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Karnataka High Court in the case of Flipkart India (P.) Ltd. vs. ACIT in Writ Petition Nos. 1339 to 1342 of 2017 dated 23.02.2017

·            The assessee submitted its ITR declaring huge losses, as in order to enter the E-commerce sector, and in order to secure a market, the assessee was selling goods at prices lower than the purchase price. Thus, ever since the beginning of its business in the year 2011, assessee had been suffering losses.

·            Assessment orders u/s 143(3) were passed for A.Y. 2014-15 and 2015-16 and the tax payable by the assessee was determined to be approximately Rs.29 crores and Rs.137 crores respectively.

·            Assessee filed appeals against both the orders and further filed applications before the AO for keeping the demand in abeyance.

·            However, the AO directed the assessee to deposit 15% of the disputed demand amounting to approximately Rs.3.5 crores and Rs.23 crores for A.Y. 2014-15 and 2015-16 respectively.

·            Assessee further filed review petitions before the Pr. CIT, however, the same were rejected by the Pr. CIT.

·            It was submitted by the assessee submitted before the Court that Circular No. 1914 was partially modified by the Circular dated 29.02.2016, however, the Circular No. 1914 was never superceded by the subsequent Circular.

·            It was further submitted that although the process for granting stay of demand was streamlined by Circular dated 29.02.2016, but it could not mean that the situations of “unreasonably highpitched” or “genuine hardship caused to the assessee” were erased by the Circular dated 29.02.2016.

·            The Court observed that the Circular dated 29.02.2016 clearly stated that the circular was in partial modification of Instruction No. 1914, and therefore, the Circular dated 29.02.2016 could not supercede the Circular No. 1914.

·            The Court, therefore, allowed the writ petitions of the assessee stating that Pr. CIT had failed to consider the issue whether the assessment order suffers from being “unreasonably highpitched” or whether “any genuine hardship would be caused to the assessee”, which were two important factors mentioned in Circular No. 1914.

 

For further reading, refer the attachment.

  Further Reading
Posted on: 15-03-2017