LOKESH CHANDRAPPA vs. INCOME TAX OFFICER

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WP/4349/2018HC KarnatakaKAHC01030970201825 July 2019Bench: S.SUJATHA5 pages
AI SummaryRemanded

What did the High Court hold?

The High Court held that the Assessing Officer (AO) has a legal obligation to implement the order of the ITAT strictly, and failure to do so results in a failure of justice. The Court found that the AO's order dated 26.12.2017 was perverse and illegal because it did not compute the peak credit in the bank account as directed by the ITAT in its remand order. The Court relied on the Supreme Court judgment in Bhopal Sugar Industries Ltd. vs. Income Tax Officer, Bhopal. Consequently, the impugned order was quashed, and the proceedings were restored to the file of the AO. The AO was directed to redo the assessment in light of the ITAT's observations, ensuring any addition does not exceed the peak credit in the petitioner's bank account. The AO was instructed to comply with this order expeditiously, preferably within four weeks.

What were the facts?

The petitioner, Lokesh Chandrappa, assailed an order dated 26.12.2017 passed by the Income Tax Officer (ITO) under Section 143(3) of the Income Tax Act, 1961. The petitioner sought a direction for the ITO to implement an order dated 09.11.2016 passed by the Income Tax Appellate Tribunal (ITAT) in ITA No.1254/Bang/2015 for Assessment Year 2009-10. The ITAT had previously remanded the matter to the ITO, directing that any addition should not exceed the peak credit in the assessee's bank account and granting the assessee one more opportunity for explanation regarding cash deposits. However, the ITO's subsequent order did not compute the peak credit.

What were the issues?

1. Whether the Assessing Officer (AO) failed to give effect to the order of the Income Tax Appellate Tribunal (ITAT) in letter and spirit, specifically concerning the computation of peak credit in the bank account, as required by the ITAT's remand order under Section 254 of the Income Tax Act, 1961? Assessee's Contention: The AO is legally bound to implement the ITAT's order strictly. The AO's impugned order failed to give effect to the ITAT's direction regarding the determination of peak credit in the bank account. Revenue's Contention: The revenue's counsel made an endeavor to justify the impugned order.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 254

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 25TH DAY OF JULY, 2019 BEFORE: THE HON’BLE MRS. JUSTICE S.SUJATHA WRIT PETITION No.4349/2018 (T– IT) BETWEEN:

LOKESH CHANDRAPPA S/O CHANDRAPPA, AGED ABOUT 34 YEARS, THALGHATTAPURA, KANAKAPURA MAIN ROAD, BANGALORE-560 062.

... PETITIONER

[BY SRI SHANKAR A., SENIOR COUNSEL FOR SRI B.S.BALACHANDRAN, ADV.]

AND:

INCOME TAX OFFICER WARD-3(2) (4) ROOM NO.114, 1ST FLOOR, BMTC DEPOT BUILDING, 80 Ft. ROAD, KORAMANGALA BANGALORE-560 095.

…RESPONDENT

[BY SRI E.I.SANMATHI, ADV. FOR SRI K.V.ARAVIND, ADV.]

THIS WRIT PETITION IS FILED UNDER ARTICLES 226 & 227 OF THE CONSTITUTION OF INDIA, PRAYING TO QUASH ANNEXURE-D THE ORDER PASSED BY THE RESPONDENT ASSESSING OFFICER UNDER SECTION 143(3) W.R.T. 254, DATED 26.12.2017 AND DIRECT THE ASSESSING OFFICER TO PASS AN ORDER TAKING INTO CONSIDERATION OF THE ITAT ORDER AND ETC.

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

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O R D E R

The petitioner has assailed the order dated 26.12.2017 passed by the respondent – Assessing Officer, under Section 143(3) of the Income Tax Act, 1961 (‘Act’ for short) inter alia, seeking a direction to the respondent – Assessing Officer to implement the orders of the Income Tax Appellate Tribunal, Bangalore Bench – C (ITAT) dated 09.11.2016 in I.T.A.No.1254/Bang/ 2015 relating to the Assessment Year 2009-10.

2.

The petitioner had filed returns for the Assessment year in question as on 31.03.2011 which has been culminated in the order of the of the ITAT dated 09.11.2016 in I.T.A.No.1254/Bang/2015, whereby the Tribunal remanded the matter to the Assessing Officer with certain directions. The relevant portion of the said order is quoted hereunder for ready reference:-

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“Further since the assessee’s case has been decided by the Assessing Officer as well as the CIT (Appeals) without any representative therefore in the facts and circumstances of the case, we set aside this matter to the record of the Assessing Officer for granting one more opportunity to the assessee for explanation of the source of cash deposit and in any case the addition if any it should not be more than the peak credit in the bank account.”

3.

Pursuant to the said order of the ITAT, the Assessing Officer has passed the Assessment Order impugned herein determining the tax and penalty amount sans computing peak credit in the bank account.

4.

Learned Senior counsel Sri. Shankar A., appearing for the petitioner would point out that the Assessing Officer is bound to give effect to the order of the ITAT in letter and spirit. The Assessing Officer has proceeded to conclude the assessments sans giving

- 4 - effect to the order of the ITAT inasmuch as the determination of the peak credit in the bank account is concerned.

5.

Learned counsel for the revenue made an endeavour to justify the impugned order.

6.

It is trite law that the Assessing Officer has a legal obligation to implement the order of the ITAT strictly and such failure would result in the failure of justice. A writ of mandamus would be issued in such circumstances to the respondent – Assessing Officer to carry out the directions given to him by the ITAT. This view is fortified by the judgment of the Hon’ble Apex Court in the case of Bhopal Sugar Industries Ltd., vs. Income Tax Officer, Bhopal reported in 40 ITR 618. It is ex-facie apparent that no peak credit of the bank account has been worked out by the Assessing Officer to conclude the assessments on remand by the ITAT.

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7.

Hence, the order impugned at Annexure – D dated 26.12.2017 being perverse and illegal stands quashed. The proceedings are restored to the file of the respondent - Assessing Officer to redo the assessment in the light of the observations made by the ITAT inasmuch as any addition if to be made to the tax declared, it should not be more than the peak credit in the bank account of the petitioner. The respondent – Assessing Officer shall comply with this order in an expedite manner preferably within a period of four weeks from the date of receipt of certified copy of the order.

Writ petition stands disposed of accordingly.

Sd/- JUDGE

PMR

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