Srinidhi Karti Chidambaram v. The Assistant Commissioner Of Income Tax

The Hon'ble Mr.Justice T.S.Sivagnanam 1. P. Chidambaram ...Petitioner in W.P.No.29413 of 20172. Karti P. Chidambaram ...Petitioner in W.P.No.29414 of 20172. Karti P. Chidambaram ...Petitioner in W.P.No.29414 of 2017 3. Smt. Nalini Chidambaram ...Petitioner in W.P.No.29415 of 2017 4. Srinidhi Karti Chidambaram ...Petitioner in W.P.No.29416 of 2017 Vs. 1. The Assistant Commissioner of Income Tax, Non-corporate Circle-3, Room No.623-A, 6th Floor,Wanaparthy Block, 121, MG Road, Nungambakkam, Chennai - 600 034. ...sole Respondent in WP.29413/17 & 1[st] Respondent in WP.29414 to 29416/17 2.The Assistant Commissioner of Income Tax,Central Circle - 2 (1),Investigation Builiding, Room No.122,1st Floor, New No.46, MG Road, Nungambakkam,Chennai - 600 034.Central Circle - 2 (1),Investigation Builiding, Room No.122,1st Floor, New No.46, MG Road, Nungambakkam,Chennai - 600 034. R-2 in W.P.Nos.29414 to 29416 of 2017 3. The Principal Commissioner of Income Tax-5,Income Tax Department,Wanaparthy Block,Income Tax Department,Wanaparthy Block, 5th Floor, No.121, Mahatma Gandhi Road, Chennai - 600 034.R-3 in W.P.Nos.29414 to 29416 of 2017 Prayer in W.P.No.29413 of 2017 Writ Petition, filed under Article 226 of the Constitutionof India, for issuance of Writ of Certiorari to call forrecords, relating to the notice issued by the respondent, dated https://hcservices.ecourts.gov.in/hcservices/ 31.03.2017, having Ref No.F.No.REF/REOP/2016-17, under Section148 of the Income Tax Act, 1961, to the petitioner, having PAN : for the assessment year 2010-11 and to quash the same. Prayer in W.P.No.29414 of 2017 Writ Petition, filed under Article 226 of the Constitutionof India, for issuance of Writ of Certiorari to call forrecords, relating to the notice issued by the first respondent,dated 31.03.2017, having Ref No.F.No.REF/REOP/2016-17, underSection 148 of the Income Tax Act, 1961, to the petitioner,having PAN No. for the assessment year 2010-11 and toquash the same. Prayer in W.P.No.29415 of 2017Writ Petition, filed under Article 226 of the Constitutionof India, for issuance of Writ of Certiorari to call forrecords, relating to the notice issued by the first respondent,dated 31.03.2017, having Ref No.F.No.REF/REOP/2016-17, underSection 148 of the Income Tax Act, 1961, to the petitioner,having PAN No. for the assessment year 2010-11 and toquash the same. Prayer in W.P.No.29416 of 2017 Writ Petition, filed under Article 226 of the Constitutionof India, for issuance of Writ of Certiorari to call forrecords, relating to the notice issued by the first respondent,dated 31.03.2017, having Ref No.F.No.REF/REOP/2016-17, underSection 148 of the Income Tax Act, 1961, to the petitioner,having PAN No. for the assessment year 2010-11 and toquash the same. Heard Mr. Sathish Parasaran, the learned SeniorCounsel for Mrs.C.Uma, the learned counsel for the petitionersand Mr.G. Rajagopalan, the learned Additional Solicitor Generalfor Mrs. Hema Murali Krishnan, the learned Senior StandingCounsel for the respondents. https://hcservices.ecourts.gov.in/hcservices/ 2.These Writ Petitions have been filed by thepetitioners, challenging the notices issued for reopening theassessment for the assessment year 2010-11. 3.The learned Senior Counsel appearing for thepetitioners submitted that, an identical issue was considered bythis Court, in respect of the earlier assessment year inW.P.Nos.1589, 1590, 1843 and 1855 of 2017, and the said WritPetitions were allowed, by order, dated 13.11.2017, and thepresent Writ Petitions are squarely covered by a earlierdecision. https://hcservices.ecourts.gov.in/hcservices/ 2.These Writ Petitions have been filed by thepetitioners, challenging the notices issued for reopening theassessment for the assessment year 2010-11. 3.The learned Senior Counsel appearing for thepetitioners submitted that, an identical issue was considered bythis Court, in respect of the earlier assessment year inW.P.Nos.1589, 1590, 1843 and 1855 of 2017, and the said WritPetitions were allowed, by order, dated 13.11.2017, and thepresent Writ Petitions are squarely covered by a earlierdecision. 4. When the matters came up for admission before thisCourt on 17.11.2017, Mr. G. Rajagopalan, the learned AdditionalSolicitor General appeared in the matter on behalf of theRevenue, and submitted that, they are yet to receive certifiedcopy of the order, dated 13.11.2017 passed in W.P.Nos.1589,1590, 1843 and 1855 of 2017, and they have to gothrough theorder. Considering the fact that, in respect of the previousassessment year, the facts were identical and reopeningproceedings were challenged, this Court granted interim order,and adjourned the matters to 21.11.2017. However, it appearsthat the cases were listed earlier and they have been adjournedto today. 5.The learned Senior Standing Counsel for the Revenuewould contend that the Revenue is in the process of filingAppeal against the order passed on 13.11.2017. 6.In any event, since the issue pertaining to thepresent reopening proceedings is identical to that of theearlier batch of case, this Court is inclined to follow itsearlier decision, which is prevailing as on date. At thisjuncture, it is useful to refer to the relevant portion of thesaid order, dated 13.11.2017, which is as follows:- " 10. Heard the learned counsels for theparties and carefully perused the materialsplaced on record. 11.Broadly three issues fall forconsideration in this writ petition, namely,1) Whether the impugned notice issuedunder Section 148 of the Act is onaccount of change of opinion of theAssessing Officer when the petitioner'scase is that he has fully and trulydisclosed all the details at the timeof scrutiny assessment and whether any tangible material was available withthe Assessing Officer to come to aconclusion that income chargeable totax has escaped assessment during therelevant year? 2) Whether the respondent had compliedwith the mandate laid down by theHon'ble Supreme Court in the case ofGKN Drive Shafts (India) Limited vs.Income Tax Officer - 2002 Supp (4) SCR359? with the mandate laid down by theHon'ble Supreme Court in the case ofGKN Drive Shafts (India) Limited vs.Income Tax Officer - 2002 Supp (4) SCR359? 3) Whethertheimpugnedreopeningproceedings and the consequentialassessmentorderamountstodiscrimination by singling out thepetitioner and taking up the case forreopening the assessment for therelevant year when there are severalhundreds of similar coffee growerswhose claim for exemption has not beenquestions or reopened?proceedings and the consequentialassessmentorderamountstodiscrimination by singling out thepetitioner and taking up the case forreopening the assessment for therelevant year when there are severalhundreds of similar coffee growerswhose claim for exemption has not beenquestions or reopened? 3) Whethertheimpugnedreopeningproceedings and the consequentialassessmentorderamountstodiscrimination by singling out thepetitioner and taking up the case forreopening the assessment for therelevant year when there are severalhundreds of similar coffee growerswhose claim for exemption has not beenquestions or reopened?proceedings and the consequentialassessmentorderamountstodiscrimination by singling out thepetitioner and taking up the case forreopening the assessment for therelevant year when there are severalhundreds of similar coffee growerswhose claim for exemption has not beenquestions or reopened? 12.In the decision in the case ofCommissioner of Income Tax vs. DineshChandra H.Shah and others reported in 1971(82) ITR 367 ITR, the matter arose under theIncome Tax Act, 1922 pertains to an actionunder Section 34(1)(b) of the 1922 Act(which is in paramateria with Section 147 ofthe Income Tax Act, 1961). The questionwhich was referred to the High Court waswhether on the facts and circumstances ofthe case, the Tribunal was justified inholding that the action under Section 34(1)(b) of the 1922 Act was legal and valid.The High Court opined that there may beinformation existing on record or brought tothe notice which does not become informativeat the first sight and requires furtherconsideration and in such cases, realisationof the fact of the information subsequentlymay give to the Income Tax Officer thejurisdiction to start proceedings underSection 34(1)(b) of the 1922 Act but themere fact that the Income Tax Officerchanges his opinion subsequently or the factthat he fails to notice a palpable orglaring matter earlier should not be treatedas additional information coming to his notice subsequent to the assessment orderand accordingly the question was answeredagainst the revenue. The Hon'ble SupremeCourt while dismissing the appeal filed bythe revenue held that a mere change ofopinion regarding the chargeability ofincome on the part of the reassessingOfficer, different from his own opinion orthat of his predecessor in office, does notjustify the action under Section 34(1)(b) ofthe 1922 Act. 13.In the case of Commissioner of IncomeTax, Delhi vs. Kelvinator of India Limited,the Hon'ble Supreme Court pointed out thatthe conceptual difference between power toreview and power to reassess has to be keptin mind. The Assessing Officer has no powerto review; he has the power to reassess.But reassessment has to be based onfulfilment of certain precondition and ifthe concept of "change of opinion" isremoved, then in the garb of reopening theassessment, review would take place. It wasfurther pointed out that the concept ofchange of opinion should be treated as anin-built test to check abuse of power by theAssessing Officer. Hence, after 01.04.1989the Assessing Officer has the power toreopen, provided there is tangible materialto come to the conclusion that there is anescapement of income from assessment. Thereasons must have a live link with theformation of the belief. 14.In the case of Calcutta Discount CompanyLimited, the Hon'ble Supreme Court examinedthe words used in the provision "omission orfailure to disclose fully and truly allmaterial facts necessary for assessment forthat year" and held as follows: "10.Does the duty however extendbeyond the full and truthfuldisclosure of all primary facts ?In our opinion, the answer to thisquestion must be in the negative.Once all the primary facts arebefore the assessing authority, herequires no further assistance byway of disclosure. It is for him 14.In the case of Calcutta Discount CompanyLimited, the Hon'ble Supreme Court examinedthe words used in the provision "omission orfailure to disclose fully and truly allmaterial facts necessary for assessment forthat year" and held as follows: "10.Does the duty however extendbeyond the full and truthfuldisclosure of all primary facts ?In our opinion, the answer to thisquestion must be in the negative.Once all the primary facts arebefore the assessing authority, herequires no further assistance byway of disclosure. It is for him to decide what inferences of factscan be reasonably drawn and whatlegal inferences have ultimatelyto be drawn. It is not forsomebody else - far less theassessee - to tell the assessingauthority what inferences whetherof facts or - law should be drawn.Indeed, when it is remembered thatpeople often differ as regardswhat inferences should be drawnfrom given facts, it will bemeaningless to demand that theassessee must disclose whatinferences - whether of facts orlaw he would draw from the primaryfacts. 11.If from primary facts moreinferences than one could bedrawn, it would not be possible tosay that the assessee should havedrawn any particular inference andcommunicated it to the assessingauthority. How could an assesseebe charged with failure tocommunicate an inference, which hemight or might not have drawn ? Thus, if primary facts have beendisclosed before the AssessingOfficer, he would require nofurther assistance by way ofdisclosure and he has to decidewhat inferences of facts can bereasonably drawn and what legalinferences have ultimately to bedrawn. Thus, if from the primaryfacts more than one inferences canbe drawn, it would not be possibleto say the assessee should havedrawn a particular inference norcan he be charged for any failure. 15.Having steered clear of the legalposition, we need to apply the same to thefacts of the present case. Two conditionsare required to be satisfied before therespondent could issue notice under Section148 of the Act, namely, (1) he must have https://hcservices.ecourts.gov.in/hcservices/ Thus, if primary facts have beendisclosed before the AssessingOfficer, he would require nofurther assistance by way ofdisclosure and he has to decidewhat inferences of facts can bereasonably drawn and what legalinferences have ultimately to bedrawn. Thus, if from the primaryfacts more than one inferences canbe drawn, it would not be possibleto say the assessee should havedrawn a particular inference norcan he be charged for any failure. 15.Having steered clear of the legalposition, we need to apply the same to thefacts of the present case. Two conditionsare required to be satisfied before therespondent could issue notice under Section148 of the Act, namely, (1) he must have https://hcservices.ecourts.gov.in/hcservices/ reason to believe that income chargeable totax has escaped assessment and (2) suchincome has escaped assessment by reason ofomission or failure on the part of theassessee to disclose fully and truly materialfacts necessary for assessment for the year.The settled legal position is that both theseconditions must co-exist in order to conferjurisdiction on the respondent. Further, therespondent should record his reasons beforeinitiating proceedings under Section 148(2)of the Act; before issuing the notice afterthe expiry of four years from the end of therelevant assessment year. The assessee isexpected to make a true and full disclosureof the primary facts. It is thereafter forthe respondent to draw an inference fromthose primary facts. If on a furtherexamination either by the same officer or bya successor, the inference arrived at appearsto be erroneous, mere change of opinion wouldnot be a justification to reopen theassessment. 16.In the instant case, the petitioner'sassessment for the subject assessment yearwas taken up for scrutiny. All primary factswere available with the Assessing Officer.The Assessing Officer completed the scrutinyassessment vide order dated 30.12.2011.After the expiry of four years, the impugnednotice dated 31.03.2016 was issued. Thepetitioner requested for the copy of thereasons for reopening vide representationdated 13.04.2016. The respondent bycommunication dated 19.04.2016 furnished thereasons for reopening. On a perusal of thereasons, I find that the respondent onverification of the assessment records andthe order sheet entries inferred that theAssessing Officer on scrutiny had failed toexamine and deliberate on the correctness ofthe income reported under the headagricultural income. Further, the respondentwould state that even though the assessee hadderived the predominant portion of theagricultural income from sale of coffeeseeds, the aspect as to whether the income soderived is completely exempt or is it a casefalling under Rule 7B was also omitted to be verified. Added to this, the AssessingOfficer was inspired by a direction issued bythe ITAT in the case of one TC Abraham.Thus, on a mere reading on the reasons forreopening clearly show that there is noallegation against the petitioner that therehas been omission or failure on the part ofthe assessee to disclose fully and truly allmaterial facts necessary for assessment forthat year. The so called reason to believethat income chargeable to tax has escapedassessment is on the ground that theAssessing Officer at the time of scrutinyassessment did not examine as to whether theentire agricultural income was completelyexempted or not. This can hardly be a reasonto believe that income chargeable to tax hasescaped assessment as it is a clear case ofchange of opinion by the respondent. Aspointed out in the case of Calcutta DiscountCompany Limited, the obligation on the partof the assessee does not extend beyond fullyand truly disclosing all primary facts. Itis for the Assessing Officer to take aninference on facts and law based on suchdisclosure. If according to the respondent,his predecessor did not come to a properinference on the facts disclosed, it is noground to reopen the assessment, as ifpermitted and it would amount to a clear caseof change of opinion. In the light of theabove discussion, the first issue framed forconsideration is answered in favour of thepetitioner and against the revenue. 17.The second issue is whether the respondenthas complied with the directives in the caseof GKN Drive Shafts (India) Limited. TheHon'ble Supreme Court pointed out that if theassessee desires and seeks for reasons forreopening, the Assessing Officer is bound tofurnish reasons within a reasonable time andon receipt of the reasons, the assessee isentitled to file objections for issuance ofnotice and the Assessing Officer is bound todispose of the same by passing a speakingorder. The reasons were furnished to thepetitionervidecommunicationdated19.04.2016. The petitioner through theirauthorizedrepresentativesubmitted 17.The second issue is whether the respondenthas complied with the directives in the caseof GKN Drive Shafts (India) Limited. TheHon'ble Supreme Court pointed out that if theassessee desires and seeks for reasons forreopening, the Assessing Officer is bound tofurnish reasons within a reasonable time andon receipt of the reasons, the assessee isentitled to file objections for issuance ofnotice and the Assessing Officer is bound todispose of the same by passing a speakingorder. The reasons were furnished to thepetitionervidecommunicationdated19.04.2016. The petitioner through theirauthorizedrepresentativesubmitted objections dated 24.05.2016. The petitioneralso sought for an opportunity of personalhearing in case the officer is not satisfiedwith the explanation. The next step that therespondent should have undertaken is to passa speaking order on the objections.Unfortunately, the respondent did not do so,but sent a communication to the petitionerdated 30.08.2016 terming it as a rebuttal forobjections for reopening the assessment. 18.The revenue's case is that thecommunication dated 30.08.2016 is an orderwith reasons and it is a speaking order andthe respondent has complied with thedirectives in the case of GKN Drive Shafts(India) Limited. While it may be true thatthe rebuttal dated 30.08.2016 has givencertain reasons and the merits of whichcannot be gone into at this stage, but therespondent has not rejected the objectionsoutright but afforded further opportunity tothe petitioner to make further submissionsand fixed the outer time limit as 08.09.2016to make further submissions. This rebuttaldated 30.08.2016 cannot be treated to be anorder as required to be passed in terms ofthe directives in the case of GKN DriveShafts (India) Limited as the respondenthimself did not attach any finality to it.The petitioner sought for extension of timeto make further submissions and accordinglythe same was made on 29.09.2016. Thissubmission appears to be an elaboratesubmissions bringing out the distinctionbetween pulping and drying of coffee andcuring of coffee. Further it was pointed outthat the Assessing Officer erred in referringto the decision of ITAT in the case of TCAbraham as one of the reasons for reopeningwhen the said order was modified by theTribunal and the matter has been remitted forreconsideration by the concerned AssessingOfficer. Though the respondent gave anopportunity to the assessee to make furthersubmission which the petitioner had availedand submitted the same on 29.09.2016, withoutreference to the said submission, noticedated 28.12.2016 was issued under Section 143(2) of the Act directing the petitioner toattend the office of the respondent on the very next day, i.e. on 29.12.2016 at 10.30a.m. Unfortunately, the respondent committeda mistake in the assessment order compellinghim to issue a corrigendum. On 29.12.2016,the petitioner through its authorizedrepresentative appeared before the respondentand submitted a written request to keep thenotice under Section 143(3) of the Act inabeyance till a speaking order is passed onthe petitioner's further representation dated29.09.2016. However, on 30.12.2016 withoutany opportunity to the petitioner, theimpugned assessment order has been passed.Thus the facts clearly demonstrate that therespondent has not followed the directives inthe case of GKN Drive Shafts (India) Limited.The rebuttal dated 30.08.2016 cannot taken asan order required to be passed on theobjections given by the petitioner forreopening the assessment and the manner inwhich the impugned assessment order has beenpassed is wholly illegal and the entireproceedings are flawed. The respondent whileissuing the rebuttal dated 30.08.2016 did notattach any finality to the proceedings butgave an opportunity to the petitioner to makefurther submission. On account of this, thepetitioner had no opportunity to challengethe rebuttal dated 30.08.2016. This is onemore ground to state that the proceedings arein violation of principles of naturaljustice. Accordingly this issue is answeredin favour of the petitioner and against therevenue. 19.The third issue is whether there has beendiscrimination. The petitioner in theaffidavit filed in support of the writpetition in more than one place has indicatedthat the petitioner has been singled outwhere several hundreds of coffee growers whoare only doing pulping and drying of coffeeseeds and not engaged in curing coffee seedsand not in a single case for the assessmentyear 2009-2010, reopening has been done.Though such an averment has been specificallyraised by the petitioner, the same has notbeen controverted in the counter affidavit,thereby deemed to have been accepted. In thereply affidavit filed by the petitioner to the counter affidavit filed by the respondentin paragraph No.20 therein, the petitionerhas referred to an application filed underthe Right to Information Act by oneMr.Radhakrishnan who had made an applicationon 25.01.2017 requesting information as to inhow many cases notice under Section 148 ofthe Act has been issued for reopening theassessment beyond four years of the relevantassessment years for the reason that saleproceeds of coffee seeds after drying andpulping in effect amounts to sale of curedcoffee seeds, in how may cases the Departmentconstrued that an assessee who has sold rawcoffee after pulping and drying and hasdisclosed in the return that the coffee wassubjected to pulping and drying disclosingthe expenditure incurred thereon and claimedexemption under Section 10(1) of the Act hasnot disclosed fully and truly all materialfacts for his/her assessment warrantingreassessment and also warrants penalty and inhow many cases the Department has reopenedthe assessment relying on the decision of theITAT in the case of TC Abraham. Reply forthe first question as given by theInformation Officer, dated 01.02.2017, is“Nil”. For the second question, it wasstated that no case has been reopened underSection 148 of the Act for the reasonmentioned supra and there is no case in theconcerned ward where application of Rule 7B(1) of the Rules has been levied by theAssessing Officer. The above facts wouldclearly establish that the reopeningproceedings are clearly discriminatory.Accordingly this issue is answered in favourof the petitioner and against the revenue. 20. For all the above reasons, the impugnedproceedings, namely, the notice for reopeningand the consequential assessment orders areheld to be illegal, unsustainable and a clearcase of change of opinion. The facts of theotherthreewritpetitions,viz.W.P.Nos.1589, 1590 and 1843 of 2017, beingidentical, the conclusion arrived at by thisCourt in W.P.No.1855 of 2017 will equallyapply to the other cases as well.21. In the result, the writ petitions are allowed and the impugned proceedings arequashed. No costs. Consequently, connectedmiscellaneous petitions are closed. " 7.Thus, following the earlier decision of this Court,rendered in the above referred case, the present Writ Petitionsare allowed and the impugned orders are set aside. No costs.Consequently, connected Writ Miscellaneous Petitions are closed. Sd/- Assistant Registrar(CS-ix) //True Copy// Sub Assistant RegistrarsdTo1. The Assistant Commissioner of Income Tax,Non-corporate Circle-3, Room No.623-A, 6th Floor,Wanaparthy Block,121, MG Road, Nungambakkam,Chennai - 600 034.2. The Assistant Commissioner of Income Tax, Central Circle - 2 (1),Investigation Builiding, Room No.122,1st Floor, New No.46, MG Road, Nungambakkam,Chennai - 600 034.3. The Principal Commissioner of Income Tax-5,Income Tax Department,Wanaparthy Block,5th Floor, No.121, Mahatma Gandhi Road,Chennai - 600 034.+2cc to Mr.C.UMA, Advocate, S.R.No. 67 & 68+3cc to Mr.A.P.SRINIVAS, Advocate, S.R.No. 239+1cc to Mr.HEMA MURALIKRISHNAN, Advocate, S.R.No. 118Writ Petition Nos.29413 to 29416 of 2017 GP(CO)TR(07/02/2018)