COMMISSIONER OF INCOME TAX vs. JAGANNATHAN

TCA/984/2019HC Madras06 December 2019Bench: Hon`ble Mr Justice N. KIRUBAKARAN6 pages

AI SummaryDismissed

What did the High Court hold?

The High Court dismissed the appeal filed by the Revenue. The dismissal was based on Circular No. 17/2019 dated August 8, 2019, issued by the Central Board of Direct Taxes, which sets a monetary limit of Rs. 1 crore for filing appeals before the High Court. The Court noted that the tax effect in this case was less than Rs. 1 crore. Consequently, the appeal was dismissed on the ground of tax effect, and the substantial questions of law framed were left open. The Revenue was granted liberty to mention the case for restoration if the tax effect was found to be above the stipulated limit, allowing the appeal to be heard and decided on merits. No costs were awarded.

What were the facts?

The Revenue has appealed against an order of the Income Tax Appellate Tribunal (ITAT) dated May 20, 2002, concerning assessment years 1986-87 to 1996-97. The assessee's residence was searched on September 13-14, 1996, leading to a block assessment framed on September 30, 1997. The ITAT had deleted an addition of Rs. 11,56,864/- made based on the valuation cell's report regarding the cost of construction of a property, holding that in a block assessment, the Assessing Officer cannot examine construction costs or refer them to the valuation officer without evidence of expenditure found during the search. The ITAT also deleted an addition of Rs. 22,38,000/-, claimed by the assessee as a loan from MG Sekhar, who confirmed the loan but could not explain its source, deeming it a protective assessment based on apprehension rather than positive evidence.

What were the issues?

1. Whether, in the facts and circumstances, the Tribunal was correct in deleting the sum of Rs. 22,38,000/- assessed protectively, when there was no evidence that the amount was indeed a loan as claimed by the assessee? This question turns on the interpretation of principles governing protective assessments and the requirement of positive evidence. The Revenue contends that the Tribunal erred in deleting the addition despite the assessee's claim of a loan being uncorroborated by the lender's explanation of its source. The assessee's argument is not recorded. 2. Whether, in the facts and circumstances, the Tribunal was correct in holding that in a block assessment, a reference cannot be made to the valuation cell regarding the cost of construction, when no material was found at the time of search showing the extent of expenditure on the construction? This question concerns the scope and limitations of block assessments and the powers of the Assessing Officer concerning construction costs. The Revenue argues that the Tribunal's view restricting the AO's powers is incorrect. The assessee's argument is not recorded.

Which sections of the Income-tax Act were involved?

Section 260A

AI-generated summary — verify with the full judgment below

T.C.A. No. 984 of 2019 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 06.12.2019 CORAM THE HONOURABLE MR. JUSTICE N.KIRUBAKARAN AND THE HONOURABLE MR.JUSTICE P.VELMURUGAN T.C.A. No. 984 of 2019 Commissioner of Income Tax, Chennai. ..Appellant Vs. K. Jagannathan Chennai. ..Respondent Prayer: Appeal under Section 260A of the Income Tax Act, 1961 as against the order of the Income Tax Appellate Tribunal, Madras 'B' Bench, dated 20.05.2002 in IT (SS) A No. 325/Mds/97 dated 20.05.2002 for the assessment years 1986-87 to 1996-97. For Appellant :: Mr.T.R. Senthilkumar Senior Standing Counsel J U D G M E N T 1\6 http://www.judis.nic.in T.C.A. No. 984 of 2019 (Judgment of the Court was delivered by N.KIRUBAKARAN,J.) This Tax Case Appeal has been preferred by the Revenue against the order dated 20.05.2002 passed in IT (SS) A No. 325/mds/97 on the file of the Income Tax Appellate Tribunal, Madras 'B' Bench for the assessment years 1986-87 to 1996-97. 2.The respondent's/assessee's residence was searched on 13th and 14th September, 1996. A block assessment was framed on 30.09.1997 including various amounts. The assessee filed an appeal before the Income Tax Appellate Tribunal. The Tribunal, by its impugned order, deleted inter alia the addition of Rs.11,56,864/- made on account of valuation cell's report regarding cost of construction of the property at RK Mutt Road, Mylapore, on the ground that in a block assessment, the Assessing Officer cannot examine the cost of construction, nor refer the same to the valuation officer, when no evidence was found at the time of search indicating that the assessee had expended the amount. The Appellate Tribunal also deleted the addition of Rs.22,38,000/- which the assessee claimed was a loan from one MG Sekhar who confirmed the 2\6 http://www.judis.nic.in T.C.A. No. 984 of 2019 loan, but could not explain the source on the ground that the addition made is not based on positive evidence but apprehension, and only protective assessment was made. Aggrieved by the order of the Appellate Tribunal only, the present appeal has been filed by the Revenue. 3.The appeal is admitted on the following substantial questions of law : “1. Whether in the facts and circumstances of the case, the Tribunal was right in deleting the sum of Rs.22,38,000 assessed protectively in the hands of the assessee, when there was no evidence that the amount was in fact, a loan as claimed by the assessee? 2. Whether in the facts and circumstances of the case, the Tribunal was right in holding that in a case of block assessment reference cannot be made to the valuation cell regarding cost of construction, when no material was found at the time of search showing the extent of expenditure on the construction?” 4.Mr.T.R. Senthilkumar, learned Senior Standing Counsel appearing 3\6 http://www.judis.nic.in T.C.A. No. 984 of 2019 on behalf of the appellant would submit that the tax effect in this case is less than Rs.1 crore and is covered by Circular No.17/2019 dated 08.08.2019 issued by the Director, Central Board of Direct Taxes, Department of Revenue, Ministry of Finance, Government of India, Delhi. As per the said circular, the monetary limit to file an appeal before the High Court is fixed at Rs.1 crore. In this case, tax effect is less than Rs.1 crore and therefore, the case has to be dismissed. 5.This Court perused the circular dated 08.08.2019 and Paragraph No.2 of the said Circular, which prescribes monetary limit for filing appeal is usefully extracted as follows: 2.As a step towards further management of litigation, it has been decided by the Board that monetary limits for filing of appeals in income-tax cases be enhanced further through amendment in Para 3 of the Circular mentioned above and accordingly, the table for monetary limits specified in Para 3 of the Circular shall read as follows: 4\6 http://www.judis.nic.in T.C.A. No. 984 of 2019 S.No. Appeals / SLPs in Income- tax matters Monetary Limit (Rs.) 1. Before Appeallate Tribunal 50,00,000 2. Before High Court 1,00,00,000 3. Before Supreme Court 2,00,00,000 6.In view of the submissions made by the learned Senior Standing counsel appearing on behalf of the appellant and also in view of the Circular No.17/2019 dated 08.08.2019 issued by the Director, Central Board of Direct Taxes, Delhi, the Tax Case Appeal is dismissed on account of tax effect. However, the substantial questions of law framed are left open. In the event the tax effect is above the limit fixed in the said circular, liberty is granted to the Revenue to make a mention to this Court to restore the appeal to be heard and decided on merits. No costs. (N.K.K.J) (P.V.J) 06.12.2019 nv To The Income Tax Appellate Tribunal, Madras 'B' Bench. N. KIRUBAKARAN,J. 5\6 http://www.judis.nic.in T.C.A. No. 984 of 2019 AND P. VELMURUGAN,J. nv

T.C.A. No. 984 of 2019 06.12.2019 6\6 http://www.judis.nic.in

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