Ita/502/2016 Of Pr. Commissioner Of Income Tax-5 v. M/S Karnataka State Industrial

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 7/ DAY OF JANUARY 2071PRESENT| THE HON’BLE MR. JUSTICE ALOK ARADHE AND| THE HON’‘’BLE MR. JUSTICE NATARAJ RANGASW A BETWEEN: LT.A. NCO.502 OF 2016 1.|PR. COMMISSIONER OF INCOME TAX-5. BMTC COMPLEX, KORMANGALA BANGALORE. 2.|THE INCOME TAX OFFICER WARD-3(1), BENGALURU. (BY SRI. JEEVAN J. NEERALGI, ADV.,) .., APPELLANTS~ AND* M/S. KARNATAKA STATE INDUSTRIAL|CO-OPERATIVE BANK LTD.,NO.11, BULL TEMPLE ROADBASAVANGUDI, BANGALORE-560004PAN: AAAAT 3503G. ~. RESPONDENT (BY SMT. R. PRATIBHA, ADV., FOR.SRI. S. PARTHASARATHI, ADV.,)_ THIS I.T.A. IS FILED UNDER SEC. J6O0-A OF INCOME TAXACT 1961, ARISING OUT OF ORDER DATED 14.01.2016 PASSEDIN ITA NO.788/BANG/2014 FOR THE ASSESSMENT YEAR 2009-10,PRAYING TQ: | (i) DECIDE THE FOREGOING QUESTION OF LAW AND/OR-SUCH OTHER QUESTIONS OF LAW AS MAY BE FORMULATED BYTHE HON BLE COURT AS DEEMED FIT. (ii) SET ASIDE THE APPELLATE ORDER DATED 14.01.2016.PASSED BY THE ITAT, ‘A’ BENCH, BENGALURU, AS SOUGHT FOR,IN|THE|RESPONDENT-ASSESSEES |CASE,|IN|APPEAL|PROCEEDINGS NO.ITA NO.788/BANG/2014.(iil) GRANT SUCH OTHER RELIEF AS DEEMED FIT, INTEREST|OF JUSTICE. THIS I.7T.A. COMING ON FOR’ HEARING, THIS’ DAY, |ALOK ARADHE J.,DELIVERED THE FOLLOWING: | JUDGMENT This appeal under Section 260A of the Income TaxAct, 1961 (hereinafter referred to as the Act for short)has been preferred by the revenue. The subject matter|of the appeal pertains to the Assessment year 2009-10.The appeal was admitted by a bench of this Court videorder dated 24.10.2017 on the following substantial|questions of law:| “Whether, OP)thefacts|andIn|circumstances of the case, the Tribunal isrignt in law In dismissing the appealpreferred by Revenue on the ground thatthe tax effect is less than 10 lakhs byrelying on the Board Circular No.21/2015even when as per para-4 of Board CircularNo.21/2015 stipulates that in cases wherereturned loss is reduced or assessed as income, the tax effect would includenotional tax on disputed additions. In thiscase, the assessing authority had madedisallowances with regard to provisions forwage reversion of Rs.9,84,29,827/- andprovision for audit fees of Rs.15,37,261/-and the notional tax effect on these twocontested issues is more than Rs.10 lakhsand as such appeals were maintainablebefore tribung!?". 2.|Facts leading to filing of this appeal brieflystated are that the assessee is a co-operative society.The assessee filed the return of Income for the!Assessment Year 2009-10. The Assessing Authority by.an order dated 30.12.2011 made disallowances relatingto provision of gold theft, wage reversion and audit fees.by holding that same are contingent in nature and/cannot be allowed as genuine expenditure. The.disallowances were made by the Assessing Officer on.the expenditure incurred by the assessee on theadvertisement, bonus as well as rent. The assessee filed an appeal before the Commissioner of Income Tax.(Appeals) who by an order dated 07.02.2014 partlyallowed the appeal. The revenue, thereupon filed anappeal before the Income Tax Appellate’ Tribunal(hereinafter referred to as the tribunal’ for short). Thetribunal by an order dated 14.01.2016 dismissed theappeal without adjudicating the same on merits on the|ground that the tax effect in the appeal is less than|Rs.10 Lakhs and relied on Circular No.21/2015. In the!aforesaid factual background, the assessee has filed this|appeal. 3.)Learned|counsel|for.tnerevenuewhileinviting the attention of tnis court to para 4 of theCircular No.21/2015 submitted that where the returned.loss is reduced or assessed as income, the tax effect.would include notional tax on disputed additions and theAssessing Authority had made disallowances with regardto the provisions of wage reversion to the extent ofRs.9,84,29,827/- aS well aS provision for audit frees of 3.)Learned|counsel|for.tnerevenuewhileinviting the attention of tnis court to para 4 of theCircular No.21/2015 submitted that where the returned.loss is reduced or assessed as income, the tax effect.would include notional tax on disputed additions and theAssessing Authority had made disallowances with regardto the provisions of wage reversion to the extent ofRs.9,84,29,827/- aS well aS provision for audit frees of Rs.15,37,261/- and the notional tax effect on aforesaid|contested issue was more than Rs.10 Lakhs and/therefore,|theappealbeforethetribunal WaSmaintainable and the same ought to have been|adjudicated on merits. The aforesaid aspect of the|matter could not be disputed by learned counsel for the.aSSe@SSAEC 4We have considered the submissions made.by learned counsel for the parties and have perused therecord. From perusal of para 4 of Circular No.21/2015, itis evident that where the returned loss is reduced or.assessed as income, tne tax effect would includenotional tax on disputed additions and the Assessing_Autnority nad made disallowances with regard to theProvisions|ofWagereversionCO theexTen.yofRs.9,84,29,827/- as well as provision for audit frees ofRs.15,37,261/- and the notional tax effect on aforesaid|contested issue was more tnan Rs.10 Lakns and/tnerefore,|tneappealpeforetnetribunal WaS maintainable and the same ought to have been|adjudicated on merits. For the aforementioned reasons,the substantial question of law is answered in favour ofthe revenue. However, the aforesaid aspect of thematter has not been appreciated by the tribunal. Theimpugned order of the tribunal is quashed and the|matter is remitted to the tribunal for decision afresh in.accordance with law. In the result, the appeal is disposed of. Sd/-JUDGE. Sd/-JUDGE.