9911796707
TMI Blog2010 (2) TMI 939X X X X Extracts X X X X X X X X Extracts X X X X ..... eir - wife Smt. Jyothikumari, wife herself is the respondent - assessee in ITA No. 258/2001 and the subject-matter of this appeal is the block assessment order passed in respect of this assessee for the block period 1.4.1985 to 18.3.1996 and in respect of her undisclosed income for this period, but the revenue passing an assessment order in the hands of this assessee more for the purpose of an alternative option as this assessee had claimed the income assessed to tax as her own income which had gone into contribution of acquiring an asset in respect of which contributions had been made by the couple, but the revenue having rejected this version of this assessee and having attributed the entire unexplained, undisclosed investment in the asset as the undisclosed income of the assessee's husband - Purushothamlal for the very block period. 3.The respondent - Smt. Jyothi Kumari in the other appeal viz. I.T.A.258/2001 is the wife of Sri. Purushothamlal. 4. The search and the follow-up action having lead to the passing of the assessment order dated 26.5.1997 under the provisions of Section 158 BC of the Act, resulting in considerable tax liability on Sri. Purushothamlal, the Principal a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 158BC of the Act as on 22.6.1996. 9. It is also the version ofthe Revenue that further panchanama was drawn as. on 16.5.1996. 10. The notice under Section 158BC of the Act was followed-up by a further notice dated 19.7.1996 issued under Section 142 of the Act apprising the assessee that the case is posted to 30.07.1996. 11. The further development thereafter as recorded in the order of the Assessing Officer is extracted as below:- "In response to this notice, the assessee's representative has stated that he has filed: Returns of income for the assessment year 1995-96 and 1996-97 in Form No. 2 in response to notice u/s 158BC . On receipt of this letter, another opportunity was given to the assessee to file the Return in form No.2 for the block period 01.04.1985 to 18.03.1996 by 30.7.1996 with copy to assessee's representative Shri U.V. Mallya, Chartered Accountant, Bangalore. In response to this notice, the assessee's representative sent a telegram seeking extension of time for filing the Return till 15.08.1996. The telegram was followed by a letter from the assessee's representative wherein he has confirmed the sending of the telegram and requesting for time till 15.08.199 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere present and they wanted time till 27.01.97 on which date the case was posted for hearing. On 27.01.97 the assessee filed detailed written submissions contesting the various issues raised at the time of hearing which are dealt with separately in this order. The case was again posted for hearing by issue of notice u/s 143(2) and summons u/s 131 on 11.02.97. The assessee along with his representative appeared on that date and a statement was recorded on that date from the assessee. While recording the statement, the assessee sought some more time to file further details that were required for finalisation of the assessment proceedings. The assessee stated that he will file the details called for by 17.02.97. In view of the assessee's failure to file the details called for, the case was again posted for hearing by issue of notice u/s 143(2) and summons u/s 131 on 27.03.97. There was no response from the assessee. The case was again posted on 25.04.97 by issue of summons on 10.04.97. There was no response from the assessee. Therefore, another letter was issued by this office on 05.05.97 requiring certain details to finalise the assessment proceedings by 12.05.97. The assessee appear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1)(b) of the Act. 14. Likewise, the assessment order passed in respect of the undisclosed income of Smt. Jyothi Kumari though was a protective measure by the Revenue, on the premise of this assessee having undisclosed income attributable to the unexplained part of the investment on the property at No.568, 10th Cross, Buddha Marga, Siddartha Layout, II Stage, Mysore. It is the very property in respect of which, her husband had also claimed to have made investment and the claim of the couple being that they had invested jointly for the construction of the house on this site and from out of their respective earnings. The block assessment order under Section 158BC of the Act of this assessee also was for the block period 1.4.1985 to 18.3.1996 on the premise that the actual investments on the house property was not fully disclosed as also the actual income of the assessee from her own activities. The order in the hands of Smt. Jyothi Kumari was also appealed against and the Income Tax Appellate Tribunal acting as the First Appellate Authority has allowed the appeals in full, in terms of the common order dated 4.4.2001 passed in respect of both these appeals IT (SS) A.No. 118/B/97 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e by the assessee or the [Assessing] Officer." 18. Though the Tribunal it appears, did permit the assessee to raise this ground and did look into its order for a possible correction on the premise of the mistake in passing the order, nevertheless on examining the question on its merits found there was no occasion to exclude the amount from the undisclosed income of the assessee as assessed by the Assessing Officer and accordingly disposed of the Miscellaneous Petition. 19. The Tribunal examined this petition under Section 254(2) and in terms of its order dated 25.1.2002 treated the petition as allowed for the limited purpose of re-examining the appeal of the assessee only in respect of ground No. 6 as urged in the memorandum of appeal and on such examination found that, there was no occasion to vary or modify the earlier order of the Tribunal touching on this aspect of the matter and there was no occasion to set aside or modify the order of the Assessing Officer on this aspect of the matter and accordingly opined that the original order dated 4.4.2001 did not call for any modification and the said order was sustained in its original form. 20. It is against this order dated 24.3. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer report by adopting erroneously local rates and granting supervision charges of 10%? 5. Whether the Tribunal was correct in holding that the assessee was entitled to claim Rs.15,000/- towards payment of loan on vehicle when there was absolutely no proof about such payment except estimation from auto consultancy? 6. Whether the Tribunal is correct in holding that a. sum of Rs. 1,00,000/- paid to Lakshmi and admitted by the Assessee in his statement cannot be added to the income of the assessee as the assessing officer has not stated whether the document of has been availed a pro-note, or an agreement which has been referred to as document No. 17 in the assessment order? 7. Whether the peak credits of Rs.14,55,550/- which was not explained by the assessee could be allowed by the tribunal that the bank accounts are figuring in the balance sheet including the cash credits when the income of the assessee was being shown on estimate basis and no final accounts were submitted along with the return ? ITA.NO.258/2001: 1. Whether the Tribunal is correct in holding, that the cost of construction should be assessed in the hand of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order passed by the Assessing Officer and as reversed by the Tribunal. If the order of the Tribunal can, be. sustained though not on merits, even without conceding but assuming for arguments sake not on merits but only on the ground of limitation in a sense that the block assessment order passed on 26.5.1997 was one barred by the period of limitation as indicated in Section 158BE of the Act, then the order of the Tribunal can be sustained on this premise alone notwithstanding the fact that the assessee has not either preferred an independent appeal on the aspect of the Tribunal not having agreed with the stand of the assessee that the assessment order was barred by the period of limitation and also notwithstanding the fact that the assessee had neither filed a cross appeal nor cross objection in the appeals filed by the Revenue but nevertheless for the purpose of sustaining the order of the Tribunal to the extent the assessee gets relief before the Tribunal that can be sustained even by supporting the order of the Tribunal and such findings and issues though would have gone against the assessee as per the answers given by the Tribunal and therefore, would vehemently urge that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... achala learned Sr. Standing Counsel for the Revenue has joined issue on this aspect, contending that in the first instance the very premise which is assumed on the part of the assessee is that the provisions of Order 41 Rule 22 are attracted to an appeal under Section 260-A of the Act, is neither tenable nor stipulated in terms of the statutory provisions of Section 260-A of the Act, that it is not open to the assessee to contend that the order of the Tribunal can be supported even by pressing the arguments to contend that the assessment order was barred by limitation though the Tribunal neither examined this question nor has in any way indicated that it was a question that merits examination for an answer to set aside the block assessment order and would urge that the assessee having not preferred an appeal by itself in terms of Section 260 A of the Act raising the precise substantial questions of law on the question of limitation if it was so permissible and a shortcoming of this nature either not seeking to modify the order or not following a procedure that can fetch the assessee a relief for invalidating the order of the Tribunal not on merits but on the ground of limitation al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s as the Court may deem fit to frame even during the course of hearing and such questions which had not been initially formulated for an answer and questions on examination of which the appeal had been admitted but which arise in the opinion of the Court and can be examined at any point of time before the disposal of the appeal. 28. While this part of the argument is an argument based on the right given under Section 260A of the Act itself, the other part of the argument such as supporting the order of the Tribunal even in the appeals preferred by the Revenue and to the limited extent of calling in aid the question of limitation, Sri. Shankar, learned counsel for the assessee has urged that this course of defence is definitely available for the assessee in the two appeals of the Revenue on the proper understanding of the provisions of sub-Section (7) of Section 260 A of the Act which in turn has adopted the provisions of CPC as are applicable to the appeal before the High Court and so far as may be such provisions applied in the case of appeals under this Section i.e. Section 260-A of the Act and the submission here is that insofar as the procedure for examining the appeals before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... implication decided by the Tribunal against the assessee or even such issues which the assessee had raised for determination by the Tribunal and in this case the question of limitation before the Tribunal and which has not been expressly addressed to can also be raised and a correct answer can be sought for even when the assessees have not filed any appeals that so tar as the question of limitation is concerned to the extent of sustaining relief granted by the Tribunal in the assessees appeal before the Tribunal and though the Tribunal had not expressly opined on the question of limitation can nevertheless demonstrate before this Court that the assessing authority had no jurisdiction to pass an assessment order in terms of the provisions of Section 158BC of the Act for the reason that a period of one year had already elapsed from the date of initial search and therefore in the wake of the provisions of Section 158BE of the Act, the Assessing Authority having been prohibited or not enabled to pass block assessment order after the expiry of this period could not have passed an assessment order which was sought in an appeal against the assessee before the Tribunal and when the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsp;(4) The appeal shall be heard only on the question so formulated, and the respondents shall, at the hearing of the appeal, be allowed to argue that the case does not involve such question: Provided that nothing in this sub-section shall be deemed to take away or abridge the power of the court to hear, for reasons to be recorded, the appeal on any other substantial question of law not formulated by it, if it is satisfied that the case involves such question. (5) The High Court shall decide the question of law so formulated and deliver such judgment thereon containing the grounds on which such decision is founded and may award such cost as it deems fit (6) The High Court may determine any issue which - (a) has not been determined by the Appellate Tribunal; or (b) has been wrongly determined by the Appellate Tribunal, by reason of a decision on such question of law as is referred to in sub-section (1). (7) Save as otherwise provided in this Act, the provisions of the Code of Civil Procedure, 1908 (5 of 1908), relating to appeals to the High Court shall as far as may be, apply in the case of appeals under this Section. OR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cond appeal be heard on the question so formulated and it shall not be open to the appellant to urge any other ground in the appeal without the leave of the court, given in accordance with the provisions of section 100. 3. Application of rule 14 of Order XLI Reference in sub-rule (4) of rule 14 of Order XLI to the court of first instance shall in the case of an appeal from an appellate, decree or order, be construed as a reference to the court to which the appeal was preferred from the original decree or order. Section 100 CPC : (1) Save as otherwise expressly provided in the body of this Code or by any other law for the time being in force, an appeal shall lie to the High Court from every decree passed in appeal by any Court subordinate to the High Court, if the High Court is satisfied that the case involves a substantial question of law. (2) An appeal may lie under this section from an appellate decree passed ex parte. (3) In an appeal under this section, the memorandum of appeal shall precisely state the substantial question of law involved in the appeal. (4) Where the High Court is satisfied that a substantial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lifting of prohibitory order as on 16.5.1996 without anything more particularly, when any seizure or impounding of any document etc., by itself will not be in the nature of a search proceedings conducted on that day and therefore, would urge that only the date of search 18.3.1996 and nothing more and if 18.3.1996 is to be taken as the date of search, then the assessment order passed as on 26.5.1997 is definitely barred in terms of Section 158BE as the period contemplated in terms of Section 158BE ended on 31.3.1997 and therefore an order dated 16.5.1996 is definitely bad in law etc. It is this factual premise which is made use of for urging the legal submissions relating to the provisions of Order 41 Rule 22, Order 42 in turn r/w Section 260 A (7) of the Act. 36. Though on facts the question as to whether search ended on 18.3.1996 or it continued up to 16.5.1996 there is no clear recording of finding by the Tribunal and in the wake of the records of the assessing authority placed before us, it indicates that certain proceedings had taken place on 16.5.1996 and if we are to accept the search etc., recording certain developments such as lifting of prohibitory order as on that date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erson in respect of search initiated or books of account or other documents or any assets requisitioned after the 30th day of June, 1995 but before the 1st day of January 1997; and (b) Two years from the end of the month in which notice under this Chapter was served on such other person in respect of search initiated or books of account or other documents or any assets are requisitioned on or after the 1st day of January, 1997. Explanation 1: In computing the period of limitation for the purposes of this section:- (i) the period during which the assessment proceeding is stayed by an order or injunction of any court; or (ii) the period commencing from the day on which the Assessing Officer directs the assessee to get his accounts audited under sub-section (2A) of section 142 and ending on the day on which the assessee is required to furnish a report of such audit under that sub-section, or (iii) the time taken in reopening the whole or any part of the proceedings or giving an opportunity to the assessee to be re-heard under the proviso to section 129; or (iv) in a case where an application made before the Settlement Commission under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act, we notice from the assessment order that the assessee had appeared before the Assessing Officer even after 31.3.1997 i.e., when the case had been posted on 25.4.1997 and the issue of summons on 10.4.1997 and when the assessee did not appear in response to subsequent letter dated 5.5.1997 from the Revenue, appearance of the assessee on 12.5.1997 and seeking for an adjournment till 16.5.1997 would virtually estop the assessee from contending that on the present facts in terms of Section 158BE of the Act, the Assessing Officer could not have passed the block assessment order for the said period. We also draw support from the first part of Clause 3 of Explanation (1) of Section 158BE of the Act which reads as under :- "Time taken in reopening the whole or any part of the proceedings or giving an opportunity to the assessee to be re-heard under the proviso to section 129; or" which would indicate that time consumed by the assessee at his request for postponing the proceedings and for passing an assessment order should be excluded in computing the period of one year from The date of search. 42. In this regard, we are unable to accept the submission of Sri. Shankar, learned counse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is a right given to a non-appealing respondent to defend a decree which the non-appealing respondent would have obtained before the Court of first instance and to the extent of merely defending in terms of the first part and for getting more relief in terms of second appeal of this provision. If first appeal in terms of Section 96 of CPC is not the same as the second appeal in terms of Section 100 of CPC. 47. While the substantive provision for filing an appeal is the judgment and decree of the original Court, question is as to whether under Section 96 and the procedure governing the filing of such an appeal, is in terms of Order 41 of CPC. The substantive provision for filing a second appeal to the High Court can be compared to Section 260 A of the Act for the purpose of present examination. The procedure for disposal of the second appeal before the Court is provided for in Order 42 and sub-rule (1) of order 42 expressly says that the provisions of Order 41 of CPC shall be applicable insofar as may be, to appeals from appellate decrees. The Karnataka amendment to Order 42 of CPC has brought about the following changes in place of existing order that as in the Central Act page 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the words "support the decree" appeared to be strange and "what is meant is that he may support it by asserting that the ground decided against him should have been decided in his favour. It is desirable to make this clear". That is why the main part of Order 41 Rule 22 was amended to reflect the principle in Venkata Rao case as accepted in Chandre Prabhuji case. 20. So far as the explanation was concerned, the Law Commission stated (p. 298) that it was necessary to "empower" the respondent to file cross-objection against the adverse finding. That would mean that a right to file cross-objections was given but it was not obligatory to file cross-objections. That was why the word "may" was used. That meant that the provision for filing cross-objections against a finding was only an enabling provision. 21. These recommendations of the Law Commission are reflected in the Statement of Objections and Reasons for the amendment. They read as follows: "Rule 22 [i.e. as it stood before 1976] gives two distinct rights to the respondent in appeal. The first is the right of upholding the decree of the court of first instance on any of the grounds on which that court decided against him ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly clarified by the 1976 Amendment and there is no change in the law after the amendment. 24. The respondents before us are, therefore, entitled to contend that the finding of the High Court in regard to the absence of reasonable and probable cause or malice - (upon which the decree for pecuniary damages in B and C Schedules was based) can be attacked by the respondents for the purpose of sustaining the decree of the High Court refusing to pass a decree for non-pecuniary damages as per A Schedule. The filing of cross-objections against the adverse finding was not obligatory. There is no res judicata. Point 1 is decided accordingly in favour of the respondent-defendants. 50. We find that the question as to whether a cross-objection is tenable in a second appeal to the High Court was not a question, which was examined in this judgment of the Supreme Court, but it is only explaining the scope of Rule 22 of Order 41 and as to the precise scope of first part of Rule 22 which enables a non-appealing respondent in an appeal against an appealable decree to defend that part of the decree even by urging such other grounds which would have gone against the non-appealing respondent and not f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance to the observation contained in para-24, we have to inevitably conclude that cross-objection as contemplaced in Rule 22 Order 41 of CPC are not tenable in an. appeal under Section 100 CPC even in terms of Order 42 of the Code. Paragraph 23 and 24 reads as under :- "23. From the examination of these judgments and the provisions of Section 41 of the Act and Order 41 Rule 22 of the Code, in our view, the following principles emerge: (1) Appeal is a substantive right. It is a creation, of the statue. Right to appeal does not exist unless it is specifically conferred. (2) Cross-objection is like an appeal. It has all the trappings of an appeal. It is filed in the form of memorandum and the provisions of Rule 1 of Order 41 of the Code, so far as these relate to the form and contents of the memorandum of appeal apply to cross-objection as well. (3) Court fee is payable on cross-objection like that on the memorandum of appeal. Provisions relating to appeals by an indigent person also apply to cross-objection. (4) Even where the appeal is withdrawn or is dismissed for default, cross-objection may nevertheless be heard and determined. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ower on the court to do so. Section 39 of the Act confers right to file appeal, insofar as the orders passed under this Act are concerned, only against such of the orders as fall within one or other of the descriptions given in clauses (i) to (vi) of sub-section (1) of Section 39. Parliament has taken care to specifically exclude any other appeal being filed, against any order passed under the Act but not covered by clauses (i) to (vi) abovesaid, by inserting the expression "and from no others" in the text of sub-section (1). Clause (a) of Section 41 extends applicability of all the provisions contained in the Code of Civil Procedure, 1908 to (i) all proceedings before the court under the Act, and (ii) to all the appeals, under the Act However, the applicability of such of the provisions of the Code of Civil Procedure shall be excluded as may be inconsistent with the provisions of the Act and/or of rules made thereunder. A bare reading of these provisions shows that in all the appeals filed under Section 39, the provisions of the Code of Civil Procedure, 1908 would be applicable. This would include the applicability of Order 41 including the right to take any cross-objection under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nefit or relief is to be deprived of that benefit or relief he should have an opportunity to defend that possession. The minimum that is expected in law and procedure is that a person is given an opportunity before being deprived of any benefit or relief which a person had already obtained. 57. It is for this reason that we have examined the merits of the submission that the assessment order was barred by the provisions of Section 158BE of the Act and Sri. Shankar, learned counsel for the assessee was permitted to make submission on that aspect of the matter on an examination of the factual position and the statutory provisions as pointed out m Section 158BE of the Act, particularly, prescribing the period of one year and indicating the situations wherein the period of one year is enlarged. We have examined and answered such submissions also in the wake of the view expressed in the earlier part of this order. We are of the clear opinion, that even on complying with the principles of natural justice and the prayer of the respondent-assessee to defend the order on the question of limitation also the submission of the respondent does not stand scrutiny in accepting the same as expres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essable entity or as a person for the purpose of Income-tax Act though the assessee was regularly assessed to tax and even the wife of the assessee was also a regular assessee and both had been filing their returns periodically in their individual capacity. The expenses of a HUF was never disclosed nor offered claim by both the assessees. 64. In this state of affairs, we notice that a finding recorded by the Tribunal assuming it to be on a fact by the Tribunal to the effect that there was an HUF and certain investments said to be explained by the assessee in whose returns it was found as unexplained to be the income of the HUF and in turn gift given to the assessee is nothing short of a perverse finding or inference not tenable in law nor stipulated on material available. The reasoning of the Tribunal towards the end of paragraph 17 reads as under :- "17. We have gone through the entire facts and thoroughly perused the assessment order. The assessee has given a clear account of transactions as to which amounts pertaining to money-lending business; punting business and double entries etc. When such facts and figures are furnished by the assessee it is the bounden duty of the Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to sustain the order of the Tribunal and even if that is not possible the assessee should now be permitted, even if it is to be held not possible, the assessee can definitely seek for raising additional grounds in his own appeal, which is again attracted against the order of the Tribunal though initially only on the question of difference of value and on the question of availability of a sum of Rs. 3.10,000/- being the sale proceeds of a car which the assessee pressed earlier and which proceeds count in the investment which had been invested in the construction of building and such other questions. Limitation was not a question but in the light of the enabling proviso to sub-section (4) r/w sub-section (6) of Section 260 A of the Act, Such additional ground/question should always be permitted to be raised and even the Courts can also admit such questions and answer the questions and if such is the statutory provision the assessee should be permitted to raise this question. It is therefore, such additional grounds sought to be urged in the assessee's appeal i.e., ITA. No. 277/2003, the question of limitation is sought to be agitated before this Court to contend that the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which issues can arise and on such premise has also urged that the appeal under Section 260 A of the Act could be taken as first appeal and not a second appeal, we are not very impressed by these submissions for the reason that the very contention on the question of limitation is that the assessing authority could not have passed block assessment order in terms of Section 158BC in view of the limitation provided under Section 158BE of the Act. The objection to the question of limitation should be raised at the earliest, particularly when it is to be found, that on the peculiar facts and circumstances of the given case there cannot be a generalization of the question of limitation being applicable to all cases. It is no doubt true that the statute has prescribed the limitation in general but even here for the purposes of considering the supporting point of limitation it is inevitably linked to the date on which the cause of action arises which depends upon the facts and circumstances of each case and can be different in respect of each litigant in respect of income tax matters, which is the respect of each assessee. If so, the question of limitation being not a pure question of law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n or has indicated that there are good number of judgments of the High Courts and even the Supreme Court indicating the scope of the provisions of Order 41 Rule 22 and even with reference to the provision as it now prevails after the 1976 amendment to CPC. The scope of Order 41 Rule 22 after the amendment is explained to be of two implications. The first part is to enable a non-appealing respondent to defend the order in appeal even by supporting the order by contending that the issues decided against the respondent should have been decided in favour of the respondent by the order under appeal even without filing a positive appeal or a cross appeal The second part is to enable a non-appealing respondent who could have filed an appeal to the extent of Original Court not having granted the relief sought for by the non-appealing person through an independent appeal to maintain a cross-objection which can achieve the purpose of maintaining an independent appeal and though such a party might have missed the bus and had not filed the appeal which is io be filed or to maintain such an appeal through the cross-objection in the appeal filed by either contestant to the original proceedings. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d nor made an issue in the several authorities placed before us by the learned counsel and the other authorities, which we had occasion to refer to are only incidentally touching upon the aspect and in the wake of the provisions of Order 41 Rule 22 as it occurs as part of the procedure regulating the filing of a regular first appeal, it cannon be by implication extended under order 42, to attribute a right of filing a cross-objection in a section 100 appeal also. 80. A Single Beach decision of the Orissa High Court in the case of Shridhar Ghose v. Hari Mohan Sahu AIR 1964 ORISSA 141, while opines that a cross-objection in terms of Order 41 Rule 22 is not tenable in a second appeal. A contrary view appears to have been taken in a Single Bench Decision of the Kerala High Court in the case of Palasseri Velayudhan v. Palasseri Ithayi AIR 1994 Ker. 267, however, to the limited extent of the cross-objection also conforming to the requirements of a Section 100 appeal. 81. We have bestowed our attention to these two authorities of the Orissa High Court as well as Kerala High Court. On an independent analysis also we find that with a second appeal being not the same as. a first appeal and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions of sub-section (7) of Section 260A of the Act on which Sri. Shankar, learned counsel for the assessee has placed considerable reliance to contend that cross-objections are tenable even in an appeal under Section 230A of the Act, also only enables the provisions of Code of Civil Procedure relating to the appeal to the High Court being made applicable only as far as may be and subject to the other provisions in this Section or in the Act also. Sub-section (7) of Section 260 A of the Act figuring towards the end of the Section "Expressly providing for the procedure to be followed, it should be understood to be only in respect of the procedural aspects of Order 42 that is made applicable and even there to the extent it may be made applicable. While even in Order 42 not all provisions of Order 41 are made applicable, the scope of the provisions of Order 42 are being made applicable to an appeal under Section 260 A of the Act should necessarily be read as a provision in providing for creating substantive rights. A right of appeal under Section 260A of the Act is governed by sub-sections (1) to (6). 85. The scope of an appeal is that the order appealed against should involve a subs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined at Page 166 reading as under :- "One other contention urged by learned counsel is that this expenditure could be treated as revenue expenditure under section 37 of the Income-tax Act and the matter may be adjudicated in that manner. Learned counsel, Mr. P.K. Ravindranatha Menon, appearing for the Revenue, submits that no separate appeal is filled by the assessee claiming this relief. The question of considering the present claim that it would be a revenue expenditure cannot be adjudicated. We are of the view that there is no prohibition in the statute preventing the examination of the said contention as to whether the present claim be treated as revenue expenditure. Sub-section (7) of section 260A reads as follows: "Save as otherwise provided in this Act, the provisions of the Code of Civil Procedure, 1908 (5 of 1908), relating to appeals to the High Court shall, as far as may be, apply in the case of appeals under this section." This means that all the provisions relating to an appeal under the Civil Procedure Code would apply when an appeal is preferred under section 260A. It is well known that a respondent in appeal can sustain the order which is being challenged in app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeals to the High Court and even here only to the extent of they being applicable or made applicable and enabled under sub Section (7) and subjected to further condition that it is so safe for application on a reading of all other provisions of Income Tax Act. A sweeping generalization to the effect they being made the basis for acceptance, even the Court maintains a distinction between the first appeal and second appeal and all appeals are generalized under the code. Be that as it may, with great respect to Kerala High Court we are unable to subscribe to the view taken in this judgment and on the other hand we indicate our views, on this aspect as above. Reliance placed by Sri. Shankar, learned counsel for the assessee, on the decision of Calcutta High Court Income Tax 124 438 cannot also advance the submissions made on behalf of the assessee to contend that a cross-objection in terms of Order 41 Rule 22 is enabled either in a Section 100 appeal or in an appeal under Section 280 A of the Act for the reason that the judgment is an authority only insofar it relates to the applicability of the provisions of Rule 5 of Order 41 and that cannot be made applicable or extended to underst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore of the Trial Court chooses to file an appeal to improve his prospects or to deprive the contestant even from the limited relief that the other party would have obtained before the Trial Court and it is only to give a second round of opportunity to a non-appealing party, who is content with limited success or failure but is dragged before the appellate court, gets a fresh opportunity to shrug off even the adverse part of the trial court even such a party had himself not filed an appeal, the enabling provisions of Rule 22 of Order 41 are put on the statute, but such an enabling provision to file a cross-objection in a second, appeal under section 100 CPC is neither the possibility nor the intention of legislature in Rule 1 of Order 42 of CPC. Even the provisions of Rule 3 of Order 42 of CPC reading "Reference in sub-rule(4) of Rule 14 of Order XLI to the court of first instance shall in the case of an appeal from an appellate decree or order, be construed as a reference to the court to which the appeal was preferred from the decree or order" also cannot make any difference to understand that the provisions of Rule 22 of Order 41 of CPC are all automatically applicable even in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 95. With regard to the question posed for our answer in paragraph-18 of the memorandum of appeal i.e., relating to valuation of the property and submission in this regard by Sri Seshachala, learned senior standing counsel appearing for the revenue is that the valuation by the department was based on sound principles and the deletions by the tribunal are not justified in law; that the Tribunal has committed an error in not only allowing a deduction of 15% purporting to be due to the differences in legal valuation method and CPW valuation method which the Tribunal presumes to have been adopted by the Departmental Valuation Officer and further deduction of 10% towards supervisory charges by the assessee himself was also not warranted when the situation did not warrant a reduction of this nature and in fact the claim of self supervision was clearly proved to be imaginary claim on the assessee's own revelations. 96. On this aspect, submission of Sri Shankar, learned counsel for the assessee is that if the revenue was not inclined to accept the valuation which according to the revenue was unearthed from the information furnished by the assessee himself and on his own valuation at Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12,44,100/- is totally not warranted in law and therefore all questions could be answered in favour of the revenue and against the assessee. 100. We notice that the difference between the two valuations is hardly around Rs.30,000/- and in such state of affairs, if the assessee's claim towards self supervision is found not tenable, we do not find the matter warranted such detail examination by the Tribunal and that too by giving various reasons. 101. With regard to the submission of Sri Shankar, learned counsel for the assessee that difference in valuation cannot be subject matter for block assessment on the premise that it is some undisclosed income and with respect to this view taken by the learned Judges of Bombay High Court in the decision stated [supra], we are of the view that the concept of block assessment is only one that enables revenue to bring to tax some undisclosed income for the block period and it is not so important as to the manner in which it is found that certain income had not been disclosed whether it is attributable to some differences in valuation or on any other reason, so long as it has a link to the search which results in passing of a block assessment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... while the assessee also did not dispute the transaction, the explanation which had not even found merit with the assessing officer was that a sum of Rs.50,000/- had been repaid by Sri Gururaj and that had been recycled etc., and therefore balance amount if at all could have been locked into was not acceptable as the claim was not supported by any receipt etc., owing from Gururaj - husband of Lakshmi. 107. The Tribunal on this issue has reversed the finding with a rather perverted reasoning to hold that there is no concrete evidence to support the view taken by the assessing officer. 108. It is not for the assessing officer to produce some negative evidence, but for the assessee who puts forth a claim, to make good the claim by producing evidence. If the assessee had claimed some amount had come back to him and that formed a reinvestment etc., that stand should have been made good by the assessee and not disproved by the assessing officer. In our considered opinion, the reasoning is most illogical, bordering on perversity. We set aside the finding of the Tribunal on this aspect and answer the question in favour of the revenue and against the assessee. 109. With regard to me ques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessing officer had committed an error warranting interference by the tribunal to conclude that on the premise that the cash credits could be explained from the source of the income of the Hindu Undivided Family, some income earned by the assessee from Singapore trip collections and amount drawn by the assessee from the chit group and also as part of home loan from Canara Bank and cash gifts received from the relatives, we find that the assessee had net put forth such claims before the assessing authority but was rest content in claiming that the method of arriving at the peak cash credit was not tenable; that it worked for each year and this claim projected for the entire number of years in the block period etc. 113. We find that the Tribunal has gone over board in finding ways and means of funding the bank deposits in favour of the assessee by attributing that to a variety of activities on the part of the assessee capable of generating income available for investments in a bank by way of deposits. 114. If the version of the assessee that he was carrying on business by borrowing money is to be pleaded, the assessee would not have been keeping the fund parked in a bank by way ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der this clause shall not be entitled to file a revised return; (b) the Assessing Officer shall proceed to determine the undisclosed income of the block period in the manner laid down in section 158BB and the provisions of section 142, sub-sections (2) and (3) of section 143 section 144 and section 145 shall, so for as may be, apply; (c) the Assessing Officer, on determination of the undisclosed income of the block period in accordance with this Chapter, shall pass an order of assessment and determine the tax payable by him on the basis of such assessment; (d) the assets seized under section 132 or requisitioned under section 132A shall be dealt with in accordance with the provisions of section 132B." 117. On a reading of the provisions of section 158BC of the Act, it becomes clear that the existence of some undisclosed income, and deduction of the same which are attributable to a search, in the sense, that it is as a sequel to the search in terms of section 132 of the Act, then in respect of such undisclosed income or as income which had not been subjected to tax, the assessing officer is bound to pass a block assessment order. 118. Here, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndicated in section 149 of the Act and if it is for a shorter period and only on fresh information and it presupposes information leading to the possible income after it was not assessed to tax unless there is information and cannot be by looking into the very information or return filed by the assessee, such a limitation we are afraid cannot and should not be read into for the assessment in the block period in terms of section 1 58BC of the Act. 120. Submission of Sri Shankar, learned counsel for the assessee proceeds on the premise that it is analogous to the applicability of the provisions of section 147 of the Act for reassessment. 121. We are also aware that if an income had already been disclosed in the returns filed prior to the search by the assessee, such income can be brought to tax only in the form of regular assessment or by reopening as permitted within the scope of section 147 of the Act and does not get into a block assessment order, but if an income had not been disclosed for earlier years, there is no way of the assessee filing a revised return for the earlier year, but it is only in the block period it has to be brought to tax and the only criteria for bringing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he criteria but what part of the available amount had been indicated to be from out of the disclosed income is the criteria and the assessee having not disclosed the income part which had gone into such investments and with the assessing officer having arrived at by a method of peak cash credit to be at Rs. 14 lakhs etc., from out of those deposits there was no way that the tribunal could have reversed that finding of the assessing authority. 125. Sri Shankar, learned counsel for the assessee very vehemently contended that not only the assessment of income on peak cash credit basis is very erroneous, but even while computing the income for the block period, the method of the assessing officer, taking into account the peak cash credit for each of the years in the block period is also not tenable as that militates against the scheme of the block period for treating the entire block period as one assessment period and it is for this reason has submitted that the aggregation of the peak cash credits in the two accounts, namely, current account and savings bank account maintained by the assessee with Canara Bank from the years 1991-92 to 18.3.1996 reads as under: Asst. Year SB A/c No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t some part of it has been recycled for the deposits made during the subsequent years within block period, quite naturally that amount could have gone into the purpose of computing the peak cash credits for the subsequent years, the actual recording on this aspect by the assessing officer that the assessee did not come forward with any evidence worthwhile to accept this claim and the Tribunal instead of addressing this aspect has given some other reasoning to reverse the finding of the assessing authority. 128. If the Tribunal should have found as a matter of fact and as is now sought to be contended by Sri Shankar, learned counsel for the assessee before us that the peak cash credit which constitute income for the years were available for redeposit on being withdrawn and if it should have been made good perhaps that could have merited acceptance and could have been a good ground for either setting aside the assessment order determining the income as assessed by the assessing officer or to the extent it is permitted to reduce the same. But, such is not the course of action resorted to by the Tribunal nor demonstrated by the assessee either before the assessing officer or before th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal attributing such sources of income to the assessee for the purpose of concluding that the assessee had cash of Rs. 27,15,600/- which even on a very liberal view appears to be rather ambitious for the assessee and rather impertinent on the part of the Tribunal to record such a finding. Attributing availability of an amount of Rs. 27,15,600/- in the hands of the assessee which had never been accounted for and even when the assessee had been borrowing from the banks for the purpose of investment for the construction of house etc., does not appeal to us either on logic or on reasoning and to accept that the assessee even while was retaining such amount of cash in his hand, was borrowing funds otherwise also and such cash was the amount which is available for such deposits etc. 133. The reasoning given by the tribunal does not appeal to us in the least and while we frown on this finding, other argument of Sri Sbankar, learned counsel for the assessee that the method of taking the peak cash credit for each of the year and aggregating that is also not tenable is an argument which we cannot accept for the simple reason that for each year, the assessing officer has in fact examined his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... credits made in the bank accounts had failed to do that, it was not for the tribunal to invent possibilities not demonstrated before it to hold that there was no undisclosed income or to opine in any other manner and even if the assessee to contended, as is now submitted by Sri Shankar, learned counsel for the assessee that it could have been only the peak which is the one peak for the entire block period. 136. There can be only one peak and not several peaks, but in the very scheme of the Income Tax assessments and the manner of computing undisclosed income, that too by the present method of the unexplained credits in the bank account, we do not find the method adopted by the assessing officer to be obnoxious enough to warrant interference by the Tribunal or to upset the same by us on the basis of arguments addressed by Sri Shankar, learned counsel for the assessee. It is for this reason we inevitably answer this question in favour of the revenue and against the assessee and by setting aside this finding of the Tribunal and sustaining the finding of the assessing officer. 137. Therefore, the substantial question Nos. 1, 2, 3, 4, 5 & 7 as indicated in memorandum of appeal at par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 254/- on the assessee. 141. The assessees stand was that she, as wife of Purushothamlal, had separate and independent income prior to the date of search of the premises of Purushothamlal; that she had filed return of income for the year 1995-96 in the normal course, towards the difference in the cost of construction of the house property jointly with her husband and other amount, was in a sum of Rs. 3,81,284/-, as unexplained investment made by the assessee for the four assessment years in question in purchasing an immovable property by the assessee. 142. The assessee had appealed to the tribunal, contending inter alia, that the search was not in accordance with law; that the assessment was not within the permitted time under Section 158BE of the Act; that the income sought to be included in the hands of the husband of the assessee cannot be again assessed in the hands of the present assessee also. With regard to the investment of Rs. 3,81,284/- as unexplained investment, it was the version of the assessee that it was an income generated by her in relation to tailoring activity pursued by the assessee and the income from this activity had also been offered to tax and the investme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount cannot be treated as an undisclosed income of her husband Purushothamlal, particularly in the wake of the present assessee having filed her return of income for the earlier years prior to the date of search and having earned some income and offered it to tax and that income being sufficient to sustain assessee's explanation on this aspect, the finding based on the premise that the assessee had an independent source of income and from out of that income she had made investment, which theory has not been accepted by the revenue and therefore, the revenue is in appeal to this extent. 149. It is also submitted that the addition of Rs. 3,81,284/- an amount which the assessing authority had found over and above what had been accepted in terms of the returns filed by the assessee in the earlier years and this amount having not been properly explained in any manner other than the amount already indicated in the returns filed by the assessee, deletion by the tribunal is not justified and is on an erroneous premise that it is only an income which had already been offered to tax in terms of the returns filed by the assessee for the earlier years. 150. Sri A Shankar, learned counsel for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee directed against the order passed by the tribunal in two appeals that had been preferred by the assessee and his spuse Ms Jyothi Kumari, is against that part of the order of the tribunal, wherein the assessee was denied relief to the extent of confirmation of addition of Rs 3.10 lakh, an amount which the assessee claimed as income generated from the sale of a car, which was not accepted by the revenue and instead treated it as undisclosed income of the assessee for the block period, and also on the aspect of the difference in the value of a building constructed by the assessee during the block period being taken as undisclosed income of the assessee, assessable to tax in terms of Chapter XIVB of the Act and on the premise that the tribunal had taken the view that the assessing authority was entitled to bring to tax as undisclosed income the block period even if the particulars relating to the generation of income had already been disclosed in the returns filed for the period prior to search and as to whether the additions made on such premise can form subject matter for assessment under Section 158B(b) of the Act. 156. This appeal had been admitted to examine the fol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in law in not holding that the assessment order dated 26.05.1997 is barred by limitation in accordance with the provisions of section 158BE of the Income Tax Act on the facts and circumstances of the case. 159. The arguments substantially overlapped one another and all questions, except the question relating to acceptability of the source of investment of Rs 3.10 lakh as one attributable to sale of a motor car owned by the assessee, have virtually being answered above while answering the questions arising in the two appeals of the revenue. 160. For the sake of record, we have further examined the question relating to limitation, particularly as Sri Shankar, learned counsel for the assessee, has submitted that if the question of limitation is to be answered in favour of the assessee if reliance placed on behalf of the assessees in the decided cases of other high courts as also a Division Bench of this court, as referred to by us while dealing ITA No 257 of 2001, are to be looked into. 161. Sri M V Sheshachala, learned standing counsel for the, revenue, has raised a preliminary objection to permit such further questions being raised in this appeal, as it was not a question which h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uage of Section 158BE of the Act and the indication provided therein to compute the period of limitation, in an elastic manner and not in a rigid manner of a watertight compartment and having found that in the facts and circumstance of the assesses's case and particularly having regard to the conduct of the assessee in seeking for further time, even to file a return of income in respect of the undisclosed income for the block period after the expiry of the date up to which alone, the assessee contends, the assessing officer has been enabled to pass an assessment order and beyond that day, he has no jurisdiction and if the assessee had, by his own conduct, sought to take the assessment order beyond that date, that too for enabling him to furnish details in respect of the return, in the sense, that the assessee wanted further opportunity before passing the assessment order and it had been acceded to by the assessing officer, we are of the view that the situation cannot be taken to be as one disentitling the assessing authority to pass assessment orders as on 26-5-1997 and that the assessment orders passed on this day in terms of Section 158BE of the Act are beyond the jurisdiction of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essarily answer this question in favour of the appellant-assessee and against the revenue. To this extent, we set aside the findings of the tribunal as well as that of the assessing authority, and hold that the addition of a sum of Rs 3.10 lakh to the undisclosed income of the assessee is not justified and the assessment order warrants correction to this extent. The assessing authority to effect the correction and to implement and given effect to this finding by passing necessary order in this regard. 168. Questions raised at paras-22 and 23 of the memorandum of appeal do not really warrant separate answers, in the light of the answers we have already indicated to the earlier substantial questions, which virtually cover these two questions also and therefore we ignore these two questions holding that they do not warrant separate answers on the facts and circumstances of this case. 169. In the result, this appeal is allowed in part to the extent indicated above. 170. In the peculiar circumstance of the case and in view of the mixed fortune for the revenue, we leave the parties to bear their respective costs, though we were inclined to mulct the assessees with proportionate cost f ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
