M/S.seshasayee Paper And Boards Limited,Rep By Its Deputy Managing Director & Secretary,Sri V.pichai v. The Assistant Commissioner Of Income Tax,Circle 1, Namakkal,Namakkal – Income Tax Office

M/s.Seshasayee Paper and Boards Limited,Rep by its Deputy Managing Director & Secretary,Sri V.Pichai,S/o.Late Sri M.R.Venkataraman,aged about 70 years,Cauvery R.S.Post,Pallipalayam, Erode – 638 007, Tamil Nadu ... Petitioner Vs. The Assistant Commissioner of Income Tax,Circle 1, Namakkal,Namakkal – Income Tax Office,No.138/3 L.M.R.Shopping Arcade,3[rd] Floor, Salem Road,Namakkal, Tamil Nadu – 637 001.... Respondent Prayer: Writ Petition is filed under article 226 of theConstitution of India praying for the issuance of Writ ofCertiorari, calling for the records in PAN in LetterNo.ITBA/AST/F/17/2018-19/1012282153(1) dated 17.09.2018 on thefile of the Respondent relating to the A.Y.2011-12 and quash thesame. For Petitioner : Mr.G.Baskar For Respondent : Mr.A.P.Srinivas Standing Counsel The petitioner has challenged in this Writ Petition theimpugned communication dated 17.09.2018 over ruling theobjection of the petitioner dated 31.07.2018 and to reasonscommunicated on 18.07.2018. The petitioner was issued with anotice under Section 148 of the Income Tax Act on 27.03.2018seeking to re-open the Assessment of A.Y.2011-12. In a 1/5 https://hcservices.ecourts.gov.in/hcservices/ communication dated 18.07.2018, the respondent has given thefollowing reasons for re-opening the assessment which reads asunder:- In your case, an Assessment for the AY2011-12 has been reopened u/s 148 for thefollowing reason.The assessee is engaged in theBusiness of manufacturing of paper and paperBoards. The assessee filed its Return ofIncome for “NIL” after claiming deduction u/s80IA. The assessee has claimed exemptedincome of Rs. 2,03,565/- was disallowed by theassessee itself which was worked out at 2% ofthe dividend received by the assessee underthe provisions of section 14A r.s.rule 8D.Since the computation of disallowance U/s.14Ar.w.rule 8D has not done as per the provisionsThe assessee is hereby informed that,If there are any objections for the abovereasons, the assessee may file the objectionin writing on or before 31.07.2018. 2.In the impugned communication dated 17.09.2018 therespondent has stated that the claim for disallowance of 2% ofthe dividend of Income Tax under 14A read with Rule 8D of theIncome Tax Act, 1961 needs to be understood that applicationunder Section 14A read with Section 8D is mandatory and is not amatter of opinion of the Assessing Officer as no powers ordiscretion is vested with respect of the applicability of thesaid provisions of the Act. 3.However, it is noticed thus prior to Assessment, anaudit objection was sent to the petitioner on 06.06.2013 whichwas replied on 19.06.2013. The petitioner had specificallyreplied as under:- 17(IAmountofdeduction: Rs.2 03 565 being the.)inadmissible in terms ofestimated expenditure @Section 14A in respect of the2% on Dividend Incomeexpenditureincurredinas per ITAT orderrelation to income which doesNo.47/(MDS)/2002, datednot form part of the totalJune 17, 2005, for theincome,Assessment year 1998-99. 4.It was considered and allowed by the Assessing Officer,while passing the assessment order. Therefore, to that extentre-opening for the assessment disallowing on expenditure under 2/5 Section 14A read with Rule 18A of the IT Rule 8D cannot besustained. 5.However, with reference to deductions claimed underSection 80-IA, the respondent had stated that the petitioner hadclaimed deduction of Rs.1,26,78,801/- under Section 10(34) andthe same needs to be verified. The aforesaid amount is notimmediately traceable from the records filed by the petitioner.In the Income Tax returns the petitioner appears to have claimeda dividend of Rs.1,01,78,256/- only under the head of otherincome (dividend). 4.It was considered and allowed by the Assessing Officer,while passing the assessment order. Therefore, to that extentre-opening for the assessment disallowing on expenditure under 2/5 Section 14A read with Rule 18A of the IT Rule 8D cannot besustained. 5.However, with reference to deductions claimed underSection 80-IA, the respondent had stated that the petitioner hadclaimed deduction of Rs.1,26,78,801/- under Section 10(34) andthe same needs to be verified. The aforesaid amount is notimmediately traceable from the records filed by the petitioner.In the Income Tax returns the petitioner appears to have claimeda dividend of Rs.1,01,78,256/- only under the head of otherincome (dividend). 6.While passing the assessment order, the issue relatingto 80-IA deductions was discussed by the Assessing Officer whichwas partly allowed and partly disallowed. On further appealbefore the Commissioner of Income Tax (Appeals) in AppealNo.259/2013-2014, the Commissioner of Income Tax (Appeals) videorder dated 30.08.2017, has discussed the same in para 4.Relevant portion is reproduced below:- “4.Ground Nos.2.1 to 2.3: DisallowanceU/s 80IA While making the disallowance u/s80IA, the Assessing Officer in the assessmentorder contended that in respect of CaptivePower Plant – CRB Undertaking, it is seen thatthe losses of the undertaking were set offagainst the income from paper business which isagainst the provisions of Section 80IA(5). TheAssessing Officer further contended that theincome of this undertaking is eligible for theclaim of 80IA only when the losses of theundertaking are set off completely against theincome of the undertaking. The AssessingOfficer concluded that the assessee isineligible for deduction u/s 80Ia since thereis no profit from the undertaking during thisyear after setting off the brought forwardlosses. 4.1.TheAuthorizedRepresentativesubmitted that the assessee is eligible for,deduction u/s 80IA of the Income Tax Act, 1961following the decision of the Hon'ble HighCourt of Madras in the case of CIT Vs.Velayuthasamay Spinning Mills (P) Ltd reportedin 21 Taxmann 95 (2012) and the latest decisionof this Court in the case of M/s.EastmanExports Global Clothing (P) Ltd reported in 54 3/5 Taxmann 408 (2015). The appellant also reliedon the CBDT Circular No.1/2016 dated15.02.2016. 4.2.Respectfully following the Board'sCircular and the recent Judgment of the Hon'bleSuprme court in the case of ACIT, Tirupur Vs.Velayudhaswamy Spg Mills P. Ltd delivered on05.09.206 in SLP(c) No.33475/2012, this groundof appeal of the appellant is allowed.” 7.There is a confusion regarding the exact amount ofdeductions claimed by the petitioner. Therefore I am notinclined to interfere in the present Writ Petition in sofarasthe proposal for disallowance of under Section 80-IA of theIncome Tax Act is concerned. Therefore, the respondent isdirected to keep in mind the proviso to Section 147 of theIncome Tax Act while passing order. 8.In case, there was no case was made out for re-openingof the Assessment within a meaning of 1[st] proviso to Section 147of the Income Tax Act, the respondent is obliged to not toproceed thereafter as no action can be taken under the saidsection after the expiry of four years from the end of therelevant assessment year unless any income chargeable to tax hasescaped assessment for such assessment year by reason of thefailure on the part of the assessee to make a return undersection 139 or in response to a notice issue under sub section(1) of section 142 or section 148 or to disclose fully and trulyall material facts necessary for assessment, for that assessmentyear. 8.In case, there was no case was made out for re-openingof the Assessment within a meaning of 1[st] proviso to Section 147of the Income Tax Act, the respondent is obliged to not toproceed thereafter as no action can be taken under the saidsection after the expiry of four years from the end of therelevant assessment year unless any income chargeable to tax hasescaped assessment for such assessment year by reason of thefailure on the part of the assessee to make a return undersection 139 or in response to a notice issue under sub section(1) of section 142 or section 148 or to disclose fully and trulyall material facts necessary for assessment, for that assessmentyear. 9.The Writ Petition stands disposed with the aboveobservation. The respondent is directed to pass appropriateorders within a period of three months from the date of receiptof a copy of this order. No cost. Consequently, connectedMiscellaneous Petition is closed. jas Sub-Assistant Registrar 4/5 https://hcservices.ecourts.gov.in/hcservices/ To The Assistant Commissioner of Income Tax,Circle 1, Namakkal,Namakkal – Income Tax Office,No.138/3 L.M.R.Shopping Arcade,3[rd] Floor, Salem Road,Namakkal, Tamil Nadu – 637 001. +1 cc to Mr.A.P.Srinivas Advocate sr14015+1 cc to Mr.G.Baskar Advocate sr13918 ca(co)aa12/05/2020 5/5 W.P.No.26996 of 2018andW.M.P.No.31382 of 2018