M/S.scorpion Industrial Polymers (P) Ltd v. The Commissioner Of Income Tax, Chennai – Iii

W.P.Nos.4464 to 4466 of 2006 andW.P.M.P.Nos.4785 to 4790 of 2006 M/s.Scorpion Industrial Polymers (P) Ltd.,30, Sri Venkateswara Colony,Nehru Nagar, Chennai – 600 041. ... Petitioner in all WPsVs. The Commissioner of Income Tax,Chennai – III,121, Mahatma Gandhi Road,Chennai – 600 034.... Respondent in all WPs Prayer in WPs.4464 & 4465/2006: Petitions filed under Article226 of the Constitution of India praying for issuance of a Writof Certiorari to call for the records and quashing the impugnedorder bearing C.No.3032/50&51/III/2003-04 dated 31.03.2005 forthe assessment years 1993-94, 1994-95 respectively passed by therespondent under Section 264 of the Income Tax Act, 1961.Prayer in WP.4466/2006: Petition filed under Article 226 of theConstitution of India praying for issuance of a Writ ofCertiorari to call for the records and quashing the impugnedorder bearing C.No.3032/36/III/2002-03 dated 27.11.2003 for theassessment year 1996-97 respectively passed by the respondentunder Section 264 of the Income Tax Act, 1961. Heard Mr.V.S.Jayakumar, learned counsel for the petitionerand Mr.A.P.Srinivas, learned Senior Standing Counsel appearingfor the respondent. 2.The petitioner is a Private Limited Company carrying onbusiness in manufacturing and trading of rubber products. Thepetitioner filed its return of income for the assessment year https://hcservices.ecourts.gov.in/hcservices/ 1993-1994 on 31.12.1993. This return was not accompanied by theAuditor's Report. Though the respondent would state that noticeunder Section 139(9) was issued on 15.06.1994 and 17.10.1995calling upon the petitioner to rectify the defect, thepetitioner would state that no such notice was received by them. 3.Though these writ petitions are pending from 2006, nocounter affidavit has been filed denying the said averment. Forthe first time, the petitioner came to know that his return wasrejected as being defective only when the order of assessmentdated 23.01.2002 for the assessment year 1996-1997 was passedwherein there is a reference that the returns filed for theassessment years 1993-1994 and 1994-1995 were treated asdefective and as the assessee has not rectified the mistake, itwas treated as invalid by the Assessing Officer and communicatedto the petitioner on 13.08.1996. The petitioner's case is thatno such communication was received by the petitioner dated13.08.1996. The petitioner had filed revision petition initiallyfor the assessment year 1996-1997 against the order of theAssessing Officer dated 23.01.2002 disallowing the carry forwardand set off of loss claimed by the petitioner company for theassessment years 1993-1994 and 1994-1995. This revision petitionwas dismissed stating that the issue related only to theassessment years 1993-1994 and 1994-1995 and denied the benefitfor the assessment year 1996-1997 and also for the earlier years1993-1994 and 1994-1995. As against the action of the AssessingOfficer in treating the return of income as invalid, thepetitioner filed revision under Section 264 of the Income TaxAct, 1961 for the assessment year 1993-1994. This was dismissedby the respondent, by common order dated 31.03.2005 for theassessment years 1993-1994 and 1994-1995 stating that thedisallowance of carry forward loss in the year 1993-1994 isproper. 4.The petitioner's grievance is that the Assessing Officerdid not give any opportunity to the petitioner with regard tothe defective returns which has to be cured by the petitionerfor the assessment year 1993-1994 and the petitioner came toknow about it only when the order of the Assessing Officergiving effect to the order of the CIT(A) was passed for theassessment year 1996-1997 on 23.01.2002. Therefore, thepetitioner filed a revision petition before the respondentpraying for an opportunity as well as a relief by way of carryforward benefit. The petitioner placed reliance on the decisionsof the Hon'ble Supreme Court in the case of CIT V. DharmaReddy 73 ITR 751, CIT V. Jaipuria China Clay Mines Limited, 59ITR 555(SC) and CIT V. Veeramani Industries Private Limited, 216ITR 607 (SC). In support of the contention that the relevantyear for consideration of carry forward of loss and depreciationand set off of the same is the year in which losses are to be set off and not in any earlier years. Thus, three orders werepassed by the respondent. In so far as the revision petitionsfiled for the assessment years 1993-1994 and 1994-1995 areconcerned, the respondent has passed an order dated 31.03.2005rejecting the petitioner's revision petitions. This order isimpugned in W.P. Nos.4464 and 4465 of 2006. In respect of therevision petition filed for the year 1996-1997, the respondentpassed a separate order dated 27.11.2003 holding that thedisallowance of setting off of the losses for the assessmentyear 1996-1997 is only consequential, as the main grievance ofthe assessee arises for the assessment years 1993-1994 and 1994-1995 and there is nothing to revise the assessment for the year1996-1997 under Section 264 of the Act. Thus, the net result isthe assessee has been shut out from availing any benefit underthe provisions of the Act. In my considered view, the assesseecannot be left remedy-less. In other words, the assessee cannotbe wrong on both the counts. The first and foremost issue thatthe respondent should have considered is as to whether thecommunication dated 13.08.1996 was received by the petitioner.This communication is stated to be a communication sent by theAssessing Officer to the petitioner stating that the returns forthe assessment years 1993-1994 and 1994-1995 are defective andaccordingly treated as invalid. 5.The petitioner's specific case is that they have neverreceived any such communication and they came to know about itonly when they received the assessment order dated 23.01.2002for the assessment year 1996-1997 which was an order givingeffect to the order of the CIT(Appeals) in ITA.No.375/1999-00dated 17.02.2000. The petitioner's case is that on beinginformed that the return filed for 1993-1994 and 1994-1995 werenot accompanied by Audit Reports, they had filed their AuditReports on 31.10.1995 well before the end of the assessment yeari.e. 31.03.1996. However, the respondent in the impugned orderdated 31.03.2005 shifts the burden on the petitioner. Ifaccording to the petitioner, they had filed the Audit Report andthe same is received by the Assessing Officer across his tableand invariably acknowledgments are not given, then, the easiestprocedure would be to call for a remand report from theAssessing Officer. If that had been done, the factualdiscrepancy could have been set right and the respondent couldhave taken a decision on merits especially when the petitionerrelies upon the decisions of the Hon'ble Supreme Court to statethat they are entitled to carry forward the loss for theassessment year 1996-1997. 6.Thus, I find that there has not been an examination of themerits of the matter, rather the petitioner has been shut out ontechnicalities. If the petitioner's contention that they hadfiled Audit Report on 31.10.1995 had been verified by either for 6.Thus, I find that there has not been an examination of themerits of the matter, rather the petitioner has been shut out ontechnicalities. If the petitioner's contention that they hadfiled Audit Report on 31.10.1995 had been verified by either for calling for them before the Assessing Officer or calling for theassessment file, the factual dispute would have been cleared anda decision could have been taken on the merits of the matter.Thus, I am of the considered view that the matters require to bere-examined by the respondent by calling for the assessmentfiles, examining the correctness of the stand taken by thepetitioner that the tax Audit Reports were filed vide theirletters dated 30.10.1995 and also examine the legal issue placedby the petitioner and pass fresh orders on merits. 7.For the above reasons, these Writ Petitions are allowedand the impugned orders are set aside and the matter is remandedto the respondent for fresh consideration to take a decision inthe matter, in the light of the observations made in thisregard. No costs. Consequently, connected miscellaneouspetitions are closed. Sd/- Assistant Registrar(CS-)//True Copy// Sub Assistant Registrar SglTo The Commissioner of Income Tax,Chennai – III,121, Mahatma Gandhi Road,Chennai – 600 034. +2cc to Mr.A.P.SRINIVAS Advocate, S.R.No. 81444, 81499