Wp/2811/2023 Of M/S Flipkart India Private Limited v. The Assistant Commissioner Of Income Tax

Digitallysigned byNARASIMHAMURTHYVANAMALALocation:HIGHCOURT OFKARNATAKA IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 24 DAY OF FEBRUARY, 2023 BEFORE THE HON'BLE MR JUSTICE B M SHYAM PRASAD -WRIT PETITION NO. 2811 OF 2023 (TIT) C/W -WRIT PETITION NO. 2824 OF 2023 (TIT) BETWEEN: M/S FLIPKART INDIA PRIVATE LIMITED A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956, HAVING ITS REGISTERED OFFICE AT BUILDINGS ALYSSA, BEGONIA AND CLOVER, EMBASSY TECH VILLAGE, OUTER RING ROAD, DEVARABEESANAHALLI VILLAGE, VARTHUR HOBLI, BENGALURU 560103, THROUGH ITS AUTHORISED REPRESENTATIVE AND SENIOR MANAGER - TAXATION MR SAKET KEDIA. …PETITIONER (BY SRI. TARUN GULATI, SENIOR ADVOCATE A/W SRI. KISHORE KUNAL AND SRI. Y SANKEERTH VITTAL.,ADVOCATES) AND: VITTAL.,ADVOCATES) AND: 1. THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 1 (4) CENTRAL REVENUE BUILDING, QUEENS ROAD, INCOME TAX, CENTRAL CIRCLE 1 (4) CENTRAL REVENUE BUILDING, QUEENS ROAD, BENGALURU 560001. 2. THE COMMISSIONER OF INCOME TAX (APPEALS) INCOME TAX (APPEALS) ROOM NO 322, 3 FLOOR, CENTRAL REVENUE BUILDING, QUEENS ROAD, BENGALURU 560001. …RESPONDENTS (BY SRI.K.V. ARAVIND.,ADVOCATE A/W SRI. M. DILIP, ADVOCATE ) THIS WRIT PETITION IS FILED UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA PRAYING TO QUASHING THE IMPUGNED ORDER BEARING DIN NO. ITBA/APL/M/250/2022-23/1049211676(1) AND APPEAL NO. CIT (A)-11/BNG/10875/2015-16 DATED 30/01/2023 (ANNEXURE-A) PASSED BY THE R-2 FOR AY 2016-17; QUASHING THE IMPUGNED NOTICE BEARING DIN AND LETTER NO. ITBA/RCV/F/17/2022-23/1049297262(1) AND DATED 31/01/2023(ANNEXURE-B) PASSED BY THE R-1. IN WP NO. 2824/2023 BETWEEN: M/S FLIPKART INDIA PRIVATE LIMITED A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956, HAVING ITS REGISTERED OFFICE AT BUILDINGS ALYSSA, BEGONIA AND CLOVER, EMBASSY TECH VILLAGE, OUTER RING ROAD, DEVARABEESANAHALLI VILLAGE, VARTHUR HOBLI, BENGALURU 560103, THROUGH ITS AUTHORISED REPRESENTATIVE AND SENIOR MANAGER - TAXATION MR SAKET KEDIA …PETITIONER (BY SRI. TARUN GULATI, SENIOR ADVOCATE A/W SRI. KISHORE KUNAL AND SRI. Y SANKEERTH VITTAL.,ADVOCATES) AND: 1. THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 1 (4) CENTRAL REVENUE BUILDING, QUEENS ROAD, INCOME TAX, CENTRAL CIRCLE 1 (4) CENTRAL REVENUE BUILDING, QUEENS ROAD, BENGALURU 560001. 2. THE COMMISSIONER OF INCOME TAX (APPEALS) ROOM NO 322, 3 FLOOR, CENTRAL REVENUE BUILDING, QUEENS ROAD, BENGALURU 560001. INCOME TAX (APPEALS) ROOM NO 322, 3 FLOOR, CENTRAL REVENUE BUILDING, QUEENS ROAD, BENGALURU 560001. …RESPONDENTS (BY SRI.K.V. ARAVIND.,ADVOCATE A/W SRI. M. DILIP, ADVOCATE ) THIS WRIT PETITION IS FILED UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA PRAYING TO QUASHING THE IMPUGNED ORDER BEARING DIN NO. ITBA/APL/M/250/2022-23/1049211850(1) AND APPEAL NO. CIT(A)-11/BNG/10590/2017-18 DATED 30/01/2023 (ANNEXURE-A) PASSED BY THE R-2 FOR AY 2018-19; QUASHING THE IMPUGNED NOTICE BEARING DIN AND LETTER NO. ITBA/RCV/F/17/2022-23/1049297262(1) AND DATED 31/01/2023 (ANNEXURE-B) PASSED BY THE R-1. THESE PETITIONS, COMING ON FOR ORDERS, THIS DAY, THE COURT MADE THE FOLLOWING: ORDER The petitioner has filed these petitions impugning the second respondent’s Order dated 30.01.2023 dismissing its appeals in No. CIT(A)-11/BNG/10875/2015-16 and No. CIT(A)- 11/BNG/10590/2017-18 for the Assessment Years 2016– 2017 and 2018-19[1] and the consequential notices dated 31/01/2023 issued by the first respondent. 2.The second respondent by the impugned order dated 31.03.2023 has dismissed the petitioner’s appeal under Section 246A read with Section 250 of the Income Tax Act, 1961 [for short, ‘the IT Act’] against the first respondent’s Scrutiny Assessment Orders dated 30.09.2021, and the petitioner alleges it is not served with a copy of the THESE PETITIONS, COMING ON FOR ORDERS, THIS DAY, THE COURT MADE THE FOLLOWING: ORDER The petitioner has filed these petitions impugning the second respondent’s Order dated 30.01.2023 dismissing its appeals in No. CIT(A)-11/BNG/10875/2015-16 and No. CIT(A)- 11/BNG/10590/2017-18 for the Assessment Years 2016– 2017 and 2018-19[1] and the consequential notices dated 31/01/2023 issued by the first respondent. 2.The second respondent by the impugned order dated 31.03.2023 has dismissed the petitioner’s appeal under Section 246A read with Section 250 of the Income Tax Act, 1961 [for short, ‘the IT Act’] against the first respondent’s Scrutiny Assessment Orders dated 30.09.2021, and the petitioner alleges it is not served with a copy of the 1The Writ Petition in WP No. 2811/2023 is against the appeal in No. No. CIT(A)-11/BNG/10875/2015-16 and the writ petition in 2824/2023 is as against the appeal in No. CIT(A)-11/BNG/10590/2017-18. The corresponding impugned orders and consequential notices are produced as Annexure – A and B respectively.appeal in No. No. CIT(A)-11/BNG/10875/2015-16 and the writ petition in 2824/2023 is as against the appeal in No. CIT(A)-11/BNG/10590/2017-18. The corresponding impugned orders and consequential notices are produced as Annexure – A and B respectively. ‘Remand Report dated 06.01.2023[2]’but the impugned orders are based on the conclusions in the said Report. Sri. Tarun Gulati, the learned Senior Counsel for the petitioner, and Sri. K V Aravind, the learned standing Counsel for the respondents, are heard for final disposal of these two writ petitions, which amongst others, raise the question of lack of due opportunity to the petitioner 3.Sri. Tarun Gulati submits that the petitioner’s case before the second respondent is that the petitioner has the advantage of conclusion by the higher authorities on the question whether the losses declared by the petitioner could be treated as income, and as against this, the Revenue wanted to contend that because of certain circumstances, including the agreement that they purport to rely upon, the losses claimed must be disallowed and 2 The second respondent has called for this report under under Section 250[4] of the Income Tax Act, 1961 [for short, ‘IT Act’].under Section 250[4] of the Income Tax Act, 1961 [for short, ‘IT Act’]. attributed as income. However, the Commissioner, because this agreement was not part of the record, has called for report from the Assessing Officer under Section 250[4] of the IT Act, and when that report is made available by the AO, the second respondent has proceeded to dismiss the appeal based on the conclusion in this report overlooking the circumstances that would justify the petitioner’s case that the losses claimed ought to have been allowed. 4.Sri. Tarun Gulati emphasizes that the second respondent to extend a fair and reasonable opportunity to the petitioner, a touchstone even in a quasi-judicial proceeding, had to furnish a copy of the RemandReportwith due opportunity to the petitioner to respond and show why the petitioner must succeed notwithstanding such Report. He submits that there is failure on this score, and therefore, this Court must interfere under Article 226 of the Constitution of India notwithstanding the alternative remedy that would be available to the petitioner as against the impugned orders and the subsequent notice. 5.Sri. K V Aravind cannot dispute that after the second respondent called for a Report in terms of Section 250[4] of the IT Act, a copy thereof is not furnished to the petitioner and that this Report is made the basis, amongst others, for a decision in terms of the impugned order, but he submits that if this Court is inclined to interfere on the short ground of lack of opportunity , this Court must observe that not only should the petitioner be furnished with a copy of the Reportwith due opportunity to respond to the same, the Revenue would also be at liberty to place additional evidence on record with reciprocal liberty to the petitioner as well. 5.Sri. K V Aravind cannot dispute that after the second respondent called for a Report in terms of Section 250[4] of the IT Act, a copy thereof is not furnished to the petitioner and that this Report is made the basis, amongst others, for a decision in terms of the impugned order, but he submits that if this Court is inclined to interfere on the short ground of lack of opportunity , this Court must observe that not only should the petitioner be furnished with a copy of the Reportwith due opportunity to respond to the same, the Revenue would also be at liberty to place additional evidence on record with reciprocal liberty to the petitioner as well. 6.In rejoinder, Sri. Tarun Gulati submits that if additional material will have to be brought on record before the second respondent either by the petitioner or by the Revenue, it must be subject to relevant Rules and any observations by this Court at this stage, when the details of the additional material not available, it would fetter the petitioner’s rights and enable the Revenue to bring on record material despite the relevant Rules. 7.It is obvious from the rival submissions that the petitioner has not had the access to the Reportunder Section 250[4] of the IT Act and that this Report, amongst others, is the basis for the impugned order; in which event, the lack of fair and reasonable opportunity, as canvassed by Sri. Tarun Gulati, is undeniable. This Court is of the considered view that notwithstanding the alternative remedy, this Court must interfere on this limited ground with the caveat that there is no observation otherwise on the rival claims, and because this Court is interfering on this ground, the second respondent must be directed to furnish a copy of the Reportto the petitioner with due opportunity to complete its pleadings in that regard before the appeal is taken up on merits. 8.Further, it would be needless to observe that if either the petitioner or the Revenue propose to bring on record the additional material before the second respondent, they must necessarily have recourse to the relevant Rules and that request must be considered in the light of the requirements of the Rules and this Court cannot enable one way or the other. As such, the following: ORDER The petitions are allowed in part, and the impugned orders dated 30.01.2023 [Annexure-A] as also the demand Notices dated 31.01.2023 [Annexure-B] in both the petitions WP No. 2811 of 2023 are quashed restoring the subject appeal proceedings to the second respondent for a decision on merits after furnishing a copy of the Remand Report by the AO with due opportunity to the petitioner to respond to the same in writing. Sd/- JUDGE AN/-