Miscellaneous Appeal No.606 of 2008 With Miscellaneous Appeal No.605 of 2008 With Miscellaneous Appeal No.607 of 2008 ******* Against the common order dated 16.05.2008, passed by the Income Tax Appellate Tribunal, Patna Bench, Patna in I.T.A. Nos.63 to 65/Pat/2007. ****** In M.A. No.606 of 2008: Supriya Developers Pvt. Ltd., Dalwar House, Bibiganj, Danapur, Patna. ....Assessee/Appellant/Appellant…. Appellant. Versus Deputy Commissioner of Income Tax, Central Circle-1, Central Revenue Building, Patna-800001. …..Assessing Officer/Respondent/Respondent…Respondent. ******* M.A. No. 605 of 2008: Supriya Developers Pvt. Ltd., Dalwar House, Bibiganj, Danapur, Patna. .... Assessee/Appellant/Appellant….Appellant. Versus Deputy Commissioner of Income Tax, Central Circle-1, Central Revenue Building, Patna-800001. .... Assessing Officer/Respondent/Respondent….Respondent. ******** In M.A. No. 607 of 2008: Supriya Developers Pvt. Ltd., Dalwar House, Bibiganj, Danapur, Patna. .... Assessee/Appellant/Appellant…..Appellant. Versus Deputy Commissioner of Income Tax, Central Circle-1, Central Revenue Building, Patna-800001. .... Assessing Officer/Respondent/Respondent….Respondent. ******** For the Appellant: Mr. Krishna Nandan Singh, Advocate (in all cases) For the Respondent: Mr. Rishi Raj Sinha, (in all cases) Assistant Standing Counsel. ******** P R E S E N T THE HON’BLE MR. JUSTICE SUDHIR KUMAR KATRIAR THE HON’BLE MR. JUSTICE AHSANUDDIN AMANULLAH ******* S.K. Katriar, J. These appeals at the instance of the assessee have been preferred under Section 260A of the Income Tax Act 1961 (hereinafter referred to as „the Act‟), are with respect to three different periods, and arise out of a common order dated 16.5.2008, passed by the Income Tax 2 Appellate Tribunal, Patna Bench, whereby the appeals preferred by the assessee as well as the department have been dismissed by a common order, and that of the learned Commissioner of Income Tax (Appeals), has been upheld. M.A. No.606 of 2008: 2. We shall first take up M.A. No.606 of 2008. A brief statement of facts essential for the disposal of the appeals may be indicated. This appeal is with respect to the assessment year 2001-02. The two other appeals have been heard analogous with the present one, and are being disposed of by the present judgment. 2.1) The appellant is a private limited company and is registered under the provisions of the Companies Act 1956. There was a search and seizure in the premises of one Brajesh Kumar, the Managing Director of the Company, on 23.11.2000. Documents related to transactions of the assessee company were found, seized, and marked SS-1 to SS-9. Proceedings for block assessment in terms of section 158BC, read with section 158BD of the Act, were initiated. During the course of block assessment proceeding, the assessee produced books of accounts for the block period. The learned assessing officer found that the books of accounts produced by the assessee were not proper and were incomplete. The bills and vouchers related to construction expenditure incurred by the assessee were not produced for the purpose of verification. The learned assessing officer ultimately dropped the proceedings under section 158BC, read with Section 158BD of the Act, for the block period 3 1.4.1990 to 23.11.2000, vide order dated 31.8.2004 (Annexure-1). Simultaneously he issued order dated 31.8.2004 (Annexure-1/2), whereby he initiated proceedings for income escaped assessment in terms of section 148, read with section 147, of the Act after recording reasons. The learned assessing officer passed an order of best-judgment assessment as per the procedure prescribed under section 144 of the Act, by order dated 27.3.2006 (Annexure-4), passed by the learned Assistant Commissioner of Income-tax, whereby the assessee was assessed to tax. 2.2) It is relevant to state that the learned assessing officer had passed separate orders of assessment under the provisions of section 144 of the Act for the three periods in question which gave rise to three appeals before the learned Commissioner. Aggrieved by the order of the learned assessing officer, the assessee preferred appeal which was allowed in part, and certain additions made by the learned assessing officer were deleted, by order dated 9.11.2006 (Annexure-5), passed by the learned Commissioner of Income Tax (Appeals)-I, Patna, whereby he disposed of the three appeals preferred by the assessee by common order dated 9.11.2006. 2.3) Aggrieved by the order of the learned Commissioner (Appeals), the assessee as well as the Revenue had preferred three appeals each before the learned Tribunal. The learned Tribunal dismissed the six appeals by a common order and impugned herein. 3. While assailing the validity of the impugned order, learned counsel for the appellant submits that, after having dropped the 4 proceedings for block-period assessment, it was not open to the learned assessing officer to initiate proceedings for best-judgment assessment under section 144 of the Act. He relies on the following reported judgments: (i) Judgment of the Supreme Court in Commissioner of Income Tax, Madras v. M.K.K.R. Muthukaruppan Chettiar, AIR 1970 S.C. 486. (ii) In Bapalal and Co. Exports v. Joint Commissioner of Income-Tax (OSD), (2007) 289 ITR 37 (Mad). 3.1) He submits in the same vein that change of opinion on the self-same facts is impermissible, and is possible only if new facts or new situation like misrepresentation of facts, fraud etc. come to light. He relies on the following reported judgments: (i) In Commissioner of Income Tax vs. Eicher Ltd., (2007) 294 ITR 310 (Delhi). (ii) In Commissioner of Income-Tax vs. Kelvinator of India Ltd., (2010) 320 ITR 561 (SC). 3.2) He next submits that if a particular procedure has been prescribed by the statute, then no other procedure can be resorted to. He relies on the judgment of the Supreme Court in the case of State of Gujarat v. Shantilal Mangaldas and others, AIR 1969 SC 634, paragraph 54 (at page 653). He also submits that once block period assessment takes place, then all other assessment proceedings merge into the same. He relies on the judgment in the case of Raja Ram Kulwant Rai vs. Assistant Commissioner of Income-Tax, (1997) 227 ITR 187 (P & H). He next submits that, if the learned assessing officer was not 5 satisfied by the books of accounts produced by the assessee, he ought to have followed the procedure prescribed under section 145(3), read with section 144 of the Act, after recording reasons. He also submits that the learned assessing officer has at one place in his order observed that the assessee produced the books of accounts which were unsatisfactory, whereas he has at another place observed that the books of accounts were not produced. He submits that the question of status of assessee has been confused by the learned assessing officer. He has described the appellant as a company, and also as a partnership firm. 4. The learned Assistant Standing Counsel submits that validity of search and seizure, or proceedings under section 158BC, read with section 158BD, are not under challenge in this appeal. The proceedings under section 144 are alone under challenge. He next submits that the books of accounts contemplated by section 2(12A) were not produced, and only some vouchers were produced. Vouchers are not mentioned in section 2(12A) of the Act, and has traditionally been treated to be supporting evidence. He further submits that best-judgment assessment can be part of block period assessment, and can equally be part of routine assessment. He relies on the judgment of the Allahabad High Court in Chandra Prakash Agrawal v. Assistant Commissioner of Income- Tax and others, (2006) 287 ITR 172 (All) (paragraphs 29, 30, 34 and 36 to 38). In his submission, the learned assessing officer has in the present case dropped the former, and resorted to the latter, which is not prohibited in the scheme of the Act. He submits in the same vein that the 6 assessee has not suffered prejudice by the procedure adopted by the learned assessing officer for the reason that the procedure as well as the liability is far more stringent under block-period assessment. He next submits that the assessee never challenged the order dropping the proceedings under section 158BC, read with section 158BD, and simultaneous issuance of notice under section 148 of the Act. The assessee submitted to the jurisdiction of the three authorities and raises this question for the first time before this Court. He also submits that the situation for best-judgment assessment is brought about by the conduct and lack of cooperation of the assessee. He relies on the judgment of the Supreme Court in Commissioner of Sales Tax, Madhya Pradesh v. H.M. Esufali H.M. Abdulali, (1973) 90 ITR 271: (1973) 32 STC 77. He lastly submits that the issues are concluded by findings of facts, and no substantial question of law arises for the consideration of this Court. 5. Learned Counsel for the appellant has pressed the following substantial question of law for our consideration: (i) Whether after the initiation and dropping after hearing of Block Assessment Proceedings for assessing undisclosed income the Assessing Officer is authorised and empowered to simultaneously re-open the assessment under section 147/148 of the Income Tax Act, 1961 alleging escapement of income on basis of the very same Audited Accounts considered by him during Block Assessment and which had already been filed with the Register of Companies, Bihar and when no return had been filed instead of making the Block Assessment of income? (ii) Whether the A.O. having treated the non-filing of the 7 Return as the concealment of the income was justified in not making an assessment as provide by Chapter XIV B of the Act and adding those figures in Block Assessment? (iii) Whether the simultaneous action for re-assessment was validly initiated against the appellant who had not submitted any regular return under section 139 of the Income Tax Act, 1961 when the Block Assessment consisting of all those years was pending as the law provides that any re-assessment proceedings be started only after completion of earlier proceedings? (iv) Whether the failure to record the findings and the act of dropping the proceedings under section 158BD can mean or result in escapement of income liable to tax when all material facts were before the A.O. purportedly on basis of which he ultimately passed assessment order? (v) Whether on the facts and circumstances of this case it is clear that recorded reasons to believe escapement of income as disclosed in the order is based on mere change of opinion which cannot be the ground for re-assessment? (vi) Whether the onus being on the Department in Block Assessment the casual remark that Books of Accounts do not represent true and correct affairs or are not properly maintained without specifying a single defect as against the Auditor‟s findings are baseless, arbitrary which vitiate the entire proceedings of re-assessment? 6. We have perused the materials on record and considered the submissions of the learned counsel for the parties. There was a search and seizure in the premises of Brajesh Kumar, the Managing Director of the appellant company, on 23.11.2000. Certain documents were seized which have been marked SS-1 to SS-9. The proceedings for block-period 8 assessment in terms of section 158BC, read with section 158BD, of the Act were initiated. During the course of block-assessment proceeding, the assessee produced the books of accounts for the block-period. The learned assessing officer, however, found that the books of accounts produced by the assessee were not proper and were incomplete. The bills and vouchers related to construction expenditure incurred by the assessee were not produced for the purpose of verification. Moreover, the assessee was not able to furnish confirmations from the persons from whom advances to the tune of Rs.39,85,257/- were claimed to have been received by the assessee in spite of repeated opportunities. Therefore, the learned assessing officer concluded that the books of accounts of the assessee did not represent true and correct affairs of the business of the assessee. In view of lack of cooperation on the part of the assessee, the learned assessing officer found it difficult to proceed further with the block-period assessment. Therefore, the learned assessing officer concluded that “…In the backdrop of above findings of the block assessment proceedings, notice u/s 148 of the Income Tax Act 1961, was issued on 31.08.2004”, after recording reason to reopen the case as follows: “Sri Brajesh Kumar and Sri Manoj Kumar are the two directors in the assessee company. The assessee has not filed the return of income for the A.Y. 2001-02.” 7. On a perusal of the two orders of 31.08.2004, we are of the view that the course adopted by the learned assessing officer is permissible in the scheme of the Act. It is evident on a perusal of the 9 order dated 31.8.2004 (Annexure-1), that the assessment proceeding had not taken place on merits and, in view of the constraints presented by the assessee, the proceeding was terminated. Such a situation was brought about by the conduct and complete lack of cooperation attributable to the assessee. The learned Assistant Standing Counsel has rightly relied on the Division Bench judgment of the Allahabad High Court in Chandra Prakash Agrawal vs. Assistant Commissioner of Income Tax (supra). Learned counsel for the appellant is not right in his submission that there was change of opinion on the self-same facts. Had the block-period assessment been concluded on merits, and thereafter best-judgment assessment been resorted to, the same may have given rise to a situation complained of by the appellant. On a perusal of the order of assessment, it is quite evident that the learned assessing officer had not disposed of the block-period assessment on merits, had decided to drop the same, and resorted to best-judgment assessment which is warranted in law. 8. Indeed in the present case, in view of complete non- cooperation on the part of the assessee, the learned assessing officer was left with no alternative but to resort to best-judgment assessment. The learned assessing officer relied on the materials which came on record during the block-assessment proceedings and discussed in detail in the order of assessment. The judgment of the Supreme Court in Commissioner of Sales Tax, Madhya Pradesh vs. H.M. Esufali H.M. Abdulali (supra), provides exhaustive guidelines with respect to best- judgment assessment. The learned assessing officer rightly concluded as 10 follows: “6.4 The assessee has not furnished even a single document on basis of which the income from business has been shown by the assessee in the return of income. The averment of the assessee is not backed up with any evidence, hence it is rejected. Thus, the only option left before me is to estimate the income from business on the basis of the information available on record.” 9. The learned Assistant Standing Counsel has rightly submitted that the assessee did not suffer any prejudice on account of the best-judgment assessment, inasmuch as the procedure and the liability is far more stringent in the case of block-period assessment. In any case, such a situation was brought about by the conduct of the assessee itself. It is further relevant to state that the learned counsel for the appellant has not pointed out any procedural irregularity. 10. The learned Assistant Standing Counsel rightly submits that the present appeal is concluded by findings of facts and it does not raise any question of law, much less a substantial question of law, which is the mandatory, statutory requirement under the Act to maintain this appeal. He has rightly relied on the judgment of a Division Bench of this Court dated 30.3.2001, in Misc. Appeal No.657 of 2010 (Deputy Commissioner of Income Tax v. Sulabh International Social Service Organisation), 2011(3) BBCJ 117, to which one of us (S.K. Katriar, J.), was a party, where the scope and sweep of section 260A of the Act was considered. 11. Section 260A of the Act is reproduced hereinbelow: 260A. (1) An appeal shall lie to the High Court from every order passed in appeal by the Appellate Tribunal [before the date of establishment of the National Tax 11 Tribunal], if the High Court is satisfied that the case involves a substantial question of law. (2)[The Chief Commissioner or the Commissioner or an assessee aggrieved by any order passed by the Appellate Tribunal may file an appeal to the High Court and such appeal under this sub-section shall be-] (a) filed within one hundred and twenty days from the date on which the order appealed against is [received by the assessee or the Chief Commissioner or Commissioner]; (b) [****] (c) in the form of a memorandum of appeal precisely stating therein the substantial question of law involved. (3) Where the High Court is satisfied that a substantial question of law is involved in any case, it shall formulate that question. (4) The appeal shall be heard only on the question so formulated, and the respondents shall, at the hearing of the appeal, be allowed to argue that the case does not involve such question; Provided that nothing in this sub-section shall be deemed to take away or abridge the power of the court to hear, for reasons to be recorded, the appeal on any other substantial question of law not formulated by it, if it is satisfied that the case involves such question. (5) The High Court shall decide the question of law so formulated and deliver such judgment thereon containing the grounds on which such decision is founded and may award such cost as it deems fit. (6) The High Court may determine any issue which- (a) has not been determined by the Appellate Tribunal; or (b) has been wrongly determined by the Appellate Tribunal, by reason of a decision on such question of law as is referred to in sub-section (1). [(7) Save as otherwise provided in this Act, the provisions of the Code of Civil Procedure, 1908 (5 of 1908), relating to appeals to the High Court shall, as far as may be, apply in the case of appeals under this section.] (Emphasis added) 12. It is evident that, in view of the mandate of law, an appeal under Section 260A of the Act will be maintainable before the High 12 Court if the appellant is able to satisfy this Court that it involves a substantial question of law. This expression has acquired a definite connotation over the years by authoritative pronouncements of the Supreme Court and High Courts. The same expression occurs in Section 100 of the Code of Civil Procedure which provides that a second appeal shall lie if the High Court is satisfied that the case involves a substantial question of law. It has been consistently held that the High Court in exercise of its second appellate jurisdiction should normally accept all findings of facts recorded by the first appellate court, being a forum of facts. Adequacy of materials, or possibility of another view on facts, is no ground for the High Court to entertain a second appeal. High Court can on facts interfere only after it reaches the conclusion that, in view of the materials on record, no person duly instructed in law can reach that conclusion. In other words, it is not possible to reach the conclusion as has been arrived at by the first appellate court. This well-established principle has avowed public policy that there should be finality to judgments and orders of courts and quasi-judicial authorities. Judicial experience has shown that unlimited number of appeals is never conducive to administration of justice. Unlimited number of appeals is only permissive of substituting one speculation on facts for another. Mr Justice Felix Frankfurter, celebrated Judge of the Supreme Court of U.S.A., in James C. Rogers vs. Missouri Pacific Rail Road Co., 352 U.S. 500= 1 L ed. 2nd 493, has made observations to that effect. The position may be more stringent for the appellant in the present case in 13 contra-distinction to the second appellate jurisdiction under section 100 of the Code of Civil Procedure, inasmuch as the second appeal before the High Court is the third forum for the appellant, whereas the present forum is the fourth one. This, to our mind, it is a vital aspect of the matter and the appellant will have to make out a strong case of substantial question(s) of law to maintain this appeal. 13. Speaking on the scope of second appeal within the meaning of section 100 CPC, the Supreme Court has observed in the case of Santosh Hazari vs. Purushottam Tiwari, (2001)3 SCC 179, that a point of law which admits of no two opinions may be a proposition of law, but cannot be a substantial question of law. To be substantial, a question of law must be debatable, not previously settled under law of the land or a binding precedent, and must have a material bearing on the decision of the case, if answered either way, in so far as the rights of the parties before it are concerned 14. The Supreme Court has held in the case of M. Janardhana Rao vs. CIT, (2005)2 SCC 324, that the conditions mentioned in section 260A of the Act must be strictly fulfilled in order to maintain appeal thereunder, otherwise the appeal would not be maintainable. The High Court must make every effort to distinguish between a question of law and a substantial question of law. In exercise of the powers under section 260A of the Act, the findings of facts of the Tribunal cannot be disturbed. The right of appeal is neither a natural nor an inherent right attached to the litigation. Being a statutory right, it has to be regulated in accordance 14 with law in force at the relevant time. Such an appeal cannot be decided on merely equitable grounds. The expression „Substantial question of law‟ has not been defined anywhere in the Statute. But it has acquired a definite connotation through various judicial pronouncements. The conditions mentioned in section 260A must be strictly fulfilled before an appeal can be maintained under section 260A. 15. In Sir Chunilal vs. Mehta & Sons Ltd. vs. Century Spg. & Mft. Co. Ltd. (1962 Supp. (3) SCR 549: AIR 1962 SC 1314), the Supreme Court laid down the following tests to determine whether a substantial question of law is involved. The tests are: (1) whether directly or indirectly it affects substantial rights of the parties, or (2) the question is of general public importance, or (3) whether it is an open question in the sense that the issue is not settled by pronouncement of this Court or Privy Council or by the Federal Court, or (4) the issue is not free from difficulty, and (5) it calls for a discussion for alternative view. There is no scope for interference by the High Court with a finding recorded when such finding could be treated to be a finding of fact. 16. In view of the discussion in the orders of the three learned authorities, we have no hesitation in concluding that the issues are concluded by findings of facts and do not give rise to any question of law, much less a substantial question of law within the constricted scope and ambit of section 260A of the Act. We are satisfied with the detailed discussion of the issues of facts and questions of law in the orders of the three learned authorities under the Act. A keen application of mind was 15 brought to bear on the appeals before him by the learned Commissioner of Income Tax (Appeals), and he gave substantial relief to the assessee by deleting certain additions made by the learned assessing officer. These appeals are indeed not maintainable in view of complete absence of any substantial question of law arising for consideration. M.A. No.606 of 2008 is dismissed. M.A. No.605 of 2008: 17. This appeal is at the instance of the same assessee, and is with respect to the assessment year 2000-01. The learned assessing officer passed order of assessment on 6.3.2006 (Annexure-4). The order of the learned Commissioner of Appeals, and that of the learned Tribunal, are common as in the aforesaid M.A. No.606 of 2008. It is entirely covered by our aforesaid judgment. Consequently M.A. No.605 of 2008 is dismissed. M.A. No.607 of 2008: 18. This appeal is also at the instance of the same assessee