TCA.No.323 of 2020 In High Court of Judicature at Madras Dated : 23.9.2020 Coram : Honourable Mr.Justice T.S.SIVAGNANAM and Honourable Mrs.Justice V.BHAVANI SUBBAROYAN Tax Case Appeal No.323 of 2020 Commissioner of Income Tax, Chennai ...Appellant Vs M/s.Hyundai Motor India Ltd., PIN : 602117. ...Respondent APPEAL under Section 260A of Income Tax Act, 1961 against order dated 26.12.2018 made in ITA.No.1836/Chny/2017 on file of Income Tax Appellate Tribunal, Chennai 'B' Bench for assessment year 2008-09. For Appellant: Mrs.R.Hemalatha, SSC For Respondent: Mr.S.P.Chidambaram Judgment was delivered by T.S.Sivagnanam,J We have heard Mrs.R.Hemalatha, learned Senior Standing Counsel appearing for appellant Revenue and Mr.S.P. 1/10 http://www.judis.nic.in TCA.No.323 of 2020 Chidambaram, learned counsel accepting notice for respondent assessee. 2. This appeal, filed by Revenue under Section 260A of Income Tax Act, 1961 (for brevity, Act), is directed against order dated 26.12.2018 made in ITA.No.1836/Chny/2017 file of Income Tax Appellate Tribunal, Chennai 'B' Bench (for short, Tribunal) for assessment year 2008-09. 3. Revenue has filed this appeal by raising following substantial questions of law : i. Whether Tribunal was right in holding that reopening of assessment made under Section 147 is bad in law on ground that Assessing Officer had not recorded any reason of failure on part of assessee to disclose fully and truly all material facts, which are necessary for passing assessment order ? And ii. Whether, on facts and in circumstances of case, Tribunal was right in holding that since Assessing Officer had not recorded any failure on part of assessee to disclose fully and truly any material fact necessary for its assessment and hence reopening of assessment was invalid? 2/10 http://www.judis.nic.in TCA.No.323 of 2020 4. By impugned order, appeal filed by assessee challenging order passed by Commissioner of Income Tax (Appeals)-17, Chennai-101 dated 31.3.2017 was allowed and reopening of assessment as done by Assessing Officer vide order dated 31.12.2014 was held to be illegal. 5. question was as to whether Assessing Officer recorded any reason for failure on part of assessee to disclose fully and truly all material facts. 6. assessee, which is limited company registered under Indian Companies Act, filed their return of income for assessment year under consideration namely 2008-09 declaring total income of Rs.4,23,23,20,855/-. scrutiny assessment was completed after making certain additions and income was assessed at Rs.8,07,28,52,213/-. However, case was reopened under Section 147 of Act by issuance of notice dated 10.3.2014. It was stated that Assessing Officer noticed that assessee sold Customer Care Parts (CCP) Division to one M/s.Mobis India Limited and had offered capital gains amounting to Rs.3,80,25,26,600/- as per Section 50B of Act. sale consideration of Rs.4,25,25,00,000/- for acquisition of CCP Division was determined by assessee at Rs.3,80,25,24,600/-. 3/10 http://www.judis.nic.in TCA.No.323 of 2020 7. Assessing Officer opined that certain assets such as land and building had not been transferred and that there was no separate undertaking called CCP Division, but only activity existed, which was transferred and therefore, same was treated as business profit under Section 28 of Act. Assessing Officer treated amount of Rs.3,80,25,24,600/-, which was treated as capital gains by assessee, as business income. Assessing Officer further noticed that for financial year 2007-08, assessee made provision for warranty amounting to Rs.82,47,61,000/- and utilized sum of Rs.54,94,74,000/- and out of un-utilized amount of Rs.27,52,87,000/-, sum of Rs.4,52,23,000/- was reversed by assessee. Assessing Officer appeared to have examined details of provision for warranty for past three years and opined that assessee did not adopt any scientific method for estimating provision for warranty and that estimate made by assessee was held to be unreliable. Assessing Officer came to conclusion that there was reason to believe that income escaped assessment. 8. Pursuant to notice dated 10.3.2014 issued under Section 148 of Act, assessee filed return of income on 12.5.2014 and reasons were stated to have been communicated to assessee vide letter dated 11.4.2014. Subsequently, case was scrutinized 4/10 http://www.judis.nic.in TCA.No.323 of 2020 after issuance of notice dated 05.8.2014 under Section 143(2) of Act and re-assessment was completed vide order dated dated 31.12.2014. 9. Aggrieved by such order, assessee preferred appeal before CIT(A), who dismissed appeal by order dated 31.3.2017. Challenging same, assessee filed further appeal to Tribunal. 10. Before Tribunal, assessee contended that assessment was reopened after expiry of four years from end of relevant assessment year and reopening was not valid because Assessing Officer had not recorded any reasons of failure on part of assessee to disclose fully and truly all material facts necessary for its assessment for that year. assessee relied upon decisions in case of (i) CIT Vs. Foramer France [reported in (2003) 264 ITR 566 (SC)] and (ii) CIT Vs. Elgi Finance Ltd. [reported in (2006) 286 ITR 674 (Madras)]. 11. Tribunal allowed assessee's appeal by passing following order : We heard rival submissions and gone through relevant material. fact remains that re-assessment notice was 5/10 http://www.judis.nic.in TCA.No.323 of 2020 issued after completion of scrutiny assessment, that too after expiry of four years from end of relevant assessment year (2008-09). As per Proviso to Section 147, where assessment under Sub-Section 3 of Section 143 has been made for relevant assessment year, no action shall be taken under Section 147 after expiry of four years from end of relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of failure on part of assessee to disclose fully and truly all material facts necessary for its assessment for that assessment year. In this case, Assessing Officer has not recorded any failure on part of assessee to disclose fully and truly any material facts necessary for its assessment and hence, applying ratios relied on by AR, assessee's appeal is allowed. 12. In our considered view, order passed by Tribunal is devoid of any reasons. We support such conclusion with following reasons : In above order passed by Tribunal, substantial portion deals with statement of law as to how re-assessment proceedings have to be done and as to how Courts have 6/10 http://www.judis.nic.in TCA.No.323 of 2020 interpreted procedure to be followed by Assessing Officer while exercising powers under Section 147 of Act. In our respectful view, Tribunal did not spell out as to how it came to conclusion that Assessing Officer did not record any failure on part of assessee to disclose fully and truly any material facts necessary for its assessment. 13. learned counsel, who has accepted notice for respondent assessee, on instructions, submits that substantial material was placed before Tribunal and merely because Tribunal had not recorded those submissions nor brought on record materials, assessee should not be put to prejudice. 14. We have carefully considered said submissions of learned counsel on either side. 15. order passed by Court or Tribunal should stand or fall based on reasons contained in that order. order cannot be substituted by reasons at appellate stage when same did not find place in original order. This legal principle has been well explained in celebrated judgment of Hon'ble Supreme Court in case of Mohinder Singh Gill Vs. Chief Election Commissioner [reported in AIR 1978 SC 851]. 16. Mr.S.P.Chidambaram, learned counsel appearing for 7/10 http://www.judis.nic.in TCA.No.323 of 2020 respondent assessee submits that even order passed by CIT(A) is not reasoned order so far as aspect of reopening of assessment was concerned. 17. This contention is vehemently opposed by Mrs.R.Hemalatha, learned Senior Standing Counsel appearing for appellant Revenue and she has invited our attention to order passed by CIT(A) to state that order is speaking order and that order has set out elaborate reasons. 18. We have also perused assessment order dated 31.12.2014 as well as order passed by CIT(A) dated 31.3.2017. We find that in both orders, certain reasons were set out. However, we do not wish to express any opinion on same because we have faulted impugned order passed by Tribunal on ground that it is devoid of reasons. Therefore, we would not be justified in making any observations on merits of matter as to whether reasons have been recorded or not. All that we can say is that assessment order as well as order passed by CIT(A) are speaking orders. If Tribunal comes to conclusion that Assessing Officer has not recorded any failure on part of assessee to disclose fully and truly any material facts necessary for its assessment, it is required that Tribunal expresses itself as to how 8/10 http://www.judis.nic.in TCA.No.323 of 2020 it formed such opinion. In absence of any such reasons emanating from impugned order, we have to necessarily hold that impugned order passed by Tribunal is devoid of reasons and would call for interference. For all above reasons, we are inclined to interfere with impugned order. As mentioned earlier, we do not want to express anything on merits of matter as it may prejudice interest of assessee. 19. In result, above tax case appeal is allowed, impugned order is set aside and matter is remanded to Tribunal for fresh consideration. substantial questions of law raised are left open. No costs. 23.9.2020 To Income Tax Appellate Tribunal, Chennai 'B' Bench. RS 9/10 http://www.judis.nic.in TCA.No.323 of 2020 T.S.SIVAGNANAM,J AND V.BHAVANI SUBBAROYAN,J RS TCA.No.323 of 2020 23.9.2020 10/10 http://www.judis.nic.in Commissioner of Income-tax, Chennai v. Hyundai Motor India Ltd