Madras High Court
M/S.Pentamedia Graphics Limited vs The Assistant Commissioner Of ... on 12 July, 2021
W.P.Nos.28183 of 2018 etc., batch
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 12.07.2021
CORAM
THE HONOURABLE MR.JUSTICE S.M.SUBRAMANIAM
W.P.Nos.28183, 28200, 28204 & 28206 of 2018
and
W.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,
1st 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 Article 226 of the
Constitution of India praying for issuance of Writ of Certiorarified
Mandamus to call for the records in F.No.AAACP1647B/A.Y.2004-
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05/ACIT/NCC-20/CHN dated 11.05.2018 on the file of the respondent
relating to the assessment year 2004-05 and quash the same and further
direct the respondent to allow the claim of investments written off and fixed
assets written off in furtherance of the order of this Court in C.A.Nos.330 to
333 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 Article 226 of the
Constitution of India praying for issuance of Writ of Certiorarified
Mandamus to call for the records in F.No.AAACP1647B/A.Y.2003-
04/ACIT/NCC-20(1)/CHN dated 24.07.2018 on the file of the respondent
relating to the assessment year 2003-04 and quash the same and further
direct the respondent to allow the claim of inventory written off in
furtherance of the order of this Court in C.A.Nos.330 to 333 of 2009 in
C.P.Nos.167 and 171 of 2004 dated 11.01.2010.
Prayer in W.P.No.28204 of 2018 :- Petition filed under Article 226 of the
Constitution of India praying for issuance of Writ of Certiorarified
Mandamus to call for the records in F.No.AAACP1647B/A.Y.2001-
02/ACIT/NCC-20(1)/CHN dated 31.07.2018 on the file of the respondent
relating to the assessment year 2001-02 and quash the same and further
direct the respondent to allow the claim of loans and advances written off
and sundry debtors written off in furtherance of the order of this Court in
C.A.Nos.330 to 333 of 2009 in C.P.Nos.167 and 171 of 2004 dated
11.01.2010.
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Prayer in W.P.No.28206 of 2018 :- Petition filed under Article 226 of the
Constitution of India praying for issuance of Writ of Certiorarified
Mandamus to call for the records in F.No.AAACP1647B/A.Y.2002-
03/ACIT/NCC-20(1)/CHN dated 31.07.2018 on the file of the respondent
relating to the assessment year 2002-03 and quash the same and further
direct the respondent to allow the claim of loans and advances written off
and sundry debtors written off in furtherance of the order of this Court in
C.A.Nos.330 to 333 of 2009 in C.P.Nos.167 and 171 of 2004 dated
11.01.2010.
For Petitioner : Mr.P.H.Aravind Pandian,
(In all W.Ps.) Senior Counsel
assisted by
Mr.M.P.Senthil Kumar
For Respondent : Ms.Hema Muralikrishnan,
(In all W.Ps.) Senior Standing Counsel
******
COMMON ORDER
All these writ petitions are filed challenging the assessment orders
passed with reference to different assessment years.
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2.The petitioner is a company registered in terms of the Indian
Companies Act, 1956. The petitioner carries on the business of export and
development of software and multimedia. The petitioner is a regular
assessee in terms of the provisions of the Income Tax Act, 1961 (hereinafter
referred to as "the Act").
3.The assessee challenges the assessment orders on the ground that
the respondent had erred in rejecting the claim of deductions on inventories
return off, sundry debtors return off and loans and advances written off as
per the Court orders dated 17.12.2007 for the assessment years 2001-02 to
2003-04 on the basis that the said claims were made for the first time in the
revised return dated 31.03.2008. Relying on the directions of the Income
Tax Appellate Tribunal, Chennai Bench 'D' (for brevity "the ITAT"), the
petitioner has contended that the respondent has committed a mistake in
holding that the claims in their revised return could not be entertained. The
respondent, being a subordinate authority to the ITAT, is bound by its
directions and thus, ought to have followed the same.
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4.It is contended that the respondent failed to follow the orders of the
Commissioner of Income Tax (Appeals-V), Chennai (for brevity "the
CIT(A)") in appellate proceedings for the assessment year 2004-05 and at
the out set, it is contended that the orders of the ITAT have not been
considered by the respondent and therefore, the assessment orders are in
violation of the orders passed by the ITAT as well as the CIT(A).
5.The petitioner-company has raised other grounds with reference to
the facts and circumstances. However, perusal of the 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
Court cannot be done in view of the fact that disputed facts are to be
adjudicated by the final fact finding authority, viz., the appellate authority.
The finding of fact by the original authority/Assessing Officer in the present
case cannot be considered as final finding, as the errors, omissions or
commissions may be rectified by the Appellate Authority and thus, the
aggrieved persons are bound to approach the appellate authority.
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6.The learned Senior Counsel appearing on behalf of the petitioner
referred to the judgment of this Court dated 29.11.2007 passed in
C.A.Nos.2975 to 2977 of 2007 in C.P.Nos.167 to 171 of 2004.
7.It is contended that this Court has passed an order that the
Composite Scheme of Amalgamation, Arrangement and Compromise
between Pentamedia Graphics Limited, Media Dreams Limited, Kris
Srikkanth Sports Entertainment Limited, Intelivision Limited and Mayajaal
Entertainment Limited, sanctioned by this Court on 12.10.2004 and
08.11.2004 in C.P.Nos.167 to 171 of 2004, now modified and morefully set
out the Annexure herewith in compliance with the No Objection letter dated
31.10.2007 of the Bombay Stock Exchange Limited be and is hereby
sanctioned with effect from 1st January, 2004 as to be binding on all the
shareholders and creditors of the Applicant Companies therein namely,
Pentamedia Graphics Limited, Media Dreams Limited, Kris Srikkanth
Sports Entertainment Limited, Intelivision Limited and Mayajaal
Entertainment Limited.
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8.Relying on the said order passed by this Court, the learned Senior
Counsel relied on the modified Scheme of Amalgamation, Arrangement and
Compromise between the companies. It is referred that the appointment
date means 1st January, 2004 that was approved by this Court in the
Company Applications. The learned Senior Counsel referred to paragraph
4.8 of the Composite Scheme of Amalgamation wherein, it is contended that
notwithstanding anything contained in the Act, an amount not exceeding
Rs.690.07 crores out of the balance standing in the Securities Premium
Account of PMGL as on 31st March 2003 shall be utilized for adjustment of
the estimated future diminution other than temporary in value of certain
fixed assets, capital work-in-progress and inventories and investments from
the balance as at 31st March, 2003 and variations thereon, if any, during the
period 1st April 2003 to 31st December, 2003 not exceeding Rs.690.07
Crore.
9.Relying on the above clause, clause 7.2 is also referred to, which
reads as follows:-
“7.2. MAYAJAAL and PMGL are expressly
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permitted to revise their Income Tax returns and related
TDS certificates and the right to claim refund, advance
tax credits etc., upon this Scheme becoming effective and
have expressly reserved the right to make such revisions
in the Income Tax returns and related TDS certificates
and the right to claim refund, advance tax credits etc.,
pursuant to the sanction of this Scheme.”
10.Referring these two clauses, the learned Senior Counsel made a
submission that this Court elaborately considered the Scheme of
Amalgamation as approved in C.A.Nos.330 to 333 of 2009 in 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 learned Senior
Counsel for the petitioner made a submission that the petitioner filed
revised returns on 12.01.2007 and 27.12.2007 after completion of the
assessment. The return filed pursuant to the notice under Section 148 of the
Act cannot be treated as a revised return is the stand taken by the
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Department and further, it is contended that the revised return was filed
beyond the period of limitation.
12.The learned Senior Counsel solicited the attention of this Court to
the stand taken by the Department, which was considered by the High Court
regarding the maintainability of the revised return beyond the period of
limitation as well as the pendency of reopening of the proceedings under
Section 148 of the Act. Considering all these factors and taking note of the
appointment date as 01.01.2004, the Court passed an order on 11.01.2010.
Paragraphs 21 to 23 of the order dated 11.01.2010 read as follows:-
“21.Learned Standing Counsel appearing for the
Revenue, however, submitted that the original
assessment order was passed even much before this date
and the revised returns filed must satisfy the provisions
of Section 139(5) of the Income Tax Act. As regard the
orders granting sanction of the scheme is concerned,
there is no dispute that the scheme is effective from
1.1.2004. That being so, the contention of the
respondent based on Section 139(5) of the Income Tax
Act as regards the non-filing of revised return before the
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expiry of one year from the end of the relevant period on
or before the expiry of the year, whichever is earlier,
needs to be considered. In this connection, the principle
laid down by the Supreme Court in the decision reported
in 88 CC 528 – Marshall Sons and Co. (India) Ltd., vs.
Income Tax Officer needs reference. Dealing with the
question of relevancy of effective date in a scheme
sanctioned by the Court, the Apex Court held that once
the scheme had been sanctioned with effect from a
particular date, it is binding on every one including the
statutory authorities. Having regard to the law declared
by the Apex Court as to the effect of the scheme
sanctioned by the Court, the only course open to the
Revenue would be to act as per the scheme sanctioned
effective from 1.1.2004, which means that the Ta
Authorities are bound to take note of the sate of affairs
of the applicant as on 1.1.2004 and a return filed
reflecting the same cannot be ignored on the strength of
Section 139(5) of the Income Tax Act. The merits or
otherwise on the returns filed, however, is a matter of
assessment for the authorities to consider and pass
order in accordance with law.
22.As rightly pointed out by the learned counsel
for the petitioner, when the claim of the assessee in the
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appeal had already been granted on a mere
circumstance that the Department had not accepted the
same and gone before the Appellate forum does not
mean that the scheme sanctioned would be of no
consequence to the respondent. The respondent cannot
ignore the order of this Court approving the scheme
giving the effective date as 1.1.2004.
23.In the circumstances, the accepting the case of
the applicant, this Court directs the Revenue to consider
the returns filed in terms of the scheme sanctioned by
this Court effective from 1.1.2004. The applications are
ordered.”
13.The learned Senior Counsel relied on the observations made by
this Court in various paragraphs in order to show that all the grounds raised
by the petitioner were considered by this Court and the applications were
ordered. Therefore, the respondent has no option but to accept the revised
return filed by the petitioner. The relief sought for in C.A.No.330 of 2009
is to accept the revised return for the assessment years 2001-02 to 2004-05.
Thus, the prayer must be read cogently along with the relief granted by this
Court. The applications filed by the petitioner were ordered. Thus, the
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respondent ought to have accepted the revised return as submitted by the
petitioner. Contrary to the orders passed by this Court, the impugned orders
are passed. Thus, the petitioner is constrained to move the present writ
petitions.
14.The learned Senior Counsel referred to the subsequent orders
passed in W.P.No.2357 of 2010 dated 15.07.2010 wherein also, the
petitioner sought for a direction to the respondent to determine the refund
due to the petitioner in respect of the assessment years 1998-99 to 2006-07
and grant the petitioner the said refund forthwith. In the said case, this
Court passed an order directing the first respondent/Assessing Officer
therein to dispose of the petitioners representation for refund within a period
of eight weeks from the date of receipt of a representation from the
petitioner.
15.The learned Senior Counsel solicited the attention of this Court
with reference to the order passed by the ITAT wherein, the ITAT also
made an observation that the directions issued by this Court are to be
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followed. Accordingly, the appeal filed by the Revenue was dismissed. In
spite of the orders passed by this Court as well as by the ITAT, and
subsequent objections submitted by the petitioner on 25.06.2012 with
reference to the assessment year 2004-05, the respondent has passed the
impugned orders and therefore, the very assessment orders are in violation
of the directions issued by this Court and thus, the orders are liable to be set
aside.
16.It is contended that the respondent cannot sit over the findings of
this Court as well as the ITAT and in the present case, the respondent has
exceeded their jurisdiction and made a finding, which is directly in violation
of the observations made and the relief granted by this Court, as far as the
petitioner herein is concerned.
17.The learned Senior Standing Counsel appearing on behalf of the
respondent disputed the contentions raised on behalf of the petitioner by
stating that the revised return was permitted only for the assessment year
2004-05. However, the petitioner-company have filed revised returns
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beyond the scope of the company applications for various assessment years
right from 2001-02 to 2004-05. The petitioner-company themselves cannot
go beyond the scope of this Court's order by submitting revised returns for
various assessment years, which all are not permitted by this Court in its
order. This order of this Court was well considered by the respondent while
passing the impugned assessment orders. The revised returns admittedly
were filed beyond the period of limitation. However, it was considered
pursuant to the directions issued by this Court. The various observations
made by this Court were also complied with, with reference to the facts
established based on the files and documents. Thus, the respondent has not
violated the orders of this Court.
18.The learned Senior Standing Counsel made a submission that it is
an assessment order passed by the original authority and therefore, the
petitioner is bound to prefer an appeal under the provisions of the Act for
the purpose of redressal of their grievances.
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19.This Court is of the considered opinion that perusal of the
impugned order would reveal that the order passed by the High Court was
considered by the respondent. The respondent formed an opinion in
paragraph 9 of the impugned order, which reads as under:-
“9. Assessee's contention that the claim was made
on the basis of order of High Court is legally and
factually incorrect as High Court in Comp.Petition
Nos.167 to 171/2004 dated 12.10.2004, 08.11.2004 and
29.11.2007 only fixed the appointed date of demerger of
assessee company as 01.01.2004 and it nowhere
permitted assessee company to make claim for any of the
earlier years; in fact there is not even a whisper about
such claim being made by company before the High
Court so as to adjust its accounts for the year ending
31.03.2003. Part IV of the High Court order only
speaks about Reorganization of capital of assessee
company in which assessee company was permitted to
adjust amount upto Rs.690.07 Crores out of the
Securities Premium a/c against value of certain fixed
assets, capital WIP, inventories and investments as on
the appointed date ie. 01.01.2004.”
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20.There is a finding in the impugned order that this Court directed
the respondent to take note of the affairs of the assessee-company as on
01.01.2004 consequent to the scheme. Since 01.01.2004 is not falling
within the previous year relevant to the assessment year under
consideration, such direction does not have any effect in the assessment year
2003-04. Para 72 of the order of the High Court dated 08.11.2004 was also
considered by the Assessing Officer and a finding was made that the claim
made by the assessee in their revised return does not have sanction of law.
Vide letter dated 09.05.2008, the Assessing Officer specifically informed
the assessee as under:-
“3. The Hon'ble Madras High Court vide order
dated 11.01.2010 has directed the Revenue to consider
the returns filed in terms of the scheme sanctioned by the
Hon'ble High Court effective from 01.01.2004. In other
words, the High Court's direction is application for the
F.Y. 2003-04 relevant to the A.Y. 2004-05 since the
appointed date (ie. 01.01.2004) falls in the Previous
Year relevant to the A.Y.2004-05.
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Such order was accepted by the assessee and did
not challenge before any appellate authority. Thus the
issue has reached finality.”
21.Thus, the Assessing Officer has considered the facts and
circumstances as well as the directions issued by this Court in the above
orders referred to by the petitioner. After considering all these factors, the
total income was computed and the impugned order has been passed.
22.This Court is of the considered opinion that this Court initially
approved the Scheme of Amalgamation. Thereafter, this Court passed an
order on 11.01.2010 in C.A.Nos.330 to 333 of 2009. Undoubtedly, this
Court made observations with reference to the revised returns filed by the
petitioner pursuant to the notice issued under Section 148 of the Act. This
Court made certain factual findings also with reference to the Scheme of
Amalgamation and certain clauses in the scheme more specifically, clauses
4.8 and 7.2. Further, this Court made certain observations on facts also.
However, these observations would not preclude the competent authorities
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to consider the facts and circumstances with reference to the documents and
evidences.
23.This Court in paragraph 23 of the judgment in clear terms directed
the Revenue to consider the return filed in terms of the scheme sanctioned
by this Court effective from 01.01.2004. Thus, one aspect of the matter is
that the High Court directed the Revenue to consider the revised return in
terms of the scheme with effect from 01.01.2004. In view of the fact that
this Court directed the authorities to consider, it is not necessary that the
facts culled out or revealed from the original documents as well as the
evidences are to be neglected. It is the duty of the competent authorities to
ensure that such directions are implemented in its real letter and spirit to
ensure that the facts, circumstances as well as the documents and evidences
are considered and appreciated in a right perspective. While doing so, if at
all some errors, omissions or commissions are made by the original
authority, the aggrieved persons are bound to prefer an appeal and certainly
not a writ proceedings once again for the purpose of adjudication of the
merits of the case. The observations made based on the affidavits filed by
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the respective parties cannot be construed as conclusive factors, which are
to be referred with reference to the original documents and evidences. This
Court has not passed an order by conducting an elaborate enquiry with
reference to the documents and evidences and such an adjudication must be
done by the competent authority. However, this Court considered certain
facts which all are placed before it and observations are made but the final
directions are granted to consider the claim of the petitioner and take a
decision. Under these circumstances, the parties cannot berely on the
observations and form an opinion that the revised return in the present case
must be accepted by the competent authority/Assessing Officer. In such an
event, opportunity of adjudication for either of the parties, viz., the
petitioner as well as the Revenue is denied and thus, the spirit of the order
of the High Court is to be understood that the observations are the
guidelines for the authorities to consider the facts and ultimately, they are
bound to consider the entire facts and circumstances with reference to the
documents and evidences, which all are on record.
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24.High Court cannot adjudicate the facts and circumstances based on
the records, which all are to be scrutinized by the appellate authority in the
present case. The petitioner-company is at liberty to adjudicate the legal
grounds before the appellate authority, which is competent to entertain the
same and redress the grievances in the manner known to law. In the event
of entertaining a writ petition against the original assessment order, the
aggrieved persons are not only deprived of an appellate remedy
contemplated under the Act, but there is a possibility of omission and
commission in respect of the complete facts and circumstances in a writ
proceedings. Merely based on the affidavit filed by the parties, High Court
cannot form an opinion with reference to the records, which is to be formed
based on the original documents and evidences. Thus, an affidavit in a writ
proceedings is insufficient to make a fact finding with reference to the
documents and evidences. Therefore, the importance of an appellate
remedy to be exhausted, at no circumstances, be undermined.
25.High Court cannot dispense with the appellate remedy in a routine
manner. Writ Petitions are filed on various grounds some times with an
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idea to avoid delay in disposal of appeals. However, the legislative
intention to exhaust the appellate remedy is to be considered by the Court.
The legislatures thought fit that by providing an appeal, complete
adjudication of facts, circumstances, documents and evidences would be
completed. Thus, such a valuable remedy provided has to be exhausted in
all circumstances.
26.The petitioner has raised certain legal grounds for the purpose of
entertaining a writ petition. However, all such legal grounds may be
pleaded before the appellate authority for effective adjudication. The final
fact finding by the appellate authority would be of greater assistance to the
High Court for effective disposal of the writ petition. Thus, the parties
aggrieved must, at the first instance, prefer an appeal, exhaust the same and
thereafter, they have to approach the appropriate form.
27.The power of review of the High Court under Article 226 of the
Constitution of India is to scrutinize the processes through which a decision
is taken by the competent authority in consonance with the provisions of a
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statute and rules, but not the decision itself. Therefore, the power of judicial
review under Article 226 of the Constitution of India cannot be extended for
the purpose of adjudicating the disputed facts with reference to the
documents and evidences, which cannot be done at all. Based on the mere
affidavit and some xerox copies of the documents, High Court cannot form
an opinion with reference to the complete facts.
28.As far as the Income Tax matters are concerned, it involves certain
technicalities and intricacies in accountancy. Such intricacies and the
expertise are to be exercised by the competent appellate authority of the
Department of Income Tax, who is having thorough knowledge about the
taxation policies. Therefore, the finding of appellate authority in such
circumstances are of paramount importance for the High Court to exercise
the power of judicial review. This Court is of the considered opinion that in
all these cases, the petitioner has challenged the assessment orders passed
admittedly and appeal is contemplated under the provisions of the Act.
There is no other reason for the purpose of entertaining a writ petition
before exhausting the appellate remedy and therefore, the petitioner-
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company is at liberty to approach the appellate authority by filing an appeal
in a prescribed format and in compliance with the provisions of the Act. In
the event of filing any such appeal, the appellate authority shall consider the
same on merits and in accordance with law and by affording opportunity to
the writ petitioner and dispose of the appeal as expeditiously as possible.
With the above observations and directions, all these writ petitions
stand disposed of. No costs. Connected MPs are closed.
12.07.2021
Index : Yes
Speaking Order
abr
To
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.
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S.M.SUBRAMANIAM, J.
(abr)
W.P.Nos.28183, 28200, 28204 &
28206 of 2018
12.07.2021
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