IN THE HIGH COURT OF JUDICATURE AT MADRAS

DATED: 02-12-2025

CORAM

THE HON'BLE DR.JUSTICE ANITA SUMANTH

AND

THE HON'BLE MR.JUSTICE MUMMINENI SUDHEER KUMAR

TCA No. 602 of 2013

Commissioner of Income-tax

Coimbatore.

..Appellant(s)

Vs

M/s Eastman Exports Global Clothing Pvt Ltd.,

Door No.10, 12 Kumar Nagar South,

Tirupur 641 003

PAN: AACCC0952E

..Respondent(s)

Prayer : Appeal filed under Section 260A of the Income-Tax Act, 1961 against the order of the Income Tax Appellate Tribunal Madras ‘C’ Bench dated

22.11.2012 in ITA.No.1108/Mds/2012.

For Appellant(s): Mr.P.E.R.Mangala Suvigaran

For Respondent(s): Mr.T.Banusekar

for Mr.R.Sivaraman

Judgment

(Judgment of the Court was delivered by Dr.Anita Sumanth J.)

The revenue is in appeal as against order dated 22.11.2012, passed by the Income Tax Appellate Tribunal (‘ITAT’/’Tribunal’). The appeal before the Tribunal was at the instance of the assessee/respondent as against order dated 27.03.2012 passed by the Commissioner of Income Tax (CIT) under Section

263 of the Income Tax Act, 1961 (in short ‘Act’).

2.The proceedings relate to Assessment Year (AY) 2007-08 in respect of which the assessee had filed a return of income that culminated in an order of assessment dated 18.12.2009. A copy of the assessment order is produced before us. It does not contain anything to indicate that the assessing authority had taken note of the scheme of demerger sanctioned by this Court in Company Petition Nos.146 to 149 of 2008 and Company Petition Nos.201 and 202 of

2009 dated 28.07.2008 and 15.09.2009.

3.The CIT hence issued a show cause notice dated 14.02.2012, calling for a response from the assessee as to the treatment of unabsorbed depreciation and unabsorbed business losses of three entities (i)M/s.Cotton Base Clothing India Private Limited; (ii)M/s.Tangible Textiles Private Limited and; (iii) Essorpe Mill Limited, in the computation of income of the assessee.

4.The CIT proceeded on the basis that the arrangement qua the parties was one of amalgamation, and that the carry forward of unabsorbed business losses and depreciation was incorrect in terms of Section 72A(2) of the Act that required the amalgamating entities to have been in existence for a minimum of three years prior to amalgamation.

5.The assessee responded pointing out that in fact, the arrangement had been one of demerger and hence, the provisions of Section 72A(2) would be inapplicable. The applicable provisions in the context of demerger, would be Section 72A(4) of the Act, that contained no condition in regard to the minimum period of existence of the demerged entitles. Hence the very basis of the notice was incorrect.

6.An order came to be passed by the CIT on 27.03.2012 where the reply of the assessee/respondent has been noted. However, instead of answering the point put forth by the assessee, an order had come to be passed under Section 263 merely remitting the issue to the assessing officer for examination. The order was carried in appeal before the Tribunal by the assessee, and set aside vide order dated 22.11.2012, aggrieved with which, the present Tax Case Appeal has been filed by the Revenue.

7.The following substantial questions of law have been admitted on

07.11.2013:

‘1.Whether in law and in the facts and circumstances of the case, the Tribunal was right in holding that the CIT has erred in revising the assessment order in the case of the assessee as erroneous prejudice to the interests of revenue?

2. Whether in law and in the facts and circumstances of the case, the Tribunal was right in holding that the CIT had travelled beyond the reasons stated in the show cause notice issued by him?

3. Whether in law and in the facts and circumstances of the case, the Tribunal was justified in allowing the appeal of the assessee in holding that the jurisdiction of the CIT is confined to the reasons stated in the notice under Section

263?

4. Whether in law and in the facts and circumstances of the case, the Tribunal is justified in allowing the appeal of the assessee when