W.P.No.23016 of 2011 IN HIGH COURT OF JUDICATURE AT MADRAS Reserved On 13.02.2020 Pronounced On 19.05.2020 CORAM HON'BLE MR.JUSTICE C.SARAVANAN W.P.No.23016 of 2011 and M.P.No.1 of 2011 M/s. Seshasayee Paper and Boards Limited, Rep. by its Director (Finance) & Secretary, Sri V.Pichai, Cauvery R.S.Post, Pallipalayam, Erode-638 007. ... Petitioner Vs. Assistant Commissioner of Income- tax, Circle I (1), No.3, Gandhi Road, Salem 636 007. ...Respondent Writ Petition filed under Article 226 of Constitution of India praying to issue Writ of Certiorari, to call for records in PAN No.AACCS1192G dated 12.09.2011 relating to Assessment Year 2003- 2004 on file of respondent and quash same. For Petitioner : Mr.G.Baskar for Mr.N.Muthukumar http://www.judis.nic.in Page No 1 of 16 W.P.No.23016 of 2011 For Respondent : Mr.A.P.Srinivas Standing Counsel. ORDER In this Writ Petition, petitioner has challenged impugned communication dated 12.09.2011 overruling objection of petitioner against re-opening of assessment vide Notice dated 30.03.2010 under Section 148 of Income Tax Act, 1961 for Assessment Year 2003-04. 2. said Notice has been issued on last date of expiry of limitation (six years), under proviso to Section 147 of Income Tax Act, 1961 seeking to re-open assessment. 3. brief facts of present case are that petitioner is engaged in manufacture and sale of paper and paper products. petitioner had filed return for Assessment Year 2003-04 on 03.11.2003. Thereafter, scrutiny assessment was completed and assessment order was passed on 29.03.2006 under Section 143(3) of Income Tax Act, 1961. Just before lapse of six years limitation, respondent issued notice dated 30.03.2010 under Section 148 of http://www.judis.nic.in Page No 2 of 16 W.P.No.23016 of 2011 Income Tax Act, 1961 to re-open aforesaid assessment. 4. Under these circumstances, petitioner called upon respondent to furnish reason for re-opening of assessment. By communication dated 02.08.2010, respondent has given reasons for re-opening of assessment, which reads as under:- 1.Provision for bad and doubtful debts of Rs.29,35,475/- under head miscellaneous expenses. 2.Diminution in value has not been added back under computation u/s. 115JB, amount of Rs.6,41,32,200/-. 5. It is contention of petitioner that Assessing Authority while issuing notice under Section 148 of Income Tax Act, 1961 has relied on objections raised by Internal Audit Party and has not independently formed opinion on objections raised. Therefore, this was contrary to views of Hon ble Supreme Court in Indian & Eastern Newspaper Society Vs. Commissioner of Income Tax, (1979) 119 ITR 996 (SC) and Bombay High Court in Hamilton Housewares (P.) Ltd. Vs. Deputy Commissioner of Income Tax, http://www.judis.nic.in Page No 3 of 16 W.P.No.23016 of 2011 (2019) 104 taxmann.com 128 (Bombay). 6. It is further contended that no fresh material has brought to invoke Section 148 of Income Tax Act, 1961 and that failure in diminution value for computation under Section 115JB was merely based on change of opinion and therefore, it was contrary to decisions of Hon ble Supreme Court in CIT Vs. Kelvinator of India Ltd., (2010) 320 ITR 561 (SC) and in ITO Vs. Techspan India P. Ltd., (2018) 404 ITR 10 (SC). 7. It is further submitted that on merits provision of bad and doubtful debts was disallowed as item not allowable by petitioner itself and that petitioner had not claimed any deduction in respect of provision for bad and doubtful debts and hence there is no escapement of income. 8. It is further submitted that diminution in value would not enhancing liability and hence, need not to be added back under computation under Section 115JB of Income Tax Act, 1961 for http://www.judis.nic.in Page No 4 of 16 W.P.No.23016 of 2011 purpose of memo altering tax under reference was made to decision of Hon ble Supreme Court in Commissioner of Income Tax Vs. HCL Comnet Systems & Services Ltd., (2008) 305 ITR 0409. 9. learned counsel appearing for petitioner relied on following decisions:- i. Calcutta Discount Co. Ltd. V. Income Tax Officer, AIR 1961 SC 372. ii. Jeans Knit P. Ltd. V. CIT, 2018(12) SCC 36. iii. Income Tax Officer V. Lakhmani Mewal Das, 1976(3) SCC 757. iv. Jindal Photo Films Ltd. V. Deputy Commissioner of Income Tax, 1998 (46) DRJ (DB). v. Income Tax Officer V. Techspan India P. Ltd., (2018) 6 SCC 685. vi. CIT V. Kelvinator of India Ltd., (2010) 2 SCC 723. vii.Deputy CIT V. Gay Travels (P) Ltd., in W.P.No.35606 and 35607 of 2002. viii.CIT V.Usha International Ltd., (2012) 348 ITR 485. http://www.judis.nic.in Page No 5 of 16 W.P.No.23016 of 2011 ix. Asianet Star Communications Pvt. Ltd. V. Assistant Commissioner of Income Tax in reported judgment in W.P.Nos.25328 of 2018 etc. 10. learned standing counsel for respondent submits that present Writ Petition is liable to be dismissed and petitioner should be relegated to participate in proceedings under Section 148 of Income Tax Act, 1961. It is further submitted that it is not open for petitioner to scuttle proceedings by citing decision and very same decision can be cited before Authority. 11. learned standing counsel for respondent submits that impugned notice and impugned communication overruling objection cannot be interfered, inasmuch as it impedes with re- assessment proceedings under Section 148 of Income Tax Act, 1961. It is submitted that it is open for petitioner to make all its submissions on merits, which has been raised before this Court and in case, as has been contended by petitioner that if there was change of opinion http://www.judis.nic.in Page No 6 of 16 W.P.No.23016 of 2011 and if petitioner establishes that there was no failure on part of petitioner to fully and truly disclose all materials required for assessment, officer would be obliged to drop proceedings. 12. On one hand, it is contention of learned counsel for petitioner that impugned proceedings are without jurisdiction and therefore petitioner was entitled for relief. On other hand, it is contention of respondent that present Writ Petition is liable to be dismissed. 13. I have considered arguments advanced by learned counsel for petitioner and learned standing counsel for respondent. 14. purpose of issuing notice under Section 148 of Income Tax Act, 1961 is for passing order of re-assessment under Section 147 of Income Tax Act, 1961. However, Section 148 of Income Tax Act, 1961 is not governed by restrictions contained in Section 147 of ____________ http://www.judis.nic.in Page No 7 of 16 W.P.No.23016 of 2011 Income Tax Act, 1961. 15. For aforesaid purpose, Assessing Officer has to merely issue notice within time limit prescribed under Section 149 of Income Tax Act, 1961. Before issuing notice, he has to record reason. In view of decision of Honourable Supreme Court in GKN Drive Shafts referred to supra, assessee is now entitled to ask for reasons for reopening of assessment after filing returns. Assessing Officer has to merely communicate reasons for reopening assessment if desired by assessee. 16. communication of reasons for reopening of assessment is merely to allow assessee to participate in re-assessment proceedings by giving effective reply. overruling of objection by respondents through speaking order is however not order under Section 147 of Income Tax Act, 1961. 17. Thus, for issuing notice under Section 148 of Income Tax Act, 1961 as it stands today, Assessing Officer has to satisfy ____________ http://www.judis.nic.in Page No 8 of 16 W.P.No.23016 of 2011 requirements of Section 149 of Income Tax Act, 1961. 18. However, while passing final order of re-assessment under Section 147 of Income Tax Act, 1961, Assessing Officer has to bear in mind express language of 1st proviso to Section 147 of Act. As per 1st proviso to Section 147 of Income Tax Act, 1961, no action shall be taken under said Section after expiry of four years from end of relevant assessment year, unless income chargeable to tax has escaped assessment for such assessment year by reason of failure on part of assessee to make return under Section 139 or in response to notice issued under sub-Section (1) of Section 142 or 148 or to disclose fully and truly all material facts necessary for that assessment year. 19. Whether notice that has been issued to petitioner was on account of change of opinion or on account of failure on part of petitioner to fully and truly disclose all material required for assessment is to be determined by Assessing Officer while passing order under Section 147 of Income Tax Act, 1961. present case ____________ http://www.judis.nic.in Page No 9 of 16 W.P.No.23016 of 2011 involves questions relating to accounts which are better left to be decided by original authority. 20. Though in recent decision, Honourable Supreme Court in Jeans Knit Private Limited Vs. Deputy Commissioner of Income Tax, (2018) 12 SCC 36 was cited, wherein it was observed that Karnataka High Court had taken view contrary to law laid down by Honourable Supreme Court in Calcutta Discount Co-Limited Vs. CIT referred to supra. Hon ble Supreme Court however refrained from making any observation on merits and remitted case back to concerned High Court. Therefore, said decision does not further case of petitioner. This is not clear case to apply principle laid down in Calcutta Discount Co-Limited Vs. CIT referred to supra. 21. In Asianet Star Communications Pvt. Ltd. V. Assistant Commissioner of Income Tax, order dated 16.04.2019 passed by this Court in W.P.Nos.25328 of 2018 etc. referred by learned counsel for petitioner, Court concluded that responsibility was on ____________ http://www.judis.nic.in Page No 10 of 16 W.P.No.23016 of 2011 assessee to make true and full disclose and thereafter, mantle would shift on Assessing Officer and is expected to complete assessment. Court there quashed notice as all material was available to open sight. 22. In facts of case, though petitioner had furnished certain details at time of re-assessment, question still remains to be answered is whether there was full and true disclosure by petitioner as is contemplated under proviso to Section 147 of Income Tax Act, 1961. 23. In this case, mere filing to annexure by petitioner in response to notice during scrutiny assessment by itself may or may not have been sufficient to come to conclusion that there was full and true disclosure by petitioner if information furnished was neither complete nor true. Question is whether information furnished were complete in all respect is to be decided only in adjudicator mechanism. 24. It is therefore best left open for petitioner to demonstrate ____________ http://www.judis.nic.in Page No 11 of 16 W.P.No.23016 of 2011 before respondent that details furnished by petitioner meets requirements of full and true disclosure for Assessing Officer to drop proceedings in terms of 1st proviso to Section 147 of Income Tax Act, 1961. 25. In case there is change of opinion, respondent cannot proceed in light of decision of Hon ble Supreme Court in CIT Vs. Kelvinator of India Ltd., (2010) 2 SCC 723. Hon ble Supreme Court cautioned Assessing Officers with following observation:- On going through changes, quoted above, made to Section 147 of Act, we find that, prior to Direct Tax Laws (Amendment) Act, 1987, re- opening could be done under above two conditions and fulfilment of said conditions alone conferred jurisdiction on Assessing Officer to make back assessment, but in Section 147 of Act (with effect from 1st April, 1989), they are given go-by and only one condition has remained, viz., that where Assessing Officer has reason to believe that income has escaped assessment, confers jurisdiction to re- open assessment. Therefore, post-1st April, 1989, power to re-open is much wider. However, one needs to give schematic interpretation to words reason to believe failing which, we are afraid, Section 147 would give arbitrary powers to Assessing Officer to re-open assessments on basis of mere change of opinion , which cannot be per se reason to re-open. We must also keep in mind ____________ http://www.judis.nic.in Page No 12 of 16 W.P.No.23016 of 2011 conceptual difference between power to review and power to re-assess. Assessing Officer has no power to review, he has power to re-assess. But re-assessment has to be based on fulfilment of certain pre-condition and if concept of change of opinion is removed, as contended on behalf of Department, then, in garb of re-opening assessment, review would take place. One must treat concept of change of opinion as in-built test to check abuse of power by Assessing Officer. 26. In case indeed there is mere change in opinion, respondent will be obliged to drop proceeding. However, to ascertain whether is mere change of opinion or not first it has to be established that there was true and full disclosure by petitioner. 27. As mentioned above, this can be demonstrated by petitioner only before respondent and not in proceeding under Art.226 of Constitution of India as scope of judicial review is very limited and it is not possible to conduct roving enquiry on facts and accounts. 28. Under these circumstances, I do not find any merits in quashing impugned notice dated 30.03.2010 and communication dated 12.09.2011 overruling objection of petitioner. ____________ http://www.judis.nic.in Page No 13 of 16 W.P.No.23016 of 2011 29. In light of above observation, I relegate petitioner to participate in proceedings before respondent by filing appropriate representations/objections within period of thirty days from date of receipt of copy of this order. espondent is obliged to pass orders on merits in accordance with law. 30. It is made clear that if circumstance do not justify invocation of proviso to Section 147, respondent shall drop proceedings. 31. At same time, while passing orders under Section 147 of Income Tax Act, respondent can pass assessment order as per Explanation 3 to Section 147 of Income Tax Act, 1961. 32. Since dispute pertains to Assessment Year 2003-2004, respondent is requested to pass appropriate order within period of sixty days from date of receipt of copy of this order. http://www.judis.nic.in Page No 14 of 16 W.P.No.23016 of 2011 33. Writ Petition stands disposed of with above observations. No costs. Consequently, connected Miscellaneous Petition is closed. 19.05.2020 Index : Yes/No Internet :Yes/No jen To Assistant Commissioner of Income- tax, Circle I (1), No.3, Gandhi Road, Salem 636007. http://www.judis.nic.in Page No 15 of 16 W.P.No.23016 of 2011 C.SARAVANAN, J. jen Pre-Delivery Order in W.P.No.23016 of 2011 and M.P.No.1 of 2011 19.05.2020 http://www.judis.nic.in Page No 16 of 16 Seshasayee Paper and Boards Limited v. Assistant Commissioner of Income-tax, Circle I(1), No.3, Salem