Ita/155/2008 Of The Commissioner Of Income Tax v. Sri B Sudheer Baliga

IN THE HIGH COURT OF KARNATAKA, BANGALOREDATEKD THIS THE 1[‘T]DAY OF JUNE 2014 PRESEHBN THER HON’BLE MR. JUSTICE N.KUMAR AND THR HON’BLE MR.JUSTICE B.MANOHAR | INCOME TAX APPBAL NO.155 OF 2008C/W INCOME TAX APPEAL NO.224 OF 2007 ITA NO.159/2008 BBRITIWE 1. THRE COMMISSIONER OF INCOME TAX ATTAVAR, MANGALORE 2. THR ASST. COMMISSIONBR OF INCOME-TAX, CENTRAL CIRCLE MANGALORE _ APPELLANTS (BY SRIL.JEEVAN J.NEERALGI, ADV.) ANI): SRI.B.SUDHEEBR BALIGAPROPRIETOR, BALIGA JEWELLERSCAR STREET, MAIN ROAD|BANTWAL —- 574 211—. RESPONDENT| (BY SRI.S.PARTHASARATHI, ADV.) ITA NO.224 /200 BETWEEN: 1. THRE COMMISSIONER OF INCOME TAX CENTRAL CIRCLE, C.R.BUILDING ATTAVARA, MANGALORE 2. THR ASST. COMMISSIONBR OF INCOME-TAX, CENTRAL CIRCLE C.R.BUILDING, ATTAVARA MANGALORE ... APPELLANTS (BY SRIL.JEEVAN J.NEERALGI, ADV.) AND: SRI.B.SUDHBEBER BALIGBALIGA JEWELLERSMAIN ROAD|BANTWAL |... RESPONDENT| (BY SRI.S.PARTHASARATHI, ADV.) These appeals is filed under Section 260-A of I.T.Act,1961 arising out of Order dated 21.9.2007 passed in ITANo.15/BNG/2007 for the assessment year 2001-02praying to formulate the substantial questions of law,allow the appeal and etc. These appeals coming on for Hearing this day,N.KUMAR J., delivered the following: ORDER In ITA No.224/2007, the assessee is in the businessof jewellery. On 30.5.2000, survey was conducted at thebusiness premises of the assessee. In the course of thesurvey, they found excess stock of gold and silver. On thevery same day, alter obtaining a search warrant, what wasfound as excess stock and jewellery in the business premises was seized and a search was also conducted inthe residential premises of the assessee and gold was.seized. Thereafter, proceedings were initiated underSection158-BC|forblockassessment.A.blockassessment order came to be passed. However, theassessee, alter the survey, filed his return disclosing in hisreturn, all the excess stock jewellery found in the business_premises. The Assessing Authority proceeded to pass anorder for the block period. Aggrieved by the said order,the assessee preferred an appeal to the Commissioner ofIncome Tax (Appeals). The Appellate Authority partlyallowed the appeal and held the subject matter of stockand jewellery found in excess during survey again becamethe subject matter of search and therefore, it cannot bethe subject matter of block assessment proceedings. —However, he upheld the order of block assessment passedin respect of jewellery seized in the residential premises. —Agegrieved by the said order, the revenue has preferred anappeal before the Tribunal. The Tribunal has declined tointerfere with the said order. Against the said order, therevenue is in the appeal. 2. The learned counsel for the revenue, assailing theimpugned order, contended that, when on the same day ofsurvey, the subject matter of survey was made the subjectmatter of search, in law, there is no provision of passingthe block assessment order. Even otherwise, the Tribunalwas not justified in relying on CVBT instructions forwealth tax and in holding that 900 grams of silver cannotbe held to be in excess of the declared income which was.found in the house premises and similarly, he was in errorin holding that surcharge is not leviable in the case ofassessee as Section 113 ot the Act was introduced w.e.f.|1.6.2002. 3. In the light of the aforesaid submissions, the| following substantial questions of law were framed: 1.Whether the Appellate Authorities werecorrect in holding that the block assessmentorder pursuant to a search in continuationof a survey is not in consonance withSection 158BB ot the Act and therefore noassessment u/s.158BD or 158BC of the Actcan be made?correct in holding that the block assessmentorder pursuant to a search in continuationof a survey is not in consonance withSection 158BB ot the Act and therefore noassessment u/s.158BD or 158BC of the Actcan be made? 3. In the light of the aforesaid submissions, the| following substantial questions of law were framed: 1.Whether the Appellate Authorities werecorrect in holding that the block assessmentorder pursuant to a search in continuationof a survey is not in consonance withSection 158BB ot the Act and therefore noassessment u/s.158BD or 158BC of the Actcan be made?correct in holding that the block assessmentorder pursuant to a search in continuationof a survey is not in consonance withSection 158BB ot the Act and therefore noassessment u/s.158BD or 158BC of the Actcan be made? ? Whether the Assessing Officer was correct.in bringing to tax in the block period the.eCXCeSSstockot|Gold,Jewelleryandsilverware found in the surveyed and.searched premises?in bringing to tax in the block period the.eCXCeSSstockot|Gold,Jewelleryandsilverware found in the surveyed and.searched premises? 3.Whether Tribunal was correct in holdingthat the CBDT instructions for Wealth tax.purposes that the Gold Jewellery and.ornaments to the extent of 500 grams per.married lady, 250 grams per unmarried ladyand 100 grams per male member of the.family need not be _ seized should bextended to income tax purposes and Silverquantity cannot form part of the seizer forthe purpose of bringing it to tax as the.undisclosed income of the assessee?that the CBDT instructions for Wealth tax.purposes that the Gold Jewellery and.ornaments to the extent of 500 grams per.married lady, 250 grams per unmarried ladyand 100 grams per male member of the.family need not be _ seized should bextended to income tax purposes and Silverquantity cannot form part of the seizer forthe purpose of bringing it to tax as the.undisclosed income of the assessee? 4Whether the Appellate Authorities werecorrect in holding that surcharge is not.leviable in the case of the assessee as!Section 113 of the Act was introduced w.e.f.1.6.2002 without taking into considerationthe Finance Act, which was in existence at.the time of search? correct in holding that surcharge is not.leviable in the case of the assessee as!Section 113 of the Act was introduced w.e.f.1.6.2002 without taking into considerationthe Finance Act, which was in existence at.the time of search? 4. The condition precedent for passing an order inblock assessment is undisclosed income being recoveredin a search proceedings. Admittedly, in the instant case, first a Survey was conducted in the business premises andexcess stock was found. The assessee promptly filed hisreturns declaring the said excess stock, well within theperiod prescribed under the law. However, what was.found to be the excess stock, was seized by convertingSurvey into search aiter obtaining a warrant. AS evenbefore the commencement of the search through survey,this unaccounted stock had been noticed, the same|cannot be the subject matter of a search again andconsequently, cannot be the subject matter of blockassessment proceedings. That is precisely what both theappellate authorities have held, which is correct andtherefore, the said questions of law is answered in favourof the assessee and against the revenue. | Oo. Though the CVBT instructions for wealth taxpurposes show that the gold jewellery and ornaments tothe extent of 900 grams per married lady, 250 grams perunmarried lady and 100 grams per male member of thefamily need not be seized, the said principle had beenextended tor Income tax purposes also by the Tribunal. In the facts of this case, when the assessee is in the businessof gold and jewellery, probably even that 900 grams wouldbe niggardly and therefore, the Tribunal committed noerror in granting benefit to the assessee to that extent. —Infact,T10substantial question|OT law.arisesforconsideration. If it arises, it is rightly held in favour of theassessee and against the revenue. Oo. Though the CVBT instructions for wealth taxpurposes show that the gold jewellery and ornaments tothe extent of 900 grams per married lady, 250 grams perunmarried lady and 100 grams per male member of thefamily need not be seized, the said principle had beenextended tor Income tax purposes also by the Tribunal. In the facts of this case, when the assessee is in the businessof gold and jewellery, probably even that 900 grams wouldbe niggardly and therefore, the Tribunal committed noerror in granting benefit to the assessee to that extent. —Infact,T10substantial question|OT law.arisesforconsideration. If it arises, it is rightly held in favour of theassessee and against the revenue. 6. In so tar as the payment of surcharge isconcerned, as the law stands today, surcharge is payableby the assessee. The Tribunal was not justified in holdingthat it is not payable. However, it is submitted that thesaid question is before the Larger Bench of the Hon’bleSupreme Court. Therefore, in our view, the appropriateorder to be passed is to set aside the order of the Tribunalin so far as non-levying of surcharge is concerned andremit the matter to the Assessing Authority with adirection to apply the judgment of the Apex Court andconsequent to the order passed by the Larger Bench, togive effect to the same. Hence, we pass the following ORDER The appeal in ITA No.224/2007 is partly allowed.The impugned order passed by the Tribunal holding thatsurcharge is not leviable, is hereby set aside. The matteris remitted back to the Assessing Authority only on thequestionoT|surcharge,TObe|passedafterthepronouncement of the judgment of the Larger Bench of theHon’ble Supreme Court, giving effect to the said order. Ordered accordingly. 7. In the light of what is stated above, the appeal inITA No.155/2008 is not maintainable and accordingly, it1S dismissed. RV Sd/-. JUDGESd/-.JUDGE| Sd/-.