M/s Sterlite Industries (India) Ltd. v. The Assistant Commissioner of Income Tax & Ors.

IN THE HIGH COURT OF JUDICATURE AT MADRASDated 12..3..2008Coram:The Hon'ble Mr. Justice K.CHANDRUW.P. No. 27780 of 2007 andM.P. No. 1 of 2007M/s Sterlite Industries (India) Ltd.Rep. by its General manager (Finance & Accounts)L.N. TandonSIPCOT Industrial ComplexMadurai By pass RoadT.V. PuramTuticorin:: Petitionervs.1.The Assistant Commissioner of Income TaxCompany Circle VI (4), Room No. 705 7th Floor, New BlockNo. 121 Mahathma Gandhi RoadNungambakkamChennai - 342.The Deputy Commissioner of Income TaxCompany Circle VI (4), Room No. 705 7th Floor, New BlockNo. 121 Mahathma Gandhi RoadNungambakkamChennai – 34:: RespondentsPetition filed under Article 226 of the Constitution ofIndia seeking for issuance of writ of Certiorari calling for therecords comprised in No. CHE/CO-VI(4))/ST/131/2000-2001 dated27.3.2007 on the file of the second respondent issued in the formof notice under Section 148 and the consequential communicationin Lr. No. CGHE/COC-VI (4)/ST/131/2000-2001 dated 17.7.2007 onthe file of the first respondent and quash the same. For Petitioner: Mr. N. Venkataraman, SC for Mr. R. KarthikeyanFor Respondents: Mr. J. Narayanasamy for Mrs. Pushya Sitaraman S.C.(IT) https://hcservices.ecourts.gov.in/hcservices/ O R D E RHeard the arguments of Mr. N. Venkataraman, learned SeniorCounsel leading Mr. R. Karthikeyan, learned counsel appearing forthe petitioner and Mr. J. Narayanasamy representing Mrs. PushyaSitaraman, learned Standing Counsel representing the respondentsand have perused the records.2.The petitioner challenges the order passed by the firstrespondent dated 17.7.2007 wherein and by which notice was givento reopen the assessment for the year 2000-2001. It is statedin the impugned order that they had received information from theEnforcement Directorate through proper channel which showspossible inflation of purchases on certain items. Thefollowing three information are furnished in the impugned order.(i)Transaction between M/s SIIL and OasisInternational for import of drawings anddesigns – Standard Chartered Bank reportedthat SIIL have failed to file the bills ofentry. The charges have been corroboratedby examining the bills of lading from BPTwhich prove that imports were not lifted bythe party and were auctioned by BPT for anamount of Rs.150/-.(ii)Standard Chartered Bank had reported another10 pending import bills for non submission oforiginal exchange control copies of Bills ofEntry.(iii)RBI had reported another 39 Bills pertainingto BNP Paribas, Scatia Bank, Ceylon Bank, ABNAmro Bank, Canara Bank where SIIL had askedfor waiver of submission of original exchangecopy of bill of entries."3.This notice is attacked by the petitioner Company onthe ground that such a notice is without jurisdiction andcontrary to Sections 147, 148 and 149 of the Income Tax Act, 1961[for short, 'I.T. Act']. According to the petitioner, theinformation allegedly received from the Enforcement Directoratefor initiating a proceeding does not relate to the relevantassessment year 2000-2001 and that no import of any design ordrawing was made during the year 2000-2001 from a Company calledOasis International. The phraseology used in the notice wasthat there was no reason to suspect and there was no mention ofthe words 'that there were reasons to believe'. It is nothingbut a change of opinion of the Assessing Officer and in the https://hcservices.ecourts.gov.in/hcservices/ absence of any credible materials, there was no question ofreopening the assessment contrary to the ingredients of Section147 of the I.T. Act. Further, the notice is also barred bylimitation. According to the petitioners, since there is ajurisdictional error, they are entitled to approach this Court tochallenge the same without availing any remedy provided under theAct.4.An additional affidavit dated 01.9.2007 was also filedby them stating that the copy of the order obtaining previoussanction by Commissioner of Income Tax was not provided asrequired under Section 151 of the Act and it is mandatory to havethe prior sanction. 5.Interim stay was granted on 14.9.2007 and it wascontinued till 19.11.2007 against which only, the respondentshave entered appearance.6.The respondents have filed a counter dated 13.9.2007stating that the information received from EnforcementDirectorate relates to the assessment year 2000-2001 and theprevious sanction of the Commissioner was also obtained. It isalso stated in the order dated 31.8.2007 issued to the writpetitioner that the previous sanction of the Commissioner ofIncome Tax was obtained under Section 151 of the I.T. Act.Since the said statement coupled with the counter affidavit andassertion made in paragraph 5, there is no reason to disbelievethat there was no such order in existence. 7.The learned counsel for the petitioner submittedplacing reliance upon the judgment of the Supreme Court in M/sChhugamal Rajpal v. S.P. Chaliha and others [1971 (1) SCC453], that if Section 151 of the I.T. Act provides for previoussanction and that available rights under Sections 148 and 151(2)of the I.T. Act should not be denied to the assessees. 8.He further relied upon the judgment of the SupremeCourt in 1973 (3) SCC 581 [Union of India and others v.Messrs. Rai Singh Dev Singh Bist and others] and stated thatreason must be recorded for invoking the power under Section 147of the I.T. Act. The counsel also relied upon the judgment ofthe Delhi High Court in (2002) 256 ITR 0001 [Commissioner ofIncome Tax v. Kelvinator of India Ltd.] to drive home thevery same point. He also relied upon the judgment of thisCourt in (2007) 290 ITR 0583 [Commissioner of Income Tax v.Chamundeswari]. Unless a fresh information is available with theAssessing Officer, he cannot invoke the power under Section 147(b) of the I.T. Act and consequently, reassessing the assessment.It is not clear as to how the above said judgments will be of anyassistance to the petitioner. https://hcservices.ecourts.gov.in/hcservices/

9.The facts of the present case is totally different.In the present case, the definite stand of the Department is thatprevious sanction from the Commissioner of Income Tax wasobtained and credible information received relates to the year2000-2001. It was also stated that an adjudication order dated22.8.2007 was already passed and despatched to the petitioner andit is the petitioner, who did not receive the same. 10.Reliance was also placed upon the decision of theSupreme Court relating to GKN Driveshafts (India) Ltd. v. ITO[(2003) 259 ITR 19] wherein in paragraph 5, it was observed asfollows:Para 5:"We see no justifiable reason to interfere withthe order under challenge. However, we clarifythat when a notice under Section 148 of the IncomeTax Act is issued, the proper course of action forthe noticee is to file return and if he sodesires, to seek reasons for issuing notices. Theassessing officer is bound to furnish reasonswithin a reasonable time. On receipt of reasons,the noticee is entitled to file objections toissuance of notice and the assessing officer isbound to dispose of the same by passing a speakingorder. In the instant case, as the reasons havebeen disclosed in these proceedings, the assessingofficer has to dispose of the objections, iffiled, by passing a speaking order, beforeproceeding with the assessment in respect of theabovesaid five assessment years."[Emphasis added]11.In the present case, it is only required to seewhether there was any prima facie material available on the basisof which the Department can reopen the file. In view of thecounter affidavit and the impugned notice, this Court cannotreject the case of Revenue for invoking the power under Sections147 and 148 of the I.T. Act. 12.In the light of the above, the writ petition fails andthe same shall stand dismissed. No costs. Consequently,connected Miscellaneous Petition is closed.Sd/Asst.Registrar/true copy/Sub Asst.Registrar https://hcservices.ecourts.gov.in/hcservices/ griTo1.The Assistant Commissioner of Income TaxCompany Circle VI (4), Room No. 705 7th Floor, New BlockNo. 121 Mahathma Gandhi RoadNungambakkamChennai - 342.The Deputy Commissioner of Income TaxCompany Circle VI (4), Room No. 705 7th Floor, New BlockNo. 121 Mahathma Gandhi RoadNungambakkamChennai – 34+1cc to M/s.Pushya Sitaraman, Advocate Sr 13901+1cc to Mr.R.Karthikeyan, Advocate Sr 13706KM (CO)km/24.3.W.P. No. 27780 of 2007