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IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 8th DAY OF AUGUST, 2018 BEFORE THE HON’BLE MR.JUSTICE B. VEERAPPA WRIT PETITION NOs.31935-31936 OF 2018 (T-RES)
BETWEEN:
THE PR. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE, C.R.BUILDING, QUEEN’S ROAD, BENGALURU-560 001.
THE DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-1(3), C.R.BUILDING, QUEEN’S ROAD, BENGALURU-560 001.
... PETITIONERS (By Sri. ARAVIND K. V., ADVOCATE)
AND
M/S. DEVI ENTERPRISES, NO. 1050/H, RAILWAY GRAND TWIN, LANE TIMMANCHERLA, GUNTAKAL.AP-515801 REP. BY ITS PARTNER SRI. K. MEHFUZ ALI KHAN. ... RESPONDENT (By Sri. MAYANK JAIN, ADVOCATE FOR SRI. LAKSHMINARAYANA N, ADVOCATE)
2 THESE WRIT PETITIONS ARE FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO DIRECT THE INCOME TAX APPELLATE TRIBUNAL, BENGALURU-A BENCH TO DEFER THE HEARING OF THE APPEAL IN ITA.NO.954/BANG/2017 VIDE ANNEXURE-F DATED 23.07.2018 TILL ADJUIDICATION OF APPEAL AGAINST THE SUBSTANTIVE ASSESSMENT IN THE CASE OF SRI GALI JANARDHAN REDDY FOR THE ASSESSMENT YEAR 2010-11 BY THE COMMISSIONER OF INCOME TAX-APPEALS.
THESE WRIT PETITIONS COMING ON FOR ORDERS, THIS DAY, THE COURT MADE THE FOLLOWING:
ORDER
The petitioners have filed the present writ petitions for a writ of mandamus to direct the Income Tax Appellate Tribunal, Bengaluru, Bench-A to defer the hearing of the appeal in ITA No.954/BANG/2017 as per Annexure-F till adjudication of appeal against the substantive assessment in the case of Gali Janardhan Reddy for the assessment year 2010-11 by the Commissioner of Income Tax(Appeals).
This Court by an order dated 25.7.2018, after hearing the learned counsel for the petitioners, granted
3 stay as prayed for staying further proceedings in ITA No.954/BANG/2017 as per Annexure-F dated 23.7.2018 till the next date of hearing. Hence, the present application I.A.1/18 is filed by the respondent for vacating the interim order.
I have heard the learned counsel for the parties to the lis.
Sri. Mayank Jain, learned counsel for the respondent contended that the very writ petitions are not maintainable and the question of granting stay would not arise. He further contended that pursuant to the search conducted in the premises of the respondent, there was a substantive assessment under Section 153-C of the Income Tax Act (hereinafter referred to as ‘the Act’) in the case of Gali Janardhan Reddy, and protective assessment under Section 153-A of the Act in the case of the respondent. It is also an admitted position that the substantive addition in the case of Gali Janardhan Reddy
4 has been deleted by order dated 17.10.2016 vide Annexure-C in the present writ petitions. The said order passed by the Appellate Tribunal has reached finality.
Thereafter, the petitioners passed reassessment order exercising power under Section 147 of the Act in the case of Gali Janardhan Reddy on 29.12.2017. Against the said order, an appeal came to be filed by the assessee before the Commissioner of Income Tax( Appeals) and the same is pending. Against the assessment order passed in the case of respondent on 27.3.2013, the respondent filed an appeal before the Commissioner of Income Tax(Appeals) in ITA No.12 & 13/DCIT, CC-1(3)/CIT(A)-11/2014-15 as per Annexure-E. The Appellate Authority by order dated 20.1.2017 dismissed the same on the ground of delay and laches. Hence, the respondent filed appeal before the Income Tax Appellate Tribunal, Bengaluru, in ITA No.954/BANG/2017. Therefore, he would submit that after the reassessment order passed on 29.12.2017, there was no protective
5 assessment except substantive assessment which is subject to the appeal pending before the Appellate Authority. The appeal filed by the present respondent before the Appellate Authority was dismissed on the ground of delay was protective assessment. There was no reason for the Tribunal to wait till the substantive appeal decided by the Commissioner of Appeals in the case of Gali Janardhan Reddy. Therefore, he sought to vacate the interim order.
Sri. Aravind Kumar, learned Central Government Counsel for the petitioners contended that the original assessment order passed in the case of Gali Janardhan Reddy on 31.3.2013 was set aside on technicality by the Income Tax Appellate Tribunal. Therefore, there was no need to challenge further. As required under the provisions of Section 147 of the Act, fresh assessment order came to be passed wherein it is specifically stated at D4 show cause notice, the assessee was required to show cause vide letter dated 22.2.2013, why an amount of
6 Rs.194,82,50,000/- for the assessment year 2010-11 and Rs.37,45,06,000/- for the assessment year 2011-12 should not be brought to tax as his undisclosed business income. Therefore, he would submit that the subject matter of the appeal before the Commissioner of Appeals and substantive appeal before deciding the said appeal, if the protective appeal rejected by the Commissioner of Appeals on delay and laches and if the Tribunal proceeds in ITA No.954/BANG/2017, the revenue will be put to great hardship and loss as they cannot make fresh assessment order because of time limit constraint. Therefore, he sought to allow the petition.
Having heard the learned counsel for the parties, it is an undisputed fact that the petitioners passed original assessment order on 31.3.2013 as per Annexure-B against Gali Janardhan Reddy which discloses that a sum of Rs.194.82 crores and Rs.37.45 crores are added to the assessee’s income as arising from undisclosed sources for the assessment years 2010-11 and 2011-12 respectively.
7 The said order came to be set aside by the Income Tax Appellate Tribunal on 17.10.2016 on technicality as contended by the learned counsel for the petitioners and on merits as contended by the learned counsel for the respondent. The fact remains that, petitioners passed fresh orders exercising power under Section 147 of the Act on 29.12.2017. Against the assessment order, appeal filed by the assessee on substantive assessment pending before the Commissioner of Income Tax (Appeals)-11 in Appeal No.ITA.No.12 & 13/DCIT, CC-1(3)/CIT(A)-11/2014-15.
It is also not in dispute that appeal is filed by the present respondent against the assessment order dated 27.3.2013. The appeal before the Commissioner of Income Tax (Appeals) came to be dismissed on 20.1.2017 on the ground of delay and laches. That is the subject matter of the appeal before the Tribunal in ITA No.954/BANG/2017. It was the specific case of the petitioners before the Tribunal that a request was made to defer the hearing of the appeal on the ground that the
8 assessment in appeal being protective basis and the order of assessment order on substantive basis in case of Gali Janardhan Reddy. The Appellate Commissioner has to decide the matter at the earliest. Therefore, a request was made to defer the appeal before the Tribunal till a decision is taken in the appeal filed by Janardhan Reddy which is a substantive appeal. The said request was turned down in ITA No.954/BANG/2017. The Tribunal without considering the said application on its merits directed the revenue to argue the matter on merits of the appeal in ITA No.954/BANG/2017 on 12.01.2017. That is how the writ petitions came to be filed.
It is not in dispute that in the protective assessment order at Annexure-A there is a reference to the case of Gali Janardhan Reddy which reads as under: In the light of the above evidence, the assessee was required to show cause, vide letter dated 07.01.2013 why an amount of Rs.194,82,50,000/- for the assessment year 2010-11 and Rs.37,45,06,000/- for the
9 assessment year 2011-12, should not be brought to tax as his undisclosed business income.
Mr.Madhukumar Varma furnished his explanation vide letter dated 24.1.2012 by disassociating himself from the seized material and contradicting his own statements made during the time of search. Hence, his contention was rejected.
In such circumstances, considering the evidence on record, the above sum of Rs.194.82 crores is added protectively in the hands of the assessee and substantively in the hands of Mr.G.Janardhana Reddy as arising from undisclosed sources for the assessment year 2010-11.
Though an attempt was made by learned counsel for the respondent, that the said order was set- aside by the Tribunal on 17.10.2016 and the same reached finality. The fact remains that a reassessment order came to be passed as per Annexure-D on 29.12.2017 and that is the subject matter of appeal pending before the
10 Commissioner of Appeals. In all fairness, the Tribunal ought to have decided the application filed for deferment by the petitioners nor deferred the hearing of ITA No.954/BANG/2017 till a decision is taken in the substantive appeals filed by the Janardhan Reddy in ITA No.216/CIT(A)-11/Bang/2017-18. Therefore, the same has not been done by the Tribunal. When the application filed by the petitioners is pending before the Tribunal in ITA No.954/BANG/2017 for deferment, it is appropriate for the Tribunal to decide the said application first on its merits and thereafter, can proceed in the appeal.
Sri Aravind K.V. learned CGSC for petitioners made submission across the bar that he will pursue the appeal pending before the Commissioner of Appeals and a request will be made to expedite the appeal at the earliest. The said submission is placed on record.
In view of the above, the Tribunal is directed to consider the application filed by the petitioners for
11 deferment of hearing in ITA No.954/BANG/2017. Till such application is decided on merits, the Tribunal shall not proceed with the hearing of ITA No.954/BANG/2017.
With the above observation, the writ petitions are disposed of. All the contentions are left open.
Sd/-
JUDGE
DKB/Dvr