ITO Vs Sanath Kumar Murali (Karnataka High Court)
Summary: The Karnataka High Court dismissed the Revenue’s intra-court appeal against the order dated 24th May, 2023 of the learned Single Judge, which had set aside the order dated 21.03.2023 passed under Section 148A(d) of the Income Tax Act, 1961 and the notice dated 21.03.2023 issued under Section 148 for Assessment Year 2016-2017.
The Revenue contended that once an amount of Rs.50.00 lakh was ascertained as escaped income for assessment, interference by the Writ Court was unwarranted. The assessee, however, submitted that merely because the concerned conveyance mentioned Rs.55.00 lakh, the entire amount could not be treated as income escaping assessment because the cost of acquisition had to be deducted and, after such deduction, the amount would fall below the Rs.50.00 lakh threshold.
The assessee relied on the decision of the Division Bench of the Madhya Pradesh High Court at Jabalpur in Nitin Nema v. Office of Principal Chief Commissioner of Income Tax, and submitted that the challenge to that decision before the Supreme Court in SLP No(C). 38708 of 2024 had attained finality on 17.09.2024.
The Karnataka High Court broadly agreed with the learned Single Judge that, while assessing the quantum of escaped income in such matters, the amount mentioned in the registered conveyance could not be straightaway taken without deducting the cost of acquisition. The Court also noted that the Madhya Pradesh High Court had followed the impugned order and that the Revenue’s challenge before the Supreme Court had been repelled. Finding no merit in the appeal, the High Court dismissed it, with costs having been made easy.
Karnataka High Court on Computation of Escaped Income under Section 149
Challenge to Section 148A(d) Order and Section 148 Notice
The intra-court appeal was directed against the learned Single Judge’s Order dated 24th May, 2023, by which respondent-Assessee’s Writ Petition No.7647 of 2023 had been allowed.
The learned Single Judge had set aside the order at Annexure-‘A’ dated 21.03.2023 passed under Section 148A(d) of the Income Tax Act and the notice at Annexure-B dated 21.03.2023 issued under Section 148 for Assessment Year 2016-2017.
Revenue’s Submission
Learned Senior Panel Counsel appearing for the Revenue argued that the impugned order was contrary to the scheme of Section 149 of the Income Tax Act, 1961. According to the Revenue, once an amount of Rs.50.00 lakh was ascertained as escaped income for assessment, interference by the Writ Court was uncalled for.
Assessee’s Submission on Cost of Acquisition
Learned Counsel for the assessee submitted that merely because the concerned conveyance mentioned Rs.55.00 lakh, that amount could not itself be treated as income escaping assessment. According to the assessee, the cost of acquisition had to be deducted from the amount mentioned in the conveyance and, after such deduction, the amount would fall below the ceiling limit of Rs.50.00 lakh.
The assessee relied upon the decision of the Division Bench of the Madhya Pradesh High Court sitting at Jabalpur in Nitin Nema v. Office of Principal Chief Commissioner of Income Tax. The assessee further submitted that the challenge to the Jabalpur Bench’s order had attained finality before the Supreme Court in SLP No(C). 38708 of 2024 on 17.09.2024.
High Court’s Findings
After hearing the parties and examining the appeal papers, the Karnataka High Court stated that it was broadly in agreement with the views of the learned Single Judge.
The Court held that while assessing the quantum of escaped income in matters of this nature, the amount mentioned in the registered conveyance could not be straightaway taken without deducting the cost of acquisition therefrom.
The Court also noted the submission concerning the Madhya Pradesh High Court’s decision in the case referred to by the assessee. It observed that the Jabalpur Bench had followed the impugned order of the learned Single Judge and that the subsequent challenge by the Revenue before the Supreme Court had been repelled.
Appeal Dismissed
In view of the above circumstances, the Karnataka High Court found no merit in the Revenue’s appeal and dismissed the same, with costs having been made easy.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
This intra-court appeal seeks to call in question the learned Single Judge’s Order dated 24th May, 2023 whereby respondent-Assessee’s Writ Petition No.7647 of 2023 having been favoured, relief has been accorded to him as under:
“21.Accordingly, the order at Annexure-‘A’ dated 21.03.2023 passed under Section 148A(d) of the I.T. Act is set aside and the noticed at Annexure-B dated 21.03.2023 issued under Section 148 of the I.T. Act by the respondent No.1 for the Assessment Year 2016- 2017 is set aside.“
2. Learned Senior Panel Counsel appearing for the revenue vehemently argues that the impugned order being contrary to the scheme of Section 149 of the Income Tax Act, 1961, once an amount of Rs.50.00 lakh is ascertained as escaped income for assessment, the interference of the Writ Court was uncalled for.
3. Learned Counsel for the assessee, per contra, submits that merely because the concerned conveyance mentions Rs.55.00 lakh, that itself cannot be taken as the income escaping assessment inasmuch as the cost of acquisition to be deducted from it and if that is done, it would fall below the ceiling limit of Rs.50.00 lakh. This aspect of the matter, learned Counsel for the assessee submits, was considered by a Division Bench of Madhya Pradesh High Court sitting at Jabalpur in NITIN NEMA v. OFFICE OF PRINCIPAL CHIEF COMMISSIONER OF INCOME 1 TAX and relief has been accorded to the Assessee of the kind after referring to the order impugned in this appeal. He also tells us that challenge to the Jabalpur Bench’s order has attained finality at the hands of the Apex Court in SLP No(C). 38708 of 2024 on 17.09.2024 and therefore, the order of the learned Single Judge has secured imprimatur of the Apex Court. So contending, he seeks dismissal of the appeal.
4. Having heard the learned counsel for the parties and having perused the appeal papers, we are broadly in agreement with the views of the learned Single Judge, inter alia, to the effect that while assessing the quantum of escaped income in matters like this, the amount mentioned in the registered conveyance cannot be straight away taken without deducting the cost of acquisition therefrom. This apart, as rightly submitted by the learned counsel for the assessee, the Jabalpur Bench of Madhya Pradesh High Court, in the case supra, followed the impugned order of the learned Single Judge of this Court and later the challenge by the Revenue before the Apex Court of the Country has been repelled.
In the above circumstances, there is no merit in the appeal and accordingly it is dismissed, costs having been made easy.
