2007 (7) TMI 92 - HC - Income Tax

Reassessment Alleged that assessee had escaped assessment within the meaning of section 147 of the Act and therefore the authority proposed to reassess the income for the AY 2000-01 Matter remanded to AC to dispose of the objections filed for the AY 2000-01

Summary

Issues: Rejection of objections for reopening assessment based on Volcker Committee Report and "kick back" payments.

Analysis:
The petitioners were aggrieved by the communication rejecting their objections for reopening the assessment based on the Volcker Committee Report regarding "kick back" payments. The Assistant Commissioner of Income-tax issued a notice under section 148 of the Income-tax Act, stating that income had escaped assessment due to commission payments representing "kick back." The petitioners contended that the reasons for reopening were baseless, and they had not made any "kick back" payments. However, the respondents argued that the petitioners' involvement in the Volcker Committee Report justified the reassessment. The Central Board of Direct Taxes had issued directions to investigate entities mentioned in the report, including the petitioners. The court had to determine if there were prima facie reasons to believe that justified reopening the assessment.

The court considered the judgment in GKN Driveshafts (India) Ltd. v. ITO and emphasized that the basis for issuing a notice under section 148 of the Act was "reasons to believe." Despite the petitioners' arguments that there were no valid reasons, the court found that the petitioners could present their case before the authorities, which would be an adequate remedy. Referring to the Supreme Court's guidance, the court highlighted the procedure for dealing with objections to a notice under section 148. The court decided that the impugned communication rejecting objections should be quashed, and the matter remanded to allow the petitioners to file additional objections if permissible, following the due process of law as outlined in the GKN Driveshafts case.

In conclusion, the court partially allowed the petition, setting aside the rejection order and remanding the matter for further consideration in line with the Supreme Court's directives. The court directed the authorities to complete the process within eight weeks and instructed that any adverse order on remand should not be enforced for eight weeks. The rule was made absolute, and no costs were awarded in the circumstances.