The main legal point established in the judgment is the requirement for the Department to demonstrate fresh tangible material for reopening assessments, and the distinction between the power of review and the power to reassess.

JUDGMENT :

T.S. Sivagnanam, J.

(Prayer: APPEALS under Clause 15 of the Letters Patent against the common order dated 25.1.2019 made in W.P.Nos.12604, 33239 and 12603 of 2002.)

1. These appeals are directed against the common order dated 25.1.2019 made in W.P.Nos.12603, 12604 and 33239 of 2002 filed by the appellant.

2. All the three writ petitions were filed by the appellant challenging the notice issued by the second respondent herein under Section 148 of the Income Tax Act, 1961 (for brevity, the Act).

3. The facts, which are essential for the disposal of these appeals, are as hereunder:

The appellant (hereinafter referred to as the assessee) is a public limited company, which had questioned the proceedings issued by the second respondent – Assessing Officer. The assessment years, which are subject matter of consideration, are 1995-96, 1996-97 and 1997-98. Since the facts are identical for all the three assessment years, it would suffice to refer to the facts relating to the assessment year 1995-96.

4. The assessee filed the return of income for the assessment year 1995-96, in which, transactions relating to purchase of assets, lease back of the assets to the seller, availing hire purchase finance, acquiring the said assets from various financial companies were disclosed by the assessee in the audited financial statements for the year ended March 31.3.1995. A search was conducted in the premises of the assessee on 08.7.1996 and a block assessment was framed for the period from 01.4.1986 to 08.7.1996. The block assessment was concluded by order dated 31.7.1997 wherein the depreciation claimed by the assessee was held to be an undisclosed income. The assessee challenged the said order dated 31.7.1997 before the Income Tax Appellate Tribunal, Chennai ‘B’ Bench (for brevity, the Tribunal), which, by order dated 18.2.2002, allowed the appeal and held that the claim of depreciation would not fall within the meaning of the expression ‘undisclosed income’.

5. In fact, initially, there was a differing opinion between the Judicial Member and the Accountant Member of the Tribunal and therefore, the matter was referred to a third Member namely the Senior Vice President of the Tribunal, who, by order dated 31.1.2002, agreed with the decision of the Judicial Member, which was in favour of the assessee. Ultimately, the appeal stood allowed based on the majority opinion by order dated 18.2.2002. The Revenue did not challenge the said proceedings and the same attained finality.

6. Parallelly, for all the three years, the assessment was concluded by order dated 30.3.1998 (AY 1995-96), 22.3.1999 (AY 1996-97) and 22.3.2000 (AY 1997-98). So far as the claim for depreciation is concerned, in the said scrutiny assessment, the Assessing Officer held that already the claim for depreciation had been held to be an undisclosed income in the block assessment and therefore, the necessity once over again for consideration would not arise. As against the findings under other heads, the assessee, being aggrieved, filed an appeal before the Commissioner of Income Tax (Appeals) concerned, who, by order dated 07.5.1999, allowed the appeal and remanded the matter to the file of the Assessing Officer to redo the assessment.

7. It will not be very relevant to take note as to how the assessments were completed on remand. What would be relevant is with regard to the action initiated by the Commissioner of Income Tax, Central 2, Chennai (for short, the CIT), who issued a notice under Section 263 of the Act dated 12.3.2001. Though the assessee objected to the invocation of power under Section 263 of the Act by the CIT, the objections were rejected, directions were issued to the Assessing Officer and ultimately, the assessments were done, which were against the interest of the assessee. Therefore, the assessee carried the matter on appeal to the Commissioner of Income Tax