Karnataka High Court
Commissioner Of Income Tax - Iii vs M/S Saravana Constructions (P) Ltd., on 14 March, 2012
Bench: N.Kumar, Ravi Malimath
'Hun LUUKI or KARNATAKA HIGHACQURT OF KARNATAKA HIGH COURT OF KARNATAKA HIGH COURT OF KARNATAKA HIGH COURT OF KARNATAKA HIGH C
IN THE HIGH COURT OF KARNATAKA AT
DATED THIS THE 14th DAY OF if
PRESEN'_Ifi
TI-{E HOFBLE MR. Jusfmzzzjzé,
THE HOBPBLE
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C cm. ;§'}I}'1I.DINGS, QUEENS ROAD, ~BFs.;?§GALORE - 560 001.
5 F E-EE INCOME TAX OFFICER, WARD 12 (12), BAKGALORE,
3. THE ASSISTANT COMMISSIONER 05' mcomrs mx, CENTRAL CIRCLE 1(2), , BANGALORE \N/ EGH COURT OF KARNATAKAHIGH COiJRT OF KARNATAKA HIGH COURT OF KARNATAKA HIGH COURT OF KARNATAKA HIGH COURT OF KARNATAKA HIGH COL APPE LLANT8 e:.z3k'r»»s[1s:;:)rz (BY SR1. 13.12. ENDRAKUMAR, SEKIQR COUIi1§iEl1}.'I?fQ§.'f.'..j\ SR1. E' SANMATHI INDIRAKUMAR, "
AND:
..__......-_--.._ M] S. SARAVANA CONSTRUCTIOH3"(_P) LTL};g' " ' No.155B, 4% MAIN, HAL II_Sr'--§AGE';. A DEFENCE comm, BANGALORE--560038«.
(BY sax. ASHOK FOR M;/3.
1'i'A§..._ARE.__FIL}E-I}_ UNDBZR 33707303 260--A OF INCOME, TAX AEET, Amsms GUT QB' ORDER DATE!) '~30;O6;faQ41'1.VWKSSED IR ITAs HC>.8éO AND 951/BRLEG/20Q3;.."-- NQ.85'9 AND QSQXBANG/2008, H0862 '».._A2§D , 'QSSAJBANG/2003, NQ863 AND 954s;3ANG12om, "NO.-B64 AND QSSIBARG/2008, N_O}956iBANG;'2QQ8 AND No.35: AND H .NC}.9Si2'EiS1iG/2008 RESPECTIVELY, page THE Okassgssmgfir YEARS 1999~2mo._, 1993.99, zaomiz, 32003-04, 2004-05 AND 2000-01 "RESPECTFEIELY T0 FORMULATE THE SEJBSTANTIAL QUEfl'I1Z;'.I'3' OF LAW STATED 'FE-{EREIN AND TO SET AsmE=fI'HE APPELLATE ORDER DATEE 30.06.2011 = P!gSSE'D BY THE ITAT, 'A' BENCH, BANGALCRE IN PROCEEDINGS ' ETA NC>s.8f:'nO Arm ._ V'.95iO/BAHGf2D08, H0559 AND 950/BAN<3;201c>., 260.862 AND 953/BANG/2008, H0863 AND ' '""954fBANG{2008, NO.8€>4 AND 955iBAR'G/i20C>8, H0954/BANG/'QOOS AND NQ861 AND NQ952/BANG/QCXDS RESPECTIVELY, as SOUGHT FC)RINTHIS APPEALS.
IN ITA H0396] 2&1 1 .397jj,O1 1 .398! 201 1 .3991 5201 1 ' ""N0.952/BAHGMOCIS, "HGH CUUKI' Of KARNATAKA HIGH ACQURT OF KARNATAKA HIGH COURT OF KARNATAKA HIGH COURT OF KARNATAKA HIGH COURT OF KARNATAKA HIGH C 400/ 2011.401/2011 AND 4-O;/_2C?11 BETWEEN:
M; s, EARAVANA comsmucnares PVT. 130. , H' NO.155B, 479 MAIN, HAL H STAGE, DEFENCE COLONY, BANC':ALC)RE--~560 0.33. G V APP"&:.LLAr:,*'_:§ {:.«:;t:vL1s.;:£::::N '- (BY BY SR1. ASHOK 1a'ULKA1%::"¢:, A@VCi2'ATE M; 3. A AND:
WARD 12(12);",:GGGHG- ' 'G = '..';.;§2EfSPC)B¥DENT £Z'.OPvfivIOH {BY ..R¥»3§RAKUMA.*é, 312; COUHSEL FOR SR. 53. Sé;Ix¥f.»:£Afr£~H ,.A.:m3cM°E; tr.q¢%A:§; man UNDER 3EC'I'IOI\'i 2604-1 _ <31? -INCOME TAX ACT, 1951, ARI8E¥G cm' O_F"2.OEE)ER 30.06.2011 PASSED IN ms. ' Hcis. T _W._95O,fBANG/20%, 951/BANG/2038, A .9521 E.£1E!G,f20%,9S3f BANG/' 2003, 954; BANG} 25:08, F_355;'B<5;:'§G§.G'20O8 AND 95.5;'BANG; 2:303 PESPB_c;T§xELY FOR THE ASSESSMENT YEARS 19%- 1999§GGG199-'ryzoeo, 2000-2001, 200142002; 2002-2003, 20o;a~2%:304 AND :20c:4.~200~5 RE SPECTEVEGLY TC} " AAFQRNFLILATE THE SUBSTANTIAL QUESTION OF LAW THEREIN AND TO ALLOW THE RPPEAL BY 'I.SErT'I"H€G ASIDE THE ORDER OF THE ITAT IN I'I'2'-is GNo.9sc:;BA1~IGg 20:33, No.95}/BANG/20083 }¥a.953fBfiNGi2€)O8, Nc::e,954fBANGf 2008, $10,955; BANG; 2:303 AND No.95c3/ BANG] 200.3 mama 35,35,231 1 RESPECTTVELY, AS SOUGHT IN THE APPEALS. i&/ iGH COURT OF KARNATAKAHIGH COURT OF KARNATAKA HIGH COURT OF KARNATAKA HIGH COURT OF KARNATAKA HIGH COURT or KAKNAIAKA Hlun buy; \ 1 THESE rma comma on FOR ORDERS THIEDAY mxuwm. J. DELIVERED THE 'FOLLOWINGV;j""-- E A E A In theae batch cf appeals order, bath the chaflengnxg' that portion of agaimt.
their interest. are taken up for eormiderattan O of by this common ~ ' " was searched undczr 32 Tax Acdfor short heremafie' r on 8.10.2003. Various
'O V' during march. In raepoxzse to Section 153A of The Act, tim returns wére for the accounting years 19%-99 be In all the aésessment years, accept for the year 1998-99, losses were declared by tlue In the cxzurse of search, certain books of accounts and papers had been semd. It was csbssrved in the assessment order that as per the seized Lk/ 'iIL=iH COURT OF KARNATAKA HIGH COURT OF KARNATAKA HIGH COURT OF KARNATAKA HIGH COURT OF KARNATAKA HIGH COURT OF KARNATAKA HIGH C matcriah, the assmace had received harms fi-om. partnem, some of whiach have been regular boom of accounts. 'ti1::.{'_Vréti1rn, respome to the not1ce' issued iéf "27-.'1fe: Act, thc asswsee encIoaed'TBa1a}_ ' " Loss account Kuchcha book enu'vie;"s f'er ycar. The trial balance as loans from Ra.4,54,07,931/-
arfi The Aszsessirxg Ofiicer "produce: persons claimed tn have fih their confirmations. The tn furnish confirmations.
« ~ thc Asaaasing Auflrxority aaded
- on the ground flrmt the assesses had failecffxa 'substantiate his claim. Whik: prepafing the A "ii under '.3-echo' 11 153A of the Act, the asseasee also V. V :ino<>rporated expemcas appearing in the same-d bocim of accounts and lcms re-drawn the P & L Account in which the irwrwzse in axpenses was founé to be Xx/ IGH COURT or KARNATAKAHIGH cot.-2:21' or KARNATAKA HIGH COURT or KARNATAKA HIGH COURT or KARNATAKA men counr or KARNATAKA men can R3.92,77,880/-. The Asmsing Autharity types of additions in all the asseasment " _ tnrms of Section 68 of the: Act axjxgl anofixraf ~ to additions on account of claimed in the returm V * amunts. The totai made in terms of Section 58 is4_§2f__Rs§'28;;3rf{ addition on account Ra.3,o6,43,3.s5/-.
V1 _ asaeasee preferred an my of Income. Ta:-:{Appe.a1s).
The A13'pVi1el,:?ate44tVie1eted the addit1'mm_made in Act hofiing that onus was an to substantiate: that the credits H kuchha cash book were not the ham but the assmse-c'a own morwy refleemsd in VA of credits in the seized The Assessing V. A EAuthority did not dfmcharge tlm pr1xna1'§' V onus cast on it and it was wrung on the part of the asseasirxg authority to throw the burden on the assaesee to pfove the
--llGH COURT OF KARNATAKA HlGH_<:O.§JR1'1OF KARNATAKA HIGH COURT OF KARNATAKA. HIGH COURT'0F*KARNAfAKA HK§H'UUU'K ! or mumnnm nmn u genuirnmws of the credits. Rqarding that': made on account of increase in expenses, Authority confirmed rm adciigirgns ~ O Assessing Authority. sets I-'::f audited boom and hm. w&3Onazm[O by the Asseasirzg Auggmmy irmorm mad by tlw aaawsev:,;.,""'t;1;ie on the basis of audited b¢qka.__we:§é" recorded in the was treated as the order of the "assasee preferred furtkmr appeax same and the Tribuzml by the corfirmed the order of rwpect of the ciefletion made in Impact in terms of Section 68 of the Act and mat the Assessing Authority wrongly added A 'OT openixg in each of the assessment year O further observed that loans Were: taken thremgh [email protected]fih.e1dthatthaetota11nansof Ra.61,36,831f- are by way of chequw. It. fxxrther hchi V 'HGH COURT OF KARNATAKA HIGF"-{COURT OF KARNATAKA HIGH COURT OF KARNATAKA HIGH COURT OF KARNATAKA HIGH COURT OF KARNATAKA I-HGH 1 that th: Asaaasing Authority shuuld amepf-,Tth¢ gem.unez1' as (If the loam wlmrever the confirmed for having Kent the money Ragardzm the add:e.::;ns A the Commisaianer, on of the Tribunal no taka inizn account 31318 " whikz dif It is against the said well as the Immune have ' .3. far the aaswsae assa1h.ng'"
O 1gJ caanmmés that in terms of Section beaks of acsczmmtzs and ether documaents possession cf tm assmaee in the cmzrse of AA it may be prmumed. that such boolm of and {rather dccunmnbs banged to the assease . fiikw contents of the: said dacumnta are true. am correct Iftk asseaxsing authority is mt gmapareci to act on that esntrica, the burdsn Tm an hm ta fiisprove the XL nun LUUKI Ur KAKNAIAKA HIGHACQURT OF KARNATAKA HIGH COURT OF KARNATAKA HIGH COURT OF KARNATAKA HIGH COURT OF KARNATAKA HIGH C the mrfecumas of the said entriea and tifl it the corrmmesa of the safi entries, no made undcr Swtion 68 of the ~ Section 29%;) of the Act, position.
4. Per cox1tt:'a.,_ for the reverme submitted has mt cienifi that am to him arm! has not anti therefore, the transactions rcflezcted in It is in this context, the asagiw-gage A' crstabfiah thc genuirmas cf' the Therefore, the a.s3ess1ng' authority was I on mere entries without the aaié 'V supported by corroborafive evidence, xThcre5fo¢1'e, he submits that this bfiing purely a qumtian "fact, no case for interference is made out as no " " 'éubetantial question of law is inv2::xh:e&. IGHVVCOURT or KARNATAKAHIGH cqumgfr or KARNATAKA HIGH' courrr or KARNATAKA HIGH counr or KARNATAKA men COURT or KARNATAKA mun um 10
5. The lcarrwd eoumclfor the revenuq poixxted out in respect of their appeak that _ rennmdcd the matmr back to '#3:: a with a direction to the assessifig au!liofit3}-£d- transactions, which are n1ain1od to" be g§s"r:uin-:;, confirming that thg m[ the banking channth. the assessing authority L has to Wh¢th¢r through banking chamxels that the said trarxsactéona ' ' the learned counsel for tha VVV'"".4bmIfied. H """ N that the trmxsactions which are 'V are all ganuine transa-zttiszzns and assesaee is entitled to the benefit of .. d.*§aHcvs%anoe once it is faund to be through the banking dhfizuiels and the autharity is satisfifi about the rmture V " ' " oft.ra1mactions.
11
7. Though several quwtiona have by both the pa1"5Es, the pal-am substantial questions of law t1121Jtb,Wa»zfi.s¢ '~ in these appeals are as H O' M O O "(1)Wh¢.fl:1¢r on :_t1*2a§ m¢mHma c1rcum:-3' tanom of ~¢§:a¢;, was inclusion of as of Pugt fiibm in the facts .... the case is the unsecured as bonafide Inerely _ _ received by chaques v.f_it1*1§>i1t ....oo:1ducti11g an enquiry with k to the identify of the payer Le. creditworthinesa of the said _ .- and the genuinsness of the O ~ t§'a11sactix3n?"
nun LUUKI Ur KAKNAIAKA HIGHACOURT OF KARNATAKA HIGH COURT OF KARNATAKA HIGH COURT OF KARNATAKA HIGH COURT OF KARNATAKA HIGH <
8. The material on recerd discloses that the loan amxmnts appeared to have been recehrcci by cash during the ancounting year 199$??? to 2fE4~O5 was to \\/ IGH COURT OF KARNATAKAHIGH COURT OF KARNATAKA HIGH COURT OF KARNATAKA HIGH COURT OF KARNATAKA HIGH COURT OF KARNATAKA HIGH CO! 12 the tune of Rs.5.97' crorm. in that body of the jgdéfngnt, the Tribuzml has set out the details of the in the aasmsmcnt ycar wise, c0 '@tI . the Department and balance ait;ou:;1'z&5:; have given the part1c' cfialri }oa1:;a¥.'A,AVw.i:,rmr iwise-..i"
, authority to aoea1§t"'.--R{h,e T' W11er:;-zver the lenders have monies to firm aasmee x aut;'t1ori1y 01' that once the kachcha aoooiznts ; and the aasessee admits the ent1?vi€;z§_VFinv them is a presumption that therein are true. Tharefore,a.11 L' account boolm are deemed to be true H the assessirg authority were to dispute t11T4$setv:"'c$;f1.tV:¥'ic:e, it is for him to place. such evidence tn A the correctness of those entriesg Admittedly, O. such attempt. is made to disprove the entries. In those circumstances, the Tribunal committed a serious error in the Asscsaing Authority to take: note of
-nun CUURI or KARNATAKA HIGH COURT OF KARNATAKAV HIGH COURT OF KARNATAKA HIGH COURT OF KARNATAKA HIGH COURT OF KARNATAKA HIGH I 13 cnly thoae credits where the landcm have __for lent monies to the assessw, On the entire credits ahoulci consideration and obtained the benefit to the materiai on record, hit F3 has maizltamed two boaxaggr mg for the search, the kachcha geeks to light. The ezntriea in reflectcd in the by the assesses.
Mereiyf boolm are found during m;ues' _ assesses: owns the said books the entrim found therein are ' .:1V:'r";zeA it is not safe for tha authcoritics to act If the assesses wants to have the xthc entrim in the said books, as he did not I' voluntarily before the autfmriiiea and those ?' are mt reflectcd in the regular aocmmts, it is for him to substantiate it by such acceptabie evidence as to the oorrczcmeas of those. entrias. In fact, he has taken b"/ IGH COURT OF KARNATAKAHIGH COURT OF KARNATAKA HIGH COURT OF KARNATAKA HIGH COURT OF KARNATAKA HIGH COURT OF KARNATAKA HIGH CO! 14 the trouble to examine thoae creditors whé»-.4:'_"bave confirmed these entries. If he had not creditors, in whose name the «games .*a11=:~..j:.1;a1;de;*AV<5n1y mference' that could be drawnfigs féfil entries. No "fc~ffi1o0xrnngf:"' AT,'»..fVc::*5 examixiirlg those 'ix; course would have come those entzim.
In those gm justified in excluding. are confirmad by the c;%av:iit:x3i*zs_VO'a{r2-:35 are rm: supwrted by cfabZ'§ir.éra é:ti£i..L4i9'aé'-zjfiiatified in isssuing directions to' the aeéééesfiitzg to accept Elm cash credits V. Iéndem have confirmed for having lent: the ' ms assassec and nest in othcr cases. O do not see ermr committed by the passing the impugned ordar an this aapmt. the fit-st substantial qumfinn of Law is answered . favcsur of the revenue and against the aaaessw. ECOHD BUBSTANIIM; QUEBTIOH O!' LAW':-
\\/ 1Iur1 k.UUKI Ur KAKNAIIAKA HIGHACQURT OF KARNATAKA HIGH COURT OF KARNATAKA HIGH COURT OF KARNATAKA HIGH COURT OF KARNATAKA HIGH I 15
9. The material on rword discloses Tribunal has taken note of the I_:':§f"' fired', rm' rs for the asémamcnt. ysaa > 'V farms" had in a paper book in I¢£Ihe,am'ng * with ma copiw of 1wg<:~i'_ I iban E.-.i"
statements of Lord Bank Limited, the The same was not :Af::i~".' I the assasing auths:::"ity§.. in the absenw of I the assswsing authéivxfity at the mnelxxsion that the allegfi not genuine and concluded Therefore, whike issuing the Tribunal has directed the Assassing I.1néer:-
" Since the transactions we aiczfmed to be by chmues the question of disaliowanoe dues not arise. Hmyevez: as a matter of czmmlan, the teamed. . Authority; is direded to afiow the same qfler confirming that the ix] IGH couwr or KARNATAKAHIGH COURT or KARNATAKA HIGH COURT or KARNATAKA HIGH coma' OFKARNATAKAV HIGH coum' or KARNATAKA HIGH Co: 16 ' dmnnegsf V "
10. The grievance is 9 only for those cheque t1'anse.ctia§s£1$:;'--E§r1:ic1f:."_31}e be ge:m11n' e. Merely are' through bank chanjrxela, not be entitled to the a cheque is issued it has bank only. There is no the payment is transaction. First it has the transaction in question is the asscassec would be . of disaflowancze. Probably, the issuing direction did not notice its the earlier part of its very same order. how a direction in the afcresaici manner is which is not correct. Therefbre, in sfiditinn to V' "What has bean sated by the Tribunal, the amassing authority shall first find om, whether the cash credit Xx./[ ..-.. wvvnl vr muuv-uAz\A nuunypuxl Ur KAKNATAKA HIGH COURT OF KARNATAKA HIGH COURT OF KARNATAKA HIGH COURT OF KARNATAKA HIGH 1'7 claimcd represents a true and genuine If the axmwer is "Ya" than accept the credit
11. In that View of ti'1§éV"ma1:§er.,; T4 O substantial question of law favour asf the revenue and 'In all' other respects, stands of.
~ rrri and Sri. E.Z.Sanmathi, are, "ta Sle."*:hA£=ir power within fear masks. Sd/-
JUDGE Sd/-
JUDGE "'aIb/ - .