SRI C R RAGHU V. THE INCOME TAX OFFICER

ITA/787/2018

AI Insights

This case involves an appeal by the assessee, Sri C.R. Raghu, against the order of the Income Tax Appellate Tribunal (ITAT) which upheld the addition of unsecured loans to the total income of the assessee for the assessment year 2012-2013. The Assessing Officer had deemed these loans as bogus without proper opportunity for cross-examination of some creditors, which raised issues of natural justice. The ITAT's decision was challenged on grounds that the additions were made purely on suspicion and without proper evidence, particularly concerning the timing of the loan receipts. The High Court of Karnataka, after hearing the arguments, decided to remit the matter back to the Assessing Officer, allowing the assessee to present further evidence regarding the timing of the loan receipts.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 693785 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 28-11-2022
• Assessment Year: misc
• Laws Referred To: Income Tax Act 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: M DILIP
• Assessee Lawyers: SHEETAL BORKAR
• Keywords: Bogus loans; Cross Examination; Cross-examination; Income tax appeal; Natural Justice; Unsecured loans
• Section: 260-A

Judgement Text

" - 1 - ITA No. 787 of 2018 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 28TH DAY OF NOVEMBER, 2022 PRESENT THE HON'BLE MR. JUSTICE P.S.DINESH KUMAR AND THE HON'BLE MR. JUSTICE T.G.SHIVASHANKARE GOWDA INCOME TAX APPEAL NO. 787 OF 2018 BETWEEN : SRI C.R.RAGHU SON OF SRI C.V.RAJAPPA AGED 36 YEARS RESIDING AT NO.42/2 8TH MAIN, 5TH CROSS, 5TH MAIN RAJMAHAL VILAS EXTENSION BANGALORE-560 080. PAN:ABOPR2185C …APPELLANT (BY SMT. SHEETAL BORKAR, ADVOCATE FOR SHRI. S.PARTHASARATHI, ADVOCATE) AND : THE INCOME TAX OFFICER WARD 6(2)(2) BMTC COMPLEX, 4TH FLOOR 80 FEET ROAD KORAMANGALA 6TH BLOCK BANGALORE-560 095. …RESPONDENT (BY SHRI. M.DILIP, ADVOCATE FOR SHRI. K.V. ARAVIND, STANDING COUNSEL) . . . . Digitally signed by YASHODHA N Location: HIGH COURT OF KARNATAKA - 2 - ITA No. 787 of 2018 THIS INCOME TAX APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED: 18.07.2018 PASSED IN ITA NO. 2145/BANG/2017, FOR THE ASSESSMENT YEAR 2012-2013, PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN AND ETC. THIS ITA, COMING ON FOR FINAL HEARING, THIS DAY, P.S.DINESH KUMAR J., DELIVERED THE FOLLOWING: JUDGMENT This appeal by the assessee directed against the order dated July 18, 2018 in ITA No.2145/Bang/2017 passed by the Income Tax Appellate Tribunal ('ITAT' for short), has been admitted to consider the following three questions of law: 1. Whether the Tribunal is justified in upholding the addition made in respect of the 41 parties mentioned at Sl. Nos. 1 to 41 pages 11 and 12 of the assessment order which addition was made by the AO without providing an opportunity of cross examination of the 7 parties who had denied any balance in their accounts as on 31.03.2012 without appreciating there was non- compliance with the principles of natural justice? 2. Whether the Tribunal's order upholding the addition in respect of 41 creditors as mentioned at pages 11 and 12 of the assessment order and also that of Sri Prakash which was made purely on suspicion, surmises and conjectures is perverse in the eye of law and unsustainable? - 3 - ITA No. 787 of 2018 3. Whether the Tribunal is justified in law in upholding the addition of closing balances as on 31.03.2012, even though the said closing balances pertained to receipts of earlier previous years and not relating to the previous year relevant to the current assessment year 2012-13? 2. Heard Ms.Sheetal Borkar, learned Advocate for the assessee and Shri. Dilip M., learned Advocate for the Revenue. 3. Brief facts of the case are, for the A.Y. 2012-13, the Assessing Officer held that there were unsecured loans of Rs.3,49,77,112/-. Notices were issued to the creditors. Some of the notices were not served as proper addresses were not available. The Assessing Officer held that the unsecured loans were bogus and added the entire amount to the total income of the assessee. On appeal, the CIT(A), partly allowed the appeal and ITAT confirmed CIT(A)'s order. 4. Smt. Sheetal Borkar submitted that the Assessing Officer gets jurisdiction only if the loan amount - 4 - ITA No. 787 of 2018 is received during the A.Y. 2012-13 (financial year 2011- 12). The Assessing Officer has recorded that the unsecured loans are bogus. Such a finding in respect of the loans which were received prior to 01.04.2011 are perverse because, Assessing Officer had no jurisdiction to consider and pass any order. 5. The said proposition is not disputed by Shri. Dilip. However, he contended that there is no clarity as to whether there was any opening balance as on 01.04.2011. In the remand report called for by the CIT(A), the Assessing Officer has clearly reported that the assessee had claimed that the amount was not received in the relevant assessment year, but no evidence was produced by the assessee to substantiate the contention that the loans were received in the earlier financial years. Thus, the controversy hinges around the receipt of money in the relevant financial year namely 2011-12. Unless relevant material is made available before the Assessing - 5 - ITA No. 787 of 2018 Officer to substantiate assessee's contention that the alleged loans were received prior to 01.04.2011 and there was a credit balance in the books of accounts as on 01.04.2011, the findings of fact recorded by all three authorities below cannot be sustained. 6. In that view of the matter, in our view, it is just and appropriate to remit the matter to the file of the Assessing Officer granting liberty to the assessee to furnish the material in support of his contention. 7. Hence, the following: ORDER (a) Appeal is allowed. (b) Matter is remitted to the of Assessing Officer reserving liberty to the assessee to produce any material to show that alleged amount was received prior to 01.04.2011. (c) It is clarified that if the loan amount is received in the financial year between 01.04.2012 and 01.03.2013, - 6 - ITA No. 787 of 2018 the Assessing Officer shall be at liberty to satisfy himself with regard to the veracity of the loan. Since the matter is remanded, questions of law are not answered. No costs. Sd/- JUDGE Sd/- JUDGE SPS List No.: 1 Sl No.: 71 "