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The Commissioner of Income Tax Tamil Nadu IV, Madras v/s M/s. Eco Media (P) Limited Thiruvanmiyur, Chennai


Company & Directors' Information:- ECO INDIA PRIVATE LIMITED [Active] CIN = U51505HR2015FTC057017

Company & Directors' Information:- MADRAS MEDIA PRIVATE LIMITED [Active] CIN = U22121TN1987PTC013910

Company & Directors' Information:- D. N. ECO PRIVATE LIMITED [Active] CIN = U37200MH2019PTC335147

    TC(A).NO. 825 OF 2005

    Decided On, 09 April 2012

    At, High Court of Judicature at Madras

    By, THE HONOURABLE MRS. JUSTICE CHITRA VENKATARAMAN & THE HONOURABLE MR. JUSTICE K. RAVICHANDRA BAABU

    For the Appellant: T. Ravikumar, Advocate. For the Respondent: C.V. Rajan, Advocate.



Judgment Text

(Prayer : Tax Case Appeal against the order of the Income Tax Appellate Tribunal, Chennai D Bench, dated 24.8.2004 passed in I.T.A.No. 2242/Mds/2003.)

JUDGMENT

(Judgment of the Court was made by CHITRA VENKATARAMAN,J)

Tax Case (Appeal) is filed at the instance of the Revenue against the order of the Tribunal. The above Tax Case (Appeal) is in respect of assessment year 1993-94 and the same is admitted on the following substantial question of law:-

"Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in setting aside the order of the lower authority and delete the entire addition of Rs.2,29,420/- on the ground the reopening under Section 147 of the Income Tax Act is not valid on the basis of the factual error pointed out by the audit party? "

2. The assessee is a private limited company. The assessee received a sum of Rs.2,29,420/- being an award money for its film "Silent Valley" "An Indian Rain Forest" and claimed exemption under Section 10(17a) of the Income Tax Act. The original assessment was completed under Section 143(3) of the Income Tax Act on 7.9.1995 and the loss was determined at Rs.38,960/-. Admittedly, the receipt of the award money was disclosed in the balance sheet under the head of "Notes on Account". However, during the course of audit, the audit parties pointed out the error that excess deduction/ relief has been granted to the assessee company on the price money, it being given by Earth Vision, 1992,Tokyo Global Entertainment Film Festival and not from the Government of India. The assessment was sought to be re-opened. Notice under Section 148 of the Act was issued on 26.5.2001. The assessee resisted the said notice by taking objection as to the limitation as provided in proviso to Section 147 of the Act. The assessee pointed out that since there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment, as per Section 147 of the Act, reopening of the assessment beyond the period of four years from the end of relevant assessment year was bad in law. However, the claim of the assessee on the jurisdictional aspect as well as, as regards the exemption for award was rejected by the Revenue on the ground that no approval had been obtained from the Central Government for the award.

3. Aggrieved by the same, the assessee went on appeal before the Commissioner of Income Tax (Appeals). The first Appellate Authority held that the assessee nowhere claimed that the said award was not given by Government of India or any Agency authorised by the Government of India as per the provisions of Section 10(17a) of the Income Tax Act. Consequently, the assessee could not be said to have disclosed fully and truly all material facts necessary for assessment.

4. As regards reopening of the assessment on the basis of the audit objection, the first Appellate Authority pointed out that AG(Audit) had not explained any provisions of law in the said objection but had merely pointed out certain factual mistakes. Thus the reopening of the assessment on the basis of factual error pointed out by Audit could not be faulted with. Thus, the Commissioner of Income Tax (Appeals) rejected the plea of the assessee and dismissed the appeal. Aggrieved by the same, the assessee went on further appeal before the Income Tax Appellate Tribunal.

5. The contention of the assessee before the Tribunal was that the assessee had categorically stated that the award was given by Earth Vision, 1992,Tokyo Global Entertainment Film Festival and hence, it was incorrect to say that the assessee had not disclosed fully and truly all material facts necessary for assessment.

6. As far as "Notes on Accounts" was concerned, the Tribunal found that the assessee had truly disclosed all material facts in the annexure to the balance sheet which was filed along with the return of income. In the note, the assessee had stated that an amount of Rs.2,29,420/- was received as award and the said award was given by Earth Vision 1992, Tokyo Global Environmental Film Festival and not from the Government of India. Thus, the Tribunal held that the reopening of the assessment was bad in law. The Tribunal, however, pointed out that the audit party had interpreted the provisions of the Income Tax Act and thereafter brought to the notice of the Assessing Officer with regard to the applicability of the Income Tax Act in respect of the award received by the assessee. Thus, the Tribunal set aside the order of the lower Authority and allowed the appeal filed by the assessee.

7. As far as the observation of the Tribunal on the audit party's alleged interpretation on law is concerned, we do not find any basis or ground for such a view, since nowhere in the order of the Commissioner of Income Tax (Appeals), we see any observation that the audit party had interpreted the provisions of the Income Tax Act nor does the order of the Assessing Officer refer to the audit party's view on any provision of the Act to lead the Assessing Officer to reopen the assessment. However, on the factual issue as to whether the escapement of income from taxation was on account of the failure of the assessee from disclosing truly and fully all material facts, the Tribunal came to the conclusion that there was no ground made out to hold that there was no full and true disclosure of all material facts on the side of the assessee, warranting reopening of the assessment.Hence, hit by proviso to Section 147 of the Act, the reassessment proceedings was liable to be set aside.

8. Aggrieved by the order of the Tribunal, the Revenue is on appeal before this Court.

9. Learned counsel appearing for the Revenue placed reliance on the decision reported in [2001] 252 ITR 673 – DR.AMIN'S PATH LABORATORY v. P.N. PRASAD, 281 ITR 394 – CONSOLIDATED PHOTO AND FINVEST LIMITED v. ASST.CIT and [2010] 320 ITR 561 – CIT v. KELVINATOR OF INDIA LIMITED, only to point out that when the income chargeable to tax has escaped assessment, the mere fact that the assessee had disclosed all the facts in the annexure, per se, would not be a ground for holding that the assessee had made full and true disclosure of the material facts for assessment.

10. Per contra, learned counsel for the respondent/ assessee, however, placed reliance on the decision reported in [2006] 286 ITR 674 – CIT v. ELGI FINANCE LIMITED and [2008] 306 ITR 136 – CIT v. T.N.TRANSPORT DEVELOPMENT FINANCE CORPORATION LTD., and contended that given the fact that the order nowhere recorded a finding that the assessee had not disclosed fully and truly all material facts at the time of original assessment, on a mere presumption that there was escapement of tax, the assessment could not be reopened. Moreover, as per Section 147 of the Act, reopening of the assessment beyond the period of four years from the end of relevant assessment year is bad in law. He further pointed out that in every case of reassessment, the Assessing Authority is bound to point out to the lapse on the part of the assessee from placing all material facts necessary for assessment. As far as the present case is concerned, the assessee pointed out that the award money was received from Earth Vision, 1992, Tokyo Global Entertainment Film Festival and it is not correct to say that the assessee ever gave an impression, as though the award was granted by the Government of India, to claim exemption. In the above circumstances, no infirmity is found in the order of the Tribunal.

11. Heard learned standing counsel appearing for the Revenue and learned counsel appearing for the assessee and perused the material placed on record.

12. As far as Section 147 of the Act relating to reassessment proceedings are concerned, the assumption of jurisdiction under Section 147 postulates the existence of tangible materials for the assessing authority to come to a conclusion that there is an escapement of income from assessment and that the reasons so assigned has a live link with the formation of the belief vide [2010] 320 ITR 561 – CIT v. KELVINATOR OF INDIA LIMITED. Admittedly, the proceedings taken herein are beyond the period. If any action to be taken beyond the four years' time limit, as per the proviso, the Assessing Authority has to satisfy that the income chargeable to tax has escaped assessment by reason of the failure on the part of the assessee to make a return under Section 139 or in response to a notice issued under sub-section (1) of Section 142 or Section 148 or to disclose fully and truly all material facts necessary for assessment. Explanation (1) of Section 147 states that mere production of books of accounts and other evidence from which material evidence could have been discovered by the Officer would not amount to disclosure within the meaning of the proviso. The sum and substance of the Explanation is that the assessee cannot contend that it had disclosed the full particulars by mere production of the accounts books or other evidence. It is the duty of the assessee to place all the materials, fully and truly, which are necessary for the purpose of grant of relief. In the event of failure on the part of the assessee to disclose fully and truly all material facts by placing necessary account books and other evidence, it is open to the Assessing Officer to assume jurisdiction to initiate reassessment proceedings. Explanation (2) of Section 147 of the Act defines that when income chargeable to tax has escaped assessment, i.e. income chargeable to tax has been under-assessed, or such income has been assessed at too low a rate, or such income has been made the subject of excessive relief under this Act, or, excessive loss or depreciation allowance or any other allowance under this Act has been computed, then these cases are treated as escaped assessment, warranting assumption of jurisdiction under Section 147 of the Act.

13. As far as the present case is concerned, there is denial of fact that the assessment was originally made under Section 143(3) of the Act on 7.9.1995. The assessment year under consideration is 1993-94. Notice under Section 148 of the Act was issued on 26.5.2001, which, evidently, is beyond the period of four years, as contemplated under Section 147 of the Act. Given the fact that the reassessment proceedings has to necessarily rest on the finding as to the failure on the part of the assessee to make fully and truly all material facts necessary for assessment, thus resulting in the escapement of assessment, when the Officer takes the decision to initiate action in exercise of jurisdiction under Section 147 of the Act, the notice has to prima facie show the materials which point out the failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. It is no doubt true that mere production of account books or other evidence would not be sufficient enough to hold that the assessee had fully and truly disclosed all material facts. Yet, as rightly pointed out by the learned counsel for the assessee, a reading of the order of the reassessment shows that nowhere the Officer had stated as a finding of fact that the assessee had failed to disclose fully and truly all material facts necessary for making the assessment of an escaped income. The first Appellate Authority too has not bestowed his attention to this aspect. However, when the Tribunal considered this aspect, it pointed out that the assesee had clearly and categorically stated that award was given by Earth Vision, 1992, Tokyo Global Entertainment Film Festival. In the circumstances, the Tribunal reversed the finding of fact that there were no reasons given to show that the assessee had not disclosed truly and fully all the facts. The Tribunal also pointed out to the production of 'Notes of accounts' to hold that the assessee had fully and truly disclosed all material facts in the annexure to the balance sheet filed along with return. Thus, the Tribunal rightly held that the reassessment proceedings taken beyond the period of four years without any tangible materials, is bad in law.

14. Section 147 of the Income Tax Act came up for consideration before this Court in the decision reported in [2006] 286 ITR 674 – CIT v. ELGI FINANCE LIMITED as well asin[2010] 320 ITR – CIT v. KELVINATOR OF INDIA LIMITED. The decision reported in [2006] 286 ITR 674 – CIT v. ELGI FINANCE LIMITED was applied in the decision of this Court reported in [2008] 306 ITR 136 – CIT v. T.N.TRANSPORT DEVELOPMENT FINANCE CORPORATION LTD., wherein this Court pointed out to the law relating to the reassessment proceedings. This Court, in the decision reported in [2006] 286 ITR 674 – CIT v. ELGI FINANCE LIMITED, pointed out that mere escapement of income, by itself, is insufficient to justify the initiation of reassessment proceedings after the expiry of four years from the end of the assessment year. This Court held that such escapement must be shown as by reason of failure on the part of the assessee either to file a return referred to in the proviso or to truly and fully disclose the material facts necessary for assessment. This Court further pointed out that whenever a notice is issued by the Assessing Officer beyond a period of four years from the end of the relevant assessment year, such notice must contain reasons for his belief that income had escaped assessment. There can be no presumption in law that there was failure on the part of the assessee to fully and truly disclose the material facts. Thus, referring to the main paragraph of Section 147 of the Act as well as the proviso, this Court held that it is necessary for the Assessing Officer to record that anyone or all the circumstances referred to in the proviso existed before the issue of notice under Section 147 of the Act. This Court further pointed out that the question as to whether the assessee had disclosed fully and truly all material facts is a question of fact and unless the facts disclosed had been examined in relation to the extent of failure, if any, on the part of the assessee, it is not possible to form an opinion that there had been a failure on the assessee's part to truly and fully disclose the material facts. This Court pointed out that a notice issued without a recording of the Assessing Officer's reasonable belief that there was such failure on the part of the assessee, would be indicative of a failure on the part of the Assessing Officer to apply his mind to material facts, and on that ground alone the notice issued would be vitiated.

15. Applying the decision reported in [2006] 286 ITR 674 – CIT v. ELGI FINANCE LIMITED as well as the decision reported in [2008] 306 ITR 136 – CIT v. T.N.TRANSPORT DEVELO

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PMENT FINANCE CORPORATION LTD., to the facts herein, on a reading of the order of the Assessing Authority as well as that of the Commissioner of Income Tax (Appeals), we have no hesitation in holding that there is absolutely no material to indicate that basic facts necessary for assumption of jurisdiction under Section 147 of the Act is absent in this case. Consequently, applying the decisions referred to above to the facts herein, we have no hesitation in upholding the order of the Tribunal. 16. As far as the decision relied on by the learned counsel appearing for the Revenue is concerned viz.,[2001] 252 ITR 673 – DR.AMIN'S PATH LABORATORY v. P.N. PRASAD, the said decision is no different from what had been considered by this Court in the decisions relied on by the assessee. In the decision reported in [2010] 320 ITR 561 – CIT v. KELVINATOR OF INDIA LIMITED, the Apex Court pointed out "we must also keep in mind the conceptual difference between power to review and power to reassess. The Assessing Officer has no power to review; he has the power to reassess". The Apex Court further pointed out that to come to a conclusion that there is escapement of income from assessment, the Assessing Officer must have tangible material and the reasons must have a live link with the formation of the belief. 17. Thus, going by the above said decisions, in the absence of any reason that the assessee has failed to disclose fully and truly all material facts necessary for assessment, we have no hesitation in confirming the order of the Tribunal, thereby rejecting the appeal. 18. The appeal stands dismissed. No costs.
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