Karnataka High Court
United Spirits Limited vs The Deputy Commissioner Of Income Tax ... on 4 September, 2025
Author: M.Nagaprasanna
Bench: M.Nagaprasanna
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WP No. 3242 of 2025
HC-KAR
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 4TH DAY OF SEPTEMBER, 2025
BEFORE
THE HON'BLE MR. JUSTICE M.NAGAPRASANNA
WRIT PETITION NO. 3242 OF 2025 (T-IT)
BETWEEN:
UNITED SPIRITS LIMITED
A COMPANY REGISTERED
UNDER THE COMPANIES ACT, 1956
AND HAVING ITS OFFICE AT
UB TOWERS, NO.24, VITTAL MALLYA ROAD,
BENGALURU - 560 001
REPRESENTED HEREIN BY ITS
GENERAL MANAGER - TAXATION
JAYATHEERTHA KULKARNI.
...PETITIONER
(BY SRI. PERCY PARDIWALLA, SENIOR COUNSEL FOR
MS. TANMAYEE RAJKUMAR, ADVOCATE)
Digitally AND:
signed by
NAGAVENI
Location: 1. THE DEPUTY COMMISSIONER OF
High Court of
Karnataka INCOME TAX CENTRAL CIRCLE 2(1),
HAVING OFFICE AT
CENTRAL REVENUE BUILDING,
QUEENS ROAD,
BENGALURU - 560 001.
2. THE COMMISSIONER OF INCOME TAX,
HAVING OFFICE AT
BMTC BUILDING,
80 FEET ROAD,
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WP No. 3242 of 2025
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KORAMANGALA,
BENGALURU - 560 095.
3. ASSISTANT DIRECTOR OF INCOME-TAX
CENTRALISED PROCESSING CENTRE,
INCOME TAX DEPARTMENT,
HAVING OFFICE AT 1ST FLOOR,
PRESTIGE ALPHA NO.48/1, 48/2
BERATENAAGRAHARA BEGUR
HOSUR RD, UTTARAHALLI HOBLI,
BENGALURU - 560 100.
4. THE DIRECTORATE GENERAL OF
INCOME-TAX (SYSTEMS),
CENTRAL BOARD OF DIRECT TAXES,
HAVING OFFICE AT
MINISTRY OF FINANCE
NEW DELHI - 110 001.
...RESPONDENTS
(BY SRI Y.V.RAVIRAJ, ADVOCATE FOR R1 AND R2)
THIS WP IS FILED UNDER ARTICLE 226 OF THE
CONSTITUTION OF INDIA PRAYING TO DIRECTING THE
RESPONDENTS TO FORTHWITH REFUND AN AMOUNT OF
RS.60,45,57,292/- DUE TO THE PETITIONER PURSUANT TO
THE ORDER DATED 27.06.2024 (ANNEXURE B) PASSED BY 1ST
RESPONDENT ON GIVING EFFECT TO THE ORDER OF THIS
HON'BLE COURT, ALONG WITH APPLICABLE INTEREST AND
ETC.
THIS PETITION, COMING ON FOR ORDERS, THIS DAY,
ORDER WAS MADE THEREIN AS UNDER:
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WP No. 3242 of 2025
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CORAM: HON'BLE MR. JUSTICE M.NAGAPRASANNA
ORAL ORDER
The petitioner is before this Court seeking a direction to
the respondents to refund an amount of Rs.60,45,57,292/-
pursuant to the order dated 27.06.2024.
2. Heard Percy Pardiwalla, learned Senior Counsel for
Ms.Tanmayee Rajkumar, learned counsel appearing for the
petitioner, learned counsel Sri.Y.V.Raviraj, learned counsel
appearing for respondent Nos.1 and 2 and have perused the
material on record.
3. The history to the case need not be gone into as
this very petitioner was before this Court in Writ Petition
No.13953/2020 and connected cases, which comes to be
disposed in terms of an order of the Co-ordinate Bench dated
17.08.2023. Therefore, I deem it appropriate to paraphrase
what is observed by the Coordinate Bench while issuing certain
directions. The Coordinate Bench has held as follows.
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"16. In the light of the rival submissions, this
Court is called upon to decide on the following
questions:
[a] Whether the ITAT by its Orders dated
31.03.2015 has entirely set-aside or cancelled the
assessment orders dated 31.12.2009, 29.12.2010
and 30.12.2011, or has the ITAT in these orders
issued certain directions for consideration of a few
aspects for conclusion of the assessment; and
[b] Whether the proceedings before the AO
for the Assessment Years 2007-08, 2008-09 and
2009-2010 consequent to the ITAT's common order
dated 31.03.2015 stood time barred as of the date
of the impugned notices irrespective of whether the
earlier provisions of Section 153 of the IT Act or the
substituted provisions thereof apply.
[c] If this Court's opinion insofar as the
previous question is in the affirmative, what order
should follow on the petitioner's request for refunds
in terms of its applications dated 29.11.2020.
17. It must be observed that the first question
is almost canvassed as an incidental question
because if indeed the ITAT has set aside/cancelled
the assessment orders [as against certain directions
being issued for consideration of a few aspects]
paving way for fresh assessment, the timeline within
which the assessment has to be concluded is
different be it under the provisions of Section 153 of
the IT Act as it stood prior to the Finance Act, 2016
or the substituted provisions. There will have to be
elaborate discussion on this aspect when the second
question is considered, but to bring out the
significance of the first question to the extent that is
relevant, this Court must refer to a decision of the
Division Bench of the High Court of Delhi in 'Basu
Distributors Private Limited v. Income Tax
Officer Ward'.
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18. The Division Bench, while referring to a
decision of the Bombay High Court in 'Rikhabdas
Jhaverchand v. Commissioner of Income Tax'
where it is held that the time line in Section 153[2A]
of the IT Act is applicable when an assessment order
is entirely set aside or cancelled and a host of other
decisions, has ultimately held as follows:
"It is trite that Parliament is continuously
concerned with the evils or undesirability of the
proverbial sword hanging over the head of an
Assessee. Parliament has, therefore, set-down the
parameters within which an assessment must be
completed, and over the years has shortened the
span of time in this regard. It has, however, carved
out an exception to the rule where a specific,
limited or restricted direction is passed by an
Appellate Authority which is of the opinion that it
would not be possible to decide the appeal before it
without a clarification on this point. The Appellate
Authority has also the power to set-aside the
Assessment Order and direct a de novo enquiry, in
which case every aspect, computation and
dimension is open for consideration. This partake
the nature of an assessment which is akin to the
original assessment and, therefore, the period of
limitation applicable to the original assessment
must apply to the fresh assessment. Where the
Appellate Authority remands the case for a
determination on a selected issue or aspect of the
assessment, the uncertainty or discomfort of the
sword of uncertainty provides no peril to the
assessee. All the parties are fully aware of the
parameters within which the fresh enquiry is
circumscribed and limited. It is obviously for this
reason that the rigours of limitation are totally
removed."
19. The ITAT by its common order dated
31.03.2015 has granted certain relief to the
petitioner against disallowance of bad
debts/advances written off and under Section 14A of
the IT Act essentially because of its order on these
very aspects in the petitioner's appeal against the
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authorities' orders for the AY 2006-2007. The ITAT in
its order9 in the proceedings for the AY 2006-2007,
both on the question of disallowance of bad
debts/advances written off and under Section 14A of
the IT Act, has concluded that the AO, in the factual
matrix and in the interest of justice and equity, must
re-examine all the relevant facts 'to ensure clarity' in
the adjudication, and the ITAT has restored these
aspects to the AO for reconsideration observing thus:
'to be dealt with in the light of its
observation' after affording to the petitioner
'adequate opportunity of hearing and to file details
required and after considering the submissions
already made and in the light of the judicial
pronouncements cited'.
The ITAT has directed the AO to consider the
question of disallowance for bad debts/advances
being written off and under Section 14A of the IT Act
permitting the petitioner to produce further
documents, and directing the AO to extend an
opportunity of hearing to the petitioner and decide
on the afore in the light of the judicial
pronouncements.
20. This order is common to all the three
subject assessment years, and in fact, it is in view of
the ITAT's similar order for the previous assessment
years. This Court, in view of the above, can only
conclude that it is indubitable that the ITAT's
common order dated 31.03.2015 do not set aside or
cancel the subject assessment orders requiring a
fresh assessment. The first question is answered
accordingly, and this Court is of the considered view
that the second question must necessarily be
examined in the light of this definite opinion.
21. The merits of the respondent's case that
the proceedings to give effect to orders, and to give
effect to findings or directions pending as of
31.03.2017 pursuant to order under Section 254 of
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the IT Act, could be concluded at any time [as
contemplated under the provisions of Section 153
prior to substitution] because of the provisions of
Section 153[9] of the IT Act must be firstly examined
upon a conspectus reading of the substituted Section
153 of the IT Act, including the provisions of Section
153[9] and the proviso and explanation clauses
appended to this subsection and secondly, with the
assistance of the CBDT's Explanatory Note issued
vide Circular 3/2017 dated 20.01.2017 on the
changes brought about by the Finance Act, 2016
22. The legislature by the substitution has
reduced the timelines for the completion of the
assessment under Section 143, 144 and 147 of the
IT Act and for completion of fresh assessment upon
intervention with the earlier assessment orders being
entirely cancelled or set aside in appeal and review.
As regards the cases in which the assessment
proceedings are to be completed by just giving effect
to certain orders or findings or directions under
Section 254 [and similar orders under other
sections], the Parliament has now provided a
bifurcation with separate timelines i.e. either three
months or twelve months from the end of the month
in which the order is received, and this is because of
the substituted provisions of Section 153[5] and
153[6].
23. Insofar as where assessment/re-
assessment/ re-computation orders are made before
01.06.2016 but the further appeal and revision
proceedings have not attained finality, it must be
opined without much dilation as it would not be
germane to the present decision, that the legislature
has saved the timelines as contemplated before the
substitution of Section 153 of the IT Act, and these
timelines are also saved for cases where notices
have been issued under Sections 142[1], 143[2] and
148 of the IT Act prior to 01.06.2016 but assessment
proceedings are not completed due to the exclusion
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of time as mentioned in Explanation - I. However, as
regards the timeline for completion of the
proceedings pending as of 01.06.2016 to give effect
to an order or a direction and finding as envisaged
under Section 153[5] and 153[6] of the IT Act, the
legislature has provided for Section 153[7] of the IT
Act which read as under:
"Where effect to any order, finding or
direction referred to in sub-section (5) or sub-
section (6) is to be given by the Assessing Officer,
within the time specified in the said sub-sections,
and such order has been received or passed, as the
case may be, by the income-tax authority specified
therein before the 1st day of June, 2016, the
Assessing Officer shall give effect to such order,
finding or direction, or assess, reassess or
recompute the income of the assessee, on or before
the 31st day of March, 2017."
The Parliament, in incorporating Section 153[7] of
the IT Act, is unequivocal that the proceedings to
give effect to orders or findings or directions under
Sections 250, Section 254, Section 260, Section 263
and Section 264 of the IT Act must be completed
before 31.03.2017.
24. The CBDT's Explanatory Note issued vide
Circular No.3/2017 dated 20.01.2017 on the
changes brought about by the Finance Act, 2016
removes any doubt about the Parliament's intention
in incorporating Section 153[7] of the IT Act. The
Explanatory Note, as regards the substitution of the
provisions of Section 153 of the IT Act, reads as
under as regards the changes in the timelines:
• The period, for completion of assessment under
section 143 or section 144 has been changed
from existing two years to twenty- one months
from the end of the assessment year in which
the income was first assessable.
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• The period for completion of assessment under
section 147 has been changed from existing one
year to nine months from the end of the financial
year in which the notice under section 148 was
served.
• The period for completion of fresh assessment in
pursuance of an order under section 254 or
section 263 or section 264, setting aside or
cancelling an assessment has been changed from
existing one year to nine months from the end of
the financial year in which the order under
section 254 is received by the Principal Chief
Commissioner or Chief Commissioner or Principal
Commissioner or Commissioner, or the order
under section 263 or section 264 is passed by
the Principal Commissioner or Commissioner.
• It is further provided that the period for giving
effect to an order under sections 250 or 254 or
260 or 262 or 263 or 264 of the Income-tax Act
or an order of the Settlement Commission under
sub-section (4) of section 245D of the Income-
tax Act, where effect can be given wholly or
partly otherwise than by making a fresh
assessment or reassessment shall be three
months from the end of the month in which
order is received or passed, as the case may be,
by the Principal Chief Commissioner or Chief
Commissioner or Principal Commissioner or
Commissioner.
• It is also provided that where the assessment,
reassessment or re-computation is made on the
assessee or any person in consequence of or to
give effect to any finding or direction contained
in an order under section 250, 254, 260, 262,
263, or section 264 of the Income-tax Act or in
an order of any court in a proceeding otherwise
than by way of appeal or reference under the
Income-tax Act, then such assessment,
reassessment or re-computation shall be made
on or before the expiry of twelve months from
the end of the month in which such order is
received by the Principal Commissioner or
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Commissioner. However, for cases pending as on
1.6.2016, the time limit for taking requisite
action is 31.3.2017 or twelve months from the
end of the month in which such order is received,
whichever is later.
• The provisions of section 153 of the Income-tax
Act as they stood immediately before their
amendment by the Act shall apply to and in
relation to any order of assessment,
reassessment or re-computation made before
the 1st of June, 2016.
25. This Court must next refer to the reason for
the substitutions vide the Finance Act, 2016 as set
forth in this Explanatory Note. The reason read as
under:
"It is desirable that proceedings under the
Act are finalised more expeditiously as digitisation
of processes within the Department has enhanced
its efficiency in handling workload. In order to
simplify the provisions of existing section 153 of the
Income-tax Act by retaining only those provisions
that are relevant to the current provisions of the
Income-tax Act, section 153 of the Income-tax Act
has been amended by substituting the existing
section changes in time limit from the existing time
limits."
It is obvious from the reading of the reasons
assigned that the substitution of Section 153 of the
IT Act is to ensure that the assessment proceedings
are finalized expeditiously and therefore, the
timelines are reduced. Crucially, insofar as the
proceedings pending as of 01.06.2016 for giving
effect to orders under Section 153[5] of the IT Act or
to give effect to a finding or direction under Section
153[6] of the IT Act, Explanatory Note also reiterates
that the final timeline will be 31.03.2017 or twelve
months from the end of the month in which such
order is received, whichever is later. This clarification
completely undermines the respondent's case, as
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canvassed by Sri E.I Sanmathi, that the proceedings
pending to give effect to orders or findings/directions
as of 31.03.2017 are saved under the provisions of
Section 153 [9] of the IT Act. The second question is
answered Accordingly 26. On the question of refund
to the petitioner, Sri Percy Pardiwala refers to the
decision of the Hon'ble Supreme Court in CIT v.
Shelly Products supra and he canvasses that with
the AO's failure to close the assessment after the
ITAT's common order dated 31.03.2015 within the
time line permitted and with such proceedings having
lapsed, the AO cannot make a fresh consideration of
the questions restored by the ITAT and
consequentially, the petitioner's declaration of bad
debts/advances written off and allowance claimed
under Section 14A of the IT Act are restored. As
such, the petitioner will be entitled for refund in
terms of the computation annexed to the
representations dated 29.10.2020 along with
interest.
27. The Hon'ble Supreme Court in CIT v.
Shelly Products supra, while examining the effect
of the failure to make an order of assessment and
the right to claim refund has observed as follows in
paragraph 35 after holding that even if the tax paid
is found to be less than that payable, no further
demand can be made for recovery of the balance
amount when a fresh assessment is barred. The
Hon'ble Supreme Court, in other words, has
observed that the tax paid by the assessee must be
accepted as it is and if any amount is paid in excess
of the admitted tax liability, the same shall be
refunded to the assessee since its retention may
offend Article 265 of the Constitution, and the
enunciation is thus:
"35. What then is the effect of the failure to
make an order of assessment after the earlier
assessment made is set aside or nullified in
appropriate proceedings? If the Assessing
Authority cannot make a fresh assessment in
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accordance with the provisions of the Act it
amounts to deemed acceptance of the return of
income furnished by the assessee. In such a case
the Assessing Authority is denuded of its authority
to verify the correctness and completeness of the
return, which authority it has while framing a
regular assessment. It must accept the return as
furnished and shall not in any event raise a
demand for payment of further taxes. Accepting
the income as disclosed in the return of income
furnished by the assessee, it must refund to the
assessee any tax paid in excess of the liability
incurred by him on the basis of income disclosed.
Even if the tax paid is found to be less than that
payable, no further demand can be made for
recovery of the balance amount since a fresh
assessment is barred. In other words, the tax paid
by the assessee must be accepted as it is, and in
the event of the tax paid being in excess of the tax
liability duly computed on the basis of return
furnished and the rates applicable, the excess shall
be refunded to the assessee, since its retention
may offend Article 265 of the Constitution."
28. It is apparent that the respondents have
issued the impugned notices after the petitioner's
applications dated 29.10.2020 as they were of the
opinion that they could give effect to the ITAT's
orders dated 31.03.2015, but the respondents,
consequent to this Court's conclusion that the time
for the AO to consider the question of disallowance of
the claims of bad debts/ advances written off and
under Section 14A of the IT Act stand lapsed as of
31.03.2017, must consider the petitioner's
representation dated 29.11.2020 for refund. The
details of the petitioner's claim for refund in these
petitions are as follows:
Writ Assessment The amount
Petition year claimed for
refund
13946/2020 2007-2008 Rs.22,55,72,973/-
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13934/2020 2008-2009 Rs.28,45,75,701/-
13953/2020 2009-2010 Rs.36,37,90,129/-
The petitioner's case for refund as
aforementioned is not considered, and it must be
considered in the light of the exposition in CIT v.
Shelly Products supra, and this Court must
emphasize that the respondents must consider the
question of interest as well as refund. For the
foregoing, the following:
ORDER
[A] The petitions are allowed in part and the
impugned notices dated 05.11.2020 and
06.11.2020 [Annexure-G in WP No.
13946/2020 and WP No. 13934/2020
and, Annexure - F in WP No.
13953/2020] are quashed on the ground
that they are issued after 31.03.2017
which would be impermissible because of
the provisions of Section 153[7] of the
Income Tax Act, 1961 as amended by
the Finance Act 2016.
[B] The respondents are directed to consider
the petitioner's representations dated
29.10.2020 [Annexure - F in WP No.
13946/2020 and WP No. 13934/2020
and, Annexure - E in WP No.
13953/2020] for refund along with
interest in the light of the decision of the
Hon'ble Supreme Court in CIT v. Shelly
Products reported in [2003] 5 SCC
461. The respondents shall so consider
the representations within a period of 3
[three] months from the date of receipt
of a certified copy of this order."
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The Coordinate Bench directed the respondents to consider the
petitioner's representations dated 29.10.2020 and others so
submitted to the respondents and consider refund in terms of
the judgment of the Apex Court in the case of CIT vs. SHELLY
PRODUCTS1.
4. What comes about is a notice to the petitioner by
the revenue seeking to set out or adjust towards the demand
that was subsisting for the Assessment Year 2013-14.
5. The learned Senior counsel would contend that
those demands that were subsisting for the Assessment Year
2013-14 had stood obliterated, in so far as one demand was
concerned, and in so far as others, the Tribunal had issued
certain directions. The directions were not implemented.
Therefore, the liberty that was granted by the Tribunal, today
has become time barred. Thus, as on today, there is no
demand subsisting, for the Assessment Year 2013-14.
Notwithstanding the same, the Revenue appears to have
adjusted the refund that is to be made to the petitioner on the
[2003] 5 SCC 461
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imaginary or illusory subsistence of a demand of the
Assessment Year 2013 14.
6. The learned counsel appearing for the respondent-
Revenue Sri.Y.V.Raviraj is not able to demonstrate on the
strength of any document of subsisting demand for the
Assessment Year 2013-14. Therefore, the action of adjusting
the refund towards the demand that is said to have been
subsisting of the Assessment Year 2013-14, is on the face of it
erroneous. If it is erroneous, the petition deserves to succeed.
As the petitioner is already armed with an order of the Co-
ordinate Bench, on determination that the petitioner is entitled
to a refund, which directed consideration of a representation,
the consideration of a representation has led the petitioner
back to the doors of this Court, on the aforesaid score, which is
illegal.
7. In the light of the aforesaid reasons, the petition
deserves to succeed, with the prayer sought to be granted.
8. Therefore, the following:
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ORDER
[i] Petition is allowed.
[ii] The orders impugned stand obliterated.
[iii] The petitioner thus is entitled to the refund that was
sought for in terms of Annexure-B dated 27.06.2024 and
Annexure-M dated 30.01.2025 along with applicable interest.
[iv] The intimations dated 26.12.2024 and 13.03.2025
issued by the 3rd respondent vide Annexures-H and R adjusting
the refunds with non-existing demand of Assessment Year
2013-14, stands quashed.
Ordered accordingly.
Sd/-
(M.NAGAPRASANNA)
JUDGE
CBC
CT:SS
