By Sri Y v. Raviraj, Advocate

IN THE HIGH COURT OF KARNATAKADHARWAD BENCH Dated this the 12[th] 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. C.R.Building, Queens Road, Bengaluru-560001. 2. The Deputy Commissioner of Income Tax, Central Circle-1, Belagavi. 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: . …Respondent (By Sri H.R. Kambiyavar & Sri S. Parthasarathi, Advocates) This appeal is filed under Section 260A of the Incometax Act, 1961, praying to formulate the substantial questionof law stated above; allow the appeal and set aside the orderspassed by the Income Tax Appellate Tribunal, Panaji Bench,Panaji, in ITA No.112/PNJ/2014, dated 09.12.2014 andconfirm the order passed by the Deputy Commissioner ofIncome Tax, Central Circle-1, Belgaum. This appeal coming on for Admission this day,RAGHVENDRA S. CHAUHAN, J, delivered the following: JUDGMENT The Revenue is aggrieved by the order dated09.12.2014, passed by the Income Tax Appellate Tribunal,Panaji Bench, Panaji, whereby the learned Tribunal hasdeleted the additions made to the income of the assessee onaccount of gifts, for proceedings that had commenced underSection 153C of the Income Tax Act, 1961 (‘the Act’, forshort). 2. Briefly the facts of the case are that the assessee,Smt. Sunita Bai, is engaged in the business of plying/hiringcarriages on routes allotted by the Government ofKarnataka. She had submitted her income tax returns forthe Assessment Year 2005-06. During the assessment, anotice was issued to her under Section 142(1) of the Act,with regard to the fact that she had shown in her income taxreturns a gift of Rs.45,00,000/- from Hasim Mod TradingEstablishment, a company set up in Dubai. She had not onlyexplained the gift of Rs.45,00,000/- made by way of chequesof Rs.5,00,000/- each, but even the donor had admitted giving cheques to the assessee. Therefore, the assessmentwas closed by the Assessing Officer. Subsequently, on 25.03.2008, the premises belongingto Mr. B. P. Anandkumar Singh of Hospet were searched.Since certain incriminating evidence was discovered, but notwith regard to the assessee, proceedings against Mr. B. P.Anandkumar Singh was initiated under Section 153A of theAct. Moreover, a notice under Section 153C of the Act wasissued to the assessee on 31.10. 2008. In response to thesaid notice, the assessee filed a return of income tax on19.12.2008 declaring her income as Rs.17,336/-. On28.04.2009, a notice under Section 143(2) was also issued tothe assessee. A notice under Section 142(1) accompaniedwith a questionnaire was also issued to the assessee on10.08.2009. In response to the said notice, the assesseeappeared before the Assessing Officer. The assessee wasasked to explain the receipt of Rs.45,00,000/- by way of giftfrom Hasim Mod Trading Establishment, Dubai. Despite theexplanation given by the assessee, the Assessing Officer wasof the opinion that the gift is not a genuine one. Therefore,the amount of Rs.45,00,000/- should be added to the assessee’s total income within the meaning of Section 68 ofthe Act. Hence, the said amount was treated as undisclosedamount of the assessee by order dated 21.12.2009. 3. Since the assessee was aggrieved by the order dated21.12.2009, she filed an appeal before the Commissioner ofIncome Tax (Appeals) (‘the CIT’, for short). However, by orderdated 20.08.2013, the learned CIT dismissed the saidappeal. Therefore, the assessee challenged the order dated20.08.2013 before the learned Tribunal. By order dated09.12.2014, the learned Tribunal allowed the appeal, andheld that no addition on account of the gifts can besustained. Hence, this appeal before this Court. assessee’s total income within the meaning of Section 68 ofthe Act. Hence, the said amount was treated as undisclosedamount of the assessee by order dated 21.12.2009. 3. Since the assessee was aggrieved by the order dated21.12.2009, she filed an appeal before the Commissioner ofIncome Tax (Appeals) (‘the CIT’, for short). However, by orderdated 20.08.2013, the learned CIT dismissed the saidappeal. Therefore, the assessee challenged the order dated20.08.2013 before the learned Tribunal. By order dated09.12.2014, the learned Tribunal allowed the appeal, andheld that no addition on account of the gifts can besustained. Hence, this appeal before this Court. 4. Mr. Y. V. Raviraj, the learned counsel for the Revenue, submits that the following substantial questions oflaw arise in the present case. 1.Whether the Tribunal was right under thefacts and circumstances of the case and inlaw in holding that, the gifts received by therespondent are genuine in disregard of thefact that in this case no scrutiny assessmenthad been made earlier and thus the issue ofgifts had not been examined in any meaningfacts and circumstances of the case and inlaw in holding that, the gifts received by therespondent are genuine in disregard of thefact that in this case no scrutiny assessmenthad been made earlier and thus the issue ofgifts had not been examined in any meaning until in the proceedings under Section 153Aof the Act? 2.Whether the order of the Tribunal is notperverse in holding that ‘the regularassessment has already been completed’ in acase wherein only an intimation underSection 143(1) has been issued?perverse in holding that ‘the regularassessment has already been completed’ in acase wherein only an intimation underSection 143(1) has been issued? 3.Whether, on the facts and in law, theTribunal erred in restricting the scope ofwords ‘assesss or reassess the total income’in the assessments under Section153A/153C, by holding that, theseassessments are to be made only on the basisof the seized materials?Tribunal erred in restricting the scope ofwords ‘assesss or reassess the total income’in the assessments under Section153A/153C, by holding that, theseassessments are to be made only on the basisof the seized materials? 4.Whether, on the facts and in law, theTribunal erred in holding that, the totalincome in the assessments under Section153A/153C should be determined in respectof assessment years for which originalassessments were already completed on thedate of search, by restricting additions only tothose which flow from materials found duringthe course of search?Tribunal erred in holding that, the totalincome in the assessments under Section153A/153C should be determined in respectof assessment years for which originalassessments were already completed on thedate of search, by restricting additions only tothose which flow from materials found duringthe course of search? According to him, the learned Tribunal is not justified inconcluding that since a regular assessment had already been completed under Section 143(1) of the Act, the proceedingsunder Section 153A of the Act could not be initiated.According to the learned counsel, in case of a searchconducted under Section 132 of the Act, and in caseincriminating evidence is discovered qua any person thanthe person whose premises is searched, then under Section153C of the Act, the Revenue is entitled to reopen the case ofsuch person. Therefore, the department was justified inreopening the case of the assessee in the present case. Secondly, the stand taken by the assessee before thelearned Tribunal that since no incriminating evidence wasdiscovered qua her, during the search made on 25.03.2008,therefore, no proceedings could be initiated under Section153C of the Act, such stand was never taken by her eitherbefore the Assessing Officer, or before the learned CIT.Therefore, the assessee cannot and could not be permitted toraise the said stand, for the first time, before the learnedTribunal. Secondly, the stand taken by the assessee before thelearned Tribunal that since no incriminating evidence wasdiscovered qua her, during the search made on 25.03.2008,therefore, no proceedings could be initiated under Section153C of the Act, such stand was never taken by her eitherbefore the Assessing Officer, or before the learned CIT.Therefore, the assessee cannot and could not be permitted toraise the said stand, for the first time, before the learnedTribunal. Thirdly, that once the assessment is reopened underSection 153C of the Act, the department has all the powersas it would have in the original assessment. Therefore, the Assessing Officer was justified, firstly, in calling for anexplanation from the assessee; secondly, in holding that thetransaction 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, thelearned Tribunal was not justified in setting aside either theassessment order, or the order passed by the learned CIT. 5. On the other hand, Mr. H.R.Kambiyavar, thelearned counsel for the assessee, submits that admittedly,no incriminating evidence was discovered during the searchof the premises belonging to Mr. B. P. Anandkumar Singh,which related to the assessee. Even prior to the search, theassessee had already filed her income tax returns. She hadexplained the receipt of Rs.45,00,000/- by way of a gift fromthe Hasim Mod Trading Establishment of Dubai. Even thedonor had accepted the fact that the cheques were issued tothe assessee and the initial assessment was completed. Secondly, therefore, the issue before the learnedTribunal, which is a legal issue, was whether the AssessingOfficer has the power under Section 153C of the Act, toreassess the income even if there was no incriminating evidence found against the assessee during a search underSection 132 of the Act or not? The said legal issue could beraised by the assessee even at the appellate stage. Thirdly, this was the only issue that was taken up bythe learned Tribunal. According to the learned counsel, thelearned Tribunal was justified in holding that the powerunder Section 153C of the Act could not be invoked in theabsence of any incriminating evidence against the assesseeduring the search under Section 132 of the Act. Moreover,even in the assessment order dated 21.12.2009, there is notan iota of evidence produced by the Revenue that anyincriminating evidence was discovered at the time of thesearch against Mr. B. P. Anand Kumar. Therefore, the verybasis of invoking the power under Section 153C did not evenexist. Hence, the learned counsel has justified the orderpassed by the learned Tribunal. 6. Heard the learned counsel for the parties andperused the impugned order. 7. A bare perusal of the impugned order clearly revealsthat the learned Tribunal was seized with only the issue, 6. Heard the learned counsel for the parties andperused the impugned order. 7. A bare perusal of the impugned order clearly revealsthat the learned Tribunal was seized with only the issue, whether the power under Section 153C of the Act could beinvoked or not, specially when there was no incriminatingdocument or evidence discovered during the search underSection 132 of the Act, against the assessee? Admittedly,the Revenue has not produced any evidence either before theAssessing Officer, or before this Court to show that anyincriminating evidence was discovered against the assesseeduring the search on 25.03.2008. In the absence of anyincriminating evidence, the Assessing Officer was notjustified in invoking his power under Section 153C of theAct. The learned Tribunal has also noticed that this opinionhas been expressed by other courts. Therefore, a merepassing observation made by the learned Tribunal that thesaid power could not be invoked for regular assessment thathad already been completed under Section 143(1) of the Actwould not give rise to a substantial question of law. Theissue is not with regard to the scope and ambit of Section143(1) of the Act; it is specifically with regard to the powerprescribed under Section 153C of the Act. To the limitedissue of the ambit and scope of Section 153A of the Act, thelearned Tribunal has correctly expressed its opinion. Therefore, the substantial questions of law raised bythe learned counsel for the Revenue do not arise at all in thepresent case. Hence, the appeal is devoid of any merit; it is, hereby,dismissed. Kms Sd/-JUDGEhSd/-JUDGE