2022 (3) TMI 253 - HC - Income Tax

Reopening of assessment u/s 147 - mandation of passing speaking order - HELD THAT - All proceedings post writ petitioner's /assessee's objections dated 23.11.2021 are set aside solely on the ground that GKN Driveshafts 2002 (11) TMI 7 - SUPREME COURT principle has not been strictly adhered to. The first respondent Assessing Officer shall proceed from this 23.11.2021 objection stage, pass a speaking order, complete the re-assessment as expeditiously as his business would permit and in any event within 12 weeks from today i.e., on or before 28.04.2022.

Summary

Issues involved:
1. Assessment under the Income Tax Act, 1961 for Assessment Year 2008-2009.
2. Compliance with the GKN principle regarding re-assessment and capital gains tax on the profit from the sale of agricultural land.

Detailed Analysis:
1. The judgment pertains to an assessment made under the Income Tax Act, 1961 for the Assessment Year 2008-2009. The matter involved search proceedings under Section 153C of the IT Act, resulting in assessment orders dated 24.12.2009 and 23.12.2011. Subsequently, a notice under Section 148 of the IT Act for re-assessment was issued, which was challenged in court. The Hon'ble Single Judge and the Division Bench directed a personal hearing for the petitioner and compliance with the law. Following objections raised by the petitioner, a show cause notice and a draft assessment order were issued, leading to the impugned order dated 20.12.2021.

2. The primary issue discussed in the judgment is whether the profit from the sale of agricultural land is liable to capital gains tax under Section 45 of the IT Act. The GKN principle, derived from a Supreme Court order, emphasizes the importance of providing reasons for issuing notices, allowing the noticee to file objections, and the assessing officer to pass a speaking order. The petitioner contended that the Assessing Officer failed to follow the GKN principle post the court orders, specifically in considering objections before finalizing the assessment.

3. The court highlighted that the Assessing Officer must consider objections before serving a draft assessment order, as per the GKN Driveshafts case law. The Revenue Counsel argued that the draft assessment itself could serve as a speaking order, but the court rejected this argument. The judgment emphasized the necessity of following the GKN principle in re-assessment cases, ensuring objections are addressed before finalizing the assessment to uphold procedural fairness and legal requirements.

4. The judgment references previous orders by the Hon'ble Single Judge and the Division Bench, emphasizing the need for a personal hearing and adherence to legal procedures. The court directed the Assessing Officer to proceed from the objections stage, pass a speaking order, and complete the re-assessment within a specified timeline. The judgment concluded by disposing of the writ petition and related matters, highlighting the importance of adhering to legal principles and procedural fairness in tax assessments under the IT Act.

Overall, the judgment underscores the significance of following established legal principles, such as the GKN principle, in tax assessments to ensure transparency, fairness, and adherence to due process.