THE COMMISSIONER OF INCOME TAX V. SRI CHANDRAKANT P SANU

ITA/764/2006

AI Insights

The case involves an appeal by the Commissioner of Income Tax and the Income Tax Officer against Sri Chandrakant P Sanu Maruthi Real Estate and Developers concerning the assessment order for the year 1996-97. The primary contention was regarding the deductions claimed by the assessee for compensation paid to tenants for eviction and improvements made by them. The Assessing Officer (AO) initially allowed some deductions but disallowed others, leading to an appeal. The Commissioner of Income Tax (Appeals) and the Tribunal upheld the assessee's claims, which led to the Revenue's appeal in the High Court. However, the appeal was dismissed as infructuous due to the reopening of the assessment and issuance of a fresh assessment order.

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 729248 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 24-07-2012
• Assessment Year: misc
• Other Referred Cases: Income-Tax Officer and another -vs- K L Srihari (HUF) and others
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: A SHANKAR; M LAVA
• Assessee Lawyers: E INDRAKUMAR
• Keywords: Assessment Order; Capital Gains; Eviction; Income Tax; Compensation Deduction
• Section: 148; 260A

Judgement Text

"1 IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 24TH DAY OF JULY 2012 PRESENT THE HON'BLE MR. JUSTICE K.SREEDHAR RAO AND THE HON'BLE MR. JUSTICE B.MANOHAR ITA No.764/2006 BETWEEN : 1 THE COMMISSIONER OF INCOME TAX MANGALORE. 2 THE INCOME TAX OFFICER CIRCLE-1(3), MANGALORE. ...APPELLANTS (By Sri. E SANMATHI INDRA KUMAR, ADV.) AND : SRI CHANDRAKANT P SANU MARUTHI REAL ESTATE AND DEVELOPERS, D.No.49-776-15, SANU PALACE, KODIALBAIL MANGALORE. ...RESPONDENT (By Sri. A SHANKAR & Sri M LAVA, ADVs.) 2 This ITA is filed under Section 260A of the Income Tax Act, 1961, praying to set aside the order passed by ITAT, Bangalore Bench `A' and confirm the assessment order passed by the Assessing Authority. This ITA coming on for hearing this day, K.SREEDHAR RAO, J, delivered the following: JUDGMENT The AO passed the assessment order against the respondent/asseessee for the assessment year 1996-97. The assessee had claimed deduction towards the compensation paid to the tenants for eviction and also for the improvement effected by the tenants while evicting the premises. 2. It is the contention of the assessee that he paid the compensation of Rs.3 lakhs to Sri Janardhan and Rs.26,20,000/- to Sri Narayana and seven others. The assessee had entered into an agreement with one Nazareth for purchase of property. The agreement is still at executory stage. In respect of the M G Road property, the assessee had purchased it by a sale deed. He entered into an agreement to sell in respect of the properties of Nazareth, M G Road, M/s.Medifare Complex and Sri Ashok Kumar Chout for total consideration of Rs.21 lakhs and further in respect of Nazareth, he entered into an agreement with Motisham Complexes Pvt. Ltd. 3 and others at Rs.60 lakhs and Sri K Ahmed, Sri K Ashraf and Sri K Aboobaker for Rs.50 lakhs. It is the contention of the assessee that he had paid the compensation of Rs.26,20,000/- for evicting the tenants for effecting sale deed in favour of the purchaser. 3. The AO from the books of accounts of the assessee found that a credit of Rs.30 lakhs invested is unexplained income and brought to assessment. In respect of the compensation paid to the tenants, the AO allowed the deduction of Rs.11,20,000/- and disallowed the payment of compensation of Rs.15 lakhs. 4. In respect of the transaction entered into with Sri Janardhan, the assessee had stated that he had paid the compensation of Rs.3 lakhs. The assessee had produced an agreement. The said agreement was not signed by Sri Janardhan. The AO therefore held that the amount of compensation stated to have been paid to Sri Janardhan (tenant) is not held to be proved and disallowed the deduction. 5. Before the CIT(A), the assessee had produced the original agreement entered into with Sri Janardhan and also an affidavit of 4 attesting witness, Sri H Rathindranath, who had sworn to the effect that the compensation amount stated in the agreement was paid to Sri Janardhan by the assessee. The CIT (A) found the version to be acceptable and allowed the deduction and in respect of the property of Nazareth allowed the entire deduction by setting aside the order of the Joint Commissioner of Income Tax (Asst), Special Range, Mangalore. The Tribunal confirmed the order of the CIT (A). Aggrieved by the said order, the Revenue has filed this appeal. 6. The following questions of law have been framed in this appeal for consideration: a) Whether the recital under the unregistered agreement can prevail over the recital in the registered sale deed? b) Whether the compensation paid to the tenants for vacating and towards the improvement would be allowable deduction by calculating the capital gains? 7. The counsel for the respondent submits that the AO has reopened the assessment under Section 148 of the IT Act and has passed the fresh assessment order considering the above said items on 30.3.2004. It is submitted that when the assessment is reopened and fresh assessment order is passed, the original order of assessment becomes extinct. In that view of the matter, it is 5 submitted that the appeal would become infructuous. He has relied upon a decision reported in ITR 2001 page 193 in the case of Income-Tax Officer and another -vs- K L Srihari (HUF) and others. The said decision squarely applies to the facts of this case. In view of the submission made by the counsel for the respondent, the appeal is dismissed as infructuous. Sd/- JUDGE Sd/- JUDGE bkm. "