2015 (8) TMI 925 - HC - Income Tax

Reopening of assessment - Held that - Re-opening of assessment under Section 143 of the Act was itself bad in law, we set-aside the order passed by the writ Court and as well as the re-assessment order dated 31.01.2014. Accordingly , this appeal as well as the writ petition stand allowed. The question of non-furnishing the reasons for re-opening an already concluded assessment goes to the very root of the matter. Besides this, it is not disputed that the statement of some other person which was recorded and the appellant was asked to explain the same, was itself not furnished to the appellant-assessee. As such, besides non-furnishing of reasons for re-opening, there was also gross violation of principles of natural justice and in view of the aforesaid, we are of the opinion that writ petition against the re-assessment order allowed - Decided in favour of assessee.

Summary

Issues:
Challenge to notice under Section 148 of the Income Tax Act, 1961 based on availability of alternative remedy, Non-furnishing of reasons for re-opening assessment, Violation of principles of natural justice, Entitlement of assessee to reasons for re-opening, Challenge to re-assessment order, Dispute over statement of another person not furnished to appellant, Justification of writ petition dismissal based on availability of alternative remedy, Legality of re-opening assessment under Section 143 of the Act.

Analysis:
The appellant filed an appeal against the judgment dismissing the petition challenging the notice under Section 148 of the Income Tax Act, 1961, citing the availability of an alternative remedy. The appellant's return for the assessment year 2006-07 was accepted under Section 143(1) of the Act, but a notice under Section 148 was issued for re-opening the assessment in 2013. The appellant requested the earlier return to be considered in response to the notice under Section 148 and asked for reasons for the re-opening, which were not provided. The Assessing Officer proceeded with re-assessment without furnishing reasons or the statement on which the re-opening was based, leading to a violation of natural justice principles.

The respondent argued that since the re-assessment order was passed, it could be challenged on appeal, justifying the dismissal of the writ petition due to the availability of an alternative remedy. However, the court found that non-furnishing of reasons for re-opening an assessment is crucial. The appellant was entitled to reasons for re-opening, which were not provided despite a request. The court held that proceedings for re-assessment could not proceed without furnishing reasons. Additionally, the statement of another person, which formed the basis for re-opening, was not given to the appellant, further violating natural justice principles.

The court concluded that the re-opening of the assessment was legally flawed, leading to the setting aside of the re-assessment order and the writ court's decision. The appeal and writ petition were allowed. The respondent was permitted to proceed lawfully after providing reasons for the notice under Section 148, if permissible by law. No costs were awarded, and pending applications were consigned to file. The judgment emphasized the importance of furnishing reasons for re-opening assessments and complying with principles of natural justice in such proceedings.