Ita/705/2008 Of B S Shantharaju v. Commissioner Of Income Tax

IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 22 DAY OF JULY 2014| PRESENT THE HON’BLE MR.JUSTICEK N.KUMAR ANT) THE HON’BLE MR.JUSTICE B. MANOHAR INCOME TAX APPEAL NO.’705 OF 200 BRIWEHEN BS SHANTHARAYJ UNO.34/41, 15 MAIN ROADPADMANABHANAGARA|BANGALORE -7/O _. APPELLANT (BY SRI PRAVEEN KUMAR HIREMATH, ADV. FOR|M/S. K.R.PRASAD, ADV.) AND: COMMISSIONER OF INCOME TAXCIRCLE-14(1)CHNITRAL REVENUE BUILDINGQUEENS ROAD,BANGALORE-]1_ RESPONDENT (BY SRIJEKEVAN J NEERALGI, ADV.) THIS ITA FILED UNDER SECTION 260-A OF I.T. ACT, 1961.ARISING OUT OF ORDER DATED 31-01-2008 PASSED IN IITANOS.793 & 794/BNG/2006, FOR THE ASSESSMENT YEAR 2000-2001, PRAYING THAT THIS HON’BLE COURT MAY BE PLEASEDTO:| 1,FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW|STATED THEREIN,STATED THEREIN, 11.ALLOW THR APPBEAL AND SET ASIDK THR ORDERPASSED BY THE IJIAIL BANGALORE IN [TA NOS.793 794/BNG/2006 DATED 31-01-2008 IN THE INTEREST OF|JUSTICE AND EQUITY.PASSED BY THE IJIAIL BANGALORE IN [TA NOS.793 794/BNG/2006 DATED 31-01-2008 IN THE INTEREST OF|JUSTICE AND EQUITY. THIS APPEAL COMING ON FOR ORDERS THIS DAY, |N. KUMAR J., DELIVERED THE FOLLOWING:| JU DBiGMENT The assessee has preferred this appeal against|the order passed by the Income Tax Appellate Tribunal,Bangalore, confirming the order of the lower authoritieswhere the assessee was held to be liable to pay thecapital gain tax on the transaction in question. | 2. The assessee along with his return enclosed a_note stating that, he is liable to pay capital gain tax inthe United Kingdom as per domestic law and not.taxable in India. Acting on the said note, when thereturn was processed under Section 143(1) of the.Income Tax Act (hereinafter referred to as ‘the Act’), the.Assessing Officer accepted the _ return. However, subsequently he issued a notice under Section 148 of.the Act, on the ground that he has reason to believethat any income chargeable to tax has escaped.assessment within the meaning of Section 147 of theAct. The assessee appeared and contended that there|is no other material other than what was produced|along with the return, which is the basis for coming to.such conclusion and therefore, he stated that the.proceedings initiated for re-opening the assessment is_bad. The objections were overruled. The Assessing.Officer held that capital gain tax is liable to be paid bythe assessee according to the domestic law of his.country. Aggrieved by the same, he preferred an appealto the first appellate court, which dismissed the appeal.The assessee preferred an appeal to the Income Tax.Appellate Tribunal against these two orders. The.Tribunal has also dismissed the appeal. Aggrieved bythe same, the present appeal is filed.| 3. The appeal was admitted on 16.60.2009 to consider the following substantial questions of law: © (1)Whether or not the Tnbunal'was Justified in upholding thereopening of the assessment whenit has given a categorical findingthat there is no failure on the partof the assessee to disclose fully andtruly all material facts relevant tothe assessment?| (it)Whether or not the Tribunal|was justified in interpreting Clause14 of the DIA to mean that thedomestic law of the assessee isapplicable and not the domestic lawof the land where the incomeaccrues 1s applicable? 4 We have heard the learned Counsel for the|parties. 5. Article 14 of the Double Taxation Avoidance| Agreement between the Government of the United.Kingdom of Great Britain and Northern Ireland and the Government of India, reads as under: "Capitals gains —Except as provided in|Article 8 (Air transport) and 9 (Shipping) of|this Convention, each Contracting State may|tax capital gains in accordance with the|provisions of its domestic law. “ The assessee under the scheme exercised option for saleof 1556 shares in November 1999 resulting in capitalgains of Rs.4,92,931/-. (it)Whether or not the Tribunal|was justified in interpreting Clause14 of the DIA to mean that thedomestic law of the assessee isapplicable and not the domestic lawof the land where the incomeaccrues 1s applicable? 4 We have heard the learned Counsel for the|parties. 5. Article 14 of the Double Taxation Avoidance| Agreement between the Government of the United.Kingdom of Great Britain and Northern Ireland and the Government of India, reads as under: "Capitals gains —Except as provided in|Article 8 (Air transport) and 9 (Shipping) of|this Convention, each Contracting State may|tax capital gains in accordance with the|provisions of its domestic law. “ The assessee under the scheme exercised option for saleof 1556 shares in November 1999 resulting in capitalgains of Rs.4,92,931/-. 6. It is not in dispute that the assessee is aresident of India. On the ground that the capital gainhas arisen in United Kingdom, he contended that, it isnot taxable in India. As is clear from Article 14, as he isa resident of India, in terms of the domestic law in this|country, he has to pay capital gains, which he did not pay. Though he gave a note along with the returns, asthe Assessing Officer did not apply his mind and moreover, it was an assessment under Section 143(1) of theAct, the return was accepted. Once this mistake wasnoticed, proceedings were initiated and the said amountwas brought to tax. All the three authorities haveconcurrently held that it is not a case of change ofopinion and therefore, the levy of tax is proper. In fact,this Court had an occasion to consider in similar|situation in the case of.Commissioner of Income Tax|and Another -vs- Rinku Chakraborthy|reported in.(2011) 242 CTR 0425wherein aiter noticing variousjudgments of the Supreme Court, it was held as under:| IFrom the aforesaid judgments it is clear that,though the word ‘opinion’ is deleted and 1s|now substituted by the words ‘reason to|believe’, the concept of change of opinion is|not obliterated w.e.f. I[Ss]| April, 1989 aftersubstitution of S.147 of the IT Act, 1961 by the Direct Tax Laws (Amendment) Act, 1987. |However, where in the original assessmenttheincomeliabletoTAX|hasescapedassessmentdue.tooversightand|In|advertence or a mistake committed by the|ITO, the ITO has the jurisdiction to reopen theoriginal assessment. It is not necessary that|for such reopening of such assessment theinformation is to be derived from externalsource of any kind or disclosure of new andimportant matters subsequent to the original|assessment. Even tf the information is.obtained from the record of the_ originalassessment after a proper investigation from|the materials on record or the facts disclosed|thereby or from any enquiry or research into|facts or law, reassessment is permissible.Income may escape assessment as a result oflack of vigilance of the ITO or due to|perfunctory performance of his duties withoutdue care and caution. Even in a case where|a return has been submitted to the ITO who}erroneously fails to tax a part of the|assessable income, it is a case of the said| part of the income as having escapedassessment and the AO _ has_ jurisdictiunder s.14/7 to reopen the assessment andbring to tax the income that has escaped|assessment. A taxpayer cannot be allowedto |take advantage of any of those lapses, as|ultimately if such a advantage is allowed, it|would be prejudicial to the interests of the|Revenue and public interest”. 7. In that view of the matter, we do not see any merit in this appeal. Accordingly, the substantial questions of law are answered in favour of the Revenueand against the assessee. Ordered accordingly. | KNM/-| Sd/-) JUDGE Sd/-) JUDGE