By TIOL News Service

ERNAKULAM, APRIL 13, 2018: THE ISSUE BEFORE THE DIVISION BENCH IS - Whether a technical fault on the part of Department in carrying out block assessment proceedings without resorting to reopening, will not nullify entire proceedings and hence, will not exonerate assessee for escaped income. YES IS THE VERDICT.

Facts of the case:

The appellant herein is the son of the now-deceased Assessee, who's premises had been searched u/s 132, pursuant to which notice u/s 153A had been issued. The Revenue alleged that the Assessee had entered into transactions pertaining to a property, from which an amount had been earned as consideration during both AYs. The Revenue claimed that certain documents recovered from a broker involved in the transaction, had revealed a considerably higher consideration. Such documents had been received by the Revenue through a Tax Evasion Petition. Thereupon, the Assessee's heirs were served notices u/s 143 pursuant to which assessment orders were passed, determining income for both AYs.

On appeal, the CIT(A) rejected the appellant's contention that the earlier of the two relevant AYs was not liable to be considered for block assessment. Also, the arguments that proceedings u/s 153A being based on material not recovered during search, was also rejected. Regarding the documents relied on by the AO, the CIT(A) found them to be photocopies not signed by the purchaser. Further they were uncorroborated with further material to show that the Assessee had received any consideration exceeding what had been declared. Hence, the CIT(A) directed that assessment be completed as per the returns filed pursuant to the notice u/s 153A and the computation of capital gains to be as returned by the Assessee and not that adopted by the AO. On further appeal, the Tribunal upheld the findings of the AO & reversed the findings of the CIT(A). Further, the computation of capital gains were remanded back to the AO.

High Court held that,

++ the mere fact that without proceeding u/s 147 r/w Sections 148 and 149, the Department proceeded u/s 153A would not by alone, absolve the assessee from making good the tax relating to the income which has escaped assessment. The mere fact that the provision under which the Department proceeded was not proper, would not vitiate the entire proceedings especially since there is no procedural requirement distinguishing a notice u/s 148 or one u/s 153A. The appellant has a contention that the assessee did not accept the signture in the copy of the consent letters. Nor could a verification of the signature with admitted signatures be attempted, for reason of the material received by the Department being mere photo copies. There was no evidence unearthed, according to the appellant, as to the assessee having received any amounts other than that returned, i.e., Rs.60,00,000/-; Rs.44,00,000/- in the financial year 1998-99 and Rs.16,00,000/- in 1999-2000. That is a question of fact and this court would not have normally looked into the same; and there is also no question on that aspect raised in the appeal. But, if there is no material available, definitely the findings of the Tribunal could be held to be perverse;

++ this question is also inextricably linked with the contention of the appellant that there was no incriminating material unearthed on search. Hence, we looked into the assessment orders. This court finds from the assessment orders that the purchaser had issued cheques to two persons unconnected with the transaction, but very close to the assessee, one Lakshmanan and another Kamala. They were nominees of the assessee and did not have any financial transaction with the purchaser. These persons admitted on oath that the cash cheques issued by the purchaser in their names were encashed on the instructions of Sri.Karunakaran, the husband of the assessee who handed over the said cheques to the two persons. The proceeds, after encashment, were also stated to be handed over to Mr Karunakaran. One of the witnesses to the agreement was examined on oath and he admitted that he had witnessed the same. The details of such evidence were communicated to the legal heir of the assessee, who did not seek cross-examination of any of the said witnesses; but merely filed a reply denying the existence of the consent letters and the statement of the witnesses;

++ in the cash flow statement filed on behalf of the assessee, the assessee had shown a total receipt of Rs.60,00,000/- from one K.N.Abdul Hameed, the purchaser, out of which Rs.44,00,000/- is said to have been received in the AY 1999-2000. The first transaction, transferring half of the right in the property, was made by execution of a sale deed after which the purchaser Abdul Hameed was found to have withdrawn Rs.50,50,000/-. Hence, there was clear evidence as to the total consideration received, being Rs.1,01,00,000/- in the two transactions; establishing the information as disclosed from the copy of the consent letters received along with the Tax Evasion Petition. The first transaction took place in the F.Y 1998-1999, in which the assessee admitted receipt of only Rs.44,00,000/- and after the execution of the first sale deed, there was a withdrawal of Rs.50,50,000/- from the purchaser's account. This obviously was for the second transaction, the sale deed of which was executed at the commencement of the next financial year 1999-2000. The exact amount of income escaped from assessment is supported by ample evidence. There is no reason to interfere with the orders of the Tribunal.

(See 2018-TIOL-677-HC-KERALA-IT)