2004 (9) TMI 18 - HC - Income Tax

Revisional order of CIT issued u/s 264 - Petitioner is challenging revisional order of the Commissioner of Income-tax issued u/s 264, refusing to interfere with exhibit P3 issued by the AO overruling the petitioner s objections against reopening of assessments under section 147 - petitioner is entitled to contest the validity of reopening of the assessments in the appeals filed before the Commissioner of Income-tax (Appeals) against the reassessments. The Commissioner of Income-tax (Appeals) is free to go into the validity of reopening of the assessments de hors the findings by the Commissioner of Income-tax in exhibit P6 revisional order under section 264 - In the circumstances, I decline to go into the merits of the contentions raised against impugned order leaving freedom to the petitioner to pursue the remedy in appeals filed before the statutory authority

Summary

Issues:
Challenge to revisional order under section 264 of the Income-tax Act upholding reopening of assessments under section 147 based on objections filed by the petitioner.

Analysis:
The petitioner, a private limited company, challenged the revisional order of the Commissioner of Income-tax under section 264 of the Income-tax Act, which upheld the reopening of assessments under section 147 by the Assessing Officer. The assessments for the years 1996-97 to 2001-02 were initially completed under section 143(1) based on filed returns but were reopened due to information from other departments following a search in a group of companies controlled by the petitioner. The petitioner filed objections against the reopening, leading to a judgment allowing objections to be filed. However, the Assessing Officer overruled the objections in exhibit P3 order and completed the assessments under sections 147 and 143(3). The petitioner then challenged exhibit P3 in a revision before the Commissioner of Income-tax, who rejected it in exhibit P6 order.

The petitioner relied on the Supreme Court decision in GKN Driveshafts (India) Ltd. v. ITO and argued that the Commissioner's order upholding the reopening was untenable. It was acknowledged that the petitioner had filed statutory appeals against the revised assessments resulting from the reopening. The petitioner filed the writ petition fearing that the issue of reopening might not be considered in the appeals due to the Commissioner's order. However, the court clarified that the petitioner could challenge the reopening validity in the appeals process as directed by the Supreme Court.

The court emphasized that reopening assessments under section 147 must be based on relevant materials, and the assessee has the right to object and have those objections adjudicated by the Assessing Officer. The court noted that objections against reopening can be addressed in the revised assessment order itself, and the proper remedy against such reassessment is to file a statutory appeal covering all aspects, including the reopening issue. The court highlighted that separate challenges against the order upholding the reopening and the revised assessment are not contemplated unless the assessee waives the right to appeal and files a revision against the reassessment.

Consequently, the court declined to delve into the merits of the contentions against exhibit P6 and disposed of the writ petition, allowing the petitioner to pursue remedies through appeals filed before the statutory authority. The Commissioner of Income-tax (Appeals) was deemed free to assess the validity of the reopening independently of the revisional order under section 264.