Madras High Court
N.Parvathi Textiles vs The Additional / Joint / Deputy / ... on 25 January, 2022
WP(MD)No.1014 of 2022
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
DATED : 25.01.2022
CORAM
THE HON'BLE MR. JUSTICE M.SUNDAR
W.P(MD)No.1014 of 2022
and W.M.P.(MD)Nos.852 & 853 of 2022
N.Parvathi Textiles,
A partnership firm,
Rep. By its Partner N.Sridharan,
No.140A, East Street,
Dindigul-624 001. ...Petitioner
-Vs-
1. The Additional / Joint / Deputy / Assistant Commissioner
of Income Tax / Income Tax Officer,
National Faceless Assessment Centre,
Room No.401, 2nd Floor,
E-Ramp, Jawaharlal Nehru Stadium,
New Delhi-110 003.
2. The Assistant Commissioner of Income Tax,
Non-Corporate Circle 2,
Madurai.
3. The Assistant Commissioner of Income Tax
Circle 1, Dindigul. ... Respondents
Prayer: Writ Petition filed under Article 226 of Constitution of India, to
issue a Writ of Certiorari, calling for the records pertaining to impugned
1/18
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WP(MD)No.1014 of 2022
assessment order passed by the 1st respondent in AABFN 3571G [DIN:
ITBA/AST/S/147/2021-22/1035666801(1)], dated 17.09.2021, quash the
same as illegal and without jurisdiction.
For Petitioner : Mr.P.H.Arvindh Pandian,
Senior Counsel,
for Mr.M.Saravanan
For Respondents : Mr.N.Dilipkumar,
Senior Standing Counsel for Income Tax.
ORDER
Captioned writ petition has been filed assailing an assessment order
dated 17.09.2021 bearing reference DIN:
ITBA/AST/S/147/2021-22/1035666801(1) made by the first respondent
(impugned assessment order).
2. Mr.P.H.Arvindh Pandian, learned Senior Advocate appearing on
behalf of the counsel on record for the writ petitioner and Mr.N.Dilip
Kumar, learned Senior Standing Counsel for Income Tax, who has accepted
notice on behalf of all the three respondents are before this Court, owing to
the factual matrix, with the consent of both sides main writ petition was
taken up and heard out.
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WP(MD)No.1014 of 2022
3. Short facts or in other words facts that are imperative for
appreciating this order are that the impugned assessment order pertains to
'Assessment year 2013-2014' ('said AY'); that the writ petitioner is a
Partnership Firm engaged in Textile business; that regarding said AY,
jurisdictional Assessing Officer took up the case for scrutiny by issue of
notices under Section 143 (2) and 142(1) of Income Tax Act, 1961 ('IT Act'
for brevity); that an assessment order came to be made on 16.02.2016; that
thereafter a notice dated 19.03.2020 came to be issued under Section 148 of
IT Act; that in response, the writ petitioner filed a return on 30.10.2020; that
thereafter notices were issued under Section 143(2) read with Section 147 of
IT Act on 09.04.2021 and 13.04.2020; that the writ petitioner uploaded
objections on 21.04.2021; that the objections of the writ petitioner were
rejected on 25.05.2021; that thereafter notices under Section 142(1) were
issued on 10.08.2021 as well as 25.08.2021; that this was followed by show
cause notice (SCN) dated 13.09.2021 calling upon the writ petitioner to
respond by 16.09.2021; that the impugned assessment order under Section
147 read with 144 (3) of IT Act came to be made on 17.09.2021; that
assailing the impugned assessment order, captioned writ petition has been
filed.
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WP(MD)No.1014 of 2022
4. Notwithstanding very many averments in the writ affidavit and
notwithstanding several grounds raised in the writ affidavit, learned Senior
Counsel for petitioner made pointed submissions, a summation of which is
as follows:
a) there is no new material for issue of Section 148
notice;
b) 142(1) notices do not give details of the
immovable property alleged to have purchased by the writ
petitioner, which is one of the issues touching upon the
proposed variation;
c) the time granted vide SCN dated 13.09.2021 is
too short as it is barely three working days and the
impugned order has been made on the very next date.
5. In response to the above submissions, learned Revenue Counsel on
instructions made submissions, a summation of which is as follows:
a) the issue touching upon new material and Section
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WP(MD)No.1014 of 2022
148 notice cannot be assailed by putting the clock back post
assessment order which itself is now under challenge in the
case on hand. Doosan Bobcat India Private Limited Vs.
Deputy Commissioner of Income Tax and others was
relied on for this proposition;
b) the details have to emanate from the assessee as the
Section 142 (1) notice clearly calls upon the assessee to
give notice;
c) the SCN giving only three days notice is not of
relevance as it was preceded by two notices, one dated
10.08.2021 and another dated 25.08.2021 and therefore,
sufficient opportunity has been given to the writ petitioner /
assessee.
6. By way of reply, learned Senior Counsel submitted that new
material arguments is predicated on Kelvinator case viz., CIT Vs.
Kelvinator of India Ltd., reported in (2002) 256 ITR 1 ((Del) affirmed by
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WP(MD)No.1014 of 2022
Hon'ble Supreme Court in CIT Vs. Kelvinator of Inida Ltd., reported in
(2010) 320 ITR 561 (SC), Cholamandalam Investment case viz., CIT Vs.
Cholamandalam Investment and Finance Co. Ltd., reported in (2009) 309
ITR 110 and India Cements Ltd., case viz., CIT Vs. India Cements Ltd.,
reported in (2020) 424 ITR 410 (Madras), he also submitted that the
decision reported in 2019 SCC OnLine Mad 36752 [Doosan Bobcat India
Private Limited Vs. Deputy Commissioner of Income Tax and others]
relied on by the learned Revenue Counsel is distinguishable on facts that
was a case where the Court came to the conclusion that the conduct of the
assessee is willful.
7. This Court now embarks upon the exercise of analyzing the rival
submissions setting out its discussion and dispositive reasoning on the
same.
8. The first point on new material, in the considered view of this
Court is tad too late in the case on hand. The reason is Doosan Bobcat
India Private Ltd., case (cited supra) relied on and Orchid Pharma Ltd.,
case viz., Orchid Pharma Ltd., Vs. Deputy Commissioner of Income-Tax
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WP(MD)No.1014 of 2022
rendered by Hon'ble Division Bench of this Court reported in [2021] 439
ITR 387 (Mad). In the case on hand, the impugned assessment order has
been made, the writ petitioner has sent objections. Writ petitioner has been
served with not one but two notices under Section 142(1) of IT Act (dated
10.08.2021 and 25.08.2021) followed by SCN dated 13.09.2021. Doosan
Bobcat being a case where Court came to the conclusion that assessee's
conduct was willful does not make the case law distinguishable on facts as
the proposition is whether one can revisit reasons for reopening the
assessment order and that too in a case assailing the assessment order.
Therefore, it is tad too late in the day. Kelvinator, Cholamandalam and
India Cements do not come to the aid of writ petitioner in case on hand as
sufficient opportunity has been given to writ petitioner before SCN and
these are case laws for principles qua reopening which are in a different
realm qua Doosan Bobcat and Orchid Pharma. There is another reason why
this Court is of the view that this is not a case where the Kelvinator
principle would help the writ petitioner and that the other reason is the
order which this Court now proposes to make.
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WP(MD)No.1014 of 2022
9. To put it differently, the three case laws relied on by writ petitioner
do not come to the aid of the writ petitioner owing to the facts of this case
and the trajectory the assessment proceedings have taken. The reason is, in
the case on hand, we are more concerned with whether purported lack of
reasons for reopening can be raised more so as a ground in support of a
challenge to assessment after the assessee has fully participated in the
assessment proceedings post reopening, invited an assessment order and has
challenged the same, i.e., impugned assessment order. In this regard Doosan
Bobcat India Private Ltd. case and Orchid Pharma Ltd., cases which are
Madras High Court judgments are those in which the Court has addressed
itself to the specific question as to whether alleged insufficient grounds for
reopening an assessment can be raised post assessment (post reopening) and
answered the same in the negative.
10. Therefore, this Court is of the view that the case laws pressed into
service by learned counsel for Revenue are relevant and they are clearly
authorities for the proposition that is being legally thrashed out in the case
on hand.
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WP(MD)No.1014 of 2022
11. To be noted, Chapter XIV of Income Tax Act. 1961 captioned
'PROCEDURE FOR ASSESSMENT' consists 20 sections, i.e., Sections 139
to 158. Section 139 talks about assessee filing return of income, section 142
talks about inquiry 'before assessment'. 'Assessment' thereafter is under
section 143. The scheme of the statute also is of relevance as in the case on
hand, writ petitioner assessee has responded to reopening notice, filed his
returns and thereafter even sent what according to him his objections qua
notices in this regard. The details of the trajectory together with dates have
already been captured supra elsewhere in this order where there is a
narrative capturing factual matrix and the trajectory the matter has taken.
12. In taking the above view, this court reminds itself of a judgment
of a Constitution Bench of Hon'ble Supreme Court in the celebrated Padma
Sundara Rao case, wherein the manner of referring to a case law (precedent)
and as to how the fact setting even owing to minor differences can make a
world of difference in a case as a precedent has been dealt with. Padma
Sundara Rao case law citation is (2002) 3 SCC 533 and the excerpted
portion of Padma Sundara Rao which would be of utmost relevance is
paragraph 9 and the same reads as follows:
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WP(MD)No.1014 of 2022
'9.Courts should not place reliance on decisions without
discussing as to how the factual situation fits in with the fact situation of
the decision on which reliance is placed. There is always peril in treating
the words of a speech or judgment as though they are words in a
legislative enactment, and it is to be remembered that judicial utterances
are made in the setting of the facts of a particular case, said Lord Morris
in Herrington v. British Railways Board [(1972) 2 WLR 537 : 1972 AC
877 (HL) [Sub nom British Railways Board v. Herrington, (1972) 1 All
ER 749 (HL)]] . Circumstantial flexibility, one additional or different fact
may make a world of difference between conclusions in two cases.'
13. Though we are concerned with the issue as to whether reopening
order can be assailed after assessment, on a demurer even if Kelvinator
principle is applied (in Kelvinator, facts are not available), this Court
interfering in writ jurisdiction will arise only when foundational fact for
reopening itself is unacceptable. In this case, prima facie 'lack of full
disclosure' ingredients is present as DRP has examined all three aspects,
namely (I) Transfer Pricing (ii) Railway Siding Charge (whether capital or
revenue expenditure) and (iii) interest from debenture, tax impact of same
and after examining all three aspects has held in favour of assessee only
with regard to Transfer Pricing. This cannot be completely ignored. This is
in the light of Padma Sundara Rao principle. To be noted, Padma Sundara
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WP(MD)No.1014 of 2022
Rao case was rendered by Hon'ble Constitution Bench and it has been
elevated from the status of ratio to that of declaration of law.
14. The next point turns on the assessee seeking details. Learned
Senior Counsel pointed out that the Department has not even given the
details of the immovable property said to have been purchased by the writ
petitioner which is now going to be made subject matter of Section 80IA of
IT Act addition /variation. The answer of the learned Revenue Counsel that
these details should emanate from the assessee is not very convincing.
Therefore, this Court would be interfering to that limited extent in this
matter. This will be set out in the latter portion of this order infra. This
douses the second point.
15. The third point that the time given vide SCN dated 13.09.2021 is
too short is clearly acceptable. The reason is the 13.09.2021 SCN has been
digitally signed at 13:55:35 IST, assuming it was uploaded immediately, half
a day would have gone by as it was in the afternoon of 13.09.2021. To be
noted, vide paragraph 3 of the SCN, writ petitioner-assessee was called
upon to respond by 23:59 hours on 16.09.2021. 13.09.2021 is a Monday
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WP(MD)No.1014 of 2022
and obviously 16.09.2021 is Wednesday and that fairly three working days.
It is clearly insufficient. Under the normal circumstances, this Court would
have been inclined to send the matter back to the Assessing authority to
proceed from the SCN stage but in this case, as the argument that it is a
scrutiny assessment and that even the details of the immovable property said
to have been purchased by assessee / writ petitioner have not been given has
some force and therefore, going into the facts and circumstances of the case,
this Court is of the considered view that this is a matter where it can be sent
back to the Department to proceed from the first of 142(1) notices viz.,
142(1) notice dated 10.08.2021 which is as follows:
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WP(MD)No.1014 of 2022
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16. The above notice vide the Annexure more particularly Serial No.8
calls upon the writ petitioner to furnish details of immovable property
purchased by the writ petitioner firm or by any partners of the firm qua said
AY with source. Nothing prevents the writ petitioner-assessee to
responding to this. Equally it is open to the Department to issue the
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WP(MD)No.1014 of 2022
additional notice giving particulars of the immovable property. This course
will balance the rights of the writ petitioner and interest of the Revenue.
17. Before proceeding i.e., before writing the operative portion of this
order, it is deemed appropriate to crystallize and say that in simplistic terms
the point is writ petitioner not having questioned the order dated 25.05.2021
rejecting the writ petitioner's objections and/or the reopening notice cannot
now go back in time and canvass Kelvinator principle.
18. In the light of the discussion and dispositive reasoning set out
supra, the following order is passed:
a) the impugned assessment order i.e., order dated
17.09.2021 bearing reference DIN:
ITBA/AST/S/147/2021-22/1035666801(1) made by the
first respondent is set aside on the grounds of lack of
opportunity / specificity;
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WP(MD)No.1014 of 2022
b) though obvious, the basis of the above limb is
this Court has not expressed any view or opinion on the
merits of the matter;
c) the Department shall now proceed from the
stage of notice under Section 142(1) of the IT Act dated
10.08.2021 (scanned and reproduced supra);
d) When the Department proceeds from the
10.08.2021 notice under Section 142(1), it is open to the
respondents to issue an additional notice giving more
details with specificity, if so advised;
e) all questions are left open and therefore, the
writ petitioner's purported objections and the writ
petitioner's contentions raised in the captioned writ
petition can well be raised in response to the 142(1)
notice;
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WP(MD)No.1014 of 2022
f) the above exercise shall be commenced
forthwith and the same shall be concluded as
expeditiously as the business of the first respondent
would permit and in any event within three months from
today i.e, on or before 25.04.2022.
19. Captioned main writ petition is disposed of with the aforesaid
directives. Consequently, captioned WMP are disposed of as closed. There
shall be no order as to costs.
25.01.2022
Index : Yes/No
Internet : Yes /No
vsm
Note :
In view of the present lock down owing to
COVID-19 pandemic, a web copy of the order may be
utilized for official purposes, but, ensuring that the copy of
the order that is presented is the correct copy, shall be the
responsibility of the advocate / litigant concerned.
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WP(MD)No.1014 of 2022
M.SUNDAR, J.
vsm
To
1. The Additional / Joint / Deputy / Assistant Commissioner
of Income Tax / Income Tax Officer,
National Faceless Assessment Centre,
Room No.401, 2nd Floor,
E-Ramp, Jawaharlal Nehru Stadium,
New Delhi-110 003.
2. The Assistant Commissioner of Income Tax,
Non-Corporate Circle 2,
Madurai.
3. The Assistant Commissioner of Income Tax
Circle 1, Dindigul.
W.P(MD)No.1014 of 2022
and W.M.P.(MD)Nos.852 & 853 of 2022
25.01.2022
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