2012 (12) TMI 784 - HC - Income Tax

Re opening of assessment - assessee contested against non furnishing of reasons to believe - Held that - The decision in G.K.N Driveshafts (India) Ltd. Versus ITO And Others (2002 (11) TMI 7 - SUPREME COURT) gives an indication that the requirement of passing the speaking order would provide an opportunity to the assessed to challenge the same by way of a writ petition under Article 226. To afford the assessee an opportunity to put before the tax authorities his point of view, before the reassessment proceedings are completed The basic requirement of the statute is the recording of the reasons to believe under Section 147. That done, all the Supreme Court opined was about the necessity of providing reasons for issuance of notice under Section 147, if the same are sought, to afford a reasonable and fair opportunity to the assessee to file his objections, and dispose of the same by a speaking order. The rest has been left to the Court s concern to be dealt within individual cases. Having regard to the facts and circumstances, this Court is of the opinion that even the question whether the petitioner was afforded a reasonable opportunity could be gone into by the CIT( Appeals) before whom the appeal is pending. It is open to the assessee to urge the question of denial of opportunity along with the other issues on merits. All rights and contentions are expressly reserved.

Issues:
Challenge to notice for reopening assessment for the assessment year 1999-2000 under Article 226 of the Income Tax Act, 1961.

Detailed Analysis:

1. The writ petitioner contested the notice dated 31.3.2006 seeking to reopen the assessment for the assessment year 1999-2000, alleging that the assessing officer did not provide the "reasons to believe" under Section 148 of the Income Tax Act within a reasonable time and did not grant an opportunity to the petitioner during the reassessment process. The petitioner argued that despite not challenging the reassessment order in appeal, the High Court had jurisdiction under Article 226 to set aside the impugned orders, including the notice, the order disposing of objections, and the reassessment order. Reference was made to the Supreme Court's ruling in G.K.N. Driveshafts (India) Ltd. Vs. Income Tax Officer & Ors., emphasizing the importance of providing reasons for issuing notices and allowing the assessee to file objections, which must be disposed of by the assessing officer through a speaking order before proceeding with the assessment.

2. The petitioner contended that the procedure outlined in the GKN Driveshafts case was crucial for the assessing officer to follow while recording the "reasons to believe" and ensuring a fair opportunity for the assessee to present their case. The petitioner cited cases such as Techspan India (P) Ltd & Anr Vs. ITO and Whirlphool Corporation Vs. Registrar of Trademarks & Ors. to support the argument that the High Court's jurisdiction under Article 226 cannot be restricted to statutory appellate remedies. It was highlighted that a writ petition challenging re-assessment proceedings could be maintainable even if the assessee had alternative appellate remedies available.

3. Additional decisions such as Sita World Travels Vs. Deputy Commissioner of Income Tax, Janki Export International Vs. UOI, S. Ujjal Singh Vs. ITO, and Kamlesh Sharma Vs. ITO were relied upon by the petitioner to strengthen the argument regarding the maintainability of a writ petition in challenging re-assessment proceedings.

4. The petitioner also referenced the recent decision in Commissioner of Income Tax Vs. Rajan Nanda to support the contention that the reassessment proceedings favored the assessee on merit, making it unnecessary to pursue appellate remedies. The Court acknowledged the arguments presented and emphasized that the power of the High Court to issue writs under Article 226 remains unaffected by legislation such as the Income Tax Act, provided certain self-imposed restrictions are considered before interference. The Court highlighted the discretionary nature of writ jurisdiction and the need for a case-by-case examination based on facts and circumstances.

5. The Court noted that while the Supreme Court's ruling in GKN Driveshafts aimed to give the assessee an opportunity to present their viewpoint before completion of reassessment proceedings, it did not mandate a review of objections in every case challenging the "reasons to believe." The Court emphasized the statutory requirement of recording the "reasons to believe" under Section 147 and clarified that the assessing officer's order dealing with objections need not be reviewed in every case challenging a Section 147 notice. The Court suggested that the question of whether the petitioner was afforded a reasonable opportunity could be addressed by the CIT(Appeals) during the pending appeal, allowing the assessee to raise issues of denial of opportunity along with other merits.

In conclusion, the writ petition was disposed of with the above considerations, preserving the rights and contentions of the parties for further proceedings.

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