Mr. Y v. Raviraj, The Learned Counsel For The

IN THE HIGH COURT OF KARNATAKADHARWAD BENCH Dated this the 13[th] day of January 2017 Present THE HON’BLE MR. JUSTICE RAGHVENDRA S. CHAUHAN And THE HON’BLE MR. JUSTICE SREENIVAS HARISH KUMAR Income Tax Appeal No.100059/2015 Between : 1. The Prl. Commissioner of Income tax, (Central), C.R.Building, Queens road, Bengaluru-560001. C.R.Building, Queens road, Bengaluru-560001. 2. The Deputy Commissioner of Income Tax, Central Circle-1, Belagavi. Income Tax, Central Circle-1, Belagavi. …Appellants (By Sri Y.V.Raviraj, Advocate) And : Smt. Lakshmi Singh,SVK Bus Service,K.R. Road, Ranipet, Hospet,PAN: . …Respondent (By Sri H.R. Kambiyavar & Sri S. Parthasarathi, Advocates) This appeal is filed under Section 260A of the Income taxAct, 1961, praying to formulate the substantial question of lawstated above; allow the appeal and set aside the orders passed bythe Income Tax Appellate Tribunal, Panaji Bench, Panaji, in ITANo.113/PNJ/2014, dated 09.12.2014 and confirm the orderpassed by the Deputy Commissioner of Income Tax, central circle-1, Belgaum. This appeal coming on for Admission this day,RAGHVENDRA S. CHAUHAN, J, delivered the following: JUDGMENT The Revenue is aggrieved by the order dated09.12.2014, passed by the Income Tax Appellate Tribunal,Panaji Bench, Panaji, whereby the learned Tribunal hasdeleted the additions made to the income of the assessee onaccount of gifts, for proceedings that had commenced underSection 153C of the Income Tax Act, 1961 (‘the Act’, forshort). 2. Briefly the facts of the case are that the assessee,Smt. Lakshmi Singh, is engaged in the business ofplying/hiring carriages on routes allotted by the Governmentof Karnataka. She had submitted her income tax returns forthe Assessment Year 2005-06. During the assessment,notice was issued to her under Section 143(2) of the Act withregard to the fact that she had shown in her income taxreturns a gift of Rs.90,00,000/- from Mr. Harish Wadava ofDubai. Not only she had explained the gift of Rs.90,00,000/-,made by way of cheques of Rs.5,00,000/- each, but even thedonor, Mr. Harish Wadava, had admitted giving cheques to the assessee. Therefore, the assessment was closed by theAssessing Officer. Subsequently, on 25.03.2008, the premises belongingto one Mr. B. P. Anandkumar Singh of Hospet weresearched. Since certain incriminating evidence wasdiscovered, but not with regard to the assessee, proceedingsagainst Mr. B. P. Anandkumar Singh was initiated underSection 153A of the Act. Moreover, on 31.10. 2008 a noticeunder Section 153C of the Act was issued to the assessee. Inresponse to the said notice, on 19.12.2008 the assessee fileda return of income tax declaring her income asRs.10,56,520/-. On 28.04.2009, a notice under Section143(2) was also issued to the assessee. On 10.08.2009, anotice under Section 142(1) accompanied with aquestionnaire was also issued to the assessee. In response tothe said notice, the assessee appeared before the AssessingOfficer. The assessee was asked to explain the receipt ofRs.90,00,000/- by way of gift from Harish Wadava of Dubai.Despite the explanation given by the assessee, the AssessingOfficer was of the opinion that the gift is not a genuine one.Therefore, the amount of Rs.90,00,000/- should be added to the assessee’s total income within the meaning of Section 68of the Act. Hence, by order dated 21.12.2009, the saidamount was treated as undisclosed amount of the assessee. 3. Since the assessee was aggrieved by the order dated21.12.2009, she filed an appeal before the Commissioner ofIncome Tax (Appeals) (‘the CIT’, for short). However, by orderdated 20.08.2013, the learned CIT dismissed the saidappeal. Therefore, the assessee challenged the order dated20.08.2013 before the learned Tribunal. By order dated09.12.2014, the learned Tribunal allowed the appeal, andheld that no addition on account of the gifts can besustained. Hence, this appeal before this Court. the assessee’s total income within the meaning of Section 68of the Act. Hence, by order dated 21.12.2009, the saidamount was treated as undisclosed amount of the assessee. 3. Since the assessee was aggrieved by the order dated21.12.2009, she filed an appeal before the Commissioner ofIncome Tax (Appeals) (‘the CIT’, for short). However, by orderdated 20.08.2013, the learned CIT dismissed the saidappeal. Therefore, the assessee challenged the order dated20.08.2013 before the learned Tribunal. By order dated09.12.2014, the learned Tribunal allowed the appeal, andheld that no addition on account of the gifts can besustained. Hence, this appeal before this Court. 4. Mr. Y. V. Raviraj, the learned counsel for the Revenue, submits that the following substantial questions oflaw arise in the present case. 1.Whether the Tribunal was right on the factsand circumstances of the case and in lawrestricting the scope of words ‘assess orreassess the total income’ in the assessmentunder Section 153A/153C, by holding that,these assessments are to be made only on thebasis of the seized material?and circumstances of the case and in lawrestricting the scope of words ‘assess orreassess the total income’ in the assessmentunder Section 153A/153C, by holding that,these assessments are to be made only on thebasis of the seized material? 2.Whether the Tribunal was right on the factsand in law in holding that, the total income’in the assessments under section 153A/153Cshould be determined in respect ofassessment years for which originalassessments were already completed on thedate of search by restricting addition only tothose which flow from material found duringthe course of search?and in law in holding that, the total income’in the assessments under section 153A/153Cshould be determined in respect ofassessment years for which originalassessments were already completed on thedate of search by restricting addition only tothose which flow from material found duringthe course of search? According to him, the learned Tribunal is not justified inconcluding that since a regular assessment had already beencompleted under Section 143(1) of the Act, the proceedingsunder Section 153A of the Act could not be initiated.According to the learned counsel, in case of a searchconducted under Section 132 of the Act, and in caseincriminating evidence is discovered qua any person, otherthan the person whose premises is searched, then underSection 153C of the Act, the Revenue is entitled to reopenthe case of such person. Therefore, the department wasjustified in reopening the case of the assessee in the presentcase. Secondly, the stand taken by the assessee before thelearned Tribunal that since no incriminating evidence was discovered qua her, during the search made on 25.03.2008,therefore, no proceedings could be initiated under Section153C of the Act, such stand was never taken by her eitherbefore the Assessing Officer, or before the learned CIT.Therefore, the assessee cannot and could not be permitted toraise the said stand, for the first time, before the learnedTribunal. Thirdly, that once the assessment is reopened underSection 153C of the Act, the department has all the powersas it would have in the original assessment. Therefore, theAssessing Officer was justified, firstly, in calling for anexplanation from the assessee; secondly, in holding that thetransaction of gifting of Rs.90,00,000/- was suspicious;thirdly, in concluding that the amount of Rs.90,00,000/-was the undisclosed amount of the assessee. Therefore, thelearned Tribunal was not justified in setting aside either theassessment order, or the order passed by the learned CIT. 5. On the other hand, Mr. H.R.Kambiyavar, thelearned counsel for the assessee, submits that admittedly,no incriminating evidence was discovered during the searchof the premises belonging to Mr. B. P. Anandkumar Singh, Thirdly, that once the assessment is reopened underSection 153C of the Act, the department has all the powersas it would have in the original assessment. Therefore, theAssessing Officer was justified, firstly, in calling for anexplanation from the assessee; secondly, in holding that thetransaction of gifting of Rs.90,00,000/- was suspicious;thirdly, in concluding that the amount of Rs.90,00,000/-was the undisclosed amount of the assessee. Therefore, thelearned Tribunal was not justified in setting aside either theassessment order, or the order passed by the learned CIT. 5. On the other hand, Mr. H.R.Kambiyavar, thelearned counsel for the assessee, submits that admittedly,no incriminating evidence was discovered during the searchof the premises belonging to Mr. B. P. Anandkumar Singh, which related to the assessee. Even prior to the search, theassessee had already filed her income tax returns. She hadexplained the receipt of Rs.90,00,000/- by way of a gift fromthe Harish Wadava of Dubai. Even the donor had acceptedthe fact that the cheques were issued to the assessee and theinitial assessment was completed. Secondly, therefore, the issue before the learnedTribunal, which is a legal issue, was whether the AssessingOfficer has the power under Section 153C of the Act, toreassess the income, even if there was no incriminatingevidence found against the assessee during a search underSection 132 of the Act or not? The said legal issue could beraised by the assessee even at the appellate stage. Thirdly, this was the only issue that was taken up bythe learned Tribunal. According to the learned counsel, thelearned Tribunal was justified in holding that the powerunder Section 153C of the Act could not be invoked in theabsence of any incriminating evidence against the assesseeduring the search under Section 132 of the Act. Moreover,even in the assessment order dated 21.12.2009, there is notan iota of evidence produced by the Revenue that any incriminating evidence was discovered at the time of thesearch against Mr. B. P. Anand Kumar. Therefore, the verybasis of invoking the power under Section 153C did not evenexist. Hence, the learned counsel has justified the orderpassed by the learned Tribunal. 6. Heard the learned counsel for the parties andperused the impugned order. 7. A bare perusal of the impugned order clearly revealsthat the learned Tribunal was seized with only the issue,whether the power under Section 153C of the Act could beinvoked or not, specially when there was no incriminatingdocument or evidence discovered during the search underSection 132 of the Act, against the assessee? Admittedly,the Revenue has not produced any evidence either before theAssessing Officer, or before this Court to show that anyincriminating evidence was discovered against the assesseeduring the search on 25.03.2008. In the absence of anyincriminating evidence, the Assessing Officer was notjustified in invoking his power under Section 153C of theAct. The learned Tribunal has also noticed that this opinionhas been expressed by other courts. Therefore, a mere passing observation made by the learned Tribunal that thesaid power could not be invoked, for regular assessment thathad already been completed under Section 143(3) of the Act,would not give rise to a substantial question of law. Theissue is not with regard to the scope and ambit of Section143(3) of the Act; it is specifically with regard to the powerprescribed under Section 153C of the Act. To the limitedissue of the ambit and scope of Section 153A of the Act, thelearned Tribunal has correctly expressed its opinion. Therefore, the substantial questions of law raised bythe learned counsel for the Revenue do not arise at all in thepresent case. Hence, the appeal is devoid of any merit; it is, hereby,dismissed. Sd/-JUDGE Sd/-JUDGE hnm