RAMNATH SANTU ANGOLKAR V. THE DEPUTY COMMISSIONER OF

ITA/5005/2012

AI Insights

The case involves Ramnath Santu Angolkar, the appellant, who is engaged in real estate business and faced a block assessment under Section 158BC of the Income Tax Act, 1961, following a search operation. The primary legal issues revolved around the validity of the search and the subsequent block assessment proceedings initiated against the appellant. The court examined whether the assessment order was valid when issued in the name of an individual, despite the warrant of authorization being in joint names, and whether the authorities properly examined the validity of the search before proceeding with the block assessment. The court found in favor of the appellant on all substantial questions of law, leading to the quashing of the assessment order and the order of the Commissioner of Income Tax (Appeals).

• Counselvise Citation: [2019] 140 COUNSELVISE.COM (IT) 692346 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 27-11-2019
• Assessment Year: misc
• Other Referred Cases: Union of India and others vs. Rai Singh Dev Singh Bist and another, Commissioner of Income Tax vs. Devesh Singh
• Laws Referred To: Income-Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: TULAJAPPA KALABURAGI
• Assessee Lawyers: V CHANDRASHEKAR
• Keywords: Assessment Order; Authorization; Block assessment; Search and seizure; Undisclosed income
• Section: 144; 143(3); 143(2); 143(1); 132; 145; 260A; 158BC(c); 132A; 292CC

Judgement Text

" : 1 : IN THE HIGH COURT OF KARNATAKA DHARWAD BENCH DATED THIS THE 27TH DAY OF NOVEMBER 2019 PRESENT THE HON’BLE MR.JUSTICE ALOK ARADHE AND THE HON’BLE MR.JUSTICE N.S.SANJAY GOWDA I.T.A. NO.5005/2012 & I.T.A. NO.5006/2012 BETWEEN RAMNATH SANTU ANGOLKAR NO.394, SHUKRAWAR PETH, TILAKWADI, BELGAUM. ... APPELLANTS (BY SRI. V.CHANDRASHEKAR, ADV. FOR SRI.A. SHANKAR, SRI.S.ANNAMALAI & SRI.S.S.HEGDE, ADVS.) AND THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-2, DR. AMBEDKAR ROAD, OPP. BELGAUM CIVIL HOSPITAL, KHIMAJIBHAI COMPLEX, BELGUAM. ... RESPONDENT (BY SRI. TULAJAPPA KALABURAGI, ADV.) THESE ITAs ARE FILED UNDER SECTION 260A OF THE INCOME-TAX ACT, 1961 AGAINST ORDER PASSED IN ITA(SS) NO.06/PNJ/2008 DTD:09.09.2011 ON THE FILE OF THE INCOME TAX APPELLATE TRIBUNAL, PANAJI BENCH, PANAJI, GOA, APPEAL IS PARTLY ALLOWED. THESE ITAs COMING ON FOR FINAL HEARING, THIS DAY, ALOK ARADHE J., DELIVERED THE FOLLOWING: : 2 : JUDGMENT Mr.V.Chandrashekar, learned Senior counsel for the assessee and Mr. Tulajappa Kalaburagi, learned counsel for the revenue. 2. These appeals under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as Act) have been filed by the assessee which was admitted by a Bench of this Court on 28.08.2013 on following substantial questions of law. “1) Whether the assessment order passed for the block period under Section 158BC(c) of the Act in the name of the individual, when the warrant of authorization issued in the joint name of the appellant and others is valid in law on the facts and circumstances of the case? 2) Whether the authorities below ought to have examined the validity of search and then only proceed to initiate block assessment proceedings on the facts and circumstances of the case? 3) Whether the Tribunal was justified in law in holding that there is no : 3 : merit to challenge the action of the Assessing Officer to assess under Section 158BC of the Act when the condition precedent are not existing as much as for computation of income under Section 158BC shall be restricted to seized material on the facts and circumstances of the case?” 3. Facts leading to filing of these appeals briefly stated are that the appellant is an individual and deals in the business of real estate and is engaged in the activity of providing service to land owners for getting compensation in case of land acquisition for promoting housing schemes, land development and selling of plot on behalf of owners on commission or service charges. 4. The appellant filed his return of income for the assessment years 1991-92 to 1998-99. The aforesaid returns were processed under Section 143(1) of the Act. On 19.11.1998 search under Section 132 of the Act was conducted in the residential premises of : 4 : the appellant and a notice under Section 158BC of the Act was issued to the appellant by which the appellant was required to file his return of income. In response to the aforesaid notice, the appellant filed the return of income for the block period i.e., 01.04.1998 to 19.11.1998 and declared an additional income of Rs.4,53,156/-. Thereafter, a notice under Section 143(2) of the Act was issued to the appellant and the appellant was directed to produce all the details. 5. The Assessing Officer passed an order of assessment on 28.11.2000 under Section 158BC(c) and determined undisclosed income of the appellant at Rs.1,63,54,846/-. Being aggrieved, the appellant filed an appeal before the Commissioner of Income Tax (Appeals). The appeal was decided by an order dated 23.08.2002 which was partly allowed. The revenue being aggrieved by the order of the Commissioner of Income Tax (Appeals) filed an appeal before the Income Tax Appellate Tribunal. The appellant filed a : 5 : cross objection in the aforesaid appeal, to the extent the appeal was decided against the appellant. 6. The Tribunal by an order dated 18.01.2007, set aside the order of the Commissioner of Income Tax (Appeals) and remitted the matter to the Commissioner of Income Tax (Appeals) and directed the issues to be adjudicated afresh by affording an opportunity of hearing to the parties in accordance with law. The Commissioner thereafter by an order dated 30.05.2008, decided the appeal and partly allowed the appeal filed by the appellant. The appellant and the revenue being aggrieved by the order passed by the Commissioner of Income Tax, again filed appeals before the Tribunal. The Tribunal by an order dated 09.09.2011 has partly allowed both the appeals. In the aforesaid factual background, these appeals have been filed by the appellant who is an assessee. : 6 : 7. Learned counsel for the appellant while inviting the attention of this Court to Section 292CC of the Act submitted that the aforesaid provision was incorporated in the statute book with effect from 01.04.1976. It is further submitted that even though under the aforesaid provision, it is not necessary for the Assessing Authority to issue an authorization separately in the name of each person. However, the Assessing Officer is required to carry out the assessment individually. However, in the instant cases, the assessment has been made against all the persons. 8. Learned counsel for the appellant has also invited the attention of this Court to panchanama and has submitted that the name of other persons have not been mentioned. It is agreed that despite order dated 30.10.2019, the revenue has failed to produce the record, therefore adverse inference has to be drawn. In this connection, reference is made to Union of India and others vs. Rai Singh Dev Singh Bist : 7 : and another, 1973 (3) SCC 581. It is also submitted that neither any books of account nor any material was seized in relation to the assessment year 1988-89 and 1989-90. However, the Assessing Officer has computed the income even in respect of the material which was not seized which is in contravention of Section 158BC(c) of the Act. 9. On the other hand, learned counsel for the revenue while placing reliance on Full Bench decision of the Allahabad High Court in the case of Commissioner of Income Tax vs. Devesh Singh (2012) 252 CTR (All.) 356, has taken us to the statement of objections for incorporation of Section 292CC of the Act and has submitted that it is not necessary to issue an authorization under Section 132 or to make a requisition under Section 132A separately in the name of each person. : 8 : 10. We have considered the submissions made by learned counsel for the parties and have perused the record. 11. Before proceeding further, it is apposite to take note of the relevant provisions of the Act namely Section 158BC(c) and Section 292CC of the Act which reads as under: “158BC. Procedure for block assessment. Where any search has been conducted under section 132 or books of account, other documents or assets are requisitioned under section 132A, in the case of any person, then,- (a) the Assessing Officer shall - (i) in respect of search initiated or books of account or other documents or any assets requisitioned after the 30th day of June, 1995, but before the 1st day of January, 1997, serve a notice to such person requiring him to furnish within such time not being less than fifteen days; (ii) in respect of search initiated or books of account or other documents or any assets requisitioned on or after the 1st day : 9 : of January, 1997, serve a notice to such person requiring him to furnish within such time not being less than fifteen days but not more than forty five days, as may be specified in the notice a return in the prescribed form and verified in the same manner as a return under clause (i) of sub-section (1) of section 142, setting forth his total income including the undisclosed income for the block period: Provided that no notice under section 148 is required to be issued for the purpose of proceeding under this Chapter: Provided further that a person who has furnished a return under this clause shall not be entitled to file a revised return; (b) the Assessing Officer shall proceed to determine the undisclosed income of the block period in the manner laid down in section 158BB and the provisions of section 142, subsections (2) and (3) of section 143 and section 144 and section 145 shall, so far as may be, apply; (c) the Assessing officer, on determination of the undisclosed income of the block period in accordance with this Chapter, shall pass an order of assessment : 10 : and determine the tax payable by him on the basis of such assessment. 292CC. Authorisation and assessment in case of search or requisition. (1) Notwithstanding anything contained in this Act,— (i) it shall not be necessary to issue an authorisation under section 132 or make a requisition under section 132A separately in the name of each person; (ii) where an authorisation under section 132 has been issued or requisition under section 132A has been made mentioning therein the name of more than one person, the mention of such names of more than one person on such authorisation or requisition shall not be deemed to construe that it was issued in the name of an association of persons or body of individuals consisting of such persons. (2) Notwithstanding that an authorisation under section 132 has been issued or requisition under section 132A has been made mentioning therein the name of more than one person, the assessment or reassessment shall be made : 11 : separately in the name of each of the persons mentioned in such authorisation or requisition.” 12. From perusal of Section 158BC of the Act, it is evident that while computing the undisclosed income for the block period, the evidence found as a result of search or requisition of books of account or other books of account and such other material or information as are available with the Assessing Officer and relatable to such evidence has to be taken into consideration. In other words, it is evident that the computation of undisclosed income should be based on such evidence which is seized during the search which is not accounted in the regular books of account. 13. From perusal of Section 292CC of the Act which has come into force with effect from 01.04.1976, it is axiomatic that it merely provides that it shall not be necessary to issue an authorization under Section 132 of the Act or make a requisition under Section 132A of the Act separately in the name : 12 : of each person. However, it is pertinent to note that where an authorization is made in the name of more than one person, the aforesaid section does not provide that the names of such persons need not be mentioned in the warrant of authorization. 14. In the backdrop of aforementioned statutory provisions, the facts of the case in hand may be examined. 15. The warrant of authorization has not been produced before this Court despite order dated 13.10.2019. Therefore, it is open for this Court to draw an adverse inference. However, in the peculiar fact situation of the case, we deem it appropriate to grant liberty to the revenue to proceed afresh in accordance with law. However, on account of non- production of the warrant of authorization, the adverse inference has to be drawn. Therefore, the first substantial question of law is answered in favour of the appellant and against the revenue, however, with the : 13 : liberty to the revenue to proceed against the appellant in accordance with law. 16. Admittedly, the authorities were under an obligation to examine the validity of the search and thereafter only to proceed to initiate the block assessment proceeding, which has not been done in the instant case. Therefore, the second substantial question of law framed is also answered in favour of the assessee and against the revenue. 17. Now we may advert to the third substantial question of law. From perusal of the material on record, it is evident that there was no seizure with regard to the assessment year 1988-89 and 1989-90 during the course of the search and seizure operations. However, the Assessing Officer while computing the undisclosed income has taken into account the income in respect of the aforesaid case also and thus the order passed by the Assessing Officer is in violation of Section 158BC(c) of the Act and therefore, the : 14 : Tribunal was not justified in holding that there is no merit to challenge the action of Assessing Officer to assess under Section 158BC(c) of the Act. Accordingly, the third substantial question of law is also answered in favour of the assessee and against the revenue. In view of preceding analysis, the impugned order dated 09.09.2011 insofar as it contains the findings against the appellant passed by the Income Tax Appellate Tribunal is hereby quashed and set aside. The order of assessment dated 28.11.2000 as well as the order of Commissioner of Income Tax (Appeals) dated 23.08.2002 are also hereby quashed and set aside. However, liberty is granted to the revenue to proceed against the appellant, if so advised in accordance with Section 158BC of the Act. In the result, the appeals are disposed of. Sd/- JUDGE Sd/- JUDGE Rsh "