2017 (9) TMI 1416 - HC - Income Tax

Vladity of reopening of assessment - Tribunal s eligibility of allowing the assessee to raise the question of validity of the notices for reopening taking recourse to Rule 27 of the Rules without the assessee having filed cross appeal or cross objection before the Tribunal against the orders of the Commissioner (Appeals) - Held that - Rule 27 of the Rules makes it clear that the respondent in appeal before the Tribunal even without filing an appeal can support the order appealed against on any of the grounds decided against him. It can be easily appreciated that all prayers in the appeal may be allowed by the Commissioner (Appeals), however, some of the contentions of the appellant may not have appealed to the Commissioner. When such an order of the Commissioner is at large before the Tribunal, the respondent before the Tribunal would be entitled to defend the order of the Commissioner on all grounds including on grounds held against him by the Commissioner without filing an independent appeal or cross-objection. Rule 27 of the Rules is akin to Rule 22 Order XLI of the Civil Procedure Code. Sub-rule (1) provides that any respondent, though he may not have appealed from any part of the decree, may not only support the decree but may also state that the finding against him in the Court below in respect of any issue ought to have been decided in his favour; and may also take any cross-objection to the decree which he could have taken by way of an appeal. - Decided in favour of the assessee. Tribunal has invalidated the reopening of assessments in both the assesment years by briefly referring to earlier notices of reopening and held that on identical grounds, the reopening was quashed. From the order of the Tribunal, we do not find a full comparison of the set of reasonings in the earlier and present reopening of assessments. For the assessment year 2002-03, in fact the conclusion of the Tribunal is merely by a reference. We would request the Tribunal to reassess this issue for both the assessment years and record its fuller reasons for coming to a particular conclusion.

Summary

Issues Involved:
1. Correctness of the Tribunal's decision to allow the assessee to argue the validity of the reopening of the assessment without filing a cross appeal or objection.
2. Validity of the notices of reopening of assessments for the assessment years 2001-02 and 2002-03.

Issue-wise Detailed Analysis:

1. Correctness of the Tribunal's Decision to Allow the Assessee to Argue the Validity of the Reopening of the Assessment Without Filing a Cross Appeal or Objection:

The Revenue challenged the Tribunal's decision to permit the assessee to contest the validity of the reopening of the assessments without filing a cross appeal or objection. The Tribunal allowed the assessee to raise this issue based on Rule 27 of the Income Tax Appellate Tribunal's Rules, which states that "the respondent, though he may not have appealed, may support the order appealed against on any of the grounds decided against him."

The Court analyzed Section 253 of the Act, which pertains to appeals to the Appellate Tribunal. Subsections (1) and (2) allow the assessee and the Principal Commissioner or Commissioner to appeal against orders of the Commissioner (Appeals). Subsection (4) permits the assessee or the Assessing Officer to file a memorandum of cross-objections within thirty days of receiving notice of the appeal, even if they did not initially appeal. This memorandum is treated as an appeal presented within the prescribed time.

The Court emphasized that Rule 27 allows a respondent to defend an order on any grounds decided against them without filing a cross-objection. This principle is akin to Rule 22 of Order XLI of the Civil Procedure Code, which permits a respondent to support a decree by challenging any adverse findings without filing a cross-objection.

Citing precedents, the Court reaffirmed that a respondent could challenge adverse findings to support a favorable decree without filing a cross-objection. The Court concluded that the Tribunal was correct in allowing the assessee to argue the validity of the reopening of assessments under Rule 27, even without a cross appeal or objection.

2. Validity of the Notices of Reopening of Assessments for the Assessment Years 2001-02 and 2002-03:

The Tribunal invalidated the reopening of assessments for both years by briefly referring to earlier notices of reopening and held that on identical grounds, the reopening was quashed. However, the Court found that the Tribunal did not provide a comprehensive comparison of the reasons for the earlier and present reopenings of assessments. Specifically, for the assessment year 2002-03, the Tribunal's conclusion was merely by reference.

The Court requested the Tribunal to reassess the issue for both assessment years and record fuller reasons for its conclusions. The appeals were placed back before the Tribunal for a decision on the merits to determine the validity of the reopening of the assessments and any other arising questions.

Conclusion:

The first question was answered against the Revenue, affirming the Tribunal's decision to allow the assessee to argue the validity of the reopening of assessments without filing a cross appeal or objection. For the second question, the Court remanded the matter to the Tribunal for a detailed reassessment and recording of reasons regarding the validity of the reopening of the assessments. Both tax appeals were disposed of accordingly.