The Hon’ble Mr. Justice v. Srishananda

IN THE HIGH COURT OF KARNATAKA AT BENGALURU|DATED THIS THE 5 DAY OF FEBRUARY, 2021 PRESENT THE HON’BLE MR. JUSTICE SATISH CHANDRA SHARMA| THE HON’BLE MR. JUSTICE V. SRISHANANDA| BETWEEN I.T.A. NO. 1/2018 M/S SIDDHIVINAYAKA PROPERTY DEVELOPERSREP, BY ITS MANAGING PARTNER |SRI.P.DAYANANDA PAT10/1, LAKSHMINARAYANA COMPLEXPALACE ROAD, BENGALURU - 560 052PAN: ABJFS 2900 B56005)2APPELLANT. (BY SRI A.SHANKAR, SR.ADVOCATE FORSRI.M.LAVA, ADVOCATE) AND THE DEPUTY COMMISSIONER OFINCOME-TAX,CENTRAL CIRCLE-1(1)C.R.BUILDING,QUEENS ROAD,BENGALURU - 560001. RESPONDENT (BY SRI E I SANMATHI, ADVOCATE) © THIS I.T.A. IS FILED UNDER SEC. 260-A OF INCOME.TAX ACT 1961, ARISING OUT OF ORDER PASSED BY THEITAT,.BENGALURU|IN|TTA.NO.165/BANG/2012,|C.O.NO.79/BANG/2012,.TTA.NO.20/7/BANG/2012DATED| 20.04.7017|AND|MISCELLANEOUSPETITIONINMPNO.213/BANG/2013CINTTA.207/BANG/2012) DATED21.11.2017 FOR THE ASSESSMENT YEAR JOO6-O0O7 PRAYINTO (A) FORMULATE THE SUBSTANTIAL QUESTIONS OF LAWSTATED ABOVE AND ANSWER THE SAME IN FAVOUR OF THEAPPELLANT. (B) TO ALLOW THE INCOME TAX APPEAL ANDSET ASIDE THE FINDINGS THEREIN TO THE EXTENTAGAINST THE APPELLANT IN THE ORDER PASSED BY THEINCOME TAX APPELLATE TRIBUNAL BENGALURU ‘A’ BENCHIN ITA NO.165/BANG/2012, CO NO./79/BANG/2012, ITANO.207/BANG/2012DATED|28.04.2017ANDMISCELLANEOUS PETITION IN MP NO.213/BANG/2013 (INLIA.207/BANG/2012).DATED21.11.2017FOR.THE.ASSESSMENT YEAR 2006/2007, (VIDE ANNEXURE-Al ANDANNEXURE-A2Z RESPECTIVELY. THIS I.7T.A. COMING ON FOR ORDERS, THIS DAY, |V. SRISHANANDA. J., DELIVERED THE FOLLOWING: JUDGMENT This appeal is filed u/s.260-A of the Income Tax Act,|1961 |hereinafter referred to as Act for short], by theassessee - M/s.Siddnhivinayaka Property Developers, Vs. TneDeputy Commissioner of Income Tax] with the followingsubstantial questions of law. “1. Whether the Tribunal was Justified in law in.aenying the allowance of bad debts ofRs.2,00,00,000/- when all the conditions for|allowance of the same have been complied|witn for the impugned assessment year on|the facts and circumstances of the case.aenying the allowance of bad debts ofRs.2,00,00,000/- when all the conditions for|allowance of the same have been complied|witn for the impugned assessment year on|the facts and circumstances of the case. >.|Whether the Tribunal was Justified in law in.not considering the latest return of incomealong with the financial statements in which|the pad debt has been written off and erredin not granting deduction for bad debts under|Section36(1)(vip)Of|the|Actand|conseguently passed a perverse order on thefacts and circumstance of the case.not considering the latest return of incomealong with the financial statements in which|the pad debt has been written off and erredin not granting deduction for bad debts under|Section36(1)(vip)Of|the|Actand|conseguently passed a perverse order on thefacts and circumstance of the case. 3.|Whether the Tribunal was Justified in law in|noiding that tne assessment order passedunder section 153 C without serving the|notice, and furtner without complying withthe mandatory conditions for assumption ofjurisdictionare|onlyacade)niiand|conseguently passed a perverse order on thefacts and circumstance of the case.noiding that tne assessment order passedunder section 153 C without serving the|notice, and furtner without complying withthe mandatory conditions for assumption ofjurisdictionare|onlyacade)niiand|conseguently passed a perverse order on thefacts and circumstance of the case. 4.|Whether the Tribunal failed to appreciate tnatthe appellant had not filed any return ofincome pursuant to notice alleged issued|under|section|T535COf|the|Actand.consequently all proceedings are perverseand bad in law on the facts and circumstanceof the case.the appellant had not filed any return ofincome pursuant to notice alleged issued|under|section|T535COf|the|Actand.consequently all proceedings are perverseand bad in law on the facts and circumstanceof the case. 4.|Whether the Tribunal failed to appreciate tnatthe appellant had not filed any return ofincome pursuant to notice alleged issued|under|section|T535COf|the|Actand.consequently all proceedings are perverseand bad in law on the facts and circumstanceof the case.the appellant had not filed any return ofincome pursuant to notice alleged issued|under|section|T535COf|the|Actand.consequently all proceedings are perverseand bad in law on the facts and circumstanceof the case. 5.|Whether the Tribunal was Justified in law in|not holding that the mandatory conditions toassume Jurisdiction under section 148 of the|[IncomeTaxAct,didnoc|ex/stand|not holding that the mandatory conditions toassume Jurisdiction under section 148 of the|[IncomeTaxAct,didnoc|ex/stand| conseguently all subsequent proceedings are|vitiated and bad in law on the facts andcircumstance of the case. 6. Whether the Tribunal was Justified in law in.not allowing the appellant MiscellaneousPetition filed under section 254(2) of the Act|and further passed an order on depreciationWNICHNWasnoc.theISSsueat|allandconsequently passed a perverse order on thefacts and circumstance of case. not allowing the appellant MiscellaneousPetition filed under section 254(2) of the Act|and further passed an order on depreciationWNICHNWasnoc.theISSsueat|allandconsequently passed a perverse order on thefacts and circumstance of case. J.|Whether the Tribunal was Justified in law in.not adjudicating the issue of levy of interestunder section 234A, 234B and 234C of theAct, 1961 on the facts and circumstance ofthe case. |not adjudicating the issue of levy of interestunder section 234A, 234B and 234C of theAct, 1961 on the facts and circumstance ofthe case. | 2DBrief facts which are necessary for disposal ofthis appeal are as under: The appellant is a registered partnership firm carrying|On business in real estate and developing including sale ofimmovable property. Tne appellant nas filed its return ofincome for the assessment year 2006-07 on 15.04.2008declaring nil income. However, a revised return was filed on31.03.2009 deciaring total income as Rs.1,41,37,910/-,claiming Rs.2,00,00,000/- as bad debts receivable from Sri Byregowda. TInereafter, it is contended tnat the autnoritiesconducted search as contemplated under Section 132 of theAct on 26.07.2007 on one Srinivasa Raju and others in orderto discover receipt if any by Mr. Dayanand Pai, one of thepartners of the firm in favour of Sri Byregowda. TneAssessing Officer disallowed the claim by an Order dated29.12.2003 purported to be under Section 143(3) read witnSection 153C of the Act. An appeal was preferred to theCommissioner of Income Tax who dismissed the appeal inlimine, in ITA No.157/DCIT, CC-1(1)/CIT(A)VI/2009-10 dated30.09.2010. Aggrieved by the said Order, an appeal wasalso preferred before the Tribunal and by an order dated28.09.2011 Tribunal remitted back the matter to theCommissioner of Income Tax.| 300After remand, the Commissioner of Income Tax.partly allowed the appeal with respect to the disallowance ofbad depts and dismissed the appeal with respect to the levyof interest under Section 234A, 234B and 234C of the Act.Again, the assessee approached tne Tribunal by raising legalgrounds regarding the validity of the assessment under Section 153C of the Act. The Revenue also preferred anappeal against the order of the Commissioner of Income Tax,wherein the assessee filed cross objections. The Tribunalconsidered both the appeals and by a common order dated28.04.2017 allowing the appeal of tne Revenue anddismissed the appeal of the assessee and its crossopjections. Thereafter, the appellant filed a Misc. Petitionunder Section 254(2) of the Income Tax Act which was alsodismissed by the Tribunal on 21.11.2017. It is that Orderwnich is under challenge in this appeal with the abovereferred substantial questions of law. Section 153C of the Act. The Revenue also preferred anappeal against the order of the Commissioner of Income Tax,wherein the assessee filed cross objections. The Tribunalconsidered both the appeals and by a common order dated28.04.2017 allowing the appeal of tne Revenue anddismissed the appeal of the assessee and its crossopjections. Thereafter, the appellant filed a Misc. Petitionunder Section 254(2) of the Income Tax Act which was alsodismissed by the Tribunal on 21.11.2017. It is that Orderwnich is under challenge in this appeal with the abovereferred substantial questions of law. 4After hearing the parties and on perusal of the.Order of the Tribunal, it is noticed that though the Misc.application was filed under Section 254E of the Act seekingreview of the order passed by the Tribunal on 28.04.2017,pointing out factual errors which have crept in the order, theTribunal dealt with the Misc. petition stating that the matterpertains to depreciation. Tne grounds urged in the Misc.Petition are as under: ‘2, The Ld. AR for the assessee has drawn ourattention to para 3 of the MP and page 12 of thepaper book. It was submitted that Tribunal Naderred in disallowing the depreciation claimed by assessee in the revised return of income and|therefore rectification of the error was required.attention to para 3 of the MP and page 12 of thepaper book. It was submitted that Tribunal Naderred in disallowing the depreciation claimed by assessee in the revised return of income and|therefore rectification of the error was required. 3.|On the other nana, the La. DR submitted that|the Tribunal after considering the revised return|of income and the returns of income filed for|the|subsequent|assessmentYEd’Ishasadisallowed tne depreciation and nence_ thTripunal was rignt in its decision. the Tribunal after considering the revised return|of income and the returns of income filed for|the|subsequent|assessmentYEd’Ishasadisallowed tne depreciation and nence_ thTripunal was rignt in its decision. 4.|We have heard the rival contentions and|perused the order passed by tne_ Tribunal,impugned in tne present miscelianeous petition. |After going througn the order, the Tribunal|wnile passing tne order on merit nas come to|the conclusion that once the assessee has not|claimed the depreciation in the return of incomefor tne subsequent year i.e. 2007-08, the|assessee could not be permitted to claim|depreciation in the revised return of income andrecast the P & L account and books of account.It was further opined by tne Tribunal while|passing the order on merit tnat the depreciationwas required to be claimed in the books of|account and once the books of account are|final, the same cannot be tinkled witn. In the present case, on account of the above|reasoning tnere is no error in the decision of tnetripunal, accordingly, there is no merit in tne|miscellaneous application filed by the assessee. 5.In the result, the miscellaneous petition filed by the assessee /S Gismissed. | 5 |As could be seen from the above, there was no.issue of depreciation involved in the Misc. Petition filed by theassessee and the Tribunal nas stated tnat assessee has notclaimed depreciation whicn is nobodys case. Tne aboveOrder prima facie establisnes that there is improperapplication of judicial mind in respect of the matters in issueand therefore, needs to be set aside and matter requires tobe remanded to the Tribunal for fresh consideration inaccordance with law. 6.|Accordingly, following Order is passed: J.Tne Appeal is allowed. The Order passed py tneIncome Tax Appellate Tribunal, Bengaluru “A Bencn in ITANo.165/Bang/2012,CO|No.79/Bang/2012,LTA|No.20/7/Bang/2012 dated 28.04.2017 and Misc. Petition in MP No.213/Bang/2013 [in ITA No.207/Bang/2012| dated21.11.2017 for the assessment year 2006-07 is hereby setaside. The matter is remitted back to the Tribunal for freshconsideration in accordance witn law. 6.|Accordingly, following Order is passed: J.Tne Appeal is allowed. The Order passed py tneIncome Tax Appellate Tribunal, Bengaluru “A Bencn in ITANo.165/Bang/2012,CO|No.79/Bang/2012,LTA|No.20/7/Bang/2012 dated 28.04.2017 and Misc. Petition in MP No.213/Bang/2013 [in ITA No.207/Bang/2012| dated21.11.2017 for the assessment year 2006-07 is hereby setaside. The matter is remitted back to the Tribunal for freshconsideration in accordance witn law. 8.Tne parties snall appear before the TribDunal on22.02.2021 and are at liberty to canvass all such pointsavailable to them and the Tribunal is directed to dispose oftne Misc. Petition filed by the assessee in accordance withlaw. Sd/-JUDGE| Sd/-| JUDGE|