IN THE HIGH COURT OF KARNATAKA AT BENGALURU ON THE 8TH DAY OF JANUARY, 2019 BEFORE THE HON'BLE MR. JUSTICE RAVI MALIMATH AND THE HON’BLE MR. JUSTICE MOHAMMAD NAWAZ INCOME TAX APPEAL NO.358 OF 2018 CONNECTED WITH INCOME TAX APPEAL NO.359 OF 2018 AND INCOME TAX APPEAL NO.360 OF 2018 IN INCOME TAX APPEAL NO.358 OF 2018:
BETWEEN:
1. THE PRINCIPAL COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE, C.R. BUILDING,QUEEN’S ROAD, BENGALURU–560 001.
2. THE DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-2(2), C.R. BUILDING, QUEENS ROAD, BENGALURU–560 001.
... APPELLANTS (BY SRI. K.V. ARAVIND, ADVOCATE) AND:
M/S. GMR ENERGY LIMITED, 25/1, SKIP HOUSE, MUSEUM ROAD, BENGALURU–560 025.
PAN:AAACT8420A.
... RESPONDENT (BY SRI. BALARAM R. RAO, ADVOCATE) THIS INCOME TAX APPEAL IS FILED UNDER SECTION 260-A OF INCOME TAX ACT, 1961, PRAYING TO SET ASIDE THE ORDERS PASSED BY THE INCOME- TAX APPELLATE TRIBUNAL, BENGALURU IN ITA NO.1917/BANG/2016 DATED 21.11.2017 AND CONFIRM THE ORDER OF THE APPELLATE COMMISSIONER CONFIRMING THE ORDER PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2(2), BENGALURU.
IN INCOME TAX APPEAL NO.359 OF 2018:
BETWEEN:
1. THE PRINCIPAL COMMISSIONER OF INCOME TAX, CENTRAL CIRLCE, C.R. BUILDING, QUEENS ROAD, BENGALURU–560 001.
2. THE DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-2(2), C.R. BUILDING, QUEENS ROAD, BENGALURU–560 001. ...APPELLANTS (BY SRI. K.V. ARAVIND, ADVOCATE) AND:
1. M/S. GMR ENERGY LIMITED, 25/1, SKIP HOUSE, MUSEUM ROAD, BENGALURU–560 025. PAN:AAACT8420A.
... RESPONDENT (BY SRI. BALARAM R. RAO, ADVOCATE) THIS INCOME TAX APPEAL IS FILED UNDER SECTION 260-A OF INCOME TAX ACT, 1961, PRAYING TO SET ASIDE THE ORDERS PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, BENGALURU IN INCOME TAX APPEAL NO.1918/BANG/2016 DATED 21.11.2017 AND CONFIRM THE ORDER OF THE APPELLATE COMMISSIONER CONFIRMING THE ORDER PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2(2), BENGALURU.
IN INCOME TAX APPEAL NO.360 OF 2018:
BETWEEN:
1. THE PRINCIPAL COMMISSIONER OF INCOME TAX, CENTRAL CIRLCE, C.R. BUILDING, QUEENS ROAD, BENGALURU–560 001.
2. THE ASSISTANT COMMISSIONER OF INCOME- TAX, CENTRAL CIRCLE-2(2), C.R. BUILDING, QUEENS ROAD, BENGALURU–560 001.
...APPELLANTS (BY SRI. K.V. ARAVIND, ADVOCATE) AND:
M/S. GMR ENERGY LIMITED, 25/1, SKIP HOUSE, MUSEUM ROAD, BENGALURU–560 025.
PAN:AAACT8420A.
... RESPONDENT (BY SRI. BALARAM R. RAO, ADVOCATE) THIS INCOME TAX APPEAL IS FILED UNDER SECTION 260-A OF INCOME TAX ACT, 1961, PRAYING TO SET ASIDE THE ORDERS PASSED BY THE INCOME- TAX APPELLATE TRIBUNAL, BENGALURU IN INCOME TAX APPEAL NO.1987/BANG/2016 DATED 21.11.2017, VIDE ANNEXURE-C, CONFIRMING THE ORDER OF THE APPELLATE COMMISSIONER AND CONFIRM THE ORDER PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2(2), BENGALURU.
****** THESE INCOME TAX APPEALS COMING ON FOR ADMISSION, THIS DAY RAVI MALIMATH, J., DELIVERED THE FOLLOWING:
J U D G M E N T The assessee is a Company engaged in the business of generation of power. The Company filed its return of income declaring a total income of Rs.28,81,94,767/- for the assessment year 2007-08 in ITA No.358 of 2018 and 360 of 2018, Rs.16,40,64,897/- for assessment year 2008-09 in ITA No.359 of 2018 and tax was computed on the book profit of Rs.125,72,44,353/- in all the appeals.
2. A search was conducted under Section 132 of Income Tax Act on the premises of the assessee. A notice under Section 153A of the Act was issued and served on the assessee to file the return of income for the above assessment years. In response to the notices, the assessee requested that the original return filed by the assessee may be treated as the return of income filed in response to the notice. Thereafter, notices under Section 143(2) and 142 were issued and served on the assessee.
3. Aggrieved by the same, an appeal was preferred before the Commissioner of Income Tax. The appeal was partly allowed. Questioning the same, appeals were preferred before the Tribunal. The Tribunal considered the appeals on technical aspects as to whether the invocation of the provisions of Section 153A of the Act is valid or not in the facts and circumstances of the case. While considering the same and while relying on the judgment of this Court in the case of COMMISSIONER OF INCOME TAX V/S. LANCY CONSTRUCTIONS, reported in 383 ITR 168 (KARNATAKA), the Tribunal remanded the matter to the Commissioner of Income Tax for fresh consideration in the light of the judgment in Lancy’s case after examining the factual aspects of the matter as to whether any incriminating materials were found during the course of search. Questioning the same, the present appeals are filed. The appeals were admitted to consider the following two substantial questions of law:
“i. Whether on the facts and in the circumstances of the case and in law the Tribunal was correct in law in holding that incriminating material is necessary condition for proceedings under Section 153A of the Act by following the judgment of this Hon’ble Court in case of CIT V/s. Lancy Constructions”
ii. Whether on the facts and in the circumstances of the case, the Tribunal is right in remitting back the matter to CIT(A) for fresh decision by considering the the judgment of this Hon’ble High Court in the case of CIT V/s. Lancy Constructions (383 ITR 168) and with a specific direction to verify the finding of incriminating material during the course of search which goes to the basic question of assumption of jurisdiction under Section 153A of the Act”?
4. Heard the learned counsel for the appellant and perused the material on record.
5. Learned counsel for the Revenue contends that the Tribunal has committed an error in relying on the judgment in Lancy’s case. He contends that the Hon’ble Court in the case of CANARA HOUSING DEVELOPMENT COMPANY V/s. DCIT reported in 274 CTR 122 (KARNATAKA) has laid down the law with regard to the same. We have considered the said judgment. At para-10 of the said Order, it is narrated as follows:
“Para 10 - ….. The condition precedent for application of Section 153A is there should be a search under Section 132. Initiation of proceedings under Section 153A is not dependent on any undisclosed income being unearthed during such search.”
6. Therefore, the position of law is quite clear.
The Tribunal was of the view that the latest judgment in the case of COMMISSIONER OF INCOME TAX V/S. LANCY CONSTRUCTIONS reported in (2016) 66 taxmann.com 264 (KARNATAKA) was valid since it is the latest judgment. We have considered the said judgment. Therein the Hon’ble High Court held in para 6, as follows:
“Para 6 – ….. Merely because a search is conducted in the premises of the assessee, would not entitle the Revenue to initiate the process of reassessment, for which there is a separate procedure prescribed in the statute. It is only when the conditions prescribed for reassessment are fulfilled that a concluded assessment can be reopened.”
7. On considering the same, we are of the considered view that the reasons assigned by the Tribunal are erroneous. Firstly, the judgment reported in CANARA HOUSING DEVELOPMENT COMPANY was not even considered in Lancy Construction’s case. Seconding, Lancy’s case was dismissed at the stage of admission without even a notice to the Assessee. The High Court in the case of LANCY CONSTRUCTIONS, was of the view that no substantial question of law would arise for consideration in the appeal. Therefore, in the absence of any substantial question of law, the question of admitting the appeal would be inappropriate. A judgment of the court becomes binding only when a question arises for consideration, is contested by both sides and thereafter findings are recorded by the Court. None of these conditions have been fulfilled. There is no notice issued to the other side. No question of law has been determined. The appeal was dismissed, as being bereft of any substantial question of law. Therefore, the judgment reported in Lancy’s case cannot be said to be applicable in law or that it is binding for any reason whatsoever. The reliance placed by the Tribunal on the judgment in Lancy’s case is misplaced. The judgment in Lancy’s case does not render the true position in law. It cannot be considered as a precedent.
8. Under these circumstances, when the Tribunal has relied on the judgment in Lancy’s case, we are of the view that a grave error has been committed. Therefore, the only issue that Lancy’s case has been wrongly followed, the impugned order requires to be set aside. Since no other issues were raised before the Tribunal, we deem it just and necessary that the matter be remanded to the Tribunal for a fresh consideration in accordance with law based on the aforesaid observations. The Tribunal is entitled to consider the appropriate law on the issue, including other judgments not considered.
9. Accordingly, the appeals are allowed. The orders dated 21.11.2017, passed by the Income Tax Appellate Tribunal, Bengaluru in Income Tax Appeal Nos.1917 of 2016, 1918 of 2016 and 1987 of 2016 are set-aside. The matters are remanded to the Tribunal for fresh consideration in accordance with law.
10. All contentions are kept open.
Sd/- Sd/-
JUDGE JUDGE Snc