Wa/2269/2021 Of N.s.srinivasan v. The Asst Commissioner Of Income Tax

IN THE HIGH COURT OF JUDICATURE AT MADRAS THE HON'BLE MR. JUSTICE T.S. SIVAGNANAMAND THE HON'BLE MR. JUSTICE SATHI KUMAR SUKUMARA KURUP N.S.Srinivasan... Appellant/ Petitioner The Asst. Commissioner of Income Tax,Non-Corporate Circle, 14(1)121, Mahatma Gandhi Road,Chennai – 600 034. .. Respondent/ Respondent Writ Appeal has been filed under Clause 15 of the LettersPatent to set aside the order dated 02.07.2021 passed inW.P.No.27810 of 2018. Prayer in W.P.No.27810 of 2018: Petition filed under Article 226 of the Constitution ofIndia praying for issuance of Writ of Certiorari to call forthe records on the file of the respondent in PAN: ABBPS7903Eand quash the impugned notice in ITBA/AST/S/148/2017-18/1009542662(1) dated 29.03.2018 issued under Section 148 ofthe Income Tax Act, 1961 and the consequential proceedingsdated 07.09.2018. This Writ Appeal by the assessee is directed against theorder, dated 02.07.2021, in W.P.No.27810 of 2018, filed by theappellant/assessee. https://hcservices.ecourts.gov.in/hcservices/ 2.The order impugned in the writ petition was theproceedings of the respondent, dated 29.03.2018, issued underSection 148 of the Income Tax Act, 1961 (“the Act” forbrevity), reopening the assessment for the Assessment Year2011-12. 3.The assessee is an individual, practicing CharteredAccountant and partner of a Chartered Accountant Firm placedin Chennai. The assessee had filed his return of income on30.09.2011, declaring a total income of Rs.15,92,960/- and thesame was processed under Section 143(1) of the Act.Subsequently, the case was selected for scrutiny and noticeunder Section 143(2) was issued on 02.08.2012, along with aquestionnaire, dated 15.07.2013, calling for various detailsand affording an opportunity to the assessee to attend apersonal hearing and explain the income declared during therelevant Assessment Year. The assessee would state that hehad filed all the details as called for by therespondent/Assessing Officer from time to time, including theexplanation pertaining to his professional fee receipts,purchase and sale of land, etc. After five sittings, in whichthe assessee was heard, the assessment was completed underSection 143(3) by order dated 20.01.2014. 4.After four years, notice, dated 29.03.2018, was issuedunder Section 148 of the Act. The assessee, by letter dated26.04.2018, stating that the assessment cannot be reopenedbeyond four years from the end of the relevant AssessmentYear, sought for the reasons for reopening, which werefurnished to the assessee by proceedings of the AssessingOfficer, dated 07.05.2018. 5.The Assessing Officer stated that, on going through themiscellaneous records for the Assessment Year 2011-12, thefollowing three observations were found :i. AIR 26AS-194 J omitted ii.Excess Investment Unexplained iii.Investment in pursuance of House Property Thus, the Assessing Officer stated that he has reasons tobelieve that income chargeable to tax has escaped assessmentwithin the meaning of Section 147 of the Act and that theassessee has failed to disclose fully and truly all materialfacts necessary for the assessment for the relevant AssessmentYear. 6.The assessee objected to the reopening vide letterdated 12.05.2018, stating that the case was taken up fordetailed scrutiny and after full fledged hearing, theAssessing Officer was satisfied with the explanation offeredand the assessment was completed and the present reopening isa clear case of change of opinion. Various other factualdetails with regard to the sale of house property were alsomentioned. The assessee placed reliance on the decision ofthe Hon'ble Supreme Court, stating that the action of thehttps://hcservices.ecourts.gov.in/hcservices/respondent amounts to reviewing the scrutiny assessment. 6.The assessee objected to the reopening vide letterdated 12.05.2018, stating that the case was taken up fordetailed scrutiny and after full fledged hearing, theAssessing Officer was satisfied with the explanation offeredand the assessment was completed and the present reopening isa clear case of change of opinion. Various other factualdetails with regard to the sale of house property were alsomentioned. The assessee placed reliance on the decision ofthe Hon'ble Supreme Court, stating that the action of thehttps://hcservices.ecourts.gov.in/hcservices/respondent amounts to reviewing the scrutiny assessment. 7.The Assessing Officer, by order dated 07.09.2018,rejected the objections raised by the assessee, inter aliastating that the scrutiny assessment was only a limitedscrutiny on the question of taxability of sale of property andthe issue on which the reopening has been done is regardingoutgoing of funds in the form of investment in property andmutual fund and this issue was not discussed in the originalassessment proceedings and no opinion was formed on this issueand hence, there is no change of opinion. 8.Aggrieved by the said order, the assessee filed thewrit petition. When the writ petition was entertained, anorder of interim stay was granted. The respondent had filedtheir counter affidavit, largely reiterating that the originalassessment was a limited scrutiny and the issues on which thereopening has been made was never discussed at the time ofscrutiny assessment and there is no change of opinion. Theassessee filed a rejoinder, denying the various averments madein the counter affidavit filed by the Assessing Officer. Thelearned Single Bench, by the impugned order, dismissed thewrit petition. Aggrieved by the same, the assessee is beforeus by way of this appeal. 9.We have elaborately heard Mr.Raghav Menon forMr.R.Sivaraman, learned counsel for the appellant andMr.Prabhumukunth Arunkumar, learned Standing Counsel appearingfor the respondent. 10.On a careful reading of the order impugned in thisappeal, we find that, in Para No.13 of the impugned order, thelearned Single Bench has held that, a perusal of theAssessment Order as well as the objections raised by theassessee reveal that, undoubtedly, the assessee had furnishedthe details regarding the sale and purchase of the propertythrough the capital gains and he has furnished details anddocuments pertaining to the sale and purchase of the property.Further, the Court held that the questionnaire issued by theAssessing Officer during the original assessment was compliedwith and the petitioner has furnished all details, which wereconsidered by the Assessing Officer. After rendering such afinding, the Court poses a question to itself stating that ithas to consider whether the reopening is sustainable withreference to the proviso to Section 147 of the Act. Aftersetting out in brief about the purport and intent of Section147 of the Act, in Para No.15 of the impugned order, thelearned Single Bench proceeds to take note of the avermentsset out in the counter affidavit filed by the AssessingOfficer, more particularly in Para Nos.16 to 20, however, wefind that the rejoinder filed by the assessee to theseaverments made in the counter affidavit have not been takennote of. Thereafter, the Court proceeds to hold that, whenthere are certain discrepancies with reference to informationhttps://hcservices.ecourts.gov.in/hcservices/provided and the Assessing Officer has reason to believe that certain information were not furnished truly and fully inrespect of the information provided at the time of assessment,the authority is empowered to reopen the proceedings. Thefurther observations made in Para No.16 of the impugned orderare all observations pertaining to the scope of Section 147and explanation contained thereunder, and nothing pertainingto the assessee's case. certain information were not furnished truly and fully inrespect of the information provided at the time of assessment,the authority is empowered to reopen the proceedings. Thefurther observations made in Para No.16 of the impugned orderare all observations pertaining to the scope of Section 147and explanation contained thereunder, and nothing pertainingto the assessee's case. 11.Thus, we can safely conclude that the learned SingleBench had dismissed the writ petition largely due to the standtaken by the Assessing Officer in his counter affidavit inPara Nos.16 to 20. As pointed out earlier, the rejoinder,which was filed by the assessee to these averments, have notbeen adverted to or taken into consideration. 12.Be that as it may, we shall examine as to whether thereopening was valid. Undisputedly, the reopening of theassessment, having been done after four years, the firstproviso under Seciton 147 of the Act would stand attracted,which would state that, where an assessment under Sub-Section3 of Section 143 or Section 147 has been made for the relevantAssessment Year, no action shall be taken under Section 147after the expiry of four years from the end of the relevantAssessment Year, unless any income chargeable to tax hasescaped assessment for such Assessment Year by reason of thefailure on the part of the assessee to make a return underSection 139 or in response to a notice issued under Sub-Section (1) of Section 142 or Section 148 or to disclose fullyand truly all material facts necessary for the assessment forthat Assessment Year. The first limb of the proviso dealswith the assessment under Sub-Section 3 of Section 143 or anyassessment under Section 147. This situation would arise onlywhen the return of income has not been filed by the assessee,which admittedly is not the case with that of the assesseebefore us. Therefore, the proceedings initiated by theAssessing Officer is undoubtedly the reassessment proceedings,as the assessment has already been completed under Section 143(3) of the Act. If such is the position, the AssessingOfficer should be able to point out that, income chargeable totax has escaped assessment by reasons of the failure on thepart of the assessee to disclose fully and truly all materialfacts necessary for the assessment. 13.The reasons for reopening, as mentioned above, areunder three heads. However, there is no allegation thatincome chargeable to tax has escaped assessment on account ofthe failure on the part of the assessee to disclose fully andtruly all material facts necessary for the assessment. We sayso, because, in the reasons for reopening dated 07.05.2018,the Assessing Officer would state that, on going through theassessee's miscellaneous records for the Assessment Year underconsideration, the observations as pointed out in the reasonsare found. Thus, it is clear that the Assessing Officer hashttps://hcservices.ecourts.gov.in/hcservices/not attributed any failure on the part of the assessee to fully and truly disclose all material particulars required tobe disclosed for the assessment. If such is the case, thereopening of the assessment would be bad in law. 14.The Assessing Officer, while considering theobjections to the reopening and rejecting the same, wouldstate that the scrutiny assessment under Section 143(3) was alimited scrutiny and the issue which he has pointed out hasnever been the subject matter of the scrutiny assessment. Thelearned Standing Counsel, to support such contention, hasreferred to the official records, which is a data-sheetmaintained by the Department, where the details of the case ofthe assessee and the reasons for scrutiny selection had beenmentioned, and pointing out to Column No.8 of the details, itis submitted that the type of scrutiny was limited andtherefore, the issues pointed out in the reasons, dated07.05.2018, were not subject matter of the scrutiny assessmentunder Section 143(3) of the Act. 15.There is nothing on record to show that the scrutinyassessment was a limited scrutiny and duly intimated to theassessee accordingly. This is clear from the Annexure to thenotice issued to the assessee, dated 15.07.2013, which is thenotice under Section 142(1), which contains an Annexure,wherein, the following details were called for from theassessee : “1.A copy of the return of income ifelectronically filed and also copies of any otheroriginal/revised return of income submitted for thesame AY 2011-12. 2.Detailed computation of total income & alsodetailed computation of income under different headsof income and evidences thereof. 3.Evidences of payments of taxes claimed in thereturn of income.4.Details and evidence of claim of deductionunder Chapter VI-A.5.Details and evidence of incomes claimedexempt/incomes claimed as taxable at a rate belownormal rate of tax. 6.Brief profile of the business or professioncarried out by the assessee for A.Y.2011-12. 7.Details of all bank accounts (viz. Name, a/cNo., type of a/c, branch & bank name etc), depositsand bank statement for A.Y.2011-12. 8.Details of sale and purchases of all movableand immovable properties during the A.Y.2011-12.” 16.The assessee had submitted his reply and furnished acopy of the e-filed Income Tax Return, detailed statement ofhttps://hcservices.ecourts.gov.in/hcservices/computation of total income reflecting the income disclosed under different heads and enclosing such details, print out ofForm 26AS, documents to support the deduction claim by theassessee under Section 80-C and 80-G, details regarding thedividend income and a very detailed explanation with regard tothe immovable property transaction, which is the core issue inthe reopening. The assessee had enclosed as many as tendocuments, including the copies of the sale deeds, etc. Theassessee also enclosed the statement from Mutual Funds and thecontract notes from the broker in support of the same, detailsof Bank accounts, separate statement showing sources andapplications of funds for the purchase and construction of newhouse property and also the details as to his profession thathe was a partner of a Chartered Accountant firm placed atChennai and he is not involved in any other activities. Heenclosed the audited income and expenditure account, BalanceSheet, partners capital accounts and current accounts,computation of total income and ITR-V of the said firm andstated that these details will explain the remuneration drawnby him from the firm during the year and his share of profitfrom the firm and the transactions through his capital accountand current account. With regard to the 26AS statement, feereceipts from Brakes India Ltd. and Turbo Energy Ltd. and theTDS recoveries were shown to have been reflected in thestatement and detailed explanation had been given.Thereafter, the assessee has explained about the sale proceedsreceived from the sale of a car and other details concerningthe purchase of a new car, which has been duly accounted bythe partnership firm. The assessee also enclosed the copiesof the housing loan statement of account of SBI, as well asIndia Bulls Housing Finance Ltd., in support of his claim fordeduction for housing loan interest against the income fromproperty. The assessee had disclosed the particulars relatingto the loan and the property which it pertains to. Theassessee, therefore, earnestly hoped that the details anddocuments enclosed will meet the requirements and queriesraised by the Assessing Officer and requested him to completethe assessment at the earliest convenience. 17.The learned counsel for the appellant has drawn theattention of this Court to all the details and statements,which were pointed out in the explanation dated 30.08.2013,submitted by the assessee. 17.The learned counsel for the appellant has drawn theattention of this Court to all the details and statements,which were pointed out in the explanation dated 30.08.2013,submitted by the assessee. 18.It appears that, once again, the assessee was calledto attend the hearing and he furnished the written submissionson 07.01.2014, furnishing particulars of computation of LongTerm Capital Gains on the sale of the house property atKodambakkam and also the particulars regarding the GuidelineValue for the purpose of Stamp Duty, Market Value, etc.Thereafter, there has been a further hearing, which wasattended by the assessee on 08.01.2014, following which, hehad submitted another representation on 09.01.2014, enclosingthe complete set of copy of the Income Tax Returnhttps://hcservices.ecourts.gov.in/hcservices/Acknowledgment and statement of total income for the Assessment Year 1991-92, which was published as evidence ofthe amount of cost of construction incurred by him forconstruction of the house during the year ended 31.03.1991,the statement of computation of income, the complete detailswith regard to the cost of construction of Rs.3,85,000/-incurred by the assessee, the sources of funds for the same,separately for each of the Floors, namely, Ground Floor andFirst Floor and additional expenditure which has been incurredby him, etc. After all these proceedings, the assessment wascompleted vide order dated 20.01.2014. 19.The reasons we have set out above are to support ourconclusion that the scrutiny assessment was not a limitedscrutiny. Apart from the fact that there is nothing on recordto show that the assessee was intimated that the scrutiny wasa limited scrutiny, in fact, we find that, on more than fiveoccasions, the case has been discussed by the AssessingOfficer with the assessee and on each occasion, the assesseehas cooperated and furnished details. There is no allegationthat the details were either inadequate or not fully or trulyfurnished or the facts or figures were distorted. Thus, theAssessing Officer, having been satisfied, has completed theassessment under Section 143(3) of the Act. 20.The Revenue would point out that the Assessment Orderis a brief order, which does not elaborately set out thediscussion. Undoubtedly, the Assessing Officer is not a Courtor judicially trained officer to write a judgment. Thedetails called for by him, pursuant to the notice underSection 142(1), and the response of the assessee to all thequeries, have to be taken note of and those details alsoshould be read along with the Assessment Order, dated20.01.2014, and if it is done so, then it cannot be said thatthe assessment under Section 143(3) was without dueapplication of mind. 21.In the reasons for reopening, dated 07.05.2018, allthe materials which were subject matter of scrutiny assessmenthave been verbatim taken up on the alleged ground ofreopening. That apart, these materials were culled out fromthe records, relating to the assessee, which are stated to bemiscellaneous records. In any event, they are part of theassessment records and in the absence of any contention thatthe income chargeable to tax has escaped assessment on accountof the reason of failure on the part of the assessee todisclose fully and truly all material facts, if a reopening isdone, it would clearly amount to a case of change of opinionand a review of the earlier Assessment Order, which isimpermissible in law. 22.The argument of the learned Senior Standing Counsel isto read Section 149(1)(b) along with the first proviso toSection 147. These provisions are referred to support thehttps://hcservices.ecourts.gov.in/hcservices/argument that the Assessing Officer is entitled to make the 22.The argument of the learned Senior Standing Counsel isto read Section 149(1)(b) along with the first proviso toSection 147. These provisions are referred to support thehttps://hcservices.ecourts.gov.in/hcservices/argument that the Assessing Officer is entitled to make the assessment in the instant case and the question of failure todisclose fully and truly all facts is not subject matter ofthe present case. We do not agree with the said submission,since the proviso under Section 147 deals with the assessmentunder Section 143(3) or the assessment under Section 147,which can occur only when the return of income was not filedby the assessee, which is not the case of the assessee in theinstant case. Therefore, we are not convinced with the standof the Revenue in this regard. 23.As pointed out earlier, the learned Single Bench haddismissed the writ petition largely referring to the avermentscontained in the counter affidavit filed by the AssessingOfficer in Para Nos.16 to 20. Some of those paragraphsparticularly deal with the statements of law, however, withregard to the averments in Para No.17 of the counteraffidavit, the assessee had specifically stated that theaverment that the case was selected for limited scrutiny, isfactually wrong, as it is evidenced by the entire assessmentrecords already available with the Assessing Officer, whichwere referred to by the assessee in the objection letter,dated 12.05.2018, and a copy of the first reply letter, dated30.08.2013, filed before the Assessing Officer during theoriginal assessment proceedings, was also enclosed as Annexureto the objection letter dated 12.05.2018. Further, theassessee had rebutted the averments in Para No.18 of thecounter affidavit, by giving full details regarding theprofessional receipts and that the credit of TDS on thosecredits was claimed in the hands of assessee, was absolutelyfalse. The details in this regard have also been furnished inthe rejoinder affidavit in Para No.18. Likewise, theaverments in Para Nos.19 and 20 of the counter affidavit havealso been denied and it was pointed out that the assessee hadsubmitted copies of the Bank statements, as well as documentsevidencing the sale and purchase of the property, and all thetransactions were duly routed through the Bank and thestatement of accounts were furnished and examined by theAssessing Officer and it cannot be stated that those aspectswere neither called for nor examined. These averments werenever tested by the learned Writ Court for its correctness,but the learned Writ Court solely relied on the averments inthe counter affidavit, which have been controverted and deniedby the assessee, by giving full particulars. 24.Thus, we are of the view that the reopening ofassessment was a clear case of change of opinion and what theAssessing Officer attempted was to review the scrutinyassessment, which is impermissible in law. 25.For all the above reasons, the Writ Appeal is allowedhttps://hcservices.ecourts.gov.in/hcservices/and the order passed in the writ petition is set aside. Consequently, the writ petition is allowed and the orderimpugned in the writ petition, dated 29.03.2018, and theentire reassessment proceedings are quashed. No costs.Consequently, connected Miscellaneous Petition is closed. Sd/- Assistant Registrar(CS III) //True Copy// Sub Assistant Registrar mkn To The Assistant Commissioner of Income Tax,Non-Corporate Circle, 14(1)121, Mahatma Gandhi Road,Chennai – 600 034. +1 cc to M/s.Hema Murali Krishnan, Advocate Sr.NO. 45739 W.A.No.2269 of 2021RR(CO)A.SK(26.10.2021)