SMT P AMMANI V. THE DEPUTYCOMMISSIONER OF INCOME TAX

ITA/256/2010

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The case involves Smt. P. Ammani, an individual and partner in Kaypee Exporters, who appealed against the order of the Income Tax Appellate Tribunal (ITAT) concerning the assessment of capital gains and the jurisdiction under Section 158 BD of the Income Tax Act, 1961. The premises of Kaypee Exporters and the appellant's premises were subjected to search, leading to the recovery of documents and materials, which were considered undisclosed income. The assessing officer initiated proceedings, resulting in a disputed assessment of capital gains from KGF property. Both the appellant and the Revenue filed appeals, which were partly allowed. The High Court found that the Tribunal failed to address the jurisdictional challenge and did not provide reasons for modifying the addition related to the KGF property, leading to the setting aside of the Tribunal's order and remanding the matter for re-evaluation.

• Counselvise Citation: [2010] 140 COUNSELVISE.COM (IT) 697659 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 02-11-2010
• 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: A SHANKAR; M LAVA
• Keywords: Adhoc Addition; Assessment proceedings; Capital Gains; Income tax appeal; Jurisdiction; Search proceedings
• Section: 132; 112; 158 BD; 260-A

Judgement Text

" 1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU ON THE 13TH DAY OF NOVEMBER, 2018 BEFORE THE HON'BLE MR. JUSTICE RAVI MALIMATH AND THE HON'BLE MR. JUSTICE K.NATARAJAN INCOME TAX APPEAL No. 256 OF 2010 BETWEEN: Smt.P.Ammani No.1147, 12th Main HAL 2nd Stage, Indranagar Bangalore-560 008. … Appellant (By Sri A. Shankar and Sri M.Lava, Advocates) AND: The Deputy Commissioner Of Income Tax Central Circle 1(2) C.R. Building, Queens Road Bangalore-560 001. …Respondent (By Sri K.V.Aravind, Advocate) This income tax appeal is filed under Section 260-A of I.T Act, 1961 arising out of order dated: 02.03.2010 passed in IT(SS)A No.44/BNG/2008, for the assessment year 1998-99 to 2003-04, praying to i) formulate the substantial questions of law stated therein ii) allow the appeal and set aside the order passed by the ITAT, Bangalore in IT(SS)A No.44/BNG/2008, dated 02.03.2010 and etc., 2 This income tax appeal, coming on for hearing this day, RAVI MALIMATH., J delivered the following: J U D G M E N T The appellant is an individual and also partner in the business concern Kaypee Exporters. The premises of Kaypee Exporters was subjected to search proceedings under Section 132 of the Income Tax Act. The premises of the appellant was also searched. Several documents and material were recovered during the course of search. The assessing officer initiated assessment proceedings against Kaypee Exporters. Certain material belonging to the assesee was handed over on the ground that they were undisclosed income in the hands of the appellant. Pursuant to the receipt of the material, a notice was issued under Section 158 BD of the Income Tax Act calling upon the appellant to file her return. The return was accordingly filed. The assessing officer computed capital gains arising from the K.G.F.property at Rs.5,01,207/- as against the claim of the capital loss of Rs. 3,20,642.20. An appeal was filed, which was partly allowed. The appellate authority confirmed the findings of the assessing officer in relation to the issue pertaining to the KGF property. Aggrieved by the same, an appeal was preferred before the 3 Tribunal. The Revenue also preferred an appeal. The appeal filed by the Revenue was allowed in part. The appeal filed by the assessee was also allowed in part. Aggrieved by the same, the present appeal is filed in so far as rejection of the grounds filed by the appellant is concerned. 2. By order dated 02.11.2010, the appeal was admitted to consider the following substantial questions of law: (i) Whether the Income Tax authorities have in law assumed proper jurisdiction on the appellant under Section 158 BD on the facts and circumstances of the case? (ii) Whether the Tribunal was justified in law in making an adhoc addition of Rs.2,00,000/- as income from capital gains in respect of KGF Robertsonpet property on the facts and circumstances of the case? (iii) Whether the Tribunal was justified in law in not adjudicating the ground relating to the issue of assumption of jurisdiction by the assessing officer to assess the appellant under Section 158 BD of the Act? (iv) Whether the Tribunal was justified in applying the rate of 60% tax to capital gains as 4 against the rate of 20% as prescribed under Section 112 of the Act? 3. Both the learned counsels submit that the substantial questions of law require to be re-framed. Therefore, they have addressed arguments with regard to the same. 4. On hearing learned counsels we are of the considered view that the following substantial questions of law arise for consideration in this appeal: (i) Whether the Tribunal was justified in law in not adjudicating the grounds relating to the question of jurisdiction as raised by the assessee? (ii) Whether the order of the Tribunal is perverse in not recording any reasons for passing the said order with regard to modifying the addition in respect of KGF property? 5. Learned counsel for the asessee contends that primarily, the question of jurisdiction with regard to Section 158 BD was raised before the Tribunal. The Tribunal has not even adverted to the said contention. Therefore, the non- consideration of the question of jurisdiction has vitiated the order of the Tribunal. It is further contended that the Tribunal 5 straightaway held that they would modify addition in respect of KGF property to Rs.2.00 lakhs. There are no reasons assigned by the Tribunal to arrive at such a conclusion. Therefore, both the substantial questions of law require to be answered in favour of the assessee. The same is disputed by learned counsel for the Revenue. 6. Heard learned counsels. 7. We are of the considered view that the contentions of the learned counsel for the assessee requires to be accepted. Whenever a question of jurisdiction is raised before the authority, the same should be adjudicated. The very power of the authority to consider the plea of the assessee is called in question. Whether it is to be accepted or not is completely within the jurisdiction of the authority. However, the question of jurisdiction should necessarily be answered by the authority which has not been done. Therefore, the first substantial question of law is answered in favour of the assesee by holding that the Tribunal was not justified in passing the impugned order without adjudicating the ground relating to jurisdiction. 6 8. In so far as second substantial question of law, with regard to modification in respect of KGF property is concerned, the Tribunal has not given any reasons for recording such a finding. Any conclusion to be recorded by the authority should stand preceded by reasons. In the absence of recording any reasons, the order becomes unsustainable. Hence, the order stands vitiated and therefore, the second substantial question of law is accordingly answered. 9. In view of answering both the substantial questions of law, the appeal is allowed. The order of the Tribunal dated 02.03.2010 passed in IT(SS)A.No.44/Bang/2008 is set-aside to the extent of jurisdiction and extent of the KGF property. The matter is remanded to the Tribunal for a fresh adjudication based on the observations made hereinabove. Sd/- Sd/- JUDGE JUDGE cm/- "