M/S. Rk Textiles (India) v. Assistant Commissioner Of Income Tax Non Corporate Circle – 19(1), 6[Th] Floor, Annex Building

IN THE HIGH COURT OF JUDICATURE AT MADRAS CORAM THE HONOURABLE DR. JUSTICE ANITA SUMANTH M/s. RK Textiles (India)Represented by its PartnerAjay AgarwalA7&8, TVK Industrial Estate,Guindy, Chennai-600 032 .. Petitioner Vs 1. Assistant Commissioner of Income Tax Non Corporate Circle – 19(1), 6[th] Floor, Annex Building, 121, Mahatma Gandhi Road, Nungambakkam, Chennai- 600 034. 2. Principal Commissioner of Income Tax 10, 121, Mahatma Gandhi Road, Nungambakkam, Chennai- 600 034. .. Respondents Prayer: Writ Petition filed under Article 226 of theConstitution of India praying Writ of Certiorari, to call forthe records on the file of the First Respondent and quash theimpugned order passed by the First Respondent in DocumentNo.20121048522 in PAN dated 22.11.2019 passed underSection 143(3) read with Section 147 of the Income Tax Act,1961 for the Assessment Year 2012-13. For Respondents : Mrs.Prabhu Mukund Arun Kumar Junior Standing Counsel The petitioner challenges an order of assessment forassessment year 2012-13 passed in terms of the provisions ofhttps://hcservices.ecourts.gov.in/hcservices/ Section 143(3) read with Section 147 of the Income Tax Act,1961 (in short ‘Act’). 2. A return was filed by the petitioner returning ‘nil’income and an intimation under Section 143(1) is stated tohave been issued. The assessment was not taken up forscrutiny thereafter. Notice under Section 148 was issued on04.01.2019, beyond a period of four years from the end of therelevant assessment year. The petitioner reiterated thereturn of income filed originally, notice under Section 143(2)was issued on 14.02.2019 and reasons for reopening of theassessment supplied to the petitioner on 22.02.2019. 3. The petitioner, vide letter dated 08.04.2019 objectedto the assumption of jurisdiction for re-assessment pointingout that the issue on merits as reflected in the reasons forre-assesssment was covered by an order of the jurisdictionalHigh Court in the case of National Company V. AssistantCommissioner of Income Tax (415 ITR 5) and the re-assessmentitself initiated beyond the permissible period of four years.4. The objections were rejected by order dated15.04.2019 and the process of assessment taken up thereafterculminating in the impugned order of assessment dated22.11.2019. 5. Learned counsel for the petitioner relies on a slew ofjudgments, such as CIT V. Kelvinator India Ltd., both the FullBench of the Delhi High Court (256 ITR 1) and the SupremeCourt (320 ITR 561), CIT V. Indo Arab Air Services (283 CTR92) and TANMAC India V. DCIT (78 taxmann.com 155) to supporther arguments on the aspect of assumption of jurisdiction. 6. The Revenue in counter, would state that thepetitioner has an effective statutory appellate remedy andthus the Writ Petition is itself not maintainable. Withoutprejudice to the aforesaid submission, the assumption ofjurisdiction is defended on the ground that the properprocedure as laid down by the Supreme Court in the case of GKNDrive Shafts (India) Ltd. V. Income Tax Officer (259 ITR 19)has been strictly complied with. Moreover, it is pointed outthat originally, only an intimation was issued and theassessment not taken up for scrutiny. Reliance is placed onthe judgment of the Supreme Court in Assistant Commissioner ofIncome Tax V. Rajesh Jhaveri Stock Brokers Pvt. Ltd. (291 ITR500). 6. The Revenue in counter, would state that thepetitioner has an effective statutory appellate remedy andthus the Writ Petition is itself not maintainable. Withoutprejudice to the aforesaid submission, the assumption ofjurisdiction is defended on the ground that the properprocedure as laid down by the Supreme Court in the case of GKNDrive Shafts (India) Ltd. V. Income Tax Officer (259 ITR 19)has been strictly complied with. Moreover, it is pointed outthat originally, only an intimation was issued and theassessment not taken up for scrutiny. Reliance is placed onthe judgment of the Supreme Court in Assistant Commissioner ofIncome Tax V. Rajesh Jhaveri Stock Brokers Pvt. Ltd. (291 ITR500). 7. Having heard learned counsel, I am of the view thatthe assumption of jurisdiction by the respondent under Section147 cannot be faulted. Admittedly, the return of incomefiled by the petitioner had not been taken up for scrutiny andas such, there has been no application of mind by the Officerat the original instance. The decisions relied upon by thelearned counsel for the petitioner are distinguishable, sincethey turn on entirely different facts. In the case ofKelvinator India Ltd., (supra) both the Delhi High Court aswell as the Supreme Court found that there was no tangiblematerial on the basis of which proceedings for re-assessmentmay be initiated. So too in Indo Arab Air Services (supra). https://hcservices.ecourts.gov.in/hcservices/ 8. In the present case, the reasons for re-assessmentrefer to material, such as the deed of retirement dated14.06.2011 under which the transfer of immovable propertieswas carried out. There is a clear finding by the AssessingOfficer to the effect that the return of income filed by thepetitioner did not disclose the capital gains that would ariseout of the transfer under the deed of retirement and it is forthis purpose that the re-assessment has been initiated. 9. Learned counsel then makes a submission that turns onthe merits of the matter arguing that the respondent ought tohave accepted the binding decision of this Court in the caseof National Company (supra). She relies on the judgment of theSupreme Court in UOI V. Kamalakshi Finance Corporation (55 ELT433), Division Bench of the Rajasthan High Court inCommissioner of Income Tax V. Sunil Kumar (212 ITR 238) andBombay High Court in Subramaniam V. Siemens India Ltd. (156ITR 11) to reiterate the binding nature of orders passed byCourts upon subordinate authorities. 10. To decide this issue, one would have to advert to thefacts briefly. The petitioner was a partnership firmcomprising eight partners. In 2011, six partners retired andtwo continued in partnership. The deed of retirement providesfor transfer of certain immovable properties and fixed assetsto the retiring partners. A portion of the amount payable tothe retiring partners was retained in the books of the firm asa loan. The Assessing Authority had received information inrelation to the transfer of the capital assets to the retiringpartners and was of the view that such transfer gave rise tocapital gains under Section 45(4), liable to be taxed. Itwas for this reason that proceedings for re-assessment hadbeen initiated. 10. To decide this issue, one would have to advert to thefacts briefly. The petitioner was a partnership firmcomprising eight partners. In 2011, six partners retired andtwo continued in partnership. The deed of retirement providesfor transfer of certain immovable properties and fixed assetsto the retiring partners. A portion of the amount payable tothe retiring partners was retained in the books of the firm asa loan. The Assessing Authority had received information inrelation to the transfer of the capital assets to the retiringpartners and was of the view that such transfer gave rise tocapital gains under Section 45(4), liable to be taxed. Itwas for this reason that proceedings for re-assessment hadbeen initiated. 11. According to the petitioner, this issue is squarelycovered by the decision of this Court in National Company(supra) and this was also brought to the notice of theAssessing Authority. It was thus incumbent upon him to havefollowed the same, instead of which the Officer states thatthe decision has not been accepted by the Department,parallelly admitting that no petition for Special Leave hadbeen filed as against the same on account of low tax effect.On the other hand, he relies on another decision of thejurisdictional Court in CIT V. Associated Electrical Agencies(2011-TIOL-843-HC-MAD-IT) in support of his conclusion thatthe transaction falls within the realm of taxability. Thequestion is whether this would result in judicial indisciplineattracting application of the judgment of the Supreme Court inthe case of Kamalakshi Finance Corporation (supra). 12. The taxability of a transaction would turn upon thefacts of a particular transaction/event and it is for theofficers of the Department to look into the documentationentered qua the parties as well as other relevant material tocome to a conclusion whether the transaction gives rise tocapital gains or not. In the present case, the AssessingOfficer has examined the issue, coming to a conclusion basedhttps://hcservices.ecourts.gov.in/hcservices/on the decision in Associated Electrical Agencies (supra) that the transaction is taxable. The Officer has not ignored thedecision in National Company (supra), preferring instead torely upon an alternate decision where, according to him, thefactual matrix is more apposite to the facts in the presentcase. If at all the petitioner is aggrieved, the properrecourse would be to file an appeal before the first AppellateAuthority. I am of the view that the impugned order does notgive rise to any legal flaw amenable to interference underArticle 226 of the Constitution of India and the AssessingAuthority cannot be said to be guilty of judicial indisciplinein this case. 13. This Writ Petition is dismissed granting liberty tothe petitioner to file a statutory appeal against the impugnedorder, if it so desires, within a period of four (4) weeksfrom date of receipt of a copy of this order. Such appeal, iffiled within the time frame as aforesaid, shall be taken onfile by the Registry of the Commissioner of Income Tax(Appeals) without reference to limitation and disposed asexpeditiously as possible. No costs. Connected MiscellaneousPetitions are closed. Sd/-Assistant Registrar(CCC)//True Copy// slTo Sub Assistant Registrar 1. The Assistant Commissioner of Income Tax Non Corporate Circle – 19(1), 6[th] Floor, Annex Building, 121, Mahatma Gandhi Road, Nungambakkam, Chennai- 600 034. 2. The Principal Commissioner of Income Tax 10, 121, Mahatma Gandhi Road, Nungambakkam, Chennai- 600 034. Copy to3. The Section Officer, VR Section, Highcourt, Madras +1 CC.to M/s. NV.BALAJI, ADVOCATE, SR.NO.42238/2020+1 CC.to M/s. HEMA MURALIKRISHNAN, ADVOCATE, SR.NO.42687/2020 AK(CO) SM/05/03/2021 https://hcservices.ecourts.gov.in/hcservices/ W.P. No.34554 of 2019andWMP. Nos.35260 & 13728 of 2019