2021 (7) TMI 173 - HC - Income Tax

Reopening of assessment u/s 147 - non disposing of objections raised by assessee - Non speaking order passed - HELD THAT - Two components are of paramount importance. Adherence of the procedures contemplated, firstly and furnishing reasons for arriving a particular decision, thereafter. Thus, on initiation of re-opening proceedings by invoking Section 147 AO is obligated to follow the procedures contemplated and furnish the reasons for arriving a particular decision. In the present case, reasons are furnished for reopening of assessment. The objections are to be disposed of in a meaningful manner, in view of the fact that the reopening procedures in the present case falls beyond the period of four years and within six years. Thus, the ingredients contemplated in the proviso clause is to be complied with. Thus, the consideration of objections and the findings for reopening are of vital and in the absence of any reasons, one cannot form an opinion that reopening of assessment is made with reference to the conditions stipulated in the proviso clause to Section 147 - Conditions under the provisions are mandatory. In order to establish the compliance of conditions, the authority competent must provide reasons, stating that the conditions stipulated in the proviso clause has been complied with. Thus, a non-speaking order in this regard cannot be sustained and therefore, the impugned order is to be construed as lacking, on application of mind and the objections raised by the petitioner are not considered, nor a finding is given. The impugned notice issued by the respondent in proceedings issued under Section 143(2) of the Income Tax Act is quashed and the matter is remanded back to the respondent for fresh consideration. - Decided in favour of assessee.

Summary

Issues:
Challenge to Notice under Section 143(2) of the Income Tax Act in re-opening of assessment proceedings without providing reasons.

Analysis:
The petitioner, a subsidiary of a company, filed its income tax return for Assessment Year 2009-10 and was selected for scrutiny by the respondent. The case was referred to the Transfer Pricing Officer under Section 92CA of the Act, and after submitting necessary documents, the assessment was completed under Section 143(3) of the Act. However, the respondent re-opened the assessment without providing reasons for the re-opening, leading to the issuance of a Notice under Section 143(2) of the Act upon the petitioner's request to treat the original return as a response to the re-opening notice.

The petitioner contended that the principles established by the Supreme Court in the case of GKN Driveshafts India Ltd. vs. ITO were not adhered to in the re-opening of assessment proceedings. The Court emphasized the importance of following procedures and providing reasons for decisions, especially in re-opening proceedings under Section 147 of the Act. The Court highlighted that reasons for re-opening must be furnished, objections must be considered meaningfully, and findings must be given to comply with the mandatory conditions under the proviso clause of Section 147.

The Court found that the impugned notice lacked a meaningful consideration of objections and reasons for re-opening, merely reproducing statutory provisions. As a result, the Court quashed the notice issued under Section 143(2) of the Act and remanded the matter back to the respondent for fresh consideration. The respondent was directed to follow proper procedures and the principles laid down by the Supreme Court in the GKN Driveshafts case, ensuring a fair reassessment process for the petitioner. The Court ordered the reassessment to be conducted expeditiously, allowing the writ petition and closing the connected miscellaneous petition without costs.