2019 (8) TMI 333 - HC - Income Tax

Reopening of assessment u/s 147 - withdraw the deduction allowed u/s 54F - whether the respondent is justified in rejecting the objections to the notice u/s 148 without considering the merits raised by the Assessee? - HELD THAT - In the instant case, the reason assigned by the AO for proposing to withdraw the deduction allowed under Section 54F is that the assessee owns more than one residential house on the date of transfer of the original asset. In his objections dated 12.01.2017, the assessee had attempted to clarify that he did not own more than one residential house at the time of sale of the original asset. This specific objection has been overruled by the AO in the impugned order dated 09.10.2017, not only without assigning any reasons but also with an observation that there was no iota of doubt that the assessee owns more than two residential property on the date of sale. In the absence of consideration of the objections raised by the petitioner in the impugned order, it cannot be said that the impugned order is a speaking order and consequently, the order is in contravention of the rulings in GKN Driveshafts (I) Ltd. 2002 (11) TMI 7 - SUPREME COURT For the foregoing reasons, this Court is of the considered view that it would be appropriate to remit the matter back to the respondent for proper consideration of the objections and to pass a speaking order, as held in GKN Driveshafts (I) Ltd., case . Consequently, the impugned order of the respondent dated 09.07.2017 is hereby set aside and the matter is remanded back to the respondent herein for fresh consideration of the petitioner's objections dated 12.01.2017 for the purpose of passing a speaking order, after giving due opportunity of personal hearing to the petitioner. Such an exercise shall be completed, within a period of six weeks from the date of receipt of a copy of this order.

Summary

Issues:
1. Rejection of objections to notice under Section 148 of the Income Tax Act, 1961 without considering the merits raised by the Assessee.

Analysis:
The High Court of Madras addressed the issue of rejecting objections to a notice under Section 148 of the Income Tax Act, 1961 without considering the merits raised by the Assessee. The petitioner had objected to the notice proposing to withdraw a deduction under Section 54(F) of the Act, claiming ownership of only one residential house during the relevant sale. The respondent rejected these objections, leading to the present Writ Petition challenging the rejection order.

The main contention revolved around whether the respondent was justified in dismissing the objections without assessing the merits raised by the Assessee. The petitioner argued that they were entitled to the deduction under Section 54(F) as they owned only one residential house during the sale, contrary to the respondent's claim. On the other hand, the respondent argued that the Assessing Officer's role was to justify the reassessment, leaving the detailed examination of objections for the assessment stage or before the Appellate Authority.

The Court referred to the case of GKN Driveshafts (India) Ltd. vs. Income Tax Officer & others, emphasizing that the Assessing Officer must provide reasons for issuing a notice under Section 148, allow the Assessee to raise objections, and subsequently dispose of these objections through a speaking order. The Court highlighted the significance of the Assessing Officer addressing each objection raised by the Assessee in a qualitative manner to qualify as a speaking order.

The Court concluded that the Assessing Officer's failure to consider the objections in the impugned order rendered it non-speaking and in violation of the principles outlined in the GKN Driveshafts case. Consequently, the Court set aside the rejection order and remanded the matter back to the respondent for proper consideration of the objections and to pass a speaking order within six weeks.

In light of the above analysis, the Writ Petition was disposed of, and the connected Miscellaneous Petition was closed without any costs being awarded.