M/S WINTAC LTD vs. COMMISSIONER OF INCOME TAX

1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 28TH DAY OF JULY 2021 PRESENT THE HON’BLE MR. JUSTICE ALOK ARADHE AND THE HON’BLE MR.JUSTICE HEMANT CHANDANGOUDAR I.T.A. NO.90 OF 2015 BETWEEN: M/S. WINTAC LTD., NO.54/1, BOODHIHAL VILLAGE NELAMANGALA, BANGALORE-562123 PREVIOUSLY HAVING ITS REGISTERED OFFICE AT NO.163, RESERVOIR STREET BASAVANNGUDI, BANGALORE-560031 PAN:AAACR8613H REPRESENTED BY ITS MANAGING DIRECTOR SHRI. S. JAYAPRAKASH MADY AGED ABOUT 53 YEARS S/O LATE S. SADANANDAMADY.

... APPELLANT (BY SRI. BALRAM R. RAO, ADV.) AND: COMMISSIONER OF INCOME TAX BANGALORE-III CENTRAL REVENUE BUILDINGS QUEENS ROAD, BANGALORE-560001.

... RESPONDENT (BY SRI. K.V. ARAVIND, ADV.,) - - -

2 THIS I.T.A. IS FILED UNDER SECTION 260-A OF I.T. ACT, 1961 ARISING OUT OF ORDER DATED 31.10.2014 PASSED IN ITA NO.604/BANG/2013, FOR THE ASSESSMENT YEAR 2008-09, PRAYING TO:

I. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE. II. ALLOW THE APPEAL AND SET ASIDE THE ORDER PASSED BY THE ITAT, DATED 31.10.2014 BEARING IN ITA NO.604/BANG/2013 FOR THE ASSESSMENT YEAR 2008-09. THIS I.T.A. COMING ON FOR HEARING, THIS DAY, ALOK ARADHE J., DELIVERED THE FOLLOWING: JUDGMENT This appeal under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as 'the Act' for short) has been filed by the assessee against the order dated 31.10.2014 passed by the Income Tax Appellate Tribunal. The subject matter of the appeal pertains to the Assessment Year 2008- 09. The appeal was admitted by a Bench of this Court on the following substantial question of law: "Whether on the facts and in the circumstances of the case, and in law, the Tribunal was justified in confirming the order passed by the Commissioner of Income Tax under Section 263 of the Income Tax Act,, 1961 cancelling the order of assessment under Section 115 WE(3) dated 18.11.2010 and directing the

3 assessing officer to make an order de novo only for the reason that there is no discussion in the order or in the record of the assessment proceedings?" 2. Facts leading to filing of this appeal briefly stated are that the assessee is a company which is engaged in the business of manufacture of pharmaceutical products. The assessee had filed return of income in respect of fringe benefits for the Assessment Year 2008-09 on 19.09.2008 and had declared the total value of fringe benefits as enumerated under Section 115WE of the Act as NIL. The order of assessment under Section 115WE of the Act was passed by the Assessing Officer on 18.11.2010 by which the Assessing Authority accepted the return filed by the assessee and treated the total value of fringe benefits as NIL. The Commissioner of Income Tax (Appeals) invoked the powers under Section 263 of the Act and issued a notice dated 11.03.2013 to the assessee. The Commissioner of Income Tax (Appeals), by an order dated 30.03.2013, inter alia held that the order passed by the Assessing Authority is erroneous and is prejudicial to the interest of the revenue as the

4 Assessing Authority has not considered the items namely vehicle maintenance of Rs.24,83,836/-, traveling and conveyance amount for a sum of Rs.22,37,001/- and pooja expenses to an extent of Rs.1,35,711/-. It was held that the aforesaid amounts attracted fringe benefit tax under Section 115WE of the Act. Accordingly, the aforesaid amounts were brought to tax. Being aggrieved, the assessee filed an appeal before the Income Tax Appellate Tribunal. The Tribunal, by an order dated 31.10.2014, dismissed the appeal preferred by the assessee. In the aforesaid factual background, this appeal has been filed. 3. Learned counsel for the assessee, at the outset, while inviting the attention of this Court to paragraph 6.4 of the order passed by the Tribunal, submitted that the claim of the assessee under Section 115WE of the Act in respect of fringe benefits has not been considered on merits by the Tribunal while deciding the appeal and the impugned order therefore be set aside and the matter be remitted to the Tribunal for decision afresh on merits with regard to the claim of the assessee in respect of fringe benefits. On the

5 other hand, learned counsel for the revenue has supported the order passed by the Tribunal. 4. We have considered the submissions made on both sides and have perused the record. From perusal of the order passed by the Tribunal, it is evident that the Tribunal has not considered the claim of the assessee with regard to fringe benefits under Section 115WE of the Act on merits. For the facility of reference, paragraph 6.4 of the order passed by the Tribunal is reproduced below: "6.4 From a perusal of the order dt:18.11.2010 passed under section 115W(2) of the Act, we do not find any material to establish that the Assessing Officer has investigated the issue of fringe benefits with respect to the three items of expenditure i.e., vehicle maintenance, travel and conveyance and pooja expenses and how he has applied his mind to this issue. In the course of hearings before us, the learned Authorized Representative of the assessee was required to furnish copy of the show cause notice, if any, issued by the Assessing Officer in respect of the fringe benefits of the above three items of expenditure and the reply of the assessee

6 thereto, but no such details were available. We also find from the reply dt.19.3.2013 filed by the assessee before the learned CIT in revisionary proceedings, that the assessee has nowhere demonstrated that the Assessing Officer had issued a show cause notice or letter calling for these details and that it has filed a reply. While it is the prerogative of the Assessing Officer to pass the order of assessment in the manner he deems fit, but if discussion is not discernable there from on a particular issue, then in order to ascertain whether the Assessing Officer has applied his mind or not, the higher appellate forum can go through the show cause notice, if any, issued by him and the reply given thereto by the assessee. This would indicate that though the order of assessment is silent, the issue in question must have been discussed in the course of assessment proceedings. We find that no such material is available on record. The Hon'ble Apex Court in the case of Malabar Industries Co. V CIT (243 ITR 83) has observed that the accepting of accounting entries as it is without any enquiry being carried out by the Assessing Officer would make the assessment order erroneous and prejudicial to the interests of revenue. In the facts and circumstances of

7 the case as discussed above, we are of the considered view that the learned CIT had rightly considered all these aspects before taking action under section 263 of the Act and therefore finding no merit in this appeal of the assessee dismiss the same." 5. It is evident from the aforesaid extract of the impugned order that the Tribunal has not dealt with the claim of the assessee on merits. The impugned order is therefore quashed and the matter is remitted to the Tribunal for decision afresh with regard to the claim of the assessee with reference to fringe benefits, on merits. In the result, the appeal is disposed of. Sd/- JUDGE Sd/- JUDGE RV