THE COMMISSIONER OF INCOME TAX V. MR. NAVAL KUMAR CHHABRA

ITA/896/2008

AI Insights

The case involves an appeal by the Commissioner of Income-Tax and the Deputy Commissioner of Income-Tax against the decision of the Appellate Authorities which held that 23 bank accounts belonged to the Hindu Undivided Family (HUF) of the assessee, Mr. Naval Kumar Chhabra, and not to him personally. The revenue challenged the validity of the assessment order which was found to be without jurisdiction as the income from these accounts had been previously disclosed under the Voluntary Disclosure of Income Scheme (VDIS) by the assessee's father, S.P. Chhabra. The Tribunal's decision, which upheld the Appellate Authority's finding, was based on the lack of direct evidence linking the business activities to Mr. Naval Kumar Chhabra personally. The High Court found that the burden of proof was incorrectly placed on the revenue and remitted the matter back to the Tribunal for a fresh examination.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 728926 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 17-11-2014
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961, VDIS Act
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: NAVAL CHHABRA
• Assessee Lawyers: K V ARAVIND
• Keywords: Bank accounts; Block assessment; Hindu Undivided Family; Jurisdiction; Undisclosed income; VDIS declaration; Evidence burden
• Section: 106; 260-A; 158(BC)

Judgement Text

" 1 IN THE HIGH COURT OF KARNATAKA, BANGALORE DATED THIS THE 17TH DAY OF NOVEMBER, 2014 PRESENT: THE HON'BLE Mr.JUSTICE N.KUMAR AND THE HON'BLE Mr.JUSTICE B.MANOHAR INCOME TAX APPEAL NO.896 OF 2008 BETWEEN: 1. THE COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE C.R.BUILDING QUEENS ROAD BANGALORE 2. THE DY.COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE-III C.R.BUILDING QUEENS ROAD BANGALORE ...APPELLANTS (BY SRI.K.V.ARAVIND, ADV.) AND: MR.NAVAL KUMAR CHHABRA NO.93/12, 1ST CROSS NANDIDURGA ROAD BENSON TOWN BANGALORE-560 016 ...RESPONDENT (BY SRI.NAVAL KUMAR CHHABRA {V/O DT:13.10.2014}) 2 THIS APPEAL IS FILED UNDER 260-A OF I.T.ACT, 1961 ARISING OUT OF ORDER DATED 16.05.2008 PASSED IN IT (SS)A NO.15/BNG/2002 & COB NO.7/BNG/2002, FOR THE BLOCK ASSESSMENT PERIOD 1988-89 TO 1998-99 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 PASSED BY THE ITAT BANGALORE IN IT(SS)A NO.15/BNG/2002 & COB NO.7/BNG/2002 (IN IT (SS) A NO.15/BNG/2002, DATED 16.05.2008, CONFIRMING THE ORDER OF THE APPELLATE COMMISSIONER AND CONFIRM THE ORDER PASSED BY THE DEPUTY ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-III, BANGALORE IN THE INTEREST OF JUSTICE AND EQUITY. THIS APPEAL COMING ON FOR HEARING, THIS DAY, N.KUMAR, J., DELIVERED THE FOLLOWING: J U D G M E N T The revenue has preferred this appeal against the concurrent finding recorded by both the Appellate Authorities holding that 23 bank accounts belongs to the Hindu Undivided Family of the assessee and therefore, the said amount cannot be assessed in the hands of the assessee. Accordingly, the order of assessment passed by the Assessing Officer was held to be invalid. 3 2. There was a search in the case of assessee on 11.07.1997, on the basis of some notings found in the premises of the assessee’s accountant’s residence and some vouchers etc., the department conducted enquiries with the bank and found 23 bank accounts. The assessee controls the business in three units in its own proprietary concern ie., Naval Silks, his wife’s Gayathri Silks and his son’s business Vipul Silks. The assessee’s father S.P. Chhabra has admitted his own separate business during the search. The assessee’s father filed a declaration under VDIS in respect of the aforesaid 23 bank accounts claiming it to be that of Hindu Undivided Family. The Assessing Authority by a detailed order found that the said 23 bank accounts actually belongs to the assessee and not to the Hindu Undivided Family as claimed and therefore, it proceeded to pass a block assessment order and levied tax at the rate of 60%. Aggrieved by the said order the assessee preferred an appeal to the Commissioner of Income Tax (Appeals). 4 3. The Appellate Authority proceeded on the footing that when the father of the assessee filed a declaration under VDIS on 29.07.1997 admitting ownership of all the 23 bank accounts and the business transacted through his bank accounts and he also offered the entire credits in his bank accounts and undisclosed turnover for the Assessment Year 1981-82 to 1996-97 and disclosed net profit of little more that Rs. 15,00,000/- and the said VDIS declaration was accepted. The said amounts found in 23 bank accounts cannot be said to be the undisclosed income of the assessee. The Assessing Authority obviously has ignored this vital aspect and has come to a wrong conclusion. When once the income arising out of some sources which is already taxed under the VDIS in somebody’s hand, it cannot again be brought to tax in the hands of another person. It is specifically covered by the VDIS Act and therefore, the order of Assessment passed under Section 158 BC in the hands of assessee was held to be without any jurisdiction and cancelled. Aggrieved by the said order, the revenue preferred an appeal. 5 4. The Tribunal after re-appreciation of the entire evidence on record held Satyapal Chhabra was holding 23 bank accounts from the records found in his bed room. They related to that 23 bank accounts and since he apparently carried on the business with the funds that he received from his father and he having a son, claimed that the business as that of Hindu Undivided Family. The Tribunal observed that this may look like a tax planning, but without any information from the persons who sold goods to the Hindu Undivided Family of Sathyapal Chhabra and the buyers from Satyapal Chhabra to the contrary ie., they were doing business only with Naval Kumar Chhabra to come to a conclusion that the business belonged to the assessee would be difficult and next to impossible. 5. In coming to the said conclusion Tribunal failed to notice that on the date of such claim, Satyapal Chhabra was aged 80 years. He has virtually stopped carrying on business. When once, Satyapal Chhabra claimed after the search that the amounts found in the 23 bank accounts belongs to him and filed a VDIS declaration, it is for 6 Satyapal Chhabra to establish as to whom he has supplied goods and who has made payments. Absolutely, no evidence was placed on record. Unfortunately, the Tribunal has placed the burden of proving the facts on the revenue, the fact which is not within their knowledge. The VDIS declaration subsequently, came to be cancelled. The Tribunal did not note the reasons for cancellation of the certificate issued earlier. It proceeded on the assumption that it is for the revenue to establish by acceptable evidence as to whether the said money belongs to the assessee, the person to whom the assessee had supplied goods and the persons who had paid for the said goods. They are all facts which are within the knowledge of assessee or his father. 6. Section 106 of the Evidence Act makes it clear that when any fact is especially within the knowledge of any person, the burden of proving that fact is upon him. 7. Therefore, the Tribunal committed a serious error in placing the burden of proving the transactions in the name of the assessee on revenue erroneously and 7 consequently, the said order is illegal and requires to be set-aside. Therefore, the proper course would be to set- aside the impugned order, remit the matter back to the Tribunal to look into the matter afresh and find out the evidence adduced by the assessee and his father regarding the status as well as the source of income and then decide the case on merits. It must be pointed out that the First Appellate Authority being the final Court on facts has virtually, not performed its functions in the way, the Appellate Authority should do. Under these circumstances, greater responsibility lies on the Tribunal to re-appreciate the entire evidence on record and pass appropriate orders. 8. For the aforesaid reasons, we are not deciding the substantial question of law framed in this case. Hence we pass the following; ORDER (i) The appeal is allowed. (ii) The impugned orders passed by both the Appellate Authorities are set-aside. 8 (iii) The matter is remitted to the Tribunal for fresh consideration and in accordance with law and in the light of the order passed by this Court. Sd/- JUDGE Sd/- JUDGE GH "