THE COMMISSIONER OF INCOME TAX vs. B.MOHANACHANDRAN NAIR

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HON'BLE THE CHIEF JUSTICE DR. MANJULA CHELLUR & THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE TUESDAY, THE 22ND DAY OF OCTOBER 2013/30TH ASWINA, 1935 ITA.No. 204 of 2012 () ----------------------- (AGAINST THE ORDER OF ITAT, COCHIN BENCH IN ITA.NO. 152/COCH/2009 DATED 25-01-2012) ------------------------------------------ APPELLANT/RESPONDENT: -------------------------------------------- THE COMMISSIONER OF INCOME TAX, THIRUANANTHAPURAM. BY SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT/APPELLANT: ------------------------------------------------ B.MOHANACHANDRAN NAIR, PRASANTHI CASHEW CO, MANGAD, KOLLAM - 691 015. THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 22-10-2013, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: sts

ITA.NO.204/2012 APPENDIX PETITIONER'S ANNEXURES: ANNEX A COPY OF THE ORDER OF THE ASSESSING OFFICER U/S 143(3)/147 DATED 29/08/2008 ANNEX B COPY OF THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) DATED 21/01/2009 ANNEX C COPY OF THE ORDER OF THE APPELLATE TRIBUNAL DATED 25/01/2012 RESPONDENT'S ANNEXURES: NIL /TRUE COPY/ P.A.TO.JUDGE sts

MANJULA CHELLUR, C.J. & A.M.SHAFFIQUE, J. ---------------------------------------------------- I.T.Appeal No. 204 of 2012 --------------------------------------------------- Dated this the 22nd October,2013 J U D G M E N T Shaffique, J. This appeal is filed by the

Revenue challenging the order passed by the Income Tax Appellate Tribunal, Cochin Bench in I.T.A No. 152/2009. The issue relates to assessment year 2002-2003. The Tribunal allowed the appeal filed by the assessee on the ground that the Assessing Officer cannot take any action after expiry of four years, on the basis of the amended provision to Section 80 HHC of the Income Tax Act. 2. The facts as disclosed would indicate that the assessment under Section 143 (3) of the I.T Act

I.T.Appeal No. 204 of 2012 2 completed on 22.8.2004 was sought to be reopened by notice issued under Section 148 of the Act on 26.3.2008. It was inter alia indicated that the assessee is not eligible for proviso deduction under Section 80 HHC in view of the retrospective amendment made to the said provision by the 2005 amendment, that loss from export of trading goods is to be set off against profits from export of manufactured goods in view of the judgment of the Supreme Court and deduction of 90% of margin on processing commission from the business profits was against the Supreme Court decision. 3. The assessee contended that the assessment cannot be reopened after four years. Assessing Officer rejected the said claim and

I.T.Appeal No. 204 of 2012 3 assessed the total income. The matter was carried in appeal. One of the arguments raised by the appellant is that once the assessment is completed under Section 143(3) it ought to have been reopened before the expiry of four years from the end of the relevant assessment year as provided under proviso to Section 147 of the I.T Act. In so far the limitation period expired on 31.3.2007 and the notice is issued under Section 148 after the expiry date of limitation, the Assessing Officer had committed serious error of law in re-opening the assessment. The first appellate authority dismissed the appeal. 4. The assessee filed appeal before the Tribunal and it is held that in so far as the assessee has filed the return of income as per law

I.T.Appeal No. 204 of 2012 4 in existence as on 1st day of April of the respective assessment year, it may not be possible to say that the assessee was negligent in filing the material fact as required by the subsequent retrospective amendment. It is found that no one can expect the assessee to anticipate an amendment in law in future and file the required material in advance. Hence the Tribunal came to a finding that there was no negligence on the part of the assesee in furnishing the return of the income and that subsequent amendment of law to section 80HHC and interpretation of the Supreme Court cannot be a reason for the assessing officer to reopen the completed assessment under section 143(3) after expiry of four years. Reference is made to the proviso to section 147, which clearly indicate that

I.T.Appeal No. 204 of 2012 5 where an assessment under section 143(3) has been made for the relevant assessment year, no action can be taken under Section 147 after the expiry of four years from the end of relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under Section 139 or on failure to disclose fully and truly all material facts on receipt of notice under section 142(1) or Section 148 of the Act. The Tribunal therefore found that when admittedly the notice under Section 148 is issued after expiry of four years based on the amended provision to section 80HHC of the Act, it was found that a situation as warranted under Sections 147 or 148 had not

I.T.Appeal No. 204 of 2012 6 arisen and hence dismissed the appeal. 5. The revenue raised the following substantial questions of law” “(i) Whether the retrospective amendment of law and subsequent judgment of apex court after filing of the return of income and completion of assessment u/s.143(3) can be a basis for reopening for assessment u/s 147 of the Income Tax Act, 1961” (ii) Whether on the facts and in the circumstances of the case and also in the light of the decisions noted in the grounds raised, is not the reassessment based on a retrospectively amended provision in accordance with law and the Tribunal is right in law in interfering with the assessment order?.

I.T.Appeal No. 204 of 2012 7 6. We do not think that the above questions arise for consideration in the above appeal. First of all on undisputed facts the assessee cannot be blamed for filing a return by contemplating a possible amendment to Section 80- HHC of the Act. Therefore one cannot state that there was an escaped assessment of tax which could be reopened within a period of four years from the end of the relevant assessment year. Admittedly the amendment and the judgment relied upon by the Assessing Officer was subsequent to the finalisation of the assessment proceedings. It is trite law that such subsequent amendments or subsequent interpretation of the statute is not a ground to reopen concluded transactions. Admittedly the assessment had been completed

I.T.Appeal No. 204 of 2012 8 under Section 143(3) of the Act and in order to reopen the same, necessarily it has to be done within a period of four years. The first proviso to section 147 reads as under: “Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year 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 his assessment for that assessment year”.

I.T.Appeal No. 204 of 2012 9 7. On a perusal of the assessment order we do not find any material to indicate that an eventuality as envisaged under the above proviso had occurred in the case to ignore the limitation period.

Hence we do not think that the assessing officer was justified in reopening the assessment. Viewed in that manner, the questions of law raised by the revenue does not arise for consideration in the above appeal. Accordingly the appeal is dismissed. Sd/- MANJULA CHELLUR, CHIEF JUSTICE Sd/- A.M.SHAFFIQUE, JUDGE

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