2007 (11) TMI 288 - HC - Income Tax

Challenge to notice issued u/s 148 and 142(1) calling upon the assessee to file return - no objection was filed by assessee against the notices before the Assessing Officer rather the petitioner approached this court directly by filling instant application - when notice u/s 148 is issued proper course of action for the assessee is to file return and if he so desires to seek reasons for issuing notices - without going into the merit of the case petitioner is directed to file objections

Summary

Issues:
Challenging notices under sections 148 and 142(1) of the Income-tax Act, 1961 for filing return; Legality of proceeding under section 147 of the Act; Satisfaction of escapement of income for reopening assessment; Obligations of the assessee upon receiving notice under section 148; Requirement for the Assessing Officer to furnish reasons and dispose of objections; Directives for appellate authority to expedite appeals against assessment orders.

Analysis:

The petitioner challenged notices issued under sections 148 and 142(1) of the Income-tax Act, 1961, for filing a return. The petitioner, a limited company engaged in construction activities, contended that the initiation of proceedings under section 147 of the Act was illegal, mala fide, and arbitrary. The petitioner argued that the original assessment was completed after due consideration, and the initiation of proceedings based on a mere change of opinion lacked jurisdiction. The petitioner also raised concerns about the lack of satisfaction recorded by the Assessing Officer regarding income escapement, as required under section 147 of the Act.

The respondents, in their counter-affidavit, clarified that the petitioner was provided reasons for the notices issued under section 148 but failed to raise objections before the Assessing Officer, choosing instead to approach the court directly. The respondents highlighted that the Commissioner's observations on the petitioner's income tax return indicated income escapement, prompting the Assessing Officer to reopen the assessment for a correct evaluation. The Assessing Officer's decision to issue notices was based on a thorough review of the Commissioner's observations, leading to the conclusion that reassessment was necessary.

The court emphasized the established procedure for an assessee upon receiving a notice under section 148, which includes filing a return and seeking reasons for the notice. The Assessing Officer must provide reasons within a reasonable timeframe, allowing the assessee to raise objections, which must be addressed through a speaking order. Referring to a Supreme Court decision, the court reiterated the importance of following due process in such cases, ensuring that objections are considered before proceeding with assessments.

In alignment with the Supreme Court's directive, the court instructed the petitioner to file objections within two weeks, if desired, and mandated the Assessing Officer to address these objections through a reasoned order before continuing with the assessment for the relevant year. The court disposed of the writ application with these directions, emphasizing the need for adherence to procedural requirements and fair consideration of objections.

In a concurring opinion, another judge agreed with the decision and directions provided in the main judgment, supporting the need for the petitioner to file objections and the Assessing Officer to address them appropriately. The comprehensive analysis of the legal issues involved in challenging the notices and the procedural obligations of the parties underscored the court's commitment to upholding due process and fairness in tax assessments.