Govind Kumar V. Assistant Commissioner of Income Tax Central Circle 1(1) and Principal Commissioner of Income Tax, Central Circle

WP/10759/2025

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The case involves Govind Kumar, a partner in Bitcipher Labs LLP, who challenged the assessment order and related notices issued by the Assistant Commissioner of Income Tax for the assessment year 2023-24. The petitioner argued that the variations proposed in the income assessment would lead to double taxation, which is impermissible under the Income Tax Act. The High Court found that the respondent did not adequately consider the petitioner's objections and the relevant statutory provisions in the impugned order, leading to the decision to set aside the order and remit the case for fresh assessment.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 821565 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 01-12-2025
• Assessment Year: misc
• Laws Referred To: Income Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: M DILIP
• Assessee Lawyers: T SURYANARAYANA
• Keywords: Assessment Year; Double taxation; Income Tax; Quash order; Remuneration; Scrutiny assessment
• Section: 143(3); 274; 40(b); 270A; 156; 28(v)

Judgement Text

" - 1 - HC-KAR NC: 2025:KHC:49986 WP No. 10759 of 2025 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 1ST DAY OF DECEMBER, 2025 BEFORE THE HON'BLE MR. JUSTICE S.R.KRISHNA KUMAR WRIT PETITION NO. 10759 OF 2025 (T-IT) BETWEEN: 1. GOVIND KUMAR SON OF SURENDRA AGED ABOUT 35 YEARS, RESIDING AT VILLA NO. 527, PHASE 3, ADARSH PALM RETREAT, DEVARABEESANAHALLI, NEAR ECO WORLD TECH PARK, BENGALURU 560103. …PETITIONER (BY SRI. T.SURYANARAYANA, SENIOR COUNSEL FOR SRI. TANMAYEE RAJKUMAR., ADVOCATE) AND: 1. ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 1(1), CENTRAL REVENUE BUILDING, QUEENS ROAD, BENGALURU 560 001 2. PRINCIPAL COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, CENTRAL REVENUE BUILDING, QUEENS ROAD, BENGALURU - 560 001 …RESPONDENTS (BY SRI.M.DILIP, ADVOCATE) Printed from counselvise.com Digitally signed by SHARADAVANI B Location: High Court of Karnataka - 2 - HC-KAR NC: 2025:KHC:49986 WP No. 10759 of 2025 THIS W.P. IS FILED UNDER ARTICLES 226 OF THE CONSTITION OF INDIA PRAYING TO QUASH THE ORDER DTD. 22.03.2025 BEARING NO. ITBA/AST/S/143(3)/2024- 25/1074872405(1) (ANNX-G) PASSED BY THE R-1 UNDER SECTION 143(3) OF THE ACT FOR THE ASSESSMENT YEAR 2023-24 AND ETC. THIS PETITION, COMING ON FOR PRELIMINARY HEARING, THIS DAY, ORDER WAS MADE THEREIN AS UNDER: CORAM: HON'BLE MR. JUSTICE S.R.KRISHNA KUMAR ORAL ORDER In this petition, the petitioner seeks the following reliefs: \"(a) quashing the order dated 22.03.2025 bearing No.ITBA/AST/S/143(3)/2024-25/ 1074872405(1) (Annexure-G) passed by the 1st Respondent under section 143(3) of the Act, for the assessment year 2023-24; (b) quashing the demand notice dated. 22.03.2025 bearing No.ITBA/AST/S/156/2024- 25/ 1074872699(1) (Annexure-H) issued by the 1st Respondent under section 156 of the Act for the assessment year 2023-24. (c) quashing of the notice dated 22.03.2025 bearing No.ITBA/PNL/S/270A/2024-25/ 1074872481(1) (Annexure-J)) issued by the 1st Respondent under Section 274 read with Section 270A of the Act for assessment year 2023-24; and (d) Pass such other or further orders as this Hon'ble Court may deem fit in the facts and circumstances of the case, in the interests of justice and equity.\" Printed from counselvise.com - 3 - HC-KAR NC: 2025:KHC:49986 WP No. 10759 of 2025 2. Heard learned Senior counsel for the petitioner and learned counsel for respondents and perused the material on record. 3. A perusal of the material on record will indicate that the petitioner is a partner of a Limited Liability Partnership Firm (LLP) under the name and style 'Bitcipher Labs LLP. During the assessment year 2023-2024, the petitioner received remuneration in a sum of ₹1,59,85,800/- as per the terms and conditions of the partnership deed and the resolution passed by the aforesaid Bitcipher LLP approving the remuneration of the petitioner. During the course of scrutiny assessment proceedings for the assessment year 2023-2024, respondent No.1 issued notices dated 23.06.2024 and 21.08.2024 inter alia calling upon the petitioner to furnish details of the sources of income and computation of income along with profit and loss account. The petitioner having filed his submissions on 05.09.2024 along with necessary details, respondent No.1 issued a show cause notice dated 15.02.2025 calling upon the petitioner to show cause as to why variation as proposed should not be made to his total income. Printed from counselvise.com - 4 - HC-KAR NC: 2025:KHC:49986 WP No. 10759 of 2025 4. It is the grievance of the petitioner that despite filing detailed objections on 24.02.2025 including taking up the contention that by virtue of Section 28(v) r/w Section 40(b) of the Income Tax Act, such a variation is impermissible since the same would amount double taxation, the respondents have proceeded to pass the impugned assessment order which deserves to be set aside. 5. Per contra, learned counsel for the respondents would support the impugned order and submit that there is no merit in the petition and the same is liable to be dismissed. 6. As rightly contented by learned Senior counsel for the petitioner, a perusal of the impugned order will indicate that respondent No.1 has noticed the specific contention urged on behalf of the petitioner regarding Section 40(b) r/w Section 28(v) of the IT Act at paragraph 4.3.3 and paragraph 4.3.4 of the impugned order which reads as: \"4.3.3 That during the year under consideration, the LLP had reported a book loss of Rs.109,54,79,057/- as per the provision of section 40(b) of the Act. Accordingly, as per the provision of section 40(b) of the Act, the firm claimed an Printed from counselvise.com - 5 - HC-KAR NC: 2025:KHC:49986 WP No. 10759 of 2025 expense of Rs.1,50,000/- and disallowed the balance remuneration. 4.3.4 That, the assessee had offered his share of remuneration of Rs.50,000/- to the tax after adjusting the disallowed amount of Rs.1,59,35,800/- as per the provision of section 28(v) of IT Act, 1961.\" 7. However while passing the impugned order, the said contention and the relevant statutory provisions have not been considered or appreciated by respondent No.1 and as such, I deem it just and appropriate to set aside the impugned order and remit the matter back to respondent No.1 for reconsideration afresh in accordance with law by issuing certain directions. 8. Accordingly, the following: ORDER i) Writ Petition is hereby allowed. ii) The impugned order dated 22.03.2025 at Annexure-G, impugned demand notice dated 22.03.2025 at Annexure-H and impugned notice dated 22.03.2025 at Annexure-J are hereby set aside. Printed from counselvise.com - 6 - HC-KAR NC: 2025:KHC:49986 WP No. 10759 of 2025 iii) The matter is remitted back to respondent No.1 for reconsideration afresh in accordance with law. iv) Petitioner shall appear before respondent No.1 on 05.01.2026 without awaiting further notice from respondent No.1. v) Liberty is reserved in favour of the petitioner to file additional pleadings, documents etc. which shall be considered by respondent No.1 bearing in mind the provisions contained in Section 28(v) r/w 40 (b) of the IT Act and after providing sufficient and reasonable opportunity to the petitioner. Sd/- (S.R.KRISHNA KUMAR) JUDGE VM List No.: 2 Sl No.: 5 Printed from counselvise.com "