CBI International v. The Income-tax Officer, Ward-I(2), Tirupur
[Citation -2020-LL-0211-44]

Citation 2020-LL-0211-44
Appellant Name CBI International
Respondent Name The Income-tax Officer, Ward-I(2), Tirupur
Court HIGH COURT OF MADRAS
Relevant Act Income-tax
Date of Order 11/02/2020
Assessment Year 2010-11
Judgment View Judgment
Keyword Tags collateral proceedings • protective assessment • allowable expenditure • benefit of deduction • capital expenditure • revenue expenditure • tax due • substantive assessment
Bot Summary: 16463 of 2016 ORDER The petitioner has impugned order dated 03.02.2016 in PAN.No. The impugned order dated 28.03.2016 in W-I(2)/Tpr/2015-16 is pursuant to a representation of the petitioner dated 19.02.2016 and 03.02.2016. The petitioner preferred an appeal before the Commissioner of Income Tax against the protective Assessment Order dated 18.03.2013 of the Assessing Officer. In view of the disposal of appeals filed by M/s. Eastman Exports Global Clothing Private Ltd. and by the Revenue against the order of the Commissioner of Income Tax-II dated 31.03.2014 by the Income Tax Appellate Tribunal vide order dated 31.07.2014, the respondent has once again issued letter dated 03.02.2016 to conclude that the protective assessment order passed under Section 143(3) on 18.03.2013 becomes substantive order and accordingly the petitioner was liable to pay a tax of Rs. 2,62,76,350/-. The petitioner sent a representation dated 19.02.2016 to the respondent to the effect that in view of the order of the Commissioner of Income Tax dated 23.06.2014 in the petitioner s case, it was not open for the respondent to demand tax from the petitioner. The petitioner has also successfully challenged the assessment order dated 18.03.2013 before the Commissioner of Income Tax in I.T.A.No. The consequential orders passed by the respondents against the petitioner based on collateral proceedings in the case of M/s. Eastman Exports Global Clothing Private Limited are also liable to be quashed and the case should be remitted back to the Assessing Officer to pass a fresh order of assessment on merits in accordance with law taking note of the facts.


W.P.No.16463 of 2016 IN HIGH COURT OF JUDICATURE AT MADRAS Reserved On 21.01.2020 Pronounced On 11.02.2020 CORAM HON'BLE MR. JUSTICE C. SARAVANAN W.P.No.16463 of 2016 and W.M.P.No.14227 of 2016 CBI International Partnership firm Represented by its Managing Partnership Mr. G. Sakthivel, No.92/4, Angeripalayam Road, Opp. Bishop School, Tirupur 641 603. Petitioner Vs. Income Tax officer Ward I (2), No. 121, 60, feet Road, Tirupur 641 602. Respondent Writ Petition filed under Article 226 of Constitution of India praying to issue Writ of Certiorari, to call for records on files of respondent and quash impugned proceedings of respondent in PAN.No. AACFC0906D dated 03.02.2016 and consequentially quash proceedings of respondent in W-I(2) / Tpr/2015-16 dated 28.03.2016 for assessment year 2010-11. For Petitioner : Mr.R.Sivaraman For Respondent : Mr. A. P. Srinivas Senior Standing Counsel. http://www.judis.nic.in Page No 1 of 10 W.P.No.16463 of 2016 ORDER petitioner has impugned order dated 03.02.2016 in PAN.No. AACFC0906D and consequential order dated 28.03.2016 in W-I(2)/Tpr/2015-16 passed by respondent. 2. By impugned order 03.02.2016, it has been concluded that order passed under Section 143(3) dated 18.03.2013 for Assessment Year 2010-11 made protectively becomes substantive and therefore, petitioner was liable to pay sum of Rs.2,62,76,350/- as tax due for said Assessment Year. impugned order dated 28.03.2016 in W-I(2)/Tpr/2015-16 is pursuant to representation of petitioner dated 19.02.2016 and 03.02.2016. petitioner has been asked to pay demand and produce challan. 3. facts of case are that petitioner manufacturer of hosiery item had signed agreement dated 01.04.2009 with M/s.Eastman Exports Global Clothing Private Limited. Under agreement, said company had advanced sum of Rs.6.5 crores to petitioner to improve desired infrastructure facility. In books of account of petitioner, aforesaid amount was treated as advance by petitioner. http://www.judis.nic.in Page No 2 of 10 W.P.No.16463 of 2016 4. On other hand, M/s. Eastman Exports Global Clothing Private Limited had treated aforesaid amount as revenue expenditure and claimed benefit of deduction as allowable expenditure under Section 37(1) of Income Tax Act, 1961. 5. Since amount was paid to improve infrastructure of petitioner for with M/s. Eastman Exports Global Clothing Private Limited to improve their business, Assessing Officer by order dated 19.02.2013 concluded that said company was not entitled to claim expenditure under Section 37(1) of Income Tax Act, 1961. 6. Aggrieved by order dated 19.02.2013, Assessing Officer disallowing expenditure Section 37(1) of Income Tax Act, 1961, M/s. Eastman Exports Global Clothing Private Limited filed appeal before Commissioner of Income Tax (Appeals). 7. By order dated 31.03.2014, Commissioner of Income Tax (Appeals) upheld order of Assessing Officer by holding that amount paid to petitioner was capital expenditure and therefore deduction under Section 37(1) of Income Tax Act, 1961, could not be allowed. On further appeal, http://www.judis.nic.in Page No 3 of 10 W.P.No.16463 of 2016 Tribunal has however allowed expenditure in by its order dated 31.07.2014. It is stated that respondent is appeal against this order. 8. As far as petitioner is concerned, since Assessing Officer in case of M/s. Eastman Exports Global Clothing Private Limited had held that expenditure could not be allowed under Section 37(1) of Income Tax Act, 1961, aforesaid amount paid to petitioner was to be protectively assessed till issue was finally decided in case of M/s. Eastman Exports Global Clothing Private Limited. 9. petitioner preferred appeal before Commissioner of Income Tax (Appeals) against protective Assessment Order dated 18.03.2013 of Assessing Officer. said appeal was disposed by Commissioner of Income Tax (Appeals) by order dated 23.06.2014 with following observations:- In view of fact that amount ofRs. 6,50,00,000 has been confirmed as capital expenditure in case of M/s.Eastman Exports Global Routing Private Limited, protective assessment in hands of assesseei.e, M/s. CIBI International cannot be sustained. Therefore, appeal is allowed. http://www.judis.nic.in Page No 4 of 10 W.P.No.16463 of 2016 10. It appears that respondent has not filed any appeal against said order before Income Tax Appellate Tribunal. However, in view of disposal of appeals filed by M/s. Eastman Exports Global Clothing Private Ltd. and by Revenue against order of Commissioner of Income Tax (Appeals)-II dated 31.03.2014 by Income Tax Appellate Tribunal vide order dated 31.07.2014, respondent has once again issued letter dated 03.02.2016 to conclude that protective assessment order passed under Section 143(3) on 18.03.2013 becomes substantive order and accordingly petitioner was liable to pay tax of Rs. 2,62,76,350/-. 11. petitioner sent representation dated 19.02.2016 to respondent to effect that in view of order of Commissioner of Income Tax (Appeals) dated 23.06.2014 in petitioner s case, it was not open for respondent to demand tax from petitioner. 12. respondent has however by impugned communication dated 28.03.2016, has reiterated position that they were justified in demanding tax in light of order passed by Income Tax Appellate Tribunal on 31.07.2014 in M/s. http://www.judis.nic.in Page No 5 of 10 W.P.No.16463 of 2016 Eastman Exports Global Clothing Private Ltd. s case and Revenue s case. 13. Defending impugned proceedings, learned Senior Standing Counsel for respondent submits that respondent has also filed further appeal before this High Court and therefore present writ petition is liable to be dismissed as premature. 14. I have considered arguments advanced by learned counsel for petitioner and Senior Standing Counsel for respondent. 15. question of making protective demand based on assessment of person who paid amount petitioner appears to be incorrect as assessment cannot be made subject to outcome of collateral proceedings of another person. 16. Assessment has to be completed based on accounts of petitioner. It cannot be left open ended as has been done in case of petitioner. petitioner has also successfully challenged assessment order dated 18.03.2013 before Commissioner of Income Tax (Appeals) in I.T.A.No.24/13-14 vide http://www.judis.nic.in Page No 6 of 10 W.P.No.16463 of 2016 order dated 23.06.2014. Therefore, impugned demands are unsustainable. 17. Since assessment procedure adopted by assessing officer for petitioner was not proper order and had left it open ended, I am of view, it was also unsustainable and is therefore liable to be quashed. Therefore, consequential orders passed by respondents against petitioner based on collateral proceedings in case of M/s. Eastman Exports Global Clothing Private Limited are also liable to be quashed and case should be remitted back to Assessing Officer to pass fresh order of assessment on merits in accordance with law taking note of facts. 18. In view of above discussion, impugned recovery proceedings dated 03.02.2016 and 28.03.2016 are quashed and case is remitted back to concerned assessing officer to pass fresh order of assessment on merits in accordance with law taking note of all facts. 19. concerned Assessing Officer is therefore requested to pass fresh assessment order for Assessment Year 2010-11 in http://www.judis.nic.in Page No 7 of 10 W.P.No.16463 of 2016 case of petitioner within period of three months from date of receipt copy of this order. 20. However, in case collateral appeal of revenue against Final Order dated 31.07.2014, Income Tax Appellate Tribunal which is said to be purportedly pending before this High Court has any bearing on assessment to be completed, Assessing Officer may at his discretion await for outcome of appeal of revenue before passing fresh order of assessment for Assessment Year 2010-11. It is made clear, it is for Assessing Officer to decide whether to defer or pass order within period stipulated herein. However, before passing order of assessment, petitioner shall also be heard. 21. Writ petition stands allowed with above observation. No cost. Consequently, connected Miscellaneous Petition is closed. 11.02.2020 Index :Yes/No Internet :Yes/No jen http://www.judis.nic.in Page No 8 of 10 W.P.No.16463 of 2016 To Income Tax officer Ward I (2), No. 121, 60, feet Road, Tirupur 641 602. http://www.judis.nic.in Page No 9 of 10 W.P.No.16463 of 2016 C.SARAVANAN, J. Jen Pre-Delivery Order in W.P.No.16463 of 2016 and W.M.P.No.14227 of 2016 11.02.2020 http://www.judis.nic.in Page No 10 of 10 CBI International v. Income-tax Officer, Ward-I(2), Tirupur
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