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2016 (8) TMI 230 - HC - Income TaxReopening of assessment - AO did not dispose of the objections before passing the order of assessment - Held that - It is true that when the Assessing Officer proceeds to pass the final order of assessment without disposing of the objections raised by the assessee, he effectively deprives the assessee of an opportunity to question the notice for reopening itself. However, the assessee is not left without the remedy when the Assessing Officer proceeds further with the assessment without disposing of the objections. Even before the final order of assessment is passed it would always be open for the assessee to make a grievance before the High Court and to prevent the Assessing Officer from finalizing the assessment without disposing of the objections. The issue can be looked from slightly different angle. Validity of the notice for reopening would depend on the reasons recorded by the Assessing Officer for doing so. Similarly, the order of reassessment would stand failed on the merits of the order that the Assessing Officer has passed. Neither the action of the Assessing Officer of supplying reasons to the assessee nor his order disposing of the objections if raised by the assessee would per se have a direct relation to the legality of the notice of reopening or of the order of assessment. To declare the order of assessment illegal and to permanently prevent the Assessing Officer from passing any fresh order of assessment, merely on the ground that the Assessing Officer did not dispose of the objections before passing the order of assessment, in our opinion would be not the correct reading of the judgement of Supreme Court in case of GKN Driveshafts (India) Ltd vs. Income Tax Officer and ors (2002 (11) TMI 7 - SUPREME Court ). In such judgement, it is neither so provided nor we think the Supreme Court envisaged such an eventuality. - Decided in favour of the Revenue.
Issues Involved:
1. Validity of reassessment proceedings initiated under Section 148 of the Income Tax Act, 1961. 2. Requirement of disposing of objections by the Assessing Officer before proceeding with reassessment. 3. Tribunal’s authority to annul reassessment orders based on procedural lapses. 4. Remedies available to the Revenue and the assessee when procedural lapses occur. Detailed Analysis: 1. Validity of Reassessment Proceedings: The central issue in these tax appeals revolves around the reassessment of the respondent-assessee for the assessment year 2002-03. The reassessment was initiated based on incriminating materials found during a search under Section 132 of the Income Tax Act, 1961. The Assessing Officer issued a notice for reopening the assessment under Section 148 on 30.03.2009, leading to a reassessment order dated 20.11.2009, which added ?75.85 lacs to the assessee's income. 2. Requirement of Disposing of Objections: The assessee raised objections to the notice of reopening, which the Assessing Officer did not dispose of before proceeding with the reassessment. The Tribunal referred to the Supreme Court's decision in GKN Driveshafts (India) Ltd vs. Income Tax Officer and ors, which mandates that the Assessing Officer must dispose of objections by passing a speaking order before proceeding with the reassessment. The Tribunal quashed the reassessment order on this ground. 3. Tribunal’s Authority to Annul Reassessment Orders: The Revenue contended that the Tribunal committed a serious error by setting aside the reassessment order solely because the Assessing Officer did not dispose of the objections. The Revenue argued that the Tribunal should have allowed the Assessing Officer to rectify the procedural lapse and proceed with the reassessment. The Tribunal's decision was challenged on the basis that the assessee had not appealed against the Appellate Commissioner's order, which partially confirmed the additions made by the Assessing Officer. 4. Remedies Available to the Revenue and the Assessee: The Court framed a common substantial question of law: whether the Tribunal was correct in setting aside the reassessment order without allowing the Assessing Officer to pass a fresh order after disposing of the objections. The Court examined various judgments, including those of the Supreme Court and High Courts, to determine whether the procedural lapse of not disposing of objections should permanently terminate the reassessment proceedings or allow the Assessing Officer to rectify the error and proceed afresh. The Court noted that the requirement to dispose of objections before reassessment is not statutory but judicially mandated to ensure fairness. It emphasized that procedural lapses should not permanently bar the Assessing Officer from performing statutory duties. The Court referred to the principles of administrative law, which suggest that when an administrative action is tainted with procedural defects, the proceedings should be placed back at the stage where the defect is detected, allowing the authority to rectify the error and proceed. Conclusion: The Court concluded that the Tribunal erred in annulling the reassessment order without allowing the Assessing Officer to rectify the procedural lapse. It held that the reassessment orders should be set aside, but the Assessing Officer should be permitted to frame fresh assessments after disposing of the objections. The Court modified the Tribunal's judgments accordingly and disposed of all tax appeals, ensuring that the statutory time limits for framing assessments would apply.
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