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1/14 IN THE HIGH COURT OF KARNATAKA, BENGALURU
DATED THIS THE 28TH DAY OF JUNE 2018
PRESENT
THE HON’BLE DR.JUSTICE VINEET KOTHARI
AND
THE HON’BLE MRS.JUSTICE S.SUJATHA
I.T.A. No.38/2017
BETWEEN : GOPAL S. PANDIT PROP. PANDIT DEVELOPERS ‘EMPORIUM’, COMMERCIAL COMPLEX, III FLOOR, OLD PUMP WELL ROAD, KANAKANADY, MANGALORE - 575 002.
...APPELLANT
(BY SRI R.CHANDRASHEKAR, ADV.)
AND : 1. THE COMMISSIONER OF INCOME TAX, C.R. BUILDING, MANGALORE - 575 001.
THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, MANGALORE - 575 001.
…RESPONDENTS
(BY SRI JEEVAN J. NEERALGI, ADV.)
THIS INCOME TAX APPEAL IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 27.07.2016 PASSED IN ITA NO.1197/BANG/2013, FOR THE ASSESSMENT YEAR-2008-2009, PRAYING TO 1. FORMULATE SUBSTANTIAL QUESTION OF LAW AS STATED ABOVE. 2. ALLOW THE APPEAL OF THE APPELLANT MODIFYING THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL
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DATED 27.07.2016 IN ITA NO.1197/BANG/2013 AND DIRECT TO THE SECOND RESPONDENT TO PASS APPROPRIATE ORDER IN ACCORDANCE WITH LAW AND ETC.
THIS APPEAL COMING ON FOR ADMISSION, THIS DAY, Dr. VINEET KOTHARI, J., DELIVERED THE FOLLOWING:
J U D G M E N T
Mr. R.Chandrashekar, Adv. for Appellant - Assessee Mr. Jeevan R. Neeralgi, Adv. for Respondents – Revenue
The Assessee – Gopal S. Pandit, Proprietor - Pandit Developers, Mangalore, has filed this Appeal under Section 260-A of the Income Tax Act, 1961 ['Act' for short], raising the purported substantial questions of law arising from the Order of learned Income Tax Appellate Tribunal, Bangalore Bench “B”, dated 27.07.2016 for the Assessment Years 2005-06 to 2009-10.
The learned Counsel for the Assessee has suggested the following four substantial questions of law in the Memorandum of Appeal filed by the Appellant.
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I. “Whether, on the facts and in the circumstances of the case, Appellate Tribunal was correct in holding that Addl./Joint Commissioner while granting an approval u/s.153D of the Act, to an order to be passed u/s.153A of the Act, no opportunity need to be provided to the Appellant? II. Whether, on the facts and circumstances of the case, the Appellate Tribunal was correct in law in holding for fixing time for compliance to a notice u/s. 153A of the Act, no reasons are required to be recorded? And whether the Appellate Tribunal is right in holding notice issued u/s. 153A of the Act dated 24.09.2009 is a valid notice? III. Whether, on the facts and in the circumstances of the appellant’s case, the Appellate Tribunal is right in holding the seized material corroborates the income fixed under the head “Pooja” though seized materials does not disclose such income from “Pooja”? and it is not a perverse finding? IV. Whether, the Appellate Tribunal even in absence of any incriminating material on record, is right in its conclusion that the
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appellant has made a sum of Rs.15,00,000/- in the addition to the amount invested on purchase of Flat?”
Mr. R. Chandrashekar, learned Counsel for the Appellant-Assessee has urged before us that Block Assessment Order was passed by the Assessing Authority in the present case, namely, Deputy Commissioner of Income Tax, Central Circle, Mangalore on 27.12.2010 u/s. 153A read with Section 143(3) of the Act for the block period of 2005-06 to 2009-10 in pursuance of search carried out at the residential premises of the Assessee at Alangar, Moodabidri on 13.02.2009. The said Order was passed by the Deputy Commissioner of Income Tax with prior approval of the Joint Commissioner of Income Tax, Central Range, Panaji, vide letter No.JCIT/ CR/ PNJ/ 153A/ C/ Approval/2010-11 dated 15.12.2010. But, the said Authority, namely, Joint Commissioner did not give any notice and opportunity of hearing to the Assessee before
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granting approval to the Draft Assessment Order of the Deputy Commissioner of Income Tax. Therefore, a substantial question of law arises in the present case.
Against the aforesaid Assessment Order passed by the Deputy Commissioner of Income Tax, the matter was taken by the Assessee before the first Appellate Authority, namely, Commissioner of Income Tax [Appeals] before whom also the same question was raised, but the first Appellate Authority negatived the said contention of the Assessee on the ground that the provisions of Section 153D of the Act, in its term, does not require any such opportunity of hearing to be given to the Assessee by the Authority who is to approve the Draft Assessment Order to be passed by the Assessing Authority. A similar contention though raised before the learned Tribunal by the Assessee was also negatived by the Tribunal.
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Learned Counsel for the Assessee, however, submitted that Clause-9 of Manual of Office Procedure, Volume-II [Technical], February 2003 issued by the Directorate of Income Tax on behalf of Central Board of Direct Taxes, Department of Revenue, Government of India, has laid down the guidelines for giving such an opportunity of being heard to the Assessee by the Supervisory Officer to the proposed block assessment. He relies upon the Order passed by the Tribunal, Pune Bench ‘B’, in the case of ‘Akil Gulamali Somji v. Income Tax Officer, Ward 4[5], Pune’, decided on 30.03.2012. However, learned Counsel was not having the original Manual of Office Procedure for our perusal.
Section 153D of the Act relevant for our purposes is quoted below for ready reference: “153D.: Prior approval necessary for assessment in cases of search or requisition.
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No order of assessment or reassessment shall be passed by an Assessing Officer below the rank of Joint Commissioner in respect of each assessment year referred to in clause (b) of 21a sub-section (1) of section 153A or the assessment year referred to in clause (b) of sub-section (1) of section 153B, except with the prior approval of the Joint Commissioner.
Provided that nothing contained in this section shall apply where the assessment or reassessment order, as the case may be, is required to be passed by the Assessing Officer with the prior approval of the Principal Commissioner or Commissioner under sub-section (12) of Section 144BA.”
Learned Counsel for the Revenue Mr. Jeevan J. Neeralgi, however, has submitted that there being no specific requirement in the provisions of Section 153D of the Act in giving any such opportunity of hearing to the Assessee before granting approval to the Draft Assessment Order to be passed by the lower Assessing Authority, namely, Deputy Commissioner in the present case, such a requirement cannot be fastened upon the
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Assessing Authority. He submitted that the act of approval is an administrative in nature and even if the same is treated as a quasi-judicial function, in the absence of any specific provision in this regard, in Section 153D of the Act, no such inference can be drawn. He also submitted that undoubtedly the Assessing Authority gave full opportunity of hearing to the Assessee in the present case, so also before the two Appellate Authorities below, who have dealt with the said contention of the Assessee. He submitted that no substantial question of law arises in the present case in this regard.
Having heard the learned Counsel for the parties, we are satisfied that the internal guidelines issued by the Central Board of Direct Taxes, as urged by the learned Counsel for the Assessee, bereft of the statutory provisions in Section 153D of the Act cannot bind the approving Authority, namely, the Joint
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Commissioner to comply with the principles of natural justice by the said Authority. The Assessing Authority undoubtedly has of course given adequate and reasonable opportunity of hearing to the Assessee and all objections on merits were considered by him. Merely because, Section 153D of the Act requires a prior approval of the Draft Assessment Order by the higher Authority, namely, the Joint Commissioner in the present case, because the Assessment Order was passed by the Authority below the rank of the Joint Commissioner, the provisions of the Act do not mandate that a fresh round of opportunity of hearing should be given to the Assessee by such Authority, namely, Joint Commissioner also even for approving Draft Assessment Order. It is not a case where the Assessee did not have any opportunity of hearing before any of the Authorities to defend his case and some assessment of tax has been made against him fastening the liability of tax against the Assessee. The Assessing
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Authority as well as the two Appellate Authorities who have concurrent powers of assessment as are available with the Assessing Authority, have admittedly heard the Assessee on the merits of the case. Therefore, we are of the opinion that no substantial question of law in this regard can be said to be arising on the basis of the office guidelines which are for internal purposes of the Department. They are not even statutory instructions issued u/s. 119 of the Act, which if beneficial to Assessee have been held to be binding on the Authorities of the Department. The Assessee has also not been able to point out any prejudice caused to him on account of approving Authority not giving him an opportunity of hearing.
As far as third question raised before us is concerned, we are of the opinion that the same does not give rise to any substantial question of law as it is a matter of estimate based on the relevant material seized during the course of search and the statement recorded
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of the Assessee u/s. 132[4] of the Act as to what was the income of the Assessee who was working as Priest during the relevant period.
The relevant findings of the learned Tribunal are quoted below for ready reference. “27. We have heard the learned Authorised Representative as well as learned Departmental Representative and considered the relevant material on record. The first objection by the learned Authorised Representative is that the original assessment was completed under Section 143(3) and that the original assessment was completed under Section 143(3) and in the reassessment under Section 153A, no addition can be made except based on seized material. We find that the Assessing Officer has placed a copy of the seized material at page 10 of the assessment order which clearly shows different entries recorded by the assessee including an entry of Mandir and Pooja of Rs.35 lakhs for the F.Y.2005-06. Therefore, the addition made by the Assessing Officer is not based merely on statement recorded under Section 132(4) of the Act. It is pertinent to note that the assessee in the
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statement had estimated the undisclosed income of Rs.75 lakhs for 3 assessment years under consideration which matches the figures and amounts shown in the seized document relating to Pooja income of Rs.35 lakhs, Rs.20 lakhs and Rs.20 lakhs for the Assessment Year 2006-07 to 2008-09 respectively. We find that there is no ambiguity in the statement of assessee regarding the Pooja income which has been clearly corroborated by the seized material. Thus when there is a sufficient evidence seized material which corroborates the statement of the assessee recorded under Section 132(4) on 23.2.2009 then the subsequent retraction of the statement by the assessee without any corroborating evidence cannot be accepted as the assessee has not explained the statement and how the income shown in the seized material is not correct. Therefore mere retraction of statement without explaining circumstances as well as corroborating evidence, it cannot be accepted being an after thought. Accordingly, we do not find any substance in this ground of the assessee and the same is dismissed.”
As regards the fourth question is concerned, sale agreement dated 13.02.2009 was impounded
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during the search and seizure which reflected that the Assessee had purchased a residential flat No.1504 for Rs.33 lakhs where as sale consideration was shown as Rs.15 lakhs. However, it was admitted by the Assessee under Section 132 [4] proceedings, that unaccounted income of Rs.15 lakhs was invested for the flat, pure questions of facts being analyzed by the fact finding authority, in our opinion, the same does not give rise to any substantial question of law. The relevant findings of the learned Tribunal are quoted below for ready reference. “Ground No.7 is the addition of Rs.15 lakhs sustained by the CIT [Appeals] under Section 69B of the Act being investment in Flat. The assessee has purchased a residential Flat No.1504 for Rs.33 lakhs as per the sale agreement dated 13.02.2009. The document was impounded during the search and seizure action. However the sale consideration is shown only at Rs.15 lakhs. In the statement recorded under Section 132(4) on 13.04.2009, the assessee stated that the Flat was in incomplete state and the owners
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did not complete the construction and because of this he paid to the owner only Rs.15 lakhs and he himself spent Rs.18 lakhs for completion work. However he has accounted only Rs.3 lakhs out of the above additional work and the balance of Rs.15 lakhs was spent out of his unaccounted income. Thus the assessee admitted the unaccounted income of Rs.15 lakhs being investment in the Flat. The Assessing Officer accordingly made an addition of the said … xxxx”
Having heard the learned Counsel for the parties, we are satisfied that no substantial question of law arises. The Appeal of the Assessee is liable to be dismissed and the same is accordingly dismissed. No costs.
Sd/- JUDGE
Sd/- JUDGE
NC.