Madras High Court
Vip Housing And Properties vs The Deputy Commissioner Of Income Tax on 25 February, 2025
Author: C.Saravanan
Bench: C.Saravanan
W.P.No.7774 of 2022
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Reserved On 25.10.2024
Pronounced On 25.02.2025
CORAM :
THE HONOURABLE MR.JUSTICE C.SARAVANAN
W.P.No.7774 of 2022
and
W.M.P.Nos.7792 and 7794 of 2022
VIP Housing and Properties,
Represented by its Partner Mr.J.Kishore,
14 and 16, 4th Floor, Raman Street,
T.Nagar, Chennai – 600 017,
Tamil Nadu, India. ... Petitioner
Vs.
1.The Deputy Commissioner of Income Tax,
Central Circle-2, Chennai,
New Building, New No.46, Old No.108,
Mahatma Gandhi Salai,
Chennai – 600 034.
2.The Principal Commissioner of Income Tax (Central),
Chennai – 2,
New Building, New No.46, Old No.108,
Mahatma Gandhi Salai,
Chennai – 600 034. ... Respondents
Prayer: Writ Petition filed under Article 226 of the Constitution of India for
issuance of a Writ of Certiorari, to call for the records on the file of the
respondents and quash the Impugned Order in PAN: AAIFV2000R dated
11.02.2022 in DIN & Letter No.ITBA/AST/F/17/2021-2022/1039674365(1)
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1/25
W.P.No.7774 of 2022
passed by the first respondent along with the Impugned Notice under Section
148 of the Income Tax Act, 1961 in PAN: AAIFV2000R dated 31.03.2021 in
DIN & ITBA No.ITBA/AST/S/148/2020-2021/1032012504(1) issued by the
first respondent for the Assessment Year 2014-2015.
For Petitioner : Ms.N.V.Lakshmi
For Respondents : Mr.A.P.Srinivas
Senior Standing Counsel
and Mr.A.N.R.Jayaprathap
Junior Standing Counsel
ORDER
In this Writ Petition, the petitioner has challenged the Notice dated
31.03.2021 issued under Section 148 of the Income Tax Act, 1961 for the
Assessment Year 2014-2015 and the Impugned Order dated 11.02.2022 passed
by the 1st respondent over ruling the objection of the petitioner against the
reopening of the assessment that was completed on 31.03.2016 under Section
143(3) of the Income Tax Act, 1961.
2. The reasons given for reopening of the assessment that was completed
on 31.03.2016 is culled out from the reply of the Department in its Email dated
16.07.2021. It reads as under:-
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“During the course of search and seizure operation, the
following amounts were seized: Rs.1,77,50,045/- from the office
premises of VIP Housing, Rs.50,00,000/- was seized from the
residence of Shri Dhanapal, Rs.50,00,000/- and gold of
Rs.38,69,168/- seized from VIP City.
The case was centralized with this circle and a notice u/s
142(1) was issued to the assessee. In response to that assessee
filed return of income on 22.02.2016 returning an income of
Rs.2,34,86,595/-. Subsequently, the assessment was completed
u/s 143(3) of IT Act, 1961 by accepting the returned income.
No addition was made on the seized cash and jewellery which
resulted in escapement of taxable income worth
Rs.3,16,19,213.”
3. It is the specific contention of the petitioner that no tangible materials
were available before the authority for reopening of the assessment that was
completed on 31.03.2016 under Section 143(3) of the Income Tax Act, 1961.
4. Learned counsel for the petitioner would submit that a search was
conducted under Section 132 of the Income Tax Act, 1961 on 03.09.2013 and
thereafter proceedings were initiated against the petitioner under the provisions
of Section 153A of the Income Tax Act, 1961 for the following Assessment
Years:-
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Assessment Income Returned in Income Returned in Additional
Year Return of Income filed the original return Income Offered
in response to 153A of Income – (C) to Tax – (D) =
(A)
Notice – (B) (B) – (C)
2011-2012 1,86,00,000 1,13,85,250 72,14,750
2012-2013 11,31,70,000 9,25,02,130 2,06,67,870
2013-2014 9,99,30,000 7,92,45,220 2,06,84,780
Total : 4,85,67,400
5. It is submitted that as far as search conducted during the Financial
Year 2013-2014 which is subject matter of the Assessment Year 2014-2015 is
concerned, the petitioner by Letter dated 28.10.2013 admitted the tax liability
on Rs.1,98,00,000/-, however, voluntarily had enhanced the same to
Rs.2,34,86,595/- in the returns filed on 22.02.2016.
6. Learned counsel for the petitioner would submit that the cash and the
golds that were seized during the search conducted on 03.09.2013 barring an
amount of Rs.1,77,50,045/-, the other amounts of Rs.50,00,000/- of each have
been offered independently to tax by Mr.Dhanapal, who is a partner of the
petitioner Firm and in the hands of M/s.VIP City (petitioner's another Firm)
respectively along with the value of gold seized from M/s.VIP City of
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Rs.38,69,168/-.
7. It is submitted that there is no scope for including the entire amount
into taxable income of the petitioner particularly when the Assessment Order
dated 31.03.2016 itself preceded a Notice issued under Section 142(1) of the
Income Tax Act, 1961 and in view of the Letter dated 28.10.2013 of the
petitioner.
8. Learned counsel for the petitioner would submit that the impugned
proceedings are inspired by a change of opinion and in the absence of tangible
evidence/material available for reopening of the assessment that was completed
on 31.03.2016, the Impugned Order is illegal. Hence, he prays for quashing of
the Impugned Order.
9. That apart, learned counsel for the petitioner further submits that the
law has been settled subsequently by the Hon'ble Supreme Court in
Commissioner of Income Tax, Delhi Vs. Kelvinator of India Limited,
(2010) 320 ITR 561 / [2010] 187 Taxman 312 (SC).
10. It is submitted that in the light of the latest decision of the Hon'ble
Supreme Court also, the question of reopening the assessment beyond the
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normal period of limitation is unjustified.
11. In support of his contention, the learned counsel for the petitioner has
placed reliance on the following decisions of the Hon'ble Supreme Court, Delhi
High Court and that of this Court:-
i. Income Tax Officer, Ward No.16(2) Vs. TechSpan India Private
Limited, [2018] 92 taxmann.com 361 (SC).
ii. Assistant Commissioner of Income-tax Vs. ICICI Securities Primary
Dealership Limited, [2012] 24 taxman.com 310 (SC).
iii. Replika Press Private Limited Vs. Deputy Commissioner of Income-
tax, [2013] 37 taxmann.com 417 (Delhi).
iv. Commissioner of Income-tax Vs. Kelvinator of India Limited, [2002]
123 Taxman 433 (Delhi).
v. NLC India Limited Vs. Assistant Commissioner of Income-tax,
[2022] 142 taxmann.com 26 (Madras).
vi. Fenner (India) Limited Vs. Deputy Commissioner of Income-tax,
[1999] 107 Taxmann 53 (Madras).
vii. Commissioner of Income-tax, Chennai Vs. Schwing Stetter India
Private Limited, [2015] 61 taxmann.com 19 (Madras)
viii.Principal Commissioner of Income-Tax-6, Chennai Vs. Santech
Solutions Private Limited, [2018] 97 taxmann.com 179 (Madras).
ix. Chinnathambi Rajeswari Vs. Assistant Commissioner of Income-tax,
[2024] 163 taxmann.com 439 (Madras).
x. M/s.Durr India Private Limited Vs. Assistant Commissioner of
Income Tax (OSD), Chennai and another in W.A.Nos.1081 and 1083
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of 2021 dated 29.08.2022.
12. Learned Senior Standing Counsel for the respondents on the other
hand would submit that the Return of Income that was filed by the petitioner on
22.02.2016 was incomplete. The said return that was filed was assessed on
31.03.2016 was under the assumption that the entire amount of
Rs.3,16,19,213/- that was seized on 03.09.2013 had been offered to tax by the
petitioner.
13. Arguing further, the learned Senior Standing Counsel for the
respondents would submit that in the return that was filed by the petitioner on
22.02.2016, the petitioner declared an income of Rs.2,34,86,595/- only. It was
not based on any records. It is further submitted that the law on the subject is
clear. It is further submitted that once an Assessment Order is passed, it can be
rectified under Section 154 of the Income Tax Act, 1961 for the error apparent
on the face of record or a revision pursuant to an Order under Section 263 of
the Income Tax Act, 1961 by the Higher Officer on the ground that the
assessment was erroneous and prejudicial to the interest of the Revenue or
under Section 264 of the Income Tax Act, 1961 or under Section 147 of the
Income Tax Act, 1961 in case of escaped assessment.
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14. It is submitted that in this case, the income had escaped assessment as
the Assessing Officer had no occasion to form an opinion regarding the amount
recovered during the course of search operation on 03.09.2013 wherein, a sum
of Rs.3,16,19,213/- was recovered from the common premises of the petitioner
Firm and M/s.VIP City and rest of the amount recovered from the premises of
Mr.Dhanapal, the common partner of the petitioner and the said M/s.VIP City
and the cash recovered from M/s.VIP City and the gold was seized from
M/s.VIP City.
15. In this connection, the learned Senior Standing Counsel for the
respondents would submit that the issue has been clarified by the Hon'ble
Supreme Court in A.L.A. Firm Vs. Commissioner of Income-Tax, (1991) 189
ITR 285 (SC) and therefore, submits that the present Writ Petition is liable to
be dismissed.
16. In support of his contention, the learned Senior Standing Counsel for
the respondents also drew attention to the following cases:-
i. Kalyanji Mavji and Co. Vs. Commissioner of Income Tax, (1976) 102
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ITR 287 / (1976) 1 SCC 985.
ii. Indian and Eastern Newspaper Society Vs. CIT, [1979] 119 ITR 996.
iii. Commissioner of Income Tax Vs. Gulam Rasool, (1997) 225 ITR 904
/ [1997] 91 TAXMAN 167 (MP).
iv. Commissioner of Income Tax Vs. Sun Engineering Works Private
Limited, [1992] 198 ITR 297,
v. Ester Industries Limited Vs. Union of India and others rendered in
W.P.(C) No.7482 of 2011 on 28.01.2013.
vi. M.K.Venkatachalam Vs. Bombay Dyeing and Manufacturing
Company Limited, (1958) 34 ITR 143 (SC).
vii. Maharaj Kumar Kamal Singh Vs. Commissioner of Income Tax,
(1959) 35 ITR 1 (SC).
viii. Commissioner of Income Tax, Delhi Vs. Kelvinator of India
Limited, (2010) 320 ITR 561 / [2010] 187 Taxman 312 (SC).
17. I have considered the arguments advanced by the learned counsel for
the petitioner and the learned Senior Standing Counsel for the respondents.
18. During the search that was conducted on 03.09.2013, cash of
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Rs.2,77,50,045/- and gold weighing 1378.400 grams were seized. The details
of cash and gold seized from the petitioner and his associates are as follows:-
Sl.No. Place of Seizure Value at Rs.
Premises of the Petitioner and 1,77,50,045
1 M/s.VIP City
2 Premises of Mr.Dhanapal 50,00,000
3 Premises of M/s.VIP City 50,00,000
Gold seized from the premises of 38,69,168
4 Mr.Dhanapal
Total : 3,16,19,213
19. It has to be assumed that the Assesment officer would have examined
all the issues before passing the Assessment order on 31.03.2016 in response to
the Return of Income dated 22.02.2016.
20. No Income Tax Officer can be presumed to have completed the
assesment without looking at all this material. This is the view of this Court in
Ramachari Case, (1961) 41 ITR 142 (Mad). Thus, the notice issued on
31.03.2021 under Section 148 of the Income Tax Act, 1961, was on the account
of “change of opinion”, the assessment was in the background of the above
search in respect of which notices were issued under Section 153A of the
Income Tax Act, 1961 as mentioned above which have culminated in the
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Assessment Orders for the Assessment Years 2011-2012, 2012-2013 and 2013-
2014.
21. The Hon'ble Supreme Court in Kalyanji Mavji and Co. Vs.
Commissioner of Income Tax, (1976) 102 ITR 287 / (1976) 1 SCC 985, in the
context of Section 34(1)(b) of the Income Tax Act, 1922 which is pari materia
with Section 147 of the Income Tax Act, 1961 and as it stood prior to
01.04.2021.
22. This view was also upheld in CIT, Excess Profits Tax, Hyderabad,
Andhra Pradesh v. V. Jagan Mohan Rao (1969) 2 SCC 389, while following
the decision of the Hon'ble Supreme Court in Maharaj Kumar Kamal Singh
v. CIT, (1959) 35 ITR 1, observed as follows :
“In these circumstances it was held by this Court
firstly that the word information in Section
34(1)(b) included information as to the true and
correct state of the law, and so would cover
information as to relevant judicial decisions,
secondly that ‘escape’ in Section 34(1) was not
confined to cases where no return had been
submitted by the assesee or where income had not
been assessed owing to inadvertence or oversight
or other lacuna attributable to the assessing
authorities. But even in a case where a return had
been submitted, if the Income Tax Officer had
erroneously failed to tax a part of the assessable
income, it was a case where that part of the
income had escaped assessment. The decision of
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the Privy Council, therefore, was held to be
information within the meaning of Section
34(1)(b) and the proceedings for reassessment
were validly initiated.”
23. In Indian and Eastern Newspaper Society Vs. CIT, [1979] 119
ITR 996, wherein it has been concluded as under:-
“20. What then, is the difference between the situations
envisaged in propositions (2) and (4) of Kalyanji Mavji [(1976)
1 SCC 985 : 1976 SCC (Tax) 111 : (1976) 102 ITR 287] The
difference, if one keeps in mind the trend of the judicial
decisions, is this. Proposition (4) refers to a case where the ITO
initiates reassessment proceedings in the light of “information”
obtained by him by an investigation into material already on
record or by research into the law applicable thereto which has
brought out an angle or aspect that had been missed earlier, for
e.g., as in the two Madras decisions referred to earlier.
Proposition (2) no doubt covers this situation also but it is so
widely expressed as to include also cases in which the ITO,
having considered all the facts and law, arrives at a particular
conclusion, but reinitiates proceedings because, on a
reappraisal of the same material which had been considered
earlier and in the light of the same legal aspects to which his
attention had been drawn earlier, he comes to a conclusion that
an item of income which he had earlier consciously left out
from the earlier assessment should have been brought to tax. In
other words, as pointed out in IENS case [(1979) 4 SCC 248 :
1979 SCC (Tax) 336 : (1979) 119 ITR 996] , it also ropes in
cases of a “bare or mere change of opinion” where the ITO
(very often a successor officer) attempts to reopen the
assessment because the opinion formed earlier by himself (or,
more often, by a predecessor ITO) was, in his opinion,
incorrect. Judicial decisions had consistently held that this
could not be done and the IENS case [(1979) 4 SCC 248 : 1979
SCC (Tax) 336 : (1979) 119 ITR 996] has warned that this line
of cases cannot be taken to have been overruled by Kalyanji
Mavji [(1976) 1 SCC 985 : 1976 SCC (Tax) 111 : (1976) 102
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ITR 287] . The second paragraph from the judgment in the
IENS case [(1979) 4 SCC 248 : 1979 SCC (Tax) 336 : (1979)
119 ITR 996] earlier extracted has also reference only to this
situation and insists upon the necessity of some information
which make the ITO realise that he has committed an error in
the earlier assessment. This paragraph does not in any way
affect the principle enumerated in the two Madras cases cited
with approval in Anandji Haridas [(1968) 21 STC 326 : AIR
1968 SC 565 : (1968) 1 SCR 661] . Even making allowances for
this limitation placed on the observations in Kalyanji Mavji
[(1976) 1 SCC 985 : 1976 SCC (Tax) 111 : (1976) 102 ITR
287], the position as summarised by the High Court in the
following words represents, in our view, the correct position in
law: (ITR p. 629)
“The result of these decisions is that the statute
does not require that the information must be
extraneous to the record. It is enough if the
material, on the basis of which the reassessment
proceedings are sought to be initiated, came to the
notice of the Income Tax Officer subsequent to the
original assessment. If the Income Tax Officer had
considered and formed an opinion on the said
material in the original assessment itself, then he
would be powerless to start the proceedings for
the reassessment. Where, however, the Income Tax
Officer had not considered the material and
subsequently come by the material from the record
itself, then such a case would fall within the scope
of Section 147(b) of the Act.””
24. A Division Bench of the Madhya Pradesh High Court, Jabalpur
Bench in Commissioner of Income Tax Vs. Gulam Rasool, (1997) 225 ITR
904 / [1997] 91 TAXMAN 167 (MP), referred to the law laid down by the
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Hon'ble Supreme Court in Commissioner of Income Tax Vs. Sun
Engineering Works Private Limited, [1992] 198 ITR 297 and had
summarized the position as follows:-
“39. The principle laid down by this Court in Jagan
Mohan Rao case [(1969) 2 SCC 389 : (1970) 75 ITR 373]
therefore, is only to the extent that once an assessment is validly
reopened by issuance of notice under Section 22(2) of the 1922
Act (corresponding to Section 148 of the Act) the previous
under-assessment is set aside and the ITO has the jurisdiction
and duty to levy tax on the entire income that had escaped
assessment during the previous year. What is set aside is, thus,
only the previous under-assessment and not the original
assessment proceedings. An order made in relation to the
escaped turnover does not effect the operative force of the
original assessment, particularly if it has acquired finality, and
the original order retains both its character and identity. It is
only in cases of “under-assessment” based on clauses (a) to (d)
of Explanation I to Section 147, that the assessment of tax due
has to be recomputed on the entire taxable income. The
judgment in Jagan Mohan Rao case [(1969) 2 SCC 389 :
(1970) 75 ITR 373] therefore, cannot be read to imply as laying
down that in the reassessment proceedings validly initiated, the
assessee can seek reopening of the whole assessment and claim
credit in respect of items finally concluded in the original
assessment. The assessee cannot claim recomputation of the
income or redoing of an assessment and be allowed a claim
which he either failed to make or which was otherwise rejected
at the time of original assessment which has since acquired
finality. Of course, in the reassessment proceedings it is open to
an assessee to show that the income alleged to have escaped
assessment has in truth and in fact not escaped assessment but
that the same had been shown under some inappropriate head
in the original return, but to read the judgment in Jagan Mohan
Rao case [(1969) 2 SCC 389 : (1970) 75 ITR 373] as if laying
down that reassessment wipes out the original assessment and
that reassessment is not only confined to “escaped assessment”
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or “under assessment” but to the entire assessment for the year
and start the assessment proceedings de novo giving right to an
assessee to reagitate matters which he had lost during the
original assessment proceeding, which had acquired finality, is
not only erroneous but also against the phraseology of Section
147 of the Act and the object of reassessment proceedings. Such
an interpretation would be reading that judgment totally out of
context in which the questions arose for decision in that case. It
is neither desirable nor permissible to pick out a word or a
sentence from the judgment of this Court, divorced from the
context of the question under consideration and treat it to be
the complete ‘law’ declared by this Court. The judgment must
be read as a whole and the observations from the judgment
have to be considered in the light of the questions which were
before this Court. A decision of this Court takes its colour from
the questions involved in the case in which it is rendered and
while applying the decision to a later case, the courts must
carefully try to ascertain the true principle laid down by the
decision of this Court and not to pick out words or sentences
from the judgment, divorced from the context of the questions
under consideration by this Court, to support their reasonings.
In Madhav Rao Scindia v. Union of India [(1971) 1 SCC 85 :
(1971) 3 SCR 9] this Court cautioned:
“It is not proper to regard a word, a clause or a
sentence occurring in a judgment of the Supreme
Court, divorced from its context, as containing a
full exposition of the law on a question when the
question did not even fall to be answered in that
judgment.”
25. The Delhi High Court in Ester Industries Limited Vs. Union of
India and others in W.P.(C) No.7482 of 2011 dated 28.01.2013, taking note of
the decision of the Hon'ble Supreme Court in M.K.Venkatachalam Vs.
Bombay Dyeing and Manufacturing Company Limited, (1958) 34 ITR 143
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(SC) and that of the decision of the Hon'ble Supreme Court in Maharaj
Kumar Kamal Singh Vs. Commissioner of Income Tax, (1959) 35 ITR 1
(SC), observed as under:-
“9. The original assessment was made on 30-11-2006
under section 143(3). The Finance Act, 2008 inserted clause (h)
of Explanation 1 to section 115JB retrospectively from 1-4-
2001. The effect of this clause was to increase the book profit by
“the amount of deferred tax and the provision therefor”. It is not
in dispute that one of the reasons to believe as recorded by the
respondent is that in view of the retrospective amendment, the
deferred tax liability, for which a provision had been made in
the accounts, was to be added back to the book profit. The
assessment was reopened within four years from the end of the
relevant assessment year. The assessing officer has to show
some “tangible material” which could form the basis for his
belief that income chargeable to tax has escaped assessment.
That material is the retrospective legislative amendment. Under
the pre-1989 law of reassessment, information as to the true
state of law could form a valid basis for reopening the
assessment : Maharaj Kumar Kamal Singh v. CIT (1959) 35
ITR 1 (SC). A retrospective amendment of the law can even
permit action for rectification of the assessment on the ground
of mistake apparent from the record : M.K. Venkatachalam v.
Bombay Dyeing & Manufacturing Co. Ltd. (1958) 34 ITR 143
(SC). But just because action for rectification is permissible, it
does not follow that no action can be taken for reopening, for,
the powers under sections 147 and 154 are not mutually
exclusive; there could be some overlapping, and so long as the
conditions for the applicability of the sections are satisfied, the
action taken thereunder has to be validated and it is no answer
to say that action should be taken under another section. Under
this principle, it is held that one of the reasons for reopening in
the present case being the retrospective amendment, the notice
is valid.”
26. However, this Court dealt with the case where the assessment was
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completed on 30.11.2006 under Section 143(3) of the Income Tax Act, 1961
and thereafter the Finance Act, 2008 was inserted Clause (h) of Explanation 1
to Section 115JB of the Income Tax Act, 1961 retrospectively from 01.04.2001.
The effect of this Clause was to increase the book profit by “the amount of
deferred tax and the provision therefor”.
27. It is, in this context, the notice was issued which was subject matter
of challenge before this Court and thus, the Court brought out the above
distinction.
28. The Hon'ble Supreme Court in A.L.A.Firm's case (cited supra), has
answered the position as follows:-
“21. Let us now examine the position in the present case
keeping in mind the narrow but real distinction pointed out
above. On behalf of the assessee, it is emphasised (a) that the
amount of surplus is a very substantial amount, (b) that full
details of the manner in which it had resulted had been
disclosed, (c) that the profit and loss account, the profit and
loss adjustment account and statement made before the ITO had
brought into focus the question of taxability of the surplus and
(d) that the decision in Ramachari case [(1961) 41 ITR 142
(Mad)] had been reported by April 10, 1962. No Income Tax
Officer can be presumed to have completed the assessment
without looking at all this material and the said decision. No
doubt, some doubt had been thrown as to whether a statement
had been given at the time of original assessment that the
amount of surplus was not taxable as an income or a capital
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gain but the case has proceeded on the footing that such a
statement was there before the officer. This, therefore, is
nothing but a case of “change of opinion”. On the other hand,
the authorities and the Tribunal have drawn attention to the
fact that the return, the Section 143(2) notice and assessment
were all on the same day and counsel for the revenue urged
that, obviously, in his haste, the ITO had not looked into the
facts at all. It is urged that no Income Tax Officer who had
looked into the facts and the law could have failed to bring the
surplus to tax in view of the then recent pronouncement
in Ramachari case [(1961) 41 ITR 142 (Mad)] . Dr
Gaurishankar submitted that the Tribunal has found that the
ITO “had acted mechanically in accepting the return without
bringing his mind to play upon the entry in the statement with
reference to the distribution of the assets”. He pointed out that
there is no evidence of any enquiry with reference to this aspect
and that, the amount involved being sufficiently large, the ITO,
if he had been aware of the existence of the entry would
certainly have discussed it. He urged that the question whether
the ITO had considered this matter at the time of the original
assessment or not is purely a question of fact and the Tribunal's
conclusion thereon having been endorsed by the High Court,
there is no justification to interfere with it at this stage.
22. We think there is force in the argument on behalf of the
assessee that, in the face of all the details and statement
placed before the ITO at the time of the original assessment, it
is difficult to take the view that the Income Tax Officer had
not at all applied his mind to the question whether the surplus
is taxable or not. It is true that the return was filed and the
assessment was completed on the same date. Nevertheless, it is
opposed to normal human conduct that an officer would
complete the assessment without looking at the material
placed before him. It is not as if the assessment record
contained a large number of documents or the case raised
complicated issues rendering it probable that the ITO had
missed these facts. It is a case where there is only one
contention raised before the ITO and it is, we think,
impossible to hold that the Income Tax Officer did not at all
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look at the return filed by the assessee or the statements
accompanying it. The more reasonable view to take would, in
our opinion, be that the Income Tax Officer looked at the
facts and accepted the assessee's contention that the surplus
was not taxable. But, in doing so, he obviously missed to take
note of the law laid down in G.R.Ramachari & Co.'s case
(supra) which there is nothing to show, had been brought to his
notice. When he subsequently became aware of the decision, he
initiated proceedings under Section 147(b). The material which
constituted information and on the basis of which the
assessment was reopened was the decision in G.R.Ramachari &
Co.'s case (supra). This material was not considered at the time
of the original assessment. Though it was a decision of 1961
and the ITO could have known of it had he been diligent, the
obvious fact is that he was not aware of the existence of that
decision then and, when he came to know about it, he rightly
initiated proceedings for assessment.”
(emphasis added)
29. In the facts of the case, it is evident that the search was completed on
03.09.2013. The Return of Income was filed by the petitioner was on
22.02.2016. Assessment was completed on 31.03.2016 under Section 143(3) of
the Income Tax Act,1961, based on the returns filed on 22.02.2016.
30. At best, the assessment order that was passed on 31.03.2016 under
Section 143(3) of Income Tax Act, 1961, may have given rise to an option
either to invoke the machinery of revision under Section 263 of the Income Tax
Act, on the ground that the assessment order dated 31.03.2016, passed under
Section 143(3) of the Income Tax Act, was both erroneous and prejudicial to
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the interests of the revenue, or that there was income that had escaped
assessment. Although there was no suppression of fact in the return that was
filed on 22.02.2016, merely because amounts were recovered from the
petitioner, the associate firms, and related party, itself would not justify the
conclusion that there was failure on the part of the petitioner to fully disclose
all materials that were required for passing the assessment order dated
31.03.2016, and there should have been a live link between the information that
was surfaced for issuance of notice under Section 148 of the Income Tax Act,
1961, to reopen the assessment and to pass fresh re-assessment order under
Section 147 of the Income Tax Act, 1961.
31. Pursuant to the search conducted under Section 132 of the Income
Tax Act, 1961 (for brevity, “IT Act”) on 03.09.2013 in the above mentioned
premises and at the place of the petitioner, notices dated 12.01.2016 were
issued to the petitioner under Section 153A(1) of the IT Act for the preceding
Assessment years and Assessment Orders were passed on 31.03.2016 as
detailed below:-
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Year of Income Returned Income Additional Total
Assessment in the original Returned in Income Income
return of Income Return of Offered to
Income filed in Tax determined,
response to finalized and
153A Notice accepted
2011-2012 1,13,85,250 1,86,00,000 72,14,750 1,86,00,000
2012-2013 9,25,02,130 11,31,70,000 2,06,67,870 11,31,70,000
2013-2014 7,92,45,220 9,99,30,000 2,06,84,780 9,99,30,000
32. These proceedings have also culminated in the Assessment Orders
for the above mentioned Assessment Years in terms of Section 153A(2) of the
IT Act.
33. As far as Assessment Year 2014-2015 (previous Assessment Year
2013-2014) is concerned, an earlier Assessment Order was passed on
31.03.2016 pursuant to a Returns filed on 22.02.2016 Admitted Taxable
Income of Rs.2,34,86,595/- against the total income Rs.3,16,19,213/- during the
search in the above mentioned premises.
34. To invoke the machinery under Section 148 of the IT Act as it stood
till 31.03.2021, the Courts have repeatedly held that the term “reason to
believe” means that Assessing Officer must have some tangible material
passing before assuming jurisdiction under Section 147 of the IT Act. A
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reference is made to Commissioner of Income Tax, Delhi Vs. Kelvinator of
India Ltd., (2010) 320 ITR 561.
35. The dispute in the present case pertains to the Assessment Year 2014-
2015. It can therefore hardly be said that the Assessing Officer was unaware of
the search proceedings and the seizure made pursuant to the search conducted
on 03.09.2013 resulting in seizure of a sum of Rs.1,77,50,045/- from the
petitioner Firm, and a sum of Rs.50,00,000/- from the petitioner's partner, and
gold worth of Rs.38,69,168/-, which was recovered from M/s.VIP City.
36. Therefore, the Impugned Order dated 11.02.2022 along with the
Impugned Notice dated 31.03.2021 are liable to be quashed and the same are
accordingly quashed as they are inspired from the change of opinion.
37. In the result, this Writ Petition is allowed. No costs. Connected Writ
Miscellaneous Petitions are closed.
25.02.2025
Neutral Citation: Yes / No
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arb
To:
1.The Deputy Commissioner of Income Tax,
Central Circle-2, Chennai,
New Building, New No.46, Old No.108,
Mahatma Gandhi Salai,
Chennai – 600 034.
2.The Principal Commissioner of Income Tax (Central),
Chennai – 2,
New Building, New No.46, Old No.108,
Mahatma Gandhi Salai,
Chennai – 600 034.
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C.SARAVANAN, J.
arb
Pre-delivery Order in
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25.02.2025
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