Commissioner Of Income Tax Corporate Ward 3(4) Chennai v. Shri.b.suresh Kumar

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 16.09.2020 CORAM THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAMandTHE HONOURABLE MRS.JUSTICE V.BHAVANI SUBBARAYON T.C.A.No.317 of 2020 Commissioner of Income TaxCorporate Ward 3(4)Chennai. ..Appellant/RespondentVersus Shri.B.Suresh Kumar,No.14, Poes Road, 1[st] Street,Teynampet, Chennai 600 018PAN ALHPS0004J ..Respondent/ Appellant Prayer:- Tax Case Appeal filed under Section 260-A of the IncomeTax Act, 1961, against the order of the Income Tax AppellateTribunal, ''A'' Bench, Chennai dated 17.02.2020 inI.T.A.No.1152/Chny/2019.TCA No.317 of 2020: Appeal against the order dated 25.01.2019made in ITA.No.99(T)CIT(A)-7/2017-18 on the file of theCommissioner of Income Tax (Appeals-7) Chennai for theAssessment year 2009-10 and as against the Order dated30.11.2016 made in PAN. on the file of the Income TaxOfficer, corporate ward-3(4) Chennai for the Assessment year2009-2010 and as against the order dated 29.06.2011 made in GIRNO/PANALHPS0004J on the file of the Assistant Commissioner ofIncome Tax, Company circle III(4), Chennai for the Assessmentyear 2009-10. For Appellant: Mr.M.Swaminathan Senior Standing Counsel [Order of the Court was made by T.S.SIVAGNANAM, J.] This appeal, filed by the Revenue, under Section 260A of theIncome Tax Act, 1961 ('the Act' for brevity) is directed againstthe order dated 17.02.2020 passed by the Income Tax AppellateTribunal Bench 'A' Chennai ('the Tribunal' for brevity) inI.T.A.No.1152/Chny/2019 for the Assessment Year underconsideration (AY 2009-10). The appeal is entertained on thefollowing Substantial Questions of Law: 1.Whether on the facts and in the circumstancesof the case, the Income Tax Appellate Tribunal wasright in quashing the reassessment order of theassessing officer u/s.147? 2.Whether on the facts and in the circumstance ofthe case the Income Tax Appellate Tribunal was rightin holding that the notice issued u/s.147 does notsatisfy the legal condition laid in the 1[st] proviso ofthe Act? 2. We have elaborately heard Mr.M.Swaminathan, learnedSenior Standing counsel assisted by Ms.V.Pushpa andMs.S.Premalatha, learned standing counsels for the appellant /Revenue. 3. The assessee is a liasoning agent and trading in medicalequipments. He filed its Return of Income on 28.09.2009, whichwas processed under Section 143(1) of the Act. Subsequently, thecase was selected for scrutiny. Notice was issued under Section143(2) of the Act and the Assessing Officer records that theassessee represented by a Chartered Accountant appeared andfurnished details. After discussing with the assessee and hisrepresentative, the assessment was completed under Section 143(3) of the Act by order dated 29.06.2011. After a period of fouryears and within the period of six years, the assessment wassought to be reopened by issuance of notice dated 25.01.2016.The reason for reopening appears to be that the AssessingOfficer, on perusal of the records found from the Profit andLoss Account (P&L A/c) that the assessee has offered a sum ofRs.1,99,28,844/- of service charges for which the assessee hasenclosed a statement of details and upon verification, theAssessing Officer found that there is differences between thecharges received as per TDS certificate and charges offered inP&L A/c. The assessee requested for furnishing the reasons forreopening which was duly furnished, after which the assesseefiled their objection on 19.10.2016. The objection raised by theassessee for reopening the assessment did not find favour withthe Assessing Officer, who had rejected the same and completedthe assessment under Section 143(3) read with Section 147 of theAct by order dated 13.11.2016. 4. Aggrieved by such order, the assessee preferred an appealbefore the Commissioner of Income Tax-7, Chennai [CIT(A)]. TheCommissioner took the appeal for consideration under two heads,firstly with regard to the reopening of the assessment andsecondly with regard to the disallowance under Section 40(a)(ia)of the Act. With regard to the reopening of the assessment, theassessee appears to have given a elaborate submission as to whythe Assessing Officer has initially completed the assessmentunder Section 143(3) of the Act. However, CIT(A) opined that as per CBDT's instruction No.9/2006 dated 07.11.2006, remedialaction has to be mandatorily taken where the Revenue Audit Partyraises an objection which is the case of the respondent and theAssessing Officer has also taken the approval of the PrincipalCommissioner of Income Tax to reopen the assessment beyond 4years. Therefore, the objection raised by the assessee wasrejected. Thus we find that the CIT(A) did not examine theassessee's objection as to whether the reopening was justifiedand the parameters required to be fulfilled under First Provisoto Section 147 of the Act. What appears to have run in the mindsof the CIT(A), is the instructions given by the Central Board ofDirect Taxes (CBDT). This Court heard the learned Senior Counselfor the Revenue on this aspect from which we were able todecipher the normal procedure that is followed when an auditobjection is raised, it is communicated to the Income TaxDepartment and to the assessee. At the first instance, it is forthe Income Tax Department to satisfy the Audit Department byproper explanation or otherwise the issue has to be taken withthe assessee, one such mode being reopening the assessment.Therefore, the CIT (A) may not be right in stating that onaccount of the instructions issued by the CBDT, mandatorily, theassessment has to be reopened. The reopening of the assessmentwould arise, if in the opinion of the Department (Income TaxDepartment) the objection raised by the Audit Department isjustified. 5. Be that as it may, the CIT(A) did not consider as towhether the income chargeable to tax has escaped assessment, onaccount of failure on the part of the assessee to disclose fullyand truly all material facts necessary for the Assessment forthe relevant Year. 6. It is an argument of Mr.M.Swaminathan, learned SeniorCounsel for the Revenue that the case of the assessee would fallunder 1[st] proviso to Section 147 of the Act and the reasonsassigned by the Tribunal for setting aside the revisedassessment is incorrect and falls foul of Explanation 1 ofSection 147 of the Act. It is the further argument that mereproduction of records and account books before the AssessingOfficer would not necessarily amount to disclosure within themeaning of 'Disclosure' as mentioned under 1[st] proviso to Section147 of the Act. 7. The correctness of the submission will be decided byexamining the relevant facts. At the first instance, theassessee objected to the reopening of the assessment bycontenting that there was no fresh tangible materials with theAssessing Officer to reopen the assessment. After obtaining thereasons for reopening, the assessee has specifically stated thatwhen the original assessment was completed under Section 143(3) 7. The correctness of the submission will be decided byexamining the relevant facts. At the first instance, theassessee objected to the reopening of the assessment bycontenting that there was no fresh tangible materials with theAssessing Officer to reopen the assessment. After obtaining thereasons for reopening, the assessee has specifically stated thatwhen the original assessment was completed under Section 143(3) of the Act, all the details were called for by the AssessingOfficer which were furnished in full form and details of partywise service charges credited in the P&L A/c was also furnished.Further the assessee stated that in the original AssessmentOrder dated 29.06.2011, while giving credit for TDS, theAssessing Officer has clearly mentioned that the TDS credited isas per NSDL. Further more, the assessee specifically stated thatthe Assessing Officer has verified the credit of TDS inaccordance with the NSDL as well as corresponding servicecharges admitted in the return of income. If such was the standtaken by the assessee, it was the duty on the part of theAssessing Officer who proposes to reopen by exercising his powerunder Section 147 of the Act to test the correctness of thesubmission, for which, the assessment files should have beenexamined in its entirety. A change of the Assessing Officercannot be a ground for exercising the power of re-assessmentespecially when scrutiny assessment under Section 143(3) of theAct was completed. Further more, in the original AssessmentOrder dated 29.06.2011, the Assessing Officer has specificallyrecorded that in response to the notice issued under Section 143(2) of the Act, a Chartered Accountant of the assessee appearedand details called for were filed and the matter was discussedwith the assessee and the Chartered Accountant and it wascompleted. Further it could be seen from the original AssessmentOrder that TDS credit was as per NSDL. If such is thecircumstances, it needs to be seen as to whether any freshtangible material was available with the Assessing Officer tojustify the reopening of the assessment. We find none to beavailable on record as is evident from the Assessment Orderdated 30.11.2016, wherein the Assessing Officer himself statesthat after the assessment was completed under Section 143(3) ofthe Act, on perusal of the records, it was seen from the P&L A/cthat there is differences between charges received as per TDSCertificate and charges offered in the P&L A/c. When theassessment was completed under Section 143(3) of the Act, thisaspect, was noted by the Assessing Officer, namely thedifferences between the charges received as per TDS Certificateand charges offered in P&L A/c and that perhaps was the reasonfor the Assessing Officer to record the TDS credit is as perNSDL. 8. Therefore, in our considered view, the Tribunal was fullyjustified in holding that reopening the assessment beyond fouryears was a clear change of opinion and did not satisfy therequirements to be fulfilled in terms of 1[st] proviso to Section147 of the Act. Thus, the Revenue has not made out any ground tointerfere with the order passed by the Tribunal. 9. Accordingly, the Tax Case Appeal is dismissed and theSubstantial Questions of Law are answered against the Revenue.No costs. Sd/- Assistant Registrar //True Copy// Sub Assistant Registrar To 1.The Income Tax Appellate Tribunal,A Bench, Chennai 2.The Commissioner of Income Tax(Appeals)-7,Chennai 3.The Income Tax Officer, Corporate Ward-3(4), Chennai 4.The Assistant Commissioner of Income Tax,Company Circle III(4), Chennai +1cc to Mr.M.Swaminathan, Advocate in SR.NO..30353 T.C.A.No.317 of 2020 LN(CO) RV(13/10/2020)