2025 (2) TMI 51 - HC - Income Tax

Reopening of assessment u/s 147 - requirement to separately dispose of objections before proceeding with the assessment - consolidated order/combined order disposing of the Petitioner s objections to reopening the assessment and assessing the Petitioner s income - HELD THAT - There being no infirmity in the impugned consolidated order. Petitioner has no doubt instituted an Appeal after the filling of this Petition. As clarified that this was only to protect from the bar of limitation. He further pointed out that the factum of the institution of this Petition and the reason for the institution of the Appeal were clarified in the appeal memo. Since the impugned consolidated order warrants interference due to noncompliance with jurisdictional parameters relegating the Petitioner to the alternate remedy would not be appropriate. As noted earlier this Court has interfered with consolidated orders in almost identical circumstances making assessments and disposing of objections. Therefore Mr Suresh Kumar s objection based on exhaustion of alternate remedy cannot be sustained in the facts of the present case. WP Allowed.

ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment include:

Whether the combined order disposing of the Petitioner's objections to reopening the assessment and assessing the Petitioner's income violates the principles of natural justice and the mandatory procedure prescribed by law.
Whether the Petitioner should be relegated to the remedy of appeal, given that an appeal has already been instituted against the impugned order.
Whether the consolidated order dated 31 March 2022 is valid in light of jurisdictional parameters and precedents.

ISSUE-WISE DETAILED ANALYSIS

1. Validity of the Combined Order

Relevant Legal Framework and Precedents: The legal framework involves the procedure for reopening assessments under the Income Tax Act, specifically the requirement to separately dispose of objections before proceeding with the assessment. The precedents include the Supreme Court's decision in GKN Driveshaft (India) Limited Vs ITO and the Bombay High Court's decisions in Fomento Resorts & Hotels Ltd and Asian Paints Ltd. vs Deputy Commissioner Of Income-Tax And Ors.
Court's Interpretation and Reasoning: The Court found that the combined order breached the principles of natural justice by not allowing the Petitioner a reasonable opportunity to challenge the order disposing of the objections separately. The Court emphasized the requirement for separate orders as established in prior cases.
Key Evidence and Findings: The Petitioner's objections were never separately disposed of, and a combined reassessment order was issued. The Court noted similar procedural violations in past cases where such combined orders were quashed.
Application of Law to Facts: The Court applied the principles from GKN Driveshaft and related cases, determining that the combined order was procedurally flawed and violated jurisdictional parameters.
Treatment of Competing Arguments: The Respondents argued that the combined order adhered to statutory timelines and that the Petitioner should pursue an appeal. However, the Court rejected these arguments, highlighting the procedural impropriety of the combined order.
Conclusions: The Court concluded that the combined order was invalid due to noncompliance with jurisdictional parameters and procedural requirements.

2. Relegation to the Remedy of Appeal

Relevant Legal Framework and Precedents: The principle of exhaustion of alternate remedies typically requires parties to pursue available appeals. However, exceptions exist for orders deemed wholly without jurisdiction.
Court's Interpretation and Reasoning: The Court reasoned that since the impugned order was vitiated by jurisdictional errors, the Petitioner was not required to exhaust the appeal remedy.
Key Evidence and Findings: The Petitioner had filed an appeal to protect against the limitation bar but clarified that the appeal was secondary to the present Petition.
Application of Law to Facts: The Court applied the exception to the exhaustion principle, allowing the Petition to proceed despite the pending appeal.
Treatment of Competing Arguments: The Respondents' argument for relegation to appeal was dismissed, as the Court found the order to be without jurisdiction.
Conclusions: The Court decided not to require the Petitioner to pursue the appeal, given the jurisdictional flaws in the order.

SIGNIFICANT HOLDINGS

Core Principles Established:

The Court reaffirmed the necessity for separate disposal of objections before proceeding with reassessment, as per the principles of natural justice and established precedents.
The judgment emphasized that procedural violations in the issuance of combined orders can render such orders invalid.
The Court highlighted that the rule of exhaustion of alternate remedies does not apply when an order is without jurisdiction.

Final Determinations on Each Issue:

The Court quashed the impugned notice and the consolidated order dated 31 March 2022, as they were issued in violation of jurisdictional parameters and natural justice principles.
The Petitioner was not required to pursue the appeal due to the jurisdictional defects in the order.

The judgment concludes with the Court allowing the Petition, making the Rule absolute, and directing the Petitioner to withdraw the appeal within 15 days. The pending interim application was disposed of as it did not survive the Petition's disposal.

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