GUMEGOWDA HANUMANTHE GOWDA NAGARAJA vs. THE PRINCIPAL COMMISSIONRE OF INCOME TAX (CENTRAL)

PDF · subscribers
WP/4645/2023HC KarnatakaKAHC01010553202301 March 2023Bench: B M SHYAM PRASAD10 pages
AI SummaryPartly Allowed

What did the High Court hold?

The High Court held that the Principal Commissioner of Income Tax (Central), while deciding the stay petition, should have examined the question of abatement and provided a prima facie opinion. The Court noted that the relevant date for abatement would differ depending on whether Section 153A or Section 153C of the IT Act applies. For Section 153A, the date of search is relevant, while for Section 153C, it is the date of receipt of seized books of account, documents, or assets by the Assessing Officer having jurisdiction over the searched person. The Court found that the first respondent failed to adequately consider these aspects and the fact that the petitioner is both a trustee and an individual assessee. Consequently, the impugned order was quashed, and the proceedings were restored to the first respondent for reconsideration of the stay petition in light of the Court's observations. The Court also directed that no precipitative action be taken until reconsideration and granted liberty to the petitioner to raise other grounds for unconditional stay.

What were the facts?

The petitioner, Gumegowda Hanumanthe Gowda Nagaraja, is challenging an order dated February 17, 2023, by the Principal Commissioner of Income Tax (Central) rejecting his stay petition for Assessment Year (AY) 2017-18. This order confirmed an earlier letter dated January 7, 2023, from the Assistant Commissioner of Income-Tax (Central Circle-1(4)) directing the petitioner to pay 20% of the total demand, amounting to Rs. 67,03,330, by February 23, 2023. The petitioner's premises were searched on October 10, 2019, in connection with group cases of Sri. Devaraj Urs Education Trust. The petitioner, who is the Secretary of the Trust and also a proprietor of various businesses, had filed his return for AY 2017-18 on October 30, 2017, and assessment proceedings under Section 143(2) were pending. The assessment for AY 2017-18 was concluded on December 12, 2019, under Section 143(3) read with Section 144 of the Income Tax Act, 1961.

What were the issues?

1. Whether the assessment proceedings for AY 2017-18, which were pending scrutiny on the date of search (October 10, 2019), would abate under Section 153A of the Income Tax Act, 1961, as contended by the petitioner? 2. Alternatively, whether the assessment proceedings would abate under Section 153C of the Income Tax Act, 1961, and if so, what would be the relevant date for determining abatement (date of search or date of receipt of seized assets/documents by the Assessing Officer), as argued by the revenue and assisted by the Court's amicus curiae? Assessee's Contention: The petitioner argued that the pending scrutiny proceedings would automatically abate under Section 153A of the IT Act due to the search conducted on his premises, and this should have been considered while deciding the stay application. Revenue's Contention: The revenue contended that abatement would only occur if the provisions of Section 153C of the IT Act were applicable, and the relevant date for abatement would be determined based on the receipt of seized materials by the petitioner's Assessing Officer.

Which sections of the Income-tax Act were involved?

Section 153A,Section 153C,Section 143(2),Section 143(3),Section 144

AI-generated summary — verify with the full judgment below

- 1 -

WP No. 4645 of 2023

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 1ST DAY OF MARCH, 2023 BEFORE THE HON'BLE MR JUSTICE B M SHYAM PRASAD WRIT PETITION NO. 4645 OF 2023 (T-IT) BETWEEN:

GUMEGOWDA HANUMANTHE GOWDA NAGARAJA S/O HANUMANTHE GOWDA GUMEGOWDA AGED ABOUT 76 YEARS, NO 51, MATHRU MANDIRA, PRASHANTH NAGAR, CHIKKABALLAPURA-562101. …PETITIONER (BY SRI. NARENDRA KUMAR JAIN.,ADVOCATE) AND:

1.

THE PRINCIPAL COMMISSIONRE OF INCOME TAX (CENTRAL) 3RD FLOOR,CENTRAL REVENUE BUILDING, QUEENS ROAD,BENGALURU-560001.

2.

THE ASSISTANT COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE-1(4) NO.1,3RD FLOOR,CENTRAL REVENUE BUILDING, QUEENS ROAD,SHIVAJINAGAR, BENGALURU-560 001. …RESPONDENTS (BY SRI.K.V. ARAVIND., ADVOCATE) THIS WRIT PETITION IS FILED UNDER ARTICLE 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH AS FAR AS THE PETITIONER IS CONCERNED BY

Digitally signed by NARASIMHA MURTHY VANAMALA Location: HIGH COURT OF KARNATAKA

- 2 -

WP No. 4645 of 2023

AN APPROPRIATE WRIT OR ORDER IN THE NATURE OF CERTIORARI OR OTHERWI SE THE IMPUGNED ORDER DATED 17.02.2023 ISSUED BY THE LEARNED FIRST RESPONDENT REJECTING THE STAY PETITION FOR THE AY 2017-18, ENCLOSE IN ANNX-A; QUASH AS FAR AS THE PETITIONER IS CONCERNED BY AN APPROPRIATE WRIT OR ORDER IN THE NATURE OF CERTIORARI OR OTHERWISE THE IMPUGNED LETTER DATED 07.01.2023 ISSUED BY THE LEARNED R-2 TO THE PETITIONER DIRECTING TO PAY 20 PERCENT OF THE TOTAL DEMAND RAISED FOR THE AY 2017-18 ENCLOSED IN ANNX-B.

THIS PETITION, COMING ON FOR ORDERS, THIS DAY, THE COURT MADE THE FOLLOWING:

ORDER

The petitioner has impugned the first respondent’s Order dated 07.01.2023 [Annexure-A] directing the petitioner to pay a sum of Rs.67,03,330/-, which is equivalent to 20% of the disputed amount, on or before 23.02.2023 observing that the concerned Assessing Officer is free to initiate recovery proceedings as per the relevant provisions of the Income Tax Act, 1961 [for short, ‘IT Act’] and to recover the entire amount if there is failure to deposit the aforesaid amount. The first respondent, in issuing the Order dated 17.02.2023 [Annexure-A] has confirmed the second respondent – the Assessing

- 3 -

WP No. 4645 of 2023

Officer’s [AO] order dated 07.01.2023 [Annexure – B] disposing of the petitioner’s stay petition dated 20.10.2022.

2.

The first respondent has reasoned thus while passing the impugned order [Annexure-A]. “The written submissions of the assessee have duly been considered. As regards the argument of the assessee that the assessment proceedings in his case got abated when on 10.10.2019, when search was conducted in the group cases of Sri. Devaraj Urs Education Trust, the same is misplaced as the case of the assessee is not covered by Section 153A of the Act but by Section 153C of the Act, the proceedings for which were initiated much after passing of order under Section 144 of the Act. So as such issue of abatement of proceedings was never there.”

3.

It is undisputed that the petitioner is the Secretary of M/s. Devaraj Urs Education Trust for Backward Classes, and his premises is searched on 10.10.2019. The petitioner is also the Proprietor of

- 4 -

WP No. 4645 of 2023

establishments such as M/s. Kavitha Wines, M/s. Pallavi Bar and Restaurant, Nagajyothi Bar & Restaurant and Nisha Bar. The petitioner on 30.10.2017 has filed his returns for the assessment year 2017-18, and this return of income is selected for scrutiny and notice is issued under Section 143[2] of the IT Act on 27.09.2018. The Assessing Officer on 12.12.2019 has concluded the assessment for the assessment year 2017-18, which was pending consideration as of the date of search i.e., 10.10.2019, under Section 143[3] read with Section 144 of the IT Act.

4.

The petitioner has filed an appeal as against the Order dated 12.12.2019. The petitioner’s case is that there could not have been such assessment because, with the search of his premises on 10.10.2019, the assessment proceedings commenced for scrutiny would stand abated in view of the provisions of Section 153A of the IT Act. The

- 5 -

WP No. 4645 of 2023

petitioner has filed an application for stay which is dealt with by the AO [the second respondent] and the first respondent as aforesaid.

5.

Sri. Narendra Kumar Jain, the learned counsel for the petitioner, submits that the scrutiny proceedings, which commenced with the notice dated 27.09.2018 under Section 143[2] of the IT Act and was pending as of the date of search i.e., 10.10.2019, will irrefutably stand abated in view of the provisions of Section 153A of the IT Act and this should have been considered while considering the terms on which stay is granted. As against these submissions, Sri K V Aravind on behalf of the respondents, contends that, in the circumstances of the case, the proceedings would abate against the petitioner only if the limitation is reckoned in terms of the provisions of Section 153C of the IT Act.

6.

The question whether the proceedings against the petitioner would abate will be dependent

- 6 -

WP No. 4645 of 2023

on what would be the effective date. As pointed by Sri.T.Suryanarayana, the learned Senior Counsel, who is called upon to assist this Court, the effective date, depending on whether Section 153A or Section 153C of the IT Act would apply, will vary. For the purposes of Section 153A of the IT Act, the relevant date could be the date of initiation of search1, and for the purposes of Section 153C of the IT Act, the relevant date could be the date of receipt of books of account [or the documents] or the assets seized or requisitioned by the Assessing Officer having jurisdiction over the person searched2.

1 Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years and for the relevant assessment years to year referred to in this sub section pending on the date of initiation of the search under Section 132 or making of requisition under section 132A, as the case may be shall abate. 2 Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to sub section (1) of section 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person.

The underlining is by this Court.

- 7 -

WP No. 4645 of 2023

7.

After some submissions in the light of the provisions of Sections 153A and 153C of the IT Act, and in the light of the assistance by Sri. T Suryanarayana, Sri. K V Aravind submits that the question whether the assessment for the relevant assessment year stood abated with the initiation of search [even if it could be under Section 153C of the IT Act] must be decided based on the date on which the petitioner’s Assessing Officer received the assets seized, or requisitioned, in the search conducted on 10.10.2019. However, Sri. Narendra Kumar Jain hastens to add that any decision in this regard should essentially be based on whether the abatement should be considered under Section 153A or Section 153C of the IT Act.

8.

It is obvious from the aforesaid submissions that a prima facie opinion on abatement would be relevant for the purposes of considering the question of stay. This Court must opine that the first

- 8 -

WP No. 4645 of 2023

respondent, instead of just making a statement, while deciding on the merits of the petitioner’s application for stay, should have examined the question of abatement mentioning the mentioning the necessary details, and expressed a prima facie opinion on whether the relevant date would be the date of search [10.10.2019] or the date of receipt of books of account or requisitioning the assets seized, if any in the search on 10.10.2019. Further, these questions must necessarily be addressed in the light of the undisputed fact that the petitioner is not just the Secretary of the aforesaid Trust but also an Assessee with his own income who has filed his returns.

9.

If the first respondent could justifiably prima facie opine that the provisions of Section 153C of the IT Act would apply or not and whether there would be abatement or not, he should have considered accordingly moderating the terms to be imposed while granting stay. In the absence of due

- 9 -

WP No. 4645 of 2023

consideration of these aspects by the first respondent, this Court must interfere with the impugned order and restore the proceedings for reconsideration directing the first respondent to consider the petitioner’s petition for stay in the light of this Court’s observations. Hence the following: ORDER

[a] The petition is allowed in part, and the impugned order dated 17.02.2023 [Annexure-A] is quashed restoring the proceedings to the first respondent for reconsideration in the light of this Court’s observation as aforesaid.

[b] The petitioner to avail opportunity of due hearing, shall appear before the first respondent, without further Notice on 27.03.2023.

- 10 -

WP No. 4645 of 2023

[c] It is needless to observe that until reconsideration on this question, there shall be no precipitative action.

[d] The petitioner is also reserved liberty to raise such other grounds as may be permissible in law to support the request of unconditional stay. As this Court has not examining other reasons, the first respondent shall reconsider in the light of the grounds that the petitioner may urge in terms of the liberty now granted.

SD/- JUDGE

AN/-

More judgments on Section 153A

All 18,957 judgments and leading authorities on Section 153A →

Recent GST High Court judgments

Search GST case law →