THE COMMISSIONER OF IT vs. M/S HYNDAI MOTOR INDIA LTD

TCA.No.323 of 2020 In the High Court of Judicature at Madras Dated : 23.9.2020 Coram : The Honourable Mr.Justice T.S.SIVAGNANAM and The Honourable Mrs.Justice V.BHAVANI SUBBAROYAN Tax Case Appeal No.323 of 2020 The Commissioner of Income Tax, Chennai ...Appellant Vs M/s.Hyundai Motor India Ltd., PIN : 602117. ...Respondent APPEAL under Section 260A of the Income Tax Act, 1961 against the order dated 26.12.2018 made in ITA.No.1836/Chny/2017 on the file of the Income Tax Appellate Tribunal, Chennai 'B' Bench for the assessment year 2008-09. For Appellant: Mrs.R.Hemalatha, SSC For Respondent: Mr.S.P.Chidambaram Judgment was delivered by

T.S.Sivagnanam,J

We have heard Mrs.R.Hemalatha, learned Senior Standing Counsel appearing for the appellant – Revenue and Mr.S.P. 1/10 http://www.judis.nic.in TCA.No.323 of 2020 Chidambaram, learned counsel accepting notice for the respondent – assessee. 2. This appeal, filed by the Revenue under Section 260A of the Income Tax Act, 1961 (for brevity, the Act), is directed against the order dated 26.12.2018 made in ITA.No.1836/Chny/2017 the file of the Income Tax Appellate Tribunal, Chennai 'B' Bench (for short, the Tribunal) for the assessment year 2008-09. 3. The Revenue has filed this appeal by raising the following substantial questions of law : “i. Whether the Tribunal was right in holding that the reopening of assessment made under Section 147 is bad in law on the ground that the Assessing Officer had not recorded any reason of failure on the part of the assessee to disclose fully and truly all material facts, which are necessary for passing the assessment order ? And ii. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that since the Assessing Officer had not recorded any failure on the part of the assessee to disclose fully and truly any material fact necessary for its assessment and hence reopening of assessment was invalid?” 2/10 http://www.judis.nic.in TCA.No.323 of 2020 4. By the impugned order, the appeal filed by the assessee challenging the order passed by the Commissioner of Income Tax (Appeals)-17, Chennai-101 dated 31.3.2017 was allowed and the reopening of the assessment as done by the Assessing Officer vide order dated 31.12.2014 was held to be illegal. 5. The question was as to whether the Assessing Officer recorded any reason for the failure on the part of the assessee to disclose fully and truly all material facts. 6. The assessee, which is a limited company registered under the Indian Companies Act, filed their return of income for the assessment year under consideration namely 2008-09 declaring a total income of Rs.4,23,23,20,855/-. The scrutiny assessment was completed after making certain additions and the income was assessed at Rs.8,07,28,52,213/-. However, the case was reopened under Section 147 of the Act by issuance of a notice dated 10.3.2014. It was stated that the Assessing Officer noticed that the assessee sold Customer Care Parts (CCP) Division to one M/s.Mobis India Limited and had offered the capital gains amounting to Rs.3,80,25,26,600/- as per Section 50B of the Act. The sale consideration of Rs.4,25,25,00,000/- for acquisition of the CCP Division was determined by the assessee at Rs.3,80,25,24,600/-. 3/10 http://www.judis.nic.in TCA.No.323 of 2020 7. The Assessing Officer opined that certain assets such as land and building had not been transferred and that there was no separate undertaking called CCP Division, but only an activity existed, which was transferred and therefore, the same was treated as business profit under Section 28 of the Act. The Assessing Officer treated the amount of Rs.3,80,25,24,600/-, which was treated as capital gains by the assessee, as a business income. The Assessing Officer further noticed that for the financial year 2007-08, the assessee made provision for warranty amounting to Rs.82,47,61,000/- and utilized a sum of Rs.54,94,74,000/- and out of the un-utilized amount of Rs.27,52,87,000/-, a sum of Rs.4,52,23,000/- was reversed by the assessee. The Assessing Officer appeared to have examined the details of provision for warranty for the past three years and opined that the assessee did not adopt any scientific method for estimating the provision for warranty and that the estimate made by the assessee was held to be unreliable. The Assessing Officer came to the conclusion that there was reason to believe that the income escaped assessment. 8. Pursuant to the notice dated 10.3.2014 issued under Section 148 of the Act, the assessee filed a return of income on 12.5.2014 and the reasons were stated to have been communicated to the assessee vide letter dated 11.4.2014. Subsequently, the case was scrutinized 4/10 http://www.judis.nic.in TCA.No.323 of 2020 after issuance of a notice dated 05.8.2014 under Section 143(2) of the Act and the re-assessment was completed vide order dated dated 31.12.2014. 9. Aggrieved by such an order, the assessee preferred an appeal before the CIT(A), who dismissed the appeal by order dated 31.3.2017. Challenging the same, the assessee filed further appeal to the Tribunal. 10. Before the Tribunal, the assessee contended that the assessment was reopened after expiry of four years from the end of the relevant assessment year and the reopening was not valid because the Assessing Officer had not recorded any reasons of failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for that year. The assessee relied upon the decisions in the case of (i) CIT Vs. Foramer France [reported in (2003) 264 ITR 566 (SC)] and (ii) CIT Vs. Elgi Finance Ltd. [reported in (2006) 286 ITR 674 (Madras)]. 11. The Tribunal allowed the assessee's appeal by passing the following order : “We heard the rival submissions and gone through the relevant material. The fact remains that the re-assessment notice was 5/10 http://www.judis.nic.in TCA.No.323 of 2020 issued

after

completion

scrutiny assessment, that too after expiry of four years from the end of the relevant assessment year (2008-09). As per Proviso to Section 147, where the assessment under Sub-Section 3 of Section 143 has been made for the relevant assessment year, no action shall be taken under Section 147 after the expiry of four years from the end of the 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 disclose fully and truly all material facts necessary for its assessment for that assessment year. In this case, the Assessing Officer has not recorded any failure on the part of the assessee to disclose fully and truly any material facts necessary for its assessment and hence, applying the ratios relied on by the AR, the assessee's appeal is allowed.” 12. In our considered view, the order passed by the Tribunal is devoid of any reasons. We support such a conclusion with the following reasons : In the above order passed by the Tribunal, the substantial portion deals with the statement of law as to how the re-assessment proceedings have to be done and as to how the Courts have 6/10 http://www.judis.nic.in TCA.No.323 of 2020 interpreted the procedure to be followed by the Assessing Officer while exercising the powers under Section 147 of the Act. In our respectful view, the Tribunal did not spell out as to how it came to the conclusion that the Assessing Officer did not record any failure on the part of the assessee to disclose fully and truly any material facts necessary for its assessment. 13. The learned counsel, who has accepted notice for the respondent – assessee, on instructions, submits that substantial material was placed before the Tribunal and merely because the Tribunal had not recorded those submissions nor brought on record the materials, the assessee should not be put to prejudice. 14. We have carefully considered the said submissions of the learned counsel on either side. 15. An order passed by a Court or a Tribunal should stand or fall based on the reasons contained in that order. The order cannot be substituted by reasons at the appellate stage when the same did not find place in the original order. This legal principle has been well explained in the celebrated judgment of the Hon'ble Supreme Court in the case of Mohinder Singh Gill Vs. Chief Election Commissioner [reported in AIR 1978 SC 851]. 16. Mr.S.P.Chidambaram, learned counsel appearing for the 7/10 http://www.judis.nic.in TCA.No.323 of 2020 respondent – assessee submits that even the order passed by the CIT(A) is not a reasoned order so far as the aspect of reopening of assessment was concerned. 17. This contention is vehemently opposed by Mrs.R.Hemalatha, learned Senior Standing Counsel appearing for the appellant – Revenue and she has invited our attention to the order passed by the CIT(A) to state that the order is a speaking order and that the order has set out elaborate reasons. 18. We have also perused the assessment order dated 31.12.2014 as well as the order passed by the CIT(A) dated 31.3.2017. We find that in both the orders, certain reasons were set out. However, we do not wish to express any opinion on the same because we have faulted the impugned order passed by the Tribunal on the ground that it is devoid of reasons. Therefore, we would not be justified in making any observations on the merits of the matter as to whether the reasons have been recorded or not. All that we can say is that the assessment order as well as the order passed by the CIT(A) are speaking orders. If the Tribunal comes to the conclusion that the Assessing Officer has not recorded any failure on the part of the assessee to disclose fully and truly any material facts necessary for its assessment, it is required that the Tribunal expresses itself as to how 8/10 http://www.judis.nic.in TCA.No.323 of 2020 it formed such a opinion. In the absence of any such reasons emanating from the impugned order, we have to necessarily hold that the impugned order passed by the Tribunal is devoid of reasons and would call for interference. For all the above reasons, we are inclined to interfere with the impugned order. As mentioned earlier, we do not want to express anything on the merits of the matter as it may prejudice the interest of the assessee. 19. In the result, the above tax case appeal is allowed, the impugned order is set aside and the matter is remanded to the Tribunal for a fresh consideration. The substantial questions of law raised are left open. No costs. 23.9.2020 To The Income Tax Appellate Tribunal, Chennai 'B' Bench. RS 9/10 http://www.judis.nic.in TCA.No.323 of 2020 T.S.SIVAGNANAM,J AND V.BHAVANI SUBBAROYAN,J RS TCA.No.323 of 2020 23.9.2020 10/10 http://www.judis.nic.in