M/S.thriveni Earthmovers Pvt. Ltd v. The Assistant Commissioner Of Income Tax,Central Circle

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 26.04.2021 CORAM THE HON'BLE MR.JUSTICE S.M.SUBRAMANIAM W.P.Nos.38185 & 38186 of 2016 and W.M.P.Nos.32726 to 32729 of 2016andW.M.P.Nos.23280 to 23283 of 2017 M/s.Thriveni Earthmovers Pvt. Ltd.,Represented by its Executive Director and Authorized SignatorySri.B.Karthikeyan,#22/110, Greenways Road, Fairlands,Salem – 636 016 ..Petitioner in both W.Ps vs The Assistant Commissioner of Income Tax,Central Circle, #3, Gandhi Road, Salem – 636 007. ..Respondent in both W.Ps Common Prayer: Writ Petition filed under Article 226 of theConstitution of India praying to issue a Writ of CertiorarifiedMandamus, calling for the entire records of the 1[st] respondentcontained in its impugned order bearing ProceedingsNo.AABCT6759R/2009-10 & Proceedings No.AABCT6759R/2010-11, dated13.10.2016, and to quash the same, and to consequently forbearthe respondents or any of their subordinates, agents or anyother person claiming under the respondents, from in any mannerre-assessing the petitioner's income for the assessment year2009-10 & 2010-11 Under Section 147 of the Income Tax Act, 1961. For Petitioner : Mr.R.V.Easwar Senior Counsel Assisted by M/s.Rubal Bansal and Mr.Suhrith Parthasarathy For Respondents : Mr.A.P.Srinivas Senior Standing counsel [For Income Tax] https://hcservices.ecourts.gov.in/hcservices/ The writs on hand are filed, challenging the proceedingsdated 13.10.2016, passed by the Assistant Commissioner of IncomeTax, Central Circle, Salem, disposing of the objections raisedby the petitioner/assessee against the initiation of actionunder Section 147 of the Income Tax Act, 1956, with reference tothe Assessment Years 2009-10 & 2010-11. 2. The petitioner is a Company, registered under CompaniesAct, 1956 and it is engaged in business of iron ore miningservices, transportation and handling of iron ore and limestone,quarrying of blue metals boulders and sale of blue metals. 3. In respect of W.P.No.38185 of 2016, the petitioner statesthat, they filed its return of income for the Assessment Year2009-10 on 29.09.2009, declaring a total income ofRs.136,50,44,330/-. The petitioner's return was processed underSection 143(1) on 31.03.2011 and the petitioner was issued andintimation of the same. The case of the petitioner was selectedfor scrutiny and a notice was issued under Section 143 (2) ofthe Income Tax Act dated 19.08.2010 was issued. Thereafter, theassessment order was passed under Section 143(3) of the Act on14.09.2011. An addition to the tune of Rs.18,94,117/- was madeto the petitioner's income, in view of a disallowance underSection 14A of the Act. Accordingly, a notice of demand of a sumof Rs.6,43,810/- dated 14.09.2011 was also issued to thepetitioner. Under these circumstances, the respondent issued anotice under Section 148 of the Act dated 25.09.2014, seekingreopening of the petitioner's income tax assessment for theassessment year 2009-10. The reasons for reopening of theassessment as sought for by the petitioner and it was furnished. 4. In respect of W.P.No.38186 of 2016, the petitioner statesthat, they filed its return of income for the Assessment Year2010-11 on 29.09.2010, declaring a total income ofRs.174,37,64,170/-. The petitioner's return was processed andthe petitioner was issued an intimation of the same. The case ofthe petitioner was selected for scrutiny and a notice was issuedunder Section 143 (2) of the Income Tax Act dated 29.08.2011 wasissued. Thereafter, the assessment order was passed underSection 143(3) of the Act on 18.12.2012. An addition to the tuneof Rs.85,08,293/- was made to the petitioner's income.Accordingly, a notice of demand of a sum of Rs.42,61,760/- dated18.12.2012 was also issued to the petitioner. Under thesecircumstances, the respondent issued a notice under Section 148of the Act dated 26.09.2014, seeking reopening of thepetitioner's income tax assessment for the assessment year 2010-11. The reasons for reopening of the assessment as sought for bythe petitioner and it was furnished. 5. On 13.04.2016, the petitioner wrote a letter to therespondent, seeking reasons on the basis of which thepetitioner's income tax assessment had been reopened by way ofthe above notice dated 28.03.2016 under Section 148 of theIncome Tax Act. The petitioner intimated the respondent that ithad already filed its return for the said assessment yearelectronically, and it had now re-filed the same electronicallyin response to the respondent's notice on 11.04.2016 underSection 143(2) of the Act. On 06.05.2016, the Joint Commissionerof Income Tax furnished the purported reasons on the basis ofwhich the notice under Section 148 had been issued. 6. The petitioner has stated about MB Shah Commission reportin the matter of illegal mining in the State of Odisha. It iscontended that the allegation of M/s.Indrani Patnaik hadillegally removed 3,04,568.175 Mts of Iron Ore with the help ofthe petitioner is only a surmise and not based on any objectivereasons. There is no link whatsoever brought between the allegedillegal dispatch by the Mine owner. It is contended that thepetitioner company, being a raising contractor, does not havepower to dispatch the stock, which belongs to the mine owner.The assessee company, in fact, does not maintain the Books ofAccounts pertaining to the production and dispatch of Iron Ore.Thus, the very basis for reopening of assessment is untenableand contrary to law. 7. The learned Senior counsel appearing on behalf of thewrit petitioner mainly contended that the Income Tax Tribunalhas quashed the entire proceedings on 16.01.2012 itself, morespecifically, before issuance of notice under Section 148 of theIncome Tax Act. 8. The learned Senior counsel contended that the order ofthe Tribunal was taken by way of a writ petition by the State ofOdisha in W.P.No.10219 of 2012, and the High Court of Odisha,dismissed the writ petition on 08.08.2016, confirming the orderpassed by the Tribunal. Thus, the entire issues are non-est inlaw and therefore, there cannot be any reason to believe for thepurpose of reopening of assessment as far as the AssessmentYears 2009-10 & 2010-11 are concerned. 9. The learned Senior counsel relying on the order of theTribunal, which was confirmed by the High Court in the writpetition, states that there is no escapement of income as such,in view of the orders passed by the Tribunal, which wasconfirmed by the High Court in order dated 08.08.2016. It iscontended that reopening of assessment was initiated after theorder passed by the Tribunal and therefore, the respondent hasnot even considered the findings made by the Tribunal in its order. Thus, the impugned orders are liable to be set aside. 9. The learned Senior counsel relying on the order of theTribunal, which was confirmed by the High Court in the writpetition, states that there is no escapement of income as such,in view of the orders passed by the Tribunal, which wasconfirmed by the High Court in order dated 08.08.2016. It iscontended that reopening of assessment was initiated after theorder passed by the Tribunal and therefore, the respondent hasnot even considered the findings made by the Tribunal in its order. Thus, the impugned orders are liable to be set aside. 10. The respondent filed a common counter affidavit,contending that the proceedings initiated for the AssessmentYears 2009-10 and 2010-11 was dropped vide letter dated15.03.2016 as the issues contained in the reasons recorded bythe Assessing officer was satisfactorily explained by theassessee. 11. However, the Department came to be in possession ofcertain new issues emanating from the Hon'ble Justice MB ShahCommission Report on illegal mining in the State of Odisha.Examination of the said report revealed that based on theVigilance Enquiry Report of the State Government, the Hon'bleJustice MB Shah Commission noted that there was shortage ofstock of 3,04,568.175 MT valued at Rs.182,74,09,050/- and gave afinding that the lessee, (M/s.Indrani Patnaik), with the help ofthe raising contractor M/s.Triveni Earth Movers Private Limited,the assessee, has clandestinely disposed off the materialwithout any records, for which, no Royalty and Sales tax hasbeen paid. The above referred Vigilance Inspection was conductedon 24.09.2009 and the period for which the production &dispatches analyzed and shortage of stock arrived was from May2008 to September 2009 relevant to Assessment Years 2009-10 &2010-11. As per the work order dated 24.02.2008 given byM/s.Indrani Patnaik, the raising Contractor, M/s.Thriveni EarthMovers Private Limited was entitled for 35.8% of the net salevalue as it's share of income on the above value of oredespatched, which comes to Rs.65.2 Crores for the above periodunder report. 12. In the above background, it is contended that whetherassessment of any other income would be sustainable when noaddition is possible on the issue on which the Assessing Officerhas reason to believe income chargeable to tax has escapedassessment. In order to support the said contention, the Hon'bleBombay High Court, in the case of CIT Vs. Jet Airways Limited(331 ITR 236) held that the words “and also” used in Section 147is conjunctive and cumulative and indicate that reassessmentmust be with respect to the income for which the AssessingOfficer has formed an opinion “and also” in respect of any otherincome, which comes to his notice subsequently. In view of theAmended proviso under Section 147, the Assessing Officer haswider power to reopen the assessment, if he has reason tobelieve to do so. The objections raised by the assessee wereconsidered by the Assessing Officer. Thus, the writ petition isliable to be dismissed. 13. The learned Senior standing counsel for the respondentcontended that on tracing out new materials based on the MB Shah Commission report, the Assessing Officer has reason to believethat there is an escape of income and thus, instituted actionunder Section 147 of the Act. There was a failure on the part ofthe petitioner to disclose fully and truly all material facts asenvisaged in Section 147 of the Income Tax Act, the assessmentvalidly reopened. A fresh tangible materials are identified bythe respondent are provided a cause for them to initiateproceedings for reopening of assessment. Thus, in the presentcase, enough reasons are substantiated by the respondents forthe purpose of reopening of assessment and thus, the writpetition is liable to be dismissed. 13. The learned Senior standing counsel for the respondentcontended that on tracing out new materials based on the MB Shah Commission report, the Assessing Officer has reason to believethat there is an escape of income and thus, instituted actionunder Section 147 of the Act. There was a failure on the part ofthe petitioner to disclose fully and truly all material facts asenvisaged in Section 147 of the Income Tax Act, the assessmentvalidly reopened. A fresh tangible materials are identified bythe respondent are provided a cause for them to initiateproceedings for reopening of assessment. Thus, in the presentcase, enough reasons are substantiated by the respondents forthe purpose of reopening of assessment and thus, the writpetition is liable to be dismissed. 14. The learned Senior Standing counsel with reference tothe orders of the Tribunal, which was confirmed by the HighCourt, contended that when the Assessing Officer received freshmaterials and has reason to believe, there is an escape ofincome from assessment, then he is empowered to independently gothrough the details and the materials available on record andfurther, in the present case, those details and materialsadjudicated before the Tribunal and in a writ petition are notconnected. However, even if the petitioner claims that it isconnected, it is for the petitioner to place all the materialsbefore the Assessing Officer for the purpose of adjudication.Contrarily, the Assessing Officer cannot form an unilateralopinion in respect of the issues adjudicated before the Tribunaland in a writ petition. As far as the reasons for reopeningcommunicated to the petitioner are concerned, the detailsregarding the new materials identified as well as thediscrepancies were categorically stated. However, the learnedSenior counsel appearing on behalf of the petitioner contendedthat all such informations were adjudicated by the Tribunal andthe order of the Tribunal was confirmed by the High Court. Thus,there is no cause for reason to believe that there was anescapement of income, so as to reopen the assessment. 15. In this regard, let us now consider the order passed bythe High Court of Odisha in W.P.(C).No.10219 of 2012. The writpetition was filed by the State of Odisha against the Governmentof India. What is challenged in the writ petition was that theorder dated 16.01.2012 passed by the Revisional authority underSection 30 of the Mines and Minerals (Development andRegulation) Act, 1957, whereby the order/ notice dated25.11.2010 passed under Section 21 (5) of the Act 1957 and underRule 27(5) of the Mineral Concession Rules, 1960 has beenquashed, whereby direction for payment of a certain amount foralleged breach of conditions of the mining lease, had beendirected by the State Government. Admittedly, the writpetitioner / assessee is not a party to the writ proceedings.The writ proceedings were conducted with reference to the issuesin an independent manner and the materials now relied on by the Department for reopening of the assessment has not beenadjudicated by the High Court. High Court has considered theorder passed by the Revisional authority under Section 30 of theMines and Minerals (Development and Regulation) Act, 1957 andthe rules and passed an order, dismissing the writ petitionfiled by the State of Odisha. Perusal of the entire orderreveals that, the reasons for dismissing the writ petitioncannot be directly connected with the facts and circumstancesnow relied upon by the Respondent Department for the purpose ofreopening of assessment under Section 147 of the Income Tax Act. Department for reopening of the assessment has not beenadjudicated by the High Court. High Court has considered theorder passed by the Revisional authority under Section 30 of theMines and Minerals (Development and Regulation) Act, 1957 andthe rules and passed an order, dismissing the writ petitionfiled by the State of Odisha. Perusal of the entire orderreveals that, the reasons for dismissing the writ petitioncannot be directly connected with the facts and circumstancesnow relied upon by the Respondent Department for the purpose ofreopening of assessment under Section 147 of the Income Tax Act. 16. Even in case, where certain observations made in theorder passed by the High Court of Odisha in a writ petition isin favour of the petitioner or in support of the contentions ofthe petitioner, it is left open to the petitioner to place allsuch facts, circumstances, orders and findings before theAssessing officer, while undertaking the process of assessmentand the same would not constitute a ground for quashing of theinitiation of reopening proceedings under Section 147 of theAct. Therefore, the contention of the learned Senior counsel inthis regard needs to be rejected and the writ petitioner is atliberty to place all those orders and materials before theAssessing Officer for the purpose of assessment and this Courtcannot adjudicate those facts and circumstances decided by theTribunal and the High Court in a writ petition, as the writpetitioner company itself is not a party to the proceedings northe issues for reopening raised now form part and parcel of theorder passed by the High Court in the writ petition. 17. The reasons for reopening of assessment intimated to thewrit petitioner reveals that from revised 26AS details, theassessee company has received contract receipts ofRs.5,78,10,06,904/-, on which, tax at source has been deductedto the tune of Rs.12,54,24,815/-. The assessee company claimedthe TDS of Rs.12,41,50,256/-. However, the assessee companycredited P & L account as contract receipts and sales forRs.521,79,70,864/- only. Thus, the assessee has not offeredreceipts of Rs.56,30,36,040/- for taxation, resulting inescapement of income due to failure on the part of the assesseecompany to correctly account its income. Thus, the Assessingofficer has reason to believe that income of Rs.57,97,88,686/-has escaped assessment within the meaning of Section 147 of theIncome Tax Act due to the failure on the part of the assesseecompany to disclose fully and truly all material facts necessaryfor its assessment. 18. In the case of Jayaram Paper Mills Limited, Vs.Commissioner of Income Tax, reported in [2010] 191 Taxman 38(Madras), the High Court of Madras held as follows: 18. In the case of Jayaram Paper Mills Limited, Vs.Commissioner of Income Tax, reported in [2010] 191 Taxman 38(Madras), the High Court of Madras held as follows: “6. It is now well settled that the term"escaped assessment" includes both non-assessment andunder assessment. (see Tax Officer-cum-RegionalTransport Officer vs. Durg Transport Company (Pvt) Ltd--1975 (4) SCC 43 and CIT vs. Sun Engineering Works(P) Ltd- 1992(4) SCC 363). In a long line ofdecisions, the Supreme Court has held that this court,under Article 226 of the Constitution, has power toset aside a notice under section 147 of the Income TaxAct, 1961, if the conditions precedent for theexercise of the jurisdiction do not exist.”19. Therefore, in the presence of materials on record, ifthe power under Section 147 is invoked by the competentauthority, then the authorities competent must be allowed toproceed with the reopening proceedings by following theprocedures as contemplated. High Court cannot adjudicate thedisputed facts and materials to form an opinion in a writproceedings. The High Court, under Article 226 of theConstitution of India, is empowered to scrutinize the process,through which, the decision is taken and the reasons and inconsonance with the statutory requirements, but not the decisionby itself. Thus, the scope of Article 226 of the Constitution ofIndia cannot be expanded for the adjudication of the disputedfacts and circumstances with reference to the documents,evidences produced by the respective parties and such anadjudication must be allowed to be done by the competentauthorities under the provisions of the Statutes by followingthe procedures as contemplated and by affording opportunity tothe assessee. 20. As in these writ petitions, the respondent could able toestablish that sufficient materials are available for thepurpose of reopening of assessment for the Assessment Years2009-10 and 2010-11 and thus, the respondent must be allowed toproceed with the reopening of assessment by following theprocedures as contemplated and the writ petitioner is bound toco-operate by defending their case by availing the opportunitiesto be provided under the Statute. 21. Accordingly, both the writ petitions fail and standdismissed. No costs. Consequently, connected miscellaneouspetitions are closed. Sd/- Assistant Registrar(CS III)//True Copy// Sub Assistant Registrar Kak https://hcservices.ecourts.gov.in/hcservices/ ToThe Assistant Commissioner of Income Tax,Central Circle, #3, Gandhi Road, Salem – 636 007. W.P.Nos.38185 & 38186 of 2016 LN(CO)A.SK (12.07.2021)