Karnataka High Court
Sri Kanakadasa Credit Co-Op Society Ltd vs National Faceless Assessment Centre on 7 September, 2023
Author: B M Shyam Prasad
Bench: B M Shyam Prasad
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NC: 2023:KHC:32396
WP No. 19953 of 2023
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 7TH DAY OF SEPTEMBER, 2023
BEFORE
THE HON'BLE MR JUSTICE B M SHYAM PRASAD
WRIT PETITION NO. 19953 OF 2023 (T-IT)
BETWEEN:
SRI KANAKADASA CREDIT CO-OP SOCIETY LTD
NO 182/K, 17 RAMVILAS ROAD,
K R MOHALLA , MYSORE - 570024
(REPRESENTED BY GEETHA N SECRETARY,
AGED ABOUT 25 YEARS
D/O NAGARAJU P )
...PETITIONER
(BY SRI. V.RAGHURAMAN, SENIOR ADVOCATE FOR
SRI. RAGHAVENDRA C.R. AND SRI. BHANUMURTHY
J.S., ADVOCATES)
AND:
Digitally 1. NATIONAL FACELESS ASSESSMENT
signed by CENTRE DELHI,
NARASIMHA
MURTHY BMTC BUILDING, 80 FEET ROAD,
VANAMALA 6TH BLOCK, NEAR KHB GAMES VILLAGE
Location: KORAMANGALA, BANGALORE- 560095
HIGH
COURT OF (REPRESENTED BY PRINCIPAL
KARNATAKA COMMISSIONER OF INCOME TAX - 3).
2. THE INCOME TAX OFFICER
CIRCLE 1(1) AND TPS 1ST FLOOR,
AYAKAR BHAVAN REAC MYSORE
KARNATAKA - 570008.
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NC: 2023:KHC:32396
WP No. 19953 of 2023
3. THE MYSORE AND CHAMRAJANAGARA DISTRICT
CO OPERATIVE
CENTRAL BANK LIMITED,
MYSURU - 570 001.
REP BY ITS MANAGER.
...RESPONDENTS
(SRI. M.DILIP, ADVOCATE FOR R1 AND R2)
THIS WP IS FILED UNDER ARTICLES 226 AND 227
OF THE CONSTITUTION OF INDIA PRAYING TO A)
QUASH THE IMPUGNED ASSESSMENT ORDER
BEARING DIN ITBA/AST/S/147/2022-
23/1050529882(1), AND ITBA/AST/S/185/2022-
23/1050530306(1) DATED 08/03/2023, ENCLOSED AS
ANNEXURE-A AND A1 PASSED BY R1, FOR THE
REASONS STATED IN THE GROUNDS.B) DIRECT THE
RESPONDENT BY AN APPROPRIATE WRIT OR ORDER IN
THE NATURE OF MANDAMUS OR OTHERWISE, NOT TO
PROCEED WITH THE RECOVERY OF THE AMOUNTS
PROPOSED IN THE DEMAND NOTICE BEARING DIN
ITBA/AST/S/156/2022-23/1050530073(1) DATED
08/03/2023 ISSUED BY R1, ENCLOSED AS ANNEXURE-
B. C) QUASH IMPUGNED PENALTY NOTICES DATED
09/03/2023, 29/05/2023 ISSUED UNDER SECTION
270A ISSUED BY R1, ENCLOSED AS ANNEXURE-C
(COLLY) AND ETC.
THIS PETITION, COMING ON FOR PRELIMINARY
HEARING, THIS DAY, THE COURT MADE THE
FOLLOWING:
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NC: 2023:KHC:32396
WP No. 19953 of 2023
ORDER
The petitioner, a Credit Co-operative Society, is aggrieved by the first respondent's assessment order dated 08.03.2023 [Annexure-A] and this grievance also rests on the grievance with the second respondent's order dated 31.03.2022 [Annexure-F] under the provisions of Section 148A(d) of the Income Tax Act 1961 [for short, 'the Act of 1961'], the consequential notice of the even date [Annexure-G] under Section 148 of the Act of 1961 and the notice dated 29.08.2023 [Annexure-H] under Section 226(3) of the Act of 1961. These proceedings relate to the Assessment Year 2018-19. The petitioner has also sought for directions with necessary instructions to the third respondent - the Mysore and Chamarajanagara District Co-operative Central Bank Limited, Mysuru - to de-freeze its accounts.
2. Sri. V.Raghuraman, the learned Senior counsel for the petitioner, submits that the petitioner -4- NC: 2023:KHC:32396 WP No. 19953 of 2023 must succeed as against the second respondent's order dated 31.03.2022 [Annexure-F] and the notices dated 31.03.2022 and 29.08.2023 [Annexure-G and H] on the short ground of violation of the principles of natural justice. Sri.V.Raghuraman elaborates that the petitioner, upon receipt of the notice dated 31.03.2022 under Section 148A(b) of the Act 1961, has filed its reply seeking time to file response with documents and later on 27.02.2023, upon receipt of notices under Section 142 of the Act of 1961, has filed reply with documents to substantiate that there cannot be any reassessment, and notwithstanding the same, the first respondent has reasoned that the petitioner has not furnished any document as regards the eligibility for deduction or to justify the amount of Rs.1,48,24,265/- described as "unexplained money". The learned Senior Counsel draws this Court's attention to the petitioner's response dated 07.02.2023 and the details of the documents enclosed as part of such response. -5-
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3. Insofar as this contention, Sri. V. Raghuraman submits that in similar circumstances, this Court has opined that failure to consider reply would amount to gross violation that justifies a finding that the impugned order suffers from an apparent lacuna, and the learned Senior counsel relies upon this Court's reasoning in the case of W.P.No.15980/2021 [T-IT]1 which reads as under:
"4. Having heard the learned counsel for the parties and having perused the Petition Papers, this court is broadly in agreement with the submission made on behalf of the Assessee inasmuch as the very official Website itself demonstrates the filing of reply and copies of documents that accompanied the same. Had the author of the impugned order adverted to the Website, he would not have proceeded on the wrong premise that no reply is filed, as rightly submitted by learned Sr. Advocate appearing for the Assessee. Even otherwise, by way of abundant caution, he could have ascertained from the Assessee as to the filing of reply, more particularly when the stakes involved was high. Thus, there is a gross violation of principles of 1 This petition is disposed of on 09.08.2023. -6-
NC: 2023:KHC:32396 WP No. 19953 of 2023 natural justice namely the version of the Assessee has remained unconsidered because of non- application of mind by the authority concerned. That is the first lacuna apparent on the face of the impugned order."
4. Sri. Dilip M., the learned Standing counsel for the respondents who is called upon to accept notice and who submits that he has received instructions, is heard in the light of the afore canvass, and he cannot dispute that the petitioner has filed its response with documents upon receipt of notice dated 25.01.2023 [Annexure-R] and that notwithstanding the submission of documents, the first respondent has opined, while passing order dated 31.03.2022 [Annexure-F], that the petitioner has not furnished any document. Sri. Dilip M submits that the only reason for the same could be that the petitioner has submitted documents that are in vernacular.
5. The justification apart, it is indisputable that the assessment is completed on 08.02.2023 -7- NC: 2023:KHC:32396 WP No. 19953 of 2023 without considering the response dated 07.02.2023 and the documents filed after notices under Section 142 of the Act of 1961, including the notice dated 25.01.2023, and the first respondent ought to have considered the same. Further, the proceedings under Section 148A of the Act 1961 are concluded without considering the petitioner's request for ten days to file response under Section 148A(c) thereof. Therefore, this Court must intervene. Sri. Dilip M. is also heard on the recourse that would be available to the petitioner to file a fresh reply with the documents, including the translation that would be required because the documents are in vernacular.
6. Sri. V.Raghuraman submits that consequent to the impugned order and the demand, the second respondent - the Income Tax Officer - has also recovered a sum of Rs.14,25,925/- with the freezing of the petitioner's account with the third respondent, and this Court must grant an order for -8- NC: 2023:KHC:32396 WP No. 19953 of 2023 return of this amount. The learned Senior Counsel canvasses that even on merits, there are only two issues for consideration viz., the alleged unexplained money in a sum of Rs. 1,48,24,265/- and the disallowance in a sum of Rs.17,61,284/- under Section 80P, and as regards these, this Court must consider the following:
[a] The petitioner relies upon the irrefutable fact that the amount of Rs.1,48,24,265/- cannot be treated as unexplained money only because these are cash transactions, as these cash transactions are remittance by the borrowers, who are petitioner's members, towards repayment of the amount availed by them.
[b] Even if there could be some dispute about the disallowance under Section 80P of the IT Act, the petitioner can file an appeal for adjudication of the dispute, and in that -9- NC: 2023:KHC:32396 WP No. 19953 of 2023 event, the petitioner can file for interim protection against recovery under Section 220(6) of the Act of 1961 and the petitioner would only be required to deposit 20% of the tax amount in dispute pending consideration of the appeal. Therefore, the retention of any sum in excess of Rs.2,40,000/- would be an unjustified burden on the petitioner.
7. In response, Sri. Dilip M. submits that both these aspects will have to be ultimately considered by the first respondent in the light of the response and the documents that are filed/would be filed. On consideration of the aforesaid submissions, this Court must opine that the petitioner cannot be fastened with a liability or denied the use of money when the assessment, which is without considering the response/documents, is quashed. The law does not permit recovery even before completion of the
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NC: 2023:KHC:32396 WP No. 19953 of 2023 assessment, and further, if the petitioner succeeds insofar as the allegations of unexplained money and the dispute continuing over disallowance under Section 80P, the immediate liability would be limited given the provisions of Section 220(6) of the Act of 1961 and the instructions issued for grant of stay pursuant thereto. These aspects must be considered, and a decision taken at the earliest without waiting for the completion of the assessment. In the light of the afore, the following:
ORDER
a) The petition is disposed of quashing the Assessment Order and the Computation Sheet dated 08.03.2023 [Annexures-A and A1], the demand notice [Annexure-B], notices for payment of penalty dated 09.03.2023 [Annexures-C1, D1] and the notice to attach bank account dated 29.08.2023 [Annexure-H] are quashed.
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b) The petitioner is reserved liberty to file a fresh response consequent to the notice dated 31.03.2022 [Annexure-G], and the petitioner shall be at liberty to file such response by re-filing the documents already filed as also additional documents and the translation wherever the document is in vernacular.
c) With Annexure-H being quashed, there shall be no freezing of the petitioner's account, and the petitioner shall also be entitled to file an application with the second respondent for repatriation of the money received, and the petitioner may file such representation within fifteen [15] days from today.
d) The second respondent is called upon to consider the same independently and take a decision on repatriation of the amount in
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NC: 2023:KHC:32396 WP No. 19953 of 2023 the light of this Court's observation within a period of six [6] weeks from the date of representation/s.
SD/-
JUDGE RB