2018 (7) TMI 954 - HC - Income Tax

Reopening of assessment - non supply of reason to believe - Non speaking order - Held that - The course adopted by the learned Assessing Officer rejecting the application for furnishing reasons to believe without supplying the reasons to believe, is contrary course outlined by Their Lordships in GKN Driveshafts 2002 (11) TMI 7 - SUPREME COURT the rebuttal order dated 2-8-2017 is quashed and the Assessing Officer is directed to furnish reasons to believe within a period of six weeks and thereafter, the petitioners will file objections within four weeks and thereafter, the Assessing Officer consider and dispose of the objections by a speaking order within reasonable time

Summary

Issues:
Challenging order of Assistant Commissioner of Income Tax rejecting application for reasons to believe under Section 147 of the Income Tax Act, 1961.

Analysis:
The petitioners questioned the order passed by the Assistant Commissioner of Income Tax, Raipur, regarding the reopening of their case under Section 147 of the IT Act. They were served with a notice under Section 142(1) of the IT Act on 21-7-2017 and moved an application seeking reasons to believe recorded under Section 147 read with Section 148 of the IT Act. The Assistant Commissioner rejected the application, leading to the filing of writ petitions by the petitioners. The respondents argued that the objections and reasons for reopening were part of the rebuttal order and that providing a copy of reasons before initiation of reopening proceedings was unnecessary.

The petitioners contended that they were not served with a notice under Section 148 of the IT Act and emphasized the importance of furnishing reasons to believe for reopening assessment, citing the Supreme Court's decision in GKN Driveshafts (India) Ltd. v. Income Tax Officer. The respondents maintained that the statutory compliance was met, and the writ petitions should be dismissed.

The Court examined Sections 147 and 148 of the IT Act, emphasizing the requirement of recording reasons to believe under Section 147 and issuing a notice under Section 148 where income has escaped assessment. Referring to the GKN Driveshafts case, the Court highlighted the necessity for the Assessing Officer to furnish reasons within a reasonable time upon receiving a notice under Section 148. The Court also cited judgments from the Delhi and Bombay High Courts, stressing the mandatory nature of supplying reasons for reopening assessments within a reasonable time.

In light of the legal principles established by the Supreme Court and the High Courts, the Court found that the Assessing Officer's rejection of the application for reasons to believe without supplying the reasons was contrary to the law. Consequently, the rebuttal order was quashed, and the Assessing Officer was directed to provide reasons to believe within six weeks. The petitioners were granted four weeks to file objections, and the Assessing Officer was instructed to dispose of the objections by a speaking order within a reasonable time, in accordance with the law. The writ petitions were allowed with each party bearing their own costs.