2015 (7) TMI 363 - HC - Income Tax

Reopening of assessment - Escapement of Income - Non speaking order - Non application of mind by Assistant Commissioner - Held that - The Court is required to make detailed reference to all this simply because in a proceeding which is as serious as this, the stand of the revenue appears to be mechanical. The attitude is light hearted and casual. During the course of arguments as well the Advocate refers to the instructions issued to the counsel for the revenue as reflected in the reply affidavit. The officers ought to know that when they file an affidavit in the Court and make a statement on oath, such statements are subject to scrutiny and verification. Their veracity can be tested, including by asking the deponent to step into the witness box and affording to the adversary a chance to cross examine him or her and in the proceeding before the court. Now at least, we expect the officers like the present deponent to be careful and vigilant. If her deposition before the Court is based on records then the least that is expected is such records are perused by the officers before deposing on oath. We do not find any application of mind by the Assistant Commissioner of Income Tax to these aspects at all. She rejected the objections on 26th February, 2015. We are surprised that neither she makes any reference to the Assessment and Appellate proceedings, the specific disallowance but files an affidavit in reply in the Court and merely copies the reasons which have been recorded by her predecessor. It was her bounden duty to have referred to all factual averments in the writ petition, the documents in support thereof and their contents and thereafter dealt with the same. There is a sanctity which is attached to the principles evolved by this Court and equally the Hon ble Supreme Court. We do not find that the impugned notice can be sustained. Once we have arrived at this conclusion and on all counts, the assessee s objections refer to the materials which were before the assessing officer for the earlier assessment year, some of which were also the subject matter of revisional/Appellate proceedings, then, we would be failing in our duty if we do not interfere with the Notice in our writ jurisdiction. Once we come to this conclusion, then, we do not find any substance in the contention of Mr. Pinto that this Court cannot invoke its writ jurisdiction. As part of our further duty and to reinforce our conclusion that if the factual aspects and the details are undisputed then the issuance of the notice itself was not called for and if it was not called for, it cannot be upheld. Thus, by invoking the writ jurisdiction we interfere with and quash the same. - Decided in favour of assessee.

Summary

Issues Involved:
1. Legality and validity of the notice dated 28th March 2014 issued under section 148 of the Income Tax Act for reopening the assessment for the assessment year 2007-08.
2. Rejection of objections by the petitioner to the reopening of the assessment.

Issue-wise Detailed Analysis:

1. Legality and Validity of the Notice:
The petitioner, a company engaged in manufacturing and trading industrial chemicals, filed a writ petition under Article 226 of the Constitution of India seeking to quash the notice dated 28th March 2014 issued under section 148 of the Income Tax Act for reopening the assessment for the assessment year 2007-08. The assessment was originally completed under section 143(3) of the Income Tax Act on 21st December 2009. The petitioner argued that the notice was issued after four years, and therefore, the assessing officer must clearly indicate that income chargeable to tax had escaped assessment due to the failure of the assessee to disclose fully and truly all material facts necessary for the assessment year.

The court found that the reasons recorded for reopening the assessment were not sufficient and did not meet the statutory mandate. The court noted that the issues raised in the notice, such as disallowance under section 14A, provision for bad and doubtful debts, interest allocation to capital gains, and TDS reconciliation, were already examined during the original assessment proceedings. The court emphasized that the assessing officer must have tangible material to form a reasonable belief that income had escaped assessment due to the assessee's failure to disclose material facts, which was not evident in this case.

2. Rejection of Objections by the Petitioner:
The petitioner filed detailed objections to the reopening of the assessment, contending that the initiation of proceedings was invalid and illegal. The objections highlighted that the issues raised in the notice were already addressed during the original assessment and subsequent appellate and revision proceedings. The petitioner argued that there was no failure to disclose material facts and that the reasons recorded for reopening the assessment were not specific or tangible.

The court found that the Assistant Commissioner of Income Tax, who rejected the objections on 26th February 2015, did not adequately address the petitioner's detailed objections. The court observed that the order rejecting the objections was mechanical and lacked application of mind. The court criticized the revenue's casual attitude and emphasized the need for a speaking order that deals with the objections in detail.

The court concluded that the impugned notice could not be sustained as it was vitiated by non-application of mind and did not meet the requirements of the proviso to section 147 of the Income Tax Act. The court noted that the assessee had provided all necessary material facts during the original assessment, and there was no failure to disclose material facts.

Judgment:
The court allowed the writ petition, quashing the notice dated 28th March 2014 issued under section 148 of the Income Tax Act for reopening the assessment for the assessment year 2007-08. The court made the rule absolute in terms of prayer clause (a) and did not pass any order as to costs.