IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 23^RD DAY OF SEPTEMBER, 2025 PRESENT THE HON'BLE MR. JUSTICE S.G.PANDIT AND THE HON'BLE MR. JUSTICE K. V. ARAVIND INCOME TAX APPEAL No. 289 OF 2021 BETWEEN:

1. PR. COMMISSIONER OF INCOME TAX-2, BMTC COMPLEX, KORAMANGALA, BANGALORE.

2. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE -4 (1) (1), BENGALURU.

…APPELLANTS Digitally signed by VALLI MARIMUTHU (BY SRI SANMATHI E I., SENIOR STANDING COUNSEL)

Location:

HIGH COURT OF AND:

KARNATAKA

1. M/S KARNATAKA POWER CORPORATION LIMITED, No.82 SHAKTHI BHAVAN, RACE COURSE ROAD, BENGALURU-560001.

…RESPONDENT (BY SRI A. SHANKAR, SENIOR ADVOCATE FOR SRI ANNAMALAI S., ADVOCATE)

THIS ITA/ INCOME TAX APPEAL IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961 ARISING OUT OF ORDER DATED 11.01.2021 PASSED IN ITA No.282/BANG/2017, FOR THE ASSESSMENT YEAR 2002-2003 PRAYING TO DECIDE THE FOREGOING QUESTION OF LAW AS MAY BE FORMULATED BY THE HON'BLE COURT AS DEEMED FIT. SET ASIDE THE APPELLATE ORDER DATED 11.01.2021 PASSED BY THE INCOMETAX APPELLATE TRIBUNAL 'A' BENCH, BENGALURU, AS SOUGHT FOR, IN THE RESPONDENT - ASSESSEE'S CASE IN APPEAL PROCEEDINGS No.282/BANG/2017 (ANNEXURE-A) , FOR THE ASSESSMENT YEAR 2002-2003.

THIS APPEAL, COMING ON FOR HEARING THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER:

CORAM: HON'BLE MR. JUSTICE S.G.PANDIT and HON'BLE MR. JUSTICE K. V. ARAVIND

ORAL JUDGMENT

(PER: HON'BLE MR. JUSTICE K.V. ARAVIND)

The revenue is in appeal challenging the order in ITA No.282/Bang/2017 for the Assessment Year 2002-03 dated

11.01.2021.

2. The following substantial questions of law are admitted on 04.02.2022.

"(i) Whether on the facts and in the circumstances of the case, the tribunal is right in law in holding that computation of deduction under Section 80I was never the subject matter of issue in any proceeding and as such limitation under Section 154(7) of the Act would have to be reckoned from the date of original assessment order dated 0.02.2005 passed under Section 143(3) of the Act and as such rectification order passed by assessing authority dated 28.03.2012 would be barred by limitation ignoring that entire assessment has merged with appellate order where under the statute, the appellate authority is given plenary jurisdiction over the entire order, irrespective of the appeal being restricted to only a part of the order of the lower authority?

(ii) Whether the order passed by tribunal can be said as perverse in law in holding that rectification order passed by assessing authority is barred by limitation when the said order has been passed to rectify the mistake occurred and ignoring law regarding merger of orders in appellate orders and jurisdiction of assessing authority to rectify the same?"

3. The assessee filed return of income on 30.10.2002 declaring an income of Rs.246,40,54,707/-. The Assessing Officer completed the assessment under Section 143(3) of the Income Tax Act, 1961 (for short 'the Act') dated 10.02.2005. The said order was subjected to revision under Section 263 of the Act by the Commissioner of Income Tax in respect of two issues.

(i) Donation of Assets of Rs . 2,18,08,292/-.

(ii) Loss of assets of Rs . 2,19,73,292/-.

In exercise of power under Section 263 of the Act, the Commissioner set aside the assessment order and directed the Assessing Officer to recompute the loss as per the directions. The order under Section 263 of the Act was carried in appeal by the assessee before the Income Tax Appellate Tribunal, Bangalore Benches "A', Bangalore (for short ITAT'). However, the ITAT did not interfere with the direction issued to the Assessing Officer.

4. The Assessing Officer giving effect to the order of the Commissioner under Section 263 of the Act and the order of the ITAT passed order under Section 143(3) read with Section 254 of the Act on 20.10.2011. The Assessment Order dated 20.10.2011 determined the tax liability in conformity with the directions of the Commissioner. Thereafter, the Assessing Officer issued notice under