2022 (7) TMI 1451 - HC - Income Tax

Validity of Reopening of assessment - subsequently two notices issued - Non disposal of objections raised against reopening - HELD THAT - As assessee has not challenged the order passed by the learned Judge in 2022 (6) TMI 29 - MADRAS HIGH COURT setting aside the reassessment order passed by the first respondent and remanding the matter for fresh consideration and hence, the said order has attained finality. No requirement to interfere with the order of the learned Judge passed which was filed challenging the notice and the order rejecting the objections raised by the appellant. However, this court cannot lose sight of the contentions raised by the learned counsel for the appellant / assessee in this appeal that the legal effect of the setting aside the reassessment order was to restore the status quo ante, thereby wiping the slate clean for consideration of the challenge to the section 147/148 notice on de novo basis and therefore, the learned Judge, while rightly permitted the appellant to submit objections to the reasons that were provided ought to have disposed the said writ petition, instead of dismissing, so as to enable the assess to submit their objections to the real reasons for reopening as provided in the order dated 06.01.2022, in the reassessment proceedings. Order - The appellant / assessee shall raise all the contentions including limitation aspect as well as the objections for reopening the assessment with regard to the reasons furnished along with the order dated 06.01.2022, in the reassessment proceedings to be carried on by the assessing officer, as per the order of the learned Judge 2022 (6) TMI 29 - MADRAS HIGH COURT - The assessing officer shall consider the same during the reassessment proceedings and pass orders afresh, on merits and as per law, after providing due opportunity of hearing to the appellant / assessee.

Summary

Issues Involved:
1. Validity of the notice issued under Section 148 of the Income Tax Act for reopening the assessment.
2. Rejection of objections filed by the appellant against the reopening of assessment.
3. Legal implications of setting aside the reassessment order and remanding the matter for fresh consideration.

Issue-wise Detailed Analysis:

1. Validity of the notice issued under Section 148 of the Income Tax Act for reopening the assessment:
The appellant, engaged in software development, filed their return for the assessment year 2014-2015 disclosing all software expenses. The assessment was initially completed on 25.01.2018. However, on 31.03.2021, the second respondent issued a notice under Section 148 of the Income Tax Act, indicating reasons to believe that income chargeable to tax had escaped assessment. The appellant contended that they had fully disclosed all material facts and that the reopening was based on a mere change of opinion without any new/tangible material, which is impermissible. The learned Judge dismissed the writ petition challenging the reassessment notice, stating that the reassessment order had already been set aside, rendering the notice irrelevant.

2. Rejection of objections filed by the appellant against the reopening of assessment:
The appellant submitted detailed objections to the reopening notice on 27.12.2021, which were rejected by the first respondent on 06.01.2022. The appellant argued that the rejection did not consider their full and complete disclosure of software expenses and was based on already available materials, amounting to a change of opinion. The learned Judge, while setting aside the reassessment order in a separate writ petition, did not find merit in the objections against the reopening notice and dismissed the writ petition challenging the rejection of objections.

3. Legal implications of setting aside the reassessment order and remanding the matter for fresh consideration:
The reassessment order dated 28.03.2022 was set aside by the learned Judge on the grounds of violation of natural justice, as the appellant was not given sufficient time to respond. The matter was remanded for fresh consideration with directions to issue a new show cause notice and provide adequate time for the appellant to reply. The appellant contended that setting aside the reassessment order should restore the status quo ante, allowing them to challenge the Section 147/148 notice afresh. The court modified the order to permit the appellant to raise all contentions, including objections to the reasons for reopening, during the reassessment proceedings. The assessing officer was directed to consider these objections and pass a fresh order on merits and as per law, after providing due opportunity of hearing to the appellant.

Conclusion:
The court upheld the dismissal of the writ petition challenging the reopening notice and the rejection of objections but allowed the appellant to raise all relevant contentions during the reassessment proceedings. The assessing officer is required to consider these objections and pass a fresh order, ensuring compliance with principles of natural justice. The appeal was disposed of with these modifications, and no costs were awarded.