AI Insights
The case involves Banaskantha District Co-op. Milk Producers Union Ltd. challenging the reassessment notice and subsequent orders issued by the Assistant Commissioner of Income Tax for the assessment year 2009-10. The petitioner argued that the reassessment was based on a change of opinion and violated principles of natural justice as the AO did not provide adequate opportunity to contest the reassessment before passing the order. The court examined the procedural lapses in the reassessment process, particularly the timing and handling of objections raised by the petitioner, and referenced several precedents to emphasize the need for adherence to procedural fairness in tax reassessment proceedings.
Appeal Details
Counselvise Citation
[2015] 140 COUNSELVISE.COM (IT) 762971 (HC-GUJARAT)
Assessee PAN
Bench
Appeal Number
CRN Number
Appellant
Respondent
Appeal Type
Others
Pronouncement Date
07-05-2015
Assessment Year
misc
Judgement Text
"C/SCA/7814/2015 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION NO. 7814 of 2015 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE M.R. SHAH sd/ and HONOURABLE MR.JUSTICE S.H.VORA sd/ ========================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? YES 2 To be referred to the Reporter or not ? YES 3 Whether their Lordships wish to see the fair copy of the judgment ? NO 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India or any order made thereunder ? NO ============================================= BANASKANTHA DISTRICT COOP. MILK PRODUCERS UNION LTD....Petitioner(s) Versus ASSISTANT COMMISSIONER OF INCOME TAX....Respondent(s) ============================================= Appearance: MR TEJ SHAH, ADVOCATE for the Petitioner(s) No. 1 MR NITIN K MEHTA, ADVOCATE for the Respondent(s) No. 1 ============================================= CORAM: HONOURABLE MR.JUSTICE M.R. SHAH and HONOURABLE MR.JUSTICE S.H.VORA Date : 07/05/2015 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE M.R. SHAH) 1.0. Rule. Shri Nitin Mehta, learned advocate waives service of notice of Rule on behalf of the respondent. In the facts and circumstances of the case and with the consent of the learned advocates for the respective parties, matter is taken up for final hearing today. Page 1 of 11 C/SCA/7814/2015 JUDGMENT 2.0. By way of this petition under Article 226 of the Constitution of India, the petitioner has prayed for an appropriate writ, direction and order to quash and set aside the impugned notice under Section 148 of the Act dated 19th March 2014 issued by the respondent for AY 200910. 2.1. The petitioner assesseee has also prayed for an appropriate writ, direction and order quashing and setting aside the impugned order passed by the respondent herein dated 13th March 2015 rejecting the objections to assumption of jurisdiction under Section 148 of the Act for AY 200910. The petitioner has also further prayed for an appropriate writ, direction and order to quash and set aside the assessment order dated 23.03.2015 passed under Section 143(3) r/w Section 147 of the Income Tax Act (hereinafter referred to as the “Act”) for AY 200910. 3.0. The facts leading to the present petition in nutshell are as under: 3.1. That the petitioner filed return of income for AY 200910 declaring total income of Rs.4,87,41,035/. That the case was taken under scrutiny. The AO issued a notice under Section 142(1) of the Act calling for various details. That thereafter, AO finalized the assumption and passed the assessment order under Section 143(3) of the Act on 19.12.2011. It appears that while finalizing the assessment, the AO made addition under Section 14 A of the Act inter alia other additions. 3.2. That feeling aggrieved and dissatisfied with the order of assessment for AY 200910, the petitioner preferred appeal before the CIT(A) and by order dated 19.12.2013, learned CIT(A) deleted the addition under Section 14 A of the Act made by the AO. Page 2 of 11 C/SCA/7814/2015 JUDGMENT 3.3. That thereafter, within a period of four years, the AO had issued notice under Section 148 of the Act on 19.3.2014 to reopen the assessment for AY 200910. By the said notice, the petitioner was called upon to file its return of income for the AY under consideration. That immediately on receipt of the notice under Section 148 of the Act, the petitioner vide communications dated 10.04.2014 and 16.04.2014 requested to furnish the reasons recorded for reopening of the assessment. However, till January 2015 the AO did not furnish reasons recorded for reopening of the assessment. That only on 5.1.2015 the petitioner was served with the copy of the reasons recorded for reopening of the assessment dated 9.2.2014. That immediately on receipt of the reasons recorded for reopening of the assessment, the petitioner filed detailed objections for reopening, vide objection dated 12.1.2015. That by order dated 13.3.2015, the AO disposed of the said objections raised by the petitioner and overruled the same. That immediately, the respondent has passed the impugned reassessment order on 20.03.2015 without giving any further opportunity to the petitioner. At this stage, it is required to be noted that even the communication / order dated 13.3.2015 disposing of the objection raised by the petitioner came to be served upon the petitioner only on 20.3.2015 i.e. simultaneously along with reassessment order i.e. on 13.3.2015. 3.4. Hence, feeling aggrieved and dissatisfied with the impugned notice under Section 148 of the Act, the communication dated 13.3.2015 disposing the objection raised by the petitioner and the reassessment order dated 20.3.2015 which has been served upon the petitioner on 30.3.2015, the petitioner has preferred present Special Civil Application under Article 226 of the Constitution of India for the aforesaid reliefs. Page 3 of 11 C/SCA/7814/2015 JUDGMENT 4.0. Shri Tej Shah, learned advocate for the petitioner has vehemently submitted that impugned reassessment order is absolutely illegal, most perverse and in breach of principles of natural justice. 4.1. It is submitted that though the notice under Section 148 of the Act, came to be issued on 19.03.2014 and the petitioner immediately asked for the reasons recorded to reopen the assessment immediately vide communications / letters dated 10.04.2014 and 16.04.2014, till January 2015, the petitioner assessee was not served with the reasons recorded. It is submitted that as per the decision of the Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd vs. Income Tax Officers and Ors reported in (2003) 259 ITR 19, the AO is bound to furnish reasons within a reasonable time and on receipt of the reasons, the assessee entitled to file objection to the issuance of notice and the AO is bound to dispose of the same by passing speaking order, before proceedings with the assessment in respect of respective assessment years. 4.2. It is further submitted that AO even disposed of the objection raised by the petitioner against reassessment proceedings only on 19.3.2015 and without giving any further opportunity to the petitioner assessee, the AO passed the impugned reassessment order on 20.3.2015. It is submitted that even the communication dated 19.3.2015 disposing the objection by the AO came to be served upon the petitioner only on 30.3.2015 along with reassessment. It is submitted that therefore, the impugned reassessment order is absolutely illegal. 4.3. It is further submitted that even the notice issued under Section 148 of the Act and initiation of reassessment proceedings itself is illegal and invalid. It is further submitted that even the reassessment Page 4 of 11 C/SCA/7814/2015 JUDGMENT proceedings and / or reopening of the assessment is purely on change of opinion of the AO, which is not permissible. 4.4. It is further submitted that even otherwise the assessment with respect to issue of deduction under Section 80P(2)(d) of the Act could not have been reopened by the AO as the said issue has now been merged with the order of CIT(A). It is submitted that therefore, the assumption of the jurisdiction for reopening of the assessment for the year under consideration is absolutely illegal and even contrary to Section 147 of the Act. Making above submissions and relying upon the decision of the Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd (supra) and the decision of the Full Bench of this Court in the case of Garden Finance Limited vs. Assistant Commissioner of Income Tax reported in (2004) 268 ITR 48 as well as decision of the Division Bench of this Court in the case of Arvind Mills Limited vs. Assistant Commissioner of Wealth Tax reported in (2004) 141 Taxman 210(Guj) as well as recent decision of the Division Bench of this Court in the case of Sahkari Khand Udyog Mandal Ltd vs. Assistant Commissioner of Income Tax reported in (2015) 370 ITR 107(Guj) it is requested to allow the present Special Civil Application and grant the reliefs as prayed for. 5.0. Shri Nitin Mehta, learned advocate for the revenue has appeared on behalf of respondent. As such, he is not in a position to dispute the aforesaid factual aspect. However, has submitted that now as reassessment order has already been passed, the petitioner can very well challenge the same before the learned CIT(A) and before the learned CIT(A) the assessee can also challenge the assumption of jurisdiction by AO to reopen the assessment. Therefore, it is requested to not to Page 5 of 11 C/SCA/7814/2015 JUDGMENT entertain the present petition. 6.0. Heard the learned advocates for the respective parties at length. It is not in dispute that the notice under Section 148 of the Act to reopen the assessment order came to be issued by the AO as far as back on 19.3.2014. The petitioner immediately asked for the reasons recorded vide communication dated 16.04.2014. Nothing was done by the AO till January 2015. That all of sudden, the petitioner came to be served with the reasons recorded for reopening dated 19.2.2014, only on 5.1.2014. That the petitioner immediately raised the objections to reopen the assessment immediately on 12.1.2015. The objections raised by the petitioner against reopening of the assessment came to be disposed of by the AO vide order dated 19.03.2015, however the same came to be served upon the petitioner only on 30.03.2015 along with reassessment order. That immediately after disposing of the objections vide communication dated 19.03.2015, without giving any sufficient time to the petitioner to challenge the same, the AO has passed the impugned reassessment order on 20.03.2015 and the same has been served upon the petitioner on 30.03.2015. It is required to be noted that after disposing of the objections by the AO vide communication dated 19.03.2015, the petitioner has not been given any further opportunity before passing the impugned reassessment order. 6.1. In backdrop of the aforesaid facts, some of the decisions of the Hon'ble Supreme Court as well as this Court are required to be referred to. 6.2. In the case of GKN Driveshafts (India) Ltd (supra), the Hon'ble Supreme Court has laid down an elaborate procedure as to the manner of dealing with objections raised against a notice under Section Page 6 of 11 C/SCA/7814/2015 JUDGMENT 148 of the Act in the following words: ...However, we clarify that when a notice under section 148 of the Incometax 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.” 6.3. In a subsequent decision in the case of Garden Finance Ltd. v. Asstt. CIT reported in (2004) 268 ITR 48 (Guj.) (FB), the effect of Supreme Court decision in the case of G.K.N. Driveshaft (India) Ltd. (Supra) came up for consideration and by a majority opinion it has been thus laid down by this Court as under: “What the Supreme Court has now done in the G.K.N. Case (2003)259 ITR 19 is not to whittle down the principle laid down by the Constitution Bench of the Apex Court in Calcutta Discount Co. Ltd. case (1961) 41 ITR 191 but to require the assessee first to lodge preliminary objection before the Assessing Officer who is bound to decide the preliminary objections to issuance of the reassessment notice by passing a speaking order and, therefore, if such order on the preliminary objections is still against the assessee, the assessee will get an opportunity to challenge the same by filing a writ petition so that he does not have to wait till completion of the reassessment proceedings which would have entailed the liability to pay tax and interest on reassessment and also to go through the gamut of appeal, the second appeal before Incometax Appellate Tribunal and then reference / tax appeal to the High Court. Viewed in this light, it appears to me that the rigour of availing of the alternative remedy before the Assessing Officer for objecting to the re assessment notice under section 148 has been considerably softened by the Apex Court in G.K.N. case (2003) 259 ITR 19 in the year 2003. In my view, therefore, the G.K.N. case (2003) 259 ITR 19 (SC) does not run counter to the Calcutta Discount Co. Ltd. case (1961) 41 ITR 191 (SC) but it merely provides for challenge to the reassessment notice in two stages, that is, i) raising preliminary objections before the Assessing Officer and Page 7 of 11 C/SCA/7814/2015 JUDGMENT in case of failure before the Assessing Officer, ii) challenging the speaking order of the Assessing Officer under section 148 of the Act (p.87).” 6.4. Thereafter, in the case of Arvind Mills Ltd. (Supra), the Division Bench of this Court had an opportunity to consider the aforesaid two decisions and after considering both the aforesaid decisions, in para 9 the Division Bench has observed and held as under: “9. The position in law is thus well settled. After a notice for re assessment has been issued an assessee is required to file the return and seek reasons for issuance of such notice. The Assessing Officer is then bound to supply the reasons within a reasonable time. On receipt of reasons, the assessee is entitled to file preliminary objections to issuance of notice and the Assessing Officer is under a mandate to dispose of such preliminary objections by passing a speaking order, before proceeding with the assessment in respect of the assessment year for which such notice has been issued.” 6.5. In the case of Sahakari Khand Udyog Mandal Ltd (supra) the Division Bench had an occasion to consider the various different stages from the date of notice under Section 148 of the Act to the reassessment order and ultimately after considering the decision of the Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd (supra), in para 14 had issued the following directions; “1. Once the Assessing Officer serves to an assessee a notice of reopening of assessment under section 148 of the Income Tax Act, 1961, and within the time permitted in such notice, the assessee files his return of income in response to such notice, the Assessing Officer shall supply the reasons recorded by him for issuing such notice within 30 days of the filing of the return by the assessee without waiting for the assessee to demand such reasons. 2. Once the assessee receives such reasons, he would be expected to raise his objections, if he so desires, within 60 days of receipt of such reasons. 3. If objections are received by the Assessing Officer from the assessee within the time permitted hereinabove, the Assessing Officer would dispose of the objections, as far as possible, within Page 8 of 11 C/SCA/7814/2015 JUDGMENT four months of date of receipt of the objections filed by the assessee. 4. This is being done in order to ensure that sufficient time is available with the Assessing Officer to frame the assessment after carrying out proper scrutiny. The requirement and the timeframe for supplying the reasons without being demanded by the assessee would be applicable only if the assessee files his return of income within the period permitted in the notice for reopening. Likewise the time frame for the Assessing Officer to dispose of the objections would apply only if the assessee raises objections within the time provided hereinabove. This, however, would not mean that if in either case, the assessee misses the time limit, the procedure provided by the Supreme Court in the case of GKN Driveshafts (India) Ltd (supra) would not apply. It only means that the time frame provided hereinabove would not apply in such cases. 5. In the communication supplying the reasons recorded by the Assessing Officer, he shall intimate to the assessee that he is expected to raise the objections within 60 days of receipt of the reasons and shall reproduce the directions contained in subpara 1 to 4 hereinabove giving reference to this judgment of the High Court. 6.The Chief Commissioner of Income Tax and Cadre Controlling Authority of the Gujarat State, shall issue a circular to all the Assessing Officers for scrupulously carrying out the directions contained in this judgment.” 6.6. In view of the aforesaid decisions of the Hon'ble Supreme Court as well as this Court and the law laid down by the Hon'ble Supreme Court, impugned reassessment order cannot be sustained. 7.0. It is required to be noted that Full Bench of this Court in the case of Garden Finance Ltd. (Supra) also had an occasion to consider the the decision of the Hon'ble Supreme Court in the case of Calcutta Discount Co. Ltd reported in (1961) 41 ITR 191 and decision of the Hon'ble Supreme Court in the case of G.K.N. Driveshaft (India) Ltd. (Supra) does not run counter to the decision of the Hon'ble Supreme Court in the case of Calcutta Discount Co. Ltd (1961) 41 ITR 191 (SC) but it merely provides for challenge to the reassessment notice in two stages i.e. ...... (i) raising preliminary objections before the Assessing Page 9 of 11 C/SCA/7814/2015 JUDGMENT Officer and in case of failure before the Assessing Officer,(ii)challenging the speaking order of the Assessing Officer under section 148 of the Act. 8.0. In the present case, thus the AO has disposed of the objections only on 19.03.2015. Thereafter some reasonable time was required to be given to the assessee to challenge the notice under Section 148 of the Act and the order disposing of the objections. Instead immediately on 20.03.2015, the AO passed reassessment order without giving any further opportunity to the petitionerassessee and even the order / communication disposing of the objection dated 19.3.2015 came to be served upon the petitioner assessee only on 30.03.2015 along with assessment order dated 20.03.2015. Thus, right of the petitioner to challenge the notice under Section 148 of the Act, subsequent to the disposing of the objections has been taken away by the AO. Under the circumstances, impugned reassessment order cannot be sustained and matter is to be remitted to the file of the AO reserving liberty in favour of petitioner to challenge the notice under Section 148 of the Act at post disposing of the objection and if within reasonable time the petitioner fails to get any order, the AO to pass appropriate reassessment order in accordance with law and after giving fullest opportunity to the petitioner assessee. 9.0. In view of the above and for the reasons stated above, the impugned order of assessment dated 20.03.2015 under Section 143(3) r/w Section 147 of the Act for AY 200708 is hereby quashed and set aside on the aforesaid ground alone. The matter is remitted to the file of the AO to pass an appropriate order in accordance with law and on merits and after giving sufficient and fullest opportunity to the petitioner assessee, however granting reasonable time to the petitioner Page 10 of 11 C/SCA/7814/2015 JUDGMENT to challenge the notices under Section 148 of the Act after the order disposing of the objection. It is observed that if within reasonable time, the assessee does not get any order in the proceedings challenging the notice under Section 148 of the Act only thereafter the AO to pass appropriate assessment order in accordance with law and on merits, however after giving the reasonable opportunity to the petitioner. It is made clear that this Court has not expressed anything on merits either with respect to initiation of reassessment proceedings and / or even on merits. Rule is made absolute to the aforesaid extent. No costs. sd/ (M.R.SHAH, J.) sd/ (S.H.VORA, J.) Kaushik Page 11 of 11 "
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