SHRI MANJUNATHESHWARA SOUHARDA SAHAKARI LTD., vs. COMMISSIONER OF INCOME TAX (APPEALS)

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WP/4713/2020HC KarnatakaKAHC01010395202019 March 2020Bench: S SUNIL DUTT YADAV5 pages
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What did the High Court hold?

The High Court directed the Appellate Authority to dispose of the petitioner's application for stay within two weeks, providing an opportunity for a hearing. Pending this, the demand notice was to be kept in abeyance.

What were the facts?

The petitioner, a credit co-operative society, had Rs. 24,05,000/- added to its income under Section 69A of the IT Act for SBNs deposited during demonetization. The deduction under Section 80P(2)(a)(i) was disallowed, leading to a significant tax and interest demand.

What were the issues?

The primary issue was the taxability of SBNs deposited during demonetization and the subsequent disallowance of deductions. The court also considered the pending application for stay of demand.

Which sections of the Income-tax Act were involved?

Section 69A,Section 80P(2)(a)(i)

AI-generated summary — verify with the full judgment below

1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU

DATED THIS THE 19TH DAY OF MARCH 2020

BEFORE

THE HON'BLE MR.JUSTICE S. SUNIL DUTT YADAV

WRIT PETITION No.4713/2020 (T-IT)

Between:

Shri Manjunatheshwara Souharda Sahakari Ltd., 1st Cross, Near Sahyadri Theatre, Hassan Taluk & District – 573 201, Represented by its Secretary Mr. Mohan Kumar M.K.

… Petitioner

(By Sri Mahesh R. Uppin, Advocate)

And:

1.

Commissioner of Income Tax (Appeals),

Aayakar Bhavan, No.21/16, Residency Road, Nazarbad, Mysuru – 575 010.

2.

Income Tax Officer, Ward – 2, Aayakar Bhavan, 2nd Stage, Belur Road, Hassan – 573 201.

… Respondents

(By Sri Jeevan J. Neeralgi, Advocate and Sri E.I. Sanmathi, Advocate)

2 This Writ Petition is filed under Articles 226 & 227 of the Constitution of India, praying to quash the assessment order dated 06.12.2019 passed by the R-2 marked as Annexure-A and etc.

This Writ Petition coming on for preliminary hearing this day, the Court made the following:

ORDER

The petitioner is a credit Co-operative Society registered under the provisions of Karnataka Co-operative Societies Act, 1959 and is stated to be engaged in the business of providing credit facilities to its members.

2.

The respondent No.2 invoking Section 69A of the Income Tax Act, 1961 (‘I.T. Act’ for brevity) has made an addition of Rs.24,05,000/- to the income of the petitioner while holding that SBNs deposited by the petitioner during demonetization are liable to be taxed under the head ‘income from other sources’. Accordingly, deduction was disallowed under Section 80P(2)(a)(i) of the Act and total income of the petitioner

3 of Rs.24,05,000/- came to be taxed levying tax and interest of Rs.30,09,699/-.

3.

The said assessment order has been appealed before respondent No.1 along with an interlocutory application for stay of the demand. It is further submitted that after filing of the appeal, an application has been made before the respondent No.2 requesting to keep the demand in abeyance till disposal of the appeal pending before respondent No.1.

4.

In light of the appeal having been filed, the question of intervening as regards to the assessment order at this stage is not appropriate. However, as regards the contention that the consideration of application for stay and further exercise of power of the PCIT keeping in mind the circular bearing No.1914 as amended on 21.5.2017, 29.2.2016 and 31.7.2017, the request of the petitioner is to be considered in a meaningful manner. In fact, the power of granting stay

4 has been considered by the High Court of Judicature at Madras in the case of M/s. Shriram Finance (supra) wherein, certain guidelines have been referred to in para-5 which may be taken note of. So also the manner of exercise of power of the Principal Commissioner of Income Tax is detailed in Flipkart’s case (supra) at paras–18 and 19, which needs to be kept in mind. This Court refrains from expressing any opinion on the merits of contentions raised.

5.

In light of discussion made above, noticing that application for stay filed by the petitioner is still not disposed off, the Appellate Authority to dispose off the application for stay filed by the petitioner pending before it within a period not later than two weeks. The petitioner is to be afforded an opportunity of hearing as regards his application for stay. In the interregnum, the demand notice at Annexure-‘B’ dated 6.12.2019 would be kept in abeyance.

Accordingly, petition is disposed off.

Sd/- JUDGE

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