2017 (4) TMI 529 - HC - Income Tax

Reopening of assessment - Held that - The matter has to go back to the respondent for passing a speaking order on the objections and thereafter, to pass the final order of assessment. Accordingly, the writ petition is allowed and the impugned order of assessment is set aside and the matter is remitted back to the respondent to pass a speaking order on the objections raised by the petitioner, after giving an opportunity of hearing to them. Such exercise shall be done by the respondent within a period of four weeks from the date of receipt of a copy of this order. Thereafter, it is open to the respondent to pass the final order on merits and in accordance with law within a period of four weeks.

Summary

Issues Involved:
1. Legality of reopening the assessment under Section 147 of the Income Tax Act, 1961.
2. Requirement of passing a speaking order on objections before finalizing the assessment.
3. Whether remitting the matter back to the Assessing Officer would extend the period of limitation.

Detailed Analysis:

1. Legality of Reopening the Assessment under Section 147:
The petitioner contended that the reopening of the assessment under Section 147 was without jurisdiction as there was no new tangible material that came to the respondent's knowledge after the original assessment. The petitioner argued that the Joint Venture Agreement dated 12.03.2012 was already scrutinized during the original assessment under Section 143(3). The respondent, however, maintained that the reopening was justified due to the erroneous reduction in the value of inventory, which was not in order as per the joint venture agreement.

2. Requirement of Passing a Speaking Order on Objections:
The petitioner argued that the respondent failed to pass a speaking order on the objections raised against the reopening of the assessment, which is a mandatory requirement as per the Apex Court's decision in GKN Driveshafts (India) Ltd. vs. Income Tax Officer and Ors. The court noted that the Assessing Officer must dispose of the objections by passing a speaking order before proceeding with the final assessment. The respondent admitted that no such order was passed and agreed to remit the matter back to pass a speaking order.

3. Whether Remitting the Matter Back Would Extend the Period of Limitation:
The petitioner contended that remitting the matter back would amount to an extension of the period of limitation prescribed under Section 153(2) of the Income Tax Act. The court, however, rejected this contention, stating that remitting the matter back for curing defects does not equate to extending the limitation period. The court emphasized that once the original order is set aside, the parties revert to their original positions, and a fresh order passed after remand is deemed to be within the prescribed period of limitation.

Conclusion:
The court allowed the writ petition, set aside the impugned order of assessment, and remitted the matter back to the respondent to pass a speaking order on the objections raised by the petitioner. The respondent is directed to complete this exercise within four weeks and thereafter pass the final order on merits within another four weeks. No costs were imposed, and the connected miscellaneous petitions were closed.