2023 (7) TMI 1211 - HC - Income Tax

Reopening of assessment u/s 147 - Ext.P7 order rejecting the objections raised by the petitioner and finding that the reassessment proceedings should continue against the petitioner - HELD THAT - There is considerable merit in the contentions taken by the learned counsel appearing for the respondent Department. Ext.P7 order cannot be held to be in violation of principles of natural justice as the said order was preceded by a show cause notice and the petitioner was given an opportunity to reply to the same. It is also clear that the petitioner was heard before Ext.P7 order was issued. The contention of the petitioner that the matters set out in the reply to the show cause notice have not been properly considered cannot be stated to be a violation of principles of natural justice. The judgments relied on by the learned counsel for the petitioner indicate that they were rendered in completely different fact circumstances. Ext.P7 order has considered the submission made by the petitioner and has found that the contentions taken have to be examined in the reassessment proceedings which, will follow. The officer holds that the nature of transactions mentioned in the show cause notice which have been explained in the reply of the assessee dated 03.06.2022 require detailed examinations with necessary evidence in support of assessee's claim during the reassessment proceedings. No ground on which Ext.P7 order can be interfered with in exercise of jurisdiction under Article 226 of the Constitution of India. The writ petition fails and it is accordingly dismissed.

Summary

Issues:
1. Legality and jurisdiction of reassessment proceedings under the Income Tax Act, 1961 for the assessment year 2016-17.
2. Violation of principles of natural justice in issuing Ext.P7 order rejecting objections raised by the petitioner.
3. Applicability of time limit prescribed in Section 149 of the Income Tax Act, 1961 for reassessment proceedings.
4. Comparison of similar judgments from the Delhi High Court in Rithala Education Society and Divya Capital One Private Limited cases.

Analysis:
1. The petitioner challenged the initiation of reassessment proceedings for the assessment year 2016-17 under the Income Tax Act, 1961, alleging illegality and lack of jurisdiction. The petitioner contended that the return of income for the relevant year was filed on time and accepted, but a notice under Section 148 was issued post-amendment effective from 01.04.2021, requiring cause to be shown for continuing reassessment proceedings.

2. The petitioner raised objections to the show cause notice, but the subsequent Ext.P7 order rejected these objections, prompting the petitioner to claim that the order was illegal and unsustainable. The petitioner argued that Ext.P7 violated principles of natural justice by not considering their contentions properly and that the reassessment proceedings were time-barred under Section 149 of the Income Tax Act, 1961. Reference was made to judgments from the Delhi High Court to support the contention that similar orders had been set aside in comparable situations.

3. The respondent Department, through the Standing Counsel, defended the legality of Ext.P7 order, emphasizing that the petitioner was given a fair hearing and that the reassessment proceedings were necessary to examine potential income escapement. It was argued that the reassessment notice fell within the time limit prescribed in Section 149(1)(b) of the Income Tax Act, allowing for a 10-year period for cases like the present one.

4. The Court, after hearing arguments from both sides, held that Ext.P7 order did not violate natural justice principles as the petitioner had been given an opportunity to respond and was heard before the order was issued. The Court distinguished the Delhi High Court judgments cited by the petitioner, noting that the facts in those cases were different. The Court found that Ext.P7 had considered the petitioner's submissions and determined that further examination was required in the reassessment proceedings. Consequently, the Court dismissed the writ petition, concluding that there were no grounds to interfere with Ext.P7 order under Article 226 of the Constitution of India.