Ita/485/2009 Of The Commissioner Of Income Tax v. Smt T Manjula

IN THER HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 06 DAY OF FEBRUARY, 2015 PRESENT. THE HON' BLE MR. JUSTICE N.KUMAR. AND THE HON’ BLE MR. JUSTICE B. VEERAPPA INCOME TAX APPEAL No.485/2009 BETWEEN: 1,THK COMMISSIONER OF INCOME-TAXCR. BUILDINGQUEENS ROADBANGALORE.CR. BUILDINGQUEENS ROADBANGALORE. 2.THER DY. COMMISSIONER OF INCOME-TAX(inv)CIRCLE-5(1)(inv)CIRCLE-5(1) BANGALORE.—~ APPELLANTS (BY SRI. K.V. ARVIND, ADVOCATE) AND: SMT. T. MANJULA|D/O. LATE SRI. A. THIMMAIAH REDDY“NIAGGRNDRA NILAYAD/O. LATE SRI. A. THIMMAIAH REDDY“NIAGGRNDRA NILAYA BANASAVADI, RAMAMURTHY NAGARBANGALORE.— RESPONDENT (RESPONDENT SERVED) THIS ITA IS FILED UNDER SECTION 260-A OF)THE INCOME TAX ACT, 1961 ARISING OUT OF ORDER|DATED 24.04.2009 PASSED IN IT(SS)A NO.76/BANG/2008,FOR THR BLOCK ASSESSMENT PRBRIOD 1.4.1989 TO246.1999 PRAYING TO RFORMULATE THE SUBSTANTIALQUESTIONS OF LAW STATED THEREIN AND ALLOW,THERE APPEAL AND SET ASIDE THE ORDER PASSED BTHE ITAT BANGALORE IN IT(SS)A NO.76/BANG/2008,DATED 24-4-2009 ANID CONFIRM THER ORDER OF THAPPELLATE COMMISSIONER AND CONFIRMING THERORDER PASSED BY THER DBPULTY COMMISSIONER OINCOME TAX(INV), CIRCLE-5(1), BANGALORE, IN THE.INTEREST OF JUSTICE AND EQUITY. THIS ITA COMING ON FOR HEARING THIS DAY,|B.VEERAPPA ]b>DELIVERED THER KFOLLOWING- JUDGMENT The above appeal is filed by the Revenue against the order|dated 24.4.2009 made in IT(SS)A No.76/BANG/2008 by the Income Tax Appellate Tribunal, Bangalore, holding that theassessment as framed on the assessee as legal heirs are incorrectand not valid in law and also on the ground that the proceedingsfor block assessment could not have been initiated against a deadperson. oDA seatch was conducted under the provisions of Section|132 of Income Tax Act, 1961 (for short hereinafter referred to as‘the Act’) on 16.04.1999 in the residence of late A. ThimmatahReddy by authorization issued in the name of Smt. Muntyammahis wite and legal representative, as she was 1n occupation of hisresidence. Ihe income earned and the property acquired by lateA. Thimmaiah Reddy had not been disclosed. Therefore, it was.treated as undisclosed income and hence the proceedings wereinitiated under the provisions of Section 158-BC r/w Section 158-BD of the Act against late A. Thimmaiah Reddy. The AssessingAuthority after considering the entire material on record haspassed an order on 30.04.2001 for the block assessment periodfrom 1.4.1989 to 24.6.1999 levying tax, surcharge and alsodirected the initiation of penalty under the provisions of Section153-BFA(2) of the Act. CuAgainst the said order passed by the Assessing Authority,|one of the legal representative of late A. Thimmatah Reddy filed ITA No.7/CIT(A)-V / 2008-2009 before the Commissioner ofIncome Tax (Appeals) V, Bangalore, who after hearing both theparties, by an order dated 19.09.2008 was pleased to allow theappeal and set aside the order passed by the Assessing Authority. AThe Revenue filed appeal before the Income Tax Appellate|Tribunal. The Tribunal after hearing both the parties by its orderdated 24.4.2009 has dismissed the appeal and recorded a findingthat insofar as the immovable properties are concerned, they arecovered by the Will and the Will still remains to be executed. |From the date of the death of Sri A Thimmaiah Reddy te.,17.6.1997 any income from the property will have to be assessedin the hands of the executor of the Will and not as the assessee isthe legal heir, because the Will is still not acted upon by theexecutors. [he assessee, though by virtue of the Will becomeentitled to the property consequential to the execution of the Will,the assessee could not be said to be in enjoyment of the propertyas owner. Therefore, the Tribunal held that the assessments as | framed on the assessee or the legal heirs are incorrect and notvalid in law. The Tribunal also held that the term of ‘BlockPeriod’ as defined under the Provisions of Section 158-B(a) of theAct, requires ten assessment years preceding the previous year inwhich search was conducted under Section 132 of the Act or anyrequisition was made under the provisions of Section 132-A ofthe Act, and includes in the previous year and search wasconducted or requisition made, the period up to the date ofcommencement of such search, or as the case may be, the date ofsuch requisition. In the present case, going backwards from thedate of search, had collapsed after two years because late A.Thimmaiah Reddy had died on 17.6.1997. ‘Therefore, thecondition of block period having not been satisfied, theassessment made by the Assessing Authority is bad in law. |Therefore, the Itribunal dismissed the appeal and confirmed theofder passed by the Commissioner of Income Tax (Appeals). |Agerieved by the said order, Revenue has preferred the presentappeal. 5The substantial question of law that arises for our| consideration in the present appeal is as under :- “Whether the Lribunal was correct in holaing that the|undisclosed income including bank deposits are not lable to be|taxed in hands of the legal representatives of the assessee|contrary to Section 159 ofthe Act¢™| 6.We have heard the learned counsel for the parties to the lis.Admittedly as on the date of search 1.e., 16.04.1999 - A.Thimmaiah Reddy was not alive. His wife and other legalrepresentatives were residing in his premises. It is not clear that inwhose name search warrant was issued. Even if search wasconducted in the premises of the wife, if incriminating materialswete found in respect of the late A. Thimmatah Reddy andproceedings are initiated against late A. Thimmaiah Reddy,the conditions stipulated 1n Section 158-BD have to be satisfied. —The material on record, do not disclose the satisfaction of the said legal requirements. The material on record shows that the search watrant was issued in the name of Smt. Muntyamma, who wasin possession and occupation of the residential premises of lateA. Thimmaiah Reddy, but there was nothing on record to showthat the requirements under the provisions of Section 158-BD ofthe Act have been complied with. In those circumstances, theorder passed by the Tribunal specifying the Block AssessmentYear against the deceased A. Thimmaiah Reddy cannot be foundfault with and there is a finding of fact recorded by the Tribunal, |such a finding of fact cannot be interfered with by exercisingpowers under the provisions of Section 260-A of the Income TaxAct, 1961. Accordingly, the substantial question of law 1sanswered in favour of the assessee and against the Revenue. fT.In view of the fact, the requirements of Section 158-BD ofthe Act are not complied with, admittedly the orders passed bythe authorities concerned in respect of the entire block assessmentproceedings which are initiated, is liable to be set aside. — �12?29!?2��<12�46!AD�388288@2+<�!?:2?�78�673462�<!�42�82<�387:2��� �AA!?:7+>6;��<12�355236�78����������� ��������������������������������������������������������� ��K�