Commissioner Of Income-Tax v. Ashim Krishna Mondal

The Judgment of the Court was delivered by

D.K Seth, J.:— This appeal has been preferred on four grounds of which the fourth one is general and is implicit in ground No. 1. Before we take up ground No. 1, we propose to deal with grounds Nos. 2 and 3, viz.:

“II. For that the Income-tax Appellate Tribunal erred in directing that figure of disclosed income of the block period should be taken as per section 158BB(1)(c) of the Income-tax Act, 1961, the same should be taken as nil.

III. For that the Income-tax Appellate Tribunal is wrong in observing in para. 13 of the order that the figure of disclosed income for the purpose of undisclosed income under section 158BB should be taken as per books of the assessee when there is no legal requirement for the assessee to file his return of income which is in contravention of section 158BB(1)(c) of the Act.”

Grounds Nos. 2 and 3:

2. In this case in the block assessment after search and seizure held in the previous year 1995-96 ten (10) earlier previous years from 1986-87 were included as law then prevailed. It was apparent from the books of account that the income for some of the previous years was below the taxable limit. This was sought to be included in the block assessment and no adjustment was allowed to the assessee by the Assessing Officer. On appeal, the Income-tax Appellate Tribunal allowed the adjustment and excluded the income for those years where the income was found to be below the taxable limit. The law as it stood before the Finance Act, 2002, provided some grounds for confusion. Even then on the same proposition in Commissioner Of Income Tax v. M.M George, [2002] 254 ITR 45, the Kerala High Court had taken a view that the income for the periods which were below the taxable limit could not be included in the block assessment. However, subsequently by the Finance Act, 2002, section 158BB was amended with effect from July 1, 1995. By reason of such amendment, the principle laid, down in M.M George, [2002] 254 ITR 45 (Ker) was statutorily recognised. In the present case, when the learned Tribunal had given its decision, this amendment was not there. It seems that the learned Tribunal had correctly interpreted the law and given a right decision in excluding the income for the years below the taxable limit as was held in M.M George, [2002] 254 ITR 45 by the Kerala High Court. The amendment so brought about has since been given effect from July 1, 1995, viz., before such search and seizure was held. Therefore, the amendment should be deemed to have been in the statute at the time when search and seizure were held and such benefit that has been given to the assessee by the Tribunal can be said to be justified and in accordance with law. Similar question arose in CIT v. M.M Thomas, [2004] 265 ITR 327 again before the Kerala High Court where it was held that since the search under section 132 of the Income-tax Act, 1961, was conducted on November 22, 1995, that is after the retrospective amendment of sub-clause (B) of clause (c) of sub-section (1) of section 158BB, the income below the taxable limit of a previous year could not be included as undisclosed income of the block period.

3. In this case, search was held on November 3, 1995, which is definitely after July 1, 1995, attracting the application of the amended provision, which is deemed to be there on the statute on the date when searches were held. Therefore, grounds Nos. 2 and 3 are to be answered against the Department and in favour of the assessee. Since we are in agreement with the decisions in M.M George, [2002] 254 ITR 45 (Ker) and M.M Thomas, [2004] 265 ITR 327 (Ker), respectively, having regard to the amended provision incorporated in the section itself by the Finance Act, 2002, with retrospective effect from July 1, 1995, these two questions are answered in favour of the assessee and against the Department.

Ground No. 1:

“For that the Income-tax Appellate Tribunal was wrong in deleting the entire addition made in the assessment in respect of income from ‘pachai business’.”

4. So far as the first question is concerned, Mr. Agarwal had pointed out that the conclusion arrived at by the learned Tribunal is perverse and is based on no material and it had believed an explanation which is not at all a plausible explanation. According to him, initially, the explanation was that the assessee had trading business in rice and that explained the discrepancy in the purchase figure and consumption figure. This was the explanation given before the Assessing Officer. Whereas before the learned Tribunal the assessee had given a different explanation. There was no proof of trading and on materials, it was found by the Assessing Officer that the assessee was unable to establish that he was carrying on any trading business in rice. The assessee sought to explain the discrepancy by alleging that he had sold this difference of consumption and purchase to his relatives. Such an explanation cannot at all be believed.

5. Apart from the above contention, Mr. Agarwal had also led us through the assessment order as well as the decision of the Appellate Tribunal and had pointed out the discrepancies and had contended that the decision of the Tribunal cannot be sustained in law, with regard to the finding arrived at on ground No. 1.

6. We have gone through these assessment and the decision of the learned Tribunal. We have also examined the materials placed before us. In fact, we are in agreement with the view taken by the learned Tribunal that the Assessing Officer had confused himself in pointing out the purchase figure and consumption figure as was rightly found by the learned Tribunal. Though the Assessing Officer purported to proceed on the basis of the documents SM-15 and SM-16, yet there was no available material from which the figure could be arrived at except through an estimation. The principle that has been laid down for the purpose of making assessment are settled proposition as was referred to by the learned Tribunal in the case of Sunder Agencies v. Deputy Commissioner of Income-tax, [1997] 63 ITD 245 (Mumbai); T.S Kumarasamy v. Asst. CIT, [1998] 65 ITD 188 (Mad), at page 206 and Indore Construction (P.) Ltd. v. Asst. CIT, [1999] 71 ITD 128 (Indore) wherein the Mumbai Bench of the Income-tax Appellate Tribunal, the Madras Bench of the Income-tax Appellate Tribunal and the Indore Bench of the Income-tax Appellate Tribunal, respectively, had held that the income for block assessment under search and seizure procedure is to be computed strictly on the basis of the documents seized; and it cannot proceed on conjectures and/or surmises and arrive at an estimation instead of computation. The word “computation” connotes a different meaning than estimation or appraisal. Computation presupposes a calculation on the basis of the materials, which is something different from estimation or appraisal and it must be based on methodical calculation with some amount of approximity to mathematical process on the materials available on search and seizure.

7. The word “computation” has not been defined in the Act. The meaning of the word is to be gathered from the scheme of the Act having regard to its ordinary grammatical meaning. The word “assessment” has been defined to mean reassessment as well. Thus we do not get the meaning from the Act. Again we are to fall back on the ordinary grammatical meaning. In order to give the meaning of the word “computation”, as intended by the Legislature, we may note the interconnection, interdependence and interlacing of these two expressions for the purpose of the Act in the context these were used. The Act requires an assessment of the income of the assessee. For the purpose of assessment the income is required to be computed. Upon such computation in the process of assessment the income chargeable to tax is determined and assessed to tax.

8. The ordinary meaning of the word “assessment” is: “the action of assessing; the amount assessed; the determination of the amount of taxation; the scheme of charge or taxation; valuation of property or income for the purpose of taxation” (see Shorter Oxford Dictionary, (Third edition)). In the context of the Act… “an assessment finding its origin in an activity of the Assessing Officer acting as such… The phrase describes the provenance of the assessment;… The use of the machinery provided by the Act…” Raleigh Investment Co. Ltd. v. Governor-General in Council, [1947] 15 ITR 332, at page 337 (PC) followed and quoted in Seth Harish Chandra v. Union of India, [1962] 46 ITR 442, at page 446 (Punj). The word “assess” is a comprehensive word, and in a taxing statute it often means the computation of the income of the assessee, the determination of the tax payable by him, and the procedure for collecting or recovering the tax. In a case where there is a dispute about the identity of the assessee, the order of assessment serves the purpose of establishing the identity and naming the person from whom the tax has to be recovered (Bhopal Sugar Industries Ltd. v. Commissioner Of Income-Tax, M.P*, (1979) 3 SCC 792, at page 796). The term assessment is flexible, capable of one of many meanings. It will take its colour from the context in which it occurs (J.K Iron and Steel Co. Ltd. v. HO, [1967] 65 ITR 386 : AIR 1967 All 248, at page 251). The word assessment can bear a very comprehensive meaning, it can comprehend the whole procedure for ascertaining and imposing liability upon the taxpayer (Kalawati Devi Harlalka v. CIT, AIR 1968 SC 162 at page 167 : [1967] 66 ITR 680 (SC)).

9. Whereas the word “computation” compared to the word “assessment”, bears a narrower meaning. It is the process of computation of the income for assessment of the tax payable. The ordinary grammatical meaning of the word “computation”, as given in Shorter Oxford Dictionary, third edition, is: “the action or process of computing; a method of reckoning” and the word “compute” means: “clear or settle (an account) reckon; to determine by calculation; to reckon, count; to take account of”. According to Longman Dictionary of Contemporary English, 1982 reprint, the word “compute” means: “to calculate (a result, answer, sum, etc.)” and “computation” means: “(the result of) the act of calculating”.

10. Thus, in the context of the Act, computation is a calculation, a method of determination by reckoning through calculation. It involves some methodical process with some amount of approximate mathematical precision based on the calculable data available. When used in the context of the Industrial Disputes Act, 1947, it merely means calculation whether simple or otherwise (Prop. Lenox Photo Mount Mfg. Co. v. Presiding Officer, Labour Court, AIR 1965 Mad 450).

11. The word “computation” is completely distinct and different from the word “estimate”, which means: “the action of valuing or appraising; an approximate calculation based on probabilities”. In Commissioner Of Income-Tax, Kanpur v. Elgin Mills Co. Ltd., [1980] 123 ITR 712, at pages 720, 721 (All), the court held that “underestimate” signifies an estimate which is below the truth or which is at too low a rate. In order to establish that an estimate is not an underestimate proper basis and justification has to be shown. Thus the state of estimation is fluid and not solid. Whereas computation is based on solid methodical process of calculation with some amount of approximate mathematical precision based on the datas and materials available.

12. On the other hand, the word “appraisal” means: “the act of appraising; the setting of a price;” “appraise” means: “to fix a price for; especially, as an official valuer; to estimate the amount, or worth of;” whereas “appraisement” means: the action of “appraising”; “valuation by an official appraiser; estimated value; estimation of worth generally”. (See Shorter Oxford English Dictionary, third edition).

13. Under the scheme of the Act, the Assessing Officer computes the income in the process of assessment in dealing with income from business; he does not estimate or appraise the income from the business. Therefore, we are supposed to keep the distinction in mind in such cases while approaching a finding of fact found by the learned Tribunal.

14. Now, we may examine as to whether the finding of the learned Tribunal can be justified in the context of the meaning of “computation” as discussed above vis-a-vis the order passed by the Commissioner of Income-tax (Appeals).

15. Having gone through the order of the learned Tribunal, we find that the learned Tribunal had recorded its reason and proceeded on the basis of the principle of law enunciated. We do not find that the inference drawn on the established facts are contrary to the principle of law or perverse. This court in appeal can interfere with the findings arrived at by the Tribunal, which is the last court of finding of facts, if perverse or based on no materials or that it was not possible by any reasonable man to arrive at such a conclusion. Where two opinions are possible on the established facts, if the Tribunal has adopted one, this court sitting in appeal under section 260A is not supposed to substitute its own view unless it is of the opinion that the findings arrived at by the Tribunal cannot be sustained and is on the border line of perversity. The learned Tribunal has rightly found that the Commissioner of Income-tax (Appeals) had appraised instead of assessed; he had attempted to work out the approximate based on probabilities. Having gone through the order of the Commissioner of Income-tax (Appeals), we do not think that the finding of the learned Tribunal in this regard cannot be possible or is perverse or that there was no scope of forming two opinions with regard thereto.

Conclusion:

16. Having regard to the facts and circumstances of the case, we are of the view that the inference drawn by the learned Tribunal is in conformity with the principle of law and the material does not speak otherwise. The first question is also answered in favour of the assessee and against the Department.

Order:

17. In the result, the appeal fails and is accordingly dismissed.

18. There will, however, be no order as to costs. Xerox certified copy of this judgment be supplied to the parties, if applied for

Tapan Kumar Dutt, J.:— I agree.