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2015 (8) TMI 930 - HC - Income TaxValidity of reopening of assessment - Held that - AO has disposed of the said objections without deciding it on merits and solely on the ground that as the assessee has not filed the return pursuant to the notice issued under Section 148 of the Act within a period not less than 30 days from the date of receipt of the notice under Section 148 of the Act. Thus, considering the aforesaid decision of the Hon ble Supreme Court in the case of GKN Driveshafts (India) Ltd (2002 (11) TMI 7 - SUPREME Court) and the decision of Garden Finance Limited (2003 (10) TMI 17 - GUJARAT High Court) and the decision in the case of Arvind Mills Ltd. (2004 (8) TMI 97 - GUJARAT High Court) and the decision of Sahakari Khand Udyog Mandal Ltd (2014 (6) TMI 149 - GUJARAT HIGH COURT) impugned orders disposing of the objections without deciding the objections on merits cannot be sustained and same deserve to be quashed and set aside. The impugned orders passed by the AO disposing of the objections are absolutely on misinterpretation and / or misreading of the decision of the Division Bench in the case of Sahakari Khand Udyog Mandal Ltd (2014 (6) TMI 149 - GUJARAT HIGH COURT) - Decided in favour of assessee.
Issues Involved:
1. Validity of the notices issued under Section 148 of the Income Tax Act, 1961 for AY 2007-08 and 2009-10. 2. Legality of the orders disposing of the objections raised against the initiation of reassessment proceedings. Detailed Analysis: 1. Validity of the Notices Issued Under Section 148 of the Income Tax Act, 1961 for AY 2007-08 and 2009-10: The petitioner, an assessee, challenged the notices issued under Section 148 of the Income Tax Act for the assessment years (AY) 2007-08 and 2009-10, claiming that the Assessing Officer (AO) had reopened the assessments without valid reasons. The AO had issued these notices stating that he had reason to believe that income had escaped assessment. The petitioner argued that the AO did not provide the reasons for reopening the assessments in a timely manner and failed to consider the objections on merits. For AY 2009-10, the petitioner filed the return of income and was later issued a notice under Section 148 on 14.03.2014. The petitioner requested the reasons for reopening, which were provided on 12.01.2015. The petitioner then raised objections on 16.02.2015, which were disposed of by the AO on 27.02.2015 without addressing the merits, citing non-compliance with the 30-day period to file the return. For AY 2007-08, a similar sequence of events occurred. The petitioner filed the return of income, received the notice under Section 148 on 21.03.2014, requested the reasons for reopening, received them on 12.01.2015, and then raised objections on 19.02.2015. The AO disposed of these objections on 27.02.2015 without addressing the merits, again citing non-compliance with the 30-day period. 2. Legality of the Orders Disposing of the Objections Raised Against the Initiation of Reassessment Proceedings: The petitioner argued that the AO erred in not considering the objections on merits and misinterpreted the directions issued by the Division Bench in the case of Sahakari Khand Udyog Mandal Ltd vs. ACIT. The Division Bench had stated that the AO must supply the reasons for reopening within 30 days of the assessee filing the return and that the assessee must raise objections within 60 days of receiving the reasons. However, the Division Bench also clarified that missing these time limits does not negate the procedure provided by the Supreme Court in GKN Driveshafts (India) Ltd vs. Income Tax Officers and Ors, which mandates the AO to dispose of objections on merits before proceeding with the reassessment. The court noted that the AO had misinterpreted the directions of the Division Bench and failed to address the objections on merits. The AO's reliance on the 30-day period for filing the return as a basis for not considering the objections was incorrect. The court emphasized that the AO is bound to dispose of objections on merits, regardless of whether the return was filed within the stipulated 30-day period. The court referred to several judgments, including GKN Driveshafts (India) Ltd, Garden Finance Limited, and Arvind Mills Limited, which support the requirement for the AO to address objections on merits before proceeding with reassessment. The court concluded that the AO's orders disposing of the objections without considering the merits were unsustainable and quashed them. Conclusion: The court quashed the impugned orders disposing of the objections and remanded the matters to the AO to consider and dispose of the objections on merits within two months. The court clarified that it had not expressed any opinion on the legality and validity of the notices under Section 148 or the objections raised against the reopening of assessments. The rule was made absolute to the extent specified, with no costs awarded.
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