The Commissioner Of Income-Tax,Coimbatore v. M/S.elgi Ultra Industries Ltd.,Elgi House,Trichy Road,Coimbatore-18

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 06.06.2007 Coram : THE HONOURABLE MR.JUSTICE P.D.DINAKARAN AND THE HONOURABLE MR.JUSTICE P.P.S.JANARTHANA RAJA Tax Case (Appeal) No.441 of 2007 The Commissioner of Income-tax,Coimbatore. ..Appellant Vs M/s.Elgi Ultra Industries Ltd.,Elgi House,Trichy Road,Coimbatore-18. ..Respondent Appeal under Section 260A of the Income-tax Act, 1961 againstthe order of the Income Tax Appellate Tribunal, Bench "D",Chennai in I.T.A. No.1147(Mds)/2005 dated 04.08.2006 for theassessment year 1999-2000 against the order of the Commissioner ofIncome tax (Appeals) I Coimbatore in Appeal No.282/04-05 dated22.5.2005 against the order of the Asst Commissioner of Income TaxCompany Circle (I) (I) Coimbatore in PA.No.GIR.No.AAACE4566G/CO.Cir I (I) CBE dated 27.8.2004. For Appellant :Mr.J.Naresh Kumar,Standing Counsel forIncome-tax Department JUDGMENT (Judgment of the Court was delivered byP.P.S.Janarthana Raja, J.) This appeal is filed under Section 260A of the Income TaxAct, 1961 by the Revenue, against the order of the Income TaxAppellate Tribunal, Bench "D", Chennai in I.T.A. No.1147(Mds)/2005dated 04.08.2006 raising the following substantial question oflaw:- Whether in the facts and circumstances of thecase, the Tribunal was right in holding thatreassessment made under Section 143(3) r/w 147is bad in law? https://hcservices.ecourts.gov.in/hcservices/ 2.The facts leading to the above substantial question oflaw are as under:The assessee is a Company. The relevant assessment year is1999-2000 and the corresponding accounting year ended on31.03.1999. The Assessing Officer completed the assessment underSection 143(3) of the Income-tax Act ("Act" in short) on27.03.2002. The assessee had disclosed all material factsnecessary for the assessment and the Assessing Officer hadconsidered the same and completed the assessment under Section 143(3) of the Act. Notice under Section 148 was issued on 28.07.2004and served on the assessee on 03.08.2004. Later, the assessmentwas completed under Section 143(3) r/w Section 147 on 27.08.2004.Aggrieved by the order of the reopening of the assessment, theassessee filed an appeal to the Commissioner of Income-tax(Appeals). The C.I.T.(A) held that reopening the assessment isnot in accordance with law and hence allowed the appeal.Aggrieved, the Revenue filed an appeal to the Income-tax AppellateTribunal ("Tribunal" in short). The Tribunal dismissed the appealfiled by the Revenue and confirmed the order of C.I.T.(A). Hencethe present appeal is filed by the Revenue. 3.Learned Standing Counsel appearing for the Revenuesubmitted that the deduction claimed by the assessee is found tobe excessive and hence the reassessment proceedings was initiatedby the Assessing Officer on the ground that there was escapementof income because of the said excess relief. Hence the reopeningof the assessment is in accordance with law. 3.Learned Standing Counsel appearing for the Revenuesubmitted that the deduction claimed by the assessee is found tobe excessive and hence the reassessment proceedings was initiatedby the Assessing Officer on the ground that there was escapementof income because of the said excess relief. Hence the reopeningof the assessment is in accordance with law. 4.Heard the counsel. In this case, notice was issued underSection 148 of the Act and served on the assessee on 03.08.2004,i.e., after four years from the end of the assessment year 1999-2000. The assessment was made under Section 143(3) of the Act.Both the Tribunal as well as the first appellate authority havefollowed the Supreme Court judgment reported in 264 ITR 566 in thecase of C.I.T. Vs. Foramer France and held that there is nofailure on the part of the assessee to disclose material facts andhence reassessment proceedings after the expiry of four years isnot possible in view of the provisions of Section 147 of the Act.Admittedly, the reassessment proceedings are initiated after aperiod of four years. The scope of the said proviso to Section 147of the Act has been considered by this Court in the case ofCommissioner of Income-tax Vs. Elgi Finance Ltd., reported in 286ITR 674, and the same reads as follows:"The law relating to the reassessment has undergone achange from April 1, 1989. The change was brought in bythe Direct Tax Laws (Amendment) Act, 1987. Two sets ofprovisions were available under section 147 in clause(a) and clause (b). This distinction has now been takenaway by the Amendment Act. Previously, the line ofdistinction was a limitation period of four years and https://hcservices.ecourts.gov.in/hcservices/ the limitation period exceeding four years. TheAssessing Officer would reopen a back assessment withina period of four years as long as he had reason tobelieve in consequence of any information, that incomehas been under-assessed or income has escapedassessment. In the case of limitation, providing for aperiod exceeding four years, there should have been afailure on the part of the assessee to disclose fullyand truly all material facts leading to the escapementof income. But as a result of the amendment broughtwith effect from April 1, 1989, the above distinctionhad been obliterated and the Assessing Officer couldreassess the income as long as he had reason to believethat income chargeable had escaped assessment. The newlaw has inserted a proviso to section 147 in thefollowing words: "Provided that where an assessment undersub-section(3) of section 143 or this sectionhas been made for the relevant assessmentyear, no action shall be taken under thissection after the expiry of four years fromthe end of the relevant assessment year,unless any income chargeable to tax hasescaped assessment for such assessment year byreason of the failure on the part of theassessee to make a return under section 139 orin response to a notice issued under sub-section (1) of section 142 or section 148 orto disclose fully and truly all material factsnecessary for his assessment for thatassessment year." In addition to the time-limits provided for undersection 149, the law has provided another limitation offour years under the proviso to section 147. As far asthe above proviso to section 147 is concerned, the lawprescribes a period of four years to initiatereassessment proceedings, unless the income alleged tohave escaped assessment was made out as a result offailure on the part of the assessee to disclose fullyand truly all material facts necessary for theassessment."In the present case, the Tribunal had considered the above provisoto Section 147 of the Act and held as follows:-"Even now, before us, the Revenue could not contend thatthe reassessment is framed on submission of new materialor information. Admittedly, the reassessmentproceedings are initiated after four years as providedunder the proviso to Section 147 of the Act. There isno charge that income chargeable to tax has escaped fromassessment by reason of the failure on the part of theassessee to disclose fully and truly material facts https://hcservices.ecourts.gov.in/hcservices/ necessary for assessment. The Hon'ble Apex Court in thecase of CIT v. Foramer France (2003) reported in 264 ITR566 has clearly laid down the principle that where thereis no failure on the part of the assessee to disclosematerial facts, the reassessment proceedings after theexpiry of four years is not possible in view of theprovisions of Sec.147 of the Act. Respectfullyfollowing the judgement of the Hon'ble Apex Court, weuphold the order of the CIT(A) and accordingly theRevenue's appeal is dismissed. 8. In the result, both the appeals filed by the Revenuestand dismissed." In case where the assessment is completed under Section 143(3) ofthe Income-tax Act, the reopening of the assessment under Section148 beyond the period of four years at the end of the relevantassessment year can be sustained only if it is established thatthere is a failure on the part of the assessee to disclose fullyand truly all material facts. In this case there is no findingthat there is failure on the part of the assessee to disclosefully and truly all material facts. Further, all the materialfacts are available at the time of making original assessment.The Tribunal has correctly followed the principles enunciated inthe Supreme Court judgment reported in 264 ITR 566 cited supra, aswell as this Court judgment reported in 286 ITR 674, in the caseof Commissioner of Income-tax Vs. Elgi Finance Ltd. and came tothe correct conclusion. 5.Under these circumstances, we do not find any error orlegal infirmity in the order of the Tribunal so as to warrantinterference. In view of the same, no substantial questions oflaw arise for consideration of this Court and accordingly the taxcase is dismissed. Consequently, M.P.No.1 of 2007 is closed. Nocosts. Sd/Asst.Registrar /true copy/ To 1. The Assistant Registrar, Income-tax Appellate Tribunal, Bench "D", Rajaji Bhavan, III floor, Besant Nagar, Chennai. 2. The Commissioner of Income-tax, Coimbatore. 3. The Commissioner of Income-tax (Appeals) I, Coimbatore. 4. The Assistant Commissioner of Income-tax, Company Circle-I(1), Coimbatore. Company Circle-I(1), Coimbatore. + 1 cc to Mr. N. Muralikumaran, Advocate SR No. 32180 GG(CO)SR/18.6.2007 T.C.(A) No.441 of 2007