2008 (7) TMI 22 - HC - Income Tax

Assessment u/s 143 - demand on account of income tax & interest raised - prior to the making of assessment order, no speaking order was passed by AO in respect of the objections taken by the assessee in its letter dated 17.09.07 in view of decision in Smt Kamlesh Sharma v. B.L. Meena, Income-Tax Officer case & inasmuch as the directives of the Supreme Court in GKN Driveshafts we set aside the assessment order AO is directed to pass a speaking order and then proceed with assessment

Summary

Issues:
Challenge against notice under Section 148 of the Income Tax Act and consequential assessment under Section 143(3) made without a speaking order. Jurisdiction issue raised by the petitioner based on GKN Driveshafts case and Smt. Kamlesh Sharma case. Argument by revenue that no jurisdiction issue can be raised at this stage. Assessment order challenged for lack of passing a speaking order on objections raised by the assessee.

Analysis:
The writ petition challenges a notice dated 26.03.2007 under Section 148 of the Income Tax Act and the subsequent assessment under Section 143(3) made on 28.12.2007 without a speaking order. The petitioner contends that the assessment order was made without a speaking order, as required by law following the decision in GKN Driveshafts case. The petitioner relied on the Smt. Kamlesh Sharma case, arguing that the circumstances are identical and the assessment should be set aside due to the absence of a speaking order.

The revenue argued against raising jurisdiction issues at this stage, citing the decision in Assistant Commissioner of Income-Tax v. Rajesh Jhaveri Stock Brokers case. The revenue contended that no further action was required by the Assessing Officer at the issuance stage of the notice under Section 147/148. It was also argued that since the petitioner did not raise objections, there was no need for a speaking order.

The assessment pertained to the year 2000-2001, with the petitioner's income initially declared at Rs 4,086. The notice under Section 148 was issued based on information indicating possible tax evasion. Despite the petitioner's request for information and objections raised, the Assessing Officer did not respond adequately, leading to the assessment order without addressing the objections raised. The court found that the Assessing Officer failed to follow the procedure outlined in the GKN Driveshafts case, which required responding to objections before proceeding with the assessment.

Referring to the Smt. Kamlesh Sharma case, the court emphasized the necessity of passing a speaking order on objections raised before finalizing the assessment. The court set aside the assessment order dated 28.12.2007 and directed the Assessing Officer to pass a speaking order on the objections raised by the petitioner. The decision in Rajesh Jhaveri Stock Brokers case was deemed irrelevant to the present case, as it did not address the procedure for passing a speaking order before assessment, unlike the GKN Driveshafts case. The court concluded by disposing of the writ petition accordingly, without imposing any costs.