Karnataka High Court
The Commissioner Of Income Tax vs M/S Mulberry Silk International Ltd on 12 December, 2011
Bench: V.G.Sabhahit, S.N.Satyanarayana
IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 12™ DAY OF DECEMBER 2011 PRESENT | - THE HON'BLE MR.JUSTICE V.G.SABHAKIT a an OS * THE HON'BLE MR. JUSTICE S.N.SATYANARAYANA INCOME TAX APPEAL NO.370 OF 2006 BETWEEN: me POSS 1. The Commissisner of» Income Tax,-C: R. Building, Queens Road, a BANGALORE. 2. The Deputy € Comin rissioner . . of Income Taz... COS Company Circle. --.4(1 (lev): C.R. Building, Queens Road, BANGALORE. | a .. APPELLANTS. i, (By Sri. Thirumalesh. Adv) AND: M/ S: Matberry. Siti International Lid., 7 .. No.33/1; Saptagiri Arcade, H.Siddaiah Road, 8» Cross, - ». Wilson Garden, BANGALORE. .. RESPONDENT. > ey Sti. S. Parthasarathi, Adv.) ee 8 Be ee This Appeal is filed under Section 260-A of the Income Tax Act, 1961 praying to formulate the substantial question of law stated therein and allow the appeal and set aside the © orders passed by the Tribunal in IT (SS) No. 11/Bang/2002 dated 12.08.2005 confirming the. order passed "by _ the Appellate Commissioner and confirm the order passed by the. Deputy Commissioner of Income. Tax, Company C} rele ~ A(1) (Inv), Bangalore. This Appeal coming" on' for Final Hearing this day, Sabhahit J., delivered the. ¢ following: . JUDGMENT
This. appeal is filed. by. 'the: revenue being aggrieved by the order passed by 'the Income Tax Appellate Tribunal, Bangalore Bench 'AY 'in' ir (SS) No.11/Bang/2002, block assessment years 1989-90 to 1999-2000, wherein the Tribunal by its ober dated 12.08.2005, wherein the appeal filed by the revenue is dismissed. wide yays vn Lad
2. This appeal has been admitted for consideration: 'of the following two substantial questions of law by. order' dated °. 02.07.2007:
1. Whether the Appell ate. Authorities were _ right in holding that a cum of Rs.3,84,88, 50))/. treated as income of the assessee under Section 58. of the Income Tax Act, pursuant: 'to, search' "had been detected in, a search, aiid the assessee had not established th €. source of the said "sum by producing positive evidence?
2. Whether 'the 'Appellate Authorities were right in holdin that the judgment of the . | Apex: Court in the case of CIT Vs. Steller > Thwestinents Ltd., reported in 251 ITR 263 is applicable to the facts of the case?
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3. The material facts leading to this appeal for adjudicating the substantial questions of law raised in this.appeat as referred to above are as follows:
There was a search in the premises of the respondent ~ assessee on 25.01.1999 and block. asséssment proceedings"
were initiated under Chapter xIV-B to issue aotice under Section 158-BC of the Incotiie Tax Act: 1961 (hereinafter referred to as the. "Act") én 07.06.1999. in response to the said notice, the assessee 'filed block return of income on 02.08.1999 adinitting the total undisclosed income as nil. After hearing the representative of the assessee, the Assessing Officer by his order dated 31.01.2001 held that so far as the , amount of share capital contribution for the assessment years 1994-95, 1995-96 and 1996-97 amounting to 7 Rs.3,85:38,50C ia The same has not been satisfactorily _ explained | and the same has to be treated as undisclosed : - iricomé tinder Section 68 of the Act. Being aggrieved by the said order of the Assessing Officer, the assessee preferred appeal before the Commissioner of Income Tax (Appeals) ~ Hl, Bangalore, in ITA No.804/DC. 12()/CIR(AJI/2000-01 and the First Appellate Authority by order dated 28.1 1.200 t allowed 7 the appeal in part. In the meanwhile, the. application had | been filed before the Settlement Commissioner by by M.S I. U on, 18.06.2001 and the same was pending consideration | The appellate authority deleted. the. addition' of Rs. 3, 85, 38,500/- being the unexplained share. capital in view. of the various submissions of the the appellant sind in view: of the decision of the Hon'ble Supreme Court in the case of Commissioner of Income Tax Vs. "Ste ller. Investments Ltd, reported in 251 ITR 263 and accordingly allowed 'the appeal in part. Being aggrieved DY 'the said order, | the revenue preferred the appeal before. the "pribanal an and the Tribunal by order dated 12.08.2605 held "iat the Appellate Authority had rightly 7 followed'the decision of the Supreme Court in the case of | " Comimtasionér of Income Tax Vs. Steller Investment Limited, ..and further also took into account the order which has a 7 already been passed by the Settlement Commissioner on 6 30.03.2005 and accordingly dismissed the appeal filed by the revenue and being aggrieved by the same, this appeal is *heing filed by the revenue.
4, We have heard the learned counsel appearing: for the appellant and the learned counsel. appearing . for the respondents.
D. Learned counsel appearing for the appellants submitted that the Appellate Authority was not justified in relying upon the judgment. of the: Sipreme 'Court in the case of Commissicner af "tnecitie "Tax Vs. Steller Investments Ltd., reported in 251 ITR 263, as ihe said case was decided on the facts of the said case, even though the conclusion arrived at 'on the basis of the fact that if the subscriber who contributed in shares of tiie 'adsessee company were not genuine, the 7 amount could 'not be treated undisclosed income of the _BSBESSEE company. The learned counsel has taken us | 7 through the order passed by the Settlement Commissioner os . dat ed 30.03.2005 as also the order passed by the Appellate sod Authority and submitted that having regard to the facts of the present case, the Assessing Officer has rightly treated the unexplained contribution to the share capital ¢ as "undisclosed a income under Section 68 of the Act anid where lore e the order of the Tribunal is liable to be set "aside and - sabstantial questions of law shall be answered in favour of the revenue.
6. Learned counsel appearing "or, 'the respondent submitted that ever vefore' the Asses sing Officer, M.S.LL. had written a letter stating hat it has subscribed to the additional share capital and | dheelore the Assessing Officer ought to have considered the Said | lett er r filed and the finding that the amount should 'be treated 'a as-undisclosed income is baseless. He further stibmittedt that the decision of the Supreme Court in the ease "of Commissioner of Income Tax Vs. Steller Par , Investinents Lid. Feported in 251 ITR 263 is applicable to the facts of the case and further the Division Bench of this Court in the case of Commissioner of Income Tax and another Vs. "Ask Brothers Ltd., reported in [2011] 233 ITR 111 has e ay ES reiterated the principles laid down in Steller Investment Limited case and subsequent decision of the Hon'blé Supreme Court in the case of Commissioner of Income Tax Vs. Steller. that the unexplained share capital contribution, even 'if not, genuine cannot be treated as undisclosed income.
7. We have given careful consideration to the contentions of the learned counsel "appearing for. the parties and scrutinised the inaterial on' ree ord. It may be observed at the outset that..it is. unfortunate that. the Department is not making available to the Court the documents that are seized during search in the present case, as it is well settled that any finding given by the Assessing Officer or the Appellate Authority or inet ribunal should be based upon the material ws, found -diiring 'search and in the present case even though .. according to the learned counsel appearing for the appellant same 'has not been produced. Even otherwise the fact BAA.9
remains that the additions made by the Assessing Officer is in respect of amount of share capital contribution amounting. to Rs.4,95,38,500/- for the assessment years 1995-96, 1996 97 a of M.S.1.L., has addressed a letter to the Assessing Officer stating that it has invested and contributed. towards the share capital is not in disputed., In view of the decision of the Hon'ble Supreme Court in Steller Investnent Limited, the decision of the Divisien Bencts of 'this Court in Ask Brothers Ltd., it is clear that "even, 'ai amount of share capital contributed is not found tobe genuine and the same cannot be treated as undiselosed income under Section 68 of the Act and in the present case having regard to the letter given by , the MSIL sisting that it had contributed to the share capital cannot:'be disputed. Further the report of the Settlement 7 Commissioner: fas been taken into consideration by the "Tribunal and though the amount of share capital contribution 7 Was Rs.4,95,38,500/- added as undisclosed income as per me the Assessing Officer, the Settlement Commissioner has also Ad sao aaeceereasparase ae 10 accepted the letter given by M.S.LL. onder the circumstances, the finding of the Tribunal confirr ming "the order of the Appellate Authority is justified arid aicco¥dingly * we answer both the substantial que stions., f jew against, the revenue and in favour of the assessee and we FP hold' that' the.
appeal is devoid of merits and. "accordingly we > pass the following:
ORDER The appeal is. dismissed. ™ Note:
"The abové. is © true"
transcription Of... the | judgment dictated to' mie by late Hon'ble Shri "Justice V.G. Sabhahit. presiding"
over the Division. Bench with, Ho uible Shri Justice S:N..°.Satyanarayana in Open Court on 12 -12-2011.
No VASUDEV Ayo 2D GMENT WRITER ae ROS SR