Ita/72/2010 Of Smt Sangeetha Jain v. The Assistant Commissioner Of Income Tax

IN THE HIGH COURT OF KARNATAKA AT BENGALURUON THE 28 DAY OF NOVEMBER, 201383 BEFORE. THE HON'BLE MR. JUSTICE RAVI MALIMATH AND THE HON'BLE MR.JUSTICE K.NATARAJAN | INCOME TAX APPEAL NOS.7272 AND 120 OF 20 BETWEEN: SMT.SANGEETHA JAINNO.26, REST HOUSE ROAD, |BENGALURU - 560 OO1. ... APPELLANT (BY SRI G.VENKATESH, ADVOCATEFOR SRI.M.LAVA, ADVOCATE) AND THE ASSISTANT COMMISSIONER OF |INCOME-TAX, CENTRAL CIRCLE-1(4),C.R.BUILDING, QUEENS ROAD,BENGALURU - 560 OOL. ... RESPONDENT| (BY SRILJEEVAN J NEERALAGI, ADVOCATE) | THESE INCOME TAX APPEALS ARE FILED UNDER|SECTION 260A OF THE INCOME-TAX ACT, 1961 ARISING|OUT OF ORDER DATED 25.09.2009 PASSED IN ITA NO.31/7AND 318/BNG/2008, FOR THE ASSESSMENT YEARS 2000-OL|AND|2001-02,PRAYING TO;FORMULATETHE| SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN;|ALLOW THE APPEAL AND SET ASIDE THE ORDER PASSED|BYTHE|LTABENGALURUIN|LIANO. 31/AND318/BNG/2008, DATED 25.09.2009. OK OOK THESE INCOME TAXK APPEALS COMING ON FORHEARING THIS DAY, RAVI MALIMATH J., DELIVERED THEFOLLOWING: JUDGMENT Tne appellant-assessee in ITA No.72 of 2010, is anindividual. She filed the return of income for the asst. year|2000-2001, declaring the total income of Rs.2,16,540/-..The case was taken up for scrutiny. Questionnaire was.issued. A reply was furnished. Thereafter, the Assessing.Officer disallowed certain ‘business expenses’ as well as.‘other expenses’ as claimed in the profit and loss accountof M/s. Maruthi Enterprises and M/s.Maruthi Business.Centre, 2.Tne Assessing Officer computed the income oftneappellantfortneasst. YearZOOO-2Z0O0as|Rs.9,34,940/-_andpassedan)assessmentorder. Aggrieved, by the said assessment order, an appeal was.preferred by tne assessee before the Commissioner of.Income Tax (Appeals), wnicnh was dismissed. Tne appealfiled before the Tribunal was also rejected. Hence, the)present appeal in ITA No.72 of 2010. By the order dated12.04.2010, the appeal was admitted to consider tnefollowing substantial questions of law: (a)Whether the Tribunal was Justified in lawin confirming the disallowance of expensesclaimed by the appellant for the asst. year2000-2001 in the proprietorship concern ofM/s.Marutni Enterprises, being the businessexpenses on tne facts and circumstances of theCase ? D)Whether the Tribunal was Justified in lawInconfirmingdisallowanceof.following.expenses claimed by the appellant for tne asst. year 2000-2001 in respect of common)bDuSsSINeexpenses|Of|botnproprietorsnipconcerns namely M/s.Maruthi Enterprises aswell as M/s.Maruthi Business Centre of the|appellant on the facts and circumstances of theCase ? appeal was preferred before the Commissioner of IncomeTax (Appeals), which was dismissed. Tnereafter, the.appellant approacned the Tribunal wherein the appeal was)rejected. Hence, the present appeal in ITA No.120 of 2010. By the order dated 12.04.2010, the appeal! was admittedto consider the following substantial questions of law: Whether the Tribunal is correct In law In|nolding tnat the reopening of the assessmentunder Section -— 148 of tne Act for the asst.year 2001-02 Is valid on the facts andacircumstances of the case? i)Whether the authorities below were!justified in law in disallowance of interestpayment of Rs.3,95,5/70/- for the loan takenfrom KSFC in the name of M/s.Hotel Haveli and|interest on vehicle loan of Rs.18,244/- for tne|asst. year 2001-2002 used for the business ofthe appellant, on tne facts and circumstance ofthe case? Hit)Whether the authorities Delow in law [Inimposing interest under Section -— 254A ana 234B of the Act on the facts and circumstancesof the case?”| Whether the Tribunal is correct In law In|nolding tnat the reopening of the assessmentunder Section -— 148 of tne Act for the asst.year 2001-02 Is valid on the facts andacircumstances of the case? i)Whether the authorities below were!justified in law in disallowance of interestpayment of Rs.3,95,5/70/- for the loan takenfrom KSFC in the name of M/s.Hotel Haveli and|interest on vehicle loan of Rs.18,244/- for tne|asst. year 2001-2002 used for the business ofthe appellant, on tne facts and circumstance ofthe case? Hit)Whether the authorities Delow in law [Inimposing interest under Section -— 254A ana 234B of the Act on the facts and circumstancesof the case?”| 5.Sri.G.Venkatesn,jearned.counse|lforthe.appellant contends that the orders passed by the.authorities are erroneous. That the authorities failed to/consider the material produced before them. That interest|payment was claimed on the loan borrowed from.Karnataka State Financial Corporation (for snort KSFC) in|the name of M/s.Hotel Haveli which was being run byM/s. Maruthi Enterprises, for which the appellant was theproprietress. Tnerefore, the finding that there was no)nexus between Hotel Haveli and Maruthi Enterprises is)erroneous. That the disallowance of expenses is not in)accordance with the facts of the case. Therefore, there is a)perversity committed by the Tribunal wnhicn calls forinterference. the name of M/s.Hotel Haveli which was being run by 6.On the other hand, Sri.Jeevan J.Neeralagi,learned counsel appearing for the Revenue, disputes theSaid contention. He pleads that inspite of granting. sufficient|opportunityCOthe.appellant-assessee, nomaterial was produced for consideration. Therefore, based|on the available material, the assessments nave been|carried out. Tnat the material produced does not indicate|that the expenses claimed are relatable to M/s.MarutnhiEnterprises. The learned counsel further submits that tnere|is no substantial question of law that!arises forconsideration in these appeals. Notwithstanding the same,|on facts he pleads that there is no error committed by the)autnorities and hence the appeals be dismissed. — J.Heard learned counsels. 8.Insofar as the appeal in ITA No.72 of 2010, isconcerned, the appeal pertains to the asst. year 2000-2001. The Assessing Officer in the assessment order held.that the assessee neither produced the books of accountsnor otner details for verification, inspite of repeated,reminders. Therefore, the loss of Rs.5,0/7,504/- wascisallowed. [Tne furtner claim of the assessee in a sum Ot Rs.2,25,297/- aS ‘expenses, by preparing yet anotherprofit and loss account, so as to Dring the profit further|down to Rs.1,25,037/-, was also disallowed. Q.Before tne Commissioner of Income Tax.(Appeals), certain fresh material were produced forconsideration. However, the lease deed was not produced, |either at the assessment stage or at the appeal stage. The)sources of receipts as claimed by tne assessee were not.genuine. That none of the documents demonstrated thatthe expenses as claimed towards Hotel Haveli were in any)manner related to M/s. Maruthi Enterprises. Therefore, inthe absence of any material to substantiate, the same the.appeal was dismissed. 10.Tne material on record would indicate tnat tne|assessee could not substantiate her claim and inspite ofgranting sufficient opportunity, no evidence of material|was led-in, in support of her case. Even the few|documents that were relied upon did not assist the) assessee in any manner whatsoever. Therefore, based onthe available material, the findings were recorded. Under)these circumstances, we do not find any ground tointerfere with the order passed by tne Tribunal. Tne order|passed by the Tribunal is based on the material available|on record. Tnerefore, no interference is called for. | 10.Tne material on record would indicate tnat tne|assessee could not substantiate her claim and inspite ofgranting sufficient opportunity, no evidence of material|was led-in, in support of her case. Even the few|documents that were relied upon did not assist the) assessee in any manner whatsoever. Therefore, based onthe available material, the findings were recorded. Under)these circumstances, we do not find any ground tointerfere with the order passed by tne Tribunal. Tne order|passed by the Tribunal is based on the material available|on record. Tnerefore, no interference is called for. | 11.Thereafter, the Tribunal passed a common.order affirming the findings of tne Assessing Officer, as)well as the Commissioner of Income Tax (Appeals). TheTribunal was also of the view that even before the!Tribunal, the assessee could not substantiate her claim|with any tangible evidence or material. Therefore, having.considered tne Balance Sneet and tne Profit And Loss'Account, the findings recorded by both the authoritieswere conf;firmec 17).Consequently, the substantial questions of law.are answered in favour of the Revenue and against the)assessee, The impugned order of the Tribunal is upheld. 13.ITA NO.120 OF 2ZO10 So far as the appeal in ITA No.120 of 2010 is|concerned, the same pertains to the asst. year 2001-2002. With regard to the income from the property situated at)Jayanagar, Bengaluru, the Assessing Officer found that theassessee nas not furnished the description of the property, rental agreement, name and address of the tenants,sources of investments, etc. Tnat the property could not be|rented out for an annual rent of Rs.1,66,450/- per annum,|without any rental agreement. So far as the business lossis concerned, tne assessee stated that she has not’maintained any books of accounts, balance sheet orstatement of affairs. That no documents nave been filed|inspite of several reminders and queries from theAssessing Officer. Therefore, the expenses as claimed were.adisallowec. 14.Even tne lease deed tnrougn which tneproperty along with furniture, etc., had been given onlease was not produced. Tnerefore, the mere contention| could not be accepted. None of the enclosures filed along.witn the written SUDMISSION cCOoUId be substantiated witthe claim of expenditure. A copy of the account of KSFC(Karnataka State Financial Corporation), would indicate|that KSFC nad given a term Loan on 29.10.1996, in a sum.of Rs.23,85,000/- to M/s.Hotel Havelli. Tne appellant)claims to have closed the hotel in the month of!October’1998. Therefore, there was no nexus between the|expenditure or depreciation claimed by the assessee and)the business of subleasing or leasing the property.Therefore, the Commissioner of Income Tax (Appeals)|rightly confirmed the computation made by the AssessingOfficer. 15.Except the plea of the assessee that theearning was out of the several deals struck with regard to.the real estate, nothing is forthcoming on record.Therefore, in the absence of any material on record, 75%)of the gross commission receipt was computed as netincome. Even though the proposal was conveyed to the) assessee, even till the date of the passing of the order, noreply was Tfurnisned by the assessee. No books of accountswere produced. Therefore, the computation was made at asum of Rs.6,57,580/-. It was contended that the material|produced before the Assessing Officer was not considered.Therefore, the said material was once again produced|before the Commissioner of Income Tax (Appeals), which.were considered. 15.Except the plea of the assessee that theearning was out of the several deals struck with regard to.the real estate, nothing is forthcoming on record.Therefore, in the absence of any material on record, 75%)of the gross commission receipt was computed as netincome. Even though the proposal was conveyed to the) assessee, even till the date of the passing of the order, noreply was Tfurnisned by the assessee. No books of accountswere produced. Therefore, the computation was made at asum of Rs.6,57,580/-. It was contended that the material|produced before the Assessing Officer was not considered.Therefore, the said material was once again produced|before the Commissioner of Income Tax (Appeals), which.were considered. 16.Yet anotner contention advanced was witn|regard to the jurisdiction to issue a notice under Section-148 of the Income tax Act. It was noticed that the'assessee did not file the return of Income in time. She hadnot filed the return of income till 31.03.2003. She filed the|return of income belatedly on 30.09.2003. Therefore, the)return was treated asanon-est| return, whicn wouldconsequently indicate that certain income nad escaped.assessment.Therefore,theAssessingOfficerbeing.satisfied with the same, issued a notice under Section-148of the Income tax Act. Therefore, the said contention was| negated. We find no good ground to take a different view.of the matter. Hence, we are of the considered view tnat|the reopening of the assessment under Section-148 of I.T..Act is valid and in tune witn Jaw. 1/.The third substantial question of law is witn>regard to imposition of interest under Sections 234-A and.234-B of the Income tax Act. In the given facts and.circumstances of the case, we do not find any ground tointerfere. Moreover, the interest is imposed in terms of)the statute. Interpretation has been made in a catena ofjuagments by this Court as well as the Hon’bie Supreme.Court. Hence, we find no error in the imposition of interestunder Sections-234-A and 234-B of the Income tax Act. 18.Under these circumstances, the substantial|questions of law are answered in favour of the Revenue,and against the assessee. Consequently, the appeals are)dismissed. 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