Directions u/s 144A does not affect applicability of decision of the Supreme Court in GKN Driveshaft for disposing off objections to reopening
ABCAUS Case Law Citation:
ABCAUS 3173 (2019) (10) HC
Important case law relied upon by the parties:
M/s. Deepak Extrusions Pvt. Ltd. vs. The Deputy Commissioner of Income Tax
GKN Driveshafts (India) Ltd. vs. Income Tax Officer & Ors
Directions us 144A not affect applicability of decision in GKN Driveshaft
In the instant case, the appellant assessee received a notice under Section 148 of the Income Tax Act, 1961 (the Act) proposing reassessment of the alleged escaped income. After receiving a copy of the reasons recorded in the notice issued, the appellant filed objections.
Apart from filing aforesaid objections, the appellant also made an application to the jurisdictional Additional Commissioner of Income Tax seeking a direction under Section 144A of the Act. The Additional Commissioner issued notice to the appellant to file objections and the appellant again filed objections to the reopening. Thereafter, the Additional Commissioner passed an order directing the Assessing Officer (AO) to pass an appropriate order after giving an adequate opportunity of hearing to the assessee.
After that the AO proceeded to conclude the assessment under sub-section (3) of Section 143 read with Section 147 of the Act.
Aggrieved by the said assessment order, the assessee had filed the instant writ before the Hon’ble High Court.
The assessee relied upon the decision of the Division Bench of the Court and submitted that the purpose of seeking a direction under Section 144A of the Act was only to ensure that the objections raised by the appellant were promptly decided. Her further submission was that without considering the objections, an assessment under subsection (3) of Section 143 read with section 147 of the said Act of 1961 could not have been completed in law.
On the other hand, the Revenue submitted that the appellant had himself applied for the direction under Section 144A of the Act and that the order passed by the Additional Commissioner on the said application was binding on the Assessing Officer and that was why the Assessing Officer proceeded to complete the assessment in accordance with law under subsection (3) of Section 143 read with section 147 of the Act.
Thus. The case of the Department was that as the Assessing Officer was bound by the order passed under Section 144A of the said Act of 1961, no interference could be made.
The Hon’ble High Court observed that the Hon’ble Supreme Court had held that 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. The AO has to dispose of the objections, if filed, by passing a speaking order, before proceeding with the assessment.
It was further observed that in a similar case, where AO did not dispose of the objections prior to proceeding with the assessment and proceeded to pass the order for assessment, the Division Bench of the Court followed the said decision of the Hon’ble Supreme Court and held that since the mandatory procedure of disposal of the objection by Assessing officer before proceeding with the assessment had not been followed, the exercise of power was not only vitiated, but the order of assessment could not be sustained.
The Hon’ble High Court noted that in the instant case, after receiving the copy of the reasons, the appellant admittedly raised objections. It was not in dispute that the Assessing Officer did not dispose of the objections prior to completing the assessment under sub-section (3) of Section 143 read with Section 147 of the Act. Therefore, the law laid down by the Apex Court as well as the Division Bench of this Court would squarely apply. Therefore, the only conclusion was that the order of assessment was bad in law as the same was made without deciding the objections of the appellant.
With respect to question about the effect of the direction issued under Section 144A of the Act, the Hon’ble High Court noted that the Additional Commissioner had not directed the Assessing Officer to complete the assessment without deciding the objections filed by the appellant. The Hon’ble High Court clarified that when a direction is issued under Section 144A of the Act to the Assessing Officer to pass an appropriate order, he has to pass the appropriate order in accordance with law. While issuing a direction under Section 144A, the Additional Commissioner could not have bypassed the well settled law and directed the Assessing Officer to act contrary to law.
The Hon’ble High Court opined that the order passed under Section 144A of the Act does not affect the applicability of the principles laid down by the Apex Court.
Accordingly, the assessment order passed by the AO was quashed and set aside. AO was directed to decide the objections raised by the appellant by passing a reasoned order before undertaking the assessment in accordance with Section 143 read with Section 147 of the Act.
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