2012 (2) TMI 388 - HC - Income Tax

Validity of reassessment order original order framed u/s 143(3) - assessee filed objections and contended change of opinion of A.O. objections disposed by way of non-speaking order on 02.11.2010 writ petition against the said order filed on 24.11.10 - reassessment order passed in meantime dated 19.11.2010 - Held that -Once we have quashed the order dated 2.11.2010 on the ground of it being non-reasoned and does not meeting the basic requirements of the principles of natural justice, the petitioner should not be denied relief on the ground that the Revenue had proceeded in great haste and hurry to pass the reassessment order. In the present case, therefore, quashing of order dated 2nd November, 2010 would necessarily entail and as a sequitor mandate quashing of the reassessment order dated 19th November, 2010. A.O. is directed to pass a fresh order on the objections raised by the petitioner in terms of direction issued in case of GKN Driveshafts (India) Ltd (2002 - TMI - 6100 - Supreme Court) Decided in favor of assessee.

Summary

Issues Involved:
1. Reopening of assessment for the assessment year 2003-04 under Section 147 of the Income Tax Act, 1961.
2. Disposal of objections raised by the petitioner against the reopening of assessment.
3. Validity of the order disposing of objections under Section 147.
4. Challenging the reassessment order dated 19.11.2010.
5. Consideration of alternative remedy in light of the circumstances.

Issue 1: Reopening of assessment under Section 147:
The respondent Deputy Commissioner of Income Tax issued a notice under Section 148 dated 8.3.2010 for the assessment year 2003-04. The reasons recorded for reopening the assessment included underassessment of income due to various discrepancies in the petitioner's financial statements, such as the provision for gratuity, settlement amount with foreign promoters, and provision for diminution in value of investment in mutual funds. The petitioner objected to the reopening, arguing that it was a case of change of opinion and that all relevant information was disclosed during the original assessment. The objections were disposed of in a non-speaking order dated 2.11.2010, which the petitioner challenged in a writ petition.

Issue 2: Disposal of Objections Against Reopening:
The petitioner filed detailed objections against the reopening of assessment, citing case law and arguing that no new material had come to light since the original assessment. The objections were disposed of in a non-speaking order dated 2.11.2010, which the petitioner contended did not address their contentions adequately. The court found the order non-speaking, cryptic, and lacking in adherence to principles of natural justice, leading to its quashing and setting aside.

Issue 3: Validity of the Order Disposing of Objections:
The court held that the order disposing of objections was non-speaking, failed to address the petitioner's contentions, and did not meet the basic requirements of natural justice. As a result, the court deemed the order unsustainable and ordered it to be set aside, allowing the petitioner to challenge the reassessment order dated 19.11.2010.

Issue 4: Challenging the Reassessment Order:
The court permitted the petitioner to challenge the reassessment order dated 19.11.2010 in the writ petition due to procedural irregularities. The court noted that the Assessing Officer did not proceed with the assessment proceedings after the order disposing of objections on 2.11.2010 and that the reassessment order was passed hastily. Consequently, the court quashed the reassessment order dated 19.11.2010, emphasizing the importance of following due process and principles of natural justice.

Issue 5: Consideration of Alternative Remedy:
The court rejected the defense of alternative remedy raised by the Revenue, emphasizing that denying relief based on the existence of an alternative remedy would result in a miscarriage of justice. The court highlighted that the petitioner had not circumvented the statutory right to appeal and that the quashing of the order disposing of objections necessitated the quashing of the reassessment order. The court concluded that the existence of an alternative remedy should not bar relief under Article 226 when there is a violation of natural justice or procedural requirements.

This comprehensive analysis of the judgment highlights the key issues surrounding the reopening of assessment, disposal of objections, validity of the order, challenging the reassessment order, and the consideration of alternative remedies in the context of the case.