2018 (5) TMI 260 - HC - Income Tax

Validity of reopening of assessment - failure to follow the judgment of the GKN Driveshafts (India) Ltd. vs. Income Tax Officer, (2002 (11) TMI 7 - SUPREME Court) to the effect that on receipt of objection given by the assessee, to the notice u/s 148, AO is bound to dispose of the objections by passing a speaking order - Held that - In case an order is passed without following a prescribed procedure, the entire proceedings would not be vitiated. It would still be possible for the authority to proceed further after complying with the particular procedure. We make the position clear that non compliance of the procedure indicated in the GKN Driveshafts (India) Ltd., would not make the order void or non est. Such a violation in the matter of procedure is only an irregularity which could be cured by remitting the matter to the authority. The first issue is accordingly answered against the appellant. Period of limitation - appellant wanted the Court to adjudicate the question regarding limitation for passing a fresh order after giving disposal to the objections - Held that - We are not expressing any opinion touching upon the question of limitation as the same would amount to pre-judging the issue. It is for the Assessing Officer to decide the said question by giving reasons. We confirm the order passed by the learned Judge remitting the matter to the Assessing Officer for passing a fresh order, after giving disposal to the objections. We set aside the findings given by the learned Single Judge with regard to the issue relating to limitation.

Issues Involved:
1. Validity of the assessment order under Section 143(3) invoking Section 147 of the Income Tax Act.
2. Requirement of passing a speaking order after objections to a notice under Section 148.
3. Impact of procedural irregularity on the assessment order.
4. Limitation period for passing a fresh assessment order.

Issue-wise Detailed Analysis:

1. Validity of the Assessment Order under Section 143(3) invoking Section 147 of the Income Tax Act:
The core issue is whether the assessment order passed by the Income Tax Officer under Section 143(3), invoking Section 147 after issuing a notice under Section 148, is void ab initio due to failure to follow the Supreme Court's judgment in GKN Driveshafts (India) Ltd. The appellant argued that the violation of the mandatory procedure laid down by the Supreme Court would result in quashing the assessment order. The Revenue contended that the failure to follow the procedure is only an irregularity and does not vitiate the ultimate order. The court concluded that non-compliance with the procedure indicated in GKN Driveshafts (India) Ltd. is an irregularity that can be cured by remitting the matter to the authority.

2. Requirement of Passing a Speaking Order after Objections to a Notice under Section 148:
The Supreme Court in GKN Driveshafts (India) Ltd. mandated that upon receipt of objections to a notice under Section 148, the Assessing Officer must dispose of the objections by passing a speaking order before proceeding with the assessment. The court found that in the present case, the Assessing Officer failed to pass a speaking order addressing the appellant's objections before passing the assessment order, thereby violating the procedural safeguard provided by the Supreme Court.

3. Impact of Procedural Irregularity on the Assessment Order:
The appellant contended that the assessment order passed in violation of the Supreme Court's law is void and cannot be ratified by remitting the matter. The court held that non-compliance with the procedural requirement does not ipso facto make the assessment order bad in law and non-est. It is permissible to comply with the procedural requirement later and pass a fresh order on merits. The court disagreed with the view expressed in Mrs. Jayanthi Natarajan, which quashed the assessment order without remitting the matter for compliance with the procedure.

4. Limitation Period for Passing a Fresh Assessment Order:
The appellant argued that since the assessment order was passed just one day prior to the expiry of the limitation period, it would not be possible to pass a fresh order after giving disposal to the objections. The court noted that the question of limitation is not a pure question of law and must be decided based on facts. The court refrained from expressing an opinion on the limitation issue, leaving it to the Assessing Officer to decide with reasons. The court confirmed the order remitting the matter to the Assessing Officer for a fresh order after addressing the objections and set aside the findings regarding the limitation period.

Conclusion:
The intra-court appeal was allowed in part. The court directed the Assessing Officer to pass a fresh order after giving disposal to the objections, while setting aside the findings on the limitation issue. The procedural irregularity identified was deemed curable by remitting the matter back to the Assessing Officer.

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