Kerala High Court
Si Property(Kerala)Pvt. Ltd vs Commissioner Of Income Tax And Another on 30 June, 2025
2025:KER:47177
W.P.(C).No.3588 of 2011
1
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE S.MANU
MONDAY, THE 30TH DAY OF JUNE 2025 / 9TH ASHADHA, 1947
WP(C) NO. 3588 OF 2011
PETITIONER:
SI PROPERTY(KERALA)PVT. LTD.
'SILVER OAKS' NEAR GOLF CLUB, KOWDIAR,
TRIVANDRUM- 695 003 REPRESENTED BY ITS
MANAGING DIRECTOR.
BY ADVS.
SRI.E.K.NANDAKUMAR (SR.)
SHRI.BENNY P. THOMAS (SR.)
SHRI.K.JOHN MATHAI
SHRI.M.GOPIKRISHNAN NAMBIAR
SRI.JOSON MANAVALAN
SRI.KURYAN THOMAS
SHRI.PAULOSE C. ABRAHAM
SHRI.RAJA KANNAN
RESPONDENTS:
1 THE COMMISSIONER OF INCOME TAX
THIRUVANANTHAPURAM, AAYAKAR BHAVAN, KOWDIAR, TRIVANDRUM-
695003.
2 ASSISTANT COMMISSIONER OF INCOME TAX
CIRCLE-1(1), THIRUVANANTHAPURAM,
AAYAKAR BHAVAN, KOWDIAR, TRIVANDRUM-695003.
BY ADV SHRI.JOSE JOSEPH, SC, INCOME TAX DEPARTMENT,
KERALA
OTHER PRESENT:
ADV CYRIAC TOM
THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON
30.06.2025, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
2025:KER:47177
W.P.(C).No.3588 of 2011
2
S.MANU, J.
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W.P.(C).No.3588 of 2011
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Dated this the 30th day of June, 2025
JUDGMENT
Aggrieved by Ext.P12 assessment order issued invoking Section 147 of the Income Tax Act petitioner has approached this Court.
2. Petitioner is a company involved in the business of construction of flats and villas. Company is also involved in real estate development. For the assessment year 2007-08 petitioner company filed return of income declaring a total income of Rs.83,24,120/-. The return was processed and the case was taken up for scrutiny and assessment was completed vide order dated 29.12.2009. Total income of the petitioner was computed at Rs.1,03,58,750/-. Petitioner's appeal against the assessment was partly allowed. Based on the appellate order consequential orders were passed on 20.8.2010. Petitioner 2025:KER:47177 W.P.(C).No.3588 of 2011 3 company filed a further appeal before the Income Tax Appellate Tribunal from the order of the appellate commissioner.
3. While so a notice was issued to the petitioner on 25.3.2010 under Section 148 of the Income Tax Act. Petitioner submitted a letter requesting the assessing officer to furnish the details of income which according to the department are escaped assessment. The assessing officer issued a letter dated 10.5.2010 furnishing the reasons for re-opening the assessment under Section 147.
4. On receipt of the letter dated 10.5.2010, the petitioner submitted a detailed reply on 19.5.2010 responding to the various points mentioned by the assessing officer. Petitioner pointed out in its reply that, re-assessment in respect of the items mentioned by the assessing officer would tantamount to a change of opinion which is impermissible. The 1st respondent thereafter issued a notice on 2.11.2010 seeking further details. Petitioner furnished elaborate clarifications on 16.12.2010. Still later, on 15.12.2010, the 2 nd respondent 2025:KER:47177 W.P.(C).No.3588 of 2011 4 sought further clarifications. Petitioner submitted detailed reply on 22.12.2010. By another letter dated 29.12.2010 petitioner furnished some other details which were sought by the 2 nd respondent at the time of hearing. The impugned order was passed by the 2nd respondent thereafter on 27.12.2010.
5. Petitioner challenges Ext.P12 raising various contentions. It is submitted by the learned counsel appearing for the petitioner that the reasons given by the 2 nd respondent for re-opening the assessment were not sufficient to justify a re- assessment under Section 147 of the Income Tax Act. All matters which were pointed out in Ext.P5 were disclosed in the balance sheet and profit and loss account of the petitioner company. Moreover, the petitioner company was issued with a proforma on 18.9.2009 invoking Section 143(2) of the Income Tax Act. Various details were sought from the petitioner on two different occasions by the assessing authority during the course of assessment under Section 143(3) of the Act. Ext.P13 notice dated 18.9.2009 along with Ext.P14 notice under Section 142(1) 2025:KER:47177 W.P.(C).No.3588 of 2011 5 of the Act along with its Annexure are pointed out in this regard. Petitioner submitted Exts.P15 and P16 in response. Contention of the learned counsel for the petitioner in this regard is that the reasons given in support of the decision to re-open the assessment are all fallacious for the reason that those aspects were considered at the time of the assessment. The learned counsel specifically referred to query numbers 4, 18, 21, 22 and 26 in the Annexure attached to Ext.P14 notice issued under Section 142(1) of the Income Tax Act. He contended that the petitioner submitted details in response to the said notice and reference to the above mentioned queries would make it clear that with respect to all aspects mentioned in Ext.P5 in support of the re-opening, materials were available with the assessing authority. The assessing authority is therefore presumed to have been taken note of the same at the time of the original assessment. The learned counsel further submitted that the assessing authority committed a serious error by not passing a separate order on the objection submitted by the petitioner 2025:KER:47177 W.P.(C).No.3588 of 2011 6 before proceeding to pass orders under Section 147. The learned counsel raised another contention with regard to the limitation under Section 153 of the Act. He pointed out that the impugned order, Ext.P12 was issued on 27.12.2010. However, it was served only on 5.1.2011. He submitted that there is no evidence to show that the order was despatched before 31.12.2010. The learned counsel relied on various judgments. The decisions relied on by the learned counsel for the petitioner are as follows:-
1. GKN Driveshafts (India) Ltd. v. Income Tax Officer and Ors [(2003) 1 SCC 72].
2. Raza Textiles Ltd. v. Income Tax Officer, Rampur [(1973) 1 SCC 633].
3. Commissioner of Income Tax, Delhi v.
Kelvinator of India Limited [(2010) 2 SCC 723]
4. Marico Ltd v. Assistant Commissioner of Income Tax and Ors [(2020) 425 ITR 177 (Bom)].
5. Assistant Commissioner of Income Tax and Ors 2025:KER:47177 W.P.(C).No.3588 of 2011 7 v. Marico Ltd.[(2020) 16 SCC 354].
6. Government Wood Works v. State of Kerala [(1988) 69 STC 62].
6. The learned Standing Counsel submitted that a survey under Section 133A was conducted at the business premises of the assessee on 12.3.2010. On verification of the documents and records impounded during the course of survey operation, excess depreciation claimed by the assessee was noticed. Computation of estimated profits from the turn-key projects was also found incorrect. Depreciation claimed on the cost of computer software was also found improper. Proceedings under Section 147 were initiated on the basis of such facts revealed in the survey. The learned Standing Counsel submitted that under the provisions of Section 147, proceedings can be initiated on receiving any such information. The learned Standing Counsel made specific reference to paragraph 'C' of Ext.P5 and contended that the reasons stated therein would justify initiation of the proceedings under Section 147. The 2025:KER:47177 W.P.(C).No.3588 of 2011 8 learned Standing Counsel further submitted that Ext.P12 is a composite order. He therefore argued that there is no merit in the contention of the petitioner that, after submitting objections no order was passed by the assessing authority with respect to the same. Relying on the judgment of a learned Single Judge of this Court in Palakkad District Co-operative Bank Ltd. v. Additional Commissioner of Income Tax and another [(2017) 392 ITR 539 (Ker)], the learned Standing Counsel submitted that when a composite order is passed, it cannot be said that the same is illegal unless any prejudice caused to the assessee is evident. With regard to the contention of the petitioner regarding limitation, the learned Standing Counsel submitted that no such contention was raised in the writ petition. Therefore, the Department had no occasion to address the same. For the first time contention regarding limitation was raised in the reply affidavit. The learned Standing Counsel therefore submitted that the contention regarding limitation may not be considered.
2025:KER:47177 W.P.(C).No.3588 of 2011 9
7. Regarding the contention on limitation, there is uncertainty or lack of clarity on facts. There are no materials to show when the order was despatched. Other than a margin note made by the petitioner on the copy he received, there is nothing to show as to when it was actually delivered. Moreover as rightly pointed out by the learned Standing Counsel there is no contention regarding limitation in the writ petition. Only in the reply affidavit the petitioner raised a contention with respect to limitation. Therefore, in my considered view, the issue regarding limitation raised by the petitioner need not be considered.
8. The learned counsel for the petitioner had raised a contention regarding the failure of the assessing authority to pass orders after objection was submitted by the petitioner. This contention was answered by the learned Standing Counsel by relying on judgment of this Court in Palakkad District Co- operative Bank's case. Apart from pointing out that no separate order was passed, no clear case of any prejudice is made out by the petitioner. Hence, in view of the decision of 2025:KER:47177 W.P.(C).No.3588 of 2011 10 this Court in Palakkad District Co-operative Bank's case I am of the view that the same need not be considered as a serious infraction. I note in this regard that this Court, in Palakkad District Co-operative Bank's case, had noted the judgment of the Hon'ble Supreme Court in GKN Driveshafts (India) Ltd. v. Income Tax Officer and Ors [(2003) 1 SCC 72], which was also pointed out by the learned counsel for the petitioner. Hence, I conclude that the omission to pass a speaking order on receipt of objections from the assessee cannot be considered as fatal in this case, as no serious prejudice has been established.
9. The next contention to be addressed is regarding the justifiability of re-opening of assessment. The learned counsel for the petitioner pointed out that issues which were subject matters of the re-opening of the assessment were mentioned in Ext.P5. They are-
1) capitalization of self-constructed units and the claim of depreciation 2025:KER:47177 W.P.(C).No.3588 of 2011 11
2) depreciation eligible on computer software and
3) the mode of recognition of income on work-in-progress of turnkey projects.
4) Non remittance of TDS within the
stipulated date
Though the issue regarding TDS was also pointed out in Ext.P5 as a reason for re-opening it was not taken into account in Ext.P12 assessment order. Therefore, the said aspect need not be considered. Regarding the other three aspects the learned counsel pointed out with reference to Exts.P14 and P15 that the details with regard to fixed assets namely the breakup of additions or deletions along with the copies of invoices/bills were called for by the assessing authority during the scrutiny under Section 143(3) of the Act. Details of various expenses claimed in the profit and loss account were also sought. Likewise, reconciliation, computation of total income and method of accounting followed were also sought by the 2025:KER:47177 W.P.(C).No.3588 of 2011 12 assessing authority in the Annexure to Ext.P14. Petitioner had furnished all required details with respect to the above aspects along with Ext.P15 reply. Hence the contention is that all issues which were pointed out to justify re-opening had formed part of queries raised by the assessing authority during the course of scrutiny assessment under Section 143(3) of the Act. The assessment was thereafter completed vide order 29.12.2009. The learned counsel contended that the queries with regard to the above said aspects and explanations offered by the petitioner were not discussed in the assessment order dated 29.12.2009. However, according to the learned counsel, the same is not a reason to conclude that the assessing authority had not considered the issues. He contended, relying on a judgment of the Bombay High Court in Marico Ltd v. Assistant Commissioner of Income Tax and Ors [(2020) 425 ITR 177 (Bom)], that when a query was raised by the assessing officer during the assessment proceedings and the assessee had responded to that query, it is to be presumed that the assessing 2025:KER:47177 W.P.(C).No.3588 of 2011 13 officer has accepted the assessee's submissions. The learned counsel referred to the following paragraph of the judgment of the Bombay High Court:-
"8. In the present facts, we note that the Assessing Officer during the course of regular assessment proceedings leading to the assessment order dated January 30, 2018, on the basis of the profit and loss account and balance-sheet and the practice for the earlier years, i.e., the assessment year 2013-14, had issued notice on September 25, 2017, to the petitioner to show cause why the amount of Rs.47.04 crores being claimed as book depreciation on intangibles should not be disallowed to determine book profits under section 115JB of the Act. The above query of the Assessing Officer was responded to by the petitioner in great detail by its letters dated October 10, 2017 and December 21, 2017. It justified its claim for deductions by placing reliance upon the decisions of the courts. In support of its contention they are entitled to deduction of the current years depreciation from the net profit to arrive at the book profits under section 115JB of the Act. It was also explained that under sub-section (6) of section 211 of the Companies Act, 1956 reference to a balance-sheet or profit and loss account would also include any notes thereto or documents annexed 2025:KER:47177 W.P.(C).No.3588 of 2011 14 thereto. Thus the notes to the account should be taken into account to determine the net profits for working out the book profits in terms of section 115JB of the Act. The Assessing Officer thereafter proceeded to pass an assessment order dated January 30, 2018, under section 143(3) of the Act and did not make the proposed disallowance."
10. The above mentioned judgment of the Bombay High Court was challenged before the Hon'ble Supreme Court. The Special Leave Petition was dismissed by the Hon'ble Supreme Court and the order is reported in Assistant Commissioner of Income Tax and Ors v. Marico Ltd.[(2020) 16 SCC 354].
11. By now it is well settled that the power under Section 147 of the Income Tax Act cannot be invoked for a review of the assessment. Mere change of opinion cannot be a reason for the assessing officer to invoke Section 147. In this case, as noted above, it cannot be said that the reasons shown in Ext.P5 are proper for the reason that those aspects were actually considered, as evident from Exts.P13 and P14, by the assessing officer at the time of scrutiny under Section 143. That being the 2025:KER:47177 W.P.(C).No.3588 of 2011 15 position the re-opening in the case at hand can be considered only as a review of the original assessment. The same is impermissible. Hence, I allow the writ petition. The impugned Ext.P12 order dated 27.12.2010 of the Assistant Commissioner of Income Tax will stand quashed.
Sd/-
S.MANU JUDGE skj 2025:KER:47177 W.P.(C).No.3588 of 2011 16 APPENDIX OF WP(C) 3588/2011 PETITIONER'S EXHIBITS Exhibit P1 True copy of the order of the Commissioner of Income Tax (Appeals) dtd.14.7.2010.
Exhibit P2 True copy of the order of the 2nd respondent dtd.20.8.2010.
Exhibit P3 True copy of the notice u/s.148 of the Income Tax Act dtd.25.3.2010.
Exhibit P4 True copy of the letter sent by the
petitioner to the 2nd respondent,
dtd.8.4.2010.
Exhibit P5 True copy of the letter from the 2nd
respondent, dtd.10.5.2010.
Exhibit P6 True copy of the reply given by the
petitioner dtd.19.5.2010.
Exhibit P7 True copy of the notice issued by the
2nd respondent dtd.2.11.2010.
Exhibit P8 True copy of the letter sent by the
petitioner to the 2nd respondent
dtd.16.12.2010.
Exhibit P9 True copy of the notice issued by the
2nd respondent dtd.15.12.2010.
Exhibit P10 True copy of the letter sent by the
petitioner to the 2nd respondent,
dtd.22.12.2010.
Exhibit P11 True copy of the letter sent by the
petitioner to the 2nd respondent,
dtd.29.12.2010.
Exhibit P12 True copy of the assessment order
passed by the 2nd respondent
dtd.27.12.2010.