M/S.india Electronics, Rep. By Its v. The Joint Commissioner Of Income Tax, Range Ii, Cuddalore

IN THE HIGH COURT OF JUDICATURE AT MADRAS THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAM M/s.India Electronics, rep. by its Partner, V.Gurunathan,No.167-168, Nehruji Road,Villupuram-605 602. ... Petitioner Vs. 1.The Joint Commissioner of Income Tax, Range II, Cuddalore. West Shanmugapuram, Villupuram. ... Respondents Petition filed under Article 226 of the Constitution ofIndia praying for issuance of Writ of Certiorari, calling forthe records of the second respondent in his proceedings inPAN:AAAF12397A : GIR.No.307-I, dated 12.08.2004 under Section148 of the Income Tax Act, and the impugned order dated01.03.2006 in PAN: AAAF12397A : GIR.No.307-I, for reassessmentof the petitioner's income tax return for the assessment year1999-2000 and to quash the same. Heard Mr.A.Muthukumar, learned counsel for the petitionerand Mr.A.P.Srinivas, learned Senior Standing Counsel assisted byMr.A.N.R.Jayaprathap, learned Junior Standing Counsel for the https://hcservices.ecourts.gov.in/hcservices/ 2.The petitioner, a partnership firm represented by itspartner V.Gurunathan, is aggrieved by an order passed by thesecond respondent rejecting the petitioner's objections forreopening of the assessment for the assessment year 1999-2000 byinvoking the power under Section 147 of the Income Tax Act, 1961(hereinafter referred to as “the Act”). The basis for reopeningof the assessment is a statement, which is said to have beenrecorded from one of the partners of the firm by name, ShriS.Balasubramanian, during the course of survey conducted in thebusiness premises of the petitioner on 06.03.2002. Therespondent would state that in the said statement, the partnerstated that there is an understatement of the cost ofconstruction of a commercial building, which was put up by thepetitioner during the assessment year 1999-2000 and suchstatement was recorded in the course of survey under Section133A of the Act and this statement was also confirmed by thepetitioner's partner and therefore, the second respondent hasreason to believe that income chargeable to tax for theassessment year 1999-2000 within the meaning of Section 147 ofthe Act has escaped assessment. 3.Admittedly, reopening has been done after a period offour years and the second respondent should have tangiblematerial available with him other than the material, which wasconsidered by the assessing officer while completing theassessment based on the return dated 30.12.1999. In fact, aftergiving credit to the advance tax paid, the petitioner wasgranted refund of a sum of Rs.3,353/- during the regularassessment. It is seen that the petitioner was confronted withthe statement given by their partner viz., S.Balasubramanian,for the first time when the impugned reopening proceedings wereinitiated and it came to his knowledge only after the petitionersought for reasons for reopening, which were furnished to thepetitioner on 24.11.2004. On seeing the said reasons, thepetitioner has submitted objections and also filed an affidavitof partner under what circumstances the statement was recordedand how the partners were under tremendous pressure, as thesurvey proceedings were going on throughout the night. Thus, ineffect, the petitioner disputed the correctness of thestatement. If that is so, can the second respondent rely on thesaid statement and reopen the proceedings. 4.The counter affidavit proceeds to justify the impugnedaction by placing reliance on the decision of the Hon'bleAllahabad High Court in the case of Dr.S.C.Gupta vs.Commissioner of Income Tax reported in [2001] 248 ITR 782. Thisjudgment was considered by the Hon'ble Division Bench of this 4.The counter affidavit proceeds to justify the impugnedaction by placing reliance on the decision of the Hon'bleAllahabad High Court in the case of Dr.S.C.Gupta vs.Commissioner of Income Tax reported in [2001] 248 ITR 782. Thisjudgment was considered by the Hon'ble Division Bench of this Court in the case of Commissioner of Income-Tax v. S.Khader KhanSon reported in [2008] 300 ITR 157 (Mad). Among other things,the Court held that the statement recorded during the course ofsurvey action under Section 133A of the Act shall not have anyevidentiary value and solely based on the said statement givenby one of the partners of the firm, the question of reopeningcannot be done. Further, after taking note of the decision inthe case of Dr.S.C.Gupta (supra), the Court held that the powerto examine a person on oath is specifically conferred on theauthorities only under Section 132(4) of the Act in the courseof any search or seizure and Section 133A does not empower anyincome-tax officer to examine any person on oath. 5.Reliance was also placed on the decision of the KeralaHigh Court in the case of Paul Mathews and sons v. CIT reportedin [2003] 263 ITR 101, wherein it was held that whateverstatement recorded under Section 133A of the Act is not givenany evidentiary value. In the instant case, the petitioner hasdenied such statement in their objections, which is in thenature of retraction. If the statement of the partner, whichwas relied on by the second respondent is eschewed, then thereis no material available with the second respondent to reopenthe assessment. 6.One more contention advanced by the learned counsel forthe petitioner is that no prior sanction was obtained, asrequired under proviso to Section 151 of the Act. The noticeunder Section 148 of the Act dated 12.08.2004, states thatnotice has been issued after obtaining necessary sanction fromthe Joint Commissioner Income Tax, Range-II, Cuddalore. Whilefurnishing the reasons for reopening, the officer states thatproceedings will be initiated after obtaining necessary approvalfrom the Joint Commissioner of Income Tax, as per Section 151 ofthe Act. This has been clarified by the respondent in thecounter affidavit stating that the approval was obtained on10.08.2004, much prior to the issuance of the notice underSection 148 of the Act. Further, the averment in the reasonsfor reopening has been explained in the counter affidavit to bean inadvertent error. The submission of the revenue in thisregard is acceptable. 7.However, I am satisfied that there is absolutely nobasis for reopening of the assessment. That apart, though thesecond respondent seeks to bring out a case of underestimationin the cost of construction by referring to the statement of thepartner, the second respondent himself called for a valuationreport from the Public Works Department and I find that the costof the construction as disclosed in the return for theassessment year 1999-2000 and the valuation, which was done bythe Public Works Department officials in the year 2003 has onlymarginal difference and the variation appears to be around Rs.1,00,000/-. Thus, on his own showing, the second respondentwas not able to bring out a case of underestimation of the costof construction. Thus, for the above reasons, I find that theimpugned reopening proceedings are wholly without jurisdictionand illegal. Accordingly, this writ petition is allowed and theimpugned reopening proceedings are quashed. No costs. Sd/Assistant Registrar/True copy/Sub Assistant Registrar To1.The Joint Commissioner of Income Tax, Range II, Cuddalore.2.The Income Tax Officer, Ward I(1), No.1, Chairman Subbarayar Street, West Shanmugapuram, Villupuram.+1cc to Mr.A.P.Srinivas Advocate SR.No.2019/18+1cc to M/sA.Muthukumar Advocate SR.No.1811/18W.P.No.8569 of 2006SDR 05.02.2018