2017 (3) TMI 1056 - HC - Income Tax

Reopening of assessment - as per appellants notices were not served within time either on the Assessee or on his authorized representative - Held that - Having regard to the facts of present case, as assessment order has already been passed on the basis of impugned notices, we should dispose of the appeal by leaving it open to the appellants to pursue remedy under the Act where all the contentions can be raised including the contention that there was no valid notice served within the time on the assessee or his authorized representative, as contemplated under law. With regard to absence of separate query with regard to AOP, we are not clearly able to cull out whether any separate query / notice was sent to the appellant in Special Appeal No. 30 of 2016. In this regard, we may notice that from the reasons supplied, which we have extracted, wherein ₹ 1,99,31,392/- was noted as escaped assessment, there is reference to the query dated 20.10.2015 and the reminder dated 16.02.2016. We find that in neither writ petition, this query letter dated 20.10.2015 is seen produced. No doubt, learned counsel for the appellant would submit that even reasons supplied would show the query letter was addressed to Sri Maruti Nandan Sah and not to AOP but we would think prima facie that Sri Maruti Nandan Sah is also admittedly the principal member of AOP. We cannot, on the material available, find conclusively - whether it is issued to Sri Maruti Nandan in his individual capacity or as member of the AOP. We would still leave it open to the appellants to raise contentions before statutory authority. We, therefore, cannot proceed on the basis that there is no query letter issued but even then, we leave it open to the appellants to pursue the said contention also that there is no query letter issued with regard to the AOP. Therefore, we think that we should not interfere under Article 226 in the facts of these cases. Instead, we leave it open to the appellants to raise all contentions available to them under the law before the statutory authority.

Summary

Issues:
1. Validity of notice under Section 148 of the Income Tax Act, 1961 for reassessment of income for AY 2009-10.
2. Proper issuance of query letters to the Assessee and the Association of Persons (AOP).
3. Compliance with the procedural requirements under Section 147 of the IT Act, 1961.
4. Burden of proof regarding the service of notice on the Revenue.
5. Financial implications for the appellants in pursuing statutory remedies.

Issue 1: Validity of Notice under Section 148:
The judgment pertains to two connected appeals challenging the notices issued under Section 148 of the Income Tax Act, 1961 for reassessment of income for AY 2009-10. The appellants contended that the notices were not served within the stipulated time frame on the Assessee or the authorized representative. The Department alleged that income amounting to ?1,99,31,392 had escaped assessment, justifying the reopening under Section 147 of the Act. The Single Judge found that the reasons were recorded in the query letter, and while there was no interference under Article 226 of the Constitution, the appellants were allowed to file objections to the notice.

Issue 2: Proper Issuance of Query Letters:
The appellants raised concerns regarding the issuance of query letters, particularly to the AOP. It was argued that only Mr. Maruti Nandan Sah received the query letter in his individual capacity, not as a representative of the AOP. The judgment highlighted that the query letter dated 20.10.2015 was referenced in the reasons supplied, but it was not produced in the writ petitions. The Court left it open for the appellants to raise contentions before the statutory authority regarding the absence of a separate query for the AOP.

Issue 3: Compliance with Procedural Requirements:
The judgment emphasized that the notices were issued under Section 147 of the Act, and the reasons for reopening were communicated to the appellants. However, the assessment orders had been completed by the time the appeal was filed. The Court suggested that the appellants pursue remedies under the Act to address all contentions, including the validity of the notice served within the prescribed time frame.

Issue 4: Burden of Proof on Revenue:
Referring to a judgment from the Delhi High Court, the Court noted that the burden of proving the service of notice lies with the Revenue. In this case, as assessment orders had already been passed based on the impugned notices, the Court disposed of the appeals, allowing the appellants to raise all contentions under the Act, including challenges to the validity of the notice.

Issue 5: Financial Implications:
The appellants expressed concerns about financial difficulties in pursuing statutory remedies due to the large sums involved. The respondent, through their advocate, mentioned that as per a circular by CBDT, the appellants would need to deposit only 15% for a stay application. The Court declined to grant further relief in the form of waiving the amount to be paid, disposing of the appeals and advising the appellants to pursue statutory remedies before the statutory authority.

In conclusion, the High Court of Uttarakhand disposed of the appeals, leaving it open for the appellants to raise all contentions under the law before the statutory authority. The judgment highlighted the importance of complying with procedural requirements, including the proper issuance of notices and query letters, and emphasized the appellants' right to pursue statutory remedies to address the issues raised in the appeals.