2017 (9) TMI 1042 - HC - Income Tax

Reopening of assessment - reasons to believe - whether the respondent was duty bound to pass a separate speaking order on the objections raised by the petitioner for reopening? - Held that - The Hon ble Supreme Court in the case of GKN Driveshafts (India) Ltd. (2002 (11) TMI 7 - SUPREME Court) held that when a notice under Section 148 of the Income Tax Act is issued, the proper course of action for the noticee is to file a return and if he so desires, to seek reasons for issuing notices. The Assessing Officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the Assessing Officer is bound to dispose of the same by passing a speaking order. This procedure has been carved out in GKN Driveshafts (supra) binds not only the assessee, but the revenue as well. Thus, the procedure, which was required to be followed by the respondent is to dispose of the petitioner s objections by passing a speaking order. Admittedly, in the instant case, this has not been done by the respondent, but the respondent seeks to sustain the impugned assessment order stating that in the first few paragraphs of the order, he has dealt with objections and disposed of accordingly. Unfortunately, the manner in which the respondent has decided the issue is wholly unsustainable in law. The purpose for passing a separate speaking order on the objections is with a view to afford an opportunity to the assessee to question such an order, if he is aggrieved. The respondent by passing the impugned order has taken away such valuable right from the petitioner inasmuch as the impugned proceedings is an order of assessment under Section 143(3). Therefore, if an order of assessment has to be challenged, necessarily an appeal has to be preferred and only in rarest of rare case, Courts would entertain challenge to assessment orders in writ proceedings. Thus, the procedure adopted by the respondent is completely flawed, which goes to the root of the matter, thereby, vitiates the entire proceedings. - Decided in favour of assessee.

Issues Involved:
1. Validity of reopening the assessment under Section 147 of the Income Tax Act, 1961.
2. Requirement of a separate speaking order for objections to reopening.
3. Jurisdictional challenges and procedural compliance.
4. Availability of alternate remedies.

Issue-wise Detailed Analysis:

1. Validity of reopening the assessment under Section 147 of the Income Tax Act, 1961:
The petitioner challenged the reopening of the assessment for the year 2009-10, arguing that it was arbitrary, unjust, and illegal. The initial assessment was completed on 18.11.2011 under Section 143(3) of the Act. The reopening notice was issued on 30.03.2016 under Section 148, claiming income had escaped assessment. The petitioner contended that the reopening was based on a change of opinion and not new facts, which is not permissible. The petitioner had already declared the capital gains in the assessment year 2007-08 and paid the necessary taxes.

2. Requirement of a separate speaking order for objections to reopening:
The petitioner argued that the respondent failed to pass a separate speaking order on the objections to the reopening, as mandated by the Supreme Court in GKN Driveshafts (India) Ltd. v. ITO. The respondent, however, included the objections within the impugned assessment order. The court held that the procedure adopted by the respondent was flawed and vitiated the entire proceedings. The Supreme Court's decision in GKN Driveshafts requires that objections to the reopening must be disposed of by a separate speaking order to afford the assessee an opportunity to challenge it.

3. Jurisdictional challenges and procedural compliance:
The petitioner argued that the reopening was without jurisdiction, especially since more than four years had lapsed since the original assessment, and there was no failure to disclose material facts fully and truly. The court noted that the respondent's failure to pass a separate speaking order on the objections was a gross breach of natural justice principles. The court referenced several cases, including KSS Petron Private Ltd. and Sona Builders, to emphasize that non-compliance with procedural requirements renders the assessment order without jurisdiction.

4. Availability of alternate remedies:
The respondent argued that the petitioner had an alternate remedy of appealing against the assessment order and that the writ petition was not maintainable. The petitioner countered that the writ petition was maintainable as the assessment was without jurisdiction and in violation of the Supreme Court's decision in GKN Driveshafts. The court agreed with the petitioner, stating that the procedural flaw in not passing a separate speaking order vitiated the entire proceedings, making the writ petition maintainable.

Conclusion:
The court held that the respondent's failure to pass a separate speaking order on the objections to the reopening notice was a procedural flaw that vitiated the entire proceedings. The impugned assessment order was quashed, and the writ petition was allowed. The court emphasized the binding nature of the Supreme Court's decision in GKN Driveshafts, which requires a separate speaking order to be passed on objections to reopening notices.

← Previous Next →