Sri B. Gajendra Kumar V. The Income-Tax Officer, Ward-1(1)

ITA/151/2013

AI Insights

The case involves Sri B. Gajendra Kumar, the proprietor of M/s. Sri Durga Credits and Investments, who appealed against the penalties levied by the income tax authorities for the assessment years 2000-01 to 2006-07. Following a survey that uncovered unaccounted transactions, the assessee revised his returns, declaring additional income to avoid litigation. However, penalties were imposed for discrepancies related to sundry creditors and interest claims, which the assessee contested. The lower appellate authorities and the Tribunal dismissed his appeals, leading to the current appeal before the High Court, which also dismissed the appeal, affirming the penalties.

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 794236 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 02-12-2013
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: K V ARAVIND
• Assessee Lawyers: S PARTHASARATHI; P MALLAHAROAK; SHEETAL BORKAR
• Keywords: Assessment; Income Tax; Notional income; Penalty; Survey; Unaccounted transactions
• Section: 148; 142(1); 143(2); 271(1)(c); 274; 133-A; 260-A

Judgement Text

" - 1 - IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 2ND DAY OF DECEMBER 2013 P R E S E N T THE HON’BLE MR. JUSTICE N. KUMAR A N D THE HON’BLE MRS. JUSTICE RATHNAKALA INCOME TAX APPEAL NOS.151 – 157 OF 2013 BETWEEN: SRI B. GAJENDRA KUMAR, AGED ABOUT 47 YEARS, SON OF LATE D. VASUDEVA ACHARYA, PROP: M/S. SRI DURGA CREDITS & INVESTMENTS, “VASUDEVA” MAIN ROAD, HALEYANGADY – 574 146. ... APPELLANT. (common in all Appeals) (BY SRI S. PARTHASARATHI, SRI P.DINESH MALLAHARAOK & MRS. SHEETAL BORKAR, ADVS.) AND: THE INCOME-TAX OFFICER, WARD-1(1), C.R. BUILDING, ATTAVAR, M.G.ROAD, MANGALORE – 575 001. ...RESPONDENT. (common in all Appeals) (BY SRI K.V. ARAVIND, ADV.) - 2 - THESE APPEALS ARE FILED UNDER SEC.260-A OF I.T. ACT, 1961, ARISING OUT OF ORDER DATED 30/11/2012 PASSED IN ITA NOS.1212 TO 1218/BANG/2009, FOR THE ASSESSMENT YEAR 2000-01 TO 2006-07, PRAYING THAT THIS HON'BLE COURT MAY BE PLEASED TO: I. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN, II. ALLOW THE APPEAL AND SET ASIDE THE ORDER OF THE ITAT DATED 30/11/2012 BEARING ITA NOS.1212 TO 1218/BANG/2009, IN THE INTEREST OF JUSTICE AND EQUITY. THESE APPEALS ARE COMING ON FOR ADMISSION THIS DAY, N. KUMAR, J., DELIVERED THE FOLLOWING: - JUDGMENT These appeals are preferred challenging the order passed by the authorities levying the penalty under Section 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’ for brevity). 2. The assessee is an individual, engaged in the business of money lending at Haleyangady, Dakshina Kannada District under the name and style of M/s.Sri - 3 - Durga Credits and Investments. The assessee filed his return of income for the assessment years 2000 – 01 to 2006 – 07, declaring his income. Subsequently, a survey was conducted at the business premises of the assessee under Section 133 (A) of the Act on 30.08.2006. The authorities found duplicate sets of exercise books, which were seized. Based on the findings of the survey authorities, the case of the assessee was reopened and notices under Section 148 of the Act was issued for the assessment years 2000 – 01 to 2005 – 06 and also notices under Sections 143(2), 142 (1) of the Act, for the assessment year 2006 – 07 was also issued. The assessee filed revised returns of income, declaring the income which had escaped assessment. Assessee though suffered loss in the business, according to him, in order to buy peace in the department and to avoid protracted litigation, offered notional income. Subsequently, a scrutiny assessment was done for the assessment year 2006 – 07 and several - 4 - additions and disallowances were made. Though there was no real income earned by the assessee and he had actually suffered loss, the assessee in the course of the assessment proceedings accepted the additions and disallowances as made by the assessing officer, in order to buy peace with the department and to avoid protracted litigation. Accordingly, he paid tax and interest. Subsequently, notices under Section 274 r/w. Section 271 (1)(c) of the Act were issued to the assessee to show cause as to why penalty under Section 271 (1)(c) should not be initiated for the addition on account of disallowance of the claim of sundry creditors and disallowance of interest paid to the fixed deposit holders as well as interest on gold loans provided. Assessee filed his reply denying all the allegations. Again he reiterated his stand in order to buy peace, though he was not liable to pay any tax, he paid the same. The assessing officer on consideration of the said reply was of the view that not only the defense set up by the - 5 - assessee is not true but it is false. Aggreived by the said order, the assessee preferred an appeal before the lower appellate authority. The lower appellate authority dismissed the appeal by confirming the order of the assessing authority. The assessee again preferred an appeal challenging the order of the lower appellate authority before the Tribunal. The Tribunal on re- appreciation of the entire material on record, dismissed the appeal. Aggrieved by these three orders, the present appeal is filed. 3. Learned Counsel for the assessee assailing the impugned orders contend, ‘though in the exercise books some amount were found, to whom the assessee had advanced loans, he had received neither the interest nor the principal. Therefore, the same was not taken into account and under those circumstances, in order to purchase peace, though not liable to pay tax, he paid the said amount. Merely because the assessee was not - 6 - able to give the particulars of the creditors and agreed to pay the tax on those amounts, again to purchase peace, levy of penalty is not justifiable.’ He further submits that ‘even if the department is not satisfied with the explanation offered by the assessee, unless it is shown to be false, question of imposing penalty will not arise. In the instant case, there is no finding that the explanation offered by the assessee is false and therefore no penalty should have been imposed.’ 4. Learned counsel for the revenue, supported the impugned judgment. 5. It is in this background, when we look at the facts of the case, it is not in dispute that during the course of survey, books were seized, entries pertaining to the unaccounted transaction were recorded. These transactions were not recorded in the account books of the assessee and the income earned from these transaction was not declared in the returns of income - 7 - filed by the assessee. The assessee agreed that the income earned out of the transactions recorded in his books were unaccounted and agreed to offer the same to tax. The assessee was asked to furnish the details of the depositors like name, full addresses, the date of deposit, amount of deposit, rate of interest payable etc. The assessee did not file these details. To a query, the assessee answered by saying that it is true that he has claimed sundry creditors for Rs.21,96,415/- as his income for the year 2000 – 01. He has no objection for disallowing the interest claim of Rs.4,63,000/- made on these deposits in the computation of income filed by him. On consideration of this reply, the Three Facts Finding Authorities have concurrently held that not only explanation offered by the assessee is unacceptable but the said explanation is false and therefore, a case for imposing penalty under Section 271 (1) (c) of the Act is made out. This being purely a question of fact, when Fact Finding Authority have concurrently held that the - 8 - explanation offered by the assessee is false, there is no ground to interfere with the same by this Court. No substantial question of law arises for consideration and appeals are liable to be dismissed. Accordingly, appeals are dismissed. Sd/- JUDGE Sd/- JUDGE nvj "