THE COMMISSIONER OF INCOME TAX vs. M/S MOOKAMBIKA DEVELOPERS

IN THE HIGH COURT OF KARNATAKA AT BENGALURU

DATED THIS THE 27TH DAY OF JULY 2015

PRESENT

THE HON'BLE MR. JUSTICE VINEET SARAN

AND

THE HON’BLE MR. JUSTICE A.V.CHANDRASHEKARA

ITA NO.374/2014 C/W ITA NO.376/2014

BETWEEN

... APPELLANTS

(COMMON)

(BY SRI. K.V. ARAVIND – ADV )

AND

M/S MOOKAMBIKA DEVELOPERS, NO.14, LAKSHMI COMPLEX, 3RD CROSS, JOURNALIST COLONY, BANGALORE-560 002.

...RESPONDENT

(COMMON)

(BY SRI S. PARTHASARATHI-ADV)

ITA NO.374/2014 IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961 PRAYING TO ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE INCOME-TAX APPELLATE TRIBUNAL, BANGALORE IN ITA NO.1314/BANG/2013 DATED 27.3.2014 CONFIRMING THE ORDER OF THE APPELLATE COMMISSIONER AND CONFIRM THE ORDER PASSED BY THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2(1), BANGALORE.

ITA NO.376/2014 IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961 PRAYING TO ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE INCOME-TAX APPELLATE TRIBUNAL, BANGALORE IN ITA NO.1632/BANG/2012 DATED 27.3.2014 CONFIRMING THE ORDER OF THE APPELLATE COMMISSIONER AND CONFIRM THE ORDER PASSED BY THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2(1), BANGALORE.

THESE APPEALS COMING ON FOR ADMISSION THIS DAY, VINEET SARAN .J. DELIVERED THE FOLLOWING:

JUDGMENT

The assessee is a partnership firm. It is engaged in the business of Real Estate. For the assessment year 2006-07 the assessee filed its return of income which was accepted under Section 143(1) of the Income Tax Act (for short ‘the Act’). Thereafter survey under Section 133A of the Act was conducted in the premises of the assessee and subsequently a notice for re- opening under Section 148 of the Act was issued on 15.9.2008. The Assessing Officer, by order dated 17.12.2009, made an

addition of Rs.53,00,000/- after disallowing the genuineness of the compensation of Rs.1,65,00,000/- alleged to have been paid by the assessee to certain parties for vacating the property. Challenging the said order, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) which confirmed the validity of reopening under Section 147 of the Act. However, the Appellate Commissioner did not accept the addition of Rs.53,00,000/- and disallowed only 20% of the total payment of Rs.1,65,00,000/- under Section 40A(3) of the Act. 2. Challenging the order of the Appellate Commissioner confirming the validity of reopening for the assessment under Section 148 of the Act, the assessee preferred an appeal before the Tribunal. The Revenue also preferred a separate appeal against the order of the Appellate Commissioner contending that the disallowance made by the Appellate Commissioner under Section 40A(3) of the Act was wrong and the disallowance to the extent of Rs.53,00,000/- as made by the Assessing Officer ought to have been maintained. By the impugned order dated 27.3.2014, the

Tribunal held that the reopening of the assessment was bad in law as, according to the Tribunal, unless the Assessing Officer has made any addition on the issue of which satisfaction was recorded for reopening of assessment, other issues could not have been looked into, though the same may have come to the notice of the Assessing Officer during the course of reassessment proceedings. Aggrieved by the said order of the Tribunal, these two appeals have been filed by the Revenue. 3. Appeal No.374/2014 has been filed primarily on the ground that the merits of the case have not been looked into by the Tribunal and Appeal No.376/2014 has been filed by the Revenue challenging the order of the Tribunal whereby it has been held that the reopening of assessment was invalid. 4. In Appeal No.376/2014 the following substantial question of law arises for consideration :- ‘Whether on the facts and in the circumstances and in law, the Tribunal was correct in holding that the reopening of assessment under Section 147 of the Act is bad in law as no

addition was made by the Assessing Officer with reference to the reasons recorded for reopening of assessment’.

(2012) CIT 344 ITR 358 & CIT Vs Mehak Finvest Pvt. Ltd. (2014) 367 ITR 769 as well as the judgment of the Bombay High Court in the case of CIT – Vs – Jet Airways (I) Ltd. (2011) 331 ITR 236 and several other judgments rendered by the Supreme Court and various High Courts, it was held that :- Considering the provision of Section 147 as well as its Explanation 3, and also keeping in view that Section 147 is for the benefit of the Revenue and not assessee and is aimed at garnering the escaped income of the assessee {viz. Sun Engineering (supra)}and also keeping in view that it is the constitutional obligation of every assessee to disclose his total income on which it is to pay tax, we are of the clear opinion that the two parts of Section

147 (one relating to ‘such income’ and the other to ‘any other income’) are to be read independently. The phrase ‘such income’ used in the first part of Section 147 is with regard to which reasons have been recorded Under Section 148(2) of the Act, and the phrase ‘any other income’ used in the second part of the Section is with regard to where no reasons have been recorded before issuing notice and has come to the notice of the Assessing Officer subsequently during the course of the proceedings, which can be assessed independent of the first part, even when no addition can be made with regard to ‘such income’, but the notice on the basis of which proceedings have commenced, is found to be valid.

No order as to costs.

Sd/-

JUDGE

Sd/-

JUDGE