IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 13/12/2005
CORAM
THE HON'BLE MR. JUSTICE K. RAVIRAJA PANDIAN
AND
THE HON'BLE MR. JUSTICE P.P.S. JANARTHANA RAJA
T.C.NO. 244 OF 2001
The Commissioner of Income Tax
Chennai. ... Appellant
-Vs-
Sri Chamundeswari
10, Muthupandiyan Avenue
Madras. ... Respondent
For Appellant : Mrs. Pushya Sitaraman
Senior Standing Counsel
for Income Tax Department
For Respondent : Mr. N. Quadir Hoseyn
:ORDER
(Order of the Court was made by P.P.S. Janarthana Raja, J.)
At the instance of the revenue, the Income Tax Appellate Tribunal
referred the following question said to arise out of its order in ITA 3 542
(MAD)/90, for the opinion of this Court in pursuance to the directioni of this
Court under Section 256(2) of the Income Tax Act.
” Whether on the facts and in the circumstances of the case and taking into
account the Supreme Court’s decision in 102 ITR 287 and 189 ITR 285, the
Appellate Tribunal was right in law in cancelling the reassessment made in the
case for the assessment year 1980-81 ?”
2. The brief facts relating to the above reference are as under:
The assessee respondent was doing business in production and sale of
cimenatography films. The relevant assessment year is 1980-81 and the
corresponding accounting year ended as on 30.6.1979. The respondent assessee
by his return on income, on 05.1`2.1980, admitted a loss of Rs.1,01,120/- and
the original assessment was completed under Section 143(3) determining the
loss at Rs.91,120/- on 31.03.1983. Subsequent to the completion of the
assessment, the Assessing Officer noticed that the respondent assessee had
filed a letter dated 19.3.1983 on 24 .3.1983 in which it had offered a credit
of Rs.5000/- standing in the name of Smt. Girija Pakriswamy as income of the
respondent assessee and the same was omitted to be taken into consideration
while completing the assessment. In view of this, the assessment was reopened
under Section 147 and in its proceedings, the amount of Rs.5000/- was added to
the total income of the respondent assessee. In addition, the Assessing
Officer has made some other addition treating them as income from other
sources. Aggrieved by this, the respondent assessee preferred an appeal to
the Deputy Commissioner of Income Tax Appeals. The said Deputy Commissioner
of Income Tax Appeals, was of the view that the reopening of the assessment
under Section 147(b) was valid and he accordingly confirmed the order of the
reassessment made by the Assessing Officer under Section 147 (b) read with
Section 143 (3). Aggrieved by the said order, the respondent assessee filed
an appeal to the Income Tax Appellate Tribunal and submitted that the invoking
the provisions of Section 147 (b) and making reassessment was not justified.
The learned Department Representative supported the order of the Deputy
Commissioner of Income Tax and maintained that the same was not called for any
interference. The Income Tax Appellate Tribunal held that it would not be
open to the Assessing Officer to invoke the provisions of Section 147 (b) on
the ground that invoking of jurisdiction under Section 147 (b) was not
justified and accordingly, cancelled the reassessment made on the basis of
such reopening.
3. The revenue filed a Reference Application before the Income
Tax Appellate Tribunal under Section 256 (1) of the Act, requesting the
Tribunal, referred the above mentioned question to this Court for its opinion.
The Income Tax Appellate Tribunal rejected the Reference Application on the
ground that there is no question of law arise out of the order of the
Tribunal. Later, the Revenue filed a petition under Section 256 (2) of the
Act, requesting this Court to give direction to the Tribunal to refer the
matter to the High Court for its opinion. In pursuance of this Court Order
dated 26.03.1998 in TCP 438 of 19 97, the Tribunal referred the above question
of law.
4. The learned counsel for the Department submitted that the
assessee has filed a letter dated 19.03.1983 on 24.03.1983 in which it had
offered a credit of Rs.5,000/- in the name of Smt.Girija Pakriswamy as income.
The said letter was not placed by the Assessing Officer in the records or
might have been misplaced and consequently it was found that the amount
offered as income for the assessment was not considered. Thus, there was
information from the documents that the income chargeable to tax has escaped
assessment. The information that the income has escaped income tax assessment
had come to the knowledge on the bare facts of the case and there was no
reconsideration and change of opinion of the material on record and for this
proposition, he relied on the following decisions of the Apex Court.
a) Vol.102 I.T.R. 287 (SC) (Kalyanji Mavji and Co. Vs.
Commissioner of Income Tax).
b) Vol.189 I.T.R. 285 (SC) (A.L.A. Firm Vs. Commissioner of
Income Tax).
5. On the other hand, the learned counsel appearing for the
respondent assessee submitted that the information regarding the credit of
Rs.5,000/- standing in the name of Smt.Girija Pakriswamy was available before
the Assessing Officer and if the Assessing Officer due to mistake or otherwise
had failed to take note of this fact while making the assessments, it was not
open to the Assessing Officer to reopen the assessment under Section 147 (b).
Therefore, invoking the provision of Section 147 (b) making reassessment was
not justified. It is also submitted that an error discovered on a
reconsideration of the same material does not give him that power and for
this, he relied on the Apex Court Judgment reported in Vol.119 I.T.R. 996
(Indian and Eastern Newspaper Society Vs. Commissioner of Income Tax, New
Delhi), to support his proposition.
6. We have heard the arguments advanced by both the parties. The
letter dated 19th March 1983 was placed before us. The said letter was
addressed to the Assessing Officer and the same was received by the Officer on
24.03.1984. The letter reads as follows:
“In the course of hearing u/s 143(2), you doubted the genuineness of the
following loan claimed:
1. Mrs.Girija Pakkiriswamy – Rs.5,000/-
It has to be pointed out that the former accountant apears to have made this
entry without any basis. This may please be added without levy of any
penalty.
Be pleased to condone.”
From a reading of the above letter, it is clear that there was a
hearing under Section 143 (2). At the time of hearing, the Assessing Officer
doubted the genuineness of the loan claimed by the respondent assessee. This
fact clearly indicates that there was enquiry at the time of original
assessment proceedings. In consequence of the enquiry, the above said letter
was addressed to the Assessing Officer. The only grievance by the Department
was that, the said letter was omitted to consider. Hence, reopening is
justified. When the enquiry is made by the Assessing Officer, the officer
ought to have considered the purpose of making original assessment. He did
not act upon at the time of original assessment eventhough the relevant
materials were available at the time of original assessment. In consequence
of the enquiry, the respondent assessee wrote a letter dated 19.3.1983 stating
that the entry was made by the former Accountant without any basis and the
same may be added without levy of any penalty. The said letter was filed at
Page No.52 of the Miscellaneous Record of the Assessing Officer. The learned
counsel for the Department did not deny that the said letter was not filed.
It is filed with the Department and the same was also available at Page No.52
of the Miscellaneous Record. We have also seen the reasons recorded by the
Assessing Officer for the purpose of reopening the assessment. The reason was
recorded on 22.11.1984 in which it is stated that the said letter was kept
separately and omitted to be considered while completing the assessment on
31.03.1983. Before even the said letter was filed by the respondent assessee,
there was enquiry relating to the genuineness of the loan of Rs.5,000/-
standing in the name of Mrs.Girija Pakriswamy and the Assessment Officer did
not proceed further. After the completion of the assessment, the Officer
cannot rely on the fact that they have omitted to consider the said letter
which was kept in different file.
7. We are of the view that the information pertaining to the cash
credit of Rs.5,000/- was already with the Asessing Officer at the time he made
the original assessment and there is no fresh information available with the
asessing Officer enabling him to invoke the provision under Section 147 (b)
and as such, reopening of assessment under Section 147 was unjustified.
8. In view of the said factual position, we have answered the
above question in favour of the assessee and the above tax case filed by the
revenue is dismissed. No costs.
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