Ita/635/2006 Of The Commissioner Of Income Tax v. M/S H M Constructions

IN THB HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 20 DAY OF JANUARY 2014 PRESENT THERE HON'BLE MR.JUSTICE DILIP B.BHOSAL AN D THR HON'BLBE MR..JUSTICBK B.MANOHA ITA NO.635/2006BBRITWRE1. The Commissioner of Income-Tax,C.R.Building, Queens Road,Bangalore.2. The Assistant Commissioner of Income-Tax,Central Circle -2(3),C.R.Building, Queens Road,Bangalore....Appellants(By Sri.K.V.Aravind, Advocate)ANT)M/s.H.M.ConstructionsGeneva House,No.14, Cunningham Road,Bangalore — 560 052...Respondent|(Bysri.A.Shankar and “Sri.M.Lava, Advocates forori.Abhinav Anand, Respondent) This ITA filed U/s.260-A of IT Act, 1961 arisingOUToT order.dated28-10-2005.passed1NITA.No.338/Bang/2005 for the Assessment Year 1996-97, praying that for the reasons stated therein, thisHon’ble Court may be pleased to: 1formulate the substantial questions of lawstated therein,stated therein, 11.allow the appeal and set aside the orders.passedby theITAT,Bangalore|1nNITA.No.338/Bang/2005 dated 28-10-2005|and confirm the order of the Appellate.Commissioner confirming Order passed by the Assistant Commissioner of Income Tax|Officer, Central Circle-2(3), Bangalore, in|the interest of justice and equity.passedby theITAT,Bangalore|1nNITA.No.338/Bang/2005 dated 28-10-2005|and confirm the order of the Appellate.Commissioner confirming Order passed by the Assistant Commissioner of Income Tax|Officer, Central Circle-2(3), Bangalore, in|the interest of justice and equity. DILIP B. BHOSALE J.>delivered the following: This appeal coming on tor HEARING this day, PC:| This Income Tax Appeal, under Section 260A ofthe Income Tax Act, 1961 (for short ‘the Act’), is directedagainst the order dated 28[6#]October 2005 passed by the.Income Tax Appellate Tribunal, Bangalore Bench-B (for short‘theTribunal’) InITANo.1666/Bang/2004whereby the Tribunal allowed the appeal, pertaining tothe assessment year 1995-96, filed by the respondent- assessee. Appeal before the Tribunal was directedagainst the order dated 30-03-2004 passed by theCommissioner of Income Tax (Appeals)-VI, Bangalore,(for short the ‘Appellate Authority’) whereby the saidappeal, tiled by the assessee against the assessmentorder dated 28-3-2003, was dismissed. 2.|In the present appeal, the respondent formulatedthe following substantial questions of law: 1.Whether the Tribunal was justified inholding that the fixed deposits ofRs.70,00,000/- noticed during thesearch, in the name of 10 persons,who were not identified by theassessee, could be treated as incomeoT theAaAsSSsSEoverlookingstatement of Sri.Seshaprakash and-that whether the findings recorded bythe Tribunal are perverse?holding that the fixed deposits ofRs.70,00,000/- noticed during thesearch, in the name of 10 persons,who were not identified by theassessee, could be treated as incomeoT theAaAsSSsSEoverlookingstatement of Sri.Seshaprakash and-that whether the findings recorded bythe Tribunal are perverse? the | ? Whether the Tribunal was justified inholdingthat.reopeningoT|theassessment was bad in law as the!holdingthat.reopeningoT|theassessment was bad in law as the! reasons recorded were not in the’requiredformatandtheprior approval of the Commissioner hadnot been obtained in accordance with|law? 3.|We have heard the learned counsel for the partiesand perused the relevant materials on record includingthe order of the Tribunal. 4It appears to us that the Tribunal while dealingwith the second question of law held that reopening ofthe assessment was bad in law as the reasons recorded|were not in proper format as contemplated by sub-section (2) of Section 148 of the Act and that the priorapproval of the Commissioner under Section 151 forissuing notice under Section 148 of the Act was notobtained. Learned counsel for the parties are ad-idemthat if the second question of law is answered againstthe revenue, the appeal should fail and in that event thefirst question need not be considered on merits. In view 3.|We have heard the learned counsel for the partiesand perused the relevant materials on record includingthe order of the Tribunal. 4It appears to us that the Tribunal while dealingwith the second question of law held that reopening ofthe assessment was bad in law as the reasons recorded|were not in proper format as contemplated by sub-section (2) of Section 148 of the Act and that the priorapproval of the Commissioner under Section 151 forissuing notice under Section 148 of the Act was notobtained. Learned counsel for the parties are ad-idemthat if the second question of law is answered againstthe revenue, the appeal should fail and in that event thefirst question need not be considered on merits. In view thereof, with the assistance of the learned counsel for)the parties, we have gone through the relevant materialson record and so also the provisions contained insections 147, 148 and 151 of the Act. The Tribunal has—extensively considered the materials on record to holdthat the reasons recorded by the Assessing Officer forreopening of the assessment for the year 1995-96 werenot in the proper format. Though we may not agreewith the findings recorded by the Tribunal in respectthereof, we have examined whether prior approval of theCommissioner as contemplated by Section 151 of theAct was obtained, taking the case of Revenue that thereasons recorded under Section 148(2) of the Act weresufficient and were in proper format.5Having regard to the scheme of the provisionscontained in Sections 147, 148 and 1951 of the Act, it isclear as crystal that if the assessment is reopened aiterexpiry of the four years from the end of relevant assessment year, no notice under Section 148 of the Act.shall be issued unless the Chiet Commissioner or Commissioner is satisfied on the reasons recorded bythe Assessing Officer that it is a fit case for issuance ofsuch notice. To examine whether the approval undersection 1ol(1) of the Act was obtained, as observedearlier, we proceed on the assumption that theAssessing Officer had recorded good and_ sulficientreasons as required under sub-Section (2) of Section148 of the Act. Admittedly, neither the reasonsrecorded by the Assessing Officer under sub-Section (2)of Section 148 of the Act nor approval granted by theChief Commissioner or Commissioner as contemplatedby the proviso to sub-Section (1) of Section 1951 of theAct is on record. | 6. Mr.Aravind, learned counsel appearing for therevenue fairly submitted that the original record/filedoes not contain either the reasons under Section| 148(2)OTtheapproval|eranted by theChief.Commissioner or Commissioner under Section 151(1) ofthe Act. He placed the original file before us for ourperusal. We also did not find those documents in thefile. He also, on instructions, submitted that even therecord that was placed for consideration of the Tribunalhas been destroyed. Thus, in the absence of either thereasons recorded by the Assessing Officer or approvalsranted by the Chief Commissioner or Commissioner,we made an attempt to find out from the other materialson record whether the approval under Section 1951 ofthe Act was obtained before issuing the notice underSection 148 thereof. [|In this connection, Mr.Shankar, learned counselfor the respondent-assessee invited our attention to theorder of assessment passed in the connected ITANo.641/2006 dated 26-02-2004, of the very sameassessee, pertaining to the assessment year 1996-97. — [|In this connection, Mr.Shankar, learned counselfor the respondent-assessee invited our attention to theorder of assessment passed in the connected ITANo.641/2006 dated 26-02-2004, of the very sameassessee, pertaining to the assessment year 1996-97. — He submitted that insofar as reopening of theassessment for the assessment year 1996-97 isconcerned, the approval of the Commissioner of IncomeTax, as required under Section 151 of the Act was.obtained and it was also placed on record in that case. —In support of this contention, he invited our attention tothe observations made by the Assessing Officer atparagraph 2. In this paragraph, the Assessing Officerhas observed that “Notice under Section 148 was issuedto the assessee on 26-33-2003, with the approval of theCommissioner of Income Tax.” He submitted that suchobservations do not find place in the order for theassessment year 1995-96. That apart, it appears fromthe observations made by the Appellate Authority, in theorder dated 30-03-2004, the assessee had raised thefollowing ground of challenge: JIt is contended that the order of|reassessment is bad in law and —void-Ab-initio for want of requisite jurisdictionsince themandatory requirements to assume Jurisdiction u/s. 148 of the Act did|not exist and have not been complied with.” It is on the basis of this ground of challenge,Mr.Shankar, learned counsel appearing for the assessee_vehemently submitted that though such ground was.raised, the Appellate Authority did not examine whetherapproval as contemplated under Section 151 of the Actwas obtained. 8.|On the other hand, Mr.K.V.Aravind, learnedcounsel appearing for the revenue invited our attentionto certain observations made by the Assessing Officerand the Tribunal and submitted that it is possible todraw an inference that approval of the Commissionerunder Section 151 of the Act was obtained by theAssessing Officer before issuing notice underSection 148 thereof. Though, he made feeble attemptto invite our attention to the orders of the Tribunal andof the authorities below in support of this contention,he could not and did not point out any such © observation so as to hold that approval under Section151 was obtained before issuing notice under Section148 of the Act. He fairly submitted that there is nofinding recorded by either of the authorities belowincluding the Tribunal that approval as contemplated bySection 151 of the Act was either referred to or'mentioned in the orders. The Tribunal has, at length,considered the issue whether the reasons recorded bythe Assessing Officer for reopening of the assessment.were in proper format, and held that no such reasonswere recorded. The Tribunal recorded such finding andfurther observed that the note sent to the Commissionerby the Assessing Officer was not sanctioned/approvedunder Section 151 of the Act. In the absence of the!order granting approval by the Commissioner undersection 151 or in the absence of any indication in theorders passed by the authorities below including theorder ot the Tribunal or the materials on record that|such approval was obtained, it would not be possible to assume that such approval under Section 151 of the Actwas obtained. The provisions contained in Section 151.of the Act are indubitably mandatory in nature andsince compliance thereof was either not made or couldbe established by the revenue, in our opinion, benefitwill have to be given to the assessee. Though we do notagree with all the reasons recorded by the Tribunal inthe order, it has rightly decided the second question infavour of the assessee. We do not find any reason tointerfere with the findings recorded by the Tribunal onthe second question and hence, the appeal will have tobe dismissed on this ground alone. Order accordingly. | QO BeforeWepart,WE|observe thatcausingdisappearance of certain documents from the recordincluding reasons recorded by the Assessing Officeras contemplated by sub-Section 2 of Section 148 ofthe Act and approval, if any, obtained under Section151 of the Act may not be innocent or innocuous. | QO BeforeWepart,WE|observe thatcausingdisappearance of certain documents from the recordincluding reasons recorded by the Assessing Officeras contemplated by sub-Section 2 of Section 148 ofthe Act and approval, if any, obtained under Section151 of the Act may not be innocent or innocuous. | The Commissioner, therefore ought to have conductedan enquiry, to find out whether the approval undersection 151 of the Act was obtained or if yes, how itdisappeared from the record and who was responsiblefor the same? Though we do not wish to record anypositive finding on the conduct of the assessee, we feelthat the authorities below ought to have takendisappearance of record to its logical conclusions. — 10.|In the result, the second question is answered infavour of the assessee and against the revenue and as aresult thereof the appeal fails and dismissed as such.No costs. od/- JUDGE _* | mp sd/-| JUDGE.