THE PR. COMMISSIONER OF INCOME TAX, CIT (A) vs. SRI. PRAKASH LADHANI

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ITA/356/2022HC KarnatakaKAHC01032736202227 September 2024Bench: S.G.PANDIT,C.M. POONACHA6 pages
AI SummaryWithdrawn

What did the High Court hold?

The High Court disposed of the appeal based on the submissions made by both parties. The assessee argued that the tax effect was below the threshold specified in CBDT Circular No. 09/2024, making the appeal not maintainable. The Revenue sought liberty to revive the appeal if the case fell under the exceptions mentioned in the circulars. The Court granted the liberty as prayed for by the Revenue. The substantial questions of law were kept open to be adjudicated in an appropriate proceeding. Therefore, no decision was made on the merits of the substantial questions of law regarding Section 2(22)(e), the deemed dividend based on the agreement, or the protective addition for unexplained investments. The operative direction was to dispose of the appeal with liberty to revive.

What were the facts?

The Revenue, comprising 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, against an order dated 25.10.2021 passed by the Income Tax Appellate Tribunal (ITAT), Bengaluru. The appeal pertains to Assessment Year 2012-2013 and challenges the ITAT's decision to delete additions made by the lower authorities. The ITAT's order confirmed the order of the Appellate Commissioner, which had set aside the order of the Deputy Commissioner of Income Tax. The amount in dispute is not explicitly stated, but the appeal was admitted to consider substantial questions of law.

What were the issues?

The Tribunal had to decide the following substantial questions of law: 1. Whether the orders passed by the CIT(A) and the Tribunal were perverse in deleting the addition made under Section 2(22)(e) of the Act, despite the assessee holding substantial interest in M/s. Cauvery Aqua Pvt Ltd and M/s. Brindhavan Beverages Pvt Ltd, which had accumulated profits, thereby attracting Section 2(22)(e) for advances/loans given by these concerns. 2. Whether the Tribunal was correct in deleting the addition on account of deemed dividend based on an agreement dated 14/1/2005, which was executed after the financial year-end and lacked essential commercial elements like total investment value, project details, benefit sharing, and penalties for non-performance. 3. Whether the Tribunal was justified in granting relief on a protective addition of Rs. 2,51,00,000/- towards unexplained investments, while the substantive addition on this issue was still pending adjudication before the High Court. The assessee contended that the tax effect in the appeal was 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 17.09.2024, which binds the Revenue. The Revenue requested liberty to revive the appeal if the matter fell within the exceptions of Circular No. 09/2024 and Circular No. 5/2024 dated 15.03.2024.

Which sections of the Income-tax Act were involved?

Section 260-A,Section 2(22)(e)

AI-generated summary — verify with the full judgment below

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NC: 2024:KHC:40422-DB ITA No. 356 of 2022

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 27TH 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.356 OF 2022

BETWEEN:

1.

THE PR. COMMISSIONER OF INCOME TAX, CIT (A) CENTRAL CIRCLE, C.R. BUILDING, QUEENS ROAD, BENGALURU-560 001.

2.

THE ASST. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-2(3), C.R. BUILDING, QUEENS ROAD, BENGALURU-560 001.

…APPELLANTS (BY SRI. DILIP.M., ADV., A/W SRI. RAVIRAJ Y.V., ADVOCATE)

AND:

SRI. PRAKASH LADHANI 12, 3RD MAIN,

Digitally signed by B LAVANYA Location: HIGH COURT OF KARNATAKA

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NC: 2024:KHC:40422-DB ITA No. 356 of 2022

JAYAMAHAL EXTENSION, BENGALURU-560 046, PAN: ABAPL 8912B

…RESPONDENT (BY SRI. ANNAMALAI.S, ADVOCATE)

THE ITA / INCOME TAX APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 05/01/2022 PASSED IN ITA NO.73/BANG/2018, FOR THE ASSESSMENT YEAR 2012-2013 PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN AND TO ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, BENGALURU IN ITA NO.73/BANG/2018 DATED 25/10/2021 FOR ASSESSMENT YEAR 2012-2013 ANNEXURE-C CONFIRMING THE ORDER OF THE APPELLATE COMMISSIONER AND CONFIRM THE ORDER PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2(3), BENGALURU AND ETC.

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

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

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NC: 2024:KHC:40422-DB ITA No. 356 of 2022

ORAL JUDGMENT (PER: HON'BLE MR JUSTICE S.G.PANDIT)

Heard the learned counsel Sri. Dilip.M., along with Sri. Raviraj.Y.V., learned counsel for the appellants/Revenue and Sri. S.Annamalai, 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 25.10.2021 passed by the Income Tax Appellate Tribunal, ‘A’ Bench, Bengaluru (for short, ‘Appellate Authority’) in ITA.No.73/Bang/2018 for the assessment year 2012-13.

3.

This

Court,

admitted the appeal on 18.10.2022 to consider the following substantial questions of law: 1. "Whether on the facts and in the circumstances of the case orders passed by CIT(A) and the Tribunal are perverse in nature as both

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NC: 2024:KHC:40422-DB ITA No. 356 of 2022

authorities have deleted addition made under section 2(22)(e) of the Act ignoring that assessee holds substantial interest in M/s.Cauvery Aqua Pvt Ltd and M/s.Brindhavan Bevereges Pvt Ltd and thus, any advances/loans given by said concerns attracts Section 2(22)(e) of the Act as there accumulated profits as well which full fills another requirement for attracting said section"?

2.

"Whether on the facts and in the circumstances of the case, the Tribunal is correct in deleting addition made on account of deemed dividend on basis of agreement dated 14/1/2005 which was executed after the closing financial year and which was devoid of even basic ingredients like the total value of the investment to be made by M/s.CAPL, details of real estate project, sharing benefits between parties in terms of square feet of developed land or built up area, penalties for non performance of

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NC: 2024:KHC:40422-DB ITA No. 356 of 2022

commercial obligations etc., which are pivotal elements of any commercial agreement"?

3.

"Whether on the facts and in the circumstances of the case, the Tribunal is justified in allowing relief to assessee on issue of protective addition made towards unexplained investments amounting to Rs.2,51,00,000/- when the decision of Tribunal on substantive addition has not yet become final and pending for adjudication before this Hon'ble Court"?

4.

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.

5.

On the other hand, learned counsel for the revenue submits that he be granted liberty to revive the

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NC: 2024:KHC:40422-DB ITA No. 356 of 2022

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.

6.

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

SMJ List No.: 4 Sl No.: 36

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