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Calcutta High Court

Smt. Kusum Goyal vs The Income Tax Officer Ward 54(2) ... on 5 February, 2010

Author: Kalyan Jyoti Sengupta

Bench: Kalyan Jyoti Sengupta

                           APOT No. 418 OF 2009
                                  WITH
                            WP No. 753 of 2009

                    IN THE HIGH COURT AT CALCUTTA
                        Civil Appellate Jurisdiction
                              ORIGINAL SIDE

                            SMT. KUSUM GOYAL

                                   Versus

    THE INCOME TAX OFFICER WARD 54(2) KOLKATA AND OTHERS



  BEFORE:

  The Hon'ble JUSTICE KALYAN JYOTI SENGUPTA

The Hon'ble JUSTICE KALIDAS MUKHERJEE Date : 5th February, 2010.

The Court :- This appeal has been directed against the order of the Learned Single Judge of this Court dated 23.9.2009 whereby and whereunder His Lordship has been pleased to dismiss the writ petition of the appellant observing that there is no ground for interference with the impugned order of the assessing officer. His Lordship held also that there has been an alternative remedy as the appeal is allowable, therefore, this writ petition is not also maintainable.

It is appropriate to record that at the earlier stage the Learned Trial Judge admitted the writ petition for hearing with affidavits, however, keeping the point of maintainability open.

The fact of the case is summarised as hereunder ;-

The petitioner is an assessee and has been carrying on business of Life Insurance Agency. In course of business she had made various expenses namely making payment to assistants who helped her in procuring business. However, this payment has been classified as "sub commission". At the time of filing of returns the payment made on account of sub commission to those persons were shown as business income and as such statutory deduction was claimed. On queries being made the petitioner submitted documents viz. copies of the returns filed by those persons in 'Saral Form', PAN cards of those persons to whom payment has been made and also bank statement purporting to show the payments made to those persons. It is an admitted position there has been no document showing receipt of payments which were made. The Assessing Officer, however, did not accept those materials to be sufficient to hold that the same being business income and as such sums of Rs.23,97,471/- and Rs.32,20,000/- were not treated to be business income and it was added to the total income of the assessee petitioner and hence the said amount was assessed to tax. It appears that a request was made to the Assessing Officer to issue summons to those persons for examining whether such payments were made to them or not. The Assessing Officer, however, turned down the prayer and assessed in his own way. It was the grievance before the Hon'ble First Court that without ascertaining correctness of the version of the petitioner with an acceptable evidence the Assessing Officer cannot disbelieve the same. With this process the petitioner's right of being heard essentially is denied and thereby violation of principle of natural justice has been perpetrated.

The Learned Trial Judge was not impressed with such argument and was of the view that the alternative remedies are there and this point can very well be agitated before the appellate authority.

Dr. Pal submits while assailing the judgment of the Hon'ble Trial Judge that dismissal of the writ petition on the ground of alternative remedy after having admitted the same is not tenable under the law. Alternative remedy, it is settled law, is not bar to exercise jurisdiction of this Court under Article 226. Mr. Som, however, does not dispute the legal proposition, however, he says that at the time of admission the point of maintainability on the ground of alternative remedy was kept reserved.

We accept Mr. Som's submission that if the writ petition is heard on affidavits reserving the right to agitate the question of alternative remedy then obligation of the Court is to decide that point before it delves into the merit of the matter. It appears that in the earlier order the Court has reserved the point of maintainability.

It is an undisputed position that against this order of assessment an appeal was preferred. Dr. Pal submits that the assessment made by the Assessing Officer in relation to the issue of payment of sub commission and also to sundry creditors is legally untenable since decision making process was not rendered on the basis of acceptable evidence. He further submits that his client has discharged his initial burden producing the PAN cards of the respective persons namely the sundry creditors and other persons who received the sub commission and also furnished the statement of bank account recording the payments made to them. Of course, the receipts of payments in formal way were not there. When such burden is discharged obviously the burden shifts upon the Revenue to discredit those documents in order to disbelieve altogether. According to him to clinch the issue said persons should have been summoned as witness to give testimony while exercising power under Section 131 of the Income Tax, 1961. He submits that the Section 131 is 4 not really power but duty in real sense. Hence Assessing Officer is duty bound to discharge duty.

Mr. Som on the other hand submits that payment of sub commission in connection with the insurance agency business is unheard of under the relevant laws so such payment cannot be accepted at the face value. Even if such payment is said to have been made for some other purpose in relation to the business then it is the burden of the assessee under 106 of the Evidence Act, who is having special knowledge to prove that it was made by producing receipts, voucher which are unimpeachable documents in character.

Dr.Pal cited a decision of the Supreme Court reported in 159 ITR in the matter of COMMISSIONER OF INCOME-TAX, ORISSA v.ORISSA CORPORATION P. LTD. on the question of burden in the circumstances of the case of this nature. At page 84 of the report it is observed by the Court as follows which is strongly relied on by the Dr. Pal ;-

"In this case, the assesse had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income-tax assesees. Their index numbers were in the file of the Revenue. The Revenue, apart from issuing notices under Section 131 at the instance of the assessee, did not pursue the matter further. The Revenue did not examine the source of income of the said alleged creditors to find out whether they were creditworthy or were such who could advance the alleged loans. There was no effort made to pursue so- called alleged creditors. In those circumstances, the assessee could not do anything further. In the premises, if the Tribunal came to the conclusion that the assessee had 5 discharged the burden that lay on him, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion is based on some evidence on which a conclusion could be arrived at, no question of law as such arises.

It is common ground that the question on the penalty aspect depended on the quantum aspect.

In the premises, it cannot be said that any question of law arose in these cases. The High Court was, therefore, right in refusing to refer the questions sought for. The appeals, therefore, fail and are dismissed with costs."

Dr. Pal also cites a decision on the question of the power of exercising summoning the witness reported in (1990) 1 Supreme Court Cases 68 in the matter of FOOD CORPORATION OF INDIA versus PROVIDENT FUND COMMISSIONER AND OTHERS. It was a case of the issuance of commission by the Provident Fund Commissioner to issue summons for discovery and production of the documents and attendance of the persons. Another case was cited of the Supreme Court in connection with the powers of the provident fund Commissioner for summonsing the witness reported in (1990) 1 Supreme Court Cases 71 in the matter of M/S.MARWAR TENT FACTORY versus UNION OF INDIA AND OTHERS.

The Learned Trial Judge in our view has dismissed the writ petition in exercise of discretion observing that there is an alternative remedy and this discretion should not be interfered with this Court lightly though but at the same time this Court is not oblivious of the contention of violation of principle of natural justice with regard to non-receipt of evidence received by the Assessing Officer while passing an order of assessment. According to us, the factum of payment made by an employer 6 to employee is not the exclusively special knowledge of the employer alone as the employee also receives such payment. So, we are of the view that if any dispute relates to payment made or received then knowledge is shared by both the persons namely employer and employee, in other words the payer and recipient. Here factually the assessee did produce certain materials before the Assessing Officer to show that payment was made. In order to reject the evidence of the factum of payment adduced by the assessee, to put otherwise to dispute factum of payment having been made, some more steps should have been taken by the department concerned to collect more evidence. If it is not done this amounts to violation of principle of natural justice as has been observed in the aforesaid Supreme Court decision. We respectively accept the ratio decided by the Hon'ble Supreme Court in view of COMMISSIONER OF INCOME- TAX, ORISSA v.ORISSA CORPORATION P. LTD.(supra).

In the facts and circumstances of this case we think because of the time bound assessment required to be made, the Assessing Officer did not issue any summons, as such course of action would have caused delay and by that time the assessment would have been time barred. It is legally realistic situation and we cannot ignore it altogether. But the assessee should not be driven to the place of injustice. We are of the prima facie view that the disbelief of the payment of Rs.23,97,471/- on account of sub commission and also a sum of Rs.32,20,000/- on account of payment to sundry creditors is not founded on legally acceptable evidence. According to us in the fitness of the situation the Assessing Officer should have summoned those persons as was requested by the assessee to have a clear picture whether they have received payment or not because they also could testify or still can testify whether the payment was received as claimed by the assessee.

Apropos, we think that everything is not over and this Appellate Authority can very well exercise such power as Section 131 of the said Act is clear in this regard as it empower all officers including the Commissioner of Appeals. The Appellate Authority has the same power as are vested in a Court under the Code of Civil Procedure 1908 (5 of 1908) when trying a suit in respect of the following matters ;-

(a) For discovery and inspection ;

(b) Enforcing attendance of any person any officer of a banking company and examining him on oath ;

(c) Compelling of production of books of accounts and other documents and

(d) Issue a Commission;

Under these circumstances we think that accepting observation of the Hon'ble Trial Judge we grant liberty to Dr. Pal's client to prefer an appeal either partly or wholly as may be advised and also to make a prayer for issuing a summons to examine those persons on the documents. On receipt of such application Appellate Authority must issue summons for examining those persons to verify such claim of payment to those persons having been made or not. We make it clear that this examination shall confine to "Two Heads" of the amounts namely sub commission amounting to Rs.23,97,471/-, and Rs.32,20,000/- on account of payment said to have been made to sundry creditors. We also make it clear that without deciding the issue as to legality and validity of the claim of deduction the Commissioner shall not decide the appeal. If for any reason the assessee is advised to prefer appeal as a whole against the entire assessment order then the rules and procedure with regard to pre-deposit etc. should not be resorted to in respect of tax liability in relation to the aforesaid amount of Rs.23,97,471/- and Rs.32,20,000/- against appellant, who, however, must 8 execute a bond in favour of the Assessing Officer, of the amount of tax already assessed on the aforesaid two amounts and such bond shall be deposited with the Appellate Authority. However, it is made clear execution of the bond will abide by the decision of the Appellate Authority.

It is placed on record if the appeal is preferred within a period of thirty days from the date of receipt of the xerox certified copy of this order then the aforesaid order will be operative. If no appeal is preferred within the time scheduled as above then the benefits in terms of this order will not be available.

If the appeal is time barred then an application for condonation of delay shall be made to the Appellate Authority who shall take note of the factum of pendency of this matter before this Court and exclude the time while computing the period of limitation.

This judgment and order is passed without prejudice to the rights and contention of Dr. Pal's client.

Let urgent xerox certified copy of this order be made available to the parties, if applied for.

(KALYAN JYOTI SENGUPTA, J.) (KALIDAS MUKHERJEE, J.) GH.