THE PRL.COMMISSIONER OF INCOME TAX vs. SUNITA BAI

1 IN THE HIGH COURT OF KARNATAKA DHARWAD BENCH Dated this the 12th day of January 2017 Present THE HON’BLE MR. JUSTICE RAGHVENDRA S. CHAUHAN And THE HON’BLE MR. JUSTICE SREENIVAS HARISH KUMAR Income Tax Appeal No.100058/2015 Between 1. The Prl. Commissioner of Income tax, (Central), C.R.Building, Queens Road, Bengaluru-560001. 2. The Deputy Commissioner of Income Tax, Central Circle-1, Belagavi. …Appellants (By Sri Y. V. Raviraj, Advocate) And: Smt. Sunita Bai, SVK Bus Service, K.R.Road, Ranipet, PAN: AVDPS5690L. …Respondent (By Sri H.R. Kambiyavar & Sri S. Parthasarathi, Advocates) This appeal is filed under Section 260A of the Income tax Act, 1961, praying to formulate the substantial question of law stated above; allow the appeal and set aside the orders passed by the Income Tax Appellate Tribunal, Panaji Bench, Panaji, in ITA No.112/PNJ/2014, dated 09.12.2014 and confirm the order passed by the Deputy Commissioner of Income Tax, Central Circle-1, Belgaum.

2 This appeal coming on for Admission this day, RAGHVENDRA S. CHAUHAN, J, delivered the following: JUDGMENT The Revenue is aggrieved by the order dated 09.12.2014, passed by the Income Tax Appellate Tribunal, Panaji Bench, Panaji, whereby the learned Tribunal has deleted the additions made to the income of the assessee on account of gifts, for proceedings that had commenced under Section 153C of the Income Tax Act, 1961 (‘the Act’, for short). 2. Briefly the facts of the case are that the assessee, Smt. Sunita Bai, is engaged in the business of plying/hiring carriages on routes allotted by the Government of Karnataka. She had submitted her income tax returns for the Assessment Year 2005-06. During the assessment, a notice was issued to her under Section 142(1) of the Act, with regard to the fact that she had shown in her income tax returns a gift of Rs.45,00,000/- from Hasim Mod Trading Establishment, a company set up in Dubai. She had not only explained the gift of Rs.45,00,000/- made by way of cheques of Rs.5,00,000/- each, but even the donor had admitted

3 giving cheques to the assessee. Therefore, the assessment was closed by the Assessing Officer. Subsequently, on 25.03.2008, the premises belonging to Mr. B. P. Anandkumar Singh of Hospet were searched. Since certain incriminating evidence was discovered, but not with regard to the assessee, proceedings against Mr. B. P. Anandkumar Singh was initiated under Section 153A of the Act. Moreover, a notice under Section 153C of the Act was issued to the assessee on 31.10. 2008. In response to the said notice, the assessee filed a return of income tax on 19.12.2008 declaring her income as Rs.17,336/-. On 28.04.2009, a notice under Section 143(2) was also issued to the assessee. A notice under Section 142(1) accompanied with a questionnaire was also issued to the assessee on 10.08.2009. In response to the said notice, the assessee appeared before the Assessing Officer. The assessee was asked to explain the receipt of Rs.45,00,000/- by way of gift from Hasim Mod Trading Establishment, Dubai. Despite the explanation given by the assessee, the Assessing Officer was of the opinion that the gift is not a genuine one. Therefore, the amount of Rs.45,00,000/- should be added to the

4 assessee’s total income within the meaning of Section 68 of the Act. Hence, the said amount was treated as undisclosed amount of the assessee by order dated 21.12.2009. 3. Since the assessee was aggrieved by the order dated 21.12.2009, she filed an appeal before the Commissioner of Income Tax (Appeals) (‘the CIT’, for short). However, by order dated 20.08.2013, the learned CIT dismissed the said appeal. Therefore, the assessee challenged the order dated 20.08.2013 before the learned Tribunal. By order dated 09.12.2014, the learned Tribunal allowed the appeal, and held that no addition on account of the gifts can be sustained. Hence, this appeal before this Court. 4. Mr. Y. V. Raviraj, the learned counsel for the Revenue, submits that the following substantial questions of law arise in the present case. 1. Whether the Tribunal was right under the facts and circumstances of the case and in law in holding that, the gifts received by the respondent are genuine in disregard of the fact that in this case no scrutiny assessment had been made earlier and thus the issue of gifts had not been examined in any meaning

5 until in the proceedings under Section 153A of the Act? 2. Whether the order of the Tribunal is not perverse in holding that ‘the regular assessment has already been completed’ in a case wherein only an intimation under Section 143(1) has been issued? 3. Whether, on the facts and in law, the Tribunal erred in restricting the scope of words ‘assesss or reassess the total income’ in the assessments under Section 153A/153C, by holding that, these assessments are to be made only on the basis of the seized materials? 4. Whether, on the facts and in law, the Tribunal erred in holding that, the total income in the assessments under Section 153A/153C should be determined in respect of assessment years for which original assessments were already completed on the date of search, by restricting additions only to those which flow from materials found during the course of search? According to him, the learned Tribunal is not justified in concluding that since a regular assessment had already been

6 completed under Section 143(1) of the Act, the proceedings under Section 153A of the Act could not be initiated. According to the learned counsel, in case of a search conducted under Section 132 of the Act, and in case incriminating evidence is discovered qua any person than the person whose premises is searched, then under Section 153C of the Act, the Revenue is entitled to reopen the case of such person. Therefore, the department was justified in reopening the case of the assessee in the present case. Secondly, the stand taken by the assessee before the learned Tribunal that since no incriminating evidence was discovered qua her, during the search made on 25.03.2008, therefore, no proceedings could be initiated under Section 153C of the Act, such stand was never taken by her either before the Assessing Officer, or before the learned CIT. Therefore, the assessee cannot and could not be permitted to raise the said stand, for the first time, before the learned Tribunal. Thirdly, that once the assessment is reopened under Section 153C of the Act, the department has all the powers as it would have in the original assessment. Therefore, the

7 Assessing Officer was justified, firstly, in calling for an explanation from the assessee; secondly, in holding that the transaction of gifting of Rs.45,00,000/- was suspicious; thirdly, in concluding that the amount of Rs.45,00,000/- was the undisclosed amount of the assessee. Therefore, the learned Tribunal was not justified in setting aside either the assessment order, or the order passed by the learned CIT. 5. On the other hand, Mr. H.R.Kambiyavar, the learned counsel for the assessee, submits that admittedly, no incriminating evidence was discovered during the search of the premises belonging to Mr. B. P. Anandkumar Singh, which related to the assessee. Even prior to the search, the assessee had already filed her income tax returns. She had explained the receipt of Rs.45,00,000/- by way of a gift from the Hasim Mod Trading Establishment of Dubai. Even the donor had accepted the fact that the cheques were issued to the assessee and the initial assessment was completed. Secondly, therefore, the issue before the learned Tribunal, which is a legal issue, was whether the Assessing Officer has the power under Section 153C of the Act, to reassess the income even if there was no incriminating

8 evidence found against the assessee during a search under Section 132 of the Act or not? The said legal issue could be raised by the assessee even at the appellate stage. Thirdly, this was the only issue that was taken up by the learned Tribunal. According to the learned counsel, the learned Tribunal was justified in holding that the power under Section 153C of the Act could not be invoked in the absence of any incriminating evidence against the assessee during the search under Section 132 of the Act. Moreover, even in the assessment order dated 21.12.2009, there is not an iota of evidence produced by the Revenue that any incriminating evidence was discovered at the time of the search against Mr. B. P. Anand Kumar. Therefore, the very basis of invoking the power under Section 153C did not even exist. Hence, the learned counsel has justified the order passed by the learned Tribunal. 6. Heard the learned counsel for the parties and perused the impugned order. 7. A bare perusal of the impugned order clearly reveals that the learned Tribunal was seized with only the issue,

9 whether the power under Section 153C of the Act could be invoked or not, specially when there was no incriminating document or evidence discovered during the search under Section 132 of the Act, against the assessee? Admittedly, the Revenue has not produced any evidence either before the Assessing Officer, or before this Court to show that any incriminating evidence was discovered against the assessee during the search on 25.03.2008. In the absence of any incriminating evidence, the Assessing Officer was not justified in invoking his power under Section 153C of the Act. The learned Tribunal has also noticed that this opinion has been expressed by other courts. Therefore, a mere passing observation made by the learned Tribunal that the said power could not be invoked for regular assessment that had already been completed under Section 143(1) of the Act would not give rise to a substantial question of law. The issue is not with regard to the scope and ambit of Section 143(1) of the Act; it is specifically with regard to the power prescribed under Section 153C of the Act. To the limited issue of the ambit and scope of Section 153A of the Act, the learned Tribunal has correctly expressed its opinion.

10 Therefore, the substantial questions of law raised by the learned counsel for the Revenue do not arise at all in the present case. Hence, the appeal is devoid of any merit; it is, hereby, dismissed. Sd/- JUDGE h Sd/- JUDGE Kms