2004 (8) TMI 97 - HC - Wealth-tax

Reassessment notice under section 17 of the Wealth-tax Act, 1957 Procedure - impugned order came to be made without first disposing of the preliminary objections raised by the petitioner by passing a speaking order - After a notice for reassessment has been issued, an assessee is required to file the return and seek reasons for issuance of such notice. The Assessing Officer is then bound to supply the reasons within a reasonable time. On receipt of reasons, the assessee is entitled to file preliminary objections to issuance of notice and the Assessing Officer is under a mandate to dispose of such preliminary objections by passing a speaking order, before proceeding with the assessment

Issues Involved:
1. Jurisdiction of the notice issued under Section 17 of the Wealth-tax Act, 1957.
2. Validity of the reassessment order dated February 9, 2004.
3. Compliance with procedural requirements as per the Supreme Court's decision in GKN Driveshafts (India) Ltd. v. ITO.
4. Requirement to pass a speaking order on preliminary objections.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Notice Issued under Section 17 of the Wealth-tax Act, 1957:
The petitioner challenged the notice issued under Section 17 of the Wealth-tax Act, 1957, dated March 26, 2002, on the grounds of jurisdiction. The petitioner contended that the notice was without jurisdiction and requested the respondent to drop the proceedings. The respondent argued that the notice was issued in accordance with the law and was not influenced by any higher authorities or audit objections.

2. Validity of the Reassessment Order Dated February 9, 2004:
The petitioner argued that the reassessment order dated February 9, 2004, was bad in law as it was a consequence of a notice that was without jurisdiction. Additionally, the petitioner contended that the order ignored the Supreme Court's directives in GKN Driveshafts (India) Ltd. v. ITO and the High Court's order in Arvind Mills Ltd. v. CWT (Asst.) (No.1). The respondent maintained that the reassessment order was passed following due procedure and was legal and valid.

3. Compliance with Procedural Requirements as per the Supreme Court's Decision in GKN Driveshafts (India) Ltd. v. ITO:
The Supreme Court in GKN Driveshafts (India) Ltd. v. ITO laid down a specific procedure for dealing with objections against a notice under Section 148 of the Income-tax Act, 1961. The court held that the Assessing Officer must dispose of the preliminary objections by passing a speaking order before proceeding with the assessment. The petitioner argued that the respondent failed to comply with this requirement. The respondent contended that there was no statutory requirement to pass a separate speaking order and that the preliminary objections were addressed in the reassessment order itself.

4. Requirement to Pass a Speaking Order on Preliminary Objections:
The court emphasized that the law requires the Assessing Officer to dispose of preliminary objections by passing a speaking order before proceeding with the reassessment. The court found that the respondent did not comply with this requirement, as the reassessment order did not address the preliminary objections raised by the petitioner. The court noted that the respondent's failure to pass a speaking order was contrary to the Supreme Court's directives and the High Court's order.

Conclusion:
The court quashed and set aside the reassessment order dated February 9, 2004, on the grounds that the respondent failed to dispose of the preliminary objections by passing a speaking order. The court directed the respondent to follow the procedural requirements laid down by the Supreme Court and the High Court. The petition was allowed to the extent that the reassessment order was invalidated, and the respondent was ordered to pay the costs to the petitioner, quantified at Rs. 2,500.

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