In the High Court of Judicature at Madras Dated : 08.07.2008 Coram :- The Honourable Mr.Justice K.RAVIRAJA PANDIAN and The Honourable Mr.Justice P.P.S.JANARTHANA RAJA Tax Case (Appeal) No.676 of 2008 Commissioner of Income Tax Chennai. .. Appellant Vs. M/s Indbank Housing Ltd., 480, Anna Salai, Nandanam, Chennai-35. .. Respondent TAX CASE (APPEAL) filed under Section 260A of the Income Tax Act against the order of the Income Tax Appellate Tribunal Madras 'A' Bench dated 27.10.2006 in I.T.A.No.581/Mds/2005 for the assessment year 1996-1997. For Appellant : Mr.J.Naresh Kumar JUDGMENT
(Judgment of the Court was delivered by P.P.S.JANARTHANA RAJA,J)
This appeal is filed by the Revenue against the order of the Income Tax Appellate Tribunal Madras ‘A’ Bench dated 27.10.2006 in I.T.A.No.581/Mds/2005 for the assessment year 1996-1997 raising the following substantial questions of law.
“1. Whether in the facts and circumstances of the case, the Tribunal was right in holding that the reopening of assessment under Section 147 was invalid when the assessee had failed to furnish all the relevant material to disclose fully and truly all material facts necessary for proper assessment?
2.Whether the non disclosure of material facts viz., norms of National Housing Bank based on which the assessee substantiated certain provisions would amount to full and true disclosure?
2. The brief facts are as follows:-
The assessee is engaged in the business of housing finance.
The relevant assessment year is 1996-1997 and the corresponding accounting year ended on 31.03.1996. The assessee has filed the return of income on 28.11.1996 admitting the total income of Rs.1,96,31,710/-. The assessment was made on 27.10.1998 under Section 143(3) of the Income Tax Act. Subsequently the assessment was completed under Section 143(3) read with Section 147 of the Income Tax Act on 29.01.2002 determining the income at Rs.2,13,18,659/-. Once again, the assessment was re-opened under Section 147 of the Act by issuing notice on 25.03.2003 on the ground that there was escapement of income and the re-assessment was completed on 26.03.2004 determining the total income at Rs.4,80,64,413/-. It is noticed that the assessee has not recognised interest to the extent of Rs.1,91,37,015/- in respect of non-performing assets under the head ‘provision for contingencies’ provided for housing loan and investments to the extent of Rs.1,92,78,560/- and the assessee has also written-off the amount payable by M/s Flesta Properties. Therefore the Assessing Officer was of the view that there was a failure to admit the correct income and, hence, the income escaped assessment. Aggrieved by the second order of re-assessment, the assessee has filed an appeal before the Commissioner of Income Tax(Appeals). The Commissioner of Income Tax(Appeals) has allowed the appeal and held that the re-opening was bad in law. Aggrieved by that order, the assessee has filed an appeal to the Income Tax Appellate Tribunal and the Tribunal dismissed the appeal filed by the Revenue confirming the order of the Commissioner of Income Tax (Appeals). Hence, the present appeal.
3. Learned counsel appearing for the Revenue has submitted that the assessee has not furnished all the information to the Assessing Officer. He further contended that the Assessing Officer was right in holding that the assessee failed to admit the correct income and therefore, the income escaped assessment and the Assessing Officer was also right in invoking the jurisdiction to initiate proceeding under Section 147 of the Income Tax Act. Therefore, the order passed by the Tribunal is not in accordance with law and the same should be set aside.
4. Heard the learned counsel appearing for the Revenue. There is no dispute that the appellant has filed an elaborate note on 27.10.1998 on interest income on NPAs before the Assessing Officer as to why the same is not declared. Based on the prudential norms, such income was not disclosed and the said fact was informed to the Department and also National Housing Bank Act, 1987 was also enclosed with the note. Further, the assessee filed a copy of the Board Resolution along with the return of income with regard to writing off the bad debts in the account of M/s Flesta properties. So all the informations were furnished truly and fully disclosed to the Department at the time of filing of return by the assessee. When all the facts are available with the Department, the authority has no jurisdiction to initiate proceeding under Section 147 of the Act. Here, the Assessing Officer re-opened the assessment on mere change of opinion. The assessee relied on the proviso to Section 147 of the Act. Unless these conditions are stated in the proviso, the Assessing Officer cannot acquire jurisdiction to initiate any proceeding under Section 147 of the Act. It is also noted that initiation of proceeding is beyond the period of four years from the end of the assessment year. When all the relevant materials are available at the time of the assessment, the assessing Officer cannot re-open the assessment on mere change of opinion. There is no dispute that all the material evidence are with the Department. So it cannot be held that the income escaped assessment. In a case, where the assessment was completed under Section 143(3) of the Act and the re-opening of the same under Section 147 of the Act is beyond the period of four years, it can be sustained only if it is established that there is a failure on the part of the assessee to disclose all material facts fully and truly. But there was no such finding that there was a failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. Considering the above facts, the Commissioner of Income Tax (Appeals) held as follows:
“The other issue relating to provision of 1.92 crores the appellant states that it is added and declared as income on its own in the computation statement. Thus it is the plea of the appellant that there is no failure on the part of the assessee to disclose any fact at any stage. It is true that the appellant has disclosed the above matters fully and truly before the Assessing Officer in the earlier proceedings. The records show that already 143(3) assessment was done on 27.10.98 and 143(3) read with Section 147 was completed on 29.01.2002. In view of these facts and the principles laid down by the Madras High Court in the case of Fenner India Vs. DCIT 241 ITR 672 I hold that the re-opening of assessment under Section 147 is not valid in law. In so far as the proceedings under Section 147 is valid, the subsequent proceedings are also vitiated. Since the reopening is held bad in law, there is no necessity for me to go into the merits of the case. The assessing officer is free to take any other course of action to bring to tax these sums, provided it is permitted by law. The appeal of the assessee on the issue of re-opening under Section 147 is allowed.”
On further appeal, the Income Tax Appellate Tribunal has also considered all relevant facts and held as follows:
“It was stated on behalf of the assessee that all the information was available in the records. There was no failure on its part to disclose fully all material facts necessary for the assessment. CIT(A) has given a categorical finding that assessee did file along with the return copy of the Board resolution with regard to the write off of bad debts in the account of M/s Fiesta Properties. This fact was disclosed to the Department at the time of filing of the return. Further an elaborate note was submitted on 21.10.1998 on interest income on NPAs before the AO. Based on the prudential norms such income was not disclosed and this fact was informed to the Department. In regard to the provision the CIT (A) noted that the assessee added and declared the income on its own in the computation statement. The CIT(A) stated in the order, ” it is true that the appellant has disclosed the above matters fully and truly before the Assessing Officer in the earlier proceedings.” Relying on the decision of the jurisdictional High Court rendered in the case of Fenner (India) Ltd. Vs. Deputy Commissioner of Income Tax (241 ITR 672)(Mad.) it was held that the conditions precedent for assuming jurisdiction under Section 147 did not exist. We have perused the reasonings adduced in the impugned order. In our opinion, CIT (A) took a correct view in the matter and his order calls for no interference on this count. Accordingly, we uphold the same.”
Both the authorities have given concurrent finding that there is no failure on the part of the assessee in disclosing the facts fully and truly before the Assessing Officer and also the re-assessment is made only on mere change of opinion. The authorities have correctly followed the principle enunciated in the judgment of this Court in the case of Fenner (India) Ltd. Vs. Deputy Commissioner of Income Tax (241 ITR 672)(Mad.). The finding given by the Tribunal is based on valid materials and evidence. It is a question of fact but not a perverse order. Hence, we do not find any error or infirmity in the order of the Tribunal warranting interference and the order of the Tribunal is in accordance with law and the same is confirmed. In these circumstances, no substantial question of law arises out of the order of the Tribunal and the Tax Case (Appeal) is liable to be dismissed and accordingly it is dismissed.
(K.R.P.,J.) (P.P.S.J.,J.) 08.07.2008 Index:Yes Internet :Yes raa To 1.Assistant Registrar, Income-Tax Appellate Tribunal, III Floor, Rajaji Bhavan, Besant Nagar, Madras 90 (with records five copies). 2.The Secretary, Central Board of Revenue, New Delhi (3 copies). 3.The Commissioner of Income Tax(Appeals)XI, Chennai34. 4.The Assistant Commissioner of Income Tax Circle-II(3) Chennai-34. 5.The Commissioner of Income Tax, Chennai. K.RAVIRAJA PANDIAN,J AND P.P.S.JANARTHANA RAJA,J. raa Tax Case (Appeal) No.676 of 2008 08.7.2008