Smt. Sunkamma, W/o. Late Sri. Krishna Reddy V. The Assistant Commissioner of Income Tax, Central Circle \\u2013 1(3)

ITA/721/2008

AI Insights

The case involves Smt. Sunkamma, the appellant, who appealed against the order of the Income Tax Appellate Tribunal (ITAT) which confirmed the order of the appellate authority and partly confirmed the order of the assessing authority under section 158BD read with section 143(3) of the Income Tax Act, 1961, for the block assessment years 1990-1991 to 2000-01. The main legal contention was whether the Assessing Officer was justified in invoking section 158BD without recording his satisfaction in writing, a requirement upheld by the Supreme Court in the case of Manish Maheshwari vs. ACIT. The Tribunal's decision was challenged on the grounds that it misread the Supreme Court's judgment, which led to the High Court's decision in favor of the appellant due to the procedural lapse in recording satisfaction under section 158BD.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 794118 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 09-09-2014
• Assessment Year: misc
• Other Referred Cases: Manish Maheshwari vs. ACIT [(2007) 289 ITR 341]
• 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: Block assessment; Undisclosed income; Satisfaction Condition; Senior Citizen Rebate
• Section: 143(3); 158BC; 158BD; 158 BD; 260-A

Judgement Text

" 1 IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 9TH DAY OF SEPTEMBER 2014 PRESENT THE HON’BLE MR.JUSTICE N.KUMAR AND THE HON’BLE MRS.JUSTICE RATHNAKALA I.T.A.No.721/2008 BETWEEN: Smt.Sunkamma, W/o.Late Sri.Krishna Reddy, No.993/1, 2nd Cross, 1st Main, New Tippasandra, Bangalore – 560 075. …APPELLANT (By Sri.A.Shankar & M.Lava, Advs.,) AND: The Assistant Commissioner of Income Tax, Central Circle – 1(3), C.R.Building, Queens Road, Bangalore – 560 001. …RESPONDENT (By Sri.K.V.Aravind, Adv.,) ***** 2 This appeal is filed under Section 260-A of I.T.Act, 1961 arising out of order dated 29.02.2008 passed in IT(SS)A 137/BANG/2004, for the Block Assessment year 1990-1991 to 2000-01, praying that this Court may be pleased to formulate the substantial questions of law stated therein and allow the appeal and set aside the order passed by the ITAT, passed in IT(SS)A 137/Bang/2004 dated 29.2.2008 in the interest of justice and equity. This appeal coming on for Hearing this day, N.KUMAR. J., delivered the following: J U D G M E N T The assessee has preferred this appeal against the order passed by the Tribunal which has dismissed the appeal confirming the order passed by the appellate authority which has partly confirmed the order passed by the assessing authority under section 158(BD) read with section 143(3) of the Income Tax Act, 1961. 2. This appeal was admitted to consider the following substantial questions of law: 3 26. Whether the Tribunal was justified to hold that Assessing Officer has rightly invoked provisions of 158BD of the Income Tax act when admittedly there was no satisfaction recorded which is a mandatory condition as upheld by the apex court in Manish Maheshwari 289 ITR 341? 28. Whether on the facts of the case was the Tribunal justified in law holding the cash has not been explained and is the finding of the Tribunal not perverse. 29. Whether the Tribunal was justified in not considering senor citizen rebate under section 88B for the assessment year 2001-02 on the facts and circumstances of the case? Reframed Question of law: 27. Whether while examining the deficit cash, the Tribunal was justified in law in not giving credit of `.52,000/- 4 being notional deduction which does not result in cash outflow, and consequentially available to explain the cash? 3. The main grievance of the assessee was that the assessing authority has not recorded his satisfaction under section 158BD which is a condition precedent for proceeding further in the matter. The Tribunal dealing with the said question has observed that the ratio of MANISH MAHESHWARI vs. ACIT [(2007) 289 ITR 341)] (SC) is not applicable to the facts of the case because in the said case, satisfaction was missing. In the instant case, there is sufficient material to justify the satisfaction on the part of the Assessing Officer so as to take action under section 158BD of the Act, which was gathered in the course of search in case of Muniswamy Reddy, son of the assessee. Therefore, the objection regarding jurisdiction under section 158(BD) was over-ruled. The Hon’ble Apex Court in the aforesaid Manish Maheshwari case has held as under: 5 “Section 158(BD) however provides for taking recourse to a block assessment in terms of section 158BC in respect of any other person, the conditions precedent wherefor are (i) satisfaction must be recorded by the Assessing Officer that any undisclosed income belongs to any person, other than the person with respect to whom search was made under section 132 of the Act; (ii) the books of account or other documents or assets seized or requisitioned had been handed over to the Assessing Officer having jurisdiction over such other person; and (iii) the Assessing Officer has proceeded under section 158BC against such other person.” Further it has held as under: “as the Assessing Officer has not recorded his satisfaction, which is mandatory; nor has he transferred the case to the Assessing Officer having 6 jurisdiction over the matter, we are of the opinion that the impugned judgments of the High Court cannot be sustained, which are set-aside accordingly.” Therefore, it is a case of the Tribunal misreading the judgment of the Hon’ble Apex Court. Even if there are sufficient material to justify the satisfaction on the part of the Assessing Authority so as to take action under section 158BD of the Act, on going through the said material the Assessing Authority has to record his satisfaction in writing, which is a condition precedent for proceeding further in the matter. Admittedly in this case, the satisfaction is not recorded in writing and therefore, the entire proceedings initiated are vitiated and the orders passed by the Authorities are illegal. Accordingly, the first substantial question of law is answered in favour of the assessee and against the revenue. In view of the finding as above, it is not 7 necessary to go into the other substantial questions of law as the entire order is wiped out on the question of jurisdiction. Accordingly, the appeal is dismissed. Ordered accordingly. Sd/- JUDGE Sd/- JUDGE Bss "