1 IN HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS 8TH DAY OF SEPTEMBER 2020 PRESENT HON BLE MR. JUSTICE ALOK ARADHE AND HON BLE MR. JUSTICE H.T.NARENDRA PRASAD I.T.A. NO.211 OF 2013 BETWEEN: 1. COMMISSIONER OF INCOME-TAX C.R. BUILDING, QUEENS ROAD BANGALORE. 2. ASSISTANT COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE-2(2), C.R. BUILDING QUEENS ROAD, BANGALORE. ... APPELLANTS (BY SRI. K.V. ARAVIND, ADV.,) AND: SHRI. H.E. PANDURANGA # 473, 4TH CROSS, 8TH MAIN HANUMANTHNAGAR, BANGALORE. ... RESPONDENT (RESPONDENT SERVED) --- THIS ITA IS FILED UNDER SECTION 260-A OF I.T. ACT, 1961 ARISING OUT OF ORDER DATED 21.12.2012 PASSED IN ITA NO.1081/BANG/2006 AND ITA NO.1001/BANG/2006, FOR ASSESSMENT YEAR 1996-97, PRAYING THAT THIS HON BLE COURT MAY BE PLEASED TO: (I) FORMULATE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN. 2 (I) ALLOW APPEAL AND SET ASIDE ORDER OF ITAT, BANGALORE IN ITA NO.1081/BANG/2006 & ITA NO.1001/BANG/2006 DATED 21-12-2012. THIS ITA COMING ON FOR HEARING, THIS DAY, ALOK ARADHE J., DELIVERED FOLLOWING: JUDGMENT This appeal under Section 260A of Income Tax Act, 1961 (hereinafter referred to as Act for short) has been preferred by revenue. subject matter of appeal pertains to Assessment year 1996-97. appeal was admitted by bench of this Court vide order dated 04.07.2013 on following substantial questions of law: (i) Whether Tribunal was correct in annulling reassessment made protectively under Section 147 for assessment years 1996-97 and 1997-98 by holding them as infructuous without going into merits of case when issues with reference to unexplained cash credits of Rs.50 Lakhs and Rs.65,10,000/- have been found to be unexplained? (ii) Whether Tribunal was correct in 3 applying provisions of sub-Section 2 to explanation (c) of section 158BA which specifically provides that income arises under Chapter XIV-B shall not be included in regular assessment of any previous year without appreciating observation of Hon ble Apex Court in case of Suresh N.Gupta reported in 297 ITR 322 (166 Taxman 313) 2. Facts leading to filing of this appeal briefly stated are that assessee is proprietor of M/s Rajarajeshwari Enterprises. On 27.03.2000, search was conducted under Section 132 of Act. In course of search, Bank accounts of assessee was examined and it was found that assessee could not explain sources of various deposits made in bank. Thereafter, Block assessment order was passed on 28.03.2002, by which Assessing officer determined total undisclosed income at Rs.2,96,78,150/-, wherein among other additions three credits pertaining to assessment years 1996-97 and 4 1997-98 amounting to Rs.67,29,564/- and Rs.60,63,900/- respectively were also assessed under undisclosed income. assessee filed appeal before Commissioner of Income Tax (Appeals), who by order dated 06.06.2002 deleted additions on account of three credits and held that credits in bank accounts were already disclosed by assessee to department and cannot be assessed in block assessment. However, liberty was given to Assessing officer to take recourse to regular assessment. 3. department challenged aforesaid order in appeal before Income Tax Appellate Tribunal (hereinafter referred to as 'the Tribunal' for short). Tribunal remitted matter to Commissioner of Income Tax (Appeals) with direction to consider all issues afresh on merits. assessments for years 1996-97 and 1997-98 were re-opened under Section 147 to tax unexplained 5 credits protectively in view of finding given by Commissioner of Income Tax (Appeals) in order dated 06.06.2002. assessment was concluded under Section 143(3) read with Section 147 of Act for both assessment years and total income was determined at Rs.1,25,03,622/- and Rs.1,31,83,189/- for assessment years 1996-97 and 1997-98 respectively which included unexplained cash credits in bank accounts to tune of Rs.50,00,000/- and Rs.65,10,000/-. 4. assessee challenged aforesaid order in appeal before Commissioner of Income Tax (Appeals). In proceeding before Commissioner of Income Tax (Appeals), assessee neither adduced any evidence nor produced books of account. Commissioner of Income Tax (Appeals) by order dated 18.09.2006 upheld order passed by Assessing officer. Tribunal however, by order dated 21.12.2012 inter alia held that findings recorded 6 by Commissioner of Income Tax (Appeals) do not survive in view of order of Tribunal dated 20.01.2006. It was further held that various additions impugned in this appeals by assessee and revenue need not be adjudicated and proceedings have become infructuous in view of order of Tribunal dated 20.01.2006 in block assessment appeals. appeals preferred by assessee were allowed. In aforesaid factual background, revenue has filed this appeal. 5. Learned counsel for revenue submitted that Tribunal erred in annulling reassessment made prospectively under Section 147 for assessment years 1996-97 and 1997-98 by treating same as infructuous and in not dealing with matter on merits especially when issue with reference to unexplained cash credits of Rs.50,00,000/- and Rs.65,10,000/- were found to be unexplained. It is also urged that Tribunal committed error in applying provisions of sub-Section 7 (2) to Explanation(c) of Section 158BA to facts of case and failed to notice decision of supreme court in CIT VS. SURESH N. GUPTA (2008)297 ITR 322. Alternatively, it is submitted that matter be remitted to Commissioner of Income Tax (Appeals) to verify whether unexplained credits of Rs.50,00,000/- and Rs.65,10,000/- have reached finality or not. 6. We have considered submissions made by learned counsel for revenue and have perused record. From perusal of order passed by Income Tax Appellate Tribunal, we find that Tribunal has not decided issue on merits and ought to have adjudicated issue with regard to unexplained credits to tune of Rs.50,00,000/- and Rs.65,10,000/-. Tribunal has held that orders of reassessment have been rendered infructuous. issue with regard to unexplained credits to tune of Rs.50,00,000/- and Rs.65,10,000/- needs to be adjudicated. Tribunal erred in not adjudicating issues on merits and 8 therefore, we answer first substantial question of law in favour of revenue. Therefore, it is not necessary to answer second substantial question of law. In result, impugned order dated 21.12.2012 passed by Income Tax Appellate Tribunal is hereby quashed and matter is remitted to Commissioner of Income Tax (Appeals) to determine issue afresh with regard to unexplained cash credits to tune of Rs.50,00,000/- and Rs.65,10,000/-. Accordingly, appeal is disposed of. Sd/- JUDGE Sd/- JUDGE ss Commissioner of Income-tax, Bangalore / Assistant Commissioner of Income-tax Central Circle-2(2), Bangalore v. H.E. Panduranga