Madras High Court
Pandiyan Paper Company vs The Income Tax Officer on 1 April, 2022
W.A.No.831 of 2022
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 01.04.2022
CORAM
THE HONOURABLE MR. JUSTICE R. MAHADEVAN
and
THE HONOURABLE MR.JUSTICE J.SATHYA NARAYANA PRASAD
Writ Appeal No. 831 of 2022
and
C.M.P. No. 5612 of 2022
---
Pandiyan Paper Company
Old No.132-A, New No.298,
1st Agraharam, Salem - 636 001. .. Appellant
Versus
The Income Tax Officer
Ward - 1(1),
Income Tax Office,
No.3, Gandhi Road, Salem - 636 007. ..
Respondent
Appeal filed under Clause 15 of Letters Patent against the order passed
by this Court in W.P. No. 186 of 2022, dated 10.01.2022.
For Appellant : Mr. R. Janakiraman
For Respondent : Mr. A.P. Srinivas
Senior Panel Counsel
JUDGMENT
[Judgment of the Court was delivered by R.MAHADEVAN,J]
This Writ Appeal is directed against the order dated 10.01.2022 passed
by the learned Judge in W.P. No. 186 of 2022 filed by the appellant herein.
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W.A.No.831 of 2022
2. The appellant company is a firm engaged in the business of
wholesale trading of paper products and stationeries. They filed their return of
income on 25.11.2014 for the assessment year 2014-15, declaring a total
income of Rs.9,31,000/-. On scrutiny of the return, notices dated 28.08.2015
and 07.04.2016 were issued under Section 143 (2) of The Income Tax Act (in
short, “the Act”) calling upon the appellant to produce certain material
evidence for the said assessment year. The appellant submitted their reply
along with all material evidence before the authority and on consideration of
the same, the respondent completed the assessment under Section 143(3) of the
Act, accepting the return of income filed by the appellant, vide order dated
07.10.2016.
3. While so, after five years, the respondent issued a notice dated
30.03.2021 to the appellant under Section 148 of the Act for re-opening the
assessment on the ground that certain income chargeable to tax for the
assessment year 2014-15 has escaped assessment. In response, the appellant
filed their return of income on 16.04.2021 admitting the same income of
Rs.9,31,100/- and also requested the respondent to furnish the reasons for
reopening the assessment. Accordingly, the respondent uploaded in the ITBA
portal on 09.07.2021 the reasons for re-opening the assessment. Upon noticing
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W.A.No.831 of 2022
the same, the appellant by its letter dated 12.07.2021 requested the respondent
to drop such proceedings initiated under section 148 of the Act. Thereafter,
challenging the notice issued by the respondent on 30.3.2021, the appellant
filed a writ petition in W.P. No. 17262 of 2021 seeking to quash the same on
the ground that the re-opening of the assessment is a clear case of change of
opinion on the part of the officer since the original assessment order under
Section 143(3) was passed only after considering all the materials available on
record.
4. By the order 18.08.2021, the learned Judge dismissed the Writ
Petition holding that it is pre-mature as the re-assessment proceedings are yet
to culminate in a speaking order on the aspect of jurisdiction and the reply of
the appellant dated 12.07.2021 objecting to the reopening is yet to be
considered by the respondent. Therefore, the learned Judge, while dismissing
the writ petition, directed the respondent to hear the appellant and pass orders
on the objections dated 12.07.2021 within a period of four weeks. It was
further observed that assessment, if any, would be taken up subject to
conclusion on the aspect of jurisdiction.
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W.A.No.831 of 2022
5. Pursuant to the aforesaid order dated 18.08.2021 made in
WP.No.17262 of 2021, the respondent passed an order dated 15.12.2021,
rejecting the objections filed by the appellant by observing that action under
section 147 was validly initiated after obtaining necessary approval from the
prescribed authority as provided in the Act; the reopening of the assessment
under section 147 for the year 2014-15 was very much within the legal
provisions envisaged by the said sections of the Income Tax Act, 1961; and the
assessee's claim that the reopening was bad in law, does not have any ground.
Aggrieved by the order of rejection dated 15.12.2021, the appellant filed
W.P.No.186 of 2022, which was disposed of, by the learned Judge on
10.01.2022. For better appreciation, the relevant portion of the same is
extracted below:
'15. In this case the assessment was made pursuant
to returns filed under Section 139 of the IT Act. The
scrutiny assessment passed under section 143(3) of the
Income Tax Act was based on the information in the
returns. Whether there was a suppression of facts or not
may be decided in the proceedings under section 148 of
the IT Act. The impugned order has merely justified the
reasons for reopening of the assessment. It cannot be
said that the respondent has come to a definite conclusion
as to whether indeed the case made out for recomputing
the income based on the reasons given and the
observations in the impugned order.
16. It is still open for the petitioner to give a proper
explanation/reason as to why the assumption of
jurisdiction under section 148 of the IT Act was
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W.A.No.831 of 2022
17. In view of the above, I am not inclined to
interfere with the impugned order over ruling the
objection of the petitioner. Liberty is however given to the
petitioner to participate in the proceedings before the
respondent by filing suitable reply for the respondent to
pass appropriate reassessment order in accordance with
law and on merits.
18. It is made clear that the observation in the
impugned order is only for disposing the objection of the
petitioner against reopening the completed assessment.
19. Ultimately, the issue will have to be decided on
merits. It is for the petitioner to file appropriate
reply/representation explaining the reason as to why the
completed under section 143(3) of the IT Act on
07.10.2016 deserves to be confirmed.
20. Under these circumstances, the writ petition
filed by the petitioner is disposed. The respondent is
directed to complete the proceedings within a period of
three months from the date of receipt of a copy of this
order.”
6. Mr. R. Janakiraman, learned counsel appearing for the appellant
submitted that adherence to the mandate of First Proviso to Section 147 is
compulsory and the Department is not discharging its onus under this proviso
which only points to lack of apparent jurisdiction. Though the same ground
was raised in the earlier W.P.No. 17262 of 2021 as well as in the present writ
petition, the learned Judge did not consider the jurisdictional issue. On the
other hand, it was observed in para 14 of the order dated 10.01.2022 that there
are several disputed questions of facts, which cannot be decided in a summary
proceedings under Article 226 of Constitution of India; and in para 16, it was
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W.A.No.831 of 2022
further observed that it is still open for the appellant to give a proper
explanation/reason as to why the assumption of jurisdiction under section 148
of the IT Act was erroneous both on the facts and on the law. The learned
counsel further submitted that though the appellant has submitted their
objections, the respondent, instead of appreciating the same in a proper
perspective, rejected the same by order dated 15.12.2021, which is erroneous
and contrary to law. In support of his contentions, the learned counsel placed
reliance on the judgment of the Apex Court in Calcutta Discount Company
Limited v. Income-Tax Officer, Companies District I, Calcutta and another
reported in 1960 (11) TMI 8 – Supreme Court, wherein, it is held as follows;
“It must, therefore, be held that the Income tax
Officer who issued the notices had not before him any
non-disclosure of a material fact and so he could have no
material before him for believing that there had been any
material non-disclosure by reason of which an under-
assessment had taken place.
We are, therefore, bound to hold that the conditions
precedent to the exercise of jurisdiction under section 34
of the Income-tax Act did not exist and the Income-tax
Officer had therefore no jurisdiction to issue the
impugned notices under section 34 in respect of the years
1942-43, 1943-44 and 1944-45 after the expiry of four
years.”
By placing reliance on the above decision, it is submitted that in the case of
appellant, the reasons recorded did not disclose any fresh materials at the
hands of the assessing officer and there is obviously lack of jurisdiction under
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W.A.No.831 of 2022
proviso to Section 147 of the Act. Thus, the learned counsel prayed for
allowing the appeal by setting aside the orders passed by the learned Judge as
well as the assessing officer.
7. Mr. A.P. Srinivas, learned Senior Panel Counsel submitted that
the original assessment order was passed under section 143(3) of the Act dated
07.10.2016, but later, on scrutiny of records, it was found that the amount
debited by the appellant to the tune of Rs.3,71,782/- towards P&L account
claiming prior period expenses was disallowable and it has to be brought to
tax. Besides this, an amount of Rs.13,03,703/- towards interest expenditure
paid to the relatives deposit loans was disallowable as it was found that no
interest had been charged for the loan received from the firm by the partner.
Therefore, the case was reopened under Section 147 of the Act. The learned
counsel further submitted that re-assessment was sought to be made on certain
issues based on the materials available at the hands of the assessing officer and
hence, the learned Judge rightly directed the appellant to file its reply /
representation explaining the reason as to why the completed assessment
deserves to be confirmed, by the order impugned herein, which does not
require any interference by this court.
8. Heard the learned counsel appearing on either side and perused
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W.A.No.831 of 2022
the materials placed before this Court.
9. Concededly, the assessment for the year 2014-15 in respect of the
appellant firm was completed under section 143(3) on 07.10.2016.
Subsequently, the respondent reopened the assessment under section 147 by
issuing notice under section 148 of the Act, to which, the appellant filed its
objections on 12.07.2021. Thereafter, as per the order of this court dated
18.08.2021 in WP.No.17262 of 2021 at the instance of the appellant, the
respondent passed the order dated 15.12.2021 rejecting the said objections, on
the premise that there are fresh tangible materials available at the hands of the
assessing officer to reopen the assessment under section 147 of the Act. The
said order was put to challenge before the learned Judge in WP.No.186 of
2022, which was dismissed, by the order dated 10.01.2022 impugned herein.
10. We find no reason to interfere with the order of the learned Judge
dated 10.01.2022 in W.P.No.186 of 2022 even prior to the passing of final
order in the re-assessment proceedings. The learned Judge has pointed out in
the order impugned herein that the respondent has only indicated the reasons
and justifications for reopening the assessment and has not come to a definite
conclusion as to whether any case has been made out for re-computing the
income of the appellant. Therefore, the learned Judge has granted liberty to the
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W.A.No.831 of 2022
appellant to file reply/representation as to why the completed assessment
proceedings deserves to be confirmed. Such a conclusion arrived at by the
learned Judge, in our opinion, does not require any interference. We also wish
to observe that it is open to the appellant to raise all their contentions including
the jurisdiction issue in the re-assessment proceedings carried on by the
assessing officer.
11. With the above observation, this writ appeal stands dismissed. No
costs. Consequently, connected miscellaneous petition is closed.
[R.M.D., J.] [J.S.N.P., J.]
01.04.2022
msr / rsh
Index :Yes / no
Internet : Yes / No
To
The Income Tax Officer,
Ward - 1(1),
Income Tax Office,
No.3, Gandhi Road,
Salem -636 007.
https://www.mhc.tn.gov.in/judis
W.A.No.831 of 2022
R. MAHADEVAN, J
and
J.SATHYA NARAYANA PRASAD, J.
msr/rsh
WA No. 831 of 2022
01.04.2022
https://www.mhc.tn.gov.in/judis
