THE COMMISSIONER OF INCOME TAX MANGALORE vs. DR K P VISWANATH PRABHU

IN THE HIGH COURT OF KARNATAKA AT BANGALORE

DATED THIS THE 05TH DAY OF MARCH 2013

PRESENT

THE HON'BLE MR.JUSTICE N.KUMAR

AND

THE HON'BLE MR. JUSTICE B.MANOHAR

ITA NO.987/2006 c/w ITA NO.986/2006

ITA.NO.987/2006

BETWEEN:

….Appellants

(By Sri.M.Thirumalesh, Advocate) AND:

Dr.K.P.Viswanath Prabhu, C/o.Prabhu’s Clinic, Main Road, Kalasa, Chikmagalur District.

….Respondent

(By Sri.P.Dinesh for S.Parthasarathi, Advocate)

ITA filed U/s.260-A of I.T.Act, 1961 arising out of Order dated 30-12-2005 passed in IT(SS)A 133/Bang/2004 for the Block Assessment Period 01-04-1988 to 04-02-1999, praying that this Hon’ble Court may be pleased to i. formulate the substantial questions of law stated therein, ii. allow the appeal and set aside the order passed by the ITAT, Bangalore Bench-B in IT(SS)A 133/Bang/2004 dated 30-12-2005 and confirm the order passed by the Assessing Officer, in the interest of justice and equity.

ITA.NO.986/2006

BETWEEN:

….Appellants

(By Sri.M.Thirumalesh, Advocate)

AND:

Dr.K.P.Viswanath Prabhu, C/o.Prabhu’s Clinic,

Main Road, Kalasa, Chikmagalur District.

….Respondent

(By Sri.P.Dinesh for S.Parthasarathi, Advocate)

ITA filed U/s.260-A of I.T.Act, 1961 arising out of Order dated 30-12-2005 passed in IT(SS)A 128/Bang/2004 for the Block Assessment Period 01-04-1988 to 04-02-1999, praying that this Hon’ble Court may be pleased to i. formulate the substantial questions of law stated therein, ii. allow the appeal and set aside the order passed by the ITAT, Bangalore Bench-B in IT(SS)A 128/Bang/2004 dated 30-12-2005 and confirm the order passed by the Assessing Officer, in the interest of justice and equity.

These appeals coming on for hearing this day, N. KUMAR J., delivered the following:

J U D G M E N T

These two appeals by the Revenue are preferred against the common order dated 30.12.2005 passed by the Income Tax Appellate Tribunal (herein after refer to

as the ‘the Tribunal’) granting full benefit to the assessee.

undisclosed income came to Rs.2,58,28,540/-. A demand was raised for a sum of Rs.1,54,97,124/- and interest under Section 158 BFA(1) of Rs.3,09,942/- was also added. Aggrieved by the said order, the assessee filed an appeal to the Commissioner of Income Tax (Appeals) Mangalore. The Appellate Authority granted reliefs under 5 headings and declined the relief on other grounds. Therefore, both the revenue as well as the assessee preferred appeals against the order of the Appellate Authority to the Tribunal. The Tribunal after hearing both the appeals together granted relief to the assessee to the full extent. Accordingly, the appeal filed by the assessee was allowed and the appeal filed the revenue came to be dismissed. Aggrieved by the said orders, the present two appeals are filed by the Revenue.

(i) Whether the Tribunal was correct in allowing the relief to the assessee contrary to the provisions contained in 158 BA of Income Tax Act?

(ii) Whether the Tribunal was correct in allowing the deduction under Section 8-L claimed by the assessee?

(i) Whether the Tribunal was correct in accepting the order of the Appellate Commissioner deleting the additions made towards purchase of car, education expenses and stock of medicines in Hospital without there being any documentary evidence available on record?

31-3-1999, the last date for filing the returns is July 1999. Therefore, the assessee could have filed returns by disclosing this income in the said returns and also paid tax. In this context, the Tribunal held that the aforesaid amount cannot be treated as undisclosed income for the reasons that such investments are out of professional receipts recorded in diaries maintained by the assessee which were found during the survey. Such disclosure in the regular returns based on the diaries satisfies the requirement of Section 158 BB(1)(C). The assessee had filed returns disclosing the said income along with the audit report. The Assessing Authority had passed the assessment order under Section 143 (3) of the Act for the assessment year 1999-2000 and in the said order he has not pointed them as receipts. Therefore, the last date for filing returns was not yet over. As he had an opportunity to file returns disclosing the said income, it cannot be said that it constitutes undisclosed income. In fact, in the assessment order,

the Department has passed a protective assessment order including the said income. In the light of the aforesaid facts, as the assessee still had the time to file returns and the said income pertains to particular year and he has infact filed returns and the same is accepted, a protective assessment order is passed. It cannot be said that it constitutes undisclosed income and the Assessing Authority was justified in adding the said income to the undisclosed income. Therefore, the Tribunal was justified in granting relief to the assessee and therefore the said substantial question of law is answered in favour of the assessee and against the revenue.

in the returns filed by the assessee, that income is also shown and tax is paid.

spot and verify the existence of the land and crops which are grown and then submit a report. The said report clearly discloses that the assessee owned the land along with his brother; they were cultivating the said lands and there exists agricultural income. The pahanies did disclose the name of the assessee and his brother. After being satisfied about the said factual aspect, the Assessing Authority held that the share of the assessee is only 50% and therefore he gave benefit to that extent, but added the remaining 50%, which order was modified to some extent by the lower Appellate Authority because while giving actual deductions, he has not given 50% deduction. But the Tribunal looked into the entire material on record and found that the assessee had no issues. The assessee had adopted the son of his brother, in whose name the land also stands. The brother of the assessee was in- charge of the agricultural operations whereas the assessee was looking after education of his son as well

as the financial aspects of the family. In the absence of any evidence to show that the brothers divided the income equally, as the assessee was in the complete financial management of all the assets, it was of the view that it is probable that entire agricultural income was kept in FD in his name as the ultimate beneficiaries of the same would be his brother and his son. In the light of evidence on record, it cannot be said that the said reasoning of the Tribunal is perverse and calls for interference. In that view of the matter, we do not see any justification in the said finding and accordingly, this substantial question of law is also answered in favour of the assessee and against the revenue.

accounts prior to 1998, there was huge opening balance from which all these acquisitions were made. In that context, the Tribunal was of the view that merely because the documentary evidence is not produced and those items, such as Car, Education expenses and stock of medicines could have been acquired out of the surplus amount and it cannot be construed as having been acquired out of the undisclosed income and the Assessing Authority was in error in adding the same to the declared undisclosed income. Therefore, he has granted the relief to the assessee. Infact, stock of medicines was not challenged by the revenue before the Tribunal and therefore, they are precluded from challenging the same for the first time before this court. We do not see any ground to interfere with the said considered order passed by the Tribunal. Therefore, the said substantial question of law is also answered in favour of the assessee and against the revenue.

Sd/-

JUDGE

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JUDGE

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