THE PR COMMISSIONER OF INCOME TAX, CENTRAL vs. M/S BARBEQUE NATION HOSPITALITY LTD

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ITA/388/2023HC KarnatakaKAHC01027207202319 August 2024Bench: S.G.PANDIT,C.M. POONACHA4 pages
AI SummaryDismissed

What did the High Court hold?

The High Court noted that the revenue's counsel admitted that there were no incriminating materials to proceed and pass an order under Section 153A of the Income Tax Act. The Court referred to the decision of the Hon'ble Apex Court in PRINCIPAL COMMISSIONER OF INCOME TAX, CENTRAL-3 v/s ABHISAR BUILDWELL PRIVATE LIMITED (2023) Taxmann.com 399. Following this Apex Court decision, the High Court held that the issue of whether an authority could exercise power under Section 153A in the absence of incriminating material is no longer res-integra. The appeal was disposed of by answering the substantial questions of law against the revenue and in favour of the assessee. The operative direction was to dispose of the appeal in terms of the Apex Court judgment.

What were the facts?

The appeal is filed by the Principal Commissioner of Income Tax and the Deputy Commissioner of Income Tax against an order of the Income-Tax Appellate Tribunal (ITAT). The assessment year in question is 2012-2013. The ITAT had allowed an appeal filed by the assessee, M/s. Barbeque Nation Hospitality Ltd., setting aside an order passed under Section 263 of the Income Tax Act, 1961. The Section 263 order had confirmed an earlier assessment order passed by the Deputy Commissioner under Section 143(3) read with Section 153A. The revenue is challenging the ITAT's decision that the assessment order under Section 153A was not based on incriminating materials and therefore not erroneous or prejudicial to the revenue.

What were the issues?

1. Whether, on the facts and circumstances, the ITAT was correct in law in holding that the issues in the order passed under Section 143(3) read with Section 153A were not based on incriminating materials found during a search, and thus the assessment order could not be considered erroneous and prejudicial to the revenue, despite Section 153A not stipulating a requirement for incriminating material? (Assessee: The assessment order under Section 153A is valid even without incriminating material. Revenue: The assessment order under Section 153A must be based on incriminating material found during search, and the ITAT erred in not considering this. The revenue also argues that the ITAT's order is perverse for not appreciating that conditions under Section 263 read with Explanation 2 were satisfied for revision proceedings, and for ignoring the mandate of Sections 263 and 153A. 2. Whether, on the facts and circumstances, the ITAT's order can be considered perverse for not appreciating that the conditions set out in Section 263 read with Explanation 2 were fully satisfied to take up the assessment order for revision proceedings? (Revenue: The conditions for revision under Section 263 were met. Assessee: No argument recorded. 3. Whether, on the facts and circumstances, the ITAT's order can be considered perverse for ignoring the mandate of Section 263 as well as Section 153A of the Act? (Revenue: The ITAT ignored the statutory provisions. Assessee: No argument recorded.)

Which sections of the Income-tax Act were involved?

Section 143(3),Section 153A,Section 263

AI-generated summary — verify with the full judgment below

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NC: 2024:KHC:33147-DB ITA No. 388 of 2023

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 19TH DAY OF AUGUST, 2024 PRESENT THE HON'BLE MR JUSTICE S.G.PANDIT AND THE HON'BLE MR JUSTICE C.M. POONACHA INCOME TAX APPEAL NO. 388 OF 2023 BETWEEN: 1. THE PR. COMMISSIONER OF INCOME TAX, CENTRAL, 3RD FLOOR, C R BUILDING, QUEEN’S ROAD, BENGALURU 560001.

2.

THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 2 (2) 3RD FLOOR, C R BUILDING, QUEEN’S ROAD, BENGALURU-560001. …APPELLANTS (BY SRI A SHANKAR, SR.ADV. FOR SRI MADHUSUDHAN U.A., ADV.)

AND: M/S. BARBEQUE NATION HOSPITALITY LTD., NO.62, SITE NO.13, 16TH CROSS, N S PALYA, BTM LAYOUT, BENGALURU-560076 PAN: AAKCS3053N. …RESPONDENT (BY SRI. RAVI RAJ Y.V., A/W SRI DILIP M., ADV.)

THIS INCOME TAX APPEAL IS FILED UNDER SECTION 260-A OF THE INCOME TAX ACT, 1961, PRAYING TO I). FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE; II). ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE INCOME-TAX APPELLATE TRIBUNAL,

Digitally signed by MARIGANGAIAH PREMAKUMARI Location: HIGH COURT OF KARNATAKA

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NC: 2024:KHC:33147-DB ITA No. 388 of 2023

BENGALURU IN ITA NO.486/BANG/2022 DATED 19.12.2022 FOR ASSESSMENT YEAR 2012-2013 ANNEXURE-C AND CONFIRM THE ORDER OF THE U/S 263 CONFIRMING THE ORDER PASSED BY THE DEPUTY COMMISSIONER OF INCOME- TAX, CENTRAL CIRCLE-2(2), 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)

This appeal is admitted on 12.06.2023 to examine the following substantial questions of law: 1. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in allowing appeal filed by assessee by holding that issues involved in the order passed under Section 143(3) r/w/s 153A are not based on incriminating materials found during course of search and as such assessment order cannot be said as erroneous and prejudicial to interest of Revenue ignoring that Section 153A do not stipulate that there must be incriminating material to pass order under said section and as such there was no such requirement in law?

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NC: 2024:KHC:33147-DB ITA No. 388 of 2023

2.

Whether on the facts and in the circumstances of the case, the Tribunal’s order can be said as perverse in nature in not appreciating that conditions set out in Section 263 r/w Explanation 2 were fully satisfied to take up assessment order for revision proceedings?

3.

Whether on the facts and in the circumstances of the case, the Tribunal’s order can be said as perverse in nature in ignoring mandate of Section 263 as well as Section 153-A of the Act?

2.

Heard learned counsel Sri.Y.V.Raviraj along with Sri.Dilip M, learned counsel for the revenue/appellants and learned senior counsel Sri.A.Shankar for Sri.Madhusudhan U.A., learned counsel for respondent-assessee.

3.

Learned counsel Sri.Y.V.Raviraj appearing for the appellants/revenue submits that when there is no challenge to Section 153-A order by the respondent- assessee, in a proceedings under Section 263 initiated by revenue, the finding could not have been recorded with regard to the order passed under Section 153-A. It is an admitted fact that there were no incriminating material to

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NC: 2024:KHC:33147-DB ITA No. 388 of 2023

proceed and pass order under Section 153-A of the Income Tax Act, 1961.

4.

The issue as to whether the Authority could have exercised power under Section 153-A of the Act in the absence of incriminating material is no more res-integra, as decided by the Honb'le Apex Court in PRINCIPAL COMMISSIONER OF INCOME TAX, CENTRAL-3 v/s ABHISAR BUILDWELL PRIVATE LIMITED reported in

(2023) Taxmann.com 399. Following the above said decision of the Honb'le Apex Court, the present appeal stands disposed of, answering the substantial questions of law against the revenue and in favour of the assessee.

Sd/- (S.G.PANDIT) JUDGE

Sd/- (C.M. POONACHA) JUDGE

MPK CT:bms List No.: 1 Sl No.: 0

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