Karnataka High Court
The Principal Commissioner Of Income ... vs M/S A.M. Constructions on 21 February, 2018
Bench: S.Sujatha, John Michael Cunha
IN THE HIGH COURT OF KARNATAKA
DHARWAD BENCH
DATED THIS THE 21ST DAY OF FEBRUARY, 2018
PRESENT
THE HON'BLE MRS. JUSTICE S. SUJATHA
AND
THE HON'BLE MR. JUSTICE JOHN MICHAEL CUNHA
I.T.A. NO.100153/2015
C/W
I.T.A. NO.100152/2015
I.T.A. NO.100153/2015:
BETWEEN
1. THE PRINCIPAL COMMISSIONER OF INCOME TAX
NAVANAGAR, HUBBALLI, DHARWAD DISTRICT
2. THE DEPUTY COMMISSIONER OF INCOME TAX
CIRCLE-1(1), NAVANAGAR, HUBBALLI
... APPELLANTS
(BY SRI.Y.V.RAVIRAJ, ADV.)
AND
M/S A.M. CONSTRUCTIONS
II FLOOR, DIAMOND CORNER
DESHPANDE NAGAR HUBBALLI
PAN AAALF6900C
... RESPONDENT
(BY SRI. M.V.SHESHACHAL, SENIOR COUNSEL FOR
SRI.GANGADHAR J.M. AND PRAVEEN TARIKAR, ADVS.)
THIS ITA IS FILED UNDER SECTION 260A OF THE
INCOME TAX ACT 1961, PRAYING TO FORMULATE THE
SUBSTANTIAL QUESTION OF LAW STATED ABOVE; ALLOW
:2:
THE APPEAL AND SET ASIDE THE ORDERS PASSED BY
THE INCOME TAX APPELLATE TRIBUNAL B BENCH
BANGALOER IN ITA NO.177/BANG/14 DATED 15.04.2015
FOR THE ASSESSMENT YEAR 2005-06 AND CONFIRM THE
ORDER PASSED BY THE DEPUTY COMMISSIONER OF
INCOME TAX, CIRCLE -1(1) HUBBALLI, IN THE INTEREST
OF JUSTICE AND EQUITY.
I.T.A. NO.100152/2015:
BETWEEN
1. THE PRINCIPAL COMMISSIONER OF INCOME TAX
NAVANAGAR HUBBALLI DHARWAD DISTRICT
2. THE DEPUTY COMMISSIONER OF INCOME TAX
CIRCLE-1(1), NAVANAGAR HUBBALLI
... APPELLANTS
(BY SRI.Y.V.RAVIRAJ, ADV.)
AND
M/S A.M. CONSTRUCTIONS
II FLOOR, DIAMOND CORNER
DESHPANDE NAGAR HUBBALLI
PAN AAALF6900C
... RESPONDENT
(BY SRI. M.V.SHESHACHAL, SENIOR COUNSEL FOR
SRI.GANGADHAR J.M. AND PRAVEEN TARIKAR, ADVS.)
THIS ITA 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 B BENCH
BANGALOER IN ITA NO.178/BANG/14 DATED 15.04.2015
FOR THE ASSESSMENT YEAR 2007-08 AND CONFIRM THE
ORDER PASSED BY THE DEPUTY COMMISSIONER OF
INCOME TAX, CIRCLE -1(1) HUBBALLI, IN THE INTEREST
OF JUSTICE AND EQUITY.
THESE APPEALS COMING ON FOR FINAL HEARING THIS
DAY, S.SUJATHA J., DELIVERED THE FOLLOWING:
:3:
JUDGMENT
These appeals are filed by the Revenue challenging the order of the Income Tax Appellate Tribunal ('Tribunal' for short), 'B' Bench Bengaluru in ITA No.177/Bang/14 and ITA No.178/Bang/14 relating to the assessment years 2005-06 and 2007-08, whereby the appeals filed by the assessee are allowed.
2. The respondent assessee is a firm involved in the business of developing and constructing house and plots at Hubballi. A survey under Section 133A was conducted on 21.10.2010, wherein certain incriminating documents and loose papers were found revealing transaction in immovable property including the land. Notice dated 09.11.2011 under Section 147 came to be issued reopening the assessment to assess the escaped income. Re-assessment came to be concluded by making additions to the returned income towards suppression in sales, unexplained deposits in Bank, :4: undisclosed advances paid, undisclosed receivables and undisclosed investments in work progress.
3. Being aggrieved by the same, assessee preferred appeal before the Commissioner of Income Tax (Appeals) which came to be dismissed.
4. On further appeal filed by the assessee before the Tribunal, the Tribunal accepting the contentions of the assessee, quashed reassessment proceedings. However, the Tribunal did not consider the appeal on merits with regard to the additions made in reassessment order, as the reassessment itself was quashed.
5. Being aggrieved by the same, revenue is in appeal raising the following substantial questions of law:
"Whether in law, the Tribunal is
justified in setting aside the order of
reassessment passed by the assessing
authority on the ground that, the additions made therein are not the items of alleged :5: escapement of income for the issuance notice under section 147 of the Income Tax Act for reopening the assessment, when 'Explanation 3' to section 147 specifically lays down that the 'assessing officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings, under this section, not withstanding that the reasons for such issue have not been included in the reasons recorded under sub-section (2) of Section 148'?"
6. Learned counsel Shri Y.V.Raviraj appearing for the revenue placing reliance on the judgment of this Court in the case of N.Govindaraju vs. Income Tax Officer and another reported in 377 ITR 243 (Kar), would submit that the issue involved in this case is squarely covered and the substantial question of law has to be answered in favour of the revenue and against the assessee.
7. However, the learned Senior counsel Sri.M.V.Sheshachala appearing on behalf of :6: Sri.J.M.Gangadhar and Sri.Praveen Tarikar for the assessee fairly admitting that the matter is covered by the judgment of this Court in Govindraju supra, would submit that the Tribunal having quashed the reassessment notice has not examined the matter on merits of the case. Hence, the matter requires reconsideration by the Assessing Officer on the merits of the case.
8. Learned counsel submitted that the Tribunal has remanded the matter relating to the assessment year 2008-09 and 2009-10 to the Assessing Officer to consider the case on merits and as such, these matters requires to be remanded to the Assessing Officer for reconsideration along with the matters relating to the assessment year 2008-09 and 2009-10 which are still pending before the Assessing Officer.
9. We have given our anxious consideration to the arguments advanced at the Bar and perused the material on record. It is not in dispute that the issue :7: involved in this case is squarely covered by the jurisdictional High Court judgment in Govindaraju supra, whereby the Division Bench of this Court has held at paras 38, 39 and 40 as under:
"38. 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 the 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 :8: 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.
39. In the end it was vehemently argued by the learned counsel for the appellant that the reason to be given under sub- section (2) of section 148 would be the very foundation of the issuance of notice and if it is false or baseless, then everything goes and the structure erected on such foundation would crumble.
40. It is true that if the foundation goes, then the structure cannot remain. Meaning thereby, if notice has no sufficient reason or is invalid, no proceedings can be initiated. But the same can be checked at the initial stage by challenging the notice. If the notice is :9: challenged and found to be valid, or where the notice is not at all challenged, then in either case it cannot be said that notice is invalid. As such, if the notice is valid, then the foundation remains and the proceedings on the basis of such notice can go on. We may only reiterate here that once the proceedings have been initiated on a valid notice, it becomes the duty of the Assessing Officer to levy tax on the entire income (including 'any other income') which may have escaped assessment and comes to his notice during the course of the proceedings initiated under section 147 of the Act."
10. In view of the said ruling of this Court, we do not find any reasons to differ from the same. We find it appropriate to follow the same. Hence, the substantial question of law is answered in favour of the revenue and against the assessee.
11. It is significant to note that the Tribunal having quashed the reassessment proceedings had no : 10 : option to examine the matter on the merits. Such being the position, we deem it proper to remand the matter to the Assessing Officer to reconsider the matter on merits, since the reassessment notice issued by the Department is held to be valid.
Appeals stand allowed.
The impugned order is set aside. The matter is remanded to the Assessing Officer for fresh consideration.
All rights and contentions of the parties are left open. Assessing Officer shall conclude the reassessment in accordance with law after hearing the assessee in an expedite manner.
Sd/-
JUDGE Sd/-
JUDGE Rsh