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I.T.A No.16/2015
1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 8TH DAY OF JULY 2022 PRESENT THE HON’BLE MR. JUSTICE P.S. DINESH KUMAR
AND THE HON’BLE MR. JUSTICE C.M. POONACHA
I.T.A NO.16 OF 2015
BETWEEN:
SRI. DINAKARA SUVARNA 1-34-3017/1 PROP. BALAJI CONSTRUCTIONS SHESHAPPA COMPOUND ASHOK NAGAR MANGALORE-575 006
.…APPELLANT
(BY SHRI. V. CHANDRASEKHAR FOR SHRI. M. LAVA, ADVOCATES)
AND:
DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE GROUND FLOOR, C.R.BUILDING N.G.ROAD, ATTAVAR MANGALORE-575 001
…RESPONDENT
(BY SHRI. K.V. ARAVIND, ADVOCATE)
THIS ITA IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 14.08.2014 PASSED IN ITA NO.829 & 830/BANG/2012 AND CO NO.24/BANG/2013 FOR THE ASSESSMENT YEARS 2005-06 TO 2007-08 PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW AND ANSWER THE SAME IN FAVOUR OF THE APPELLANT AND TO ALLOW THE APPEAL AND SET ASIDE
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2 THE FINDINGS TO THE EXTENT AGAINST THE APPELLANT IN THE ORDER PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH IN ITA NOS.829 & 830/BANG/2012 RELATING TO ASSESSMENT YEARS 2005-06 AND 2006-07 RESPECTIVELY; ITA NOS.850 TO 852/BANG/2012 RELATING TO ASSESSMENT YEARS 2005-06 TO 2007-08 RESPECTIVELY AND CO NO.24/BANG/2013 RELATING TO ASSESSMENT YEAR 2007-08 VIDE ITS COMMON ORDER DATED 14.08.2014.
THIS ITA, HAVING BEEN HEARD AND RESERVED FOR JUDGMENT ON 14.06.2022 COMING ON FOR PRONOUNCEMENT OF JUDGMENT, THIS DAY, P.S.DINESH KUMAR J, PRONOUNCED THE FOLLOWING:-
JUDGEMENT
These appeals have been admitted to consider following questions of law: " a) whether the Tribunal is correct in law in upholding the action of the assessing officer in reopening the assessment under Section 147 of the Act for the assessment years 2005-06, 2006-07 and 2007-08 on the facts and circumstances of the case? b) Whether Tribunal erred in law in not holding that there was no reason to believe that income escaped assessment and all mandatory conditions to reopen the assessment under Section 147 of the Act were not satisfied on the facts and circumstances of the case?
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3 c) Whether the Tribunal was correct in law in reversing the deletion made by the Commissioner of Income Tax [Appeals] of the addition under Section 69B in respect of alleged unexplained investments made in properties of Rs. 28,75,500/- for the assessment year 2007-08 on the facts and circumstances of the case? ”
Brief facts of the case are, the assessee is an individual who carries out contract works. He filed returns of income for the assessment years 2005-06 to 2007-08 as follows: AY Original return of income 2005-06 3,94,513 2006-07 18,09,501 2007-08 14,37,560
A search was conducted under Section 132 of the Income Tax Act, 1961 ('the Act' for short) in the residential premises of one Shri. Ashok Kumar Chowta and among other documents and papers, a
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4 diary was also seized. It contained details of payments made by Shri. Ashok Kumar Chowta to the assessee. On April 21, 2009, a survey was conducted in the business premises of the assessee and his statement was recorded on May 11, 2009 and the assessee agreed to offer 8% additional receipts as income but did not file his revised return of income. On March 26, 2010, the Assessing Officer issued notice under Section 148 of the Act and called upon the assessee to show cause as to why the amount agreed to be offered to tax was not declared in the returns of income. On April 12, 2010, the assessee filed his return of income and declared the same income as filed in the original return of income. The case of the assessee was selected for scrutiny by issuing notice under Section 143(2) of the Act. The assessee vide letter dated May 30, 2010 objected on the ground that there was no reason to believe that the income
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5 chargeable to tax had escaped assessment. On December 24, 2010, the Assessing Officer passed Assessment orders for the assessment years 2005-06 to 2007-08. Assessee challenged it before the CIT (A)1. By common order dated March 16, 2012, CIT (A) partly allowed the appeals. The assessee and the Revenue preferred appeals against the said order before the ITAT2. Against the appeal preferred by the Revenue, the assessee preferred cross objections. By its judgment dated August 14, 2014, the Tribunal partly allowed the appeals and cross objections filed by the assessee. The appeal preferred by the Revenue for the assessment year 2007-08 was partly allowed and dismissed the appeals for other assessment years. Questions No.(a) & (b):
1 Commissioner of Income Tax (Appeals) – VI 2 Income Tax Appellate Tribunal, ‘A’ Bench, Bengaluru
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6 4. Shri. Chadrashekar, learned advocate for the appellant submitted that these two questions are interlinked and the issue is with regard to validity of reopening the assessment under Section 147 of the Act for the assessment years 2005-06, 2006-07 and 2007-08. He submitted that reopening of assessment under Section 147 of the Act, based on a search conducted in the residence of Shri. Ashok Kumar Chowta, is unsustainable, because, the right procedure in such case is the one prescribed under Section 153C of the Act. In support of his contention, he placed reliance on Manish Maheshwari Vs. ACIT3 and Commissioner of Income Tax Vs. IBC Knowledge Park (P.) Ltd.4 and argued that Section 153C start with a non-obstante clause relating to normal assessment procedure covered by Sections 139, 147, 148, 149, 151, and 153 of the Act in respect of searches made after May 31,
3 289 ITR 341 4 (2016) 69 taxmann.com 108
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7 2003 as Section 153C has been amended with effect from June 1, 2003 and search in this case has been conducted on February 13, 2009.
The sum and substance of Shri. Chandrashekar's argument is, Revenue ought to have followed the procedure contemplated under Section 153C because, it's case is based on material found during the search of the premises of one Shri. Ashok Kumar Chowta.
In reply, Shri. Aravind submitted that Shri. Chowta had offered a lump-sum income. The ITAT has recorded that the assessee had affixed his signature in the seized diary. He argued that even though Mr.Chowta is not taxed, in view of assessee's admission, the order passed by the Assessing Officer does not call for any interference.
We have carefully considered rival contentions and perused the records.
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8 8. In Manish Maheshwari, the Hon'ble Supreme Court of India has held as follows: "10. Law in this regard is clear and explicit. The only question which arises for our consideration is as to whether the notice dated 6-2-1996 satisfies the requirements of Section 158-BD of the Act. The said notice does not record any satisfaction on the part of the assessing officer. Documents and other assets recovered during search had not been handed over to the assessing officer having jurisdiction in the matter.
No proceeding under Section 158-BC had been initiated. There is, thus, a patent non-application of mind. A prescribed form had been utilised. Even the status of the assessee had not been specified. It had only been mentioned that the search was conducted in the month of November 1995. No other information had been furnished. The provisions contained in Chapter XIV-B are drastic in nature. It has draconian consequences. Such a proceeding can be initiated, it would bear repetition to state, only if a raid is conducted. When the provisions are attracted, legal presumptions are raised against the assessee. The burden shifts on the assessee. Audited accounts for a period of ten years may have to be reopened."
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In IBC Knowledge Park, this Court has held in para 50 that Section 153C is parimateria with Section 158BD considered in Manish Maheshwari. The Assessing Officer, in his order dated 24.12.2010 for assessment year 2005-06 has held in para 4.2 that reasons formed to reopen the assessment on the basis of assessee's voluntary depositions and seized materials are in order and further that assessee's objection on that aspect has been rejected by his order dated June 7, 2010.
Admittedly no proceedings were initiated under Section 153C of the Act. Thus, there is patent non-application of mind. It is relevant to note that the author of the diary Smt. Soumya Shetty had passed away prior to the date of search. It was argued on behalf of the Revenue that Shri. Ashok Kumar Chowta had offered tax on lump-sum income.
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Further, the Assessing Officer has not recorded his satisfaction with regard to escapement of income. On the other hand, he has based Revenue's case entirely on the statement of assessee. Assessee has placed reliance on Pullangode Rubber Produce Co.Ltd.Vs. State of Kerala5 and rightly urged that assessee's admission cannot be a conclusive evidence. Therefore, these two questions merit consideration and require to be answered in favour of the assessee and against the Revenue. Re. Question No.(c):
The issue in this question is addition of Rs.28,75,500/- by the Assessing Officer under Section 69B of the Act as unexplained investment. Shri. Chandrashekar argued that the addition has been made on the basis of the entries found in the diary seized during search of Shri. Chowta's
5 (1973)91 ITR 18(SCC) PARA 4
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11 premises. The assessing officer came to the conclusion that assessee had paid cash over and above the amount shown in the registered document.
Shri. Aravind for the Revenue contended that the ITAT has rightly reversed the finding recorded by the CIT (Appeals) on the ground that there was no dispute that the properties had been acquired by the assessee from Shri. Ashok Kumar Chowta.
We have perused the order passed by the CIT (Appeals) and ITAT. It is held therein that the entries in the seized diary could not be relied upon because Smt. Soumya Shetty had passed away and there was no corroborating evidence. The CIT (Appeals) has held that it was travesty of justice that the relevant entry has not been used in Shri. Ashok Chowta's case but it has been used in assessee's case who is a third party to the
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12 proceedings. The ITAT while reversing the finding of CIT (Appeals) has relied upon the signature of assessee in the seized diary. Admittedly, the author of the diary had passed away. The addition has been made in the case of assessee based on the entries in the diary but the said entries have not been used in the case of Shri. Chowta. As recorded hereinabove, the Hon'ble Supreme Court in the case of Pullengode Rubber Produce Co.Ltd.'s case has held that admission is an important piece of evidence but it cannot be said to be conclusive. Shri. Chadrashekar also placed reliance on Commissioner of Income-tax vs. S.Khader Khan son6 and contended that a statement recorded under Section 133A of the Act is not given any evidentiary value because the officer is not authorised to administer oath and to take any sworn statement. Therefore, in view of
6 (2008) 300 ITR 157
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13 the fact that the author of the diary had passed away and relevant entry has not been used in the case of Shri. Chowta himself, reversing the findings of the CIT (A) by the ITAT is not sustainable. Hence, this question is also answered in favour of the Assessee and against the Revenue.
In the result, the following: ORDER (i) Appeal allowed.
(ii) Questions No.1, 2 and 3 are answered in
favour of the Assessee and against the
Revenue.
No costs.
Sd/- JUDGE
Sd/- JUDGE
Yn.