THE Prl. Commissioner of Income Tax vs. PURADAKOPPALU BATTEGOWDA KARIGOWDA

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ITA/458/2023HC KarnatakaKAHC01035095202326 September 2024Bench: S.G.PANDIT,C.M. POONACHA4 pages
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What did the High Court hold?

The High Court of Karnataka disposed of the appeal with liberty granted to the revenue to revive it, as prayed for by the revenue's counsel. The substantial questions of law were kept open to be adjudicated in an appropriate proceeding. The court noted the assessee's submission regarding the tax effect being below Rs. 2 Crores, referencing CBDT Circular No. 09/2024. The revenue requested liberty to revive the appeal if the case fell under the exceptions of the mentioned circulars. Consequently, no decision was made on the merits of the substantial questions of law raised.

What were the facts?

The Revenue, comprising the Principal Commissioner of Income-tax and the Deputy Commissioner of Income-tax, has filed an appeal under Section 260-A of the Income Tax Act, 1961, against an order dated February 9, 2023, passed by the Income Tax Appellate Tribunal, Bengaluru Bench. The appeal pertains to Assessment Year 2018-19 and challenges the Tribunal's decision in ITA No. 1023/Bang/2022. The High Court of Karnataka had admitted the appeal on August 8, 2023, to consider substantial questions of law. The assessee is Puradakoppalu Battegowda Karigowda, a PWD contractor.

What were the issues?

1. Whether, on the facts and circumstances, the Tribunal's order is perverse in holding that no further disallowances can be made by the assessing authority when profits from business are made on an estimation basis? 2. Whether, on the facts and circumstances, the Tribunal's order is perverse in holding that there were no purchases claimed by the assessee to invoke Section 40A(2) of the Act, ignoring that purchases are part of business activity even if not properly recorded? 3. Whether, on the facts and circumstances, the Tribunal's order is perverse in deleting additions without appreciating that the estimation of profits was based on undisclosed business activity found during a search, and the assessee had not maintained books of accounts for purchases? Assessee's Contention: The assessee argued that the tax effect in this appeal is 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 September 17, 2024, which binds the revenue. Revenue's Contention: The revenue sought liberty to revive the appeal if the matter falls within the exceptions provided under Circular No. 09/2024 and Circular No. 5/2024 dated March 15, 2024.

Which sections of the Income-tax Act were involved?

Section 260-A,Section 40A(2)

AI-generated summary — verify with the full judgment below

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NC: 2024:KHC:40519-DB ITA No. 458 of 2023

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 26TH 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. 458 OF 2023 BETWEEN:

1.

THE PRL. COMMISSIONER OF INCOME-TAX, CENTRAL, 3RD FLOOR, C.R. BUILDING, QUEEN S ROAD, BENGALURU - 560 001.

2.

THE DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE, ROOM NO. 305, AAYAKAR BHAVAN, NO. 21/16, RESIDENCY ROAD, NAZARBAD, MYSURU - 570 010. …APPELLANTS (BY SRI. DILIP M., A/W SRI. RAVIRAJ Y.V., ADVOCATES) AND:

PURADAKOPPALU BATTEGOWDA KARIGOWDA, PWD CONTRACTOR, PURADAKOPPALU DUDDA HOBLI, MUDAGANDUR POST, MANDYA, KARNATAKA - 571 416, PAN. AHLPK 6049B. …RESPONDENT (BY SRI. K.R. VASUDEVAN, ADVOCATE)

THIS ITA / INCOME TAX APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 09/02/2023 PASSED IN ITA NO.1023/BANG/2022, FOR THE ASSESSMENT YEAR 2018-2019 PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE AND ETC.

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

Digitally signed by B LAVANYA Location: HIGH COURT OF KARNATAKA

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NC: 2024:KHC:40519-DB ITA No. 458 of 2023

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. Dilip.M., along with Sri. Raviraj.Y.V., learned counsel for the appellants/Revenue and Sri. K.R.Vasudevan, 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 09.02.2023 passed by the Income Tax Appellate Tribunal, ‘B’ Bench, Bengaluru (for short ‘Appellate Authority’) in ITA.No.1023/Bang/2022 for the assessment year 2018-19.

3.

This

Court,

admitted the appeal on 08.08.2023 to consider the following substantial questions of law:

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NC: 2024:KHC:40519-DB ITA No. 458 of 2023

1.

"Whether on the facts and in the circumstances of the case, the Tribunal's can be said as perverse in nature in holding that when the profits from business is made on estimation basis, no further disallowances can be made by assessing authority"?

2.

"Whether on the facts and in the circumstances of the case the Tribunal's order can be said as perverse in nature in holding that there was no purchases claimed by the assesse to invoke provisions of Section 40A(2) of the Act ignoring the fact that purchases is part of business activity though the same is not recorded in proper books of accounts"?

3.

"Whether on the facts and in the circumstances of the case, the Tribunal's order can be said as perverse in nature in deleting the additions without appreciating that estimation of profits was made on the undisclosed business of the assesse on the basis of documents found during course of search and assesse had not maintained books of accounts recording the purchases"?

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

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NC: 2024:KHC:40519-DB ITA No. 458 of 2023

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.

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.: 3 Sl No.: 21

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