SRI.MOHANLAL ASAWA and BROTHERS vs. THE ASST. COMMISSIONER OF

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ITA/100059/2018HC KarnatakaKAHC02014203201815 April 2019Bench: G.NARENDAR,BELLUNKE.A.S.5 pages
AI SummaryRemanded

What did the High Court hold?

The High Court answered the substantial question of law in the affirmative. It held that the appeal requires to be allowed in part and the order under challenge is set aside. The matter is remitted back to the competent authority for re-assessment. The reasoning is that the provisions of Section 10(37) (which deals with exemption of capital gains on compulsory acquisition of agricultural land) and Section 145A (which deals with the method of computation of income) were not considered in the assessment proceedings. Although Section 145A was substituted with effect from 01.04.2010, and Section 10(37) was inserted from 01.04.2005, the High Court found it necessary for these provisions to be considered during re-assessment. The ratio decidendi is that if relevant statutory provisions, particularly those concerning the computation and exemption of income, are not considered by the assessing authorities, the matter should be remanded for proper adjudication. The operative direction is to remit the appeal to the competent authority for re-assessment in accordance with law, with specific reference to Sections 10(37) and 145A.

What were the facts?

The appellant, Sri Mohanlal Asawa & Brothers, represented by Sri Mohanlal Asawa, filed an appeal under Section 260A of the Income Tax Act, 1961, challenging the order of the Income Tax Appellate Tribunal (ITAT), Bengaluru Bench. The ITAT had confirmed the order of the Commissioner of Income Tax (Appeals), Gulbarga, which in turn upheld the order of the Assistant Commissioner of Income Tax, Circle-1, Bellary. The assessment year in question is 2007-08. The dispute pertains to income by way of interest and compensation, which the assessee had declared on an accrual basis. The revenue contended that the arguments now being advanced by the appellant, relying on Sections 10(37) and 145A of the Income Tax Act, were not canvassed before the lower authorities.

What were the issues?

1. Whether the appeal requires to be remanded in light of assessments made without reference to Section 10(37) and 145A of the Income Tax Act? (Question of law and mixed fact and law, turning on Sections 10(37) and 145A). Assessee's Contention: The assessee argued that the assessment should have been made with reference to Sections 10(37) and 145A of the Income Tax Act. The judgment does not explicitly detail the assessee's arguments beyond this implied reliance. Revenue's Contention: The revenue argued that the points now being raised by the assessee, relying on Sections 145A and 10(37) of the Income Tax Act, were not canvassed before the authorities below. Therefore, the new case requires examination by the Assessing Officer. The revenue also noted that the income by way of interest and compensation was declared on an accrual basis, and the law regarding the method of computation of income was settled by the Apex Court in CIT vs. Ghanshyam (2009) 315 ITR 1 (SC) to be on a receipt basis.

Which sections of the Income-tax Act were involved?

Section 260A,Section 10(37),Section 145A

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KARNATAKA DHARWAD BENCH DATED THIS THE 15TH DAY OF APRIL, 2019 PRESENT THE HON’BLE MR. JUSTICE G.NARENDAR AND THE HON’BLE MR. JUSTICE BELLUNKE A.S.

I.T.A.NO.100059/2018

BETWEEN :

SRI MOHANLAL ASAWA & BROTHERS REP. BY SRI.MOHANLAL ASAWA S/O LATE RAMNIVAS ASAWA, AGED: 64 YEARS, R/AT: NO.52, WARD NO.IX, FLOWER STREET, BALLARI-583 101. (PAN NO.AAKHM2616Q) ... APPELLANT

(BY SRI M.V.SESHACHALA SENIOR COUNSEL FOR SRI GANGADHAR J.M. ADVCOATE)

AND :

1.

THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-I, AAYAKAR BHAVAN, STAF ROAD,

BALLARI-583 102.

2.

THE COMMISSIONER OF INCOME-TAX, AAYAKAR BHAVAN, SADEM ROAD, KALABURAGI-585 105.

... RESPONDENTS (BY SRI Y.V.RAVIRAJ, ADVCOATE) THIS INCOME TAX APPEAL IS FILED UNDER SECTION 260A OF THE INCOME-TAX ACT, 1961, PRAYING TO ALLOW THE APPEAL AND SET ASIDE THE

ORDERS PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, ‘C’ BENCH, BENGALURU IN ITA NO.664/BANG/2016 DATED 03.08.2018 CONFIRMING THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) GULBARGA DATED 29.01.2016 AND THE ORDER PASSED BY THE (ASSESSING OFFICER) ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE- 1, BELLARY DATED 31.01.2013 PASSED FOR THE ASSESSMENT YEAR 2007-08.

THIS APPEAL COMING ON FOR FURTHER HEARING THIS DAY, G.NARENDAR J., DELIVERED THE FOLLOWING: J U D G M E N T Heard the learned senior counsel Sri Seshachala along with Sri G.M.Gangadhar learned counsel for the appellant and Sri Y.V.Raviraj, Senior standing counsel for the Revenue in detail. 2. The substantial question of law that arises for consideration is: “Whether the appeal requires to be remanded in the light of the fact that assessments have been made without reference to Section 10(37) and 145A of the Income Tax Act?” 3. The learned counsel for the Revenue would vehemently submit that the arguments now

being advanced, by placing a reliance on Sections 145A and 10(37) of the Income Tax Act is not the case that was canvassed before the authorities below and that the new case now being canvassed by the appellant requires to be examined by the Assessing Officer, which is not in dispute that is for the Assessment Year 2007-08. The income by way of interest and the compensation amount were declared on accrual basis. That the law with regard to the method of computation of the income came to be settled by the Hon’ble Apex Court in the case of Commissioner of Income Tax Vs. Ghanshyam [(2009) 315 ITR 1 (SC)], wherein the Hon’ble Apex Court was pleased to lay down the law that the computation of income sought to be made on receipt basis. 4. It is not in dispute that under the amended provision of sub-section 37 of section 10 of the Income Tax Act the income in the case of an assessee, being an individual or a Hindu undivided family, any income chargeable under the head

“Capital Gains” arising from the transfer of agricultural land and such transfer is by way of compulsory acquisition under any law, or a transfer the consideration for which is determined or approved by the Central Government or the Reserve Bank of India and where such income has arisen from the compensation or consideration for such transfer received by such assessee on or after received, such income would not form part of the total income. 5. Learned counsel for the revenue would vehemently contend that the point now raised by the learned Senior Counsel is not a case that has been canvassed before the Assessing Officer and hence the same requires to be appreciated by the Original Authority. 6. During the course of arguments, the learned Senior counsel placed reliance on the provisions of Section 10(37) of the Income Tax Act which undoubtedly came to be inserted vide

amendment dated 01.04.2005 and the provision of Section 145A came to be substituted with effect from 01.04.2010. 7. In that view of the matter, the substantial question of law is answered in the affirmative. 8. Accordingly, the appeal is allowed in part. The order under challenge is set aside. The appeal is remitted back to the competent authority for re-assessment in accordance with law and more particularly with reference to Sections 10(37) and 145A of the Income Tax Act. In that view of the matter, there shall be no order as to costs. Sd/- JUDGE

Sd/- JUDGE EM/Kmv

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