Ita/1379/2009 Of The Commissioner Of Income-Tax, Tvpm v. M/S. Hydrotech Engineers And Contractors

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON WEDNESDAY,THE 14TH DAY OF NOVEMBER 2018 / 23RD KARTHIKA, 1940 ITA.No. 1379 of 2009 AGAINST THE ORDER/JUDGMENT IN ITA 151/2006 of I.T.A.TRIBUNAL,COCHINBENCH DATED 14-01-2008 APPELLANT/S: THE COMMISSIONER OF INCOME-TAX, THIRUVANANTHAPURAM. BY SRI. PKR MENON, SR SC FOR GOI TAXESSRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT/S: M/S. HYDROTECH ENGINEERS AND CONTRACTORSSANTHA BHAVAN, KALANJOOR, PATHANAPURAM. BY ADVS.SMT.NIVEDITHA A. KAMATHSRI.ANIL D. NAIR OTHER PRESENT: THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 14.11.2018, THECOURT ON THE SAME DAY DELIVERED THE FOLLOWING: JUDGMENT The assessee, a partnership firm, is engaged in civilcontract. A return of income was filed for the assessmentyear 1998-99, which was processed under Section 143(1).Subsequently, assessment was reopened by issue of a noticeunder Section 148 and re-assessment completed under Section143(3) read with Section 147. A rectification of mistakewas also carried out to the order of re-assessment. Lateron 12.12.2003, after the four year period as stipulated inSection 147, a further notice under Section 148 was issued.The present notice was with respect to the repetition of aclaim made in the subject year, which was actually allowedin the previous year. 2.The assessee claimed that even during there-assessment proceedings initiated earlier, within thefour year period, there was a full disclosure made andhence there could be no re-assessment on the basis of non-disclosure of true and full material facts for thepurpose of assessment. 3.The question of law framed is as to whether meredisclosure in a re-assessment proceedings would permit theassessee to be absolved of the liability of re-assessment,after four years but within six years, if there was no fulland true disclosure at the time of the original assessment,ie., under Section 143(1)(a). 4.We notice on facts that for the year 1997-98, theassessment was completed under Section 143(3) read withSection 147 estimating the profit from the business. Thiswas on account of bills received on 31.03.1997, which werenot credited into the Profit & Loss Account. The creditwas actually made on 01.04.1997 and the expenses deducted.Rs.3,08,621/- which was claimed for the assessment year1998-99 was actually granted in the assessment year 1997-98was the ground on which the re-assessment proceedings wereinitiated after four years. Similarly, the expenditureincurred with respect to the contracts on which billsreceivedofRs.19,14,244/-,Rs.4,84,030/-and Rs.27,38,020/- were also allowed while estimating theprofit on the said contract amounts. The expenditureclaimed at Rs.12,40,539/- was also credited to the Profit &Loss Account. 5.We do not think any question arises as to whethernon-disclosure at the time of first re-assessment was theground on which the First Appellate Authority or theTribunal set aside the second re-assessment proceedings.We find that there can be no allegation raised of non-disclosure of full and true material facts, especiallysince it to be noticed that the estimation of profits onthe contract bills were made by the A.O. himself for theprevious assessment year. The expenses were also allowed onthe estimation of profits. The assessee had claimed thebenefit, since the receipt was accounted by the assessee inthe previous year to the subject assessment year. What ispertinent is that the earlier years, assessment wascompleted making the estimation on certain contractreceipts on 24.11.2000 under Section 143(3) read withSection 147. The return of income for 1998-99 was filed on 31.03.2000 prior to the completion of assessment of theprevious assessment year. The estimation and allowance ofexpenditure would not be in the knowledge of the assesseeat the time when the returns were filed for the subjectassessment year, ie., 1998-99. 6.We are surprised that the proceeding was initiatedunder Section 147 on the ground of non-disclosure of fulland true material facts for the purpose of assessment. Aswe noticed, the return of income for the assessment year1998-99, the subject assessment year, was filed on31.03.2000. An assessment was completed under Section143(1) on 11.09.2000 and a scrutiny assessment underSection 143(3) was completed on 18.03.2002. The presentproceedings were initiated by notice dated 12.12.2003, onthe premise that there was double claim with respect tocertain expenditures. The said claim of expenditure wasnever raised by the assessee in the previous year. Infact, while completing the assessments for the previousassessment year being 1997-98 under Section 143(3) r/wSection 147, certain additions were made estimating the profit from business with respect to certain receipts saidto have been received by the assessee on 31.03.1997. Theexpenditure relating to the said contract bills also stoodallowed for the assessment year 1997-98. Such scrutinyassessment for the earlier assessment year 1997-98 wascompleted on 24.11.2000, long after return of income for1998-99 was filed. It was even after the first order ofassessment on 11.09.2000 under Section 143(1). Later inthe subject assessment year a scrutiny assessment was alsocarried out on 18.03.2002. Even when such claim ofexpenditure relating to profits was not interfered with.The Assessing Officer who carried out such assessment underSection 143(1) and 143(3) ought to have been more carefulin having scrutinized the assessment order of the earlieryear wherein the additions were made estimating a profitwith respect to certain contract receipts. In any event,there could not have been any non-disclosure of full andtrue material facts alleged by the assessee since thereturn was filed long prior to the estimation made. Insuch circumstances, we are of the opinion that the proceedings itself was misconceived and the assessee had tofile a first appeal in which the proceedings under Section147 was set aside. Revenue has again gone in appeal beforethe Tribunal and revision before this Court. In suchcircumstances, we are of the opinion that the assessee hasto be reimbursed the costs before the Tribunal and thisCourt which we quantify it as Rs.10,000/-. We, hence, concur with the order of the Tribunal as tothe proceedings being bad, on the different reasoningadopted by us as above and refuse to answer the question oflaw, which does not arise in the facts of the case. Theappeal stands rejected. Costs as ordered above. Sd/- K.VINOD CHANDRAN JUDGE Sd/- dkr ASHOK MENONJUDGE APPENDIX APPELLANT'S/S ANNEXURES: ANNEXURE ACOPY OF THE ORDER OF THE ASSESSING OFFICER U/S143(3)/147 OF INCOME TAX ACT DATED 28.03.2005143(3)/147 OF INCOME TAX ACT DATED 28.03.2005 ANNEXURE BCOPY OF THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS) DATED 24.10.2005.(APPEALS) DATED 24.10.2005. ANNEXURE CCOPY OF THE ORDER OF THE APPELLATE TRIBUNAL DATED14.01.2008.14.01.2008.