By Shri v. Raghuraman, Advocate

IN THE HIGH COURT OF KARNATAKA AT BENGALURUDATED THIS THE 20 DAY OF JULY, 2020 BEFORE THE HON'BLE MR.JUSTICE P.S. DINESH KUMAR #WRIT PETITION No.8531 OF 2020 (1IT) BETWEEN 1.M/S. PENTIUM CONSTRUCTION PRIVATE LIMITED|S J) PATEL BUSINESS CHAMBERSII FLOOR, NO.2/2, II MAIN.VINAYAKA CIRCLEPALACE GUTTAHALLIBANGALORE-560 OOQ3|REPRESENTED BY |MR. VELLALATH GOPINATHAN.MANAGING DIRECTORAGED ABOUT 54 YEARS.S/O LATE KARUNAKARAN NAIR] 2.|MR. VELLALATH GOPINATHAN MANAGING DIRECTOR OF.M/S. PENTIUM CONSTRUCTIONS PVT LTDII FLOOR, MANANCHIRA TOWER|A.G. ROAD, KOZHIKODE| KERALA-6/73 OO1 PETITIONERS) (BY SHRI. V. RAGHURAMAN, ADVOCATE) |THROUGH VIDEO CONFERENCE| AND 1.|THE INCOME TAX OFFICER|WARD-5 (1) (3)BMTC BUILDING|80 FEET ROAD, 6 BLOCK|NEAR KHB GAMES VILLAGE|KORAMANGALABANGALORE-560 O95 NEAR KHB GAMES VILLAGE| 2 2 |SYNDICATE BANK (REPRESENTED BY BANK MANAGER) HOTEL FOURA BUILDINGS| MAVOOR ROAD, TEA KOZHIKODE KERALA-6/73 OO] 3.0PRINCIPAL COMMISSIONER OF INCOME TAX-5BMTC BUILDING|80 FEET ROAD, 6 BLOCK|NEAR KHB GAMES VILLAGE|KORAMANGALABANGALORE-560 095 |... RESPONDENTSBMTC BUILDING|80 FEET ROAD, 6 BLOCK|NEAR KHB GAMES VILLAGE|KORAMANGALABANGALORE-560 095 |... RESPONDENTS (BY SHRI. E.I. SANMATHI, ADVOCATE FOR R1 & R3) |THROUGH VIDEO CONFERENCE| THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 22/7OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE IMPUGNEDASSESSMENT ORDER DTD.30.12.2019 (ANNEXURE-A) PASSED BY R-1.AS BEING VIOLATIVE OF ARTICLE OF ARTICLE 14, ARTICLE 19 (1) (g)OF THE CONSTITUTION AND ETC. THIS WRIT PETITION COMING ON FOR,ORDERSTHIS DAY, THE:COURT MADE THE FOLLOWING: | ORDER Though this matter is listed for orders regarding completion|ofservice ofnoticestO. respondents. | Shri E.I.Sanmathi, learned Standing Counsel appears for. respondents No.1 & 3, the Income Tax Department. 2.|Tne matter being in a snort compass, as prayedfor by learned advocates for petitioner and respondents. No.1 & 3, it is taken up for final disposal. 3. Petitioner has challenged the assessment orderdated 30[64]December 2019 (Annexure-A) passed by the![86]respondent- Income Tax Officer, Bengaluru. On|17[64]March 2020, the Assessing Authority instructed secondrespondent bank to freeze petitioners Bank account. —Petitioner has filed an application before the Assessing|Authority on 20[64]March 2020 seeking stay of assessment|order and the Assessing Authority rejected the same on 23[<>]March 2020. Thereafter, petitioner filed an application for|Stay|beforethird|respondent|namely,thePrincipalCommissioner of Income Tax-5, Bengaluru (the PCIT’ for.short)) under Section 246A of Income Tax Act, 1961. Since.no orders were passed by the PCIT, the petitioner has)approached this Court with a prayer to quash theassessment order. 4. Shri Raghuraman, learned advocate for petitionersubmitted that|whilst|this.writpetitionIS|pendingconsideration, on 1/[64]July 2020, the PCIT has passed anorder directing petitioner to deposit 20% of the tax amount. in six installments. The said order has been passed without| petitioner. notice and|without.hearing|theShri Raghuraman further submitted that the Assessing.Authority has disallowed expenditure of nearly Rs.7.87.crores, which the petitioner nas incurred by making.payment to its contractors. The list of eighteen such|contractors has been recorded in the assessment order.Notices were issued to the said contractors and they have|given reply to the Assessing Authority. However, without.properly appreciating the replies, the Assessing Authority|has disallowed the expenditure and assessed the payment|of tax of Rs. 3.35 Crores. 5. To substantiate his submission, Shri Raghuramanadverted to letter dated 74[64]December 2019 written by ©M/s SanWe MEP Contracting Private Limited and email by. in six installments. The said order has been passed without| petitioner. notice and|without.hearing|theShri Raghuraman further submitted that the Assessing.Authority has disallowed expenditure of nearly Rs.7.87.crores, which the petitioner nas incurred by making.payment to its contractors. The list of eighteen such|contractors has been recorded in the assessment order.Notices were issued to the said contractors and they have|given reply to the Assessing Authority. However, without.properly appreciating the replies, the Assessing Authority|has disallowed the expenditure and assessed the payment|of tax of Rs. 3.35 Crores. 5. To substantiate his submission, Shri Raghuramanadverted to letter dated 74[64]December 2019 written by ©M/s SanWe MEP Contracting Private Limited and email by. M/s.Credal.CalicutOf)26[64]December.2019.He submitted that these replies were given prior to date ofassessment order namely, 30[64]December 2019. He arguedthat though this is the factual matrix, the Assessing.Authority has called these expenses as ‘bogus expenses’ and disallowed. Petitioner is thus not liable to pay any.tax. Therefore, the conditional order passed by the PCITdirecting the petitioner to pay 20% of the amount assessed.in the assessment order is also not sustainable in law.Accordingly, he prayed for allowing this petition. 6. Shri Sanmathi argued opposing the petition. Hesubmitted that the appeal is pending before the appellate|authority and the PCIT has partly allowed the stayapplication and directed payment of 20% tax amount in six.easy installments. When the appeal is pending, a writ|petitionchallengingtheassessmentorder|Isnotmaintainable. _ 7. I have carefully considered rival submissions andperused the records. 8. It is not in dispute that the assessment order ispassed on 30[64]December 2019. M/s SanWe MEPContracting Private Limited have sent their reply to theIncome Tax Officer on 24[64]December 2019 and M/s CredalCalicut on 26[64]December 2019. As per Raghuraman’s Submission, all the contractors have submitted their reply.and petitioner is prepared to furnish them before the PCIT.The said two letters addressed to the Income Tax Officer|prima facieshow that the Assessing Authority has not taken.note them while passing the assessment order on |30[64]December2019.|TneASS@SSINGQAuthorityNasdisallowed the expenditure of Rs.7.8/7 crores, by calling theexpenditure as bogus. As noticed herein, the replies of.two contractors are on record and the same are admittedly|received prior to the date of assessment order. Therefore, |saddling on the assessee to pay taxes by disallowing theexpenditure without appreciating replies received under.Section 133(6) of the Income Tax Act will meet an assesseewith consequences of making the payment. It is always.expected of the Assessing Autnority to take note of and.examine the replies of the recipients of such expenditure.In the instant case, it appears the same is overlooked. | 9. Admittedly, an application was filed before the PCIT|seeking stay of assessment order. The same has also been.disposed of without hearing the petitioner. Generally, in all. cases, an application filed before any quasi judicial,authority is required to be heard before any orders arepassed and more so, in the case of this nature, where the)assessee becomes liable to pay Nuge taxes. The application |has been presented before the PCIT on 30[64]April 2020 and.the order has been passed on 17[64]July 2020. Tnough theapplication was pending for more than two months,petitioner has not been heard. 10. In the facts and circumstances of the case, the.submission of Shri Sanmathi, seeking to defend theRevenue by contending that petitioner has Deen snown|concession to pay 20% of the tax amount, that too in sixequal installments is too fragile to be countenanced. 11. Hence, the following: ORDER cases, an application filed before any quasi judicial,authority is required to be heard before any orders arepassed and more so, in the case of this nature, where the)assessee becomes liable to pay Nuge taxes. The application |has been presented before the PCIT on 30[64]April 2020 and.the order has been passed on 17[64]July 2020. Tnough theapplication was pending for more than two months,petitioner has not been heard. 10. In the facts and circumstances of the case, the.submission of Shri Sanmathi, seeking to defend theRevenue by contending that petitioner has Deen snown|concession to pay 20% of the tax amount, that too in sixequal installments is too fragile to be countenanced. 11. Hence, the following: ORDER Tne third respondent- PCIT snail grant an opportunityto petitioner to put forth its case so far as the application|for stay is concerned. The PCIT, subject to his)convenience, may either near the petitioner in person or. through the video conference. The petitioner shall appear. before the PCIT on 30[64]July 2020 and take _ furtherinstructions. The PCIT, after hearing the petitioner, shall|dispose of the said application within a period of four weeks—from the date of petitioner’s appearance.No coercivesteps to recover the tax amount shall be initiated till PCIT|passes his order. 12. The writ petition is accordinglydisposed of. No costs. Yn.| Sd/- JUDGE