M/S. KBL LAYOUT vs THE DEPUTY COMMISSIONER OF INCOME TAX

Income Tax Appellate Tribunal, ‘ITAT’ for

Before: and

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 23RD DAY OF AUGUST, 2022 PRESENT THE HON'BLE MR JUSTICE P.S.DINESH KUMAR AND THE HON'BLE MR JUSTICE UMESH M ADIGA INCOME TAX APPEAL NO. 647 OF 2016 BETWEEN:

M/S. KBL LAYOUT REP BY ITS AOP MEMBER SRI L.SRIDHAR, # 1 & 2, 1ST CROSS SILICON CITY LAYOUT, NEW BANK COLONY, KUMAR NURSERY, KONANKUNTE, BENGALURU- 560 062 …APPELLANT

(BY SRI. A.SHANKAR, SENIOR COUNSEL FOR SRI.M.LAVA, ADVOCATE)

AND:

THE DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-1 (1), C R BUILDING, QUEENS ROAD, BENGALURU- 560 001 …RESPONDENT (BY SRI.E.I.SANMATHI, ADVOCATE)

THE ADVOCATE FOR THE APPELLANT HAS FILED THE ABOVE INCOME TAX APPEAL UNDER SECTION 260A OF THE INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED: 25/07/2016 PASSED IN ITA No.709/BANG/2013, FOR THE ASSESSMENT YEAR: 2006-07; PRAYING THIS HON'BLE COURT TO :

Digitally signed by KIRAN KUMAR R Location: High Court of Karnataka

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(A) TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW AS STATED IN APPEAL MEMO AND ANSWER THE SAME IN FAVOUR OF THE APPELLANT;

(B) TO ALLOW THE APPEAL AND SET ASIDE THE FINDINGS TO THE EXTENT AGAINST THE APPELLANT IN THE ORDER PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, BENGALURU BENCH 'A' IN ITA No.709/BANG/2013 DATED: 25/07/2016 FOR THE ASSESSMENT YEAR: 2006-07 VIDE ANNEXURE-A, AND ETC.

THIS APPEAL COMING ON FOR FINAL HEARING, THIS DAY, P.S. DINESH KUMAR J., DELIVERED THE FOLLOWING:

JUDGMENT

This appeal by the assessee has been admitted to consider following substantial questions of law:

“(1) Whether the Tribunal was justified in law in not cancelling the assessment when it has recorded a finding that records were not produced and consequently an adverse inference ought to have been drawn and cancelled the assessment on the facts and circumstances of the case?

(2) Whether the Assessment under Section 153C of the Act, is valid when proper satisfaction is not recorded by the

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Assessing officer in the manner contemplated in law before initiating proceedings under Section 153C of the Act on the facts and circumstances of the case? (3) Whether the Tribunal erred in law in keeping the issues of merit open which is without jurisdiction on the facts and circumstances of the case? (4) Whether the Tribunal has power to keep issues open which it cannot subsequently adjudicate as it has become functus officio and consequently the appellant will become remedy less in future and hence the order passed by the Tribunal is bad in law on the facts and circumstances of the case? ” 2. Heard Sri.A.Shankar, learned senior advocate for the appellant and Sri.E.I.Sanmathi, learned advocate for the respondent.

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The brief facts of the case are, assessee filed his Returns for the Assessment Year 2006-2007 declaring an income of Rs.16,20,956/-. 4. The Assessing Officer after completion of assessment under Section 153C read with Section 143(3) of the Income Tax Act, 1961 (‘the Act’ for short) added Rs.37,19,971/-. 5. The Commissioner of Income Tax (Appeals) not only dismissed the appeal but also enhanced the total income to Rs.57,81,981/- and determined the total income as Rs.1,11,22,908/-. 6. The Income Tax Appellate Tribunal (‘ITAT’ for short) by the impugned order has recorded thus: “7. ... ... Neither the CIT (Appeals) has given any finding about the stage and assessment proceedings in which the alleged satisfaction is recorded nor any record has been produced before us to ascertain the correct factual position of the satisfaction recorded by the Assessing

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Officer. Accordingly, in the facts and circumstances of the case, we set side this issue (and remit sic) to the record of the CIT (Appeals) for deciding the same by giving a detailed factual finding as well as the validity of assessment under Section 153C of the Act to the extent of the enhancement of assessment made by the CIT (Appeals). Since the jurisdictional issue has been set aside (and the matter remitted sic) to the record of the CIT (Appeals) for fresh adjudication, therefore the other issues raised by the assessee are kept open.”

Sri.A.Shankar submitted that the ITAT has remitted the matter to the Commissioner of Income Tax (Appeals) to record findings with regard to the validity of the assessment under Section 153C of the Act to the extent of enhancement of assessment made by the Commissioner of Income Tax (Appeals) and kept other issues open. He contended that the ITAT has erred in passing such order because other issues could not have been kept open. Once the order is passed by the ITAT,

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the same attains finality and consequently, the order of Commissioner of Income Tax (Appeals) excluding the validity under Section 153C of the Act, becomes final. Accordingly, he prayed that in the facts and circumstances of this case, this Court may consider setting aside the ITAT’s order and to remit entire matter to the ITAT for fresh consideration. 8. Sri.E.I.Sanmathi for the Revenue, does not dispute the position of law and has no objection for remitting the entire matter to the ITAT. 9. In view of the above, we pass the following order:

ORDER (i) The appeal is allowed; (ii) The order dated 25.07.2016 in I.T.A. No.709/Bang/2013 (Assessment Year: 2006-07) by ITAT, Bengaluru, is set aside;

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(iii) The matter is remitted to the ITAT for re-consideration of the entire appeal on its merits; (iv) In the circumstances, the substantial questions of law recorded hereinabove do not call for any answer and accordingly they are not answered; No costs.

SD/- JUDGE

RK CT:AN List No.: 1 Sl No.: 32

M/S. KBL LAYOUT vs. THE DEPUTY COMMISSIONER OF INCOME TAX