Of Calcutta In The Case Ofhungerford Investment Trustlimited v. Income Tax Officer, F’ Ward, Reported Itnlaws (Cal)1982 4 30

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 1/ DAY OF OCTOBER, 2019. BEFORE. THE HON’BLE MRS .JUSTICE S.SUJATHA -W.P.No.34252/2018 (TIT) BETWEEN - SRI A.HARISH BHATS/O LATE A.CHANDRA BHAT,|AGED ABOUT 65 YEARS ©R/AT NO.28, 4 MAIN, |SHANKARNAGAR,MAHALAXMI LAYOUT,BANGALORE-560 O96, . PETITIONER. (BY SRI CHYTHANYA K.K., ADV.) AND :/ THE ASSISTANT COMMISSIONER OFINCOME TAX, TDS CIRCLE 1 (1)" FLOOR, NO.59, HMI BHAVAN,BELLARY ROAD, BENGALURU-560 O95. RESPONDENT (BY SRI JEEVAN J. NEERALGI, ADV.) THIS WRIT PETITION IS FILED UNDER ARTICLES 220)AND 22/7 OF THE CONSTITUTION OF INDIA PRAYING TO QUASHAS FAR AS THE PETITIONER IS CONCERNED, IMPUGNED ORDER|DATED 18.06.2018 IN RELATION TO ENCLOSED IN ANNEXURE-A.| THIS PETITION COMING ON FOR PRELIMINARY HEARING|IN ‘B’ GROUPfTHIS DAY, THE COURT MADE THE FOLLOWING: -9.- ORDER Tne.petitionernas|assallecdtneorder|dated18.06.2018 of the respondent whereby the petitioner has|been treated as a Principal Officer of tne Company-_|M/s Kingfisher Airlines Limited for the financial year 2009-10 to 2012-13 under Section 2(35) of the Income Tax Act,1961 (Act’ for short). The said action of the respondent|nas been challenged mainly on the ground that the)objections submitted by the petitioner to the notice issued, nas not been duly considered. 2).Learned counsel Sri. Chythanya K.K. for thepetitioner submitted that treating tne petitioner as a‘Principal Officer’ would result in serious consequences. Tocome within the ambit of Key Management Personnel’ as)Stated py the respondent, the petitioner is neitner the)Managing Director nor the Chief Executive Officer/the|Whole time Director/the Company Secretary/the ChiefFinancial Officer/anywayconnectedwitntneManagement/Administration of the Company. -3- ‘3.Learned counsel submits tnat these aspectsthough brougnt to the notice of the respondent Authority,|nas not been properly appreciated and a Dianket order nas)been passed treating the petitioner as a ‘Principal Officer’|without any substantial material, hence seeks for settingaside the order impugned. 4Learnedcounse|lSri. JeevanJ.Neeralgiappearing for the revenue justifying the impugned order.submits that the petitioner was the Treasurer of theU.B.Group of companies during the relevant financial years|and hence he was treated as the ‘Principal Officer’ underSection 2(35) of tne Act. Neither a personal nearing nor.an order is necessary to treat the person as a PrincipalOfficer under Section 2(35) of the Act. It is suffice if a.notice of the intention of the Assessing Officer of treatingany person as a Principal Officer is issued. Accordingly,seeks for dismissal of the writ petition. 5.Learned counsel for the revenue has placedreliance on the judgment/order of the Hon’ble High Court -4- of Calcutta in the case ofHungerford Investment TrustLimited Vs. Income Tax Officer, F’ Ward, reported itnLaws (Cal)1982 4 30 6.Having considered the rival submissions of thelearned counsel for the parties and perusing the materialon record, the order impugned deserves to be set aside for.the reason that a Principal Officer, as contemplated underSection 2(35) of the Act, used with reference to a local.authority or a company or any other public body or any.association of persons or any body of individuals, means: &6(tne secretary, treasurer, Manager or agentof the authority, company, association orbody, orof the authority, company, association orbody, or &<(any person connected with the management|Or administration of the local authority,|company, association or body upon whom)the Assessing Officer has served a notice ofhis intention of treating him as the principalofficer thereotr;Or administration of the local authority,|company, association or body upon whom)the Assessing Officer has served a notice ofhis intention of treating him as the principalofficer thereotr; -5- &6(tne secretary, treasurer, Manager or agentof the authority, company, association orbody, orof the authority, company, association orbody, or &<(any person connected with the management|Or administration of the local authority,|company, association or body upon whom)the Assessing Officer has served a notice ofhis intention of treating him as the principalofficer thereotr;Or administration of the local authority,|company, association or body upon whom)the Assessing Officer has served a notice ofhis intention of treating him as the principalofficer thereotr; -5- J.It is clear tnat to treat any person as aPrincipal Officer, such person should be connected with themanagement.Or.administrationOf|tnelocalauthority/companyOFTassociationOFTbody.Sucn|connection with the management or administration is the.basis for treating any person as a Principal Officer. Such)connection nas to be establisned or to be supported with.substantial material to decide the connection of any person.with the management or administration. Without disclosing the basis, no person can be treated as a ‘Principal Officer’of the company recognising him as the Key ManagementPersonnel of the company. The details of such information.on the basis of whicn the Key Management Personne! tag.is made, has to be explicitly expressed in the notice of theintention of treating any person as a Principal Officer by|the Assessing Officer. Neither in the show cause notice norin the order impugned, such connection of the petitioner|with the management or administration of the companyM/s Kingfisher Airlines Limited is establisned. Tne phrase‘Key Management Personnel’ of the company has a wide -6- connotation and the same Nas to be supported with certain.material unless such connection is established, no noticeserved on the petitioner would empower the respondent.Authority to treat the petitioner as a Principal Officer. 8.The judgment relied on by the learned counselfor the Revenue was rendered in a different context,considering the notice issued under Section 148 of the Act,whether was properly served as required under Section.282 of the Act, as the appellant therein contended that hecould not be treated as a Principal Officer in terms of.Section 2(35) of the Act. At the first instance, the learnedJudge had negated the contention of the appellant and.held that it could not be said that the finding that theappellant No.2 was connected with the management and.administration of the appellant No.1 was based on nomaterial or was wholly arbitrary. On further considerationby the division bench, it was observed that before treatinga person concerned as a Principal Officer under Section © -~Tf- 2(35) of the Act by the ITO, it is not necessary todetermine that question upon nearing the submission or.representation of the person concerned. Q.|In the present case, the question inasmuch asneither service of notice nor hearing of the petitionerbefore treating the petitioner as a Principal Officer is)involved. The fulcrum of dispute revolves around theaspect wnethner the petitioner is the person connected witnthe management or administration of the company. SuchTinding has to be supported py substantial material and.has to be reflected in the notice issued under Section.2(35) of the Act to treat a person as a Principal Officer of|the company which will have wider consequences. Tne.said aspect is lacking in tne present order impugned.Merely on surmises and conjectures, no person shall betreated as a Principal Officer. 10.|Writ petition is allowed. The impugned orderdated 18.06.2018 at Annexure —- A is quasned. It Is ������� 4//98/77�13�3<7/5F/�1.61�82</51=�27�5/7/5F/9�13�1./��/0651?/41�13�053>//9�24�6>>35964>/�;21.�86;������ �F5-� �������� ��