M/S. Seshasayee Paper And Boards Limited,Rep. By Its Director (Finance) & Secretary,Sri V.pichai, Cauvery R.s.post,Pallipalayam, Erode-638 007 v. The Assistant Commissioner Of Income- Tax,Circle I (1)

IN THE HIGH COURT OF JUDICATURE AT MADRAS Reserved On 13.02.2020Pronounced On 19.05.2020 CORAM THE HON'BLE MR.JUSTICE C.SARAVANAN W.P.No.23016 of 2011andM.P.No.1 of 2011 M/s. Seshasayee Paper and Boards Limited,Rep. by its Director (Finance) & Secretary,Sri V.Pichai, Cauvery R.S.Post,Pallipalayam, Erode-638 007.... Petitioner Vs. The Assistant Commissioner of Income- tax,Circle I (1), No.3,Gandhi Road, Salem – 636 007....Respondent Writ Petition filed under Article 226 of the Constitutionof India praying to issue a Writ of Certiorari, to call forthe records in PAN No. dated 12.09.2011 relating toAssessment Year 2003-2004 on the file of the respondent andquash the same. For Petitioner : Mr.G.Baskar for Mr.N.Muthukumar For Respondent : Mr.A.P.Srinivas Standing Counsel. In this Writ Petition, the petitioner has challenged theimpugned communication dated 12.09.2011 overruling theobjection of the petitioner against the re-opening of theassessment vide Notice dated 30.03.2010 under Section 148 ofthe Income Tax Act, 1961 for the Assessment Year 2003-04. 2. The said Notice has been issued on the last date ofexpiry of limitation (six years), under proviso to Section 147of the Income Tax Act, 1961 seeking to re-open the assessment. 3. The brief facts of the present case are that thepetitioner is engaged in manufacture and sale of paper andhttps://hcservices.ecourts.gov.in/hcservices/paper products. The petitioner had filed the return for the Assessment Year 2003-04 on 03.11.2003. Thereafter, a scrutinyassessment was completed and an assessment order was passed on29.03.2006 under Section 143(3) of the Income Tax Act, 1961.Just before a lapse of six years limitation, the respondentissued a notice dated 30.03.2010 under Section 148 of theIncome Tax Act, 1961 to re-open the aforesaid assessment. 4. Under these circumstances, the petitioner called uponthe respondent to furnish the reason for re-opening of theassessment. By a communication dated 02.08.2010, therespondent has given the reasons for re-opening of theassessment, which reads as under:- 1.Provision for bad and doubtful debts ofRs.29,35,475/- under the head miscellaneousexpenses. 2.Diminution in value has not been added backunder the computation u/s. 115JB, an amount ofRs.6,41,32,200/-. 5. It is the contention of the petitioner that theAssessing Authority while issuing notice under Section 148 ofthe Income Tax Act, 1961 has relied on the objections raisedby the Internal Audit Party and has not independently formedan opinion on the objections raised. Therefore, this wascontrary to the views of the Hon’ble Supreme Court in Indian &Eastern Newspaper Society Vs. Commissioner of Income Tax,(1979) 119 ITR 996 (SC) and the Bombay High Court in HamiltonHousewares (P.) Ltd. Vs. Deputy Commissioner of Income Tax,(2019) 104 taxmann.com 128 (Bombay). 6. It is further contended that no fresh material hasbrought to invoke Section 148 of the Income Tax Act, 1961 andthat the failure in diminution value for computation underSection 115JB was merely based on the change of opinion andtherefore, it was contrary to the decisions of the Hon’bleSupreme Court in CIT Vs. Kelvinator of India Ltd., (2010) 320ITR 561 (SC) and in ITO Vs. Techspan India P. Ltd., (2018) 404ITR 10 (SC). 7. It is further submitted that on merits the provisionof bad and doubtful debts was disallowed as item not allowableby the petitioner itself and that the petitioner had notclaimed any deduction in respect of provision for bad anddoubtful debts and hence there is no escapement of income. 6. It is further contended that no fresh material hasbrought to invoke Section 148 of the Income Tax Act, 1961 andthat the failure in diminution value for computation underSection 115JB was merely based on the change of opinion andtherefore, it was contrary to the decisions of the Hon’bleSupreme Court in CIT Vs. Kelvinator of India Ltd., (2010) 320ITR 561 (SC) and in ITO Vs. Techspan India P. Ltd., (2018) 404ITR 10 (SC). 7. It is further submitted that on merits the provisionof bad and doubtful debts was disallowed as item not allowableby the petitioner itself and that the petitioner had notclaimed any deduction in respect of provision for bad anddoubtful debts and hence there is no escapement of income. 8. It is further submitted that the diminution in valuewould not enhancing the liability and hence, need not to beadded back under the computation under Section 115JB of theIncome Tax Act, 1961 for the purpose of memo altering the taxunder reference was made to the decision of the Hon’bleSupreme Court in Commissioner of Income Tax Vs. HCL Comnethttps://hcservices.ecourts.gov.in/hcservices/Systems & Services Ltd., (2008) 305 ITR 0409. 9. The learned counsel appearing for the petitionerrelied on the following decisions:- 10. The learned standing counsel for the respondentsubmits that the present Writ Petition is liable to bedismissed and the petitioner should be relegated toparticipate in the proceedings under Section 148 of the IncomeTax Act, 1961. It is further submitted that it is not open forthe petitioner to scuttle the proceedings by citing thedecision and the very same decision can be cited before theAuthority. 11. The learned standing counsel for the respondentsubmits that the impugned notice and the impugnedcommunication overruling the objection cannot be interfered,inasmuch as it impedes with the re-assessment proceedingsunder Section 148 of the Income Tax Act, 1961. It is submittedthat it is open for the petitioner to make all its submissionson merits, which has been raised before this Court and incase, as has been contended by the petitioner that if therewas a change of opinion and if the petitioner establishes thatthere was no failure on the part of the petitioner to fullyand truly disclose all materials required for assessment, theofficer would be obliged to drop the proceedings. 12. On the one hand, it is the contention of the learnedcounsel for the petitioner that the impugned proceedings arewithout jurisdiction and therefore the petitioner was entitledfor the relief. On the other hand, it is the contention of therespondent that the present Writ Petition is liable to bedismissed. https://hcservices.ecourts.gov.in/hcservices/ 13. I have considered the arguments advanced by thelearned counsel for the petitioner and the learned standingcounsel for the respondent. 14. The purpose of issuing notice under Section 148 ofthe Income Tax Act, 1961 is for passing an order of re-assessment under Section 147 of the Income Tax Act, 1961.However, Section 148 of the Income Tax Act, 1961 is notgoverned by the restrictions contained in Section 147 of theIncome Tax Act, 1961. 15. For the aforesaid purpose, the Assessing Officer hasto merely issue a notice within the time limit prescribedunder Section 149 of the Income Tax Act, 1961. Before issuingnotice, he has to record reason. In view of the decision ofthe Honourable Supreme Court in GKN Drive Shafts referred tosupra, an assessee is now entitled to ask for the reasons forreopening of the assessment after filing the returns. TheAssessing Officer has to merely communicate the reasons forreopening the assessment if desired by the assessee. 15. For the aforesaid purpose, the Assessing Officer hasto merely issue a notice within the time limit prescribedunder Section 149 of the Income Tax Act, 1961. Before issuingnotice, he has to record reason. In view of the decision ofthe Honourable Supreme Court in GKN Drive Shafts referred tosupra, an assessee is now entitled to ask for the reasons forreopening of the assessment after filing the returns. TheAssessing Officer has to merely communicate the reasons forreopening the assessment if desired by the assessee. 16. The communication of reasons for reopening of theassessment is merely to allow an assessee to participate inthe re-assessment proceedings by giving effective reply. Theoverruling of the objection by the respondents through aspeaking order is however not an order under Section 147 ofthe Income Tax Act, 1961. 17. Thus, for issuing a notice under Section 148 of theIncome Tax Act, 1961 as it stands today, the Assessing Officerhas to satisfy the requirements of Section 149 of the IncomeTax Act, 1961. 18. However, while passing final order of re-assessmentunder Section 147 of the Income Tax Act, 1961, the AssessingOfficer has to bear in mind the express language of the 1[st]proviso to Section 147 of the Act. As per the 1[st] proviso toSection 147 of the Income Tax Act, 1961, no action shall betaken under the said Section after expiry of four years fromthe end of the relevant assessment year, unless incomechargeable to tax has escaped assessment for such assessmentyear by reason of the failure on the part of the assessee tomake a return under Section 139 or in response to a noticeissued under sub-Section (1) of Section 142 or 148 or todisclose fully and truly all material facts necessary for thatassessment year. 19. Whether the notice that has been issued to thepetitioner was on account of change of opinion or on accountof failure on the part of the petitioner to fully and trulydisclose all material required for the assessment is to bedetermined by the Assessing Officer while passing order underhttps://hcservices.ecourts.gov.in/hcservices/Section 147 of the Income Tax Act, 1961. The present case involves questions relating to accounts which are betterleft to be decided by the original authority. 20. Though in a recent decision, the Honourable SupremeCourt in Jeans Knit Private Limited Vs. Deputy Commissioner ofIncome Tax, (2018) 12 SCC 36 was cited, wherein it wasobserved that the Karnataka High Court had taken a viewcontrary to the law laid down by the Honourable Supreme Courtin Calcutta Discount Co-Limited Vs. CIT referred to supra. TheHon’ble Supreme Court however refrained from making anyobservation on the merits and remitted the case back to theconcerned High Court. Therefore, the said decision does notfurther the case of the petitioner. This is not a clear caseto apply the principle laid down in the Calcutta DiscountCo-Limited Vs. CIT referred to supra. 21. In Asianet Star Communications Pvt. Ltd. V. AssistantCommissioner of Income Tax, order dated 16.04.2019 passed bythis Court in W.P.Nos.25328 of 2018 etc. referred by thelearned counsel for the petitioner, the Court concluded thatthe responsibility was on the assessee to make true and fulldisclose and thereafter, mantle would shift on the AssessingOfficer and is expected to complete the assessment. The Courtthere quashed the notice as all material was available to opensight. 22. In the facts of the case, though the petitioner hadfurnished certain details at the time of re-assessment, thequestion still remains to be answered is whether there wasfull and true disclosure by the petitioner as is contemplatedunder proviso to Section 147 of the Income Tax Act, 1961. 21. In Asianet Star Communications Pvt. Ltd. V. AssistantCommissioner of Income Tax, order dated 16.04.2019 passed bythis Court in W.P.Nos.25328 of 2018 etc. referred by thelearned counsel for the petitioner, the Court concluded thatthe responsibility was on the assessee to make true and fulldisclose and thereafter, mantle would shift on the AssessingOfficer and is expected to complete the assessment. The Courtthere quashed the notice as all material was available to opensight. 22. In the facts of the case, though the petitioner hadfurnished certain details at the time of re-assessment, thequestion still remains to be answered is whether there wasfull and true disclosure by the petitioner as is contemplatedunder proviso to Section 147 of the Income Tax Act, 1961. 23. In this case, mere filing to the annexure by thepetitioner in response to notice during scrutiny assessment byitself may or may not have been sufficient to come to theconclusion that there was full and true disclosure by thepetitioner if the information furnished was neither completenor true. Question is whether the information furnishedwere complete in all respect is to be decided only in aadjudicator mechanism. 24. It is therefore best left open for the petitioner todemonstrate before the respondent that the details furnishedby the petitioner meets the requirements of full and truedisclosure for the Assessing Officer to drop the proceedingsin terms of 1[st] proviso to Section 147 of the Income Tax Act,1961. 25. In case there is a change of opinion, the respondentcannot proceed in the light of the decision of the Hon’bleSupreme Court in CIT Vs. Kelvinator of India Ltd., (2010) 2SCC 723. The Hon’ble Supreme Court cautioned the AssessingOfficers with the following observation:-https://hcservices.ecourts.gov.in/hcservices/ “On going through the changes, quoted above,made to Section 147 of the Act, we find that,prior to Direct Tax Laws (Amendment) Act,1987, re-opening could be done under above twoconditions and fulfilment of the saidconditions alone conferred jurisdiction on theAssessing Officer to make a back assessment,but in Section 147 of the Act (with effectfrom 1[st] April, 1989), they are given a go-byand only one condition has remained, viz.,that where the Assessing Officer has reason tobelieve that income has escaped assessment,confersjurisdictiontore-opentheassessment. Therefore, post-1[st] April, 1989,power to re-open is much wider. However, oneneeds to give a schematic interpretation tothe words “reason to believe” failing which,we are afraid, Section 147 would givearbitrary powers to the Assessing Officer tore-open assessments on the basis of “merechange of opinion”, which cannot be per sereason to re-open. We must also keep in mindthe conceptual difference between power toreview and power to re-assess. The AssessingOfficer has no power to review, he has thepower to re-assess. But re-assessment has tobe based on fulfilment of certain pre-condition and if the concept of “change ofopinion” is removed, as contended on behalf ofthe Department, then, in the garb of re-opening the assessment, review would takeplace. One must treat the concept of “changeof opinion” as an in-built test to check abuseof power by the Assessing Officer.” 26. In case indeed there is a mere change in opinion, therespondent will be obliged to drop the proceeding. However, toascertain whether is a mere change of opinion or not first ithas to be established that there was true and full disclosureby the petitioner. 27. As mentioned above, this can be demonstrated by thepetitioner only before the respondent and not in a proceedingunder Art.226 of the Constitution of India as scope ofjudicial review is very limited and it is not possible toconduct a roving enquiry on facts and accounts. 26. In case indeed there is a mere change in opinion, therespondent will be obliged to drop the proceeding. However, toascertain whether is a mere change of opinion or not first ithas to be established that there was true and full disclosureby the petitioner. 27. As mentioned above, this can be demonstrated by thepetitioner only before the respondent and not in a proceedingunder Art.226 of the Constitution of India as scope ofjudicial review is very limited and it is not possible toconduct a roving enquiry on facts and accounts. 28. Under these circumstances, I do not find any meritsin quashing the impugned notice dated 30.03.2010 and thecommunication dated 12.09.2011 overruling the objection of thepetitioner. 29. In the light of the above observation, I relegate thehttps://hcservices.ecourts.gov.in/hcservices/petitioner to participate in the proceedings before the respondent by filing appropriate representations/objectionswithin a period of thirty days from the date of receipt of acopy of this order. The espondent is obliged to pass orders onmerits in accordance with law. 30. It is made clear that if the circumstance do notjustify invocation of proviso to Section 147, the respondentshall drop the proceedings. 31. At the same time, while passing orders under Section147 of the Income Tax Act, the respondent can pass assessmentorder as per Explanation 3 to Section 147 of the Income TaxAct, 1961. 32. Since the dispute pertains to the Assessment Year2003-2004, the respondent is requested to pass appropriateorder within a period of sixty days from date of receipt of acopy of this order. 33. The Writ Petition stands disposed of with the aboveobservations. No costs. Consequently, connected MiscellaneousPetition is closed. Sd/- Assistant Registrar(CS IV) //True Copy// Sub Assistant Registrar jen To The Assistant Commissioner of Income- tax,Circle I (1), No.3, Gandhi Road, Salem – 636 007. Ln (Co)EU 24.6.2020 W.P.No.23016 of 2011and M.P.No.1 of 2011