Karnataka High Court Rules in Favor of Mukesh Bansal
The Karnataka High Court has ruled in favor of Mukesh Bansal, co-founder of Myntra and Cult.fit, by setting aside the revision proceedings initiated by the Income Tax Department concerning a tax refund of ₹27.13 crore for the Assessment Year 2019-2020.
In the case of Mukesh Bansal v. Principal Commissioner of Income Tax, Bengaluru-2, Justice S Sunil Dutt Yadav determined that the notice issued to Bansal lacked jurisdiction and thus needed to be annulled. The court highlighted that an intimation under Section 143(1) of the Income Tax Act cannot be equated with an assessment order for the purposes of exercising revision powers under Section 263.
Key Judicial Observations
Justice Yadav clarified the limitations of treating an intimation as an order, noting, “The treating of an intimation under Section 143(1) as a notice of demand is a legal fiction that cannot be extended to deeming the passing of an Assessment Order prior to an intimation.” The court delivered this ruling on September 18.
Mukesh Bansal had declared an income of ₹231.73 crore for the year 2019-20, with a tax liability amounting to ₹82.55 crore. Initially claiming a refund of ₹6.07 lakh, Bansal later sought a larger refund of ₹27.13 crore following a revised return submission.
Dispute and Court Proceedings
The dispute arose when Bansal requested a delay condonation in January 2024 and submitted a revised return for AY 2019-20. He reclassified the Repurchase of Employee Stock Options (ESOPs) from ‘Capital Gains’ to ‘Salary’, leading to the significant refund claim. Although the revised return was processed, the Revenue sought to revise the refund order, prompting Bansal to challenge the proceedings in court.
The court emphasized the narrow scope for adjustments under Section 143(1), which does not allow for extensive discretion. Conversely, Section 143(2) allows for scrutiny, resulting in an Assessment Order. Justice Yadav noted, “Having lost out on time to initiate proceedings under Section 143(2), the Revenue cannot readily resort to the proceedings under Section 263 without establishing that the intimation under Section 143(1) of the I.T. Act constitutes an Assessment Order.”
Legal Representation
The court further stated that any inquiry into whether ‘Repurchase of ESOPs’ should be treated as ‘Salary’ rather than ‘Capital Gains’ would extend beyond the jurisdiction of Section 143(1). Therefore, in this factual context, the application of Section 263 was deemed inappropriate.
Mukesh Bansal was represented by advocates Prashant S Shivadass, Gayathri GS, Prahalad Sriram, and Siddhant Kishanpuria. Representing the Principal Commissioner of Income Tax were Additional Solicitor General Aravind Kamath and Advocate EI Sanmathi.
