Non furnishing reasons recorded-High court quashed reassessment order admitting writ as an exceptional case for invoking power under Article 226
ABCAUS Case Law Citation:
ABCAUS 2923 (2019) (05) HC
Important Case Laws Cited/relied upon by the parties
Commissioner of Income-tax vs. Trend Electronics [2015] 61 taxman.com 308 (Bombay)
GKN Driveshafts (India) Ltd. v. Income-tax Officer: [2002] 125 Taxman 963 (SC)
Commissioner of Income Tax and others v. Chhabil Dass Agarwal: (2014) 1 SCC 603
Petitioners had filed the instant Writ Petition before the Hon’ble High Court challenging the reassessment order passed u/s 147 of the Income Tax Act, 1961 (the Act) by the Assessing Officer (AO) being passed without furnishing reasons recorded for the reopening of the assessment.
The Department (Revenue) submitted that the writ petitions were not maintainable because petitioner had efficacious remedies available under the Act (the Act) i.e. appeal under Section 246 of the Act before the Commissioner (Appeals) thereafter appeal before the Appellate Tribunal then against the order of the Tribunal appeal before the High Court in terms of Section 260A of the Act.
In opposition, the petitioners submitted that availability of such remedies would not deprive the petitioner from invoking extra ordinary jurisdiction of the Hon’ble High Court under Article 226 of the Constitution of India when principles of natural justice and the procedures for reassessment had not been followed.
Placing reliance on the judgment of the Hon’ble Supreme Court, the Petitioners submitted that when Notice under Section 148 of the Act had to be issued, reasons had to be furnished so as to enable the assessee to file objections which objections are required to be considered and disposed of by the AO by passing a speaking order until then, AO cannot pass the assessment order.
The Petitioners further stated that principles of natural justice had been violated as the petitioners had been condemned unheard. The AO had not provided sufficient opportunity so as to enable them to collect requisite information which related to sites located at different remote place, retrieval of which was time consuming. However, the AO had passed the assessment and demand orders.
The Hon’ble High Court noted that admittedly reasons for re-opening of assessments had not be furnished to the petitioner. The Court opined that object of furnishing reasons was to enable the petitioner to file objections regarding re-opening and then on filing of objections, the petitioner had the right of hearing before the Assessing Officer (AO), then, A.O. after considering the objections and after hearing the petitioner was to deal with the objections by passing a speaking order, same has not been done.
The Hon’ble High Court also noted that the petitioner while responding to the Notices under Sections 143(2) and 142(1) of the Act had requested for extending time for production of requisite documents. While ignoring, to follow statutory requirements, filing objections and hearing, impugned assessment and demand orders had been passed which suggested that the AO had not only breached the principles of natural justice but also breached the procedure which was required to be followed for decision.
The Hon’ble High Court noted that the Hon’ble Supreme Court had laid down that when a notice under section 148 of the Income Tax Act is issued, the proper course of action for the noticee is to file 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 noticee 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 Hon’ble High Court noted that the Hon’ble Supreme Court had also laid down that if there is an adequate efficacious alternative remedy available to the petitioner and he has approached the High Court without availing the same, the High Court not to interfere unless he has made out an exceptional case warranting such interference or there exist sufficient grounds to invoke the extraordinary jurisdiction under Article 226.
Further, it was noted that the Constitution Bench had held that the Court, in extraordinary circumstances, may exercise the power if it comes to the conclusion that there has been a breach of principles of natural justice or procedure required for decision has not been adopted.
The Hon’ble High Court opined that it was satisfied that there had been a breach of principles of natural justice and also the procedure, required to be adopted for passing assessment orders on reassessment and demand orders, had not been followed. Therefore, an exceptional case for invoking power under Article 226 of the Constitution of India. Both the orders being unsustainable, to ask the petitioner to avail remedies of appeal, matter will unnecessarily get protracted.
Accordingly, the Hon’ble High Court holding petitions maintainable, allowed them and set aside the impugned assessment and demand orders. It was directed that the AO shall furnish reasons for re-opening of assessment of income for the said assessment years so as to enable the petitioner to file objections and after hearing the petitioner, to pass speaking orders then to proceed with the assessment and to pass appropriate orders as shall be warranted.
