2024 (9) TMI 1336 - HC - Income Tax

Reopening of assessment u/s 147 - Issuance of three successive notices - there was no return to cross-check - HELD THAT - Company brought to the notice of the officer concerned about the filing of the returns in the year 2010 i.e., on 08.10.2010 and about the One Time Settlement. However, the officer concerned without application of mind, disposed of the objections concluding that there are reasons to believe that income has escaped assessment and the same was established on the intimation received from the Investigation wing, Mumbai and there was no return in hand for the relevant assessment year to cross-check the facts. This is untenable. The reason is apparent. It is relevant to note that the company had already filed its returns in the year 2010 and it was also brought to the notice of the department about the one-time settlement. However, the same was not noticed and the officer concerned concluded that there was no return to cross-check. Absolutely, there is no application of mind by the officer concerned in dealing with the objections and reopening the assessment. The reasons recorded for reopening of assessment are without application of mind and cannot be said to be reasons to believe which is a mandatory condition to invoke the provisions of Section 147 R/w Section 148 of the Act. The reasons recorded for reopening of assessment are based on a borrowed satisfaction which is impermissible in law. Hence, the reasons for reopening of assessment are untenable. Furthermore, the issuance of successive notices under Section 148 of the Act is also unsustainable in law. Therefore, the Communication dated 27.11.2017 and the notices are liable to be quashed. Accordingly, they are quashed. WP allowed.

Summary

Issues:
1. Validity of successive notices issued under Section 148 of the Income Tax Act.
2. Legality of reasons recorded for reopening assessment.
3. Existence of income escaping and jurisdictional errors.
4. Maintainability of Writ Petition.
5. Discretionary powers exercised by the respondent.
6. Application of mind by the officer concerned.
7. Compliance with mandatory conditions under Section 147 and Section 148 of the Act.

Analysis:

The judgment delivered by the High Court of Karnataka involved a case where a Company had filed its returns for the Assessment Year 2010-11, declaring a total income. Subsequently, the Company received three successive notices under Section 148 of the Income Tax Act in 2017, leading to a writ petition challenging the validity of these notices and the reasons for reopening the assessment.

The petitioner argued that the successive notices were defective and lacked proper approval under Section 151 of the Act. It was contended that the reasons recorded for reopening the assessment did not meet the mandatory condition of having reasons to believe. The petitioner also disputed the existence of income escaping and raised concerns about the borrowed satisfaction in the reasons recorded. The petitioner sought the writ petition to be allowed.

On the other hand, the respondents argued that the writ petition was not maintainable as the petitioner had an alternate remedy under the Act. They contended that there were factual questions involved that could not be decided in extraordinary jurisdiction. The respondents highlighted information received from the Investigation wing, Mumbai, regarding a one-time settlement by the Company with a bank, leading to alleged income escapement.

After considering the contentions of both parties, the Court observed that the Company had indeed filed returns in 2010, which were not considered by the Income Tax Officers issuing the notices in 2017. The Court found that the reasons for reopening the assessment lacked proper application of mind and were based on borrowed satisfaction, rendering them untenable. Additionally, the issuance of successive notices was deemed unsustainable in law. Consequently, the Court quashed the notices and the communication dated 27.11.2017.

In conclusion, the Court allowed the Writ Petition, ordering a Writ of Certiorari to quash the notices and communication issued by the Income Tax Officers and the Assistant Commissioner. The judgment emphasized the importance of complying with mandatory conditions under the Income Tax Act and ensuring proper application of mind in assessment proceedings.