M/S UNITED GLOBAL CORPORATION LIMITED vs. ASSISTANT COMMISSIONER OF INCOME TAX

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WP/8217/2023HC KarnatakaKAHC01019632202314 December 2023Bench: B M SHYAM PRASAD9 pages
AI SummaryPartly Allowed

What did the High Court hold?

The High Court allowed the petition in part. It quashed the Garnishee Order dated 07.03.2023, the Assessment Order dated 17.01.2023 (in WP No. 8217/2023), and the Assessment Order dated 30.12.2022 (in WP No. 8893/2023). The Court restored the proceedings for reconsideration, leaving all questions open for due consideration. The amount deposited by the petitioner in compliance with the order dated 17.01.2023 will be subject to the outcome of this reconsideration. The reasoning is based on the principle that an assessee must be given a reasonable opportunity of being heard before an assessment order is passed, as highlighted by the Supreme Court in the cited case.

What were the facts?

The petitioner, M/s United Global Corporation Limited, is challenging assessment orders for Assessment Years (AY) 2020-21 and 2021-22, a garnishee order, and an order on a stay application. The petitioner claims to be in the business of construction and infrastructure works and has filed returns declaring due compliance and taxes. The assessment proceedings were initiated based on sworn statements from third parties alleging the petitioner received accommodation entries to reduce profits. The petitioner contends it was not granted an adequate opportunity to present its case and evidence.

What were the issues?

1. Whether the assessment orders passed under Section 143(3) of the Income Tax Act, 1961, are liable to be quashed for want of a proper opportunity of hearing to the assessee? Assessee's contention: The petitioner argues that it should have been granted an opportunity to present evidence to demonstrate that there was no basis for initiating assessment proceedings under Section 143(3) on the grounds of accommodation entries. It relies on the Supreme Court decision in Tin Box Co. v. Commissioner of Income Tax, emphasizing that an assessment order must be made after the assessee has been given a reasonable opportunity of setting out its case. Revenue's contention: The revenue, through its standing counsel, submits that in the peculiar facts of the case, the Court could quash the impugned orders and restore the proceedings for reconsideration, with due opportunity to the petitioner, leaving all contentions open.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 139

AI-generated summary — verify with the full judgment below

Heard together (2 matters)

WP No. 8217 of 2023
WP No. 8893 of 2023

Read from the judgment's own cause title. This page is filed under one of them.

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NC: 2023:KHC:45457 WP No. 8217 of 2023 C/W WP No. 8893 of 2023

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 14TH DAY OF DECEMBER, 2023 BEFORE THE HON'BLE MR JUSTICE B M SHYAM PRASAD WRIT PETITION NO. 8217 OF 2023 (T-IT) C/W WRIT PETITION NO. 8893 OF 2023 (T-IT)

IN WP NO. 8217/2023

BETWEEN:

M/S UNITED GLOBAL CORPORATION LIMITED REGISTERED COMPANY E 07, 7TH FLOOR, NO 2, 1ST FLOOR, JC ROAD, PURNIMA TALKIES, BANGALORE 560027, REP BY ITS DIRECTOR, SRI MYNENI VAMSIDHAR, (REGISTERED UNDER COMPANIES ACT) AGE 41 YEARS.

…PETITIONER (BY SRI. M.V. SESHACHALA, SENIOR ADVOCATE FOR SRI. ARAVIND V CHAVAN.,ADVOCATE)

AND:

1.

ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCE -2(4), C R BUILDING, QUEENS ROAD, BANGALORE 560001.

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

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NC: 2023:KHC:45457 WP No. 8217 of 2023 C/W WP No. 8893 of 2023

2.

PRINCIPAL COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, C R BUILDING, QUEENS ROAD, BANGALORE 560001.

3.

COMMISSIONER OF INCOME TAX(APPEALS) CENTRAL RANGE C.R. BUILDING QUEENS ROAD BANGALORE – 560 001.

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

THIS WP IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE GARNISHEE ORDER DATED 07.03.2023 BEARING NO. ITBA/COM/F/17/2022-23/1050485416(1) ANNX-F3 ISSUED BY R1 AND THE ORDER ON THE STAY APPLICATION PASSED BY R2 DATED 17.01.2023 BEARING F. NO.25(188)/STAY/PR.CIT(C)/2022-23 ANNX-F2 IN RESPECT OF THE ASSESSMENT YEAR 2020-21; QUASH THE ORDER OF ASSESSMENT PASSED BY R1 DATED 30.09.2022 BEARING NO. ITBA/AST/S/143(3)/2022-23/1046134609(1) ANNX-D FOR A.Y.2020-21.

IN WP NO. 8893/2023 BETWEEN:

M/S UNITED GLOBAL CORPORATION LIMITED REGISTERED COMPANY, E-07, 7TH FLOOR, NO.2, 1ST FLOOR, J C ROAD, PURNIMA TALKIES, BANGALORE-560027 REP BY ITS DIRECTOR,

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NC: 2023:KHC:45457 WP No. 8217 of 2023 C/W WP No. 8893 of 2023

SRI MANENI VAMSIDHAR, AGED 41 YEARS, (REGISTERED UNDER COMPANIES ACT).

…PETITIONER (BY SRI. M.V. SESHACHALA, SENIOR ADVOCATE FOR SRI. ARAVIND V CHAVAN.,ADVOCATE) AND:

1.

ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE -2 (4), C.R. BUILDING, QUEENS ROAD, BANGALORE-560001.

2.

PRINCIPAL COMMISSIONER OF INCOME TAX CENTRAL CIRCLE, C.R. BUILDING, QUEENS ROAD, BANGALORE-560001.

3.

COMMISSIONER OF INCOME TAX (APPEALS) CENTRAL RANGE, C.R.BUILDING, QUEENS ROAD, BANGALORE-560001.

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

THIS WP IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE ORDER OF ASSESSMENT PASSED BY THE R1 DATED 30.12.2022 BEARING NO.

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NC: 2023:KHC:45457 WP No. 8217 of 2023 C/W WP No. 8893 of 2023

ITBA/AST/S/143(3)/2022-23/1048374126(1) ANNX-D FOR AY.2021-22.

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

ORDER

The petitioner has impugned the Assessment Orders for the relevant assessment years 2020-21 and 2021-22 as also the Garnishee Order, and the details of the impugned orders in these petitions are as follows:

W.P.NO.8217/2023

W.P.NO.8893/2023

• The second respondent’s Assessment Order dated 17.01.2023 in F.No.25(188)/Stay/ Pr. CIT (C)/2022-23 [Annexure-F2].

• The first respondent’s Garnishee order dated

• The first respondent’s Assessment Order dated 30.12.2022 in No. ITBA/AST/S/143(3)/20 22-23/1048374126(1) [Annexure-D]

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NC: 2023:KHC:45457 WP No. 8217 of 2023 C/W WP No. 8893 of 2023

07.03.2023 in No. ITBA/COM/F/17/202 2-23/1050485416(1) [Annexure-F3];

2.

The petitioner’s case is that it is carrying on the business of construction and maintenance of roads and other infrastructure works under the Work Orders issued by the different Governments and it has filed its returns under Section 139 of the Income Tax Act, 1961 [for short, ‘the IT Act’] even for the relevant assessment years declaring due compliance and discharging taxes payable thereon. The assessment proceedings under Section 143(3) of the IT Act are commenced in the premise that certain sworn statements of the third parties have been recorded by the DCIT, Bengaluru Zone, and these third parties have stated that the petitioner has been granted accommodation entries to reduce profit.

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NC: 2023:KHC:45457 WP No. 8217 of 2023 C/W WP No. 8893 of 2023

3.

Sri M. V. Seshachala, the learned Senior Counsel for the petitioner, arguing against the impugned Assessment Orders and the Garnishee order, submits that the petitioner should have been granted opportunity of hearing to place on record the evidence to demonstrate that there is no occasion for the assessment under Section 143 of the IT Act on the ground that there are accommodation entries and if such opportunity was extended, the petitioner would have demonstrated that there was no reason for the assessment under Section 143(3) of the IT Act.

4.

Sri M. V. Seshachala relies upon the decision of the Hon’ble Supreme Court in Tin box Co. v. Commissioner of Income Tax1 and invites this Court’s attention to the following paragraph:

1 (2001) 116 Taxman 491 [SC]

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NC: 2023:KHC:45457 WP No. 8217 of 2023 C/W WP No. 8893 of 2023

“That the assessee could have placed evidence before the first appellate authority or before the Tribunal is really of no consequence for it is the assessment order that counts. That order must be made after the assessee has been given a reasonable opportunity of setting out his case. We, therefore, do not agree with the Tribunal and the High Court that it was not necessary to set aside the order of assessment and remand the matter to the assessing authority for fresh assessment after giving to the assessee a proper opportunity of being heard.”

5.

Sri M.Dilip, the learned standing counsel for the respondents, submits that in the peculiarities of this case, this Court could observe setting aside the impugned orders and restoring the proceedings for reconsideration with due opportunity to the petitioner leaving open all the contentions.

5.

As regards the amount deposited by the petitioner and as recorded by this Court while granting interim order, there is some confusion.

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NC: 2023:KHC:45457 WP No. 8217 of 2023 C/W WP No. 8893 of 2023

This Court has recorded that a sum of Rs.4,65,15,000/- is deposited insofar as in W.P.No.8217/2023. Sri M.V. Seshachala clarifies that this amount [Rs.4,65,15,000/-] is not the amount deposited but the tax paid while declaring the income, and the respondents clarify that after the order dated 17.01.2023 by the Principal Commissioner of Income Tax, Central, Bengaluru, the petitioner has only deposited the first installment. These assertions are not contested, and in the light of the afore, the following:

ORDER

[A] The petition is allowed in part, and the first respondent’s Garnishee Order dated 07.03.2023 and the second respondent’s Assessment Order dated 17.01.2023 in W.P.No.8217/2023 and the first respondent’s Assessment Order dated 30.12.2022 in W.P.No.8893/2023 are

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NC: 2023:KHC:45457 WP No. 8217 of 2023 C/W WP No. 8893 of 2023

quashed restoring the proceedings for reconsideration leaving open all the questions for due consideration.

[B] The amount deposited by the petitioner in compliance with the order dated 17.01.2023 by the Principal Commissioner of Income Tax, Central, Bengaluru shall be subject to the outcome of such reconsideration.

Sd/- JUDGE

SA ct:sr

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