Madras High Court
Sl Lumax Ltd vs Deputy Commissioner Of Income Tax on 30 March, 2022
W.A.No.2691 of 2021
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 30.03.2022
CORAM
THE HONOURABLE MR. JUSTICE R. MAHADEVAN
AND
THE HONOURABLE MR.JUSTICE J. SATHYA NARAYANA PRASAD
Writ Appeal No. 2691 of 2021
and
C.M.P. No. 17436 of 2021
---
SL Lumax Ltd.,
Rep by its Managing Director,
G-15, SIPCOT Industrial Park,
Sriperumbudur Taluk,
Kancheepuam District,
Irrungattukottai - 602 117 .. Appellant
Versus
Deputy Commissioner of Income Tax
Corporate Circle VI - 2
7th Floor, New Block, Room 705
121, MG Road, Nungambakkam,
Chennai – 600 034 .. Respondent
Appeal filed under Clause 15 of Letters Patent against the order passed
by this Court in W.P. No. 35924 of 2016 dated 02.09.2021.
For Appellant : Mr. Srinath Sridevan
For Respondent : Mr. A.P. Srinivas
Senior Panel Counsel
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W.A.No.2691 of 2021
JUDGMENT
[Judgment of the Court was delivered by R.MAHADEVAN,J.]
The appellant is the petitioner in W.P. No.35924 of 2016. They have
preferred this writ appeal against the order dated 02.09.2021 passed by the
learned Judge in the said writ petition.
2.By the order impugned herein, the learned Judge has made the
following observation, while dismissing the writ petition filed by the
appellant:
“41.In view of the facts and circumstances, this court
could able to arrive a conclusion that the case of the petitioner
is falling under Sub-clause (c) to Explanation 2 of Section 147
of the Act as it is a deemed case, where income chargeable to
tax has escaped assessment and if such deemed cases are traced
out, then necessarily the Assessing authority has to draw an
inference on certain factual aspects for forming such an opinion
and such 'reason to believe' would be certainly falling under the
condition that the assessee has not disclosed fully and truly
material facts necessary for assessment. Thus, the Assessing
Officer had 'reason to believe' that income chargeable to tax has
escaped assessment. However, whether it is escaped assessment
or not is the subjective adjudication, which is to be done by
following the procedures as contemplated under the Act.”
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W.A.No.2691 of 2021
3.The main grievance of the learned counsel for the appellant is that
after clearing the returns filed by the appellant for the assessment year 2009-10
by the Transfer Pricing Officer, without making any adjustments and the same
having been accepted by the assessing officer, the respondent issued the notice
under section 148 of the Income Tax Act for reopening the assessment, that
too, after the expiry of four years, on the premise that the income chargeable to
tax for the said assessment year has escaped assessment, which is illegal and
contrary to the relevant provisions of the Act. The learned counsel further
submitted that the reopening of the assessment is based on change of opinion
of the assessing officer and not on any new materials on record. However, the
learned Judge, instead of quashing the same, erred in concluding that the
reassessment proceedings must go on and the appellant has to avail the
opportunity to be provided to defend their case and co-operate for the early
completion of the same. Therefore, the learned counsel sought to quash the
order of the learned Judge and allow this writ appeal.
4.On the other hand, the learned senior panel counsel appearing for the
respondent submitted that as per the provisions of section 43A of the Act,
revaluation of any asset purchased in foreign currency can be revalued on
account of fluctuation in the value of money on the date of exchange and only
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W.A.No.2691 of 2021
at the time of actual repayment of the loan; it will be clear from the accounts
that there has been no actual repayment made by the assessee/ appellant during
the current year; and the claim of Rs.390.96 lakhs on account of depreciation
in the current year is higher and hence, the same should have been added back
to the book profits as per clause (iia) of Explanation (1) of section 115JB.
Thus, there was a shortfall in assessment of income under section 115JB,
which warrants re-assessment. The learned counsel further submitted that in
any event, the respondent has only rejected the objections filed by the
appellant and hence, it is open for the appellant to substantiate its case by
producing the necessary materials at the time of hearing the reassessment
proceedings. Therefore, according to the learned counsel, the order impugned
herein does not call for any interference by this court.
5.Heard both sides and perused the materials placed before this court.
6.Before proceeding further, it is but necessary to look into the relevant
facts of the case, which are as follows:
6.1. The appellant is a company incorporated under the Companies
Act, 1956 and they are engaged in the business of manufacturing the
automobile parts. During the course of its business, they borrowed certain
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W.A.No.2691 of 2021
amount from the entities outside India. However, due to unprecedented
economic crises witnessed around the globe, they suffered a loss of
Rs.4699.80 lakhs. Therefore, the appellant capitalized the Foreign Exchange
Loss (Forex Loss) and claimed depreciation for Rs.1.33 lakhs in the books of
accounts, which was explained in schedule 21 to the 12th Annual Report for the
Assessment Year in question. Accordingly, on 28.08.2009, the appellant
company filed its return declaring an income of Rs.5,17,12,710/- and claimed
depreciation for Rs.1.33 lakhs.
6.2. While so, the appellant received a notice dated 14.11.2011 under
Section 142 (1) of the Act along with a questionnaire. On receipt of the same,
the appellant's representative appeared before the respondent and disclosed all
the material facts necessary for the assessment, besides submitted 12th Annual
Report which disclosed the manner in which the Forex Loss was treated. As
there are transactions made by the appellant outside India, the case was
referred to Transfer Pricing Officer, who on scrutiny of the documents passed
an order dated 06.12.2012 vide order No.S-605/TPO-VI/AY2009-2010
clearing the return filed by the appellant and made no adjustments to it.
Subsequently, the respondent passed the assessment order on 08.02.2013
accepting the income declared by the appellant.
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W.A.No.2691 of 2021
6.3. Be that as it may, after seven years, the appellant received a notice
dated 10.03.2016 under Section 148 of the Act, to which, they filed a detailed
objection on 08.09.2016 and supplementary objection on 21.09.2016, which
were rejected by the respondent, by order dated 26.09.2016. Challenging the
same, the appellant preferred WP.No.35924 of 2016, which was dismissed, by
the order impugned herein.
7.It is an admitted fact that the respondent passed the assessment order
in respect of the appellant for the assessment year in question, on 08.02.2013.
However, the same was reopened by issuing notice dated 10.03.2016 under
section 148 of the Act, to which, the appellant filed its detailed objections.
But, the said objections were rejected by order dated 26.09.2016 by the
respondent.
8.The learned counsel for the appellant, while raising many grounds
assailing the notice issued by the respondent under section 148 and the order
impugned herein, has submitted that the learned Judge having noticed that the
appellant did not suppress any material particulars, ought to have quashed the
notice issued by the respondent for reopening the assessment already
completed and allowed the writ petition filed by the appellant, whereas the
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W.A.No.2691 of 2021
learned Judge failed to do so. The learned counsel further submitted that the
appellant had furnished all the necessary material facts with the supportive
documents before the assessing officer, who did not properly appreciate the
same and hence, the matter may be remanded to him for fresh consideration.
9.The allegation so raised against the assessing officer was refuted on
the side of the respondent. According to the learned senior panel counsel, the
respondent has reopened the assessment in accordance with the provisions of
the Act. However, he has no serious objection for fresh consideration of the
matter by the assessing officer.
10.It could be seen from the order impugned herein that the learned
Judge after analysing the legal position qua reopening the assessment, has
categorically opined that the appellant has produced all the material facts and
evidences, however, the assessing officer in the original assessment order
dated 08.02.2013, has not considered many details and passed the said order in
a cryptic manner. The relevant passage of the same is profitably extracted
below:
"40. In this context, this Court is of an opinion that the petitioner
has produced all the material facts and evidences. However, the Assessing
Officer in the original assessment order dated 08.02.2013, not considered
many such details and passed an assessment order in a cryptic manner.
From and out of such an assessment order, the respondent could able to
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W.A.No.2691 of 2021
trace out certain under assessment and such income has been made the
subject of excessive relief under the Income Tax Act or excessive allowance
under the Act has been computed. In view of the fact that the case of the
petitioner is falling under the deemed cases, where income chargeable to
tax has escaped assessment and such intricacy of under assessment and the
excess relief or excess allowance or otherwise would be falling under the
condition that the petitioner has failed to disclose fully and truly. Thus, it is
necessary that the reassessment proceedings must go on. The petitioner/
assessee has to avail the opportunity to be provided to defend their case
with regard to the allegations of under assessment or excessive relief or
otherwise and co-operate for the early completion of the reassessment
proceedings. What is necessary for arriving at a conclusion is that where
there has been such non-disclosure of primary facts, which has escaped
assessment of income in the assessment would be sufficient for conferring
jurisdiction on the Assessing Officer to reopen the assessment. As held
repeatedly, escapement of assessment is the primary factor to be
considered and such escaped assessment occurred due to any one of the
reasons enumerated under Section 147 of the Income Tax Act."
Having observed so, the learned Judge ought to have set aside the notice for
reopening the assessment and remanded the matter to the assessing officer for
fresh consideration. On the other hand, it was erroneously concluded that it is
a deemed case where income chargeable to tax has escaped assessment and
hence, the reassessment proceedings must go on.
11.In view of the above, this court, without expressing any opinion on
the merits of the case, is inclined to set aside the orders impugned herein as
well as in the writ petition and are accordingly, set aside. Consequently, the
matter is remanded to the assessing officer to decide the decision for reopening
the assessment under Section 147 of the Act, afresh, by passing a speaking
order, after considering all the documentary evidence and materials placed by
the appellant, without being influenced by any observations made by the
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W.A.No.2691 of 2021
learned Judge in the impugned order dated 02.09.2021 in WP No. 35924 of
2016. Such an exercise shall be completed by the Assessing Officer, after
providing an opportunity of being heard to the appellant, within a period of
eight weeks from the date of receipt of a copy of this judgment.
12.This Writ Appeal is disposed of in the above terms. No costs.
Consequently, connected miscellaneous petition is closed.
(R.M.D., J.) (J.S.N.P., J.)
30.03.2022
rsh/gba
Index : Yes / no
Internet : Yes / No
To
Deputy Commissioner of Income Tax,
Corporate Circle VI - 2,
7th Floor, New Block, Room 705,
121, MG Road, Nungambakkam,
Chennai – 600 034.
https://www.mhc.tn.gov.in/judis
W.A.No.2691 of 2021
R.MAHADEVAN, J.
and
J.SATHYA NARAYANA PRASAD, J.
rsh/gba
WA No. 2691 of 2021
30.03.2022
https://www.mhc.tn.gov.in/judis
