M/S. VARDHMAN METALS V. INCOME TAX OFFICER

WA/219/2015

AI Insights

The case involves M/s. Vardhman Metals, represented by its proprietor Mr. Devi Chand Kothari, who appealed against the order directing them to approach the Appellate Authority as per Section 146(a) of the Income Tax Act. The appeal was based on a similar previous case (W.A.No.218/2015) where the Division Bench had allowed the appeal due to non-furnishing of reasons for re-opening the assessment and violation of natural justice. The respondent, Income Tax Officer, did not object to a similar order being passed but requested modifications to observations made in the earlier case. The court, adhering to the precedent set in the earlier case, allowed the appeal and set aside the re-assessment order.

• Counselvise Citation: [2016] 140 COUNSELVISE.COM (IT) 699914 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 26-10-2016
• Assessment Year: misc
• Other Referred Cases: W.A.No.218/2015
• Laws Referred To: Income Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: K V ARAVIND
• Assessee Lawyers: HARISH S
• Keywords: Income Tax; Natural Justice; Notice under section 148; Re-assessment; Writ Appeal
• Section: 148; 142(1); 143(1); 4; 146(a)

Judgement Text

" 1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 26TH DAY OF OCTOBER 2016 PRESENT THE HON’BLE MR.JUSTICE JAYANT PATEL AND THE HON’BLE MR.JUSTICE ARAVIND KUMAR WRIT APPEAL NO.219 OF 2015(T-IT) BETWEEN: M/S. VARDHMAN METALS OMKAR HOUSE, NO. 8/1 4TH CROSS, KALASIPALYAM NEW EXTENSION, BANGALORE-560 002 REPRESENTED BY ITS PROPRIETOR MR. DEVI CHAND KOTHARI S/O SHA POONAMCHAND GALBAJI AGED ABOUT 44 YEARS ...APPELLANT (BY SRI.HARISH V S, ADVOCATE) AND: INCOME TAX OFFICER WARD 1(4), HMT BHAVAN BANGALORE-560 032 ...RESPONDENT (BY SRI.K V ARAVIND, ADVOCATE) 2 THIS WRIT APPEAL IS FILED U/S 4 OF THE KARNATAKA HIGH COURT ACT PRAYING TO SET ASIDE THE ORDER PASSED IN THE WRIT PETITION NO.14671/2014 DATED 11/12/2014. THIS APPEAL COMING ON FOR PRELIMINARY HEARING THIS DAY, JAYANT PATEL J., PASSED THE FOLLOWING: ORDER Admit. 2. Mr.K.V.Aravind, learned Counsel waives notice of admission. 3. With the consent of learned Advocates appearing for both the sides, the appeal is finally heard. 4. The present appeal is directed against the order dated 11.12.2014 passed by the learned Single Judge of this Court in W.P.No.14671/2014 whereby the learned Single Judge for the reasons recorded in the order has directed the petitioner to approach before the Appellate 3 Authority within two months as per the provisions of Section 146(a) of the Income Tax Act. 5. We have heard Mr.V.S.Harish, learned Counsel appearing for the appellant and Mr.K.V.Aravind, learned Counsel appearing for the respondent. 6. As such the learned Counsel appearing for the appellant has brought to our notice that the present matter is covered by the decision of the Division Bench of this Court dated 14.08.2015 in W.A.No.218/2015, whereby the Division Bench of this Court, for the reasons recorded in the order has allowed the appeal and he prays that similar order may be passed by this Court. 7. Whereas Mr.K.V.Aravind, learned Counsel appearing for the respondent submitted that he has no objection if similar order is passed. However, he submitted that the observations made at paragraph-9 in 4 the earlier order dated 14.08.2015 be modified by observing that the matter is remanded, since it was a case of breach of principles of natural justice and therefore he submitted that this Court may take a different view. 8. We may record that this Court in the above referred W.A.No.218/2015 has observed thus: “This is an appeal filed by the assessee against the judgment and order dated 11.12.2014 passed by the learned Single Judge in W.P.No.14670/2014 whereby the petition challenging the notice under Section 148 of the Income Tax Act, 1961 (for short ‘the Act’) has been dismissed on the ground of availability of alternative remedy. 2. The brief facts of this case are that for the assessment year 2006-07 the appellant had filed its return of income, which was accepted under Section 143(1) of the Income Tax Act, 1961 (for short ‘the Act’) on 14.06.2007. 5 Subsequently, on 28.03.2013, notice under Section 148 of the Act was issued for re-opening of the assessment. In response to the same, the appellant requested the respondent to treat the earlier return filed as the return filed in response to the notice issued under Section 148 of the Act. The appellant also prayed for furnishing the reasons for issuance of notice under Section 148 of the Act. Even when no reason for the issuance of the notice was furnished to the appellant, the Assessing Officer commenced proceedings for re-assessment of the income of the assessee/appellant for the said assessment year and issued questionnaire under Section 142(1) of the Act. 3. From the questionnaire issued to the assessee, it appears that re-opening of the assessment was on the basis of statement recorded by the Income Tax authorities of some other person, which statement was never furnished to the appellant. The appellant, thus, contends that besides the non-furnishing of the reasons for re-opening the assessment, 6 principles of natural justice were also not complied in the present case in as much as the appellant was not even furnished the statement, which was required to be explained by the appellant before the Assessing Officer. 4. Sri K.V.Aravind, learned counsel appearing for the respondent has, however, submitted that since the re-assessment order has now been passed on 31.01.2014, the same can be challenged in appeal and, as such dismissal of the writ petition on the ground of availability of alternative remedy is perfectly justified. 5. We have heard learned counsel for the parties and perused the record. 6. The question of non-furnishing the reasons for re-opening an already concluded assessment goes to the very root of the matter. After filing of the return in response to the notice issued under Section 148 of the Act or on request of the assessee requesting that the 7 return of income initially filed be treated as a return of income filed in response to such notice, the assessee is entitled to be furnished the reasons for such re-opening, which can also be challenged independently. Since such reasons had not been furnished to the appellant, even though a request for the same had been made, we are of the opinion that proceedings for the re- assessment could not have been taken further on this ground alone. 7. Besides this, it is not disputed that the statement of some other person which was recorded and the appellant was asked to explain the same, was itself not furnished to the appellant-assessee. As such, besides non- furnishing of reasons for re-opening, there was also gross violation of principles of natural justice and in view of the aforesaid, we are of the opinion that writ petition against the re- assessment order dated 31.01.2014 ought to have been entertained and that dismissal of the writ petition on the ground of availability of 8 alternative remedy was not justified in the facts of the present case. 8. Since we are of the opinion that the re-opening of assessment under Section 143 of the Act was itself bad in law, we set-aside the order passed by the writ Court and as well as the re-assessment order dated 31.01.2014. Accordingly, this appeal as well as the writ petition stand allowed. 9. However, it may be observed that the respondent shall be at liberty to proceed in the matter, in accordance with law, after furnishing reasons for issuance of notice under Section 148 of the Act, if law so permits. No order as to costs. All pending applications stand consigned to file.” 9. Two relevant aspects are worth recording. One is that in the above referred order, the impugned order 9 of the learned Single Judge was dated 11.12.2014 that is the same date and the number of the writ petition was 14670/2014, whereas in the present case, number of the writ petition is 14671/2014. Further the assessment year was 2006-2007 and the notice under Section 148 of the Act issued in the said case was on 28.03.2013, whereas in the present case it has been issued on 27.03.2013. As the fact situation are the same, we are not inclined to take a different view as contended by learned Counsel for the respondent, since the above referred decision of the Division Bench of this Court dated 14.08.2015 is binding on us. 10. In view of the aforesaid, following order: The re-opening of the assessment under Section 143 of the Income Tax Act was itself bad in law. Hence, we set aside the order passed by the learned Single Judge as well as the reassessment order dated 10 31.01.2014. Accordingly the appeal as well as the writ petition shall stand allowed. 11. However it may be observed that the respondent shall be at the liberty to proceed in the matter in accordance with law, after furnishing reasons for issuance of the notice under Section 148 of the Income Tax Act, if law permits. No order as to costs. 12. In view of the disposal of the main appeal, I.A 1/2015 would not survive and shall stand disposed of. Sd/- JUDGE Sd/- JUDGE JT/- "