M/S GREEN ORCHARD FARM HOUSES vs. DEPUTY COMMISSIONER OF INCOME TAX

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ITA/75/2021HC KarnatakaKAHC01009109202120 February 2023Bench: P.S.DINESH KUMAR,RAMACHANDRA D. HUDDAR5 pages
AI SummaryAllowed

What did the High Court hold?

The High Court of Karnataka allowed the appeal, setting aside the order of the ITAT dated 22.10.2020. The Court held that the question of law raised by the assessee merits consideration. The Court noted that the undisputed facts were that the sale deeds executed by the assessee were set aside by the Arbitral Tribunal, and subsequently, three new sale deeds were executed. The assessee's specific case was that capital gains were offered and paid for AY 2016-17. The Revenue contended that consideration was received in AY 2009-10. The Court observed that while the Revenue contended money was received in 2009-10, the matter undoubtedly requires proper computation to decide tax, interest, and penalty liability, keeping in view the assessment order for AY 2016-17. Therefore, the matter requires consideration in the hands of the AO. The Court remitted the matter to the AO for fresh consideration in accordance with law, keeping all contentions of the parties open. The question of law was answered in favour of the Assessee and against the Revenue.

What were the facts?

The assessee, M/s. Green Orchard Farm Houses, a registered partnership firm, filed an appeal before the High Court of Karnataka challenging an order of the Income Tax Appellate Tribunal (ITAT). The assessment year in question is 2010-11. The dispute pertains to income arising from sale deeds that were subsequently cancelled by an arbitration award dated 02.09.2015. The assessee had entered into an agreement to sell land and executed sale deeds in June 2009. A dispute arose, leading to arbitration. The original sale deeds were set aside, and new sale deeds were executed. The assessee's contention is that capital gains were offered and paid for assessment year 2016-17, and the ITAT failed to consider the assessee's request to remand the matter to the Assessing Officer (AO) for re-examination.

What were the issues?

1. Whether the Tribunal was justified in not setting aside and remanding the assessment order dated 12.03.2014, which brought to tax amounts received under agreements to sell and sale deeds that were cancelled by an arbitration award dated 02.09.2015, and income arising under these deeds which were brought to tax in the assessment order dated 24.12.2018 for assessment year 2016-17? (Question of mixed law and fact, concerning the interpretation and application of provisions related to capital gains and cancellation of sale deeds). Assessee's Contention: The assessee argued that the matter required a detailed examination of facts, particularly concerning the cancellation of sale deeds by an arbitration award and the subsequent execution of new sale deeds. Therefore, the ITAT should have acceded to the request to remand the matter to the AO for a proper factual inquiry. The assessee relied on the fact that capital gains were offered for AY 2016-17. Revenue's Contention: The Revenue did not dispute the facts presented by the assessee. However, it was contended that a remand might not be necessary as the assessee received consideration in FY 2009-10 and is liable for interest and penalty, even though capital gains were paid in AY 2016-17. The Revenue's primary stance was that the consideration was received in an earlier year.

Which sections of the Income-tax Act were involved?

Section 260-A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, Digitally signed

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ITA No.75 of 2021

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 20TH DAY OF FEBRUARY, 2023 PRESENT THE HON'BLE MR. JUSTICE P.S.DINESH KUMAR AND THE HON'BLE MR. JUSTICE RAMACHANDRA D. HUDDAR INCOME TAX APPEAL NO. 75 OF 2021 BETWEEN: M/S. GREEN ORCHARD FARM HOUSES REGISTERED PARTNERSHIP FIRM NO. 10/1, LAKSHMINARAYANA COMPLEX PALACE ROAD,BANGALORE-560 094 REP. BY ITS PARTNER SRI. ASHWIN PAI …APPELLANT

(BY SHRI. M.V. SESHACHALA, SENIOR ADVOCATE FOR SHRI. ARAVIND V. CHAVAN, ADVOCATE) AND: 1. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE -2(2) C.R.BUILDING, QUEENS ROAD BANGALORE-560 001 2. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE C.R.BUILDING, QUEENS ROAD BANGALORE-560 001 …RESPONDENTS

(BY SHRI. E.I. SANMATHI, STANDING COUNSEL) THIS ITA IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW AS STATED THEREIN AND ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE INCOME TAX APPELLATE TRIBUNAL,

Digitally signed by YASHODHA N Location: HIGH COURT OF KARNATAKA

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ITA No.75 of 2021

BENGALURU IN ITA NO. 202/BANG/2020 DATED 22.10.2020 CONFIRMING THE ORDER OF THE APPELLATE COMMISSIONER DATED 06.01.2020 BEARING ITA NO.12/CIT(A)-11/BNG/2014-2015 AND THE ORDER PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2(2), BENGALURU DATED 12.03.2014 FOR ASSESSMENT YEAR 2010-11 AND ETC.

THIS ITA, COMING ON FOR FINAL HEARING, THIS DAY, P.S.DINESH KUMAR, J., DELIVERED THE FOLLOWING:

JUDGMENT This appeal by the Assessee challenging the order dated 22.10.2020 in ITA No.202/Bang/2020 passed by the ITAT1, "A" Bench, Bangalore, though has been admitted to consider five questions of law. Shri M.V.Seshachala, learned Senior Advocate for the appellant and Shri E.I.Sanmathi, learned Standing Counsel for the respondents submit that only first question arises for consideration and it reads as follows: “Whether the Tribunal was justified in not setting aside and remanding the assessment order dated 12.03.2014 bringing to tax amount received under agreement to sale and sale deeds which was cancelled by the arbitration award dated 02.09.2015 and income arising under these deeds which were brought to tax in the assessment order dated 24.12.2018 for assessment year 2016-17?

2.

Shri Seshachala submitted that assessee had entered into an agreement to sell 190 acres of land to

1 Income tax Appellate Tribunal, Bengaluru Bench

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ITA No.75 of 2021

M/s Manipal University. It was executed three sale deeds on 03.06.2009, and another sale deed on 24.06.2009. Thereafter, there was a dispute between the parties and matter got resolved pursuant to the award passed in the arbitration proceedings. The said sale deeds were set-aside by Arbitral Tribunal and subsequently, three new sale deeds have been executed. Therefore, matter required examination of facts and hence the assessee has filed this appeal as the ITAT did not consider assessee’s request to remand the matter to the A.O.2

3.

Shri Sanmathi, did not dispute the facts and submissions made by Shri Seshachala. However, he stated that a remand order may not be necessary because assessee has received consideration in the F.Y.3 2009-10 and it is liable to pay interest and penalty even though assessee has paid capital gains in the A.Y.4 2016-17.

4.

We have carefully considered rival submissions and perused the records.

2 Assessing Officer 3 Financial Year 4 Assessment Year

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ITA No.75 of 2021

5.

Undisputed facts of the case are, sale deeds executed by the assessee have been set aside by the Arbitral Tribunal. Subsequently, three sale deeds have been executed. Assessee’s specific case is, it has offered and paid capital gains for the A.Y. 2016-17. The Revenue’s contention is that though assessee may have paid capital gains in the A.Y. 2016-17, it had received consideration in the A.Y.2009-10. Assessee sought for remand and the same was not considered by the ITAT.

6.

Shri Sanmathi has not disputed the facts and submissions made by the learned Senior Advocate for the assessee. Although it is contended that money was received by the assessee in the year 2009-10, undoubtedly, it requires proper computation to decide as to whether assessee is liable to pay any tax, interest and penalty, keeping in view the assessment order for the A.Y. 2016-17.

7.

In view of the above, in our opinion, the matter requires consideration in the hands of the A.O. Therefore,

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ITA No.75 of 2021

the first question raised by the assessee merits consideration and hence, the following: ORDER i) Appeal is allowed; ii) Order dated 22.10.2020 in ITA No.202/Bang/2020 passed by the ITAT, ‘A’ Bench, Banglaore, is set aside;

iii) The question of law is answered in favour of the Assessee and against the Revenue;

iv) The matter is remitted to the file of A.O. for fresh consideration in accordance with law;

v) All contentions of parties are kept open. No costs. Sd/- JUDGE

Sd/- JUDGE

YN List No.: 1 Sl No.: 55

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