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

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WP/15603/2025HC KarnatakaKAHC01034424202504 June 2025Bench: B M SHYAM PRASAD6 pages
AI SummaryAllowed

What did the High Court hold?

The High Court allowed the writ petition, quashing the impugned Assessment Order and consequential Demand Order. The Court reasoned that while the Assessing Officer noted non-compliance and failure to substantiate claims, it was undisputed that the books of accounts submitted for assessment years 2020-21 to 2022-23 were accepted, permitting allowance for expenditure. The Court found that the Assessing Officer must consider why the same treatment should not be afforded to the assessment year 2018-19, especially in light of the books of accounts already submitted. The proceedings were restored to the respondent for due consideration, with the petitioner granted liberty to make submissions before July 7, 2025. The respondent was directed to issue further notice, extend an opportunity for personal hearing, and conclude the assessment proceedings. All questions were left open except for the aforementioned considerations. The operative direction was to quash the impugned orders and restore the proceedings.

What were the facts?

The petitioner, M/s Ruchira Projects Private Limited, filed a writ petition before the High Court of Karnataka challenging an Assessment Order dated March 29, 2025, and a consequential Demand Order dated March 29, 2025, both issued by the Assistant Commissioner of Income Tax, Central Circle 2(4), for the Assessment Year 2018-19. The assessment order was passed under Section 147 read with Section 144 of the Income Tax Act, 1961. The Assessing Officer noted repeated non-compliance, failure to substantiate revenue recognition and inventory valuation, and reliance on irrelevant judicial precedents by the petitioner. The petitioner, engaged in construction and sale of apartments, argued that its books of accounts were rejected for assessment years 2018-19, 2019-20, and 2023-24, while income declared for 2020-21 to 2022-23 was accepted.

What were the issues?

1. Whether the Assessment Order and Demand Order for AY 2018-19, passed under Section 147 read with Section 144 of the IT Act, are liable to be quashed on the grounds of procedural irregularities and lack of proper consideration of the assessee's submissions and evidence. (Mixed question of law and fact) The assessee contended that its books of accounts were rejected for the assessment year in question, while similar submissions for subsequent assessment years were accepted. The assessee argued for a remand to allow for proper consideration of its books of accounts. The revenue, through its counsel, submitted that multiple opportunities were granted to the assessee, with notices under Section 142(1) receiving no response or requests for adjournment. However, it was also acknowledged that books of accounts for other assessment years were accepted, raising a question of consistency.

Which sections of the Income-tax Act were involved?

Section 147,Section 144,Section 142(1)

AI-generated summary — verify with the full judgment below

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HC-KAR NC: 2025:KHC:18757 WP No. 15603 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. 15603 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:18757 WP No. 15603 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/147/2024- 25/1075264793(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- 25/1075264855(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 2018-19] under Section 147 read with 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 impugned demand, has observed that [i] there is repeated non-compliance and [ii]

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HC-KAR NC: 2025:KHC:18757 WP No. 15603 of 2025

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

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HC-KAR NC: 2025:KHC:18757 WP No. 15603 of 2025

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 4 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, the petitioners must be given a reasonable opportunity to submit such Books of Accounts. This

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HC-KAR NC: 2025:KHC:18757 WP No. 15603 of 2025

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 thereafter, the respondents shall issue further notice to extend an opportunity of

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HC-KAR NC: 2025:KHC:18757 WP No. 15603 of 2025

personal hearing and conclude the assessment proceedings.

Sd/- (B M SHYAM PRASAD) JUDGE

SA ct:sr

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