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IN THE HIGH COURT OF JUDICATURE AT MADRAS
C. SARAVANAN, J.
M/s. Metafilms (India) Ltd., Rep. by its Director V. Rajendran - Petitioner
Versus
The Assistant Commissioner of Income Tax, Company Circle IV (2), Chennai - Respondent
W.P. No. 28967 of 2010 & M.P. No. 1 of 2010
Decided On : 17-04-2021
Constitution of India, 1950 - Article 226 - Income Tax Act, 1961 - Sections 148, 143(3) and 115JB - Companies Act, 1956 - Section 211 - Writ of Certiorari - Notice - Assessment - Petitioner had boosted the income by adding waiver of interest for a sum of Rs.9,01,80,464/-, it was wrongly shown by the petitioner for making profit and had given a report along with the financial statements of the petitioner’s company
Finding of the court: Mere declaration in Auditors Report to shareholders of petitioner that secured loans and losses of company have been understated to extent of interest written back and balance sheet and profit and loss account dealt with in said report were in compliance with Accounting Standards referred to in Sub-Section (3C) of Section 211 of Act, 1956 is not sufficient to conclude that there was true and full disclosure by petitioner at time of filing of income tax returns for purpose of assessment - It is not clear as to how petitioner is aggrieved by impugned re-opening of assessment vide notice and impugned speaking order. Even according to petitioner, entire exercise was an academic exercise and a harassment as no additional tax was to be paid by petitioner. It is therefore not clear why petitioner is fighting shy from participating in the aforesaid proceedings. After all, the speaking order merely shows a prima facie view of Income Tax Department to justify re-opening of assessment -
Result: Writ Petition dismissed
JUDGMENT :
(Prayer: Writ Petition filed under Article 226 of the Constitution of India, to issue a Writ of Certiorari calling for the records in PAN : AAACM6975F/2003-04 dated 03.09.2010 read with notice under Sec. 148 of the Income Tax Act, 1961, P.A. No.AAACM6975F dated 17.03.2010 relating to the Assessment Year 2003-04 on the file of the respondent and quash the same.)
1. The petitioner has challenged the re-opening of the Assessment vide impugned notice dated 17.03.2010 for the Assessment Year 2003-2004 and the impugned communication dated 03.09.2010 bearing reference PAN:AAACM6975F/2003-2004 for the Asessment Year 2003-overruling the objection of the petitioner for re-opening of the completed assessment.
2. The petitioner had filed income tax return for the Assessment Year 2003-2004 belatedly on 06.07.2004. There the petitioner had declared the loss of income from business as Rs.3,66,77,842/-. At the time of filing of the return on 06.07.2004, the petitioner had enclosed a copy of the financial statement which included the report of the auditor to the shareholder of the petitioner M/s.Metafilms (India) Limited.
3. The learned counsel for the petitioner further submits that though the petitioner had boosted the income by adding waiver of interest for a sum of Rs.9,01,80,464/-, it was wrongly shown by the petitioner for making profit and had given a report along with the financial statements of the petitioner’s company on 03.09.2003. In the report, it was stated as follows:-
The Company has entered into discussions with the financial institutions for a one-time settlement scheme. Pending final approval from the financial institutions, the company has written back the interest due to these financial institutions (refer note 3(v) of Schedule 14 financial statements). This in our opinion is incorrect and is in violation of Fundamental Accounting Assumption of “Accrual”as advocated by Accounting Standard-1 –Disclosure of Accounting Policies issued by the Institute of Chartered Accountants of India. The Secured Loans and the Losses of the company have been understated to the extent of interest written back. Subject to the above, in our opinion, the balance sheet and the profit and loss account dealt with by this report are in compliance with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956 to the extent applicable thereto.
4. The learned counsel for the petitioner further submits that the Assessing Officer passed a scrutiny assessment order under Section 143(3) of the Income Tax Act, 1961 after scrutinizing the records which included the financial statements and that the explanations were given pursuant to notice under Section 143(2) dated 27.07.2005, notice under Section 143(1) dated 19.08.2004 and detailed questionaires dated 31.08.2005, 09.09.2005 and 06.03.2005. It is further submitted that after scrutiny of all the records, the Assessing Officer came to a conclusion that the petitioner had incurred the total loss of Rs.3,66,77,842/-. It is further submitted that the assessment order was passed on 30.03.2006. Just 30 days before the expiry of limitations, notice dated 17.03.2010 was issued under Section 148 of the income Tax Act, 1961. It is this notice is challenged in this Writ Petition.
5. The learned counsel for the petitioner further submits that the reason given by the respondent for re-opening the assessment was that the petitioner had filed belated return on 06.07.2004 and therefore not entitled to carry forward the loss the loss to subsequent years and that the petitioner had shown an amount of Rs.9,01,80,464/- as other income in its profit and loss account.
6. The learned counsel for the petitioner further submits that the for invoking the jurisdiction, as per proviso to Section 147 of the Income Tax Act, 1961, there should have been a failure to disclose truly and fully all i
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