THE COMMISSIONER OF INCOME TAX V. SMT YASHODHA SHETTY

ITA/926/2008

AI Insights

The case involves multiple appeals by the Commissioner of Income Tax and the Assistant Commissioner of Income-Tax against Smt. Yashoda Shetty and Shri. Sudheer Prasad Shetty concerning block assessments for the assessment period from April 1, 1996, to September 12, 2002. The appeals were based on the ITAT's decision, which found that the income identified during a survey could not be subjected to block assessment as it was not discovered during the search. The High Court's judgment focused on whether the Tribunal was correct in its interpretation of the law regarding the separation of sales for regular and block assessments.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 728951 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 10-10-2014
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: S PARTHASARATHI
• Assessee Lawyers: K V ARAVIND
• Keywords: Block assessment; Incriminating material; Search and survey; Undisclosed income
• Section: 132; 132(3); 260-A; 158 BB

Judgement Text

" 1 IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 10TH DAY OF OCTOBER 2014 PRESENT THE HON'BLE MR. JUSTICE N. KUMAR AND THE HON’BLE MR. JUSTICE B. MANOHAR ITA No. 926 OF 2008 C/W ITA NOS. 923, 927 & 924 OF 2008 IN ITA NO.926/2008 BETWEEN; 1. THE COMMISSIONER OF INCOME TAX C.R.BUILDING, ATTAVARA MANGALORE 2. THE ASST. COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE, C.R.BUILDING ATTAVARA, MANGALORE. ...APPELLANTS (BY SRI.K.V.ARAVIND, ADVOCATE) AND: SMT. YASHODA SHETTY, ANUGRAHA OPP. BEJAL CHURCH BEJAL, MANGALORE. ...RESPONDENT (BY SRI. S. PARTHASARATHI, ADVOCATE) 2 THIS APPEAL IS FILED UNDER U/S 260-A OF I.T. ACT, 1961 ARISING OUT OF ORDER DATED 30-05- 2008 PASSED IN IT(SS)A NO.28/BNG/2007, FOR THE ASSESSMENT PERIOD 1.4.1996 TO 12.09.2002 PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN AND ALLOW THE APPEAL AND SET ASIDE THE ORDER PASSED BY THE ITAT, BANGALORE IN IT(SS) A NO.28/BNG/2007, DATED 30-5-2008 CONFIRM THE ORDERS OF THE APPELLATE COMMISSIONER AND CONFIRM THE ORDER PASSED BY THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, MANGALORE IN THE INTEREST OF JUSTICE AND EQUITY. IN ITA NO.923/2008 BETWEEN; 1. THE COMMISSIONER OF INCOME TAX C.R.BUILDING, ATTAVARA MANGALORE 2. THE ASST. COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE, C.R.BUILDING ATTAVARA, MANGALORE. ...APPELLANTS (BY SRI.K.V.ARAVIND, ADVOCATE) AND: SHRI. SUDHEER PRASAD SHETTY, ANUGRAHA, OPP. BEJAL CHURCH BEJAL, MANGALORE. ...RESPONDENT (BY SRI. S. PARTHASARATHI, ADVOCATE) THIS APPEAL IS FILED UNDER U/S 260-A OF I.T. ACT, 1961 ARISING OUT OF ORDER DATED 30-05- 2008 PASSED IN IT(SS)A NO.27/BNG/2007, FOR THE ASSESSMENT PERIOD 1.4.1996 TO 12.09.2002 PRAYING TO FORMULATE THE SUBSTANTIAL 3 QUESTIONS OF LAW STATED THEREIN AND ALLOW THE APPEAL AND SET ASIDE THE ORDER PASSED BY THE ITAT, BANGALORE IN IT(SS) A NO.27/BNG/2007, DATED 30-5-2008 CONFIRM THE ORDERS OF THE APPELLATE COMMISSIONER AND CONFIRM THE ORDER PASSED BY THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, MANGALORE IN THE INTEREST OF JUSTICE AND EQUITY. IN ITA NO.927/2008 BETWEEN; 1. THE COMMISSIONER OF INCOME TAX C.R.BUILDING, ATTAVARA MANGALORE 2. THE ASST. COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE, C.R.BUILDING ATTAVARA, MANGALORE. ...APPELLANTS (BY SRI.K.V.ARAVIND, ADVOCATE) AND: SMT. YASHODA SHETTY, ANUGRAHA, OPP. BEJAL CHURCH BEJAL, MANGALORE. ...RESPONDENT (BY SRI. S. PARTHASARATHUI, ADVOCATE) THIS APPEAL IS FILED UNDER U/S 260-A OF I.T. ACT, 1961 ARISING OUT OF ORDER DATED 30-05- 2008 PASSED IN IT(SS)A NO.30/BNG/2007, FOR THE ASSESSMENT PERIOD 1.4.1996 TO 12.09.2002 PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN AND ALLOW THE APPEAL AND SET ASIDE THE ORDER PASSED BY THE ITAT, BANGALORE IN IT (SS) A NO.30/BNG/2007, DATED 30-5-2008 CONFIRM THE ORDERS OF THE 4 ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, MANGALORE IN THE INTEREST OF JUSTICE AND EQUITY. IN ITA NO. 924/2008 BETWEEN; 1. THE COMMISSIONER OF INCOME TAX C.R.BUILDING, ATTAVARA MANGALORE 2. THE ASST. COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE, C.R.BUILDING ATTAVARA, MANGALORE. ...APPELLANTS (BY SRI.K.V.ARAVIND, ADVOCATE) AND: SRI. SUDHEER PRASAD SHETTY, ANUGRAHA, OPP. BEJAL CHURCH BEJAL, MANGALORE. ...RESPONDENT (BY SRI. S. PARTHASARATHI, ADVOCATE) THIS APPEAL IS FILED UNDER U/S 260-A OF I.T. ACT, 1961 ARISING OUT OF ORDER DATED 30-05- 2008 PASSED IN IT(SS)A NO.29/BNG/2007, FOR THE ASSESSMENT PERIOD 1.4.1996 TO 12.09.2002 PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN AND ALLOW THE APPEAL AND SET ASIDE THE ORDER PASSED BY THE ITAT, BANGALORE IN IT(SS) A NO.29/BNG/2007, DATED 30-5-2008 CONFIRM THE ORDERS OF THE APPELLATE COMMISSIONER AND CONFIRM THE ORDER PASSED BY THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, MANGALORE IN THE INTEREST OF JUSTICE AND EQUITY. 5 THESE APPEALS COMING ON FOR HEARING THIS DAY, N. KUMAR, J. DELIVERED THE FOLLOWING:- COMMON JUDGMENT The Revenue has preferred these appeals against the order passed by the Income Tax Appellate Tribunal (hereinafter referred as ‘Tribunal’) 2. All these appeals are preferred against the common order passed by the Tribunal where a common question of law is involved. Therefore, they are taken up for consideration together and disposed of by this common judgment. 3. The common substantial question of law which is framed in this appeal is as under:- “Whether the Tribunal was correct in holding that after the search and in the consequential survey it was discovered that the assessee had adopted a modus operandi where there was separation of sales which could be brought to tax in regular assessments and not in Block assessment?” 6 4. A Search under Section 132 of the Income Tax Act was conducted on 12.09.2002 in the residential premises of the Assessee. As per the copy of the panchanama, the search was temporarily concluded on 12.09.2002. An order under Section 132(3) was passed in respect of first floor of the residence. The search was again commenced on 07.10.2002. It was temporarily concluded on 07.10.2002. As per the copy of the panchnama dated 07.10.2002, an order under Section 132(3) was passed wherein inventorised jewelry was kept in the safe locker under the master bedroom of the Assessee. Documents were also inventorised. It show the said search was concluded on 07.10.2002. The jewelry which was kept under the custody of the Assessee was also inventorised. Another panchanama was drawn on 08.11.2002, in respect of search, which was commenced at 12.10 PM and concluded at 1.00 PM. During the proceedings conducted on 08.11.2002, statement of Sri. Sudheer Prakash Shetty was recorded 7 the last panchanama was drawn on 08.11.2002. Statement of Sri. K. Balakrishna was recorded on 20.11.2002. Such statement was not recorded during the continuation of search proceedings and it is clear from the aforesaid materials no incriminating materials were seized during the said search. 5. It is not in dispute that on 12.09.2002, a survey was conducted in the business premises of the Assessee. During which incriminating materials were identified and they were impounded. Such material contained the extract of savings bank account No.5612 which was in the name of Balakrishna K. Shetty. His statement was recorded on 12.09.2002. The said bank account contained heavy deposits and withdrawals. After going through the said statement, the assessing authority came to the conclusion that this bank account contained transactions related to the Assessee and it contained deposits in respect of unaccounted sales and withdrawals. Therefore, he estimated the undisclosed income on the basis of the deposits made in the bank 8 account and applied a certain rate of profit and computed the undisclosed the income. Therefore a Block assessment order came to be passed. Aggrieved by the said order the assessee preferred an appeal. 6. The first appellate authority held the undisclosed income has been computed on the basis of the documents found during the course of survey which is not permissible and therefore, it set aside the said order. Aggrieved by the said order the revenue has preferred an appeal to the Tribunal. 7. The Tribunal upholding the order of the appellate authority after referring to the various judgments and after noticing Section 158 BB prior to amendment and subsequent to amendment held the income computed in the hands of the Assessee as undisclosed income could not have been taxed under the block assessment and the same has to be considered for regular assessment. As the said income 9 was not detected during the search. Aggrieved by the said order of the Tribunal the revenue is in appeal. 8. We have heard the learned counsel for tlhe parties. 9. It is not in dispute that during the search no undisclosed income was detected. No seizure of incriminating materials was made. It is only in the course of survey, the incriminating material was found. That material is not relatable to any incriminating material found during survey. Therefore, on the basis of the incriminating material found in the course of survey merely because the same was put to the Assessee and his statement was recorded subsequent to the search, the same cannot be held to be relatable to the Assessee. Therefore the authorities were justified in holding that the said material found in the course of survey can become the subject matter of regular assessment and it cannot become the subject matter of Block assessment. 10 In that view of the matter we do not see any merits in these appeals. The substantial question of law is answered in favour of the Assessee and against the Revenue. Appeals are dismissed accordingly. Sd/- JUDGE. Sd/- JUDGE. Bsv "