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TMI Blog2016 (8) TMI 230X X X X Extracts X X X X X X X X Extracts X X X X ..... rch, reference was made to the assessee in one of the books, which led to unaccounted business transactions of the searched person with the assessee. 2. On the basis of such materials, the Assessing Officer issued a notice for reopening of the assessment under Section 148 of the Act on 30.03.2009. The assessee raised objections to the notice of reopening under letter dated 11.11.2009. However, without disposing of such objections, the Assessing Officer continued with the assessment. He eventually passed an order of reassessment on 20.11.2009 and made a total addition of Rs. 75.85 lacs to the income of the assessee. He also directed initiation of penalty proceedings. The assessee challenged the order of assessment before the Appellate Commissioner, who, by his order dated 08.03.2011, partly allowed the appeal. He sustained addition only of Rs. 8.55 lacs out of the total addition of Rs. 75.85 lacs made by the Assessing Officer and deleted the rest. 3. This order was challenged by the Revenue before the Tribunal. Interestingly though the assessee had not challenged the order of the Commissioner (Appeals) and thus had indirectly accepted the validity of the re-opening of the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Parikh for the department submitted that the action of the Assessing Officer of passing final order of assessment without disposing of the objections of the assessee would not be fatal to the assessment proceedings and the Tribunal ought to have allowed the Assessing Officer to pass the fresh order after dealing with the objections of the assessee. In this context, counsel relied on the decision of Division Bench of Madras High Court in case of Areva T and D Ltd vs. Assistant Commissioner of Income Tax reported in 294 ITR 233, in which, somewhat similar situation came up for consideration. 7. On the other hand, learned counsel Mr. Soparkar for the assessees opposed the appeals contending that by virtue of the judgement of the Supreme Court in case of GKN Driveshafts (India) Ltd vs. Income Tax Officer and ors (supra), once the assessee raises objections to the notice for reassessment, it is the duty of the Assessing Officer to dispose of the same before proceeding further with the assessment. This would ensure that frivolous cases of reassessment are filtered at the very threshold, if the assessee can point out to the Assessing Officer that the reasons for issuing notice for reope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal. In this appeal, therefore, the Tribunal clearly committed a fundamental error. 11. This aspect, however, does not arise in other tax appeals and, in any case, we have framed a common question which does not involve this element at all. We would, therefore, proceed to decide the question framed. 12.We may recall, Section 147 of the Act pertains to income escaping assessment and under which, if the Assessing Officer has reason to believe that income chargeable to tax has escaped assessment, he may assess or reassess such income. Section 148 of the Act pertains to issuance of notice where income has escaped assessment. Sub section (1) of Section 148 requires that before making the assessment under Section 147, the Assessing Officer would serve on the assessee a notice requiring him to furnish within the specified time a return of his income. Sub section (2) of Section 148 provides that the Assessing Officer shall, before issuing any notice under said section, record his reason for doing so. Thus, before reassessment can be done, statutory requirements are of issuance of a notice and before issuance of notice, recording of reasons by the Assessing Officer for reopening of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r: "13. There is one more aspect of the matter. The order dated 3rd March, 2004 made by this Court in the earlier petition filed by the present petitioner namely Special Civil Application No. 2736 of 2004 directed the respondent to dispose of the objections filed by the petitioner by passing a speaking order as per the aforesaid decision of the Hon'ble Supreme Court. It is further laid down in the said order that it is only after the Assessing Officer passes a speaking order deciding the petitioner's preliminary objections against the notice for reassessment that any cause of action would arise for the petitioner. This order was served on the respondent on 4th March 2004 and immediately on 5th March 2004, the petitioner was served with a copy of the impugned re-assessment order dated 9th February 2004. The petitioner thereupon preferred a rectification application under Section 35 of the Act requesting the respondent to withdraw the impugned re-assessment order dated 9th February 2004, but, as averred in the petition, till the date of filing of the petition, the respondent has neither called the petitioner for hearing on the application dated 10th March 2004 nor withdrawn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstitution of India is maintainable where no order has been passed by the Assessing Officer deciding the objection filed by the assessee under Section 148 of the Act and assessment order has been passed or the order deciding an objection under Section 148 of the Act has not been communicated to the assessee and assessment order has been passed or the objection filed under Section 148 has been decided along with the assessment order. If the objection under Section 148 has been rejected without there being any tangible material available with the Assessing Officer to form an opinion that there is escapement of income from assessment and in absence of reasons having direct link with the formation of the belief, the writ Court under Article 226 can quash the notice issued under Section 148 of the Act. The writ petition filed by the petitioner is maintainable. The Assessing Officer is mandated to decide the objection to the notice under Section 148 and supply or communicate it to the assessee. The assessee gets an opportunity to challenge the order in a writ petition. Thereafter, the Assessing Officer may pass the reassessment order. We hold that it was not open to the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r: "8.1 On going through the same, it is evident that the Assessing Officer has to pass a speaking order disposing of the objections "before proceeding with the assessment". In the present case, a separate speaking order has not been passed and the objections have been dealt with, if at all, in the re-assessment order itself. On this ground also, the petitioner is liable to succeed." 20. On the other hand, Madras High Court in case of Areva T and D Ltd vs. Assistant Commissioner of Income Tax(supra) came to a specific conclusion that the action of the Assessing Officer in passing order of reassessment without disposing of the objections is not a nullity but a procedural defect. The Court held and observed as under: "23. From a reading of the above, it is clear that the Assessing Officer has to furnish reasons, within a reasonable time and on receipt of the same, the assessee can file objection to issue of notice and the Assessing Officer is bound to dispose of the same by a speaking order, before proceeding with the reassessment. In the present case, the objections have not been considered at all by the Assessing Officer before proceeding with the reassessment. Reassessment orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Supreme Court in case of Managing Director, ECIL, Hyderabad vs. B.Karunakar reported in AIR 1994 SC 1074. While reiterating that the delinquent would be entitled to copy of Inquiry Officer's report even when the punishment imposed is other than the major punishment of dismissal, removal or reduction in rank or when the rules are silent or even against it, the Court observed that, in case of non- furnishing of copy of report, it has to be seen whether the delinquent has been prejudiced thereby or not. Reinstatement with back-wages should not be mechanically ordered. It was provided that the Court or the Tribunal should furnish to the delinquent a copy and afford an opportunity to show if any prejudice is caused. 23. The decision in case of Union of India and ors vs. Mohammad Ramzan Khan (supra) came up for consideration in case of State Bank of Patiala and ors vs. S.K.Sharma reported in AIR 1996 SC 1669, in which, while discussing the effect of nonsupply of inquiry Officer's report before the Disciplinary Authority passed final order of punishment, it was held and observed as under: "32. We may summarise the principles emerging from the above discussion. [These are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such need be called for in such a case. To repeat, the test is one of prejudice, i.e., whether the person has received a fair hearing considering all things. Now, this very aspect can also be looked at from the point of view of directory and mandatory provisions, if one is so inclined. The principle stated under (4) hereinbelow is only another way of looking at the same aspect as is dealt with herein and not a different or distinct principle. (4)(a) In the case of a procedural provision which is not of a mandatory characters the complaint of violation has to be examined from the standpoint of substantial compliance. Be that as it mays the order passed in violation of such a provision can be set aside only where such violation has occasioned prejudice to the delinquent employee. (b) In the case of violation of a procedural provisional which is of a mandatory character, it has to be ascertained whether the provision is conceived in the interest of the person proceeded against or in public interest. If it is found to be the former, then it must be seen whether the delinquent officer has waived the said requirements either expressly or by his conduct. If he is found to have waived it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that arise before them. (7) There may be situations where the interests of state or public interest may call for a curtailing of the rule of audi alteram partem. In such situations, the Court may have to balance public/State interest with the requirement of natural justice and arrive at an appropriate decision." 24. It can thus be seen that whenever an administrative action is found to be tainted with defect in the nature of breach of natural justice or the like, the Court would set aside the order, place back the proceedings at the stage where the defect is detected and leave the liberty to the competent authority to proceed further from such stage after having the defect rectified. In other words, the breach of principle of natural justice would ordinarily not result in terminating the proceedings permanently. 25.As noted, the requirement of supplying the reasons recorded by the Assessing Officer issuing notice for reopening and permitting the assessee to raise objections and to decide the same by a speaking order are not part of the statutory provisions contained in the Act. Such requirements have been created under a judgement of the Supreme Court in case of GKN Driveshafts ..... X X X X Extracts X X X X X X X X Extracts X X X X
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