PRINCIPAL COMMISSIONER OF INCOME TAX-4 vs. M/S EPSILON ADVISORS

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NC: 2023:KHC:24931-DB ITA No.318 of 2019 C/W ITA No.320 of 2019

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 18TH DAY OF JULY, 2023 PRESENT THE HON'BLE MR. JUSTICE P.S.DINESH KUMAR AND THE HON'BLE MR. JUSTICE T.G. SHIVASHANKARE GOWDA INCOME TAX APPEAL NO.318 OF 2019 C/W INCOME TAX APPEAL NO.320 OF 2019

IN I.T.A No.318 OF 2019 BETWEEN:

(BY SHRI. E.I. SANMATHI, STANDING COUNSEL) AND:

M/s. EPSILON ADVISORS PVT. LTD., NO.642, 4TH MAIN 2ND STAGE INDIRANAGAR BANGALORE-38 PAN:AAACE4111H …RESPONDENT

(BY SHRI. NARENDRA KUMAR JAYANTI LAL JAIN, ADVOCATE)

Digitally signed by ANUSHA V Location: HIGH COURT OF KARNATAKA

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NC: 2023:KHC:24931-DB ITA No.318 of 2019 C/W ITA No.320 of 2019

THIS ITA IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 29.11.2018 PASSED IN ITA NO.1600/BANG/2014 (ANNEXURE-A) FOR ASSESSMENT YEAR 2006-2007, PRAYING TO DECIDE THE FOREGOING QUESTION OF LAW AND/OR SUCH OTHER QUESTIONS OF LAW AS MAY BE FORMULATED BY THE HON’BLE COURT DEEMED FIT AND SET ASIDE THE APPELLATE ORDER DATED 29.11.2018 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, 'C' BENCH, BANGALORE, IN APPEAL PROCEEDINGS NO. ITA NO.1600/BANG/2014 (ANNEXURE-A) FOR THE ASSESSMENT YEAR 2006-2007 AS SOUGHT FOR IN THIS APPEAL AND TO GRANT SUCH OTHER RELIEF AS DEEMED FIT, IN THE INTEREST OF JUSTICE. IN I.T.A No.320 OF 2019 BETWEEN:

(BY SHRI. E.I. SANMATHI, STANDING COUNSEL) AND:

M/s. EPSILON ADVISORS PVT. LTD., NO.642, 4TH MAIN 2ND STAGE INDIRANAGAR BANGALORE-38 PAN:AAACE4111H …RESPONDENT

(BY SHRI. NARENDRA KUMAR JAYANTI LAL JAIN, ADVOCATE)

THIS ITA IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 29.11.2018 PASSED IN ITA NO.1608/BANG/2014 FOR ASSESSMENT YEAR 2006-2007, PRAYING TO DECIDE THE FOREGOING QUESTION OF LAW AND/OR SUCH OTHER QUESTIONS OF LAW AS MAY BE FORMULATED BY THE HON’BLE COURT DEEMED FIT AND SET ASIDE THE APPELLATE ORDER DATED 29.11.2018 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, 'C' BENCH, BANGALORE, IN APPEAL

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NC: 2023:KHC:24931-DB ITA No.318 of 2019 C/W ITA No.320 of 2019

PROCEEDINGS NO. ITA NO.1608/BANG/2014 (ANNEXURE-A) FOR THE ASSESSMENT YEAR 2006-2007 AS SOUGHT FOR IN THIS APPEAL AND TO GRANT SUCH OTHER RELIEF AS DEEMED FIT, IN THE INTEREST OF JUSTICE AND ETC.,

THESE ITAs COMING ON FOR FINAL HEARING, THIS DAY, P.S.DINESH KUMAR, J., DELIVERED THE FOLLOWING:

JUDGMENT

These two appeals by the Revenue directed against common impugned order dated November 29, 2018 in ITAs No.1600 & 1608/Bang/2014 passed by the ITAT1, Bengaluru, have been admitted to consider following questions of law; “1) Whether on the facts and circumstances of the case, the Tribunal is correct in giving a finding that the loss on shares of M/s. BPL Communication LT., in A.Y 2003-04 calculated on pro-rata basis will be part of actual cost of the share, to be deducted from the sale proceeds? 2) Whether on the facts and circumstances of the case, the Tribunal is correct in allowing the calculation of long term capital gain on sale of share of Rs.40,88,08,542/- by taking the actual cost as Rs.24,61,98,742/-? 3) Whether on the facts and circumstances of the case, the Tribunal erred in not appreciating the actual cost of BPL communication share is the cost refunded by the assessee to the buyer because of inability of the assessee to give delivery of these shares in that year? 4) Whether on the facts and circumstances of the case, the Tribunal is correct in setting aside the loss

1 Income Tax Appellate Tribunal

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NC: 2023:KHC:24931-DB ITA No.318 of 2019 C/W ITA No.320 of 2019

incurred by the assessee in the trading of shares of M/s. Jupiter Capital Pvt Ltd., by ignoring the various decision of the Hon’ble Supreme Court quoted by the Assessing Officer in the Order and the decision of the Hon’ble High Court of Karnataka in the case of CIT Vs. Wipro Ltd., 50 Taxman.com 421, which is on the similar set of facts? 5) Whether on the set of facts and circumstances of the case, the Tribunal ought to have appreciated that the company has purchased the shares of JCPL @ Rs. 5000 per share and sold to another group concern @ Rs. 10 per share within a span 4 months 11 days? 6) Whether on the facts and circumstances of the case, the Tribunal has failed to appreciated that the assessee has managed the above loss of Rs.117 cr in trading of share of M/s.JCPL just to set off the capital gain of Rs.101 cr earned by the company in selling the shares of M/s. BPL Communication Ltd? 7) Whether on the facts and circumstances of the case, the Tribunal is correct in dismissing the appeal of the Revenue by relying on the decision of Hon’ble High Court of Karnataka in the case of M/s. Manjunatha Cotton and Ginning Factory 359 ITR 565 which has been accepted by the department due to low tax effect?”

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NC: 2023:KHC:24931-DB ITA No.318 of 2019 C/W ITA No.320 of 2019

Revenue to urge these questions in ITAs No.317 & 319 of 2019 and only question No.7 be considered in these appeals. 4. Shri Jain has no objection. 5. The seventh question is whether tribunal is right in dismissing the appeal by following the decision of this court in Commissioner of Income-tax Vs. M/s.Manjunatha Cotton & Ginning Factory2. 6. According to Shri Sanmathi, the grievance of the Revenue is that the disposal of the case by the ITAT by placing reliance on M/s.Manjunatha Cotton and Ginning Factory is erroneous. 7. We may record that the AO3 has stated in his order that penalty proceedings under Section 271(1) (c) of the Income Tax Act, 19614, were initiated separately without specifying allegations such as whether there was any concealment of income or inaccurate particulars of the income were furnished. This very

2 [2013] 35 taxmann.com 250 (Karnataka) 3 Assessing Officer 4 ‘the Act’ for short

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NC: 2023:KHC:24931-DB ITA No.318 of 2019 C/W ITA No.320 of 2019

aspect has been considered in M/s.Manjunatha Cotton and Ginning Factory wherein it has held as follows; “63. In the light of what is stated above, what emerges is as under: (a) xxx (b) xxx (c) xxx (d) xxx (e) xxx (f) xxx (g) xxx (h) xxx (i) xxx (j) xxx (k) xxx (l) xxx (m) xxx (n) xxx (o) If the Assessing Officer has not recorded any satisfaction or has not issued any direction to initiate penalty proceedings, in appeal, if the appellate authority records satisfaction, then the penalty proceedings have to be initiated by the appellate authority and not the Assessing Authority. (p) Notice under Section 274 of the Act should specifically state the grounds mentioned in Section 271 (l)(c), i.e., whether it is for concealment of income or for furnishing of incorrect particulars of income.” 8. In our considered opinion, the question for consideration in these appeals was the very question under consideration in M/s.Manjunatha Cotton and

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NC: 2023:KHC:24931-DB ITA No.318 of 2019 C/W ITA No.320 of 2019

Ginning Factory. Therefore, we find no error in the impugned order. Consequently, question of law requires to be answered in favour of the assessee. Hence, the following; ORDER (i) Both appeals are dismissed so far as question No.7 is concerned and the same is answered in favour of the assessee and against the Revenue; and (ii) Questions No.1 to 6 are kept open with liberty to urge them in ITAs No.317 & 319 of 2019. No costs.

Sd/- JUDGE

Sd/- JUDGE