M/S RUCHIRA PROJECTS PRIVATE LIMITED vs. OFFICE OF THE ASSISTANT COMMISSIONER OF INCOME TAX

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WP/15599/2025HC KarnatakaKAHC01034427202504 June 2025Bench: B M SHYAM PRASAD6 pages
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What did the High Court hold?

The High Court allowed the petition, quashing the impugned Assessment Order and the consequential Demand Order. The Court reasoned that while the Assessing Officer noted non-compliance and failure to substantiate revenue recognition and inventory valuation, it was undisputed that Books of Accounts for Assessment Years 2020-21 to 2022-23 were accepted. The Court found merit in the petitioner's submission that if the Books of Accounts were accepted for those years, a similar consideration should be given for the subject assessment year. The Court directed that the proceedings be restored to the respondent. The petitioner was granted liberty to make submissions again before 07.07.2025, after which the respondent was to issue further notice, provide an opportunity for personal hearing, and conclude the assessment proceedings. The Court emphasized that this opportunity should foreclose defenses based on limitation. All questions were left open except as stated.

What were the facts?

M/s Ruchira Projects Private Limited (the petitioner) filed a writ petition before the High Court of Karnataka challenging an Assessment Order dated 29.03.2025 and a consequential Demand Order dated 29.03.2025, both issued by the Assistant Commissioner of Income Tax (the respondent). The Assessment Order, passed under Section 144 of the Income Tax Act, 1961, for Assessment Year 2023-24, cited repeated non-compliance, failure to substantiate revenue recognition and inventory valuation, and reliance on irrelevant judicial precedents. The petitioner, engaged in construction and sale of apartments, stated that while income for Assessment Years 2020-21, 2021-22, and 2022-23 was accepted based on Books of Accounts, the Books were rejected for Assessment Years 2018-19, 2019-20, and 2023-24. The petitioner claimed to have produced relevant Books of Accounts for the subject assessment years.

What were the issues?

1. Whether the Assessment Order and consequential Demand Order passed by the respondent for Assessment Year 2023-24 are liable to be quashed? (Question of law and fact, concerning Section 144 of the Income Tax Act, 1961). Assessee's Contention: The petitioner argued for a remand, emphasizing that they had declared income for Assessment Years 2018-19 to 2023-24. They highlighted that income for Assessment Years 2020-21, 2021-22, and 2022-23 was accepted based on Books of Accounts, and that relevant Books of Accounts had been produced even for the subject assessment years. The petitioner sought to have the proceedings restored for due consideration. Revenue's Contention: The respondent's counsel submitted that multiple opportunities were granted to the petitioner, with notices under Section 142(1) receiving either no response or requests for adjournment. However, it was undisputed that Books of Accounts for Assessment Years 2020-21 to 2022-23 were accepted, leading to the question of why the same treatment should not apply to the subject assessment year. The respondent acknowledged that the Assessing Officer must consider the submitted Books of Accounts and, if not submitted, grant a reasonable opportunity to do so.

Which sections of the Income-tax Act were involved?

Section 144,Section 142(1)

AI-generated summary — verify with the full judgment below

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HC-KAR NC: 2025:KHC:18759 WP No. 15599 of 2025

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 4TH DAY OF JUNE, 2025 BEFORE THE HON'BLE MR JUSTICE B M SHYAM PRASAD WRIT PETITION NO. 15599 OF 2025 (T-IT)

BETWEEN:

M/S RUCHIRA PROJECTS PRIVATE LIMITED (A PRIVATE LIMITED COMPANY INCORPORATED UNDER THE COMPANIES ACT) HAVING ITS OFFICE AT NO.31, GCN ENCLAVE, FF2, 15TH CROSS, KUNDANAHALLI, BENGALURU- 560037 REPRESENTED BY ITS DIRECTOR SRI. RAMANJULU GONIGUNTLA.

…PETITIONER (BY SRI. GAUTAM SHREEDHAR BHARADWAJ.,ADVOCATE)

AND:

OFFICE OF THE ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 2(4), CENTRAL REVENUE BUILDING, NO.1, QUEENS ROAD, BANGALORE- 560001.

…RESPONDENT (BY SRI.M. DILIP., ADVOCATE)

Digitally signed by VANAMALA N Location: High Court of Karnataka

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HC-KAR NC: 2025:KHC:18759 WP No. 15599 of 2025

THIS W.P. IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUITON OF INDIA PRAYING TO QUASH THE ASSESSMENT ORDER DATED 29.03.2025 BEARING DIN AND ORDER NO. ITBA/AST/S/144/2024- 25/1075236373(1) ISSUED BY RESPONDENT AUTHORITY FOR ASSESSMENT YEAR 2018-19 (ANNX-A); QUASH THE DEMAND ORDER DATED 29.03.2025 BEARING DIN AND NOTICE NO. ITBA/AST/S/156/2024- 25/1075236473(1) ISSUED BY THE RESPONDENT AUTHORITY FOR ASSESSMENT YEAR 2018-19 (ANNX- B).

THIS PETITION, COMING ON FOR ORDERS, THIS DAY, ORDER WAS MADE THEREIN AS UNDER: CORAM: HON'BLE MR JUSTICE B M SHYAM PRASAD

ORAL ORDER

The petitioner has called in question the Assessment Order dated 29.03.2025 [Annexure-A which is for the assessment year 2023-241] under Section 144 of the Income Tax Act, 1961 [for short, 'the IT Act']. The Assessing Officer, in the impugned Assessment Order which has resulted in the

1 In the prayer column the assessment year is erroneously mentioned as "the assessment year 2018-19".

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HC-KAR NC: 2025:KHC:18759 WP No. 15599 of 2025

impugned demand, has observed that [i] there is repeated non-compliance and [ii] failure to substantiate revenue recognition and inventory valuation. The Assessing Officer has also observed that the petitioner relies upon judicial precedents that are not relevant.

2.

Sri Gautam S. Bharadwaj, the learned counsel for the petitioner, while arguing for a remand, submits that the petitioner, who is engaged in construction and sale of apartments, has declared income for the assessment years 2018-19 to 2023-24; and that the income declared claiming expenditure for the assessment years 2020-21, 2021-22 and 2022-23 are considered permitting allowance based on Books of Accounts but it is only for the assessment years 2018-19, 2019-20 as also 2023-24 that the Books of Accounts are rejected. The learned counsel also emphasizes that the petitioner’s earlier correspondence shows that the petitioner has

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HC-KAR NC: 2025:KHC:18759 WP No. 15599 of 2025

produced relevant Books of Accounts even for the subject assessment years .

3.

As against these submissions, Sri M.Dilip, the learned standing counsel for the respondents who is called upon to accept notice, submits that as is stated in paragraph 2 of the impugned assessment order, multiple opportunities have been granted with issuance of notice under Section 142(1) starting from 07.10.2024 either with no response or with a request for adjournment. However, crucially, it is undisputed that Books of Accounts filed for the assessment years 2020-21 to 2022-23 have been accepted permitting allowance for expenditure incurred in construction, and if this is so, the Assessing Officer must consider why the same must not be for the subject assessment year.

Further, the Assessing Officer will also have to consider this question in the light of the Books of Accounts already submitted, and if not submitted,

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HC-KAR NC: 2025:KHC:18759 WP No. 15599 of 2025

the petitioners must be given a reasonable opportunity to submit such Books of Accounts. This opportunity must foreclose all defenses based on limitation lest it be that there is fortuitous defense based on a default. In the light of the afore, the petition must be disposed of quashing the impugned Assessment Order and the consequential Demand [Annexures-A and B] restoring the proceedings to the respondent for due consideration leaving open all questions except as aforesaid. Hence, the following:

ORDER

[a[ The petition is allowed quashing the impugned Assessment Order and the consequential Demand [Annexures-A and B] restoring the proceedings to the respondent.

[b] The petitioner is reserved with liberty to make all submissions once again without any further notice before 07.07.2025, and

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HC-KAR NC: 2025:KHC:18759 WP No. 15599 of 2025

thereafter, the respondents shall issue further notice to extend an opportunity of personal hearing and conclude the assessment proceedings.

Sd/- (B M SHYAM PRASAD) JUDGE

SA ct:sr

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