THE PR COMMISSIONER OF INCOME TAX vs. M/S BHARAT INFRA TECH (P) LTD

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ITA/448/2018HC KarnatakaKAHC01042057201809 September 2022Bench: N S SANJAY GOWDA,S SUNIL DUTT YADAV7 pages
AI SummaryDismissed

What did the High Court hold?

The High Court dismissed both appeals filed by the Department. The Court found that the appeals did not deserve acceptance. The primary reasoning was based on Circular No. 17/2019, which prescribes monetary limits for filing appeals. The Court noted that the tax liability, after considering the deletions of additions under the remand order and the return of income, would be less than Rs. 1,00,00,000, and further, less than Rs. 50,00,000. Consequently, the appeals were held to be not maintainable. The Court explicitly stated that the dismissal of the appeals would not amount to an affirmation or decision on any question of law involved in the proceedings. No specific issue was left undecided; the appeals were dismissed on the ground of maintainability.

What were the facts?

The appeals were 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) for the assessment year 2007-08. The ITAT had upheld the assessee's cross-objections, thereby holding the assessment order dated 31.12.2009 invalid. The Assessing Officer had made six additions totaling Rs. 5,20,37,160, resulting in a total tax liability of Rs. 1,54,48,268. The assessee appealed this order. The Appellate Commissioner found five of the six additions improper, except for the 'Loss on sale of land-Mysore Branch'. A remand report also indicated that some additions were accepted as incorrect. The Department's appeals to the High Court were based on the contention that the tax effect of the deletions would be below the monetary limits prescribed by Circular No. 17/2019.

What were the issues?

1. Whether the appeals filed by the Department are maintainable in light of Circular No. 17/2019, given that the tax effect of the deletions made by the Appellate Authority is below the prescribed monetary limits? (Question of law) Assessee's Contention: The assessee argued that the tax liability, after considering the deletions based on the remand order, would be less than Rs. 1,00,00,000, and subsequently less than Rs. 50,00,000. Therefore, the appeals before the Appellate Authority and consequently before this Court would not be maintainable as per Circular No. 17/2019. It was further submitted that even if the appeals were allowed and remanded, the subject matter would still be less than Rs. 50,00,000, rendering the appeals infructuous. Revenue's Contention: The judgment does not record specific arguments made by the revenue regarding the maintainability of the appeals under Circular No. 17/2019. The appeals were filed challenging the ITAT's order that invalidated the assessment order.

Which sections of the Income-tax Act were involved?

Section 260A,Section 40A(3),Section 234A,Section 234B,Section 234C

AI-generated summary — verify with the full judgment below

1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 9TH DAY OF SEPTEMBER 2022 PRESENT THE HON'BLE MR.JUSTICE S. SUNIL DUTT YADAV AND THE HON'BLE MR.JUSTICE N.S. SANJAY GOWDA INCOME TAX APPEAL NO.450/2018 C/W INCOME TAX APPEAL NO.448/2018 IN I.T.A. NO.450/2018 BETWEEN: 1. THE PR. COMMISSIONER OF INCOME-TAX, CIT(A)

5TH FLOOR, BMTC BUILDING,

80 FEET ROAD, KORAMANGALA

BENGALURU - 560 095. 2. THE DEPUTY COMMISSIONER OF INCOME-TAX,

CENTRAL CIRCLE-1(2),

PRESENT ADDRESS

CIRCLE-1(1)(2)

2ND FLOOR, BMTC BUILDING

80 FEET ROAD, KORMANGALA

BENGALURU - 560 095.

… APPELLANTS (BY SRI ARAVIND K.V., ADVOCATE) AND: M/S. BHARAT INFRA TECH (P) LTD., NO.186, 1ST CROSS, HOSUR ROAD WILSON GARDEN

2 BENGALURU - 560 027 PAN: AACCB 0960 F

… RESPONDENT (BY SRI A. SHANKAR, SENIOR COUNSEL FOR SRI LAVA M., ADVOCATE) ***** THIS INCOME TAX APPEAL IS FILED UNDER SECTION 260A 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, BENGALURU

IN C.O. NO.211/BANG/2015 IN (ITA 1442/B/14) DATED

19.01.2018 VIDE ANNEXURE-C AND CONFIRM THE ORDER

OF THE APPELLATE COMMISSIONER CONFIRMING THE

ORDER PASSED BY THE DEPUTY COMMISSIONER OF

INCOME TAX, CIRCLE-1(1)(2), BENGALURU; (III) TO PASS SUCH OTHER SUITABLE ORDERS AS THIS HON'BLE COURT DEEMS FIT TO GRANT IN THE FACTS AND CIRCUMSTANCES OF THE CASE IN THE INTEREST OF JUSTICE AND EQUITY. IN I.T.A. NO.448 /2018 BETWEEN: 1. THE PR. COMMISSIONER OF INCOME-TAX, CIT(A)

5TH FLOOR, BMTC BUILDING,

80 FEET ROAD,

KORAMANGALA

BENGALURU - 560 095. 2. THE DEPUTY COMMISSIONER OF INCOME-TAX,

CENTRAL CIRCLE-1(2),

PRESENT ADDRESS

CIRCLE-1(1)(2)

2ND FLOOR, BMTC BUILDING

80 FEET ROAD,

KORMANGALA

BENGALURU - 560 095.

… APPELLANTS (BY SRI ARAVIND K.V., ADVOCATE) AND: M/S. BHARAT INFRA TECH (P) LTD., NO.186, 1ST CROSS, HOSUR ROAD WILSON GARDEN BENGALURU - 560 027 PAN: AACCB 0960 F

… RESPONDENT (BY SRI A. SHANKAR, SENIOR COUNSEL FOR SRI LAVA M., ADVOCATE) ***** THIS INCOME TAX APPEAL IS FILED UNDER SECTION 260A 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, BENGALURU

IN I.T.A. NO.1442/BANG/2014 DATED 19.01.2018 VIDE

ANNEXURE-C CONFIRMING THE ORDER OF THE

APPELLATE COMMISSIONER AND CONFIRM THE

ORDER PASSED BY THE DEPUTY COMMISSIONER OF

INCOME TAX, CIRCLE-1(1)(2), BENGALURU; (III) TO PASS SUCH OTHER SUITABLE ORDERS AS THIS HON'BLE COURT DEEMS FIT TO GRANT IN THE FACTS AND CIRCUMSTANCES OF THE CASE IN THE INTEREST OF JUSTICE AND EQUITY. THESE INCOME TAX APPEALS COMING ON FOR ORDERS THIS DAY, SANJAY GOWDA J., DELIVERED THE FOLLOWING:

4 JUDGMENT

These two appeals are filed by the Department challenging the dismissal of the appeal and also allowing of cross-objections which resulted in dismissal of the appeal for the assessment year 2007-08.

2.

ITA 450/2018 is preferred challenging the order of the Tribunal by which the cross-objections of the assessee were upheld and as a consequence, the assessment order dated 31.12.2009 was held to be invalid in law.

3.

It is not in dispute that as per the order of the Assessing Officer, the following six additions were made: i) Disallowance u/s 40A (3) - para 9 Rs.1,30,000 ii) Loss on sale of land-Mysore Branch - para 10 Rs.6,50,500 iii) Other income from M/s.Trinity Sun Rise - para 11 Rs.59,87,640 iv) Bad debts - para 12 Rs.2,42,94,958 v) Compensation paid - para 13 Rs.13,50,000 vi) Disallowance u/s 40A (3) in respect of Bastipura Property - para 14 Rs.3,41,000

Total Income Rs.5,20,37,160

Tax thereon Rs.1,56,11,148

Add: surcharge Rs.15,61,115

Add: Education Cess Rs.3,43,445

Rs.1,75,15,708

Add: Interest u/s 234A Rs.5,25,471

234B Rs.54,79,311

234C Rs.3,27,778

Rs.2,38,48,258

Less: 140A paid Rs.84,00,000

Total payable Rs.1,54,48,268

4.

It was thus held that the assessee was liable to pay a sum of Rs.1,54,48,268/-. Being aggrieved by the said assessment order, the assessee preferred an appeal.

5.

In the appeal, out of the six additions mentioned above, except the addition relating to Loss on sale of land-Mysore Branch amounting to Rs.6,50,500/-, the remaining five additions were held to be improper.

6.

It is also pertinent to state here that these additions were in fact accepted to be incorrect by the remand report itself. In respect of fourth addition i.e., bad debt, the remand report partially accepted that additions to the extent of Rs.1,30,10,250/- is bad in law.

7.

It is submitted that as per the remand report, additions to an extent of Rs.2,08,18,890/- stood reduced and taking into consideration the return of income already filed, the amount involved was a sum of Rs.1,19,35,208/- of which the tax liability would only be a sum of Rs.37,98,432/-.

8.

In view of the fact that the tax liability by virtue of deletion of the additions under the remand order would be less than Rs.1,00,00,000/- appeal would not be maintainable as per Circular No.17/2019 and appeal would have to be therefore dismissed.

9.

It is also pertinent to state here that assuming that this appeal of the department is to be allowed and the matter is remanded to the Tribunal, even then the subject matter of the appeal would Rs.50,00,000/- and that would also be lesser in Monetary limits than prescribed in Circular No.17/2019. In other words, no useful purpose would be served as the tax effect in this case would be below Rs.50,00,000/-.

10.

It is to be stated here that if the additions disallowed by the Appellate Authority on the basis of the remand order is taken into consideration and the return of Rs.1,19,35,208/- is taken into consideration, the tax liability on the said sum would actually be less than Rs.50,00,000/- and the appeal before the Appellate Authority cannot be maintained.

11.

In view of the above, we find that the appeals filed by the Department does not deserve acceptance. Accordingly, both the appeals are dismissed in accordance with Circular No.17/2019.

12.

It is needless to state that dismissal of the appeals would not amount to affirmation or deciding any question of law involved in these proceedings. Sd/-

JUDGE

Sd/-

JUDGE Np/-

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