MR NIKHIL KUMAR V. ASSISTANT COMMISSIONER OF INCOME TAX

WP/13206/2023

AI Insights

The case involves Mr. Nikhil Kumar, the petitioner, who challenged the initiation of assessment proceedings for the Assessment Year 2015-16 by the Assistant Commissioner of Income Tax, Bangalore. The proceedings were based on a transaction involving securities on the National Securities Exchange (NSE), which was initially treated as unexplained income amounting to Rs.12,17,10,434. The petitioner contested the addition of this amount to his income, arguing that the necessary documentary evidence was not considered. The NSE later clarified the transaction details, which were not acknowledged in the initial assessment. The court found substantial merit in the petitioner's contention and remanded the matter for a fresh assessment considering the new evidence.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 690187 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 19-07-2023
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: M DILIP ADVOCATE
• Assessee Lawyers: T SURYANARAYAN SENIOR ADVOCATE
• Keywords: Assessment proceedings; Income Tax; NSE; Securities transaction; Unexplained income
• Section: 147; 10(38); 144B; 148A(d)

Judgement Text

" - 1 - NC: 2023:KHC:25302 WP No. 13206 of 2023 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 19TH DAY OF JULY, 2023 BEFORE THE HON'BLE MR JUSTICE S SUNIL DUTT YADAV WRIT PETITION NO. 13206 OF 2023 (T-IT) BETWEEN: MR. NIKHIL KUMAR, AGED 55 YEARS, 174, 2ND MAIN, 1st BLOCK, 2ND STAGE, RMV EXTENSION, BANGALORE - 560 094. …PETITIONER (BY SRI. T. SURYANARAYAN, SENIOR ADVOCATE FOR SMT. TANMAYEE RAJKUMAR, ADVOCATE) AND: 1. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 6(1)(1), 2ND FLOOR, BMTC BUILDING, 6TH BLOCK, 80 FEET ROAD, KORAMANGALA, BANGALORE - 560 095. 2. THE PRINCIPAL CHIEF COMMISSIONER OF INCOME-TAX, KARNATAKA AND GOA REGION, BANGALORE, 5TH FLOOR, Digitally signed by SUCHITRA M J Location: High Court of Karnataka - 2 - NC: 2023:KHC:25302 WP No. 13206 of 2023 BMTC BUILDING, 6TH BLOCK, 80 FEET ROAD, KORAMANGALA, BANGALORE - 560 095. 3. ASSESSMENT UNIT INCOME-TAX DEPARTMENT, NATIONAL FACELESS ASSESSMENT CENTRE, ROOM NO.401, 2ND FLOOR, E-RAMP, JAWAHARLAL NEHRU STADIUM, DELHI - 110 003. 4. NATIONAL SECURITIES EXCHANGE, EXCHANGE PLAZA, C-1, BLOCK G, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI - 400 051, REPRESENTED BY ITS CHAIRMAN. …RESPONDENTS (BY SRI. M. DILIP, ADVOCATE) THIS WP IS FILED UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE ORDER DATED 30.6.2022 BEARING NO. ITBA/COM/F/17/2022- 23/1043693016(1) (ANNEXURE-D) PASSED BY THE R-1 UNDER SECTION 148A(D) OF THE ACT, REJECTING THE PETITIONERS OBJECTION AS TO THE INITIATION OF THE ASSESSMENT PROCEEDINGS FOR THE A.Y 2015-16 AND ETC. THIS PETITION, COMING ON FOR PRELIMINARY HEARING, THIS DAY, THE COURT MADE THE FOLLOWING: - 3 - NC: 2023:KHC:25302 WP No. 13206 of 2023 ORDER The petitioner has sought to set aside the order dated 30.06.2022 passed by respondent No.1 under Section 148A(d) of the Income Tax Act, 1961 (for short 'the Act') rejecting the petitioner's objection to the initiation of assessment proceedings for the Assessment Year 2015-16. The petitioner has also sought for setting aside the notice at Annexure-E; the assessment order dated 25.05.2023 passed under Section 147 read with Section 144B of the Act at Annexure-K; the demand notice dated 25.05.2022 at Annexure-L and penalty notice at Annexure-M. 2. Sri. T.Suryanarayana, learned Senior Counsel appearing for the petitioner would submit that the assessment order at Annexure-K has made an addition of Rs.12,17,10,434/- to the income of the assessee observing that the assessee has failed to furnish relevant documentary evidence as to why the aforesaid amount should not be added to his income. In the assessment order, it is observed that the transaction stated by the petitioner in the National Securities Exchange (NSE) has not been confirmed in light of the letter dated 27.03.2018. It is submitted that the dispute is of - 4 - NC: 2023:KHC:25302 WP No. 13206 of 2023 variation in respect of Rs.12,17,10,434/-, which has been treated as unexplained income and demand raised pertains to dealing with the securities on NSE of TD Power Systems Limited between the period 01.10.2014 to 31.10.2014. 3. Learned Senior Counsel appearing for the petitioner relies on the memo of production of documents dated 28.06.2023 and submits that the NSE in its correspondence dated 23.06.2023 has clarified that they sent a letter dated 05.07.2022 to the Income Tax Department providing clarification of their earlier letter dated 27.03.2018, while also sharing the requisite transaction details of the scrip 'TD Powers Systems Limited' during the period 01.10.2014 to 31.10.2014 in the capital market segment of exchange. Attention is also drawn to the letter dated 22.06.2023 reiterating the same position. Para-2 of the said communication reads as follows: \"In this regard, please note that vide your letter dated 23.03.2018, your good office sought certain trade details of the scrip 'TD Powers Systems Limited' for the period of 01.10.2014 to 31.10.2014, from the Exchange. Pursuant to an inadvertent error occurred in the Exchange communication dated 27.03.2018 letter ref. no. NSE/MSD/10273/41989, the Exchange vide its letter dated 05.07.2022, clarified and provided the - 5 - NC: 2023:KHC:25302 WP No. 13206 of 2023 transaction details of the scrip 'TD Powers Systems Limited' during the period 01.10.2014 to 31.10.2014 in the Capital Market Segment of the Exchange. We had also clarified the said position to your office through a telephonic conversation held on 5th July 2022.\" 4. Reliance is also placed on the letter dated 05.07.2022 to the same effect. Learned Senior Counsel further submits that the NSE has clarified regarding its earlier letter dated 23.03.2018 and it comes out from the correspondence that telephonically the Department has been intimated on 05.07.2022. Accordingly, it is submitted that if that aspect of the matter was taken note of, the question of passing an order treating Rs.12,17,10,434/- as unexplained income and ineligible for exemption under Section 10(38) of the Act would not have arisen. 5. Learned counsel Sri. M.Dilip appearing for the respondents-Department submits that this aspect of the correspondence along with the memo filed before this Court relied on by the petitioner would be re-looked into. Prima-facie there is substantial merit in the contention raised on behalf of the petitioner. However, as it is a factual aspect, the assessment order is set aside; the matter is relegated to the - 6 - NC: 2023:KHC:25302 WP No. 13206 of 2023 Assessing Officer to provide an opportunity to the petitioner to clarify regarding correspondence filed along with memo, which correspondence would also be placed before the Assessing Officer. The Assessing Officer to have a re-look at the matter and provide sufficient opportunity to the petitioner and proceed further. 6. Accordingly, assessment order at Annexure-K is set-aside; the matter is relegated in light of the discussions made above. It is only expected that the Authority will have to re-look at the matter afresh taking note of the response of the NSE. It is needless to state that if the material as pointed out is already available with the Assessing Officer and the question of calling upon the petitioner would arise only if there is an ambiguity. However, if any adverse order is sought to be passed, petitioner's stand to be taken note of. Accordingly, petition is disposed off. All contentions are kept open. Sd/- JUDGE SMJ "