M/S.consolidated Constructionconsortium Limited v. The Commissioner Of Income Tax, Chennai -1, Room

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 16.07.2021CORAM THE HONOURABLE MR. JUSTICE S.M.SUBRAMANIAM W.P.No.19871 of 2012 M/s.Consolidated ConstructionConsortium Limited,No.3, Second Link Street,CIT Colony, Chennai 600 004. ..Petitioner Vs. 1. The Commissioner of Income Tax, Chennai -1, Room No.701, 7[th] Floor, New Block, 121, Mahatma Gandhi Road, Nungambakkam, Chennai 600 034. 2. The Assistant Commissioner of Income Tax, Company Circle I (3), 6[th] Floor, New Block, Income Tax Department, 121, Mahatma Gandhi Road, Nungambakkam, Chennai 600 034. 3. The Deputy Commissioner of Income-Tax, Company Circle I (3), 121, M.G. Road, Chennai 600 034. ..Respondents Prayer: Writ Petition filed under Article 226 of theConstitution of India, to issue a Writ of CertiorarifiedMandamus, calling for the records of the 2[nd] respondent to quashthe impugned notice dated 27.01.2012 issued in terms of Section148 of the Income Tax Act, 1961 on the assumption ofjurisdiction u/s 147 of the said Income Tax Act, 1961 forframing re-assessment for the Assessment Year 2006-07 in PANAAACC4214B and consequential interim order/letter No.Co.Cir.I(3)/2012-13 dated 29.06.2012 of the 3[rd] respondent herein andfurther direct the 2[nd] respondent to drop the proceedingsinitiated under 147 of the Act for the said assessment year2006-07. For Petitioner : Mr.S.Sridhar For Respondents : Mr.D.Prabhumukunth Arunkumar (Standing Counsel) ORDER The petitioner is a Company incorporated under the CompaniesAct, 1956, with the main object to carry on the business ofundertaking construction contracts and such other activitiesprescribed in Memorandum and Articles of Association dated24.06.1997. The facts in brief to be considered are that theassessment order under Section 143 (3) of the Income Tax Act,1961 (hereinafter referred to as, 'the Act') was passed on29.12.2008, by the Assessing Officer, for the Assessment Year2006-2007. The learned Counsel for the petitioner contended thatthe Return of Income filed along with the details, books ofaccounts and informations, were considered elaborately by theAssessing Officer and a final assessment order was passed. Eventhereafter, a revision order was passed under Section 263 of theAct. The petitioner had gone up to the Income Tax AppellateTribunal and the Tribunal passed an order on 24.05.2011. Thus,even certain left out issues were adjudicated at that point oftime and therefore, there is no reason for reopening ofassessment beyond the period of four years. 2.Notice under Section 148 of the Act was issued on27.01.2012 and the petitioner filed its objections. W.P.No.6513of 2012 was filed by the petitioner, challenging the reopeningproceedings as well as the notice under Section 148 of the Actand the Writ Petition was disposed of with a direction toconsider the proviso clause to Section 147 of the Act. Pursuantto the final order, hearing notice was issued by the 2[nd]respondent on 21.06.2012. The petitioner submitted its writtensubmissions/reply and a second written submission/reply was alsopassed. Despite the fact that the petitioner is able toestablish that the reasons furnished cannot be construed as anew materials/tangible material and the reopening of assessmentis based on change of opinion, the respondents issued animpugned order, rejecting the objections filed by thepetitioner. Thus, the petitioner is constrained to move thepresent Writ Petition. 3.The learned counsel for the petitioner reiterated thatthere is no fresh materials available for the purpose ofreopening of assessment, beyond the period of four years. In thepresent case, the petitioner has submitted all the books ofaccounts, statements, etc., at the time of reopening assessmentand during subsequent proceedings. Thus, the reopening of 3.The learned counsel for the petitioner reiterated thatthere is no fresh materials available for the purpose ofreopening of assessment, beyond the period of four years. In thepresent case, the petitioner has submitted all the books ofaccounts, statements, etc., at the time of reopening assessmentand during subsequent proceedings. Thus, the reopening of proceedings are not falling under the scope of proviso clauseunder Section 147 of the Act and thus, the impugned rejectionorder is to be set aside. The learned counsel for the petitioneremphasised that reopening of assessment beyond four years mustbe done strictly in consonance with the proviso clause and inorder to establish the conditions, the authority competent musthave tangible material. Thus, in the absence of any suchmaterial available on record, reopening of assessment isuntenable and in violation of the proviso clause to Section 147of the Act. 4.The learned Standing Counsel appearing on behalf of therespondents disputed the said contention by stating that thereason for reopening of assessment was communicated. Theretention money of Rs.1,27,94,910/- cannot be allowed asexpenditure since it is contingent in nature. The issue has beenelaborately discussed and the expenditure allowed in the orderu/s. 143(3) for the Assessment Year 2009-10. Therefore, theassessment order passed for the Assessment Year 2009-10 provideda cause for reopening of assessment, as certain informationswere not fully and truly disclosed by the assessee withreference to the Assessment Year 2006-07. When the AssessingOfficer has reason to believe that the informations provided bythe assessee was not full and true, then he is empowered toreopen the assessment and all other materials, if any availablewith the petitioner, has to be submitted before the AssessingOfficer, for completion of the re-assessment procedures.Contrarily, such a factual adjudication of these factors are notpreferable in the present Writ Petition. 5.Considering the arguments as advanced by the respectivelearned counsels appearing on behalf of the parties to the lis,this Court is of the considered opinion that scope ofinterference during the interregnum period when the reopening ofassessment is undertaken, must be in consonance with theprovisions of the Act, by the Courts. Routine intervention isnot desirable. However, the Court must ensure that the reasonsfurnished are satisfied with reference to the ingredientscontemplated under the Act. The provision contemplates reopeningof assessment within four years and beyond four years, butwithin six years. If the reopening of assessment is made withinfour years, the scope is much wider and beyond four years, butwithin six years, certain conditions are stipulated in theproviso clause to Section 147. Accordingly, any incomechargeable to taxes escaped assessment for such Assessment Yearhave reason of failure on the part of the assessee, but made areturn under Section 139 or in response to a notice underSection (1) or Section 142 or Section 148 or discloses fully andtruly all the material facts necessary for assessment for theAssessment Year. Therefore, circumstances are prescribed in the proviso clause for the purpose of reopening of assessment beyondthe period of four years, but within six years. Admittedly, inthe present case, the reopening is made beyond the period offour years and within a period of six years. In furtherance ofthe proviso clause to Section 147, explanations 1 and 2 are alsorelevant to consider the circumstances narrated in the provisoclause to Section 147. Incidentally, if the Assessing Officerforms an opinion that the assessee has not disclosed thematerials fully and truly, as required, then, he is empowered toreopen the assessment, beyond the period of four years. Even insuch circumstances, the materials, informations relied on is tobe in consonance with the other ingredients contemplated underthe Act for the purpose of reopening of assessment. In thisregard, explanation 1 to Section 147 contemplates thatproduction before the Assessing Officer of account books orother evidence from which material evidence could with duediligence have been discovered, the Assessing Officer, will notnecessarily amount to disclosure within the meaning of theforegoing proviso. Therefore, even in case where the assesseehad submitted all the books of accounts or other evidences, thenalso, there is a possibility of reopening of assessment, on theground that the Assessing Officer could able to cull out moreinformations from the books of accounts and evidences producedby the assessee and said informations discovered are fresh andtangible and has reason to believe that the income chargeable totax escaped assessment. 6.Further instances are also contemplated. Explanation 2 Subclause (c) contemplated where an assessment has been made, but -(i) income chargeable to tax has been under assessed; or (ii)such income has been assessed at too low a rate; or (iii) suchincome has been made the subject of excessive relief under theIncome Tax Act; or (iv) excessive loss or depreciation allowanceor any other allowance under the Income Tax Act has beencomputed. Therefore, numerous circumstances are contemplatedunder the provisions of the Act, providing scope of reopening ofassessment, as the very purpose and object of reopening ofassessment is to ensure that the income chargeable to tax, whichescaped assessment, must be brought under the tax net byfollowing the provisions of the Income Tax Act. 7.The Return of Income filed by the assessee at the firstinstance is accepted in the normal circumstances. The assessmentorders are passed based on the Return of Income filed by theassessee. Therefore, the act contemplates reopening ofassessment in cases where the Assessing Officer could able toform an opinion and has reason to believe that the incomechargeable to tax escaped assessment. The 3[rd] phase of Chapter-XIV, procedure contemplated under the Income Tax Act, is thesearch operations and set of procedures contemplated. Therefore, 7.The Return of Income filed by the assessee at the firstinstance is accepted in the normal circumstances. The assessmentorders are passed based on the Return of Income filed by theassessee. Therefore, the act contemplates reopening ofassessment in cases where the Assessing Officer could able toform an opinion and has reason to believe that the incomechargeable to tax escaped assessment. The 3[rd] phase of Chapter-XIV, procedure contemplated under the Income Tax Act, is thesearch operations and set of procedures contemplated. Therefore, the scheme of the Act unambiguously provides variousopportunities to the assessee to settle the disputes, omissions,commissions, if any occurred at the stage of return of income,by the assessee. The Return of Income is nothing but voluntaryinformations provided by the assessee. The Income Tax Act truststhe informations provided by the assessee under the Return ofIncome. Only if any doubt arises or materials are identified orinformations are gathered, then only, the Income Tax Actcontemplates reopening of assessment and thereafter, searchoperations. Therefore, the assessees are expected to settle theissues, by providing information truly and fully. A citizen isexpected to be law abiding and only if any breach is identified,then only, actions are initiated and not otherwise. Thus, thescope and scheme of act is vibrant enough to ensure that theincome chargeable to tax are not allowed to escape from theassessment. Therefore, the assessees are to be provided with theopportunities contemplated and if still they are not cooperativein settling the issues in accordance with the provisions of theAct and based on the informations and materials, then they arebound to face the consequences. 8.In the present case, the opportunities provided under theAct were availed of by the petitioner. They have submittedobjections. The objections were considered. Reason for reopeningis also furnished and in the rejection order impugned, theauthorities have categorically stated "therefore, it is clearthat this treatment to be given on the retention monies heldback by the assessee company from its contracts, but claimed asexpenditure by debiting it fully in the P/L account, there hadbeen no true disclosure of material facts by the assessee eitherin the return of income, annual reports, disclosures, auditreports, memo of total income, neither has the Assessing Officersought them, nor has the assessee during the course of scrutinyproceedings volunteered to produce them". The Assessing Officerfound that due to the failure on the part of the assessee andnon-disclosure of certain acts fully and truly, the reopeningproceeding were necessitated and accordingly, the objectionsraised by the petitioner for reopening are rejected. 9.This Court is of the considered opinion that intricaciesof non-disclosure of certain informations, materials, fully andtruly, cannot be gone into by the High Court. In other words,the High Court has to ensure whether the mandatory condition ofreason to believe is satisfied or not. However, the sufficiencyof the reasons cannot be gone into by the High Court in a writproceedings. The provisions of the Act enumerates mainly thereason to believe and the findings provided to form such anopinion, which are the material factors to be considered.Therefore, the High Court has to scrutinise the reasons and thereasons are sufficient enough to meet out the requirements as 9.This Court is of the considered opinion that intricaciesof non-disclosure of certain informations, materials, fully andtruly, cannot be gone into by the High Court. In other words,the High Court has to ensure whether the mandatory condition ofreason to believe is satisfied or not. However, the sufficiencyof the reasons cannot be gone into by the High Court in a writproceedings. The provisions of the Act enumerates mainly thereason to believe and the findings provided to form such anopinion, which are the material factors to be considered.Therefore, the High Court has to scrutinise the reasons and thereasons are sufficient enough to meet out the requirements as contemplated under the Act. Other aspects, on merits, are to beadjudicated by the Assessing Officer and High Court is notexpected to adjudicate the disputed facts with reference to theaccounting system followed or the materials which all are to beadjudicated with reference to the documents and evidences. Thisbeing the factum and the principles to be followed, this Courthas no hesitation in forming an opinion that the petitioner isbound to cooperate for the completion of reopening of assessmentproceedings initiated under Section 147 of the Act, by producingall the relevant materials and documents and the authoritiescompetent are expected to complete the process by affordingopportunity to the writ petitioner, as contemplated and asexpeditiously as possible. 10.The learned counsel for the petitioner made a submissionthat the reason for reopening of assessment is the assessmentorder passed for the Assessment Year 2009-10. However, the saidassessment order was reversed by the Income Tax AppellateTribunal in its order dated 06.01.2016. Therefore, the reasonsfurnished for reopening of assessment is not in existence as ofnow and therefore, the authorities cannot proceed further. ThisCourt is of the considered opinion that the order of theTribunal, its findings, as well as the applicability withreference to the materials produced and informations regardingthe Return of Income for the Assessment Year 2006-07 all to beconsidered by the competent authorities and this Court cannot gointo those merits and demerits and it is for the petitioner toestablish the same before the Assessing Officer, by availing theopportunities to be provided for the purpose of completion ofre-assessment proceedings. With these observations, the Writ Petition stands dismissed. Assistant Registrar True Copy Sub-Assistant Registrar gsaTo1. The Commissioner of Income Tax, Chennai -1, Room No.701, 7[th] Floor, New Block, 121, Mahatma Gandhi Road, Nungambakkam, Chennai 600 034. 2. The Assistant Commissioner of Income Tax, Company Circle I (3), 6[th] Floor, New Block, Income Tax Department, 121, Mahatma Gandhi Road, Nungambakkam, Chennai 600 034. Company Circle I (3), 6[th] Floor, New Block, Income Tax Department, 121, Mahatma Gandhi Road, Nungambakkam, Chennai 600 034. 3. The Deputy Commissioner of Income-Tax, Company Circle I (3), 121, M.G. Road, Chennai 600 034. Company Circle I (3), 121, M.G. Road, Chennai 600 034. +1 CC to M/s. Hema Muralikrishnan, Advocate sr 33881. W.P.No.19871 of 2012 JPL(CO)SP(10/08/2021)