M/S. Home Finders Housing Limited v. The Income Tax Officer, Corporate Ward 2(3) Rome

IN THE HIGH COURT OF JUDICATURE AT MADRAS Reserved on 16.03.2017 Delivered on 07.04.2017 CORAM THE HONOURABLE MR.JUSTICE K.RAVICHANDRABAABU M/s. Home Finders Housing LimitedRepresented by its Chairman and ManagingDirector,K.S.Ramalingam,Block N.10, Homefinders Estate,75/2, Thiruvallurvar Salai, Ramapuram,Chennai - 600 089.. PetitionerVs. The Income Tax Officer,Corporate Ward 2(3)Rome No.504, Wanaparthy Block,5th Floor,121, M.G.Road, Nungambakkam.Chennai - 600 034. .. Respondent Writ petition filed under Article 226 of the Constitution ofIndia praying for issuance of a Writ of Certiorari to call forthe records of the respondent contained in its Assessment Orderdated 30.12.2016 in PAN: , passed under Section 143(3)of the Income Tax Act, 1961, for the assessment year 2012-13 andto quash the same as arbitrary , unjust and illegal. The petitioner is aggrieved against the order of assessmentdated 30.12.2016 passed under Section 143(3) of Income Tax Act,1961, for the assessment year 2012-13. https://hcservices.ecourts.gov.in/hcservices/ 2. The case of the petitioner in short is as follows:The petitioner is a real estate Company involved in thedevelopment of properties. They filed their return for theassessment year 2012-13 on 30.09.2012, admitting a nil totalincome. The petitioner's case was selected for scrutiny andnotice dated 03.12.2014 was issued under Section 143(2) of theIncome Tax Act, 1961. On 29.12.2014, the petitioner, throughtheir authorised representative, submitted certain documentspertaining to the issue. After detailed scrutiny of thedocuments and hearing the petitioner's representative on variousdates, the respondent passed an order of assessment on23.03.2015, by accepting the petitioner's return. While so, therespondent issued a notice dated 16.10.2015 under Section 148of the said Act seeking to reopen the assessment under Section147 of the said Act, simply by stating that the respondent hasreasons to believe that the petitioner's income escapedassessment. By letter dated 20.11.2015, the petitionerrequested for furnishing the informations pertaining to thereasons for reopening the assessment and the copies of documentsrelied upon by the respondent. The petitioner also requested totreat the return filed on 30.09.2012 as response to the noticeunder Section 148 of the said Act. After four months, therespondent through letter dated 05.02.2016 furnished thepurported reasons recorded for reopening of the assessment. Inresponse to the aforementioned letter, the petitioner gave areply on 26.03.2016 objecting to the reopening of theassessment. It is specifically stated by the petitioner that ajoint venture development agreement dated 12.03.2012 was verymuch available with the respondent at the time of originalscrutiny itself and that the assessment had been completedunder Section 143(3) of the said Act after scrutinising the saiddocument as well. There was no tangible material or basisavailable to the respondent so as to reopen the assessment underSection 147 of the said Act. Inspite of the specific objectionraised by the petitioner to the reopening of the assessment, therespondent failed to pass a speaking order disposing thoseobjections. On the other hand, the respondent passed theimpugned order of assessment on 30.12.2016 assessing thepetitioner's income at Rs.1,63,58,148/-. Hence, this writpetition. 3. The respondent filed a counter affidavit wherein it isstated as follows: 3. The respondent filed a counter affidavit wherein it isstated as follows: During the financial year 2011-12 relevant to the assessmentyear 2012-13, project expenses were claimed to the extent ofRs.56,14,265/- without submitting the details of the same. Theprevious officer had accepted only the difference in the openingand closing stock to the extent of Rs.7,43,883/- and not theabove project expenses. The assessment was reopened underSection 147 by issuing notice under Section 148 after obtaining necessary approval as contemplated under Section 151 of the saidAct. The objections raised by the petitioner for reopening theassessment was considered while passing the impugned order ofassessment. 4. A rejoinder affidavit was filed by the petitioner whereinit is contended as follows: The objections of the petitioner to the reopening of theassessment was submitted on 26.03.2016 and however, theassessment order was passed only on 30.12.2016 just one dayprior to the last date for passing such assessment, as requiredunder Section 153(2) of the said Act. Therefore, this Court atany event cannot extend the time period by giving an opportunityto the respondent to further reassess the income of thepetitioner. The period of limitation statutorily prescribedcannot be extended by an order of the Court. 5. Learned counsel for the petitioner submitted as follows:(a) Once the respondent has chosen to reopen the assessmentunder Section 147 by issuing a notice under section 148, he isduty bound to pass a speaking order on the objections raised bythe petitioner which is admittedly received by the respondent,well before passing the impugned order of assessment. Withoutpassing a speaking order on the objections raised againstreopening of the assessment, the respondent cannot pass thefinal order of assessment. In support of the above contention,the decision of the Apex Court reported in 2003(1) SCC 72 (GKNDriveshafts (India) Ltd. vs. Income Tax Officer and Ors) isrelied on. (b) The Joint Venture Agreement dated 12.03.2012 was verymuch available with the respondent even at the time of theoriginal scrutiny of the returns and therefore, the respondentis not having jurisdiction to reopen the assessment in theabsence of any tangible material which has come to his knowledgelater. In this aspect, the decision of the Apex Court reportedin 2010(2) SCC 723 (Commissioner of Income tax, Delhi vs.Kelvinator of India Limited) is relied on. (c) When, admittedly, the respondent has not passed anyspeaking order on the objections raised by the petitioner andwhen the impugned order of assessment itself was passed just oneday prior to the expiry of the prescribed period, this Courtcannot even remit the matter, by extending the period oflimitation, to the respondent to redo the assessment beyond theperiod prescribed under Section 153(2) of the said Act. Insupport of the above contentions, the decision of the Apex Courtreported in 2001(10) SCC 280 (Sone Builders vs. Union of Indiaand others)and the Division Bench decision of the Bombay HighCourt reported in (2016)382 ITR 333 (Bayer Material Science (P.)Ltd. vs. Deputy Commissioner of Income Tax-10(3)) are relied on. (c) When, admittedly, the respondent has not passed anyspeaking order on the objections raised by the petitioner andwhen the impugned order of assessment itself was passed just oneday prior to the expiry of the prescribed period, this Courtcannot even remit the matter, by extending the period oflimitation, to the respondent to redo the assessment beyond theperiod prescribed under Section 153(2) of the said Act. Insupport of the above contentions, the decision of the Apex Courtreported in 2001(10) SCC 280 (Sone Builders vs. Union of Indiaand others)and the Division Bench decision of the Bombay HighCourt reported in (2016)382 ITR 333 (Bayer Material Science (P.)Ltd. vs. Deputy Commissioner of Income Tax-10(3)) are relied on. 6. Per contra, learned Standing Counsel appearing for therespondent submitted that though a speaking order is not passedby the respondent on the objections raised by the petitioneragainst the reopening of the assessment, all those objectionswere considered while passing the impugned order of assessment.Even though the learned Standing Counsel submitted so, he ishowever fair enough to state further that in view of theDivision Bench decisions made by the Bombay High Court reportedin (2006)287 ITR 1(Bombay) (Allana Cold Storage Ltd. vs. Income-tax Officer) , (2012)27 Taxmann.com 163(Bombay) (Rabo IndiaFinance Ltd. vs. Deputy Commissioner of Income-tax) and (2010)233 CTR 175(Bombay) (IOT Infrastructure & Energy services Ltd.vs. Assistant Commissioner of Income-tax), the matter may beremitted back to the Assessing Officer to first pass a speakingorder on the objections raised by the petitioner and thereafter,to pass a final order of assessment afresh. 7. Heard both sides. 8. The petitioner is aggrieved against the order ofassessment passed in pursuant to the reopening of the sameunder Section 147 of the said Act. There is no dispute to thefact that in respect of the assessment year 2012-13, anassessment order was passed on 23.03.2015 under Section 143(3)of the said Act. Thereafter, the Assessing Officer issued anotice under Section 148 on 16.10.2015 stating that he hadreasons to believe that the income chargeable to tax had escapedassessment, within the meaning of Section 147 of the said Act.On receipt of such notice, the petitioner, through their replydated 20.11.2015, sought the details of reasons for reopeningthe assessment. In response to such request, the respondent senta communication on 05.02.2016 indicating the reason forreopening the assessment as extracted hereunder: "It has been observed that the assesseehas claimed erroneous reduction in the valueof inventory being flats under constructionas per joint venture development, which willbe completed only on receipt of share offlats apart from cash by the assessee-company as agreed in the Joint Venturedocument which has not taken place duringthe year. Hence the claim of reduction tothe tune of Rs.1,63,58,148/- is found not tobe in order and thus the income to theextent is considered as having escapedassessment." 9. The petitioner, on receipt of such communication, sent adetailed objection on 26.03.2016 running to several pages. It isspecifically stated therein that the assessment itself wascompleted under section 143(3) read with Section 147 and that https://hcservices.ecourts.gov.in/hcservices/ 9. The petitioner, on receipt of such communication, sent adetailed objection on 26.03.2016 running to several pages. It isspecifically stated therein that the assessment itself wascompleted under section 143(3) read with Section 147 and that https://hcservices.ecourts.gov.in/hcservices/ the entire books of accounts, bank statements, re-conciliationof Form 26AS with profit and loss accounts was done during thecourse of assessment proceedings. It is also stated in theirobjection that the entire details and agreements and documentswere scrutinised in detail before passing the assessment orderunder section 143(3) and that the petitioner had furnished thedetails on various matters relevant to the assessment year.Therefore, it is contended by the petitioner in the saidreply/objection that reopening of the assessment is withoutjurisdiction, since it does not satisfy the test for reopeningthe assessment, as held by the Apex Court in the Kelvinator ofIndia's case. 10. Though such objections of the petitioner were receivedby the respondent, admittedly he has not passed any order,muchless a speaking order, rejecting those objections. On theother hand, he straight away passed the impugned order ofassessment on 30.12.2016. It is well settled that the AssessingOfficer has to first pass a speaking order on the objectionsraised by the petitioner against the reopening of the assessmentbefore ever proceeding to pass final order of assessment. Inthis aspect, the decision of the Apex Court reported in 2003(1)SCC 72 (GKN Driveshafts (India) Ltd. vs. Income Tax Officer andOrs) is relevant to be quoted wherein at paragraph No.5, it hasbeen observed as follows: 5. We see no justifiable reason tointerfere with the order under challenge.However, we clarify that when a notice underSection 148 of the Income Tax Act is issued,the proper course of action for the noticeis to file return and if he so desires, toseek reasons for issuing notices. Theassessing officer is bound to furnishreasons within a reasonable time. On receiptof reasons, the notice is entitled to fileobjections to issuance of notice and theassessing officer is bound to dispose of thesame by passing a speaking order. In theinstant case, as the reasons have beendisclosed in these proceedings, theassessing officer has to dispose of theobjections, if filed, by passing a speakingorder, before proceeding with the assessmentin respect of the abovesaid five assessmentyears. (emphasis supplied) 11. Learned counsel for the respondent though wants tosustain the impugned order of assessment, is, however, fairenough to admit the position that the respondent has not passedany order on the objections raised by the petitioner. Therefore,he submitted that the matter may be remitted back to the Assessing Officer for passing a speaking order and thereafter,to pass the assessment order. In support of such contention, herelied on the decision of the Bombay High Court reported in(2006)287 ITR 1(Bombay) (Allana Cold Storage Ltd. vs. Income-taxOfficer). In the above decision, the Division Bench of theBombay High Court, after following the GKN Driveshafts (India)Ltd. case, set aside the order of assessment and remitted thematter back to the Assessing Officer for passing a speakingorder on the objections. At paragraph Nos.7, 8, and 9, it hasbeen observed as follows: Assessing Officer for passing a speaking order and thereafter,to pass the assessment order. In support of such contention, herelied on the decision of the Bombay High Court reported in(2006)287 ITR 1(Bombay) (Allana Cold Storage Ltd. vs. Income-taxOfficer). In the above decision, the Division Bench of theBombay High Court, after following the GKN Driveshafts (India)Ltd. case, set aside the order of assessment and remitted thematter back to the Assessing Officer for passing a speakingorder on the objections. At paragraph Nos.7, 8, and 9, it hasbeen observed as follows: 7. We have noted the submissions ofboth counsel. The law as laid down by theapex court is binding on this court as wellas on the authorities functioning under thestatute. This being the position, we fail tounderstand as to why the first respondentdid not decide the objections separatelywhich he is duty bound to decide. The wholeidea in laying down the law in theabovereferred judgment of the apex court isto give an opportunity to the assessee toknow as to what is the decision on hisobjections, which decision has also to bearrive at after giving an opportunity to theassessee. In the present case, the assesseehas been denied this opportunity. Not onlythat but in the first three writ petitionswhat we find is that a common order has beenpassed on the objections as well as for thereassessment. In the fourth matter, theassessment order does not disclose anydecision on the objections at all andundoubtedly no such decision has been givenseparately on the objections.8. Having noted this scenario, in ourview the proper course will be to interferewith the assessment orders passed in allfour matters by the concerned officer. Weare aware that when an alternative remedy isresorted to, the writ jurisdiction is not tobe exercised, but that is a rule of self-limitation. The orders challenged in thepresent matter are clearly against the lawlaid down by the apex court and , therefore,the exercise of writ jurisdiction is calledfor. That being so, we allow these petitionsand quash and set aside the orders ofassessment passed in all these fourpetitions. Inasmuch as the assessment ordersare set aside, the appeals filed by thepetitioners no longer require to be prosecuted. The same will stand disposed of.9. Now that the impugned orders are setaside, the first respondent, after hearingthe petitioners, will pass separate speakingorders on the objections which thepetitioners have filed. We further add thatin the event the objections are rejected,the assessment order will not be passed fora period of four weeks thereafter. 12. The same view was taken by another two Division Bench ofthe Bombay High Court in the cases reported in (2010) 233 CTR175(Bombay) (IOT Infrastructure & Energy services Ltd. vs.Assistant Commissioner of Income-tax) and (2012)27 Taxmann.com163(Bombay) (Rabo India Finance Ltd. vs. Deputy Commissioner ofIncome-tax). Thus, it is evident from the above decisions ofthe Bombay High Court that after setting aside the order ofassessment, the matter was remitted back to the AssessingOfficer to pass a speaking order on the objections raised bythe respective petitioners therein. 13. In this case, the first contention raised by thepetitioner is that the respondent has not passed a speakingorder on the objections filed against the reopening ofassessment. Insofar as the said contention is concerned, therespondent's side has not raised any serious objections and onthe other hand, they admit to such position. However, they wantthe matter to be remitted back for passing such a speakingorder. However, the petitioner is opposing to such course ofaction by contending that it would amount to extension of theperiod of limitation prescribed for passing the order ofassessment. Therefore, this Court has to now consider as towhether remitting the matter back to the respondent for passinga speaking order on the objections raised against the reopeningof the assessment and thereafter, to pass a fresh order ofassessment, would amount to extension of period of limitation. 14. In my considered view, the question of extension ofperiod of limitation, as contended by the petitioner, does notarise at all in this case. Admittedly, the order of assessmentimpugned in this writ petition was already passed within theprescribed period of limitation. If the Assessing Officer haspassed the order of assessment within the prescribed period oflimitation and thereafter, if such order is put to challengebefore the Court of law and consequently, is set aside on somereason, which in the opinion of the Court is a curable defect,it is always open for the Court to remit the matter back to theAssessing Officer for passing a fresh order of assessment aftercuring those defects. In such cases, it does not mean that theCourt has extended the period of limitation. Needles to saythat once the Court has set aside the order and remitted thematter back to the Assessing Authority, the parties are reverted back to their original position as existed before passing theorder of assessment and therefore, a fresh order to be passed inpursuant to such remand, is deemed to have been passed withinthe prescribed period of limitation, even though the timeprescribed so under statute got expired by that time. back to their original position as existed before passing theorder of assessment and therefore, a fresh order to be passed inpursuant to such remand, is deemed to have been passed withinthe prescribed period of limitation, even though the timeprescribed so under statute got expired by that time. 15. An order passed within the period of limitation canalways be questioned before the Court of law by raising verymany grounds touching upon the merits of the matter. Uponconsidering those grounds, if the Court comes to a conclusion toset aside the impugned order and remit the matter back to theauthority for passing a fresh order, depending upon the factsand circumstances of each case, it can do so. In view of suchremand, as the parties are reverted back to their originalposition as existed prior to the impugned order, it cannot besaid that the court is extending the period of limitation. Ifsuch construction or interpretation is accepted, no fresh orderof assessment can ever be made in respect of cases remitted bythe Court where the limitation for passing the orders prescribedunder the statute has already expired. Needless to say thatprescription of statutory period of limitation is for theconcerned authority to perform a particular act within such timelimit. If he has acted within such prescribed time and passed anorder, the statutory obligation vested on such authority,insofar as the period of limitation is concerned, is deemed tohave been discharged. His order, so passed within time, may beright or wrong. Still it is an order passed within time. Theperson aggrieved against such an order is entitled to challengethe same before the appropriate forum, in a manner known to law.If any such challenge is made, such Forum has to look into theother aspects of the matter and the objections raised by theperson so aggrieved, in order to come to a conclusion on thequestion whether to sustain the order or to set aside the same.If for some reasons such Forum chooses to set aside, it is opento such Forum to remit the matter back to the Original Authorityfor redoing the exercise once again. At that point of time,certainly, the question of considering the limitation does notarise, as such forum is not granting time to pass the originalorder itself beyond the period of limitation and on the otherhand, it is an order empowering the original authority to redotheir exercise. Certainly, there is a vast difference betweenthe stage and circumstances of the exercise of power “to do” and“redo”. When the power “to do” is certainly to be exercisedwithin the statutory period of limitation, the power to “redo”such exercise does not fall under the purview of limitation onceagain. Hence, I reject the contention of the petitioner on thisaspect. 16. In all the three cases relied on by the learned StandingCounsel for the respondent, the respective Division Bench of theBombay High Court has only remitted the matter back to the Assessing Officer to pass a speaking order. 17. No doubt, the learned counsel relied on another DivisionBench decision of the Bombay High Court reported in (2016)382ITR 333 (Bayer Material Science (P.) Ltd. vs. DeputyCommissioner of Income Tax-10(3)). A perusal of the saiddecision would show that the Assessing Officer has passed adraft assessment order on 30.03.2015 without disposing of thepetitioner's objections therein. Since the Division Bench hasfound that the final assessment order as provided under 4[th]proviso to sub-section 2 of Section 153 of the Income Tax Act,1961, has not been passed in that case within the timeprescribed, it has set aside the draft assessment order itself.Paragraph No.10 of the said decision reads as follows: 10. In the present facts, we find that 17. No doubt, the learned counsel relied on another DivisionBench decision of the Bombay High Court reported in (2016)382ITR 333 (Bayer Material Science (P.) Ltd. vs. DeputyCommissioner of Income Tax-10(3)). A perusal of the saiddecision would show that the Assessing Officer has passed adraft assessment order on 30.03.2015 without disposing of thepetitioner's objections therein. Since the Division Bench hasfound that the final assessment order as provided under 4[th]proviso to sub-section 2 of Section 153 of the Income Tax Act,1961, has not been passed in that case within the timeprescribed, it has set aside the draft assessment order itself.Paragraph No.10 of the said decision reads as follows: 10. In the present facts, we find that the draft Assessment order was passed on 30thMarch, 2015, without having disposed of thepetitioner's objections to the reasonsrecorded in support of the impugned notice.The reasons were supplied to the petitioneronly on 19th March, 2015 and the Petitionerhad filed the objections to the same on 25thMarch, 2015. This passing of the draftAssessment order without having disposed ofthe objections is in defiance of the SupremeCourt's decision in GKN Driveshafts (India)Ltd. (Supra). Thus, the draft assessmentorder dated 30th March, 2015 is notsustainable being without jurisdiction. Thisfor the reason that it has been passedwithout disposing of the objections filed bythe Petitioner to the reasons recorded insupportoftheirimpugnednotice.accordingly, we set aside the draftassessment order dated 30th March, 2015. weare not dealing the validity of the reasonsin support of the impugned notice in thepresent facts as the time limit to pass theAssessment order as provided under 4thProviso to sub-section (2) of Section 153 ofthe act has already expired when the petitionwas filed. Rule is made absolute in theaforesaid terms,with no order as to costs. 18. The facts and circumstances of the present case aretotally different. As I have pointed out earlier, it is not thedraft assessment order and on the other hand, admittedly, thefinal assessment order itself was passed well within the periodof limitation. Therefore, the above said decision, which isfactually distinguishable, cannot be applied to the facts andcircumstances of the present case. 18. The facts and circumstances of the present case aretotally different. As I have pointed out earlier, it is not thedraft assessment order and on the other hand, admittedly, thefinal assessment order itself was passed well within the periodof limitation. Therefore, the above said decision, which isfactually distinguishable, cannot be applied to the facts andcircumstances of the present case. 19. The next decision relied on by the learned counsel forthe petitioner reported in 2001(10) SCC 280 (Sone Builders vs.Union of India and others) is also not relevant to the facts andcircumstances of the case. A perusal of the said decision wouldshow that the Apex Court did not think fit to remand the matterto the appropriate authority as there was breach of theprinciples of natural justice and by that time, the statutorylimit within which the appropriate authority has to act also gotlapsed. In this case, there is no violation of principles ofnatural justice. On the other hand, the petitioner was put onnotice and his objections were received. The only fault on theside of the respondent is that he has not passed a speakingorder on those objections. Moreover, the respondent hasadmittedly passed the order of assessment within the period oflimitation. Going by these facts, I do not think that the abovedecision of the Apex Court helps the petitioner in any manner.20. Considering all these aspects, I am of the view that thematter has to go back to the respondent for passing a speakingorder on the objections and thereafter, to pass the final orderof assessment. Accordingly, the writ petition is allowed and theimpugned order of assessment is set aside and the matter isremitted back to the respondent to pass a speaking order on theobjections raised by the petitioner, after giving an opportunityof hearing to them. Such exercise shall be done by therespondent within a period of four weeks from the date ofreceipt of a copy of this order. Thereafter, it is open to therespondent to pass the final order on merits and in accordancewith law within a period of four weeks. No costs. Consequently,connected miscellaneous petitions are closed. Sd/- Asst.Registrar (CS II ) /true copy/ Sub Asst. Registrar vsi To The Income Tax Officer,Corporate Ward 2(3)Rome No.504, Wanaparthy Block,5th Floor,121, M.G.Road, Nungambakkam.Chennai - 600 034. +1 cc to Mr. T.Pramod kumar chopda, Advocate. sr 21168+1 cc to Mr. Arun karthik mohan, Advocate, sr 20923 Pre-delivery order made inW.P.No.1019 of 2017rj(co)rmp(10/04/17)