SMT SANGEETHA JAIN V. THE ASSISTANT COMMISSIONER OF INCOME TAX

ITA/72/2010

AI Insights

The case involves two income tax appeals filed by Smt. Sangeetha Jain against the Assistant Commissioner of Income-Tax, Central Circle-1(4), concerning the assessment years 2000-01 and 2001-02. The primary issues revolved around the disallowance of certain business expenses claimed by the appellant and the validity of the reopening of assessments for the year 2001-02 under Section 148 of the Income Tax Act. The Tribunal had earlier dismissed the appellant's claims, leading to these appeals. The High Court, after reviewing the submissions and evidence, upheld the Tribunal's decision, finding no substantial evidence to support the appellant's claims and affirming the legality of the assessment reopening.

• Counselvise Citation: [2010] 140 COUNSELVISE.COM (IT) 761221 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 12-04-2010
• Assessment Year: misc
• Laws Referred To: Income-Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: JEEVAN NEERALAGI
• Assessee Lawyers: G VENKATESH; M LAVA
• Keywords: Assessment Year; Business expenses; Income tax appeal; Interest disallowance; Non-est return; Reopening of assessment
• Section: 148; 234B; 260A; 234A

Judgement Text

" 1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU ON THE 28TH DAY OF NOVEMBER, 2018 BEFORE THE HON'BLE MR. JUSTICE RAVI MALIMATH AND THE HON’BLE MR.JUSTICE K.NATARAJAN INCOME TAX APPEAL NOS.72 AND 120 OF 2010 BETWEEN: SMT.SANGEETHA JAIN NO.26, REST HOUSE ROAD, BENGALURU – 560 001. ... APPELLANT (BY SRI G.VENKATESH, ADVOCATE FOR SRI.M.LAVA, ADVOCATE) AND: THE ASSISTANT COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-1(4), C.R.BUILDING, QUEENS ROAD, BENGALURU – 560 001. ... RESPONDENT (BY SRI.JEEVAN J NEERALAGI, ADVOCATE) THESE INCOME TAX APPEALS ARE FILED UNDER SECTION 260A OF THE INCOME-TAX ACT, 1961 ARISING OUT OF ORDER DATED 25.09.2009 PASSED IN ITA NO.317 AND 318/BNG/2008, FOR THE ASSESSMENT YEARS 2000- 01 AND 2001-02, PRAYING TO; FORMULATE THE 2 SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN; ALLOW THE APPEAL AND SET ASIDE THE ORDER PASSED BY THE ITAT BENGALURU IN ITA NO.317 AND 318/BNG/2008, DATED 25.09.2009. ***** THESE INCOME TAX APPEALS COMING ON FOR HEARING THIS DAY, RAVI MALIMATH J., DELIVERED THE FOLLOWING: JUDGMENT The appellant-assessee in ITA No.72 of 2010, is an individual. She filed the return of income for the asst. year 2000-2001, declaring the total income of Rs.2,16,540/-. The case was taken up for scrutiny. Questionnaire was issued. A reply was furnished. Thereafter, the Assessing Officer disallowed certain ‘business expenses’ as well as ‘other expenses’ as claimed in the profit and loss account of M/s. Maruthi Enterprises and M/s.Maruthi Business Centre. 2. The Assessing Officer computed the income of the appellant for the asst. year 2000-2001 as Rs.9,34,940/- and passed an assessment order. 3 Aggrieved, by the said assessment order, an appeal was preferred by the assessee before the Commissioner of Income Tax (Appeals), which was dismissed. The appeal filed before the Tribunal was also rejected. Hence, the present appeal in ITA No.72 of 2010. By the order dated 12.04.2010, the appeal was admitted to consider the following substantial questions of law: (a) Whether the Tribunal was justified in law in confirming the disallowance of expenses claimed by the appellant for the asst. year 2000-2001 in the proprietorship concern of M/s.Maruthi Enterprises, being the business expenses on the facts and circumstances of the case? i) Bank Charges Rs. 372/- ii) Electricity Charges Rs. 49,587/- iii) Interest on KSFC Rs.4,03,982/- iv) KSFC Ins.Premium Rs. 11,563/- v) Repairs and Maintenance Rs.2,22,000/- Rs.6,87,504/- b) Whether the Tribunal was justified in law in confirming disallowance of following expenses claimed by the appellant for the asst. 4 year 2000-2001 in respect of common business expenses of both proprietorship concerns namely M/s.Maruthi Enterprises as well as M/s.Maruthi Business Centre of the appellant on the facts and circumstances of the case? i) Interest paid Rs.1,52,382/- ii) Bank Charges Rs. 24/- iii) Audit Fee Rs. 3,000/- iv) Interest on Vehicle Rs. 7,017/- v) Depreciation Rs. 48,472/- Rs.2,10,895/- 3. Insofar as the appeal in ITA No.120 of 2010 is concerned, the appellant-assessee filed the return of income for the asst. year 2001-2002 declaring the total income of Rs.1,15,138/-. The case was taken up for scrutiny. No reply was furnished, inspite of Notice issued under Section–148 of the Income tax Act. The expenses claimed were disallowed by the Assessing Officer. Thereafter, the Assessing Officer computed the total income at Rs.6,57,580/-. Aggrieved by the same, an 5 appeal was preferred before the Commissioner of Income Tax (Appeals), which was dismissed. Thereafter, the appellant approached the Tribunal wherein the appeal was rejected. Hence, the present appeal in ITA No.120 of 2010. By the order dated 12.04.2010, the appeal was admitted to consider the following substantial questions of law: “i) Whether the Tribunal is correct in law in holding that the reopening of the assessment under Section – 148 of the Act for the asst. year 2001-02 is valid on the facts and circumstances of the case? ii) Whether the authorities below were justified in law in disallowance of interest payment of Rs.3,95,570/- for the loan taken from KSFC in the name of M/s.Hotel Haveli and interest on vehicle loan of Rs.18,244/- for the asst. year 2001-2002 used for the business of the appellant, on the facts and circumstance of the case? iii) Whether the authorities below in law in imposing interest under Section – 234A and 6 234B of the Act on the facts and circumstances of the case?” 5. Sri.G.Venkatesh, learned counsel for the appellant contends that the orders passed by the authorities are erroneous. That the authorities failed to consider the material produced before them. That interest payment was claimed on the loan borrowed from Karnataka State Financial Corporation (for short KSFC) in the name of M/s.Hotel Haveli which was being run by M/s. Maruthi Enterprises, for which the appellant was the proprietress. Therefore, the finding that there was no nexus between Hotel Haveli and Maruthi Enterprises is erroneous. That the disallowance of expenses is not in accordance with the facts of the case. Therefore, there is a perversity committed by the Tribunal which calls for interference. 6. On the other hand, Sri.Jeevan J.Neeralagi, learned counsel appearing for the Revenue, disputes the said contention. He pleads that inspite of granting 7 sufficient opportunity to the appellant-assessee, no material was produced for consideration. Therefore, based on the available material, the assessments have been carried out. That the material produced does not indicate that the expenses claimed are relatable to M/s.Maruthi Enterprises. The learned counsel further submits that there is no substantial question of law that arises for consideration in these appeals. Notwithstanding the same, on facts he pleads that there is no error committed by the authorities and hence the appeals be dismissed. 7. Heard learned counsels. 8. Insofar as the appeal in ITA No.72 of 2010, is concerned, the appeal pertains to the asst. year 2000- 2001. The Assessing Officer in the assessment order held that the assessee neither produced the books of accounts nor other details for verification, inspite of repeated reminders. Therefore, the loss of Rs.5,07,504/- was disallowed. The further claim of the assessee in a sum of 8 Rs.2,25,297/- as ‘expenses’, by preparing yet another profit and loss account, so as to bring the profit further down to Rs.1,25,037/-, was also disallowed. 9. Before the Commissioner of Income Tax (Appeals), certain fresh material were produced for consideration. However, the lease deed was not produced, either at the assessment stage or at the appeal stage. The sources of receipts as claimed by the assessee were not genuine. That none of the documents demonstrated that the expenses as claimed towards Hotel Haveli were in any manner related to M/s. Maruthi Enterprises. Therefore, in the absence of any material to substantiate, the same the appeal was dismissed. 10. The material on record would indicate that the assessee could not substantiate her claim and inspite of granting sufficient opportunity, no evidence of material was led-in, in support of her case. Even the few documents that were relied upon did not assist the 9 assessee in any manner whatsoever. Therefore, based on the available material, the findings were recorded. Under these circumstances, we do not find any ground to interfere with the order passed by the Tribunal. The order passed by the Tribunal is based on the material available on record. Therefore, no interference is called for. 11. Thereafter, the Tribunal passed a common order affirming the findings of the Assessing Officer, as well as the Commissioner of Income Tax (Appeals). The Tribunal was also of the view that even before the Tribunal, the assessee could not substantiate her claim with any tangible evidence or material. Therefore, having considered the Balance Sheet and the Profit And Loss Account, the findings recorded by both the authorities were confirmed. 12. Consequently, the substantial questions of law are answered in favour of the Revenue and against the assessee. The impugned order of the Tribunal is upheld. 10 13. ITA NO.120 OF 2010 : So far as the appeal in ITA No.120 of 2010 is concerned, the same pertains to the asst. year 2001-2002. With regard to the income from the property situated at Jayanagar, Bengaluru, the Assessing Officer found that the assessee has not furnished the description of the property, rental agreement, name and address of the tenants, sources of investments, etc. That the property could not be rented out for an annual rent of Rs.1,66,450/- per annum, without any rental agreement. So far as the business loss is concerned, the assessee stated that she has not maintained any books of accounts, balance sheet or statement of affairs. That no documents have been filed inspite of several reminders and queries from the Assessing Officer. Therefore, the expenses as claimed were disallowed. 14. Even the lease deed through which the property along with furniture, etc., had been given on lease was not produced. Therefore, the mere contention 11 could not be accepted. None of the enclosures filed along with the written submission could be substantiated with the claim of expenditure. A copy of the account of KSFC (Karnataka State Financial Corporation), would indicate that KSFC had given a term Loan on 29.10.1996, in a sum of Rs.23,85,000/- to M/s.Hotel Havelli. The appellant claims to have closed the hotel in the month of October’1998. Therefore, there was no nexus between the expenditure or depreciation claimed by the assessee and the business of subleasing or leasing the property. Therefore, the Commissioner of Income Tax (Appeals) rightly confirmed the computation made by the Assessing Officer. 15. Except the plea of the assessee that the earning was out of the several deals struck with regard to the real estate, nothing is forthcoming on record. Therefore, in the absence of any material on record, 75% of the gross commission receipt was computed as net income. Even though the proposal was conveyed to the 12 assessee, even till the date of the passing of the order, no reply was furnished by the assessee. No books of accounts were produced. Therefore, the computation was made at a sum of Rs.6,57,580/-. It was contended that the material produced before the Assessing Officer was not considered. Therefore, the said material was once again produced before the Commissioner of Income Tax (Appeals), which were considered. 16. Yet another contention advanced was with regard to the jurisdiction to issue a notice under Section– 148 of the Income tax Act. It was noticed that the assessee did not file the return of income in time. She had not filed the return of income till 31.03.2003. She filed the return of income belatedly on 30.09.2003. Therefore, the return was treated as a non-est return, which would consequently indicate that certain income had escaped assessment. Therefore, the Assessing Officer being satisfied with the same, issued a notice under Section–148 of the Income tax Act. Therefore, the said contention was 13 negated. We find no good ground to take a different view of the matter. Hence, we are of the considered view that the reopening of the assessment under Section–148 of I.T. Act is valid and in tune with law. 17. The third substantial question of law is with regard to imposition of interest under Sections 234-A and 234-B of the Income tax Act. In the given facts and circumstances of the case, we do not find any ground to interfere. Moreover, the interest is imposed in terms of the statute. Interpretation has been made in a catena of judgments by this Court as well as the Hon’ble Supreme Court. Hence, we find no error in the imposition of interest under Sections-234-A and 234-B of the Income tax Act. 18. Under these circumstances, the substantial questions of law are answered in favour of the Revenue and against the assessee. Consequently, the appeals are dismissed. The impugned order of the Tribunal passed in 14 ITA No.317 and 318/Bang/2008, dated 25.09.2009, are affirmed. SD/- SD/- JUDGE JUDGE JJ "