M/S.alfa Investments Rep. By Its v. The Income-Tax Officer, Non-Corporate Ward-1 (1) Room

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 10.04.2018 CORAM: THE HON'BLE MR.JUSTICE K.K.SASIDHARANANDTHE HON'BLE MR.JUSTICE R.SUBRAMANIAN W.A.Nos.1438 and 1439 of 2017 andCMP Nos.19350 and 19351 of 2017 M/s.Alfa InvestmentsRep. by its Partner Shri Ahamed Shakir4th Floor, Door Nos.10 & 11Chennai CITI Centre,Dr.Radhakrishnan Salai,Mylapore, Chennai - 600 004. ...Appellant in both AppealsVs The Income-Tax Officer,Non-Corporate Ward-1 (1)Room No.305, III FloorWanaparthy Block121, Mahatma Gandhi Road,Chennai - 600 034. ...Respondent in both Appeals Prayer:- Writ Appeals filed under Clause 15 of LettersPatent Act, to set aside the order passed by this Court inW.P.Nos.27549 and 27550 of 2017 dated 31.10.2017respectively. Writ petitions filed under Article 226 of thefor issuance of writ of certiorari to call for the recordsin AATFA1690D/ NCW1(1)/ 2017-18 dated 11.10.2017 on the fileof the respondent relating to the A.Y.2010-2011 and quashthe same. For Appellant: Mr.M.P.Senthil KumarFor Respondent : Ms.Hema Muralishrishnan J U D G M E N T(Judgment of the Court was delivered by K.K.SASIDHARAN, J.) The appellant challenged the order passed by the IncomeTax Officer, Non Corporate Ward 1(1), Chennai, dealing withthe objections on re-opening the assessment for theAssessment Years 2010-2011 and 2011-2012 under Section 147of the Income Tax Act, 1961, before the Writ Courtprimarily on the ground that notices issued under Section148 of the Income Tax Act, would proceed as if it was issuedpursuant to the direction given by the Commissioner ofhttps://hcservices.ecourts.gov.in/hcservices/Income Tax (Appeals) [hereinafter referred to as CIT (A)] notwithstanding the fact that no such specific direction wasgiven for re-opening the assessment. The learned singleJudge dismissed the writ petitions with liberty to theAssessing Officer to complete the assessment in accordancewith law. Feeling aggrieved, the assessee has come up withthe intra court appeals. Brief Facts 2. The appellant is a partnership firm engaged in thebusiness of commercial and trading activities includinginvesting, acquiring and holding shares, stocks, assets andother securities. The appellant filed Return of Income forthe Assessment Year 2012-2013 declaring "Nil" income. TheAssessing officer completed the assessment for theAssessment Year 2012-2013 under Section 143(3) of the IncomeTax Act by adding Rs.108,35,05,000/- as unexplained creditunder Section 68 of the Income Tax Act and computed thetotal income at Rs.108,35,05,000/-. 3. The order dated 31 March 2015 was challenged beforethe Commissioner of Income Tax (Appeals), Chennai. The CIT(A) while allowing the appeal by order dated 13 October 2016indicated that the Capital was introduced in the course ofthe earlier two Financial Years 2009-2010 and 2010-2011 andas such, the Assessing Officer can only take cognizance ofthe matter by way of initiating suitable proceedings. 4. Thereafter, the Income Tax Officer issued a noticedated 19 January 2017 under Section 148 of the Income TaxAct for the Assessment Years 2010-11 and 2011-12. Theappellant made a request for furnishing reasons for re-opening the assessment. The respondent provided thereasons for re-opening the assessment. Thereafter, takinginto account the objections of the assesssee, speakingorders were passed by the Assessing Officer. The order dated11 October 2017 for the Assessment Year 2010-11 waschallenged in W.P.No.27549 of 2017. Similarly, the orderdated 27 September 2017 for the Assessment Year 2011-2012was challenged in W.P.No.27550 of 2017. 4. Thereafter, the Income Tax Officer issued a noticedated 19 January 2017 under Section 148 of the Income TaxAct for the Assessment Years 2010-11 and 2011-12. Theappellant made a request for furnishing reasons for re-opening the assessment. The respondent provided thereasons for re-opening the assessment. Thereafter, takinginto account the objections of the assesssee, speakingorders were passed by the Assessing Officer. The order dated11 October 2017 for the Assessment Year 2010-11 waschallenged in W.P.No.27549 of 2017. Similarly, the orderdated 27 September 2017 for the Assessment Year 2011-2012was challenged in W.P.No.27550 of 2017. 5. Before the learned single Judge, the appellantcontended that there was no direction given by the CIT (A)in its order dated 13 October 2016 for re-opening theassessment. The Assessing Officer was therefore not correctin taking inspiration from the appellate order for re-opening the assessment for the Assessment Years 2010-2011and 2011-2012. 6. The learned single Judge considered the contentionstaken by the appellant in the light of the order passed bythe CIT (A). The learned single Judge opined that theappellant succeeded in the appeal before the CIT (A) on theground that the entire amount of Capital was actuallyhttps://hcservices.ecourts.gov.in/hcservices/introduced into the books of the firm during the Financial Years 2009-10 and 2010-11. The learned single Judgedismissed the writ petitions leaving it open to theAssessing Officer to complete the assessment in accordancewith law. Feeling aggrieved by the common order dated 31October 2017, the unsuccessful writ petitioner is beforethis Court. Summary of Submissions 7. The learned counsel for the appellant contended thatthe reasons given by the respondent would proceed as ifthere was a specific direction given by the CIT (A) to re-open the assessment for the Assessment Years 2010-11 and2011-12. There was no such direction given by the CIT (A).The respondent has not given any other reasons for re-opening the assessment. The respondent is therefore notentitled to re-open the assessment for the Assessment years2010-11 and 2011-12. 8. The learned Standing Counsel for the Revenuecontended that the order passed by the CIT (A) waschallenged before the Income Tax Appellate Tribunal inI.T.A.No.3439/Mds/2016. The Income Tax Appellate Tribunalwhile dismissing the appeal filed by the Revenue indicatedin its order that the Assessing Officer could only takecognizance of the matter by way of initiating scrutinyproceedings for the Assessment Years 2010-11 and 2011-12.The learned Standing Counsel contended that the assessee hasnot filed returns during the Assessment Years 2010-11 and2011-12 declaring the Capital introduction as theinvestments made out of the sources. The Revenue wastherefore had no opportunity to take cognizance or toexamine the transaction claimed to have been made by theassessee during the previous years. Analysis 9. The Assessing Officer completed the assessment forthe Assessment Year 2012-2013 by order dated 31 March 2015.Since the assessee failed to produce corroborative evidencefor introduction of capital amount and its failure to co-relate the trail of funds, the Assessing Officer addedRs.108,35,05,000/- as unexplained credit under Section 68 ofthe Income Tax Act. Analysis 9. The Assessing Officer completed the assessment forthe Assessment Year 2012-2013 by order dated 31 March 2015.Since the assessee failed to produce corroborative evidencefor introduction of capital amount and its failure to co-relate the trail of funds, the Assessing Officer addedRs.108,35,05,000/- as unexplained credit under Section 68 ofthe Income Tax Act. 10. The assessment order dated 31 March 2015 waschallenged before the CIT (A), Chennai. The Commissioner wasof the view that the Capital was introduced in the course ofthe earlier two Financial Years and as such, the AssessingOfficer can take cognizance of the matter only by way ofinitiating suitable proceedings for the Assessment Years2010-11 and 2011-12. The CIT (A) therefore opined that theAssessing Officer was not justified in adding back the'capital introduced' by treating it as unexplained creditunder Section 68 of the Income Tax Act. Since there was nohttps://hcservices.ecourts.gov.in/hcservices/introduction of fresh capital whatsoever during the Assessment Year 2012-2013, the addition made in the hands ofthe appellant was held to be unwarranted. The CIT (A)therefore allowed the appeal. 11. The order dated 13 October 2016 on the file of theCIT (A) was unsuccessfully challenged by the Revenue beforethe Income Tax Appellate Tribunal. While dismissing theappeal, the Tribunal noted the observation made by CIT (A)that the Assessing Officer could only take cognizance of thematter by way of initiating scrutiny proceedings for theAssessment Years 2010-11 and 2011-12. 12. The Income Tax Officer by notice dated 19 January2017 initiated proceedings for re-opening the assessment.The notice was issued under Section 148 of the Income TaxAct to the appellant for the Assessment Years 2010-11 and2011-12. The Income Tax Officer in the notice issued for therelevant years indicated that he has reasons to believe thatincome chargeable to tax for the relevant assessment yearshas escaped assessment within the meaning of Section 147 ofthe Income Tax Act. 13. The appellant on receipt of notices requested theIncome Tax Officer to furnish reasons for re-opening theassessment. 14. The Income Tax Officer in the letter dated 7 June2017 indicated that the firm has received a sum of Rs.64crores as capital introduction made by Shri Hameed SyedSalahuddin, who is a partner of the firm. According to theIncome Tax Officer, in the absence of return of income forthe relevant Assessment Years and lack of verifiable proofwith regard to the source of investment, the order for theAssessment Year 2012-13 had treated the entire openingbalance of credit to the Capital Amount as on 1 April 2011as unexplained credit and brought the same to tax underSection 68 of the Income Tax Act. The Income Tax Officermade an observation that the Appellate Authority in itsorder indicated that such additions under Section 68 cannotbe undertaken in the subsequent year when no capital isintroduced. 15. The contention of the appellant appears to be onaccount of the reference made in the letter dated 7 June2017 about the order passed by the CIT (A). 16. The appellant succeeded in the appeal by contendingthat there was no fresh capital introduced during theAssessment year 2012-2013. It was the contention of theappellant before the CIT (A) that the entire amount ofcapital of Rs.108.35 crores was actually introduced into thebooks of the firm during the earlier two financial years2009-2010 and 2010-2011. The appellant by demonstrating thathttps://hcservices.ecourts.gov.in/hcservices/the entire amount of capital referred to above was introduced during the two earlier financial years succeededin the appeal. 17. The appellant has no case that a return of incomewas filed for the Assessment Years 2010-11 and 2011-12explaining the capital of Rs.108,35,05,000/- 16. The appellant succeeded in the appeal by contendingthat there was no fresh capital introduced during theAssessment year 2012-2013. It was the contention of theappellant before the CIT (A) that the entire amount ofcapital of Rs.108.35 crores was actually introduced into thebooks of the firm during the earlier two financial years2009-2010 and 2010-2011. The appellant by demonstrating thathttps://hcservices.ecourts.gov.in/hcservices/the entire amount of capital referred to above was introduced during the two earlier financial years succeededin the appeal. 17. The appellant has no case that a return of incomewas filed for the Assessment Years 2010-11 and 2011-12explaining the capital of Rs.108,35,05,000/- 18. The appellant is now resisting the proceedings forre-opening the assessments on the ground that proper reasonswere not given. It is true that specific direction was notgiven by the CIT (A) for re-opening the assessment for theassessment years 2010-11 and 2011-12. However, the reasonsgiven by the Income Tax Officer would be sufficient for re-opening the assessment. 19. The Income Tax Officer in the order dealing withthe objections indicating the reasons, justified theproceedings for re-opening the assessment. The Income TaxOfficer made it clear that assessee did not file itsreturns of income for the Assessment Years 2010-2011 and2011-2012. Therefore, there was no opportunity to verifythe transactions claimed to have been made in those years.It was further indicated in the said order that the assesseewas not maintaining any bank account and it failed tofurnish any other proof to establish the link between thecapital introduced and its withdrawals for the purpose ofinvestments. The Income Tax Officer would be in a positionto consider the introduction of capital for the relevantyear only in case returns were filed by the appellant. Theappellant having failed to file its return of income for theAssessment Years 2010-11 and 2011-12 cannot be heard to saythat the Income Tax Officer was not correct in re-openingthe assessment when it was made known at a later point oftime that capital was introduced in the course of theearlier two financial years. The reasons given by theIncome Tax Officer would satisfy the statutory requirementsfor re-opening the assessment. We are therefore of the viewthat the appellant has not made a case to interfere in theproceedings initiated by the Income Tax Officer for re-opening the assessment for the Assessment Years 2010-11 and2011-12. We therefore confirm the order passed by thelearned single Judge. 20. In the upshot, we dismiss the intra court appeals.No costs. Consequently, connected miscellaneous petitionsare closed. Sd/- Assistant Registrar(CS-III) //True Copy// Sub Assistant Registrar To The Income-Tax Officer,Non-Corporate Ward-1 (1)Room No.305, III FloorWanaparthy Block121, Mahatma Gandhi Road,Chennai - 600 034. + 1 cc to M/s. G. Baskar, Advocate Sr.26474+ 1 cc to M/s. G. Baskar, Advocate Sr.26474(16.05.2018)W.A.Nos.1438 and 1439 of 2017GMI(CO)EU(16/05/2018)