2012 (8) TMI 614 - HC - Income Tax

Reopening the assessment - assessment is sought to be opened beyond a period of four years of the end of the relevant assessment year Held that - Assessing Officer did not hear the objections of the assessee nor did he pass a separate order on those objections - Assessing Officer has acted arbitrarily and in a manner clearly contrary to law in passing an order without disposing of the objections of the assessee - order of reassessment quashed and set aside

Summary

Issues:
1. Reopening of assessment beyond the prescribed period.
2. Failure of the Assessing Officer to consider objections raised by the assessee.
3. Compliance with Supreme Court judgment in GKN Driveshafts (India) Ltd. v. ITO [2003] 259 ITR 19 (SC).
4. Setting aside the order of reassessment and providing directions for a fresh order.

Analysis:

1. The High Court dealt with the issue of reopening the assessment beyond the stipulated period. A notice under section 148 of the Income-tax Act, 1961, was issued to the assessee on March 28, 2011, for the assessment year 2004-05. The assessment was sought to be opened beyond four years from the end of the relevant assessment year. The court noted that the Assessing Officer did not hear the objections of the assessee before passing the order of reassessment on December 16, 2011.

2. The failure of the Assessing Officer to consider the objections raised by the assessee was a crucial point in the judgment. The court found merit in the contention of the assessee that the Assessing Officer had acted in breach of the Supreme Court judgment in GKN Driveshafts (India) Ltd. v. ITO [2003] 259 ITR 19 (SC). The court emphasized that the principle laid down by the Supreme Court was binding upon the Assessing Officer, and not hearing the objections before passing the order was against the law.

3. The High Court stressed the importance of compliance with the Supreme Court judgment in GKN Driveshafts (India) Ltd. v. ITO [2003] 259 ITR 19 (SC). It noted that the Assessing Officer had acted arbitrarily and contrary to law by not disposing of the objections of the assessee before passing the order of reassessment. The court referred to a similar case to highlight the necessity of following legal precedents in such matters.

4. Finally, the High Court set aside the order of reassessment and provided detailed directions for further proceedings. The court quashed the order of reassessment dated December 16, 2011, and instructed the Assessing Officer to pass a fresh order on the objections raised by the assessee within a specific timeframe. The court also outlined the steps to be taken in case an adverse order was passed, ensuring that the assessee had the opportunity to seek remedies against the decision. Additionally, the court stayed the notice dated March 28, 2011, for a specified period to facilitate the completion of the entire process.

In conclusion, the High Court's judgment focused on ensuring procedural fairness and adherence to legal principles in the reassessment process, highlighting the importance of considering objections raised by the assessee and complying with relevant legal precedents.