In Line With The Procedure Set Out By The Supreme Courtin The Case Of Gkn Driveshafts (India) Ltd v. Reasons For Reopening Dated 22.03.2019 Were Suppliedreading As Follows

IN THE HIGH COURT OF JUDICATURE AT MADRAS THE HONOURABLE DR. JUSTICE ANITA SUMANTH M/s.Asianet Star Communications Private Limited Kochar Jade Plot No. 22 Thiru Vi Ka Industrial Estate,Guindy, Chennai – 600032... Petitioner Assistant Commissioner of Income Tax Non-Corporate Circle - 20 (1) Room No. 311 3th Floor Wanaparthy Block Aayakar Bhavan, 121, Mahatma Gandhi Road, Chennai – 600034.…Respondent Prayer: Writ Petition filed under Article 226 of theConstitution of India praying to Writ of Certiorari, to call forthe records pertaining to Notice bearing No. ITBA/ AST/ S/ 148/2018-19/ 1015132633(1) dated 21.02.2019 consequent Reasonsbearing No.F.No. 21/ AAACA2460P/ AY 2012-13/ ACIT-NCC-20(1)/Chennai dated 22.03.2019 consequent Notice bearing No. ITBA/AST/ S/ 143(2)-3/ 2019-20/ 1016322795(1) dated 13.06.2019 andthe consequent Impugned Order No. 21/ AAACA2460P/ AY2012-13/ACIT/ NCC-20(1)/ Chennai dated 24.06.2019 on the file of theRespondent herein and quash the same. For Petitioner : Mr.Porus F.Kaka Senior Counsel for Mr.Sivaraman For Respondent : Mrs.Hema Muralikrishnan Senior Standing Counsel The petitioner has challenged notice under Section 148 ofthe Income Tax Act, 1961 (in short ‘Act’) dated 21.02.2019,reasons for re-assessment dated 22.03.2018, consequent noticedated 13.06.2019 and order dated 24.06.2019 rejecting theassumption of jurisdiction under Section 147 of the Act. 2. In regard to Assessment Year (AY) 2012-13, a return ofincome had been filed on 29.11.2012 along with tax audit reportand financials, followed by a revised return. An intimationdated 30.01.2014 in terms of Section 143(1) was issued. Interalia, the foreign tax credit claimed by the petitioner wasdenied. Thereafter, notice under Section 143(2) was issued and https://hcservices.ecourts.gov.in/hcservices/ there was exchange of communications between the petitioner andthe department in regard to the issues that arose from thereturns of income. Specifically, a hard copy of the return ofincome, financial statements and tax audit report were sought,that were supplied by the petitioner. The petitioner soughtrectification of the intimation on various grounds including therejection of the foreign tax credit claimed. This rectificationpetition is admittedly pending as on date. The proceedings forassessment did not culminate in an order of assessment underSection 143(3). 3. On 19.12.2018, the petitioner intimated therespondent/assessing authority that Asianet CommunicationPrivate Limited (ACPL) had amalgamated with Vijay TelevisionPrivate Limited (VTPL), and by order dated 30.07.2020 passed bythe National Company Law Tribunal, the appointed date will be01.10.2017. The name of the assessee consequently stood amendedto Asianet Star Communication Private Limited (ASCPL) and itsbusiness address was changed to Plot No.SP 22, TS No.25, BlockNo.5, 7,8,9, 10[th] Floor, Kochar Jade, Thiru Vi Ka IndustrialEstate, Guindy, Chennai, Tamil Nadu – 600 032 and the aforesaiddetail was also intimated to the respondent on 10.01.2019. 4. Notwithstanding the intimation regarding change of nameand address, the impugned notice under Section 148 came to beissued in the name of ACPL to No.15, Jaganathan Road,Nungambakkam, Chennai – 600 034 on 21.02.2019, on which date, nosuch entity by that name existed. 5. In line with the procedure set out by the Supreme Courtin the case of GKN Driveshafts (India) Ltd. V. Income TaxOfficer (259 ITR 19), the petitioner enclosed the revised returnfiled earlier by it and also sought reasons on the basis ofwhich jurisdiction had been assumed for re-assessment. Therespondent was intimated yet again, about the merger of theerstwhile entity with VTPL and the change of name to ASCPL. 6. Reasons for reopening dated 22.03.2019 were suppliedreading as follows: 4. Notwithstanding the intimation regarding change of nameand address, the impugned notice under Section 148 came to beissued in the name of ACPL to No.15, Jaganathan Road,Nungambakkam, Chennai – 600 034 on 21.02.2019, on which date, nosuch entity by that name existed. 5. In line with the procedure set out by the Supreme Courtin the case of GKN Driveshafts (India) Ltd. V. Income TaxOfficer (259 ITR 19), the petitioner enclosed the revised returnfiled earlier by it and also sought reasons on the basis ofwhich jurisdiction had been assumed for re-assessment. Therespondent was intimated yet again, about the merger of theerstwhile entity with VTPL and the change of name to ASCPL. 6. Reasons for reopening dated 22.03.2019 were suppliedreading as follows: GOVERNMENT OF INDIAINCOME TAX DEPARTMENTOffice of the Assistant Commissioner of Income Tax,Non-Corporate Circle-20(1), Room No.311, 3[rd] Floor,. . . . . . . . . . . . . . . . . .No.21/AAACA2460P/A.Y.2012-13/ACIT-NCC-20(1) ChennaiDate:22/03/2019M/s.Asianet Star Communications P. Ltd.(Formerly known as M/s.Asianet Communications P. Limited)Kochar Jade, Plot No.22Thiru.Vi.ka Indl. EstateGuindy, Chennai-600 032. Sirs, Sub: Income Tax Assessment – A.Y. 2012-13 – Your own case – PAN: – Communication of reasons for Re-opening of assessment – Reg.Ref: 1. This office notice u/s.148 of the IT Act, 1961,dated 21/02/2019. 2. Your letter dated 21/03/2019 filing Return ofIncome for the Asst. Year 2012-13 on 20/03/2019, in response to thisOffice Notice u/s 148 of the Act, Dated 21/02/2019 and alsorequesting for reasons for reopening the Assessment.***** Please refer to the above. The nature of Item is ‘Plant and Machinery’ eligible fordepreciation @ 15% which works out to Rs.33,74,848/- as noted inColumn No.5 of the above Table. Thus, there is excessdepreciation claimed of Rs.40,32,837/-. 2. It is also seen that there is claim of excess relief u/s90/91 and also tax credit in ITR is less than tax credit in 26AS. 3. Therefore, for the reasons discussed in Paras (1) & (2)above, I have reason to believe that there is escapement ofincome within the meaning of u/s 147 of the Income-tax Act, 1961,in the instant case for the A.Y.2012-13 due to the failure on thepart of the assessee to disclose fully and truly all materialfacts necessary for its assessment. . . . . . . . .Asst. Commissioner of Income-taxNon Corporate Circle-20(1), Chennai. https://hcservices.ecourts.gov.in/hcservices/ 7. The two issues on which jurisdiction has been assumedare i) claim of depreciation on computers, ii) alleged excessrelief of tax credit under Section 90/91 of the Act since thetax credit in the income tax return was less than the tax creditreflected in Form 26AS. The petitioner filed objections dated06.05.2019 on the assumption of jurisdiction pointing out thatthere was no new or tangible material on the basis of which theproceedings for re-assessment has been initiated. The petitionerrelied on the judgments of the Supreme Court in the case of CITV. Foramer France (264 ITR 566), Commissioner of Income Tax V.Corporation Bank Ltd. (254 ITR 791) Radhasoami Satsang V.Commissioner of Income Tax (193 ITR 321) CIT V. Excel IndustriesLimited (358 ITR 295) and CIT V. Gopala Naicker Bangaru (236 CTR82) contending that the issues on the basis of which theproceedings had been initiated had been reflected in the returnof income and annexures called for in the course of assessment,and hence there was no basis for the re-assessment. Theobjections however came to be rejected on 24.06.2019 relying onthe decisions of the Supreme Court in Raymond Woollen MillsLtd. V. Income Tax Officer (236 ITR 34) and a Division Benchof the Delhi High Court in the case of AGR Investments LimitedV. Additional Commissioner of Income Tax (333 ITR 146),challenging which the present writ petition has come to be filed. 8. Heard Mr.Porus F.Kaka, learned Senior Counsel forMr.Srinath Sridevan, learned counsel for the petitioner andMrs.Hema Muralikrishnan, learned Senior Standing Counsel for therespondent. 9. This is a case where the proceedings for re-assessmenthave been initiated beyond a period of four years from the endof the relevant assessment year, i.e., A.Y. 2012-13, at the fagend of six year period. The proviso to Section 147 states thatwhere an assessment had been completed under scrutiny at thefirst instance, the time available to the department to initiateproceedings for re-assessment would be extended from four to sixyears, conditional upon the officer establishing that theescapement of income was attributable to the failure of theassessee to have failed to file a return of income or to havemade a full and true disclosure of income in the return ofincome. 10. In the instant case, the proceedings at the firstinstance have not resulted in an order of assessment underSection 143(3). However, in my view, this would not lead to theassumption that there was no application of mind to the issuesarising from the return of income as the Assessing Officer hasissued a notice in terms of Section 143(2) on 02.09.2014, calledfor the income tax return and annexures and conducted a personal hearing on 11.09.2014. The petitioner has filed a writtensubmission on 15.09.2014, received and acknowledgement by therespondent on the same day enclosing a copy of the return ofincome, financial statements with all schedules and annexuresand Auditors’ Report under Section 44AB of the Act with allannexures. All material particulars in regard to the probableissues emanating from the return of income are on record beforethe Assessing Authority. 11. Initiation of scrutiny is by issuance of a notice underSection 143(2) and this has been done in this case. Not only hasthe Assessing Officer issued a notice, he has conducted ahearing and sought various particulars and this, in my view, istantamounts to the process of scrutiny. The passing of an orderor otherwise is entirely within the control of the Officer andin such circumstances the fact that no order of assessment hasbeen passed cannot be held against the assessee/petitioner. I amconscious of, and hasten to add that this is not of universalproposition and has to be examined against the facts andcircumstances in every case to decide whether the officer hasdisplayed application of mind to the matter. In this case, acomparison of the details sought for by the Officer and suppliedby the petitioner at the stage of original assessment and of thereasons for re-assessment that is, depreciation and foreign taxcredit reveal total identity of the issues, identified at thetime of original assessment and the reasons on the basis ofwhich proceedings for re-assessment have been initiated.Moreover, and admittedly, there is no new material, let alonetangible material, that has come to the notice of the authorityto justify the impugned proceeding for re-assessment. 12. As far as the claim of depreciation is concerned, theOfficer proceeds on the ground that computers constitute plantand machinery, eligible for depreciation at 15% and not 60% asclaimed by the petitioner. Learned Senior Standing Counsel wouldsubmit that as the petitioner is in the business of media andcommunication and operates a television channel, computers andall accessories thereof would assume a far more integral role inthe business, as such equipment would support editing, graphics,sound effects and other facilities intrinsic to the business. 12. As far as the claim of depreciation is concerned, theOfficer proceeds on the ground that computers constitute plantand machinery, eligible for depreciation at 15% and not 60% asclaimed by the petitioner. Learned Senior Standing Counsel wouldsubmit that as the petitioner is in the business of media andcommunication and operates a television channel, computers andall accessories thereof would assume a far more integral role inthe business, as such equipment would support editing, graphics,sound effects and other facilities intrinsic to the business. 13. Though an attractive argument, such distinction has notbeen envisaged in Appendix I (depreciation schedule), and PartA/Tangible Assets, categorises all computers under the head‘Machinery and Plant’, eligible for depreciation at 60%.Moreover, the depreciation statement referred to in the reasonsrecorded, was admittedly on record from the commencement oforiginal proceedings. 14. The above conclusion would be equally, if not morerelevant, to the second issue concerning the alleged claim of https://hcservices.ecourts.gov.in/hcservices/ excess tax credit. The reasons state that excess relief underSection 90/91 has been claimed and the tax credit in the incometax return is less than the tax credit in the 26AS. In such anevent I see no escapement of income to tax, as the petitioner,going as per Form 26AS, has more tax to its credit as againstwhat was claimed in the return of income. 15. Moreover, the tax credit claimed has been rejected infull in intimation dated 30.01.2014 and the petitioner hassought rectification of the intimation on 09.05.2017 andrestoration of the credit claimed. There is thus no prejudicethat has been caused to the revenue in regard to the claim offoreign tax credit and the initiation of re-assessmentproceedings on this ground is found to be misconceived, in lightof the judgment of the Supreme Court in Commissioner of IncomeTax V. Sun Engineering Works (P) Ltd. (198 ITR297). 16. As regards the decisions relied on by the revenue, theyturn on the sufficiency of reasons recorded. The Court hadrejected the challenge for re-assessment on the ground that theywill not, under Article 226 of the Constitution of India, testthe sufficiency of reasons recorded. These decisions aredistinguishable, since I have in the present matter, looked tothe reasons only for the limited aspect of comparing the issuesraised therein with the issues raised at the time of initialproceedings for assessment and the material on the basis ofwhich the impugned proceedings were initiated. 17. There is yet another point. The petitioner has, on19.12.2018, brought to the notice of the Assessing Officer thefactum of amalgamation. Though initially a tentative argumentwas put forth to the effect that this letter was not received bythe officer, I find a seal at the bottom of the letter alongwith tracking number of the communication making it clear thatthe communication has been delivered to the addressee, i..e,ACIT, Non-corporate Circle 20(1), the respondent herein. On10.01.2019, the change of name of the petitioner from VTPL toASCPL has also been communicated to the respondent and thiscommunication has been received on 14.01.2019. Thus, both thefactum of amalgamation and change of name have been dulyintimated to the Officer. Despite this, notice under Section148 has been issued to ACPL, which, in my view invalidates theproceedings in full. The fact that the petitioner has respondedto the notice would not bring to life an invalid proceeding. Theresponse of the petitioner has been on the letter head of ASCPL,the reasons have been communicated to ASCPL and the objectionsof the petitioner to the assumption of jurisdiction have beenfiled on the letter head of ASCPL. Despite the reiteration ofthe fact of amalgamation and change of name by the petitioner on21.03.2019 in response to notice under Section 148 of the Act, Section 143(2) notice has been issued to ACPL, a non-existingentity. 18. In the light of the above, impugned notice dated21.02.2019, reasons for re-assessment dated 22.03.2018,consequent notice dated 13.06.2019 and order dated 24.06.2019rejecting the assumption of jurisdiction under Section 147 ofthe Act are quashed. 19. This Writ Petition is allowed. No costs.Consequently, connected Miscellaneous Petition is closed. Sd/-Assistant Registrar /True Copy/ Sub Assistant Registrar To The Assistant Commissioner of Income Tax Non-Corporate Circle - 20 (1) Room No. 311 3th Floor Wanaparthy Block Aayakar Bhavan, 121, Mahatma Gandhi Road, Chennai – 600034. +1cc to M/s.Hema Muralikrishnan, Advocate SR.No.39442+1cc to M/s.Srinath Sridevan, Advocate SR.No.39138 AKM/10.3.21/7P-4C/ W.P.No.24842 of 2019 andWMP.No.24467 of 202004.12.2020