Ita92/10 v. The Dispute Between The Department And The Assessee, Is As To

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE THOTTATHIL B.RADHAKRISHNAN & THE HONOURABLE MR. JUSTICE DEVAN RAMACHANDRAN THURSDAY, THE 27TH DAY OF OCTOBER 2016/5TH KARTHIKA, 1938 ITA.No. 92 of 2010 ( ) ----------------------- AGAINST THE ORDER/JUDGMENT IN ITA 264/COCH/2001 ofI.T.A.TRIBUNAL,COCHIN BENCH DATED 24-08-2009 APPELLANT(S)/RESPONDENT: ----------------------- THE COMMISSIONER OF INCOME TAX, THIRUVANANTHAPURAM. BY ADV.SRI.PKR MENON, SENIOR COUNSEL, GOI (TAXES)ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT(S)/APPELLANT: ------------------------ M/S. HINDUSTAN LATEX LTD., VAZHUTHACAUD, THIRUVANANTHAPURAM. BY ADV. SRI.E.K.MADHAVAN BY ADV. SRI.V.KRISHNA MENON BY ADV. SMT.P.VIJAYAMMA THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 27-10-2016,THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ITA92/10 APPENDIX APPELLANT'S ANNEXURES ANNEXURE-A :COPY OF INTIMATION UNDER SECTION 143(1)(a) OF THEINCOME TAX ACT, DATED 16.07.1993. ANNEXURE-B :COPY OF ORDER UNDER SECTION 154 OF THE INCOME TAXACT DATED 14.10.1993. ANNEXURE-C :COPY OF ORDER OF THE ASSESSING OFFICER UNDERSECTION 143(3) OF THE INCOME TAX ACT DATED 24.03.1995. ANNEXURE-D :COPY OF ORDER OF THE ASSESSING OFFICER UNDERSECTION 143(3)/147 OF THE INCOME TAX ACT DATED 18.10.2000. ANNEXURE-E :COPY OF ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS) DATED 24.05.2001. ANNEXURE-F :COPY OF ORDER OF THE APPELLATE TRIBUNAL DATED24.08.2009. //TRUE COPY// jg-14/11 PA TO JUDGE. THOTTATHIL B.RADHAKRISHNAN & DEVAN RAMACHANDRAN, JJ. ....................................................................I.T.A.No.92 of 2010 .................................................................... Dated this the 27[th] day of October, 2016. J U D G M E N T Thottathil B.Radhakrishnan, J. 1.This income tax appeal by the Department stands admitted on30.09.2013 formulating the following as the substantial questionsof law, for consideration: (1)“Whether on the facts and circumstances of thecase, the Tribunal was right in holding that thereassessment proceedings in the case of theassessee is not valid under law in light of the factthat there has been no full and true disclosure ofmaterial necessary for assessment during theoriginal assessment proceedings?case, the Tribunal was right in holding that thereassessment proceedings in the case of theassessee is not valid under law in light of the factthat there has been no full and true disclosure ofmaterial necessary for assessment during theoriginal assessment proceedings? (2)Whether on the facts and circumstances of thecase, the Tribunal is right in holding that theAssessing Officer had verified the claim ofdeduction at the stage of proceedings u/s.143(1)(a) and also in the related proceedings u/s.154,when in fact the Assessing Officer had onlycase, the Tribunal is right in holding that theAssessing Officer had verified the claim ofdeduction at the stage of proceedings u/s.143(1)(a) and also in the related proceedings u/s.154,when in fact the Assessing Officer had only considered the allowability of the deduction in totounder the above proceedings and not the eligibilityof the assessee to claim the deductions, sincethere was no opportunity for the Assessing Officerto verify the previous assessment records of theassessee to detect the wrongful claim as he isconstrained under law from going into the pastrecords under the provisions of Section 143(1)(a)? (3)Whether on the facts and circumstances of thecase, the finding of the Tribunal is perverse innature as the same is based on wrong appreciationof facts?”case, the finding of the Tribunal is perverse innature as the same is based on wrong appreciationof facts?” 2.We have heard the learned counsel for the Department and thelearned counsel for the respondent/assessee, which is aGovernment Company. (3)Whether on the facts and circumstances of thecase, the finding of the Tribunal is perverse innature as the same is based on wrong appreciationof facts?”case, the finding of the Tribunal is perverse innature as the same is based on wrong appreciationof facts?” 2.We have heard the learned counsel for the Department and thelearned counsel for the respondent/assessee, which is aGovernment Company. 3.Learned counsel for the respondent pointed out that no questionof law much less any substantial question of law, including thosementioned hereinabove, arises for decision in this appeal, goingby the order of the Income Tax Appellate Tribunal as also the order of the subordinate authority, which the Tribunal considered. 4.Learned Senior Standing Counsel for the Department argued thatthe Tribunal exceeded its jurisdiction in setting aside the actiontaken by the assessing authority to determine and assess incomewhich, according to the assessing authority, had escapedassessment. He pithily pointed out that the Tribunal erred in lawin holding that the materials were insufficient for the assessingauthority to proceed under Section 147 of the Income Tax Act,1961, the 'Act', for short. Specific reference was made to thedecision in Sowdagar Ahmed Khan (deceased) (By His LegalRepresentatives)v. Income Tax Officer, Nellore[70 ITR 79] tostate that when the original assessment order showed that thecash credits in question were not duly considered, proceedingsunder Section 147 of the 1961 Act would be applicable, going bythe ratio of that decision rendered in terms of the correspondingprovisions of the 1922 Act. 5.The dispute between the Department and the assessee, is as to whether the assessing authority was entitled to invoke Section147 of the Act as regards the deductions granted by the assessingauthority at the first instance through the assessment orderallowing deductions under Sections 80HH and 80I during theregular assessment proceedings against the assessee. Theargument advanced by the learned counsel for the Department onthe basis of the pleadings of the Department in the appeal is thatthe said issue was considered by the assessing authority throughthe original assessment order within the narrow confines ofSection 143(1)(a) of the Act, and therefore, it was permissibleunder Section 147 to re-open the assessment. 6.The Tribunal through the impugned order noted that the re-assessment was attempted to be made after the period of fouryears from the end of the relevant assessment year. Specificreference was made to Sub-section (3) of Section 147 of the Actand the effect of the provisos. assessment was attempted to be made after the period of fouryears from the end of the relevant assessment year. Specificreference was made to Sub-section (3) of Section 147 of the Actand the effect of the provisos. 7.We may now note certain factual details, which have been culled ITA92/10 out from the relevant paper books and materials by the AppellateTribunal, which is the last authority on facts, after noticing thatthe assessment under Section 143(3) of the Act was done on24.03.1995. We quote the relevant facts from the order of theAppellate Tribunal as follows: “xxxxxxxxxxxxIn the assessee's paper book Pg.No.3 (internalpage No.2) shows the deductions under section80HH and 80I (6[th] year claim) made by theAssessing Officer under the Head revisedcomputation of total income. The assessee'spaper book pg.No.6 shows the intimation underSection 143(1)(a) dated 16.07.1993 wherein theAssessing Officer has not allowed deductionunder section 80I as separate accounts have notbeen kept for new industrial undertaking asrequired by section 80I. In assessee's paper book,pg.No.7, in reply to the intimation under section143(1)(a), the assessee vide letter dated 10[th] July1993 stated that Section 80-I does not insist onkeeping separate accounts for the new industrialundertaking. The profit arising out of the “xxxxxxxxxxxxIn the assessee's paper book Pg.No.3 (internalpage No.2) shows the deductions under section80HH and 80I (6[th] year claim) made by theAssessing Officer under the Head revisedcomputation of total income. The assessee'spaper book pg.No.6 shows the intimation underSection 143(1)(a) dated 16.07.1993 wherein theAssessing Officer has not allowed deductionunder section 80I as separate accounts have notbeen kept for new industrial undertaking asrequired by section 80I. In assessee's paper book,pg.No.7, in reply to the intimation under section143(1)(a), the assessee vide letter dated 10[th] July1993 stated that Section 80-I does not insist onkeeping separate accounts for the new industrialundertaking. The profit arising out of the operations of the new plants can be reasonablyestimated as a proportion to the production sincethe items produced at all the plants are same.Hence, the basis on which the deduction isallowed under section 80HH can be applied forthis section also. Therefore since deduction wasallowed under section 80HH, the deductionclaimed under section 80-I must also be allowedon the same basis. Then in assessee's paper bookpg.No.9, the Deputy Commissioner of Income Tax(Asst.), Special Range vide letter dated 10.08.1993invited the assessee's attention to section 80I(6).He pointed out that in section 80HH there was noparallel sub-section. The Deputy Commissioner,however, submitted that if any case laws areavailable in assessee's favour, he may be informedof the same. Further, the Deputy Commissionerasked the assessee to clarify why this deductionwas claimed at 5% only. The assessee vide hisletter dated 19[th] August 1993 furnished thenecessary clarifications in first para itself which isavailable in assessee's paper book pg.No.10. Itwas also accepted by the ld. Counsel for theassessee in assessee's paper book in pg.11 that itappears by mistake he has claimed only 5% instead of 25%. Since it was mistake apparent onrecord, he requested the Department to allow theeligible 25% deduction. The assessee's paperbook pg.No.12 particularly para 2 sub-para (a)relates to the Department's rectification orderunder section 154 wherein the assessee vide letterdated 30.07.1993 pointed out that theDepartment has accepted that this is a debatableissue which cannot be covered under section 143(1)(a) and allow the deductions claimed. TheDepartment allowed the request of the assessee tofully deduct 25% since this was within the scope ofsection 143(1)(a). The rectified deduction ofincome under Section 80I is given in assessee'spaper book pg.No.13. The assessee has furnishedthe information called for by the Department indetail which is available in assessee's paper book,pg.Nos.14 and 15 particularly pg.15 and pg.No.16mentions about the schedule of sundry creditors.” 8.On the basis of the aforesaid materials, the Appellate Tribunalwas satisfied that the assessing officer, in the first round, whilemaking the original assessment order, had actually considered ITA92/10 the materials, after requiring the relevant materials to beproduced. The assessee-Company had produced those materialsand the Tribunal also dilated on the question as to whether theclaims were debatable or not. 8.On the basis of the aforesaid materials, the Appellate Tribunalwas satisfied that the assessing officer, in the first round, whilemaking the original assessment order, had actually considered ITA92/10 the materials, after requiring the relevant materials to beproduced. The assessee-Company had produced those materialsand the Tribunal also dilated on the question as to whether theclaims were debatable or not. With the aforesaid in mind, we revert to the first proviso toSection 147 of the Act. It has to be pointedly noted here thataction under the first proviso to Section 147, that is to say, for aperiod after the expiry of four years, can be generated only if theincome chargeable to tax has escaped assessment by reason ofthe failureon the part of the assessee to make a returnundersection 139 or in response to a notice issued under Section 142(1)or Section 148 or to disclose fully and truly all material factsnecessary for the assessment. As is clearly discernible from whatwe have quoted above out of the order of the Tribunal, it wascrystal clear for the Tribunal that the assessee had responded tothe queries raised by the assessing officer in the originalassessment proceedings and during the course of suchproceedings had produced all material facts as were called for and were relevant and necessary for completing the assessmentfor the year. Under such circumstances, we are of the view thatthe Tribunal was abundantly justified in the facts and in thecircumstances of the case in hand to have concluded that this is acase where proceedings were impermissible in view of theembargo under the first proviso to Section 147 of the Act. Havingheld so, we cannot but to affirm the decision of the Tribunal andthereby answer the questions raised by the Revenue against it.The income tax appeal is dismissed answering the questionsformulated, against the Revenue. (THOTTATHIL B.RADHAKRISHNAN, JUDGE) jg-27/10 (DEVAN RAMACHANDRAN, JUDGE)