Sl Lumax Ltd.,Rep By Its Managing Director, G v. Deputy Commissioner Of Income Taxcorporate Circle Vi - 27[Th] Floor, New Block, Room

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 30.03.2022 CORAM THE HONOURABLE MR. JUSTICE R. MAHADEVANANDTHE HONOURABLE MR.JUSTICE J. SATHYA NARAYANA PRASAD Writ Appeal No. 2691 of 2021andC.M.P. No. 17436 of 2021 SL Lumax Ltd.,Rep by its Managing Director, G-15, SIPCOT Industrial Park,Sriperumbudur Taluk,Kancheepuam District,Irrungattukottai - 602 117 .. Appellant Versus Deputy Commissioner of Income TaxCorporate Circle VI - 27[th] Floor, New Block, Room 705121, MG Road, Nungambakkam,Chennai – 600 034.. Respondent Appeal filed under Clause 15 of Letters Patent against toset aside the order passed by this Court in W.P. No. 35924 of2016 dated 02.09.2021. Prayer in WP.No.35924 of 2016:- Writ Petition filed under Article 226 of the Constitutionof India praying to issue a Writ of Certiorari, calling ofrecords of the respondent herein pertaining to notice dated10.03.2016 for AY 2009-2010 and consequential communicationNo.Misc/Corp.Cir 6(2)/2014-15 dated 26.09.2016, issued by therespondent and quash the same. For Appellant : Mr. Srinath SridevanFor Respondent: Mr. A.P. SrinivasSenior Panel Counsel JUDGMENT [Judgment of the Court was delivered by R.MAHADEVAN,J.] The appellant is the petitioner in W.P. No.35924 of 2016.They have preferred this writ appeal against the order dated02.09.2021 passed by the learned Judge in the said writ petition. 2.By the order impugned herein, the learned Judge has madethe following observation, while dismissing the writ petitionfiled by the appellant:“41.In view of the facts and circumstances, thiscourt could able to arrive a conclusion that the caseof the petitioner is falling under Sub-clause (c) toExplanation 2 of Section 147 of the Act as it is adeemed case, where income chargeable to tax hasescaped assessment and if such deemed cases aretraced out, then necessarily the Assessing authorityhas to draw an inference on certain factual aspectsfor forming such an opinion and such 'reason tobelieve' would be certainly falling under thecondition that the assessee has not disclosed fullyand truly material facts necessary for assessment.Thus, the Assessing Officer had 'reason to believe'that income chargeable to tax has escaped assessment.However, whether it is escaped assessment or not isthe subjective adjudication, which is to be done byfollowing the procedures as contemplated under theAct.” 3.The main grievance of the learned counsel for theappellant is that after clearing the returns filed by theappellant for the assessment year 2009-10 by the Transfer PricingOfficer, without making any adjustments and the same having beenaccepted by the assessing officer, the respondent issued thenotice under section 148 of the Income Tax Act for reopening theassessment, that too, after the expiry of four years, on thepremise that the income chargeable to tax for the said assessmentyear has escaped assessment, which is illegal and contrary to therelevant provisions of the Act. The learned counsel furthersubmitted that the reopening of the assessment is based on changeof opinion of the assessing officer and not on any new materialson record. However, the learned Judge, instead of quashing thesame, erred in concluding that the reassessment proceedings mustgo on and the appellant has to avail the opportunity to beprovided to defend their case and co-operate for the earlycompletion of the same. Therefore, the learned counsel sought toquash the order of the learned Judge and allow this writ appeal. 4.On the other hand, the learned senior panel counselappearing for the respondent submitted that as per the provisionsof section 43A of the Act, revaluation of any asset purchased inforeign currency can be revalued on account of fluctuation in thevalue of money on the date of exchange and only at the time ofactual repayment of the loan; it will be clear from the accountsthat there has been no actual repayment made by the assessee/appellant during the current year; and the claim of Rs.390.96lakhs on account of depreciation in the current year is higherand hence, the same should have been added back to the bookprofits as per clause (iia) of Explanation (1) of section 115JB.Thus, there was a shortfall in assessment of income under section115JB, which warrants re-assessment. The learned counsel furthersubmitted that in any event, the respondent has only rejected theobjections filed by the appellant and hence, it is open for theappellant to substantiate its case by producing the necessarymaterials at the time of hearing the reassessment proceedings.Therefore, according to the learned counsel, the order impugnedherein does not call for any interference by this court. 5.Heard both sides and perused the materials placed beforethis court. 6.Before proceeding further, it is but necessary to lookinto the relevant facts of the case, which are as follows: 6.1. The appellant is a company incorporated under theCompanies Act, 1956 and they are engaged in the business ofmanufacturing the automobile parts. During the course of itsbusiness, they borrowed certain amount from the entities outsideIndia. However, due to unprecedented economic crises witnessedaround the globe, they suffered a loss of Rs.4699.80 lakhs.Therefore, the appellant capitalized the Foreign Exchange Loss(Forex Loss) and claimed depreciation for Rs.1.33 lakhs in thebooks of accounts, which was explained in schedule 21 to the 12[th]Annual Report for the Assessment Year in question. Accordingly,on 28.08.2009, the appellant company filed its return declaringan income of Rs.5,17,12,710/- and claimed depreciation forRs.1.33 lakhs. 6.2. While so, the appellant received a notice dated14.11.2011 under Section 142 (1) of the Act along with aquestionnaire. On receipt of the same, the appellant'srepresentative appeared before the respondent and disclosed allthe material facts necessary for the assessment, besidessubmitted 12[th] Annual Report which disclosed the manner in whichthe Forex Loss was treated. As there are transactions made by theappellant outside India, the case was referred to TransferPricing Officer, who on scrutiny of the documents passed an order dated 06.12.2012 vide order No.S-605/TPO-VI/AY2009-2010 clearingthe return filed by the appellant and made no adjustments to it.Subsequently, the respondent passed the assessment order on08.02.2013 accepting the income declared by the appellant. 6.3. Be that as it may, after seven years, the appellantreceived a notice dated 10.03.2016 under Section 148 of the Act,to which, they filed a detailed objection on 08.09.2016 andsupplementary objection on 21.09.2016, which were rejected bythe respondent, by order dated 26.09.2016. Challenging the same,the appellant preferred WP.No.35924 of 2016, which wasdismissed, by the order impugned herein. 7.It is an admitted fact that the respondent passed theassessment order in respect of the appellant for the assessmentyear in question, on 08.02.2013. However, the same was reopenedby issuing notice dated 10.03.2016 under section 148 of the Act,to which, the appellant filed its detailed objections. But, thesaid objections were rejected by order dated 26.09.2016 by therespondent. 6.3. Be that as it may, after seven years, the appellantreceived a notice dated 10.03.2016 under Section 148 of the Act,to which, they filed a detailed objection on 08.09.2016 andsupplementary objection on 21.09.2016, which were rejected bythe respondent, by order dated 26.09.2016. Challenging the same,the appellant preferred WP.No.35924 of 2016, which wasdismissed, by the order impugned herein. 7.It is an admitted fact that the respondent passed theassessment order in respect of the appellant for the assessmentyear in question, on 08.02.2013. However, the same was reopenedby issuing notice dated 10.03.2016 under section 148 of the Act,to which, the appellant filed its detailed objections. But, thesaid objections were rejected by order dated 26.09.2016 by therespondent. 8.The learned counsel for the appellant, while raising manygrounds assailing the notice issued by the respondent undersection 148 and the order impugned herein, has submitted thatthe learned Judge having noticed that the appellant did notsuppress any material particulars, ought to have quashed thenotice issued by the respondent for reopening the assessmentalready completed and allowed the writ petition filed by theappellant, whereas the learned Judge failed to do so. Thelearned counsel further submitted that the appellant hadfurnished all the necessary material facts with the supportivedocuments before the assessing officer, who did not properlyappreciate the same and hence, the matter may be remanded to himfor fresh consideration. 9.The allegation so raised against the assessing officerwas refuted on the side of the respondent. According to thelearned senior panel counsel, the respondent has reopened theassessment in accordance with the provisions of the Act.However, he has no serious objection for fresh consideration ofthe matter by the assessing officer. 10.It could be seen from the order impugned herein that thelearned Judge after analysing the legal position qua reopeningthe assessment, has categorically opined that the appellant hasproduced all the material facts and evidences, however, theassessing officer in the original assessment order dated08.02.2013, has not considered many details and passed the saidorder in a cryptic manner. The relevant passage of the same isprofitably extracted below: 10.It could be seen from the order impugned herein that thelearned Judge after analysing the legal position qua reopeningthe assessment, has categorically opined that the appellant hasproduced all the material facts and evidences, however, theassessing officer in the original assessment order dated08.02.2013, has not considered many details and passed the saidorder in a cryptic manner. The relevant passage of the same isprofitably extracted below: "40. In this context, this Court is of anopinion that the petitioner has produced all thematerial facts and evidences. However, the AssessingOfficer in the original assessment order dated08.02.2013, not considered many such details andpassed an assessment order in a cryptic manner. Fromand out of such an assessment order, the respondentcould able to trace out certain under assessment andsuch income has been made the subject of excessiverelief under the Income Tax Act or excessiveallowance under the Act has been computed. In view ofthe fact that the case of the petitioner is fallingunder the deemed cases, where income chargeable totax has escaped assessment and such intricacy ofunder assessment and the excess relief or excessallowance or otherwise would be falling under thecondition that the petitioner has failed to disclosefully and truly. Thus, it is necessary that thereassessment proceedings must go on. The petitioner/assessee has to avail the opportunity to be providedto defend their case with regard to the allegationsof under assessment or excessive relief or otherwiseand co-operate for the early completion of thereassessment proceedings. What is necessary forarriving at a conclusion is that where there has beensuch non-disclosure of primary facts, which hasescaped assessment of income in the assessment wouldbe sufficient for conferring jurisdiction on theAssessing Officer to reopen the assessment. As heldrepeatedly, escapement of assessment is the primaryfactor to be considered and such escaped assessmentoccurred due to any one of the reasons enumeratedunder Section 147 of the Income Tax Act." Having observed so, the learned Judge ought to have set asidethe notice for reopening the assessment and remanded the matterto the assessing officer for fresh consideration. On the otherhand, it was erroneously concluded that it is a deemed casewhere income chargeable to tax has escaped assessment and hence,the reassessment proceedings must go on. 11.In view of the above, this court, without expressing anyopinion on the merits of the case, is inclined to set aside theorders impugned herein as well as in the writ petition and areaccordingly, set aside. Consequently, the matter is remanded tothe assessing officer to decide the decision for reopening theassessment under Section 147 of the Act, afresh, by passing aspeaking order, after considering all the documentary evidenceand materials placed by the appellant, without being influencedby any observations made by the learned Judge in the impugnedorder dated 02.09.2021 in WP No. 35924 of 2016. Such an exercise shall be completed by the Assessing Officer, after providing anopportunity of being heard to the appellant, within a period ofeight weeks from the date of receipt of a copy of this judgment. 12.This Writ Appeal is disposed of in the above terms. Nocosts. Consequently, connected miscellaneous petition is closed. Sd/-Assistant Registrar(CO) //True Copy// rsh/gba Sub Assistant Registrar To The Deputy Commissioner of Income Tax,Corporate Circle VI - 2,7[th] Floor, New Block, Room 705,121, MG Road, Nungambakkam,Chennai – 600 034. +1cc to Mr.Srinath Sridevan, Advocate, S.R.No.21962 +1cc to Mr.A.P.Srinivas, Advocate, S.R.No.21500 WA No. 2691 of 2021 SKM(CO)SU(10/05/2022)