2021 (4) TMI 1098 - HC - Income Tax

Validity of reopening of assessment u/s 147 - notice issued on the last day of expiry of limitation - HELD THAT - Violation in following the procedure for reassessment as set out by the Supreme Court in the case of GKN Drive Shafts V. ITO ( 2002 (11) TMI 7 - SUPREME COURT ) where in conclusion, the Bench states as follows - We see no justifiable reason to interfere with the order under challenge. We clarify that when a notice under Section 148 of the Income tax Act is issued, the proper course of action for the noticee is to file return and if he so desires, to seek reasons for issuing notices. The assessing officer is bound to furnish reasons within a reasonable time. 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 . In the light of the above, the impugned order dated 30.12.2019 is set aside. The petitioner is permitted to file objections to the assumption of jurisdiction within a period of four (4) weeks from date of uploading of this order and an order be passed either accepting or rejecting the same within a period of three (3) weeks from date of receipt of objections, after hearing the petitioner. Proceedings for assessment, if any all, shall be initiated in accordance with law, thereafter.

Summary

Issues: Violation of reassessment procedure and principles of natural justice.

Violation of Reassessment Procedure:
The judgment concerns an impugned order of assessment passed under Sections 147 and 143(3) of the Income Tax Act, 1961, for Assessment Year 2012-13. The petitioner had complied with the requirement of filing a return and sought reasons for the reassessment. However, the assessing officer issued a show cause notice and reasons were furnished on the same day as the assessment order, indicating a lack of adherence to the prescribed procedure. The court noted that the procedure for reassessment, as outlined by the Supreme Court in GKN Drive Shafts v. ITO, was not followed. The judgment highlighted the necessity for the assessing officer to furnish reasons within a reasonable time, allowing the noticee to file objections and requiring the officer to dispose of them by passing a speaking order before proceeding with the assessment.

Principles of Natural Justice:
The court observed a patent disregard for the principles of natural justice based on the sequence of dates and events leading to the assessment order. The judgment emphasized the importance of following due process and ensuring fairness in administrative actions. The court set aside the impugned order dated 30.12.2019, granting the petitioner the opportunity to file objections to the assumption of jurisdiction within four weeks and directing the authorities to pass an order accepting or rejecting the objections within three weeks after hearing the petitioner. The judgment concluded by allowing the writ petition in favor of the petitioner, with no costs imposed and closing the connected miscellaneous petition.