2019 (2) TMI 452 - HC - Income Tax

Reopening of assessment u/s 147 - notice issued u/s 148 beyond 4 years - failure to record the reasons for reopening - sanction obtained u/s 151(2) and not u/s 151(1) - Held that - once a notice under Section 148 of the Act is issued, the proper course of action for the noticee is to file a return and to seek reasons for issuing notice, if he so desires. 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. - Decision in the case of GKN DRIVESHAFTS (INDIA) LTD. 2002 (11) TMI 7 - SUPREME COURT followed. Since a Bench of this Court, while entertaining this writ petition, by an ad interim order dated 16.11.2016 had clarified that no final order shall be passed by the Assessing Officer without leave of this Court, it is directed that the aforesaid order shall remain in force for a further period of three weeks after decision by the Assessing Officer on the objections preferred by the petitioner so as to enable him to approach the appropriate forum in accordance with law, if occasion so arises.

Issues:
1. Validity of notice issued under Section 148 of the Income Tax Act, 1961 after a significant period.
2. Compliance with the conditions mentioned in the proviso to Section 147(1) of the Act.
3. Jurisdiction of the Assessing Officer in issuing the notice under Section 148.
4. Applicability of the sanction under Section 151(1) versus Section 151(2) of the Act.
5. Allegations of issuing the notice based solely on suspicion.
6. Lack of clarity in the notice regarding whether it is for assessment or re-assessment.
7. Impact of any invalidity in the notice on the entire proceeding.

Analysis:

1. The petitioner challenged the notice issued under Section 148 of the Income Tax Act, 1961 for the assessment year 2009-10, arguing that it was beyond the permissible time frame. The petitioner had previously filed returns, undergone scrutiny, and had an order of assessment passed. Despite a favorable decision in an appeal, a subsequent notice was issued, prompting the petitioner to question the jurisdiction and timing of the notice.

2. The petitioner contended that the conditions specified in the proviso to Section 147(1) were not met, raising concerns about the validity of the notice. The Assessing Officer had added a substantial amount to the petitioner's income through a later order, leading to further disputes and legal challenges.

3. The key argument presented was the lack of jurisdiction in issuing the notice under Section 148, especially after previous assessments and appeals had been concluded. The petitioner emphasized that the notice seemed to be based on suspicion rather than concrete evidence or valid reasons, casting doubt on the procedural correctness of the action.

4. Another significant issue raised was the discrepancy in obtaining sanction under Section 151(1) versus Section 151(2) of the Act. The petitioner highlighted the importance of proper sanctioning procedures and argued that the incorrect application of the sanctioning provision could render the notice invalid.

5. The petitioner's counsel referenced various legal precedents to support the contention that failure to disclose all material facts could lead to the quashing of a notice issued under Section 148. This highlighted the importance of transparency and completeness in the assessment process to ensure fairness and legality.

6. Additionally, the petitioner pointed out the lack of clarity in the notice, as it did not specify whether it was for assessment or re-assessment. This ambiguity raised concerns about the procedural correctness of the notice and its potential impact on the overall assessment process.

7. The judgment referred to the Supreme Court's guidance on the proper course of action for the noticee upon receiving a notice under Section 148. It emphasized the need for transparency, the right to seek reasons, and the obligation of the Assessing Officer to address objections raised by the noticee before proceeding with the assessment.

In conclusion, the court directed the petitioner to file objections challenging the notice within a specified period, with the Assessing Officer obligated to address these objections in a timely manner. The judgment aimed to ensure procedural fairness and adherence to legal requirements in the assessment process.

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