2019 (9) TMI 389 - HC - Income Tax

Reopening of assessment beyond the period of six years - directions of the appellate authority to re-open the case - exclusion of certain period u/s 150 - non furnishing of reasons in support of the reopening notice - HELD THAT - It is a settled position in law that before commencing the reassessment proceedings under Section 147/148 of the Act, the recorded reasons have to be given to the parties and its objections to it is considered and disposed of by an order. This is in accord what the directions of the Apex Court in GKN Driveshaft 2002 (11) TMI 7 - SUPREME COURT . Therefore, in the normal course an reassessment order without furnishing of reasons in support of the reopening notice would be set aside following the decision of this Court in CIT v/s. VSNL 2011 (7) TMI 715 - BOMBAY HIGH COURT . Revenue s stand before us is that in the present facts where the reopening notice is issued as per the specific directions of the Appellate Authority, the requirement of giving the recorded reasons and considering the objections to it may not arise as the reasons for reopening in the present facts are known to the parties by virtue of the Appellate order. Further the Assessing Officer is only carrying out the directions of the Appellate Authority and the contentions of the Revenue would be considered during the course of reassessment proceedings. Therefore, the contention of the Revenue that the decision of the Apex Court in GKN Driveshaft (supra) will not apply in the present facts as also the alleged conduct of the Petitioner would merit dismissal of the Petition.

Summary

Issues:
Challenge to orders under Section 143(3) of the Income Tax Act for Assessment Years 2007-08 and 2008-09; Lack of furnishing reasons for reopening notices; Invocation of Section 150 of the Act for reopening notices beyond six years; Dispute over whether reasons for reopening need to be provided when directed by Appellate Authority; Alleged deliberate delay in complying with Appellate Authority's directions.

Analysis:
The Petitioner contested two orders dated 31 March 2019 by the Assessing Officer under Section 143(3) of the Income Tax Act for Assessment Years 2007-08 and 2008-09, which stemmed from notices dated 11 March 2019 seeking to reopen the assessments beyond the six-year period under Section 150 of the Act. The Petitioner argued that the orders were unlawful as reasons for the notices were not provided, despite requests, contrary to the Supreme Court's decision in GKN Driveshaft India Ltd. v/s. ITO 259 ITR 19.

On the other hand, the Revenue justified the reopening notices, issued following an Appellate order directing the Petitioner to reassess for the mentioned years within 12 months. The Revenue contended that the Petitioner's failure to file the return of income and delayed request for reasons hindered the assessment process, making the application of GKN Driveshaft (I) Ltd. inapplicable and potentially disentitling the Petitioner from extraordinary writ remedy.

Regarding the requirement to provide reasons for reopening, the Revenue argued that when reopening is done as per Appellate Authority's directions, the necessity of furnishing reasons may not apply as parties are aware of the reasons from the Appellate order. The Revenue asserted that the Assessing Officer is merely following the Appellate Authority's directions, and contentions would be addressed during reassessment. The Revenue posited that GKN Driveshaft's decision might not be applicable in the current scenario, and the Petitioner's conduct could warrant dismissal of the Petition, necessitating detailed examination during the final hearing.

Additionally, the Court noted the need to assess whether the nearly eleven-month delay in complying with the Appellate Authority's directions for issuing reopening notices was deliberate, considering the GKN Driveshaft decision. As an interim measure, the Court stayed the impugned orders pending final disposal of the Petition, scheduled for 21 November 2019.