Indian Syntans Investments Private Limited v. The Deputy Commissioner Of Income Tax, Company Circle Ii (3)

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED : 28.04.2021 CORAM THE HON'BLE MR.JUSTICE S.M.SUBRAMANIAMW.P.No.14021 of 2017andW.M.PNos.15232 & 15233 of 2017 Indian Syntans Investments Private Limited,Represented byits Director Mr.N.NarayananNo.71, Third Main Road,Kasturba Nagar, Adyar,Chennai – 600 020..Petitionervs The Deputy Commissioner of Income Tax,Company Circle II (3)121, Nungambakkam High Road,Chennai – 600 034. ..Respondent Prayer: Writ Petition filed under Article 226 of theConstitution of India praying to issue a Writ of Certiorari,call for the records on the files of the respondent and quashthe impugned notice issued u/s 148 of the Act in PANNo. dated 30.03.2010 and consequentially quash theproceedings in PAN No. / A.Y-2005-06 dated 20.04.2017as illegal and without jurisdiction. The initiation of proceedings under Section 147 of theIncome Tax Act by issuing a notice under Section 148 of theIncome Tax Act in proceedings dated 30.03.2010 and theconsequential proceedings dated 20.04.2017 are under challengein the present writ petition. https://hcservices.ecourts.gov.in/hcservices/ 2. The petitioner is a Private Limited company, carrying onbusiness as non banking financial company, dealing ininvestments, broking in shares and securities, land andbuildings etc., For the assessment year 2005-06, the petitionercompany had filed its return of income on 20.10.2005, admittinga total income of Rs.3,90,15,137/-. Subsequently, the assessmentwas taken up for scrutiny together with calling certain details. 3. The respondent issued a notice under Section 148 forreopening of assessment for the Assessment Year 2005-06 on30.03.2010. The petitioner company filed a letter dated31.03.2010, to treat the return filed by the petitioner companyon 28.10.2005 as the return filed in response to the noticeunder Section 148 of the Act. The petitioner company, in thesaid letter, made a request to the respondents to furnishreasons to believe that income liable to tax had escapedassessment within the meaning of Section 147 of the Act. Therespondent in their letter dated 05.05.2010, furnished reasonsfor reopening the assessment for the Assessment Year 2005-06. 4. The petitioner company, by their letter dated 27.05.2010,furnished their detailed reply along with annexure, requestingthe respondent to drop the proceedings. However, the reply hadnot been considered and issued notice under Section 143 (2)dated 18.11.2010, fixing the date of hearing on 25.11.2010. Thepetitioner filed W.P.No.27139 of 2010 and this Court directedthe respondent to consider the legal submissions taken by thepetitioner on the aspect of jurisdiction by giving the assesseean opportunity to place their submissions. But, the writpetition was dismissed. The petitioner filed Writ Appeal inW.A.No.2646 of 2010 and the Hon'ble Division Bench of this Courtpassed an order as follows: “This writ appeal is disposed of by modifying theorder dated 30.11.2010 passed by the learned SingleJudge and setting aside only impugned order dated30.03.2010. We confirm the direction to the respondentto consider the objections on the assumption ofjurisdiction after granting the assessee an opportunityof personal hearing. Accordingly, the respondent isdirected to pass a speaking order on the aspect ofjurisdiction under Section 147 of the Act, within aperiod of four weeks from the date of receipt of a copyof this order. No costs.” 5. Pursuant to the orders of the Hon'ble Division Bench, thepetitioner company by their letter dated 14.02.2017, had fileddetailed objections to the reopening of the assessment andsought for personal hearing before the respondent. However, therespondent without considering the directions passed by thisCourt nor considering the legal objections raised by the writ 5. Pursuant to the orders of the Hon'ble Division Bench, thepetitioner company by their letter dated 14.02.2017, had fileddetailed objections to the reopening of the assessment andsought for personal hearing before the respondent. However, therespondent without considering the directions passed by thisCourt nor considering the legal objections raised by the writ petitioner, passed the impugned order dated 20.04.2017,rejecting the objections filed by the petitioner. Challengingthe said impugned order dated 20.04.2017 as well as the noticedated 30.03.2010, the present writ petition is filed. 6. The learned counsel appearing on behalf of the writpetitioner mainly contended that the element of reasons tobelieve as contemplated under Section 147 of the Income Tax Actis absolutely missing in the present case. In fact, it is achange of opinion as the material facts now relied on in theimpugned order for reopening of assessment were made availableby the petitioner even during the original assessment for theyear 2005-06. 7. The learned counsel for the writ petitioner relied on thereturn of income, wherein the petitioner solicited the attentionof this Court with reference to the IL & FS Growth & Value fundSemi Annual Dividend Redemption of units and the dividendreceived and loss occurred et., All such particulars madeavailable in the return of income were relied on by thepetitioners established that the Assessing Officer has no reasonto believe for reopening of assessment. Thus, the initiation ofproceedings under Section 147 is change of opinion. 8. The learned counsel for the petitioner with reference tothe returns of income and the particulars stated therein,compared the same with the reassessment proceedings initiatedunder Section 147 of the Act and more specifically, the reasonsas recorded by the respondent. By comparison, it is contendedthat both are one and the same and therefore, it is only achange of opinion. Relying on the said details, the learnedcounsel for the petitioner made a submission that the impugnedorders are liable to be set aside. 9. The learned counsel for the petitioner relied on thejudgment of the High Court of madras in the case of PVP VenturesLtd., Vs. ACIT, reported in (2016) 65 taxmann.com 21 (Madras),wherein the Court held as follows: “30. As we have indicated earlier, cases where thereopening is found to be within the parameters of theprescription contained in Sections 147 and 148, theadditions made subsequently in the course of theproceedings, have always been upheld by Courts. But,where the reopening of assessment cannot stand on thestrength of the reasons recorded under Section 148(2),the Revenue cannot seek to justify the reopening, byfinding some point or the other post-facto after thereopening of assessment. 31. Sub-Sections (1) and (2) of Section 148 andExplanation 3 under Section 147 contemplate two entry “30. As we have indicated earlier, cases where thereopening is found to be within the parameters of theprescription contained in Sections 147 and 148, theadditions made subsequently in the course of theproceedings, have always been upheld by Courts. But,where the reopening of assessment cannot stand on thestrength of the reasons recorded under Section 148(2),the Revenue cannot seek to justify the reopening, byfinding some point or the other post-facto after thereopening of assessment. 31. Sub-Sections (1) and (2) of Section 148 andExplanation 3 under Section 147 contemplate two entry points or two gate ways. The first entry point or theouter gate is the formation of an opinion that therewas some income, which escaped assessment and which isreflected in the reasons recorded under Section 148(2).The Assessing Officer will be permitted entry throughthis outer gate only if he satisfies three criterianamely (i) the existence of a reason to believe that anincome chargeable to tax has escaped assessment (ii)the recording of reasons under Section 148(2) and (iii)the issuing of notice under Section 148(1). Once theAssessing Officer satisfies these three criteria, he isallowed entry through the outer gate or the firstcheck-post. The moment he has gained entry lawfullythrough the first check-post, the proceedings forreassessment begin. In the course of those proceedings,if issues other than those, which triggered theformation of his opinion under Section 147, come to hisnotice, he would be permitted, by virtue of Explanation3, to gain entry into all other check-posts locatedwithin the prohibited area. Therefore, Explanation 3comes into play only after the Assessing Officer gainsentry through the first door. If the Assessing Officeris imagined to be an air passenger, travelling byflight to another destination, his reason to believe,his recording of reasons and the issuance of notice canbe compared to a valid ticket that he holds. Only if heholds such a valid ticket, he will be permitted entryinto the airport. After gaining entry into the airport,he may also be permitted to visit restaurants, dutyfreeshops etc., before boarding the flight. His access tothe facilities inside the airport is dependent upon hisright of entry into the airport. This is how Sub-Sections (1) and (2) of Section 148 and Explanation 3to Section 147 have to be understood.” 10. In the case of Commissioner of Income Tax Vs. Elgi Tread(India) Ltd., reported in (2018) 96 taxmann.com 254 (Madras),the Hon'ble Division Bench of this Court held as follows:“24.The short question, which falls forconsideration, is whether the reopening of theassessments both within four years and beyond fouryears could have been done for the reasons assigned bythe Revenue. We are required to take a decision inrespect of the other substantial questions of law,after deciding the first question and if this questionis answered in favour of the Revenue, then we may berequired to examine the other substantial questions oflaw. However, if we answer the said question in favourof the assessee, then nothing further remains to bedecided in these appeals. As pointed out in the preceding paragraphs, the Assessing Officer, whilereopening the assessment, has not disclosed thereasons for reopening. This is evident from theassessment order dated 05.03.1999, which only statesthat the assessment was reopened to consider certainpoints with prior permission of the Commissioner ofIncome Tax. Thus, the basic requirement for recordingreasons to believe that income chargeable to tax hasescaped assessment is absent in the instance case,which would be sufficient to hold that the reopeningproceedings are wholly without jurisdiction. preceding paragraphs, the Assessing Officer, whilereopening the assessment, has not disclosed thereasons for reopening. This is evident from theassessment order dated 05.03.1999, which only statesthat the assessment was reopened to consider certainpoints with prior permission of the Commissioner ofIncome Tax. Thus, the basic requirement for recordingreasons to believe that income chargeable to tax hasescaped assessment is absent in the instance case,which would be sufficient to hold that the reopeningproceedings are wholly without jurisdiction. 35.In the light of the above discussion, we holdthat the reopening proceedings was wholly withoutjurisdiction and we affirm the view taken by theTribunal and accordingly, dismiss all the tax cases(appeals) filed by the Revenue by answering the firstsubstantial question of law as framed above in favourof the assessee and hold that the Assessing Officerwas not empowered to reopen the assessment for all theassessment years. Consequently the other substantialquestions of law as framed are left open.” 11. The Hon'ble Supreme Court of India in the case ofCommissioner of Income Tax Vs. Corporation Bank Limited,reported in (2002) 122 Taxman 826 (SC), held as follows:“6. Turning attention to the first question asregards the provisions under Section 147(a) be itnoted and as the facts depict, there is no failure onthe part of the assessee in furnishing the particularspertaining to the above noted sum as not recoverablefor the relevant accounting year and the statementsfiled along with the original return disclosed thefull details of the aforesaid account. There is,therefore, no failure on the part of the assessee todisclose fully and truly the material facts necessaryfor the assessment years for the respective years andas such Section 147(a) has no manner of applicationand is not attracted in the facts of the matter underconsideration. The High Court on consideration of thefacts came to the conclusion that the Tribunal wasjustified in coming to the said finding and we alsorecord our concurrence therewith” 12. In the case of Assistant Commissioner of Income Tax Vs.ICICI Securities Primary Dealership Limited, reported in (2012)24 taxmann.com 310 (SC), it is stated as follows : “Section 147 of the Income tax Act, 1961 – Income escaping assessment – General – Assessment year 1999- https://hcservices.ecourts.gov.in/hcservices/ 2000 – Assessing Officer completed assessment ofassessee under Section 143(3) after taking intoconsideration account furnished by assessee – Afterlapse of four years from relevant assessment yearAssessing Officer reopened assessment of assessee onground that during relevant year assessee company hadincurred a loss in trading in share, which was aspeculative one and therefore, chargeable to tax –Accordingly, passed order under Section 147 – Whethersince after a mere re-look of accounts which wereearlier furnished by assessee, Assessing officer hadcome to conclusion that income had escaped assessment,same was not permissible under Section 147 as it wasclearly a change of opinion – Held, yes – Whethertherefore, order reopening assessment was notpermissible – Held, yes.” 13. Relying on the above judgments, the learned counsel forthe petitioner is of an opinion that case on hand is a change ofopinion by the Assessing Officer and absolutely, there is noreason to believe. 13. Relying on the above judgments, the learned counsel forthe petitioner is of an opinion that case on hand is a change ofopinion by the Assessing Officer and absolutely, there is noreason to believe. 14. The respondents filed their counter affidavit, bystating that the writ petition is untenable. The respondentshave stated that the allegation of petitioner that its claimregarding Section 94(7) was examined by the respondent duringthe course of original proceedings is against facts and records.The petitioner did not produce any evidence to substantiate theclaim of exemption on this issue in the original assessment. Itis stated that two sheets of papers at page nos.142 & 143 of thetyped set filed by the petitioners in the present writ petitionwere filed subsequently to the completion of original assessmentproceeding and that is the reason why the petitioner notmentioned date of submission of the document in the index totyped set of papers. Therefore, the petitioner's claim that thedetails of two transaction coming under the Short term Capitalgains were furnished and respondents had completed theAssessment under Section 143 (3) on 29.11.2007, afterconsidering the same is absolutely incorrect. It is contendedthat the petitioner has come before the Courts with uncleanhands and therefore, the writ petition is to be dismissed. 15. The respondent has stated that with regard to thepetitioner's claim under Section 94 (7) was formed during theoriginal assessment proceedings and therefore, the petitioner'sallegations that the revision of assessment is based on thechange of opinion is wrong and cannot be sustained. It iscontended that the issues discussed in the reasons recorded forreopening was not considered during the course of originalassessment proceedings, since no opinion was formed on such issues during the course of original assessment proceedings.Thus, there is no question of change of opinion as alleged bythe petitioner. The petitioner is not disputing the reasonsgiven by the Assessing Officer for reopening the assessment.There is no mandatory condition that tangible material for thereopening of the assessment should come from external source. Inthe present case, the reopening is done within four years fromthe end of the assessment year. Thus, Proviso to Section 147 isnot applicable. 16. It is further contended that the reopening on the basisof Audit objections was upheld by the Hon'ble Supreme Court ofIndia in the case of CIT Vs. P.V.S.Beedies Pvt Ltd., reported in237 ITR 13. 17. The respondent has duly considered all the objectionsand case laws submitted by the petitioner. In the impugned orderdated 20.04.2017, some of the decisions cited by the petitionerwere not discussed as they pertain to reopening after expiry offour years from the end of the relevant assessment year and insuch proviso 147 is applicable. However, in the present case,reopening has been made within four years from the end of theAssessment Year. Thus, the respondent has duly complied with theorders of this Court. The writ petition is premature as thepetitioner has to now file objections on the merits of theissues and convince the Assessing officer about the merits ofits claim and therefore, the Assessment officer is duty bound topass revised order either accepting or rejecting the claim ofthe writ petitioner. 18. The respondent had not formed any opinion on any of theissues that are now the subject matter of proceedings underSection 147 at the time of original assessment. Section 94(7)was substituted with effect from 1[st] April 2005. Thus, anyassessment made contrary to the said provision is liable to bereopened. The petitioner has claimed loss on transfer of sharesfrom stock in Trade to investments. It is settled position thatone cannot earn income from himself. Hence, the AssessingOfficer followed the decision of Calcutta High Court to reopenthe assessment. The petitioner fails to note that the directionissued by the RBI cannot override the proviso of Income Tax Actas held by the Hon'ble Supreme Court in the case of SouthernTechnologies Ltd., reported in 320 ITR 577. 19. When an income liable to tax has been escaped fromassessment in the original assessment proceedings due to theoversight and inadvertence or mistake committed by the AssessingOfficer, still he has the jurisdiction to reopen the assessmentas held by the Hon'ble Supreme Court of India. 20. Relying on all these grounds, the respondent sought forthe dismissal of the writ petition. 21. Relying on the above contentions, made a submission thatthe case on hand is the case of reopening within a period offour years and therefore, the contention of the petitioners areliable to be rejected. 22. The Courts have held that disputed facts andcircumstances cannot be adjudicated in a writ proceedings andonce, there is a reason to believe that the income has escapedfrom assessment, then the Assessing officer is empowered toinstitute proceedings under Section 147 and further, certainmaterials were identified by the Assessing officer are providedcause for reopening of assessment by initiation under Section147 of the Act and as such there is no infirmity. Thus, the writpetition is liable to be dismissed. 23. Perusal of the reasons provided by the AssistantCommissioner of Income Tax, in proceedings dated 05.05.2010, thesame reveals that the assessee has claimed loss ofRs.53,34,895/- on transfer of shares from trading to investment.This is an internal transfer of conversion of certain shares andsecurities held as stock in trade into investments. The assesseehas transferred shares of Rs.6,81,08,496/- from trading accountto investment account (as against nil last year). The assesseehas not given any computation as to how the loss came to beincurred. The loss on conversion of shares and securities heldas stock in trade into investment is not an allowable deduction.The deduction claimed by the assessee is therefore erroneous andthere is reason to believe that income has escaped assessmentdue to this incorrect claim. 24. In Annexure 'A' to Audit Report dated 21.06.2004 forAssessment Year 2004-05, the auditors have specifically statedthat company has taken loan from financial institution andpurchases shares for Rs.165.19 lakhs, which were treated as longterm investments. However, no interest disallowance has beenconsidered, though the learned counsel for the petitioner statesthat the Audit report cannot be a source for initiation ofproceedings under Section 147 of the Act. 25. This Court is of the considered opinion that the sourceof information may be irrelevant for the purpose of initiationof proceedings under Section 147 of the Act. Section 147unambiguously enumerates that if the Assessing officer hasreason to believe that any income chargeable to tax has escapedassessment for any Assessment Year. Further the Sectioncontemplates 'any other income chargeable to tax which hasescaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recomputethe loss or the depreciation allowance or any other allowance,as the case may be, for the assessment year concerned'. 25. This Court is of the considered opinion that the sourceof information may be irrelevant for the purpose of initiationof proceedings under Section 147 of the Act. Section 147unambiguously enumerates that if the Assessing officer hasreason to believe that any income chargeable to tax has escapedassessment for any Assessment Year. Further the Sectioncontemplates 'any other income chargeable to tax which hasescaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recomputethe loss or the depreciation allowance or any other allowance,as the case may be, for the assessment year concerned'. 26. Explanation 1 to Section 147 contemplates that“Production before the Assessing Officer of account books orother evidence from which material evidence could with duediligence havebeen discovered by the Assessing Officer will notnecessarily amount to disclosure within the meaning of theforegoing proviso. Therefore, even in case, where certaininformations were drawn after passing of the assessment orderand materials were identified, which all are not adjudicated,then the Assessing officer has reason to believe for reopeningof the assessment. Undoubtedly, the power under Section 147 forthe Assessing Officer is wider enough to intervene in all thecases, where any income chargeable to tax has escaped assessmentfor any assessment year. The escaped assessment includes eventhe subject matters considered in the assessment, which all areescaped, the word "escape" undertakes that it is not only thematerials, which were not adjudicated during the originalassessment but the materials adjudicated and certain aspectsescaped from assessment during such original assessment. Thus,it is made clear that even the material facts, which all areprovided by the assessee during the original adjudication andthe Assessing Officer also passed an order under Section 143(3)of the Act, thereafter, if any materials are made available toestablish that any income chargeable to tax has escapedassessment for the assessment year, then the Assessing officeris well within his power to institute proceedings under Section147 of the Act. 27. It is insufficient that the assessee has compared thereasons stipulated in the order by the respondents withreference to certain informations provided in the originalassessment order. Beyond such comparable factors, with referenceto the original assessment order and the reasons furnished forreopening of assessment, the Assessing Officer, if found any newmaterials, which were not considered, though provided,constitute a cause for 'reason to believe' regarding the incomeescaped assessment, then also the Assessing Officer is empoweredto reopen the assessment by invoking the powers under Section147 of the Act. 28. Undoubtedly, the informations or materials etc., forreopening of the assessment must be new and not considered bythe Assessing Officer during the original assessment. However,the word 'New' does not mean that there is an impediment to cullout the new facts from the informations or materials provided bythe assessee at the time of original assessment. Even the materials, facts, informations, which were made available duringthe original assessment and not considered by the AssessingOfficer, while passing the assessment order and it constitute areason to believe regarding the escapement, then also, theAssessing Officer may have reason to believe for reopening ofthe assessment. 29. At the outset, the power conferred on the AssessingOfficer under Section 147 is wider enough to cover theinformations, materials and evidences, which were not consideredduring the original assessment and there is a reason to believethat such non-consideration constitute a cause for reopening ofassessment. materials, facts, informations, which were made available duringthe original assessment and not considered by the AssessingOfficer, while passing the assessment order and it constitute areason to believe regarding the escapement, then also, theAssessing Officer may have reason to believe for reopening ofthe assessment. 29. At the outset, the power conferred on the AssessingOfficer under Section 147 is wider enough to cover theinformations, materials and evidences, which were not consideredduring the original assessment and there is a reason to believethat such non-consideration constitute a cause for reopening ofassessment. 30. The very purpose and object of the proviso under Section147 is to ensure that the assessee pays the income tax in themanner prescribed under the Statute and therefore, the Courtsare expected to be cautious, while dealing with such intricaciesand the disputed facts, which all are to be adjudicated by thecompetent authority by following the procedures as contemplated.High Court shall scrutinize the processes, through which, adecision is taken by the competent authorities with reference tothe provisions of the Statute and the established principles andcertainly, not the decision itself. Roving enquiry cannot beundertaken by the High Court in a writ proceedings under Article226 of the Constitution of India. Contrarily, the assessee mustbe provided with an opportunity to putforth his case before theAssessing Officer, who in turn, is bound to consider all thedocuments and evidences available and pass appropriate orders. 31. Thus, this Court has no hesitation in forming an opinionthat the petitioner has not made out any acceptable ground forthe purpose of interfering with the initiation of proceedingsfor reopening of assessment under Section 147 of the Income TaxAct. Accordingly, the Writ Petition fails and stands dismissed.No costs. Consequently, connected miscellaneous petitions areclosed. Assistant Registrar(CO) Sub Assistant Registrar Kak https://hcservices.ecourts.gov.in/hcservices/ To The Deputy Commissioner of Income Tax,Company Circle II (3)121, Nungambakkam High Road,Chennai – 600 034. +1cc to Mr.R.Sivaraman, Advocate, S.R.No.26607+1cc to Mrs.Hema Murali krishnan, Advocate, S.R.No.26157 W.P.No.14021 of 2017 VBM(CO)CB(15/06/2021)