2016 (12) TMI 1556 - HC - Income Tax

Validity of reopening of assessment - non disposing objections submitted by the petitioner assessee against the reasons recorded to reopen the assessment - Held that - In the case of GKN Driveshafts (India) Ltd (2002 (11) TMI 7 - SUPREME Court ) clarify that when a notice under section 148 of the Income-tax Act is issued, the proper course of action for the notice is to file a return and if he so desires, to seek reasons for issuing notices. The Assessing Officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the notice is entitled to file objections to issuance of notice and the Assessing Officer is bound to dispose of the same by passing a speaking order. In the instance case, as the reasons have been disclosed in these proceedings, the Assessing Officer has to dispose of the objections, if filed, by passing a speaking order, before proceeding with the assessment in respect of the abovesaid five assessment years AO may not pass any reassessment order in haste, more particularly either disposing of the objections and/or without giving reasonable and sufficient time to the assessee to challenge the order disposing of the objections and as nothing is on record that as on today either the objections made by the petitioner are disposed of and/or any decision disposing of the objections is communicated to the petitioner, we dispose of the present Special Civil Application at this stage.

Summary

Issues:
Challenge to notice under section 148 of the Income Tax Act, 1961 for A.Y. 2009-2010.

Analysis:
1. The petitioner filed a petition under Article 226 seeking to quash the notice under section 148 of the Income Tax Act for reopening assessment for A.Y. 2009-2010.
2. The petitioner raised objections against the notice and the reasons recorded for reopening the assessment.
3. The petitioner expressed concern that the Assessing Officer (A.O.) might pass the reassessment order without disposing of the objections or without giving sufficient time to challenge the decision.
4. Referring to the case of GKN Driveshafts (India) Ltd, the Supreme Court outlined the procedure for dealing with objections to a notice under section 148, emphasizing the need for the A.O. to provide reasons and dispose of objections by passing a speaking order.
5. In the case of Garden Finance Ltd., the Court clarified that the assessee must first raise preliminary objections before the A.O. and challenge any adverse decision, thus softening the rigour of availing alternative remedies.
6. The case of Arvind Mills Ltd. reiterated the requirement for the A.O. to supply reasons, address preliminary objections, and pass a speaking order before proceeding with assessment.
7. In Sahakari Khand Udyog Mandal Ltd, the Court issued directions for the A.O. to provide reasons promptly, allow objections within 60 days, and dispose of objections within four months to ensure proper scrutiny.
8. The Court emphasized that the A.O. must follow the established legal principles and decisions laid down by the Supreme Court and High Court to avoid passing reassessment orders hastily.
9. The Court, in a previous case, set aside a reassessment order due to insufficient time given to the assessee to challenge the decision on objections.
10. The judgment concluded with the expectation that the A.O. would adhere to the decisions of the Supreme Court and the High Court, ensuring proper disposal of objections and providing adequate time for the assessee to challenge any adverse decisions before passing a reassessment order.