Jyothi Kumari vs Asst. Commissioner of Income Tax (INV), Mysore

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2010 Supreme(Kar) 121

High Court of Karnataka
THE HONOURABLE MR. JUSTICE D.V. SHYLENDRA KUMAR & THE HONOURABLE MR. JUSTICE N. ANANDA
Jyothi Kumari
Versus
Asst. Commissioner of Income Tax (INV), Mysore
Income Tax Appeal No.277 of 2003 C/w Income Tax Appeal No.258 of 2001 & Income Tax Appeal No.257 of 2001
Decided On : 02-02-2010

Advocates Appeared:
For the Appellant:A. Shankar, Advocate.
For the Respondent:M.V. Seshachala, Advocate.

Headnote:INCOME TAX ACT, 1961 - Sections 158-BC, 113 & 260-A: [D.V. Shylendra Kumar & N. Ananda, JJ] Undisclosed income - Acquiring asset out of contributions of couple - Held, the amount cannot constitute an undisclosed source of investment to treat it as an income on the premise of unexplained source for further investment. Therefore, we have to necessarily answer this question in favour of the appellant-assessee and against the revenue. To this extent, we set aside the findings of the tribunal as well as that of the assessing authority, and hold that the addition of a sum of Rs.3.10 lakh to the undisclosed income of the assessee is not justified and the assessment order warrants correction to this extent. The assessing authority to effect the correction and to implement and given and effect to this finding by passing necessary order in this regard. Questions raised at paras-22 and 23 of the memorandum of appeal do not really warrant separate answers, in the light of the answers we have already indicated to the earlier substantial questions, which virtually cover these two questions also and therefore we ignore these two questions holding that they do not warrant separate answers on the facts and circumstances of this case. In the result, this appeal is allowed in part to the extent indicated above. In the peculiar circumstances of the case and in view of the mixed fortune for the revenue, we leave the parties to bear their respective costs, though we were inclined to mulct the assessees with proportionate cost for the unduly long time these appeals engaged our attention.
INCOME TAX ACT, 1961 - Section 260(7): [D.V. Shylendra Kumar & N. Ananda, JJ] Applicability of Order 41, Rule 22 CPC - Held, insofar as the applicability or the attraction of the provisions of Order 41, Rule 22 in respect of the appeal under sub-section (7) of Section 260A of the Act is concerned it may be examined as one leading to such possibility if it crosses three stages - Firstly, the provisions of Order 41, rule 22 is applicable to a cross-objection enabled in an appeal against original decrees even as indicated in the very provision. It is a right given to a non-appealing respondent to defend a decree which the non-appealing respondent would have obtained before the Court of the first instance and to the extent of merely defending in terms of the first part and for getting more relief in terms of second appeal of this provision. If first appeal in terms of Section 96 of CPC is not the same as the second appeal in terms of Section 100 of CPC.
The substantive provision for filing a second appeal to the High Court can be compared to Section 260A of the Act for the purpose of present examination. In so far as the Income-Tax Act is concerned we say it is fortiori so for the reason that even while adopting the procedure as indicated in Code of Civil Procedure for the purpose of disposal of a cross-objection the procedure is again made applicable insofar as apply in the case of appeals under Section 260A(1) and not in its entirety.

Judgment :

1. These three sets of Income Tax Appeals under Section 260-A of the Income Tax Act, 1961, have their origin to a search that was conducted by the Income Tax Authorities on 18.3.1996 at the resident/business premises No.568, 10th Cross, Buddha Marga, Siddartha Layout, II Stage, Mysore, of the respondent in I.T.A.No.257/2001 and the appellant in I.T.A.No.277/2003.

2. Two of the appeals, ITA Nos.257/2001 and 258/2001 are by the revenue and respondents in these two appeals are couple. While in ITA No.257/2001 Purushothamlal is the respondent-assessee and the subject matter relates to his undisclosed income assessed to tax by the Assessing Officer under the provisions of section 158BC of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’), but on his demise being now represented by his legal heir-wife Smt. Jyothikumari, wife herself is the respondent-assessee in ITA No.258/2001 and the subject matter of this appeal is the block assessment order passed in respect of this assessee for the block period 1.4.1985 to 18.3.1996 and in respect of her undisclosed income for this period, but the revenue passing an assessment order in the hands of this assessee more for the purpose of an alternative option as this assessee had claimed the income assessed to tax as her own income which had gone into contribution of acquiring an asset in respect of which contributions had been made by the couple, but the revenue having rejected this version of this assessee and having attributed the entire unexplained, undisclosed investment in the asset as the undisclosed income of the assessee’s husband-Purushothamlal for the very block period.

3. The respondent-Smt. Jyothi Kumari in the other appeal viz., I.T.A.258/2001 is the wife of Sri. Purushothamlal.

4. The search and the follow-up action having lead to the passing of the assessment order dated 26.5.1997 under the provisions of Section 158 BC of the Act, resulting in considerable tax liability on Sri. Purushothamlal, the Principle assessee to an extent of Rs.32,51,142/- which is on the premise that the total undisclosed income, unearthed as a result of the search on 18.3.1996 was in a sum of Rs.54,18,571/- subjecting this undisclosed income to tax at 60% in terms of provisions of Section 113 of the Income Tax Act, 1961.

5. As a precautionary measure, the Revenue has also passed a protective assessment order in the hands of spouse of Sri. Purushothamlal i.e., his wife as per a separate order dated 26.5.1997 [copy of which is available as Annexure-B to I.T.A.No.258/2001]. In the hands of Smt. Jyothi Kumari wife of Sri. Purushothamlal the protective assessment order in its turn has resulted in an independent tax liability of a sum of Rs.5,80,254/- on the premise that there was an undisclosed income of Rs.9,67,088/- rounded of to Rs.9,67,090/- for the block period from 1.4.1985 to 18.3.1996, also in terms of Section 158BC r/w Section 158BD of the Act.

6. Both the persons who have suffered these assessment orders under Chapter XIV B of the Income Tax Act are also regular assessees under the Act and while both of them are assessed to tax as individuals and the income offered to tax being an income earned and taxable under the head “Profits and Gains of Business and profession”, to a certain extent under other sources also. Mr. Purushothamlal had offered his income from the business activity of Auto consultancy and Smt. Jyothi Kumari had offered her income to tax in the returns that she had filed to be from the activity of tailoring and therefore, assessable to tax under the head “Profits and Gains of Business and Profession.”

7. The search was followed-up by certain other developments and for the purpose of further discussion a few more dates that can be on some significance in this context are that while on the date of search the searching officer had while impounded as may as 68 documents in terms of the panchanama drawn on that date, which were all inventoriesd on the very date. A

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