Reddy Vanga Ventures LLP V. Pr. Commissioner of Income Tax - 2, Hyderabad and Asst. Director of Income Tax Centralized Processing Centre, Income Tax Department, Bengaluru and Income Tax Officer Ward-11(1), Hyderabad and Union of India, Rep. by its Secretary, Department of Revenue, Ministry of Finance

WP/19073/2023

AI Insights

The case involves Reddy Vanga Ventures LLP, which challenged the communications from the Income Tax Department declaring their income tax return for A.Y. 2021-22 as defective and invalid. The petitioner argued that their turnover was less than Rs. 10 Crores, and thus, they were not required to have their accounts audited, contrary to the claims of the tax authorities. The High Court examined the orders passed by the tax authorities and found inconsistencies with the findings of the Assessing Officer, who had acknowledged the petitioner's turnover as less than Rs. 10 Crores. Consequently, the court quashed the orders of the tax authorities and remitted the matter back for a fresh examination.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 796616 (HC-TELANGANA)
• Appeal Type: Others
• Pronouncement Date: 28-12-2023
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961, Constitution of India
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: SUNDARI R PISUPATI; GADI PRAVEEN KUMAR
• Assessee Lawyers: C V NARASIMHAM
• Keywords: Audit requirement; Defective return; Income Tax Return; Natural Justice; Writ of Mandamus; Invalidation of Return; Turnover Less than Rs.10 Crores
• Section: 264; 14; 139(9); 265; 226; 19(1)(g)

Judgement Text

"[ 337e ] HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD (Special Original Jurisdiction) THURSDAY, THE TWENTY EIGHTH DAY OF DECEMBER TWO THOUSAND AND TWENTY THREE PRESENT THE HONOURABLE SRI JUSTICE P.SAM KOSHY AND THE HONOURABLE SRI JUSTICE N.TUKARAMJI WRIT PETITION NO: 19073 OF 2023 Between: Reddy Vanga Ventures LLP, Having its Registered Office at Flat No.202, Oak Wood Apartments Plot No, 29,3O,34, Nandagiri Hills, Jubilee Hills, Hyderabad, Telangana-500033 Represented by its Designated Partner ...PETITIONER AND 1. Pr. Commissioner of lncome Tax - 2, Hyderabad lncome Tax towers, A.C. Guards, Masab Tank, Hyderabad - 500004 2. Asst. Director of lncome Tax Centralized Processing Centre, lncome Tax Department, Bengaluru - 560500 3. lncome Tax Officer Ward-11(1), Hyderabad Signature Towers, Sy. No.6(P) of Kondapur Sy. No.37(P) of Kothaguda Opp. Botanical Gardens, Serilingampally (M) Hyderabad - 500084 4. Union of lndia, Rep. by its Secretary, Department of Revenue, Ministry of Finance, North Block New Delhi - 110001 ...RES'ONDENTS Petition under Article 226 of the Constitution of lndia praying that in the circumstances stated in the affidavit filed therewith, the High Court may be pleased to issue Writ Order or Direction more particularly in the nature of Writ of Mandamus declaring the 2nd respondents . communications DIN no.EFLl2122lG5al1TR000177067055 dated 91812022 treating the petitioners return for AY 2021-22 as defective and consequent communication DIN no.CPCl2122lG5dl63516996030122'1 dated 2511212022 invalidating the petitioners return of income for A.Y.2021-22 and also communication DIN no.EFLl2223lG22llTRO0O472429203 dated 1411212022 as all being illegal, arbitrary, violative of principles of natural justice and contrary to sections 4448, 139 (9) and 264 and other provisions of the lncome Tax Act, 1961 and violative of Articles 14, 19(1 )g and 265 of the Constitution of lndia consequently direct the 2 /, and 3rd respondents to treat the petitioners return of income for A.y.2021-22 as valid and not to disallow the carried forward loss of AY 2021-22 to set off for subsequent A-Y.2022-23 and pass such further orders in the interest of justice or alternatively Set aside the order no.ITBA/REV/F|REV7l2o23-24l10561569j4(1) dated 15-09-2023 passed by the 'lst respondent uls 264 of the act and direct respondent to consider and dispose off on merits the petitioner's application uis 264 of the Act after duly considering the report of Assessing officer dated 30-08- 2023 and pass such further orders in the interest of justice\" and carry out the amendments in the writ affidavit and writ petition and permit petitioner to make all consequential amendments. (Prayer is amended as per Court Order dated 15.11.2023 Vide lA.No.2 of 2023 in WP.No.'19073 ot 2023) lA NO: 1 OF 2023 Petition under Section '151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased to stay the communication Dl N no.CPCl 21 22 I G5dl635 1 69960 30i 221 dated 25- 1 2-2022 issued by 2nd respondent invalidating the petitioner's return of income for 4.Y.2021 -22 and communication Dt N no.EF Ll 2223t G22 I lT ROOO47 2429203 dated 1411212022 issued by 2nd respondent tor A.y.2022-23 proposing to disailow the carried fonr,vard loss of A.Y.2021-22 and set off for Ay 2022-23. Counsel for the Petitioner: SRI C.V.NARASIMHAM Counsel forthe Respondent Nos.1 TO 3: M/s. SUNDARI R plSUpATl, SR.SC FOR INCOME TAX DEPARTMENT Counsel for the Respondent No.4: SRI GADI PRAVEEN KUMAR, Dy. SOLICITOR GENERAL OF INDIA The Court made the following: ORDER THE HON'BLE SRI JUSTICE P. SAM KOSHY AND THE HON'BLE SRI JUSTICE N. TUKARAMJI WRIT PETITION No.19O73 OF 2OZ3 ORDER: (Per the Hon'ble Sri lustice P. Sam Koshy) Present is the Writ Petition, which has been filed seeking the following relief : \"In these circumstances, it is prayed that the Hon'ble High Court may be pleased to issue Writ Order or Direction more particularly in the nature of Writ of Mandamus declaring the 2n{ respondent's communications DIN No.EFL/2122/GSa/ ITRbOO177067055 dated g-8-2O22 treating the petitioner',s return for A.Y. 2O2l-22 as defective and consequent communication DIN No.CPC/2t22/G5d/635169960301221 dated 25-12-2022 invalidating the petitioner's return of income for A.Y. 2021-22 and also communication DIN N o.EF Ll 2223 / G22 / IT ROO O 47 2429 20 3 date d 14 - 72 - 20 2 2 a s a I I being illegal, arbitrary, violative of principles of natural justice and contrary to sections 4448, 139(9) and 264 and other provisions of the Income Tax Act, 1961 and violative of Articles 14, 19(1)(g) and 265 of the Constitution of India and consequently. direct the 2nd and 3'd respondents to treat the petitioner's return of income for A.Y. 2027-22 as valid and not to disallow the carried forward loss of A.Y. 2O2l-22 to set off for subsequent A.Y. 2022-23 and pass such further orders in the interest of justice; or alternatively set aside the Order No.ITBA/REV/F/REV7/2023- 24/t}56t569t4(1) dated L5-09-2O23 passed by the 1't respondent u/s. 264 of the Act and direct 1* respondent to consider and dispose off on merits the petitioner's application uls 264 of the Act after duly considering the report of Assessing Officer dated 30-08-2023 and pass such further orders in the interest of justice.\" 2. At the outset, learned counsel for the petitioner referred the order, dated 09.08.2022, passed by respondent No.2 considering the income tax return filed by the petitioner-esta blish ment as defective -2 PSK.J & NTR,J w.P.No.l907l of2023 within the meaning oF Section 139(9) of the Income Tax Act, 1961 (for short, 'the Act'), to be erroneous and contrary to the facts. Respondent No.2 has held the income tax return of the petitioner to be defective as the balance sheet and profit and loss account of the petitioner's establishment have not got audited, as is required under the statute, as is the reason that is reflected in the order, dated 09.08.2022, passed by respondent No.2. 3. Learned counsel for the petitioner categorically makes a statement that it was the stand of the petitioner all along that their income under the'profits and gains from business or profession'was less than Rs.10 Crores and therefore, it was not required to be audited. Hence, the finding given by respondent No.2 to the aforesaid extent is bad in law. In support of his contention, learned counsel for the petitioner referred to I.A.No.2 of 2023, wherein there is an order passed by respondent No.1, under Section 264 of the Act, where an extract of the order of the Assessing Officer was reproduced and in paragraph No.6.B, there is a specific finding that the assessee's claim of its turnover being less than Rs.10 Crores is found to be in order. This in other words mean that the turnover of the petitioner-establishment has been found to be less than Rs.10 Crores by the Assessing OfFicer. Contrary to this, the authorities concerned i.e., respondent No.2 has now declared the .J PSK.J & NTRJ w P.No.l907.l of202l income tax return submitted by the petitioner to be defective and invalid, as it has not been got audited and hence it was found to be in contravention to the provisions of Section 139(9) of the Act. There does not seem to be any strong material available with the authority concerned, particularly respondent No.2, to reach to a conclusion that the turnover of the petitioner was exceeding Rs.10 Crores, particularly, in the teeth of the finding given by the Assessing Officer i.e., respondent No.3. 4. Given the said facts that respondent No.1 in the course of passing the order under Section 264 of the Act reproduced the findings given by the Assessing Olficer that the turnover of the petitioner being less than Rs.10 Crores, both the orders of respondent No.2, dated 09.08.2022 and 25.12.2022, would not be sustainable and the same would have to be set aside and is ordered accordingly. 5. As a consequence, the communication, dated 14.L2.2022, is also set aside/quashed and the matter thereby stand remitted back to the Assessing Officer, respondent No.3, to reexamine the entire thing, particularly, the turnover of the petitioner's establishment and thereafter, pass appropriate orders afresh, in accordance with law. I I I 4- PSKJ & NTR.J W.P.No 19073 of202l 6. The Writ Petition to the aforesaid extent stands allowed. The impugned orders, dated 09.08.2022, t4.t2.2022 and 25.t2.2022, would stand quashed. There shall be no order as to costs. Miscellaneous Petition, if any, pending in this Writ petition shall stand closed. SD/. P.Ch. NAGABHUSHAMBA ASSISTANT REGISTRAR //rRUE coPY// v SECTION OFFICER To 1 . Pr. Commissioner of lncome ltax - 2, Hyderabad - lncome Tax towers, A C' Guards, Masab Tank, Hyderabad - 500004 Z. AJst. Oirector of lncome'Tax Centralized Processing Centre, lncome Tax Department, Bengaluru - 560500 3. lnc'ome Tax'Offic6r Ward-11(1), Hyderabad Signature Towers, Sy' No'6(P) of - kondapur Sy. No.37(P) of Kothaguda Opp. Botanical Gardens, Serilingampally (M) Hyderabad - 500084 +. ine Sdcretarv, jnionbt lndia, Department of Revenue, Ministry of Finance, North Block New Delhi - 110001 5. One CC to SRI C.V.NARASIMHAIVI, Advocate [OPUC] O. On. CC to tM/s. SUNDARI R PISUPATI, SR.SC FOR INCOME TAX DEPARTMENT [OPUCI z. one Cc to sRt enot phnvEeN KUIMAR. Dv. SollclroR GENERAL oF rNDrA [OPUC] 8. Two CD Copies PSK GJP HIGH COURT DATED:2811212023 ORDER WP.No.19073 of 2023 ALLOWING THE WRIT PETITION WITHOUT COSTS. 6sa- g @ oqtq IIN 1$1 21 .t o A- f o i or:sPf AT 5T E "