Nataraju (Huf) & Ors v. Pr. Commissioner Of Income Tax & Anr

IN THE HIGH COURT OF KARNATAKA, BENGALURU. DATED THIS THE 20[th]DAY OF FEBRUARY 2Z2O18 BEFORE THE HON'BLE Dr.JUSTICE VINEET KOTHARI WRIT PETITION Nos.54836(8377/2017 ((IT) BETWEEN: 1]NATARAJU (HUF) »/O. LATE MADAPPA| AGED ABOUT 49 YBARS. oD S. JEBVAN| AGED ABOUT 11 YBARS| »/O LATE SIDDARAJU (HUF)| 3.)S. PAVANAGED ABOUT 9 YEARSAGED ABOUT 9 YEARS 9/O LATE SIDDARAJU (HUF) RBEPRBESEBENTBD BY THRIR NATURAL GUARDMrs. GEETHA W/O LATE SIDDARAJUMrs. GEETHA W/O LATE SIDDARAJU ALL RESIDING AT VAJAMANGALA VILLAGE VARUNA HOBLI, MYSURU. _.. PHTITIONBERS (By Ms. VANAJA M.R. ADV..,) AND: 1.|PR. COMMISSIONEBR OF INCOME-TAX MYSURU, 21/16, RESIDENCY ROAD NAZERBAD, MYSURU-9/7/0 O10 «|INCOME - TAX OFFICER WARD-1(1), MYSURU-570010.. Date of Order 20-02-2018 W.P.Nos.54836-837/2017 Nataraju (HUF) & Ors. Vs. Pr. Commissioner of Income Tax & Anr. 2/12 —. RBSPONDENTS (By Mr. JEEVAN J. NEERALGI, ADV..,) THESE W.Ps. ARB FILED UNDER ARTICLES 2296 & 227 OFTHE CONSTITUTION OF INDIA PRAYING TO DIRECT THE R-1 TORBECONSIDEBER THR RBVISION PETITIONS FILED BY TPETITIONERS DTD:9.3.2015 AND 17.3.2015 FILED ON 8.5.2015FOR THE ASSESSMENT YEAR 2006-07 [ANNEXURE-C AND Cl] THESE W.Ps. COMING ON FOR PRELIMINARY HBARING|THIS DAY, THE COURT MADE THE FOLLOWING:-_ ORDER Ms. Vanaja M.R.Adv. tor Petitioners | Mr. Jeevan J. Neeralgi, |Adv. for Respondents 1. The petitioners have filed these writ petitions inthis Court on)06.12.2017agerieved by the impugnedorder passed by the 1[ 6]Respondent-Prl.Commissioner ofIncome Tax, Mysuru, rejecting the petition of thepetitioner-assessee under Section 264 of the Income Tax Act, 1961, filed by)Mr.Siddaraju s/o late Madappa,who|expired|duringthependencyoT|thesaid proceedings before the learned Commissioner but thefact of the death of the said person on21.04.2016,does not appear to have been brought to the notice of Date of Order 20-02-2018 W.P.Nos.54836-837/2017 Nataraju (HUF) & Ors. Vs. Pr. Commissioner of Income Tax & Anr. 3/12 the 1[ 6]Respondent-Prl.Commissioner of Income Taxduring the pendency of the said proceedings. 2. The said petition under Section 264 of theIncome Tax Act, 1961 therefore filed by the assesseeagerieved by the order passed by the AssessingAuthority forA.Y.2006-07seeking to tax the Long term |capital gains on the sale of agricultural lands byentering into the Joint Development Agreement withM/s.SkillTech.EngineersandContractorsOTL25.01.2006of the agricultural lands situated inSy.No.119,Part, measuring 1 Acre 22’ Guntas and.Sy.No.213/1, Part, 3 Acres and 4% Guntas situated atVajamangala village, Varuna Hobli, Mysore taluk,forthe consideration ofRs.44,41,250/-. 3. The Assessing Authority by passing the.impugned order on21.03.2014, raised a demand of|Rs.12,21,132/-againstthepetitioner-assessee Date of Order 20-02-2018 W.P.Nos.54836-837/2017 Nataraju (HUF) & Ors. Vs. Pr. Commissioner of Income Tax & Anr. 4/12 including the tax and interest underSections 234AandQA3S4of the Act. 4. Instead of availing the remedy by way of anappeal before the Commissioner of Income Tax (Appeals)or ITAT in usual course, the assessee preferred apetition under Section 264 of the Act before the learnedCommissioner on17.03.2015which came to be!rejected by the learned Prl.Commissioner of Income TaxbytheimpugnedordervideAnnexure-Ddated27.03.2017 Oo. The reasons assigned by the RespondentPrl.Commissioner of Income Tax for rejecting the saidpetition under Section 264 of the Act as recorded in theimpugned order are quoted below for ready reference:- “6.In the assessee’s case, by virtue ofdevelopment agreement the transfer has takenplace during the previous year 2005-06 relevantto assessment year 2006-07 and hence thecapital gain is chargeable to tax for the Nataraju (HUF) & Ors. Vs. Pr. Commissioner of Income Tax & Anr. 5/12 Oo. The reasons assigned by the RespondentPrl.Commissioner of Income Tax for rejecting the saidpetition under Section 264 of the Act as recorded in theimpugned order are quoted below for ready reference:- “6.In the assessee’s case, by virtue ofdevelopment agreement the transfer has takenplace during the previous year 2005-06 relevantto assessment year 2006-07 and hence thecapital gain is chargeable to tax for the Nataraju (HUF) & Ors. Vs. Pr. Commissioner of Income Tax & Anr. 5/12 assessment year 2006-07.Since the assesseehas not filed the return of income admittingthe capital gains a notice under section 148of the act was correctly issued.Moreover, theassessing officer had given ample opportunities tothe assessee to present their case which was notavailed by the assessee. Due to the non-compliance to the notices issued to the assessee,the Assessing Authority was left with no otheroption except to complete the assessment undersection 144 of the act to the best of his judgmentbased on the materials available on record.Similarly, for the defaults committed by theassessee for non-compliance of notices and alsonot disclosing the income to the Department, theassessing officer had levied the penalties underrespective Section of the Acct. 7 |The assessee has claimed that|only1/3[ra]of the total sale consideration shouldhave been assessed in the hands of theassessee since his was a joint family and|also his share of sale consideration received|has been utilized for purchase of agricultureland for which he is eligible for deductionunder section 54B of the Act. |Here, it ispertinent to mention that, as per page 2, para 3 ofthe Development Agreement dated 25-01-2006 6/12 entered into between the assessee as one of theparty and the Developer, it is clearly mentionedthat “The schedule property is ancestral propertyof the OWNERS. The RTC records the name of theOwner No.1 and 2. Ow ner No.1 and 2’s sisterhas been married 20 years back and in futureany problem arises the said owners will besolved at their own cost. For this the said owners|have agreed and signed in this DevelopmentAgreement’. In this context, the assessee’scontention that 1/3[ra]of sale proceeds were paid|to Smt. Nagaratnamma is examined. No evidenceto the effect that any amount has been paid to thesister Smt. Nagaratnamma is furnished. Anyreturn of income filed by Smt. Nagaratnamma, insupport of the contention, is also not referred to inthe submissions. Unless adequate documentaryevidences are produced, the issue cannot be)examined and adjudicated by applying theprinciple of “Diversion of income by overridingtitle” or “Application ofIncome”. 5.|In view of the foregoing, I decline tointerfere with the orders passed by the assessingofficer for assessment year 2006-07 in respect offollowing petitions for revisions under section 264|of the Act”. Date of Order 20-02-2018 W.P.Nos.54836-837/2017 Nataraju (HUF) & Ors. Vs. Pr. Commissioner of Income Tax & Anr. 7/12 (t)Order under section 144¢ rws. 147of the act dated 21-03-2014| (it)Order under section 271(1})(b) of theact dated 29-09-2014..”9_However concealment penalty undersection 271(I}(c) of the act is also levied in this|case, although none represented the applicant.Considering the facts and circumstances of thecase, it is just and fair to afford anotheropportunity to the applicant so as to comply withprinciples of natural justice. In view of this the)order passed under section 271(c) of the act is set)aside and restored to the file of the assessingofficer, with a direction to provide adequateopportunity of hearing to the applicant beforeconcluding the concealment penalty proceedings. Sd/ - D. Vishnuvardhana Reddy, IRS|Pr. Commuissioner ofIncome-Tax Mysuru’ 6. ThelearnedcounselforthepetitionerMs.M.R.Vanaja submitted that the petitioners-assessees_ being illiterate agriculturists could not avail the regularremedy of appeal and later on, they preferred the saidpetition under Section 264 of the Act, which ought to Sd/ - D. Vishnuvardhana Reddy, IRS|Pr. Commuissioner ofIncome-Tax Mysuru’ 6. ThelearnedcounselforthepetitionerMs.M.R.Vanaja submitted that the petitioners-assessees_ being illiterate agriculturists could not avail the regularremedy of appeal and later on, they preferred the saidpetition under Section 264 of the Act, which ought to Date of Order 20-02-2018 W.P.Nos.54836-837/2017 Nataraju (HUF) & Ors. Vs. Pr. Commissioner of Income Tax & Anr. 8/12 have been allowed in the facts and circumstances of theCase. | She also submitted that the applicant — petitionerMr.Siddaraju s/o late Madappa had expired during thependency of the said petition under Section 264 of theAct on|21.04.2016.therefore, the impugned order videAnnexure-Ddated27O3.2017|inthenameoT|Mr.Siddaraju cannot be sustained, while the otherpetition under Section 264 of the Act by Sri.Natarajus/o late Madappa, the two being the brothers, alsocould not be rejected on the aforesaid grounds. 7. Mr.Jeevan J.Neeralgi, learned counsel for theRespondents-Department,howeversupportedtheimpugned orders. 8. Having heard the learned counsels for theparties, this Court is satisfied that the impugned ordersunder Section 264 of the I.T.Act do not deserve anyinterference by this Court under Article 226 of the Date of Order 20-02-2018 W.P.Nos.54836-837/2017 Nataraju (HUF) & Ors. Vs. Pr. Commissioner of Income Tax & Anr. 9/12 Constitution of India. The said impugned orders rightlyreject the prayer of the petitioners on the ground of non-chargeability of the capital gain tax for|A.Y.2006-077Moreover, it cannot be presumed that the petitioners-assessees being ignorant of relevant provisions of theAct, could not prefer the regular appeals before theappellate authorities namely, before the CIT (Appeals) orbefore the [TAT in due time. 9. The fact that the revision petitions undersection 264 of the Act was filed by them within a year ofpassingoT|theimpugnedassessmentyorderOT]21.03.2014namely, on09.03.2015and)17.03.2015,Shows that the petitioners-assessees were very wellsuided about the relevant provisions of the Income TaxAct and for the reasons best known to them, theyavoided the appellate remedies provided in the Act. 10. Even otherwise, the ignorance of law is noexcuse and no such presumption as prayed for, can be Date of Order 20-02-2018 W.P.Nos.54836-837/2017 Nataraju (HUF) & Ors. Vs. Pr. Commissioner of Income Tax & Anr. 10/12 drawn in favour of the petitioners-assessees. Theremedy by way of a revision under Section 264 of theAct obviously lies in a narrow compass and the saidremedy cannot be treated as a regular remedybypassing the regular remedy of appeals against theimpugned assessment orders and one cannot be allowedto avail the said revisional remedy under Section 264 ofthe Act in a routine manner bypassing the requirementof payment of tax and allowing the regular appellateauthorities to apply their minds to the relevant factsand evidence on record. 11. The said provision also stipulatesinteralia|that the non exercise of powers under the saidprovisions of 264 of the Act declining to interfere at theinstance of assesses shall not be deemed to be an order|prejudicial to the assessee videExplanations (1) & (2)oT Section 264(7)ot the Act.Thesaidprovisionalso.prohibitsexercise ot such.powersby the. Date of Order 20-02-2018 W.P.Nos.54836-837/2017 Nataraju (HUF) & Ors. Vs. Pr. Commissioner of Income Tax & Anr. 11/12 Prl.Commissioner when either the regular remedy byway ol appeal has been availed or the limitation thereofhas not expired or the assessee gives an Undertakingthat he has waived his right to appeal against theimpugned order before the said Prl.Commissioner. Thetime limit of one year also has been provided. 11. The said provision also stipulatesinteralia|that the non exercise of powers under the saidprovisions of 264 of the Act declining to interfere at theinstance of assesses shall not be deemed to be an order|prejudicial to the assessee videExplanations (1) & (2)oT Section 264(7)ot the Act.Thesaidprovisionalso.prohibitsexercise ot such.powersby the. Date of Order 20-02-2018 W.P.Nos.54836-837/2017 Nataraju (HUF) & Ors. Vs. Pr. Commissioner of Income Tax & Anr. 11/12 Prl.Commissioner when either the regular remedy byway ol appeal has been availed or the limitation thereofhas not expired or the assessee gives an Undertakingthat he has waived his right to appeal against theimpugned order before the said Prl.Commissioner. Thetime limit of one year also has been provided. 12. Therefore, the fact that the assessees-petitioners preferred these Revision petitions undersection 264 of the Act just before the expiry of one yearof the impugned assessment orders passed by theAssessing Authority, on the contrary reflects that thepetitioners-assessees were very conscious and aware ofthe legal provision and deliberately avoided the availingof the regular remedy by way of an appeal and at thenick time of the expiry of the time period, preferred thepresent revision petition under Section 264 of the Act,which tor good reasons, came to be dismissed by thelearned Prl.Commissioner of Income Tax. Date of Order 20-02-2018 W.P.Nos.54836-837/2017 Nataraju (HUF) & Ors. Vs. Pr. Commissioner of Income Tax & Anr. 12/12 13. This Court finds no grounds to interfere with the said impugned order in the present writ petitions. — The writ petitions are found to be devoid of merit and the same are liable to be dismissed and are dismissed| accordingly. No costs. Srl. sd/-| JUDGE