THE COMMISSIONER OF INCOME TAX V. SREENIVASA ENTERPRISES

ITA/755/2008

AI Insights

The case revolves around an appeal by the Commissioner of Income Tax and the Assistant Commissioner of Income Tax against Sreenivasa Enterprises, challenging the ITAT's decision which favored the respondent. The core issue was the procedural validity of the initiation of proceedings under Section 158BD of the Income Tax Act, 1961, where the Assessing Officer had not recorded any satisfaction in writing regarding undisclosed income belonging to the respondent. The High Court referenced the Supreme Court's decision in Manish Maheshwari vs. Assistant Commissioner of Income Tax, which emphasized the necessity of recording satisfaction and transferring the case to the appropriate Assessing Officer.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 728963 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 16-09-2014
• Assessment Year: misc
• Other Referred Cases: MANISH MAHESHWARI vs ASSISTANT COMMISSIONER OF INCOME TAX
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: A SHANKAR; M LAVA
• Assessee Lawyers: E I SANMATHI
• Keywords: Assessment Order; Block assessment; Income tax appeal; Satisfaction Record; Undisclosed income
• Section: 132; 158BC; 158BD; 132A; 260-A

Judgement Text

" 1 IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 16th DAY OF SEPTEMBER, 2014 PRESENT THE HON' BLE MR. JUSTICE N.KUMAR AND THE HON' BLE MRS. JUSTICE RATHNAKALA Income Tax Appeal No 755/2008 BETWEEN 1.THE COMMISSIONER OF INCOME TAX 284, PARK VIEW BUILDING, 4TH MAIN, P.J. EXTENSION, DAVANGERE-2. 2.THE ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE, BELGAUM. … APPELLANTS (BY SRI E.I. SANMATHI, ADVOCATE) AND SREENIVASA ENTERPRISES, C/O SRI S. RUDRAMUNIYAPPA, OPPOSITE TO KEB OFFICE, THYAGARAJANAGAR EXTENSION, CHITRADURGA ROAD, CHALLAKERE. ... RESPONDENT (BY SRI A. SHANKAR & M.LAVA, ADVOCATES) … This Income Tax Appeal is filed under Section 260-A of Income Tax Act, 1961 praying to formulate the 2 substantial questions of law and to allow the appeal and set aside the Order dated 20.12.2007 passed by the ITAT, Panaji Bench in IT (SS) A. No. 03/PNJ/2005 and confirm the order passed by the Assessing Authority. This Income Tax Appeal coming on for Hearing this day, N. Kumar J., delivered the following: JUDGMENT The revenue has preferred this appeal challenging the order passed by the Tribunal holding that as the Assessing Authority has not recorded any satisfaction in writing before initiating proceedings under Section 158BD of the Income Tax Act, 1961 and the very initiation of proceedings and the consequential orders are all bad in law. 2. The revenue has raised in this appeal, the following substantial questions of law: “1. Whether the reasons is to be recorded in writing before issue of notice under Section 158 BD of the Act? 2. Whether the reasons recorded in the case of the assessment order itself would constitute the 3 ‘satisfaction’ as contemplated under Section 158 BD of the Act?” 3. The Apex Court in the case of MANISH MAHESHWARI –vs- ASSISTANT COMMISSIONER OF INCOME TAX reported in (2007) 289 ITR 341 has categorically held at paras-11 and 22 as under: “11. The condition precedent for invoking a block assessment is that a search has been conducted under section 132, or documents or assets have been requisitioned under section 132A. The said provision would apply in the case of any person in respect of whom search has been carried out under section 132A or documents or assets have been requisitioned under section 132A. Section 158BD, 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 4 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. 22. As the Assessing Officer has not recorded his satisfaction, which is mandatory; nor has he transferred the case to the Assessing Officer having 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. The appeals are allowed. However, in 5 the facts and circumstances of the case, there shall be no order as to costs.” 4. In view of the aforesaid law declared by the Apex Court, the substantial questions of law raised in this appeal are answered in favour of the assessee and against the revenue. Accordingly, the appeal is dismissed. 5. Office is directed to show the name of Sri E.I. Sanmathi as the Counsel appearing for the revenue and to return the original records produced in this case by the learned Counsel. Sd/- Judge Sd/- Judge Nsu/- "