Commissioner Of Income-Tax v. Tbs Publishers And Distributors,Calicut

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE V.K.MOHANAN WEDNESDAY, THE 4TH NOVEMBER 2009 / 13TH KARTHIKA 1931 ITA.No. 164 of 2009() --------------------- ITA.50/COCH/2000 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT/APPELLANT: -------------------- THE COMMISSIONER OF INCOME TAX,KOZHIKODE. BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT(S): --------------- M/S.TBS PUBLISHERS AND DISTRIBUTORS, KOZHIKODE. ADV. SRI.P.BALAKRISHNAN (E) THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 04/11/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: C.N.RAMACHANDRAN NAIR &V.K.MOHANAN, JJ. .................................................................... I.T. Appeal No.164 of 2009 ....................................................................Dated this the 4th day of November, 2009. JUDGMENT Ramachandran Nair, J. The question raised in the appeal filed by the Revenue is whetherthe Tribunal was justified in confirming the order of the C.I.T.(Appeal)cancelling the reassessment completed under Section 147 of theIncome Tax Act in the case of the respondent for the year 1996-1997.We have heard Senior counsel appearing for the appellant andSri.P.Balakrishnan, counsel appearing for the respondent. 2. The assessee filed the return on 29.11.1996 disclosing the totalincome as nil. Return of income was processed under Section 143(1)(a) and intimation was sent on 20.1.1997. However, on 31.1.1997itself the Assessing Officer issued notice under Section 148 proposingto reopen the assessment for the reason that the Assessing Officer wasof the belief that taxable income has escaped assessment within themeaning of Section 147 of the Income Tax Act. The reason forreopening as recorded in the C.I.T.(Appeal)'s order is extracted hereunder: "The return of income was filed on 29.11.1996disclosing total income of Rs.Nil. The return of income wasprocessed under 143(1)(a) accepting the return of incomeand disallowing credit for TDS as the relevant income wasnot offered for assessment. According to the certificate ofTDS filed along with the return of income, the assessee waspaid rent amounting to Rs.2,46,180/- from State Bank ofMysore, Calicut Branch. This amount has not been includedin the total income of the assessee. Balance sheet showssundry creditors at Rs.62,03,601/-. The details have notbeen furnished. Enquiries reveal that the list included non-existent liabilities due to omission to record rebates,commissions, discounts and also the payments. Suchamounts are assessable as cessation of liability. I havetherefore, reason to believe that income chargeable to tax hasescaped assessment within the meaning of section 147 of theIncome-tax Act. Issue Notice u/s.148." In the revised assessment even though no rental income was assessedfrom house property, among other things disallowance of sundrycreditors is to the extent of Rs.7,07,008/-. In fact, as against the nilincome returned by the assessee, the total tax and interest payableunder Section 234A and 234B was worked out by the AssessingOfficer at Rs.18,09,870/-. 3. The appeal filed before the C.I.T.(Appeal) was allowedvacating the revised assessment for the reason that the grounds stated In the revised assessment even though no rental income was assessedfrom house property, among other things disallowance of sundrycreditors is to the extent of Rs.7,07,008/-. In fact, as against the nilincome returned by the assessee, the total tax and interest payableunder Section 234A and 234B was worked out by the AssessingOfficer at Rs.18,09,870/-. 3. The appeal filed before the C.I.T.(Appeal) was allowedvacating the revised assessment for the reason that the grounds stated for reopening were non-existent because in the first place, no incomefrom house property was assessed even though claim of TDS withoutdisclosing income under this head was the ground for reopening.Besides this, the C.I.T.(Appeal) held that the Assessing Officer had nomaterial to hold that liability towards sundry creditors covered non-existent liabilities as well. Since the re-assessment was cancelled onthis ground, the first appellate authority did not go into the merits ofthe case. The other grounds raised were against additions made in thereassessment. In second appeal filed by the department, the Tribunalconfirmed the order of C.I.T. (Appeal) against which this appeal isfiled. 4. Senior counsel relied on decision in ASSISTANT COMMISSIONER OF INCOME-TAX V. RAJESH JHAVERISTOCK BROKERS P. LTD. reported in (2007) 291 ITR 500 wherethe Supreme Court stated that what is required for reopeningassessment under Section 147 is only the subjective satisfaction of theAssessing Officer that income chargeable to tax has escapedassessment. This does not necessarily follow that the reason for reopening should by itself lead to assessment of any income. In otherwords, in the course of reassessment all escaped income could bebrought to tax and the Assessing Officer is not bound to confine to thegrounds on which reopening is made. In this case assessee claimedcredit based on TDS Certificate on rent, but without disclosing incomeunder the head "income from house property". Further, the AssessingOfficer doubted genuineness of claim under sundry creditors becausehe was of the opinion that non-existent liabilities due to omission torecord rebates, commissions, discounts and also the payments areincluded under the claim of sundry creditors. In fact, it is seen in thereassessment that there was substantial addition of above Rs.7 lakhsunder this head in the reassessment. Going by the judgment of theSupreme Court, we do not think the decision of the C.I.T.(Appeal)confirmed by the Tribunal is tenable or sustainable. Even thoughcounsel for the assessee contended that the Assessing Officer couldhave issued notice under Section 143(2) and made a regular assessmentunder Section 143(3), we do not think such a recourse open to theAssessing Officer stands in his way of reopening the assessment under Section 147, if he has reason to believe that income has escapedassessment. We find that the reasons recorded by the officer aresufficient to justify his belief that income has escaped assessment, nomatter whether any addition could be sustained in the assessment withspecific reference to the grounds of reopening. We, therefore, allowthe appeal by reversing the order of the Tribunal and that of the firstappellate authority and remand the matter to the first appellate authorityfor considering the appeal on merits. C.N.RAMACHANDRAN NAIRJudge pms V.K.MOHANANJudge