M/S.doshi Housing v. The Principal Commissioner Of Income Tax, Chennai

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 21.06.2021CORAM THE HONOURABLE MR. JUSTICE S.M.SUBRAMANIAMW.P.Nos.42729 & 42730 of 2016and W.M.P.Nos.36656 & 36657 of 2016 M/s.Doshi Housing,No.3-H, Century PlazaNo.560, Anna Salai, Chennai 600 018 ...Petitioner in both W.Ps. Vs.1.The Principal Commissioner of Income Tax, Chennai 5, Wanapathy Block, 5[th] Floor, Income Tax Department, 121, Nungambakkam High Road, Chennai 600 034. 2.The Additional Commissioner of Income Tax, Non Corporate Ward – 3, Room No.622, Main Building, Income Tax Department, 121, Nungambakkam High Road, Chennai 600 034. 3.The Income Tax Officer, Non Corporate Ward – 3(2), Wanapathy Block, Room No.623C, 6[th] Floor, Income Tax Department, 121, Nungambakkam High Road, Chennai 600 034. ...Respondents in both W.Ps. Common Prayer: Writ Petitions filed under Article 226 of theConstitution of India, to issue a Writ of CertiorarifiedMandamus, calling for the records of the third respondent toquash the impugned notice dated 31.03.2016 in PAN: AAFFD6620Aissued in terms of Section 148 of the Income Tax Act, 1961 onthe assumption of jurisdiction u/s 147 of the said Income TaxAct, 1961 for framing re-assessment in relation to theAssessment Years 2009-10 and 2010-11 in the light of the interimorders dated 21.11.2016 in PAN: /AY 2010-11 and PAN:AAFD6620A/AY 2009-10 respectively and further direct the thirdrespondent to drop the proceedings initiated under Section 147of the Act for the said assessment years 2009-10 and 2010-11respectively. (In both W.Ps.) For Petitioner : Mr.S.Sridhar For Respondents : Mr.D.Prabhumukunth Arunkumar (Standing Counsel for IT) COMMON ORDER The notice issued under Section 148 of the Income Tax Act,1961 (hereinafter referred to as 'the Act') for reopening ofassessment by invoking Section 147 of the Act is under challengein these two Writ Petitions with reference to two separateAssessment Years. The 1[st] Writ Petition in W.P.No.42729 of 2016is with reference to the Assessment Year 2009-10 andW.P.No.42730 of 2016 is relating to the Assessment Year 2010-11.The facts and circumstances in both the Writ Petitions aresimilar and thus, this Court is inclined to pass a common order. 2.The petitioner is a Partnership Firm, incorporated in theyear 2005 under the Partnership Deed dated 16.08.,2005 with themain object to carry on the business in real estate and suchother activities described in the Partnership Deed. Thepetitioner filed their Return of Income for the respectiveAssessment Years 2009-10 and 2010-11. It is an admitted factthat the Assessing Authority scrutinized the returns of incomeand passed final order of assessment on 30.12.2011 in respect ofthe Assessment Year 2009-10 and on 28.03.2013 with reference tothe Assessment Year 2010-11. The 3[rd] respondent issued noticeunder Section 148 of the Act on 31.03.2016 in respect of thesaid two Assessment Years and for the purpose of reopening ofthe assessment by invoking Section 147 of the Act. Admittedly,the petitioner raised an objection and requested for reasons forreopening of assessment. On 04.05.2016, the respondentsrequested the petitioner to submit Return of Income. Thepetitioner responded the same and thereafter, the reasons forreopening of assessment was furnished in proceedings dated18.07.2016. The petitioner submitted its objection with detailsand by raising grounds and thus, the objections were disposed ofby the 3[rd] respondent in proceedings dated 21.11.2016. 3.The learned counsel appearing for the petitioner solicitedthe attention of this Court with reference to the originalassessment orders passed in respect of two Assessment Years on30.12.2011 and contended that the details regarding the reasonsfurnished on initiation of Section 147 proceedings wereadjudicated and considered by the Assessing Authority whilepassing the original assessment order. All those particulars aremade available in the assessment orders dated 30.12.2011 and28.03.2013 regarding the Assessment Years 2009-10 and 2010-11 respectively. When there was an adjudication in entirety withreference to the informations, materials and books of accountsand the taxes produced by the petitioner/assessee, the very sameparticulars were furnished as reasons for reopening ofassessment and therefore, the reopening of assessment is nothingbut change of opinion and not falling within the ambit and scopeof Section 147 of the Act. It is contended that the reopening isdone beyond the period of four years, however, within a periodof six years. Thus, the ingredients contemplated in the provisoclause to Section 147 of the Act is to be adhered to in itsstrict sense. The respondents have not found any tangiblematerial or other wise and there was no suppression of fact onthe part of the petitioner and the details and particularsfurnished by the petitioner were scrutinized and considered inthe original assessment orders. Thus, the reopening ofproceeding initiated by invoking Section 147 of the Act beyondthe period of four years is untenable and the conditionscontemplated in the proviso clause has not been complied withand thus, the Writ Petitions are to be allowed. 4.The petitioner relied upon the details of reasonsfurnished by the respondents for reopening of the assessment.The income of the petitioner firm to the extent ofRs.3,58,74,171/- being the share of profit derived by ShriV.G.Surendranath for the Assessment Year 2009-10 has escapedassessment within the meaning of Section 147. The claim ofdeduction under Section 80IB(10) is found untenable andexcessive to the extent of Rs.3,58,74,174/- and hence, thededuction requires restriction to the amount of eligiblequantum. The assessment of the petitioner firm has been reopenedunder Section 147 of the Act. With reference to the saidreasonings furnished for reopening of the assessment, thelearned counsel for the petitioner referred the Return ofIncome, wherein the petitioner has stated the net profittransferred to partners capital accounts and the other detailsregarding the accounts. The petitioner made an attempt to statethat the reasonings now raised were already adjudicated andconsidered by the Assessing Officer and the final assessmentorder was passed. Thus, raising the same reasons are nothing butchange of opinion. The learned counsel appearing for thepetitioner referred to the objections raised in this regard intheir letter dated 16.08.2016. In their objections, thepetitioner has categorically explained these aspects before therespondents. Specifically, it is contended by the petitionersthat “the transaction with Coromandal Cables Private Limiteddoes not involve any expenditure incurred by the assessee andhence, there is no requirement to report the said transaction inColumn 18 of Form 3CD. The transaction between the assessee/thepartnership firm and the company/CCPL was wrongly considered asrelated party transaction within the scope of the specified persons in Section 40A(2)(b) of the Act. The misconstruction ofthe provisions of Section 40A(2)(b) of the Act would vitiate theentire attempt to frame the re-assessment so as to overcome theprohibition contemplated in the proviso below Section 147 of theAct.” The said objections were also not considered. Thus, theimpugned order disposing of the objections is bad in law and theauthorities have not considered the objections in a meaningfulmanner. 5.This Court is of the considered opinion that theprocedures contemplated were followed by the respondents oninitiation of reopening proceedings by invoking Section 147 ofthe Act. The notice under Section 148 of the Act was issued on31.03.2016. The petitioner responded to the notice. At therequest of the petitioner, reasons were furnished. The reasonsfurnished by the 3[rd] respondent are elaborate and the petitioneralso submitted further objections regarding the reasonsfurnished and then, objections were also disposed of by the 3[rd]respondent. 6.This Court has to consider the findings given in the orderof disposal passed by the 3[rd] respondent in proceeding dated21.11.2016. This Court has to consider whether the 3[rd]respondent has considered the objections in a meaningful manneror not. Certain intricacies of the transaction of the accountscannot be gone into by the High Court in a writ proceedingsunder Article 226 of the Constitution of India. What is requiredis to scrutinize the reasons and sufficiency of the reasons neednot be gone into by the High Court in a writ proceedings wherethe assessment is sought to be reopened by invoking Section 147of the Act. Thus, sufficiency of the reasons cannot be gone intoin a writ proceedings. The High Court cannot conduct a rovingenquiry in respect of the accounts details as well as thetechnicalities involved in respect of the transactions. Allthose aspects are to be considered by the Assessing Officerwhile passing the final order of re-assessment. However, theHigh Court has to find out whether the reasons furnished forreopening of assessment amounts to change of opinion or not. Inthis regard, it is useful to extract reasons furnished by the 3[rd]respondent while disposing of the objections submitted by thewrit petitioner which reads as under: “6.17. Hence, it is substantiated that thereassessment proceedings have been initiated basedon clear reasons to reopen and not a mere changeof opinion. 7. The assessee firm finally contends that thetransactions between the company and the assesseefirm are not covered u/s.40A(2)(b). This contention is totally baseless. The son of theManaging Director of the company which owns theland is the substantial stake holder in theassessee firm. The transactions between theassessee firm and company are so arranged that theentire sale proceeds of UDS of land and buildingis received by the firm and a portion isthereafter parted to the company, apart from theamount diverted through the partner ShriM.G.Surendranath as share of profit from the firm.When the transactions are undertaken between theserelated enterprises, it is madndatory that thenature and characteristics of the transactionsrequires to be furnished in Form No.3CD. ColumNo.18 emphasizes on the phrase 'Particulars ofpayments made to persons specified u/s.40A(2)(b)'and does not specify that such payments should beexpenditure. A payment may be of revenue in natureor capital in nature. It may or may not getdebited to the Profit and Loss Account. However,when there are transactions between relatedparties, it is the duty of the Auditor to reportthe same. Having failed to do so, as statedearlier, the Assessing Officer was constrained toprobe further into the correctness of quantum ofdeduction. 8. It is once again reiterated that freshtangible material had come into the possession ofthe undersigned through the order of the Hon'bleITAT, which is in public domain. The AssessingOfficer had omitted to examine as to whether therelated party transaction remain at arm's lengthwhile concluding the original assessment. Therewas no deliberation on this aspect and hence,failure to undertake proper enquiry resulted inexcessive and unreasonable deduction to theassessee firm. The same requires correction andtherefore, this reassessment proceedings isjustified. Therefore, the request of the assesseefirm to drop the reassessment proceedings issummarily rejected.” 7.Perusal of the above findings of the 3[rd] respondent wouldbe sufficient to hold that the requirements of Section 147 ofthe Act has been complied with and the initiation of reopeningproceedings is well within the provisions of the Act andtherefore, the respondents are at liberty to proceed with re-assessment by following the procedures and by affordingopportunity to the writ petitioner/assessee, as contemplated. The respondents are directed to complete the said exercise ofcompletion of the re-assessment proceedings within a period offour months from the date of receipt of a copy of this order. 8.With these directions, both these Writ Petitions standdismissed. No costs. Consequently, connected MiscellaneousPetitions are closed. Sd/- Assistant Registrar(CS IV) //True Copy// Sub Assistant Registrar gsa To 1.The Principal Commissioner of Income Tax, Chennai 5, Wanapathy Block, 5[th] Floor, Income Tax Department, 121, Nungambakkam High Road, Chennai 600 034. 2.The Additional Commissioner of Income Tax, Non Corporate Ward – 3, Room No.622, Main Building, Income Tax Department, 121, Nungambakkam High Road, Chennai 600 034. 3.The Income Tax Officer, Non Corporate Ward – 3(2), Wanapathy Block, Room No.623C, 6[th] Floor, Income Tax Department, 121, Nungambakkam High Road, Chennai 600 034. +1CC to Mrs.Hema Murali Krishnan Advocate SR No.28689 W.P.Nos.42729 & 42730 of 2016 PCH (CO)PR (16/07/2021)