Ita/358/2018 Of The Principal Commissioner Of Income Tax v. M/S Gmr Energy Ltd

IN THE HIGH COURT OF KARNATAKA AT BENGALURUON THE 8 DAY OF JANUARY, 2019 BEFORE. THE HON BLE MR. JUSTICE RAVI MALIMATH| AND THE HON'’BLE MR. JUSTICE MOHAMMAD NAW A INCOME TAX APPEAL NO.358 OF 2701 CONNECTED WITH INCOME TAX APPEAL NO.359 OF 2018 AND INCOME TAX APPEAL NO.360 OF 2701 IN INCOME TAX APPEAL NO.358 OF 2018: BETWEEN 1.THE PRINCIPAL COMMISSIONER OF INCOME-TAX,CENTRAL CIRCLE,CENTRAL CIRCLE, C.R. BUILDING,QUEEN’S ROAD,BENGALURU-560 OO1.BENGALURU-560 OO1. 2.THE DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-2(2), C.R. BUILDING,| QUEENS ROAD, BENGALURU-560 OOL. ... APPELLANTS (BY SRI. K.V. ARAVIND, ADVOCATE) ? AND" M/S. GMR ENERGY LIMITED,25/1, SKIP HOUSE,MUSEUM ROAD,BENGALURU-560 O25.PAN: . ... RESPONDENT (BY SRI. BALARAM R. RAO, ADVOCATE). THIS INCOME TAX APPEAL IS. FILED UNDERSECTION 260-A OF INCOME TAX ACT, 1961, PRAYINGTO SET ASIDE THE ORDERS PASSED BY THE INCOME-TAXAPPELLAIETRIBUNAL,BENGALURU IN|LIANO.1917/BANG/2016.DATED21.11.7017|ANDCONFIRMTHE|ORDER.OF|THE|APPELLATECOMMISSIONER CONFIRMING THE ORDER PASSED BYTHE|DEPUTYCOMMISSIONEROF|INCOME|TAX,CENTRAL CIRCLE-2(2), BENGALURU. IN INCOME TAX APPEAL NO.359 OF 2018: BETWEEN: 1.THE PRINCIPAL COMMISSIONEROF INCOME TAX, CENTRAL CIRLCE,C.R. BUILDING, QUEENS ROAD,BENGALURU-560 OO1.OF INCOME TAX, CENTRAL CIRLCE,C.R. BUILDING, QUEENS ROAD,BENGALURU-560 OO1. 2.THE DEPUTY COMMISSIONER OF INCOME-TAX,CENTRAL CIRCLE-2(2),C.R. BUILDING,QUEENS ROAD,BENGALURU-560 OOL... APPELLANTS|CENTRAL CIRCLE-2(2),C.R. BUILDING,QUEENS ROAD,BENGALURU-560 OOL... APPELLANTS| .. APPELLANTS| (BY SRI. K.V. ARAVIND, ADVOCATE) 3 AND" 1.M/S. GMR ENERGY LIMITED,25/1, SKIP HOUSE,25/1, SKIP HOUSE, MUSEUM ROAD, BENGALURU-560 O25.PAN: .PAN: . ... RESPONDENT (BY SRI. BALARAM R. RAO, ADVOCATE). THIS INCOME TAX APPEAL IS. FILED UNDERSECTION 260-A OF INCOME TAX ACT, 1961, PRAYINGTO SET ASIDE THE ORDERS PASSED BY THE INCOMETAX APPELLATE TRIBUNAL, BENGALURU IN INCOMETAX APPEAL NO.1918/BANG/2016 DATED 21.11.2017AND CONFIRM THE ORDER OF THE APPELLATECOMMISSIONER CONFIRMING THE ORDER PASSED BYTHE|DEPUTYCOMMISSIONEROF|INCOME|TAX,CENTRAL CIRCLE-2(2), BENGALURU. IN INCOME TAX APPEAL NO.360 OF 2018: BETWEEN: 1.CENTRAL CIRLCE, C.R. BUILDING),QUEENS ROAD,BENGALURU-560 OO1.CENTRAL CIRLCE, C.R. BUILDING),QUEENS ROAD,BENGALURU-560 OO1. THE PRINCIPAL COMMISSIONER OF INCOME TAX, 2).THE ASSISTANT COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-2(2),C.R. BUILDING, QUEENS ROAD,TAX, CENTRAL CIRCLE-2(2),C.R. BUILDING, QUEENS ROAD, BENGALURU-560 OO1. ...APPELLANTS (BY SRI. K.V. ARAVIND, ADVOCATE) 4 AND" M/S. GMR ENERGY LIMITED,25/1, SKIP HOUSE,MUSEUM ROAD,BENGALURU-560 O25.PAN: . ... RESPONDENT (BY SRI. BALARAM R. RAO, ADVOCATE). THIS INCOME TAX APPEAL IS. FILED UNDERSECTION 260-A OF INCOME TAX ACT, 1961, PRAYINGTO SET ASIDE THE ORDERS PASSED BY THE INCOME-TAX APPELLATE TRIBUNAL, BENGALURU IN INCOMETAX APPEAL NO.1987/BANG/2016 DATED 21.11.2017,VIDE ANNEXURE-C, CONFIRMING THE ORDER OF THEAPPELLATE COMMISSIONER AND CONFIRM THE ORDERPASSED BY THE DEPUTY COMMISSIONER OF [INCOMETAX, CENTRAL CIRCLE-2(2), BENGALURU. OK AK A THESE INCOME TAX APPEALS COMING ON FOR!ADMISSION,THIS|DAY|RAV]MALIMATH,.J.|DELIVERED THE FOLLOWING: JUDGMENT Tne assessee iS a Company engaged in the.business of generation of power. The Company filed its return|of|income.declaringa tota]income.Of|Rs.28,81,94,/6/7/- for the assessment year 2007-08 in|ITANo. 358Of|2018.and360.of|2018,Rs.16,40,64,897/- for assessment year 2008-09 in ITA|No.359 of 2018 and tax was computed on the book|profit of Rs.125,72,44,353/- in all the appeals. OK AK A THESE INCOME TAX APPEALS COMING ON FOR!ADMISSION,THIS|DAY|RAV]MALIMATH,.J.|DELIVERED THE FOLLOWING: JUDGMENT Tne assessee iS a Company engaged in the.business of generation of power. The Company filed its return|of|income.declaringa tota]income.Of|Rs.28,81,94,/6/7/- for the assessment year 2007-08 in|ITANo. 358Of|2018.and360.of|2018,Rs.16,40,64,897/- for assessment year 2008-09 in ITA|No.359 of 2018 and tax was computed on the book|profit of Rs.125,72,44,353/- in all the appeals. 2.A searcn was conducted under Section 1327of Income Tax Act on the premises of the assessee. |A notice under Section 153A of the Act was issued andserved on the assessee to file the return of Income forthe above assessment years. In response to the.notices, the assessee requested tnat the original returnfiled by the assessee may be treated as the return of.income filed in response to the notice. Thereafter,notices under Section 143(2) and 142 were issued andserved on tne assessee. ‘3.Aggrieved by the same, an appeal waspreferred before the Commissioner of Income Tax. The.appeal was partly allowed. Questioning the same,appeals were preferred before the Tribunal. TheTribunal considered the appeals on technical aspects asto whether the invocation of the provisions of Section153A of tne Act Is valid or not in the facts andcircumstances of the case. While considering the sameand while relying on the judgment of this Court in thecase of COMMISSIONER OF INCOME TAX V/S. LANCYCONSTRUCTIONS,reported in383)TTR168|(KARNATAKA), the Tribunal remanded the matter tothe.Commissioner.Of|Income.Taxforfreshconsideration in the lignt of the judgment in Lancy’scase after examining the factual aspects of the matteras to whetner any incriminating materials were foundduring the course of search. Questioning the same, thepresent appeals are filed. Tne appeals were admitted toconsider the following two substantial questions of law: “yoWhether on the facts and In the|circumstances of the case and in law the|Tribunal was correct in ftaw in nolding thatincriminating material is necessary condition|for proceedings under Section 153A of the|Act by following the Judgment of this Hon'bleCourtIn.CaSeCof.CIT|V/s.LancyConstructions” ieWhether on the facts and In the|circumstances of the case, the Tribunal Is right in remitting back the matter to CIT(A)|for fresh decision by considering the the|judgment of this Hon’ble High Court in the|case of CIT V/s. Lancy Constructions (383|ITR 168) and with a specific direction toverify the finding of incriminating material|auring the course of search wnicn goes to tnebasic question of assumption of jurisdiction|Under Section 153A of the Act”? 4Heard the learned counsel for the appellant and perused the material on record. 8 5.Learned counsel for the Revenue contendstnat the TridDunal has committed an error in relying onthe judgment in Lancy’s case. He contends that theHon’ble Court tn the case of CANARA HOUSINGDEVELOPMENT COMPANY V/s. DCIT reported in 2/74CTR 122 (KARNATAKA) has laid down the law withregard to the same. We have considered the said.judgment. At para-10 of the said Order, it is narratedas follows: “Para 10 -..... The condition precedent for application of Section 153A is thereShould be a search under Section 137.Initiation of proceedings under Section 153Ais not dependent on any undisclosed incomebeing uneartned auring sucn searcn.”~ 6.Therefore, the position of law is quite clear.The Tribunal was of the view that the latest judgmentin the case of COMMISSIONER OF INCOME TAX V/S.LANCYCONSTRUCTIONSreported In.(2016)66| taxmann.com 264 (KARNATAKA) was valid since it isthe latest judgment. We have considered tne saidjudgment. Therein the Hon’ble High Court held in |para 6, as follows: “Para 10 -..... The condition precedent for application of Section 153A is thereShould be a search under Section 137.Initiation of proceedings under Section 153Ais not dependent on any undisclosed incomebeing uneartned auring sucn searcn.”~ 6.Therefore, the position of law is quite clear.The Tribunal was of the view that the latest judgmentin the case of COMMISSIONER OF INCOME TAX V/S.LANCYCONSTRUCTIONSreported In.(2016)66| taxmann.com 264 (KARNATAKA) was valid since it isthe latest judgment. We have considered tne saidjudgment. Therein the Hon’ble High Court held in |para 6, as follows: "Para 6 —-..... Merely because a searcIs conducted|in the premises of theassessee, would not entitle the Revenue to.initiate the process of reassessment, forWHICH)there1Sadseparateproceaqureprescribed in the statute. It is only when theconditions prescribed for reassessment arefulfilled that a concluded assessment can be.reopened.” J.On considering the same, we are of theconsidered view that the reasons assigned by theTribunal are erroneous. Firstly, the judgment reportedin CANARA HOUSING DEVELOPMENT COMPANY was notevenconsideredinLancyConstruction’sCaSe.,Seconding, Lancy’s case was dismissed at the stage ofadmission witnout even a notice to tne Assessee. Tne High Court in the case of LANCY CONSTRUCTIONS, wasof the view that no substantial question of law wouldarise for consideration in the appeal. Therefore, in theabsence of any _ substantial question of law, thquestionOf|admitting»theappealwould|beinappropriate. A judgment of the court becomesbinding only when a question arises for consideration,is contested by both sides and thereafter findings arerecorded by the Court. None of these conditions havebeen fulfilled. There is no notice issued to the otherside. No question of law has been determined. Theappeal was dismissed, as being bereft of anysubstantial question of law. Therefore, the judgmentreported in Lancy’s case cannot be said to be applicablein law or that it is binding for any reason whatsoever.The reliance placed by the Tribunal on the judgment inLancys case is misplaced. The judgment in Lancy’scase does not render the true position in law. It cannotbe considered as a precedent. 117 8.Under|thesecircumstances,whenthe.Tribunal has relied on the judgment in Lancy’s case, weare of the view that a grave error has been committed.Therefore, the only issue that Lancy’s case has been.wrongly followed, the impugned order requires to beset aside. Since no other issues were raised before theTribunal, we deem it just and necessary that thematter be remanded to the Tribunal for afreshconsideration in accordance with law based on theaforesaid observations. The Tribunal is entitled toconsider the appropriate law on the issue, includingother judgments not considered. — QO.Accordingly, the appeals are allowed. Theorders dated 21.11.2017, passed by tne Income Tax.Appellate Tribunal, Bengaluru in Income Tax AppealNos.1917 of 2016, 1918 of 2016 and 1987 of 2016 are| 42=(345<2���12�73==2A4�3A2�A2739<2<�=6�=12��A5>?93C� @6A�@A241�D6945<2A3=569�59�3DD6A<39D2�B5=1�C3B��� �����CC�D69=29=5694�3A2�F28=�6829����<-(���<-(����������������������������9D�