M/S.tenzing Match Worksboopathy Buildingsvirudhunagar Roadsivakasi v. The Deputy Commissioner Of Income Taxcircle I, Virudhunagar

IN THE HIGH COURT OF JUDICATURE AT MADRAS CORAM THE HON'BLE MR.JUSTICE T.S.SIVAGNANAMANDTHE HON'BLE MRS.JUSTICE V.BHAVANI SUBBAROYAN Tax Case (Appeal) No.702 of 2009 M/s.Tenzing Match WorksBoopathy BuildingsVirudhunagar RoadSivakasi, PAN: ....Appellant - Vs -The Deputy Commissioner of Income TaxCircle I, Virudhunagar....Respondent Prayer : Appeal under Section 260A of the Income Tax Act, 1961,against the common order of the Income Tax Appellate Tribunal“B” Bench, Chennai in I.T.A.No.1034/2008 for the assessmentyears 2001-02 dated 31.03.2009, and against the order of theCommissioner of Income Tax (Appeals) II, Madurai dated 06/02/08made in ITA No.123/07-08, against the Deputy Commissioner IncomeTax, Circle I, Virudhunagar, dated 06/09/07 made in PAN/GIR- assessment year 2001-02. For Appellant : Mr.A.S.SriramanFor Respondent :Ms.S.PremalathaStanding Counsel J U D G M E N T (Judgment of the Court was delivered by T.S.SIVAGNANAM, J.)This appeal by the assessee is directed against the orderpassed by the Income Tax Appellate Tribunal, Chennai 'B' BenchI.T.A.No.1034/2008 for the assessment years 2001-02 dated31.03.2009. Though the assessee has raised five substantialquestions of law, which have been admitted, it would suffice toanswer the following question, which would cover all thesubstantial questions of law. Accordingly, the appeal isentertained on the following substantial question of law. “1. Whether the Appellate Tribunal iscorrect in law in confirming the order ofthe re-assessment framed in terms of https://hcservices.ecourts.gov.in/hcservices/ Section 147 read with 143(3) of the Act forthe assessment year 2001-02 by therespondent in the second attempt eventhough there were no fresh materials in hispossession justifying the action?” 2. Heard Mr.A.S.Sriraman, learned counsel for the assesseeand Ms.Premalatha, learned Standing Counsel for the Revenue.The short issue which falls for consideration is whether thereopening of the assessment was valid. The assessee filed thereturn of income on 29.10.2001, admitting the total income at'Nil', after claiming deduction under Section 80HHC to theextent of Rs.13,07,561/-. The return was processed underSection 143(1)(a) of the Act, by issuance of a communicationdated 29.01.2004. After more than 2½ years, a notice underSection 148 was issued on 22.11.2006, alleging that theassessee, in his return of income, had made excess claim ofdeduction under Section 80HHC. The assessee offered hisexplanation, justifying the claim for deduction and requestedthe return of income dated 29.10.2001 to be treated as returnin pursuance to the notice under Section 148 of the Act dated29.11.2006. Nothing happened thereafter for over four months.When the assessee was issued another notice under Section 148of the Act dated 13.03.2007 for the very same reason, allegingexcess claim deduction under Section 80 HHC, the assesseeoffered his explanation, justifying the claim and requestedthe return dated 29.10.2001 to be treated as return in responseto the notice under Section 148 dated 13.03.2007. Theassessee further contended that the reopening of the assessmentis bad in law, as the assessing officer has not recorded anyreason that income chargeable to tax has escaped assessment andthere was no tangible material available to the assessingofficer to reopen the assessment. This contention wasrejected and the assessment was completed on 06.09.2007. 3. The assessee preferred an appeal before the Commissionerof Income Tax (Appeals), Madurai (hereinafter referred to asCIT 'A'), who dismissed the appeal by an order dated 06.02.2008on the ground that the intimation issued under Section 143(1)(a) dated 29.01.2004 is not an order and therefore the noticeissued under Section 148 dated 13.03.2007 cannot be stated tobe reopening of assessment, as it is an assessment by itself,and that an intimation is not an order of assessment. Similarwas the view taken by the tribunal as well, dismissing theappeal filed by the assessee. This is how the assessee isbefore us, by way of this appeal. 4. There is no quarrel about the legal position as laiddown by the Honourable Supreme Court in the cases of “ACIT-Vs- Rajesh Jhaveri Stock Brokers P.Ltd [2007] 291 ITR 500 https://hcservices.ecourts.gov.in/hcservices/ (SC)”, “CIT -Vs- Kelvinator India Ltd (2010) 320 ITR 561 (SC)”and “Income-tax v. Zuari Estate Development & InvestmentCo.Ltd. (2015) 373 ITR 661 (SC)”. However, the question beforeus in this appeal is whether the finality attached to anassessment, pursuant to a communication under Section 143(1)(a)could be disturbed by invoking the power under Section 147 andunder what circumstances it can be done. 5. This issue was considered in the case of “CIT -Vs-Orient Craft Ltd (2013) 354 ITR 536”, wherein the Court held asfollows. 13. Having regard to the judicial interpretationplaced upon the expression "reason to believe", andthe continued use of that expression right from 1948till date, we have to understand the meaning of theexpression in exactly the same manner in which it hasbeen understood by the courts. The assumption of theRevenue that somehow the words "reason to believe"have to be understood in a liberal manner where thefinality of an intimation under Section 143(1) issought to be disturbed is erroneous and misconceived.As pointed out earlier, there is no warrant for suchan assumption because of the language employed inSection 147; it makes no distinction between an orderpassed under section 143(3) and the intimation issuedunder section 143(1). Therefore it is not permissibleto adopt different standards while interpreting thewords "reason to believe" vis-a-vis Section 143(1)and Section 143(3). We are unable to appreciate whatpermits the Revenue to assume that somehow the samerigorous standards which are applicable in theinterpretation of the expression when it is appliedto the reopening of an assessment earlier made underSection 143(3) cannot apply where only an intimationwas issued earlier under Section 143(1). It would ineffect place an assessee in whose case the return wasprocessed under Section 143(1) in a more vulnerableposition than an assessee in whose case there was afull-fledged scrutiny assessment made under Section143(3). Whether the return is put to scrutiny or isaccepted without demur is not a matter which iswithin the control of assessee; he has no choice inthe matter. The other consequence, which is somewhatgraver, would be that the entire rigorous procedureinvolved in reopening an assessment and the burden ofproving valid reasons to believe could becircumvented by first accepting the return underSection 143(1) and thereafter issue notices to reopenthe assessment. An interpretation which makes a distinction between the meaning and content of theexpression "reason to believe" in cases whereassessments were framed earlier under Section 143 (3)and cases where mere intimations were issued earlierunder Section 143(1) may well lead to such anunintended mischief. It would be discriminatory too.An interpretation that leads to absurd results ormischief is to be eschewed.” distinction between the meaning and content of theexpression "reason to believe" in cases whereassessments were framed earlier under Section 143 (3)and cases where mere intimations were issued earlierunder Section 143(1) may well lead to such anunintended mischief. It would be discriminatory too.An interpretation that leads to absurd results ormischief is to be eschewed.” 6. This decision was followed in the case of “Principal CIT-Vs- Tupperware India (P) Ltd., (2016) 65 Taxmann.com 17(Delhi)”. Similar view was taken in “Khubchandani Healthparks(P) Ltd., -Vs- Income Tax Officer, Mumbai ”, wherein it was heldthat notice under Section 148 could be challenged as beingwithout jurisdiction for absence of reason to believe thatincome had escaped assessment even in case where assessment hadbeen completed earlier by an intimation under Section 143(1).The decision in “CIT -Vs- Orient Craft Ltd (2013) 354 ITR 536”was followed in “TANMAC India -Vs- Deputy CIT, Pondicherry(2017) 78 Taxmann.com 155 (Madras)”. 7. It is the contention of Ms.Premalatha, learned StandingCounsel that this Court, in the case of “Diebold Systems PvtLtd., -Vs- IT Officer (OSD)” in T.C.No.2153 of 2008 dated11.07.2019, had distinguished the decision of “CIT -Vs- OrientCraft Ltd (2013) 354 ITR 536” and “TANMAC India -Vs- Deputy CIT,Pondicherry (2017) 78 Taxmann.com 155 (Madras)”. It is truethat this Court has distinguished the aforesaid decisions in thecase of “Diebold Systems Pvt Ltd., -Vs- IT Officer (OSD)”, onthe ground that in the said case assessment was reopened basedon factual material, which were available with the assessingofficer subsequent to the intiation issued under Section 143(1)and to be precise, in the next assessment year, where theassessing officer found that no services were rendered by theassessee for their unit at Pondicherry. Therefore, the saiddecision will not aid the case of the Revenue. 8. The legal principle laid down in the above decision isthat the language employed in Section 147 does not make anydistinction between an order passed under Section 143(3) and theintimation issued under Section 143(1) and therefore, it is notpermissible to adopt different standards while interpreting thewords “reason to believe” vis-a-vis Section 143(1) and Section143(3). In the instant case, it is not in dispute thatreopening is based upon the return of income filed by theassessee at the first instance. There is no allegation againstthe assessee that there was failure on the part of the assesseeto make a true disclosure, nor the assessing officer had reliedon any tangible material, which has come to his knowledge afterthe filing of the return and intimation under Section 143(1), justifying reopening. Therefore, to reopen an assessment basedon the return filed by the assessee, will clearly be a case ofchange of opinion and consequently bad in law. 9. In the result, the appeal filed by the assessee isallowed and the substantial question of law No.1 is answered infavour of the assessee. No costs. Sd/- Assistant Registrar(CO) //True copy//Sub Assistant RegistrarKSTTo1. The The Deputy Commissioner of Income Tax Circle I, Virudhunagar.2. The Income Tax Appellate Tribunal, Chennai 'B' Bench.3. The Commissioner of Income Tax (Appeals) II, Madurai+1cc to Mr.S.Sridhar, Advocate SR.No.58790+1cc to Ms.S.Premalatha, Advocate SR.No.59053T.C.(A) No.702 of 2009VG II(CO)GMY(02/08/2019)