THE COMMISSIONER OF INCOME TAX V. M/S KIRLOSKAR INVESTMENTS & FINANCE LTD

ITA/915/2007

AI Insights

The case involves an appeal by the Commissioner of Income-Tax and the Assistant Commissioner of Income Tax against M/s Kirloskar Investments & Finance Ltd. and the Official Liquidator, High Court of Karnataka. The appeal challenges the decision of the Income Tax Appellate Tribunal (ITAT), which had confirmed the order passed by the Assistant Commissioner of Income Tax. The primary contention revolves around the applicability of the limitation period for assessments under Section 158BC of the Income Tax Act, 1961, for the block assessment years 1986-87 to 1996-97. The High Court of Karnataka had previously directed the ITAT to address several substantial questions of law, including the interpretation of Section 158BE and the conditions under which depreciation claimed on fraudulent documents can be considered as 'undisclosed income'.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 742868 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 08-07-2014
• Assessment Year: misc
• Other Referred Cases: C. Ramaiah Reddy vs. ITD 100
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: K S MAHADEVAN
• Assessee Lawyers: JEEVAN NEERALGI
• Keywords: Block assessment; Depreciation; Fraudulent Documents; Limitation Period; Undisclosed income
• Section: 260-A; 256(2); 158(BC); 158 BE

Judgement Text

" 1 IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 8TH DAY OF JULY 2014 P R E S E N T THE HON’BLE MR. JUSTICE N. KUMAR A N D THE HON’BLE MR. JUSTICE B. MANOHAR ITA No.915/ 2007 BETWEEN: 1.THE COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE C.R.BUILDING, QUEENS ROAD, BANGALORE. 2.THE ASST. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE V, C.R. BUILDING QUEENS ROAD BANGALORE ... APPELLANTS. (BY SRI JEEVAN J NEERALGI, ADV.) AND: 1. M/S KIRLOSKAR INVESTMENTS & FINANCE LTD. II FLOOR C BLOCK UNITY BUILDING J.C. ROAD BANGALORE 2. OFFICIAL LIQUIDATOR HIGH COURT OF KARNATAKA CORPORATE BHAVAN 2 NO.26-27, 12TH FLOOR RAHEJA TOWERS M.G. ROAD BANGALORE – 560 001 (R-2 AMENDED V/O DT.7.4.2014) ... RESPONDENTS. (BY SRI K.S. MAHADEVAN, ADV. FOR R-2, R-1 PERMITTED TO RETIRE V/O DT.6.6.2014) THIS ITA IS UNDER SEC.260-A OF I.T. ACT, 1961, ARISING OUT OF ORDER DATED 06/07/2007 PASSED IN IT (SS)A 88 /BANG/1997, FOR THE BLOCK ASSESSMENT YEAR 1986-87 TO 1996-97, PRAYING THIS HON'BLE COURT TO: I. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN, II. ALLOW THE APPEAL AND SET ASIDE THE ORDER PASSED BY THE ITAT, BANGALORE IN IT(SS)A 88/BANG/2010 DATED 06/07/2007 CONFIRMING THE ORDER PASSED BY THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-V, BANGALORE. THIS ITA COMING ON FOR HEARING THIS DAY, N. KUMAR, J., DELIVERED THE FOLLOWING: - JUDGMENT The Revenue has preferred this appeal against the order passed by the Tribunal, though holding that the assessment order passed under Section 158 BC of the Income Tax Act, is not barred by limitation, declining to answer the other substantial questions of law framed in this case. 3 2. The Revenue filed Reference Application under Section 256(2) of the Income Tax Act. This Court vide its order dated 22.1.2004 directed that following questions of law be referred :- “ 1. Whether having regard to the provisions of Section 158BE in particular the explanations thereto, the Tribunal was justified in holding that the assessment under Section 158BC was barred by limitation. 2. If depreciation is claimed on fraudulent documents and allowed in regular assessment, whether it can be terms as ‘undisclosed income’ on discovery of fraud. 3 Whether on the facts and circumstances, the Tribunal was justified in inferring that there was no undisclosed income which could be subjected to assessment under Chapter XIV-B of the Act. 4. Whether on the facts and circumstances, probabilities of the case and legal presumptions available, Tribunal was justified in inferring that the material was 4 not sufficient to warrant withdrawal of depreciation already allowed or to add lease discount charges 5. Whether on the facts and in the circumstances of the case, the ITAT was justified in holding that the Commissioner of Income-tax cannot modify the Draft Assessment Order while according approval u/s 158BC of the Income-tax Act ? 6. Whether on the facts and in the circumstances of the case, the ITAT was justified in holding that the Tribunal does not have powers of enhancement of income, even though it is the first Appellate Authority in the instant case ? ” 3. Accordingly, the Tribunal after remand took up the matter. Following the judgment of the Special Bench of Bangalore in the case of C. RAMAIAH REDDY 100 ITD 439 , it held assessment order under Section 158BC is not barred by limitation as there is seizure by Panchanama dated 25.5.1996 but has not answered the other questions 5 of law referred to it. It is not proper. In fact this Court considered the judgment of the Special Bench in C. RAMAIAH REDDY’S case and has set aside the finding recorded by the Special Bench on the question of limitation. 4. Under these circumstances, we deem it proper to remand the matter back to the Tribunal with a direction to await the judgment of the Supreme Court in the appeal preferred by the Revenue against the judgment of this Court, wherein the judgment of the Special Bench in C. RAMAIAH REDDY’S case has been set aside. If ultimately the judgment of this Court is up held then the Tribunal has to go into the question as to whether the order under Section 158BC of the Act is within time or barred by limitation as upheld by the Apex Court. If the judgment of this Court is set aside then it shall consider the other substantial questions of law and decide the case on merits without reference to the impugned order passed, where an attempt is made to answer one such question on the basis 6 of an earlier judgment. That would meet the ends of justice. 5. Accordingly, we pass the following order :- The appeal is allowed. The matter is remanded back to the Tribunal to consider all other grounds of appeal referred to its for consideration, after the Apex Court decides the appeal filed by the Revenue against the judgment of this Court, wherein the judgment of C. RAMAIAH REDDY’S case is set aside. Ordered accordingly. Sd/- JUDGE Sd/- JUDGE NG* "