Gujarat High Court
The C.I.T vs Shri Harish Popatlal Prajapati on 9 December, 2014
Bench: Ks Jhaveri, K.J.Thaker
O/ITR/38/2000 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
INCOME TAX REFERENCE NO. 38 of 2000
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE KS JHAVERI Sd/
and
HONOURABLE MR.JUSTICE K.J.THAKER Sd/
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1 Whether Reporters of Local Papers may be allowed to see No
the judgment ?
2 To be referred to the Reporter or not ? No
3 Whether their Lordships wish to see the fair copy of the No
judgment ?
4 Whether this case involves a substantial question of law as to No
the interpretation of the Constitution of India, 1950 or any
order made thereunder ?
5 Whether it is to be circulated to the civil judge ? No
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THE C.I.T.....Applicant(s)
Versus
SHRI HARISH POPATLAL PRAJAPATI....Respondent(s)
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Appearance:
MR NITIN K MEHTA, ADVOCATE for the Applicant(s) No. 1
SERVED BY RPAD (N) for the Respondent(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE KS JHAVERI
and
HONOURABLE MR.JUSTICE K.J.THAKER
Date : 09/12/2014
Page 1 of 8
O/ITR/38/2000 JUDGMENT
ORAL JUDGMENT
(PER : HONOURABLE MR.JUSTICE KS JHAVERI)
1. By way of this reference, following questions of law are referred by the tribunal.
"1. Whether the Appellate Tribunal is right in law and on facts in deleting the additions made observing that the Assessing Officer could not make addition for noncompliance by the Custom authorities?
2. Whether the Appellate Tribunal ought not to have appreciated that the assessee also did not comply with the notices leading to the impugned additions?
3. Whether the Appellate Tribunal has correctly appreciated the facts on record while deleting the additions made."
2. The facts of the case in brief are that in this case the original assessment was completed on 25.3.1985 which was set aside by the learned CIT (Appeals) vide order dated 29.2.1988 with a direction to pass fresh order after giving adequate opportunity to the assessee and to examine from the custom department as to whether any statement of the assessee was recorded or that the assessee had any dealing as a carrier of smugglers. The department did not accept the order of the CIT (Appeals) and went in appeal before Income Tax Appellate Tribunal. The tribunal vide order dated 13.3.1992 dismissed the same. Thereafter, a fresh assessment was made by the Assessing Officer on 27.3.1990 which was again set aside by the CIT (Appeals) on 9.12.1991 whereby Assessing Officer was directed to give an opportunity to the assessee to rebut the evidence which is being used against the assessee. The CIT (Appeals) further directed the Assessing Officer to obtain the Page 2 of 8 O/ITR/38/2000 JUDGMENT total wealth statement of the assessee and use that as a basis for computing the taxable income. Subsequently, the Assessing Officer passed order determining total income at Rs.1,29,70,000/ on 30.3.1993. In the order, the Assessing Officer mentioned that there was no response from the custom department to the information called for by correspondence and personal meeting by head clerk. Hence, the assessment was completed on the basis of the facts available on record. The assessed income stood the same as assessed originally vide order dated 25.3.1985 and more or less the findings and references were also the same.
3. The assessee again filed appeal before the CIT (Appeals) who confirmed the addition of Rs.1,51,000/ in respect of investment in residential house at Patel Society as well as partly confirmed the income from the property. The investment in purchase of two cars of Rs.32,000/ was also confirmed. However, the CIT (Appeals) deleted the following additions in toto: Sr. Amount of Reasons for additions No. addition 1 Rs.1,17,80,556/ Unaccounted purchase of silver. 2 Rs.1,62,000/ Estimated income as carrier of Shri A.C.Jain. 3 Rs.2,00,000/ Estimated income as carrier of Kadar Bhatti. 4 Rs.5,95,840/ Business income from silver dealings
4. The tribunal allowed the appeal of the assessee for the reasons given in para 3 of its order. It held that the additions are made on the basis of the custom investigation and search. The custom officials did not comply with the request of the Assessing Officer and the Assessing Officer cannot, therefore, make addition in respect of assessee's Page 3 of 8 O/ITR/38/2000 JUDGMENT assessment for noncompliance by the custom authorities. It is further held that the Assessing Officer did not carry out the direction of the CIT (Appeals) contained in order dated 29.2.1988 and 9.12.1991.
5. We have gone through the record. While deciding the issue, Commissioner of Income Tax (Appeals) has held that, "However, I will suggest that since it may not be possible to get evidence regarding the appellant's involvement in smuggling activities, the Assessing Officer will have to obtain the total wealth statement of the appellant and that may be used as a basis for computing the total income of the appellant for the previous year. Needless to say, if the Assessing Officer hold that certain properties belong to the appellant, though stand in the name of other persons, necessary evidence in respect thereof will have to be brought on record and adequate opportunity should be given to the appellant to rebut that evidence."
6. In support of such finding, the CIT (Appeals) relied on the following observations of the Andhra Pradesh High Court in the case of Berulal Tiwari v. CIT (173 ITR 280).
"The assessee has questioned the validity of service by affixture and claimed that the assessment was barred by limitation. The Incometax Officer should blame himself for the problems that arose in this case subsequent to his passing the draft assessment order. We should express our disapproval of the way in which Incometax Officer drag on the assessment proceedings till almost the last minute and rush through the entire process of assessment when the limitation was about to set in without giving absolute opportunities to the assessees. The Commissioner of Incometax, exercising administrative jurisdiction over these officers, should Page 4 of 8 O/ITR/38/2000 JUDGMENT keep a close watch on the proceedings and should discourage any attempt on the part of the tax Officers in dragging on the assessment proceedings till the last minute causing difficulties both to the assessee and to the Department."
7. Thereafter, when the matter went in appeal before the Income Tax Appellate Tribunal, the tribunal observed as under:
"We have considered the rival submissions, facts and materials on record. It is evident that the learned CIT (A) in the impugned order totally deviated from the order of his predecessor setting aside the assessment on the first occasion. His predecessor's direction was that custom authorities should be connected in this matter to come to the conclusion whether the assessee was engaged in smuggling activities and the property at Patel Society was actually belonging to him. This direction also includes the cars and the telephone connection. It is evident from record that custom authorities did not comply with the request of the Assessing Officer in this matter and the AO had followed the original order to come to the conclusion that the assessee is the owner of the impugned property at Patel Society as well as telephone connection and the cars. The AO himself in the impugned order pointed out that the original assessment for A.Y. 198283 had been adopted by him for making the fresh assessment. Needless to say that original order was disapproved by ld.CIT (A) to saddle the assessee with the impugned addition. That order of the ld. CIT (A) had been confirmed by the ITAT. Therefore, following the original order is not only illegal but beyond his jurisdiction. Further, it may be noted that the CIT (A) again set aside the order of the AO directing him to go through the Page 5 of 8 O/ITR/38/2000 JUDGMENT evidence regarding the assessee's involvement in the smuggling activities and the AO may obtain the total wealth statement of the assessee and use the same as the basis for computing the total income for the purpose. He himself pointed out that the AO did not make any enquiry which was required to be made. On that basis, it is difficult to accept that any addition made by the AO could be sustained by him. Further, involvement of the assessee with the smuggler had not been brought into record except some statements given to the custom authorities which the ld. CIT (A) on first occasion did not approve as an evidence to contrary the evidence. In short, the AO did not carry out the direction of the ld. CIT (A) made in his order dated 25th March, 1985 (confirmed by the Tribunal) or 29th December, 1991 which is against the principle of law as stated by the Supreme Court in the case of Bhopal Sugar Inds. Ltd. v. ITO (40 ITR 618). In these circumstances, we do not find any force in holding the assessee liable to be assessed on the materials on record in respect of house property at Patel Society and income therefrom as well as expenditure on telephone connection and purchase of cars. To repeat, all these additions were made on the basis of the custom investigation and search. The custom officials did not comply with the request of the AO and the AO cannot, therefore, make an addition in respect of assessee's assessment for noncompliance by the custom authorities."
8. We have gone through the record. We have also considered the observations of the Supreme Court in the case of Bhopal Sugar Industries Ltd. v. Income Tax Officer, Bhopal (AIR 1961 SC 182), wherein the Supreme Court observed as under:
Page 6 of 8O/ITR/38/2000 JUDGMENT "8. We think that the learned Judicial Commissioner was clearly in error in holding that no manifest injustice resulted from the order of the respondent conveyed in his letter dated March 24, 1955. By that order the respondent virtually refused to carry out the directions which a superior tribunal had given to him in exercise of its appellate powers in respect of an order of assessment made by him. Such refusal is in effect a denial of justice, and is furthermore destructive of one of the basic principles in the administration of justice based as it is in this country on a hierarchy of Courts. If a subordinate tribunal refuses to carry out directions given to it by a superior tribunal in the exercise of its appellate powers, the result will be chaos in the administration of justice and we have indeed found it very difficult to appreciate the process of reasoning by which the learned Judicial Commissioner while roundly condemning the respondent for refusing to carry out the directions of the superior tribunal, yet held that no manifest injustice resulted from such refusal.
9. It must be remembered that the order of the Tribunal dated April 22, 1954, was not under challenge before the Judicial Commissioner. That order had became final and binding on the parties, and the respondent could not question it in any way. As a matter of fact the Commissioner of Income tax had made an application for a reference, which application was subsequently withdrawn. The Judicial Commissioner was not sitting in appeal over the Tribunal and we do not think that in the circumstances of this case it was open to him to say that the order of the Tribunal was wrong and, therefore, there was no injustice in disregarding that order. As we have said earlier such a view is destructive of one of the basic principles of the administration of justice."
Page 7 of 8O/ITR/38/2000 JUDGMENT
9. In view of above observations, it can be said that tribunal is right in law and on facts in deleting the additions made observing that the Assessing Officer could not make addition for noncompliance by the Custom authorities. In view of above discussion, we are in complete agreement with the reasoning adopted by the tribunal. Accordingly, all the three questions are answered against the department and in favour of the assessee. Accordingly, this reference is dismissed.
Sd/ (K.S.JHAVERI, J.) Sd/ (K.J.THAKER, J) *malek Page 8 of 8