IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 11TH DAY OF JULY, 2019 BEFORE THE HON’BLE MRS.JUSTICE S.SUJATHA WRIT PETITION No.46265 OF 2018 (T-IT) BETWEEN :
Badagabettu Credit Co-operative Society Ltd., H.O.: “Chethana Building”, Mission Compound, Udupi - 576 101. Represented by its General Manager Sri. B. Jayakar Shetty Indrali.
(By Sri. Mahesh R. Uppin, Advocate) AND :
1. Commissioner of Income Tax(Appeals) C.R.Building, N.G.Road, Attavara, Mangaluru - 575 003.
2. The Assistant Commissioner of Income Tax, Central Circle-2, Albuquerque House, Pandeshwar, Mangaluru-575 001.
... Petitioner 3. The Income Tax Officer, Ward-1, Aayakar Bhavan, Adi-Udupi, Udupi - 576 103.
(By Sri. K.V.Aravind, Advocate) … Respondents This Writ Petition is filed under Articles 226 and 227 of the Constitution Of India praying to quash the order dated 04.09.2018 passed by the respondent No.2 marked as Annexure-G and the demand notice dated 04.09.2018 raised in PAN No.AAAAB3065F by the respondent No.2 marked as Annexure-H and etc.
This Writ Petition is coming on for Preliminary Hearing in “B” Group, this day, the Court made the following:
O R D E R The petitioner has challenged the order and demand notice dated 04.09.2018 passed by the respondent No.2 at Annexures-G and H respectively, inter alia seeking a direction to the respondent No.1 to adjudicate the issues on ground Nos.9 and 10 as per the direction of the Income Tax Appellate Tribunal (‘ITAT’ for short) within a time frame.
2. The petitioner is a Co-operative Society registered under the provisions of Karnataka Co-operative Societies Act, 1959. The petitioner has filed its return of income in respect of Assessment Year 2013-2014, claiming deduction under Section 80P of the Income Tax Act, 1961 (‘the Act’ for short). The assessment came to be concluded disallowing the same under Section 80P of the Act against which, the petitioner preferred an appeal before the respondent No.1 and the said appeal came to be partly allowed. The petitioner has preferred an appeal before the ITAT on the ground Nos.9 and 10 being Jewel Appraiser’s fee paid Rs.5,32,943/- and interest on investment of Rs.3,22,507/-. The said appeal was remitted to the file of Commissioner of Income Tax (Appeals) [‘CIT(A)’ for short] for adjudication of ground Nos. 9 and 10 by ITAT vide order dated 26.04.2017. In the meantime, the respondent No.2 had issued the notice under Sections 154/155 of the Act dated 02.08.2018 proposing to rectify the order dated 12.01.2017 giving
“1. The order giving effect dated 12.01.2017, to the CIT(A) order in ITA239/UDP/CIT(A)/MNG/15-16 for the A.Y.
2013-14 requires to be amended as there is a mistake apparent from record within the meaning of Section 154/155 of the Income-tax Act, 1961. The rectification of the mistake, as per particulars given below, will have the effect of enhancing the assessment/reducing the refund/increasing your liability.
2. If you wish to be heard, you are requested to appear in person or through an authorized representative in my office on 13.08.2018 at 3.00 P.M. Alternatively you may send a written reply so as to reach me on or before the due mentioned above.
Particulars of mistake proposed to be rectified.
There is an error in the computation of Revised total income after the consideration of the relief allowed by CIT(A)”
3. Pursuant to the said notice, the respondent No.2 has passed the order impugned herein, hence, this writ petition.
4. Learned counsel for the petitioner would submit that the notice dated 02.08.2018 at Annexure-F is incoherent and no details of the rectification to be carried out in the order dated 12.01.2017 was proposed. Shockingly, the tax liability has been enhanced by virtue of the order impugned herein. The rectification order passed without providing an opportunity to the petitioner to meet the proposals, enhancing the tax liability is wholly unsustainable. The said impugned order is passed during the pendency of appeal before the CIT(A). Hence, seeks for setting aside the order impugned and the consequential demand notice.
5. Learned counsel appearing for the Revenue would submit that there is no prohibition for the Authorities to initiate rectification proceedings in terms of Sections 154/155 of the Act in view of the mistake apparent from the record being found. The pendency of the appeal before the CIT (A) pursuant to the remand by the Tribunal was on a different subject matter relating to the ground Nos.9 and 10, which has no bearing on the rectification order now made.
6. I have carefully considered the rival submissions of the learned counsel for the parties and perused the material on record.
7. It is ex facie apparent that the notice issued under Sections 154/155 of the Act dated 02.08.2018 is incomplete. Furnishing the details of the rectification, which the Authority is proposing to, is sine qua non for passing rectification order. In the absence of such particulars made available to the petitioner/assessee, the assessee is deprived to meet the proposals made which would result in violation of principles of natural justice. On the basis of the notice dated 02.08.2018, the order impugned is passed enhancing the tax liability. Hence, the said order suffers from the vice of arbitrariness and is illegal per se. The pendency of the proceedings before CIT(A) pursuant to the order of ITAT on a different issue, would not preclude the respondent No.2-Authority to proceed with the rectification of the order giving effect to the original order of CIT(A), not the subject matter of the present appeal before CIT(A). But in view of the remand by ITAT to the CIT(A) for adjudication on the ground Nos.9 and 10, this Court deems it appropriate to direct CIT(A) to dispose of the appeal in accordance with law in an expedite manner, preferably within a period of six months from the date of receipt of the certified copy of the order and is ordered accordingly.
8. The respondent No.2 is at liberty to conclude the rectification proceedings in accordance with law relating to any other issue not the subject matter of the pending appeal, after issuing a fresh notice and providing an opportunity of hearing to the petitioner.
Sd/- JUDGE SJK