M/S.vestas Technology R&D Chennai Private Limited v. Assistant Commissioner Of Income Tax, Company Circle 3(2

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED :30.06.2021 CORAM THE HON'BLE MR.JUSTICE S.M.SUBRAMANIAM W.P.No.37563 of 2016andW.M.P.No.32189 of 2016 M/s.Vestas Technology R&D Chennai Private Limited,Represented by its Director – Finance,Mr.Govindaraj KolappanBlock A, 8[th] Floor, Tecci Park,No.173, Rajiv Gandhi Salai (OMR)Sholinganallur, Chennai – 600 119. ...Petitioner Vs. 1.Assistant Commissioner of Income Tax, Company Circle 3(2) 4[th] Floor, Wanaparthy Block, 121, Mahatma Gandhi Road, Chennai – 600 034. 2.Principal Commissioner of Income Tax-3, 4[th] Floor, Main Building, 121, Mahatma Gandhi Road, Chennai – 600 034. ... Respondents PRAYER : Writ Petition filed Under Article226 of theConstitution of India to issue of Writ of Certiorari, callingfor the records on the file of the first respondent and quashthe impugned order in AACV8490Q/458-V/2009-10 dated 08.09.2016along with notice issued by the first respondent under Section148 of the Act in Pan No.AACV4768P dated 25.01.2016. For Petitioner: Mr.N.V.BalajiFor Respondents: Mrs.Hema Muralikrishna Standing Standing Counsel for Income TaxO R D E R The Notice issued under Section 148 of the Income TaxAct dated 25.01.2016 and the order dated 08.09.2016 disposing of https://hcservices.ecourts.gov.in/hcservices/ the objections filed by the writ petitioner are under challengein the present writ petition 2. The petitioner is a Private Limited Company,incorporated under the Companies Act, 1956 and is a wholly ownedsubsidiary of Vestas Wind Systems A/S, a company incorporated inDenmark. 3. The petitioner filed return of income on 29.09.2009,for the Assessment Year 2009 - 10, claiming deduction underSection 10 A of the Act. The Assessing Officer issued noticeunder Section 143 (2) of the Income Tax Act on 21.09.2010followed by notice under Section 142 (1) of the Act calling forinformation. The petitioner submitted all the informations andmaterials which were scrutinized and considered by the AssessingOfficer and original assessment order was passed by theAssessing Officer on 17.04.2013 under Section 143 (3) of theIncome Tax Act. 4. While so, surprisingly notice under Section 148 ofthe Income Tax Act was issued on 25.01.2016. The petitioner videletter dated 25.02.2016 sought for the reasons for reopening ofassessment. The respondents furnished the reasons for reopeningof assessment in proceedings dated 29.04.2016. Thereafter on15.06.2016, the petitioner submitted its objections in detailand the said objections were disposed of by the respondent, videletter dated 08.09.2016. 5. The learned counsel for the petitioner strenuouslycontended that there is no reason to believe for reopening ofassessment, in view of the fact that the judgment relied on bythe Assessing Officer for reopening of assessment is theTribunal's judgment and the issues as raised in the reasons aredecided by the Bombay High Court, in the case of CIT vs. GemPlus Jewellery India Limited, reported in 2011 330 ITR 175,which reads as follows: “On this position, in the present case it cannotbe disputed that the net consequence of the disallowance of the employer's contribution is that thebusiness profits have to that extent been enhanced.There was, as we have already noted, an add back bythe Assessing Officer to the income. All profits ofthe unit of the assessee have been derived frommanufacturing activity. The dis allowance of theprovident fund / ESIC payments has been made becauseof the statutory provisions section 43 B in the caseof the employee's contribution and section 36 (v) readwith section 2 (24) (x) in the case of the employee'scontribution which has been deemed to be the income ofthe assessee. The plain consequence of the dis “On this position, in the present case it cannotbe disputed that the net consequence of the disallowance of the employer's contribution is that thebusiness profits have to that extent been enhanced.There was, as we have already noted, an add back bythe Assessing Officer to the income. All profits ofthe unit of the assessee have been derived frommanufacturing activity. The dis allowance of theprovident fund / ESIC payments has been made becauseof the statutory provisions section 43 B in the caseof the employee's contribution and section 36 (v) readwith section 2 (24) (x) in the case of the employee'scontribution which has been deemed to be the income ofthe assessee. The plain consequence of the dis allowance and the add back that has been made by theAssessing Officer is an increase in the businessprofits of the assessee. The contention of the revenuethat in computing the deduction under section 10 A theaddition made on account of the dis allowance of theprovident fund / ESIC payments ought to be ignoredcannot be accepted. No statutory provision to thateffect having been made, the plain consequence of thedis allowance made by the Assessing Officer mustfollow. The second question shall accordingly, standanswered against the revenue and in favour of theassessee.” 6. When the similar issue relating to dis-allowancewere decided by the Bombay High Court, there is no reason torely on the judgment of the Tribunal by invoking Section 147 ofthe Income Tax Act and thus, the very basis for reopening ofassessment is unsustainable and liable to be set aside. 7. The learned counsel for the petitioner furthercontended that the objections in detail with reference to thematerials regarding dis-allowance were dealt with by theAssessing Officer, while passing an original order ofassessment. Thus, the objections were not considered nor anyfindings are given in the impugned order. For all these reasons,the impugned order is liable to be set aside. 8. The learned Senior Standing Counsel appearing forthe respondents disputed the said contentions by stating thatwhere principles with reference to the facts are applicable, inrelation to the judgment referred by either of the parties, arelooked into by the Assessing Officer, while proceeding with thereassessment, this Court cannot go into such disputed factsregarding the materials scrutinized and the informations ordetails now available with the Assessing Officer for reopeningof Assessment. All such details are to be gone into whileundertaking the process of reassessment and now it is in thestage of disposing of the objections and therefore, thepetitioner has to cooperate for reassessment. 9. This Court is of the considered opinion that thedisputed facts and circumstances based on the documents andevidences cannot be adjudicated in a writ proceedings underArticle 226 of the Constitution of India. The facts relevant andthe principles laid down in a particular judgment are to beconsidered while adjudication and this Court cannot enter intoventure of adjudication of those disputed facts. However, thefact remains that the reasons are communicated and the reasonswould show that the expenditures are expressly disallowed underthe deeming fiction created by the penal Section of IT Act, on https://hcservices.ecourts.gov.in/hcservices/ account of infringement of law. By adding back the same item,the eligible profits got increased by these disallowances,resulting in excess claim. It is well settled principle that thedeeming fictions created under any provisions of the IT Act,cannot be imported to a beneficial provision of the Act as heldin the case of DCIT vs. Rameshbhai C Prajapati 2013 140 ITO 488(AHD). Therefore, the above dis allowance is required to beadded back to the taxable income. https://hcservices.ecourts.gov.in/hcservices/ account of infringement of law. By adding back the same item,the eligible profits got increased by these disallowances,resulting in excess claim. It is well settled principle that thedeeming fictions created under any provisions of the IT Act,cannot be imported to a beneficial provision of the Act as heldin the case of DCIT vs. Rameshbhai C Prajapati 2013 140 ITO 488(AHD). Therefore, the above dis allowance is required to beadded back to the taxable income. 10. With reference to the above said reasons, variousfacts, circumstances and intricacies in the documents are to bescrutinized by the Competent Authority and such an exercisecannot be done by the High Court. 11. The disposal of the objections in the impugnedorder reveals that mere production of account books or otherevidence from which material evidence could with due diligencehave been discovered by the AO does not necessarily amount to adisclosure within the meaning of the first proviso to Section147 - “necessary” - 79 ITR 582 (SC). It is to further to bestated here that “It is possible with due diligence theAssessing Officer would have ascertained this fact at the timeof original assessment also, but in view of the explanation (1)it does not mean that there was no default on the part of theassessee”. The assessee can not try to take shelter under theexception provided by the above proviso to Sec.147 that where anassessment order u/s 143 (3) has been completed, no action afterthe expiry of four years from the end of the assessment year canbe taken. 12. With the above observations, the writ petitionstandsdismissed.Nocosts.Consequently,connectedmiscellaneous petition is closed. Sd/- Assistant Registrar //True Copy// Pns Sub Assistant Registrar To 1.The Assistant Commissioner of Income Tax, Company Circle 3(2) 4[th] Floor, Wanaparthy Block, 121, Mahatma Gandhi Road, Chennai – 600 034. Company Circle 3(2) 4[th] Floor, Wanaparthy Block, 121, Mahatma Gandhi Road, Chennai – 600 034. 2.The Principal Commissioner of Income Tax-3, 4[th] Floor, Main Building, 121, Mahatma Gandhi Road, Chennai – 600 034. +1cc to Ms.Hema Muralikrishnan, Standign Counsel, S.R.No.30123+1cc to Mr.N.V.Balaji, Advocate, S.R.No.20172 W.P.No.37563 of 2016 andW.M.P.No.32189 of 2016 UM(CO)SB(03/08/2021)