2021 (3) TMI 902 - HC - Income Tax

Reopening of assessment u/s 147 - reopening for the Assessment Year 2012-13 beyond the period of 04 years and that too, in a case of scrutiny assessment under Section 143(3) - As argued none of the objections raised by the assessee could be said to have been dully considered by AO - HELD THAT - As noticed something which in our opinion should not be overlooked. It is a settled position of law that if the Assessing Officer intends to reopen the assessment, he is obliged to assign reasons for the same. Once such reasons are assigned, the assessee has a right to lodge his objections to the same. Once the objections are lodged, it is obligatory for the AO to take such objections into consideration and pass a speaking order. When we say speaking order, it means a meaningful order dealing with the objections raised by the assessee. The exercise which the Assessing Officer is supposed to undertake while dealing with the objections raised by the assessee is not an empty formality. The order disposing of the objections should reflect application of mind. In the case on hand, none of the objections raised by the assessee could be said to have been dully considered by the Assessing Officer in a meaningful manner. We are of the view that we should quash and set aside the order disposing of the objections and remit the matter to the Assessing Officer for fresh consideration of the objections at his end. Writ-application succeeds in part. The order disposing of the objections filed by the assessee dated 5th October, 2018, Annexure-N to this petition Page-93 is hereby quashed and set aside and the matter is remitted to the Assessing Officer. The Assessing Officer shall take into consideration the objections raised by the assessee and pass a fresh speaking order in accordance with law.

Summary

Issues:
Reopening of assessment beyond the statutory period for Assessment Year 2012-13 in a case of scrutiny assessment under Section 143(3) of the Income Tax Act, 1961.

Analysis:
1. The writ-application sought relief under Article 226 of the Constitution of India, challenging the impugned 148 notice and the order disposing of objections. The case involved reopening the assessment for the Assessment Year 2012-13 beyond the statutory period of 4 years, following scrutiny assessment under Section 143(3) of the Income Tax Act, 1961.

2. The reasons for reopening the assessment under Section 147 of the Act were based on discrepancies in the income declared by the assessee. The Assessing Officer noted that the assessee had written off certain liabilities but set them off against deposits, resulting in underassessment of income. The notice of reopening was issued to assess the unexplained income that had escaped assessment for the relevant year.

3. The assessee raised objections to the reasons for reopening, which were subsequently overruled by the Assessing Officer. The writ-applicant challenged the reopening, arguing that the notice was not sustainable in law. The High Court observed that the Assessing Officer must provide valid reasons for reopening, and the assessee has the right to lodge objections, which must be duly considered.

4. The High Court found that the objections raised by the assessee were not adequately considered by the Assessing Officer. As a result, the Court quashed and set aside the order disposing of objections, remitting the matter back to the Assessing Officer for fresh consideration. The Assessing Officer was directed to pass a fresh speaking order, taking into account the objections raised by the assessee within four weeks.

5. The Court clarified that it did not express any opinion on the merits of the case, as the matter was being remitted to the Assessing Officer. If the fresh order passed by the Assessing Officer is adverse to the assessee, the assessee has the right to challenge it before the appropriate forum within the legal framework. A grace period of four weeks would be granted to the assessee to pursue legal remedies if the fresh order is unfavorable.