The Commissioner Of Income Taxcoimbatore v. M/S. Precot Meridian Limitedno

IN THE HIGH COURT OF JUDICATURE AT MADRAS CORAM THE HONOURABLE MR. JUSTICE R. MAHADEVANAND THE HONOURABLE MR. JUSTICE MOHAMMED SHAFFIQ TCA.No.1018 of 2009 The Commissioner of Income TaxCoimbatore. .. Appellant Versus M/s. Precot Meridian LimitedNo.737, Green Fields Puliakulam RoadCoimbatore 641 045... Respondent Tax Case Appeal filed against the order of Income TaxAppellate Tribunal, Madras “A” Bench, Chennai, dated27.02.2009 passed in I.T.A.No.749/Mds/2007 against the orderof the Commissioner of Income Tax (Appeals)-I, Coimbatoredated 05/01/2007 passed in Appeal No.132/06-07 against theorder of the Assistant Commissioner of Income Tax, CompanyCircle-1(1), Coimbatore dated 27/03/2006 made in PAN/GIRNo. Co.CirI(1)/CBE for the Assessment year 1999-2000. JUDGMENT (Judgement was delivered by R. MAHADEVAN, J.) Heard both sides and perused the records. 2.The respondent / assessee is engaged in the business ofmanufacturing and sale of cotton and blended yarn. They filedthe return of income for the assessment year 1999-2000 on29.12.1999, declaring a total loss of Rs.7,44,57,879/- andbook profit for the purpose of section 115JA of the Income TaxAct, was computed to the tune of Rs.1,33,70,320/-. The regularassessment was completed under section 143(3) of the Act on26.03.2002 determining the total loss at Rs.1,81,91,075/-. Thehttps://hcservices.ecourts.gov.in/hcservices/Assessing Officer subsequently, noted that an amount of Rs.76,93,861/- claimed under section 10B of the Act inrelation to Unit 'C' do not constitute 'profits and gainsderived from the industrial undertaking' and hence, incomechargeable to tax has escaped from escapement within themeaning of Section 147 of the Act r/w section Explanation 2thereof. The break up of the receipts disallowed by theAssessing Officer are as follows: Thereafter, the Assessing Officer proceeded to issue noticeunder section 148 on 02.02.2006, to which, the assessee filedits objections. However, the Assessing Officer considered thesaid three receipts as ineligible for exemption under section10B. Challenging the same, the assessee filed appeal, whichwas dismissed by the First Appellate Authority, by order dated05.01.2007. Aggrieved over the same, the assessee went onfurther appeal before the Income Tax Appellate Tribunal. 3.By order dated 27.02.2009, the Tribunal allowed theappeal filed by the assessee, on the ground of procedurallapses. The relevant observations of the Tribunal are quotedbelow for ready reference: “5.We are of the view that in order to invokesection 147 of the Act, after the expiry of fouryears from the end of the assessment year, theAssessing Officer has to make sure that the assesseehas failed to disclose fully and truly all materialfacts necessary for the assessment. It can be seenthat the assessee has disclosed the entire facts inthe balance sheet and Profit and Loss Account filedalong with the return. It is pertinent to say thatthe Assessing officer himself initiated proceedingsunder section 147 of the Act by following the sameprofit and Loss Account and balance sheet filedalong with the return. Hence, in thesecircumstances, one cannot say that the assessee hasconcealed any material facts from the knowledge ofthe Assessing officer. Explanation 2 to section 147envisages different circumstances where incomechargeable to tax can be treated as escaped income,only in such cases where reassessment proceedingsstarted within four years from the end of therelevant assessment year. In other words, we are ofthe considered opinion that if the reassessmentproceeding is initiated after the expiry of fouryears, it must be supported by sufficient reasons...6.In short, the assessee has furnished allhttps://hcservices.ecourts.gov.in/hcservices/materials necessary for claiming relief under section 10B along with the return itself. In thesecircumstances, one cannot say that the reassessmentproceeding initiated under section 147 of the Actafter four years form the end of the relevantassessment year is in accordance with law. Hence, weallow the appeal filed by the assessee. As theappeal is allowed on procedural lapses by the AO, weare not entering into the merits of the case.” The aforesaid order of the Tribunal is impugned in this appealat the instance of the Revenue. 4.By order dated 02.11.2009, the above appeal has beenadmitted on the following substantial questions of law:-“1. Whether in the facts and in thecircumstances of the case, the Tribunal wasright in holding that reopening of assessmentafter the expiry of 4 years from the end ofrelevant assessment year was not valid? 2. Whether the disallowance made onaccount of lease rentals, miscellaneous incomeand sale of import license aggregating toRs.76,93,961/- forms part of Incomes of theassessee for claiming deduction under Section10-B of the Income Tax Act?” 5.As regards the first substantial question of law, it isseen that the notice under section 148 of the Income Tax Act,1961, was issued on 02.02.2006, which is beyond the period offour years from the end of the relevant assessment year.Further, there was no failure on the part of the assessee indisclosing all the materials facts necessary for theassessment. In such circumstances, this court is of theopinion that the Tribunal was justified in annulling the re-assessment order of the year 1999-2000 on the ground of samebeing barred by limitation as per proviso to section 147. Theposition of law in this regard has already been decided infavour of the assessee and against the revenue in T.C.A. No.317 of 2020 dated 16.09.2020 in the case of Commissioner ofIncome Tax, Corporate Ward 3(4), Chennai vs B. Suresh Kumar[(2020) 120 taxmann.com 404 (Madras)], wherein it was held asfollows: “8.Therefore, in our considered view, theTribunal was fully justified in holding thatreopening the assessment beyond four years was aclear change of opinion and did not satisfy therequirements to be fulfilled in terms of 1[st] provisoto section 147 of the Act. Thus, the Revenue has notmade out any ground to interfere with the orderpassed by the Tribunal.” In the light of the above, this court does not find any groundto interfere with the order of the Tribunal and thissubstantial question of law is answered in favour of theassessee and against the Revenue. 6.Consequently, the second substantial question of law isalso answered in favour of the assessee and against theRevenue. 7.Accordingly, the Tax Case Appeal filed by the Revenueis dismissed. No costs. Sd/-Assistant Registrar (CS-II)//True Copy// dhk/msrTo Sub Assistant Registrar 1.The Income Tax Appellate Tribunal Madras 'A' Bench, Chennai 2.The Commissioner of Income Tax (Appeals)-I Coimbatore. 3.The Assistant Commissioner of Income Tax, Company Circle -1(1), Coimbatore. 4.The Commissioner of Income Tax, Coimbatore. +1cc to Mr.M.Swaminathan, Advocate SR. No. 64556+1cc to Mr.S.Sridhar, Advocate SR. No.64131 TCA No. 1018 of 2009 GSM (CO)PR (12/01/2022)