MR. PETER CADDY V. THE DEPUTY COMMISSIONER

ITA/869/2017

AI Insights

The case involves Mr. Peter Caddy, the appellant, who was assessed for unexplained investment in property under Section 69 of the Income Tax Act, 1961, following a search operation. The Income Tax Appellate Tribunal upheld the addition made by the Assessing Officer, which was challenged in the High Court of Karnataka. The main legal issues revolved around the sustainability of the assessment under Section 153A despite no material related to the impugned addition being found during the search, the sustainability of the addition under Section 69 given the investments made by an associated party, and the alleged violation of natural justice due to the appellant not being provided an adequate opportunity to contest the additions. The court noted that the appellant had been granted sufficient opportunities to present his case but failed to do so adequately, leading to the dismissal of his appeal.

• Counselvise Citation: [2021] 140 COUNSELVISE.COM (IT) 692006 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 06-04-2021
• Assessment Year: misc
• Laws Referred To: Income Tax Act 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: K V ARAVIND
• Assessee Lawyers: PRATHIBHA
• Keywords: Assessment Year 2011-12; Income Tax; Natural Justice; Search and seizure; Unexplained investment
• Section: 154; 132; 153A; 69; 260-A

Judgement Text

"1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 6TH DAY OF APRIL 2021 PRESENT THE HON’BLE MR. JUSTICE ALOK ARADHE AND THE HON’BLE MR. JUSTICE M.G.S. KAMAL I.T.A. NO.869 OF 2017 BETWEEN: MR. PETER CADDY AGED 63 YEARS S/O LATE OSWAL CADDY R/AT. NO.3, PURVA PARKWAY NO.10, HALLS ROAD RICHARD PARK BANGALORE-560056. ... APPELLANT (BY SMT. PRATHIBHA R, ADV., FOR SRI. S. PARTHASARATHI, ADV.,) AND: THE DEPUTY COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE-2(1) BMTC BUILDING, 80 FEET ROAD KORAMANGALA, BANGALORE-560095. ... RESPONDENT (BY SRI. K.V. ARAVIND, ADV.) - - - THIS I.T.A. IS FILED UNDER SEC. 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 14.07.2017 PASSED IN ITA NO.1580/BANG/2016 FOR THE ASSESSMENT YEAR 2011- 12, PRAYING TO: (i) FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE. 2 (ii) ALLOW THE APPEAL AND SET ASIDE THE COMMON ORDER OF THE INCOME-TAX APPELLATE TRIBUNAL DATED 14.7.2017 IN SO FAR AS IT PERTAINS TO THE APPEAL BEARING ITA NO.1580/BANG/2016 FOR THE ASSESSMENT YEAR 2011-12. (iii) PASS SUCH OTHER SUITABLE ORDERS AS THIS HON'BLE COURT DEEMS FIT TO GRANT ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN THE INTEREST OF JUSTICE AND EQUITY. THIS I.T.A. COMING ON FOR HEARING, THIS DAY, ALOK ARADHE J., DELIVERED THE FOLLOWING: JUDGMENT This appeal under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as the Act for short) has been preferred by the assessee. The subject matter of the appeal pertains to the Assessment year 2011-12. The appeal was admitted by a bench of this Court vide order dated 11.03.2019 on the following substantial questions of law: \"(i) Whether even in the case of search in the case of the Appellant under Section 132 of the Act when no material related to the impugned addition for the relevant year was found and seized, the assessment under Section 153A of the Act was sustainable in 3 the case of the Appellant for the relevant year? (ii) When contemporary materials found would show that investment was made by the other party who was associated with the Appellant, the addition made under Section 69 of the Act in the hands of the Appellant was sustainable when there was no contrary material to support the case of the Revenue? (iii) Whether the orders of the CIT (Appeals) as well as the Tribunal were sustainable since there was gross violation of principles of natural justice when the Appellant was not provided an opportunity which was specifically sought for to make submissions against the impugned addition on merits and in such circumstances whether the impugned addition was sustainable?\". 2. Facts leading to filing of this appeal briefly stated are that the assessee was operating horses on regular basis under Bangalore Turf Club. The assessee 4 had taken horses on leases and also has owned horses. Some transactions took place between the ass. And one participant viz., Mr.Cherian Abraham, in pursuance of which a Memorandum of Understanding was executed on 07.04.2011 between the assessee and the aforesaid Mr.Cherian Abraham. A search proceeding was conducted in the premises of M.M.Prasanna Kumar and others on 06.12.2012. As a consequence of the aforesaid search, there was a search in the premises of the assessee as well under Section 132 of the Act. Thereafter, the assessee was served with a notice under Section 153A of the Act, to which the assessee responded by filing a copy of the return, which was originally filed on 26.09.2013, in which income of Rs.1,04,90,100/- was declared. The Assessing Officer by an order dated 28.03.2014 concluded the assessment and made an addition of Rs.1,00,00,000/- towards unexplained investment in the property of Sy.No.95 and Sy.No.96 of Seegehalli Village, Bidarahalli Hobli, 5 Bangalore. Thus, the total income of Rs.2,04,90,098/- was determined. 3. The assessee thereupon filed an appeal before the Commissioner of Income Tax (Appeals) who by an order dated 25.06.2016 dismissed the appeal. The assessee thereupon filed an appeal before the tribunal. During the pendency of the appeal before the tribunal, the assessee filed an application under Section 154 of the Act, before the Commissioner of Income Tax (Appeals). The tribunal by an order dated 14.07.2017 inter alia held as under: We have considered the rival submissions as well as the relevant material on record. We have earlier considered this point while dealing with the Ground Nos.1 to 3 and found that the CIT (Appeals) granted more than sufficient opportunities to the assessee however the conduct of the assessee is manifest for the fact that on five occasions the assessee avoided the service of the notices issued by the CIT (Appeals) by 6 not claiming as well as refusing the same. Finally the notice was effected through the income tax Inspector who has also given its report that the assessee even refuse to give the acknowledgement of the service of the notice. Therefore, in view of the fact that the assessee's conduct was non-co-operative and causing delay in the proceedings the assessee has failed to make out the cause that there was a violation of principle of natural justice. Apart from seeking one more opportunity of being heard before the CIT (Appeals), the assessee has not produced before us any material, record or facts to controvert the findings of the Assessing Officer on merits of the addition except a copy of MOU dt. 7.11.2011 which was not either claimed or filed before the authorities under Section 154 which is pending adjudication then it is up to the wisdom of the CIT (Appeals) to consider the plea of the assessee as made in the petition under Section 154. We make it clear that our observation in the present order shall have 7 no bearing on the petition filed by the assessee under Section 154 of the Act. 4. Thereafter, petition filed by the assessee under Section 154 of the Act was allowed by the Commissioner of Income Tax (Appeals) on 29.12.2017. 5. Learned counsel for the assessee submitted that the tribunal did not adjudicate the controversy involved in the appeal on merits. It is also urged that an opportunity should be given to the assessee for submitting the documents to show that addition could not be made in the hands of the assessee. On the other hand, learned counsel for the revenue submitted that despite opportunity being given before the tribunal, the assessee has not availed of the aforesaid opportunity. It is further submitted that since the relief of the assessee has already been granted in proceedings under Section 154 of the Act, therefore, the issue with regard to 8 validity of the order passed by the tribunal has been rendered academic. 6. We have considered the submissions made by learned counsel for the parties and have perused the record. It is not in dispute that subsequently, the Commissioner of Income Tax (Appeals) has allowed the petition filed by the assessee under Section 154 of the Act and has granted the relief to the assessee. From the relevant extract of para 19 of the order of the tribunal which is quoted supra, it is evident that despite opportunity being available to the assessee before the tribunal, the as. Has not produced any material before the tribunal. Apart from this, in the fact situation of the case, in our considered opinion, the relief has already been granted to the assessee in proceedings under Section 154 of the Act, therefore, the challenge to the impugned order has been rendered academic. It is therefore not necessary for us to adjudicate the validity 9 of the order dated 14.07.2017 passed by the tribunal and to answer the substantial questions of law. In the result, the appeal is disposed of has having rendered academic. However, it is clarified that the observations made in this order shall not have bearing on any other proceedings, if pending. Sd/- JUDGE Sd/- JUDGE ss "