IN THE HIGH COURT OF KARNATAKA AT BENGALURU ON THE 25TH DAY OF APRIL, 2019 BEFORE THE HON'BLE MR. JUSTICE RAVI MALIMATH AND THE HON'BLE MR. JUSTICE S. G. PANDIT WRIT APPEAL No.1427 OF 2018 (T-IT) BETWEEN:
M/S. BRIGHT PACKAGING PRIVATE LIMITED REPRESENTED BY ITS AUTHORISED REPRESENTATIVE, SRI. STANY SANTHOSH RODRIGUES, SON OF SRI. MARIAN RODRIGUES, AGED ABOUT 44 YEARS, NO.162-BM, BAIKAMPADY INDUSTRIAL AREA, MANGALURU-575 011.
... APPELLANT (BY SRI. S. ANNAMALAI AND SRI. M.LAVA, ADVOCATE) AND:
1. THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-1 (1),C.R. BUILDING, ATTAVAR, MANGALURU-575 001.
2. THE PRINCIPAL COMMISSIONER OF INCOME TAX, C.R. BUILDING, ATTAVAR, MANGALURU-575 001.
(BY SRI. K.V. ARAVIND, ADVOCATE) ...RESPONDENTS THIS APPEAL IS FILED UNDER SECTION 4 OF THE KARNATAKA HIGH COURT ACT PRAYING TO SET ASIDE THE ORDER PASSED BY THE LEARNED SINGLE JUDGE IN WRIT PETITION 13714/2018 DATED 17/4/2018 AND CONSEQUENTLY GRANT THE RELIEF PRAYED FOR IN THE WRIT PETITION.
THIS APPEAL COMING ON FOR ADMISSION THIS DAY, S.G.PANDIT J., DELIVERED THE FOLLOWING:
JUDGMENT Aggrieved by the portion of the impugned order dated 17.04.2018 passed by the learned Single Judge in W.P.No.13714 of 2018, by which the petitioner was directed to furnish security for 35% of the enforceable total demand, the petitioner is in appeal.
2. The petitioner filed writ petition under Articles 226 and 227 of the Constitution of India praying for quashing the order under Section 220(6) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’ for short) passed by the respondent No.1 vide dated 26.03.2018 for the assessment year 2010-11 and for a direction to the respondents not to take coercive steps for recovery of disputed taxes. The petitioner is a Company registered under the Companies Act, 1956. The petitioner filed return of income on 27.09.2010 declaring NIL income. The return was processed under Section 143(1) and income was determined at Rs.98,08,840/-. The case of the petitioner was reopened under Section 147 of the Act by issuing noticed under Section 148 of the Act. The petitioner filed objections for reopening of the assessment. The Assessing Officer reassessed the income and arrived at taxable income of Rs.4,50,00,000/- and issued notice of demand under Section 156 of the Act. The petitioner being aggrieved by the assessment order filed appeal before the Commissioner of Income-Tax (Appeals), Bengaluru (hereinafter referred to as ‘the Appellate Authority’ for short). Along with the appeal, the petitioner also filed an application for stay of the disputed demand. It is stated that respondent No.1 by rectification order determined the total balance tax payable at Rs.2,81,43,390/-. It is stated that, respondent No.1 in reply to the stay application vide letter dated 15.02.2018 advised the petitioner to pay 20% of the disputed demand. Accordingly, the petitioner vide letter dated 26.02.2018 sought to pay 20% of demand in installments and also enclosed challan for Rs.4,80,000/- as part payment. The petitioner was asked to appear before the second respondent in respect of request for payment of disputed demand in installments. Subsequently respondent No.1 passed order rejecting the application seeking absolute stay and also the request for installments. The order is passed taking approval under Section 220(6) of the Act. Aggrieved by the said order, the petitioner filed instant writ petition seeking for setting aside the order dated 26.03.2018 and not to take coercive steps for recovery of disputed taxes. The learned Single Judge after hearing both sides passed the order holding that the petitioner shall deposit 40% of the total enforceable demand and shall furnish sufficient security for 35% of the enforceable total demand. Aggrieved by the portion of the order by which, the petitioner was directed to furnish security for 35% of the enforceable total demand, the petitioner is in appeal.
3. Heard the learned counsel for the appellant as well as the learned counsel for the respondents. Perused the appeal papers.
4. Learned counsel for the appellant would submit that the learned Single Judge committed an error in directing to furnish security for 35% of the enforceable total demand in addition to deposit of 40% of the total enforceable demand. It is contended that when the matter is pending in appeal before the Appellate Authority, the appellant is required to pay only 20% of the demand and nothing more than that. The learned Single Judge failed to appreciate the fact that the appellant has already deposited 20% of the disputed demand. The appellant is not required to pay any more amount as demanded in the order under Section 220(6) of the Act. He further submits that the reopening of the assessment and further orders passed by the Assessing Authority is without jurisdiction and consequently, the demand made is also without jurisdiction. Hence prays for allowing the appeal.
5. Per contra, learned counsel for the respondents would submit that the order under Section 220(6) of the Act was passed referring the matter to the Appellate Authority seeking his approval for collection of entire demand, since there was fabrication of capital and share premium contributed from other companies. Hence, the petitioner is not entitled for stay of entire demand.
6. On hearing the learned counsels for the parties and on going through the appeal papers, we are of the view that the learned Single Judge in her discretion passed the order directing deposit of 40% of total enforceable demand and to furnish 35% of the enforceable total demand, which would not require any interference. The petitioner filed assessment relating to the assessment year 2010-11 showing NIL income. The case of the petitioner was taken up for reassessment under Section 143(1) of the Act and further under Section 147 of the Act, the assessment was reopened and demand was raised. Against the reopening and reassessment the petitioner filed appeal before the Appellate Authority. Along with the appeal, the petitioner also filed an application seeking for stay of the entire enforceable demand. The petitioner had also deposited 20% of the demand before the Appellate Authority. On the stay application of the appellant, order was passed under Section 220(6) of the Act. In the order it is noticed that based on the material, the Assistant Commissioner of Income Tax was of the view that it is a fit case for recovery of the entire demand raised, since the assessee had failed to prove genuineness of the credits in the Books of Accounts. It is also observed that the assessee could not prove the identity, creditworthiness of the Companies, who contributed to the share capital as well as the genuineness of the transaction. Taking note of the petitioner’s argument and taking note the Circular No.1914, the learned Single Judge modified the order of the Assistant Commissioner passed under Section 220(6) of the Act demanding the entire enforceable demand to that of deposit of 40% of the total enforceable demand and furnishing of security to an extent of 35% of the enforceable total demand which in our view is an equitable order passed by the learned Single Judge.
7. In the facts and circumstances of the case, we are of the view that the petitioner has not made out any good ground to interfere with the equitable order passed by the learned Single Judge. Hence, the appeal is dismissed.
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JUDGE JUDGE mpk/-*/CT:KHV