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IN THE HIGH COURT OF JUDICATURE AT MADRAS CORAM THE HONOURABLE MR.JUSTICE S.M. SUBRAMANIAM M/s.Thambbi Modern Spinning Mills Ltd.,Rep., by the Managing Director,Omalur Road, Jagir Ammapalayam,Salem-636 302... Petitioner 1. The Commissioner of Income Tax, Income Tax Department, No.3, Gandhi Road, Salem-636 007. 2. The Assistant Commissioner of Income Tax Circle 2, Income Tax Department, No.3, Gandhi Road, Salem-636 007. Circle 2, Income Tax Department, No.3, Gandhi Road, Salem-636 007. 3. The Deputy Commissioner of Income Tax Circle (1), Income Tax Department, No.3, Gandhi Road, Salem-636 007. .. Respondents Petition filed under Article 226 of the Constitution ofIndia praying for issuance of Writ of Certiorarified Mandamus tocall for the records of the second respondent and quash theimpugned order No.148/Circle-2, SLM/2014-15 dated 02.03.2015issued in terms of Section 148 of the Income Tax Act, 1961 onthe assumption of jurisdiction under Section 147 of the saidIncome Tax Act, 1961 for framing re-assessment in relating tothe Assessment Year 2007-08 in PAN: of the 3[rd]respondent and further direct the second respondent to drop theproceedings initiated under Section 147 of the Act for the saidassessment year 2007-08. For Petitioner :Mr.S.SridharFor Respondents:Mr.A.P.Srinivas,Senior Standing Counsel ORDER The order dated 02.03.2015, passed by the secondrespondent, rejecting the objections filed by the writpetitioner is under challenge in the present writ petition.Further direction is sought for to drop the reopeningproceedings initiated by the second respondent under Section 147of the Income Tax Act, 1961 (hereinafter referred to as “theAct”). 2. The petitioner was incorporated under the Companies Act,1956 with the object to carry on the business of manufacturingand sale of cotton yarn and other activities as described in theMemorandum of Articles of Association. 3.The petitioner filed its return of income for theassessment year 2007-08 on 28.10.2007 disclosing the totaltaxable income at Rs.NIL under normal computation provisions aswell as under the book profits computation for imposing MinimumAlternate Tax under Section 115JB of the Act, after claiming theset off brought forward business loss as well as the unabsorbeddepreciation. The said return of income was taken up forscrutiny by the second respondent and a notice under Section 143(2) of the Act was issued to the petitioner and the petitioner-company furnished all the details as called for by the secondrespondent in the said scrutiny assessment proceedings and theAssessing Officer passed the final order of assessment dated27.07.2009 after completion of the procedures. 4.The second respondent initiated proceedings under Section147 of the Act and a notice under Section 148 of the Act wasissued on 28.03.2014 beyond the period of four years, but withina period of six years. On receipt of Section 148 notice, thepetitioner responded vide letter dated 14.04.2014 with a requestto treat the original return of income as return of income filedin response to the notice issued under Section 148 of the Act.The Assessing Officer sent reminder letter dated 27.08.2014 forfiling the return of income in response to the notice issuedunder Section 148 of the Act dated 21.03.2014. Once again thesecond respondent issued a reminder letter on 14.10.2014 seekingresponse from the assessee. In response, the assessee videletter dated 20.10.2014, informed the Assessing Officer aboutthe filing of return of income to the notice of re-opening dated21.03.2014. Thereafter, notice under Section 143(2) of the Actwas issued on 24.10.2014 directing the petitioner to appear on03.11.2014 at 11.30 am either in person or by a representativeduly authorized in writing and produce documents, accounts andany other evidence on which the assessee may rely in support ofthe return of income filed. 5.At the request of the petitioner, the Assessing Officervide letter dated 27.10.2014, furnished reasons for reopening ofassessment for the assessment year 2007-08. However, thepetitioner filed its objections and thereafter, filedW.P.No.31294 of 2014 challenging the notice dated 21.03.2014issued under Section 148 of the Act. The writ petition wasfinally disposed of by this Court on 01.12.2014 directing thesecond respondent therein to consider the objections raised bythe petitioner, afford an opportunity of personal hearing andthereafter, pass a reasoned order on merits and in accordancewith law by following the principles enunciated in the case ofGKN Driveshafts (India) Ltd., vs. Income Tax Officer & Ors.reported in (2003) 259 ITR 19 (SC). Pursuant to the orderspassed in the writ petition, the petitioner submitted furtherobjections contesting the reopening proceedings and theAssessing Officer passed orders on 02.03.2015 furnishing reasonsfor the reopening of assessment proceedings. The said order isunder challenge in the present writ petition. 6.The learned counsel appearing on behalf of the writpetitioner mainly contended that the petitioner had truly andfully furnished all the books, details, informations etc., alongwith the return of income, which was duly filed and scrutinisedby the Assessing Officer. The informations sought for by theAssessing Officer were also provided and the final assessmentorder was passed on 27.07.2009. When there is no fresh materialmade available for the Assessing Officer to reopen theassessment, the present proceedings initiated is nothing, butchange of opinion and absolutely, there is no tangible materialfor the purpose of invoking the jurisdiction under Section 147of the Act. 7.The learned counsel for the petitioner reiterated thatthe reasons furnished in the impugned order and the proceedingsregarding such reasons are completely adjudicated by theAssessing Officer at the time of passing the original assessmentorder. Even in the counter, the second respondent could notable to establish that they have recovered tangible materialsfor the purpose of reopening of assessment as required under theprovisions of the Act and therefore, reopening of the assessmentis based on change of opinion and thus, the impugned order isliable to be set aside. 8.The learned counsel for the petitioner is of an opinionthat it is a case where the reopening proceedings are initiatedbeyond the period of four years and during the fag end of sixthyear. Thus, the ingredients contemplated under Proviso toSection 147 are to be complied with scrupulously. When there isno tangible materials available on record and the petitioner has truly and fully furnished all the details at the time oforiginal assessment, the initiation of reopening the proceedingsbeyond four years is impermissible and thus, the requirementprescribed under Proviso to Section 147 has not been compliedwith and on this ground also, the writ petition is to be allowed. 9.In support of the contentions, the learned counsel forthe petitioner cited the judgment of this High Court in the caseof Asianet Star Communications (P.) Ltd., vs. AssistantCommissioner of Income-tax, Non-Corporate Circle 20(1) reportedin (2019) 106 taxmann.com 203 (Madras) and the relevantparagraph 40 is extracted hereunder:- truly and fully furnished all the details at the time oforiginal assessment, the initiation of reopening the proceedingsbeyond four years is impermissible and thus, the requirementprescribed under Proviso to Section 147 has not been compliedwith and on this ground also, the writ petition is to be allowed. 9.In support of the contentions, the learned counsel forthe petitioner cited the judgment of this High Court in the caseof Asianet Star Communications (P.) Ltd., vs. AssistantCommissioner of Income-tax, Non-Corporate Circle 20(1) reportedin (2019) 106 taxmann.com 203 (Madras) and the relevantparagraph 40 is extracted hereunder:- 40.Finally, and in addition to my reasoningas aforesaid for assessment year 2011-12, theplacement of the Explanation, after the Provisoto Section 147 is also, in my view, relevant.This indicates the scheme of the section and theinterplay of the components thereof. To my mind,the application of the Explanation would besubject to, and post the application of theProviso itself. Thus, in cases, where the benefitof the Proviso is claimed by the revenue, itwould first have to satisfy the condition underthe proviso and validate the assumption ofjurisdiction beyond four years. Only thereaftercan the Revenue seek application of theExplanation to Section 147. In order of sequence,the Proviso comes first and only thereafter, doesthe Explanation. In the present case, where theRevenue has not satisfied the statutory conditionimposed by the Proviso, the door to re-assessmentremains conclusively shut. There is no occasionleft for the Revenue to look any further, eitherat the Explanation or otherwise, to justify theproceedings for re-assessment, and the assumptionof jurisdiction falls, at the very threshold. 10.Relying on the said judgment, the petitioner hasinsisted the Proviso to Section 147 and in the present case, thestatutory requirements are not fulfilled and thus, the impugnedorder, disposing of the objections filed by the petitioner, isnot in consonance with the fact and it is in violation of theProviso to Section 147 of the Act. 11.The learned Senior Standing Counsel opposed thecontentions raised on behalf of the assessee in its entirety bystating that the very contention that the reopening proceedingsis change of opinion is incorrect. The reasonings for reopeningfurnished in the impugned orders are elaborate and the details are also in clear terms. Perusal of the impugned order itselfwould reveal that the case of the assessee is a fit one forreopening of assessment. It is contended that mere submissionof informations, books of accounts etc., alone cannot be aground restraining the Assessing Officer to invoke the powersunder Section 147 of the Act. Various other circumstances arecontemplated under Section 147 of the Act and therefore, thecase of the assessee, that it is a change of opinion, isincorrect and thus, the writ petition is liable to be dismissed. 12.The learned Senior Standing Counsel referred to theorder passed by this Court in W.P.No.31294 of 2014 filed by thepetitioner, wherein this Court directed the Assessing Officer toconsider the objections raised by the petitioner, afford anopportunity of personal hearing and pass orders on merits. Thedirection was issued in view of the fact that the AssessingOfficer, at the first instance, while passing the order, has notelaborated the reasons in clear terms. Thus, the High Courtthought fit to direct the Assessing Officer to consider theobjections and pass orders by following the procedures and theprinciples laid down in GKN Driveshafts (India) Ltd. (supra).Subsequently, the Assessing Officer, considered all the aspectson merits and in accordance with law and passed a speakingorder, which is impugned in the present writ petition. Thus,the impugned order is relevant for the purpose of finding outthe reasons for reopening of assessment. 13.The learned Senior Standing Counsel referred toparagraph 6 of the impugned order wherein, the reasons forreopening are recorded. The Assessing Officer furtherconsidered that it is a case of under-assessment and certainfacts were not furnished by the petitioner. In paragraph 3 and4 of the impugned order, the Assessing Officer made thefollowing findings:- “3.This deferred tax asset and waivedinterest amounts which were also already debitedin the earlier years profit and loss accountshould have been considered for the calculationof book profit under Section 115JB. Assesseefailed to disclose this amount in the taxcalculation and subsequently for the taxationhence it is the failure on the part of theassessee to disclose fully and truly all materialfacts. 4.In the view of the above, as there is areason to believe that the income chargeable totax has escaped assessment on account of thefailure on the part of the assessee to disclose fully and truly all material facts within themeaning of Section 147 of the Income Tax Act aNotice u/s. 148 was issued on 21.03.2014.” 14.Relying on the said findings of the Assessing Officer,the learned Senior Standing Counsel reiterated that the reasonswere furnished and the assessee failed to disclose certainamount in the tax calculation and subsequently, for thetaxation. Thus, it is the failure on the part of the assesseeto disclose fully and truly all material facts. As there is areason to believe that the income chargeable to tax has escapedassessment on account of failure on the part of the assessee todisclose fully and truly all material facts within the meaningof Section 147 of the Act, notice was issued under Section 148of the Act on 21.03.2014. Therefore, the case is to beconsidered by following the procedures contemplated and byaffording opportunity to the assessee and the second respondentmay be permitted to proceed with the reassessment proceedings inaccordance with the provisions of the Act. 15.This Court is of the considered opinion that admittedly,the assessment order under Section 143(3) of the Act was passedon 27.07.2009. Reopening of assessment was initiated beyond theperiod of four years, but within a period of six years. Theorder furnishing reasons for reopening issued at the firstinstance by the Assessing Officer was ambiguous and the reasonswere not made clear. Thus, the petitioner filed a writ petitionin W.P.No.31294 of 2014 and this Court passed an order on01.12.2014 and the operative portion is extracted hereunder:- “8.In the light of the above direction, dutyis cast upon the Assessing Officer to dispose ofthe objections raised by the petitioner bypassing a speaking order, thereby the AssessingOfficer should consider the objections raised bythe petitioner, when the petitioner hasspecifically contended that the assessment iscomplete in all respects after due considerationand a detailed reply was given by the petitioneron 19.06.2009. 9.Accordingly, this Court is of the viewthat the Writ Petition is pre-mature and at thisstage, the impugned notice cannot be quashed.However, in the light of the decision of theHon'ble Apex Court made in the case ofG.K.N.Driveshafts (India) Ltd., (supra), it isthe duty of the Assessing Officer to consider thepetitioner's objections and in my view he shouldjudiciously take note of the factual and legal contentions raised by the petitioner in theirobjection dated 20.11.2014, which appears to havereiterated the stand in their earlierrepresentation dated 29.06.2009, which was foundto be satisfactory by the Assessing Officer. 10.In the light of the above, there will bea direction to the second respondent to considerthe objections raised by the petitioner, affordan opportunity of personal hearing andthereafter, pass a reasoned order on merits andin accordance with law.” contentions raised by the petitioner in theirobjection dated 20.11.2014, which appears to havereiterated the stand in their earlierrepresentation dated 29.06.2009, which was foundto be satisfactory by the Assessing Officer. 10.In the light of the above, there will bea direction to the second respondent to considerthe objections raised by the petitioner, affordan opportunity of personal hearing andthereafter, pass a reasoned order on merits andin accordance with law.” 16.This Court directed the second respondent therein toconsider the objections raised by the petitioner, afford anopportunity of personal hearing and pass orders. Thereafter,the petitioner was provided with an opportunity and thepetitioner also had admittedly availed the same. The orderpursuant to the directions issued by this Court was passed bythe second respondent in proceedings dated 02.03.2015 andperusal of the order would reveal that the assessee failed todisclose certain amount in the tax calculation and subsequentlyfor the taxation. Hence, the said discrepancy was found as afailure on the part of the assessee to disclose fully and trulyall material facts. To elaborate the said ground, the secondrespondent in his order dated 02.03.2015, has narrated the factsas under:- “Assessee is a company engaged in thebusiness of spinning of yarn. During the F.Y.2006-07 relevant to the Assessment Year 2007-08it entered into one time settlement (OTS)agreement with financial institution to whom theassessee. The assessee had entered into a onetime settlement (OTS) agreement with financialinstitution to whom the assessee had defaulted inpayments. Accordingly, assessee got waivedRs.9,10,84,000/- towards principal amount andRs.15,66,62,000/- towards interest amount duringassessment year 2007-08. 2.Assessee failed to credit waivers ofprincipal amount of Rs.9,10,84,000/- in theprofit and loss account and also waivers ofinterest amount of Rs.15,66,62,000/- had beenshown as prior period adjustments and creditedbelow the line in the profit and loss accounti.e. after book profit (i.e. out ofRs.17,52,72,070/- as prior period adjustmentRs.15,66,62,000/- is the waiver of interest). This waiver of interest had to be offered to taxunder Section 41(1). Further, assessee hadcredited an amount of Rs.14,18,66,299/- towardsdeferred tax asset.” 17.Perusal of the above facts, as narrated, would establishthat the assessee failed to disclose certain amount, whichresulted failure on the part of the assessee to disclose fullyand truly all materials. The very ground taken by the assesseethat it has furnished/disclosed fully and truly all materialfacts deserves no merit consideration. The second respondentcould able to ascertain certain material facts establishingfailure on the part of the assessee to disclose the facts fullyand truly. 18.Regarding the ground of availability of fresh materialfor reopening of assessment proceedings, this Court is of theconsidered opinion that Explanation 2(c) to Section 147 would berelevant. The concept of “has reason to believe” is widerenough to cover numerous circumstances and possibilities forreopening of assessment and such a wider scope is contemplatedunder the Act with an object to deal with certain cases wherethe assessee has not produced true and full facts at the time oforiginal assessment. The original assessment orders are passedbased on the return of income filed by the assessee. Thus, anydiscrepancy, new material or inference or otherwise areidentified by the Assessing Officer, then he is empowered toinitiate reopening proceedings by invoking Section 147 of theAct. 19.In the present case, Explanation 1 and Explanation 2(c)to Section 147 are to be considered. Explanation 1 to Section147 contemplates that “production before the Assessing Officerof account books or other evidence from which material evidencecould with due diligence have been discovered by the AssessingOfficer will not necessarily amount to disclosure within themeaning of the foregoing proviso”. Therefore, mere productionof books of account and the details by the assessee are oneaspect of the matter and even with reference to such books ofaccounts and materials, if the Assessing Officer could able todiscover some new information or materials, which provided causefor the Assessing Officer to invoke Section 147 of the Act orhas reason to believe, then also such reopening proceedings arepermissible. Explanation 2(c)(i) states that where anassessment has been made, but income chargeable to tax has beenunder-assessed, then also reopening of assessment ispermissible, in cases where assessment order has been alreadypassed based on the materials available on record. In the eventof identifying under-assessment based on the very samematerials, then also reopening of assessment is possible. Regarding the under-assessment there need not be new materials.Even based on the available materials, if the competentauthority could able to identify any under-assessment, then alsopower under Section 147 shall be invoked by the competentauthority. 20.This being the scope of Section 147, this Court is ofthe considered opinion that the Assessing Officer could able tofind out that the materials furnished by the assessee wereinsufficient and the assessee failed to disclose certain amountin the tax calculation and subsequently, for the taxation.Thus, the second respondent formed an opinion that it is thefailure on the part of the assessee to disclose fully and trulyall material facts. When such an opinion is formed, a noticeunder Section 148 was issued and thereafter, the reasons werealso furnished by following the principles laid down in GKNDriveshafts (India) Ltd. Therefore, the assessee is bound toparticipate in the assessment proceedings by defending theircase in the manner known to law. In view of the fact that thecase on hand is a case where it is established that the assesseefailed to disclose certain amount in the tax calculation andsubsequently for the taxation, there is a reason to believe thatthere was a failure on the part of the assessee to disclosefully and truly all material facts. This being the factum, theinitiation cannot be construed as change of opinion warrantinginterference from the hands of this Court. This being thefactum established, this Court has no hesitation in arriving aconclusion that the petitioner has not made out any acceptableground for the purpose of considering the relief as such soughtfor in the present writ petition. 21.With the above observations, this writ petition standsdismissed. No costs. Consequently, connected miscellaneouspetition is closed. Sd/-Assistant Registrar(CCC) // True Copy// Sub Assistant Registrar abr To 1. The Commissioner of Income Tax, Income Tax Department, No.3, Gandhi Road, Salem-636 007. 2. The Assistant Commissioner of Income Tax Circle 2, Income Tax Department, No.3, Gandhi Road, Salem-636 007. 3. The Deputy Commissioner of Income Tax Circle (1), Income Tax Department, No.3, Gandhi Road, Salem-636 007.+1cc to Mr.A.P.Srinivas, Advocate, SR.No.29101 CP(CO)RLP(03/08/2021)