MR. GUTHARAMAMOHANARAO KRISHNAKISHOR vs. PRINCIPAL COMMISSIONER OF INCOME TAX

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WP/13324/2023HC KarnatakaKAHC01031531202319 July 2023Author: S SUNIL DUTT YADAV4 pages
AI SummaryRemanded

What did the High Court hold?

The High Court of Karnataka, while acknowledging the petitioner's contentions and the assertion that he could demonstrate the Rs. 40,00,000/- addition was agricultural income eligible for exemption under Section 10(37) of the Act, decided to grant an opportunity to the petitioner. The Court noted the violation of natural justice due to notices being sent to an incorrect email ID. Consequently, the assessment order dated 09.12.2019 (Annexure-A) and the order dated 08.03.2022 under Section 264 (Annexure-B) were set aside. The petitioner was directed to deposit 10% of the demand to demonstrate bonafides within four weeks of his bank account being defreezed. The freezing of the petitioner's bank account was ordered to be lifted. All contentions were kept open for future adjudication. The principle is that procedural fairness, including proper communication, is essential for valid tax assessments, and where it is violated, an opportunity to present one's case should be granted.

What were the facts?

The petitioner, Mr. Gutharamamohanarao Krishnakishor, filed a writ petition challenging an assessment order dated 09.12.2019 passed by the Income Tax Officer (ITO) and a consequent notice of demand. The petitioner also challenged an order dated 08.03.2022 passed by the Principal Commissioner of Income Tax under Section 264 of the Income Tax Act, 1961. The assessment order, for Assessment Year 2017-18, added Rs. 40,00,000/- to the returned income, treating it as disentitled for exemption under Section 10(37) of the Act. The petitioner contended that notices were sent to the wrong email ID of his consultant, who failed to inform him, leading to a violation of natural justice. The petitioner also claimed the amount added was agricultural income and sought an opportunity to substantiate this. The respondents argued that the revisional authority's findings were correct but acknowledged that the violation of natural justice was a matter for the court to consider.

What were the issues?

1. Whether the assessment order dated 09.12.2019 and the consequent notice of demand dated 09.12.2019, passed by the Income Tax Officer for AY 2017-18, are liable to be quashed on grounds of violation of principles of natural justice, specifically concerning the issuance of notices to an incorrect email ID and the subsequent addition of Rs. 40,00,000/- to the petitioner's income, which the petitioner claims is agricultural income eligible for exemption under Section 10(37) of the Income Tax Act, 1961? 2. Whether the order dated 08.03.2022 passed by the Principal Commissioner of Income Tax under Section 264 of the Income Tax Act, 1961, requires interference, considering the alleged procedural irregularities in the assessment proceedings and the petitioner's claim for exemption? Assessee's Contentions: The petitioner argued that notices were sent to the wrong email ID of his consultant, who did not keep him informed, thus violating the principles of natural justice. He contended that the addition of Rs. 40,00,000/- was agricultural income and should have been exempted under Section 10(37) of the Act. He sought an opportunity to substantiate his case before the authorities. He relied on the benefit conferred by Section 10(37) of the Act. Revenue's Contentions: The respondents submitted 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 the principles of natural justice was a matter for the Court to consider appropriately.

Which sections of the Income-tax Act were involved?

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

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 19TH DAY OF JULY, 2023 BEFORE THE HON'BLE MR JUSTICE S SUNIL DUTT YADAV WRIT PETITION NO. 13324 OF 2023 (T-IT) BETWEEN: MR. GUTHARAMAMOHANARAO KRISHNAKISHOR, SON OF 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)(3) BANGALORE, BMTC BUILDING, 80 FEET ROAD, 6TH BLOCK, NEAR KHB GAMES VILLAGE, KORAMANGALA, BENGALURU - 560 095. …RESPONDENTS (BY SRI. SUSHAL TIWARI, ADVOCATE)

THIS WP IS FILED UNDER ARTICLE

OF THE CONSTITUTION OF INDIA, 1950 PRAYING TO QUASH THE IMPUGNED ASSESSMENT ORDER BEARING NO. ITBA/AST/S/143(3)/2019- 20/1021953269(1) DATED: 09/12/2019 (ANNEXURE-A) PASSED BY THE R-2 AND CONSEQUENT NOTICE BEARING NO. ITBA/AST/S/156/2019-20/1021953748(1) DATED 09/12/2019 ISSUED BY THE R-2 FOR THE AY 2017-18 (ANNEXURE-A1) AND ETC. Digitally signed by SUCHITRA M J Location: High Court of Karnataka

THIS PETITION, 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 09.12.2019 passed by respondent No.2 and the consequent notice of demand at Annexure-A1. The petitioner has also sought for setting aside of the order dated 08.03.2022 passed under Section 264 of the Income Tax Act, 1961 (for short 'the Act') at Annexure-B. 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 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 that the petitioner is disentitled for exemption under Section 10(37) of the Act and added Rs.40,00,000/- to the returned income for the year 2017-18. 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.40,00,000/-

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.40,00,000/- added is 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-J). 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. Accordingly, Assessment Order at Annexure-A and order at Annexure-B 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. Accordingly, petition is disposed off. All contentions are kept open. Sd/- JUDGE SMJ List No.: 1 Sl No.: 26

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