2016 (12) TMI 1296 - HC - Income Tax

Reopening of assessment - Held that - Whether or not the reasons recorded by the assessing officer for issuing notices under Section 148 are valid and good reasons is entirely a factual issue. The assessee would have the right to urge before the assessing officer that the reasons are not justifiable and the assessing officer would have to deal with and dispose of the assessee s objection by a reasoned order. In the present case, the Writ Court cannot go into the disputed fact of whether or not the petitioner company has window-dressed its accounts by showing contributions on account of share subscription money by paper companies and by showing payments for alleged services rendered by shell companies. Such factual matters are within the exclusive domain of the assessing officer. We are inclined to give an opportunity to the petitioner company to file its objection to the reasons recorded by the assessing officer for issuing the notices under Sec. 148 of the IT Act so that the assessing officer may conduct the assessment proceeding afresh from that stage. Solely on that ground and without going into the merits of the assessment orders dated 31 March, 2015, the said assessment orders are set aside. The petitioners are permitted to file objection to the Department s communication dated 15 January, 2015 within three weeks from date. In the event they do so, the assessing officer shall consider and dispose of such objection by a reasoned order, before proceeding, if at all, with the reassessment in accordance with law and the principles of natural justice. If the petitioners do not file their objection within the time indicated above, the assessment orders dated 31 March, 2015 shall stand revived.

Issues Involved:
1. Challenge to notices issued under Section 148 read with Section 147 of the IT Act for reassessment.
2. Compliance with the High Court's previous order regarding the provision of detailed reasons for reassessment.
3. Validity of ex parte assessment orders passed during the pendency of the writ petition.
4. The right of the petitioner to file objections to the reasons for reassessment.

Detailed Analysis:

1. Challenge to Notices Issued Under Section 148 Read with Section 147 of the IT Act for Reassessment:
The petitioners challenged the notices issued by the Income Tax Department under Section 148 read with Section 147 of the IT Act, 1961, for the assessment years 2007-08 to 2011-12. The notices were issued between 6 February 2014 and 28 February 2015. The petitioners argued that the reasons provided for the reassessment were inadequate and not sufficiently informative, as previously determined by the court.

2. Compliance with the High Court's Previous Order:
The petitioners contended that the Department did not comply with the High Court's order dated 18 December 2014, which required the Department to issue fresh communications containing detailed reasons to substantiate the allegations. The Department, however, issued a letter dated 15 January 2015, along with a certified copy of the enquiry report, which they claimed fulfilled the court's directive. The court found that the Department had indeed complied with the order by providing detailed reasons and the enquiry report, making the reasons for reopening the assessment clear.

3. Validity of Ex Parte Assessment Orders:
During the pendency of the writ petition, the respondent no. 1 passed five ex parte assessment orders on 31 March 2015. The court noted that although there was no stay order preventing the reassessment, it would have been proper for the Department to seek leave of the court before proceeding ex parte, given the pending writ petition. The court emphasized that ex parte orders are generally frowned upon unless there are compelling reasons, as they can affect the civil rights of a party without giving them an opportunity to be heard.

4. Right of the Petitioner to File Objections:
The petitioners argued that they had a right to file objections to the reasons for reassessment provided by the Department. The court agreed, stating that the petitioner company should have filed its objections to the reasons communicated by the Department. The court granted the petitioners an opportunity to file their objections within three weeks from the date of the judgment. The assessing officer was directed to consider and dispose of such objections by a reasoned order before proceeding with the reassessment. If the petitioners failed to file their objections within the stipulated time, the ex parte assessment orders dated 31 March 2015 would stand revived.

Court's Conclusion:
The court concluded that the petitioners were ill-advised to file the present writ application instead of filing objections as permitted by the court's earlier order. For the ends of justice, the court set aside the ex parte assessment orders dated 31 March 2015 and allowed the petitioners to file their objections. The petitioners were also ordered to pay costs of ?25,000 to the respondent Department within two weeks, failing which the writ application would stand dismissed.

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