Wa/2563/2018 Of A.sridevi v. The Income Tax Officer

IN THE HIGH COURT OF JUDICATURE AT MADRAS RESERVED ON : 22.11.2018 PRONOUNCED ON: 03.12.2018 CORAM THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAMandTHE HONOURABLE MR.JUSTICE N.SATHISH KUMAR Writ Appeal No.2563 of 2018and C.M.P.Nos.20763 & 20766 of 2018 Smt A. Sridevi,L/H of Late Sri L.S.Abhinesh Babu,No.32, Nathamuni Street,Naduvankarai, Anna Nagar,Chennai 600 040. ...Appellant/Petitioner-vs- The Income Tax Officer,Non-Corporate Ward 16(1),Chennai – 600 034. ...Respondent/Respondent Prayer:- Writ Appeal filed under Clause 15 of LettersPatent, to set aside the order dated 04.10.2018 passed inW.P.No.20625 of 2016 by this Court. Writ Petition filed under Article 226 of theConstitution of India praying for the issuance of a Writ ofCertiorarified Mandamus to call for the records of therespondent and quash the order in PAN/ /NCW 16(1)/16-17dated 26.05.2016 and direct the respondent to drop thereassessment proceedings for the assessment year 2009-10. For Petitioner :Mr.Vijayaraghavan for Mr.Subbaraya Aiyar Padmanabhan & Ramamani For Respondents:Mrs.Hema Muralikrishnan Senior Standing Counsel JUDGMENT This appeal, by the appellant/assessee, is directedagainst the order passed in W.P.No.20625 of 2016, dated04.10.2018. The said Writ Petition was filed by the appellantchallenging the proceedings of the respondent dated 26.05.2016.By the said proceedings, the respondent rejected the objectionsfiled by the assessee for reopening the assessment under Section147 of the Income Tax Act, 1961, (hereinafter referred to as“the Act”) for the assessment year 2009-2010. 2. The assessee filed return of income for the assessmentyear 2008-2009 on 30.07.2009, declaring a total income ofRs.14,58,174/-, comprising of income from salary and income fromother sources. The return was processed under Section 143(1) ofthe Act. The assessment was reopened by issuance of a noticeunder Section 148 of the Act, dated 21.02.2011. A letter, dated02.11.2011, was sent to the assessee fixing the date of personalhearing on 12.11.2011. In response to the same, the assesseesubmitted a letter requesting to treat the return already filedon 30.07.2009, as one filed in response to the notice underSection 148 of the Act. During the course of hearing, theappellant/assessee was asked to file details of sources andnature of cash deposits made during the previous year in savingsbank account maintained with Axis Bank, Anna Nagar Branch,Chennai. The assessee's authorized representative filed copiesof bank statements in respect of savings bank account maintainedwith Axis Bank, Anna Nagar Branch and Tamil Nadu MercantileBank, Aminjikarai Branch, on 21.12.2011, followed by letters,dated 29.12.2011 and 30.12.2011, setting out the details of realestate transactions undertaken by the appellant/assessee onbehalf of the company. The assessment was completed and an orderwas passed on 30.12.2011, by adding the short fall in cashwithdrawal of Rs.10,50,000/- as unexplained income under Section68 of the Act. 3. Subsequently, the assessment was reopened by issuance ofa notice under Section 148 of the Act, dated 25.03.2016. A replywas sent by the assessee requesting to treat the return alreadyfiled on 30.07.2009, as one filed in response to the noticeunder Section 148 of the Act and requested the reasons forreopening to be furnished. The respondent, by reply dated27.04.2016, furnished the reasons for reopening stating thatduring the financial year 2008-2009, relevant to the assessmentyear 2009-2010, one Mr.S.Nagarajan had received a sum of Rs.2.75crores from Sri.L.S.Abhinesha Babu for purchase of propertythrough his bank account, the sources for such advances maderequire to be verified. 3. Subsequently, the assessment was reopened by issuance ofa notice under Section 148 of the Act, dated 25.03.2016. A replywas sent by the assessee requesting to treat the return alreadyfiled on 30.07.2009, as one filed in response to the noticeunder Section 148 of the Act and requested the reasons forreopening to be furnished. The respondent, by reply dated27.04.2016, furnished the reasons for reopening stating thatduring the financial year 2008-2009, relevant to the assessmentyear 2009-2010, one Mr.S.Nagarajan had received a sum of Rs.2.75crores from Sri.L.S.Abhinesha Babu for purchase of propertythrough his bank account, the sources for such advances maderequire to be verified. 4. The appellant/assessee filed her objections dated06.05.2016, inter alia contending that during the course offirst reassessment proceedings, the assessee has produced copiesof bank statements and other records including the sources ofall deposits made in the account; the account of S.Nagarajanalso figured in the details of receipts and payments submitted;reassessment was completed after due verification of allpayments and proposal to reopen to re-verify the source ofadvances given by S.Nagarajan amounts to change of opinion; nonew material is available to conclude that income has escapedassessment for issuing notice under Section 148 of the Act;there has been full disclosure of all material facts by theassessee based on which assessment was completed under Section143(3) of the Act and by applying proviso to Section 147,reopening is barred by limitation. 5. The respondent considered the objections and passed anorder dated 26.05.2016, rejecting the objections filed by theassessee on the ground that the reopening of assessment was toverify the cash deposits in various banks on various dates andno other issues were considered; the issue now raised is thatthe assessee has advanced several crores of rupees during thesaid year, but the source was not explained and in the return ofincome, the assessee has filed only statement showingcomputation of income consisting of salary income and interestincome from other sources and no other documents were furnished;the assessee ought to have filed balance sheet/statement ofaffairs which he has failed to do, which shows that the assesseehas not disclosed fully and truly all the materials necessaryfor the assessment. 6. Further, it was stated that the information that theassessee's advance Rs.2.75 crores was received by the AssessingOfficer at the time of scrutiny in the case of borrower only andnot at the time of scrutiny assessment of the assessee's return.This order dated 26.05.2016 was impugned in the Writ Petition.The Writ Petition was dismissed by order dated 04.10.2018,holding that the advance made to S.Nagarajan to the tune ofRs.2.75 crores was not disclosed in the original return filed bythe assessee as on 30.07.2009, and though the assessment wasreopened under Section 148 of the Act by notice dated21.02.2011, it was for a different purpose, namely, forverifying the details of sources and nature of cash depositsmade by the assessee in savings bank account maintained to thetune of Rs.93,00,000/-. Even during the reassessmentproceedings, the assessee did not file any fresh return, butwanted the return dated 30.07.2009, be treated as return inresponse to the notice for reopening. 7. Further, the Court held that there is no bar forreopening an assessment more than once within the timeprescribed, if the Assessing Officer has reason to believe thatincome has escaped assessment based on tangible material and incases, if reopening is done after four years, the requirement tobe satisfied is that the assessee had failed to disclose fullyand truly all material facts necessary for its assessment. Thus,the Court concluded that whatever was the material, which wasconsidered in the reassessment proceedings, was relatable to aparticular issue and the present reopening proceedings is onaccount of the assessee not fully and truly disclosing allmaterial facts necessary for its assessment. 8. Mr.Vijayaraghavan, learned counsel appearing forMr.Subbaraya Aiyar Padmanabhan and Ramamani, learned counsel forthe appellant/assessee while reiterating the grounds raised inthe Writ Petition has drawn the attention of this Court to theletters written by the authorized representative of theassessee, dated 29.12.2011 and 30.12.2011 and the cash flowstatement and the assessment order, dated 30.12.2011, whereinthe Assessing Officer has recorded that the assessee was askedto file copies of bank accounts and other evidences in supportof her claim and the authorized representative has filed detailsof receipts and payments in respect of the previous year andstated that there are sufficient cash withdrawals prior to thecash deposits of Rs.93,00,000/-. Therefore, it is submittedthat all details were considered in the first reopening of theassessment and the reasons for reopening does not place anyomission on the part of the assessee to fully and truly discloseany material for its assessment and only states that the sourcefor advances has to be verified, which was verified in theearlier proceedings and therefore, the impugned reopening is aclear case of change of opinion. Further, it is submitted thatthe Assessing Officer should assign reasons for reopening andcannot make a rowing enquiry as done in the case on hand. 9. Further, it is contended that no mention of satisfactionof escapement of income assessable to tax has been recorded bythe Assessing Officer in the reasons for reopening dated27.04.2016. Therefore, it is submitted that the reopening isclearly a change of opinion. Further, it is submitted that theduty cast upon the assessee is only to disclose all primaryfacts and it is not for the assessee to prepare a draftassessment order or what inferences the Assessing Officer shouldtake based on the facts disclosed. In support of hiscontention, the learned counsel referred to the decision of theHon'ble Supreme Court in Calcutta Discount Co Ltd Vs. Income TaxOfficer and another (1961) 41 ITR 0191; the decision of thisCourt in Fenner (India) Ltd Vs. DCIT (2000) 241 ITR 0672; the decision of the Division Bench of this Court in CIT Vs. ElgiUltra Industries (2008) 296 ITR 0573; and the decision of thisCourt in Tractors and Farm Equipment Limited Vs. ACIT in T.C.(A).No.1548 of 2008, dated 31.10.2018. Ontheabovegrounds, the learned counsel prays for setting aside the orderpassed by the learned Writ Court and allowing the Writ Appeal. 10. Mrs.Hema Muralikrishnan, learned Senior StandingCounsel appearing for the respondent/Revenue referred to theExplanation I to Section 147 of the Act and submitted thatreopening was well within the powers conferred under the Act andthe first reopening was only for cash deposits with Axis Bankaccount and no opinion was formed by the Assessing Officer inrespect of other matters. The advances made by the assessee cameto the knowledge of the Assessing Officer only after theinformation was given by the Assessing Officer of S.Nagarajanand therefore, the reopening is not a case of change of opinion,but a case where the assessee failed to furnish fully and trulyall materials required for its assessment. 10. Mrs.Hema Muralikrishnan, learned Senior StandingCounsel appearing for the respondent/Revenue referred to theExplanation I to Section 147 of the Act and submitted thatreopening was well within the powers conferred under the Act andthe first reopening was only for cash deposits with Axis Bankaccount and no opinion was formed by the Assessing Officer inrespect of other matters. The advances made by the assessee cameto the knowledge of the Assessing Officer only after theinformation was given by the Assessing Officer of S.Nagarajanand therefore, the reopening is not a case of change of opinion,but a case where the assessee failed to furnish fully and trulyall materials required for its assessment. 11. Further, it is pointed out that, even in the firstassessment proceedings, dated 30.12.2011, the assessee was notable to explain the cash withdrawals and there was a short fallof Rs.10,15,000/- which will clearly go to show that the cashadvance given to S.Nagarajan was never disclosed. It is furthersubmitted that the decisions relied on by the learned counselappearing for the appellant/assessee all pertain to scrutinyassessment under Section 143(3) of the Act followed by reopeningunder Section 147, whereas in the instant case, the initialintimation was under Section 143(1) of the Act. Therefore, noopinion was formed when the order under Section 143(3) read withSection 147 of the Act, dated 30.12.2011, was formed by theAssessing Officer with regard to the advances given to the saidS.Nagarajan. Therefore, it is submitted that the reopening ofthe assessment was valid and the learned Writ Court was correctin dismissing the Writ Petition. 12. Heard the learned counsel appearing on either side andperused the materials available on record. 13. The law on the subject, namely, what would be a validreopening proceeding under Section 147 of the Act is fairly wellsettled as on date. The earliest of the oft quoted decision isthat of the Apex Court in Calcutta Discount Company Limited(supra) arising under 1922 Act, questioning the correctness ofthe re-assessement done under Section 34 of the said Act. TheHon'ble Supreme Court pointed out that the duty of the assesseeis to make full and true disclosure of all primary facts andonce it is done, it is for the Assessing Authority to decidewhat inference of fact or law could be drawn therefrom. The law does not require the assessee to state the conclusion that couldreasonably be drawn from the primary facts and if there were, infact, some reasonable grounds for thinking that there had beenany non-disclosure as regards any primary fact, which could havea material bearing on the question of “under-assessment”, thatwould be sufficient to give jurisdiction to the ITO to issuenotices under Section 34 and whether these grounds were adequateor not for arriving at the conclusion that there was a non-disclosure of material facts could not be opened for the Court'sinvestigation. 14. In Fenner (India) Limited, (supra), the Court wastesting the correctness of a re-assessment proceeding initiatedbeyond the period of four years from the end of the assessmentyear and it was held that the Assessing Officer must necessarilyrecord not only his reasonable belief that income has escapedassessment, but also the default or failure committed by theassessee and failure to do so would vitiate the notice and theentire proceedings. 14. In Fenner (India) Limited, (supra), the Court wastesting the correctness of a re-assessment proceeding initiatedbeyond the period of four years from the end of the assessmentyear and it was held that the Assessing Officer must necessarilyrecord not only his reasonable belief that income has escapedassessment, but also the default or failure committed by theassessee and failure to do so would vitiate the notice and theentire proceedings. 15. In Elgi Ultra Industries, (supra), the Division Benchupheld the order passed by the Tribunal on the ground that allthe material facts were available at the time of making theoriginal assessment. Thus, the sheet anchor of the arguments ofMr.Vijayaraghavan is that the assessee was called upon toexplain the sources and nature of cash deposits and through herauthorized representative had filed the necessary detailsincluding the cash flow, which reflected the payments made toS.Nagarajan as advance being a sum of Rs.27,50,000/-. Therefore,it is submitted that the materials were available even at thetime, when the reassessment proceedings took place and thepresent reopening is a clear case of change of opinion. Tosupport such contention, the assessment order, dated 30.12.2011,was referred to. 16. We have perused the order and we find that theAssessing Officer has recorded that during the course ofhearing, the authorized representative of the assessee was askedto file details of sources and nature of cash deposits madeduring the previous year in savings bank account maintained withAxis Bank, Anna Nagar Branch, Chennai to the tune ofRs.93,00,000/-. Further, the assessee was asked to file copiesof bank accounts and other evidences in support of her claim. 17. The assessing officer has recorded that the authorizedrepresentative of the assessee filed details of receipts andpayments in respect of the previous year and stated that therewere sufficient cash withdrawals prior to the cash deposit ofRs.93,00,000/-. One fact, which is visibly clear, from what hasbeen recorded in the assessment order, is that the details called for pertaining to the savings bank account maintained inAxis Bank, Anna Nagar Branch, Chennai and the details, whichwere furnished by the assessee also pertain to the said amount.Therefore, merely because a cash flow statement was appended tothe letter of the assessee's authorized representative dated30.12.2011, cannot be taken to be establish that the assesseehas made full and true disclosure of the advance paid toS.Nagarajan. One more factor which has weighed in our minds iseven in the first reassessment proceedings dated 30.12.2011,there was a short fall of Rs.10,50,000/-. Therefore, we holdthat the assessee did not fully and truly disclosed allmaterials necessary for its assessment. 18. Mr.Vijayaraghavan, next argued that the AssessingOfficer has not recorded any reasons for reopening and he hasnot formed any opinion nor recorded satisfaction that there hasbeen failure to disclose material. 19. We have perused the reasons for reopening ascommunicated to the assessee vide communication dated 27.04.2016and the reason for reopening is regards the source for theadvance of Rs.2.75crores to S.Nagarajan. Reading of the reasons,clearly shows that the assessing officer intended to verify thetransactions as it was not disclosed by the assessee. Thus, theomission on the part of the assessee has been pointed out andthe reason why the Assessing Officer wants to verify is alsoclear from reading the reasons for reopening. Therefore, we donot agree with the submissions of the learned counsel that noopinion was formed by the Assessing Officer for being satisfiedthat there is a case for reopening. 19. We have perused the reasons for reopening ascommunicated to the assessee vide communication dated 27.04.2016and the reason for reopening is regards the source for theadvance of Rs.2.75crores to S.Nagarajan. Reading of the reasons,clearly shows that the assessing officer intended to verify thetransactions as it was not disclosed by the assessee. Thus, theomission on the part of the assessee has been pointed out andthe reason why the Assessing Officer wants to verify is alsoclear from reading the reasons for reopening. Therefore, we donot agree with the submissions of the learned counsel that noopinion was formed by the Assessing Officer for being satisfiedthat there is a case for reopening. 20. Furthermore, the assessee has not filed the balancesheet or statement of affairs as noted by the Assessing Officerand in the return of income, the assessee has filed onlystatement showing computation of income consisting of salaryincome and interest income from other sources. Even when thereassessment proceedings were commenced by issuance of notice,dated 02.11.2011, the assessee did not file a fresh return ofincome, but informed the Assessing Officer to treat the returnof income filed on 30.07.2009, as return in response to thenotice under Section 147. Thus, whatever was placed before theAssessing Officer through their authorized representative'sletter dated 30.12.2011, cannot be taken to be full and truedisclosure pertaining to the transactions with S.Nagarajan. 21. Thus, we are satisfied with the reasons assigned forreopening of assessment is just and proper and no opinion wasformed during the assessment proceedings dated 30.12.2011, forit to be termed as a 'change of opinion', more so, when theassessee has failed to fully and truly disclose all the https://hcservices.ecourts.gov.in/hcservices/ materials necessary for its assessment. Thus, the reasonsassigned by the learned Writ Court is just and proper and doesnot call for any interference. In the result, the Writ Appeal fails and it is dismissed.Consequently, connected Miscellaneous Petitions are closed. Nocosts. pbn/nsd Sd/-Assistant Registrar //True Copy// Sub Assistant RegistrarToThe Income Tax Officer,Non-Corporate Ward 16(1),Chennai – 600 034. +1cc to M/s.Subbaraya Aiyar, Advocate, S.R.No.83222+1cc to M/s.Hema Muralikrishnan, Advocate, S.R.No.82807W.A.No.2563 of 2018rv(co)kak(28/12/2018)