2021 (11) TMI 1115 - HC - Income Tax

Reopening of assessment u/s 147 - requirement for giving a speaking order - Notice at last date of expiry of the limitation for reopening of the assessment - sale of land and the claim of long term capital gain under the provisions of the Income Tax Act - allegation of non-disposal of objections against reopening of assessment - HELD THAT - Perused the notices issued under Section 148 and the reasons given for reopening of the assessment and the subsequent communications which culminated in the issuance of the show cause notices and the disposal of the proceedings vide impugned assessment orders. It is the case where there is slight irregularity in the proceedings carried out by the respondent in as much as the decision of the Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd 2002 (11) TMI 7 - SUPREME COURT was not followed. Though the requirement for giving a speaking order is pursuant to the aforesaid decision of the Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd reported in 259 ITR 119 (SC), is doubtful in the light of the change in the method of assessment under the e-assessment. Nevertheless, assessment ought not to have been carried out in a mechanical manner. Though the petitioners have also not replied to the show cause notices, the fact remains that the objections to reopening of the assessment was conveyed after issuing the show cause notices. The petitioners were also not given sufficient time. Thus, there is procedural irregularity while passing the impugned orders. The impugned orders are set aside and the matters are remitted back to the respondent to pass orders afresh on merits.

Summary

Issues:
Challenging reassessment orders under Section 147 of the Income Tax Act for AY 2012-13 based on notices issued under Section 148, violation of principles of natural justice, procedural irregularities, misrepresentation of facts, failure to participate in proceedings, and compliance with the decision of the Hon'ble Supreme Court in GKN Driveshafts (India) Ltd.

Analysis:

Challenging Reassessment Orders:
The petitioners filed two Writ Petitions challenging reassessment orders under Section 147 of the Income Tax Act for AY 2012-13 based on notices issued under Section 148. The petitioners argued that the reassessment was in violation of the decision of the Hon'ble Supreme Court in GKN Driveshafts (India) Ltd. The dispute pertained to the sale of land and the claim of long-term capital gain, which was previously subject to scrutiny assessment in 2014.

Procedural Irregularities:
The petitioners contended that the respondent did not follow the guidelines set by the Supreme Court in the GKN Driveshafts case. The respondent issued notices and disposed of objections without proper consideration, leading to procedural irregularities in the assessment process. The impugned orders were challenged on the grounds of irregularity and non-compliance with legal procedures.

Misrepresentation of Facts:
The respondent argued that there were disputed facts involved, alleging that the petitioners misrepresented the sale of agricultural land as the sale of villas. This misrepresentation was claimed to have occurred during the filing of returns and subsequent assessment orders, raising concerns about the accuracy of information provided to the tax authorities.

Failure to Participate and Compliance Issues:
The respondent further argued that the petitioners failed to participate effectively in the proceedings. The petitioners requested the Department to furnish reasons for reopening the assessment, citing the GKN Driveshafts case, but failed to engage adequately. Compliance with legal requirements and participation in the assessment process were highlighted as essential aspects in resolving the dispute.

Judicial Decision:
The High Court acknowledged slight irregularities in the assessment proceedings and noted that the Supreme Court's decision in GKN Driveshafts might not apply directly due to changes in assessment methods. However, the Court emphasized that assessments should not be conducted mechanically. The impugned orders were set aside due to procedural irregularities, and the matters were remitted back to the respondent for fresh orders on merits. The petitioners were directed to appear before the Competent Authority for assessment completion, with additional representation allowed within a specified timeframe.

Conclusion:
In conclusion, the High Court directed the Competent Authority to pass fresh orders within a stipulated period, emphasizing the need for procedural compliance and fair assessment practices. The Writ Petitions were disposed of based on the above terms, with connected petitions closed and no costs awarded.