Wp/20625/2016 Of Smt.a.sridevi v. The Income Tax Officer

THE HIGH COURT OF JUDICATURE AT MADRASReserved on 26.09.2018Delivered on 04.10.2018CORAM THE HONOURABLE MR.JUSTICE K.RAVICHANDRABAABUW.P.No.20625 of 2016andW.M.P.No.17707 of 2016A.Sridevi.. Petitionervs.The Income Tax Officer,Non-Corporate Ward 16(1),Chennai – 600 034...RespondentWrit Petition filed under Article 226 of the Constitution ofIndia praying for the issuance of a Writ of CertiorarifiedMandamus to call for the records of the respondent and quash theorder in PAN/ /NCW16(1)/16-17 dated 26.05.2016 anddirect the respondent to drop the reassessment proceedings forthe assessment year 2009-10.For Petitioner : Mr.R.Venkatanarayanan for M/s. Subbaraya Aiyar PadmanabanFor Respondent : Mrs.Hema Muralikirshnan, Senior Standing Counsel for Income Tax The petitioner is aggrieved against the order of therespondent dated 26.05.2016, in rejecting the objections raisedby the petitioner against reopening of the assessment.2. The case of the petitioner is as follows: The petitioner is an assessee under the respondent. For theassessment year 2008-09, the return of income was filed on30.07.2009 declaring the total income of Rs.14,58,174/-. Thereturn was processed under Section 143(1) of the Income Tax Act.The case was reopened by issuing a notice dated 21.02.2011 underSection 148. The respondent was informed that the return already https://hcservices.ecourts.gov.in/hcservices/ filed on 30.07.2009 has to be treated as the one filed inresponse to the notice under Section 148 of the said Act. Duringthe course of hearing, the petitioner was asked the details ofsources and nature of cash deposits. The petitioner was asked tofile the copies of bank accounts and other evidences. Theauthorised representative of the petitioner filed copies ofBank statement. The Assessing Officer, on scrutiny of bankaccounts, completed the reassessment under section 143(3) readwith section 147 on 30.12.2011 by adding the short fall in cashwithdrawal of Rs.10,50,000/- as unexplained income. Therespondent once again reopened the assessment by issuing noticeunder section 148 on 25.03.2016. The petitioner filed a replydated 11.04.2016 to treat the return already filed on 30.07.2009as the one filed in response to the notice and also requested tofurnish the reasons for reopening the assessment. Therespondent, vide letter dated 27.04.2016 furnished the reasonsby stating that during the financial year 2008-09, oneS.Nagarajan has received a sum of Rs.2.75 crores from thedeceased L.S.Abinesh, husband of the petitioner, for purchase ofproperty through his bank account and that sources for suchadvance made require to be verified. The petitioner, throughletter dated 06.05.2016, filed their objections to reopen theassessment by stating that during the course of the firstreassessment proceedings, copies of bank statements, receiptsand payments account were produced including the sources of alldeposits made and that the assessment was completed after dueverification of all receipts and payments and the sources andtherefore, the proposal to reopen to re-verify the source ofadvance given to S.Nagaraj amounts to change of opinion. It wasalso informed that there was no material available to concludethat the income has escaped assessment for issuing notice undersection 148. The petitioner had also informed the respondentthat there had been full and true disclosure of all materialfacts. However, the respondent through the impugned proceedingsrejected the objection. The very reopening of the assessment forthe second time beyond four years is barred by limitation. 3. A counter affidavit is filed by the respondent wherein itis stated as follows: 3. A counter affidavit is filed by the respondent wherein itis stated as follows: The writ petition is not maintainable since the petitioneris having effective and alternative remedy once the assessmentorder is passed under the Act. The reopening of the assessmentwas not barred by limitation. The assessee has not disclosed theadvance made to the said S.Nagarajan for a sum of Rs.2.75 crorestowards the purchase of property at Adyar, Chennai. Thus, therewas failure on the part of the Assessee in not disclosing fullyand truly, all material facts. Based on the tangible informationavailable with valid reason existed, the conclusion was arrivedthat income had escaped assessment. As the assessee has notfully and truly disclosed the material facts, the issuance of notice beyond four years is not barred by limitation. Thecontention of the assessee that the assessment has been reopenedon the basis of the existing material and that no newinformation has come to the knowledge of the Assessing Officeris an incorrect statement. The issue during the firstreassessment proceedings pertains to the examination of thesources of the cash deposit made by the assessee in its bankaccount maintained at Axis Bank amounting to Rs.93 lakhs only.It is evident from the return of income filed as well as fromthe assessment order passed that the issue of advance given toNagarajan, which was never disclosed, was not examined in theorder passed by the Assessing Officer. The Assessee is relyingon the fact that she had interalia produced the Bank statementof Tamilnadu Mercantile Bank also before the Assessing Officerwherein the name of Nagarajan figures and therefore, the sametantamount to specific information available in respect of theproperty purchased dealing with S.Nagarajan. This clarified thatthe evidence submitted by her including the bank statement canbe treated as sufficient and relevant only insofar as the issueof verification of sources for cash deposits and there has beenno mention by the Assessee regarding the particulars of purchaseof property transaction with S.Nagarajan as well as its sourceas there was no queries regarding the issue in the originalreassessment proceedings. Mere production of bank statementetc., does not amount to disclosure made by the assessee on thesaid issue and the said information was specifically received bythe Assessing Officer only after completion of the first re-assessment and the said information was never disclosed by theassessee prior to it. Therefore, it cannot be stated that thereopening of assessment now initiated was on the basis ofexisting material or amount to change of opinion. 4. The petitioner filed a reply to the counter affidavitwherein it is stated as follows: The return of income tax filed in Form No.1 and 2 does notcontain in production for disclosure of advances given and itcontains only the income tax returned. However, during the firstre-assessment proceedings, the petitioner has furnished theentire bank account along with details of all receipts andpayments wherein the advance made to Nagarajan amounting toRs.2.75 crores is also mentioned. Therefore, there is no failureon the part of the assessee to disclose the advance made toNagarajan during the re-assessment proceedings. 5. Heard learned counsel for the petitioner and the learnedcounsel appearing for the respondents. 6. The petitioner is aggrieved against the reopening of theassessment. The challenge made in this writ petition is againstthe proceedings of the respondent in rejecting the objection to https://hcservices.ecourts.gov.in/hcservices/ 5. Heard learned counsel for the petitioner and the learnedcounsel appearing for the respondents. 6. The petitioner is aggrieved against the reopening of theassessment. The challenge made in this writ petition is againstthe proceedings of the respondent in rejecting the objection to https://hcservices.ecourts.gov.in/hcservices/ reopen the assessment. The first objection raised by thepetitioner against such reopening is on the ground oflimitation. According to the petitioner, when the AssessingOfficer completed the re-assessment under Section 143(3) readwith 147 on 30.12.2011, issuing of notice once again undersection 148 on 25.03.2016 is barred by limitation. On the otherhand, it is the case of the Revenue that the subject matterescapement of income namely, an advance of Rs.2.75 crores madeto one S.Nagarajan for purchase of land was not shown in theoriginal return filed for the assessment year 2009-10 andtherefore, as per proviso to Section 147, notice issued toreopen even after the expiry of four years, but within sixyears, is legal and sustainable. It is the further contention ofthe Revenue that disclosure of certain details during theearlier reassessment proceedings with regard to the presentsubject matter transaction cannot be treated as full and truedisclosure of the material facts while the assessee made theoriginal return. 7. Let me now consider as to whether the reopening of theassessment is within the scope of Section 147. It is seen thatthe assessee, in respect of the assessment year 2009-10, filedthe return of income on 30.07.2009 declaring the total income ofRs.14,58,174/-. The return of income was processed under Section143(1). Therefore, it is evident that assessment of the originalreturn was already made under Section 143(1) based on thematerials filed/disclosed in the said return. Subsequently, theAssessing Officer reopened the assessment by issuing noticeunder section 148 dated 21.02.2011 by stating that he had reasonto believe that the income has escaped assessment. It is seenthat the issue involved in the above reassessment proceedingswas in respect of the cash deposits made by the assessee duringthe previous year in savings bank account maintained with AxisBank, Annanagar Branch, Chennai, to the tune of Rs.93 lakhs andthat the Assessing Officer wanted to verify the details ofsources and nature of such cash deposits. Therefore, it isevident that the present issue, namely, the advance made to thesaid S.Nagarajan to the tune of Rs.2.75 crores for purchase ofproperty was not the issue during the earlier reassessmentproceedings. Accordingly, in pursuant to the earlier reopeningof the assessment under section 147, an order of assessment waspassed on 30.12.2011 under section 143(3) read with section 147of the Income Tax Act, 1961. Only during the course of such re-assessment proceedings, the assessee has filed the statement ofreceipts and payments, wherein payment made to S.Nagarajanas advance to the tune of Rs.2.75 crores has also beenreferred to. The above said material filed before the AssessingOfficer, during the earlier re-assessment proceedings alsocontaining the disclosure of advance made to S.Nagarajan asstated supra, is sought to be relied on by the petitioner to contend that there was full and true disclosure of all materialfacts before the Assessing Officer and therefore, invoking thefirst proviso under section 147 to reopen the assessment beyondthe period of limitation, cannot be sustained. On the otherhand, the said material is sought to be relied on by the revenueas a tangible material for reopening the assessment once again. contend that there was full and true disclosure of all materialfacts before the Assessing Officer and therefore, invoking thefirst proviso under section 147 to reopen the assessment beyondthe period of limitation, cannot be sustained. On the otherhand, the said material is sought to be relied on by the revenueas a tangible material for reopening the assessment once again. 8. It is not in dispute that the original assessment can bereopened at any number of times within the period of limitationprescribed under section 147 read with section 149. In thiscase, admittedly, the impugned reopening of the assessment wasinitiated after the period of four years. In order to justifysuch reopening after such limitation period, the Revenue has tosatisfy that any one of the ingredients as stipulated under thefirst proviso to section 147 is satisfied. Section 147 reads asfollows: If the Assessing Officer has reason tobelieve that any income chargeable to tax hasescaped assessment for any assessment year,he may, subject to the provisions of sections148 to 153, assess or reassess such incomeand also any other income chargeable to taxwhich has escaped assessment and which comesto his notice subsequently in the course ofthe proceedings under this section, orrecompute the loss or the depreciationproceedings under this section or recomputethe loss or the depreciation allowance or anyother allowance, as the case may be, for theassessment year concerned.Provided that where an assessment undersub-section (3) of section 143 or the 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 yearby reason of the failure on the part of theassessee to make a return under section 139or in response to a notice issued under sub-section (1) of section 142 or section 148 orto disclose fully and truly all materialfacts necessary for his assessment, for thatassessment year:.......... 9. As per the above said provision of law, if the Revenuewants to invoke the extended period of limitation, by taking 9. As per the above said provision of law, if the Revenuewants to invoke the extended period of limitation, by taking shelter under the first proviso, it has to satisfy thatescapement of income was by the reason either by failure on thepart of the assessee to make the return under section 139 or inresponse to notice issued under sub section 142(1) or section148 or by his failure to disclose fully and truly all materialfacts necessary for that assessment year. In this case, it isthe claim of the Revenue that the assessee has failed todisclose fully and truly all material facts necessary for theassessment. Admittedly, the advance made to S.Nagarajan to thetune of Rs.2.75 crores was not disclosed in the original returnfiled by the Assessee as early as on 30.07.2009. It is true thatthe assessment was reopened subsequently, by issuing noticeunder section 148 dated 21.02.2011 but for different purpose,namely, for verifying the details of sources and nature ofcash deposits made by the assessee in the savings bank accountmaintained to the tune of Rs.93 lakhs. Admittedly, the assesseehas participated in the re-assessment proceedings and filedtheir reply requesting the Assessing Officer only to treat thereturn already filed on 30.07.2009 as the one filed in responseto the notice under section 148. it is further seen that duringthe course of hearing of re-assessment proceedings, theassessee's representative filed details of receipts and paymentsin respect of previous year. It is not in dispute that suchdetails of receipt and payments furnished by the assesseebefore the Assessing officer, during the earlier re-assessmentproceedings, also contained the advance made to the saidS.Nagarajan to the tune of Rs.2.75 lakhs. It is true that thisparticular detail regarding advance made to the said person isconsidered as a tangible material to reopen the assessment. Nodoubt, this material could give rise to a cause of action forthe reopening of the assessment once again, but it should beborne in mind that any number of reopening could be done onlywithin the time prescribed under section 148 read with section149. If the Assessing Officer is having reason to believe thatthe income has escaped the assessment, based on such tangiblematerial, he can reopen the assessment within four years. Ifsuch reopening is sought to be done after four years, then therequirement of satisfying either of the two conditions as statedin the first proviso to section 147 would arise. In this case,the Revenue contends that the assessee has failed to disclosefully and truly all material facts necessary for its assessment.In support of such contention, they seek to refer to theoriginal return. 10. Admittedly, the original return filed by the assesseedid not reflect the subject matter income, namely, the advancemade by the assessee to the said Nagarajan of a sum of Rs.2.75crores. When the earlier reopening proceedings was initiatedwith issuance of notice under section 148, the assessee did notfile a fresh return by disclosing the subject matter income and 10. Admittedly, the original return filed by the assesseedid not reflect the subject matter income, namely, the advancemade by the assessee to the said Nagarajan of a sum of Rs.2.75crores. When the earlier reopening proceedings was initiatedwith issuance of notice under section 148, the assessee did notfile a fresh return by disclosing the subject matter income and on the other hand, she made a request to treat the returnalready filed for the assessment year 2009-10, as the one filedin response to the said notice. Therefore, it is evident thatthe original return filed by the assessee, which is sought to betreated as that of the return filed in response to the noticeunder section 148, is in tact and did not disclose truly andfully the material facts, more particularly, in respect of thesubject matter transaction. Therefore, in my considered view thesaid transaction which came to the notice of the AssessingOfficer, while reopening the assessment earlier, is certainly, atangible material, based on which, the present reopening undersection 147, can be resorted to. Admittedly, this material wasnot existing at the time of original assessment. No doubt, it issought to be contended that the said material was placed beforethe Assessing Officer during the earlier reassessmentproceedings and however, he has not taken note of the same. Ihave already pointed out that the earlier reopening of theassessment was based on some other issue and therefore, theassessee is not justified in contending that no new material isavailable before the Assessing Officer for the presentreopening. On the other hand, it is evident that the subjectmatter material was placed only by default, as the first timebefore the Assessing Officer, during the hearing of earlierreassessment proceedings in respect of a different issue andtherefore, such material is undoubtedly, a new material for theAssessing Officer to resort to reopening of the assessment onceagain. At this juncture, it is to be noted that the assesseedid not file a fresh return in response to Section 148 noticeand only relied on the original return. Providing certainmaterials during the earlier reopening proceedings, cannot beequated with the disclosure of true and full material factsnecessary for the assessment, unless such material was alreadyplaced on record at the time of filing the original returnitself. Therefore, whatever the materials filed during thereassessment proceedings relatable to a particular issue, cannotbe considered as the true and full disclosure, unless suchmaterial is having any connection with the issue for which suchreopening was done. On the other hand, such material, notrelatable to the issue for the earlier reopening proceedings,will only take the shape of a new and tangible material beforethe Assessing Officer to reopen the assessment once again. 11. Now let me consider as to whether the reopening ofassessment is barred by limitation as contended by thepetitioner. It is seen that the assessee filed the originalreturn on 30.07.2009 and the same was processed under section143(1). Thereafter, the earlier reopening notice under section148 was issued on 21.02.2011, admittedly within time.Consequently, the re-assessment order under section 143(3) readwith section 147 was passed on 30.12.2011. Perusal of the said 11. Now let me consider as to whether the reopening ofassessment is barred by limitation as contended by thepetitioner. It is seen that the assessee filed the originalreturn on 30.07.2009 and the same was processed under section143(1). Thereafter, the earlier reopening notice under section148 was issued on 21.02.2011, admittedly within time.Consequently, the re-assessment order under section 143(3) readwith section 147 was passed on 30.12.2011. Perusal of the said order would show that the Assessing Officer has re-assessed theincome and finally arrived at the quantum of tax payable,surcharge and interest. Therefore, it is evident that theoriginal order of assessment made under Section 143 (1) havebeen re-assessed on 30.12.2011, and thus, the same is to beconstrued as having merged with the above re-assessment orderdated 30.12.2011. However, if the second reopening is sought tobe done, after the above said re-assessment, still, the same hasto be done within the limitation prescribed under the firstproviso to Section 147 read with Section 149. The relevantassessment year is 2009-10. The end of such assessment year fellon 31.03.2010. Admittedly, the escapement of assessment allegedin this case exceeds One lakh rupees. In view of the time limitprescribed under section 149(1)(b), such reopening can be donewithin the period of six years from the end of the assessmentyear 2009-10. Section 149(1) reads as follows: Time limit for notice.(1) No notice under section 148 shall beissued for the relevant assessment year,-(a) if four years have lapsed form theend of the relevant assessment year, unlessthe case falls under clause (b) or clause(c);(b) if four years, but not more than sixyears, have elapsed from the end of therelevant assessment year unless the incomechargeable to tax which has escapedassessment amounts to or is likely to amountto one lakh rupees or more for that year............. 12. Taking note of the fact that end of the assessment year2009-10 fell on 31.03.2010, the impugned notice under section148 having been issued on 15.03.2016, I am of the view that thesame is well within the period of six years and therefore, Ifind that the impugned reopening of the assessment is not barredby limitation as contended by the petitioner. 13. Learned counsel for the petitioner further contendedthat notice issued under section 148 dated 15.03.2016 did notallege that the assessee has not disclosed fully and truly allthe materials necessary for the assessment and therefore, theissuance of mere notice without such material averment is bad.I do not think that the learned counsel for the petitioner isjustified in making such contention, more particularly, when theproceedings issued with reasons for reopening the assessment isin clear and categorical terms stated that the assessee has notdisclosed fully and truly all the material details necessary forthe assessment. 14. Learned counsel for the petitioner relied on thedecisions reported in (2000)241 ITR 0672 (Fenner (India Ltd.vs. Deputy Commissioner of Income Tax), (2008) 296 ITR 0573(Commissioner of Income Tax vs. Elgi Ultra Industries Ltd.,) and2009 317 ITR 0066 (Thiagarajar Mills (P) Ltd. vs. DeputyCommissioner of Income Tax) to contend that mere escapement ofincome is not sufficient to justify the initiation of actionafter expiry of four years and such escapement must be by reasonof failure on the part of the assessee to disclose truly andfully the material facts necessary for the assessment. I havealready discussed supra and found that there was failure on thepart of the assessee in not disclosing truly and fully thematerial facts with regard to the subject matter transaction inthe original return. Therefore, the above decisions will nothelp the petitioner as the same are factually distinguishable. 15. (2010) 320 ITR 0561 (Commissioner of Income Tax vs.Kelvinator of India Ltd.) is relied on to contend that change ofopinion cannot be a reason for reopening the assessment. Hereagain, the above decision, which is factually distinguishable,will not help the petitioner since the question of change ofopinion does not arise in this case as admittedly, the subjectmatter income was never shown in the original return andtherefore, it cannot be said that the Assessing Officer hastaken a different opinion now on the said income. 16. Considering the above stated facts and circumstances,this Court is of the view that the petitioner has not made out acase for interfering with the impugned proceedings of reopeningthe assessment. Needless to state that it is open to thepetitioner to produce the relevant details required forcompleting the assessment, pursuant to the impugned proceedings.Accordingly, the Writ Petition fails and the same is dismissed.No costs. Consequently, connected miscellaneous petition isclosed. Sd/-- Assistant Registrar(CS V) //True Copy// Sub Assistant Registrar vsi https://hcservices.ecourts.gov.in/hcservices/ To The Income Tax Officer,Non-Corporate Ward 16(1),Chennai – 600 034. +1cc to M/s.Hema Muralikrishnan, Advocate SR.NO.68472+1cc to M/s.Subbaraya Aiyar, Advocate SR.NO.68786 SKV(CO)sm:23.10.2018W.P.No.20625 of 2016