THE COMMISSIONER OF INCOME TAX vs. M/S RASTRIYA COMPUTER SAKSHARATA SAMITHI

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ITA/712/2023HC KarnatakaKAHC01066932202330 September 2024Bench: S.G.PANDIT,C.M. POONACHA4 pages
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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 noted the submission by the assessee regarding the tax effect being less than Rs. 2 Crores, referencing CBDT Circular No. 09/2024. The Revenue's counsel sought liberty to revive the appeal in case the matter fell within the exceptions of Circulars 09/2024 and 05/2024. Consequently, the appeal was disposed of on these terms. The substantial questions of law were kept open to be adjudicated in an appropriate proceeding. No specific finding was given on the merits of the penalty deletion or the reliance on the Bennet Coleman case.

What were the facts?

The Revenue, represented by the Commissioner of Income Tax (Exemptions) and the Assistant Commissioner of Income Tax, filed an appeal before the High Court of Karnataka against an order dated February 28, 2023, passed by the Income Tax Appellate Tribunal (ITAT), Bengaluru. The ITAT's order was in ITA No. 1098/Bang/2022 for the assessment year 2010-11. The appeal challenges the ITAT's decision to delete a penalty imposed on the assessee, M/s Rastriyam Computer Saksharata Samithi. The ITAT had confirmed the order of the Appellate Commissioner, which in turn had directed the Assessing Officer (AO) to assess the net taxable income after verification. The Revenue sought to set aside the ITAT's order and confirm the order of the Assistant Commissioner.

What were the issues?

The High Court was asked to decide the following substantial questions of law: 1. Whether the ITAT was correct in deleting the penalty by holding that additions made by the AO were curtailed and the assessed income was substantially reduced, even though the income had not yet been quantified as the CIT(A) directed the AO to bring to tax the net taxable income after verification? 2. Whether the ITAT ought to have directed the levy of penalty proportionately based on the income that would be quantified in the order giving effect to the CIT(A)'s order? 3. Whether the ITAT was correct in relying on the decision of the Bombay High Court in Bennet Coleman and Co. Ltd. when the facts of the present case were distinguishable? The Revenue argued that the ITAT erred in deleting the penalty without the final income being quantified. The assessee contended 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 sought 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:41508-DB ITA No. 712 of 2023

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 30TH 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. 712 OF 2023 BETWEEN:

1.

THE COMMISSIONER OF INCOME TAX EXEMPTIONS, 6TH FLOOR, UNITY BUILDING ANNEXE, MISSION ROAD, BENGALURU 560027

2.

THE ASST COMMISSIONER OF INCOME TAX EXEMPTIONS CIRCLE, 1, GROUND FLOOR, ALBUQUERQUE HOUSE, OPP FORUM FIZA MALL, PANDESHWAR, MANGALURU 575001 …APPELLANTS (BY SRI. DILIP M, ADVOCATE A/W SRI. RAVI RAJ Y V.,ADVOCATE)

AND:

M/S RASTRIYA COMPUTER SAKSHARATA SAMITHI PM IV 1491, SHEIKMALE BUILDING, PUTTUR 574201 …RESPONDENT (BY SRI. SHREEHARI KUTSA,ADVOCATE)

THIS ITA / INCOME TAX APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED

Digitally signed by B LAVANYA Location: HIGH COURT OF KARNATAKA

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NC: 2024:KHC:41508-DB ITA No. 712 of 2023

THEREIN, ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, BENGALURU IN ITA NO. 1098/BANG/2022 DATED 28/02/2023 FOR ASSESSMENT YEAR 2010- 2011 ANNEXURE-A CONFIRMING THE ORDER OF THE APPELLATE COMMISSIONER AND CONFIRM THE ORDER PASSED BY THE ASST. COMMISSIONER OF INCOME TAX, EXEMPTIONS, CIRCLE-1, MANGALURU AND ETC.

THIS APPEAL, COMING ON FOR FURTHER 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)

Heard the learned counsel Sri Dilip M along with learned counsel Sri Raviraj Y.V, for appellants/Revenue and learned counsel Sri Shreehari Kutsa, 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 28.02.2023 passed by the Income Tax Appellate Tribunal, ‘B’ Bench, Bengaluru (for short, ‘Appellate Authority’) in

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NC: 2024:KHC:41508-DB ITA No. 712 of 2023

ITA.No.1098/Bang/2022 for the assessment year 2010-11, raising the following substantial questions of law: “1. Whether on the facts and in the circumstances of the case, the ITAT is correct in deleting the penalty by holding that additions made by the AO has been curtailed and assessed income is substantially reduced, while the income has not yet been quantified, as the CIT(A) has directed AO to bring to tax the net taxable income after verification as per the provisions of the Income Tax Act?

2.

Whether on the facts and in the circumstances of the case, the ITAT ought to have directed to levy the penalty proportionately depending on the income that would be quantified in the order giving effect to the CIT(A) order?

3.

Whether on the facts and in the circumstances of the case, the ITAT in correct in relying on the decision of Bombay High Court in the case of Bennet Coleman and Co. Ltd., - 33 taxmann.com 227 while the facts of the present case are distinguishable from the facts of the relied upon case?”

3.

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

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NC: 2024:KHC:41508-DB ITA No. 712 of 2023

Taxes. It is also submitted that the aforesaid Circular binds the revenue.

4.

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.

5.

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

BS List No.: 4 Sl No.: 16

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