Income Tax Appellate Tribunal - Bangalore
The Income-Tax Officer vs Sri Laxminarayana Asranna on 19 October, 2006
Equivalent citations: [2008]298ITR231(BANG)
ORDER
J. Sudhakar Reddy, Accountant Member
1. The assesses had filed appeals for assessment years 1997-98 and 1998-99 and the Revenue has filed appeals for the four assessment year 1995-96, 1996-97, 1997-98 and 1998-99. The assesses has also filed cross-objections for three assessment year 1995-96, 1996-97 and 1997-98. As the issues are common in all these appeals for the sake of convenience they are heard together and disposed off by way of this common order.
2. The brief facts of the case are as follows;
2.1 The assessee is the hereditary trustee and the officiating Pradhana Archak of Sree Durga Parameswari Temple, Kateel (hereinafter called the Temple). The Temple is located at Mangalore Taluk of Dakshina Kannada District. This place formed part of Madras Presidency, and, under the State Reorganization Act 1956, became a part of Karnataka. Under the State Reorganization Act, the temples continued to be governed by the earlier laws applicable to them notwithstanding their merger with the new states. Thus, the temple is governed by 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 and Sri. Sadananda Asranna. After the death of Sri. Laxminarayana Asranna in 1956, the archak post came to be held by Sri. Gopalakrishna Asranna even though the property viz., the pooja rights belonged to the family consisting of four brothers headed by Sri. Gopalakrishna Asranna. This is because the temple records provided for one vacancy of Archaka and did not provide for increasing the number. The four brothers were rendering the pooja at the Temple on monthly rotation basis even though, in the official records, Sri. Gopalakrishna Asranna was the only Archak. Sri. Sadananda Asranna died before 1991 leaving behind three sons viz., Sri. Ananthapadmanabha, Sri. Kamaladevi Prasad and Sri. Harinarayanadasa. Sri. Gopalakrishna Asranna died on 15.9.1991 leaving behind his only son Sri. Laxminarayana Asranna (the assessee in present appeal) as his heir in the male line. Sri. Srinivasa Asranna died subsequently leaving behind two sons viz., Sri. Vasudeva and Sri. Venkataramana. After 15.9.1991, the pooja duties were being conducted on weekly rotation basis. Out of the five duties enumerated above, Sri. Gopalakrishna Asranna was performing yajamanatwa duties to the exclusion of his brothers. On his death, this duty came to be performed by his son Sri. Laxminarayana Asranna to the exclusion of other collaterals. Thus, during the previous years relevant to the assessment years 1995-96, 1996-97, 1997-98 and 1998-99 the pooja duties were performed by the four branches of Asranna family on weekly rotation basis while the yajamanatwa duty was being attended to exclusively by Sri. Laxminarayana Asranna.
2.2 The Temple was managed by two hereditary trustees. One trustee, as stated above, was from the assessee's family. The other trustee was from Kodettur Guttu family. The trustees had bifurcated their duties from a very long time. As per the practice, the trustee from the Asranna family was in charge of all the happenings within the temple precinct whereas the other trustee was responsible for all the activities outside the temple.
2.3 The various rituals within the temple precinct are being carried out by a number of persons including archaks. These persons are collectively called as Vilayadhars. The Vilayadhar holds the post on hereditary basis. He comes within the administrative control of the trustees. However, he is not an employee of the temple. He is required to render the services throughout the 365 days of the year without any leave. In the event of "ashaudha" (uncleanliness) arising on account of "Vruddhi and Kshayd' (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.
2.4 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 trustee to be distributed between the various Vilayadhars. Each of the vilayadhar is entitled to a share in the commission. The entitlement of various Vilayadhar is a matter of record of assessment and has been furnished before the I.T.O Survey, I.T.O Ward - 1(4) Mangalore and also before CIT (A) (refer Exhibit - 1). At the end of every month the total seva commission attributable to various vilayadhars used to be worked out by the temple and a consolidated cheque used to be credited to the bank account of Archak Trustee. The Archak Trustee maintains a register known as Seva Commission Batwada Register. It is maintained Fisly year wise i.e. from 1st July of the calendar year to 30th June of the subsequent calendar year. The register is maintained in four parts. In the first part, the seva commission attributable to Asranna family who were rendering Yajamanatwa, pooja, prarthana, purana and sahasranama duties are recorded on weekly basis. In the next part, the seva commission attributable to other vilayadhars is worked out and recorded on monthly basis. In the said register, other Vilayadhars have signed to acknowledge the receipt of their share of seva commission. In the third part, charges paid towards prasada vitharana is recorded, and is, similarly acknowledged. In the last part, the salary paid to the personal staff of the assessee is recorded and acknowledged. It should be noted that the first part did not contain the signatures of the recipients viz., the assessee and his collaterals.
2.5 During the year under reference, there were, in all, seven archaks. There are several disputes between the assessee and other six archakas. As an off shoot of the dispute, an enquiry came to be made by the I.T.O. Survey Circle, Mangalore. A sworn statement of the assessee was recorded on 25.1.2000. The assessee was asked a number of questions. The manner of distribution of seva commission came to be enquired into and the same was explained with reference to Batwada Registers. The I.T.O, Survey retained the Batwada Registers for about a month for investigation and the registers were returned thereafter. In the course of the survey, it was explained (question number 11) that the ratio of distribution of seva commission between various vilaydhars has been decided by custom and practice 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 HUF 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 I.T.O, Survey followed up the enquiry and, vide letter dated 1.2.2000, 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 I.T.O Survey prepared a detailed survey report and forwarded the same to I.T.O, Ward - 1(4), Mangalore who had the jurisdiction over the assessee. On receipt of the survey report, I.T.O, Ward - 1(4), Mangalore (hereinafter called the Assessing Officer) initiated action under Section 147 of the Act by issuing notices under Section 148 of the Act for the assessment years 1997-98 and 1998-99.
2.6 Seva Commission:
The assessee responded to the notices and filed the returns declaring the same income as disclosed originally. The Assessing Officer was also requested to furnish copy of the reasons recorded in terms of Section 148. However, the reasons were not furnished. In the course of the hearing, the assessee supported the return and produced the Seva Batwada registers. The Assessing Officer required the assessee to produce confirmation from other archaks for having received the seva commission as shown in the said registers. The assessee submitted that, in view of the disputes, he was unable to procure the confirmation from other archaks. In the circumstances, the Assessing Officer proposed to treat the entire seva commission received by the assessee as his income of the respective previous years. The assessee objected to the proposal. Threefold objections were raised. Firstly, it was submitted that the assessee received and distributed the seva commission to various claimants in his official capacity as trustee and hence the same cannot be considered as the personal income of the assessee. He acted like a Pay Distributing Officer. Secondly, it was submitted that the various claimants having held the different posts and rendered the services had a better title to the income than the assessee. It was, therefore, pleaded that the income stood diverted at source itself. Finally it was submitted that, if seva commission is to be regarded as the personal income of the assessee, the amount payable to other archaks, which has been contemporaneously recorded in the Batwada register will have to be allowed as an expenditure. It was pointed that there were no disputes between the archaks (including the assessee) regarding the existence of right to a share of seva commission in favour of other archaks as noted in the batwada register. The dispute was regarding the payment of such commission Since the liability was not under dispute, it was prayed, that the same wil have to be allowed irrespective of actual payment. It was pointed out thai 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 sub-judice, 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.
2.7 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.
2.8 Tatte Kanike In the course of the hearing, the Assessing Officer examined the Administrative Officer of the Temple. He stated that the archaks used to receive offerings at the time of distribution of theertha prasada. In a normal day the offering varied between Rs. 1,000 to Rs. 2,000 and on Fridays the offerings totaled up to Rs. 10,000 to Rs. 15,000. The Assessing Officer proposed to estimate the income of the assessee on this basis and made a proposal accordingly. The assessee submitted that the Administrative Officer had no personal knowledge in this regard and demanded cross-examination. The Assessing Officer was requested to make local enquiry or to visit any other temple to have first hand information about the offerings. Thereupon, the Assessing Officer reexamined the witness who admitted that he had no personal knowledge and only made a guess work. Thereafter, the Assessing Officer proposed to estimate the income on a different basis. It was the theory of the Assessing Officer that every devotee who purchases a kajjaya from the Temple by paying Rs. 5 will pay Rs. 10 to the archaks as offerings. The assessee objected. The Assessing Officer concluded the assessment by estimating the income at Rs. 2/- per kajjaya ticket. It should be noted that this was in addition to the dakshina income admitted by the assessee.
2.9 Pooja Expenses:
While computing the total income, the assessee had claimed family pooja expenses of Rs. 65,500/- for the assessment year 1997-98 and Rs. 75,400/- for the assessment year 1998-99. The Assessing Officer proposed that, in the absence of nexus between the expenditure and income, the expenses on this score cannot be allowed. The assessee submitted that as the yajaman of the Temple, he was required to perform certain special sevas in the Temple to set example for other devotees to perform similar sevas. It was pointed out that these family poojas were being performed over a period of generations. In support, the partition deed executed between the forefathers of the assessee in February 1893, i.e. more than 100 years back, was alsb furnished. In the said partition deed, it had been agreed to between the two coparceners to enjoy the pooja rights on yearly rotation basis. It was stipulated that the person performing the pooja must also perform certain special pooja/sevas at the Temple, stated therein, at his own cost. The Assessing Officer's attention was drawn to the agreement executed between Sri. Gopalakrishna (the father of the assessee) and his brothers on 29.1.1984 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.
2.10 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, the expenditure was proposed to be disallowed. The assessee submitted that, as compared to his collaterals, he was holding the additional post of Trustee which resulted both in additional income and additional expenditure. As the yajaman of Kateel Temple, he was required to visit other temples. He was also required to frequently attend government offices in connection with the Temple affairs. Besides, he was also travelling whenever the yakshagana troops of the Temple gave performances. It was pointed out that because of the keen interest shown by the assessee and his father, the Temple had four yakshagana troops as against one troop in other temples. The assessee also relied on the decision of the Supreme Court in the case of CIT v. Rajendra Prasad Moody 115 ITR 519 and submitted that since the expenditure had been incurred in course of his carrying out the duties, the same was allowable. The Assessing Officer was not convinced and consequently, the travelling expenses came to be fully disallowed.
2.11 Salary:
The assessee had claimed salary of Rs. 55,200/- for the assessment year 1997-98 and Rs. 58,800/- for the assessment year 1998-99. Of the above, the Assessing Officer allowed deduction of Rs. 16,800 in each of the assessment years. The rest of the claim was not allowed to be deducted. No reasons have been stated for not allowing the balance of the salary claimed.
2.12 Status:
In the course of the assessment, the assessee claimed that the right to perform pooja at the Temple belonged to his joint family and hence the proceedings taken against him in individual capacity to bring to tax such income shall be dropped. The Assessing Officer did not agree with the assessee. She noted that a proposal made by I.T.O (Survey) to tax all the seven archakas of the Temple as one joint family had been opposed both by the assessee and by other archakas. She also noted that the assessee had taken a stand, in several proceedings under the Endowment Act, that the other archaks are not the hereditary archakas of the temple. Finally, by relying on the decision of the Supreme Court in CIT v. Sun Engineering 198 ITR 297 she held that the proceedings Under Section 147 is for the benefit of the revenue and hence the assessee is precluded from taking any stand to his advantage in the course of such proceedings.
2.13 Consequently, the Assessing Officer, by her orders dated 28.3.2002, 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 C.I.T. (A). While the matter was pending adjudication before C.I.T. (A), 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 28.2.2005 for the assessment years 1995-96 and 1996-97. The assessee filed appeals before C.I.T (A) seeking redressal of his grievances.
2.14 In the appeal, the CIT (A) has passed different orders for different years. He has discussed the various issues in the appeal relating to the assessment year 1998-99 and in other years he has followed his reasoning for the said year. His findings on various issues are as under:
a. Regarding seva commission attributable to other archakas his findings are as under:
In the first place, it may be stated that since the other archakas have filed suits against the appellant, claiming therein their rights in seva commission and non-receipt of the same for a particular period and the above suit is sub-judice, the Assessing Officer's action in coming to the conclusion that the entire income from seva commission belongs to the appellant exclusively and is assessable entirely in his hands, is not justified. The Assessing Officer, on her part has also not established the above fact by bringing on record cogent, convincing and clinching evidence. The contention of the appellant that the other vilayadhars and archakas are entitled to their share in the seva commission and hence the same is required to be excluded from the hands of the appellant, either as diversion of income at source or as an admissible deduction, cannot be brushed aside.
He also held that if, finally the civil court were to hold that the seva commission belonged exclusively to the assessee and the other archakas have no right therein, the department can always invoke Section 41(1) of the IT Act. In this view of the matter, he directed the deletion of the seva commission attributable to the other archakas from the income of the assessee.
b. Regarding family pooja expenses, he agreed with the assessee; in principle. However he noted that, In the absence of details and evidence, the claim will have to be allowed partially. Accordingly, he directed the following amounts to be allowed:
Assessment Years
1995-96 1996-97 1997-98 1998-99
Pooja expenses claimed
by the assessee 48,629 62,628 65,500 75,400
Allowed by CIT (A) 35,000 45,000 45,000 50,000
c. - Regarding travelling expenses he did not agree with the Assessing Officer and held that it cannot be said that the assessee would be able to earn substantial income from profession without incurring any expenditure on travelling. Since the expenditure in question is not fully verifiable, he limited the allowance as under:
Assessment Years
1995-96 1996-97 1997-98 1998-98
Travelling expenses claimed
by the assessee 47,354 58,534 79,139 45,030
Allowed by CIT (A) 25,000 35,000 45,000 25,000
d. The findings of CIT (A) 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 abo ve 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, he estimated income from tatte kanike at Re. 1/-per kajjaya ticket i.e. at Rs. 1,13,881/- for assessment year 1998-99 and at Rs. 1,22,298/- for assessment year 1997-98.
e. He confirmed the action of the Assessing Officer in not allowing salary claimed by the assessee for the assessment years 1997-98 and 1998-99 on the ground that the assessee did not raise specific ground against such disallowance.
2.15 Regarding the status of the assessee, he agreed with the assessee that the right to perform pooja at the Temple is a hereditary right. However, he held that this right, by itself, is not an income earning asset. In order to exercise the right, the personal exertion, skill, knowledge and experience is required. In order to work as a Pradhan Archaka of the Temple one has to equip himself with the working knowledge of Sanskrit, mantras, agamas and other relevant shastras and modes of worship according to sampradaya and other customs and tradition of the temple. Finally he justified the action of the Assessing Officer on the following lines:
As a matter of fact, it has not been established by producing any evidence before me that the other members of the appellants family have been instrumental in earning the above income. I also do not agree with the contention of the AR that the reliance placed by the Assessing Officer on the decisions of the Hon'ble Supreme Court in Sun Engineering Works Pvt. Ltd. 198 ITR 297 (SC) and Chettinad Corporation Pvt. Ltd. 200 ITR 320 (SC) is totally misplaced on the ground that the above decisions relate to the reassessments made after making the original assessments, as it is found that only in the return filed in response to the notice issued Under Section 148 of the Act, the appellant has raised a completely new issue regarding status, which if accepted, would run contrary to the appellant's own stand taken in the original return regarding assessability of the said income in 'individual' status. The appellant has thus tried to take advantage of the reassessment proceedings by challenging the status and thereby virtually withdrawing the income voluntarily offered by him in the original return of income. It is in this context that the above mentioned two decisions of the Hon'ble Supreme Court are found to be relevant and significant in the facts and circumstances of the present case. Under the circumstances, 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.
2.16 Against the order of CIT (A) 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 8.9.2004 the Assessing Officer furnished to the assessee a copy of reasons recorded for initiating action u/s 147. The assessee, by his memo dated 24.11.2004, has sought leave of the Tribunal to raise additional grounds of cross objections for the assessment years 1995-96 and 1996-97.
17. 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 CIT (A) on account of the following:
Grievance of the department Grievance of the assessee a. Estimated income from tatte Kanike ought not have been addition ought to have (a.y.97-98 and 98-99) reduced been deleted. b. Family pooja expenses ought not have ought to have been and traveling expenses been allowed. Fully allowed.
Secondly, the department is aggrieved, by the deletion of the seva commission referable to other archakas. Finally, the assessee is aggrieved on account of the following:
a. Expenditure on salary not being allowed for 1997-98 and 1998-99 b. Assumption of jurisdiction Under Section 147 for assessment years 1995-96 and 1996-97 without application of mind, and c. Determination of the status of the assessee as individual.
17.1 The assessee has raised an additional ground of cross-objection for assessment year 1995-96 and 1996-97 after obtaining the reasons recorded by the Assessing Officer for initiating action for re-opening of assessment under Section 147. His case is that the reasons recorded for re-opening of assessments have not been furnished to him earlier and hence he has raised the fresh ground at this stage of appeal proceedings. He further submitted that this is a legal ground and has to be admitted.
Contentions On Issues;
18. Tatte Kanike:
18.1 On behalf of the department it is contended that the assessee has not maintained proper records regarding the income from Dakshina/Tatte Kanike. In the circumstances, the Assessing Officer had no option but to estimate the income on the basis of available information. Originally, it was proposed to estimate the income at Rs. 10/- per devotee. After considering the objection, the Assessing Officer made estimation at Rs. 2/-per devotee. Thus, the Assessing Officer had herself given substantial relief. Consequently, the CIT (A) was not justified in giving further relief to the assessee.
18.2 On behalf of the assessee, it is submitted that the nature of income is such that no documentary evidence can practically be maintained. Therefore, the authorities below cannot find fault with the assessee. It may be noted that the assessee has confirmed the receipt of dakshina income in a sum of Rs. 41,500 for the year ended 31.3.1997 and Rs. 47,800 for the year ended 31.3.1998 in a statement recorded before the Income-tax Officer (Survey). This oral evidence cannot be lightly discarded. The assessee's explanation that he did not receive similar incomes in the earlier years, for which assessments have been framed subsequently, have been accepted. Therefore, there was no reason whatever 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 29.1.1984). 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 the assessment years 1997-98 and 1998-99 the assessee started distributing theerta prasada between 3.00 p.m. to 6.00 p.m. Whatever income received has been recorded and offered for assessment. There is a fallacy in the estimate made by the lower authorities. It is assumed that each devotee will purchase only one kajjaya ticket. This assumption is far from reality. The devotees purchase kajjaya tickets so that, on return from the piligrimage, kajjaya can be distributed as prasada among their friends and relatives. Therefore, it is not uncommon for a devotee to purchase five to ten kajjaya tickets. In the instant case the Assessing Officer has initiated action Under Section 147 to bring to tax the seva commission. It is not the case of the Assessing Officer, while bringing to tax the seva commission, she came across positive evidence that the assessee had not furnished true income from dakshina. In the absence of positive evidence, it is submitted that the Assessing Officer is not justified in estimating the income. These submissions will apply with equal force to the disallowance of family pooja expenses and travelling expenses (Vipin Khanna v. C.I.T and Ors. 255 ITR 220).
18.3 We have carefully considered rival submissions. It is an admitted fact that no documentary evidence is available for quantification of this income. The assessee has disclosed certain amount as Tatte Kanike and pleads that the same should be accepted though he is not able to produce any record for the same. The Revenue also has no basis for estimation.
18.4 Be it as it may, these are reopened assessments and the assessee's submissions have been accepted in the earlier assessment. There is no information whatsoever for the Assessing Officer to hold that there was some escapement of income under this head. The Assessing Officer disagreed with the estimate by his predecessor. The estimate in such cases depends purely upon the perception of each person. Thus, definitely the additions made in the reassessment proceedings are nothing but a change in opinion. This change in opinion is not based on any material or evidence or information gathered by the Assessing Officer. In this view of the matter, there is no gainsaying in the fact that the in proceedings under Section 147 of the Act, it is only the escapement of income which is to be assessed or reassessed. As per the law laid down by the Apex Court in the case of CIT v. Sun Engineering Works P. Ltd. reported in 198 ITR 297 and interpreted by the Hon'ble Punjab & Haryana High Court in the case of Vipin Khanna v. CIT reported in 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 under assessment. The finality of the assessment proceedings on other issues remain undisturbed. Thus, at Para 2 at page 234, the Court held as follows:
We may also mention that the interpretation placed on the observations of the Supreme Court of V. Jaganmohan Rao's case 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.
18.5 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 CIT (Appeals) as they have once again resorted to fresh estimation of income, when in fact, the earlier estimation made by the assesse was accepted by the earlier Assessing Officer, specifically, when there is no positive evidence to disbelieve the statement of the assessee.
18.6 In the result, the ground of the assessee is allowed and this ground of the Revenue is dismissed.
19. Family Pooja Expenses & Travelling Expenses:
19.1 On behalf of the department, it was submitted THAT:
as per the oral evidence of the administrative officer of the Temple, all the expenditure referable to performance of pooja at the Temple was being provided by the Temple itself and an archak was not required to incur any expenditure in this regard. It was also not in dispute that the assesse was living within the temple locality and hence there was no need to incur any travelling expenses. It was pleaded, therefore, the Assessing Officer had rightly disallowed the family pooja expenses and the travelling expenses claimed by the assessee. The onus of proving the expenses is on the assessee and the CIT (A) has shifted the burden on to the Assessing Officer. In the circumstances the order of the CIT (A) requires to be set aside.
19.2 In reply the Id. Counsel for the assessee submitted THAT:, for the assessment year 1995-96, in the regular assessment made Under Section 143(3), the claims of the assessee regarding family pooja expenses and travelling expenses had been accepted by the department after due enquiry and verification. Therefore, the assessee is not required to prove the expenses once again in the course reassessment. Burden is certainly upon the revenue. In the course of reassessment, the Assessing Officer is not permitted to review the decision taken by her predecessor and disallow the expenses originally allowed. It is well settled that reassessment cannot be justified on account of change of opinion. The Assessing Officer has not even alleged that, in the original assessment, the assessee had not furnished any material fact necessary for allowing the expenditure in question. Hence it is pleaded that the authorities below ought to have allowed the expenditure in full at least for the assessment year 1995-96. In regard to the other three years, the Ld.Counsel of the assessee submitted THAT: the Assessing Officer had not even understood the nature of the claim made by the assessee. It was not the case of the assessee that he has incurred any travelling expenditure in commuting between his residence 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 CIT (A) was not justified in partially disallowing the claim of the assessee. As stated earlier, the assessee's claim in this regard for the assessment year 1995-96 could not have been disturbed in the absence of any evidence being lead by the revenue. Taking the quantum of expenditure incurred and allowed originally in the previous year ended on 31.3.1995 as the basis, the expenses incurred in the subsequent years ought to have been allowed in full as being reasonable. The following table will prove the point beyond any doubt:
1995-96 1996-97 1997-98 1998-99 Family pooja expenses 48,629 62,628 65,500 75,400 Travelling expenses 47,354 58,534 79,139 45,030 Therefore the Ld. Counsel for the assessee prayed for relief.
19.3 After concidering rival contentions we find that ,in this case also, as in the case of Tatte Kanike, it is a question of variation of estimates. The facts narrated earlier, clearly demonstrates that the assessee has to necessarily incur family pooja expenses and traveling expenses. The earlier Assessing Officer had accepted that the assessee incurred such expenditure. Even otherwise the facts narrated in detail, do point out to the fact that the assessee is necessarily to incur these expenses in performance of his duties. The CIT(A) was right in holding that there are expenses which have been in fact incurred and that they have to be allowed. On a change in opinion, without any further information, evidence or investigation, the Assessing Officer in the reassessment proceedings has disturbed the conclusions of the Assessing Officer in the original assessment proceedings. Thus, for the same reasons, as recorded in the case of Tatte Kanike, these disallowances as sustained by the first appellate authority are also deleted. Reopening of assessments can be used for bringing to tax items of underassessment and not to make roving enquires and to disturb earlier estimates without any further evidence. It is just one opinion against another. On the facts and circumstances, the statement of the archak may be accepted and expenditure claimed be allowed This ground of the assessee is allowed and the ground of the Revenue are dismissed.
20. Seva Commission:
20.1 The Ld. D.R. objected to the deletion of seva commission attributable to other archaks from the income of the assessee. It is the submission of the learned Departmental Representative that the assessee had undisputably received the seva commission 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 CIT (A) to give total relief to the assessee.
20.2 The Ld.Counsel for the assessee submitted THAT: that the entire argument of the department rests on a petition made by the assessee under the Endowment Act. In the course of the assessment the Assessing Officer did not seek any explanation from the assessee in this regard. It is submitted that the petition must be read as a whole. If so read, it will be clear that it is a petition made by the archak trustee in the context of his collaterals claiming similar rights without taking the legal course of getting their names entered as archaks of the temple in the register maintained Under Section 25 of the Endowment Act. The resolution passed by the trustees, on which reliance is placed by the Assessing Officer, nowhere gives an absolute right to the assessee as claimed by the revenue. Even otherwise, an unilateral claim, by itself, cannot result in accrual of income. The Assessing Officer had herself noted that the assessee had been charge sheeted under the Endowment Act for not having distributed the seva commission. This would not have been possible if seva commission received by the assessee was his absolute income. Similarly, the Assessing Officer notes that subsequent to January 1999, the temple itself is distributing the seva commission to other vilayadhars and the seva commission due to other archaks being deposited in court. This clearly proves that the alleged claim of the assessee that the seva commission belongs absolutely to himself had not been accepted or acknowledged by anybody including the Temple, other vilayadhars, archaks, Endowment Department and the Civil Court.
20.3 It is further pleaded That :it is true that the assessee does not have documentary evidence to support the fact of payment of seva commission to other archaks. However, this does not improve the case of the department. In the course of assessment and survey the assessee had produced Seva Batwada Registers. In these registers, contemporaneous entries had been made showing the amount due to various vilayadhars including archaks in a predefined manner. This claim was investigated by the ITO (Survey) who retained these registers for more than a month. He was not able to point out even a single instance where the seva commission was not worked out in accordance with the predefined scheme. These registers are primary evidences of two facts. Firstly, the amount due to various vilayadhars including archaks is worked 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.
20.4 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 mercantile system of accounting. Under the said system what is relevant is the proof of liability and not its discharge. The assessee has undoubtedly established the liability, if not, its actual discharge. Therefore, looking from any angle the amount shown in the Seva Batwada Register as attributable to other archaks ought not to have been considered as income of the assessee. In this context reference may be made to the decision of the Supreme Court in the case of Charandas Haridas and Anr. v. C.I.T 39 ITR 202. In that case, Charandas was the karta of a joint family consisting of his wife and three minor sons. He was a partner in six managing agency firms and his share of the managing agency commission received by him as such partner was being assessed as income of the family. Subsequently there was a partition in the family and his share in all the firms came to be divided. Notwithstanding the partition, Charandas continued to be the partner in all the firms. The income received from these firms were credited, in his books, to the account of divided members. The question was whether the entire income received by Charandas was to be assessed in his hands or to be assessed in the hands of the divided members. It was held that the income received belonged to the divided members and not to the joint family.
20.5 It was further submitted THAT: in the instant case, notwithstanding the partition, Late Sri. Gopalakrishna Asranna continued to be the archak of the Temple. Thereafter, it is an admitted fact that during his life time the seva commission had been distributed between his divided brothers. After his death, the assessee came to hold the similar position. In his books, the income had been divided depending on the duties performed by each branch during their rotational week. Consequently, such income cannot be assessed as the income of the assessee.
20.6 On a careful consideration of this issue, we are of the considered opinion that the seva commission accrues to the assessee by virtue of a right inherited by him. The source of income is the right of the assessee as a legal heir. Thus the first appellate authority, in the case of other assessee's who are collaterals has accepted that the income in question is income of the HUF and not income of the individual. The same first appellate authority has taken a contrary view in this case. Thus, we agree with the submissions of the 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 H.U.F. 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 C.I.T. (A). All the evidence in record proves that the only dispute is the factum of payment. As rightly pointed out by CIT(A) in case, the Civil Court takes a contrary view Section 41(1) is available to tax the assessee.
20.7 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 can not be any estoppel against the statute. Acquiescence can not take away from a party the relief that he is entitled to where the tax is levied or collected without authority of law. The Hon'ble Calcutta High Court In the case of Mayanak Poddar (HUF) v. Wealth Tax Officer reported in 181 CTR 362 has held as follows:
Even if the assessee had included the same in his return, that would not preclude the assessee from claiming the benefit of law. There can not be any estoppel against statute. A property, which is not otherwise taxable, can not become taxable because of misunderstanding or wrong understanding of law by the assessee or because of his admission or on his misapprehension. If in law an item is not taxable, no amount of admission or misapprehension can make it taxable. The taxability or the authority to impose tax is independent of admission. Neither there can be any waiver of their right by the assessee. The department can not rely upon any such admission or misapprehension if it is not otherwise taxable.
The Hon'ble Bombay High Court in the case of Nirmal L Mehta v. CIT 269 ITR 185 held as follows:
There can not be any estoppel against the statute. Article 265 of the Constitution of India in unmistakable terms provides that no tax shall be levied or collected except by authority of law. Acquiescence can not take away from a part, the relief that he is entitled to where the tax is levied or collected without proper authority of law.
20.8 Thus applying the ratio of the above case laws to the facts of the case we are of the considered opinion that the assessee can not be precluded from agitating the issue of the taxability of Seva Commission in the hands of the individual, despite the fact that he has offered this income in the hands of the individual. The issue as to in which status the income in question is to be taxed is more elaborately discussed under the head 'status' from para 23 onwards in this order. Suffice to say Income of H.U.F can not be taxed in the hands of the Individual as it would be against the settled position of law.
21. Salary:
The assessee has three additional grievances. Firstly, it is submitted by the Ld. Counsel for the assessee that the assessee paid salary and the same stands recorded and acknowledged in Part IV of the Batwada Register. The claim in this regard has been fully allowed in the assessment years 1995-96 and 1996-97. But the Assessing Officer has allowed only Rs. 16,800/- each for assessment years 1997-98 and 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 Ld. D.R. relied on the order of the CIT(A).
22. Reasons For Re-Opening:
22.1 The next grievance of the assessee is regarding the re-opening of the assessments for the assessment years 1995-96 and 1996-97. The Ld. Counsel submitted that the Assessing Officer communicated the reasons recorded in terms of Section 148(2) to the assessee on 8.9.2004. Thereupon, the assessee has filed a memo before the Tribunal on 25.10.2004 seeking leave to file additional ground of cross objection for the assessment years 1995-96 and 1996-97. The additional ground of cross objection 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 3/4 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 submitted that the assessee was not aware of the reason when he filed the cross objections and that as the additional ground goes to the root of the jurisdiction and can be decided on the basis of materials available on record. Therefore, it is prayed that the additional ground may be admitted and decided on merits.
22.2 In this context the attention of the Hon'ble Tribunal was invited to the reasons recorded. Identical reasons have been recorded for the assessment years 1995-96 and 1996-97. The extract reads as under:
Extract: Assessment Year 1995-96:
The assessee has filed suit O.S. No. 24/194 before the Court of Civil Judge (S.R. Division), Mangalore seeking 3/4 share of income from such commission received by Shri. Laxminarayana Asranna. The total seva commission paid to Shri. Laxminarayana Asranna for the assessment year 1995-96 as per the Seva Batwada Register is Rs. 9,81,770/-. Therefore, I have reason to believe that the same has escaped income within the meaning of Section 147 of the Income-tax Act.
Extract: Assessment Year 1996-97:
The assessee has filed suit O.S. No. 24/194 before the Court of the Civil Judge (S.R. Division), Mangalore seeking 3/4 share of income from Seva Commission received by Shri. Laxminarayana Asranna. The total seva commission paid to Shri. Laxminarayana Asranna for this assessment year as per the Seva Batwada Register is Rs. 11,30,761/-. Therefore, I have reason to believe that the same has escaped income within the meaning of Section 147 of the Income-tax Act.
22.3 The Ld. Counsel for the assessee submitted That:
As per the reasons recorded, the assessee is supposed to have filed a case in the Civil Court seeking 75% of the seva commission. There is no such case in existence. The assessee himself having received the seva commission could not have filed any case against himself seeking any share there from. Thus, there were no reasons whatever to believe that the income of the assessee had escaped assessment within the meaning of Section 147. The additional fact to be noted is that a regular assessment Under Section 143(3) had been framed for the assessment year 1995-96 and therefore, the proviso to Section 147 was applicable. In the reasons recorded, the Assessing Officer has nowhere mentioned about the material facts which the assessee omitted to furnish in the course of the original assessment proceedings.
22.4 In reply, 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 I.T.O had earlier framed assessment on the assessee for the assessment years 1997-98 and 1998-99, it will be clear that the I.T.O had applied her mind before initiating action Under Section 147. The Departmental Representative has also relied on the decision of Karnataka High Court in the case of C.I.T. v. R. Giridhar 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 Income-tax Act. Further he has relied on the decision of the Supreme Court in the case of Phoolchand Bajrang Lal v. I.T.O 203 ITR 456. Particular reference was invited to the following observations of the court:
Since the belief is that of the I.T.O, sufficiency of the reasons for forming the belief is not for the Court to judge.
Therefore, it was submitted that the Tribunal cannot go into the adequacy of the reasons recorded.
22.5 In response, the Ld. Counsel for the assessee submitted That: the courts can go into the question whether there in fact existed any reasonable, bonafide belief or whether the belief was based on vague, irrelevant and non specific information. This stands established by the very decision of the Supreme Court relied upon by the learned Departmental Representative. In C.I.T v. Giridhar, the Kamataka High Court was concerned with an assessment order which did not contain the tax computation. It was an undisputed fact that the tax computation had been personally made by the I.T.O in a separate sheet of paper. The Court held That separate sheet, although does not bear the signature of the I.T.O, none the /ess forms part of the assessment order.
Thus, the court was not concerned with the reasons to be recorded in terms of Section 148(2). In this context recent decision of Bombay High Court in Hindustan Lever Ltd. v. R C Wadkar 268 ITR 332 is relevant. The assessee relies on the following observations appearing on pages 337/338.
The reasons recorded by the Assessing Officer nowhere state that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment of that assessment year. It is needless to mention that the reasons are required to be read as they were recorded by the Assessing Officer. No substitution or deletion is permissible. No additions can be made to those reasons. No inference can be allowed to be drawn based on reasons not recorded. It is for the Assessing Officer to disclose and open his mind through reasons recorded by him. He has to speak through his reasons. It is for the Assessing Officer to reach the conclusion as to whether there was failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the concerned assessment year. It is for the Assessing Officer to form his opinion. It is for him to put his opinion on record in black and white. The reasons recorded should be clear and unambiguous and should not suffer from any vagueness. The reasons recorded must disclose his mind. The reasons are the manifestation 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. I.T.O 155 ITR 748 which is directly on the point. In the said decision, the court observed as under (at page 751 of the report) A 'note' or 'notes' is generally prepared by a subordinate or even by the very same officer as an aide memoire or to help the memory or enable a superior officer to examine the same and pass his orders thereon. A 'note', even when the same is prepared by the very same officer and even placing the most charitable construction on the same, cannot be elevated to or treated as the I.T.O recording his reasons under Section 148 which is a statutory requirement.
(emphasis supplied) Further, reliance is also placed on the decision of the Karnataka High Court in H Noronha v. I.T.O, Bangalore 133 ITR 199. In particular, the following observations of the Court appearing at pages 203/204 of the report are relevant:
When an officer is required to form an opinion on the basis of information and is required to record his reasons before proceeding to issue notice under Section 148 of the Act, at that point he should record in full detail the source of information on the basis of which he has formed his belief reasonably which has led to the conclusion that there has been escapement of income from being assessed.
23. Status:
23.1 It is the next grievance of the assesse that the authorities below are not justified in considering the income from the Temple as his individual income. One of the reasons stated by the Assessing Officer was that a proposal made by the I.T.O. (Survey) was objected to by the assessee. This is misleading. The claim of the assessee before Assessing Officer was to treat the assessee, his wife and children as a joint family to which the pooja rights belonged under Hindu Law. On the other hand, the proposal made by the I.T.O (Survey) was to treat the assessee and his divided collaterals as one joint family. This was opposed not because the pooja rights did not belong to them as a family, but because there was a partition between them wherein the pooja rights had been divided. As a result, pooja rights were being held and enjoyed by the four branches on weekly rotation basis. In other words, consequent to the partition, instead of one family, there were in all four families. Secondly, she has taken note of the fact that in certain proceedings (under the Endowment 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.
23.2 The Ld. Counsel for the assessee further submitted THAT: the learned CIT (A) 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 CIT (A) the performance of pooja at the Temple requires personal exertion and knowledge of the assesse and the accrual of income is directly attributable to it. The assessee objects to this finding. Personal exertion by one or more members of the family, it is submitted, does not make the income of the family as the income of the respective member. For instance, where a member of the family personally cultivates the agricultural land belonging to the family, the resulting income cannot be considered as the individual income of the member. It should be noted that the family can perform the pooja by proxy, i.e. by appointing a competent person. In such an event, the person so employed will have to be paid by the family for the services rendered. The family alone will be entitled to receive the seva commission attributable to its share. In this context the assessee relies on the decision of the Hyderabad Bench of Income Tax Appellate Tribunal in the case of I.T.O. v. M. Govindachari 12 ITD 415. The following observations are relevant:
The archaka has to equip himself with the working knowledge of Sanskrit, Mantras, Agamas and other relevant Shastras, rituals, mode of worship according to sampradaya, sthala purana and other traditions of the Temple. Thus, there is a personal element involved. But that is not dominant 23.3 The assessee also relies on the decision of the Supreme Court in Raj Kali Kuer v. Ramrattan Pandey 1955 2SCR 186 wherein their Lordships upheld the usage of performing the various functions of a poojari by a competent deputy. Reference is also invited to paragraph 419A of "Principles of Hindu Law" by Mulla. In view of the above authorities, it is submitted that the CIT, (A) was not justified in his conclusion that the disputed income did not belong to the joint family of which the assessee is the Karta. It is also worthwhile to note that similar issue came up for consideration before the very same CIT (A) in the case of the six collaterals of the assessee. It is understood that the CIT (A) has upheld the status of HUF. It is also understood that no further appeals have been filed.
23.4 In reply, the Departmental Representative admitted that, in the hands of collaterals, the CIT (A) has decided the status as HUF. But, the department could not file appeals before the Tribunal since the 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.
23.5 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 earned by the assessee is his separate property. Since the income was earned to the detriment of the family property, the same is required to be considered as the joint family property/income.
23.6 It was further argued THAT: Both the authorities below, having held, on merits, that the impugned income did not belong to the joint family of the assessee, have also held that in the proceedings Under Section 147 it is not open to the assessee to seek the change of status. It is submitted that once the Assessing Officer decides an issue on merits, for the first time in the course of proceedings Under Section 147, the aggrieved assessee certainly has a right of appeal. Similarly, CIT (A) having decided the issue on merits, further appeal lies to the Tribunal. It is trite that if the assessee cannot agitate an issue before an authority, it is equally true that the said issue cannot be decided by the authority on merits.
24. On this issue, the Ld. Counsel for the assessee further submitted THAT:There are four assessment years involved. For the assessment year 1995-96, a reassessment has been framed and for the rest three years assessments have been framed (for the first time) Under Section 147. In all the above four years, the authorities below have taken a stand that in an assessment made Under Section 147, it is not open to the assessee to make a fresh claim which has not been made in the original return. For this proposition they have relied on the decisions of the Supreme Court in the case of Sun Engineering Works (P) Ltd. v. C.I.T 198 ITR 320 and Chettinad Corporation v. C.I.T 200 ITR 320. The learned Counsel submitted that the reliance placed is totally misplaced and the assessee is not debarred from making fresh claims in the course of proceedings Under Section 147.
25.1 Attention of the Honourable Tribunal was invited to page 308 of 198 ITR wherein their Lordships have extracted Sections 147 and 148 of the Act. At page 310, the court noted the difference between an assessment and a reassessment as under:
The use of the expression' assess or reassess such income or recompute the loss or depreciation allowance' in Section 147 after the conditions for reassessment are satisfied is only relatable to the preceding expression in Clauses (a) and (b), viz., escaped assessment'. The term 'escaped assessment' includes 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) 25.2 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 charge items of income which had escaped assessment other than or in addition to that item or items which have led to the issuance of the notice under Section 148 and where reassessment is made under Section 147 in respect of income which has escaped tax, the Income-tax Officer's jurisdiction is confined to only such income which has escaped tax or has been under assessed and does not extend to revising, reopening or reconsidering the whole assessment or permitting the assessee to reagitate questions which had been decided in the original assessment proceedings. It is only the underassessment which is set aside and not the entire assessment when reassessment proceedings are initiated. The Income-tax Officer cannot make an order of reassessment inconsistent with the original order of assessment in respect of matters which are not the subject matter of proceedings under Section 147. An assessee cannot resist validly initiated reassessment proceedings under this section merely by showing that other income which had been assessed originally was at too high a figure except in cases under Section 152(2). The words 'such income' in Section 147 clearly refer to the income which is chargeable to tax but has 'escaped assessment' and the Income-tax Officer's jurisdiction under the section is confined only to such income which has escaped assessment It does not extend to reconsidering generally the concluded earlier assessment. Claims which have been disallowed in the original assessment proceeding cannot be permitted to be reagitated on the assessment being reopened for bringing to tax certain income which had escaped assessment because the controversy on reassessment is confined to matters which are relevant only in respect of the income which had not been brought to tax during the course of the original assessment. A matter not agitated in the concluded original assessment proceedings also cannot be permitted to be agitated in the reassessment proceedings unless relatable to the item sought to be taxed as escaped income'. Indeed, in the reassessment proceedings for bringing to tax items which had escaped assessment it would be open to an assessee to put forward claims for deduction of any expenditure in respect of that income or the non-taxability of the items at all. Keeping in view the object and purpose of the proceedings under Section 147 of the Act which are for the 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) 25.3 The Ld. 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 that all the case laws noted by the Supreme Court from pages 310 to 320 of the report deal with the case of reassessment. The court was not dealing with the scope of "assessment" (for the first time) Under Section 147 but was dealing with the case of "reassessment" vis-a-vis the concluded assessment. The conclusion is that in the case of fresh assessment, the ratio of the decision is not applicable. In the present set of appeals, three assessments relate to first assessment Under Section 147 and not a case of reassessment and hence the decision of the Supreme Court cited by the AO has no application for these three years viz., 1996-97, 1997-98 and 1998-99.
26.1 Regarding the issue regarding the right of the assessee to make fresh claims in the course of reassessment (i.e. assessment year 1995-96), the learned Counsel submitted that the AO appears to be under the impression that there is a total embargo. This conclusion as per the counsel does not flow from the decision of the Supreme Court. On the other hand, where an assessee makes a fresh claim, the question to be considered is whether the claim relates to the item sought to be taxed as "escaped income". If the answer is in the affirmative, the assessee is entitled to make a fresh claim and not otherwise. In support we quote the following observations A matter not agitated in the original concluded proceedings also can not be permitted to be agitated in the reassessment proceedings unless relatable to the item sought to be taxed as escaped income.
26.2 The Ld. Counsel further submitted That: in the course of reassessment proceedings, it is open to the assessee to claim, that the income sought to be reassessed is exempt either partially or fully. In support he quoted as follows:
Indeed, in the reassessment proceedings for bringing to tax items which had escaped assessment, it would be open to an assessee to put forward claims for deduction of any expenditure in respect of that income or the non-taxability of the items at all. Keeping in view the object and purpose of the proceedings under Section 147 of the Act which are for the 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.
26.3 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.
27.1 The Ld. Counsel distinguished the judgment relied upon by the A.O. and submitted that: The Assessing Officer has relied on another decision of Supreme Court in Chettinad Corporation v. C.I.T 200 ITR 320. In this case their Lordships have followed the decision in Sun Engineering Works and dismissed the appeal of the assessee. As a result, the decision of Madras High Court, from which the appeal arises, has merged with the decision of Supreme Court. The following observations of the High Court are relevant (head note) Having regard to the object and language of Section 34 of the Indian Income-tax Act, 1922, Section 147 of the Income-tax Act, 1961, and Section 8 of the Surtax Act, 1964, the reopening of an assessment can only be for the benefit of the Revenue. But this is subject to one exception, viz., that where a particular item is sought to be brought to charge for the first time in the reassessment proceedings, any allowance, deduction or other relief in relation to that item can be put forward by the assessee and will have to be considered bv the assessing authority for grant of relief or otherwise. However, if any disallowance made in the course of the original assessment which the assessee wants to be reconsidered during the reassessment is relevant or has anv nexus with items of income that are brought to charge in the reassessment, they can also be considered. But other items of disallowance or relief claimed by the assessee which are not relevant to items which are the subject-matter of the enquiry in the reassessment proceedings cannot be considered again by the Income-tax Officer at the stage of reassessment.
(emphasis supplied).
27.2 He argued that the above observations have also been noted (probably with approval) by the Supreme Court in Sun Engineering's case. (Refer Page 313 of 198 ITR). At any rate, in view of the theory of merger, the above observations of the High Court are required to be considered as the observations of the Supreme Court itself. Thus, as per this decision, which has been relied on by the Assessing Officer, the assessee is even permitted to question the disallowances made in the original proceedings provided it has nexus to the escaped income.
28. As per the Ld. Counsel for the assessee, it is clear that the assessee is permitted to make fresh claim provided the claim is relatable or has nexus with the "escaped income" which is the subject matter of assessment Under Section 147 and therefore, the enquiry should be directed to understand the nature and scope of escaped income for assessing which proceedings have been initiated Under Section 147. Where an assessment is being made for the first time under Section 147, no assessment having been framed earlier, the entire income is required to be considered as having escaped assessment. Consequently, the assessee can make all the claims in the course of assessment of such income Under Section 147. In other words the 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 can not be said that an issue stands concluded against the assessee in the original proceedings. Thus the Id. 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 can not 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).
29. In this context, the assessee further relied on the decision of the jurisdictional High Court in the case of I.T.O v. K L Srihari (HUF) 197 ITR 694). In that particular case a regular assessment was framed. Subsequently, the assessment came to be made under Section 147. In the said re-assessment the Assessing Officer levied interest under Section 215 of the Act. The assessee filed a writ against the levy of interest and the writ was allowed. The department filed a writ appeal. The court held as under:
The content/on raised on behalf of the appellants is that interest under Sections 139(8) and 215 of the Act, though not leviable in reassessments under Section 147 of the Act, the respondent is liable to pay interest levied under the original assessment. This contention is plainly untenable in view of the decision of this court in CIT v. Mysore Iron and Steel Ltd. [1986] 157 TTR 531. In that case, after making a review of the case-law, this court considered the question as to the effect of reopening an assessment and held that the original assessment gets totally effaced in that event. When there is a total effacement of the original assessment order, it is impossible to understand the contention raised and how the interest levied there under still survives, [emphasis supplied]
30 He further submitted THAT: The revenue carried the matter in appeal to the Supreme Court. The two judge bench of the Supreme court noted that the views expressed by Supreme court in CIT v. Sun Engineering Works Pvt. Ltd. 198 ITR 297 differed from the view taken by the three judge bench of the Supreme court in V Jagamohan Rao v. C.I.T 75 ITR 373 and consequently the matter has to be considered by a larger bench. Finally, the Supreme court, consisting of three judges, held as under (250 ITR 193 at page 194) We have also perused the original assessment order dated March 19,1983, as well as the subsequent assessment order that was passed on July 16, 1987, after the re-opening of the assessment under Section 147. On a consideration of the order dated July 16,1987, we are satisfied that the said assessment order makes a fresh assessment of the entire income of the respondent assessee and the High Court was, in our opinion, right in proceeding on the basis that the earlier assessment order had been effaced by the subsequent order. In these circumstances, we do not consider it necessary to go into the question that is raised and the same is left open. The special leave petitions are accordingly dismissed.
[underlining by us]
31. Thus he contended that from the above decision of the Supreme Court, it is clear that the decision in C.I.T v. Sun Engineering Pvt Ltd. 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 Jagamohan Rao's case decided by a larger bench. That if the re-assessment 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.
32. 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.
33. 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 re-opening for the first time before the Tribunal. For this proposition we rely ont eh following case laws:
Ramilaben Ratilalshah v. CIT 281ITR 176 (Guj) Abdul Majid v. CIT (AII) 281 ITR 366 On the issue of reopening we agree with the submission of the Ld. Counsel for the assessee that the reasons given by the A.O. show total lack of application of mind. It is a well settled law that the reasons recorded can not be illusionary or make-belief. They have to have some rational connection with belief. In this case, the assessee has never filed any suit in OS. No. 24/194 before the Court of Civil Judge (S R Division), Mangalore. On the other hand it was the other collaterals in the family who had filed the cases against the asssessee who is the plaintiff. Thus the reasons recorded are totally false. The assessee claims that there is no such case on the file in the court of Civil Judge (S R Division), Mangalore. This claim is not refuted by the Revenue, argument of the Ld. D.R. that Section 292B comes to the rescue of the revenue is devoid of merit. It is a well settled law that the reasons recorded speak the mind of the A.O. and when the reasons itself are based on wrong or false information, it can be said that there is total lack of application of mind and reopening based on such reasons is bad in law. The reasons recorded are manifestation of mind of the A.O. The reason can not be merely a pretence, an empty formality. When there is no such case on the file of the Civil Court how can it be a reason for reopening. This shows that the CO. of the assessee on the issue of reopening for the year 95-96 and 96-97 have to be allowed. Thus the assessment made in pursuance of such invalid reopening are hereby cancelled. In the result the re-assessments for the asst.year 1995-96 and 1996-97 have to be cancelled as bad in law.
33.1 Coming to the issue of status, we have already held that the income earned by the member of joint family in his status as Pradhan Archaka' is a hereditary right and that this is the dominant source which results in the income though the archaka had to equip himself with the working knowledge of Sanskrit, Mantras, rituals and other traditions. Reliance placed by the D.R. on the "Hindu Gains of Learning Act, 1930" does not advance the case of the revenue. It is not the learning alone that results in the source of income to the assessee in this case. In fact the other collaterals and relatives also are equally learned. The pooja rights in question have been acquired through inheritance and the assessee could have also performed the pooja by proxy by appointing a competent person. Income is of the HUF and as held in para 20.7, there can be no estoppel against law. Thus this plea of the assessee has to be allowed.
34. Coming to the issue of disallowance of salary we find that the assessee has evidence in the form of recordings in a register. Similar claim of the assesee is allowed in the earlier years. We see no reason for part disallowance in these years. Thus we delete the disallowance and allow the claim of the assessee. In the result all the appeals of the revenue are dismissed and the appeals of the assessee as well as the cross objections are allowed.