KRISHNABILLAVA CHUTHBILLAVA V. THE INCOME TAX OFFICER

WP/17383/2023

AI Insights

The case involves Krishnabillava Chuthbillava, the petitioner, who challenged the orders and notices issued by the Income Tax Officer under Sections 148A and 148 of the Income Tax Act, 1961, concerning the assessment year 2016-17. The dispute arose from the purchase of immovable property for Rs. 66,00,000, where the income used for the purchase was alleged to have escaped tax. The petitioner argued that the property was purchased using a loan from M/s Hotel Industrialists Co-operative Bank Limited and hand loans from known persons. The Income Tax Officer, however, found insufficient evidence to substantiate the sources of income used for the property purchase, leading to the issuance of the impugned orders and notices. The court's decision to quash the orders and notices was based on the need for a detailed reconsideration of the evidence provided by the petitioner.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 760286 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 26-10-2023
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: SUSHAL TIWARI
• Assessee Lawyers: BALRAM RAO
• Keywords: Assessment Year 2016-17; Income Tax; Loan utilization; Property Purchase; Tax Evasion
• Section: 148; 148A; 226; 227

Judgement Text

" - 1 - NC: 2023:KHC:38056 WP No. 17383 of 2023 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 26TH DAY OF OCTOBER, 2023 BEFORE THE HON'BLE MR JUSTICE B M SHYAM PRASAD WRIT PETITION NO. 17383 OF 2023 (T-IT) BETWEEN: KRISHNABILLAVA CHUTHBILLAVA AGED ABOUT 55 YEARS S/O KRISHNA BILLAVA, NO 54/4-1, NEW SHANTHI SAGAR, 2ND CROSS, LORRY STAND GODOWN APMC YARD, YESHAWANTHPURA, BENGALURU 560022, KARNATAKA, PAN AIKPA4069P. …PETITIONER (BY SRI. BALRAM R RAO.,ADVOCATE) AND: THE INCOME TAX OFFICER WARD 6(2)(1), BENGALURU, BMTC BUILDING, 80 FEET ROAD, 6TH BLOCK, NEAR KHB GAMES VILLAGE, KORAMANGALA, BENGALURU KARNATAKA 560095. …RESPONDENT (BY SRI.SUSHAL TIWARI., ADVOCATE) THIS WP IS FILED UNDER ARTICLES 226 AND 227 OF CONSTITUTION OF INDIA PRAYING TO-CALL FOR THE RECORDS OF THE PETITIONERS CASE AND AFTER EXAMINING THE LEGALITY AND VALIDITY THEREOF TO QUASH AND SET ASIDE THE IMPUGNED ORDER PASSED UNDER CLAUSE (d) OF SECTION 148A OF THE ACT DATED 30.03.2023 IN DIN AND NOTICE Digitally signed by NARASIMHA MURTHY VANAMALA Location: HIGH COURT OF KARNATAKA - 2 - NC: 2023:KHC:38056 WP No. 17383 of 2023 NO.ITBA/AST/ F/ 148A/ 2022-23/ 1051662194(1) ANNEXURE-E1 AN NOTICE DATED 31.03.2023 ISSUED U/S 148 OF THE INCOME TAX ACT HAVING DIN AND NOTICE NO. ITBA/ AST/ S/ 148_1/ 2022-23/ 1051736160(1) ANNEXURE-E2 PASSED BY THE RESPONDENT FOR THE ASSESSMENT YEAR 2016-17; DIRECT THE RESPONDENTS BY WITHDRAWING AND CANCELLING THE IMPUGNED ORDER PASSED UNDER CLAUSE (d0 OF SECTION 148A OF THE ACT DATED 30.03.2023 IN DIN AND NOTICE NO.ITBA/ AST/ F/148A/ 2022-23/ 1051662194(1) ANNEXURE-E1 AND NOTICE DATED 31.03.2023 ISSUED U/S 148 OF THE INCOME TAX ACT HAVING DIN AND NOTICE NO.ITBA/ AST/ S/ 148_1_2022-23/ 1051736160(1) ANNEXURE-E2. THIS PETITION, COMING ON FOR PRELIMINARY HEARING IN ‘B’ GROUP, THIS DAY, THE COURT MADE THE FOLLOWING: ORDER The petitioner has called in question the order dated 30.03.2023 [Annexure-E1] under Section 148A(d) of the Income Tax Act, 1961 [for short, ‘the IT Act’] and the subsequent notice dated 31.03.2023 [Annexure-E2] under Section 148 of the IT Act. The petitioner has admittedly purchased immovable property on 17.02.2016 for a total consideration of Rs.66,00,000/-, and the notice under Section 148 is issued in the premise that the income utilized for the purchase of the property has escaped tax. - 3 - NC: 2023:KHC:38056 WP No. 17383 of 2023 2. The petitioner, upon service of notice under Section 148A(b) of the IT Act, has filed response inter alia stating that he has availed loan of Rs.40,00,000/- from M/s Hotel Industrialists Co- operative Bank Limited and the remaining as hand loan from the known persons. The respondent has concluded the proceedings under Section 148A(d) of the IT Act by the impugned order dated 30.03.2023 reasoning as under: “However, the assessee has not furnished any details of supporting documentary proof for the savings and details of the friends and relatives from whom loan taken. As such, the identity, genuineness and credit - worthiness of the lenders is not established. Further, though assessee has submitted a copy of loan sanction letter for Rs 40 lakh dated 01/02/2016. However it doesn't appear to be a home loan taken for the purpose of buying of property, though the same property has been mortgaged as per the said letter. Further interest on loan being 14%, it's not matching with prevailing home loan rates of the time. - 4 - NC: 2023:KHC:38056 WP No. 17383 of 2023 The respondent, while observing that the petitioner’s declared income of Rs.2,14,500/- would be insufficient to pay interests on the loan which in itself shall be Rs.5,60,000/-, has opined that the petitioner has not furnished documents like bank account statements etc, to substantiate that the loan was taken to purchase the immovable property. 3. Sri Balram R. Rao, the learned counsel for the petitioner, submits that the petitioner to substantiate that the property is purchased utilizing the loan sanctioned from the Co-operative Bank has produced the sanction letter and this document should have been considered. Sri Balram R Rao also submits that the respondent could not have discarded the probative value of the sanction letter on the ground that it relates to mortgage loan and not a home loan, and he further submits that if the utilization of the aforesaid loan is accepted and even if there is no confirmation of the loan from the third - 5 - NC: 2023:KHC:38056 WP No. 17383 of 2023 party, the income that could have escaped tax would be below Rs.50,00,000/-, the threshold for initiation of the proceedings under Section 147 of the IT Act. 4. Sri Sushal Tiwari, the learned counsel for the respondent, while not disputing that these circumstances could be crucial, submits that the onus to submit every explanation is on the assessee when a notice is served under Section 148A(b) of the IT Act and in the absence thereof, the petitioner cannot take exception with the order under Section 148A (b) of the IT Act, and he also canvasses that it would be open to the petitioner in the proceedings under Section 148 of the IT Act to demonstrate the same. 5. These rival submissions are considered, and if indeed the consideration paid for the purchase is explained, there would be no reason for the proceedings under Section 148 of the IT Act and there is material at this stage to indicate that the - 6 - NC: 2023:KHC:38056 WP No. 17383 of 2023 petitioner could have availed loan and utilized the same for purchase of the property. This would be crucial because if it is established that the petitioner has availed loan for the purchase of the property, the threshold for initiation of the proceedings under Section 148 of the IT Act for the relevant year could inure to the petitioner’s advantage. Therefore, this Court is of the considered view that there must be reconsideration, and hence, the following: ORDER [A] The petition is allowed in part and the impugned order dated 30.03.2023 and the notice dated 31.03.2023 [Annexures - E1 and E2] are quashed restoring the proceedings for reconsideration. The petitioner will be at liberty, within a period of three weeks from the date of receipt of a certified copy of this order, to file on his own initiative the details of the disbursement of the loan by the Co-operative - 7 - NC: 2023:KHC:38056 WP No. 17383 of 2023 Bank, the utilization thereof and confirmation of loan from the third party. [B] The respondent shall consider the same before proceeding to pass the order under Section 148A of the IT Act. It is needless to observe that if for any reason the portal is not open, which would enable the petitioner to file details, there shall be corresponding extension of time viz., three weeks from the date of opening of the portal. Sd/- JUDGE SA ct:sr "