MR. GUTHARAMAMOHANARAO KRISHNAKISHOR vs. PRINCIPAL COMMISSIONER OF INCOME TAX

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WP/13359/2023HC KarnatakaKAHC01031532202327 July 2023Author: S SUNIL DUTT YADAV5 pages
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What did the High Court hold?

The Court noted the petitioner's contention regarding the violation of principles of natural justice due to notices being sent to an incorrect email ID and the consultant's failure to inform him. It also considered the petitioner's assertion that he could demonstrate the Rs. 22,50,000/- addition was agricultural income and thus eligible for exemption under Section 10(37). Consequently, the Court decided to grant the petitioner an opportunity to file a reply to the notice under Section 142(1) of the Act. The assessment order dated 13.12.2018, consequent notice of demand, order dated 25.06.2019, consequent notice of demand, order dated 08.03.2022 under Section 264, rectification order dated 22.12.2022, and the related notice of demand were set aside. The petitioner was directed to deposit 10% of the demand to demonstrate bonafides within four weeks of the bank account being defrozen. The freezing of the petitioner's bank accounts was ordered to be lifted.

What were the facts?

The petitioner, Mr. Gutharamamohanarao Krishnakishor, filed a writ petition challenging assessment orders and notices of demand for Assessment Year 2016-17, passed by the Income Tax Officer (ITO) and the Principal Commissioner of Income Tax. The petitioner contended that notices were issued to a wrong email ID and that communications were sent to his consultant who failed to inform him. Consequently, the ITO added Rs. 22,50,000/- to the returned income, treating it as non-agricultural income and denying exemption under Section 10(37) of the Income Tax Act, 1961. The petitioner claimed this amount was agricultural income and sought an opportunity to prove it. The petitioner's bank accounts were also frozen as a consequential action.

What were the issues?

1. Whether the assessment order and consequent notices of demand, passed by the Income Tax Officer for Assessment Year 2016-17, are liable to be quashed on grounds of violation of principles of natural justice, specifically due to notices being sent to an incorrect email ID and lack of proper intimation to the assessee? 2. Whether the addition of Rs. 22,50,000/- to the returned income, by denying exemption under Section 10(37) of the Income Tax Act, 1961, is sustainable, and if the assessee should be granted an opportunity to prove that this amount constitutes agricultural income? Assessee's Contentions: The petitioner argued that notices were issued to a wrong email ID and that his consultant failed to keep him informed, thus violating principles of natural justice. He asserted that the addition of Rs. 22,50,000/- was agricultural income and sought an opportunity to substantiate this claim for exemption under Section 10(37). The petitioner also sought interference with the findings of the Revisional Authority under Section 264 of the Act. Revenue's Contentions: The respondents contended that the Revisional Authority had recorded correct findings and no case was made out for interference. However, they conceded that the aspect of violation of principles of natural justice was a matter for the Court to consider.

Which sections of the Income-tax Act were involved?

Section 10(37),Section 142(1),Section 264

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 27TH DAY OF JULY, 2023 BEFORE THE HON'BLE MR JUSTICE S SUNIL DUTT YADAV WRIT PETITION NO. 13359 OF 2023 (T-IT) BETWEEN: 1. MR. GUTHARAMAMOHANARAO KRISHNAKISHOR S/O MR. GUTHARAMA MOHANARAO, AGED ABOUT 56 YEARS, RESIDING AT NO.642, HARAGADDE, JIGANI, ANEKAL TALUK BENGALURU RURAL-560 105 … PETITIONER (BY SRI. SYED KHAMRUDDIN., ADVOCATE) AND: 1. PRINCIPAL COMMISSIONER OF INCOME TAX BMTC BUILDING, 80 FEET ROAD, 6TH BLOCK, NEAR KHB GAMES VILLAGE, KORAMANGALA, BENGALURU-560 095 2. THE INCOME TAX OFFICER WARD 4(3)(5) BANGALORE, BMTC BUILDING, 80 FEET ROAD, 6TH BLOCK, Digitally signed by VIJAYA P Location: High Court of Karnataka

NEAR KHB GAMES VILLAGE, KORAMANGALA, BENGALURU-560 095 … RESPONDENTS (BY SRI. SUSHAL TIWARI., ADVOCATE)

THIS W.P. IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA, PRAYING TO QUASH THE IMPUGNED ASSESSMENT ORDER BEARING NO. ITBA/AST/S/144/2018-19/1014252339(1) DTD 13/12/2018 (ANNEXURE-A) PASSED BY THE R-2 AND NOTICE OF DEMAND DTD 13/12/2018 PASSED BY THE R-2 AND FURTHER, FOR THE ASSESSMENT YEAR 2016-17 BEARING NO. ITBA/AST/S/156/2018-19/1014252375(1) (ANNEXURE-A1) AND ETC.

THIS W.P. COMING ON FOR PRELIMINARY HEARING, THIS DAY, THE COURT MADE THE FOLLOWING: ORDER The petitioner has sought for setting aside of the assessment order at Annexure-A dated 13.12.2018, consequent notice of demand at Annexure-A1, order dated 25.06.2019 at Annexure-B, consequent notice of demand at Annexure-B1, order dated 08.03.2022 passed under Section 264 of the Income Tax Act, 1961 (for short 'the Act') at Annexure-C, rectification order dated 22.12.2022 at Annexure-D and notice of demand dated 22.12.2022 at Annexure-D1 passed by the respondent No.2.

2.

Learned counsel appearing for the petitioner would submit that the notice is issued preceding the assessment order and has been issued to a wrong email-ID, that communications were sent to the email-ID of the Consultant, who has not kept the petitioner intimated. Accordingly, it is submitted that the Authority while passing the assessment order has treated the petitioner as disentitled for exemption under Section 10(37) of the Act and added Rs.22,50,000/- to the returned income for the year 2016-17. Learned counsel for the petitioner further submits that if an opportunity is granted, they would be in a position to substantiate that the addition of Rs.22,50,000/- is in fact agricultural income. It is further submitted that the findings by the Revisional Authority under Section 264 of the Act, are also required to be interfered with while taking a broader look at the matter and affording a fresh opportunity to the petitioner to substantiate his case in light of the benefit conferred by way of exemption under Section 10(37) of the Act. 3. Learned counsel appearing for the respondents would point out that the Revisional Authority has recorded correct findings and no case as such is made out for interference. But

however, he submits that the aspect of the violation of the principles of natural justice is a matter left for a Court to be considered appropriately. 4. Noticing the contention of the petitioner and also that if he was to be given an opportunity, the assertion that he would be able to demonstrate that Rs.22,50,000/- added as additional income ought to have been left out and hence, entitled for exemption under Section 10(37) of the Act is a matter that is to be taken note of, and an opportunity may be granted for the petitioner to file his reply to the notice dated 08.11.2019 under Section 142(1) of the Act.

5.

It is noticed that the Bank Account of the petitioner SB A/c No.656902010004359 and Gold Loan A/c No.654/2282 at UNION BANK OF INDIA has been frozen (Annexure-N). In light of the petition being allowed, freezing of Bank Account as a consequential relief would stand lifted and accordingly, the Bank Authorities to take note of the same.

6.

Accordingly, the assessment order at Annexure-A 13.12.2018, consequent notice of demand Annexure-A1, order 25.06.2019 Annexure-B,

consequent notice of demand at Annexure-B1, order dated 08.03.2022 Annexure-C, rectification order 22.12.2022 at Annexure-D and notice of demand dated 22.12.2022 at Annexure-D1 passed by the respondent No.2 are set aside, the petitioner to deposit 10% of the demand to demonstrate his bonafides, which is to be made within a period of four weeks from the date of defreezing of the Bank Account. 7. Accordingly, petition is disposed off. All contentions are kept open. Sd/- JUDGE NP

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