The Commissioner of Income Tax v. M/s.Premier Mills Ltd.No.185, ATD Street, Race Course

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED: 18.6.2007CORAMTHE HON'BLE MR.JUSTICE P.D.DINAKARANANDTHE HON'BLE MR.JUSTICE P.P.S.JANARTHANA RAJAT.C.(A).Nos.603 & 604 of 2007The Commissioner of Income TaxAppellant inCoimbatore...both appealsVs.M/s.Premier Mills Ltd.No.185, ATD Street, Race Course,Respondent inCoimbatore 641 018. .. both appeals-----Appeals under Section 260A of the Income Tax Act, 1961against the common order of the Income Tax AppellateTribunal, Madras 'D' Bench dated 28.4.2006 made in ITANos.1892 and 1893/Mds/2000 for the assessment years 1991-92and 1992-93 respectively. Against the order of theCommissioner of Income Tax (Appeals) Coimbatore inAssessment year of 1991-92 and 1992-93 dated 29.9.2000 inITA NO. 452C to 455/99-2000 against the order of the JointCommissioner of Income Tax and Deputy Commissioner ofIncome Tax Special Range I Coimbatore dated 10.02.2000,31.3.1995 in PAN/GIR NO. 47-021-CV 1500 and CV-1500/SRI/CBE respectively-----For Appellant : Mr.N.Muralikumaran, Sr.S.C.-----J U D G M E N T(Delivered by P.D.DINAKARAN, J.)The above tax case appeals are directed against thecommon order of the Income-tax Appellate Tribunal dated28.4.2006 made in ITA Nos.1892 and 1893/Mds/2000 for theassessment years 1991-92 and 1992-93 respectively.2. The Revenue is the appellant. The AssessingOfficer completed assessment under Section 143(3) of theAct and reopened the same with prior permission ofCommissioner of Income Tax and issued notice under Section https://hcservices.ecourts.gov.in/hcservices/ 148 of the Act and passed orders. Aggrieved, the assesseewent on appeal to the Commissioner of Income-tax (Appeals),who dismissed the appeals. On further appeals, theTribunal holding that the notice under Section 148 of theAct was issued after the expiry of four years from the endof the relevant assessment year and the same would amountto change of opinion, allowed the appeals. Hence, theabove appeals raising the following substantial question oflaw."Whether the Assessing Officer is empowered toreopen an assessment based on a subsequentsupreme Court decision?"3. It is fairly conceded by the learned StandingCounsel appearing for the appellant that the above issue iscovered by the decision of this Court in COMMISSIONER OFINCOME-TAX v. ELGI ULTRA INDUSTRIES LTD. (T.C.No.441 of2007 dt.6.6.2007). 4. In COMMISSIONER OF INCOME-TAX v. ELGI ULTRAINDUSTRIES LTD. (T.C.No.441 of 2007 dt.6.6.2007), thisCourt following the decision of COMMISSIONER OF INCOME TAXv. ELGI FINANCE LTD. (286 ITR 674) held as under."In this case, notice was issued under Section 148of the Act and served on the assessee on03.08.2004, i.e., after four years from the end ofthe assessment year 1999-2000. The assessment wasmade under Section 143(3) of the Act. Both theTribunal as well as the first appellate authorityhave followed the Supreme Court judgment reportedin 264 ITR 566 in the case of C.I.T. Vs. ForamerFrance and held that there is no failure on thepart of the assessee to disclose material factsand hence reassessment proceedings after theexpiry of four years is not possible in view ofthe provisions of Section 147 of the Act.Admittedly, the reassessment proceedings areinitiated after a period of four years. The scopeof the said proviso to Section 147 of the Act hasbeen considered by this Court in the case ofCommissioner of Income-tax Vs. Elgi Finance Ltd.,reported in 286 ITR 674, and the same reads asfollows:"The law relating to the reassessment hasundergone a change from April 1, 1989.The change was brought in by the DirectTax Laws (Amendment) Act, 1987. Two setsof provisions were available under section147 in clause (a) and clause (b). Thisdistinction has now been taken away by the https://hcservices.ecourts.gov.in/hcservices/ Amendment Act. Previously, the line ofdistinction was a limitation period offour years and the limitation periodexceeding four years. The AssessingOfficer would reopen a back assessmentwithin a period of four years as long ashe had reason to believe in consequence ofany information, that income has beenunder-assessed or income has escapedassessment. In the case of limitation,providing for a period exceeding fouryears, there should have been a failure onthe part of the assessee to disclose fullyand truly all material facts leading tothe escapement of income. But as a resultof the amendment brought with effect fromApril 1, 1989, the above distinction hadbeen obliterated and the Assessing Officercould reassess the income as long as hehad reason to believe that incomechargeable had escaped assessment. Thenew law has inserted a proviso to section147 in the following words: "Provided that where anassessment under sub-section(3) ofsection 143 or this section hasbeen made for the relevantassessment year, no action shallbe taken under this section afterthe expiry of four years from theend of the relevant assessmentyear, unless any income chargeableto tax has escaped assessment forsuch assessment year by reason ofthe failure on the part of theassessee to make a return undersection 139 or in response to anotice issued under sub-section(1) of section 142 or section 148or to disclose fully and truly allmaterial facts necessary for hisassessment for that assessmentyear."In addition to the time-limits provided forunder section 149, the law has providedanother limitation of four years under theproviso to section 147. As far as theabove proviso to section 147 is concerned,the law prescribes a period of four yearsto initiate reassessment proceedings, https://hcservices.ecourts.gov.in/hcservices/ unless the income alleged to have escapedassessment was made out as a result offailure on the part of the assessee todisclose fully and truly all material factsnecessary for the assessment."In the present case, the Tribunal had consideredthe above proviso to Section 147 of the Act andheld as follows:-"Even now, before us, the Revenue could notcontend that the reassessment is framed onsubmission of new material or information.Admittedly, the reassessment proceedingsare initiated after four years as providedunder the proviso to Section 147 of theAct. There is no charge that incomechargeable to tax has escaped fromassessment by reason of the failure on thepart of the assessee to disclose fully andtruly material facts necessary forassessment. The Hon'ble Apex Court in thecase of CIT v. Foramer France (2003)reported in 264 ITR 566 has clearly laiddown the principle that where there is nofailure on the part of the assessee todisclose material facts, the reassessmentproceedings after the expiry of four yearsis not possible in view of the provisionsof Sec.147 of the Act. Respectfullyfollowing the judgement of the Hon'ble ApexCourt, we uphold the order of the CIT(A)and accordingly the Revenue's appeal isdismissed.8. In the result, both the appeals filed bythe Revenue stand dismissed."In case where the assessment is completed underSection 143(3) of the Income-tax Act, thereopening of the assessment under Section 148beyond the period of four years at the end of therelevant assessment year can be sustained only ifit is established that there is a failure on thepart of the assessee to disclose fully and trulyall material facts. In this case there is nofinding that there is failure on the part of theassessee to disclose fully and truly all materialfacts. Further, all the material facts areavailable at the time of making originalassessment. The Tribunal has correctly followedthe principles enunciated in the Supreme Courtjudgment reported in 264 ITR 566 cited supra, aswell as this Court judgment reported in 286 ITR https://hcservices.ecourts.gov.in/hcservices/ 674, in the case of Commissioner of Income-taxVs. Elgi Finance Ltd. and came to the correctconclusion. 5.Under these circumstances, we do notfind any error or legal infirmity in the order ofthe Tribunal so as to warrant interference. Inview of the same, no substantial questions of lawarise for consideration of this Court andaccordingly the tax case is dismissed. In view of the above settled proposition in thedecision cited supra, finding no substantial question oflaw that arises for our consideration, these appeals aredismissed. No costs. Consequently, M.P.No.1 of 2007 isalso dismissed.kplSd/Asst.Registrar/true copy/Sub Asst.RegistrarTo:1.The Assistant Registrar,Income Tax Appellate TribunalMadras Bench "C", Chennai.2.The Secretary, Central Board of Direct Taxes, New Delhi.3.The Commissioner of IncomeTax (Appeals), Coimbatore.4.The Joint Commissioner of Special Range I, Coimbatore. 5. The Deputy Commissioner of Income Tax Special Range ICoimbatoreNSM(CO)NM(09.07.07)T.C.(A).Nos.603 & 604 of 2007.