2015 (12) TMI 773 - HC - Income Tax

Reopening of assessment - whether the reopening of the assessment under Section 147/148 is valid? - Held that - In respect of one of the issues, viz., payment of interest on fixed deposits, the Assessees drew the attention of the Assessing Officer ( AO ) to the fact that the amount has already been offered to tax and tax had been paid and yet, in the order disposing of the objections, the AO is completely silent as regards this objection. The Court is of the view that notwithstanding several decisions of the Supreme Court as well as this Court clearly enunciating the legal position under Section 147/148 of the Act, the reopening of assessment in cases like the one on hand give the impression that reopening of assessment is being done mechanically and casually resulting in unnecessary harassment of the Assessee. - Decided in favour of assessee.

Summary

Issues:
Delay in refiling appeals, validity of reopening assessment under Section 147/148 of the Income Tax Act, 1961, compliance with legal requirements for reopening assessment, imposition of costs on the Revenue for filing frivolous appeals.

Delay in Refiling Appeals:
The High Court condoned the delay in refiling the appeals based on the reasons stated in the applications, and subsequently disposed of the applications.

Validity of Reopening Assessment under Section 147/148:
The appeals by the Revenue were directed against a common order passed by the Income Tax Appellate Tribunal for the Assessment Year 2002-03. The issue in question was whether the reopening of the assessment under Section 147/148 of the Act was valid. The Court found that the reasons for reopening did not satisfy the basic requirement of the law in two aspects. Firstly, the reopening was beyond four years from the original assessment, and the reasons did not clearly state a failure to disclose material particulars. Secondly, the Assessing Officer failed to address objections raised by the Assessees, indicating a lack of compliance with legal requirements.

Compliance with Legal Requirements for Reopening Assessment:
The Court noted that the reopening of assessments seemed to be done mechanically and casually, causing unnecessary harassment to the Assessees. While the Court refrained from imposing heavy costs due to the appeals being dismissed ex parte, it directed the Revenue to issue instructions to Assessing Officers to strictly adhere to legal requirements for reopening assessments. The Revenue was mandated to ensure that each order for reopening clearly recorded compliance with legal requirements and address objections raised by Assessees in accordance with Supreme Court decisions.

Imposition of Costs on the Revenue for Filing Frivolous Appeals:
Although the Court considered imposing heavy costs on the Revenue for filing frivolous appeals, it declined to do so as the appeals were dismissed ex parte. However, the Court directed the Revenue to issue instructions to Assessing Officers to strictly comply with legal requirements for reopening assessments and address objections raised by Assessees as per Supreme Court decisions.

In conclusion, the appeals were dismissed with the Court's observations, and a certified copy of the order was to be delivered to the Principal Chief Commissioner of Income Tax for compliance with the directives issued by the Court.