Madras High Court
The Commissioner Of Income Tax vs M/S. Precot Meridian Limited on 6 December, 2021
TCA.No.1018 of 2009
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 06.12.2021
CORAM
THE HONOURABLE MR. JUSTICE R. MAHADEVAN
AND
THE HONOURABLE MR. JUSTICE MOHAMMED SHAFFIQ
TCA.No.1018 of 2009
The Commissioner of Income Tax
Coimbatore. .. Appellant
Versus
M/s. Precot Meridian Limited
No.737, Green Fields Puliakulam Road
Coimbatore 641 045. .. Respondent
Tax Case Appeal filed against the order of Income Tax Appellate
Tribunal, Madras “A” Bench, Chennai, dated 27.02.2009 passed in
I.T.A.No.749/Mds/2007.
For Appellant :Mr. M. Swaminathan
Senior Counsel
assisted by
Mrs.K.G.Usharani
Junior Standing counsel
For Respondent : Mr. S. Sridhar
1/7
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TCA.No.1018 of 2009
JUDGMENT
(Judgement was delivered by R. MAHADEVAN, J.)
Heard both sides and perused the records.
2.The respondent / assessee is engaged in the business of manufacturing
and sale of cotton and blended yarn. They filed the return of income for the
assessment year 1999-2000 on 29.12.1999, declaring a total loss of
Rs.7,44,57,879/- and book profit for the purpose of section 115JA of the
Income Tax Act, was computed to the tune of Rs.1,33,70,320/-. The regular
assessment was completed under section 143(3) of the Act on 26.03.2002
determining the total loss at Rs.1,81,91,075/-. The Assessing Officer
subsequently, noted that an amount of Rs.76,93,861/- claimed under section
10B of the Act in relation to Unit 'C' do not constitute 'profits and gains derived
from the industrial undertaking' and hence, income chargeable to tax has
escaped from escapement within the meaning of Section 147 of the Act r/w
section Explanation 2 thereof. The break up of the receipts disallowed by the
Assessing Officer are as follows:
(i)Lease rental receipts - Rs.69,66,729/-
(ii)Sale of import licences - Rs. 3,64,679/-
(iii)Miscellaneous income - Rs. 3,62,454/-
Total - Rs.76,93,861/-
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TCA.No.1018 of 2009
Thereafter, the Assessing Officer proceeded to issue notice under section 148
on 02.02.2006, to which, the assessee filed its objections. However, the
Assessing Officer considered the said three receipts as ineligible for exemption
under section 10B. Challenging the same, the assessee filed appeal, which was
dismissed by the First Appellate Authority, by order dated 05.01.2007.
Aggrieved over the same, the assessee went on further appeal before the
Income Tax Appellate Tribunal.
3.By order dated 27.02.2009, the Tribunal allowed the appeal filed by the
assessee, on the ground of procedural lapses. The relevant observations of the
Tribunal are quoted below for ready reference:
“5.We are of the view that in order to invoke section 147 of
the Act, after the expiry of four years from the end of the
assessment year, the Assessing Officer has to make sure that the
assessee has failed to disclose fully and truly all material facts
necessary for the assessment. It can be seen that the assessee has
disclosed the entire facts in the balance sheet and Profit and Loss
Account filed along with the return. It is pertinent to say that the
Assessing officer himself initiated proceedings under section 147
of the Act by following the same profit and Loss Account and
balance sheet filed along with the return. Hence, in these
circumstances, one cannot say that the assessee has concealed any
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TCA.No.1018 of 2009
material facts from the knowledge of the Assessing officer.
Explanation 2 to section 147 envisages different circumstances
where income chargeable to tax can be treated as escaped income,
only in such cases where reassessment proceedings started within
four years from the end of the relevant assessment year. In other
words, we are of the considered opinion that if the reassessment
proceeding is initiated after the expiry of four years, it must be
supported by sufficient reasons...
6.In short, the assessee has furnished all materials necessary
for claiming relief under section 10B along with the return itself.
In these circumstances, one cannot say that the reassessment
proceeding initiated under section 147 of the Act after four years
form the end of the relevant assessment year is in accordance with
law. Hence, we allow the appeal filed by the assessee. As the
appeal is allowed on procedural lapses by the AO, we are not
entering into the merits of the case.”
The aforesaid order of the Tribunal is impugned in this appeal at the instance of
the Revenue.
4.By order dated 02.11.2009, the above appeal has been admitted on the
following substantial questions of law:-
“1. Whether in the facts and in the circumstances of
the case, the Tribunal was right in holding that reopening of
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TCA.No.1018 of 2009
assessment after the expiry of 4 years from the end of
relevant assessment year was not valid?
2. Whether the disallowance made on account of
lease rentals, miscellaneous income and sale of import
license aggregating to Rs.76,93,961/- forms part of Incomes
of the assessee for claiming deduction under Section 10-B
of the Income Tax Act?”
5.As regards the first substantial question of law, it is seen that the notice
under section 148 of the Income Tax Act, 1961, was issued on 02.02.2006,
which is beyond the period of four years from the end of the relevant
assessment year. Further, there was no failure on the part of the assessee in
disclosing all the materials facts necessary for the assessment. In such
circumstances, this court is of the opinion that the Tribunal was justified in
annulling the re-assessment order of the year 1999-2000 on the ground of same
being barred by limitation as per proviso to section 147. The position of law in
this regard has already been decided in favour of the assessee and against the
revenue in T.C.A. No. 317 of 2020 dated 16.09.2020 in the case of
Commissioner of Income Tax, Corporate Ward 3(4), Chennai vs B. Suresh
Kumar [(2020) 120 taxmann.com 404 (Madras)], wherein it was held as
follows:
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TCA.No.1018 of 2009
“8.Therefore, in our considered view, the Tribunal was
fully justified in holding that reopening the assessment beyond
four years was a clear change of opinion and did not satisfy the
requirements to be fulfilled in terms of 1st proviso to section 147
of the Act. Thus, the Revenue has not made out any ground to
interfere with the order passed by the Tribunal.”
In the light of the above, this court does not find any ground to interfere with
the order of the Tribunal and this substantial question of law is answered in
favour of the assessee and against the Revenue.
6.Consequently, the second substantial question of law is also answered
in favour of the assessee and against the Revenue.
7.Accordingly, the Tax Case Appeal filed by the Revenue is dismissed.
No costs.
[R.M.D,J.] [M.S.Q, J.]
06.12.2021
Internet : Yes
Index : Yes / No
dhk/msr
https://www.mhc.tn.gov.in/judis
TCA.No.1018 of 2009
R. MAHADEVAN, J.
AND
MOHAMMED SHAFFIQ, J.
dhk/msr
To
1. The Income Tax Appellate Tribunal
Madras 'A' Bench, Chennai
2. The Commissioner of Income Tax
Coimbatore.
TCA No. 1018 of 2009
06.12.2021
https://www.mhc.tn.gov.in/judis
