Wp/32371/2017 Of Kovalam Santhana Krishnan v. Income Tax Officer

IN THE HIGH COURT OF JUDICATURE AT MADRAS THE HONOURABLE MR.JUSTICE S.M. SUBRAMANIAM and W.M.P.Nos.35661 to 35663 of 2017 Kovalam Santhana Krishnan Mohan,Flat No.4/B, Block No.24 & 25,P.T.Rajan Salai, K.K.Nagar,Chennai-600 078.... Petitioner-vs- Income Tax Officer,Ward-I, Income Tax Office,Ootacamund.... Respondent Petition filed under Article 226 of the Constitution ofIndia praying for issuance of Writ of Certiorarified Mandamusto call for the records of the respondent comprised in itsnotice issued under Section 148 of the Income Tax Act, 1961 forPAN: AMNPM3778N, dated 30.03.2017 and all proceedings infurtherance thereof, including but not limited to the orderdated 04.12.2017, disposing of the petitioner's objections tothe reopening of the income tax assessment for the assessmentyear 2010-11, passed by the respondent and to quash the same asarbitrary, unjust and illegal and to consequently forbear therespondent from in any manner reassessing the petitioner'sincome under Section 147 of the Income Tax Act, 1961 for theassessment year 2010-11. The order dated 04.12.2017, disposing of the petitioner'sobjections to the reopening of the income tax assessment for theassessment year 2010-11, passed by the respondent is underchallenge in the present writ petition. 2.The provision to be considered in the writ on hand is thefirst proviso to Section 147 and Explanation 2(a) to Section 147 https://hcservices.ecourts.gov.in/hcservices/ of the Income Tax Act, 1961 (hereinafter referred to as “theAct”). 3.The first proviso to Section 147 contemplates that wherean assessment under sub-Section (3) of Section 143 or Section147 has been made for the relevant assessment year, no actionshall be taken under Section 147, after the expiry of four yearsfrom the end of the relevant assessment year, unless any incomechargeable to tax has escaped assessment for such assessmentyear by reason of the failure on the part of the assessee tomake a return under Section 139 or in response to a noticeissued under sub-Section (1) of Section 142 or Section 148 or todisclose fully all material facts necessary for assessment forthat assessment year. 4.Admittedly, in the present case, no return of income isfiled by the petitioner/assessee for the assessment year 2010-11. Thus, contemplation of four years would not arise in thepresent case. Thus, reopening of the assessment under Section147 of the Act is permissible beyond four years also. 5.Explanation 2(a) to Section 147 enumerates that “where noreturn of income has been furnished by the assessee although histotal income or the total income of any other person in respectof which he is assessable under the Act during the previous yearexceeded the maximum amount which is not chargeable to IncomeTax Act”. Therefore, reopening of assessment is permissiblewhere no return of income is furnished by the assessee in suchcircumstances as stipulated in Explanation 2(a) to Section 147. 6.In respect of the above requirement with reference to thefacts, the present writ petition is to be considered. 7.The learned counsel for the writ petitioner mainlycontended that the reason furnished in the order impugned isnothing but change of opinion and cannot be construed as reasonto believe. In order to substantiate the said contention, thelearned counsel for the petitioner solicited the attention ofthis Court with reference to the proceedings dated 08.08.2017,wherein reasons are furnished. As per the said proceedings,nine immovable properties were sold by the writpetitioner/assessee on the file of the Sub Registrar,Nagapattinam. The details of the transaction are enumerated inthe proceedings dated 08.08.2017. 6.In respect of the above requirement with reference to thefacts, the present writ petition is to be considered. 7.The learned counsel for the writ petitioner mainlycontended that the reason furnished in the order impugned isnothing but change of opinion and cannot be construed as reasonto believe. In order to substantiate the said contention, thelearned counsel for the petitioner solicited the attention ofthis Court with reference to the proceedings dated 08.08.2017,wherein reasons are furnished. As per the said proceedings,nine immovable properties were sold by the writpetitioner/assessee on the file of the Sub Registrar,Nagapattinam. The details of the transaction are enumerated inthe proceedings dated 08.08.2017. 8.With reference to the above reasons, the writpetitioner/assessee submitted a detailed objection vide letterdated 18.08.2017 wherein, it is contended that no transaction asalleged has taken place on 30.04.2009, but the petitioner hasexecuted sale deed for a similar amount on 22.12.2008 and handed over possession of the property on the same day andconsequently, treated the above sale as part of his income forthe assessment year 2009-10. Similarly in all the other cases,the transactions have been accounted for in his return of incomefor the assessment year 2009-10 and included as part of totalrevenue and his income for the assessment year 2009-10. 9.It is further contended by the petitioner that a sum ofRs.1,92,000/- was received as commission during the year ended31.03.2010 and after deduction of expenditure incurred inearning that income, the net income was below the taxable limitsfor the assessment year 2010-11 and consequently, no tax waspayable thereon. Relying on the period of transaction as wellas the handing over of possession by the petitioner to thepurchaser, it is contended that the non-filing of return duringthe assessment year 2010-11 would not have any implication withreference to the reopening of assessment and the authoritycompetent invoked Section 147 of the Act without jurisdictionand based on erroneous facts. 10.The learned counsel for the petitioner further contendedthat the writ petitioner earlier filed W.P.No.29614 of 2017 andthis Court by order dated 20.11.2017, allowed the writ petition,set aside the impugned order and remanded the matter back forreconsideration. Once again, the Assessing Officer has failedto consider these aspects and passed the impugned order incyclostyled manner by photocopying the reply sent by thepetitioner. Thus, the present impugned order is also infirm andliable to be set aside. 11.At the outset, it is contended by the learned counsel forthe petitioner that there are no new materials available forreopening of the assessment, non-filing of return of income forthe assessment year 2010-11 has no implication with reference tothe sale of immovable property took place prior to theassessment year and the total income was already assessed andthe petitioner paid taxes for the said income. Thus, there isno reason to believe for reopening of the assessment and it isonly change of opinion. Thus, the order impugned are liable tobe set aside. 12.The learned Senior Standing Counsel appearing on behalfof the respondent disputed the said contention by stating thatcertain transactions, which are all doubtful in nature wereraised as new materials for the purpose of reopening theassessment. Admittedly, the writ petitioner/assessee had notfiled return of income for the assessment year 2010-11. Thus,the provisions of Explanation 2(a) to Section 147 would beapplicable in the present case and in such circumstances, https://hcservices.ecourts.gov.in/hcservices/ 12.The learned Senior Standing Counsel appearing on behalfof the respondent disputed the said contention by stating thatcertain transactions, which are all doubtful in nature wereraised as new materials for the purpose of reopening theassessment. Admittedly, the writ petitioner/assessee had notfiled return of income for the assessment year 2010-11. Thus,the provisions of Explanation 2(a) to Section 147 would beapplicable in the present case and in such circumstances, https://hcservices.ecourts.gov.in/hcservices/ reopening of assessment is permissible. Thus, even in theabsence of filing of return in a particular assessment year andsubsequently the Assessing Officer should able to identify newmaterials or informations relating to the previous assessmentyear, wherein assessment order has been passed, then it is opento the Assessing Officer to reopen the assessment and adjudicatethe issues on merits. 13.To substantiate the said contention, the learned SeniorStanding Counsel relied on the findings of the Assessing Officerin proceedings dated 04.12.2017. In the said proceedings whilefurnishing reasons, the Assessing Officer made the followingobservations which all are relevant:- “On discussion, it was observed that theassessee filed a return of income on 01/08/2017for the AY 2010-11 in response to the Noticeu/s148 dated 30/03/2017 admitting income fromprofession of Rs.1,92,800/- received fromM/s.NagapattinamEnergy(P)Ltd.,asprofessional fees and claimed TDS of Rs.19,280/-as deducted by M/s.Nagapattinam Energy (P) Ltd.,on this payment. Since the assessee did notfile his return of income for the A.Y.2010-11within the time as prescribed u/s 139 of theIncome Tax Act 1961 and the income admitted bythe assessee in his return of income filed forthe A.Y.2010-11 in response to the Notice u/s148 dated 30/03/2017 was Rs.1,92,800/- it isvery obvious that the reasons recorded forissuing Notice u/s 148 is correct and good inlaw.Without prejudice to the above, theauthorised representative of the assessee didnot produce any evidence to substantiate hiscontentions as mentioned in the letters dated18/08/2017 and 27/09/2017 that the possessionfor the two immovable properties were handedover in February 2009 to the purchaser andincome arisen from the sale of these twoimmovable properties vide Document No.780/2009and 781/2009 for Rs.14,31,250/- & Rs.46,72,800/-respectively was already admitted in thefinancial year 2008-09 relating to theassessment year 2009-10. On careful perusal of these two documents780/2009 and 781/2009 registered with the SRO,Thirupundi, it is observed from the page no.8 ofDocument No.780/2009 and from the page no.15 &16 of Document No.781/2009 that the purchasershall henceforth hold and enjoy the right, title and interest of the vendor in future.......Thus, it is very clear from the copies ofthe sale deeds without any evidence contrary tothis that the possession of this property wasnot handed over to the purchaser in February2009 as claimed by the assessee in his letterdated 18/08/2017 and 27/09/2017.” On careful perusal of these two documents780/2009 and 781/2009 registered with the SRO,Thirupundi, it is observed from the page no.8 ofDocument No.780/2009 and from the page no.15 &16 of Document No.781/2009 that the purchasershall henceforth hold and enjoy the right, title and interest of the vendor in future.......Thus, it is very clear from the copies ofthe sale deeds without any evidence contrary tothis that the possession of this property wasnot handed over to the purchaser in February2009 as claimed by the assessee in his letterdated 18/08/2017 and 27/09/2017.” 14.The above reasons given by the Assessing Officer wouldthrow light with reference to the material identified. TheAssessing Officer admitted the fact that the return of incomewas filed by the assessee on 01.08.2017 for the assessment year2010-11 in response to the notice under Section 148 dated30.03.2017 admitting income from profession of Rs.1,92,800/-received from M/s.Ngapattinam Energy (P) Ltd., as professionalfees and claimed TDS of Rs.19,280/- as deducted byM/s.Nagapattinam Energy (P) Ltd., on this payment. Since theassessee did not file return of income for the assessment year2010-11 within the time as prescribed under Section 139 of theAct, it is obvious that the reason recorded for issuing thenotice under Section 148 is correct. It is to be construed thatthough the documents were registered which all are not fallingwithin the assessment year 2010-11, the transactions and certaininferences drawn by the Assessing Officer are to be adjudicatedwith reference to the documents and other informations for thepurpose of reaching finality. 15.This Court is of the considered opinion that certainintricacies in the matter of considering the income details withreference to the informations cannot be adjudicated in a writproceedings. All such disputed facts and informations are to beadjudicated by the Assessing Officer by affording opportunity tothe assessee concerned. Undoubtedly, the transactions are beingdone on many occasions in a calculated manner. However, thosefacts and circumstances are required to be adjudicated by theAssessing Officer and this Court cannot go into such facts andinformations in a writ proceedings. 16.It is to be borne in mind that assessment orders areinitially passed under Section 143(3) only based on theinformations and particulars furnished by the assessee at hisown instance. Thus, the Assessing Officer in the eventuality ofidentifying any new material is empowered to reopen theassessment, if there is any reason to believe. Undoubtedly, theconcept of reason to believe has been decided in many cases bythe constitutional courts. However, the power under Section 147is wider and therefore, even a slightest doubt which forms a newinformation is to be adjudicated on merits and High Court neednot enter into the venture of adjudicating those factualinformations which all are identified by the Assessing Officer during the scrutiny or otherwise. Thus, the High Court in awrit proceedings is expected to be cautious and an amount ofrestraint is required in the case of reopening of assessment.In the event of adjudicating the merits, there is a possibilityof error as the intricacies in certain transactions and in acalculated manner through which such transactions are executed,deserve detailed adjudication with reference to the documents,which cannot be done by the High Court in a writ proceedingsunder Article 226 of the Constitution of India. during the scrutiny or otherwise. Thus, the High Court in awrit proceedings is expected to be cautious and an amount ofrestraint is required in the case of reopening of assessment.In the event of adjudicating the merits, there is a possibilityof error as the intricacies in certain transactions and in acalculated manner through which such transactions are executed,deserve detailed adjudication with reference to the documents,which cannot be done by the High Court in a writ proceedingsunder Article 226 of the Constitution of India. 17.All these factors cannot be brushed aside as Section 147provides various circumstances under which reopening ofassessment can be done. As pointed out by the learned SeniorStanding Counsel in the present case, the first proviso toSection 147 deals with cases where no return of income is filed.Explanation 2 enumerates various circumstances under whichreopening of assessment is permissible. When the scope ofreopening is wider enough to cover certain information which allare not adjudicated during the original assessment, then theHigh Court is expected to allow the Assessing Officer toadjudicate all those informations and factual disputes betweenthe parties. In these circumstances, the petitioner would getliberty to place all the material facts and adjudicate the sameon merits before the Assessing Officer. Therefore, this Courtis not inclined to interfere in respect of the reasons furnishedas the same constitute certain new informations in view of thefact that the petitioner/assessee had not filed any return ofincome for the assessment year 2010-11. Thus, the petitioner isat liberty to place all these materials as well as the groundsraised in this writ petition before the Assessing Officerenabling him to consider and take appropriate decision byfollowing the procedures contemplated. 18.Accordingly, this writ petition is devoid of merits andstands dismissed. No costs. Consequently, connectedmiscellaneous petitions are closed. //True Copy// abrTo The Income Tax Officer,Ward-I,Income Tax Office,Ootacamund. +1cc to Mr.A.P.Srinivas, Advocate Sr.25398+1cc to Mr.Arun Karthik Mohan, Advocate Sr.25278 W.P.No.32371 of 2017ak ii[co]srg 08/07/2021