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2011 Supreme(Kar) 449
High Court of Karnataka
THE HONOURABLE MR. JUSTICE V. G. SABHAHIT & THE HONOURABLE MR. JUSTICE RAVI MALIMATH
The Commissioner of Income-tax Karnataka (Central)
Versus
Late Sri H.R. Basavaraj By Legal Representative
ITA.No.3010 of 2005
Decided on : 15-07-2011
For the Appellant:E.R. Indra Kumar, Advocate.
For the Respondent:A. Shankar, Sri Lava, Advocates.
The legal representatives could not retract the admissions made by the deceased, and the undisclosed income was binding on them.
Headnote:
Revenue - Income Tax - Section 132 - Summary
Fact of the Case:
The late Sri H.R. Basavaraj, an assessee, had undisclosed income discovered during a search and seizure under Section 132 of the Income Tax Act. After his demise, his legal representatives, the HRB Family Trust, sought to retract his admissions of undisclosed income. The Tribunal partly allowed the appeals of the assessee, leading to the present appeal by the Revenue.
Finding of the Court:
The court found that the legal representatives could not retract the admissions made by the deceased and that the undisclosed income was binding on them. The court also held that the assessing authority was duty-bound to determine the liability to tax, and the right of the assessee to file an appeal could not be denied. The court answered the substantial questions of law in favor of the Revenue and against the assessee.
Issues: The issues included the deletion of admitted undisclosed income, unexplained credits, undisclosed income from deposits, unexplained payments, and benami investments.
Ratio Decidendi: The court held that the legal representatives could not retract the admissions made by the deceased and that the undisclosed income was binding on them. The court also emphasized that the assessing authority was duty-bound to determine the liability to tax, and the right of the assessee to file an appeal could not be denied.
Final Decision: The court answered some questions in favor of the Revenue and others in favor of the assessee.
1. This appeal is by the revenue being aggrieved by the order of the Tribunal wherein the appeals filed by the assessee were party allowed and the appeals filed by the revenue were dismissed.
2. Late Sri H.R. Basavaraj was an assessee, Search and seizure were conducted under the provisions of Section 132 of the Income Tax Act at his residential premises and that of his associates. In the course of the search, receipts, agreements and other documents were found. His statement was recorded as well as of other concerned persons. During the course of the search by his letter dated 4-3-1998 he offered a total undisclosed income of `1.26 Crores. Thereafter a notice under Section 158-BC was issued to him. He filed the return of income for the block period on 28.09.1998 disclosing therein an undisclosed income of a sum of Rs.34,51,960/-. During the pendency of the assessment proceedings he died on 6-9-1999. Accordingly, the assessing officer by his letter dated 12-11-1999 proposed to treat his wife, sons and grand-sons as his legal representatives. However, vide letter dated 17-11-1999 these persons informed the assessing authority that on the demise of Sri H.R. Basavaraj, the entire estate passed on to H.R.B. Family Trust in terms of his last Will and testament. Accordingly, the assessing authority proceeded to complete the assessment represented by the legal representatives namely, the HRB Family Trust.
3. The assessing authority after affording adequate opportunities of hearing on various dates passed an assessment order on 30-12-1999 determining the total undisclosed income in a sum of `2,66,67,510/-which included the admitted undisclosed income of a sum of `34,51,960/-. Aggrieved by the same, the assessee preferred an appeal before the Commissioner assailing the additions made in the course of block assessment including the admitted undisclosed income. By the order dated 10-5-2002 the Commissioner confirmed some of the additions made by the assessing authority and so far as remaining additions are concerned rejected the same. Aggrieved by the same, three appeals each were filed by the assessee and the Revenue were filed arising out of the regular assessment under Section 143(3). The Tribunal partly allowed the appeals of the assessee whereby some of the additions made by the assessing authority and confirmed by the appellate authority were deleted. Hence, the present appeal by the Revenue assailing the deletions made by the Tribunal and on other grounds.
4. The appeal was admitted to consider the following substantial questions of law:-
.(1) Whether the Income Tax Appellate Tribunal (ITAT) is correct in law in deleting the undisclosed income admitted and declared for taxation in the Block Return filed under the provisions of Section 158-BC of the Income Tax Act 1961?
.(2) Whether the ITAT is correct in law in deleting the admitted undisclosed income declared in the Block Return when such undisclosed income is admitted by the assessee in the statements recorded under the provisions of Section 131 and 132(4) of the Income Tax Act, 1961 and also when such admitted income was not disputed by the assessee himself before the assessing authority at the stage of assessment?
.(3) Whether the ITAT is correct in law in deleting the admitted undisclosed income of `17.5 lakhs relating to investment in Normandy Distilleries representing cash paid by the assessee when such unaccounted investment is evident from the seized material, confirmed by the assessee in his statement on oath and offered for tax in the Block Return?
.(4) Whether there is evidence and material justifying the ITAT to delete the admitted undisclosed income of the sum of `17.5 lakhs relating to investment in Normandy Distilleries brought to taxation in the Block Assessment?
.(5) Whether the Tribunal is correct in law in confining the undisclosed income declared in the Block Return to the sum of `5 lakhs as against the admitted undisclosed income of `6.15 lakhs relat
