Sri v. Balasubramanyam

IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 22[nd]DAY OF APRIL 2014 PRESENT THE HON’BLE MR. JUSTICE DILIP B BHOSALE AND THE HON’'BLE MR, JUSTICE B MANOHAR ITA.NO.404/ 2013 |C/W.ITA.NO.405/ 2013 | IN ITA.NO.404/ 201 BETWEEN SRI VS BALASUBRAMANYAM.S/O LATE V S SESHA IYARAGED ABOUT 7/7 YEARSRESIDING AT #7/3, BULL TEMPLE ROADSHANKARPURAM,BANGALORE 560 O04 — APPELLANT| (BY SRI TATA KRISHNA, ADV.,) AND THE INCOME TAX OFFICERWARD - 3(2), UNITY BUILIDNG ANNEXEMISSION ROADBANGALORE 560 O77... RESPONDENT (BY SRI K V ARAVIND, ADV.,) THIS ITA FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 21/09/2012|PASSED|IN|ITANO.189/BANG/2010,FORTHE|ASSESSMENT YEAR 2005-06 PRAYING TO: [. FORMULATE.THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN,I]. ALLOW THE APPEAL AND SET ASIDE THE ORDER.PASSED BY THE ITAT, BANGALORE B BENCH IN ITA.NO.189/BANG/2010 DATED 21/09/2012. IN ITA.NO.405/ 201 BETWEEN SMT KALAVATHLW/O V S BALASUBRAMANYAMAGED ABOUT 56 YEARS.RESIDING AT # 7/3, BULL TEMPLE ROADSHANKARPURAM,BANGALORE-560004— APPELLANT| (BY SRI TATA KRISHNA, ADV.,) AND THE INCOME TAX OFFICERWARD-3(3), UNITY BUILDING ANNEXEMISSION ROADBANGALORE-56002/7... RESPONDENT (BY SRI K V ARAVIND, ADV.,) THIS ITA FILED UNDER SEC.260-A OF INCOME TAXACT 1961, ARISING OUT OF ORDER DATED 21/09/2012|PASSED|IN|LIANO.814/BANG/2011,FORTHE|ASSESSMENT YEAR 2005-06 PRAYING TO: [. FORMULATE.THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN,I]. ALLOW THE APPEAL AND SET ASIDE THE ORDER.PASSED BY THE ITAT, BANGALORE B BENCH IN ITA. NO.814/BANG/2011 DATED 21/09/2012. THESE ITAs. COMING ON FOR ADMISSION,THIS’ DAY,Diltp B. Bhnosale_ JDELIVERED JHE.FOLLOWING: PC: We have heard learned counsel for the parties. By)consent, the appeal is heard for final disposal at the stage.of admission. 2.Tnese two Income Tax Appeals arise from theseparate orders, botn dated 21.09.2012, passed by theIncome Tax Appellate Tribunal, Bangalore Bench ‘B’ (for.snort ‘the Tribunal), in ITA Nos.189/2010 & 814/2011,.pertaining to the Assessment year 2005-06. 3. Tne appellant-assessee in ITA No.189/2010 andtne appellant-assessee in ITA No.814/2011 are Nusband.and wife. The facts, against which the orders are passedby tne Authorities below including the Tribunal are:common and hence, these appeals are being disposed ofby the common order. 4Tne.appellantinITANo.404/2013nas| formulated the following questions as substantial questions| of law:-_ (A)WhnetnerONnthefactsandIntnecircumstances of tne case, the finding ofthe Tribunal that the partnership firmwas not genuine and did not exist isperverse? circumstances of tne case, the finding ofthe Tribunal that the partnership firmwas not genuine and did not exist isperverse? (B)WhnetnerOn|tnefactsand.Inthe.circumstances of the case and in law theTribunal was right in holding that theappellant transferred the capital assetduring the previous year and hence,llable to tax?circumstances of the case and in law theTribunal was right in holding that theappellant transferred the capital assetduring the previous year and hence,llable to tax? The appellant in ITA No.405/2013 has formulated the very same questions as substantial questions of law and in)addition thereto, framed the following question assubstantial question of law:- (C)WhnetnerOn|tnefactsand.Inthe.circumstances of the case, the Hon’bleTribunal was right in law in upholding thecircumstances of the case, the Hon’bleTribunal was right in law in upholding the validity of the notice issued underSection 148 of IT Act for reopening theassessment? The appellant in both the appeals, hereinafter shall bereferred to as ‘assessees’, or as ‘assessee-husband’ and|‘assessee-wife’. The appellant in ITA No.405/2013 has formulated the very same questions as substantial questions of law and in)addition thereto, framed the following question assubstantial question of law:- (C)WhnetnerOn|tnefactsand.Inthe.circumstances of the case, the Hon’bleTribunal was right in law in upholding thecircumstances of the case, the Hon’bleTribunal was right in law in upholding the validity of the notice issued underSection 148 of IT Act for reopening theassessment? The appellant in both the appeals, hereinafter shall bereferred to as ‘assessees’, or as ‘assessee-husband’ and|‘assessee-wife’. 5.Tne.assessee-nuspanc|Nad.purchased|agricultural landmeasuring 4 acres 1Q guntas In.Sy.No.125 situate at Hosakerehalli village, Uttaranalii|hobli, for total consideration of)<38,000/- under the,registered sale deed dated 20.06.1980. At the same time,|the assessee-wife purchased 5 acres 9 guntas in Sy.No.43_SituateatIttamadu village,UttaranalllNobili,forconsideration otf<38,000/- under the registered sale deeddated 20.06.1980. Both the assessees by executing power.of attorney dated 23.12.1988 autnorised L.K.Srinari.Khoday to sell their landed property. On the same day,|tney also executed a partnersnip deed constituting thefirm - ‘M/s.Highland Enterprise’ showing the nature of itsbusiness being construction of Duilding and to develop the) land. Tne assessees claimed tnat they contributed the|aforementioned.landed.propertiesas|their.capitalcontribution in the firm. The firm had three partnersnamely, the assessees and M/s.L.K.Trust and they nad.profit and loss sharing ratio of 3% for the assessees and97% for the Trust. There does not appear to be any.dispute that after execution of the partnership firm, thefirm did not carry on any construction/development|activity till the retirement-cum-reconstitution of the firm)deed was executed on 22.05.7004. On execution of the|deed of retirement, the assessees were paid<2.85 crores|andz2.9 crores respectively, py tne firm. 6. In the course of regular assessment of the|assessee-nusband in ITA No.404/13, the Assessing Officer.noticed that the assessee-wife had also received a sum of.z2.9 crores during the financial year 2004-05. Thisinformation he shared with the concerned Assessing Officerfor the assessee-wife. Tne assessee-wife nad filed ner§return—Of|incomeforthe.assessmentYEdr|under| consideration, declaring total income of<1,37,990/- whichwas initially processed under Section 143(1) of the Act. Itis in this backdrop, tne assessment order was passed)holding that the partnership was not a genuine firm andtreated the amount received by both the assessee ascapital gain. /.Admittedly, tne assessees did not place onrecord the original partnership deed or a Certificate of itsRegistration at any point of time. They claim that thougnthe partnership firm was formed in 1988, it was registeredwith the Registrar of Firms only in 2003 I.e., after the.lapse of 15 years. Though they so claimed, they did not.produce Certificate of Registration before the autnorities|below. It nas come on record that subsequent to theRetirement-cum-Reconstitution Deed of partnership dated22.5.2004, the landed properties were transferred toM/s.Prestige Estate Project Private Limited by the firm videagreement dated 23.12.2005. Tne agreement to sell in.respect thereof dated 22.05.2004 however was executed not only by the firm but also by the assessees. Based onthis material, the authorities pelow and the Tribunal|rejected the claim of the assessees that they received theaforementioned amounts not as consideration for transfer|of their lands but by way of retirement as partners in thefirm. We do not find any reason to interfere with these|findings of fact recorded by the authorities below. The firstCWOquestionsframedDYtneaSSe@SSECeIntnememorandum of appeals, in our opinion, do not arise for.our consideration those being not substantial questions oflaw. | not only by the firm but also by the assessees. Based onthis material, the authorities pelow and the Tribunal|rejected the claim of the assessees that they received theaforementioned amounts not as consideration for transfer|of their lands but by way of retirement as partners in thefirm. We do not find any reason to interfere with these|findings of fact recorded by the authorities below. The firstCWOquestionsframedDYtneaSSe@SSECeIntnememorandum of appeals, in our opinion, do not arise for.our consideration those being not substantial questions oflaw. | 8.Insofar as the third question of law, which is—raised by the assessee-wife in ITA No.405/2013 isconcerned, that also, in our opinion, does not arise for our|consideration. It nas come on record tnat tneassessee-wife had declared her total income of.|1,37,990/-.for the assessment year 2005-06 and it was processedunder Section 143(1) of the Act. Thereafter, the AssessingOfficer received information from his counter part in ward. No.3(2), Bangalore, to the effect that during the course oftneassessmen_proceedingsinCa SeOT|assessee-husband it was noticed that the assessee-wife|had also received a sum ofz2,90,00,000/- during theassessment year 2004-05 from Srihari Knoday as saleconsideration for transfer of property situated at Sy.No.43,Ittamadu village of Uttaranalli Hobli. It is, on the basis ofthis information, notice under Section 148 of the Act was.issued after recording the following reasons: | the “An information was received from theITO.Ward3(2),Bangalore.vide|jetterNo.AATPB8232E/ITO|W-3(2)/09-10cated08/04/2009tnat|during|theCOUTSEOT|assessment proceedings, for the assessmentYear2005-06In,tneCaSe of|SrlV.S.Balasubramanyam,IT|IS|noticed|tnat|Smt.Kalavatni,wifeOT|SrV.S.Balasubramanyam had received a sum ofRs.2,90,00,000/-, during the financial year.2004-05fromSriHa rlKnodeas|Saleconsideration for the transfer of propertybearingSUFVEYNo.43,.Ittemeduvillage,Uttaranalli Hobli, Bangalore South. The|property being non-agricultural measuring fiveacres nine guntas. It appears that Smt.Kalavatni nas not disclosed tnis transaction to.Income Tax. Hence, I nave the reason to’belief (sic) that the income has escapedassessment witnin the meaning of section 147 of the Income Tax Act, 1961 issue notice u/s.148 of the Income-Tax Act.”| QO.From bare perusal of the reasons recorded andthe background facts, against which notice was issued)under Section 148 of the Act, in our opinion, cannot bestated to be invalid as contended by learned counsel|appearing for the assessee-wife. In the circumstances,botn the appeals are dismissed. —No costs Sd/-|JUDGE. Sd/-JUDGE. SRL/TL |