The Commissioner Of Income Tax Chennai v. Sri Chamundeswari 10, Muthupandiyan Avenue Madras

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 13.12.2005CORAMTHE HONOURABLE MR. JUSTICE K. RAVIRAJA PANDIANANDTHE HONOURABLE MR. JUSTICE P.P.S. JANARTHANA RAJA T.C.NO. 244 OF 2001 The Commissioner of Income TaxChennai. ... AppellantVs. Sri Chamundeswari10, Muthupandiyan AvenueMadras.... RespondentFor Appellant: Mrs. Pushya Sitaraman Senior Standing Counsel for Income Tax DepartmentFor Respondent : Mr. N. Quadir Hoseyn O R D E R (Order of the Court was made by P.P.S. Janarthana Raja, J.) At the instance of the revenue, the Income TaxAppellate Tribunal referred the following question said toarise out of its order in ITA 3542 (MAD)/90, for theopinion of this Court in pursuance to the directioni ofthis Court under Section 256(2) of the Income Tax Act. " Whether on the facts and in thecircumstances of the case and taking intoaccount the Supreme Court's decision in 102ITR 287 and 189 ITR 285, the AppellateTribunal was right in law in cancelling there-assessment made in the case for theassessment year 1980-81 ?"2. The brief facts relating to the above referenceare as under:The assessee respondent was doing business inproduction and sale of cimenatography films. The relevant https://hcservices.ecourts.gov.in/hcservices/ assessment year is 1980-81 and the corresponding accountingyear ended as on 30.6.1979. The respondent assessee by hisreturn on income, on 05.1`2.1980, admitted a loss ofRs.1,01,120/- and the original assessment was completedunder Section 143(3) determining the loss at Rs.91,120/- on31.03.1983. Subsequent to the completion of the assessment,the Assessing Officer noticed that the respondent assesseehad filed a letter dated 19.3.1983 on 24.3.1983 in which ithad offered a credit of Rs.5000/- standing in the name ofSmt. Girija Pakriswamy as income of the respondent assesseeand the same was omitted to be taken into considerationwhile completing the assessment. In view of this, theassessment was reopened under Section 147 and in itsproceedings, the amount of Rs.5000/- was added to the totalincome of the respondent assessee. In addition, theAssessing Officer has made some other addition treatingthem as income from other sources. Aggrieved by this, therespondent assessee preferred an appeal to the DeputyCommissioner of Income Tax Appeals. The said DeputyCommissioner of Income Tax Appeals, was of the view thatthe reopening of the assessment under Section 147(b) wasvalid and he accordingly confirmed the order of thereassessment made by the Assessing Officer under Section147 (b) read with Section 143 (3). Aggrieved by the saidorder, the respondent assessee filed an appeal to theIncome Tax Appellate Tribunal and submitted that theinvoking the provisions of Section 147 (b) and makingreassessment was not justified. The learned DepartmentRepresentative supported the order of the DeputyCommissioner of Income Tax and maintained that the same wasnot called for any interference. The Income Tax AppellateTribunal held that it would not be open to the AssessingOfficer to invoke the provisions of Section 147 (b) on theground that invoking of jurisdiction under Section 147 (b)was not justified and accordingly, cancelled thereassessment made on the basis of such reopening. 3.The revenue filed a Reference Application beforethe Income Tax Appellate Tribunal under Section 256 (1) ofthe Act, requesting the Tribunal, referred the abovementioned question to this Court for its opinion. TheIncome Tax Appellate Tribunal rejected the ReferenceApplication on the ground that there is no question of lawarise out of the order of the Tribunal. Later, the Revenuefiled a petition under Section 256 (2) of the Act,requesting this Court to give direction to the Tribunal torefer the matter to the High Court for its opinion. Inpursuance of this Court Order dated 26.03.1998 in TCP 438of 1997, the Tribunal referred the above question of law. 4.The learned counsel for the Department submittedthat the assessee has filed a letter dated 19.03.1983 on24.03.1983 in which it had offered a credit of Rs.5,000/-in the name of Smt.Girija Pakriswamy as income. The saidletter was not placed by the Assessing Officer in therecords or might have been misplaced and consequently itwas found that the amount offered as income for theassessment was not considered. Thus, there was informationfrom the documents that the income chargeable to tax hasescaped assessment. The information that the income hasescaped income tax assessment had come to the knowledge onthe bare facts of the case and there was no reconsiderationand change of opinion of the material on record and forthis proposition, he relied on the following decisions ofthe Apex Court. 5.On the other hand, the learned counsel appearingfor the respondent assessee submitted that the informationregarding the credit of Rs.5,000/- standing in the name ofSmt.Girija Pakriswamy was available before the AssessingOfficer and if the Assessing Officer due to mistake orotherwise had failed to take note of this fact while makingthe assessments, it was not open to the Assessing Officerto reopen the assessment under Section 147 (b). Therefore,invoking the provision of Section 147 (b) makingreassessment was not justified. It is also submitted thatan error discovered on a reconsideration of the samematerial does not give him that power and for this, herelied on the Apex Court Judgment reported in Vol.119I.T.R. 996 (Indian and Eastern Newspaper Society Vs.Commissioner of Income Tax, New Delhi), to support hisproposition. 6.We have heard the arguments advanced by both theparties. The letter dated 19th March 1983 was placed beforeus. The said letter was addressed to the Assessing Officerand the same was received by the Officer on 24.03.1984.The letter reads as follows: "In the course of hearing u/s 143(2), you doubted the genuineness of thefollowing loan claimed: 1. Mrs.Girija Pakkiriswamy - Rs.5,000/- It has to be pointed out that theformer accountant apears to have madethis entry without any basis. This mayplease be added without levy of anypenalty. 6.We have heard the arguments advanced by both theparties. The letter dated 19th March 1983 was placed beforeus. The said letter was addressed to the Assessing Officerand the same was received by the Officer on 24.03.1984.The letter reads as follows: "In the course of hearing u/s 143(2), you doubted the genuineness of thefollowing loan claimed: 1. Mrs.Girija Pakkiriswamy - Rs.5,000/- It has to be pointed out that theformer accountant apears to have madethis entry without any basis. This mayplease be added without levy of anypenalty. Be pleased to condone."From a reading of the above letter, it is clear thatthere was a hearing under Section 143 (2). At the time ofhearing, the Assessing Officer doubted the genuineness ofthe loan claimed by the respondent assessee. This factclearly indicates that there was enquiry at the time oforiginal assessment proceedings. In consequence of theenquiry, the above said letter was addressed to theAssessing Officer. The only grievance by the Departmentwas that, the said letter was omitted to consider. Hence,reopening is justified. When the enquiry is made by theAssessing Officer, the officer ought to have considered thepurpose of making original assessment. He did not act uponat the time of original assessment eventhough the relevantmaterials were available at the time of originalassessment. In consequence of the enquiry, the respondentassessee wrote a letter dated 19.3.1983 stating that theentry was made by the former Accountant without any basisand the same may be added without levy of any penalty. Thesaid letter was filed at Page No.52 of the MiscellaneousRecord of the Assessing Officer. The learned counsel forthe Department did not deny that the said letter was notfiled. It is filed with the Department and the same wasalso available at Page No.52 of the Miscellaneous Record.We have also seen the reasons recorded by the AssessingOfficer for the purpose of reopening the assessment. Thereason was recorded on 22.11.1984 in which it is statedthat the said letter was kept separately and omitted to beconsidered while completing the assessment on 31.03.1983.Before even the said letter was filed by the respondentassessee, there was enquiry relating to the genuineness ofthe loan of Rs.5,000/- standing in the name of Mrs.GirijaPakriswamy and the Assessment Officer did not proceedfurther. After the completion of the assessment, theOfficer cannot rely on the fact that they have omitted toconsider the said letter which was kept in different file. 7.We are of the view that the informationpertaining to the cash credit of Rs.5,000/- was alreadywith the Asessing Officer at the time he made the original assessment and there is no fresh information available withthe assessing Officer enabling him to invoke the provisionunder Section 147 (b) and as such, reopening of assessmentunder Section 147 was unjustified. 8.In view of the said factual position, we haveanswered the above question in favour of the assessee andthe above tax case filed by the revenue is dismissed. Nocosts.kb/km Sd/Asst.Registrar/true copy/Sub Asst.RegistrarToThe Assistant RegistrarIncome-tax Appellate TribunalA3 Rajaji Bharna, Besant NagarMadras2. The Commissioner of Income-tax, madras3. The Assistant Commissioner of Income taxCentral Circle I (4) Madras4. The Assistant Commissioner of Income taxCentral Circle I (V) Madras + one cc to Mr. Pushya Sitaraman, Sc for Income taxDepartment+ one cc to Mr. Quadir Hoseyn, Advocate sr no. 49352 KMCO) NM(23.12.2005) T.C.NO.244 OF 2001 https://hcservices.ecourts.gov.in/hcservices/