2006 (9) TMI 123 - HC - Income Tax

Notice under section 148 - principal grievance of the petitioners is based on the judgment of the apex court in the case of CKN Driveshafts (India) Ltd. v. ITO. The law laid down by the apex court in this judgment is that when a notice u/s 148 is issued, the noticee is expected to file the return and if he so desires he may seek reasons for issuing the notice. The apex court has laid down that on the assessee seeking such reason, the AO is bound to furnish the reasons within a reasonable time . Thereafter, the apex court has added that on receipt of reasons, the noticee is entitled to file objections and AO is bound to dispose of the same by passing a speaking order. The whole idea in laying down the law in the abovereferred judgment of the apex court is to give an opportunity to the assessee to know as to what is the decision on his objections, which decision has also to be arrived at after giving an opportunity to the assessee. In the present case, the assessee has been denied this opportunity. - The orders challenged in the present matter are clearly against the law laid down by the apex court and, therefore, the exercise of writ jurisdiction is called for. That being so, we allow all these petitions and quash and set aside the orders of assessment passed in all these four petitions.

Summary

Issues:
Challenges to assessment orders based on failure to provide reasons for reopening, failure to dispose of objections separately, passing common orders on objections and reassessment, and failure to follow the law laid down by the apex court.

Analysis:
The judgment involves four petitions by sister concern companies challenging assessment orders for the assessment year 2001-02 issued by the Income-tax Officer. The petitioners' principal grievance is based on the apex court's judgment in CKN Driveshafts (India) Ltd. v. ITO, which emphasizes the obligation to provide reasons for issuing a notice under section 148 of the Income-tax Act and to dispose of objections separately.

In the first matter, the petitioner sought reasons for reopening the assessment multiple times, but the reasons were not provided promptly. The assessment order was passed without addressing the objections separately. Similar issues were present in the next three petitions, where common orders were passed on objections and reassessment. The court noted that in previous assessment years, similar issues were resolved by setting aside the assessment orders to dispose of objections properly.

The court highlighted that the officer was aware of the legal obligations but failed to follow them in the current assessment year. The petitioners had filed appeals to the Commissioner of Income-tax (Appeals), but the court found it necessary to intervene due to the non-compliance with the apex court's directives. The orders challenged were against the law laid down by the apex court, justifying the exercise of writ jurisdiction to quash the assessment orders in all four petitions.

As a result of setting aside the assessment orders, the appeals filed by the petitioners were no longer necessary. The court directed the first respondent to pass separate speaking orders on the objections filed by the petitioners, with a provision to withhold the assessment order if objections are rejected for four weeks. The judgment clarified that it did not reflect any opinion on the merits of the impugned orders and made the rule absolute with no order as to costs.

In conclusion, the judgment emphasizes the importance of following legal procedures, providing reasons for reopening assessments, and disposing of objections separately as mandated by the apex court, leading to the quashing of assessment orders in all four petitions.