The Karnataka High Court has set aside the revision proceedings initiated by the Income Tax (IT) Department against entrepreneur Mukesh Bansal in relation to a refund of over ₹27.13 crore return for the Assessment Year 2019-2020 [Mukesh Bansal v Principal Commissioner of Income Tax, Bengaluru-2]
Justice S Sunil Dutt Yadav held the notice issued to Bansal, who co-founded Myntra, Cult.Fit, and Meraki Labs, for hearing of the revision proceedings was without any jurisdiction and required to be set aside.
The Court ruled that the intimation under Section 143(1) could not be treated as an order for the purpose of revision of power under Section 263 of the IT Act.
"The treating of an intimation under Section 143(1) as a notice of demand is by a fiction of law which cannot be extended to deeming the passing of an Assessment Order prior to an intimation," the Court said on September 18.
Bansal had declared income of ₹231.73 crore for the year 2019-20, tax liability of ₹82.55 crore and claimed a refund of ₹6.07 Lakh. The same was processed.
The dispute began when Bansal sought a condonation of delay in January 2024 and filed a revised return for AY 2019-20. In the revised return, Bansal claimed the Repurchase of Employee Stock Options (ESOPs) under the head of 'Salary' rather than 'Capital Gains' as previously filed.
Due to this, Bansal claimed he was eligible for a refund of ₹27.13 crore. While the revised return was processed and the refund was ordered, the same was sought to be revised by the Revenue.
Bansal moved the Court, arguing that power under Section 263 could be exercisable only against an order passed in the proceedings under the IT Act, while an intimation under Section 143(1) is not an order.
Considering the Revenue’s powers in this regard, the Court found that the adjustments permitted under Section 143(1) are narrow and limited, with not much discretion. In contrast, the Court said that Section 143(2) provides for scrutiny and leads to the passing of an Assessment Order.
“Having lost out on time to initiate proceedings under Section 143(2), the Revenue cannot readily resort to the proceedings under Section 263 by construing without establishing that the intimation under Section 143(1) of the I.T. Act into an Assessment Order,” the Court added.
The Court further said that the Assessing Officer under Section 143(1) may be of the view that ‘Repurchase of ESOPs’ cannot be treated as income from ‘Capital Gains’ and must be treated as ‘Salary’ but such inquiry would immediately take the proceedings outside the purview of Section 143(1).
“Where the intimation under Section 143(1) does not amount to an order, the question of resorting to Section 263 in the present factual matrix does not arise,” the Court ruled.
Advocates Prashant S Shivadass, Gayathri GS, Prahalad Sriram and Siddhant Kishanpuria appeared for Mukesh Bansal.
Additional Solicitor General Aravind Kamath and Advocate EI Sanmathi appeared for the Principal Commission of Income Tax.
[Read Order]