Bombay H.C : Reopening of assessment without communication of reasons for reopening and without furnishing to assessee an opportunity of filing its objections is not valid

High Court Of Bombay

Agarwal Metals and Alloys vs. ACIT

Assessment Year : 2004-05

Section : 147

Dr. D.Y. Chandrachud And M.S. Sanklecha, JJ.

Writ Petition No. 266 Of 2012

February 15, 2012

JUDGMENT

1. The grievance of the petitioner in these proceedings under article 226 of the Constitution is that an order of assessment was passed by the Assessing Officer on December 29, 2011, for the assessment year 2004-05 following a reopening of the assessment under section 148 of the Income-tax Act, 1961, without communication of the reasons for the reopening and without furnishing to the petitioner an opportunity of filing its objections as mandated in the judgment of the Supreme Court in GKN Driveshafts (India) Ltd. v. ITO [2003] 259 ITR 19/[2002] 125 Taxman 963. Having regard to this grievance, a brief reference to the facts would be in order.

2. A notice was issued to the petitioner under section 148 on August 23, 2010, seeking to reopen the assessment for the assessment year 2004-05, beyond a period of four years of the end of the relevant assessment year. The petitioner by its letter dated December 22, 2011, sought a disclosure of the reasons and an opportunity to file its objections to the reopening of the assessment in terms of the judgment of the Supreme Court in GKN Driveshafts (India) Ltd. (supra). The Assessing Officer completed the assessment without a notice under section 143(2) and passed order on December 29, 2011.

3. On these admitted facts, it is evident that there has been a complete violation of the applicable principles of law by the Assessing Officer. The Assessing Officer was required to communicate the reasons for reopening the assessment which he has failed to do. The Assessing Officer despite the judgment of the Supreme Court in GKN Driveshafts (India) Ltd. (supra) has failed to provide an opportunity to the assessee to submit his objections to the reopening of the assessment. In the affidavit-in-reply, it has been submitted that the assessee was well aware of the reasons for the reopening of the assessment as the reasons were on the record for the assessment year 2007-08. This is clearly a specious explanation. According to counsel appearing on behalf of the Revenue, during the course of the assessment year 2007-08, it has been found that the petitioner has been engaged in under invoicing and it is on that basis that the assessment for the assessment year 2004-05 is sought to be reopened. Even if the submission of the learned counsel were to be correct, reasons have to be communicated to the petitioner. There has admittedly been no communication of reasons to the petitioner. In these circumstances, we are inclined to quash and set aside the impugned order of assessment which has been passed in a brazen violation of the governing principles of law. However, in order to obviate the bar of limitation, we intend to incorporate a protective stay in order to enable the Assessing Officer to proceed further in accordance with law. Hence, we pass the following order :

(i) The order of assessment dated December 29, 2011, for the assessment year 2004-05 is quashed and set aside.

(ii) Within a period of two weeks from today, the Assessing Officer shall communicate to the petitioner the reasons on the basis of which the assessment for the assessment year 2004-05 is sought to be reopened.

(iii) The petitioner would be at liberty to file its objections before the Assessing Officer to the reopening of the assessment within a period of two weeks from the receipt of the reasons for reopening the assessment.

(iv) The Assessing Officer shall dispose of the objections by a reasoned order within a period of four weeks of the receipt of the objections, if any.

(v) The Assessing Officer shall defer the passing of an order of assessment in the event that he rejects the objections of the assessee, for a period of four weeks from the communication of the order on the objections so as to enable the assessee to seek recourse to its remedies in law.

(vi) In order to facilitate the completion of the entire exercise set out hereinabove and for a period of four months from today, the notice dated August 23, 2010, shall remain stayed.

(vii) All the rights and contentions of the parties are kept open.

4. The petition is accordingly disposed of in these terms.

5. There shall be no order as to costs.

[Citation : 346 ITR 64]

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