Commissioner Of Income Tax Chennai v. M/S Indbank Housing Ltd., 480, Anna Salai, Nandanam, Chennai-35

In the High Court of Judicature at MadrasDated : 08.07.2008 Coram :- The Honourable Mr.Justice K.RAVIRAJA PANDIANandThe Honourable Mr.Justice P.P.S.JANARTHANA RAJA Tax Case (Appeal) No.676 of 2008 Commissioner of Income TaxChennai. .. Appellant Vs. M/s Indbank Housing Ltd.,480, Anna Salai,Nandanam, Chennai-35. .. Respondent TAX CASE (APPEAL) filed under Section 260A of the Income TaxAct against the order of the Income Tax Appellate Tribunal Madras 'A'Bench dated 27.10.2006 in I.T.A.No.581/Mds/2005 for the assessmentyear 1996-1997. Against the order of the Commissioner of Income-Tax(Appeals)-XI, Chennai in ITA.TR.No.162/ITA.142/2004-05/A-XI dated29/12/2004 for the assessment year 1996-1997. Against the order of Assistant Commissioner of Income-TaxCompanyCircleII(3),Chennai-34,inG.I.No./P.A.No.IXI-024/AAAC11777M dated 26-3-2004 for the assessment year 1996-97. For Appellant : Mr.J.Naresh Kumar (Judgment of the Court was delivered by P.P.S.JANARTHANA RAJA,J) This appeal is filed by the Revenue against the order of theIncome Tax Appellate Tribunal Madras 'A' Bench dated 27.10.2006 inI.T.A.No.581/Mds/2005 for the assessment year 1996-1997 raising thefollowing substantial questions of law. https://hcservices.ecourts.gov.in/hcservices/ "1. Whether in the facts and circumstances of the case,the Tribunal was right in holding that the reopening ofassessment under Section 147 was invalid when the assesseehad failed to furnish all the relevant material todisclose fully and truly all material facts necessary forproper assessment? 2.Whether the non disclosure of material facts viz.,norms of National Housing Bank based on which the assesseesubstantiated certain provisions would amount to full andtrue disclosure? 2. The brief facts are as follows:- The assessee is engaged in the business of housing finance.The relevant assessment year is 1996-1997 and the correspondingaccounting year ended on 31.03.1996. The assessee has filed thereturn of income on 28.11.1996 admitting the total income ofRs.1,96,31,710/-. The assessment was made on 27.10.1998 underSection 143(3) of the Income Tax Act. Subsequently the assessment wascompleted under Section 143(3) read with Section 147 of the IncomeTax Act on 29.01.2002 determining the income at Rs.2,13,18,659/-.Once again, the assessment was re-opened under Section 147 of theAct by issuing notice on 25.03.2003 on the ground that there wasescapement of income and the re-assessment was completed on26.03.2004 determining the total income at Rs.4,80,64,413/-. It isnoticed that the assessee has not recognised interest to the extentof Rs.1,91,37,015/- in respect of non-performing assets under thehead 'provision for contingencies' provided for housing loan andinvestments to the extent of Rs.1,92,78,560/- and the assessee hasalso written-off the amount payable by M/s Flesta Properties.Therefore the Assessing Officer was of the view that there was afailure to admit the correct income and, hence, the income escapedassessment. Aggrieved by the second order of re-assessment, theassessee has filed an appeal before the Commissioner of Income Tax(Appeals). The Commissioner of Income Tax(Appeals) has allowed theappeal and held that the re-opening was bad in law. Aggrieved bythat order, the assessee has filed an appeal to the Income TaxAppellate Tribunal and the Tribunal dismissed the appeal filed by theRevenue confirming the order of the Commissioner of Income Tax(Appeals). Hence, the present appeal. 3. Learned counsel appearing for the Revenue has submitted thatthe assessee has not furnished all the information to the AssessingOfficer. He further contended that the Assessing Officer was rightin holding that the assessee failed to admit the correct income andtherefore, the income escaped assessment and the Assessing Officerwas also right in invoking the jurisdiction to initiate proceedingunder Section 147 of the Income Tax Act. Therefore, the order passedby the Tribunal is not in accordance with law and the same should beset aside. 4. Heard the learned counsel appearing for the Revenue. There isno dispute that the appellant has filed an elaborate note on27.10.1998 on interest income on NPAs before the Assessing Officer asto why the same is not declared. Based on the prudential norms,such income was not disclosed and the said fact was informed to theDepartment and also National Housing Bank Act, 1987 was alsoenclosed with the note. Further, the assessee filed a copy of theBoard Resolution along with the return of income with regard towriting off the bad debts in the account of M/s Flesta properties.So all the informations were furnished truly and fully disclosed tothe Department at the time of filing of return by the assessee. Whenall the facts are available with the Department, the authority has nojurisdiction to initiate proceeding under Section 147 of the Act.Here, the Assessing Officer re-opened the assessment on mere changeof opinion. The assessee relied on the proviso to Section 147 of theAct. Unless these conditions are stated in the proviso, theAssessing Officer cannot acquire jurisdiction to initiate anyproceeding under Section 147 of the Act. It is also noted thatinitiation of proceeding is beyond the period of four years from theend of the assessment year. When all the relevant materials areavailable at the time of the assessment, the assessing Officer cannotre-open the assessment on mere change of opinion. There is nodispute that all the material evidence are with the Department. Soit cannot be held that the income escaped assessment.In a case,where the assessment was completed under Section 143(3) of the Actand the re-opening of the same under Section 147 of the Act isbeyond the period of four years, it can be sustained only if itis established that there is a failure on the part of the assessee todisclose all material facts fully and truly. But there was no suchfinding that there was a failure on the part of the assessee todisclose fully and truly all material facts necessary for assessment.Considering the above facts, the Commissioner of Income Tax (Appeals)held as follows: "The other issue relating to provision of 1.92 croresthe appellant states that it is added and declared asincome on its own in the computation statement. Thusit is the plea of the appellant that there is nofailure on the part of the assessee to disclose anyfact at any stage. It is true that the appellant hasdisclosed the above matters fully and truly before theAssessing Officer in the earlier proceedings. Therecords show that already 143(3) assessment was doneon 27.10.98 and 143(3) read with Section 147 wascompleted on 29.01.2002. In view of these facts andthe principles laid down by the Madras High Court inthe case of Fenner India Vs. DCIT 241 ITR 672 I holdthat the re-opening of assessment under Section 147 isnot valid in law. In so far as the proceedings under Section 147 is valid, the subsequent proceedings arealso vitiated. Since the reopening is held bad in law,there is no necessity for me to go into the merits ofthe case. The assessing officer is free to take anyother course of action to bring to tax these sums,provided it is permitted by law. The appeal of theassessee on the issue of re-opening under Section 147is allowed." On further appeal, the Income Tax Appellate Tribunal has alsoconsidered all relevant facts and held as follows: Section 147 is valid, the subsequent proceedings arealso vitiated. Since the reopening is held bad in law,there is no necessity for me to go into the merits ofthe case. The assessing officer is free to take anyother course of action to bring to tax these sums,provided it is permitted by law. The appeal of theassessee on the issue of re-opening under Section 147is allowed." On further appeal, the Income Tax Appellate Tribunal has alsoconsidered all relevant facts and held as follows: "It was stated on behalf of the assessee that all theinformation was available in the records. There was nofailure on its part to disclose fully all materialfacts necessary for the assessment. CIT(A) has given acategorical finding that assessee did file along withthe return copy of the Board resolution with regard tothe write off of bad debts in the account of M/s FiestaProperties. This fact was disclosed to the Departmentat the time of filing of the return. Further anelaborate note was submitted on 21.10.1998 on interestincome on NPAs before the AO. Based on the prudentialnorms such income was not disclosed and this fact wasinformed to the Department. In regard to the provisionthe CIT (A) noted that the assessee added and declaredthe income on its own in the computation statement. TheCIT(A) stated in the order, " it is true that theappellant has disclosed the above matters fully andtruly before the Assessing Officer in the earlierproceedings." Relying on the decision of thejurisdictional High Court rendered in the case of Fenner(India) Ltd. Vs. Deputy Commissioner of Income Tax (241ITR 672)(Mad.) it was held that the conditions precedentfor assuming jurisdiction under Section 147 did notexist. We have perused the reasonings adduced in theimpugned order. In our opinion, CIT (A) took a correctview in the matter and his order calls for nointerference on this count. Accordingly, we uphold thesame." Both the authorities have given concurrent finding that there is nofailure on the part of the assessee in disclosing the facts fullyand truly before the Assessing Officer and also the re-assessmentis made only on mere change of opinion. The authorities havecorrectly followed the principle enunciated in the judgment of thisCourt in the case of Fenner (India) Ltd. Vs. Deputy Commissioner ofIncome Tax (241 ITR 672)(Mad.). The finding given by the Tribunal isbased on valid materials and evidence. It is a question of fact butnot a perverse order. Hence, we do not find any error or infirmity in the order of the Tribunal warranting interference and the order ofthe Tribunal is in accordance with law and the same is confirmed. Inthese circumstances, no substantial question of law arises out of theorder of the Tribunal and the Tax Case (Appeal) is liable to bedismissed and accordingly it is dismissed. Sd/-Assistant Registrar./true copy/Sub. Assistant Registrar.raaTo1.Assistant Registrar, Income-Tax Appellate Tribunal, III Floor,Rajaji Bhavan, Besant Nagar, Madras 90 2.The Commissioner of Income Tax(Appeals)XI, Chennai–34.3.The Assistant Commissioner of Income Tax Circle-II(3) Chennai-34.4.The Commissioner of Income Tax, Chennai.+ 1 CC to Mr.Pushya Sitaraman,S.S.C.-IT.Dept.in SR NO.35661. Tax Case (Appeal) No.676 of 2008ss(co)pmk/29.7.08.