Ita/538/2009 Of The Commissioner Of Income Tax v. The Mathrubhumi Printing And Publishing Co. Ltd

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON MONDAY ,THE 22ND DAY OF OCTOBER 2018 / 30TH ASWINA, 1940 ITA.No. 504 of 2009 AGAINST THE ORDER/JUDGMENT IN ITA 100/2006 ofI.T.A.TRIBUNAL,COCHIN BENCH DATED 12-11-2008 APPELLANT/S: COMMISSIONER OF INCOME TAX,CALICUT. BY ADV. SRI.JOSE JOSEPH, SC FOR INCOME TAX RESPONDENT/S: THE MATHRUBHUMI PRINTING AND PUBLISHING CO. LTD.,KOZHIKODE. BY ADVS.SRI.E.K.NANDAKUMAR (SR.)SRI.ANIL D. NAIRSRI.P.BENNY THOMAS OTHER PRESENT: THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 22.10.2018, ALONG WITH ITA.538/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON MONDAY ,THE 22ND DAY OF OCTOBER 2018 / 30TH ASWINA, 1940 ITA.No. 538 of 2009 AGAINST THE ORDER/JUDGMENT IN ITA 99/2006 of I.T.A.TRIBUNAL,COCHINBENCH DATED 12-11-2008 APPELLANT/S: THE COMMISSIONER OF INCOME TAX,CALICUT. BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT/S: THE MATHRUBHUMI PRINTING AND PUBLISHING CO. LTD.,CALICUT. BY ADVS.SRI.E.K.NANDAKUMAR (SR.) SRI.ANIL D. NAIR SRI.P.BENNY THOMAS THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 22.10.2018, ALONG WITH ITA.504/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: JUDGMENT [ ITA 504/2009 ,ITA.538/2009 ] Vinod Chandran, J. The appeals are against the common order of the Tribunal for two assessment years, ie., 1997-98 and 1998-99. The assessee was maintaining the accounts asper the mercantile system. The income tax returns werefiled based on cash system of accounting as ispermissible under Section 145 of the Income Tax Act,1961. However, the assessee had not been maintaining anyaccounts as per the cash system. The assessments werecompleted and re-assessment proceedings were taken underSection 147 read with Section 143(3), after four years ofcompletion of the assessments. 2.The learned Standing Counsel, Government of India (Taxes), submits that under Section 44AA, theassessee, though entitled to maintain accounts as per themercantile or cash system, is also obliged to maintainaccounts on the system based on which the income tax iscomputed and returns filed. In the present case there were no accounts maintained as per the cash system andhence re-assessment proceedings were initiated. 3.We have to first consider whether there is anyabsence of full and true disclosure of all the materialfacts necessary for assessment. The Assessing Officer hadinitially considered the returns filed by the assessee,which specifically indicated that the assessee had beenmaintaining accounts as per the mercantile system and hadcomputed income tax in accordance with cash system. Noaccounts were called for and the assessments werecompleted. It is also submitted by the learned Counselfor the respondent-assessee that in altogether four yearsthe above problem arose. The problem arose also becauseof the change in the Companies Act, which mandatedmaintenance of accounts as per the mercantile system.The assessee had hence maintained the accounts as per themercantile system for the purpose of the Companies Actand had computed income tax in accordance with the cashsystem of accounting. For the earlier two years whereinre-assessment proceedings were taken; the same wasdropped for reason of the income returned as per the cash system being in excess of that which would have beencomputed under the mercantile system. These two yearsthe re-assessment was taken up and completed on the basisof the mercantile system of accounting. 4.It is also submitted that for the year 1997-98,there was a rectification proceedings under Section 154,which is handed over across the Bar by the learnedCounsel for the respondent. The recitals in the order dated 07.07.1999 is extracted below:- system being in excess of that which would have beencomputed under the mercantile system. These two yearsthe re-assessment was taken up and completed on the basisof the mercantile system of accounting. 4.It is also submitted that for the year 1997-98,there was a rectification proceedings under Section 154,which is handed over across the Bar by the learnedCounsel for the respondent. The recitals in the order dated 07.07.1999 is extracted below:- “While processing the return of income, outof the total TDS claims, credit for an amount ofRs.73,970/- was not allowed because as per thedate of payment shown in the certificate, theywere not relating to the assessment year. Theassessee by their letter dated 24-5-99 hasclarified that they are maintaining accounts forI.T. purposes on cash basis and out of the totalreceipts for advertisement and interest, a sum ofRs.3,13,520/- was received during April/May 1996and such receipts were offered for assessment forA.Y. 1997-98. Since the assessee has clarifiedthe position, the TDS made from the abovementioned Rs.3,13,520/- amounting to Rs.58,513/-is allowable for this year. The assessment isrevised as under to allow credit for TDS. xx xx ” 5.It is pertinent that even in the rectificationorder, the Assessing Officer specifically notices that the assessee had been maintaining accounts for income taxpurposes under the cash system. There was no accountscalled for by the Assessing Officer, who completed theassessment proceedings. In such circumstances, we are ofthe opinion that there could be no allegation raised ofnon-disclosure of full and true material facts. The re-assessment proceedings having been attempted after aperiod of four years as prescribed under Section 147,there should be non-disclosure of full and true materialfacts. We agree with the Tribunal that there was nowarrant for re-assessment especially after the expiry offour years. We reject the I.T.Appeals, answering thequestions of law in favour of the assessee and againstthe Revenue. No order as to costs. dkr Sd/- K.VINOD CHANDRANJUDGE Sd/-ASHOK MENONJUDGE APPENDIX OF ITA 504/2009 PETITIONER'S/S EXHIBITS: ANNEXURE AANNEXURE BANNEXURE C COPY OF ASSESSMENT ORDER COPY OF CIT(A)'S ORDER COPY OF THE ITAT'S ORDER APPENDIX OF ITA 538/2009 PETITIONER'S/S EXHIBITS: ANNEXURE AANNEXURE BANNEXURE C COPY OF ASSESSMENT ORDERCOPY OF CIT (A)'S ORDERCOPY OF THE ITAT'S ORDER