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Commissioner of Income Tax Chennai III v/s Sri Sudarshan Kumar Rungta Prop.Raunaq Steel Industries

    Tax Case (Appeal) No.630 of 2009

    Decided On, 20 July 2009

    At, High Court of Judicature at Madras


    For the Appellant: K. Subramanian, Advocate. For the Respondent: ---------

Judgment Text

(Prayer: Appeal against the order of the Income Tax Appellate Tribunal Madras 'C' Bench dated 21.10.2008 in I.T.A. No.864/Mds/2008 for the assessment year 2003-2004.)


The revenue has come forward with this appeal raising the following substantial question of law:-

"Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the order of the Commissioner of Income Tax under section 263 was not valid on the ground that the Assessing Officer had taken only one of the possible views regarding the assessability of credits appearing in the books of the assessee, when the Assessing Officer has failed to make necessary enquiries regarding the assessability of the said amount in the hands of the assessee under the provisions of section 68 of the Income Tax Act ?"

2. The brief facts are that the assessee herein is a proprietory concern. The assessment relates to the assessment year 2003-2004. The assessment order came to be made on 28.3.2006. At the time when the assessment order came to be passed, the assessing authority himself has noted that the assessee's proprietory concern was converted into a private limited company named " Raunaq Steel Trading Pvt. Ltd.". As a proprietory concern, since sale suppression was found out, the assessment was taken up for scrutiny as a survey related assessment. Be that as it may, when the assessee's return of income dated 28.11.2003 was analysed, a notice under Section 143 (2) was issued on 16.12.2003. The assessee's representative was heard. A sum of Rs.2,94,16,923/- was reflected in the accounts by way of credit entries under the caption 'sundry creditors'. At that point of time, there was no response from the assessee for producing the person, who extended such credit in the form of security deposit to the tune of Rs.2 crores and another credit of Rs.42,71,373/-. The assessing authority also noted that by proceedings dated 22.3.2006, the assessment of the company was reopened for the very same assessment year 2003-2004 for considering the investment of share capital. The assessing authority, therefore, held that the issue can be considered as and when the assessment for the assessment year 2003-2004 for the company is completed. As far as the remaining sum of Rs.51,45,550/- was concerned, the same was added, as the assessee failed to prove the same as unsecured loans. The income was thus arrived at a sum of Rs.58,10,980/-.

3. The Commissioner of Income-tax, by invoking his revisional power under Section 263 of the Income-tax Act, suo moto took up the order of assessment dated 28.3.2006 for consideration and by his order dated 27.3.2008, held that the assessing authority, shall call for further records, examine the same and pass a fresh order of assessment. Aggrieved against the same, the assessee went before the Tribunal. By the time the matter was taken up by the Tribunal, the assessment of the company came to be concluded and in the assessment, the amounts with reference to which the Commissioner of Income-tax has passed the order under revision by invoking his power under Section 263 of the Act, came to be fully assessed and the tax liability was also fastened on the company. The Tribunal has, therefore, held as under in its order in paragraph 6:-

"6.Learned counsel for the assessee, in order to counter the submission of Learned D.R., has pleaded that firstly, assessing officer has adopted one of the 2 possible views and assessing officer did not probe further cause of the reasons mentioned in the assessment order that since he is the assessing officer for the creditors company also and company's assessment has already been reopened by the same assessing officer and reassessment orders passed, which was before the CIT at the time of passing the impugned order so there cannot be double taxation, when the assessing officer has already reopened the assessment of the Company and taxed the impugned amounts, therefore action of the CIT is unjustified and uncalled for and not proper and as such pleaded for setting aside/quashing of the impugned order."

4. When once the proprietory concern admittedly got merged with the company in the very same assessment year 2003-2004 and the credit entries in the name of the company in the accounts of the assessee came to be assessed to tax at the hands of the company, the Tribunal, in our considered o

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pinion, rightly held that there cannot be a further liability fastened on the proprietory concern for that assessment year, viz., 2003-2004, which had already suffered tax in the hands of the company with which the proprietory concern got merged. 5. In such circumstances, we do not find any scope to entertain this appeal on any question of law, much less substantial question of law sought to be raised in this appeal. Accordingly, the appeal fails and the same is dismissed. No costs.