PR COMMISSIONER OF INCOME TAX PANAJI vs. SHRI M N RAJENDRA KUMAR

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ITA/382/2022HC KarnatakaKAHC01036643202224 September 2024Bench: S.G.PANDIT,C.M. POONACHA5 pages
AI SummaryRemanded

What did the High Court hold?

The High Court disposed of the appeal with liberty granted to the revenue to revive it as prayed for by its counsel. The Court explicitly stated that the substantial questions of law were kept open to be adjudicated in an appropriate proceeding. No decision was made on the merits of the questions of law. The operative direction was to dispose of the appeal with the liberty granted, without adjudicating the substantial questions of law.

What were the facts?

The Revenue (Pr. Commissioner of Income Tax, Panaji and Income Tax Ward 2(3), Mangaluru) filed an appeal under Section 260-A of the Income Tax Act, 1961, against an order dated March 28, 2022, passed by the Income Tax Appellate Tribunal, Bengaluru Bench. The appeal pertains to Assessment Year 2013-2014 and concerns the respondent-assessee, Shri M N Rajendra Kumar. The High Court admitted the appeal to consider substantial questions of law. The procedural history involves the Tribunal's order in ITA No.644/Bang/2021, which is now under challenge before the High Court.

What were the issues?

The High Court was asked to decide the following substantial questions of law: 1. Whether the Tribunal erred in holding that unsubscribed creditors should be examined in the year of receipt, contrary to this Court's decision in Southern Motors India Plywood Co. V/S CIT, which allowed additions for unproved creditors in the assessment year even if credit entries related to earlier years. 2. Whether the Tribunal was correct in holding that the cause of action in the case of M/s. Shruthi Securities arises in the year of repayment, not the year under consideration, when the assessing authority added non-existing loans shown in the books for the year under consideration. 3. Whether the Tribunal was right in deleting the addition made by treating loan creditors as of March 31, 2013, as bogus, given that the onus is on the assessee to prove creditors were not bogus but existing. 4. Whether the Tribunal's order was perverse for ignoring facts, circumstances, and materials presented by the assessing authority. The assessee argued that the appeal should not be entertained due to the tax effect being less than Rs. 2 Crores, citing CBDT Circular No. 09/2024. The revenue requested liberty to revive the appeal if the matter fell within exceptions under Circulars 09/2024 and 05/2024.

Which sections of the Income-tax Act were involved?

Section 260-A

AI-generated summary — verify with the full judgment below

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NC: 2024:KHC:39735-DB ITA No. 382 of 2022

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 24TH 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. 382 OF 2022

BETWEEN:

1.

PR. COMMISSIONER OF INCOME TAX, PANAJI. 2. INCOME TAX WARD 2(3), MANGALURU. …APPELLANTS (BY SRI SANMATHI E I,ADVOCATE) AND:

1.

SHRI M N RAJENDRA KUMAR, 1-276, PO 721, PULKERI, KARKALA UDUPI – 574104, PAN AFOPK5638K. …RESPONDENT (BY SMT SHEETAL BORKAR, ADVOCATE)

THIS APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 28/03/2022 PASSED IN ITA NO.644/BANG/2021, FOR THE ASSESSMENT YEAR 2013-2014, PRAYING THIS HON’BLE COURT TO: DECIDE THE FOREGOING QUESTION OF LAW AND / OR SUCH OTHER QUESTIONS OF LAW AS MAY BE FORMULATED BY THE HONBLE COURT AS DEEMED FIT AND SET ASIDE THE APPELLATE ORDER DATED 28/03/2022 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, A BENCH, BENGALURU, AS SOUGHT FOR, IN THE RESPONDENT-ASSESSEES CASE, IN APPEAL PROCEEDINGS IN ITA NO.644/BANG/2021 FOR ASSESSMENT YEAR 2013-2014 (ANNEXURE-A) AND GRANT

Digitally signed by B LAVANYA Location: HIGH COURT OF KARNATAKA

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NC: 2024:KHC:39735-DB ITA No. 382 of 2022

SUCH OTHER RELIEF AS DEEMED FIT, IN THE INTEREST OF JUSTICE.

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

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

Heard the learned counsel Sri.Sanmathi.E.I., for appellants/Revenue and learned counsel Smt.Sheetal Borkar for 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 28.03.2022 passed by the Income Tax Appellate Tribunal, ‘A’ Bench, Bengaluru (for short, ‘Appellate Authority’) in ITA.No.644/Bang/2021 for the assessment year 2013-14.

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NC: 2024:KHC:39735-DB ITA No. 382 of 2022

3.

This

Court,

admitted the appeal on 17.08.2022 to consider the following substantial question of law: “1. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the unsubscribed creditors should be examined in the year of receipt when this Hon’ble Court in case of Southern Motors India Plywood Co. V/S CIT (ITA No.180/2002 dated 16.11.2007) has held that the authorities are justified in making addition on account of unproved creditors in the year of assessment, even if the credit entries pertain to earlier assessment years?

2.

Whether on the facts and in the circumstances of the case, the Hon’ble Tribunal is right in law in holding that in the case of M/s.Shruthi Securities the cause of action shall arise in the year of repayment and not in the year under consideration when the assessing authority made the addition of non-existing loan shown in the books of accounts during the year under consideration?

3.

Whether on the facts and in the circumstances of the case, the Hon’ble Tribunal is right in law in deleting the addition made by

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NC: 2024:KHC:39735-DB ITA No. 382 of 2022

treating the loan creditors as on 31.03.2013 as bogus since the onus is on the assessee to prove that the creditors reflected in the books of accounts were not bogus credits but still existing?

4.

Whether the Tribunal order is perverse in nature since Tribunal has ignored the facts and circumstances of the case and materials brought on record by assessing authority?.

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 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.

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NC: 2024:KHC:39735-DB ITA No. 382 of 2022

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

MPK List No.: 2 Sl No.: 44

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