Wp/28183/2018 Of M/S.pentamedia Graphics Ltd v. The Assistant Commissioner Of Income Tax

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED : 12.07.2021CORAM THE HONOURABLE MR.JUSTICE S.M.SUBRAMANIAM W.P.Nos.28183, 28200, 28204 & 28206 of 2018andW.M.P.Nos.32847, 32878, 32885 & 32891 of 2018 M/s.Pentamedia Graphics Limited,Rep., by its Director (Independent), Mr.R.Kalyanaraman,'Taurus', No.25, First Main Road,United India Colony, Kodambakkam,Chennai-600 024,Now at No.30A, Akbarabad,1[st] Street, Kodambakkam,Chennai-600 024. .. Petitioner in all W.Ps.-vs- The Assistant Commissioner of Income Tax,Non Corporate Circle 20(1),Room No.311, III Floor, Wanaparthy Block,No.121, Mahatma Gandhi Road,Chennai-600 034. .. Respondent in all W.Ps. Prayer in W.P.No.28183 of 2018 :-Petition filed under Article226 of the Constitution of India praying for issuance of Writ ofCertiorarified Mandamus to call for the records inF.No.AAACP1647B/A.Y.2004-05/ACIT/NCC-20/CHN dated 11.05.2018 onthe file of the respondent relating to the assessment year 2004-05 and quash the same and further direct the respondent to allowthe claim of investments written off and fixed assets writtenoff in furtherance of the order of this Court in C.A.Nos.330 to333 of 2009 in C.P.Nos.167 and 171 of 2004 dated 11.01.2010. Prayer in W.P.No.28200 of 2018 :-Petition filed under Article226 of the Constitution of India praying for issuance of Writ ofCertiorarified Mandamus to call for the records inF.No.AAACP1647B/A.Y.2003-04/ACIT/NCC-20(1)/CHN dated 24.07.2018on the file of the respondent relating to the assessment year2003-04 and quash the same and further direct the respondent toallow the claim of inventory written off in furtherance of theorder of this Court in C.A.Nos.330 to 333 of 2009 in C.P.Nos.167and 171 of 2004 dated 11.01.2010. https://hcservices.ecourts.gov.in/hcservices/ Prayer in W.P.No.28204 of 2018 :-Petition filed under Article226 of the Constitution of India praying for issuance of Writ ofCertiorarified Mandamus to call for the records inF.No.AAACP1647B/A.Y.2001-02/ACIT/NCC-20(1)/CHN dated 31.07.2018on the file of the respondent relating to the assessment year2001-02 and quash the same and further direct the respondent toallow the claim of loans and advances written off and sundrydebtors written off in furtherance of the order of this Court inC.A.Nos.330 to 333 of 2009 in C.P.Nos.167 and 171 of 2004 dated11.01.2010. Prayer in W.P.No.28206 of 2018 :-Petition filed under Article226 of the Constitution of India praying for issuance of Writ ofCertiorarified Mandamus to call for the records inF.No.AAACP1647B/A.Y.2002-03/ACIT/NCC-20(1)/CHN dated 31.07.2018on the file of the respondent relating to the assessment year2002-03 and quash the same and further direct the respondent toallow the claim of loans and advances written off and sundrydebtors written off in furtherance of the order of this Court inC.A.Nos.330 to 333 of 2009 in C.P.Nos.167 and 171 of 2004 dated11.01.2010. For Petitioner : Mr.P.H.Aravind Pandian,(In all W.Ps.)Senior Counselassisted by Mr.M.P.Senthil KumarFor Respondent :Ms.Hema Muralikrishnan,(In all W.Ps.)Senior Standing Counsel COMMON ORDER All these writ petitions are filed challenging theassessment orders passed with reference to different assessmentyears. 2.The petitioner is a company registered in terms of theIndian Companies Act, 1956. The petitioner carries on thebusiness of export and development of software and multimedia.The petitioner is a regular assessee in terms of the provisionsof the Income Tax Act, 1961 (hereinafter referred to as "theAct"). 3.The assessee challenges the assessment orders on theground that the respondent had erred in rejecting the claim ofdeductions on inventories return off, sundry debtors return offand loans and advances written off as per the Court orders dated https://hcservices.ecourts.gov.in/hcservices/ COMMON ORDER All these writ petitions are filed challenging theassessment orders passed with reference to different assessmentyears. 2.The petitioner is a company registered in terms of theIndian Companies Act, 1956. The petitioner carries on thebusiness of export and development of software and multimedia.The petitioner is a regular assessee in terms of the provisionsof the Income Tax Act, 1961 (hereinafter referred to as "theAct"). 3.The assessee challenges the assessment orders on theground that the respondent had erred in rejecting the claim ofdeductions on inventories return off, sundry debtors return offand loans and advances written off as per the Court orders dated https://hcservices.ecourts.gov.in/hcservices/ 17.12.2007 for the assessment years 2001-02 to 2003-04 on thebasis that the said claims were made for the first time in therevised return dated 31.03.2008. Relying on the directions ofthe Income Tax Appellate Tribunal, Chennai Bench 'D' (forbrevity "the ITAT"), the petitioner has contended that therespondent has committed a mistake in holding that the claims intheir revised return could not be entertained. The respondent,being a subordinate authority to the ITAT, is bound by itsdirections and thus, ought to have followed the same. 4.It is contended that the respondent failed to follow theorders of the Commissioner of Income Tax (Appeals-V), Chennai(for brevity "the CIT(A)") in appellate proceedings for theassessment year 2004-05 and at the out set, it is contended thatthe orders of the ITAT have not been considered by therespondent and therefore, the assessment orders are in violationof the orders passed by the ITAT as well as the CIT(A). 5.The petitioner-company has raised other grounds withreference to the facts and circumstances. However, perusal ofthe impugned order would reveal that it is an assessment order,which is appealable under the provisions of the Act.Adjudication of merits, at this juncture, by the High Courtcannot be done in view of the fact that disputed facts are to beadjudicated by the final fact finding authority, viz., theappellate authority. The finding of fact by the originalauthority/Assessing Officer in the present case cannot beconsidered as final finding, as the errors, omissions orcommissions may be rectified by the Appellate Authority andthus, the aggrieved persons are bound to approach the appellateauthority. 6.The learned Senior Counsel appearing on behalf of thepetitioner referred to the judgment of this Court dated29.11.2007 passed in C.A.Nos.2975 to 2977 of 2007 in C.P.Nos.167to 171 of 2004. 7.It is contended that this Court has passed an order thatthe Composite Scheme of Amalgamation, Arrangement and Compromisebetween Pentamedia Graphics Limited, Media Dreams Limited, KrisSrikkanth Sports Entertainment Limited, Intelivision Limited andMayajaal Entertainment Limited, sanctioned by this Court on12.10.2004 and 08.11.2004 in C.P.Nos.167 to 171 of 2004, nowmodified and morefully set out the Annexure herewith incompliance with the No Objection letter dated 31.10.2007 of theBombay Stock Exchange Limited be and is hereby sanctioned witheffect from 1[st] January, 2004 as to be binding on all theshareholders and creditors of the Applicant Companies therein namely, Pentamedia Graphics Limited, Media Dreams Limited, KrisSrikkanth Sports Entertainment Limited, Intelivision Limited andMayajaal Entertainment Limited. namely, Pentamedia Graphics Limited, Media Dreams Limited, KrisSrikkanth Sports Entertainment Limited, Intelivision Limited andMayajaal Entertainment Limited. 8.Relying on the said order passed by this Court, thelearned Senior Counsel relied on the modified Scheme ofAmalgamation, Arrangement and Compromise between the companies.It is referred that the appointment date means 1[st] January, 2004that was approved by this Court in the Company Applications.The learned Senior Counsel referred to paragraph 4.8 of theComposite Scheme of Amalgamation wherein, it is contended thatnotwithstanding anything contained in the Act, an amount notexceeding Rs.690.07 crores out of the balance standing in theSecurities Premium Account of PMGL as on 31[st] March 2003 shall beutilized for adjustment of the estimated future diminution otherthan temporary in value of certain fixed assets, capital work-in-progress and inventories and investments from the balance asat 31[st] March, 2003 and variations thereon, if any, during theperiod 1[st] April 2003 to 31[st] December, 2003 not exceedingRs.690.07 Crore. 9.Relying on the above clause, clause 7.2 is also referredto, which reads as follows:-“7.2. MAYAJAAL and PMGL are expresslypermitted to revise their Income Tax returns andrelated TDS certificates and the right to claimrefund, advance tax credits etc., upon thisScheme becoming effective and have expresslyreserved the right to make such revisions in theIncome Tax returns and related TDS certificatesand the right to claim refund, advance taxcredits etc., pursuant to the sanction of thisScheme.” 10.Referring these two clauses, the learned Senior Counselmade a submission that this Court elaborately considered theScheme of Amalgamation as approved in C.A.Nos.330 to 333 of 2009in C.P.Nos.167 to 171 of 2004 dated 11.01.2010. The petitioner,Pentamedia Graphics Limited filed C.A.Nos.330 & 331 of 2009. 11.Relying on the said judgment of this Court, the learnedSenior Counsel for the petitioner made a submission that thepetitioner filed revised returns on 12.01.2007 and 27.12.2007after completion of the assessment. The return filed pursuantto the notice under Section 148 of the Act cannot be treated asa revised return is the stand taken by the Department andfurther, it is contended that the revised return was filedbeyond the period of limitation. 12.The learned Senior Counsel solicited the attention ofthis Court to the stand taken by the Department, which wasconsidered by the High Court regarding the maintainability ofthe revised return beyond the period of limitation as well asthe pendency of reopening of the proceedings under Section 148of the Act. Considering all these factors and taking note ofthe appointment date as 01.01.2004, the Court passed an order on11.01.2010. Paragraphs 21 to 23 of the order dated 11.01.2010read as follows:- 12.The learned Senior Counsel solicited the attention ofthis Court to the stand taken by the Department, which wasconsidered by the High Court regarding the maintainability ofthe revised return beyond the period of limitation as well asthe pendency of reopening of the proceedings under Section 148of the Act. Considering all these factors and taking note ofthe appointment date as 01.01.2004, the Court passed an order on11.01.2010. Paragraphs 21 to 23 of the order dated 11.01.2010read as follows:- “21.Learned Standing Counsel appearing forthe Revenue, however, submitted that the originalassessment order was passed even much before thisdate and the revised returns filed must satisfythe provisions of Section 139(5) of the IncomeTax Act. As regard the orders granting sanctionof the scheme is concerned, there is no disputethat the scheme is effective from 1.1.2004. Thatbeing so, the contention of the respondent basedon Section 139(5) of the Income Tax Act asregards the non-filing of revised return beforethe expiry of one year from the end of therelevant period on or before the expiry of theyear, whichever is earlier, needs to beconsidered. In this connection, the principlelaid down by the Supreme Court in the decisionreported in 88 CC 528 – Marshall Sons and Co.(India) Ltd., vs. Income Tax Officer needsreference. Dealing with the question of relevancyof effective date in a scheme sanctioned by theCourt, the Apex Court held that once the schemehad been sanctioned with effect from a particulardate, it is binding on every one including thestatutory authorities. Having regard to the lawdeclared by the Apex Court as to the effect ofthe scheme sanctioned by the Court, the onlycourse open to the Revenue would be to act as perthe scheme sanctioned effective from 1.1.2004,which means that the Ta Authorities are bound totake note of the sate of affairs of the applicantas on 1.1.2004 and a return filed reflecting thesame cannot be ignored on the strength of Section139(5) of the Income Tax Act. The merits orotherwise on the returns filed, however, is amatter of assessment for the authorities toconsider and pass order in accordance with law.22.As rightly pointed out by the learnedcounsel for the petitioner, when the claim of theassessee in the appeal had already been grantedon a mere circumstance that the Department had not accepted the same and gone before theAppellate forum does not mean that the schemesanctioned would be of no consequence to therespondent. The respondent cannot ignore theorder of this Court approving the scheme givingthe effective date as 1.1.2004. 23.In the circumstances, the accepting thecase of the applicant, this Court directs theRevenue to consider the returns filed in terms ofthe scheme sanctioned by this Court effectivefrom 1.1.2004. The applications are ordered.” 13.The learned Senior Counsel relied on the observationsmade by this Court in various paragraphs in order to show thatall the grounds raised by the petitioner were considered by thisCourt and the applications were ordered. Therefore, therespondent has no option but to accept the revised return filedby the petitioner. The relief sought for in C.A.No.330 of 2009is to accept the revised return for the assessment years 2001-02to 2004-05. Thus, the prayer must be read cogently along withthe relief granted by this Court. The applications filed by thepetitioner were ordered. Thus, the respondent ought to haveaccepted the revised return as submitted by the petitioner.Contrary to the orders passed by this Court, the impugned ordersare passed. Thus, the petitioner is constrained to move thepresent writ petitions. 14.The learned Senior Counsel referred to the subsequentorders passed in W.P.No.2357 of 2010 dated 15.07.2010 whereinalso, the petitioner sought for a direction to the respondent todetermine the refund due to the petitioner in respect of theassessment years 1998-99 to 2006-07 and grant the petitioner thesaid refund forthwith. In the said case, this Court passed anorder directing the first respondent/Assessing Officer thereinto dispose of the petitioners representation for refund within aperiod of eight weeks from the date of receipt of arepresentation from the petitioner. 15.The learned Senior Counsel solicited the attention ofthis Court with reference to the order passed by the ITATwherein, the ITAT also made an observation that the directionsissued by this Court are to be followed. Accordingly, theappeal filed by the Revenue was dismissed. In spite of theorders passed by this Court as well as by the ITAT, andsubsequent objections submitted by the petitioner on 25.06.2012with reference to the assessment year 2004-05, the respondenthas passed the impugned orders and therefore, the veryassessment orders are in violation of the directions issued bythis Court and thus, the orders are liable to be set aside. 16.It is contended that the respondent cannot sit over thefindings of this Court as well as the ITAT and in the presentcase, the respondent has exceeded their jurisdiction and made afinding, which is directly in violation of the observations madeand the relief granted by this Court, as far as the petitionerherein is concerned. 17.The learned Senior Standing Counsel appearing on behalfof the respondent disputed the contentions raised on behalf ofthe petitioner by stating that the revised return was permittedonly for the assessment year 2004-05. However, the petitioner-company have filed revised returns beyond the scope of thecompany applications for various assessment years right from2001-02 to 2004-05. The petitioner-company themselves cannot gobeyond the scope of this Court's order by submitting revisedreturns for various assessment years, which all are notpermitted by this Court in its order. This order of this Courtwas well considered by the respondent while passing the impugnedassessment orders. The revised returns admittedly were filedbeyond the period of limitation. However, it was consideredpursuant to the directions issued by this Court. The variousobservations made by this Court were also complied with, withreference to the facts established based on the files anddocuments. Thus, the respondent has not violated the orders ofthis Court. 18.The learned Senior Standing Counsel made a submissionthat it is an assessment order passed by the original authorityand therefore, the petitioner is bound to prefer an appeal underthe provisions of the Act for the purpose of redressal of theirgrievances. 19.This Court is of the considered opinion that perusal ofthe impugned order would reveal that the order passed by theHigh Court was considered by the respondent. The respondentformed an opinion in paragraph 9 of the impugned order, whichreads as under:- “9. Assessee's contention that the claim wasmade on the basis of order of High Court islegally and factually incorrect as High Court inComp.PetitionNos.167to171/2004dated12.10.2004, 08.11.2004 and 29.11.2007 only fixedthe appointed date of demerger of assesseecompany as 01.01.2004 and it nowhere permittedassessee company to make claim for any of theearlier years; in fact there is not even awhisper about such claim being made by companybefore the High Court so as to adjust its 19.This Court is of the considered opinion that perusal ofthe impugned order would reveal that the order passed by theHigh Court was considered by the respondent. The respondentformed an opinion in paragraph 9 of the impugned order, whichreads as under:- “9. Assessee's contention that the claim wasmade on the basis of order of High Court islegally and factually incorrect as High Court inComp.PetitionNos.167to171/2004dated12.10.2004, 08.11.2004 and 29.11.2007 only fixedthe appointed date of demerger of assesseecompany as 01.01.2004 and it nowhere permittedassessee company to make claim for any of theearlier years; in fact there is not even awhisper about such claim being made by companybefore the High Court so as to adjust its accounts for the year ending 31.03.2003. Part IVof the High Court order only speaks aboutReorganization of capital of assessee company inwhich assessee company was permitted to adjustamount upto Rs.690.07 Crores out of theSecurities Premium a/c against value of certainfixed assets, capital WIP, inventories andinvestments as on the appointed date ie.01.01.2004.” 20.There is a finding in the impugned order that this Courtdirected the respondent to take note of the affairs of theassessee-company as on 01.01.2004 consequent to the scheme.Since 01.01.2004 is not falling within the previous yearrelevant to the assessment year under consideration, suchdirection does not have any effect in the assessment year 2003-04. Para 72 of the order of the High Court dated 08.11.2004 wasalso considered by the Assessing Officer and a finding was madethat the claim made by the assessee in their revised return doesnot have sanction of law. Vide letter dated 09.05.2008, theAssessing Officer specifically informed the assessee as under:-“3. The Hon'ble Madras High Court vide orderdated 11.01.2010 has directed the Revenue toconsider the returns filed in terms of the schemesanctioned by the Hon'ble High Court effectivefrom 01.01.2004. In other words, the HighCourt's direction is application for the F.Y.2003-04 relevant to the A.Y. 2004-05 since theappointed date (ie. 01.01.2004) falls in thePrevious Year relevant to the A.Y.2004-05. Such order was accepted by the assessee anddid not challenge before any appellate authority.Thus the issue has reached finality.” 21.Thus, the Assessing Officer has considered the facts andcircumstances as well as the directions issued by this Court inthe above orders referred to by the petitioner. Afterconsidering all these factors, the total income was computed andthe impugned order has been passed. 22.This Court is of the considered opinion that this Courtinitially approved the Scheme of Amalgamation. Thereafter, thisCourt passed an order on 11.01.2010 in C.A.Nos.330 to 333 of2009. Undoubtedly, this Court made observations with referenceto the revised returns filed by the petitioner pursuant to thenotice issued under Section 148 of the Act. This Court madecertain factual findings also with reference to the Scheme ofAmalgamation and certain clauses in the scheme more https://hcservices.ecourts.gov.in/hcservices/ specifically, clauses 4.8 and 7.2. Further, this Court madecertain observations on facts also. However, these observationswould not preclude the competent authorities to consider thefacts and circumstances with reference to the documents andevidences. 22.This Court is of the considered opinion that this Courtinitially approved the Scheme of Amalgamation. Thereafter, thisCourt passed an order on 11.01.2010 in C.A.Nos.330 to 333 of2009. Undoubtedly, this Court made observations with referenceto the revised returns filed by the petitioner pursuant to thenotice issued under Section 148 of the Act. This Court madecertain factual findings also with reference to the Scheme ofAmalgamation and certain clauses in the scheme more https://hcservices.ecourts.gov.in/hcservices/ specifically, clauses 4.8 and 7.2. Further, this Court madecertain observations on facts also. However, these observationswould not preclude the competent authorities to consider thefacts and circumstances with reference to the documents andevidences. 23.This Court in paragraph 23 of the judgment in clear termsdirected the Revenue to consider the return filed in terms ofthe scheme sanctioned by this Court effective from 01.01.2004.Thus, one aspect of the matter is that the High Court directedthe Revenue to consider the revised return in terms of thescheme with effect from 01.01.2004. In view of the fact thatthis Court directed the authorities to consider, it is notnecessary that the facts culled out or revealed from theoriginal documents as well as the evidences are to be neglected.It is the duty of the competent authorities to ensure that suchdirections are implemented in its real letter and spirit toensure that the facts, circumstances as well as the documentsand evidences are considered and appreciated in a rightperspective. While doing so, if at all some errors, omissionsor commissions are made by the original authority, the aggrievedpersons are bound to prefer an appeal and certainly not a writproceedings once again for the purpose of adjudication of themerits of the case. The observations made based on theaffidavits filed by the respective parties cannot be construedas conclusive factors, which are to be referred with referenceto the original documents and evidences. This Court has notpassed an order by conducting an elaborate enquiry withreference to the documents and evidences and such anadjudication must be done by the competent authority. However,this Court considered certain facts which all are placed beforeit and observations are made but the final directions aregranted to consider the claim of the petitioner and take adecision. Under these circumstances, the parties cannot berelyon the observations and form an opinion that the revised returnin the present case must be accepted by the competentauthority/Assessing Officer. In such an event, opportunity ofadjudication for either of the parties, viz., the petitioner aswell as the Revenue is denied and thus, the spirit of the orderof the High Court is to be understood that the observations arethe guidelines for the authorities to consider the facts andultimately, they are bound to consider the entire facts andcircumstances with reference to the documents and evidences,which all are on record. 24.High Court cannot adjudicate the facts and circumstancesbased on the records, which all are to be scrutinized by theappellate authority in the present case. The petitioner-companyis at liberty to adjudicate the legal grounds before the 24.High Court cannot adjudicate the facts and circumstancesbased on the records, which all are to be scrutinized by theappellate authority in the present case. The petitioner-companyis at liberty to adjudicate the legal grounds before the appellate authority, which is competent to entertain the sameand redress the grievances in the manner known to law. In theevent of entertaining a writ petition against the originalassessment order, the aggrieved persons are not only deprived ofan appellate remedy contemplated under the Act, but there is apossibility of omission and commission in respect of thecomplete facts and circumstances in a writ proceedings. Merelybased on the affidavit filed by the parties, High Court cannotform an opinion with reference to the records, which is to beformed based on the original documents and evidences. Thus, anaffidavit in a writ proceedings is insufficient to make a factfinding with reference to the documents and evidences.Therefore, the importance of an appellate remedy to beexhausted, at no circumstances, be undermined. 25.High Court cannot dispense with the appellate remedy in aroutine manner. Writ Petitions are filed on various groundssome times with an idea to avoid delay in disposal of appeals.However, the legislative intention to exhaust the appellateremedy is to be considered by the Court. The legislaturesthought fit that by providing an appeal, complete adjudicationof facts, circumstances, documents and evidences would becompleted. Thus, such a valuable remedy provided has to beexhausted in all circumstances. 26.The petitioner has raised certain legal grounds for thepurpose of entertaining a writ petition. However, all suchlegal grounds may be pleaded before the appellate authority foreffective adjudication. The final fact finding by the appellateauthority would be of greater assistance to the High Court foreffective disposal of the writ petition. Thus, the partiesaggrieved must, at the first instance, prefer an appeal, exhaustthe same and thereafter, they have to approach the appropriateform. 27.The power of review of the High Court under Article 226of the Constitution of India is to scrutinize the processesthrough which a decision is taken by the competent authority inconsonance with the provisions of a statute and rules, but notthe decision itself. Therefore, the power of judicial reviewunder Article 226 of the Constitution of India cannot beextended for the purpose of adjudicating the disputed facts withreference to the documents and evidences, which cannot be doneat all. Based on the mere affidavit and some xerox copies of thedocuments, High Court cannot form an opinion with reference tothe complete facts. 28.As far as the Income Tax matters are concerned, itinvolves certain technicalities and intricacies in accountancy. Such intricacies and the expertise are to be exercised by thecompetent appellate authority of the Department of Income Tax,who is having thorough knowledge about the taxation policies.Therefore, the finding of appellate authority in suchcircumstances are of paramount importance for the High Court toexercise the power of judicial review. This Court is of theconsidered opinion that in all these cases, the petitioner haschallenged the assessment orders passed admittedly and appeal iscontemplated under the provisions of the Act. There is no otherreason for the purpose of entertaining a writ petition beforeexhausting the appellate remedy and therefore, the petitioner-company is at liberty to approach the appellate authority byfiling an appeal in a prescribed format and in compliance withthe provisions of the Act. In the event of filing any suchappeal, the appellate authority shall consider the same onmerits and in accordance with law and by affording opportunityto the writ petitioner and dispose of the appeal asexpeditiously as possible. With the above observations and directions, all these writpetitions stand disposed of. No costs. Connected MPs are closed. Sd/- Assistant Registrar(CCC) //True Copy// abr Sub Assistant Registrar ToThe Assistant Commissioner of Income Tax,Non Corporate Circle 20(1),Room No.311, III Floor, Wanaparthy Block,No.121, Mahatma Gandhi Road,Chennai-600 034. +4CCs to Mr.G.Baskar, Advocate, Sr.Nos.32718, 32719, 32720, 32721+1CC to M/s.Hema Muralikrishnan, Advocate, Sr.No.32558 SKY (CO)K.RK. (01.11.2021) W.P.Nos.28183, 28200, 28204 &28206 of 2018