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.No.10846 of 2016 and W.M.P.Nos.9468 & 9469 of 2016 and W.M.P.Nos.23278 & 23279 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 vs 1.The Assistant Commissioner of Income Tax, Central Circle, #3, Gandhi Road, Salem – 636 007. 2.The Deputy Commissioner of Income Tax, Central Circle, #3, Gandhi Road, Salem – 636 007. 3.The Deputy Commissioner of Income Tax, Circle - 1 Circle - 1 3, Gandhi Road, Salem – 636 007. ..Respondents 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/2008-09, dated 23.02.2016, and to quash the same,and to consequently forbear the respondents or any of theirsubordinates, agents or any other person claiming under the https://hcservices.ecourts.gov.in/hcservices/ respondents, from in any manner re-assessing the petitioner'sincome for the assessment year 2008-09 under Section 147 of theIncome Tax Act, 1961. The writ on hand is filed, challenging the proceedings dated23.02.2016, passed by the Assistant Commissioner of Income Tax,disposing of the objections raised by the petitioner against theinitiation of action under Section 147 of the Income Tax Actwith reference to the Assessment Year 2008-09. 2. The petitioner is a Company, registered under CompaniesAct, 1956 and it is engaged in the business of iron ore miningservices, transportation and handling of iron ore and limestone,quarrying of blue metals boulders and sale of blue metals. Thepetitioner company filed its return of income on 30.09.2008,declaring a total income of Rs.117,55,95,560/- and the saidreturn was processed and intimation under Section 143(1) wasissued from the respondents. The case of the petitioner wasselected for scrutiny and notice under Section 143(2) was issuedto the petitioner on 23.09.2009. In the said intimation notice,it was stated that income tax computed at higher rate againstthe actual rate and actual rate, and credit for tax deducted atsource was given only to the extent of Rs.8,51,06,508/- asagainst the actual TDS of Rs.9,04,19,747/-, which was claimed bythe petitioner. The petitioner on 05.04.2010, had filed arectification application before the 2[nd] respondent to rectifythe same. The 2[nd] respondent passed an order under Section 154 ofthe Income Tax Act on 28.12.2010 and a revised demand was issuedto the petitioner, reducing the total demand to the tune ofRs.38,05,14,782/-, Subsequently, the Department passed an orderunder Section 143(3), wherein again TDS was given only to theextent of Rs.8,51,06,508/-. On 20.07.2011, the petitioner filedanother rectification petition before the Learned DeputyCommissioner of Income Tax (DCIT) to rectify the order passedunder Section 154 for Assessment Year 2008-09, it was submittedby the petitioner that since the TDS amount of Rs.55,65,195/-had not been taken into account, interest levied under Section234B would be reduced and hence, no tax was payable to thepetitioner. 3. The respondent Department on 20.02.2015, issued a noticeunder Section 148 of the Income tax Act, to reopen thepetitioner's income tax assessment for the Assessment Year 2008-09. It is contended that the said notice was issued beyond fouryears and after the end of relevant Assessment Year. On21.04.2015, the petitioner wrote a letter to the DCIT, seekingthe reason for reopening of the impugned Assessment Year. On12.10.2015, the reasons were furnished by the DCIT forreopening. The petitioner has stated that he has disclosed fullyand truly all the material particulars during the originalAssessment proceedings. Thus, the petitioner on 23.11.2015,filed a detailed written submission, objecting to the reopeningof its assessment under Section 147. However, the DCIT passedthe impugned order on 23.02.2016, rejecting the explanations andobjections given by the petitioner. Thus, the petitioner isconstrained to move the present writ petition. 4. The respondents filed a counter affidavit stating thatorder, considering the objections of the petitioner, is not afinal order and it is just one stage in the adjudication processand the writ petition is pre-mature as the Department is yet topass the Assessment order and therefore, the petitioner has aright of appeal. 5. The assessee's case was selected for scrutiny under CASSand assessment under Section 143(3) was completed on 31.12.2010by Additional Commissioner of Income Tax, Range I, Salem. Thecases are selected through this process to investigate thespecific issues. The contention of the petitioner that theassessment under Section 143(3) was concluded on the basis ofthe detailed examination of the various Books of Accounts andother informations provided by the petitioner's own statements,is not supported by any evidence. Mere production of Books ofAccounts by the assessee cannot tantamount to full and truedisclosure as per the explanation to the Proviso to Section 147.Regarding TDS Credit, the same is given only as per the creditavailable in the OLTAS (Online Tax Accounting System), whichreflects the correct TDS available to the petitioner at thegiven point of time. The assessment under Section 143(3) wascompleted on 31.12.2010. The notice under Section 148 was issuedon 20.02.2015 in accordance with the provisions of Section 147of the Income Tax Act. Regarding the delay for furnishing thereasons are concerned, the movement of records from thetransferor officers to the transferee officers was the reasonfor the delay in furnishing of reasons by the Department. Therespondents contended that the powers given to the AssessingOfficer under the amended provisions of Section 147 with effectfrom 01.04.1989 are wide. Therefore, in the event of any reasonto believe that income has escaped assessment, it is enough to confer jurisdiction to reopen the assessment. The AmendedSection provides that the Assessing officer may assess, orreassess such income (believed to have escaped assessment) andalso any other income chargeable to tax, which has escapedassessment and which comes to the notice of the AssessingOfficer. Subsequently in the course of the proceedings underSection 147 of the Act. Explanations 1 to 3[rd] proviso isabundantly clear to indicate that mere production before theAssessing officer of account books or other evidence from whichmaterial evidence could with due diligence have been discoveredby the Assessing Officer will not necessarily amount todisclosure. The records do no show any opinion formed by theAssessing Officer during the course of original assessmentproceedings on the issues, which have been mentioned in thereasons recorded for reopening of the assessment under Section147. In fact, no opinion had been formed by the AssessingOfficer during the course of the original assessment on theissues under consideration. Thus, it is to be construed as newmaterial traced out for the purpose of reopening of assessment.The respondents reiterated that the informations, which isstated to be available cannot be stated to be fully and trulydisclosed by the petitioner. Be that as it may, the assessmentwas reopened under Section 147 as the Assessing Officer had'reason to believe' that income chargeable to tax had escapedassessment. Thus, the reopening has been done as per thestatutory provisions of the Income Tax Act. The writtensubmissions had been duly and carefully considered by theAssessing officer. 6. The assessment reopened in the case of the petitioner asthere was huge difference between data reflected in Form 26ASand assessee's statement. Form 26AS is constantly updated fromtime to time. The figures reflected in Form 26AS may increase ordecrease based on TDS statements filed by the deductors. InForm 26AS, rate of TDS deducted and total payments made to thedeductee are vital. Although the amount of TDS credited inassessee's account may vary according to the TDS statementsfiled by the deductor, the amount of gross receiptsreceived/receivable by the assessee during the relevantfinancial year is available with the assessee as it follows themercantile system of accounting. 7. The assessee had credited in his P & L account income ofRs.377,87,93,055/- only out of the total receipts ofRs.419,47,44,777/-. Thus, there is a huge difference inassessee's submission before the Assessing Officer during thecourse of assessment and the figures reflected in form 26AS.Thus, it is evident that the petitioner did not submit the correct figures before the Assessing Officer. The facts came tothe knowledge of the Assessing Officer, when petitioner filedthe rectification application and form 26AS was downloaded bythe Assessing Officer. Thus, there is failure on the part of theassessee to disclose fully and truly all the materials beforethe Assessing Officer and the reopening of the assessment is inorder. As the assessee has not made full and true disclosureduring the assessment proceedings under Section 143(3), thereassessment can be initiated after the expiry of 4 years fromthe end of the relevant assessment year. The assessment isreopened in the case of the petitioner for this assessment year,after getting the prior approval of the Commissioner of IncomeTax, Salem as per the relevant provisions. correct figures before the Assessing Officer. The facts came tothe knowledge of the Assessing Officer, when petitioner filedthe rectification application and form 26AS was downloaded bythe Assessing Officer. Thus, there is failure on the part of theassessee to disclose fully and truly all the materials beforethe Assessing Officer and the reopening of the assessment is inorder. As the assessee has not made full and true disclosureduring the assessment proceedings under Section 143(3), thereassessment can be initiated after the expiry of 4 years fromthe end of the relevant assessment year. The assessment isreopened in the case of the petitioner for this assessment year,after getting the prior approval of the Commissioner of IncomeTax, Salem as per the relevant provisions. 8. The respondents relied in comparison with Form 26AS andthe rectification application filed by the petitioner on20.07.2011, found that there is a huge mismatch in receiptsappearing in 26AS vis-a-vis receipts credited in P & L Account.Thus, the Assessing Officer had tangible material to reopen theincome tax assessment and the same was legally done as per theprovisions of Section 147 of the Income Tax Act by issuing anotice under Section 148 of the Income Tax Act. 9. Further, the Assessing officer came into possession ofcertain other information which also lead to the 'belief' thatincome chargeable to tax had escaped assessment. As per the MBShah Commission's report (Annexure-D to Report-I of Volume -I)has tabulated the list of 146 lessees who were involved illegaland excess production of iron ore during 2000-01 to 2009-10. Itis reported that the State Government of Odisha issued showcause notices to various parties for recovery of mineral value.KJS Ahulwalia, one of the lessese who employed assesee asraising contractor, has been issued for recovery ofRs.2022,00,72,213/- for the above said period. The notice hasbeen issued for excess production which was produced illegallyand not disclosed to appropriate authorities. Since assessee isdoing extraction work for the lessee, the contract chargescorresponding to the value of excess production was believed tohave been suppressed. Hence, the Assessing officer has rightlyreopened the assessment. 10. In view of the facts and circumstances, the respondentsprayed for the dismissal of the writ petition. 11. The learned Senior counsel appearing on behalf of thewrit petitioner made a submission that the escaped discrepancy https://hcservices.ecourts.gov.in/hcservices/ with reference to Form 26AS regarding TDS, the petitionercompany itself filed a rectification application under Section154 of the Act on 20.07.2011. The said rectification applicationwas filed in order to rectify the mistakes occurred andtherefore, the Assessing Officer ought not to have rushed to aconclusion that the petitioner has not disclosed true and fullincome. The petitioner, when themselves identified certainerrors and submitted a rectification application twice, thenthere is no reason to believe that the Department has formed anopinion for reopening of assessment. 12. The learned Senior counsel contended that the noticeissued under Section 148 of the Income Tax Act is vague and nomaterial reasons are available for the purpose of reopening ofassessment. Therefore, the very initiation is perverse and notin consonance with the mandatory requirement to be complied withunder Section 147 of the Income Tax Act. 12. The learned Senior counsel contended that the noticeissued under Section 148 of the Income Tax Act is vague and nomaterial reasons are available for the purpose of reopening ofassessment. Therefore, the very initiation is perverse and notin consonance with the mandatory requirement to be complied withunder Section 147 of the Income Tax Act. 13. Secondly, the learned Senior Counsel pointed out that asper MB Shah Commission's report (Annexure-D to Report-I ofVolume -I) has tabulated the list of 146 lessees, who wereinvolved illegal and excess production of iron ore during 2000-01 to 2009-10. It is reported that the State Government ofOdisha, issued show cause notices to various parties forrecovery of mineral value. KJS Ahulwalia, one of the lessee, whoemployed assesee as raising contractor, has been issued forrecovery of Rs.2022,00,72,213/- for the above said period. Thenotice has been issued for excess production which was producedillegally and not disclosed to appropriate authorities. Withreference to the said allegations of the Department, the learnedSenior counsel made a submission that regarding the illegalmining activity in the State of Odisha, the petitioner isunconnected and he was a raising contractor and in respect ofhis business transactions, he made full and true disclosure.Thus, the petitioner is no way connected with the illegal miningand as a raising contractor, he has performed his job andsubmitted the materials, which all are true and full for thepurpose of assessment. Thus, the impugned order is liable to bescrapped. 14. The learned Senior counsel mainly raised objectionsregarding the alleged mismatch with reference to thediscrepancies identified for forming an opinion in the matter ofescaped income. Mere reference made with Form 26AS, would not bethe sufficient factor for the purpose of reopening of assessmentas the petitioner themselves filed an application forrectification under Section 154 of the Act and therefore, they https://hcservices.ecourts.gov.in/hcservices/ have made true and full disclosure. Thus, the very reason tobelieve as contemplated has not been met with and in fact, itamounts to change of opinion by the competent authority. As faras the MB Shah Commission report is concerned, the illegalmining to a larger scale was identified and the petitioner isno way connected and he being a raising contractor of one of thelessee namely KJS Ahulwalia, he has submitted his income for thepurpose of assessment and thus, the other reasons stated is alsoincorrect and the same would not constitute any reason tobelieve for the purpose of reopening of assessment. 15. The learned Senior standing counsel appearing on behalfof the respondents objected the contentions seriously by statingthat as per the Amended provisions of Section 147 with effectfrom 01.04.1989, the Power of the Assessing Officer is widerenough regarding reopening the assessment, if any new materialsare identified. Thus, if the Assessing officer has reason tobelieve that the income has escaped assessment, that issufficient to confer jurisdiction to reopen the assessment.Explanation 1 to third Proviso to Section 147 is abundantlyclear to indicate that mere production before the Assessingofficer of account books or other evidence from which materialevidence could with due diligence have been discovered by theAssessing Officer will not necessarily amount to disclosure.Thus, the Assessing officer is vested with the power of proceedwith the reopen in the event of any new informations ormaterials and there is a reason to believe. 16. Regarding the rectification application filed by thepetitioner assessee on 20.07.2011, the learned Senior standingcounsel contended that the information in Form 26AS, which is astatement of TDS deducted and deposited was itself was not usedas a reason for reopening of the assessment. It may not be outof place to mention that this observation was made from therectification petition filed by the petitioner on 20.07.2011,claiming additional credit for tax deduction, albeitcorresponding income receipts had not appeared in the Profit &Loss Account filed by the petitioner along with the return ofincome. Thus, the Assessing officer disposed off the objectionsof the petitioner against the reopening of the assessment underSection 147 of the Income Tax Act, after carefully consideringthe merits of these factors. The said belief has been formed bythe Assessing Officer on the income chargeable to tax had beenescaped assessment based on the information, which came to lightduring the process of Section 154 rectification filed by thepetitioner. Thus, there is a valid reason for the purpose ofreopening of assessment and the informations provided andevidences produced by the petitioner / assessee, cannot beconstrued as full and true and therefore, the petitioner has toco-operate for the reassessment proceedings for the Assessment Year 2008-09, enabling the authorities to adjudicate and passreassessment orders. 17. Considering the arguments, this Court is of theconsidered opinion that the scope of Section 147 of the IncomeTax Act are unambiguous. Reopening of Assessment under Section147 within four years and beyond four years, but within 6 yearsare well enumerated in the provision itself. Thus, the case ofthe petitioner falls under the category of beyond four years,but within six years as the Assessing officer found that thedisclosure made by the assessee was not full and true and thepetitioner has not submitted all material facts necessary forthe assessment for the relevant year. This apart, in the presentcase, the respondents have culled out certain factors, based onthe rectification application filed by the petitioner underSection 154 of the Act. Mismatching found with reference to Form26AS, also a ground to reason to believe. The Assessing Officerhaving found discrepancies and amount involved are mismatchingand there are huge difference with reference to the incomedisclosed and the income escaped from assessment, then theproceedings under Section 147 of the Income Tax Act wasinitiated and 148 Notice was issued and reasons for initiatedare also furnished to the petitioner. 18. The learned Senior Standing counsel appearing on behalfof the respondents, relying on Explanation 1 to Section 147,made a submission that the informations and materials providedby the assessee in the case will not necessarily amount todisclosure within the meaning of Proviso to Section 147.Further, Explanation 1, in clear terms, contemplates thatproduction before the Assessing officer of account books orother evidence from which material evidence could with duediligence have been discovered by the Assessing Officer will notnecessarily amount to disclosure within the meaning of theforegoing proviso. 19. In the present case, the learned Senior standing counselappearing on behalf of the respondents relied on the TabularColumn, which they have extracted in ground (f) of the counteraffidavit filed by the respondents, which reads as under: “F. The reasons recorded for reopening of theassessment u/s.147 of IT Act are elaborate and clearlyshow that the petitioner has not made a full and truedisclosure of all materials facts required. A part ofthe reasons recorded which show that there was afailure on the part of the petitioner to disclose fullyand truly all material facts is extracted from thereasons recorded and reproduced below: 19. In the present case, the learned Senior standing counselappearing on behalf of the respondents relied on the TabularColumn, which they have extracted in ground (f) of the counteraffidavit filed by the respondents, which reads as under: “F. The reasons recorded for reopening of theassessment u/s.147 of IT Act are elaborate and clearlyshow that the petitioner has not made a full and truedisclosure of all materials facts required. A part ofthe reasons recorded which show that there was afailure on the part of the petitioner to disclose fullyand truly all material facts is extracted from thereasons recorded and reproduced below: “.......Similarly parties from whom assesseestated to have received contract charges but notappearing in 26AS are tabulated below:S.No &As per Assessee'sAs per 26AS Deductorsubmission viderectificationapplication dated20.07.2011AmountAmount ofAmountAmountCreditedTDSCreditedof TDS1Tata127089680287985216678156377927SteelLimited2Topworth18047097408948NilSteelPrivate3Rajesh4472001101336NilJaiswal& Co4Rashmi16852646381391NilCementLimited5Shree5818292131843NilVirangana Steels6Sunflag5102596105113NilIron&SteelLtd7Tata72234116369NilSpongeIronLimitedTotal17,81,04,65340,24,852 20. In the case of Jayaram Paper Mills Limited, Vs.Commissioner of Income Tax, reported in [2010] 191 Taxman 38(Madras), it is held as follows: “6. It is now well settled that the term "escapedassessment" includes both non-assessment and underassessment. (see Tax Officer-cum-Regional TransportOfficer 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 of decisions, the Supreme https://hcservices.ecourts.gov.in/hcservices/ Court has held that this court, under Article 226 ofthe Constitution, has power to set aside a notice undersection 147 of the Income Tax Act, 1961, if theconditions precedent for the exercise of thejurisdiction do not exist.” 21. Thus, it is sufficient if there are certain additionalmaterials available, which satisfies requirements of Section 147of the Act, then it is sufficient for the Assessing officer, hasreason to believe for the purpose of reopening of assessment. 22. In the present case, let us now consider the reasons forissuance of notice under Section 148 dated 20.02.2015 for theAssessment Year 2008-09. It is seen from the Form 26ASdownloaded that assessee was in receipt of income ofRs.419,47,44,777/-, whereas the total amount credited in P & Laccount is Rs.387,30,50,376/-. In this context, the Assessingofficer relied on the breakup details. In view of largediscrepancy and mismatch, the Assessing officer has reason tobelieve that income of Rs.41,59,51,722/- has escaped assessmentwithin the meaning of Section 147 due to the failure on the partof the assessee to disclose all and true material factsnecessary for assessment. In fact, the rectification applicationdated 20.07.2011, submitted by the assessee company was alsoconsidered by the Assessing Officer and the Assessing Officerverified the informations provided in the rectificationapplication and found that very Form 26AS that was downloaded inview of assessee's application for the rectification, it wasfound that there was huge mismatch in receipts appearing in26AS vis-a-vis receipts credited in P & L Account. Therefore,the Assessing Officer has reason to believe that the income ofthe assessee as escaped assessment and decided to reopen theassessment. This apart, the Assessing officer relied on the MBShah Commission, set up by the Government of India to enquireinto the cases of illegal mining in the State of Odisha. Thepetitioner/assessee was a raising contractor, employed by oneKJS Ahulwalia, who was a lessee found in the Shah Commissionreport. For all these reasons, the Assessing officer has reasonto believe for reopening of assessment. 23. The respondents have placed on record the materials andinformations and evidences that gave them reason to believe thatthere is escapement of income. 24. The grounds placed before this Court for reopening ofassessment is “sufficient reason” to believe that there isescapement of income and the “sufficiency” of the reasons cannotbe gone into by the High Court in a writ proceedings underArticle 226 of the Constitution of India. The contents of thebreakup details, evidences, documents, invoices etc., have to be adjudicated during the course of hearing and certainly, not bythe High Court in a writ proceedings. Thus, there is noillegality or irregularity as such, which can be attached to thereasoning of the competent authority for arriving a conclusionthat there is a reason to believe for reopening of assessment.Thus, the grounds raised in the present writ petition areneither candid nor convincing and the petitioner has to co-operate with the Assessing Officer in the reassessmentproceedings by availing the opportunities to be provided ascontemplated under the Statute. 25. Thus, the writ petition is devoid of merits and standsdismissed. No costs. Consequently, connected miscellaneouspetitions are closed. Sd/- Assistant Registrar(CS III) //True Copy// Sub Assistant Registrar KakTo 1.The Assistant Commissioner of Income Tax, Central Circle, #3, Gandhi Road, Salem – 636 007.2.The Deputy Commissioner of Income Tax, Central Circle, #3, Gandhi Road, Salem – 636 007.3.The Deputy Commissioner of Income Tax, Circle - 1 #3, Gandhi Road, Salem – 636 007.+1CC to Mr.A.P.Srinivas, Advocate, Sr.No.25394+1CC to Mr.Arunkarthik Mohan, Advocate, Sr.No.25279W.P.No.10846 of 2016LN (CO)A.SK (12.07.2021)