2017 (3) TMI 1257 - HC - Income Tax

Obligatory on the part of the Assessing Officer to dispose of the objection before invoking the re-assessment proceedings - Held that - The reasons for re-opening of the assessment by issuing of the notice under Section 148 of the Act were supplied to the appellant assessee. It is also admitted position that the appellant assessee after receipt of such reasons raised objections. It is also undisputed position that the Assessing Officer did not dispose of the objections prior to proceeding with the assessment further and proceeded to pass the order for assessment. Under the circumstances, it can be said that the mandatory procedure of disposal of the objection by Assessing Officer before proceeding with the assessment has not been followed and exercise of power can be said as not only vitiated, but the order of assessment cannot be sustained. If the decision of the Assessing Officer is illegal on the face of it, in our view, it would fall in the exceptional category of making departure from the normal principles of self-impose limitation of not to interfere in a matter where there is existence of alternative statutory remedy.In view of the aforesaid, the impugned order passed by the learned Single Judge is set aside. The impugned order of assessment is also set aside.

Summary

Issues:
1. Whether the Assessing Officer was obligated to dispose of the objection before invoking the re-assessment proceedings?

Analysis:
The High Court of Karnataka heard an appeal challenging the order of a learned Single Judge who declined to interfere in a matter on the ground of the availability of an alternative remedy. The main issue in the appeal was whether the Assessing Officer was required to dispose of objections before initiating re-assessment proceedings. The appellant had objected to the notice issued under Section 148 of the Income Tax Act for the re-opening of assessment year 2007-2008. Despite the objections, the Income Tax Officer proceeded with the final assessment order under Section 147 read with Section 143(3) of the Act and issued a Demand Notice for recovery. The appellant contended that the failure to dispose of objections before assessment rendered the process invalid.

The Court referred to the decision in G.K.N. Driveshafts (India) Limited Vs. Income Tax Officer, emphasizing that the Assessing Officer must furnish reasons upon request, and the assessee is entitled to file objections, which must be disposed of before proceeding with assessment. The Court also cited a similar case, M/S. Vardhman Metals Vs. Income Tax Officer, where the failure to furnish reasons for re-opening an assessment and the violation of natural justice principles were considered significant. The Court held that the failure to furnish reasons and the non-compliance with natural justice principles rendered the re-assessment invalid.

The Court concluded that the Assessing Officer's failure to dispose of objections before proceeding with assessment was a departure from normal principles, justifying intervention despite the existence of an alternative statutory remedy. Consequently, the impugned order of the learned Single Judge and the assessment order were set aside. The Assessing Officer was directed to proceed in accordance with the law. The appeal was allowed, and no costs were awarded considering the circumstances.