THE COMMISSIONER OF INCOME TAX V. SMT T MANJULA

ITA/485/2009

AI Insights

The case revolves around an Income Tax Appeal filed by the Commissioner of Income-Tax and the Deputy Commissioner of Income-Tax against Smt. T. Manjula, the legal heir of the late A. Thimmaiah Reddy. The appeal challenged the decision of the Income Tax Appellate Tribunal, Bangalore, which had dismissed the Revenue's appeal against the order setting aside the block assessment made on the deceased's legal heirs. The Tribunal's decision was based on the grounds that the block assessment proceedings could not be initiated against a deceased person and that the legal requirements for such proceedings under Section 158-BD of the Income Tax Act were not met.

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 728886 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 06-02-2015
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Assessee Lawyers: K V ARVIND
• Keywords: Block assessment; Income Tax; Legal heirs; Search and seizure; Undisclosed income
• Section: 132; 158 BD; 260-A; 158(BC); 158 BFA(2)

Judgement Text

" 1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 06TH DAY OF FEBRUARY, 2015 PRESENT THE HON' BLE MR. JUSTICE N.KUMAR AND THE HON' BLE MR. JUSTICE B. VEERAPPA INCOME TAX APPEAL No.485/2009 BETWEEN: 1. THE COMMISSIONER OF INCOME-TAX C.R. BUILDING QUEENS ROAD BANGALORE. 2. THE DY. COMMISSIONER OF INCOME-TAX (Inv) CIRCLE-5(1) BANGALORE. ... APPELLANTS (BY SRI. K.V. ARVIND, ADVOCATE) AND: SMT. T. MANJULA D/O. LATE SRI. A. THIMMAIAH REDDY “NAGENDRA NILAYA” BANASAVADI, RAMAMURTHY NAGAR BANGALORE. ... RESPONDENT 2 (RESPONDENT SERVED) THIS ITA IS FILED UNDER SECTION 260-A OF THE INCOME TAX ACT, 1961 ARISING OUT OF ORDER DATED 24.04.2009 PASSED IN IT(SS)A NO.76/BANG/2008, FOR THE BLOCK ASSESSMENT PERIOD 1.4.1989 TO 24.6.1999 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.76/BANG/2008, DATED 24-4-2009 AND CONFIRM THE ORDER OF THE APPELLATE COMMISSIONER AND CONFIRMING THE ORDER PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX(INV), CIRCLE-5(1), BANGALORE, IN THE INTEREST OF JUSTICE AND EQUITY. THIS ITA COMING ON FOR HEARING THIS DAY, B.VEERAPPA J., DELIVERED THE FOLLOWING: JUDGMENT The above appeal is filed by the Revenue against the order dated 24.4.2009 made in IT(SS)A No.76/BANG/2008 by the Income Tax Appellate Tribunal, Bangalore, holding that the assessment as framed on the assessee as legal heirs are incorrect and not valid in law and also on the ground that the proceedings for block assessment could not have been initiated against a dead person. 3 2. A search was conducted under the provisions of Section 132 of Income Tax Act, 1961 (for short hereinafter referred to as ‘the Act’) on 16.04.1999 in the residence of late A. Thimmaiah Reddy by authorization issued in the name of Smt. Muniyamma his wife and legal representative, as she was in occupation of his residence. The income earned and the property acquired by late A. Thimmaiah Reddy had not been disclosed. Therefore, it was treated as undisclosed income and hence the proceedings were initiated under the provisions of Section 158-BC r/w Section 158- BD of the Act against late A. Thimmaiah Reddy. The Assessing Authority after considering the entire material on record has passed an order on 30.04.2001 for the block assessment period from 1.4.1989 to 24.6.1999 levying tax, surcharge and also directed the initiation of penalty under the provisions of Section 158-BFA(2) of the Act. 3. Against the said order passed by the Assessing Authority, one of the legal representative of late A. Thimmaiah Reddy filed 4 ITA No.7/CIT(A)-V / 2008-2009 before the Commissioner of Income Tax (Appeals) V, Bangalore, who after hearing both the parties, by an order dated 19.09.2008 was pleased to allow the appeal and set aside the order passed by the Assessing Authority. 4. The Revenue filed appeal before the Income Tax Appellate Tribunal. The Tribunal after hearing both the parties by its order dated 24.4.2009 has dismissed the appeal and recorded a finding that insofar as the immovable properties are concerned, they are covered by the Will and the Will still remains to be executed. From the date of the death of Sri A Thimmaiah Reddy i.e., 17.6.1997 any income from the property will have to be assessed in the hands of the executor of the Will and not as the assessee is the legal heir, because the Will is still not acted upon by the executors. The assessee, though by virtue of the Will become entitled to the property consequential to the execution of the Will, the assessee could not be said to be in enjoyment of the property as owner. Therefore, the Tribunal held that the assessments as 5 framed on the assessee or the legal heirs are incorrect and not valid in law. The Tribunal also held that the term of ‘Block Period’ as defined under the Provisions of Section 158-B(a) of the Act, requires ten assessment years preceding the previous year in which search was conducted under Section 132 of the Act or any requisition was made under the provisions of Section 132-A of the Act, and includes in the previous year and search was conducted or requisition made, the period up to the date of commencement of such search, or as the case may be, the date of such requisition. In the present case, going backwards from the date of search, had collapsed after two years because late A. Thimmaiah Reddy had died on 17.6.1997. Therefore, the condition of block period having not been satisfied, the assessment made by the Assessing Authority is bad in law. Therefore, the Tribunal dismissed the appeal and confirmed the order passed by the Commissioner of Income Tax (Appeals). Aggrieved by the said order, Revenue has preferred the present appeal. 6 5. The substantial question of law that arises for our consideration in the present appeal is as under :- “Whether the Tribunal was correct in holding that the undisclosed income including bank deposits are not liable to be taxed in hands of the legal representatives of the assessee contrary to Section 159 of the Act?” 6. We have heard the learned counsel for the parties to the lis. Admittedly as on the date of search i.e., 16.04.1999 - A. Thimmaiah Reddy was not alive. His wife and other legal representatives were residing in his premises. It is not clear that in whose name search warrant was issued. Even if search was conducted in the premises of the wife, if incriminating materials were found in respect of the late A. Thimmaiah Reddy and proceedings are initiated against late A. Thimmaiah Reddy, the conditions stipulated in Section 158-BD have to be satisfied. The material on record, do not disclose the satisfaction of the said legal requirements. The material on record shows that the search 7 warrant was issued in the name of Smt. Muniyamma, who was in possession and occupation of the residential premises of late A. Thimmaiah Reddy, but there was nothing on record to show that the requirements under the provisions of Section 158-BD of the Act have been complied with. In those circumstances, the order passed by the Tribunal specifying the Block Assessment Year against the deceased A. Thimmaiah Reddy cannot be found fault with and there is a finding of fact recorded by the Tribunal, such a finding of fact cannot be interfered with by exercising powers under the provisions of Section 260-A of the Income Tax Act, 1961. Accordingly, the substantial question of law is answered in favour of the assessee and against the Revenue. 7. In view of the fact, the requirements of Section 158-BD of the Act are not complied with, admittedly the orders passed by the authorities concerned in respect of the entire block assessment proceedings which are initiated, is liable to be set aside. 8 Therefore, the block assessment order is liable to be set aside. Accordingly, the appeal is dismissed. Sd/- Judge Sd/- Judge NG* "