Commissioner of Income Tax vs Steel Tubes of India Ltd.

Prakash Shrivastava, J.—This order will govern the disposal of I.T.A. No. 95 of 2009 and I.T.A. No. 96 of 2009 which have been filed against the common order dated 19-6-2009 passed by the Income Tax Appellate Tribunal, Indore Bench, Indore in I.T.A. Nos. 518 and 519/Ind/07 the assessment years 1997-98 and 1998-99.

The Respondent is a company engaged in manufacturing of steel tubes and strips. It had taken certain plant and machinery on lease from M/s. Tata Finance Limited for which monthly rent of Rs. 3,62,866.00 was paid for a period of five years. It had submitted a return of income for the relevant assessment year. The Respondent subsequently found some technical problems in transactions and to avoid litigation as also to purchase peace, the principal amount was offered back. The Respondent submitted a revised return on 15-1-1999 for the assessment year in question to offer the principal amount of Rs. 29,17,657 out of the total lease rent paid to M/s. Tata Finance Limited Rs. 43,54,392. The Respondent submitted that since it had paid interest of Rs. 14,36,735 which was included in the lease rent paid, the same had been excluded from the lease rent and only the balance part was offered back as in any case the transaction concerned was a finance transaction if not a lease transaction.

For the assessment year 1997-98, the assessment u/s 143(3) of the Income Tax Act, 1961 ("the Act" hereafter) was completed on 31-3-2000 and for the assessment year 1998-99 the assessment u/s 143(3) of the Act was completed on 30-3-2001. Notices u/s 148 of the Act were issued for the assessment years 1997-98 and 1998-99 on 17-3-2004 and 4-3-2005 respectively. The Respondent objected to the issuance of notices u/s 148 of the Act on the ground that the same were issued beyond the period prescribed u/s 147 of the Act. The assessing officer rejected the objection and reopened the assessments u/s 147/148 of the Act. The Respondent raised the issue of reopening of assessment beyond four years before the Commissioner (Appeals)-I, Indore and the Commissioner by order dated 22-6-2007 held that the reopening of assessment u/s 147 of the Act for the assessment year in question was not sustainable and accordingly the Commissioner quashed both the assessment orders. The Income Tax Appellate Tribunal, Indore by the order under appeals has affirmed the order of the Commissioner and dismissed the appeals of the revenue. Aggrieved with the same, the revenue has filed the present appeals.

Learned Counsel appearing for the Appellant submitted that the Commissioner (Appeals) as well as the Tribunal committed an error in interfering in the reopening of the assessments u/s 147/148 of the Act and in quashing the consequent assessment orders.

We have heard learned Counsel for the Appellant and perused the records.

u/s 147 of the Act, the assessing officer can reopen assessment if he had reason to believe that any income chargeable to tax has escaped assessment for any assessment year. In terms of the proviso to Section 147 of the Act. Action u/s 147 of the Act cannot be taken after the expiry of four years form the end of the relevant assessment year unless any income chargeable to tax has escaped assessment by reason of failure on the part of the Assessee to make a return u/s 139 or in response to a notice u/s 142(1) or Section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year.

In the present case undisputedly the assessments for the assessment years 1997-98 and 1998-99 were completed u/s 143(3) of the Act on 31-3-2000 and 30-3-2001 respectively whereas the notices u/s 148 of the Act for these assessment years were issued on 17-3-2004 and 4-3-2005 respectively. Thus, the notices u/s 148 of the Act were issued after the expiry of four years from the end of the relevant assessment years.

Learned Counsel for the Appellant has submitted that in the case of failure by the Assessee to disclose all materials facts necessary for his assessment, the assessment can be reopened after the expiry of four years.

In the present case, the Commissioner (Appeals) as well as the Tribunal on the examination of the matter has found that it is not the case where the Respondent-Assessee had failed to disclose fully and truly all material facts necessary for his assessment. Before the final assessment, the Respondent had submitted revised returns which were duly considered and discussed by the assessing officer while passing the order of assessment. In the revised return, the Assessee had disclosed the entire facts, therefore, the Commissioner (Appeals) as well as the Tribunal have rightly reached the conclusion that it is not a case where the Assessee failed to disclose fully and truly all material facts necessary for his assessment. The Tribunal has committed no error in reaching the conclusion that in the facts of the case, in view of the proviso to Section 147 of the Act, the notice issued u/s 148 of the Act after a lapse of four years was beyond the jurisdiction of the assessing officer. Learned Counsel for the Appellant has failed to point out any error in the order of the Tribunal.

Thus, we find that the appeals do not involve any substantial question of law requiring consideration by this Court u/s 260A of the Act. The appeals are accordingly dismissed in limine.

A copy of this order be placed in the record of connected appeal, as particularised above, for ready reference.