2013 (11) TMI 820 - HC - Income Tax

Writ petition without going to the Assessing officer Re-opening made u/s 148 of the Income tax act In the present case, the petitioner has not filed objections before the Assessing Officer and has directly approached the court by way of the present writ petition - Held that - Followed the decision in the case of GKN Driveshafts (India) Limited versus ITO, 2002 (11) TMI 7 - SUPREME Court , wherein it was held that when a notice under Section 148 of the Income Tax Act is issued, the proper course of action for the noticee is to file a return and if he so desires, to seek reasons for issuing notices. The Assessing Officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the Assessing Officer is bound to dispose of the same by passing a speaking order. - Decided against the assessee. To protect the interest of assessee - Held that - The Assessing Officer will first dispose of the objections by a speaking order meeting the contentions and issues raised by the petitioner. In case the objections are rejected, the Assessing Officer will give at least three weeks time to the petitioner to approach the court before taking up the re-assessment proceedings on merits. The aforesaid directions will protect the interest of the petitioner and in case the objections are rejected, it will be open to them to approach the court and raise all contentions and issues, including the contentions and issues raised in the present writ petition.

Issues:
1. Challenge to re-assessment notice under Section 148 of the Income Tax Act, 1961 for Assessment Year 2006-07.
2. Procedure to be followed upon receiving a notice under Section 148 as per Supreme Court guidelines.
3. Petitioner's approach of directly approaching the court without filing objections before the Assessing Officer.
4. Legal and statutory parameters of the "reasons to believe" for re-assessment.
5. Interpretation of directions issued under Section 144C(5) regarding the attribution of income.
6. Compliance with the procedure laid down by the Supreme Court in GKN Driveshafts (India) Limited for re-assessment proceedings.
7. Protection of petitioner's interest and directions to file objections before the Assessing Officer.

Analysis:
1. The judgment concerns a writ petition challenging a re-assessment notice under Section 148 of the Income Tax Act, 1961 for the Assessment Year 2006-07. The petitioner filed the petition after receiving reasons to believe on 8th April, 2013, enclosed with the notice dated 30th March, 2013.

2. The Supreme Court's guidelines in GKN Driveshafts (India) Limited emphasize the procedure to be followed upon receiving a notice under Section 148. The noticee is expected to file a return, seek reasons for the notice, file objections, and the Assessing Officer must dispose of the objections by passing a speaking order before proceeding with the assessment.

3. The petitioner in this case directly approached the court without filing objections before the Assessing Officer. The petitioner argued that the re-assessment proceedings were unjustified and illegal, citing precedents where court interference without approaching the Assessing Officer was allowed in exceptional cases.

4. The petitioner contended that the "reasons to believe" for re-assessment did not meet legal and statutory parameters, highlighting discrepancies in the assessment order related to the remuneration cost of expatriate employees.

5. The judgment delves into the interpretation of directions issued under Section 144C(5) regarding the attribution of income, emphasizing the rejection of certain propositions made by the Assessing Officer and the Panel's decision on the issue of fixed place Permanent Establishment (P.E).

6. The court emphasized the importance of following the procedure laid down by the Supreme Court in GKN Driveshafts (India) Limited for re-assessment proceedings, stating that deviating from this procedure may not be appropriate and could lead to increased litigation.

7. To protect the petitioner's interest, the court passed directions for filing objections before the Assessing Officer within a specified period, setting a hearing date for addressing arguments on the objections. The Assessing Officer was directed to dispose of the objections by a speaking order, allowing the petitioner time to approach the court if objections were rejected.

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