M/S SWADESH TRADING CO vs. DEPUTY COMMISSIONER OF INCOME TAX

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WP/1374/2019HC KarnatakaKAHC01000178201907 February 2019Bench: S.SUJATHA7 pages
AI SummaryRemanded

What did the High Court hold?

The High Court held that the petitioner's argument regarding the non-disposal of objections prior to the assessment order could not be countenanced because the petitioner had voluntarily sought directions from the Additional Commissioner (R-2) under Section 144A of the Act. The Court noted that the Assessing Officer (R-1) was bound by the directions issued by R-2. Therefore, the judgments relied upon by the petitioner were distinguishable as they did not involve a situation where an order under Section 144A was considered. Without going into the merits or demerits of the impugned order, the writ petition was disposed of with liberty to file an appeal before the appropriate authority within two weeks from the date of receipt of the certified copy, with the appeal to be considered on merits without objection to limitation.

What were the facts?

The petitioner, M/s Swadesh Trading Co., filed a writ petition challenging an assessment order dated 26.12.2018 for Assessment Year 2011-12, passed by the Deputy Commissioner of Income Tax (R-1) under Section 143(2) read with Section 147 of the Income Tax Act, 1961, and a consequential demand notice. The assessment followed a survey under Section 133A on 24.11.2015, leading to a notice under Section 148 on 27.03.2018. The petitioner filed objections to the reassessment proceedings. During this period, the petitioner also made a representation under Section 144A before the Additional Commissioner of Income Tax (R-2). R-2 issued directions on 28.11.2018 to R-1 regarding the assessment, specifically concerning other receipts amounting to Rs.1,07,025/- and a loan assessed in another party's hands. R-1 then concluded the assessment on 26.12.2018, after hearing the petitioner and considering objections.

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 petitioner, 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 Assessing Officer committed a mandatory procedural lapse by not disposing of objections before passing the reassessment order, which is a jurisdictional defect. Revenue's Contention: The revenue's counsel supported the impugned order, without elaborating specific arguments in the judgment.

Which sections of the Income-tax Act were involved?

Section 143(2),Section 147,Section 133A,Section 148,Section 144A,Section 143(3)

AI-generated summary — verify with the full judgment below

Before: SMT.KADEEJA MOHAMMED ANDHUNI

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.1374/2019 (T – IT) BETWEEN: M/s SWADESH TRADING CO., A PARTNERSHIP FIRM D.NO.2-43, BADRIYA COMPOUND KAMBALABETTU, VITTAL MUDNOOR BANTWAL-574211, DAKSHINA KANNADA, KARNATAKA REP. BY ITS ERSTWHILE PARTNER SMT.KADEEJA MOHAMMED ANDHUNI W/O ANDHUNI MOHAMMED AGED ABOUT 57 YEARS

... PETITIONER

[BY SMT.VANI H., ADV.]

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

2.

THE ADDITIONAL COMMISSIONER OF INCOME TAX, CENTRAL RANGE, ALBUQUERQUE HOUSE, GROUND FLOOR, 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

- 2 - SECTION 143(2) R/W SECTION 147 OF THE INCOME-TAX ACT, 1961 VIDE ANNEX-P AND THE CONSEQUENTIAL DEMAND NOTICE DATED 26.12.2018 VIDE ANNEX-P1.

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

- 3 - 24.11.2015 in the business premises of the petitioner. Pursuant to the said survey, a notice dated 27.03.2018 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 15.10.2018 and 17.10.2018 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:-

“The assessee has also credited other receipts on various dates amounting to Rs.1,07,025/-, the sources of these receipts are not known. Further, it is also not clear whether the amount given was fully repaid or not. All the above facts leads to a conclusion that the assessee has arranged this fund out of the

- 4 - funds of the borrower. Since, the said loan has already been assessed in the hands of Sri. M.A. Siddique, Supreme Industries, and the issue is before the Appellate Authority, the tax on the same addition in the hands of M/s. Swadesh Trading Co. may be kept in abeyance till the issue reaches its finality. As regards the other proposed addition is concerned, the A.O. is directed to verify the same 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

- 5 - 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, 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

- 6 - 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 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.

- 7 -

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 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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