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Re-assessment order merits being quashed where passed without furnishing reasons in support of notice for re-opening assessment: HC

2019-TIOL-2000-HC-MUM-IT

IN THE HIGH COURT OF BOMBAY

Writ Petition No. 1787 Of 2019 With
Writ Petition No. 1791 Of 2019

ASHOK HOTCHAND ADVANI

Vs

INCOME TAX OFFICER WARD-17(1)(2)
AND ORS

M S Sanklecha & Nitin Jamdar, JJ

Dated: August 21, 2019

Appellant Rep by: Mr P Pardiwala, Sr. Adv. a/w Chirag Bhatia i/b Deepak Lad
Respondent Rep by: 
Mr Suresh Kumar

Income tax – Writ – Sections 147, 148 & 150

Keywords – reasons for reopening – validity of re assessment

THE assessee, an individual, had preferred the present petition challenging the notices issued u/s 148 seeking reopening of concluded assessment beyond the period of six years.

On Writ, the HC held that,

Whether reassessment order passed without furnishing of reasons in support of the reopening notice, calls for dismissal of such order – YES: HC

++ it is a settled position in law that before commencing the reassessment proceedings u/s 147/148, the recorded reasons have to be given to the parties and its objections to it is considered and disposed of by an order. This is in accord what the directions of the Apex Court in GKN Drive shaft case. Therefore, in the normal course an reassessment order without furnishing of reasons in support of the reopening notice would be set aside. One more issue which would require consideration is whether the delay of almost eleven months in complying with the directions of the Appellate Authority in issuing the reopening notice was deliberate or not, particularly bearing in mind the Apex Court decision in GKN Drive shaft case. In view of the same, by way of interim relief, pending the final disposal of the Petition, the orders are stayed.

Case deferred

Case followed:

GKN Drive shaft India Ltd. v/s. ITO – 2002-TIOL-634-SC-IT

JUDGEMENT

Heard. Rule.

2. The Petitioner has challenged the two orders dated 31 March 2019 passed by the Assessing Officer under Section 143(3) of the Income Tax Act, 1961 (the Act) relating to Assessment Years 2007-08 and 2008-09. The impugned orders emanated from two notices dated 11 March 2019 seeking re-opening of the Assessment Years 2007-08 and 2008-09. The above notices have been issued consequent to the directions in the Appellate order. Thus the provisions of Section 150 of the Act has been invoked to issue the reopening notices beyond the period of six years.

3. It is the admitted position that before passing the impugned order reasons in support of the impugned notices were not furnished to the Petitioner. This in spite of the Petitioner’s request. Thus it is submitted on behalf of the Petitioner that orders dated 31 March 2019 were bad in law as being contrary to the decisions of the Supreme Court in GKN Drive shaft India Ltd. v/s. ITO 259 ITR 19 = 2002-TIOL-634-SC-IT.

4. On the other hand, it is contended by the Revenue that the re-opening notices dated 11 March 2019 were issued consequent to a direction in the Appellate order dated 27 March 2018. The Appellate order in terms directed the Petitioner to reopen the assessment of the Petitioner for Assessment Years 2007-08 and 2008-09 for the reason stated therein. The reassessment in such cases has to be completed within a period of 12 months from the end of the month in which the Appellate order is passed in terms of Section 153(6) of the Act. Therefore, in the above facts, the reopening notices dated 11 March 2019 had requested the Petitioner to file its return of income within 5 days. This would have given the Revenue time to give the Petitioner its reasons in support of the reopening notice as well as consider the objections if any prior to completing the assessment by 31 March 2019. However, the Petitioner did not file its return of income, but on 28 March 2019 filed a copy of the intimations dated 5 November 2008 issued by the Respondent for Assessment Year 2007-08 and 2008-09. Thereafter on 29 March 2019 sought for copy of recorded reasons for the reopening notices. It was impossible to meet this request, as the assessment would have become time barred. Thus, it is submitted in these facts, GKN Drive shaft (I) Ltd. (supra) will not apply and in any case the conduct of the Petitioner will dis-entitle the Petitioner to extraordinary writ remedy.

5. It is a settled position in law that before commencing the reassessment proceedings under Section 147/148 of the Act, the recorded reasons have to be given to the parties and its objections to it is considered and disposed of by an order. This is in accord what the directions of the Apex Court in GKN Drive shaft (supra). Therefore, in the normal course an reassessment order without furnishing of reasons in support of the reopening notice would be set aside following the decision of this Court in CIT v/s. VSNL 340 ITR 66. However, the Revenue’s stand before us is that in the present facts where the reopening notice is issued as per the specific directions of the Appellate Authority, the requirement of giving the recorded reasons and considering the objections to it may not arise as the reasons for reopening in the present facts are known to the parties by virtue of the Appellate order. Further the Assessing Officer is only carrying out the directions of the Appellate Authority and the contentions of the Revenue would be considered during the course of reassessment proceedings. Therefore, the contention of the Revenue that the decision of the Apex Court in GKN Drive shaft (supra) will not apply in the present facts as also the alleged conduct of the Petitioner would merit dismissal of the Petition. These issues raised by the Revenue would require detailed consideration at the final hearing of this Petition, in the peculiar facts of this case. One more issue which would require consideration is whether the delay of almost eleven months in complying with the directions of the Appellate Authority in issuing the reopening notice was deliberate or not, particularly bearing in mind the Apex Court decision in GKN Drive shaft (supra).

6. In the above view, by way of interim relief, pending the final disposal of the Petition, the impugned orders dated 31 March 2109 are stayed. The Petition is kept for final disposal on 21 November 2019 at 3.00 p.m.

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