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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

DATED THIS THE 08^TH DAY OF FEBRUARY 2021

PRESENT

THE HON’BLE MR. JUSTICE ALOK ARADHE

AND

THE HON’BLE MR. JUSTICE NATARAJ RANGASWAMY

I.T.A. NO.88 OF 2015

BETWEEN:

M/S KARNATAKA FINANCIAL SERVICES LIMITED

(IN LIQUIDATION)

REP. BY THE OFFICE OF THE

OFFICIAL LIQUIDATOR

HIGH COURT OF KARNATAKA

NO.26-27

CORPORATE BHAVAN

12TH FLOOR

RAHEJA TOWERS

M.G. ROAD

BANGALORE - 560001.

... APPELLANT

(BY SRI. A SHANKAR SENIOR WITH

SRI. V. CHANDRASEKHAR AND BHAIRAV KUTTAIAH ADVS.,)

AND:

ASSISTANT COMMISSIONER OF INCOME TAX

CENTRAL CIRCLE- V

C.R. BUILDING

QUEENS ROAD

BANGALORE - 560 001.

... RESPONDENT

(BY SRI.K.V. ARAVIND FOR ADV.,)

- - -

THIS I.T.A. IS FILED UNDER SEC. 260-A OF INCOME TAX

ACT 1961, ARISING OUT OF ORDER DATED 17.10.2014 PASSED

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IN IT(SS)A NO.115/BANG/1997 FOR THE ASSESSMENT YEAR

1986-87 TO 1996-97, PRAYING TO:

(i) FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW

STATED ABOVE.

(ii) ALLOW THE APPEAL AND SET ASIDE THE FINDINGS TO

THE EXTENT AGAINST THE APPELLANT IN THE ORDER PASSED BY

THE INCOME TAX APPELLANT TRIBUNAL, BANGALORE "B'' BENCH

IN IT(SS)A NO.115/BANG/1997 DATED: 17.10.2014 FOR THE

ASSESMENT YEARS 1986-87 TO 1996-97

THIS I.T.A. COMING ON FOR FURTHER HEARING, THIS DAY,

ALOK ARADHE J., DELIVERED THE FOLLOWING:

JUDGMENT

This appeal under Section 260A of the Income Tax

Act, 1961 (hereinafter referred to as the Act for short)

has been preferred by the assessee. The subject matter

of the appeal pertains to the Block Assessment years

1986-87 to 1996-97. The appeal was admitted by a

bench of this Court vide order dated 31.08.2015 on the

following substantial questions of law:

1.

Where the Tribunal is justified in

law in not holding that the block assessment

order passed by the assessing office for the

block assessment years 1986-87 to 1996-97

is barred by limitation on the facts and

circumstances of the case?

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2.

Whether the Tribunal is correct in

law in holding there was material evidence

found and seized in the course of search

under section 132 of the Act on the basis of

which the alleged excess depreciation is to be

brought to tax in the block assessment made

under chapter XIV-B of the Act on the facts

and circumstances of the case?

3.

Whether the Tribunal is justified in

upholding the action of the assessing officer

in invoking the provisions of explanation 3 to

section 43(1) of the Act even when the same

is

not

warranted,

on

the

facts

and

circumstances of the case?

4.

Whether the Tribunal is justified in

law in holding that the value of the assets is

to be adopted at Rs.2,00,00,000/- for the

purpose

of

depreciation

in

place

of

Rs.1,00,00,000/- adopted by the assessing

officer as against the actual incurred by the

appellant of Rs.3,62,52,209/- on the facts

and circumstances of the case?

5.

Without prejudice, whether the

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Tribunal erred in law in not appreciating that

if the value of the assets is adopted at an

amount lower than the value agreed upon by

the parties of Rs.32,62,52,209/-, then a

proportionate reduction in lease rentals will

have to be made as otherwise it would result

in

double

taxation

on

the

facts

and

circumstances of the case?

2.

Facts leading to filing of this appeal briefly

stated are that the assessee is a company in liquidation

and for the relevant Block Assessment Year viz., 1986-

87 to 1996-97 was carrying on the business of financial

activity in equipment leasing. A search under Section

132 of the Act was conducted at the premises of the

appellant and its Directors on 29.03.1996. Thereafter, a

notice was issued to the appellant under Section 158BC

requiring the assessee to file return of income from

block period pending on 29.03.1996. The return of

income in Form-2B was filed on 02.12.1996. The

Assessing Officer by an order dated 30.05.1997 inter

alia held that the assessee purchased the assets from

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M/s PL Fin