ABARAN TIMELESS JEWELLERY (P) LTD vs THE INCOME TAX OFFICER

1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU

DATED THIS THE 27TH DAY OF NOVEMBER, 2020

BEFORE

THE HON'BLE MR. JUSTICE M. NAGAPRASANNA

WRIT PETITION No.9909/2019 (T-IT)

BETWEEN

ABARAN TIMELESS JEWELLERY (P) LTD 192, WEST OF CHORD ROAD MAHALAXMI LAYOUT OPP: ISKON BENGALURU – 560 025 REPRESENTED BY ITS DIRECTOR SRI PRATAP KAMATH

... PETITIONER [BY SRI. SUKUMAR S., ADVOCATE (VIDEO CONFERENCING)]

AND

THE INCOME TAX OFFICER

WARD-1(1)(1)

ROOM NO.201, 2ND FLOOR

BMTC BUILDING, 80 FEET ROAD

6TH BLOCK, KORAMANGALA

BENGALURU – 560 095

THE INCOME TAX OFFICER

WARD 8(3), KOLKATA

AAYAKAR BHAVAN, V FLOOR

P7, CHOWRINGHEE SQUARE

KOLKATA – 700 069

2 3. THE PRINCIPAL COMMISSIONER

OF INCOME-TAX

BENGALURU – 1

BMTC BUILDING, 80 FEET ROAD

6TH BLOCK, KORAMANGALA

BENGALURU – 560 095

THE COMMISSIONER OF INCOME-TAX

(APPEALS), BENGALURU – 1

7TH FLOOR, BMTC BUILDING

80 FEET ROAD, 6TH BLOCK

KORAMANGALA

BENGALURU – 560 095 ... RESPONDENTS [BY SRI. K.V. ARAVIND, ADVOCATE (PHYSICAL HEARING)]

THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE ORDER PASSED BY THE R-1 VIDE COMMUNICATION DATED 31.1.2019 [ANNEXURE-A] TO THE ASSESSMENT YEAR 2014-15 PENDING DISPOSAL OF THE APPEAL BY R-4 AND ETC.

THIS WRIT PETITION COMING ON FOR PRELIMINARY HEARING IN ‘B’ GROUP THIS DAY, THE COURT MADE THE FOLLOWING:

ORDER

The petitioner in this writ petition has called in question the order of respondent No.1 rejecting the stay application filed by the petitioner along with

3 statutory appeal preferred to the Commissioner of Income Tax – the Appellate Authority.

Brief facts leading to the filing of present writ petition are that, the petitioner is a Private Limited Company. Respondent No.2 issued a notice under Section 143(2) of the Income Tax Act, 1961 (hereinafter referred to as ‘the said Act’ for short) on 28.08.2015 to the petitioner, which was served on the petitioner on 11.09.2015. In response to the notice under Section 143(2) of the said Act, the petitioner communicated a letter dated 05.12.2015 raising an objection regarding jurisdiction of the 2nd respondent and also requested to transfer the matter to the concerned jurisdictional Officer. 3. Respondent No.2 concluded the assessment under Section 143(3) of the said Act on 29.12.2016 by making several additions to be declared income, which reads as follows:

4 1. Elexe Jewels Rs.2,76,50,165 2. Royal Jewels Rs. 29,76,870 3. J. Varun & Co. Rs. 1,50,70,031 4. Sahadev Karmakar Rs. 16,13,496

Total Rs. 4,73,10,562

and also served a notice of demand under Section 156 of the said Act on the petitioner demanding a sum of Rs.2,29,24,530/- by his Assessment Order 29.12.2016.

The petitioner against the aforesaid Assessment Order and notice of demand, filed an appeal before the Commissioner of Income Tax (A-3) on 14.01.2017. The appeal was later transferred to Commissioner of Income Tax (Appeals), Bengaluru. The petitioner had also filed an application seeking stay of the Assessment Order. The Commissioner of Income Tax – the Appellate Authority, by his order

5 dated 21.02.2019 rejected the application for stay without considering any of the contentions advanced by the petitioner in the appeal memorandum or in the application for stay, the order reads as follows: “6. Further, the assessee’s AR states that the payment of any tax would cause genuine hardship to the assessee. In this regard, the AO’s submission is reproduced as under:-

“ A glance of financials for the AYs 2016-17, 2017-18 & 2018-19 reveals that the assessee company has been doing good business. The assessee company has declared total income at Rs.5.6 crores, Rs.7.71 crores and Rs.9.13 crores respectively for the AYs 2016-17, 2017-18 & 2018-19. Similary, the company has shown the inventories at Rs.45 crore, Rs.53.69 crores and Rs.61.80 crore. It shows for the last 3 years that taxable income and inventrores has an average increase at 28% and at 17.2% respectively

6 and comparatively, the trade payable has been maintained by the assessee. As per the balance sheet as on 31.3.2018, a sum of Rs.2.99 crores has been shown as Cash and Cash equivalents and Rs.3.07 crores has been show as under Other current assets. In these circumstances, even if the assessee come forward to pay Rs.45,84,900/- being 20% of the outstanding tax, it would not affect the business of the assessee and it would be a hardship to the assessee.”

It is therefore seen that there would be no undue hardship to the assessee. (emphasis supplied)

As regard the contention of the AR that the amounts outstanding for AY 2015-16 is concerned and that the same creditors were accepted, it is worth reproducing the comments of the Assessing Officer in this regard as under:-

7 Assessee’s case was selected under CASS for “Limited Scrutiny” for the assessment year 2015-16 to examine the issue of mismatch in sales turnover and mismatch of expenditure of personal nature reported in Audit report and ITR. Assessment u/s 143(3) of the Act has been concluded accepting the returned income and therefore, the issue of examining the genuineness of Sundry Creditors did not arise.

This clarifies the issue raised by the AR of the assesse. (emphasis supplied)

Except the portion on which emphasis is supplied, there is no consideration at the hands of the Commissioner of Income Tax – the Appellate Authority for rejecting the stay application filed by the assessee along with the appeal against the Assessment Order.

8 6. It is trite law that administrative or quasi judicial orders must be informed by reasons. An unreasoned order is an unsustainable order as it does not bear application of mind. Hence, the order of the Commissioner of Income Tax – the Appellate Authority rejecting the application of the stay of the petitioner is required to be set aside and the Commissioner of Income Tax – the Appellate Authority to be directed to reconsider the said application afresh filed by the assessee against the Assessment Order.

For the aforesaid reasons, the impugned order at Annexure-E dated 28.08.2015 is quashed. The matter is remitted back to the hands of the Commissioner of Income Tax – the Appellate Authority to reconsider the stay application and pass appropriate, reasoned order in accordance with law.

9 8. This Court, while entertaining the petition has granted an interim order, which is in operation even as on date. In light of the interim order being in operation, the same shall be in operation, till the Commissioner of Income Tax – the Appellate Authority considers and passes appropriate orders on the application for stay filed by the assesee against the Assessment Order within three months from the date of receipt of copy of this order.

It is made clear that this Court has not pronounced upon the merit of the contentions advanced by the petitioner. All the contentions of both the parties are kept open. 10. With the aforesaid observations, the following: ORDER i. The writ petition is allowed.

10 ii. The impugned order dated 28.08.2015 at Annexure-E is set aside. iii. The matter be remitted back to the hands of the Commissioner of Income Tax - Appellate Authority. iv. The Appellate Authority shall consider the contentions put forth by the petitioner in the application for stay and pass appropriate orders in accordance with law.

Sd/- JUDGE

SJK

ABARAN TIMELESS JEWELLERY (P) LTD vs. THE INCOME TAX OFFICER