2015 (7) TMI 1030 - HC - Income Tax

Reopening of assessment - Under invoicing of the exports and income arising out of mining is an illegal incomeHeld that - The objection filed by the petitioner to the reasons recorded in support of the impugned notice, very categorically states that they do not hold any mining leases as they are only in the business of buying ores, processing it and exporting the processed iron ore. Thus, the second ground/ reason recorded in support of the notice viz. illegal mining does not apply. However, order dated 20/02/2015, while disposing of the objections, does not deal with the above objection. On the contrary, the order dated 20/02/2015 disposes of an imaginary objection, not taken by the petitioner, by a reasoned order. The least that is expected of Assessing officer while disposing of the objections filed by the Assessee is some application of mind to the objections raised by the Assessee and in that context, take a relook at the reasons recorded in support of the reopening notice. On such a fundamental lapse on the part of the Assessing Officer in disposing of the objections was pointed out to us, we expected the State-Revenue would withdraw the order and crave liberty to pass a fresh order dealing with the objections of the petitioner. Therefore, we decided to set aside the order of the Assessing Officer disposing of the objections to the impugned notice - Decided in favour of assessee for statistical purposes.

Summary

Issues:
Challenge to notice under Section 148 of the Income Tax Act, 1961 for reopening assessment for the Assessment Year 2008-2009 based on under invoicing of exports and income arising from mining; Failure of Assessing Officer to address objections raised by the petitioner regarding not holding any mining leases; Violation of procedural requirements for reopening assessments as per GKN Driveshafts case; Failure of the Revenue to objectively deal with objections raised by the petitioner; Justification of the impugned notice based on under invoicing despite objections regarding ownership of mining leases.

Analysis:
The petition challenged a notice issued under Section 148 of the Income Tax Act, 1961, seeking to reopen the assessment for the Assessment Year 2008-2009. The reasons for reopening were based on under invoicing of exports and income from mining, following a Supreme Court order regarding expired mining leases in Goa. The petitioner objected to these reasons, stating they were not involved in mining but only traded iron ore. The Assessing Officer disposed of the objections without addressing the key objection of not holding mining leases, leading to a lack of application of mind.

The court emphasized the importance of following procedural requirements before reopening assessments, as outlined in the GKN Driveshafts case. It highlighted that the Assessing Officer must furnish reasons for reopening to the assessee, who can then object and have those objections considered in a speaking order. This procedure aims to prevent unnecessary reassessment proceedings and ensure fairness to the assessee.

In this case, the Assessing Officer failed to objectively address the petitioner's objections, instead justifying the reopening based on under invoicing. The court criticized the Revenue for attempting to sustain the order despite clear lapses in addressing objections. It noted that the Revenue's attitude risked undermining the purpose of the procedural safeguards and indicated a lack of proper application of mind.

Ultimately, the court set aside the order disposing of objections and directed the Revenue to assign the issue to an officer other than the one who made the initial decision. The new officer was tasked with expeditiously addressing the objections, ensuring a fair and thorough review before proceeding with any further actions. The court's decision aimed to uphold procedural fairness and prevent arbitrary actions by the Revenue.