JAKKA SRINIVASULU REDDY V. THE PRINCIPAL COMMISSIONER OF INCOME TAX - 4

WP/17229/2018

AI Insights

The case involves Jakka Srinivasulu Reddy, a senior citizen and individual Income-tax assessee, who challenged the orders passed by the Income Tax authorities regarding the assessment year 2009-10. The petitioner contested an assessment order that deemed a sum of Rs.6,25,000 as a deemed dividend, which was initially taxed under Section 2(22)(e) of the Income Tax Act, 1961. After partially succeeding in an appeal to the Commissioner of Income-tax (Appeals), the petitioner was dissatisfied with the subsequent order and demand notice issued by the Joint Commissioner of Income-Tax (OSD), claiming that he was not given a proper opportunity to be heard. The High Court found that the principles of natural justice were violated as the petitioner was not adequately heard before the impugned orders were passed.

• Counselvise Citation: [2018] 140 COUNSELVISE.COM (IT) 755157 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 30-05-2018
• Assessment Year: misc
• Laws Referred To: Income-Tax Act, 1961, Constitution of India
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: K ARAVIND
• Assessee Lawyers: G VENKATESH
• Keywords: Deemed dividend; Natural Justice; Opportunity of Hearing; Writ of Certiorari; Writ of Mandamus
• Section: 147; 143(3); 250; 2(22)(e); 156; 226; 227

Judgement Text

" 1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 30TH DAY OF MAY, 2018 BEFORE THE HON'BLE Mr. JUSTICE B.VEERAPPA WRIT PETITION No.17229 OF 2018 (T-IT) BETWEEN: JAKKA SRINIVASULU REDDY, AGED ABOUT 74 YEARS, NO.318, SRI SOUDHA, 100 FEET ROAD, INDIRANAGAR, BENGALURU – 560 038. …PETITIONER (BY SRI G.VENKATESH, ADVOCATE FOR SRI SHANKAR.A., ADVOCATE) AND: 1. THE PRINCIPAL COMMISSIONER OF INCOME TAX-4, BMTC DEPOT BUILDING, 80 FEET ROAD, KORAMANGALA, BENGALURU-560 095. 2. THE JOINT COMMISSIONER OF INCOME TAX (OSD), CIRCLE 4(1)(1), ROOM NO.229, 2ND FLOOR, BMTC DEPOT BUILDING, 80 FEET ROAD, KORAMANGALA, BENGALURU – 560 095. ...RESPONDENTS (BY SRI K.V.ARAVIND, ADVOCATE) 2 THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE IMPUGNED ORDER GIVING EFFECT TO THE ORDER OF THE COMMISIONER OF INCOME-TAX (APPEALS) UNDER THE INCOME-TAX ACT, 1961 FOR THE ASSESSMENT YEAR 2009-10 DATED 30.03.2018 IN ANNEXURE-A PASSED BY THE RESPONDENT NO.2 WITHOUT AFFORDING ADEQUATE OPPORTUNITY OF REPRESENTATION AND BEING HEARD TO THE PETITIONER. THIS PETITION COMING ON FOR PRELIMINARY HEARING, THIS DAY, THE COURT MADE THE FOLLOWING : O R D E R The petitioner has filed the present writ petition seeking for writ of certiorari to quash the order dated 30.03.2018 made in No.OGE/AFKPS0888K/A.Y.2009- 10/JCIT(OSD)/C-4(1)(1)/17-18 passed by the second Respondent-Joint Commissioner of Income-Tax (OSD) for the year 2009-10 as per Annexure-A and also the demand notice issued under Section 156 of the Income Tax Act, 1961 in Form No.7 dated 30.03.2018 as per Annexure-B issued by the second respondent and writ of mandamus directing the second respondent to provide reasonable opportunity to the petitioner before 3 passing fresh order, giving effect to the order of the Commissioner of Income-Tax (Appeals) under the Income-Tax Act, 1961 for the assessment year 2009- 10. 2. It is the case of the petitioner that the petitioner is an individual Income-tax assessee and is a senior citizen, aged about 74 years. In respect of the assessment year 2009-10, an assessment order came to be passed by the Assistant Commissioner of Income-tax, Circle 4(1)(1), Bengaluru on 28.12.2016 under Section 143(3) read with Section 147 of the Income-tax Act, 1961 (for short, the ‘Act’). In the said assessment order, a sum of Rs.6,25,000/- was brought to tax in the hands of the petitioner as deemed dividend under Section 2(22)(e) of the Act, on the pretext that the said sum was paid by M/s.JSR Constructions Private Limited to M/s.Samanthu Business Forms Private Limited and that the petitioner had substantial interest in both of these companies. 4 The total demand of tax along with interest as per the said assessment order was Rs.12,58,350/-. 3. Being aggrieved by the said order, the petitioner preferred statutory appeal before the Commissioner of Income-tax (Appeals)-4, Bengaluru on 27.01.2017. The Appellate Authority exercised powers under Section 250 of the Act and passed the order on 30.11.2017 allowing the appeal in part and rejected the ground of the petitioner on the challenge to the legality of the re-opening of the assessment but held that in view of the fact that the petitioner had running credit balances in the books of account of M/s.JSR Constructions Private Limited, the same could not be treated as deemed dividend. The assessing officer was directed to take appropriate rectificatory action in re-working the deemed dividend under Section 2(22)(e) after verification and after giving due opportunity to the appellant during the appeal- 5 effect process. The order of the Commissioner of Income-tax (Appeals)-4, Bengaluru was served on the petitioner on 27.12.2017. 4. Thereafter, the petitioner received a notice dated 26.03.2018 from the second respondent stating that the petitioner is given an opportunity of being heard and was directed to submit the details to substantiate the claim as per the order of the Commissioner of Income-tax (Appeals). The notice of the second respondent was received by the petitioner on 28.03.2018 and by that time, the time for hearing had already lapsed. Thereafter, the petitioner brought to the attention of the second respondent in the letter dated 28.03.2018 filed on 29.03.2018 that the notice itself was received only on 28.03.2018 and the petitioner could not appear due to this reason and sought another opportunity of being heard. Thereafter, the petitioner was shocked to receive on 6 02.04.2018, the impugned order giving effect to the order of the Commissioner of Income-tax (Appeals) dated 30.03.2018 in which the second respondent has stated that the assessee was given an opportunity of being heard vide letter dated 26.03.2018 but the assessee failed to appear on that date. Being aggrieved by the same, the petitioner is before this Court. 5. I have heard the learned counsel for the parties to the lis. 6. Sri.G.Venkatesh, learned counsel for the petitioner contended that the impugned order passed by the second respondent is in utter violation of principles of natural justice and without giving an opportunity of being heard, the same is liable to be set aside. 7. Per contra, Sri.K.V.Aravind, learned Standing Counsel fairly submits that though notice 7 was issued individually, opportunity of hearing was not given. 8. The submission of the learned counsel for the respondent is placed on record. Without adverting to the merits and de-merits of the case urged by the learned counsel for the parties, it is suffice to set aside the impugned order passed by the Authorities, remanding the matter to provide an opportunity of hearing to the petitioner before passing the order. 9. In view of the above, the writ petition is allowed. i) The impugned order dated 30.03.2018 made in No.OGE/AFKPS0888K/A.Y.2009-10/ JCIT (OSD)/C-4(1)(1)/17-18 passed by the second Respondent-Joint Commissioner of Income-Tax (OSD) for the year 2009-10 as per Annexure-A is hereby quashed. 8 ii) Consequently, the demand notice issued under Section 156 of the Income Tax Act, 1961 in Form No.7 dated 30.03.2018 as per Annexure-B issued by the second respondent is also quashed. iii) The matter is remanded to the second respondent for fresh consideration after giving notice and opportunity of being heard and pass order in accordance with law. iv) The petitioner is directed to appear before the second respondent on 11.06.2018 and the second respondent is directed to pass orders strictly in accordance with law. Sd/- JUDGE dh "