M/S.S.PRABHAKAR KAMATH & 3 OTHERS (AOP) vs. THE ASSISTANT COMMISSIONER

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ITA/627/2007HC KarnatakaKAHC01050221200710 February 2014Bench: B.MANOHAR,DILIP B.BHOSALE6 pages
AI SummaryDismissed

What did the High Court hold?

The High Court addressed the second substantial question of law regarding the time limit for assessment. It noted that a notice under Section 148 was issued on 03.09.1999, and the assessee filed a return on 13.01.2000. Although the date of the notice under Section 143(2) was not explicitly stated, it was admitted to have been issued within 12 months from the last date of the month of filing the return. Crucially, the Court referred to the proviso to sub-section (2) of Section 153, which allowed assessments/reassessments to be made up to 31st March 2002, if the notice under Section 148 was served between 1st April 1999 and 1st April 2000. As the assessment was made before 31st March 2002, the assessee's counsel conceded on the issue of limitation, agreeing that the second question should be decided in favour of the Revenue. Consequently, the assessee's counsel did not press the remaining substantial questions of law, and the appeals were dismissed. No issue was expressly left undecided.

What were the facts?

The assessee, an Association of Persons (AOP) represented by Sri. S. Prabhakar Kamath, filed appeals before the High Court of Karnataka against the order of the Income Tax Appellate Tribunal (ITAT). The ITAT's order dated 30.04.2007 in ITA Nos. 818-821/Bang/2003 partly allowed appeals filed by the Revenue and dismissed cross-objections filed by the assessee. These appeals by the assessee before the High Court pertained to Assessment Years 1995-96 to 1998-99. The ITAT's order was against the order of the Commissioner of Income-tax (Appeals), who had allowed the assessee's appeal against the order of the Assessing Officer. The High Court admitted the appeals and framed substantial questions of law.

What were the issues?

The High Court was to decide four substantial questions of law. The first question concerned whether the Tribunal was justified in upholding proceedings initiated under Section 147 of the Income Tax Act, 1961, for the relevant assessment years. The second question was whether the Tribunal was justified in holding that the assessment made under Section 143(3) read with Section 147 was issued beyond the time limit provided. The third question asked if the Tribunal was right in holding that the profit on the sale of shops was assessable under the head 'business' and not 'capital gains' as declared by the assessee. The fourth question probed whether the co-ownership of property with definite shares and the sale of shops to supplement construction costs constituted carrying on a business activity, justifying assessment under 'income from business'. The assessee's counsel argued that if the second question was answered against the assessee, the appeal would have to be dismissed. The Revenue's contentions are not explicitly recorded in the judgment.

Which sections of the Income-tax Act were involved?

Section 260A,Section 147,Section 143(3),Section 148,Section 153(2)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KARNATAKA AT BANGALORE

DATED THIS THE 10th DAY OF FEBRUARY 2014

PRESENT

THE HON’BLE MR. JUSTICE DILIP B.BHOSALE AND THE HON’BLE MR. JUSTICE B.MANOHAR

I.T.A. Nos.627/2007 & 56-58/2014

BETWEEN :

M/s.S.Prabhakar Kamath & 3 others (AOP), `Krishna Prasad’ Building, Nehru Avenue Cross Road, Opp: Air India Office (M.G.Road), Mangalore – 575 001, Represented by Sri.S.Prabhakar Kamath, Aged about 65 years, Son of Sri.Mukund Kamath. …APPELLANT

(By Sri. Parthasarathi, Adv.)

AND :

The Asst. Commissioner of Income-tax, Circle-2(1), C.R.Building, Attavar, Mangalore. …RESPONDENT

(By Sri.K.V.Aravind, Adv.) . . . .

These I.T.As. are filed under Section 260A of the Income Tax Act, 1961 praying to (i) formulate the substantial questions of law stated therein, (ii) allow the appeal and set-aside the order passed by the Income Tax Appellate Tribunal in I.T.A. Nos.818 to

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821/Bang/2003 dated 30.04.2007 in the interest of justice and equity.

These I.T.As. coming on for hearing, this day, the Court, delivered the following:

ORAL JUDGMENT (Dilip B.Bhosale. J.)

These Income-tax appeals are arising from the order dated 30th April, 2007 rendered by Income Tax Appellate Tribunal, Bangalore Bench `B’ (for short `the Tribunal’) in I.T.A. Nos. 818-821/2003 and Cross Objection Nos. 53 to 56/2006 pertaining to the Assessment years 1995-96 to 1998-99.

2.

Tribunal allowed the appeals filed by the Revenue, in part and dismissed the Cross objections filed by the assessee and hence, assessee is before this Court by way of these appeals under Section 260A of the Income-tax Act, 1961 (for short `the Act’). The Tribunal dealt with the appeals filed by the Revenue and Cross-Objections filed by the Assessee against the order dated 24.03.2003 passed by the Commissioner of Income-tax (Appeals), Mangalore (for short `the First Appellate Authority). The First Appellate Authority

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vide its order dated 24.03.2003 allowed the appeal filed by the assessee against the order dated 27.03.2002 passed by the Assistant Commissioner of Income-tax Circle-2(1), Mangalore (for short `the Assessing Officer’). This Court while admitting the appeals had framed the following questions of law vide order dated 19.09.2007: (1) Whether the Tribunal was justified in upholding the proceedings initiated under Section 147 of the Act for the relevant assessment years?

(2) Whether the Tribunal was justified in holding that the assessment made under Section 143(3) read with Section 147 of the Act was issued beyond the time limit provided under the said Section?

(3) Whether the Tribunal was right in holding that the profit on sale of shops was required to be assessed under the head business and not amenable to assessment under the head capital gains as declared by the members of the appellant?

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(4) Whether the fact that the property in question was co-owned by the members with definite share and the sale of part of the property consisting of shops to supplement the construction cost of the building would amount to carrying on an activity of business to construe that there was adventure in the nature of trade to justify the profit to be assessed under the head income from business?

3.

The learned counsel appearing for the appellant, at the outset submitted that if the second question is answered against the appellant-assessee, then the appeal will have to be dismissed. In other words he submitted that if the second question is answered in favour of the assessee, perhaps this Court will have to allow the appeal and answer the other questions in favour of the appellant-assessee.

4.

In view thereof, we have examined the second substantial question of law. There does not appear to be any dispute that, a notice under Section 148 of the Act was issued on 03.09.1999. In response thereto, the

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assessee had filed return on 13.01.2000. Though the date of notice under Section 143(2) of the Act does not find place in the orders passed by the authorities, including the Tribunal, admittedly, it was issued during the period of 12 months from the last date of the month, in which return of income was filed by the assessee. In view thereof and in the light of the proviso to sub- section (2) of Section 153 read with the other relevant provisions such as 148 and 143 of the Act, the learned counsel fairly stated that the notice under Section 143(2) of the Act cannot be stated to be beyond the period of limitation provided under the said provision. Proviso to Sub-section (2) of Section 153 states that “where the notice under Section 148 was served on or after the 1st day of April, 1999 but before the 1st date of April 2000 such assessment/ reassessment/re- computation may be made in time up to 31st day of March, 2002. Admittedly, in our case it was made before 31st day of March, 2002. In the circumstances, the learned counsel appearing for the appellant conceded insofar the issue of limitation is concerned

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and submitted that the second question may be decided against the assessee and in favour of the Revenue. Ordered accordingly.

5.

In the light of finding on the second issue, the learned counsel for the appellant does not press the other substantial questions of law and submitted that the appeal may be dismissed. Accordingly, appeals are dismissed.

Sd/- JUDGE

Sd/- JUDGE

SPS

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