SHRI PRUTHVIMALLIK vs. THE INCOME TAX OFFICER

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WP/5076/2018HC KarnatakaKAHC01030682201826 November 2019Bench: S.SUJATHA5 pages
AI SummaryRemanded

What did the High Court hold?

The High Court of Karnataka, after hearing both parties and perusing the record, held that it would be appropriate to relegate the petitioner to pursue the alternative and efficacious statutory remedy of appeal available under the Income Tax Act. The Court found that the disputed questions of facts and law involved in the case could not be adjudicated in writ proceedings. The Court noted that reasonable opportunity was provided to the petitioner to present their case. The Court directed that if an appeal is filed within two weeks from the receipt of the certified copy of the order, it shall be considered by the Appellate Authority on merits without objection to limitation. All rights and contentions of the parties were left open, and the Appellate Authority was directed to decide the matter expeditiously and in accordance with law. No opinion was expressed on the merits or demerits of the case.

What were the facts?

The petitioner, Shri Pruthvimallik, sold equity shares of M/s Lifeline Drugs and Pharma Limited, acquired in 2012 and held in DEMAT form, through the stock exchange in the assessment year 2015-16. The sale proceeds were received via banking channels. The petitioner claimed exemption on the long-term capital gain under Section 10(38) of the Income Tax Act, 1961. The Income Tax Department, as part of a nationwide scrutiny of such exemptions, selected the petitioner's case. The petitioner submitted all requested documents and information. However, the petitioner contends that the assessment order passed by the respondent Income Tax Officer under Section 143(3) and the consequential demand notice were arbitrary and violative of natural justice, as the respondent failed to provide copies of investigation reports and sworn statements relied upon.

What were the issues?

1. Whether the assessment order passed by the respondent under Section 143(3) of the Income Tax Act, 1961, is liable to be quashed for alleged violation of principles of natural justice due to non-furnishing of investigation reports and sworn statements relied upon by the Assessing Officer, thereby raising a question of law and fact? Assessee's Contentions: The petitioner argues that the assessment order is hasty and arbitrary, violating principles of natural justice because the respondent failed to provide copies of the investigation report and sworn statements that were relied upon. The petitioner also asserts that all necessary documents and information were furnished, and the respondent's allegations were contrary to the petitioner's case. Revenue's Contentions: The revenue contends that the background investigation was merely to facilitate assessment proceedings and not the sole basis for the conclusion. They assert that all relevant materials were provided to the assessee, and adequate opportunity was given to present their reply. The revenue further argues that the petitioner has an efficacious alternative remedy under the Act, which has been circumvented by filing the present writ petition.

Which sections of the Income-tax Act were involved?

Section 10(38),Section 143(3),Section 156

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KARNATAKA AT BENGALURU

DATED THIS THE 26TH DAY OF NOVEMBER, 2019

BEFORE

THE HON’BLE MRS.JUSTICE S.SUJATHA

WRIT PETITION No.5076/2018 (T – IT)

BETWEEN :

SHRI PRUTHVIMALLIK W/O Mr. MALLIKARJUNA, AGED ABOUT 35 YEARS, R/AT BASAVESHWARA NILAYA, NEW SANTHE MAIDANA, CHITRADURGA-577501

...PETITIONER

(BY SRI PRADEEP KUMAR J., ADV. FOR SRI HARISH V.S., ADV.)

AND :

THE INCOME TAX OFFICER WARD-2, TAMATKAL ROAD, MEDEHALLI, CHITRADURGA-577205 …RESPONDENT

(BY SRI K.V.ARAVIND, ADV.)

THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE IMPUGNED ASSESSMENT ORDER PASSED BY THE RESPONDENT UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961, DATED 29.12.2017 FOR THE ASSESSMENT YEAR 2015-16 i.e., ANNEXURE-C AND CONSEQUENTIAL NOTICE OF DEMAND ISSUED BY RESPONDENT DATED 29.12.2017 FOR THE ASSESSMENT YEAR 2015-16 i.e., ANNEXURE-C1.

THIS PETITION COMING ON FOR PRELIMINARY HEARING IN ‘B’ GROUP, THIS DAY, THE COURT MADE THE FOLLOWING:

- 2 - O R D E R

The petitioner has assailed the assessment order passed by the respondent under Section 143(3) of the Income Tax Act, 1961 (‘Act’ for short) relating to the assessment year 2015-16 and consequential notice of demand issued by the respondent under Section 156 of the Act.

2.

The petitioner is an individual. It is submitted that during the relevant assessment year the petitioner has sold equity shares of M/s Lifeline Drugs and Pharma Limited, had earned long term capital gain, accordingly claimed exemption under Section 10(38) of the Act. The relevant investments were made by the petitioner way back in the year 2012 which were the shares in the DEMAT form. The said shares were sold by the petitioner in the stock exchange. The sale proceeds were received by the petitioner though banking channel. It is submitted that the Income Tax

- 3 - Department selected the cases of all those individuals across the Country who had claimed exemption under Section 10(38) of the Act. The petitioner’s case was also selected for scrutiny. Pursuant to the show cause notice issued, the petitioner has furnished all the documents/information that were sought by the respondent in addition to demonstrating that the allegation of the respondent was contrary to the petitioner’s case.

3.

It is the contention of the petitioner that the respondent has hastily and arbitrarily concluded the assessment in violation of the principles of natural justice by failing to furnish the copy of the investigation report, sworn statements that were relied upon by the respondent. Hence, the present writ petition.

4.

Learned counsel for the Revenue would submit that the background of investigation referred by the Assessing Officer was only to facilitate the

- 4 - assessment proceedings. Marshalling of facts for better understanding of the case would not be considered as the reliance made by the Assessing Officer to arrive at a conclusion. Indeed, all the relevant materials were made available to the assessee and adequate opportunity was provided to putforth his reply/objections with all materials. After considering the same, the order impugned has been passed. The petitioner has an efficacious, alternative remedy available under the Act. However, circumventing the same, the present writ petition is filed. 5. Having heard the learned counsel for the parties and perusing the material on record, this Court is of the considered view that it would be appropriate to relegate the petitioner to file an alternative and efficacious statutory remedy of appeal available under the Act since the disputed questions of facts and law involved herein cannot be adjudicated in the writ proceedings. Indeed, reasonable opportunity was

- 5 - provided to the petitioner to putforth his case. If the petitioner is aggrieved by the decision of the Assessing Officer, hierarchy of authorities provided under the Act are required to adjudicate upon the said issue.

6.

Without expressing any opinion on the merits or demerits of the case, the petitioner is relegated to file the alternative remedy of appeal under the Act. If such an appeal is preferred within a period of two weeks from the date of receipt of certified copy of the order, the same shall be considered by the Appellate Authority on merits without objecting to the aspect of limitation. All rights and contentions of the parties are left open. The Appellate Authority shall decide the matter in accordance with law in an expedite manner.

Sd/- JUDGE

Dvr:

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