2018 (5) TMI 160 - HC - Income Tax

Reopening of assessment - bogus accommodation entries obtained - disposal of objections - non examining of contentions - Held that - In view of the reasons recorded in our order dated 12th April, 2018 without examining the other contentions raised on behalf of the Petitioner, the two orders dated 17th November, 2017, disposing of the Petitioner s objections to the reasons in support of the notices dated 30th March, 2107, are quashed and set aside. The Petitioner is given an opportunity to file fresh objections to the reasons in support of the impugned notice dated 30th March, 2017 in the context of the material now made available (relied upon by the Revenue in its affidavit in reply). AO would pass a fresh order, disposing of the objections within a period of four weeks from the date of filing of the fresh objections. AO will not act upon the impugned notice for the period of four weeks from the date of the communication of the fresh order, disposing of the Petitioner s objections.

Summary

Issues:
Challenging Notice under Section 148 of the Income Tax Act, 1961 for Assessment Year 2010-11, rejection of objections to the reasons in support of the notice, failure to provide information forming the basis of the notice, reliance on information from the Additional Director of Income Tax (Investigation), applicability of guidelines for reopening assessments, restoration of objections to the Assessing Officer, compliance with legal guidelines for issuing reopening notices.

Analysis:
The petition challenged a Notice dated 31st March, 2017, issued under Section 148 of the Income Tax Act, 1961, seeking to reopen the assessment for Assessment Year 2010-11. The petitioners objected to the reasons supporting the notice, seeking a copy of the information received from the Additional Director of Income Tax (Investigation) forming the basis of the notice. The objections were rejected on 17th November, 2017, prompting the petitioners to file the present petition. The Assessing Officer supported the reasons for the notice based on information received from the Investigation office. The court referred to a similar case where objections were restored for fresh consideration, emphasizing the need to provide relevant information and documents as per legal guidelines.

The court highlighted the importance of complying with legal guidelines for issuing reopening notices, citing a CBDT Circular requiring reasons to mention details of relied-upon documents. The court decided to restore the objections to the Assessing Officer for a fresh review, ensuring adherence to legal standards and reducing unnecessary litigation. The court emphasized the need for the Assessing Officer to independently consider the objections and follow legal precedents, such as the GKN Divesshaft case. By restoring the objections, the court aimed to facilitate a fair review process and prevent hasty reassessments.

The court quashed the orders disposing of the objections, granting the petitioner an opportunity to file fresh objections based on the material now made available. The Assessing Officer was directed to pass a fresh order within four weeks of receiving the objections, with a stay on acting upon the notice during this period. Due to the stay granted by the court, the assessment proceedings were stayed, necessitating a further stay on the notice for an additional 10 weeks. The court disposed of both petitions accordingly, leaving all contentions open and not awarding costs to any party.