THE PR COMMISSIONER OF INCOME TAX vs. M/S IND SING DEVELOPERS PVT LTD,

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HC-KAR NC: 2025:KHC:27807-DB ITA No. 584 of 2023

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 23RD DAY OF JULY, 2025 PRESENT THE HON'BLE MR. JUSTICE JAYANT BANERJI AND THE HON'BLE MR. JUSTICE S.G.PANDIT INCOME TAX APPEAL NO. 584 OF 2023

BETWEEN:

M/S. IND SING DEVELOPERS PVT. LTD., NO.208, WEST MINISTER COMPLEX, 13 CUNNINGHAM ROAD, BENGALURU-560-052 …RESPONDENT (BY SRI.A.SHANKAR, SENIOR COUNSEL FOR SRI.MADHUSUDHAN.U.A., ADVOCATE)

Digitally signed by K G RENUKAMBA Location: HIGH COURT OF KARNATAKA

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HC-KAR NC: 2025:KHC:27807-DB ITA No. 584 of 2023

THIS INCOME TAX APPEAL IS FILED UNDER SECTION 260-A OF INCOME TAX ACT, 1961, PRAYING TO SET ASIDE THE ORDER PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, BENGALURU IN ITA NO.107/BANG/2012 DATED 02.03.2022, FOR THE ASSESSMENT YEAR 2005-2006 ANNEXURE-A AND ETC.

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

CORAM: HON'BLE MR. JUSTICE JAYANT BANERJI AND HON'BLE MR. JUSTICE S.G.PANDIT

ORAL JUDGMENT (PER: HON'BLE MR. JUSTICE JAYANT BANERJI)

This is an appeal (AY: 2005-06) filed by the Revenue under Section 260-A of the Income Tax Act, 1961 ('Act' for short). It is stated that a search was conducted under Section 132 of the Act on 26.08.2008 and an Assessment Order under Section 153(A) read with Section 143(3) of the Act came to be passed on 31.12.2010. The Assessing Authority considering the income arising on sale of land and relinquishment of rights as business income as against the assessee's treatment as part of income as receipt from capital gains and part of it as capital receipt, not

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HC-KAR NC: 2025:KHC:27807-DB ITA No. 584 of 2023

eligible to tax. Certain other disallowances were also made. 2. The appeal preferred before the Commissioner of Income Tax (Appeals) against that order was partly allowed on 30.11.2022 holding that income from sale of land and relinquishment of rights is to be taxed under the head 'Capital Gains'. Both the assessee as well as the Revenue preferred the appeals before the Tribunal. 3. By an order dated 02.03.2022, the appeals for the Assessment Year 2005-06 were disposed of by the Tribunal holding that the assessment is to be taxed in the hands of Association of Persons (AOP) and not in the hands of the assessee. Therefore, in the assessment pursuant to search, the only question was regarding taxability of Rs.6.00 Crores disclosed by the assessee in the original return of Income under the head of 'Capital Gains'. It was held that the Assessing Officer had, in the assessment concluded under Section 153(A) read with Section 143(3) of the Act, sought to tax the aforesaid

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HC-KAR NC: 2025:KHC:27807-DB ITA No. 584 of 2023

amount as Business Income on the basis of a written opinion of a Senior Advocate which was found during the course of search and therefore, no addition could be based on an opinion which was not even put to the assessee for his rebuttal during the course of the assessment. It was further held by the Tribunal that there were no incriminating materials to make addition. 4. It has not been disputed by the learned counsel appearing for the appellant that, apart from the written opinion of the Senior Advocate recovered during the search, no other material was found that was considered by the Assessment Officer after the search. 5. We have perused the order of the Tribunal. 6. The Tribunal has noticed that the Assessing Officer had sought to tax an amount little over Rs.6.00 Crores as business income, mainly on the basis of a written opinion of the senior Advocate found during the course of search in which he opined that the receipt of sale

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HC-KAR NC: 2025:KHC:27807-DB ITA No. 584 of 2023

of land and the relinquishment of rights is taxable under business income. It was observed that, it is the present position of law that the taxes are not to be collected or paid on the basis of opinion of an expert. No addition could be based on an opinion, which is not even put to the assessee for his rebuttal during the course of assessment proceedings. It was noted that the assessee had taken opinion from others and the same was not considered by the Assessing Officer. The Tribunal analysed that, if there was an opinion in favour of the assessee, the Assessing Officer would not have followed the same in place of the one against the assessee. It was noted that the contention of the learned Standing Counsel for the Revenue was that the Director's report to shareholders, note forming of accounts as on 31.03.2004 audited balance sheet for the year ending 31.03.2004 was found during the course of search under Section 132 of the Act, and those were incriminating material. The standing counsel’s further contention was that the balance sheet

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HC-KAR NC: 2025:KHC:27807-DB ITA No. 584 of 2023

filed in Assessment Year: 2004-05 and 2005-06 (as comparative) were different from the balance sheet filed before the Assessing Officer. It was noted by the Tribunal that the contention of the Standing Counsel was contrary to the facts of the case. The assessment under Section 143(3) of the Act was completed by the Assessing Officer vide letter dated 28.12.2007 and copies of the relevant financial statement were available before the Assessing Officer much before the search was conducted under Section 132 of the Act. Therefore, the documents could not be considered to be incriminating material on the facts of the case. As far as his contention that the balance sheet filed in the Assessment Years: 2004-05 and 2005-06 (as comparative) were different from the balance sheet filed before the Assessing Officer, the Tribunal noted that whenever there is a change in the accounting policy followed by the assessee, the assessee is required to disclose the same in accordance with the accounting standards as applicable then and also required to re-

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group/re-classify the figures of the previous years so as to make them comparable with current year's figures in the financial statements. The assessee had offered capital gains even after re-classification and it was not disputed by the Assessing Officer in the order of 28.12.2007. It was therefore noted there was no incriminating material seized during the course of the search which could be linked to the 03 additions made in the assessment completed under Section 143(3) read with 153(A) of the Act. It was also noted that the jurisdictional High Court had noted in similar cases that those additions could not be sustained. 7. The aforesaid findings of the Tribunal which are based on facts, have not been demonstrated by the Revenue to be contrary to law. No material has been placed that would render the findings of the Tribunal susceptible to be set aside on the ground of perversity, want of jurisdiction or non-application of mind. As such, given the fact that the substantial questions of law as

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framed in the instant appeal already stand answered by the judgments referred to in the order of the Tribunal, which has not been disputed by the learned Standing Counsel appearing for the Revenue, this appeal is dismissed.

Sd/- (JAYANT BANERJI) JUDGE

Sd/- (S.G.PANDIT) JUDGE

KGR* List No.: 1 Sl No.: 21