SRI ANDUNHI MOHAMMED vs. DEPUTY COMMISSIONER OF INCOME TAX

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WP/1303/2019HC KarnatakaKAHC01001105201907 February 2019Bench: S.SUJATHA7 pages
AI SummaryRemanded

What did the High Court hold?

The High Court held that the petitioner's argument regarding the Assessing Officer's failure to dispose of objections prior to passing the reassessment order could not be countenanced because the petitioner themselves had invited an order under Section 144A of the Act from the Additional Commissioner. The Court found that the judgments relied upon by the petitioner were distinguishable as they did not involve consideration of an order passed under Section 144A. Therefore, the Court did not go into the merits or demerits of the impugned order. Instead, the writ petition was disposed of with liberty to the petitioner to file an appeal before the appropriate authority within two weeks of receiving a certified copy of the order. Such an appeal would be considered on merits without objection to the period of limitation, subject to other procedural requirements. All rights and contentions of both parties were left open.

What were the facts?

The petitioner, Sri Andunhi Mohammed, proprietor of Supari Garden, is challenging an assessment order dated 26.12.2018 and a consequential demand notice dated 26.12.2018, passed by the Deputy Commissioner of Income Tax (R-1) for Assessment Year 2011-12. This order was passed under Section 143(2) read with Section 147 of the Income Tax Act, 1961. The proceedings were initiated after a survey under Section 133A on 24.11.2015, followed by a notice under Section 148 on 27.03.2018. The petitioner filed objections to the reassessment notice. During the pendency of reassessment proceedings, the petitioner made a representation under Section 144A before the Additional Commissioner of Income Tax (R-2), who issued directions on 28.11.2018 to R-1 to conclude the assessment after verifying exceptions under Rule 6DD(e)(i) and keeping tax on a specific loan addition in abeyance until finality. R-1 passed the impugned order in compliance with these directions.

What were the issues?

1. Whether the Assessing Officer (R-1) failed to dispose of the assessee's objections prior to passing the reassessment order, rendering the exercise of power without jurisdiction, as contended by the assessee, relying on M/s. Deepak Extrusion Pvt. Ltd. vs. The Deputy Commissioner of Income Tax and M/s. Wartyhully Estates Limited vs. The Income Tax Officer? Assessee's Contention: The assessee argues that the Assessing Officer committed a mandatory procedural lapse by not disposing of objections before issuing the reassessment order, which invalidates the assessment. They rely on the High Court judgments in M/s. Deepak Extrusion Pvt. Ltd. and M/s. Wartyhully Estates Limited. Revenue's Contention: The revenue's counsel supports the impugned order. No specific arguments are recorded for the revenue beyond supporting the order.

Which sections of the Income-tax Act were involved?

Section 143(2),Section 147,Section 133A,Section 148,Section 144A

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 7TH DAY OF FEBRUARY, 2019 BEFORE: THE HON’BLE MRS. JUSTICE S.SUJATHA WRIT PETITION No.1303 /2019 (T – IT) BETWEEN: SRI ANDUNHI MOHAMMED S/O LATE MOHAMMED AGED ABOUT 69 YEARS, PROPRIETOR OF SUPARI GARDEN NO.9-9-508, J.M. ROAD, BUNDER MANGALORE-575001

... PETITIONER

[BY SMT.VANI H., ADV.]

AND: 1. DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-I ALBUQUERQUE HOUSE, PANDESHWAR MANGALORE-575001

2.

THE ADDITIONAL COMMISSONER OF INCOME TAX, CENTRAL RANGE ALBUQUERQUE HOUSE, PANDESHWAR MANGALORE-575001

…RESPONDENTS

[BY SRI E.I.SANMATHI, ADV.)

THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA, PRAYING TO QUASH THE ASSESSMENT ORDER DATED 26.12.2018 FOR THE ASSESSMENT YEAR 2011-12 PASSED BY THE R-1 UNDER SECTION 143(2) R/W SECTION 147 OF THE INCOME-TAX ACT, 1961 VIDE ANNEX-N AND THE CONSEQUENTIAL DEMAND NOTICE DATED 26.12.2018 VIDE ANNEX-N1.

- 2 - THIS PETITION COMING ON FOR PRELIMINARY HEARING IN ‘B’ GROUP, THIS DAY, THE COURT MADE THE FOLLOWING:-

O R D E R

The present writ petition arises against the Assessment Order dated 26.12.2018 passed by the respondent No.1 under Section 143(2) read with Section 147 of the Income Tax Act, 1961 (‘Act’ for short) relating to the Assessment Year 2011-12 and the consequential demand notice dated 26.12.2018 as well as the directions dated 28.11.2018 issued under Section 144A of the Act by the respondent No.2.

2.

In order to appreciate the contentions of the parties, it is apt to refer to the relevant facts.

3.

For the Assessment Year 2011-12, the petitioner has filed return of income which was processed under Section 143(1) of the Act. A survey under Section 133A of the Act was conducted on 24.11.2015 in the business premises of the petitioner. Pursuant to the said survey, a notice dated 27.03.2018

- 3 - under Section 148 of the Act was issued by the respondent No.1 proposing the reassessment. On the request made by the petitioner, copy of the reasons recorded for initiating the reassessment proceedings was made over to the petitioner on 05.10.2018. The petitioner filed objections on 06.10.2018 and 15.10.2018 to the notice issued by the respondent No.1 under Section 148 of the Act. Meanwhile, petitioner made representation under Section 144A of the Act before the respondent No.2 seeking directions. Accordingly, respondent No.2 passed an order on 28.11.2018 issuing directions to the respondent No.1, the relevant direction reads as under:-

“Therefore, it is concluded that the assessee has arranged this fund out of the funds of the borrower. Since, the said loan has already been assessed in the hands of Sri. M.A. Siddique, and the issue is before the Appellate Authority, the tax on the same addition in the hands of Shri. Andunhi Mohammed may be kept in abeyance till the issue reaches its finality. As regards the proposed addition u/s 40A(3) is concerned, the A.O. is directed to verify the exceptions laid

- 4 - down under the Rule 6DD(e)(i) of Income Tax Rules and conclude the assessment as per law. Accordingly, the Assessing Officer is hereby directed u/s 144A of the I.T. Act, to pass an appropriate order after giving adequate opportunity of hearing to the assessee”.

4.

In compliance of the directions issued by the respondent No.2, the respondent No.1 concluded assessment proceedings and an order has been passed on 26.12.2018 after providing an opportunity of hearing to the petitioner and considering the objections filed.

5.

Learned counsel Smt.Vani H., appearing for the petitioner placing reliance on the Division Bench judgment of this Court in the case of M/s. Deepak Extrusion Pvt. Ltd., vs. The Deputy Commissioner of Income Tax in W.A.No.1725/2017 (T-IT) dated 15.03.2017, would submit that the Assessing Officer failed to dispose of the objections prior to passing the re-assessment order which is mandatory requirement and the same not having been followed,

- 5 - exercise of power can be said without jurisdiction. Reliance is also placed on the order of this Court in the case of M/s. Wartyhully Estates Limited vs. The Income Tax Officer and another in W.P.No.4679/2018 (T-IT) dated 21.03.2018.

6.

Learned counsel for the revenue supports the impugned order.

7.

I have carefully considered the arguments advanced by the learned counsel for the parties and perused the material on record.

8.

It is not in dispute that the petitioner has moved before the respondent No.2 under Section 144A of the Act seeking directions to respondent No.1 during the pendency of the reassessment proceedings under Section 143(3) read with Section 147 of the Act. It is hardly required to be stated that the respondent No.1 is bound by the directions issued by the respondent No.2

- 6 - in terms of the order passed under Section 144A of the Act. That being the fact situation, the order impugned is passed by respondent No.1. It is the grievance of the petitioner that no decision has been taken by the respondent No.1 on the objections relating to the jurisdiction prior to passing of the order impugned. This argument of the learned counsel for the petitioner cannot be countenanced for having invited an order under Section 144A of the Act by respondent No.2.

9.

In the circumstances, this Court is of the considered view that the judgments relied upon by the petitioner are distinguishable for the reason that no order under Section 144A of the Act was considered in the said cases.

10.

Be that as it may, without going into the merits or demerits of the order impugned, writ petition stands disposed of with liberty to file an appeal before an appropriate authority in accordance with law. If such

- 7 - an appeal is filed within a period of two weeks from the date of receipt of certified copy of the order, the same shall be considered on merits without objecting to the period of limitation, subject to other procedures to be followed by the petitioner/assessee. All rights and contentions of the parties are left open.

Sd/- JUDGE

PMR

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