CavinKare Pvt. Ltd. Vs DCIT (Madras High Court)
It is the case of the petitioner that reopening of the assessment was based on the change of opinion for the year 2011-2012, and there was no ground for reopening of the assessment under Section 148 of the Income Tax Act for the purpose of Section 147 of the Income Tax Act, as the petitioner had not suppressed any information required for completing the assessment.
Reopening of the completed assessment based on change of opinion has been frowned upon by the Apex Court by its several decisions. The decision cited by the petitioner are squarely applicable facts and circumstances of the case. Even if the matter is remitted back to the respondents to pass a speaking order, no useful purpose would be served as the respondents appear to have accepted the views of the Commissioner of Income Tax (Appeals) vide order dated 15.12.2017 for the assessment years 2008-2009 under similar circumstances.
Commissioner of Income Tax (Appeals) has been appealed against before the Income Tax Appellate Tribunal and an Appeal is pending as on dated. Therefore, even on merits it is not permissible to the respondents to proceed with the impugned proceeding contrary to the said order.
Further, as an assessing officer, the respondent cannot take a different view for the assessment year 2007-2008 from the view is taken for the assessment year 2008-2009 by the Commissioner of Income Tax (Appeals) in the light of the decision of the Hon’ble Supreme Court, Union of India Vs Kamalakshi Finance Corporation Limited 1991 (55) ELT 333.
Under these circumstances, this Court is inclined to allow this writ petition. Accordingly, this writ petition is allowed. No cost. Consequently, connected Miscellaneous Petition is closed.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
The petitioner has challenged the impugned notice dated 29.03.2014 issued under Section 148 of the Income Tax Act seeking to re-open the Assessment for the year 2007-2008 and the consequential communication/speaking order dated 05.12.2014 over ruling the objection of the petitioner against the reopening of the assessment for the aforesaid Assessment year 2007-2008.
2.Regular scrutiny Assessment was completed under Section 143(3) of the Income Tax Act an assessment order was passed on 31.12.2009. Thereafter, at the fag end of the limitation, the impugned notice dated 29.03.2014 was issued to the petitioner under Section 148 of the Income Tax Act, 1961. The reasons given for reopening of the assessment was communicated to the petitioner vide letter dated 06.08.2014 reads as under:-
”During the A.Y.2007-2008, the assessee has paid a sum of Rs.1,40,00,000/- to Shri C.K. Ranganathan apart from directors remuneration of Rs.99,21,973/-. The same requires to be disallowed u.s 36(i)(ii).
Since there is a failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment, there is a reason to believe that the income has escaped assessment.”
3. It is the case of the petitioner that reopening of the assessment was based on the change of opinion for the year 2011-2012, and there was no ground for reopening of the assessment under Section 148 of the Income Tax Act for the purpose of Section 147 of the Income Tax Act, as the petitioner had not suppressed any information required for completing the assessment.
4. It is submitted that a similar proceedings was also initiated based on a similar reasoning for the Assessment year 2008-2009. The Commissioner of Income Tax(Appeals) by an order dated 15.12.2017 in I.T.A.No.65/17-18 had dropped the demand with the following observations:-
”During the appellate proceedings, the appellant raised a significant ground that in the absence of any fresh material in the possession of the AO and that too after the expiry of four years, the issuance of notice under Section 148 for reopening the already completed assessment is ao initio void. In order to fortify this ground, the appellant relied on the decision of the Hon ‘ble Apex Court in the case of CIT Vs. Kelvinator of India Ltd (2010) 320 ITR 561.
It is a fact that the assessment was reopened beyond the period of 4 years. Further as pointed out by the AR, there were no fresh materials which would justify the invocation of the provisions of Section 147. It is also true that the AO has not brought on record any failure on the part of the appellant to disclose fully and truly all material facts necessary for its assessment.”
5. The learned counsel for the petitioner submits that similar reasonings has to be adopted for the present case as well as for the Assessment year 2007-2008. He further submits that for the Assessment year 2011-12, an appeal before the Commissioner of Income Tax (Appeals) was pending on the basis of change of opinion for the reopening of the Assessment under Notification dated 29.03.20 14 under Section 148 of the Income Tax Act. It is fairly submitted that even though, the petitioner had earlier filed a separate writ petition, the petitioner could not obtained a stay from this High Court.
6. On merits, the learned counsel for the petitioner further submits that the Minutes of the Meeting of the petitioner held on 01.08.2006 decided that the Chairman cum Managing Director of the petitioner company will be paid a remuneration consisting of a salary, commission and perquisites which reads as under:
”a. Salary:Rs. 5,00,000/- per month (rupees five lakhs only)
b. Commission:0.3% of the net turnover of the company, {if the turn over is upto Rs. 400,00,00,000/- (Rupees four hundred crores only,} payable on a quarterly basis and a fixed commission of Rs.20,00,000/- (Rupees twenty lacs only) if the turnover exceeds Rs. 400,00,00,000/- (Rupees four hundred crores only)
c. Perquisites: The following perquisites shall be allowed in addition to the salary.”
7. He further submits that this was also reflected in the Schedule forming part of the Financial Statement for the year 31.03.2007 wherein clearly the commission of Rs.1,40,00,000/- has been declared has detailed below:
Schedules Forming Part of the Financial Statements for the year ended 31st March 2007.
(b) (i)Remuneration to Chairman and Managing Director and a Whole-time Director (key management Personnel)
