not file the return of income in the status of Hindu undivided family since he represented the Asranna family and all the archakas belonged to the said family. The assessee replied that it was a question of law to be handled by the consultant. The Income-tax Officer, survey followed up the enquiry and, vide letter dated February 1, 2000, made two alternative proposals. Firstly, it was proposed to treat the seven archakas as a joint family and to consider the assessee as its kartha. Alternatively, it was proposed to treat the seven archakas as an association of persons. This proposal was seriously objected to by the assessee. Thereafter the Income-tax Officer, survey prepared a detailed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wed irrespective of actual payment. It was pointed out that only under section 43B the fact of payment is relevant. The assessee also requested that he should be supplied with the copies of the sworn statement of other archaks and an opportunity to cross-examine. This request was turned down. The Assessing Officer felt that since the issue was subjudice, an opportunity to cross-examine other archaks may amount to interfering with the process of law which may be regarded as contempt of civil court. In the assessments, the Assessing Officer held that the assessee had the absolute right to distribute the seva commission in the manner he wanted. If he so desired, he also had the discretion not to distribute the same and retain it with himself. In view of this, entire seva commission came to be considered as the income of the assessee. Since the assessee was not in a position to prove that he made the payments to other archaks as shown in the batwada registers, no deduction was given towards the same. However, she deducted the commission paid to other vilayadhars and taxed the balance of seva commission in the hands of the assessee. Tatte Kanike In the course of the hearing, the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed between Sri. Gopalakrishna (the father of the assessee) and his brothers on January 29, 1984, wherein the various family poojas stood enumerated. The assessee also filed a copy of the partition deed executed in December 2000 wherein the assessee had undertaken to continue to perform various family poojas stated therein in consideration of his sisters giving up the pooja rights inherited by them on the death of Sri Gopalakrishna Asranna in favour of the assessee. It was submitted that by performing the family poojas the assessee was able to enjoy the pooja income in entirety i.e. without sharing the same with his sisters . The Assessing Officer overruled the objections and confirmed the disallowance as proposed. Travelling expenses In his returns the assessee had claimed travelling expenses of Rs. 79,139 for the assessment year 1997-98 and Rs. 45,030 for the assessment year 1998-99. The Assessing Officer noticed that the assessee was staying in the temple locality. She was of the view that the assessee was not required to undertake any travelling in the course of performing pooja at the temple. In the absence of a clear nexus between the income and the alleged expenditure, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer, by her orders dated March 28, 2002, determined the total income of the assessee at Rs. 8,96,830 for the assessment year 1997-98 and at Rs. 9,08,260 for the assessment year 1998-99. The assessee, being aggrieved, carried the issues in appeal before the Commissioner of Income-tax (Appeals). While the matter was pending adjudication before the Commissioner of Income-tax (Appeals), the Assessing Officer initiated action under section 147 for the assessment years 1995-96 and 1996-97, by issuing notices under section 148. The assessee responded to the notices and furnished the returns. His request for the reasons recorded in terms of section 148 was not granted. In the assessments that followed, the Assessing Officer followed her reasonings for the assessment year 1998-99 subject to two exceptions. Firstly, salary claimed by the assessee has been fully allowed. Secondly, in respect of tatte kanike, she accepted the explanation of the assessee and no additions were made on this score. Consequently, assessments came to be made on February 28, 2005, for the assessment years 1995-96 and 1996-97. The assessee filed appeals before the Commissioner of Income-tax (Appeals) seeking redressa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he limited the allowance as under : Assessment years 1995-96 1996-97 1997-98 1998-99 Travelling expenses claimed by the assessee 47,354 58,534 79,139 45,030 Allowed by the CIT(A) 25,000 35,000 45,000 25,000 d. The findings of the Commissioner of Income-tax (Appeals) with regard to tatte kanike is to the following effect : "Though it has been claimed that the income from tatte kanike has been duly recorded in the books of account maintained by the appellant, it has not been established with proper evidence and narration before me. The income from dakshina shown at Rs. 47,800 which has been accepted by the Assessing Officer, also does not indicate any evidence that it is inclusive of the income from tatte kanike. It is contended by the appellant that some of the devotees give tatte kanike in small coins, which cannot be ruled out. The Assessing Officer has also not made any local enquiry or spot verification in the above matter. Neither any comparable cases have been cited in this regard. Under the circumstances, the contention of the appellant that the estimation has been made by the Assessing Officer in an excessive and arbitrary manner cannot be brushed aside." Consequently, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tances, I am constrained to hold that the Assessing Officer s action in bringing to tax the above income in the individual status is perfectly in order. Against the order of the Commissioner of Income-tax (Appeals) the Department has filed appeals for all the four years. The assessee has filed appeals for 1997-98 and 1998-99. He has also filed cross-objections for 1995-96, 1996-97 and 1998-99. By his letter dated September 8, 2004, the Assessing Officer furnished to the assessee a copy of reasons recorded for initiating action under section 147. The assessee, by his memo dated November 24, 2004, has sought leave of the Tribunal to raise additional grounds of cross-objections for the assessment years 1995-96 and 1996-97. The parties before the Tribunal have raised a number of grounds which may be conveniently classified into three groups. Firstly, both the parties are aggrieved by the orders of the Commissioner of Income-tax (Appeals) on account of the following : Grievance of the Department Grievance of the assessee a. Estimated income from tatte kanike (the assessment years 1997-98 and 1998-99) Ought not to have been reduced Addition ought to have been deleted. b. Family ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ever for not accepting the income returned which was supported by the sworn statement recorded by the Income-tax Officer (survey), Mangalore. The authorities below, have gone on the assumption that, at the temple, theerta prasada was being exclusively distributed by the Asranna family. It is a matter of record that, on special days and on Fridays, in view of large number of devotees visiting the temple, theerta prasada was also being distributed by other vilayadhars. (refer the agreement between Shri Gopalakrishna and his brothers dated January 29, 1984). The assessee had requested the Assessing Officer to make local enquiry in this regard or, in the alternative, to estimate the income based on similar reported cases. The Assessing Officer failed to bring on record any comparable case nor did she make any local enquiry. It should be noted that unlike other archakas, the assessee had no persons to support him. He was busy in conducting pooja from the morning to noon. During this time, theerta prasada was distributed by his assistants and tatte kanike was also received by them. This explanation was accepted by the Assessing Officer for the assessment years 1995-96 and 1996-97. For th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt in the case of CIT v. Sun Engineering Works P. Ltd. reported in [1992] 198 ITR 297 and interpreted by the hon ble Punjab and Haryana High Court in the case of Vipan Khanna v. CIT reported in [2002] 255 ITR 220, at page 234 is that when proceedings under section 147 of the Act are initiated, the proceedings are open only qua items of underassessment. The finality of the assessment proceedings on other issues remain undisturbed. Thus, at paragraph 2 at page 234, the court held as follows : We may also mention that the interpretation placed on the observations of the Supreme Court in V. Jaganmohan Rao s case [1970] 75 ITR 373 by the Deputy Commissioner in his order dated October 26, 1998, is not correct. He was not correct in holding that once valid proceedings under section 147 are started the whole assessment proceedings start afresh. Thus, on this ground, we allow the appeal of the assessee in deleting the addition made by the Assessing Officer and partly sustained by the Commissioner of Income-tax (Appeals) as they have once again resorted to fresh estimation of income, when in fact, the earlier estimation made by the assessee was accepted by the earlier Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce and the temple. It was also not the case of the assessee that he had incurred any particular expenditure while discharging his duty as an archak. The Assessing Officer had examined the administrative officer of the temple as her witness. However, she failed to ask the witness whether or not the assessee had performed various poojas, at his own cost, as is recorded in the resolution of the trustees, on which the Assessing Officer had otherwise relied on. Similarly, no questions were asked regarding the claim of the assessee that he had visited other temples, Government offices and yakshagana performances, as a representative of the temple at his own cost. Therefore, adverse inference had to be drawn against the Assessing Officer. In the assessment order, the Assessing Officer had not met the case made out by the assessee. The Assessing Officer failed to appreciate that by agreeing to incur the family pooja expenses the assessee was able to retain the pooja rights attributable to his father to the exclusion of the other legal heirs. The learned Commissioner of Income-tax (Appeals) was not justified in partially disallowing the claim of the assessee. As stated earlier, the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion attributable to all the vilayadhars and he had not rendered any accounts in this regard to the temple. Nor was he expected to render any such accounts and that this proves that the assessee had the absolute right over the amount received. He further submitted that : If he so chose, he could retain the entire seva commission to himself without distributing the same to any of the vilayadhars including other archaks. The assessee had admitted this position in the petition made to the Deputy Commissioner. In the circumstances, it was argued that the entire seva commission received by the assessee has been rightly considered as the income of the assessee. It is not in dispute that the assessee had no evidence to prove that he had actually disbursed the seva commission attributable to other archaks. On the other hand, the Assessing Officer, had in her possession, the affidavits sworn to by other archaks confirming the fact of non payment of seva commission by the assessee. In the circumstances, the learned Departmental representative had questioned the decision of the Commissioner of Income-tax (Appeals) to give total relief to the assessee. Learned counsel for the assessee submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ked out on monthly basis i.e. as soon as the assessee receives the payment from the temple. Thus, the amount due to each of the claimants is evidenced by these entries. Secondly, it is also an evidence of the fact of payment. It is this second evidence which is missing in the case of other archaks. This does not however mean that the first evidence is also absent. The Assessing Officer, who claimed to have examined other archaks, has failed to bring on record any evidence to prove that the seva commission shown in the registers as due to other archaks, is in fact, not due to them. It is further submitted that : It is to be noted that all the persons concerned viz., the assessee, the other archaks, the temple, the endowment authorities and the court agree that the other archaks have a right to perform pooja at the temple and infact have rendered pooja on weekly rotation basis and therefore are entitled to a part of the seva commission attributable thereto. The dispute is limited to the fact of payment. There are no evidences whatever that the liability to make payment to other archaks as recorded and found in the seva batwada register does not exist. The assessee is following merc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the submissions of learned counsel for the assessee in this regard. As the source of income is the right which accrued due to inheritance, the income therefrom is assessable only as Hindu undivided family income. Learning alone is not the source of income. There would be many persons, including other collaterals in the family who would be equally or better learned. That does not, by itself result in income. As regards, amounts due to collaterals, we agree with the findings of the Commissioner of Income-tax (Appeals). All the evidence in record proves that the only dispute is the factum of payment. As rightly pointed out by the Commissioner of Income-tax (Appeals) in case, the civil court takes a contrary view section 41(1) is available to tax the assessee. Coming to the issue as to whether the assessee can agitate this matter before the Tribunal after having himself offered such income in his income-tax return in his individual capacity that too in reopening proceedings, we hold that there cannot be any estoppel against the statute. Acquiescence cannot take away from a party the relief that he is entitled to where the tax is levied or collected without authority of law. The ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1998-99 out of the claim of Rs. 55,200 and Rs. 58,800 respectively. No reasons are stated for not allowing salary in full. It is prayed that the claim will be allowed in full. The learned Departmental representative relied on the order of the Commissioner of Income-tax (Appeals). Reasons for reopening The next grievance of the assessee is regarding the reopening of the assessments for the assessment years 1995-96 and 1996-97. Learned counsel submitted that the Assessing Officer communicated the reasons recorded in terms of section 148(2) to the assessee on September 8, 2004. Thereupon, the assessee has filed a memo before the Tribunal on October 25, 2004, seeking leave to file additional ground of cross-objection for the assessment years 1995-96 and 1996-97. The additional ground of crossobjection for both the years is identical and reads as under : Since the cross objector has not filed suit O. S. No. 24/194 before the court of civil judge (S R Division) Mangalore, seeking th share of income from such commission received by Sri. Laxminarayana Asranna as recorded by the Assessing Officer, the initiation of assessment proceedings under section 147 is clearly illegal. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned Departmental representative has submitted that there is a mistake in mentioning the case number. If we omit the first sentence and read the balance of the reasons recorded, after taking the fact that the very same Income-tax Officer had earlier framed assessment on the assessee for the assessment years 1997-98 and 1998-99, it will be clear that the Income-tax Officer had applied her mind before initiating action under section 147. The Departmental representative has also relied on the decision of the Karnataka High Court in the case of CIT v. R. Giridhar [1984] 145 ITR 246 in support of the proposition that in view of section 292B the reasons cannot be held to be invalid on account of unintended errors, since in substance and effect, the reasons recorded were in effect in conformity with or according to the intent and purpose of the Income-tax Act. Further he has relied on the decision of the Supreme Court in the case of Phool Chand Bajrang Lal v. ITO [1993] 203 ITR 456. Particular reference was invited to the following observations of the court (page 477) : Since the belief is that of the Income-tax Officer, the sufficiency of reasons for forming the belief is not f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... festation of the mind of the Assessing Officer. The reasons recorded should be self-explanatory and should not keep the assessee guessing for the reasons. Reasons provide the link between conclusion and evidence. The reasons recorded must be based on evidence. The Assessing Officer, in the event of challenge to the reasons, must be able to justify the same based on material available on record. He must disclose in the reasons as to which fact or material was not disclosed by the assessee fully and truly necessary for assessment of that assessment year, so as to establish the vital link between the reasons and evidence, that vital link is the safeguard against arbitrary reopening of the concluded assessment. The reasons recorded by the Assessing Officer cannot be supplemented by filing an affidavit or making an oral submission, otherwise, the reasons which were lacking in the material particulars would get supplemented, by the time the matter reaches the court, on the strength of the affidavit or oral submissions advanced. (underlining by us) Attention of the hon ble Tribunal is also invited to the decision of the Karnataka High Court in the case of Vijayalakshmi Oil Industries v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt Act) the assessee has claimed that his collaterals are not the ancestral archaks. It is submitted that, under the Endowment Act, there is only one archak whose name appears in the register maintained under section 25 of the Act. It is well-settled that where a person is a partner in firm representing his family, the other members of the family do not thereby become the partners of the firm. Similarly, in the instant case, the other archaks whose name is not entered in the register cannot claim to be archaks of the temple. Their remedy is to initiate appropriate proceedings for rectifying the register. It must be noted that the two civil courts (refer pages 75 to 102 of the departmental paper book) have concurrently held that the pooja rights in the temple belong to the Asranna family. Learned counsel for the assessee further submitted that : The learned Commissioner of Income-tax (Appeals) held that the pooja rights no doubt belong to the family. However, in his view the income in question did not accrue because of the pooja rights. According to the Commissioner of Income-tax (Appeals) the performance of pooja at the temple requires personal exertion and knowledge of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he tax effect was less than the prescribed limit. He has also relied on the Hindu Gains of Learning Act, 1930, and contended that the seva commission earned by the assessee is Gains of learning as defined in section 2(b) of the said Act. Therefore, the said income cannot be considered as the income of the joint family but can only be regarded as the separate income of the assessee. In reply it is the submission of the assessee that : The above Act was enacted to overcome a series of decisions which held that the income earned by a member of a joint family by the practice of a profession or occupation requiring formal education belonged to the joint family if such education was imparted at the cost of joint family. In order to be a gains of learning under the above Act it must be shown that the property was acquired by means of learning. As submitted earlier, in the instant case, the assessee would have earned the seva commission even if he did not have requisite knowledge and experience to perform pooja at the temple. In such a situation the family would have earned the seva commission by appointing a suitable archak. Consequently, it cannot be said that the seva commission ear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... both non-assessment as well as underassessment . Income is said to have escaped assessment' within the meaning of this section when it has not been charged in the hands of an assessee in the relevant year of assessment. The expression assess refers to a situation where the assessment of the assessee for a particular year is, for the first time, made by resorting to the provisions of section 147 because the assessment had not been made in a regular manner under the Act. The expression reassess refers to a situation where an assessment has already been made but the Income-tax Officer has, on the basis of information in his possession, reason to believe that there has been underassessment . . . (emphasis supplied) From pages 310 to 316 of the report, their Lordships have noted the decisions rendered by various High Courts. Thereafter, the court examined three decisions rendered by the Supreme Court (refer pages 316 to 320 of the report). Finally, their Lordships concluded the discussion as under (refer pages 320 and 321 of the report) As a result of the aforesaid discussion, we find that, in proceedings under section 147 of the Act, the Income-tax Officer may bring to ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e benefit of the Revenue and not an assessee, an assessee cannot be permitted to convert the reassessment proceedings as his appeal or revision, in disguise, and seek relief in respect of items earlier rejected or claim relief in respect of items not claimed in the original assessment proceedings, unless relatable to escaped income , and reagitate the concluded matters. Even in cases where the claims of the assessee during the course of reassessment proceedings relating to the escaped assessment are accepted, still the allowance of such claims has to be limited to the extent to which they reduce the income to that originally assessed. The income for purposes of reassessment cannot be reduced beyond the income originally assessed. (emphasis supplied) Learned counsel submitted that : From the above extracts, it is clear that the issue before the Supreme Court was whether, in the course of reassessment proceedings, an assessee can be permitted to reagitate the issues which stand concluded against him in the earlier assessment proceedings? In other words, the issue related to reassessment proceedings and did not relate to assessment under section 147 . It must be further noted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect of items not claimed in the original assessment proceedings, unless relatable to escaped income and reagitate the concluded matters. That the Supreme Court has further clarified that where a fresh claim for deduction or exemption is made and entertained, the allowance of such claims has to be limited to the extent to which they reduce the income to that originally assessed. The true ratio of the decision is that in the course of reassessment, the assessee is not permitted to reagitate the issues which have been decided against him in the original proceedings. Learned counsel distinguished the judgment relied upon by the Assessing Officer and submitted that : The Assessing Officer has relied on another decision of the Supreme Court in Chettinad Corporation P. Ltd. v. CIT [1993] 200 ITR 320. In this case their Lordships have followed the decision in Sun Engineering Works P. Ltd. [1992] 198 ITR 297 (SC) and dismissed the appeal of the assessee. As a result, the decision of the Madras High Court in Chettinad Corporation P. Ltd. v. CIT [1984] 147 ITR 57, from which the appeal arises, has merged with the decision of the Supreme Court. The following observations of the High C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... course of assessment of such income under section 147. In other words counsel submits that in the case of fresh assessment (not reassessment) there is no limitation for making claims by the assessee. That this is for two reasons. Firstly because, the entire income having escaped assessment, all claims relatable to computation of such income is permitted to be made. Secondly because, in the absence of an assessment, it cannot be said that an issue stands concluded against the assessee in the original proceedings. Thus learned counsel submitted that looking from any angle, the authorities below are not justified in holding that even in the case of first assessment, the assessee cannot be permitted to make fresh claims. However, for the assessment year 1995-96, the Assessing Officer is required to drop the proceedings under section 152(2). In this context, the assessee further relied on the decision of the jurisdictional High Court in the case of ITO v. K. L. Srihari, (HUF) [1992] 197 ITR 694 (Karn). In that particular case a regular assessment was framed. Subsequently, the assessment came to be made under section 147. In the said reassessment the Assessing Officer levied interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ering Works P. Ltd. [1992] 198 ITR 297 cannot be said to be the last word on the subject, and that the Supreme Court itself noted that the ratio of the said decision is not in accordance with the ratio of the decision in the V. Jaganmohan Rao s case [1970] 75 ITR 373 (SC) decided by a larger Bench. That if the reassessment order makes a fresh assessment of the entire income, the earlier order stands totally effaced and that consequently, the entire proceedings are fresh proceedings and the assessee can insist that he should be taxed on the total income computed in accordance with the Act and for this purpose can make all the claims including fresh claims not made in the course of original assessment. The assessee pleaded for further relief : (i) to drop the proceedings under section 147 by applying section 152(2), for the assessment year 1995-96, and (ii) to frame the assessment for the rest of the years by excluding the pooja income. After carefully considering rival contentions we hold as under : We admit the additional grounds as they are legal grounds. The assessee can be permitted to raise the issue of reopening for the first time before the Tribunal. For this proposit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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