2006 (8) TMI 140 - HC - Income Tax

Notice seeking reopening of his assessment under sections 147 and 148 - petitioner filed objections dated October 19 2004 which were apparently received by the respondent on October 21 2004. Since then the petitioner has been requesting for a speaking order on the objections - Assessing Officer should have rejected the objections if he thought it appropriate to do so before passing the final order and not simultaneously. - submits that the objections touched upon the merits of the controversy and the failure of the Assessing Officer to deal with the objections before passing the assessment order was only a technical error. We are mentioning this only to reject this argument in view of the clear language of the Supreme Court. The Assessing Officer cannot try to hide behind niceties which are not even legal. - Under the circumstances we set aside the assessment order dated January 31 2005 and direct the Assessing Officer to deal with the objections dated October 19 2004 filed by the petitioner

Summary

Issues:
1. Reopening of assessment under sections 147 and 148 of the Income-tax Act, 1961.
2. Compliance with the requirement of passing a speaking order on objections before proceeding with assessment.
3. Failure of the Assessing Officer to deal with objections before passing the assessment order.
4. Imposition of costs on the respondent for not following the law laid down by the Supreme Court.

Analysis:

1. The petitioner received a notice for the reopening of assessment under sections 147 and 148 of the Income-tax Act, 1961. After filing objections based on a decision of the Supreme Court in GKN Driveshafts (India) Ltd. v. ITO [2003] 259 ITR 19, the Assessing Officer proceeded to pass an assessment order without addressing the objections, which led to the petitioner's request for a speaking order.

2. The High Court emphasized the importance of complying with the law as laid down by the Supreme Court and stressed the necessity for the Assessing Officer to reject objections, if deemed appropriate, before passing the final assessment order. The court referred to the judgment in Sita World Travels (India) Ltd. v. CIT [2005] 274 ITR 186 to reinforce this position.

3. Despite the clear directives from both the Supreme Court and the High Court, the Assessing Officer failed to address the objections before passing the assessment order. The court rejected the argument that the failure to deal with the objections was merely a technical error and emphasized that the Assessing Officer cannot evade the legal requirement of passing a speaking order.

4. In light of the Assessing Officer's non-compliance with the legal obligations, the High Court set aside the assessment order and directed the Assessing Officer to address the objections within eight weeks, emphasizing the necessity of passing a speaking order. Additionally, the court imposed costs of Rs. 3,500 on the respondent for not adhering to the legal standards set by the Supreme Court and the High Court.

This detailed analysis of the judgment highlights the issues surrounding the reopening of assessment, the importance of passing a speaking order on objections, the failure of the Assessing Officer to comply with legal requirements, and the imposition of costs for non-compliance with established legal principles.