VIRESH HEMANI V. INCOME TAX OFFICER,W

WP(C)/15305/2014

AI Insights

The case involves Sri Viresh Hemani, the proprietor of M/s. Pratik Tours and Travels, who challenged a notice issued by the Income Tax Officer (ITO) for reassessing his income for the Assessment Year 2007-08. The notice was issued more than five years after the original return was filed. Hemani objected to the reopening of the assessment, but the ITO proceeded to issue a Show Cause Notice without addressing these objections. The court examined whether the issuance of the SCN was valid and whether the appropriate procedural requirements were met, particularly concerning the disposal of objections and the authorization for reopening the assessment.

• Counselvise Citation: [2021] 140 COUNSELVISE.COM (IT) 674646 (HC-ORISSA)
• Appeal Type: Others
• Pronouncement Date: 23-04-2021
• Assessment Year: misc
• Other Referred Cases: GKN Driveshafts (India) Ltd. v. Income Tax Officer, Principal Commissioner of Income Tax, Kerala v. N.C. Cables Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: S S MOHAPATRA
• Assessee Lawyers: SIDHARTH RAY
• Keywords: Approval; Income Tax; Jurisdiction; Notice; Objections; Reassessment; SCN
• Section: 147; 148; 151

Judgement Text

" Page 1 of 5 IN THE HIGH COURT OF ORISSA AT CUTTACK W.P.(C) No.15305 of 2014 Sri Viresh Hemani …. Petitioner Mr. Sidharth Ray, Advocate. -versus- Income Tax Officer, Ward-3, Rourkela …. Opp. Party. Mr. S.S. Mohapatra, Sr. Standing Counsel for Income Tax. CORAM: THE CHIEF JUSTICE JUSTICE B. P. ROUTRAY ORDER 23.04.2021 Order No. 06. 1. This matter is taken up by video conferencing mode. 2. The challenge in this writ petition is to a notice dated 21st May, 2013 issued by the Income Tax Officer (‘ITO’), Ward-3, Rourkela to the Petitioner proposing to reassess the income for the Assessment Year (AY) 2007-08 under Section 147 of the Income Tax Act, 1961 (‘the Act’) on the ground that the income chargeable to tax for the said AY has escaped assessment. 3. While directing issuance of notice in the present writ petition on 20th October, 2014, an interim order was passed directing that the proceedings against the Petitioner may continue, but no final order shall be passed pursuant to the impugned order. 4. The background facts are that the Petitioner is the proprietor of M/s. Pratik Tours and Travels which is in the business of selling of AIR Page 2 of 5 Tickets and Tour Packages. The Petitioner filed his return of income for the AY 2007-08 on 29th October 2007. More than five years thereafter, the Petitioner received the impugned notice dated 21st May, 2013, in response to which by letter dated 15th July, 2013, the Petitioner assessee requested the ITO to inform him of the reasons for the reopening. Prior thereto on 21st June, 2013 the Petitioner asked the ITO to treat the earlier income filed as return pursuant to the impugned notice. 5. On 25th July, 2013, the ITO furnished the Petitioner the reasons for reopening of the assessment. On receipt of the reasons, the Petitioner made a detailed representation on 8th October, 2013 objecting to the reopening of the assessment. 6. Without deciding those objections, on 2nd July, 2014 the ITO proceeding to issue the show cause notice (SCN) calling upon the Petitioner to explain why the reassessment should not be completed by enhancing the Petitioner’s total income by making addition as proposed in the said SCN. 7. The Petitioner replied to the SCN on 30th July, 2013 and soon thereafter filed the present writ petition in this Court. 8. In response to the notice issued, a counter affidavit has been filed by the Opposite Party enclosing inter alia, the approval granted by the Joint Commissioner of Income Tax to the ITO to initiate proceeding under Section 148 of the Act. Page 3 of 5 9. In the counter affidavit there is no response to the averment in paragraphs 3.16 of the petition that the Opposite Party has proceeded with the SCN without disposing of the Petitioner’s objections. 10. Mr. S. Ray, learned counsel appearing for the Petitioner, relied on the decision of the Supreme Court in GKN Driveshafts (India) Ltd. v. Income Tax Officer (2003) 1 SCC 72 and submitted that the failure to dispose of the objections of the Petitioner prior to issuing the SCN to reopen the assessment would vitiate the SCN, particularly since it is sought to be reopened more than four years after the return was filed. 11. In response thereto, Mr. S.S. Mohapatra, learned Senior Standing Counsel for the Department submitted that the SCN dated 2nd July, 2014 issued to the Petitioner by the ITO should be construed as the disposal of the Petitioner’s objection. 12. The Court is unable to agree with the above submission on behalf of the Department. A perusal of the SCN dated 2nd July, 2014 reveals that there is no mention of the Petitioner’s detailed objections given in writing on 8th October, 2013. In fact, even the counter affidavit filed by the Department is silent on disposal of such objections prior to issuance of the impugned SCN. Indeed the requirement spelt out by the Supreme Court in GKN Driveshafts (supra), that an assessee’s objection to the reopening of the assessment should be disposed of by the Assessing Officer by a speaking order is a mandatory requirement that cannot be dispensed with. Admittedly this mandatory requirement has not been complied with in the instant case. On this ground alone the re- assessment proceeding is vitiated. Page 4 of 5 13. Relying on the decision in Principal Commissioner of Income Tax, Kerala v. N.C. Cables Ltd. (2017) 391 ITR 11(Del), Mr. Ray submitted that there was a failure by the competent authority in terms of Section 151 of the IT Act to authorize the reopening of the assessment. Factually, the above position has not been able to be disputed by Mr. Mohapatra, learned Standing Counsel on behalf of the Department. Indeed the impugned letter dated 10th / 20th May, 2013 issued by the Joint Commissioner of Income Tax, Rourkela Range, to the ITO simply states ‘Approval is hereby accorded u/s. 151(2) of the I.T. Act, 1961 for initiation of proceeding u/s. 147 of the I.T. Act, 1961 in the case of Sri Viresh Hemani….’. There is no indication of any application of mind by the authority. Moreover, the approval under Section 151 of the Act had to be granted by the Principal Chief Commissioner, or the Chief Commissioner, or the Principal Commissioner, or the Commissioner, if the reopening is beyond four years. However, the above approval in the instant case was issued by the Joint Commissioner and therefore, it was not a valid approval under Section 151 of the IT Act. 14. For both the above reasons, the impugned notice dated 21st May, 2013 issued to the Petitioner cannot be sustained in law and is hereby set aside. All consequential proceedings are also hereby set aside. 15. The writ petition is allowed in the above terms, but in the circumstances with no order as to costs. 16. As the restrictions due to resurgence of COVID-19 situation are continuing, learned counsel for the parties may utilize a printout of the order available in the High Court’s website, at par with certified copy, Page 5 of 5 subject to attestation by the concerned advocate, in the manner prescribed vide Court’s Notice No.4587, dated 25th March, 2020 as modified by Court’s Notice No.4798, dated 15th April, 2021. (Dr. S. Muralidhar) Chief Justice ( B.P. Routray) A.Dash Judge "