Madras High Court
Mr.K.Rajesh vs The Assistant Commissioner Of ... on 1 July, 2021
W.P.Nos.33134 & 33139 of 2018
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED :01.07.2021
CORAM
THE HON'BLE MR.JUSTICE S.M.SUBRAMANIAM
W.P.Nos.33134 & 33139 of 2018
and
W.M.P.Nos.38431 & 38436 of 2018
Mr.K.Rajesh ...Petitioner in both Wps.
Vs
1.The Assistant Commissioner of Income Tax,
Non-Corporate Circle – 1,
63, Race Course Road,
Coimbatore – 641 018.
2.Commissioner of Income Tax (Appeals) – 3,
63, Race Course Road,
Coimbatore. ... Respondents in both Wps.
PRAYER in W.P.No.33134/2018: Writ Petition filed Under Article 226 of
the Constitution of India to issue a writ of certiorari, calling for the records
relating to the notice issued by the 1st respondent under Section 148 of the
Income Tax Act, 1961 dated 28.02.2018 in respect of the petitioner,
K.Rajesh, PAN No.ACTPR3290A, to quash the same.
PRAYER in W.P.No.33139/2018: Writ Petition filed Under Article 226 of
the Constitution of India to issue a writ of certiorari, calling for the records
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W.P.Nos.33134 & 33139 of 2018
relating to the order passed by the 2nd respondent in ITA No.191/16-17
dated 18.11.2016 in the case of M/s.B.Rangaswamy Naidu Orchards
Pvt.Ltd., quash the same.
For Petitioner : Mr.Niranjan Rajagopalan
For Respondents : Mr.A.P.Srinivas
Senior Standing Counsel
for Income Tax
..in both Wps.
COMMON ORDER
The writ petition in W.P.No.33134 of 2018 is filed challenging
the notice issued by the first respondent under Section 148 of the Income
Tax Act on 28.02.2018 and another writ petition in W.P.No.33139 of 2018
is filed to call for the records relating to the order passed by the second
respondent in ITA No.191/16-17 dated 18.11.2016 in the case of
M/s.B.Rangaswamy Naidu Orchards Private Limited.
2. Admittedly, in the said order dated 18.11.2016, the petitioner
was not a party and he challenges a particular portion of the observations
made by the second respondent, which would affect the interest of the
petitioner.
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W.P.Nos.33134 & 33139 of 2018
3. The petitioner is an assessee and filed his return of income
regularly. The facts as narrated and with reference to the shares purchased
by the petitioner are not disputed. However, the learned counsel for the
petitioner made a submission that the petitioner, Mr.K.Rajesh was not a
Director of the Company, namely M/s.B.Rangaswamy Naidu Orchards
Private Limited and without even hearing him and not providing any
opportunity to defend his case in the impugned order dated 18.11.2016, the
order was passed under Section 143 (3) of the Act. The second respondent
made an observation in Paragraph No.5.4, as under:
“5.4 However, what is allowed as expenditure has been
receipt in the hands of the erstwhile directors of the
appellant company. The receipt of Rs.5.50 crore do partake
the character of income in the hands of erstwhile directors of
the appellant company. It has been stated in Paragraph 4.3
of the assessment order that the erstwhile director of the
company have admitted income from capital gain on sale of
shares in than Income Tax return for the Assessment Year
2009 – 10. The erstwhile directors have received Rs.2.75
crore each (by repayment of loan taken from the Escrow
agent Shr Vikram Mohan and Rs.2.75 crore liabilities
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W.P.Nos.33134 & 33139 of 2018
waived, when the present directors took over the appellant
company). The total amount of Rs.5.50 crore will have to be
considered for assessment in their hands under Section 28
(iv) of the Income Tax Act, 1961. The Assessing Officer is to
consider this in their hands for assessment for the
appropriate financial year. Direction is given for this by
invoking provisions of Section 150 (1) and (2) of the Income
Tax Act, 1961.”
4. The contetions in the above paragraph would affect the
interest of the petitioner. Then the petitioner claims that he was not the
Director of the said Company. Such an observation made against him
without even providing an opportunity to him is in violation of principles of
natural justice and based on the observations, the first respondent issued
notice under Section 147 of the Act, for reopening of assessment for the
Assessment Year 2009 - 10. Thus, both the orders dated 18.11.2016 and the
consequential notice under Section 148 of the Income Tax Act on
28.02.2018 are to be set aside. It is further contended that the impugned
notice was issued beyond the period of limitation contemplated and on that
ground also the orders are unsustainable.
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W.P.Nos.33134 & 33139 of 2018
5. The learned Senior Standing Counsel appearing on behalf of
the respondents disputed the said contention by stating that the order dated
18.11.2016 was passed under Section 143 (3) of the Act. The observations
made by the Commissioner of Income Tax (Appeals) in Paragraph No.5.4
are the facts which were considered and an observation made with reference
to certain transactions. Thus, the said observations are considered as an
information for the purpose of reopening of assessment under Section 147
of the Act. However, no final decision is taken directly based on the
observations made in the said order dated 18.11.2016. The Petitioner is
entitled for an opportunity and the directions issued by the Hon'ble Apex
Court in the case of GKN Driveshafts India Ltd., vs. ITO reported in 2003
259 ITR 19 (SC), are to be followed scrupulously. Thus, the Authorities
have not been taken any decision based on the observations made by the
second respondent in order dated 18.11.2016 and thus the order impugned
has not caused any prejudice to the interest of the petitioner and he has to
defend the reopening proceedings in the manner known to law.
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W.P.Nos.33134 & 33139 of 2018
6. The learned counsel for the petitioner relied on the judgment
of the High Court of Delhi in the case of Rural Electrification Corporation
Ltd., vs. Commissioner of Income Tax – (LTU), dated 23.04.2013.
However, the said facts are dissimmilar and in the present case, this Court
of an opinion that the observations or certain considerations made in an
order passed under Section 143 (3) of the Act, against the assessee
M/s.B.Rangaswamy Naidu Orchards Pvt.Ltd., and no direct action was
taken against the petitioner and admittedly in the present case no direct
orders are passed and the Assessing Officer has reason to believe for
reopening of assessment under Section 147 of the Act and consequently
issued a notice under Section 148 of the Act. Thus the petitioner is entitled
for an opportunity to defend his case including the factual aspects submitted
even before this Court. If at all, the petitioner claims that he was not a
director of the said Company M/s.B.Rangaswamy Naidu Orchards Pvt.Ltd.,
it is for the petitioner to establish the same before the Authorities
Competent. However, those disputed facts cannot be adjudicated in writ
proceedings under Article 226 of Constitution of India and the only
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W.P.Nos.33134 & 33139 of 2018
question would be an opportunity to be provided and the procedures which
all are to be followed based on the directions given by the Apex Court in the
case of GKN Driveshafts India Ltd., vs. ITO reported in 2003 259 ITR 19
(SC).
7. The learned Senior Standing Counsel though disputed the
fact that the petitioner was not a director of the Company, said that the
petitioner was the Ex-director of the Company. However, all such disputed
facts with reference to the relevant dates and documents are to be verified
by the Authorities Competent and the petitioner by availing an opportunity
has to establish the said facts.
8. As far as the observations / considerations recorded in
Paragraph No.5.4 of the order impugned dated 18.11.2016 is concerned, it is
to be construed only as an information for the purpose of invoking Section
147 of the Act and all further procedures contemplated under the Acts as
well as the directions of the Hon'ble Apex Court in the case of GKN
Driveshafts India Ltd., vs. ITO reported in 2003 259 ITR 19 (SC) are to
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W.P.Nos.33134 & 33139 of 2018
followed scrupulously by the Assessing Officer, while undertaking the
process of completion of proceedings initiated.
9. The petitioner is at liberty to raise both the legal grounds as
well as the factual grounds including the point of limitation now raised in
these writ petitions before the Authorities Competent and the Authorities
Competent shall consider all the facts and the legal grounds raised by the
writ petitioner and proceed in accordance with law.
10. With these observations, both the writ petitions stands
disposed of. No costs. Consequently, connected miscellaneous petitions are
closed.
01.07.2021
Speaking order
Index : Yes
Internet: Yes
Pns
https://www.mhc.tn.gov.in/judis/
W.P.Nos.33134 & 33139 of 2018
To
1.The Assistant Commissioner of Income Tax,
Non-Corporate Circle – 1,
63, Race Course Road,
Coimbatore – 641 018.
2.Commissioner of Income Tax (Appeals) – 3,
63, Race Course Road,
Coimbatore.
https://www.mhc.tn.gov.in/judis/
W.P.Nos.33134 & 33139 of 2018
S.M.SUBRAMANIAM,J.
Pns
W.P.Nos.33134 & 33139 of 2018
and
W.M.P.Nos.38431 & 38436 of 2018
01.07.2021
https://www.mhc.tn.gov.in/judis/
