THE PR COMMISSIONER OF INCOME TAX vs. SLN COFFEE CURING WORKS

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ITA/407/2023HC KarnatakaKAHC01028317202330 September 2024Bench: S.G.PANDIT,C.M. POONACHA6 pages
AI SummaryAllowed

What did the High Court hold?

The High Court disposed of the appeal, granting the Revenue liberty to revive it if the tax effect falls within exceptions to CBDT circulars. The substantial questions of law were kept open for future adjudication.

What were the facts?

The Revenue appealed against an ITAT order that directed the re-computation of the assessee's income. The ITAT's decision was based on seized materials indicating undisclosed cash loans given by the assessee and accrued interest income.

What were the issues?

Whether the ITAT's order was perverse in directing re-computation of income based on seized materials and whether opening loan balances appearing as closing balances could be treated as unaccounted advances under Section 69.

Which sections of the Income-tax Act were involved?

Section 260-A,Section 69

AI-generated summary — verify with the full judgment below

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NC: 2024:KHC:41207-DB ITA No. 407 of 2023

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 30TH DAY OF SEPTEMBER, 2024 PRESENT THE HON'BLE MR JUSTICE S.G.PANDIT AND THE HON'BLE MR JUSTICE C.M. POONACHA INCOME TAX APPEAL NO. 407 OF 2023 BETWEEN:

1.

THE PR. COMMISSIONER OF INCOME TAX CENTRAL, 3RD FLOOR, C R BUILDING, QUEENS ROAD, BENGALURU 560001

2.

THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE AAYAKAR BHAVAN, ROOM NO. 306, 21/ 16, RESIDENCY ROAD, NAZARBAD MYSURU 570010 …APPELLANTS (BY SRI. DILIP M.,ADVOCATE A/W SRI. RAVIRAJ Y V, ADVOCATE)

AND:

SLN COFFEE CURING WORKS POST BOX NO, 47, KIADB INDUSTRIAL AREA, KUDLOOR, KUSHAL NAGAR, KARNATAKA BENGALURU 571234 PAN AALFS1182L

…RESPONDENT (BY SRI.JAGADISHCHANDRA KAMATH K .,ADVOCATE)

THIS ITA / INCOME TAX APPEAL IS FILED UNDER SEC.260-A OF THE INCOME TAX ACT, 1961, PRAYING TO FORMULATE THE

Digitally signed by BHARATHI S Location: HIGH COURT OF KARNATAKA

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NC: 2024:KHC:41207-DB ITA No. 407 of 2023

SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE, ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE INCOME-TAX APPELLANT TRIBUNAL, BENGALURU IN ITA NO. 570/BANG/2022 DATED 20.01.2023 FOR ASSESSMENT YEAR 2013-2014 ANNEXURE- C AND CONFIRM THE ORDER OF THE APPELLATE COMMISSIONER CONFIRMING THE ORDER PASSED BY THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, MYSURU AND ETC.

THIS APPEAL, COMING ON FOR ADMISSION, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER:

CORAM: HON'BLE MR JUSTICE S.G.PANDIT and HON'BLE MR JUSTICE C.M. POONACHA

ORAL JUDGMENT (PER: HON'BLE MR JUSTICE S.G.PANDIT)

Heard the learned counsel Sri Dilip M along with learned counsel Sri Raviraj Y.V, for appellants/Revenue and learned counsel Sri Jagadishchandra Kamath K, for the respondent/assessee.

2.

The Revenue is in appeal under Section 260-A of the Income Tax Act, 1961 (for short, ‘the Act’) questioning the correctness and legality of order dated 20.01.2023 passed by the Income Tax Appellate Tribunal, ‘B’ Bench, Bengaluru (for short, ‘Appellate Authority’) in

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NC: 2024:KHC:41207-DB ITA No. 407 of 2023

ITA.No.570/Bang/2022 for the assessment year 2013-14, raising the following substantial questions of law: “1. Whether on the facts and in the circumstances of the case, the Tribunal's order can be said as perverse in nature in directing assessing authority to re-compute income of assessee by issuing specific directions though the assessing authority had made addition of Rs.104577000 under the head business income on the basis of seized material which indicated undisclosed cash loans which were given by assessee and accrued interest income was also detailed therein?

2.

Whether, on the facts and in the circumstances of the case, the Tribunal is justified in holding that the opening balances of loan which were also appearing in closing balance as on 31/3/2012 cannot be treated as unaccounted advances without appreciating that deeming provisions of Section 69 would apply in case of investments not recorded in the books of accounts?

3.

Whether, on the facts and in the circumstances of the case, the Tribunal's order can be said as perverse in nature as Tribunal has failed to consider the reasons of Commissioner of Income Tax(A) and Assessing Officer and materials on record?

4.

Whether on the facts and in the circumstances of the case, Tribunal's order can be said as perverse in nature in holding that the opening balances of loan which were also appearing in closing balance as on 31/3/2012 cannot be treated

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NC: 2024:KHC:41207-DB ITA No. 407 of 2023

unaccounted advances the advances without appreciating that deeming provisions of Section 69 would apply in case of investments not recorded in the books of accounts?

5.

Whether on the facts and in the circumstances of the case, Tribunal's order can be said as perverse in nature in directing assessing authority to compute the unaccounted advances on the peak credit basis ignoring the fact that the advances were unaccounted?

6.

Whether on the facts and in the circumstances of the case, the tribunal's order can be said as perverse in holding that recovery of the loan and interest was doubtful ignoring the fact that the partners were all family members and had full liberty to transact without any binding nature as per commercial rules?

7.

Whether on the facts and in the circumstances of the case, the Tribunal's order can be said as perverse in holding that interest was not taxable ignoring the fact that the assessee and its partners have recovered such interest payment and details of same were available in seized materials?

8.

Whether on the facts and in the circumstances of the case, the Tribunal's order can be said as perverse in treating the interest on loan as notional although the same was actual interest accrued as per details available in the seized documents?

9.

Whether on the facts and in the circumstances of the case, the Tribunal's order can be said as perverse in directing the

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NC: 2024:KHC:41207-DB ITA No. 407 of 2023

assessing authority to give credit for the declaration made by partners before the Income Tax Settlement Commission ignoring the fact that Firm and partners are different taxable entities under Income Tax Act?”

3.

Learned counsel for the assessee submits that the tax effect in this appeal is less than Rs.2 Crores and therefore, the appeal should not be entertained at the instance of the revenue in view of the Circular No.09/2024 dated 17.09.2024 issued by the Central Board of Direct Taxes. It is also submitted that the aforesaid Circular binds the revenue.

4.

On the other hand, learned counsel for the revenue submits that he be granted liberty to revive the appeal in case the matter falls within the exceptions under the aforesaid Circular dated 17.09.2024 and Circular No.5/2024 dated 15.03.2024.

5.

In view of the aforesaid submissions, the appeal is disposed of with liberty as prayed for by the learned

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NC: 2024:KHC:41207-DB ITA No. 407 of 2023

counsel for the revenue. However, the question of law is kept open to be adjudicated in an appropriate proceeding.

Sd/- (S.G.PANDIT) JUDGE

Sd/- (C.M. POONACHA) JUDGE

BS List No.: 4 Sl No.: 38

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