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

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ITA/252/2023HC KarnatakaKAHC01019897202330 September 2024Bench: S.G.PANDIT,C.M. POONACHA4 pages
AI SummaryWithdrawn

What did the High Court hold?

The High Court disposed of the appeal based on the submissions made by both parties concerning CBDT Circular No. 09/2024 and Circular No. 5/2024. The assessee's counsel argued that the tax effect was below the threshold stipulated in the circular, making the appeal not maintainable at the instance of the Revenue. The Revenue's counsel sought liberty to revive the appeal if the matter fell within the exceptions of the circulars. The Court granted this liberty to the Revenue. Consequently, the appeal was disposed of without a decision on the merits of the substantial questions of law. The Court explicitly kept the questions of law open to be adjudicated in an appropriate proceeding. No specific findings were made on the applicability of Section 68 or Section 5(2) of the Act, nor was there any determination of the assessee's onus or the assessing authority's actions.

What were the facts?

The Revenue, represented by the Principal Commissioner of Income Tax and the Assistant Commissioner of Income Tax, filed an appeal under Section 260-A of the Income Tax Act, 1961, before the High Court of Karnataka. The appeal challenges an order dated October 28, 2022, passed by the Income-Tax Appellate Tribunal (ITAT), Bengaluru. The ITAT's order, in ITA No. 1442/Bang/2018, pertains to the assessment year 2012-13. The Revenue seeks to set aside the ITAT's order, which had confirmed the order of the Appellate Commissioner and the Assessing Officer. The dispute revolves around additions made under Section 68 of the Act concerning remittances made by a non-resident investor.

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 deleting the addition made under Section 68 when all conditions for its invocation were satisfied and the assessee failed to discharge its prima facie burden to establish the investor's creditworthiness? 3. Whether the Tribunal failed to observe that the assessing authority had taken all necessary steps to make the addition under Section 68 as required by law and Apex Court principles? 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? The Revenue argued that the Tribunal erred in its findings regarding Section 68 and the onus on the assessee. The assessee contended that the tax effect in the appeal is less than Rs. 2 Crores, and therefore, the appeal should not be entertained by the Revenue in view of CBDT Circular No. 09/2024 dated September 17, 2024, which binds the Revenue. The Revenue did not present arguments on the merits of the case.

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

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NC: 2024:KHC:41278-DB ITA No. 252 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. 252 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 APPELLATE TRIBUNAL, BENGALURU IN ITA NO.1442/BANG/2018 DATED 28.10.2022 FOR ASSESSMENT YEAR 2012-2013 ANNEXURE - C CONFIRMING THE ORDER OF THE APPELLATE COMMISSIONER AND

Digitally signed by BHARATHI S Location: HIGH COURT OF KARNATAKA

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NC: 2024:KHC:41278-DB ITA No. 252 of 2023

CONFIRM 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 ITA No.1442/Bang/2018 for 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

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NC: 2024:KHC:41278-DB ITA No. 252 of 2023

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 assessee 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 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,

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NC: 2024:KHC:41278-DB ITA No. 252 of 2023

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 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.: 5

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