Madras High Court
The Principal Commissioner Of vs M/S.Raja Transports on 6 July, 2023
T.C.A.No.352 of 2023
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 06.07.2023
CORAM :
THE HON'BLE MR. JUSTICE R. MAHADEVAN
AND
THE HON'BLE MR. JUSTICE MOHAMMED SHAFFIQ
T.C.A.No.352 of 2023
The Principal Commissioner of
Income Tax, Trichy. ... Appellant
Versus
M/s.Raja Transports,
No.34, Trichy Main Road,
Ariyalur - 621 704 ... Respondent
(PAN No.AAEFR4385H)
Appeal preferred under Section 260A of the Income Tax Act, 1961, against
the order of the Income Tax Appellate Tribunal, 'A' Bench, Chennai, dated
22.02.2023 in ITA No.722/Chny/2020.
For Appellant : Mr.M.Swaminathan,
Senior Standing Counsel assisted by
Mrs.S.Premalatha,
Junior Standing Counsel
For Respondent : Mr.S.Sridhar
JUDGMENT
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T.C.A.No.352 of 2023
(Judgment was delivered by R.MAHADEVAN, J.)
Heard the learned counsel on either side and perused the materials
available on record. By consent, this tax case appeal is taken up for final disposal
at the stage of admission itself.
2. This tax case appeal has been filed by the appellant / Revenue,
challenging the order dated 22.02.2023 passed by the Income Tax Appellate
Tribunal, 'A' Bench, Chennai, in ITA No.722/Chny/2020, relating to the
assessment year 2014-15, raising the following substantial questions of law:-
“1. Whether on the facts and in the circumstances of the case and in law
the Tribunal was right in holding that reopening of assessment under Section 147
is only change of opinion and hence bad in law?
2. Whether on the facts and in the circumstances of the case and in law
the Tribunal was right in holding that the reopening of assessment under Section
147 is only change of opinion on the basis of factual error pointed out by the
Internal Party is not valid?"
3. The issue on hand pertains to reopening of assessment for the
Assessment Year 2014-2015. The Assessing Officer initiated reopening
proceedings under Section 147 by issuing a notice under Section 148, alleging
that the assessee firm had not deducted TDS as required under Section 194(C) on
the entire hire charges of Rs.14,78,95,505/-. The Assessing Officer disallowed
30% of the charges, amounting to Rs. 4,43,68,652/- under Section 40(a)(ia) and
has completed the reopened assessment on 30.12.2019.
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T.C.A.No.352 of 2023
4. The assessee, being aggrieved by the reopening of assessment order,
preferred an appeal before the Commissioner of Income Tax (Appeals)-I, Trichy
[CIT(A)]. The CIT(A) allowed the appeal of the assessee and annulled the
assessment holding that reopening of the assessment did not meet the basic
requirements set out in Sections 148 to 151 of the Income Tax Act. While so, the
CIT(A) opined that the Assessing Officer's action to reopen the assessment merely
to verify certain details, could not be considered as valid ground for reopening
the assessment.
5. Being dissatisfied with the order of the Commissioner of Income Tax
(Appeals)-I, Trichy, the Revenue filed an appeal before the Income Tax
Appellate Tribunal (ITAT). The ITAT, by order dated 22.02.2023, dismissed the
appeal of the revenue holding that reopening of the assessment was purely
based on a change of opinion. Therefore, this appeal by the Revenue.
6. The main contention of the learned senior standing counsel for the
appellant is that the ITAT erred in considering the reopening of the assessment
under Section 147 as a mere change of opinion, relying on the judgment of the
Supreme Court in CIT v. Kelvinator India Limited [320 ITR 561 (SC)] and
that, the ITAT failed to appreciate the validity of reopening the assessment
based on a factual error pointed out by the internal audit.
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T.C.A.No.352 of 2023
7. It is seen that the assessee in this case is engaged in the transport
contract business and claimed expenses amounting to Rs.14,78,95,505/- in the
returns filed. The Assessing Officer sought an explanation from the assessee
regarding the substantial expenses claimed under the category "other expenses"
in the Profit and Loss account. In response, the assessee's authorized
representative submitted a letter stating that the expenses were related to
transport contracts for transporting gypsum and cement to the companies. It was
further explained that the expenses were included under the head "other
expenses" due to the absence of a separate column for such expenditures in the
returns. Upon careful examination of the documents and details provided by the
assessee along with the IT statement, the Assessing Officer completed the
assessment under Section 143(3) of the Income Tax Act on 26.10.2016. The
assessment order explicitly stated that the Assessing Officer had examined all the
documents and details submitted by the assessee and accepted the income
returned. Thus, it is evident from the assessment order that the Assessing Officer
had already scrutinized the expenses claimed by the assessee during the original
assessment. While so, reopening the assessment solely on the basis of an audit
objection amounts to a clear case of change of opinion, as observed by the
Tribunal.
8. It is settled law that the Assessing Officer must have valid reasons to
believe that the income has escaped assessment due to the assessee's failure to
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T.C.A.No.352 of 2023
disclose material facts necessary for assessment. In the present case, reopening
the assessment by the Assessing Officer without any substantive basis or new
material would only tantamount to a change of opinion and it is not at all a valid
ground for reopening. Therefore, the Tribunal has rightly held that reopening the
assessment under Section 147 is indeed a change of opinion, which is not
permissible under law, in the light of the judgment of the Apex court in CIT V.
Kelvinator India Ltd. (cited supra). Thus, this court finds no infirmity in the
order impugned herein, warranting interference.
9. Accordingly, this tax case appeal is dismissed. No costs.
(R.M.D., J.) (M.S.Q., J.)
06.07.2023
rns
Index: Yes / No.
Speaking order/ Non-speaking order
Neutral Citation: Yes / No.
To
1. The Income Tax Appellate Tribunal, 'A' Bench,
Chennai.
2. The Principal Commissioner of
Income Tax, Trichy.
3.The Deputy Commissioner of Income Tax,
Circle 1(1), Trichy.
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T.C.A.No.352 of 2023
R. MAHADEVAN, J.
and
MOHAMMED SHAFFIQ, J.
rns
T.C.A.No.352 of 2023
06.07.2023
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