- 1 - HC-KAR NC: 2025:KHC:45019 WP No. 6403 of 2018 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 6TH DAY OF NOVEMBER, 2025 BEFORE THE HON'BLE MR. JUSTICE S.R.KRISHNA KUMAR WRIT PETITION NO. 6403 OF 2018 (T-IT) BETWEEN: ACQUA BOREWELLS PRIVATE LIMITED A PRIVATE LIMITED COMAPNY INCORPORATED UNDER THE COMPANIES ACT, 1956, HAVING OFFICE AT 7TH MILE, BREWERY HOUSE, KANAKPURA ROAD, BENGALURU-560 062, REPRESENTED BY TIS DIRECTOR, SRI. K. L. SWAMY. …PETITIONER (BY SRI. A. SHANKAR, SENIOR ADVOCATE FOR SRI. M. LAVA AND SMT. SWATHI SUKUMAR, ADVOCATES) AND: 1. THE PRINCIPAL COMMISSIONER OF INCOME TAX BENGALURU 1, BMTC BUILDING, 80 FEET ROAD, 6TH BLOCK, KORAMANGALA, BENGALURU-560 095. 2. THE INCOME TAX OFFICER WARD-1 (1) (1), ROOM NO. 201, 2ND FLOOR, BMTC BUILDING, 80 FEET ROAD, 6TH BLOCK, KORAMANGALA, BENGALURU-560 095. …RESPONDENTS (BY SRI. M. DILIP AND SRI. Y.V. RAVIRAJ, ADVOCATES) THIS W.P IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE NOTICE ISSUED Digitally signed by CHANDANA B M Location: High Court of Karnataka - 2 - HC-KAR NC: 2025:KHC:45019 WP No. 6403 of 2018 UNDER SECTION 148 DATED 30.03.2017 BY RESPONDENT NO.2 MARKED AS ANNEXURE-A1 FOR THE A.Y.2010-11 AS BAD IN LAW; THIS PETITION, COMING ON FOR PRELIMINARY HEARING, THIS DAY, ORDER WAS MADE THEREIN AS UNDER: CORAM: HON'BLE MR. JUSTICE S.R.KRISHNA KUMAR ORAL ORDER In this petition, petitioner seeks for the following reliefs:- “ (a) Issue a writ of certiorari or direction in the nature of a writ certiorari quashing the notice issued under section 148 dated:30.3.2017 by Respondent No.2 marked as Annexure-A1 for the A.Y. 2010-11 as bad in law. (b) Issue a Writ of Certiorari or direction in the nature of a writ of certiorari quashing the order assessment passed by Respondent No.2 under Section 147 of the Act, dated: 31.12.2017 marked as Annexure-A2 for the A.Y. 2010-11 as one without jurisdiction. (C) Issue a Writ of certiorari or direction in the nature of a writ of certiorari quashing the notice of demand issued u/s 156 of the Act pursuant to the above impugned assessment order passed U/s 147 of the Act by the Respondent No.2 on 31.12.2017 for the assessment years 2010-11 marked as Annexure-A3. (d) Issue a writ of Certiorari or direction in the nature of a writ of certiorari quashing the notice of penalty issued u/s 274 r.w.s.271 of the Act pursuant to the above impugned assessment order passed u/s 147 of the Act, by the Respondent No.2 on 31.12.2017 for the assessment years 2010-11 marked as Annexure-A4. - 3 - HC-KAR NC: 2025:KHC:45019 WP No. 6403 of 2018 (e) Declare that the Respondent No.2 erred in law in invoking the provisions of section 147 of the Act on mere surmises, conjectures and suspicion without having any reasons to believe as contemplated under the provisions of section 147 of the Act. (f) And pass such other orders as this Hon’ble Court deems fit and proper in the interest of justice and equity.” 2. A perusal of the material on record will indicate that on 30.03.2017, respondents issued a notice under Section 148 of the I.T.Act to the petitioner in relation to the assessment year 2010-11, to which, the petitioner submitted a reply dated 17.04.2017 intimating them that the original returns are to be treated as returns filed to the said notice. In his reply, petitioner also sought for reasons for the respondents to re-open the assessment proceedings and for details of the approval obtained by the 2nd respondent which would enable him to re-open the assessment. On 01.08.2017, the 2nd respondent issued a notice under Section 142(1) of the I.T.Act to the petitioner followed by copy of the reasons recorded for re-opening which were served on the petitioner on 09.08.2017. On 29.08.2017, the petitioner submitted objections to the re-opening sought to be made by the respondents and also sought for personal hearing. - 4 - HC-KAR NC: 2025:KHC:45019 WP No. 6403 of 2018 3. Thereafter, on 06.10.2017, 2nd respondent issued a letter intimating the petitioner that the returns had been processed under Section 143(1) of the I.T.Act, in pursuance of which, the petitioner addressed communications dated 11.10.2017 and 21.10.2017 informing the 2nd respondent about non-disposal of the objections filed by the petitioner. On 07.12.2017 and 19.12.2017, the 2nd respondent issued notices under Section 142(1) of the I.T.Act, to which the petitioner submitted replies dated 15.12.2017 and 25.12.2017 specifically contending that the objections of the petitioner had not been addressed by the 2nd respondent and called upon him to do so before proceeding further in the matter. It is the grievance of the petitioner that despite the aforesaid facts and circumstances, the 2nd respondent proceed to pass the impugned assessment order without considering the petitioner’s reply or objections by raising a demand in a sum of Rs.3,18,38,330/- against the petitioner, who is before this Court by way of the present petition. 4. Heard learned Senior counsel for the petitioner and learned counsel for the respondents – Revenue and perused the material on record. - 5 - HC-KAR NC: 2025:KHC:45019 WP No. 6403 of 2018 5. In addition to reiterating the various contentions urged in the petition and referring to the material on record, learned Senior counsel for the petitioner submits that the impugned assessment order is illegal and arbitrary, since the objection filed by the petitioner to the reasons recorded by the 2nd respondent for re- opening the assessment had not been addressed, considered or disposed of as required in law, as a result of which, the impugned order was vitiated and deserves to be set aside. It was also contended that apart from the fact that the notice under Section 148 issued by the 2nd respondent contained material errors without stating as to from whom approval had been obtained under Section 151 of the I.T.Act, the mandatory notice under Section 143(2) had also not been issued by the 2nd respondent before passing the impugned assessment order. It was also submitted that the refundable deposit received by the petitioner has been erroneously treated as ‘income’ in the hands of the petitioner, which is impermissible in law, in addition to the fact that the 2nd respondent has purported to re-assess the loss for the purpose of re-opening the assessment and in the absence of any reasons to believe to re- open the assessment as contemplated under Section 147 of the - 6 - HC-KAR NC: 2025:KHC:45019 WP No. 6403 of 2018 Act, the impugned assessment order deserves to be quashed. In support of his submissions, learned Senior counsel placed reliance upon the following judgments:- (i) Deepak Extrusions (P.) Ltd. Vs. DCIT; (2017) 80 taxmann.com 77 (Kar.) (ii) Arvind Mills Ltd. Vs. ACWT; (2004) 27 ITR 469 (Guj.) (iii) Martech Periherals P. Ltd. Vs. DCIT; (2017) 81 taxmann.com 73 (Madras) (iv) KSS Petron Private Ltd. Vs. ACIT in ITA No. 224 of 2014 (Bom.) (v) Ms. Jayanthi Natarajan vs. ACIT; (2018) 401 ITR 215 (Mad.) (vi) Pr. CIT vs. Tupperware India P. Ltd.; (2016) 284 CTR 68 (Delhi) (vii) Standard Chartered Finance Ltd. Vs. CIT; (2016) 67 taxmann.com 54 (SC) (viii) CIT vs. Kurban Hussain Ibrahimji Mithiborwala; (1971) 82 ITR 821 (SC) (ix) CIT vs. B.N. Keshav; ITA No. 21/2003 dated 03.04.2008 (x) CIT vs. Ramaiah Reddy; ITA No. 192/2012 dated 24.06.2020 (xi) CIT v. Laxman Das Khandelwal; (2019) 417 ITR 325 (SC) (xii) CIT v. Hotel Blue Moon; (2010) 321 ITR 363 (SC) - 7 - HC-KAR NC: 2025:KHC:45019 WP No. 6403 of 2018 (xiii) PCIT v. Paramount Biotech Industries Ltd; (2017) 398 ITR 701 (Delhi) (xiv) PCIT v. Oberoi Hotels Pvt Ltd; (2018) 409 ITR 132 (Cal) (xv) Alpine Electronics Asia Pte Ltd v. DGIT and Others; (2012) 341 ITR 247 (Delhi) (xvi) Pai Vinod v. DCIT; (2013) 353 ITR 622 (Karnataka) (xvii) CIT v. Rajeev Sharma; (2011) 336 ITR 678 (Allahabad) (xviii) ACIT v. Greater Noida Industrial Development Authority; (2015) 379 ITR 14 (Allahabad) (xix) CIT v. Mukesh Kumar Agrawal; (2012) 345 ITR 29 (Allahabad) (xx) Metal Alloys Corporation v. ACIT; (2013) 214 Taxman 83 (Guj.) (xxi) CIT v. Gitsons Engineering Co.; (2015) 370 ITR 87 (Madras) (xxii) PCIT v. Ravnet Solutions Pvt Ltd.; (2017) 399 ITR 567 (Delhi) (xxiii) PCIT v. Staunch Marketing Pvt Ltd; (2018) 404 ITR 299 (Delhi) (xxiv) CIT v. Norton Motors; (2005) 275 ITR 595 (P&H) (xxv) CIT v. Bihari Lal Agrawal; (2012) 346 ITR 67 (Allahabad) (xxvi) Nawal Kishore and Sons Jewellers v. CIT; (2012) 79 DTR (All) 241 (Allahabad) - 8 - HC-KAR NC: 2025:KHC:45019 WP No. 6403 of 2018 (xxvii) PCIT v. Shri Jai Shri Jai Shiv Shankar Traders Pvt Ltd.; (2016) 129 DTR (Del) 63 (xxviii) Travancore Diagnostics Pvt Ltd. v. ACIT; (2017) 390 ITR 167 (Ker) (xxix) Indus Towers Ltd v. DCIT; (2017) 82 taxmann.com 430 (Delhi) (xxx) Late Sri Seetharama Shetty v. ACIT; ITA No.733/ 2018 (Kar); (xxxi) Sapthagiri Finance & Investments v. ITO; (2015) 25 taxmann.com 341 (Mad.) (xxxii) CIT vs. Balbir Singh Maini; (2017) 86 taxmann.com 94 (SC) (xxxiii) Jaswant Rai vs. CWT; (1997) 107 ITR 477 (P&H) (xxxiv) Gulabrai Hanumanbox vs. CWT; (1192) 198 ITR 131 (Gauhati) (xxxv) CIT vs. SPL’s Siddhartha Ltd.; (2012) 345 ITR 223 (Delhi)] (xxxvi) Ghanshyam K Khabrani vs. ACIT; (2012) 20 Taxmann.com 726 (Bom.) (xxxvii) GKN Driveshafts (India) Ltd. Vs. ITO; (2003) 259 ITR 19 6. Per contra, learned counsel for the respondents – revenue would reiterate the various contentions urged in the statement of objections and submits that there is no merit in the petition and the same is liable to be dismissed. - 9 - HC-KAR NC: 2025:KHC:45019 WP No. 6403 of 2018 7. I have given my anxious consideration to the rival submissions and perused the material on record. 8. As rightly contended by the learned Senior counsel for the petitioner, the undisputed material on record will indicate that in response to the reasons recorded by the 2nd respondent for re- opening the assessment, the petitioner filed objections on 29.08.2017 which were undisputedly not considered, addressed or disposed of by the 2nd respondent before passing the impugned order, which stands vitiated in the light of the well settled position of law as held by the Apex Court and this Court in various judgments including GKN Driveshafts’ s case supra, wherein it has been held that it is incumbent and obligatory on the part of the 2nd respondent to dispose of the objections filed by the petitioner before passing the impugned assessment order, which deserves to be set aside on this ground alone. 9. A perusal of the material on record will also indicate that the 2nd respondent had not issued the mandatory notice under Section 143(2) of the I.T.Act, which is another circumstance vitiating the impugned order as held by the Apex Court and this - 10 - HC-KAR NC: 2025:KHC:45019 WP No. 6403 of 2018 Court in various judgments including the judgment of this Court in Ramaiah Reddy’s case supra and consequently, the impugned order deserves to be quashed on this ground also. 10. A perusal of the impugned assessment order will indicate that the petitioner had entered into an MoU dated 15.03.2010 with M/s.Khoday Eshwarsa & Sons, under which, petitioner received a refundable deposit of Rs.5 crores which has also been erroneously held to be income in the hands of the petitioner without appreciating that the said sum was received by the petitioner only as a refundable deposit which can be never construed, considered or treated as an income in the hands of the petitioner, especially when as per the MoU, the other parties among whom the refundable deposit is to be collectively apportioned as per the agreement. Further, the Assessing officer of the other party namely M/s.Khoday Eshwarsa & Sons has passed an assessment order dated 27.12.2017 categorically holding that under the aforesaid MoU, there was no transfer during the financial year 2009-10 by placing reliance upon the judgment of the Apex Court in Balbir Singh Maini’s case supra, and consequently, the petitioner being co-owner along with the other party, there cannot - 11 - HC-KAR NC: 2025:KHC:45019 WP No. 6403 of 2018 be different treatment of the petitioner and by applying / invoking the doctrine of parity, the 2nd respondent could not have treated the refundable deposit received by the petitioner as income in his hands as erroneously held in the impugned assessment order which deserves to be quashed on this score also. 11. Though several other grounds and contentions have been urged by the petitioner and respondents in support of their respective claims by placing reliance upon the aforesaid judgments, having regard to the findings recorded by me hereinbefore and the facts and circumstances obtaining in the instant case, the same are not dealt with elaborately for the purpose of the present order and as such, I am of the considered opinion that the impugned orders, notices and all consequential proceedings pursuant thereto are illegal, arbitrary and without jurisdiction or authority of law and contrary to the provisions of the I.T.Act warranting interference by this Court in the present petition. 12. In the result, I pass the following:- ORDER (i) Petition is hereby allowed. - 12 - HC-KAR NC: 2025:KHC:45019 WP No. 6403 of 2018 (ii) The impugned notice at Annexure-A1 dated 30.03.2017, Order at Annexure-A2 dated 31.12.2017, demand notice at Annexure-A3 dated 31.12.2017 and penalty notice at Annexure-A4 dated 31.12.2017 and all further proceedings pursuant thereto are hereby quashed. Sd/- (S.R.KRISHNA KUMAR) JUDGE SV/SRL List No.: 2 Sl No.: 0