IN HIGH COURT OF JUDICATURE AT MADRAS DATED : 11.07.2019 CORAM HON'BLE MR.JUSTICE T.S.SIVAGNANAM AND HON'BLE MRS.JUSTICE V.BHAVANI SUBBAROYAN Tax Case (Appeal) No.702 of 2009 M/s.Tenzing Match Works Boopathy Buildings Virudhunagar Road Sivakasi, PAN:AABFT6787A. Appellant - Vs - Deputy Commissioner of Income Tax Circle I, Virudhunagar Respondent Prayer : Appeal under Section 260A of Income Tax Act, 1961, against common order of Income Tax Appellate Tribunal B Bench, Chennai in I.T.A.No.1034/2008 for assessment years 2001-02 dated 31.03.2009. For Appellant : Mr.A.S.Sriraman For Respondent : Ms.S.Premalatha Standing Counsel JUDGMENT (Judgment of Court was delivered by T.S.SIVAGNANAM, J.) This appeal by assessee is directed against order passed by Income Tax Appellate Tribunal, Chennai 'B' Bench I.T.A.No.1034/2008 for assessment years 2001-02 dated 31.03.2009. Though assessee has raised five substantial questions of law, which have been admitted, it would suffice to answer following question, which would cover all substantial questions of law. Accordingly, appeal is entertained on following substantial question of law. http://www.judis.nic.in 2 1. Whether Appellate Tribunal is correct in law in confirming order of re-assessment framed in terms of Section 147 read with 143(3) of Act for assessment year 2001-02 by respondent in second attempt even though there were no fresh materials in his possession justifying action? 2. Heard Mr.A.S.Sriraman, learned counsel for assessee and Ms.Premalatha, learned Standing Counsel for Revenue. short issue which falls for consideration is whether reopening of assessment was valid. assessee filed return of income on 29.10.2001, admitting total income at 'Nil', after claiming deduction under Section 80HHC to extent of Rs.13,07,561/-. return was processed under Section 143(1)(a) of Act, by issuance of communication dated 29.01.2004. After more than 2 years, notice under Section 148 was issued on 22.11.2006, alleging that assessee, in his return of income, had made excess claim of deduction under Section 80HHC. assessee offered his explanation, justifying claim for deduction and requested return of income dated 29.10.2001 to be treated as return in pursuance to notice under Section 148 of Act dated 29.11.2006. Nothing happened thereafter for over four months. When assessee was issued another notice under Section 148 of Act dated 13.03.2007 for very same reason, alleging excess claim deduction under Section 80 HHC, assessee offered his explanation, justifying claim and requested return dated 29.10.2001 to be treated as return in response to notice under Section 148 dated 13.03.2007. assessee further contended that reopening of assessment is bad in law, as assessing officer has not recorded any reason that income chargeable to tax http://www.judis.nic.in 3 has escaped assessment and there was no tangible material available to assessing officer to reopen assessment. This contention was rejected and assessment was completed on 06.09.2007. 3. assessee preferred appeal before Commissioner of Income Tax (Appeals), Madurai (hereinafter referred to as CIT 'A'), who dismissed appeal by order dated 06.02.2008 on ground that intimation issued under Section 143(1)(a) dated 29.01.2004 is not order and therefore notice issued under Section 148 dated 13.03.2007 cannot be stated to be reopening of assessment, as it is assessment by itself, and that intimation is not order of assessment. Similar was view taken by tribunal as well, dismissing appeal filed by assessee. This is how assessee is before us, by way of this appeal. 4. There is no quarrel about legal position as laid down by Honourable Supreme Court in cases of ACIT -Vs- Rajesh Jhaveri Stock Brokers P.Ltd [2007] 291 ITR 500 (SC) , CIT -Vs- Kelvinator India Ltd (2010) 320 ITR 561 (SC) and Income-tax v. Zuari Estate Development & Investment Co.Ltd. (2015) 373 ITR 661 (SC) . However, question before us in this appeal is whether finality attached to assessment, pursuant to communication under Section 143(1)(a) could be disturbed by invoking power under Section 147 and under what circumstances it can be done. 5. This issue was considered in case of CIT -Vs- Orient Craft Ltd (2013) 354 http://www.judis.nic.in 4 ITR 536 , wherein Court held as follows. 13. Having regard to judicial interpretation placed upon expression "reason to believe", and continued use of that expression right from 1948 till date, we have to understand meaning of expression in exactly same manner in which it has been understood by courts. assumption of Revenue that somehow words "reason to believe" have to be understood in liberal manner where finality of intimation under Section 143(1) is sought to be disturbed is erroneous and misconceived. As pointed out earlier, there is no warrant for such assumption because of language employed in Section 147; it makes no distinction between order passed under section 143(3) and intimation issued under section 143(1). Therefore it is not permissible to adopt different standards while interpreting words "reason to believe" vis-a-vis Section 143(1) and Section 143(3). We are unable to appreciate what permits Revenue to assume that somehow same rigorous standards which are applicable in interpretation of expression when it is applied to reopening of assessment earlier made under Section 143(3) cannot apply where only intimation was issued earlier under Section 143(1). It would in effect place assessee in whose case return was processed under Section 143(1) in more vulnerable position than assessee in whose case there was full-fledged scrutiny assessment made under Section 143(3). Whether return is put to scrutiny or is accepted without demur is not matter which is within control of assessee; he has no choice in matter. other consequence, which is somewhat graver, would be that entire rigorous procedure involved in reopening assessment and burden of proving valid reasons to believe could be circumvented by first accepting return under Section 143(1) and thereafter issue notices to reopen assessment. interpretation which makes distinction between meaning and content of expression http://www.judis.nic.in 5 "reason to believe" in cases where assessments were framed earlier under Section 143 (3) and cases where mere intimations were issued earlier under Section 143(1) may well lead to such unintended mischief. It would be discriminatory too. interpretation that leads to absurd results or mischief is to be eschewed. 6. This decision was followed in case of Principal CIT -Vs- Tupperware India (P) Ltd., (2016) 65 Taxmann.com 17(Delhi) . Similar view was taken in Khubchandani Healthparks (P) Ltd., -Vs- Income Tax Officer, Mumbai , wherein it was held that notice under Section 148 could be challenged as being without jurisdiction for absence of reason to believe that income had escaped assessment even in case where assessment had been completed earlier by intimation under Section 143(1). decision in CIT -Vs- Orient Craft Ltd (2013) 354 ITR 536 was followed in TANMAC India -Vs- Deputy CIT, Pondicherry (2017) 78 Taxmann.com 155 (Madras) . 7. It is contention of Ms.Premalatha, learned Standing Counsel that this Court, in case of Diebold Systems Pvt Ltd., -Vs- IT Officer (OSD) in T.C.No.2153 of 2008 dated 11.07.2019, had distinguished decision of CIT -Vs- Orient Craft Ltd (2013) 354 ITR 536 and TANMAC India -Vs- Deputy CIT, Pondicherry (2017) 78 Taxmann.com 155 (Madras) . It is true that this Court has distinguished aforesaid decisions in case of Diebold Systems Pvt Ltd., -Vs- IT Officer (OSD) , on ground that in said case assessment was reopened based on factual material, which were available with assessing officer subsequent to intiation issued under Section 143(1) and to be precise, in next assessment year, where assessing officer found http://www.judis.nic.in 6 that no services were rendered by assessee for their unit at Pondicherry. Therefore, said decision will not aid case of Revenue. 8. legal principle laid down in above decision is that language employed in Section 147 does not make any distinction between order passed under Section 143(3) and intimation issued under Section 143(1) and therefore, it is not permissible to adopt different standards while interpreting words reason to believe vis-a-vis Section 143(1) and Section 143(3). In instant case, it is not in dispute that reopening is based upon return of income filed by assessee at first instance. There is no allegation against assessee that there was failure on part of assessee to make true disclosure, nor assessing officer had relied on any tangible material, which has come to his knowledge after filing of return and intimation under Section 143(1), justifying reopening. Therefore, to reopen assessment based on return filed by assessee, will clearly be case of change of opinion and consequently bad in law. 9. In result, appeal filed by assessee is allowed and substantial question of law No.1 is answered in favour of assessee. No costs. (T.S.S.J.) (V.B.S.J.) 11-07-2019 KST Index : Yes/No Internet : Yes/No http://www.judis.nic.in 7 To 1. The Deputy Commissioner of Income Tax Circle I, Virudhunagar. 2. Income Tax Appellate Tribunal, Chennai 'B' Bench. 8 T.S.SIVAGNANAM, J. AND V.BHAVANI SUBBAROYAN, J. kst T.C.(A) No.702 of 2009 11.07.2019 Tenzing Match Works v. Deputy Commissioner of Income-tax, Circle-I, Virudhunagar