Writ petitioner challenged assessment order under Section 143(3) IT Act imposing income tax on alleged inflated share sales. Court dismissed petition, ruling petitioner offered insufficient material to rebut department's findings on trading activity prior to disposal. Petitioner directed to approach statutory appellate authority.
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NC: 2023:KHC:42286 WP No. 4515 of 2017
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 23RD DAY OF NOVEMBER, 2023
BEFORE
THE HON'BLE MR JUSTICE B M SHYAM PRASAD WRIT PETITION NO. 4515 OF 2017 (T-IT)
BETWEEN:
MR. S M KUPENDRA SETTY S/O MR S MADHAVA SETTY, AGED ABOUT 67 YEARS, R/AT NO.55, SRI VIJAYESHWARI COTTON TRADING CO, A BLOCK, RMC YARD, CHITRADURGA-577502.
…PETITIONER
(BY SRI. HARISH V S.,ADVOCATE)
AND:
THE INCOME TAX OFFICER WARD-1, TAMATAKAL ROAD, MEDEHALLI, CHITRADURGA-577502.
Digitally signed by ANAND N Location: HIGH COURT OF KARNATAKA
…RESPONDENT
(BY SRI. M DILIP.,ADVOCATE)
THIS WP IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE IMPUGNED ASSESSMENT ORDER PASSED BY RESPONDENT U/S 143(3) OF THE INCOME TAX ACT, 1961, DATED 30.12.2016 FOR THE ASSESSMENT YEAR 2014-15 I.E., ANNEX-C AND CONSEQUENTIAL NOTICE OF DEMAND ISSUED BY RESPONDENT UNDER SECTION 156 OF THE INCOME TAX ACT, 1961 DATED
NC: 2023:KHC:42286 WP No. 4515 of 2017
30.12.2016 FOR THE ASSESSMENT YEAR 2014-15 I.E., ANNEX-C1.
THIS PETITION, COMING ON FOR PRELIMINARY HEARING IN ‘B’ GROUP, THIS DAY, THE COURT MADE THE FOLLOWING:
ORDER
The petitioner has impugned the Assessment Order dated 30.12.2016 [ Annexure – C ] for the Assessment Year 2014-15 under Section 143[3] of the Income Tax Act, 1961 [for short, ‘IT Act’ ]. The petitioner is issued with the notice dated 23.11.2016, and with the petitioner filing reply thereto on 14.12.2016, the assessment is completed vide the impugned Assessment Order dated 30.12.2016. The relevant portion of the Impugned Assessment Order reads as under:
“Under these circumstances, it can be easily pointed out that, the sale value of the shares is inflated to match the investments made by the assessee. Hence, an amount of Rs.59,44,750/-, the alleged income from LTCG on sale of shares is brought to tax under the
NC: 2023:KHC:42286 WP No. 4515 of 2017
head income from other sources as the assessee has taken an accommodative entry by means of transferring the shares at an inflated figure to explain the sources for investments.”
NC: 2023:KHC:42286 WP No. 4515 of 2017
the transaction in securities is a bona fide transaction and is chargeable to ‘securities transaction tax’, and capital gain from such transaction is offered to tax under Section 10[38] of the IT Act; Secondly, in reply, the petitioner had asked for a copy of the investigation report and statements made by the concerned and these copies have not been furnished. In support of the first ground, Sri Harish V S submits that the respondent has not denied that ‘securities transaction tax’ is paid on the subject transaction and the petitioner’s investments with the aforesaid company is not an one-off transaction, and in fact, during the relevant assessment year, the petitioner has invested a total sum of Rs.49,91,983.75/- in the shares of different companies.
NC: 2023:KHC:42286 WP No. 4515 of 2017
aforementioned would be a reason for this Court’s interference under Article 226 of the Constitution of India and that if the petitioner is aggrieved by the assessment order, he must avail statutory remedy. Sri. M Dilip also submits that the merits of the submissions on behalf of the petitioner must be examined, even if warranted, in the appeal permitted under the statute upon examination of all the relevant facts. The petitioner’s grievance as against the impugned Assessment Order is examined in view of the respondent’s defense.
NC: 2023:KHC:42286 WP No. 4515 of 2017
value of this company’s fixed assets was only a sum of Rs.1,00,000/-; that notwithstanding the afore, bonus shares have been allotted and shares are subdivided resulting in the increase in the petitioner’s 500 shares [purchased at the cost of Rs.75,000/- ] to 12,000 shares that are sold at the rate of Rs.242/per share; and that the petitioner has brought those 500 shares offline at the rate of Rs.150/- per share while the same was available online at Rs.0.81/- per share.
this regard, this Court, in the present proceedings, cannot opine that the petitioner is prejudiced because a copy of the Report is not furnished. The petitioner, who seeks this Court’s indulgence under Article 226 of the Constitution of India, should have brought on record some material to demonstrate that the respondent’s findings cannot even be prima facie accepted. Insofar as the first ground viz., that the
NC: 2023:KHC:42286 WP No. 4515 of 2017
petitioner’s transaction is a bona fide transaction and has suffered ‘securities transaction tax’ and is part of the proceedings of investments in shares, it would suffice for this Court to observe that it must be examined by the competent authority if the petitioner avails such opportunity. In the light of the afore, subject to all just exceptions in law to the petitioner, the petition stands disposed of.
Sd/JUDGE
AN/-
3 issues framed by the court
Whether the High Court can interfere under Article 226 with the impugned assessment order passed under Section 143(3) of the Income Tax Act, 1961.
Whether the petitioner has discharged the burden of proving that the income tax department's findings of false investment entries are prima facie unacceptable.
Whether claims of bona fide transactions and payment of securities transaction tax warrant judicial interference in summary proceedings.
4 provisions across 2 enactments
Mr. S M Kupendra Setty
The Income Tax Officer Ward-1
B M Shyam Prasad
As recorded by the court registry
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