Pandiyan Paper Company,Old v. The Income Tax Officer,Ward - 1(1),Income Tax Office

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED : 01.04.2022CORAM THE HONOURABLE MR.JUSTICE R.MAHADEVANANDTHE HONOURABLE MR.JUSTICE J.SATHYA NARAYANA PRASAD WRIT APPEAL NO.831 OF 2022ANDC.M.P.NO.5612 OF 2022 Pandiyan Paper Company,Old No.132-A, New No.298,1[st] Agraharam, Salem - 636 001. ... Appellant Versus The Income Tax Officer,Ward - 1(1),Income Tax Office,No.3, Gandhi Road, Salem - 636 007.... Respondent PRAYER:- Appeal filed under Clause 15 of Letters Patent against theorder passed by this Court in W.P.No.186 of 2022, dated10.01.2022. PRAYER IN W.P.NO.186 OF 2022:- Writ Petition filed under Article 226 of Constitution ofIndia, for issuance of a Writ of Certiorari calling for therecords of the respondent dated 30.03.2021 in DIN:ITBA/AST/S/148/2020-2021/1031908779(1) issued under Section 148 of theIncome Tax Act, for the assessment year 2014-2015 inPAN:AAGFP4598J and quash the same. For Appellant :Mr.R.JanakiramanFor Respondent : Mr.A.P.SrinivasSenior Panel Counsel https://hcservices.ecourts.gov.in/hcservices/ [Judgment of the Court was delivered by R.MAHADEVAN,J] This Writ Appeal is directed against the order dated10.01.2022 passed by the learned Judge in W.P.No.186 of 2022filed by the appellant herein. 2. The appellant company is a firm engaged in the businessof wholesale trading of paper products and stationeries. Theyfiled their return of income on 25.11.2014 for the assessmentyear 2014-15, declaring a total income of Rs.9,31,000/-. Onscrutiny of the return, notices dated 28.08.2015 and 07.04.2016were issued under Section 143 (2) of The Income Tax Act (inshort, “the Act”) calling upon the appellant to produce certainmaterial evidence for the said assessment year. The appellantsubmitted their reply along with all material evidence beforethe authority and on consideration of the same, the respondentcompleted the assessment under Section 143(3) of the Act,accepting the return of income filed by the appellant, videorder dated 07.10.2016. 3. While so, after five years, the respondent issued anotice dated 30.03.2021 to the appellant under Section 148 ofthe Act for re-opening the assessment on the ground that certainincome chargeable to tax for the assessment year 2014-15 hasescaped assessment. In response, the appellant filed theirreturn of income on 16.04.2021 admitting the same income ofRs.9,31,100/- and also requested the respondent to furnish thereasons for reopening the assessment. Accordingly, therespondent uploaded in the ITBA portal on 09.07.2021 the reasonsfor re-opening the assessment. Upon noticing the same, theappellant by its letter dated 12.07.2021 requested therespondent to drop such proceedings initiated under section 148of the Act. Thereafter, challenging the notice issued by therespondent on 30.3.2021, the appellant filed a writ petition inW.P.No.17262 of 2021 seeking to quash the same on the groundthat the re-opening of the assessment is a clear case of changeof opinion on the part of the officer since the originalassessment order under Section 143(3) was passed only afterconsidering all the materials available on record. 4. By the order 18.08.2021, the learned Judge dismissed theWrit Petition holding that it is pre-mature as the re-assessmentproceedings are yet to culminate in a speaking order on theaspect of jurisdiction and the reply of the appellant dated12.07.2021 objecting to the reopening is yet to be considered bythe respondent. Therefore, the learned Judge, while dismissingthe writ petition, directed the respondent to hear the appellant and pass orders on the objections dated 12.07.2021 within aperiod of four weeks. It was further observed that assessment,if any, would be taken up subject to conclusion on the aspect ofjurisdiction. 4. By the order 18.08.2021, the learned Judge dismissed theWrit Petition holding that it is pre-mature as the re-assessmentproceedings are yet to culminate in a speaking order on theaspect of jurisdiction and the reply of the appellant dated12.07.2021 objecting to the reopening is yet to be considered bythe respondent. Therefore, the learned Judge, while dismissingthe writ petition, directed the respondent to hear the appellant and pass orders on the objections dated 12.07.2021 within aperiod of four weeks. It was further observed that assessment,if any, would be taken up subject to conclusion on the aspect ofjurisdiction. 5. Pursuant to the aforesaid order dated 18.08.2021 made inW.P.No.17262 of 2021, the respondent passed an order dated15.12.2021, rejecting the objections filed by the appellant byobserving that action under section 147 was validly initiatedafter obtaining necessary approval from the prescribed authorityas provided in the Act; the reopening of the assessment undersection 147 for the year 2014-15 was very much within the legalprovisions envisaged by the said sections of the Income Tax Act,1961; and the assessee's claim that the reopening was bad inlaw, does not have any ground. Aggrieved by the order ofrejection dated 15.12.2021, the appellant filed W.P.No.186 of2022, which was disposed of, by the learned Judge on 10.01.2022.For better appreciation, the relevant portion of the same isextracted below: '15. In this case the assessment was madepursuant to returns filed under Section 139 of theIT Act. The scrutiny assessment passed undersection 143(3) of the Income Tax Act was based onthe information in the returns. Whether there wasa suppression of facts or not may be decided inthe proceedings under section 148 of the IT Act.The impugned order has merely justified the reasonsfor reopening of the assessment. It cannot be saidthat the respondent has come to a definiteconclusion as to whether indeed the case made outfor recomputing the income based on the reasonsgiven and the observations in the impugned order. 16. It is still open for the petitioner to givea proper explanation/reason as to why theassumption of jurisdiction under section 148 of theIT Act was erroneous both on the facts and on thelaw. 17. In view of the above, I am not inclined tointerfere with the impugned order over ruling theobjection of the petitioner. Liberty is howevergiven to the petitioner to participate in theproceedings before the respondent by filingsuitable reply for the respondent to passappropriate reassessment order in accordance withlaw and on merits. 18. It is made clear that the observation inthe impugned order is only for disposing theobjection of the petitioner against reopening thecompleted assessment. 19. Ultimately, the issue will have to bedecided on merits. It is for the petitioner to fileappropriate reply/representation explaining thereason as to why the completed under section 143(3) of the IT Act on 07.10.2016 deserves to beconfirmed. 20. Under these circumstances, the writpetition filed by the petitioner is disposed. Therespondent is directed to complete the proceedingswithin a period of three months from the date ofreceipt of a copy of this order.” 18. It is made clear that the observation inthe impugned order is only for disposing theobjection of the petitioner against reopening thecompleted assessment. 19. Ultimately, the issue will have to bedecided on merits. It is for the petitioner to fileappropriate reply/representation explaining thereason as to why the completed under section 143(3) of the IT Act on 07.10.2016 deserves to beconfirmed. 20. Under these circumstances, the writpetition filed by the petitioner is disposed. Therespondent is directed to complete the proceedingswithin a period of three months from the date ofreceipt of a copy of this order.” 6. Mr.R.Janakiraman, learned counsel appearing for theappellant submitted that adherence to the mandate of FirstProviso to Section 147 is compulsory and the Department is notdischarging its onus under this proviso which only points tolack of apparent jurisdiction. Though the same ground was raisedin the earlier W.P.No.17262 of 2021 as well as in the presentwrit petition, the learned Judge did not consider thejurisdictional issue. On the other hand, it was observed in para14 of the order dated 10.01.2022 that there are several disputedquestions of facts, which cannot be decided in a summaryproceedings under Article 226 of Constitution of India; and inpara 16, it was further observed that it is still open for theappellant to give a proper explanation/reason as to why theassumption of jurisdiction under section 148 of the IT Act waserroneous both on the facts and on the law. The learned counselfurther submitted that though the appellant has submitted theirobjections, the respondent, instead of appreciating the same ina proper perspective, rejected the same by order dated15.12.2021, which is erroneous and contrary to law. In supportof his contentions, the learned counsel placed reliance on thejudgment of the Apex Court in Calcutta Discount Company Limitedv. Income-Tax Officer, Companies District I, Calcutta andanother reported in 1960 (11) TMI 8 – Supreme Court, wherein,it is held as follows; “It must, therefore, be held that the Incometax Officer who issued the notices had not beforehim any non-disclosure of a material fact and sohe could have no material before him for believingthat there had been any material non-disclosure byreason of which an under-assessment had takenplace. We are, therefore, bound to hold that theconditions precedent to the exercise ofjurisdiction under section 34 of the Income-tax Actdid not exist and the Income-tax Officer hadtherefore no jurisdiction to issue the impugnednotices under section 34 in respect of the years1942-43, 1943-44 and 1944-45 after the expiry offour years.” By placing reliance on the above decision, it is submitted thatin the case of appellant, the reasons recorded did not discloseany fresh materials at the hands of the assessing officer andthere is obviously lack of jurisdiction under proviso to Section147 of the Act. Thus, the learned counsel prayed for allowingthe appeal by setting aside the orders passed by the learnedJudge as well as the assessing officer. We are, therefore, bound to hold that theconditions precedent to the exercise ofjurisdiction under section 34 of the Income-tax Actdid not exist and the Income-tax Officer hadtherefore no jurisdiction to issue the impugnednotices under section 34 in respect of the years1942-43, 1943-44 and 1944-45 after the expiry offour years.” By placing reliance on the above decision, it is submitted thatin the case of appellant, the reasons recorded did not discloseany fresh materials at the hands of the assessing officer andthere is obviously lack of jurisdiction under proviso to Section147 of the Act. Thus, the learned counsel prayed for allowingthe appeal by setting aside the orders passed by the learnedJudge as well as the assessing officer. 7. Mr.A.P.Srinivas, learned Senior Panel Counsel submittedthat the original assessment order was passed under section 143(3) of the Act dated 07.10.2016, but later, on scrutiny ofrecords, it was found that the amount debited by the appellantto the tune of Rs.3,71,782/- towards P&L account claiming priorperiod expenses was disallowable and it has to be brought totax. Besides this, an amount of Rs.13,03,703/- towards interestexpenditure paid to the relatives deposit loans was disallowableas it was found that no interest had been charged for the loanreceived from the firm by the partner. Therefore, the case wasreopened under Section 147 of the Act. The learned counselfurther submitted that re-assessment was sought to be made oncertain issues based on the materials available at the hands ofthe assessing officer and hence, the learned Judge rightlydirected the appellant to file its reply/representationexplaining the reason as to why the completed assessmentdeserves to be confirmed, by the order impugned herein, whichdoes not require any interference by this court. 8. Heard the learned counsel appearing on either side andperused the materials placed before this Court. 9. Concededly, the assessment for the year 2014-15 inrespect of the appellant firm was completed under section 143(3)on 07.10.2016. Subsequently, the respondent reopened theassessment under section 147 by issuing notice under section 148of the Act, to which, the appellant filed its objections on12.07.2021. Thereafter, as per the order of this court dated18.08.2021 in WP.No.17262 of 2021 at the instance of theappellant, the respondent passed the order dated 15.12.2021rejecting the said objections, on the premise that there arefresh tangible materials available at the hands of the assessingofficer to reopen the assessment under section 147 of the Act. The said order was put to challenge before the learned Judge inWP.No.186 of 2022, which was dismissed, by the order dated10.01.2022 impugned herein. 10. We find no reason to interfere with the order of thelearned Judge dated 10.01.2022 in W.P.No.186 of 2022 even priorto the passing of final order in the re-assessment proceedings.The learned Judge has pointed out in the order impugned hereinthat the respondent has only indicated the reasons andjustifications for reopening the assessment and has not come toa definite conclusion as to whether any case has been made outfor re-computing the income of the appellant. Therefore, thelearned Judge has granted liberty to the appellant to filereply/representation as to why the completed assessmentproceedings deserves to be confirmed. Such a conclusion arrivedat by the learned Judge, in our opinion, does not require anyinterference. We also wish to observe that it is open to theappellant to raise all their contentions including thejurisdiction issue in the re-assessment proceedings carried onby the assessing officer. 11. With the above observation, this writ appeal standsdismissed. No costs. Consequently, connected miscellaneouspetition is closed. Sd/- Assistant Registrar(CS III) //True Copy// Sub Assistant Registrar msr/rsh To 11. With the above observation, this writ appeal standsdismissed. No costs. Consequently, connected miscellaneouspetition is closed. Sd/- Assistant Registrar(CS III) //True Copy// Sub Assistant Registrar msr/rsh To The Income Tax Officer,Ward - 1(1),Income Tax Office,No.3, Gandhi Road, Salem - 636 007.+1cc to Mr.A.P.Srinivas, Advocate, S.R.No.22673 W.A.NO.831 OF 2022 SSV(CO)PBS/26/04/2022