Karnataka High Court
M/S Bangalore Phamaceutical And ... vs Dy. Commissioner Of Income Tax on 29 January, 2025
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RP No. 364 of 2023
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 29TH DAY OF JANUARY, 2025
PRESENT
THE HON'BLE MRS JUSTICE K.S.MUDAGAL
AND
THE HON'BLE MR JUSTICE T.G. SHIVASHANKARE GOWDA
R.P. NO.364 OF 2023
IN
I.T.A. NO.24 OF 2018
BETWEEN:
M/S BANGALORE PHARMACEUTICAL
AND RESEARCH LABORATORY PVT. LTD.
NO.163, RESERVOIR STREET
BASAVANAGUDI, BANGALORE
REP. BY ITS MANAGING DIRECTOR
SRI.S.T.RAGHAVENDRA MADY ...PETITIONER
(BY SRI.BALARAM R. RAO, ADV.)
AND:
DY.COMMISSIONER OF INCOME TAX
PRESENTLY CIRCLE 1(1)(2), PREVIOUSLY
CIRCLE - 11(2), BMTC BUILDING
80 FEET ROAD, KORAMANGALA
BANGALORE - 560 095 ... RESPONDENT
Digitally signed by (BY SRI.M.DILIP, STANDING COUNSEL)
MALA K N
Location: HIGH COURT THIS RP IS FILED UNDER ORDER XLVII RULE 1 READ
OF KARNATAKA WITH SECTION 114 OF THE CODE OF CIVIL PROCEDURE 1908
PRAYING TO REVIEW THE JUDGMENT PASSED BY THE HON'BLE
COURT IN ITA NO.24/2018, DATED 12.06.2023 TO THE EXTENT
AS DEEMED FIT BY THIS HON'BLE COURT TO MEET THE ENDS
OF JUSTICE.
THIS PETITION HAVING BEEN RESERVED FOR ORDERS ON
20.01.2025 COMING ON FOR PRONOUNCEMENT THIS DAY,
T.G.SHIVASHANKARE GOWDA, J., MADE THE FOLLOWING:
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RP No. 364 of 2023
CORAM: HON'BLE MRS. JUSTICE K.S.MUDAGAL
AND
HON'BLE MR JUSTICE T.G. SHIVASHANKARE GOWDA
CAV ORDER
(PER: HON'BLE MR JUSTICE T.G. SHIVASHANKARE GOWDA)
This Review Petition is filed by the assessee
under Order XLVII Rule 1 read with Section 114 of the
Code of Civil Procedure, 1908, seeking review of the
order dated 12.06.2023 passed in I.T.A.No.24/2018.
2. The Assessee has filed I.T.A.No.24/2018
under Section 260A of the Income Tax Act, 1961,
against the order dated 13.01.2017 passed by the
Income Tax Appellate Tribunal, Bengaluru ('ITAT' for
short) in I.T.A.No.560 & 1025/Bang/2014 for the
assessment year 2010-11.
3. This Court had admitted the appeal to
consider the following substantial questions of law:
"1. Whether the Tribunal in law as well as facts was
right in holding that when income from house property
held as inventory is assessed to tax under the head
"Income From House Property" as in the instant case,
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the corresponding interest on borrowals for acquiring
the said house property cannot be allowed under the
head income form house property and is to be allowed
as a deduction under "profits and gains of business
and profession"?
2. Whether the Tribunal in law as well as facts
correct in restricting the deduction for interest on
borrowed funds u/s 24 only for the period after the
building was let out, while clause (b) of Section 24
permits deduction of interest payable on borrowed
capital during the previous year?
3. Whether the Tribunal has erred in giving the AO
directions to verify the end use of the funds by the
developer and not whether the borrowed funds have
been used by appellant to acquire the property from
which rental income was obtained.
4. Whether the Tribunal in law as well as facts of
the case correct in confirming the order of the AO
wherein sum of Rs.15.50 Lakhs paid to M/s Sheshanka
Financial Services Pvt. Ltd., has been disallowed as an
"accommodation entry"?
5. Whether the Tribunal was right in not
considering ground no.3 raised before them in Form 36
with regard to disallowance of interest of Rs.66,66,733
paid to M/s Pratibha Realtors Pvt Ltd., under the head
provisions when the liability to pay the same had
crystallized during the Financial year ended
31.03.2010?
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4. When the matter was taken up for hearing,
submission was made on behalf of both sides that the
ITAT has remanded the matter for the limited purpose
of verification of facts on grounds No.1 and 2. As
regards ground No.3 regarding disallowance of interest
of Rs.41,55,000/-, the ITAT has not recorded any
finding. As regards ground No.4, the ITAT has
remitted the matter to the Assessing Officer. After
remand, the Assessing Officer has passed an order on
28.09.2017 holding all the issues against the assessee.
The assessee has challenged the order of the Assessing
Officer before the National Faceless Appeal Centre,
New Delhi ('NFAC' for short) in Appeal No.CIT(A),
Bengaluru-1/10187/2017-18 and the same is pending.
In the assessment order, the Assessing Officer has
recorded at para-6.6 that the ITAT has not directed the
Assessing Officer to allow the assessee's claim of
interest. The observation of the ITAT shows that the
Assessing Officer has decided the matter based on
ITAT's observations and not independently by applying
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his mind and it was prayed that appeal may be allowed
and NFAC may be directed to consider the assessee's
appeal on merits, uninfluenced by the orders passed by
the ITAT.
5. We have heard the arguments of Sri.Balram
R.Rao, learned counsel for the assessee and
Sri.M.Dilip, learned standing counsel for the Revenue.
6. Learned Standing counsel appearing for the
Revenue has submitted that NFAC may consider the
appeal on merits uninfluenced by the order passed by
the ITAT.
7. The sum and substance of the argument on
behalf of both sides is that the appeal before the NFAC
has to be determined purely on merits uninfluenced by
the observations or order passed by the ITAT.
Accordingly, this Court at para-6 has referred to the
observations made by the Assessing Officer and
ultimately in the light of the submission made by both
sides, it was held that the ends of justice would be met
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by directing the NFAC to dispose of Appeal No.CIT(A),
Bengaluru-1/10187/2017-18, which is filed against the
assessment order dated 28.09.2017 uninfluenced by
the order passed by ITAT in accordance with law.
8. It is the contention of the learned counsel
for the assessee that the substantial question of law
No.4 regarding confirmation order of Assessing Officer
to a tune of Rs.15.50 lakhs paid to M/s.Sheshanka
Financial Services Pvt.Ltd., which has been disallowed
as an 'accommodation entry' is correct and it requires
a finding before this Court.
9. Learned standing counsel for the Revenue
contended that the appeal before the NFAC has to be
considered purely on merits without referring to any of
the observations recorded by the ITAT. Hence,
whatever observations that require to be urged has to
be urged before the NFAC and the review is not
permissible on a point which is not argued in the
appeal sought to be reviewed. The assessee has given
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an option to urge all the contentions before the NFAC
and review is not permissible.
10. We have carefully perused the order of this
Court dated 12.06.2023 and also the submissions
made on behalf of the assessee as well as the
Revenue.
11. On consideration of the submissions made
by Sri.Balram, learned counsel for the assessee, it is
thus clear that the assessee intended to safeguard his
right by making a new submission in the review
petition and wants to re-argue the case on merits. As
we noticed that the interest of the assessee has been
safeguarded as the NFAC is required to decide the
appeal purely on merits uninfluenced by the order of
the ITAT, we do not find any ground for reviewing the
order impugned as it amounts to allowing the parties
to re-argue the case. The assessee is having every
right to question the order of the NFAC after
adjudication of the appeal on merits.
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12. We do not find any ground for review of the
order of this Court. Hence, we pass the following;
ORDER
The Review Petition is dismissed.
SD/-
(K.S.MUDAGAL)
JUDGE
SD/-
(T.G.SHIVASHANKARE GOWDA)
JUDGE
KNM
