THE PR COMMISSIONER OF INCOME TAX vs. M/S KANSUR DEVELOPERS INDIA PVT LTD

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ITA/251/2023HC KarnatakaKAHC01019895202330 September 2024Bench: S.G.PANDIT,C.M. POONACHA5 pages
AI SummaryWithdrawn

What did the High Court hold?

The High Court disposed of the appeal with liberty to the Revenue to revive it if the matter falls within the exceptions of CBDT Circular No. 09/2024 and Circular No. 5/2024. The substantial questions of law were kept open to be adjudicated in an appropriate proceeding. The judgment does not record any findings on the merits of the substantial questions of law raised by the Revenue. Therefore, there is no decision on the applicability of Section 68 to remittances by non-residents, the assessee's onus to prove investor creditworthiness, the steps taken by the assessing authority, or the interplay between Section 5(2) and Section 68. The operative direction is to dispose of the appeal with liberty to revive, leaving the questions of law undecided.

What were the facts?

The Revenue has filed an appeal under Section 260-A of the Income Tax Act, 1961, against an order dated 28.10.2022 passed by the Income Tax Appellate Tribunal (ITAT), Bengaluru. The appeal pertains to Assessment Year 2012-13. The ITAT's order was in relation to CO.No.104/Bang/2018 (in ITA. No.1442/Bang/2018). The Revenue is challenging the ITAT's decision to delete an addition made under Section 68 of the Act. The assessee is M/s Kansur Developers India Pvt Ltd. The appeal is before the High Court of Karnataka.

What were the issues?

The Tribunal had to decide the following substantial questions of law: 1. Whether the Tribunal's order was perverse in holding that Section 68 is not applicable to remittances made in India by a non-resident and that it was not the company's onus to prove the source of the investor-company? 2. Whether the Tribunal was right in law in deleting the addition made under Section 68 when all conditions for invoking the section were satisfied and the assessee failed to discharge its prima facie burden to establish the creditworthiness of the investor? 3. Whether the Tribunal failed to observe that the assessing authority had taken all steps required by law and by Apex Court pronouncements to make an addition under Section 68? 4. Whether the Tribunal was right in holding that what is not taxable under Section 5(2) cannot be taxed under Section 68 when Section 5(2) is not applicable to the instant case? The Revenue argued that the conditions for invoking Section 68 were met and the assessee failed to discharge its burden. The assessee argued that the tax effect in the appeal is less than Rs. 2 Crores, and therefore, the appeal should not be entertained in view of CBDT Circular No. 09/2024 dated 17.09.2024, which binds the Revenue. The Revenue sought liberty to revive the appeal if the matter falls within exceptions under Circular No. 09/2024 and Circular No. 5/2024.

Which sections of the Income-tax Act were involved?

Section 260-A,Section 68,Section 5(2)

AI-generated summary — verify with the full judgment below

Heard together (2 matters)

C.O. NO. 104/BANG/2018
ITA NO. 1442/BANG/2018

Read from the judgment's own cause title. This page is filed under one of them.

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NC: 2024:KHC:41273-DB ITA No. 251 of 2023

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 30TH DAY OF SEPTEMBER, 2024 PRESENT THE HON'BLE MR JUSTICE S.G.PANDIT AND THE HON'BLE MR JUSTICE C.M. POONACHA INCOME TAX APPEAL NO. 251 OF 2023 BETWEEN:

1.

THE PR COMMISSIONER OF INCOME TAX CENTRAL,3RD FLOOR, C R BUILDING, QUEENS ROAD, BENGALURU 560001

2.

THE ASSISTNAT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 1(4) 3RD FLOOR C R BUILDING QUEENS ROAD BENGALURU 560001 …APPELLANTS (BY SRI. DILIP M.,ADVOCATE A/W SRI. RAVIRAJ Y V, ADVOCATE)

AND:

M/S KANSUR DEVELOPERS INDIA PVT LTD NO. 2650, GROUND FLOOR 37TH B CROSS 28TH MAIN 9TH BLOCK JAYANAGAR BENGALURU 560009 PAN AACCK 9866F …RESPONDENT (BY SRI. G. S. NAGHARISH.,ADVOCATE)

THIS ITA / INCOME TAX APPEAL IS FILED UNDER SEC.260-A OF THE INCOME TAX ACT, 1961, PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE, ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE INCOME-TAX

Digitally signed by BHARATHI S Location: HIGH COURT OF KARNATAKA

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NC: 2024:KHC:41273-DB ITA No. 251 of 2023

APPELLATE TRIBUNAL, BENGALURU IN C.O. NO. 104/BANG/2018 (IN ITA NO. 1442/BANG/2018) DATED 28.10.2022 FOR ASSESSMENT YEAR 2012-2013 ANNEXURE C AND CONFIRM THE ORDER OF THE APPELLATE COMMISSIONER CONFIRMING THE ORDER PASSED BY THE ASST. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE- 1(4), BENGALURU AND ETC.

THIS APPEAL, COMING ON FOR ORDERS, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER:

CORAM: HON'BLE MR JUSTICE S.G.PANDIT and HON'BLE MR JUSTICE C.M. POONACHA

ORAL JUDGMENT (PER: HON'BLE MR JUSTICE S.G.PANDIT) Heard the learned counsel Sri. Dilip. M., along with Sri. Raviraj. Y.V., for appellants/Revenue and learned counsel Sri. G.S. Nagharish., learned counsel for the respondent/assessee.

2.

The Revenue is in appeal under Section 260-A of the Income Tax Act, 1961 (for short, ‘the Act’) questioning the correctness and legality of order dated 28.10.2022 passed by the Income Tax Appellate Tribunal, ‘A’ Bench, Bengaluru (for short, ‘Appellate Authority’) in CO.No.104/Bang/2018 (in ITA. No.1442/Bang/2018) for

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NC: 2024:KHC:41273-DB ITA No. 251 of 2023

the assessment year 2012-13, raising the following substantial questions of law: “1. Whether on the facts and in the circumstances of the case, the Tribunal’s order can be said as perverse in holding that Section 68 is not applicable to remittance made in India by a non-resident and that it was not the company’s onus to prove the source of investor-company? 2. Whether on the facts and circumstances of the case, the Tribunal is right in law deleting the addition made under section 68 of the Act when all the conditions for invoking said section are satisfied in present case and when assesse had failed to discharge prima facie burden to establish credit worthiness of the investor? 3. Whether on the facts and in the circumstances of the case, the Tribunal failed to observe that assessing authority had taken all steps to make addition under section 68 of the Act as required under the law and as per principles laid down by Hon’ble Apex Court in various cases? 4. Whether on the facts and circumstances of the case, the Tribunal is right in holding that

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NC: 2024:KHC:41273-DB ITA No. 251 of 2023

what is not taxable under section 5(2) of the Act cannot be taxed under section 68 of the Act when the provisions of section 5(2) are not applicable to instant case?”

3.

Learned counsel for the assessee submits that the tax effect in this appeal is less than Rs.2 Crores and therefore, the appeal should not be entertained at the instance of the revenue in view of the Circular No.09/2024 dated 17.09.2024 issued by the Central Board of Direct Taxes. It is also submitted that the aforesaid Circular binds the revenue.

4.

On the other hand, learned counsel for the revenue submits that he be granted liberty to revive the appeal in case the matter falls within the exceptions under the aforesaid Circular dated 17.09.2024 and Circular No.5/2024 dated 15.03.2024.

5.

In view of the aforesaid submissions, the appeal is disposed of with liberty as prayed for by the learned

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NC: 2024:KHC:41273-DB ITA No. 251 of 2023

counsel for the revenue. However, the question of law is kept open to be adjudicated in an appropriate proceeding.

Sd/- (S.G.PANDIT) JUDGE

Sd/- (C.M. POONACHA) JUDGE

BS List No.: 4 Sl No.: 4

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