M/S. Dalmia Cement (Bharat) Limited vs The Assistant Commissioner of Income Tax

BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT

DATED : 30.10.2019

CORAM:

THE HONOURABLE MR.JUSTICE M.GOVINDARAJ

W.P.(MD)Nos.19202, 19825 and 19826 of 2018 and W.M.P.(MD)Nos.17030, 17605 and 17606 of 2018

W.P.(MD)No.19202 of 2018:

M/s.Dalmia Cement (Bharat) Limited, Represented by its Deputy Executive Director (Finance) and Authorized Signatory Shri.R.Gururajan, Dalmiapuram, Tiruchirapalli - 621 651. : Petitioner

Vs.

1.The Assistant Commissioner of Income Tax, Circle 1, Trichy, No.44, Williams Road, Cantonment, Tiruchirapalli-620 001.

2.The Deputy Commissioner of Income Tax, Central Circle -2, New Delhi.

3.The Principal Commissioner of Income Tax 1 - Trichy, No.44, Williams Road, Cantonment, Tiruchirappalli-620 001. : Respondents

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PRAYER: Writ Petition is filed under Article 226 of the Constitution of India praying for issuance of a Writ of Certiorari, to call for the records on the file of the first respondent and quash the impugned order in PAN:AADCA9414C/ACIT/TRY/2011-12, dated 26.07.2018 along with notice in PAN:AADCA9414C, dated 31.03.2018 issued under Section 148 of the Income Tax Act for the Assessment Year 2011-12.

W.P.(MD)No.19825 of 2018:

M/s.Dalmia Bharat Limited, (Formerly Known as Dalmia Bharat Enterprises Limited), Dalmiapuram, Tiruchirapalli, Tamil Nadu - 621 651. : Petitioner

Vs.

1.The Assistant Commissioner of Income Tax, Circle 1, Trichy, No.44, Williams Road, Cantonment, Tiruchirapalli-620 001.

2.The Deputy Commissioner of Income Tax, Central Circle -2, New Delhi.

3.The Principal Commissioner of Income Tax 1 - Trichy, No.44, Williams Road, Cantonment, Tiruchirappalli-620 001. : Respondents

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PRAYER: Writ Petition is filed under Article 226 of the Constitution of India praying for issuance of a Writ of Certiorari, to call for the records on the file of the first respondent and quash the impugned notice in PAN: AAJCS7366K, dated 31.03.2018 issued under Section 148 of the Income Tax Act for the Assessment Year 2011-12, along with the impugned order in PAN: AAJCS7366K/ACIT/TRY 2011-12, dated 30.07.2018.

W.P.(MD)No.19826 of 2018:

M/s.Dalmia Power Limited, (Amalgamated Company of DCB Power Ventures Limited), Dalmiapuram, Tiruchirapalli, Tamil Nadu - 621 651. : Petitioner

Vs.

1.The Assistant Commissioner of Income Tax, Circle 1, Trichy, No.44, Williams Road, Cantonment, Tiruchirapalli-620 001.

2.The Principal Commissioner of Income Tax 1 - Trichy, No.44, Williams Road, Cantonment, Tiruchirappalli-620 001. : Respondents

PRAYER: Writ Petition is filed under Article 226 of the Constitution of India praying for issuance of a Writ of Certiorari, to call for the records on the file of the first respondent and quash the impugned notice in PAN: AAJCS7367J, dated 31.03.2018 in notice number

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ITBA/AST/148/2017-18/1009600073(1) issued under Section 148 of the Income Tax Act for the Assessment Year 2011-12, along with the impugned order in PAN:AAJCS7367J/AAJCS2658E/ACIT/TRY/2011-12, dated 31.07.2018.

For Petitioner : Mr.N.Venkataraman, in all WPs. Senior Counsel, For Mr.N.V.Balaji For Respondents : Mr.G.Rajagopalan, in all WPs. Additional Solicitor General of India For Mr.N.Dilip Kumar

******

COMMON ORDER

Since the issue involved in all the three Writ Petitions is one and the

same, they were heard together and are being disposed of by means of

this common order.

2. For the sake of convenience, the facts leading to the filing of the

Writ Petition in W.P.(MD)No.19202 of 2018 are taken into consideration

for deciding the issue at hand.

3. The Writ Petition in W.P.(MD)No.19202 of 2018 challenges the

order passed by the first respondent in

PAN:AADCA9414C/ACIT/TRY/2011-12, dated 26.07.2018 along with

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notice in PAN:AADCA9414C, dated 31.03.2018, issued under Section 148

of the Income Tax Act, 1961, for the assessment year 2011-2012.

4. The petitioner filed his original return on 29.09.2011. Thereafter,

vide F.No.ACIT/CC-2/2013-14, dated 14.10.2013, further details were

sought for by the second respondent, which, he submitted on 26.10.2013

and 09.11.2013. In that letter, it is disclosed as to which are the

companies holding shares above 10%. The petitioner has disclosed the

allotment of shares, opening share capital, share capital raised during the

year, closing share capital, total turnover, gross profit, net profit and all

other details as required by the second respondent. He filed Form 2 to

disclose all the details showing the shares allotted to other persons above

10%. After considering all these details, the second respondent passed an

assessment order on 31.03.2014, wherein, it was found that a sum of Rs.

84 Crores was treated as unexplained expenditure under Section 69C of

the Income Tax Act, 1961, and another sum of Rs.55 Crores was treated

as bribe on the basis of the documents seized by them, against which, the

petitioner preferred an appeal, in which, Rs.84 Crores as well as Rs.55

Crores, totalling to Rs.1,39,00,00,000/-, was reversed and for the rest of

the amount, penalty was imposed. This was given effect to by an order

under Section 250/154/153A/143(3) of the Income Tax Act, 1961, dated

18.08.2015. Thereafter, on 31.03.2018, vide impugned proceedings in

PAN:AADCA9414C, a notice under Section 148 of the Income Tax Act,

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1961, was issued, calling upon the petitioner to deliver the return in the

prescribed form for the assessment year 2011-2012, on the reason that

the Assessing Officer had reason to believe that income chargeable to tax

has escaped assessment. In response to this notice, the petitioner

submitted his xerox copy of the return for the year 2011-2012 with

acknowledgement due dated 13.04.2018, vide his letter dated 16.04.2018

and also sought for reasons to come to a conclusion to initiate action

under Section 148. The first respondent, by

PAN:AADCA9414C/ACIT/Circle-1/TRY/2011-12, dated 11.05.2018,

communicated the reasons. The allegation is that Rs.500 Crores, which

was invested by a Company called 'KKR' in the year 2010-2011 and held

15% equity shares issued to the petitioner's company, is nothing but the

black money of the petitioner's company and it has been circulated

through the said company called 'KKR' and it was brought back at a value

of more than Rs.1200 Crores. Further, on the basis of information, vide a

charge sheet issued to Y.S.Jagan Mohan Reddy, credible proof of criminal

conspiracy was obtained against Mr.Puneet Dalmia on account of a sum of

Rs.95 Crores in the nature of illegal gratification paid for allotment of

lime stone mining lease in favour of the petitioner company. Further

reason is that it was widely believed that the petitioner company has tacit

understanding with its distributors of cement by giving over discount on

sale of cement so as to receive kickbacks in personal names and that it

was widely believed that Dalmia Group has tacit understanding with its

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suppliers of coal, and other services to over invoice that charges so as to

receive kickbacks in personal names and Dalmia Group is in the habit of

booking bogus bills in the accounts. All these reasons are culminated in

the initiation of proceedings under Section 148 and it is observed in

closing paragraph as under:

"8. It is surprising as to why the Dalmia Bharat

Ltd., paid 2.4 times to KKR for the buyback of its

investment of Rs.500 crores in 2010 amounting to

approx. Rs.1218 crores.

As the transaction mentioned above is important

due to the sensitivity it attracts and for the

requirement of deep digging of data to retrieve the

final information through the means of exchange of

information forum the issue needs to be relooked

through reopening of the case for reassessment of

Dalmia Cement Bharat Ltd., Dalmia Bharat Ltd., Dalmia

Bharat Enterprises Ltd. and Avnija Properties Ltd.

9. Another allegation pertains to the Dalmia

Group investing around Rs.5000 crores by way of

capital expenditure on setting up cement

manufacturing facility and various part of the country

in "last 4 years". As the TEP was received in F.Y.2016-17

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in the office of DGIT (Inv.), Mumbai therefore the

aforementioned "last 4 years" may be considered as,

from F.Y. 2012-13 to F.Y.2015-16. However as this is a

generalized allegation therefore only the specific issue

in this allegation may be looked into. The specific issue

in this allegation is that "Calcom Cement India Limited,

one of the subsidiary of DCBL awarded a contract for

mechanical erection and fabrication to Gannon

Dunkerley & Co Limited at a rate almost double of

market rate. Copy of contract awarded, copy of

comparable contract and a comparison chart is

attached as Annexure - D where contract of Rs.21

Crores has been given at Rs.43 Crores. On going

through the Annexure - E, of this TEP name of other

contractors were found, however as no specific or

incriminating information or amount of transaction is

present against these parties, hence information in

their case is generalized in nature hence does not

invite any further action at this stage only in case of

Gannon Dunkerley & Co Limited, the issue is specific.

Therefore, the contract awarded and payment received

by Gannon Dunkerley & Co Limited may be verified by

passing on the information to its jurisdictional

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assessing officer to take an appropriate action under

the relevant section of I.T. Act, 1961.

10. There is another allegation that Subhshri

Road Carriers Pvt. Ltd., a known and related entity of

Dalmia Group has been given the contracts of major

transportation work by the Dalmia Group. The

contracts are given at the higher rates than the

prevailing market rates and kickbacks are received in

the personal name of the promoters."

5. Against the reasons given by the first respondent, the petitioner

company filed his objections by communication dated 19.06.2018, stating

that the proceedings initiated is,

(a) barred by limitation;

(b) without jurisdiction; and

(c) vague and bereft of specific details.

6. The first respondent, by his proceedings in

PAN:AADCA9414C/ACIT/TRY/2011-12, dated 26.07.2018, rejected the

objections, against which, the present Writ Petition came to be filed.

7. The learned Senior Counsel appearing for the petitioner would

submit that the relevant assessment year is 2011-2012. The petitioner

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submitted all the books of accounts and all other details, as sought for by

the respondents even at the time of processing the assessment. Once all

the required documents are given, it is for the Assessing Authority with

due diligence, to mention, what is not disclosed and the definite reason to

arrive at a decision as to the escaped assessment. It cannot be based on

the information generally known by believing or on wild belief. In support

of his contention, he would rely on the following judgments:

(1) Asianet Star Communications (P) Ltd. vs. ACIT

(2019) 106 Taxmann.Com 293 (Mad-HC);

(2) Sterlite Industries (India) Ltd. vs. ACIT (2008)

305 ITC 339 (Mad HC);

(3) Fenner (India) Ltd. vs. DCIT (2000)241 ITR

672 (Mad HC);

(4) CIT vs. Schwing Stetter India P. Ltd. (2015) 378

ITR 380 (Mad HC);

(5) NuPower Renewables (P.) Ltd. vs. ACIT (2019)

104 Taxmann.com 307 (Bom HC);

(6) CIT vs. S & S Power Switchgear Ltd. (2018) 92

Taxmann.com 429(Mad);

(7) PCIT v. Manzil Dineshkumar Shah (2018) 406

ITR 326 (Guj);

(8) Krupesh Ghanshyambhai Thakkar vs. DCIT

(2017)77 Taxmann.com 293(Guj HC);

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(9) CIT vs. Kelvinator of India Limited (2010) 320

ITR 561 (SC);

(10) Rubix Trading vs. ITO [W.P.No.3130 of 2018,

dated 20.12.2018] (Bom HC);

(11) CIT vs. Usha International Ltd. (2012) 253

CTR 113 (Del-HC);

(12) Ganga Saran & Sons (P) Ltd. vs. ITO [(1981)

130 ITR 1 (SC)];

(13) South Yarra Holdings vs. ITO (2019) 104

Taxmann.com 216 (Bom HC);

(14) PCIT vs. Meenakshi Overseas (P) Ltd. (2017)

395 ITR 677 (Del-HC);

(15) ITO vs. Lakhmani Mewal Das (1976) 103 ITR

437 (SC);

(16) SMCC Construction India Ltd. vs. ACIT (2014)

220 Taxman 354 (Del.HC);

(17) Novo Nordisk India (P) Ltd. (2018)95

Taxmann.com 225 (Kar-HC);

(18) Mahesh Kumar Gupta vs. CIT (2014) 363 ITR

300 (All-HC);

(19) Haryana Acrylic Manufacturing Co vs. CIT

(2009) 308 ITR 38 (Del);

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(20) CIT, Delhi vs. Kelvinator India Ltd. 256 ITR 1

(Del);

(21) Calcutta Discount Co. Ltd. vs. ITO 41 ITR

191(SC);

(22) Jindal Photo Films Ltd. vs. DCIT 234 ITR

170(Del);

(23) Garden Silk Mills P. Ltd. vs DCIT 237 ITR 668

(Guj);

(24) PCIT vs. Santech Solutions P Ltd 97 Taxmann.

com 179 (Mad);

(25) Union of India vs. Ajit Jain 260 ITR 80(SC);

(26) Ajit Jain vs. Union of India 242 ITR 302 (Del);

(27) CIT vs. Indo Arab Air Services 283 CTR 92

(Del);

(28) PCIT vs. Shodiman Investments (P) Ltd. 93

Taxmann. com 153 (Bom);

(29) CIT vs. Sfil Stock Broking Ltd 325 ITR 285

(Del);

(30) CIT vs. Batra Bhatta Company 321 ITR 526

(Del);

(31) Vipan Khanna vs. CIT 255 ITR 220 (Pun &

Har);

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(32) National Dairy Development Board vs. DCIT

356 ITR 413 (Guj);

(33) Ashkjyot Oxygen (P) Ltd. vs. H.N.Patel, ITO

346 ITR 199 (Guj);

(34) Madras Suspension Ltd. vs. DCIT 88

Taxmann.com 256 (Madurai);

(35) Sri. C.M.Mahadeva S/o.Sri Manche Gowda vs.

The CIT, Mysore (2015) Taxcorp (DT) 62455 (KAR);

(36) CIT vs. Elgi Tread (India) Ltd 96 Taxmann.com

254 (Mad);

(37) JCIT vs. Kalanithi Maran 366 ITR 453

(Madras);

(38) Jeans Knit P Ltd vs. DCIT Banglore 390 ITR 10

(SC);

(39) CIT vs. M/s.Spice Enfotainment Ltd., Civil

Appeal No.285 of 2014-SC;

(40) Spice Infotainment Ltd. vs. CIT 65 DTR 391

(Delhi);

(41) Jitendra Chandrala Navlani vs. Union of India

386 ITR 288 (Bom);

(42) PCIT New Delhi vs. Maruti Suzuki India Ltd.

397 ITR 681 (Delhi); and

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(43) Indian & Eastern Newspaper Society vs.

Commissioner of Income Tax [1979]2 Taxman 197(SC).

8. Secondly, on the point of limitation, the learned Senior Counsel

would draw the attention of this Court to proviso to Section 147, which

contemplates only three circumstances in which the assessment can be

re-visited within four years i.e.,

(a) failure on the part of the assessee to make a

return under Section 139; or

(b) in response to a notice issued under sub-

section (1) of section 142 or section 148; or

(c) to disclose fully and truly all material facts

necessary for his assessment, for that assessment year.

9. The learned Senior Counsel would further submit that in respect

of required things, namely (a) and (b), the assessee has filed his return

under Section 139 and he has filed his reply in response to the notice

issued under Section 142 as well as Section 148.

10. The only issue, which is to be decided, is as to whether the

assessee has disclosed fully and truly what material facts necessary for

his assessment, for that assessment year or not.

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11. In that aspect, the petitioner would submit that he has

submitted all the necessary details in Form-2 with all other attachments

including the reply given to the notice issued under Section 142. Against

the order passed by the Assessing Authority, the petitioner also filed an

appeal to the Commissioner of Income Tax, in which, all these points were

elaborately discussed and thereafter, the order charging tax under

Section 139 was set aside and the appeal was partly allowed and

consequent upon the order, it was given effect to by the other

consequential order under Section 250/154/153A/143(3) of the Income

Tax Act, 1961. In those circumstances, it should be construed that the

petitioner has given all the materials fully and truly. As per the

explanation to Section 147, if at all the Assessing Officer with his due

diligence discovers that there is some escaped assessment, then, on the

basis of that, he can initiate proceedings. But the impugned orders do not

disclose the main reasons given by the Assessing Authority and the same

also do not disclose any escaped assessment. Further, the assessment

order for 2011-2012, ended with 31.03.2012. As per Section 147,

proceedings, if any, should have been commenced within four years from

the date of end of the assessment year. But, in the instant case, the

proceedings were initiated on 31.03.2018. Therefore, it is barred by

limitation.

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12. It is contended that the further reason given pertains to the

Calcom Cement India Limited, which is an independent legal entity and

that does not have any connection with the return filed for the

assessment year 2011-2012. Even assuming that it is a sister concern,

then, for the transaction done by the sister concern, proceedings should

have been initiated against that independent legal entity and it cannot be

initiated against the petitioner company. Therefore, the impugned orders

are barred by limitation.

13. Further, in respect of the allegation given with respect to the

contracts, Paragraph 10 of the reasons that the contracts are given at the

higher rates than the prevailing market rates and kickbacks are received

in the personal name of the promoters, does not disclose any specific

transaction which happened between the petitioner and other company.

The date of transaction, the amount which said to have been received

higher than the market value, the quantum of kickbacks that was

received in the personal name of the promoters, the date and time when

it was received and all other specific details, are missing. Therefore, he

prays that the impugned proceedings are likely to be quashed.

14. The learned Senior Counsel would also contend that once in a

concluded assessment where the Assessing Authority discovers

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undisclosed material evidence and has a reason to believe that there is an

escaped assessment, then only, he can initiate proceedings. Whereas, in

the cases at hand, the impugned proceedings are based on wild belief

without any materials.

15. In response to the arguments, the learned Additional Solicitor

General of India appearing for the respondents would contend that after

issuance of notice under Section 148, the petitioner has not chosen to

challenge the same in time. But, whereas, he has submitted himself to the

proceedings and filed returns, as directed by the authorities and also filed

his objections. Once he submitted himself to the jurisdiction, he shall

await the orders of the Assessing Authority and he cannot rush to the

Court without awaiting the orders. Therefore, once the matter is

subjudice before the fact finding authority, challenging the notice issued

under Section 148 is without cause of action and hence, the Writ Petitions

are not maintainable.

16. In support of the contention, he would rely on the judgment of

the Hon'ble Supreme Court in GKN Driveshafts (India) Ltd., vs.

Income Tax Officer and others reported in 2003(1) SCC 72, wherein

the Hon'ble Supreme Court has held that the proper course of action for

the noticee is to file return and if he so desires, to seek reasons for

issuing notices and on receipt of notice, he can file objection and he

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cannot rush to the Court without awaiting for the orders to be passed in

the matter.

17. He would further submit that against the order passed by the

authority, there is an appeal provision available to the petitioner and

without exhausting the alternative remedy, the petitioner shall not rush to

the Court. In this regard, he would rely on the judgment of the Hon'ble

Supreme Court in CIT v. Chhabil Dass Agarwal reported in 2014(1)

SCC 603, wherein it is held that when there is an efficacious alternative

remedy available, the High Court should not interfere in the proceedings

of Income Tax Department, pursuant to a notice issued under Sections

246, 246-A, 143, 144, 147 and 148. Therefore, the Writ Petitions are not

maintainable.

18. Further, explanation to Section 147 would clarify the position

that there are material evidences, which were discovered by the

Assessing Authority, for which, action should be initiated. Paragraph 8 of

the reasons adduced by the Assessing Authority clearly shows that there

is suppression of income to the tune of Rs.1218 crores for the investment

of Rs.500 Crores, which definitely is the re-circulation of black money. As

there are material evidences, it cannot be said that it is without reason.

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19. Insofar as the issue at hand is concerned, it is a disputed

question of fact and it can be decided only by the authority and the Writ

Court cannot delve into the disputed questions of facts and, therefore, the

Writ Petition shall not be entertained.

20. I have considered the rival submissions made by both parties.

21. This Court has dealt with the issue of change of opinion after

considering the various judgments of the Hon'ble Supreme Court and the

other Courts, in Asianet Star Communications (P) Ltd. vs. ACIT

(2019) 106 Taxmann.Com 293 (Mad-HC). The relevant portion reads

thus:

"26. In similar circumstances, the Supreme

Court, in the case of ACIT v. ICICI Securities Primary

Dealership Ltd. ([2012] 348 ITR 229) has held as

follows:

The assessee had disclosed full details in the

Return of Income in the matter of its dealing in stocks

and shares. According to the assessee, the loss

incurred was a business loss, whereas, according to

the Revenue, the loss incurred was a speculative loss.

Rejection of the objections of the assessee to the re-

opening of the assessment by the Assessing Officer

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vide his Order dated 23rd June, 2006, is clearly a

change of opinion. In the circumstances, we are of the

view that the order re-opening the assessment was not

maintainable.

27. The Supreme Court, in Commissioner of

Income Tax v. Corporation Bank [254 ITR 791] has had

occasion to consider a similar issue holding as follows:

Turning attention to the first question as regards

the provisions under Section 147(a) be it noted and as

the facts depict, there is no failure on the part of the

assessee in furnishing the particulars pertaining to the

above noted sum as not recoverable for the relevant

accounting year and the statements filed along with

the original return disclosed the full details of the

aforesaid account. There is, therefore, no failure on

the part of the assessee to disclose fully and truly the

material facts necessary for the assessment years for

the respective years and as such Section 147(a) has no

manner of application and is not attracted in the facts

of the matter under consideration. The High Court on

consideration of the facts came to the conclusion that

the Tribunal was justified in coming to the said finding

and we also record our concurrence therewith.

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28. The Supreme Court in the case of

Commissioner of Income Tax v. Kelvinator of India

Ltd., and another ([2010) 320 ITR 561 (SC)] has held

thus:

However, one needs to give a schematic

interpretation to the words "reason to believe" failing

which, we are afraid, Section 147 would give arbitrary

powers to the Assessing Officer to re-open assessments

on the basis of "mere change of opinion", which cannot

be per se reason to re-open. We must also keep in

mind the conceptual difference between power to

review and power to re-assess. The Assessing Officer

has no power to review; he has the power to re-assess.

But re-assessment has to be based on fulfilment of

certain pre-condition and if the concept of "change of

opinion" is removed, as contended on behalf of the

Department, then, in the garb of re-opening the

assessment, review would take place. One must treat

the concept of "change of opinion" as an in-built test

to check abuse of power by the Assessing Officer.

Hence, after 1st April, 1989, Assessing Officer has

power to re-open, provided there is "tangible material"

to come to the conclusion that there is escapement of

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income from assessment. Reasons must have a live link

with the formation of the belief.

29. I am thus of the view that, in the light of the

proviso to section 147, the assessee having made a

complete disclosure of all relevant facts along with the

return of income, the impugned proceedings are

barred by limitation and also constitute a review of the

original order of assessment, impermissible in law. In

fact, the Assessing Officer is seen to have applied his

mind to the issue in question and the original order of

assessment confirms the position that various

materials have been called for, such as accounts,

financials, tax audit report, etc. and the assessee has

also engaged in discussions with the Assessing Officer

in regard to the issues that arise therefrom. The full

and true disclosure of the assessee is thus not in

doubt.

35. The Full Bench has specifically gone into the

question whether an order of assessment must contain

detailed discussion in regard to a specific issue in

order that the Assessing Authority may be said to have

initially 'considered the issue'. The Bench cites the

provisions of section 114(e) of the Indian Evidence Act

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1872 to bring home the position that all acts

performed by a Judicial Officer in the discharge of his

regular functions would be legally presumed to have

been properly and regularly performed and executed.

Thus, even in cases where there is no discussion in

regard to specific issues, if it is established by the

assessee that all material relevant and germane to that

issue were available before the Assessing Officer,

easily discernible and part of the record, reassessment

is impermissible. Then again, it does not stand to

reason that an officer, once convinced by the

submissions of an assessee, will proceed to devote time

to recording is agreement in a detailed and reasoned

fashion. The legitimate and reasonable expectation is

that a detailed and speaking order is passed in cases

where he differs and dissents from the stand of the

assessee. On this score, the arguments of

Mr.J.Narayanasamy in this regard have no merit and

are rejected.

41. In fine, all relevant, primary particulars have

been produced/filed/furnished by the petitioner at the

first instance before the authorities, in a transparent

fashion. It is for the officer to have appreciated the

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same and arrived at the necessary and appropriate

inferences at that juncture. Having missed the bus at

that point, the Department cannot seek to re-assess

the income as culled from material already on record,

as this constitutes a review of the original assessment.

Admittedly, and even as per the reasons stated, there is

no new material that has come to the notice of the

authorities and the impugned exercise is undertaken

solely on the basis of the materials already supplied by

the petitioners and available on the records of the

department. This argument of the revenue is also

consequently rejected."

22. It is pertinent to note that insofar as the judgments relied on by

the respondents that the Writ Petitions are not maintainable against the

notices issued under Section 148 of the Income Tax Act, 1961, are

concerned, the Hon'ble Supreme Court in its judgment reported in

[2017] 77 taxmann.com 176 (SC) [Jeans Knit (P.) Ltd. vs. Deputy

Commissioner of Income-Tax, Bangalore], has held as under:

"2. We find that the High Courts in all these cases

have dismissed the writ petitions preferred by the

appellant/assessee herein challenging the issuance of

notice under section 148 of the Income Tax Act, 1961

http://www.judis.nic.in 24/32 W.P.(MD)Nos.19202, 19825 and 19826 of 2018

and the reasons which were recorded by the Assessing

Officer for reopening the assessment. These writ

petitions are dismissed by the High Courts as not

maintainable. The aforesaid view taken is contrary to

the law laid down by this Court in Calcutta Discount

Ltd. Co. v. ITO [1961]41 ITR 191 (SC). We, thus, set

aside the impugned judgments and remit the cases to

the respective High Courts to decide the writ petitions

on merits.

3. We may make it clear that this Court has not

made any observations on the merits of the cases, i.e.

the contentions which are raised by the appellant

challenging the move of the Income Tax Authorities to

re-open the assessment. Each case shall be examined

on its own merits keeping in view the scope of judicial

review while entertaining such matters, as laid down by

this Court in various judgments."

In the above referred judgment, it was observed that the judgment

referred to by the High Court in CIT v. Chhabil Dass Agarwal [2013]

357 ITR 357/217 Taxman 143/36 taxmann.com 36, does not apply to

the case. Therefore, a writ against the notice issued under Section 148 is

maintainable.

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23. Insofar as the contention of the respondents that the assessee

shall await for the orders to be passed by the Assessing Officer, as held

by the Hon'ble Supreme Court in GKN Driveshafts (India) Ltd., vs.

Income Tax Officer and others reported in 2003(1) SCC 72, is

concerned, Paragraph No.5 of the order, the Supreme Court has observed

as under:

"5. We see no justifiable reason to interfere with

the order under challenge. However, we clarify that

when a notice under Section 148 of the Income Tax

Act is issued, the proper course of action for the

noticee is to file return and if he so desires, to seek

reasons for issuing notices. The assessing officer is

bound to furnish reasons within a reasonable time.

On receipt of reasons, the noticee is entitled to file

objections to issuance of notice and the assessing

officer is bound to dispose of the same by passing a

speaking order. In the instant case, as the reasons

have been disclosed in these proceedings, the

assessing officer has to dispose of the objections, if

filed, by passing a speaking order, before proceeding

with the assessment in respect of the abovesaid five

assessment years."

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24. In the instant cases, notices under Section 148 are issued,

against which, the petitioner filed the return of the particular assessment

year and also filed his reply seeking reasons. The first respondent has

given the reasons for the same, against which, the petitioner filed his

objections, which were rejected by the Assessing Authority by a speaking

order. That particular orders are under challenge.

25. It is pertinent to note that all the requirements, as observed by

the Hon'ble Supreme Court, have been followed by the petitioner and it is

only the rejection order which is challenged now, against which, in the

opinion of this Court, the Writ is maintainable and it cannot be said that

the petitioner has rushed to the Court without availing the alternative

remedy.

26. Further, insofar as the contention raised by the respondents that

as per explanation 1, once the Assessing Authority with due diligence has

discovered some material evidence, it will not amount to disclose the

same within the meaning of Section 147 is concerned, the Hon'ble

Supreme Court has held that it is the assessee who can only produce the

documents and he cannot be expected to give inference to the disclosure.

Once all the primary facts are before the Assessing Authority, he requires

no further assistance by way of disclosure and it is not possible for the

http://www.judis.nic.in 27/32 W.P.(MD)Nos.19202, 19825 and 19826 of 2018

assessee to draw any particular inference and communicate the same to

the Assessing Authority and explanation given to Section 147, does not

cast a duty upon the assessee to disclose the inferences in the following

lines:

"Does the duty, however, extend beyond the full

and truthful disclosure of all primary facts? In our

opinion, the answer to this question must be in the

negative. Once all the primary facts are before the

assessing authority, he requires no further assistance

by way of disclosure. It is for him to decide what

inferences of facts can be reasonably drawn and what

legal inferences have ultimately to be drawn. It is not

for somebody else - far less the assessee - to tell the

assessing authority what inferences, whether of facts

or law, should be drawn. Indeed, when it is

remembered that people often differ as regards what

inferences should be drawn from given facts, it will be

meaningless to demand that the assessee must

disclose what inferences - whether of facts or law - he

would draw from the primary facts.

If from primary facts more inferences than one

could be drawn, it would not be possible to say that

the assessee should have drawn any particular

http://www.judis.nic.in 28/32 W.P.(MD)Nos.19202, 19825 and 19826 of 2018

inference and communicated it to the assessing

authority. How could an assessee be charge with

failure to communicate an inference, which he might

or might not have drawn?

It may be pointed out that the Explanation to

the sub-section has nothing to do with "inferences"

and deals only with the question whether primary

material facts not disclosed could still be said to be

constructively disclosed on the ground that with due

diligence the income-tax Officer could have

discovered them from the facts actually disclosed.

The Explanation has not the effect of enlarging the

section, by casting a duty on the assessee to disclose

"inferences" - to draw the proper inferences being the

duty imposed on the income-tax officer."

27. In the instant cases, the assessee has submitted Form-2

disclosing all the materials giving all the explanations. In such

circumstances, it cannot be said that he has not submitted all the

materials fully and truly. Therefore, once the assessee has submitted

reply; once he submitted the returns for the assessment year; and once

he has filed a reply to the notice under Section 148 and files his

objections to the reasons for issuance of 148 notice before the very same

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authority, Section 147 is fully complied with. Further, the objections

raised by the assessee had been considered and rejected by the Assessing

Authority, but the reasons given by the first respondent are contrary to

the well settled principles of law laid down by the Hon'ble Supreme

Court.

28. In view of the foregoing reasons, this Court is of the view

that the impugned orders along with notices dated 31.03.2018, are liable

to be set aside and accordingly, set aside and consequently, the Writ

Petitions are allowed. No costs. Consequently, the connected

miscellaneous petitions are closed.

30.10.2019 Index : Yes / No Internet : Yes / No SML To

1.The Assistant Commissioner of Income Tax, Circle 1, Trichy, No.44, Williams Road, Cantonment, Tiruchirapalli-620 001.

2.The Deputy Commissioner of Income Tax, Central Circle -2, New Delhi.

http://www.judis.nic.in 30/32 W.P.(MD)Nos.19202, 19825 and 19826 of 2018

3.The Principal Commissioner of Income Tax 1 - Trichy, No.44, Williams Road, Cantonment, Tiruchirappalli-620 001.

http://www.judis.nic.in 31/32 W.P.(MD)Nos.19202, 19825 and 19826 of 2018

M.GOVINDARAJ, J.

SML

Common Order made in W.P.(MD)Nos.19202, 19825 and 19826 of 2018

Dated: 30.10.2019

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