Wp/4832/2023 Of M/S Welcome Foods Limited v. The Principal Commissioner Of Income Tax (Central), Bengaluru

Digitally signedby NARASIMHAMURTHYVANAMALALocation: HIGHCOURT OFKARNATAKA IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 15 DAY OF MARCH,2023 BEFORE THE HON'BLE MR JUSTICE B M SHYAM PRASAD WRIT PETITION NO.4832 OF 2023(T-IT) BETWEEN: M/S WELCOME FOODS LIMITED REPRESENTED BY ITS DIRECTOR SMT HEMAMALINI W/O SRI ANAND AGED ABOUT 53 YEARS GROUND FLOOR NO.249 14 CROSS STREET, 2 BLCOK R T NAGAR, BANGALORE-560032 COMMUNICATION ADDRESS-NO.2/1, NORTH CRESCENT ROAD T NAGAR, CHENNAI-600017. …PETITIONER (BY SRI. ANNAMALAI S.,ADVOCATE) AND: 1. THE PRINCIPAL COMMISSIONER OF INCOME TAX (CENTRAL), BENGALURU CENTRAL REVENUE BUILDING QUEENS ROAD BENGALURU-560001. CENTRAL REVENUE BUILDING QUEENS ROAD BENGALURU-560001. 2. THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1(2) BEGNALURU, CENTRAL REVENUE BUILDING QUEENS ROAD, BENGALURU-560001. INCOME TAX, CENTRAL CIRCLE-1(2) BEGNALURU, CENTRAL REVENUE BUILDING QUEENS ROAD, BENGALURU-560001. …RESPONDENTS (BY SRI.SUSHAL TIWARI., ADVOCATE) THIS WRIT PETITION IS FILED UNDER ARTICLE 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE ORDER PASSED BY THE R-1 VIDE DIN NO.ITBA/COM/M/17/2022-23/1049587175(1) DATED 08.02.2023 HEREIN ENCLOSED AND MARKED AS ANNX-A; DIRECT THE R-1 TO APPROXIMATELY MODIFY THE ORDER PASSED BY THE R-1 VIDE DIN NO.ITBA/COM/M/17/2022-23/1049587175(1) DATED 08.02.2023 HEREIN ENCLOSED AND MARKED AS ANNX-A. THIS PETITION, COMING ON FOR PRELIMINARY HEARING, THIS DAY, THE COURT MADE THE FOLLOWING: ORDER The petitioner is aggrieved by the first respondent’s order dated 08.02.2023 [Annexure-A] under Section 153C read with Section 144 read with Section 153D of the Income Tax Act, 1961 (for short, ‘the IT Act’), and the first respondent by this impugned order has disposed of the petitioner’s appeal as against the terms on which the interim order is granted by the Assessing Officer vide order dated 17.10.2022. If the Assessing Officer has granted stay of demand for the disputed amount of Rs.1,90,78,877/- on the condition that 20% of this amount shall be paid in six monthly installments from the month of October 2022, the first respondent has modified the Assessing Officer’s order granting ten equal monthly installments commencing from 15.02.2023. It is undisputed that the petitioner has paid first installment of Rs.19,07,890/- on 15.02.2023 as directed by the first respondent. 2.Sri Annamalai S., the learned counsel for the petitioner, submits that the petitioner can demonstrate that the addition on account of the alleged non-disclosure of capital gain is even prima facie tenuous and the petitioner’s financial constraints are also not considered. As regards the first ground, Sri Annamalai S submits that the petitioner has entered into Joint Development Agreement dated 07.09.2016 with a builder as the owner of certain immovable properties; the developer has obtained necessary permissions not in the subject assessment years but in the subsequent assessment year and the construction has been commenced much later and possession of the petitioner’s constructed area is not yet delivered. 3.Sri Annamalai S. further submits that if the petitioner could be liable to pay any capital gain tax, given the provisions of Section 45A of the Income Tax Act 1960, it would only be when there is delivery of constructed area and these circumstances ought to have been considered while deciding on the merits of the petitioner's application for stay and if considered, the stipulation that the petitioner must deposit 20% of the disputed demand would be onerous and this aspect has not at all been considered. commenced much later and possession of the petitioner’s constructed area is not yet delivered. 3.Sri Annamalai S. further submits that if the petitioner could be liable to pay any capital gain tax, given the provisions of Section 45A of the Income Tax Act 1960, it would only be when there is delivery of constructed area and these circumstances ought to have been considered while deciding on the merits of the petitioner's application for stay and if considered, the stipulation that the petitioner must deposit 20% of the disputed demand would be onerous and this aspect has not at all been considered. 4.Sri Sushal Tiwari, the learned counsel for the respondents, on the other hand, submits that the addition as made in the assessment order is because of the information that is gathered in search proceedings and therefore the condition on which the interim order is granted could be regulated in paragraph 4(B)(a) of the Official Memorandum dated 29.02.2016 (Annexure-M). The first respondent has therefore rightly opined that addition is prima facieon a strong footing. Though the financial constraints are pleaded before this Court, nothing is brought on record before the first respondent. 5.The rival submissions are considered, and the records perused. As regards the petitioner’s case that it would not be liable to pay any capital gain tax unless possession of the corresponding constructed area is delivered by the developer and such possession is not yet delivered, the first respondent has recorded thus: “It is noted that the assessment order was passed by the AO and undisclosed capital gain was brought to tax. The said addition is prima facie on a strong footing.” 6.This Court must opine that the first respondent is rather perfunctory in opining that the addition is on a strong footing because such opinion is not in the backdrop of the petitioner's specific case. If the petitioner has demonstrated, as now proposed to be canvassed before this Court, that its liability to pay capital gain tax would be only upon delivery of the possession of the corresponding constructed area by the developer and as of the conclusion of the relevant assessment year, the developer had not even obtained necessary approvals much less commenced construction, the same should have been considered by the first respondent before opining that there is a strong prima facie case. 7.This Court must interfere with the impugned order on the ground that the first respondent has not considered the material circumstances in recording an opinion on the prima facie case in the specific circumstances set-forth by the petitioner, and the proceedings must be restored for reconsideration by the first respondent with due opportunity to the petitioner. Hence, the following: ORDER The petition is allowed in part, and the impugned order dated 08.02.2023 is quashed restoring the petitioner’s application for stay for reconsideration by the first respondent in the light of the observation as aforesaid, and until such reconsideration, there shall be no further precipitation. It would be needless to observe that the petitioner shall be at liberty to file additional submissions/information within such time as may be permitted by the first respondent, and the petitioner shall appear before the first respondent on 05.04.2023. SD/- JUDGE SA ct:sr